Determination
40In essence, there are three basic propositions which underpin the plaintiffs' case as presented. These are:
(1)that neither of them agreed to enter into the loan and mortgage transaction, and that such transaction was a fraud, implemented without their knowledge, to benefit Mr Louis;
(2)that once the transaction had been put in place, Mr Louis drew upon the loan to obtain benefits for himself without the knowledge or consent of the plaintiffs; and
(3)that the fraud did not come to their attention until 2011 when they were advised by Mr Louis' estranged wife that he had been stealing money from them.
41Acceptance of the proposition that the making of the loan and mortgage transaction was a fraud perpetrated upon the plaintiffs faces numerous hurdles, including:
(1)in circumstances where the processing of the transaction entailed the use of documents and information personal to the plaintiffs such as drivers licences, rates notices, water bills and Medicare details, and details concerning the plaintiffs' existing loan and mortgage with Westpac, a credible explanation as to how such documents and information came into the hands of the fraudsters was called for;
(2)the need to establish that the signatures, apparently of Mr Taouk and Mrs Taouk, on the Loan Contract and mortgage and other documents associated with the transaction, were forgeries;
(3)in circumstances where Sky was running a successful loan introduction business in 2004, introducing loans to a value of about $5 million per month, there is little reason to think that Sky (through Ms Baker and Mr Manafikhi) would engage in serious fraud in order to obtain the relatively modest commissions which would be earned in respect of the loan; and
(4)there is no apparent reason why the fraudsters would arrange for statements of account in respect of the loan to be directed to each of the plaintiffs at the plaintiffs' home address if they were intended to be the victims of a fraud.
42Acceptance of the proposition that Mr Louis drew down upon the loan to obtain benefits for himself without the knowledge or consent of the plaintiffs faces the hurdle of needing to establish that the signatures, apparently of Mr Taouk and Mrs Taouk, on the Redraw Request Forms, were forgeries.
43Acceptance of the proposition that the alleged fraud did not come to the attention of the plaintiffs until 2011 faces numerous hurdles, including:
(1)in circumstances where $116,704 was drawn upon the loan and paid into Mrs Taouk's Commonwealth Bank account in 2005 and 2006, an explanation as to why no query was raised is called for;
(2)in circumstances where the electronic recording system maintained by DMS indicated that from 2006 there were numerous contacts made by Mrs Taouk (and other members of her family, including her son George and daughter-in-law Sandra) concerning the loan, an explanation as to how such records came to be made was called for; and
(3)an explanation is also called for as to how it came to be that, since the establishment of the loan in December 2004, the interest payments on the loan were largely made directly from Mrs Taouk's Commonwealth Bank account, and no further payments were made by the plaintiffs to Westpac.
44Clearly, the strength of each of those propositions depends in large measure upon the credibility and reliability of the testimony given by each of the plaintiffs. For the reasons which follow, I have concluded that the evidence given by the plaintiffs on these matters was neither credible nor reliable. In the absence of reliable corroborating evidence from other sources, the basic propositions described above, which involve allegations of serious wrongdoing, must be rejected.
45I formed an unfavourable impression of both Mr Taouk and Mrs Taouk as witnesses. In each case, the impression is based, in part, upon the evidence each gave concerning their signature.
46Mr Taouk was cross-examined at length on that issue. I found his evidence to be wholly unconvincing. He was shown what was apparently his signature on copies of numerous documents which were produced by Westpac. He firmly denied that any of the signatures were his. He also stated that he "knew" his signature. One of the documents is a Loan Application dated 2 December 2003 in relation to an application to borrow $15,000 for the stated purpose of home renovations. The information which appears on the document concerning the plaintiffs seems to be accurate, and there is no reason to doubt that the document concerns an application in fact made by the plaintiffs. I do not accept that Mr Taouk did not sign that document. Amongst the other documents produced by Westpac were three Requests for Progress Payments apparently executed in December 1999, February 2000 and June 2000. They concern payments to be made to Romanous Constructions Pty Limited who were then building the house on the Property. Again, there is no reason to doubt that these documents concern requests in fact made by the plaintiffs, and I do not accept that Mr Taouk did not sign them.
47Later in his cross-examination, Mr Taouk was shown a signature, apparently his, on a handwritten agreement dated 21 February 2005. Mr Taouk denied that the signature was his. However, in his affidavit in reply, Mr Taouk swore that he had signed the document and, when confronted with the affidavit, he agreed that he had indeed signed the handwritten agreement.
48At one stage, Mr Taouk was shown a signature at the foot of the second page of his own affidavit sworn on 1 October 2013. Mr Taouk was prepared to say that "maybe" the signature was his "because it is close to my signature". He later gave similar evidence about the signature at the foot of the first page of the affidavit. I gained the firm impression that Mr Taouk was not prepared to clearly admit that any signature was his for fear that such an admission might damage his case.
49Variations between many of the signatures apparently made by Mr Taouk can be plainly observed. However, Mr Taouk gave no clear evidence as to how the various signatures which he claimed were not his, differed from his genuine signature. No expert handwriting evidence was adduced. In essence, the Court was left with little more than his denials, which he gave firmly and repeatedly.
50I regard Mr Taouk's evidence on this topic to be most unsatisfactory. In the light of other unsatisfactory aspects of his evidence, and the absence of reliable corroborating evidence, I am not prepared to accept his evidence that he did not sign the various documents in relation to the loan and mortgage transaction, including the Loan Contract and the mortgage itself. Neither do I accept his evidence that he did not sign any Redraw Request Forms.
51I also found Mrs Taouk's evidence concerning her signature to be unconvincing. In cross-examination, Mrs Taouk was shown a copy of the loan application form which apparently bore her signature. She strongly denied that the signature was hers. She maintained that denial when confronted with the content of some particulars provided by her solicitor which indicated that she had admitted the possibility that she had signed a loan application. Mrs Taouk said that she would know if it was her signature.
52Mrs Taouk was then shown her affidavit verifying the Statement of Claim. Initially, she evaded the question whether it was her signature that appeared there, but then said that it was "possible" that it was. After a few more questions, Mrs Taouk then clearly said that it was her signature and that she recognised it as such. Mrs Taouk was then pressed as to what it was about that particular signature which allowed her to say that it was genuine. She was not able to offer any reasons other than "because I signed the right way". There was no re-examination on the topic. As was the case with her husband's evidence, the Court was left with little more than her repeated denials.
53Mrs Taouk's evidence on this topic was singularly unimpressive. Her evidence, particularly when viewed alongside other unsatisfactory aspects of her testimony, provides no reliable basis for a conclusion that she did not sign the various documents in relation to the loan and mortgage transaction, including the Loan Contract and the mortgage itself. In the absence of reliable corroborating evidence, I do not accept her evidence that she did not sign those documents. I also do not accept her evidence that she did not sign any Redraw Request Forms.
54My general assessment of Mr Taouk is that he was a less than satisfactory witness. His testimony featured a number of inconsistencies and implausibilities. His evidence about the handwritten agreement dated 21 February 2005 is an example of the former. Another example concerns his evidence as to his ability to read English. He swore in an affidavit that he could not read English, and whilst being cross-examined about his 1998 taxation return, he seemed to confirm that impression. However, later in his cross-examination, he conceded that he could read in English and that he had a reasonable although not full understanding of documents written in English.
55Mr Taouk's evidence that he did not know anything about a change in lender from Westpac struck me as highly implausible. His evidence to the effect that he never saw any of the letters which were undoubtedly addressed to him and sent by DMS to the Property from 2005 also struck me as implausible.
56His denial that an application had been made to Westpac for finance in December 2003 was in my view plainly false.
57Mr Taouk seemed to approach his cross-examination in a guarded and defensive manner. He was not a witness who appeared to be making an effort to candidly answer the questions asked of him. Rather, Mr Taouk appeared to me to be quite ready to give answers in accordance with what he saw was advantageous to his case, even if those answers were untruthful. I am unable to regard Mr Taouk as a reliable or credible witness, and would not be prepared to accept his evidence on any matter of importance unless it was corroborated by reliable evidence.
58My general assessment of Mrs Taouk as a witness is no less unfavourable. Indeed, the evidence which clearly establishes that she received a substantial amount of the loan funds into her own bank account, had contact with DMS concerning the loan on a number of occasions, and was using her bank account to make monthly repayments to DMS (not to Westpac), renders her evidence about her lack of knowledge of the loan and mortgage transaction even less credible than her husband's. Mrs Taouk was unable to explain away that evidence, which showed that she knew all about the new loan. Her evidence to the effect that she understood only that there was a loan for $113,000 and an additional $50,000 "for my nephew" must be regarded as falsely given.
59Mrs Taouk's evidence about Mr Louis taking letters relating to the loan, so that after the first few months she did not receive any statements, was most implausible. I also found implausible her evidence about always speaking to an Arabic speaker when she telephoned DMS to arrange money for Mr Louis. I gained the impression that Mrs Taouk gave that evidence in order to play down her level of ability with spoken English.
60Numerous parts of Mrs Taouk's evidence were unsatisfactory. Her answer that she had no knowledge of the $116,704 that went into her account is a clear example. She had claimed, in her affidavit in reply, that she had arranged for money to be deposited into her account, which she then withdrew and paid to Mr Louis in cash. Her answer that she had no knowledge of $50,000 being paid into her account in December 2004 is another example. That payment was something she had admitted in her affidavit in reply. The evidence she gave, when confronted with an entry in the DMS electronic recording system which suggested that she had wanted to arrange a $20,000 increase in the loan, that she had no knowledge of the matter, is a further example. Her evidence that she had no knowledge of the in excess of $100,000 that Mr Louis paid into her Commonwealth Bank account is yet another example. Mrs Taouk went so far in that answer to claim that Mr Louis "withdrew $400,000".
61Mrs Taouk seemed to be a witness less intent on giving honest answers than giving answers thought to be favourable to her case. On occasions, she was quite dismissive of the questions, and made no real effort to answer them. At one stage, Mr Louis' affidavit was mentioned and she answered "I haven't seen it. I wouldn't know", yet she had responded to the affidavit in her own affidavit in reply.
62Mrs Taouk was, like her husband, willing to give untruthful evidence to support her case. Her testimony was neither credible nor reliable. As is the case with Mr Taouk, I would not be prepared to accept her evidence on any matter of importance unless it was corroborated by reliable evidence.
63I note that, in making the above assessments, I have made some allowance for the difficulties which often accompany the giving of evidence through an interpreter.
64Quite apart from the above, the evidence given by Mr and Mrs Taouk was significantly undermined by the evidence called in their case from their daughter-in-law, Ms Sandra Taouk. Sandra Taouk, in the course of her cross-examination, stated that in 2005 she was making telephone calls to DMS on behalf of Mrs Taouk and, further, that Mrs Taouk knew that she was making repayments to DMS and "obviously" knew that she had a mortgage with DMS. Sandra Taouk further gave evidence to the effect that on occasions when the paperwork in respect of the loan was not received, telephone calls would be made to ascertain the amount of the loan repayment required in that month. When asked about the nature of the paperwork which was received, Sandra Taouk answered:
"A document requiring the payments for both loans, I would add them up for my mother-in-law, give her the total and she would take them to the bank to pay it."
65Sandra Taouk was also asked about some of the entries in the DMS electronic recording system. Her answers indicated that insofar as those records contained details relating to her, they were accurate. However, in relation to an entry dated 7 August 2009, Sandra Taouk could not recall whether she was informed on that occasion by Michael Connolly that the amount outstanding was $439,373.11. Similarly, she did not recall being informed on 15 May 2008 that the current balance was $446,586.98. Sandra Taouk did, however, accept that, during a separate conversation held on that day, she was informed that the next monthly repayment for the two accounts totalled almost $4,000.
66I have little doubt that the DMS electronic recording system is, by and large, accurate. Two witnesses gave evidence about the system. These were Colin Whybourne and Michael Connolly. Neither of those witnesses was challenged concerning the accuracy or reliability of the system.
67A number of the entries in the system further undermined the version of events given by the plaintiffs, in particular, Mrs Taouk. Amongst those entries are the following:
(1)Entry dated 21 August 2006 made by Amy McKendrick. This entry refers to a redraw request sent through by the borrower for $3,000 and the fact that the account only had $2,204 available. The entry records Ms McKendrick speaking to Mrs Taouk about the matter and Mrs Taouk advising her to "go ahead with the redraw of $2,204". A redraw in that amount was in fact made on that day. A redraw request for $3,000 dated 18 August 2006, apparently signed by Mr and Mrs Taouk, was in evidence. In her cross-examination, Mrs Taouk denied that she signed the Redraw Request Form and stated that she had no knowledge of any conversation with Ms McKendrick about the request. Mrs Taouk's evidence on these matters must be rejected.
(2)Entry dated 1 February 2008 made by Irene Xexenis in the following terms:
"Najibi Taouk called wanting to confirm Bal on acc 965XXXXXXXX $157,980.58 Bal on account 674XXXXXXXX $288,348.00".
The two figures recorded in the entry accurately state the account balances as at that date. In her cross-examination, Mrs Taouk said that she had no knowledge of such a communication. I also reject that evidence. In my view it is clear that in February 2008 Mrs Taouk was aware that the total amount outstanding on the loan was in excess of $446,000.
(3)Entry dated 1 May 2008 made by Minyoung Kim. This entry refers to the "client" advising that a payment due today will dishonour due to insufficient funds, and arrangements being made for the payment to be made on 9 May 2008. Payments were in fact made in accordance with that arrangement.
(4)Entry dated 2 September 2008 made by Michael Connolly in the following terms:
"Najibi has called and put her son on to discuss they want to close the second split confirmed we would post close of split form to XX Terrace Road Dulwich Hill NSW 2203."
In an affidavit, Mrs Taouk denied that there was any such discussion. Mr Connolly, for his part, deposed to such a conversation in his affidavit. Neither witness was challenged on their account. However, I find that a conversation to the effect recorded in the entry did take place.
(5)Entry dated 3 August 2009 made by Michael Connolly in the following terms:
"Spoke to Najibi she wanted to arrange an increase for the loan of $20,000 transferred to Kaitlyn to set up an appointment."
In an affidavit, Mrs Taouk denied that she sought such an increase in the amount of the loan. She also expressly denied in her cross-examination that she had such a conversation with Mr Connolly. Although Mr Connolly does not depose to the terms of the conversation in his affidavit, I am satisfied that the entry accurately records a request made by Mrs Taouk for an increase in the amount of the loan.
68The evidence plainly demonstrates that, some years before the plaintiffs claim to have discovered that they were the victims of a fraud, Mrs Taouk was well aware of the existence of the loan, the fact that it was divided into two accounts, and that the amount borrowed was as much as $446,000. One of the entries further demonstrates that at least one of the Redraw Request Forms, which the plaintiffs deny they signed, was the subject of discussion between Mrs Taouk and an officer of DMS. Numerous other entries in the recording system show contact with DMS about direct debit arrangements, and the making of payments after some of the monthly repayments had not been met on time.
69I formed a generally favourable impression of Mr Louis as a witness. The reasonably detailed account in his affidavit was not shown to be incorrect in any material way, and his recollection of the detail of the events of 2004 and 2005 appeared to be quite reasonable. Mr Louis gave his evidence in what appeared to be a candid fashion, and appeared to be attempting to accurately answer the questions put to him. He readily accepted that Mr and Mrs Taouk had been very good to him and had welcomed him into their home, and that he started to have financial problems in 2004. Where there is direct conflict between Mr Louis' evidence on the one hand, and the evidence of Mr Taouk or Mrs Taouk on the other, I prefer the evidence of Mr Louis.
70Specifically, I accept Mr Louis' evidence to the effect:
(1)that in the second half of 2004, Mrs Taouk told him that she needed $50,000 and asked Mr Louis whether he knew someone who could help, and that in response Mr Louis suggested Fay Baker;
(2)that Mr Louis was present in Fay Baker's office when there was a discussion in Arabic about a loan which would refinance the existing loan with Westpac and provide an additional sum of about $50,000, and a further loan of $297,000 which could be drawn upon when needed;
(3)that Mrs Taouk later told him that everything was fine with the loan, Westpac had been paid out, and $297,000 was available in another account to use if necessary;
(4)that in February 2005 Mr Louis approached Mrs Taouk and then Mr Taouk, seeking to borrow $50,000, and they agreed to help;
(5)that arrangements were then made for Mr Taouk and then Mrs Taouk to sign a Redraw Request Form, requesting that $50,000 be paid into Mr Louis' account with the National Australia Bank;
(6)that the Redraw Request Form was sent to DMS by facsimile and $50,000 was received into his account on 11 February 2005 (although the form itself appears to be dated 12 February 2005);
(7)that on numerous occasions between October 2005 and February 2006, Mr and Mrs Taouk signed Redraw Request Forms to enable money (totalling a further $143,000) to be paid into Mr Louis' account; and
(8)that between about May 2005 and July 2011, Mr Louis repaid in excess of $116,000 into Mrs Taouk's Commonwealth Bank account.
71I specifically reject the evidence given by the plaintiffs to the effect that Mr Louis asked them to help him or sponsor him to obtain a loan of $50,000. I further specifically reject their evidence to the effect that Mr Louis took their drivers licences, a Medicare card, a council rates notice and a water bill and gave them to Fay Baker in order to obtain a loan and mortgage without the plaintiffs' knowledge, and later took letters containing the loan statements. There is no doubt that from the beginning of 2005, loan statements were sent by DMS to the Property, addressed to Mr Taouk and Mrs Taouk separately. The evidence given by Sandra Taouk suggests that such "paperwork" was generally received and dealt with.
72There is no credible evidence to support the suggestions that Mr Louis was involved in a fraud against the plaintiffs, that he obtained money from them without their knowledge, or that he forged their signatures. Those suggestions have been shown, in my view, to be totally without foundation.
73I also formed a favourable impression of Fay Baker as a witness. She presented as a capable and experienced loan introducer. Her account of the events of late 2004 rested partly on recollection and partly upon what she described as her usual practices. She appeared to be genuinely trying to recall the events, and answer the questions put to her. I generally accept her evidence as honest and reliable, and where there is direct conflict between her testimony and that of either the plaintiffs, I unhesitatingly prefer her account.
74Specifically, I accept Fay Baker's evidence to the following effect:
(1)that she met the plaintiffs (accompanied by their son George, who had recently been a client of Sky) in her office in 2004 and, in the course of a discussion in Arabic about a refinance transaction, advised them about what information would be needed in order to assess a loan;
(2)that the plaintiffs subsequently provided various documents to her (including drivers licences, a Medicare card, a council rates notice and a water bill) and unsigned copies of taxation returns for each of them in respect of the years 2003 and 2004;
(3)that at a meeting in her office attended by the plaintiffs and Mr Louis, she prepared a loan application largely based upon the information so provided;
(4)that on that occasion there was a discussion in Arabic concerning a loan of $460,000, $163,000 of which would be used to pay off the existing mortgage and provide further funds of about $50,000, and $297,000 of which would be available for future investments, following which each of the plaintiffs signed the loan application form in Fay Baker's presence;
(5)that each of the plaintiffs attended her office together on at least one other occasion to sign documents in connection with the proposed loan, including the Loan Contract and mortgage, and a Direction to Pay (which contains Fay Baker's handwriting on the page); and
(6)that when she acts as a Justice of the Peace she uses the name Fatme El Bakkar, and she so acted in relation to Identification Records for a Signatory to an Account which were signed by each of the plaintiffs in relation to the loan, and a Real Property Act Change of Name form which was signed by Mrs Taouk.
75In making the finding in (1), above, I am preferring the evidence of Fay Baker to that of George Taouk. He was an unimpressive witness, who gave his evidence in a rather belligerent and unhelpful manner, and did not appear to have a good recollection of the events. In making the findings at (3) and (4), above, I am preferring the evidence of Fay Baker to that of Mr Louis who recalls attending the office only in the company of Mrs Taouk. I do not find it necessary to resolve the various conflicts in the evidence as to who it was who referred the plaintiffs to Fay Baker.
76I reject the evidence given by the plaintiffs to the effect that Fay Baker only met Mrs Taouk on one occasion in relation to the loan (on which occasion Mrs Taouk signed only one document), and never met Mr Taouk at all in relation to the loan.
77I reject the suggestions made to Fay Baker to the effect that she processed the loan application with Mr Louis without the involvement or authority of the plaintiffs, and that she requested Mr Bernard Moussa (who was a shareholder in Sky and had a business relationship with that company involving the referral of clients and the sharing of the profits of such) to prepare taxation returns to be used in connection with the loan. It is far more likely that the plaintiffs gave the instructions to Mr Moussa to prepare the returns. Insofar as these returns contain inaccurate information, I do not doubt that the plaintiffs would have been quite prepared to supply such information if they saw it as necessary to do so in order to obtain the loan.
78The suggestions that Fay Baker was involved in a fraud against the plaintiffs, and that she may have been responsible for placing the plaintiffs' forged signatures on documents in connection with the loan, have been shown, in my view, to be totally without foundation. I reject the further suggestion that Fay Baker has attempted to conceal the fact that she also uses the name Fatme El Bakkar.
79I accept the evidence given by Mr Manafikhi that he witnessed Mr and Mrs Taouk sign the Loan Contract and the mortgage, and that before he signed those documents as a witness, he requested and obtained some evidence to confirm their identities. I find that those documents were executed by Mr and Mrs Taouk on 16 November 2004. Mr Manafikhi had some recollection of meeting Mr and Mrs Taouk in 2004 but his evidence concerning the signing of the documents was based, not upon a specific recollection of the signing process, but rather his invariable practice when witnessing the execution of loan documents, a task he has carried out on many occasions. Mr Manafikhi gave his evidence in a clear and forthright manner and I have no hesitation in accepting his evidence. I reject the suggestions that he never met Mr and Mrs Taouk, and that they did not sign the Loan Contract and mortgage in his presence. I reject the further suggestion that Mr Manafikhi may have requested Mr Bernard Moussa to prepare taxation returns for Mr and Mrs Taouk.
80I also find that when the Loan Contract and mortgage documents were executed, Mr and Mrs Taouk were at least aware:
(a)that they were to obtain a loan for a total amount of $460,000, $163,000 of which was to be used to repay their loan to Westpac and provide an additional $50,000, and $297,000 of which was to be available to draw upon if required;
(b)that monthly repayments would need to be made in respect of the amount borrowed; and
(c)that there would be a mortgage over the Property in favour of the new lender.
81Knowledge of those matters must have been gained from the discussions held with Fay Baker in relation to the loan, the content of the Loan Contract (which clearly shows the amount of the loan, and refers to monthly repayments), the form of the mortgage, and the plaintiffs' prior experience of borrowing money secured by a mortgage, including the servicing of the existing Westpac mortgage over the Property. In earlier years, the plaintiffs had given mortgages over real property to the Commonwealth Bank and St George Bank. The St George Bank mortgage was given over a property at Picton in respect of which Mr and Mrs Taouk were part owners.
82The plaintiffs pleaded various causes of actions or claims against each of the defendants. The claims against each defendant will be dealt with in turn.