Defrancesca v Ruby Loans Pty Ltd

[2020] SADC 106

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

DEFRANCESCA v RUBY LOANS PTY LTD & ANOR

[2020] SADC 106

Judgment of His Honour Judge Beazley

13 August 2020

TORTS - NEGLIGENCE - ESSENTIALS OF ACTION FOR NEGLIGENCE - DUTY OF CARE

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH

PROFESSIONS AND TRADES

FINANCE BROKER - DUTIES AND LIABILITIES

EQUITY - GENERAL PRINCIPLES - FIDUCIARY OBLIGATIONS - FIDUCIARY DUTY

DEALINGS AND OTHER FORMS OF EQUITABLE FRAUD - FORGERY

FINANCE BROKER - Where plaintiff claims that her purported signature to loan documents was forged by her then partner and joint borrower - where defendant broker unaware of alleged forgery - duties and liabilities of finance broker to client - scope of duty of care to borrowers - specific advice not sought as to the wisdom of incurring further debt - effect of changing circumstances in determining the scope of the duty of care - whether finance broker should have enquired as to the borrowers capacity to meet payments under the loan secured for them - whether broker should have been aware of risk of fraud by one joint borrower - subsequent financial loss by the joint borrower - measure of damages for breach of duty - whether alleged breaches by finance broker causative of any losses - whether the plaintiff has proved that her purported signature was forged.

EQUITY - fiduciary duties - no conflict rule - loan by spouse of the finance broker - whether fiduciary duty owed by the finance broker to the borrowers - whether proper disclosure made by the finance broker of the fact that spouse was a lender - whether finance broker acted in breach of duty to the borrower by assisting the lenders in executing upon their securities for the loan - whether finance broker breached duty not to act in conflict with the plaintiff's interests - measure of equitable compensation for alleged breach of fiduciary duty.

EQUITY - Equitable Remedies - relevance of causal connection between alleged breach of fiduciary duty and the lending of monies - whether plaintiff required to "do equity" - where the proceeds of the subject loan discharged loans previously incurred by the borrowers.

AGENCY - whether the broker was agent of the borrowers - scope of alleged agency - whether proper disclosure made to the borrowers of the brokers arrangements with the lenders - no pleading that broker was agent of the lenders or that any alleged liability of broker ought to be imputed to the lenders.

EVIDENCE - Burden of proof of forgery - failure of parties to call the alleged forger as a witness - general principles in Jones v Dunkel and Blatch v Archer - whether inference ought be drawn against a party for the failure to call the plaintiff's former de facto partner - approach to oral recollections of events which occurred 10 years previously - weight to be ascribed to contemporaneous documents - hypothetical evidence of the plaintiff may have done in respect of the subject loan if aware that her de facto partner had engaged in forgery or fraud.

DOCUMENTARY EVIDENCE - proof of hand writing and signatures - opinion evidence.

DAMAGES - Claim by plaintiff for loss of opportunity to negotiate a settlement of claims by prior lenders - economic loss.

DAMAGES - MITIGATION - Whether plaintiff failed to mitigate loss, in compromising her claim against the group of lenders.

DAMAGES - CAUSATION - Whether sufficient evidence of causation of loss - remoteness - expenses incurred in litigation.

CONTRIBUTORY NEGLIGENCE - Whether plaintiff contributorily negligent - assessment of contribution.

PROPORTIONATE LIABILITY - whether any damages, if awarded to the plaintiff ought be reduced because of actions of concurrent wrongdoers - assessment of respective degrees of responsibility of concurrent wrongdoers - apportionment of liability as between concurrent wrong doers.

HELD

1. The plaintiff has failed to satisfy the court that the signatures on the subject loan document were forged.

2. Save for the question of payments made to the defendants from the proceeds of the subject loan funds, in the respective sums of $3,300 and $6,500, the plaintiff's claims are dismissed. Leave is given to the parties file written submissions within 14 days restricted to whether those two payments constituted a breach of fiduciary duty, or duty of care.

3. I will hear the parties as to any order as to costs.

In the event that the costs of action are not agreed, I direct that each party do file and serve written submissions as to costs, within 21 days of today.

Evidence Act 1929 (SA)  ss 30, 34A, 34C, and 59J; Law of Property Act (1936) s 41; Law Reform Contributory Negligence and Apportionment of Liability Act 2001 (SA) Parts 2 & 3, referred to.
Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43; Oliver Hume South East Queensland v Investa Residential Group Pty Ltd [2017] FCAFC 141; Maguire and Tansey v Makaronis [1997] HCA 23; Permanent Trustee Co Ltd v Burniston (No 2) [2012] WASC 383; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) HCA 22; Kayteal Pty Ltd v Dignan [2011] NSWSC 197; Mayfair Trading Co v Dreyer (1958) 101 CLR 428; Lintrose Nominees v King (1995) 1 VR 575; Tonto Home Loans Aust v Tavare [2011] NSWCA 389; FHR European Ventures LLP v Cedar Capitol Partners LLC [2015] AC 250; Hospital Products Ltd v US Surgical Corporation (1984) 156 CLR 41; Krypton Nominees Pty Ltd v Gutnick [2013] VSC 446; Rawley Pty Ltd v Bell (No 2) [2007] 61 ACSR 648; Vadasz v Pioneer Concrete (SA) Pty Ltd [1995] HCA 14; Ellis v Ellis [2015] WASC 234; First Mortgage Management Investments v Pittman [2014] NSWCA 110; Westpac Banking Corporation v Kekatos [2015] NSWSC 1629; McKay v NAB [1998] 1 VR 173; Kuhl v Zurich Financial Services Aust (2011) 243 CLR 361; Adami v The Queen (1959) 108 CLR 605; Jones v Dunkel [1959] HCA 8; West v GIO (NSW) (1981) HCA 38; Bell Group (In Liq) v Westpac (No 9) (2008) WASC 239; Fifteenth Eestin Nominees v Rosenberg (2009) VSCA 178; Capital Break Service v Meagher [2003] NSWCA 225; Kestrel Holdings v APF Properties [2009] FCAFC 144; Gel Custodians Pty Ltd v Dewar [2014] WASC 177; Dewar v Ollier [2018] WASC 212 and [2020] WASCA 25; Pilmer v Duke Group Ltd [2001] HCA 31; Blong Ume Nominees Pty Ltd v Semweb Nominees Pty Ltd [2019] SASCFC 151; Creswick v Creswick [2010] QSC 339; Australia and New Zealand Banking Group Ltd v Couanis [2020] WASC 125; Australia and New Zealand Banking Group Ltd v Adventure Quest Paintball-Skirmish Pty Ltd [2016] NSWSC 188; Perpetual Trustees of Victoria v Cox [2014] NSWCA 328; Black Magic Design Pty Ltd v Overliese (2011) 191 FCR 1 at [105]-[108]; Breen v Williams (1996) 186 CLR 71; Simpson v Donnybrook Properties Pty Ltd [2010] NSWCA 229; Hunt & Hunt v Mitchell Morgan (2012) 247 CLR 613; Con-Stan Industries of Aust v Norwich Winterthus Insurance Aust [1986] HCA 14; Royal Bank of Scotland v Etridge [2001] UKHL 44; Nocton v Lord Ashburton [1914] AC 932; Polon v Dorian [2014] NSWSC 571; Landmark Operations v TiverNominees [2008] SASC 322; Plenty v Pattinson [2001] SASC 83; Cam & Bear Pty Ltd v McGoldrick [2018] NSWCA 110; Perpetual Trustee Co Ltd v Milanex Pty Ltd (In Liq) [2011] NSWCA 367 at [94]; Astley v Austrust [1999] HCA 6 and [1993] 60 SASR 354; Antov v Bokan [2018] NSWSC 1474; Antov v Bokan (No 2) [2019] NSWCA 250; Neat Holdings v Karatan (1992) HCA 66; Esined No 9 Pty Ltd v Moylan Retirement Solutions and others [2020] NSWSC 359; Vella v Permanent Mortgages [2008] NSWSC 505; Smart v AAI Ltd [2015] NSWSC 621; Perpetual Trustees of Victoria v Menzies [2012] NSWSC 1066; Permanent Custodians Ltd v Nobilo [2012] NSWSC 109; Permanent Mortgages Pty Ltd v Mac Fadyen [2012] NSWSC 130; Bowstead and Reynolds on Agency (19th ed); Elliott "Fiduciory Liability for client mortgage frauds" TLI (1999) Vol 13 (2) p74-84; Aitken "Agency, mortgage originator and loan enforcement" (2016) 41 Aust Bar Rev 220; Heydon "Causal relationships between a fiduciary's default and the principal's loss" (1994) 110 LQR 328; Heydon "Cross on Evidence" 11th ed, Vol 1 at [39105]; Rodrick "Forgeries False attestations and Impostors" [2002] Deakin Law Rev 97; Young "Forged Mortgages" (2010) 84 ALJ 512-513, considered.

DEFRANCESCA v RUBY LOANS PTY LTD & ANOR
[2020] SADC 106

Introduction

·The parties in the subject trial

1. The events leading to the subject proceedings date back to February 2008, when Belinda Anne Defrancesca, (the plaintiff), and her then de facto partner, Andrew Eustice, (Eustice), entered into an ill-fated relationship.

2. That relationship, which only lasted until late January 2010, ended with the loss of the plaintiff’s home, and financial resources.

3. Within a few months of the commencement of the relationship, the plaintiff made the first of two disastrous decisions, when she agreed to a proposal by Eustice, that “they” purchase a River Murray houseboat for the sum of $155,000, in addition to substantial fit-out costs.  Those funds were all paid by the plaintiff, principally from her overdraft facility with the ANZ Bank, but also from a number of subsequent loans, sourced from other lenders.

4. In the second such decision, the plaintiff proceeded with the renovation of her home in the early months of 2009, notwithstanding that her loan facility was, by then, exhausted.

5. Ruby Loans Pty Ltd (the sixth defendant), and Rikki Loffler, (the seventh defendant), had arranged 13 short-term loans for the plaintiff and Eustice between March 2009 and December 2009.

6. The plaintiff claims, in the subject proceedings, damages for alleged professional negligence, and/or equitable compensation for alleged breaches of a fiduciary duty, against the sixth defendant and the seventh defendant, jointly and severally, for losses allegedly sustained by her in consequence of only one of those loans, being the 8^th of 13 loans arranged by them. No claim has been made by the plaintiff against the defendants in respect of any of the other loans.

7. That single loan transaction, the subject of these proceedings, was in the sum of $130,000, (the subject loan), sourced from a group of four private lenders, by the sixth and seventh defendants, in the month in July 2009, purportedly for the benefit of the plaintiff, and Eustice, as the named borrowers.[1] As will soon be plain, the subject loan was expressed to be a short-term loan, with the principal to be repaid within two months.[2]

   [1]    Paragraphs 46 and 47 of the Fourth Statement of Claim (the FSC).

   [2]    EX P1.1 at p 12.

8. The role of Eustice in those losses is central to the remaining issues in the subject proceedings. The plaintiff has alleged that Eustice had forged her signature on each of the subject loan documents, and, indeed, and many other documents, prior to, and subsequent to, the subject loan documents.

9. A further complicating factor is the plaintiff’s allegation that Eustice had also forged the signature of her son, whose alleged task it was to attest to their respective signatures, on the subject loan documents.

   ·Summary judgment against Eustice

10. Eustice is no longer a defendant.[3] On 28 July 2014, the plaintiff obtained summary judgment, by default, against him in the sum of $280,486.16, together with interest in the sum of $30,000.

    [3]    Eustice was initially the 5^th defendant.

11. Save for a number of affidavits sworn by him, and, which were not tendered at the trial, Eustice did not give evidence at any stage of the subject proceedings, which were commenced in the Supreme Court, over 9 years ago on 9 April 2010.

12. Upon the application of the plaintiff, as Petitioning Creditor, Eustice was declared bankrupt, with the Sequestration Order being made on 7 April 2017.  There was no return to any creditor.[4]

    ·The compromise of the plaintiff’s claim against the lenders

    [4]    EX P3. 74 at p 597-605.

13. The four lenders of the subject loan are also no longer defendants, leaving the sixth and seventh defendants as the remaining parties defending the proceedings.[5] In Perpetual Trustees Victoria Ltd v English,[6] this scenario was described as being “a familiar one” where two relatively innocent parties are left to dispute a loss allegedly caused by another. If it is ultimately established by the plaintiff that the signatures on the subject loan documents were forged by Eustice, there is no suggestion that the defendants were at any time aware of, or even suspected such a forgery. Indeed, they continued to arrange loans for the plaintiff and Eustice for at least a further 5 months after the subject loan.

    [5]    They were initially the 1^st to 4^th defendant.

    [6] [2010] NSWCA 32 at [3].

14. The plaintiff had initially brought the subject proceedings against that group of lenders alone.  In the event that she had established those assertions as to forgery, in her action against the lenders, this would have resulted in the subject loan being void as against her, there being no question of indefeasibility, as the mortgage documents were not registered in the subject case.[7]   Eustice of course was a joint borrower. A question, which would have arisen is, whether the lenders would have been entitled to a remedy against him as the alleged perpetrator of the alleged forgery.[8]

    [7]    See Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10 at [3].

    [8]    See Perpetual Trustees Victoria v Cox [2014] NSWCA 328; cf. Perpetual Trustees Victoria Ltd v English, supra.

15. However, the plaintiff elected not to have the question of alleged forgery determined in the proceedings against the lenders, but instead to compromise her claim against those lenders.[9]

    [9]    EX P1.20 at p 166.

16. The terms of the compromise, as detailed in a Deed of Settlement dated 29 February 2012, were that the plaintiff surrendered all claims to ownership of the houseboat, and that the proceeds of sale of the houseboat would instead be paid to those lenders.  The lenders agreed to withdraw their counter claim in the sum of $426,677, including penalty interest under the terms of the allegedly forged Loan Deed.

17. The compromise was expressed to be on the basis that it was without any admission of liability.[10]

    [10] EX P1.20 at p 148.

18. On any view, the result of the compromise was to resolve a relatively simple action, on the plaintiff’s case, and, in effect, replace it with a more complex case against the sixth and seventh defendants.[11]

    [11] Lewis Securities Ltd (In Liq) v Carter [2018] NSWCA 118.

19. It is most unfortunate for all of the remaining parties for the proceedings to have continued in this form. The plaintiff’s case against Eustice would most likely have included the allegation of a fraudulent misrepresentation by him to the plaintiff, in about May 2009, that he would be in a position in the future, to pay out the debts, incurred by the plaintiff in the purchase and fit-out of the houseboat. That issue was not fully explored in the claim against the defendants, as the primary claim by the plaintiff centred upon alleged forgeries by Eustice.

20. The sixth defendant had, at all relevant times in 2009, been the proprietor of a business arranging finance for borrowers.[12]

    [12] Paragraph 29 of the FSC.

21. The seventh defendant had managed that finance business of the sixth defendant, and was, at all relevant times, a finance broker.[13]

    [13] Paragraph 30 of the FSC.

22. Throughout the trial the plaintiff did not seek to distinguish the respective roles of the sixth and seventh defendants. I will accordingly refer to the sixth and seventh defendants as “the defendants”, except when any issue is restricted to one only of them.

    ·Overview

23. The plaintiff denies having entered into the subject loan transaction. 

24. She asserted in her pleadings, and, at least initially, in her evidence at the trial, that the signatures ascribed to her on the subject loan documents, and on some documents recording previous loans, had either been forged, or alternatively had been obtained, by Eustice by deception.[14]

    [14] Paragraphs 17 and 18 of the FSC.

25. The subject proceedings potentially involve a large number of complex legal issues.[15] They include the role of a finance broker, and the nature and scope, if any, of a duty of care to the plaintiff, as a joint borrower, on the facts of this case; whether any fiduciary duty was owed to her by the defendants; whether the relationship between them was one of agency;[16] whether the plaintiff’s apparent signature on the subject loan agreement was forged by Eustice; if so, whether Eustice was authorised to sign the plaintiff’s name on the loan documents;[17] if not, whether the attesting witness signature to the loan agreement was forged by Eustice; if so, the legal effect of such a forgery;[18]  the consequences , if any, which flow from no claim being made by the plaintiff in respect of the other loans taken out in the respective names of the plaintiff and Eustice between February 2009 and December 2009, and where the proceeds of the subject loan were used to pay out some of the previous loans; the questions of ostensible authority and/or ratification by the plaintiff of Eustice’s alleged forgeries;[19] whether the defendant’s alleged breaches were causative of any loss; and whether in compromising her claim against the lenders, the plaintiff had failed to mitigate her alleged damages.

    [15] See Hunt & Hunt Lawyers v Mitchell Morgan Nominees [2013] HCA 10; Mitchell Morgan Nominees v Vella [2011] NSWCA 390; Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505; Perpetual Trustee Co Ltd v El Bayeh [2010] NSWSC 1487; Jeans v Cleary [2006] NSWSC 647; and Permanent Custodians Ltd v Nobilo [2012] NSWSC 109.

    [16] See Perpetual Trustee Co Ltd v Burniston (No 2) [2012] WASC 383; Landa v Perpetual Trustees (Vic) [2013] NSWSC 1685; Tonto Home Loans Aust v Tavares [2011] NSWCA 389; Plenty & Plenty v Pattison & Anor [2001] SASC 42; Esanda Finance Corp Ltd v Spence Financial Group Pty Ltd [2006] WASC 177 and Octapon Pty Ltd v Esanda (NSW) BC 8902608 at [27]-[28].

    [17] Perpetual Trustees Victoria Ltd v XIAO [2015].

    [18] Russo v Bendigo Bank Ltd [1999] VSCA 108 and National Australia Bank v Maher [1995] 1 VR 318 at 332.3.

    [19] Perpetual Trustees Victoria Ltd v Xiao [2015] VSC 21; Learn and Play (Rhodes No 1) Pty Ltd v Lombe [2011] NSWSC 1506 at [21] and Perpetual Trustees Australia v Schmidt [2010] VSC 67.

26. It also, potentially, raises difficult issues of proportionate liability “involving concurrent wrongdoers” pursuant to the provisions of the Law Reform (Contributory Negligence and Apportionment of Liability Act) 2001 (SA); and that of alleged contributory negligence.

27. The events, the subject of the plaintiff’s claim, occurred prior to the commencement of the National Credit Code.[20] The obligations under that Code did not apply to the defendants. On any view, they were not “deemed by the law to be imbued with perfect foresight or be required to foresee every conceivable business risk and to alert a person [in the position of the plaintiff] that her partner may possibly be committing a forgery of her signature”.[21]

    ·The genesis of the subject loan

    [20] See Schedule 1 to National Consumer Credit Protection Act 2009 (which commenced on 1 April 2010).

    [21] See MacIndoe v Parbery (1994) Aust Torts Reports 81–290, approved in Tasmania Sandstone Quarries Pty Ltd v Legalcom Pty Ltd [2010] SASCFC 6; Creswick v Creswick [2010] QSC 339; Elfar v Reg-Gen (NSW) [2010] NSWSC 539; Radin v Commonwealth Bank [1998] FCA 1361 and Bell Group Ltd (In Liq) v Westpac Banking Corporation (No 9) [2008] WASC 239.

28. In Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7 at [35], the High Court stressed that in proceedings of this nature, it is essential to identify the genesis of the subject loan in order to place the proceedings in a proper context.

1. In order to understand the commercial purpose for the subject loan, and to place it in a proper context it will be necessary to detail the plaintiff’s financial history.

2. The critical event was the purchase of that houseboat, prior to which the plaintiff had been financially comfortable. When her formal education had ceased at age 14 years, she became a successful hairdresser.

3. She had been the sole registered proprietor of a house property at Hyde Park (her home), following her divorce, on 29 October 2002. She has four adult children from that previous marriage, including the witness Christopher Reid. She had conducted her hairdressing business, from a garage at her home, which had produced a “modest income”.[22]

   [22] TP 115.

4. Her home was subject to a registered mortgage from the ANZ Bank, which at the time of the commencement of the relationship with Eustice in February 2008, carried a debt of about $136,000.[23]

   [23] See EX D20 and EX P6.

5. On the advice of her brother, prior to her meeting Eustice, the plaintiff had the capacity to borrow up to $400,000 pursuant to that loan facility with the ANZ Bank. The plaintiff, and her brother, had intended to secure her financial future by undertaking a redevelopment of her home, which included building two units in its place.

6. The obvious question is why did the plaintiff put all of her financial security at risk by agreeing to purchase the houseboat? Whatever is the answer, that is precisely what she did.

7. The plaintiff asserts that she was vulnerable at the time she met Eustice. There is no suggestion that the defendants knew or could have known by the time of the subject loan of that asserted vulnerability.

8. By late December 2008, on the defence case, the plaintiff had become overwhelmed by debt, in consequence of that disastrous decision to purchase the houseboat. She had no capacity to meet her ongoing financial commitments.  Her $400,000 loan facility with the ANZ Bank, had been exhausted, and she required additional loans to complete the fit-out of the houseboat, and to pay the costs of renovations to her home, which she had nonetheless, subsequently, commenced in early 2009.[24]

   [24] The plaintiff debt to the ANZ Bank was $398,442.03 as at 14 January 2009.

   The relevance of other loans

9. I repeat that the subject loan was only one of a large number of short-term loans purportedly obtained by the plaintiff, either in her own name, or jointly with Eustice in 2009. Those other loans are relevant to the assessment of the signatures on the subject loan in a number of respects. Most of those other loans were also documented and contained the purported signature of the plaintiff.

10. The plaintiff admits that she had signed only the “Morris Finance Statutory Declaration”, and the Stones’ loan, to which I will later refer. She also deposed in her evidence in chief,[25] that “around the time that the subject loan documents were purportedly signed in late July 2009, Eustice had asked me to sign a number of documents quickly without giving the plaintiff a chance to read them. Sometimes the pages were folded over so that all that was visible was the signature panel”.

    [25] EX P6 at p 763, 35-38.

11. A significant portion of the subject loan funds, advanced by that group of lenders, had been applied to discharge those previous loans, some of which had allegedly been advanced in respect of the fit-out of the houseboat.

12. In the event that the plaintiff is entitled to any relief against the defendants, the question which would then arise, is whether she is required to “do equity”, by reducing her claim by the amounts paid from the subject loan proceeds in respect of the discharge of those previous loans.[26]

    [26] Maguire and Tansey v Makaronis [1997] HCA 23 - Contrast the position of a breach of fiduciary duty.

13. In addition to those other loans, the defendants had made a number of loan applications for long-term refinancing of the ANZ Bank loan, in the names of the plaintiff and Eustice, and included, as potential lenders, Rams Home Loans; Assist Finance Corporation; and MKM Capital.[27] They were ultimately unsuccessful.

    [27] EX D22 and EX P4 at p 958; EX P4 at p 970.

14. On the plaintiff’s case, she was unaware of almost all of the loans purportedly taken out in her name in 2009, including the subject loan.

15. On the defence case, the plaintiff was well aware of the subject loan, and, in addition, those other loans, and the loan applications.

16. At the very least, this evidence of the other loans in 2009, places in context the level of her indebtedness at the time of the subject loan in July 2009, and her capacity, if any, to meet her financial commitments without recourse to the subject loan.

    The subject loan

17. The subject loan, evidenced by documents dated 27 and 29 July 2009, in the total sum of $130,000, was purportedly advanced by the group of lenders to the plaintiff and Eustice jointly.

18. On their case, the defendants were engaged by Eustice to obtain the subject loan as an urgent, short-term loan only.  There was no evidence to suggest that the defendants had been requested to provide advice to Eustice or the plaintiff as to whether it was appropriate to take a short-term loan. I will briefly refer, later in these reasons as to whether a finance broker was obliged, at law, to give such advice at that time. [28] 

    [28] Caldwell v JA Neilson Investments Pty Ltd (2007) 69 NSWLR 120 at 137 even in the case of an insurance broker; Plenty v Pattinson & Anor [2001] SASC 42 and Dewar v Ollier [2020] WASCA 25, and [2018] WASC 212.

19. The stated purpose for the subject loan, if it could be arranged on short notice by the defendants, was, inter alia, to discharge the Morris Finance loan, and yet another loan, this time from BLA Enterprises Pty Ltd, which had also been secured by a Bill of Sale.

20. The loan from Morris Finance Ltd, in the sum of $33,000, had purportedly been obtained by the plaintiff and Eustice jointly on 5 February 2009.  At the time of the subject loan, the Morris Finance loan was grossly in default, and the quantum of the debt was then in excess of $60,000.

21. The urgency for the grant of the subject loan was dictated by a notice from Morris Finance of its intention to sell the houseboat pursuant to the terms of a Bill of Sale.

22. The defendants had had no involvement in procuring the loan from Morris Finance Ltd. That loan had been arranged for the plaintiff and Eustice by another, unrelated, finance broker, Mr Timothy Victory, who was not joined as a party to the subject proceedings.

23. The seventh defendant at the request of Eustice, had verified with Morris Finance Ltd, that its intention was to proceed quickly with a forced sale of the houseboat, unless that loan was paid out in full.[29]

    [29] EX D21.

    The subject loan documents

24. The documents which purportedly evidenced the subject loan were prepared by solicitors, to whom I will refer as “OL”.

25. The documents were not signed in the presence of those solicitors, but collected by Eustice, and returned by him to those solicitors, after they were purportedly signed by Eustice and the plaintiff, and purportedly witnessed by the plaintiff’s son. The solicitors are also not parties to the subject proceedings.[30]

    [30] cf Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA) See also Kayteal Pty Ltd v Dignan [2011] NSWSC 197; Polon v Dorian [2014] NSWSC 571, and Maguire v Makaronis [1997] HCA 23; and Hunt & Hunt Lawyers v Mitchell Nominees Pty Ltd [2013] HCA 10.

26. “OL” also attended to the Stamping and Certification of the subject loan documents; the registration of the Bill of Sale over the houseboat; the lodgement of Caveats over the title to the plaintiff’s home; the preparation of the Disbursement Authority, and the distribution of the subject loan funds in accordance with that purportedly signed authority. “OL” had previously provided similar services in respect of what is, hereafter, referred to as the Stones’ loan in May 2009, including informing the plaintiff and Eustice of their obligations under the terms of the Stones’ loan.

27. The “subject loan documents” are respectively:[31]

    ·A Deed of Loan executed by Eustice and purportedly by the plaintiff, on or about 27 July 2009 (the Loan Deed). This records the advance of $130,000 from Lillian Musolino; Lloyd White; Yvonne White and Hilary Abel (the lenders). Of the total sum, Ms Musolino advanced the sum of $60,000; Mr and Mrs White jointly advanced the sum of $50,000; while Ms Abel advanced the balance of $20,000.

    ·Three memoranda of mortgage, each dated 27 July 2009, being one for each of the lenders, providing security to the extent of their individual advances over the plaintiff’s home.

    ·Three caveats, each of which was registered over the title to the plaintiff’s home, one for each lender dated 27 July 2009, claiming an estate or interest as equitable mortgagee.

    ·A Bill of Sale dated 29 July 2009 (the Bill of Sale), secured over the houseboat, then registered in the joint names of the plaintiff and Eustice, for the full value of the $130,000 advanced by the lenders.

    ·A document entitled “Disbursement Authority” dated 29 July 2009, purporting to authorise the subject loan funds to be disbursed, and which was purportedly signed by the plaintiff and Eustice.[32]  That authority specifically referred, inter alia, to payments made to both Morris Finance Ltd and to BLA Enterprises Pty Ltd in full satisfaction of their respective loans.

    ·Documents entitled “Borrowers Acknowledgement and Warranty” dated 27 July 2009; and “An Authority to Complete” dated 27 July 2009.

    [31] EX P1.1; 1.2, 1.3, 1.4 and 1.5.

    [32] See EX P2.64.

28. One of that group of lenders, who advanced the subject loan funds, Hilary Abel, was the then spouse of the seventh defendant. An issue in the trial was whether the seventh defendant had informed the plaintiff of a potential conflict of interest.

29. The fact that there were 3 separate mortgage documents, with that solely for Ms Abel securing her loan of $20,000, was not the subject of detailed submissions by either party.

30. It was asserted by the plaintiff that Ms Abel, as the seventh defendant’s spouse, stood to earn interest on her $20,000 advance at a rate of 10% per month, or at 12% in the event of default.[33]

    [33] Contrast plaintiff’s written submissions p 4.14.

31. As I have noted the plaintiff had pleaded that her signature, on the subject loan, had been forged by Eustice, but somewhat unusually, in the light of such a serious allegation, had pleaded, in the alternative that, if it were found to be her own signature, then it was procured from her by Eustice, by deception[34].

    [34] EX P6 paragraphs 35-38, 41.

32. That pleading must be seen in context. In her statement dated 17 July 2015, which constituted her evidence in chief, the plaintiff had maintained, “that she had looked at the three unregistered mortgages (one of which is missing the execution page) and the Loan Deed. As with the Bills of Sale, I cannot say for sure whether the signatures are mine or if they were forged”.

33. From time to time throughout her evidence, particularly in respect of previous purported loans, she also expressed herself as not “knowingly” having signed those loan documents.

34. At the completion of her evidence, the plaintiff had abandoned the alternative plea of deception because of “the size of the subject loan documents”, and thereafter solely relied upon the assertion of forgery by Eustice.

35. She further asserts that she did not receive any of the proceeds of the subject loan, nor did she derive any benefit, at all, from it. 

36. The defence case is that the plaintiff had indeed been benefitted, because the proceeds were used to pay out her previous loans, and that she had received a cheque from the “OL” Trust Account for the sum of $10,626.69. I will return to the quantum of that cheque later, as the disbursement authority had specifically referred to the sum of $16,626.69 to be paid to the plaintiff and Eustice.[35]

    [35] EX P2 at p 510.

37. The defendants assert that the subject loan was entirely for the benefit of the plaintiff, failing which the houseboat would have been sold by Morris Finance Ltd.

    The conduct of the subject proceedings

38. The resolution of the issues between the remaining parties has been made even more difficult by the long delays, particularly by the plaintiff, in her conduct of the subject proceedings.  Those delays have been inexcusable notwithstanding that all of the parties have been self-represented at various times. It had been 10 years between the execution of the subject loan documents and the commencement of the subject trial.[36]

    [36] Paragraph 12 of the Fourth Statement of Claim.

39. The proceedings were commenced in the Supreme Court on 9 April 2010 by the plaintiff who sought an injunction restraining the lenders from selling or dealing in any way with the houseboat.

40. Her relationship with Eustice had ceased in February 2010.  I infer that the plaintiff then realised that his representations about obtaining a windfall from a River Murray development within 6 months of May 2009, to which I will later refer, had come to nothing, and she was facing a number of claims.

41. Other proceedings were commenced in the Magistrates Court, and in this Court, by the various other lenders against the plaintiff. [37]

    [37] See EX D7 at p 1401.

42. The plaintiff did not join either Eustice or the sixth and seventh defendants as parties initially.

43. Indeed, it was not until 5 December 2011, that an order was made to join Eustice as the fifth defendant. The sixth and seventh defendants were eventually joined as parties on 24 February 2012.

44. As I have already noted, some 5 days later the plaintiff compromised her claims against the lenders.[38]

    [38] Paragraphs 40 and 50 of the FSC.

45. On 15 November 2012, a Notice of Discontinuance was filed by the plaintiff against the lenders with no order as to costs between them.[39]

    [39] FDN 49 in Supreme Court Action No 464 of 2010.

46. On 28 November 2012, an order was made in the Supreme Court that the subject action be transferred to this Court.[40] A further six and a half years passed before the commencement of the trial.

    [40] The action is now No 2579 of 2012.

47. The summary judgment, by default, against Eustice, does not constitute any admission by him on any issue, including whether he did or did not forge any signatures of the plaintiff, or her son, Christopher Reid.

    The effects of the delay

48. Neither party called Eustice as a witness at the trial. I will address their respective decisions not to call him later in these reasons, however his absence has made the task of determining the question of forgeries more difficult.[41] The only oral evidence to the signatures was that provided by the plaintiff in respect of her “signature”, and by her son as to his “signatures”; save for some “expert” witnesses.

    [41] Creswick v Creswick [2010] QSC 339 at [113]–[125] and MDN Mortgages v Caradonna [2010] NSWSC 1298.

49. The long delay has, understandably, adversely affected the memory of all of the witnesses. Accordingly, the demeanour of the witnesses was of even less assistance than usual, in a case where the honesty and reliability of the witnesses was critical.[42]

    [42] Fox v Percy [2003] HCA 22, and Dewar v Ollier [2018] WASC 212.

50. Some documents had been destroyed or lost over time.[43] They included the original subject loan documents, and the originals of some of the other loan documents, including the BLA Enterprises loan documents. In a case involving alleged forgery, the need for original documents is crucial for a proper assessment of disputed signatures, particularly for the party who carries the onus of proof.

    [43] See EX D32. Affidavit of “OL” solicitor sworn 19 March 2019 at [10].

51. In the subject case, it was also important, because, in addition to the disputed signatures, there was some handwriting which included the word “Labour” or “Labourer”, on some of the loan documents.

52. Other difficulties include the dearth of evidence as to the then current interest rates; the extent of any duty of care of a finance broker prior to the commencement of the National Credit Code in 2010; the difference, if any, between interest rates for short term loans, with or without security on the one hand, and long-term loans with security, on the other; the financial circumstances generally in the community in 2008 and 2009, including the prevalence of what has been referred to as “low document short term loans”.[44]

    [44] See Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505 at [121]-[122]; Perpetual Trustee Co Ltd v Burnistow (No 2) [2012] WASC 383, and Pirie Street Stage 1 v Trotman & Anor [2015] SADC 123; Perpetual Trustees Victoria Ltd v Cox [2014] NSWCA 328 and Perpetual Trustees Australia Ltd v Schmidt [2010] VSC 67.

53. Ultimately it was not in dispute that the “Global Financial Crisis” had an adverse impact on the availability of finance in South Australia at the time.[45]

    [45] Perpetual Trustee Co v Burnistow (No 2) [2012] WASC 383; and Pirie Street Stage 1 v Trotman & Anor [2015] SADC 123.

54. The Courts in various States have been inundated with actions arising out of the “Global Financial Crisis”.[46]

    [46] Hunt & Hunt v Mitchell Nominees Pty Ltd [2013] HCA 10; Perpetual Trustees Victoria Ltd v Menzies [2012] NSWSC 1066; Tonto Home Loans Aust v Tavares [2011] NSWCA 389; Permanent Custodians Ltd v Nobilo [2012] NSWSC 109; Creswick v Creswick [2010] QSC 339; Elfar v Reg-Gen (NSW) [2010] NSWSC 539; and Perpetual Trustees Victoria v XIAO [2015] VSC 21.

55. The inherent doubts which arise as to the reliability of recollections of events which occurred many years ago were noted by the High Court of Australia in West v GIO (NSW)[47] and more recently, by other appellate Courts, in Bell Group Limited v Westpac Banking Corp (No 9);[48] Fifteenth Eestin Nominees Pty Ltd v Rosenberg,[49] and Watson v Foxman.[50]

    [47] (1981) 148 CLR 62 at 69.

    [48] [2008 WASC 239.

    [49] (2009) 24 VR 155.

    [50] (1995) 49 NSWLR 315 at 319.

56. In Watson’s case, the Supreme Court of NSW, said, relevantly:

    …human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interests, as well as conscious consideration of what should have been said or could have been said. All too often, what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed.

57. In Savril Contractors Limited v Bank of New Zealand[51], the Court of Appeal noted research to the effect that:

    A fair judicial decision is unlikely by the time 10 years has passed after the occurrence of the events on which a claim is based due to the deterioration of the evidence of the true facts … at this point adjudication will as likely result in that judicial remedy for a claimant with a spurious claim as one with a meritorious claim.

    [51] [2004] NZCA 4 at [18].

58. In Capital Brake Service Pty Ltd v Meagher,[52] the Court of Appeal (NSW) expressed the need for caution in making findings of fact, and informing conclusions on liability in professional negligence, because of the danger associated with hindsight. That warning is particularly apt where so much time has elapsed between the date of the alleged conduct, the subsequent date of the alleged loss and the evidence given during the trial.

    [52] [2003] NSWCA 225 at (30).

59. In Hall v Foong, Debelle J, said, in a case concerning the question of causation, and in particular what the alleged victim would have done had she been aware of a breach of duty:[53]

    It is important that the Court does not allow hindsight to insinuate itself into its reasoning. Hindsight is no doubt useful in other contexts but, as a general rule, it must be avoided when determining liability. … In this world there are few things that could not have been better done if done with hindsight. The advantages of hindsight include the benefit of having a sufficient indication of which of the many factors present are important and which are unimportant. But hindsight is no touchstone of negligence. The standard of card to be expected of a professional man must be based upon events as they occur, in prospect and not in retrospect.

    [53] (1995) 65 SASR 281.

    Procedural matters

    ·Documentary evidence

1. At the commencement of the trial, the plaintiff sought to tender 5 large volumes as tender books, containing what were said to be contemporaneous documents. Objections had been taken by the parties as to some of the documents.  Save for certain documents which were clearly inadmissible, I received the balance of those documents, to which objection had been taken, de bene esse. Throughout the trial, the tendered volumes were amended from time to time, and supplementary documents, including Exhibit D7, were tendered without objection.

2. I made a number of orders with respect to some specific documents in dispute.[54]

   [54] See orders made 13/3/19, 15/3/19 and 18/3/19.

3. I do not intend to give individual rulings on all other documents in these reasons. If any documents are referred to, and form part of the reasoning process, I have found that they are relevant and admissible. If I do not mention them, then I have regarded them as either inadmissible, or of insufficient weight to influence my findings.

   ·Some specific objections

4. Volume 3 of the Tender Books contained three types of documents which were in dispute as follows:

   ·One documented the sequestration order for Eustice’s Bankruptcy dated 7 April 2017 together with details of the plaintiff’s claimed debt of $355,342.76 as at that date. Those documents were plainly relevant and were accordingly admitted at the trial.

   ·Another involved solely an affidavit of Jacqueline McPherson sworn on 8 March 2019. It related to the usual practice of the plaintiff on most occasions on a Wednesday. I admitted that affidavit which did not add anything to the plaintiff’s evidence on that topic.

   The prior convictions of Eustice

   ·The third involved a bundle of documents, marked as Exhibit P3, which was produced on subpoena and detailed criminal offences committed by Eustice in New South Wales and Queensland principally between 2000 and 2002.

5. Allegations of a very serious nature have been made against Eustice by the plaintiff.

6. The plaintiff sought to tender those documents as evidence of the likelihood that Eustice had forged the signatures of the plaintiff and/or Mr Reid on the subject loan documents. The criminal offence of forgery involves both a false signature, and an intent to defraud.[55]

   [55] ANZ Banking Group Ltd v Couanis [2020] WASC 125 at [48] and Perpetual Trustees Victoria Ltd v Xiao [2015] VSC 21.

7. I have been conscious of the fact that he has not been heard in the subject proceedings when I have come to consider those allegations.

8. Eustice had been convicted of a dishonesty offence in Queensland. While the offence, involving a dishonoured cheque for the purchase of a motor vehicle, had occurred in early 2002, he was only convicted of it on 22 February 2011. The District Court, having noted his oldest son’s illness, and the financial difficulties faced by Eustice, imposed a sentence of 15 months imprisonment, suspended after 5 months in custody.

9. In New South Wales, he had committed a number of dishonesty offences between 1998 and 2000. They generally involved the offences of obtaining credit without disclosing that he was a discharged bankrupt. He ultimately served 5 years imprisonment, partly in New South Wales, with the balance upon transfer to South Australia.

10. The plaintiff conceded that Eustice had told her, at the time of the commencement of their relationship, that he had criminal convictions. He told her that he was on home detention at the time.[56]  Counsel for the plaintiff submitted that there was a question about what, precisely, she had been told by Eustice, and that the Court ought to find that she was not told about the precise convictions.

    [56] TP 78-79.

11. Evidence of previous offences may be admitted in a civil trial for various purposes. They may, if logically probative, as correctly submitted by the plaintiff, be admitted as evidence of the likelihood of forgery, or fraud especially where the previous offences were strikingly similar.  See Sheldon v Sun Alliance Australia Ltd.[57]

    [57] (1989) 53 SASR 97 – See also Evidence Act 1929 (SA) s 34P as to criminal trials.

12. Counsel for the plaintiff however expressly excluded any use on the basis of propensity.[58]

    [58] See s 45A(2)(a) and (c) of the Evidence Act 1929 (SA) and written submissions at [60].

13. Obviously if there had been a criminal conviction in consequence of the same event, then pursuant to s 34A Evidence Act 1929, the conviction would constitute proof of the conduct in the civil trial. As to s 34A of the Act, while a complaint was made by the plaintiff to them, the police declined to issue criminal proceedings against Eustice.

14. They may be admitted, in limited circumstances as provided in s 26 of the Act, for the purpose of assessing the credibility and reliability of Eustice as a witness, had he been called as a witness.[59]

    [59] See White v Woodward [2020] VSC 258; Perpetual Trustee Co Ltd v El-Bayeh [2010] NSWSC 1487 at [110] – [114].

15. They may also be relevant to other minor issues including whether a Jones v Dunkel inference ought to be drawn against either party for failing to call Eustice as a witness in the trial.

16. I determined at the start of the trial that I should receive that evidence of the previous convictions, de bene esse. At that stage I did not know whether Eustice would be called as a witness.

17. I indicated to the parties that I would determine, later in the trial, whether that evidence was logically probative of the question as to whether Eustice had forged any signatures, or otherwise had deceptively obtained the signatures of others.

18. I have no doubt that Eustice, in the years 2000 to 2003, was a person of bad character.

19. Plainly however, without more evidence, that bad character alone cannot prove that he forged any of the loan documents.

20. The evidence of bad character may add to the weight of any other evidence of the alleged forgery by him. [60] I will discuss this question of the purposes for which the evidence was received, when I deal with the evidence of forgery later in these reasons.

    [60] See White v Woodward, Supra; Tasoulas v Tasoulas [2018] NSWSC 861; and Perpetual Trustees v Xiao [2015] VSC 21; and Vu v NSW Crime Commission [2013] NSWCA 282.

    The oral evidence

21. Ultimately 6 witnesses were called to give oral evidence.

    ·The plaintiff’s witnesses

22. I affirmed orders that had been made upon directions hearings, that the plaintiff’s evidence in chief be that set out in the statement executed by her on 17 July 2015, and as subsequently amended by orders of the Court, together with such other evidence in chief as I permitted.[61]

    [61] The Statement – EX P6 as amended by order made on 13/3/19 to exclude parts of paragraphs 19, 28.3, 39, 41 and 59. See also TP 60-62.

23. She was extensively cross-examined by counsel for the defendants.

24. The plaintiff called her son Christopher Reid on the topic of whether he had signed the subject loan documents.

25. The plaintiff also called, as a witness, Carolyne Bird, a forensic scientist, who gave evidence of an expert nature, limited however, to the method of forensically assessing signatures. Somewhat surprisingly, she had not been requested by the plaintiff to give evidence as to the signatures themselves.

26. The plaintiff elected not to call any expert evidence as to the genuineness or otherwise of the signatures in dispute,[62] thereby relying on the evidence of Christopher Reid, and the plaintiff herself, as to the respective purported signatures, ascribed to them.

    ·The defendants’ witnesses

    [62] See Evidence Act 1929 (SA) s 30 and Adami v The Queen (1959) 108 CLR 605.

27. The seventh defendant gave evidence, and called, as witnesses, Henry Kutek, to give evidence of an expert nature as to the genuineness of the signatures in dispute; and Noelleen Williams, to give evidence as to various documents prepared by “OL” solicitors, and a telephone discussion with either Mr Reid, on the defence case; or Eustice, on the plaintiff’s case, as to Mr Reid’s “occupation” for the purpose of the Bill of Sale securing the subject loan.

28. An objection was taken, by the plaintiff, as to the evidence of Mr Kutek, including as to the written reports made by him.

29. I determined that I should receive Mr Kutek’s evidence de bene esse. The parties accepted that approach.[63] I will discuss this issue further when I deal with Mr Kutek’s evidence.[64]

    ·Evidence given by affidavit

    [63] TP 211-215.

    [64] See Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority (No 11) [2018] NSWSC 368, and Makita (Aust) Pty Ltd v Sprowles [2001] NSWCA 305.

30. The plaintiff and the defendant tendered a number of affidavits including that of Melanie Louise Hrvatin sworn 14 August 2010;[65] two affidavits sworn by Yvonne White being respectively Exhibit D10 and Exhibit D18; the affidavit of David Weber, as to the value of the houseboat, being Exhibit D19; and affidavits including Exhibit D9 and two affidavits by Willem Ouwens being Exhibits D32 and D33. The evidence contained in those affidavits was not in dispute.

    [65] TP 17.

    Dealing with the submissions of counsel

31. I was greatly assisted by the respective written and oral submissions of Mr Heuzenroder, Ms Clark and Mr Lazarevich. Those submissions totalled well over two hundred pages. I do not intend to detail all of them in these reasons. I have considered and taken into account all of those submissions.

    The current pleadings

32. In light of the unfortunate history of the subject proceedings, it is necessary to detail the current pleadings following the “resolution” of the plaintiff’s claims against the group of lenders, and against Eustice.

    ·The plaintiff’s pleadings

33. In her Fourth Statement of Claim, filed on 10 November 2014, the plaintiff claims the same relief against both the sixth defendant, and its employee, the seventh defendant.[66]

    [66]  cf. Polon v Dorian [2014] NSWSC 571.

34. The plaintiff’s claim against the defendants is, in essence, that they held themselves out to be the agents of the plaintiff and the fifth defendant; that they owed the plaintiff a duty of care arising from the relationship of finance broker and client; that they owed the plaintiff a fiduciary duty arising from the relationship of agent and principal, and that they acted in breach of their respective duty of care to the plaintiff and their fiduciary duty to the plaintiff, but for which breaches, the plaintiff would not have entered into the transaction, the subject of the claim.

35. I repeat that there was no suggestion that the defendants were aware of any alleged forgery or fraud by Eustice.

36. The plaintiff specifically pleads the following causes of actions:

    ·Negligence

    She asserts that:

    ·Each defendant owed her “a duty of care arising from the relationship of finance brokers and client”.[67]

    ·The loan documents were either forged by Eustice or obtained by deception.

    ·The scope of the duty was to exercise all of the due care and skill of a reasonably competent finance broker in arranging the [subject loan], in explaining the nature and effect of [it] to the plaintiff, and in advising her of any risks associated with it”.

    ·She had no knowledge of the subject loan documents; did not receive the loan funds or any part of them, nor did she derive any benefit from the subject loan.

    ·The defendant breached their duty of care by failing to:

    ·       Ensure that the plaintiff understood the nature and effect of the transaction;

    ·       Explain the risks of the transaction to the plaintiff.

    ·Breach of fiduciary duty

    [67] Contrast Permanent Mortgages Pty Ltd v MacFayden [2012] NSWSC 130; and Perpetual Trustees Australia v Schmidt [2010] VSC 67.

37. The plaintiff asserts that:

    ·The defendant owed her a “fiduciary duty arising from the relationship of agent and principal”;

    ·The scope of the duty was “to obtain instructions from her; to follow her instructions; to disclose any conflict of interest; to avoid any conflict of interest; and to exercise due care, skill and diligence”;

    ·The defendant breached their fiduciary duty by:

    ·       Failing to comply with the scope of their duty;

    ·       Failing to avoid “conflicts of interest by acting on the instructions of and assisting the [group of lenders] in instructing lawyers on behalf of the [group of lenders] and in attempting to take possession of the houseboat”.

    ·Remedies

    ·The plaintiff asserts an entitlement to equitable compensation as the loss would not have occurred but for the breach of duty”.[68]

    ·The plaintiff claims, in addition to interest and costs:

    ·       “Forfeiture of agency fees/commission and an account for profits against them for breach of fiduciary duties”.

    ·       “Damages in the sum of $280,486.16 jointly and severally”.

    [68] See Blackmagic Design Pty Ltd v Overliese [2011] FCAFC 24.

38. In her Reply, the plaintiff asserts that:

    ·she did not give authority for the subject loan funds to be distributed;

    ·that she was unaware of the existence of loans other than the Stones’ loan; and

    ·that it was reasonable for her to compromise her claim against the group lenders.[69]

    [69] See Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38.

    ·The defendants in their fourth defence:

    ·Admit “at law” that certain aspects of their relationship with the plaintiff including by receiving a commission, and in acting on instructions from Eustice, “may give rise to a relationship of agency”.

    ·Deny that:

    ·       the subject loan documents were forged;

    ·       that the plaintiff suffered any losses from the conduct of the defendants.

    ·Assert that:

    ·       The plaintiff was in need of finance by February 2009 and otherwise could not, or would not have been in a position to pay out her debts to the ANZ Bank or to those employed in the fit-out of the houseboat or in the renovation of her home.

    ·       The plaintiff was at all times well aware that the houseboat was subject to a Bill of Sale to Morris Finance Ltd and the subject loan documents.

    ·       The subject loan was disbursed as authorised by her to pay out existing debts to the plaintiff to Morris Finance Ltd and BLA Enterprises Pty Ltd; the debts of Eustice and other liabilities of the plaintiff.

    ·       The plaintiff discussed a short-term loan with the seventh defendant on 8 or 9 April 2009, which loan was repaid in May 2009; and the fact that Hilary Abel was his spouse.

    ·       That the plaintiff was well aware of the risk of not meeting the obligations under the subject loan, having been involved in the Stones’ loan previously

    ·       That the subject loan documents were prepared by solicitors known to the plaintiff from the previous Stones’ loan which she admits having entered into.

    ·       That they were under no duty to investigate whether Eustice, her ongoing partner, would forge any documents; nor indeed to investigate their relationship.

    ·       That the plaintiff suffered no loss from any alleged forgery, and any losses were caused by her own acts or omissions.

    ·       The defendants also pleaded both contributory negligence; and that the plaintiff’s claim for damages is apportionable.

39. The defendants did not seek to plead, by way of defence, that the judgment by the plaintiff against Eustice had amounted to an election by the plaintiff having the effect of discharging them from any potential liability.[70]

    [70] Scarf v Jardine (1882) 7 AC 345 and Morel Brothers v WestMoreland (1903) 1 KB 64.

    The issues

    1.Were any of the signatures on the subject loan documents forged by     Eustice?

    2.The nature, of the relationship between the plaintiff, and the sixth and seventh defendants.

    2.1    Whether the seventh defendant was the agent of the plaintiff?

    2.2    Whether Eustice was the agent of the plaintiff?

    2.3    Whether the seventh defendant was the agent of the lenders?

    3.Whether the defendants owed a duty of care, or alternatively a fiduciary duty to the plaintiff, and if so the scope of any such duty of care owed by them.

    4.Whether the alleged acts or omissions of the seventh defendant were causative of any loss to the plaintiff, and, whether the plaintiff would not have acted differently in any event.

    5.Whether the plaintiff was unaware of the existence of the Morris Finance Ltd; BLA Enterprises Pty Ltd and the subject loans as at 29 July 2009.

    6.     Whether the plaintiff has ratified previous loans and the subject   loan by her subsequent conduct.

    7.Whether the plaintiff could or would have been in a position to have paid monies outstanding to the lenders Morris Finance Ltd and BLA Enterprises so as to avoid a forced sale of the houseboat, having regard to her financial position, in particular her acknowledged indebtedness to the ANZ Bank, and to Mr and Mrs Stone.

    8.What consequences, if any, ought to flow from the failure of either party to call Eustice as a witness in the trial.

    9.     Whether the plaintiff had failed to mitigate any alleged loss.

    10.What is the quantum of the plaintiff’s claim in the event that a breach of duty and causation is established by the plaintiff.

    11.Whether the plaintiff must “do equity” in this case by allowing a credit for the repayment of her previous alleged debts from the disbursement of the proceeds of the subject loan.

    12.The relevance, if any, of the record keeping of the sixth and seventh defendants, and whether any consequences ought to flow from their alleged failure to keep adequate records of instructions from the plaintiff and Eustice.

    13.    Any contributory negligence by the plaintiff.

    14.Whether the plaintiff’s claim is an apportionable claim in which one or more wrongdoers had also committed wrongdoing from which the plaintiff had suffered alleged loss pursuant to the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA).

    14.1  Whether “OS” solicitors were “wrongdoers” under the Act.

    14.2  Whether Eustice was a “wrongdoer” under the Act.

    ·The principal witnesses

40. Before detailing some of the evidence, it is appropriate to say something, briefly, about my impressions of the principal witnesses, namely the plaintiff, the seventh defendant, and Christopher Reid. The evidence of the “OL” was not in dispute.

41. I have no doubt that the memories of all three principal witnesses were adversely affected by the gross delay between the events in 2009, and when giving their respective evidence in 2019.

42. I also have no doubt that each of the principal witnesses reconstructed some of the events to which they have deposed.

    ·The plaintiff

43. I sympathise with the plaintiff for the position in which she found herself in 2009, and for the financial losses which she has suffered.

44. I also accept that the plaintiff had placed her trust in Eustice on all financial matters between 2008 and early 2010.

45. I have no doubt that the plaintiff was besotted with him during the whole of that period. That can be the only explanation for the plaintiff agreeing to the purchase and fit-out of the houseboat. Once she embarked on that course, she had exhausted her funds. With the benefit of hindsight, and being less trusting, she should not have proceeded to incur even more debt, by commencing renovations to her home.

46. The subject trial however involves the plaintiff’s claim, not against Eustice, but against the defendants.

47. Her embarrassment about giving Eustice that trust was plain when giving her evidence. She had been aware that Eustice had a poor reputation, but had accepted his explanations without reservation.

48. Counsel for the defendants were highly critical of her credit as a witness. For the reasons which follow, I do not accept that the plaintiff was a reliable witness. I have therefore treated her evidence with caution unless it was supported by contemporaneous documents or other established facts.

1. The plaintiff was evasive when presented with documents which “demanded” concessions by her. She maintained a denial of knowledge of anything that might connect her with previous loans, despite the inevitability of a finding adverse to her.

2. I have no doubt that she has convinced herself that Eustice was solely responsible for her misfortune, and that this has clouded her evidence. Of particular concern, however, is that since providing her statement in 2015, the plaintiff has altered her evidence from admitting that she did not know whether the signatures were hers, albeit through the deception of Eustice, to being adamant that they were forged, at the trial.

   ·Christopher Reid

3. I was generally impressed by Mr Reid as a witness, giving evidence about two events involving alleged signatures so long ago.

4. I have no doubt that he was an honest witness, doing the best that he could to recall the events. On any view, if they did occur, they would not have been significant events.

5. He was obviously, and naturally, concerned about his mother, and the change in her financial position. There were a number of significant events over a short time involving Eustice and his mother, including the purchase and fit-out of the houseboat, and the renovation of her home in 2008 and 2009.

6. It must have been an exciting time for his family and indeed himself over that short period.  Mr Reid conceded that at all times, he was on good terms with Eustice.

7. Subsequent events including the loss of the houseboat, and finally the plaintiff’s home, would have been overwhelming for Mr Reid.

8. Mr Reid’s evidence was restricted to the issue as to whether he had signed documents in respect of what I will refer to as the BLA loan in June 2009, and the subject loan in late July 2009, as a witness to the respective signatures of Eustice and the plaintiff.

9. He was cross-examined about his witness statement[71] which he had signed on each page.

   [71] EX P16.

10. He very properly conceded that each of the signatures was different, and that there were variations between his signatures from one page to another. He conceded that the differences were explicable by whether he signed quickly or slowly.

11. He did accept that the signature, on the subject loan mortgage document in favour of Ms Abel,[72] purporting to witness his mother’s signature, did appear to be similar to his normal handwriting.[73]

    [72] EX P1.5 at p 126.

    [73] TP 267-268.

12. I repeat that I have no doubt as to his honesty as a witness. The question which remains is whether his memory of the events is reliable, or, in his case, unwittingly reconstructed over the long periods of delay.

    ·The seventh defendant (Mr Loffler)

13. I was generally impressed by his honesty and reliability as a witness. As it transpired he had dealt directly with Eustice on most of the loans. He did not know anything of Eustice’s criminal antecedents.

14. He regarded his role as obtaining relatively small loans for borrowers, employing the then prevalent “low document” arrangements.[74]

    [74] See Tonto Home Loans Aust Pty Ltd v Tavares [2011] NSWCA 389 and Perpetual Trustee Pty Ltd v Burnistow (No 2) [2012] WASC 389.

15. In relation to larger loans, in this case for refinancing existing bank mortgages, he would prepare a detailed submission to financiers.

16. He would generally obtain the smaller loans from friends or family. They were short-term loans only. As to the larger short-term loans, including the subject loan of $130,000; and the Stones’ loan of $125,000, he would refer the parties to a solicitor, “OL”, who would prepare the loan documents and disburse the loan monies. He believed that he had no further role to play.

17. The plaintiff’s counsel was particularly critical of his evidence on 5 specific topics.

18. The first concerned whether the seventh defendant had attended upon the plaintiff and Eustice on 8 April 2009, in respect of a cash loan of $7,000, and had told her that Ms Abel was his spouse.

19. I have no doubt that he, in fact, had arranged a cash loan of $7,000 from Yvonne White. There is equally no doubt that that sum was requested of the seventh defendant by Eustice.[75]

    [75] Ex D10 at p 2-3.

20. At issue was whether the cash, ultimately, after expenses, in the sum of $6,000 was hand delivered to Eustice and the plaintiff at her home.

21. I readily accept that the seventh defendant’s memory on specific loans was poor, notwithstanding that 10 years had intervened by the time of trial.

22. He was also asked to explain how a disbursement authority purportedly signed by the plaintiff and Eustice had included a handwritten date of “8/4/10”, if it truly reflected an authorisation dated 8 April 2009. He was cross examined about his record keeping generally.

23. The second issue was whether he had spoken to Eustice and the plaintiff by telephone on or about 16 June 2009, albeit with the plaintiff in the background.

24. The third issue was whether he had witnessed the plaintiff’s signature on 2 July 2009 on a document involving an application to Assist Finance for a loan.

25. The fourth issue involved the decision by him to assist the lenders to enforce the Bill of Sale over the houseboat against the plaintiff and Eustice.

26. The final issue involved the apparent receipt by the defendants of various sums, disbursed by “OL” from the proceeds of the subject loan, but in particular the respective sums of $3,300 as “fees”, and $6,500, the latter being unexplained.

27. The Disbursement Authority expressly required a sum of $16,629.69 to be paid to the plaintiff and Eustice, yet only $10,629.69,[76] was paid to them.

    [76] TP 309-310.

28. I will discuss each of these matters further when detailing his evidence on these topics.

29. Save for those matters I had no doubt that he did his best to accurately recall the events so long ago. It was not suggested that he was involved in any alleged fraud by Eustice.

    ·Summary

30. I am confident that each of the three principal witnesses has convinced himself or herself over time as to what they now believe had occurred. The respective memories of each of them had undoubtedly been adversely affected over the long period of delay since the subject loan. They each did not have a specific memory of many events, but in some cases held a belief as to what they would have done or said[77]. Save for the particular concerns which I hold about the plaintiff’s evidence on some matters, I have otherwise found that none of them gave evidence that they knew to be deliberately untrue.

    [77] Dewar v Ollier [2018] WASC 212.

31. In light of my doubts as to their respective recollections of events which occurred so many years ago, and the partiality of at least one of them, I have placed the most significant weight upon the reliable contemporaneous documents contained in the voluminous tender books, and the inferences which I can properly draw from them.

    Synopsis of the events which predate the subject loan

32. I set out in a chronological form a synopsis of the following background facts which were established by reliable contemporaneous documents tendered at the trial:

    ·The purchase of the houseboat

33. The plaintiff did not assert, in her evidence, that Eustice had misled her, at least at the time of the decision to acquire the houseboat in about mid-2008.

34. On a fair reading of all the evidence, she was content to leave financial matters in his hands at all relevant times.

35. Plainly, if she was to be the sole source of the funds for the purchase, and fit‑out, it would result in her being unable to fund a redevelopment of her home.

36. In any event, she decided that she would renovate her home rather than redevelop it. No capital was provided by Eustice, nor did she demand payment of any capital from him at that time.

37. In about May or June 2008, Eustice and the plaintiff “agreed” to purchase the subject houseboat from Russell Ward for the sum of $155,000.[78] The houseboat was not complete, but required a significant fit-out. The plaintiff deposed that she left all the negotiations for the purchase and the fit-out to Eustice.[79]

    [78] The receipt for the houseboat was dated 3 July 2008. EX P1.18 at p 162.

    [79] TP 88, EX P1.18

38. On various occasions in her evidence, the plaintiff deposed that Eustice had told her about an interest which he asserted that he had, with his family, in a land development on the River Murray. The plaintiff’s evidence on this topic, however, was somewhat vague. She later deposed that it was in or about May 2009, when discussing the Stones’ loan, that Eustice had told her that he expected a windfall from that development “within six months”.

39. It may be that Eustice did misrepresent his financial prospects, much later, at the time of the Stones’ loan in mid-2009, but the plaintiff did not make any claim against him for misrepresentation or undue influence by him, at the time of the purchase of the houseboat.

    ·The payment for the houseboat

40. As it transpired, the plaintiff had little recollection of each of the payments made by her for the purchase and fit-out of the houseboat. Initially she suggested that she had given cash to Eustice, who in turn paid the vendor. Despite the vagueness of that evidence, I have no doubt that the plaintiff did pay the whole of the purchase price from her ANZ Bank loan facility.

41. There was some confusion in her evidence about certain payments identified subsequently from the bank statements. This was the result of the monies being given to Eustice, who would pay the trades people.

42. While ultimately it is of little relevance, the probable payments for the purchase were as follows:

    ·A bank cheque in the sum of $45,000, drawn on 7 July 2008;

    ·A bank cheque in the sum of $95,000, drawn on 16 July 2008; and

    ·A cash payment of $15,000.[80]

    [80] EX P1.38 and EX P1.33, cf. TP 101.

43. While Eustice was, at the time, engaged in a “public speaking role”, and working for a courier business, the plaintiff was undoubtedly aware that he did not have significant funds when he was on home detention.

44. There was also some confusing evidence about the source of finance, and the quantum of the fit-out costs.

45. I repeat that no capital was provided by Eustice for the purchase or fit-out.

46. The houseboat was substantially completed by December 2008. It was registered with the number “X01075”, in the respective names of the plaintiff and Eustice jointly.

47. I do not accept the plaintiff’s evidence that she did not know that it was registered in both names.

48. Despite her poor financial position at that time, she was initially adamant that the houseboat was not to be used to produce income. I did not accept that evidence.

49. I infer that the houseboat was indeed purchased for the very purpose of producing income. It defies common sense that it would not be so used, when it was finally completed.

50. The plaintiff blames Eustice for her present financial circumstances.  I am satisfied that she justifiably regards the purchase of the houseboat as the cause of her impecuniosity.  This has plainly coloured her evidence on any matter involving Eustice.  But for his request that she purchase the house boat, there is no doubt that she would have redeveloped her home.

51. The plaintiff deposed that Eustice did no work on the houseboat, and that he was “lazy”.[81]

    [81] TP 84.

52. I do not accept her evidence on that topic either.

53. I have no doubt that he and his relatives did undertake some works on the fit-out, in addition to supervising the contractors engaged by him.

54. The difficulty with her evidence, on this topic, is that she was still besotted with Eustice throughout 2008 and 2009. She expected that he would repay her, and that it was intended by both of them that it would then be his houseboat.

55. When cross-examined, the plaintiff was asked:

    QWas part of the discussion that the boat could be used for leasing out and earning an income.

    ANo, it wasn’t.

    QWasn’t there a discussion that the boat could earn an income but to get an income it needed to be put into what’s called an “in survey standard”.

    AThat’s what he said.

    QDid he tell you that an “in survey standard” was something to do with getting a Certificate of Survey from the Australian Maritime Safety Authority.

    AYes, I think so.

    QDid he say that you needed to have a Certificate if you were to use the boat for commercial purposes?

    AWell I suppose so, he was supposed to pay me back for [the houseboat] as it was going to be his boat. (my emphasis)

    QSo are you saying the arrangement was that it was going to be his boat.

    ANo, what I’m, saying is – what I’m saying is I bought the boat, he wanted the boat and he wanted it for – to lend out and get rent in.[82]

    [82] TP 83.

56. The plaintiff denied suggesting that the houseboat be placed in joint names. She did concede that she did not make any fixed arrangements with Eustice for the repayment of the purchase or the fit-out costs. She deposed that, she left it all for Eustice to do, because she trusted him.[83]

    [83] TP 87.

57. In consequence of her payments for the houseboat, Eustice would be taken, in equity, to hold his interest on trust for the plaintiff.[84]

    [84] See Radan and Stewart “Principles of Australian Equity and Trusts”, 2^nd ed, (2012) 28.216.

58. The defendants accept that the plaintiff trusted Eustice. They submit that the plaintiff would have entered into the loans requested by Eustice, and that it is not open to her, now, to assert that she would not have entered into the subject loan but for alleged breaches of a duty of care, or of a fiduciary duty by them.[85]

    ·The cost of the fit-out

    [85] See Simpson v Donnybrook Properties Pty Ltd [2010] NSWCA 229 at [97]-[101].

59. While the plaintiff deposed that she had paid $83,810 on the fit-out, the invoices produced at trial totalled about $55,000. The absence of Eustice as a witness also impacted upon a reconciliation of the fit-out costs.  I have used my best endeavours to determine those costs.

60. The sum of $7,000 which was paid by bank cheque to Mannum Slipway on 6 February 2009, was plainly paid from the proceeds of the Morris Finance loan.

61. One invoice, for the fit-out costs, in the sum of $22,000, dated 17 December 2008, was long outstanding when finally paid in about late March 2009. [86] A number of other invoices were also not paid until much later.

    [86] EX D7 at p 1299 and TP 109 as at March 2009.

62. This question of the cost of fit-out is of more than passing interest. The plaintiff’s counsel attempted to use the total costs as evidence of the value of the houseboat, for the purpose of assessing damages. I do not accept that this is an appropriate basis for assessing value.[87] The actual amounts paid for the fit-out, and the source of those funds, are also relevant to the plaintiff’s financial position in January 2009. The plaintiff maintained, during the trial, that she had no understanding that other loans were needed to meet apparently mounting debts. See Permanent Custodians Ltd v Nobilo.[88]

    [87] See ETSA v O’Leary (1986) 43 SASR 26; McDonald v FCLT (NSW) [1915] HCA 54; Plenty & Anor v Pattison [2001] SASC 42.

    [88] [2012] NSWSC 109.

63. By late December 2008, the plaintiff, Eustice, and some family members had a meal for Christmas on the then almost completed houseboat. She repeated that at the time she trusted Eustice and only looked at correspondence if he brought it to her attention.[89] She was content to let him conduct all negotiations, and to make payment to the contractors from her funds.

    ·The plaintiff’s finances in the lead up to the subject loan

    [89] EX P6.23.

64. The houseboat was not in a position to earn income at any time, because its commercial use was dependent upon the grant of a Certificate of Survey from the Australian Maritime Safety Authority.  The plaintiff’s home renovations were not completed.  Eventually these factors adversely affected the respective values of each asset and resulted in prospective lenders declining to refinance the ANZ Bank loan on a long-term basis.

65. In mid-October 2008, the ANZ bank loan had been in debit to the sum of $388,571.20. Interest on the borrowings at that time varied between 7.97% and 11.97% per annum.

66. As early as 14 January 2009 in consequence of the purchase, and the then limited fit-out of the houseboat, the borrowings on the ANZ Bank loan facility, had increased to $398,442.03.[90] The plaintiff and Eustice had opened a joint bank account with the Goodwood Road branch of the Bendigo Bank, with a balance of $1,211.66 as at 2 August 2008.

    [90] ANZ Account Woodville North Branch - Statement no 66.

67. Between 2 February 2009, and 1 May 2009, a total sum of $24,675.34 was paid into that account, with the sum of $23,863.81 withdrawn. It was the defence case that the deposits were from a number of loans obtained in the plaintiff’s name; and the withdrawals were used to pay for the fit-out of the houseboat or the renovations to her home.[91]

    [91] EX D8.

68. In light of the ANZ Bank loan credit limit of $400,000, the plaintiff had no capacity to repay the ANZ Bank loan, nor to do any further work on the houseboat. She certainly had no funds to renovate her house at that time without another source of finance.

    The primary issue

    The plaintiff’s claim of alleged forgeries by Eustice of the subject loan documents

    ·The evidence

69. I turn now to a synopsis of the evidence on the topic of whether the plaintiff’s signature and/or Christopher Reid’s signature on the subject loan documents was or were forged by Eustice. It will be necessary to consider each of those alleged “forgeries” separately. For reasons that I will explain, the two do not stand or fall together.

70. I stress again that the plaintiff’s claim is limited to the subject loan. However, it is, in the circumstances of this case, essential to set out in detail, other relatively contemporaneous loans, including one not even arranged by the defendants,[92] in order to determine what the plaintiff knew about them, and when.

    [92] See Perpetual Trustees Victoria v Xiao [2011] VSC 680.

71. The plaintiff’s counsel had submitted in their written submissions at [62] that “the fact in issue on the question of forgery is whether the plaintiff had knowledge of the various loans apart from the Stones’ loan in May 2009, or whether she was the victim of deception by Eustice”.

    ·    The loans purportedly obtained by the plaintiff prior to the subject loan

    A.The Morris Finance loan – arranged by a separate Broker

72. On 5 February 2009, in a loan transaction, which I repeat was neither arranged by nor had involved the defendants in any way, Morris Finance Ltd provided $30,000 plus GST, in loan funds, purportedly to Eustice and the plaintiff, which loan was secured by a Bill of Sale over the houseboat. The plaintiff denied having any knowledge of that loan.

73. The plaintiff acknowledged that she was for a short time, a client of a firm of accountants, Henson Lloyd, as at 13 November 2008.[93] She was shown a series of documents dated 22 December 2008, one of which referred to a loan application for $33,000 to pay for the fit-out to the houseboat.[94]

    [93] TP 117 and EX D7 at p 1300.

    [94] EX D7 at p 1307.

74. That loan application, to Morris Finance Ltd had specified that the plaintiff and Eustice, had a joint after-tax income of $126,605 with her estimated after tax income being $71,900.

75. It contained the assertion, that the houseboat had cost $240,000, and it was expected to produce, initially, gross earnings of $25,000. It disclosed a number of “commitments”, including the $400,000 ANZ Bank Facility.

76. A Privacy Act authorisation accompanying the application, appeared to have been signed by both Eustice and the plaintiff.[95]

    [95] EX D7 at p 1306.

77. There cannot be any doubt that, in December 2008 and January 2009 an application for a loan in the sum of $33,000 was sought, purportedly for the plaintiff and Eustice, by a finance broker, Mr Timothy Victory of Victory Commercial Finance.[96]

    [96] EX P1.35 and EX D7 TP 1305-1331.

78. An invoice, dated 6 January 2009, contained the purported signatures of the plaintiff and Eustice, and noted that “the proceeds of $30,000 be forwarded to the Bendigo Bank – Goodwood Road – account No 132168592”.

1. In addition, while the state of the evidence was unclear as to the sum of $6,500 apparently received by the sixth defendant, a question arises as to that payment. I appreciate that the respective sums of $3,300, and $6,500 were set out in the subsequent Disbursement Authority apparently approved by both Eustice and the plaintiff. There is no doubt that Eustice approved it as deposed to by Ms Williams.

2. However, the plaintiff would not have been in the position to appreciate the payments for “fees” in respect of the $3,300 or the basis for payment of the $6,500 without some further explanation.

3. It may be that the parties accept the propriety of those payments. On one possible view, there is a need to account for those payments.[276]

   [276] In re: Ellis; Ellis v Ellis [2015] WASC 77.

4. In light of the dearth of evidence before me, and the brief submissions on this point at the trial. I am of the opinion that the parties ought to be given the opportunity to consider their positions with respect to those two sums of $3,300 and $6,500 respectively.

5. There is a difference between the two payments. The seventh defendant had sought the payment of $3,300. That may, subject to submissions fall within the common law duty of care, or alternatively constitute a misrepresentation, not the subject of a claim.

6. By contrast the payment of the $6,500 a breach of a fiduciary duty, or a claim for money had and received.

7. There can be little doubt that if the defendants did owe a fiduciary duty to the plaintiff in respect of the disbursement of the loan funds to themselves, there would be a shifting onus upon themselves to justify the payments.[277]

   [277] See Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd [2018] HCA 43 at [85]-[97] and Berry v CCL Secure Pty Ltd [2020] HCA 27 at [29].

8. I direct that, in the event that the parties cannot reach agreement about those respective sums of $3,300 and $6,500, that each have liberty to provide short submissions within 14 days of the date of receipt of these reasons for judgment.

9. In the event that the parties are able to reach agreement on this issue, they should advise the Court of the orders which are sought by them.

10. In the event that no submissions are forthcoming, I will order that the plaintiff’s claim for breach of a common law duty of care be dismissed for the above reasons.

    The claim for breach of fiduciary duty

    ·A claim in fiduciary duty

    The plaintiff pleaded that the defendants owed her a fiduciary duty, the scope of which was to:

    ·       Obtain and follow the plaintiff’s instructions;

    ·       Disclose and then avoid any conflict of interest; and

    ·       Exercise due care, skill and diligence as a finance broker.

    Did the defendants owe a fiduciary duty to the plaintiff?

11. I will be brief on this topic, as in my opinion, the defendants, save perhaps for the disbursed monies to which I have referred, did not owe any fiduciary duty to the plaintiff.

12. The plaintiff asserted that the defendants fall within the description of an “agent” in the extended sense referred to in Tonto’s case; and that it did not matter that the defendants had no authority to bind the plaintiff and Eustice.

13. He described the arrangement between the seventh defendant and the plaintiff as that of an “incomplete” agent.

14. He also referred to the seventh defendant as an agent de son tort and that his duties as a remunerated professional agent de son tort must be of the fiduciary nature as that of a contracted professional agent.

15. He submitted that both defendants owed the plaintiff the following duties:

    ·To obtain instructions from the plaintiff.

    ·To follow the plaintiff’s instructions.

    ·To disclose any conflict of interest.

    ·To avoid any conflict of interest.

    ·To exercise due care, skill and diligence.

16. He submitted that there was also a duty to avoid pure economic loss to the plaintiff.

17. I do not accept that any fiduciary duty arises in respect of any of the above matters which constitute “prescriptive obligations”.

    Principles of Law

18. In Pilmer v Duke Group Ltd (In Liq)[278] at [115] the High Court explained that:

    In this country, fiduciary obligations arise because a person has come under an obligation to act in another's interests.  As a result, equity imposes on the fiduciary proscriptive obligations (my emphasis) not to obtain any unauthorised benefit from the relationship and not to be in a position of conflict.  If these obligations are breached, the fiduciary must account for any profits and make good any losses arising from the breach.  But the law of this country does not otherwise impose positive legal duties on the fiduciary to act in the interests of the person to whom the duty is owed.

    [278] (2001) 207 CLR 165.

19. In FHR European Ventures LLP v Cedar Capital Partners LLC.[279] Lord Neuberger said at [261]:

    The following three principles are not in doubt and they are taken from the classic summary of the law in the judgment of Millett LJ and Bristol and West Building Society v Mothew.  First, an agent owes a fiduciary duty to his principal because he is someone who is undertaking to act for and on behalf of his principal in a particular matter in circumstances which give rise to a relationship of trust and confidence. Second, as a result, an agent must not make a profit-out of his trust and must not place himself in a position in which his duty and interest may conflict – and, as Lord Upjohn pointed out in Phillps v Boardman, the former proposition is part of the wider rule. Third, a fiduciary who acts for two principals with potentially conflicting interests without being formed a consent of both is in breach of the obligation of undivided loyalty; he puts himself in a position where his duty to one principal may conflict with his duty to the other. Another well-established principle which applies where an agent receives a benefit in breach of his fiduciary duty is that the agent is obliged to account to the principal for such a benefit, and to pay, in effect a sum equal to the profit by way of equitable compensation.

    [279] [2015] AC 250.

20. In Krypton Nominees Pty Ltd v Gutnick[280] Robson J said at [329] that there are various indicia which may indicate that a fiduciary relationship exists.

    [280] [2013] VSC 446.

21. In Hospital Products Ltd v US Surgical Corporation (1984) 156 CLR 41 the High Court said:

    The critical feature of accepted fiduciary relationships is that the fiduciary undertakes or agrees to act for all on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense.

    A second is where a relationship of trust and confidence exists.

    A third is where a party has a disadvantage, vulnerability or unequal bargaining power giving rise to reliance on the other person.

    There is, however, the notion underlying all the cases of fiduciary obligation that inherent in the nature of a relationship itself is a position of disadvantage or vulnerability on the part of one of the parties which causes him to place reliance upon the other and requires the protection of equity acting upon the conscience of that other.

    … In the decided cases, various circumstances have been relied on as indicating the presence of a fiduciary relationship. One such circumstance is the existence of a relation of confidence, which may be abused. However, an actual relation of confidence – the fact that one person subjectively trusts another – is neither necessary for nor conclusive of a fiduciary relationship – an ordinary transaction for sale and purchase does not give not rise a fiduciary relationship simply because the purchaser trusted the vendor and the latter defrauded him.

22. In Rawley Pty Ltd v Bell (No 2) [281] Finn J said:

    Outside of commercial agency, partnership and trust relationships care needs to be taken in concluding that commercial parties are in a fiduciary relationship for some or all purposes … because such a relationship, commonly, possesses characteristics (for example, known adversarial interests, the reasonable expectation of self reliance) which negative a fiduciary finding.

    [281] [2007] 61 ACSR 648.

23. In Breen v Williams[282]Gaudron and McHugh JJ said:

    These circumstances, which are not exhaustive and they overlap, have included the existence of a relation of confidence, any quality of bargaining power, an undertaking by party to perform a task or fulfil a duty in the interests of another party, the scope for one party to unilaterally exercise a discretion or power which may affect the rights or interests of another, and a dependency or vulnerability on the part of one party that causes that party to rely upon another.

    [282] [1996] 186 CLR 71.

24. Even where the fiduciary relationship relates to a well-established category such as an agent/principal, it is still necessary to determine the particular obligations owed and as to what acts or omissions amount to a breach. In Bristol and West Building Society v Mothew,[283] Millett LJ said:

    Not every breach of duty by a fiduciary is a breach of fiduciary duty.

    His Lordship drew a distinction between fiduciary duties and those other duties a person occupying a fiduciary office may owe to his principal. Most fiduciaries, including solicitors, owe their principals a duty of skill and care in carrying out the business for which they have been engaged. This duty may be contractual or tortious, and in other cases it may find its historical provenance in equity. A director, for instance, owes his company a duty of skill and care that is actionable in what is sometimes called the equitable jurisdiction of the courts, and a trustee likewise owes a duty of skill and care in the management of his fund that would not have been recognised in the common law courts. These are ‘equitable’ duties that bind a person who happens to stand in a fiduciary relation to his principal, but they are not fiduciary duties. Millett LJ explained that: ‘the expression “fiduciary duty” is properly confined to those duties which are peculiar to fiduciaries and the breach of which attracts legal consequences differing from those consequent upon the breach of other duties.

    [283] (1998) Ch 1.

25. In Rexstraw v Johnson [2003] NSWCA 287, the Court of Appeal (NSW) explained:

    That if a solicitor, in that case, was “in breach of a duty of care to his or her client, it does not necessarily follow that he or she is in breach of any fiduciary duty owed to the client. The fiduciary duties of a solicitor are more limited in scope and do not include a duty to exercise reasonable care and skill, as such duty is essentially tortious. There was no obligation of a fiduciary nature to inform [the borrowers] of anything, and any such duty arose not from a fiduciary duty, but [if at all] from a duty of care in tort.

26. I do not intend in these reasons to detail the case law dealing with an incomplete agency.

27. The principles as to the incurrence of fiduciary obligations were set out at length in Oliver Hume South East Queensland Pty Ltd v Investa Residential Group Ltd [2017] FCAFC 141 at [33]-[60] and [235]-[259]. I will not include them, as these reasons are already too long. For the same reason, I will not set out the very detailed reasons of the Full Court of the Supreme Court of South Australia in Blong Ume Nominees Pty Ltd v Semweb Nominees, supra save for at [69] where the Court said:

    In Clay v Clay, Gleeson CJ, McHugh, Gummow, Hayne and Callinan JJ described the moulding of a fiduciary duty to the nature of the relationship as a truism:

    We should add that, in any event, we do not accept the reasoning whereby the Full Court concluded that Mrs Clay acted in breach of her fiduciary duties as guardian in acquiring Queenslea Drive from the estate of her late husband to provide a home for herself and the children. It is a truism that the scope of her fiduciary duty was, to adopt the words of Mason J, to be ‘moulded according to the nature of the relationship and the facts of the case’. His Honour also observed that, in some cases, ‘the so-called rule that the fiduciary cannot allow a conflict to arise between duty and interest … cannot be usefully applied in the absolute terms in which it has been stated’.

28. It is plain that the necessary factors giving rise to a fiduciary duty can be gleaned from the established categories, which include that of a principal and agent relationship. However, “fiduciary relationships” are of different types and carry different obligations so that a test appropriate to determine whether a fiduciary relationship exists for one purpose might be entirely inappropriate for another.

29. On the plaintiff’s case, at its highest, the defendants would be akin to a “canvasing agent” who has limited power to alter their principals’ legal relations. In the Oliver Hume case, supra, at [52] they were described as having “the capacity to alter their principals legal position, by receiving and communicating information on their principals’ behalf, or sometimes hold money on their behalf”.

30. That case of an “incomplete agency” does affect that “agents” equitable duties; “such that the precise scope of the duties must be moulded according to the nature of the relationship”.

31. In my opinion, the relationship between the plaintiff and Eustice on the one hand and the defendants on the other does not fall within even the lowest level of an incomplete agency.

32. The defendants’ role, at least in respect of the subject loan was to seek out a lender for the specific sum on an urgent basis.

33. In my opinion, whatever “label” is attached, whether it be agent de son tort or “incomplete agency”, the defendants did not owe any fiduciary duty, save perhaps to ensure the correct disbursement of the subject loan funds by “OL”.

34. In Simpson v Donnybrook Properties Pty Ltd, supra the Court of Appeal said of financial advisors.

    There is no doubt that at least some investment advisors will owe fiduciary duties. However, it is an error to think that merely because one can put the tag “investment advisor” on a defendant that he or she will be a fiduciary: Pilmer v Duke Group Ltd [2001] HCA 31; 207 CLR 165, 197. It will depend on the circumstances of the case, ASIC V Citigroup Global Markets Australia Pty Ltd (No 4) [2007] FCA 963; 160 FCR 35, 75 at [266]

    Examples of financial advisers not being fiduciaries are provided by Pavan v Ratnam (1966) 23 ACSR 214 (NSWCA); Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40; 33 WAR 321.

    Conclusion

35. I reject the plaintiff’s case that the defendants owed her a fiduciary duty.

36. In the event that I am in error as to the question of a fiduciary duty, that duty would be confined to avoiding a conflict of interest.

37. This question was considered in a number of cases including Maguire and Tansey v Makaronis [1997] HCA 23, and in Polon v Dorian [2014] NSWSC 571.

38. In Maguire’s case, the Court said:

    From various decisions in recent years there appear attempts to throw a fiduciary mantle over commercial and personal relationships and dealings which might not have thought previously to contain a fiduciary element. In some instances, the forensic advantage has sought to be gained.

39. However, in that case the solicitors had, in effect, hidden the fact that they were the effective lenders. The Court set out at length the need for notice of a conflict to be given to the borrower.

40. As to appropriate notice of a conflict the High Court in Maguire said:

    “ … in the circumstances disclosed above, if the appellants were to escape the stigma of an adverse finding of breach of fiduciary duty, with consequent remedies, it was for them to show, by way of defence, informed consent by the respondents to the appellants’ acting, in relation to the Mortgage, with a divided loyalty. What is required for a fully informed consent is a question of fact in all the circumstances of each case and there is no question of fact in all the circumstances of each case and there is no precise formula which will determine in all cases if fully informed consent has been given. The circumstances of the case may include (as they would have here) the importance of obtaining independent and skilled advice from a third party. On no footing could it be maintained that the appellants had taken the necessary steps of this nature to answer the charge of breach of fiduciary duty. However, it should be noted that, contrary to what appeared to be suggested by the respondents in argument, there was no duty as such on the appellants to obtain an informed consent from the respondents. Rather, the existence of an informed consent would have gone to negate what otherwise was a breach of duty. [citations omitted] [underlining added]

41. In Blackmagic Design Pty Ltd v Overliese.[284] As Besanko J (with whom Finkelstein and Jacobson JJ agreed) said:

    [284] (2011) 191 FCR 1 at [105]-[108].

    The second matter raises a difficult question as to what constitutes the breach of the relevant fiduciary duty. On one view there is no duty to disclose a conflict and when judges refer to a duty to disclose in this context it is no more than a shorthand way of referring to the defence of fully informed consent by the principal. As I have said, the law in Australia is that fiduciary duties are proscriptive and not prescriptive. On this view the breach of fiduciary duty is the conduct of the fiduciary in placing himself in a position of conflict. Disclosure is simply means of avoiding a breach, not a duty. The loss which is recoverable by way of equitable compensation on this view is that which would not have occurred if the conflict had not arisen and not the loss which would not have occurred had disclosure have been made. In Hill v Rose [1990] VR 129 (“Hill v Rose”), Tadgell J said (at 144):

    The aim therefore superficially resembles that of the common law award of damages but is achieved. If necessary, not by merely awarding monetary compensation but by way also of granting peculiarly equitable relief such as indemnity and rescission: Robinson v Abbott, at p 368.

    Moreover, equity’s approach to providing redress differs from that of the common law in that it depends upon treating the fiduciary’s obligation as one of a personal character to make restitution to the beneficiary or to the trust estate. So much appears from the judgment of Street J in Re Dawson (deceased) [1966] 2 NSWR 211, at pp 214-16, cited with approval by Brightman LJ in Bartlett v Barclay’s Bank Trust Co Ltd (No 2) [1980] Ch 515, at 543. The obligation imposed by courts of equity upon defaulting trustees and other fiduciaries is of a more absolute nature than the common law obligation to pay damages for tort or breach of contract. It follows that the obligation is not limited or influenced by common law principles governing remoteness of damage, foreseeability or causation. The question for considering is not whether the loss was caused by or flowed from the breach. Rather, as Street J put it in Dawson’s Case, at 215: … the enquiry in each case would appear to be whether the loss would have happened if there had been no breach.

    The other view is that the duty is not to act in conflict without the informed consent of the principal and that there are many decisions of high authority where the courts have said that there is a duty of disclosure in circumstances of conflict of interest and duty. As to the latter part of this proposition, reference may be made to Tracy v Mandalay (1953) 88 CLR 215 at 240 per Dixon CJ, Williams and Taylor JJ; BLB Corporation of Australia Establishment v Jacobsen (1974) 48 ALJR 372 at 378; Walden Properties Ltd v Beaver Properties Pty Ltd [1973] 2 NSWLR 815 AT 835 PER Hope JA. (See also the Hon Mr Justice Gunnow, “Compensation for Breach of Fiduciary Duty”, in Youdan TG (ed), Equity, Fiduciaries and Trusts (Carswell, 1989)).

    It seems to me the first view is the correct one. It seems to me to be the orthodox approach because there is undoubtedly a breach when the fiduciary places himself or herself in a position of conflict. The breach is excused or perhaps does not arise if the principal consents. In other words, it is not enough that there be disclosure, there must be consent. Disclosure is part of a defence.

    Moreover, there is well-established authority to the effect that the equitable obligations of a fiduciary are proscriptive, not prescriptive. In Breen v Williams,[285] Gaudron and McHugh JJ said (at 113) that Australian Courts only recognise proscriptive fiduciary duties (see also Gummow J at 137-138). The principle that fiduciary duties are proscriptive and not prescriptive has been applied in a number of cases.[286]

    Insofar as it might be argued that prescriptive duties may be imposed upon a director despite Breen v Williams (which the Plaintiff does not accept), that is in any event confined to a duty to act bona fide in the interests of the company and for a proper purpose, not any duty of the nature alleged by the Defendant (a duty to advise, a duty to prevent payments, a duty to take legal advice). Whether or not prescriptive duties may be imposed upon a fiduciary, the duties that are alleged are manifestly untenable.

    Moreover, the content of any prescriptive duty (to act bona fide in the interests of the company and for a proper purpose), if it were alleged (which it is not), and if there be prescriptive duties despite Breen v Williams, must conform to the equitable proscriptions.

    [285] (1996) 186 CLR 71.

    [286] See eg, P & V Industries Pty Ltd v Porto (2006) 14 VR 1; Levy v Bablis [2007] NSWSC 565; Wilden Pty Ltd v Green (2009) 38 WAR 429; Blackmagic Design Pty Ltd v Overliese (2011) 191 FCR 1.

1. In my opinion, appropriate notice had been given by the defendants as to the role of Ms Abel. As to the plaintiff’s understanding of loan documents I point out that the plaintiff acknowledged that at the signing of the Stones’ loan on 14 May 2009, “OL” solicitor had explained to her the terms of that loan and her obligations. The plaintiff had signed an acknowledgement to the effect that she had been advised to obtain independent legal and financial advice, and informed “OL” that she was happy to proceed even though she had not obtained legal advice.[287]

   [287] TP 302.

2. In the subject case the plaintiff, I have found, was well aware that Ms Abel was the spouse of the seventh defendant. Not only did the seventh defendant tell her so but she had previously provided a number of short-term loans to the plaintiff and Eustice.

3. I also note that Ms Abel provided only $20,000 by way of the subject loan. She received advanced interest of $2,000. Her loan was on the same terms and conditions as to interest as on the BLA loan, which it replaced.

4. Having regard to my findings that there was no fiduciary duty owed, I do not intend to deal with the assistance given by the sixth defendant to the lenders for the sale of the houseboat, save to note that the plaintiff obtained an injunction restraining the sale.

   Summary

5. In my opinion, each of the plaintiff’s claims against the defendants have failed save for the question of the two sums of $3,300 and $6,500 respectively.

6. In consequence of my conclusions, I do not propose to deal any further with the assessment of damages. I have already referred to the difficulties in respect of that question in consequence of the compromise of the claim by the lenders against the plaintiff, and the true value of the houseboat.

7. I have no doubt that in the event that I was in error, the plaintiff would be obliged to “do equity” by giving credit for the payments made to Morris Finance and BLA Enterprises from the $130,000 together with an appropriate allowance for interest. See Maguire’s case, supra, and Kayteal Pty Ltd v Dignan [2011] NSWSC 197. This would reduce the plaintiff’s claim significantly.

8. I do not propose to discuss the question of causation in light of my findings.

9. I do not need to discuss the questions of contributory negligence by the plaintiff, nor to apportion liability between the potential concurrent wrongdoers Eustice; “OL” and the defendants pursuant to the Act, save that overwhelmingly the role of Eustice would have been the most significant contribution. See Hunt & Hunt v Mitchell Morgan [2013] HCA 10; and Polon v Dorian, supra.

10. I have already discussed the question of an alleged failure to mitigate on the limited basis submitted by the defendants.

11. I do however make clear that a plaintiff “cannot be said to have incurred any loss which might have been avoided by taking steps as a reasonably prudent person in his or her position would have taken to avoid further loss to himself or herself”.[288]

    [288] Sherson & Assoc v Bailey [2009] NSWCA 275 at [77].

    Conclusion

12. For the above reasons.

    ·I reject the plaintiff’s case that the subject loan documents were forged.

    ·Save for the respective sums of $3,300, and $6,500 disbursed to the seventh defendant and the sixth defendant respectively:

    ·       I dismiss the plaintiffs claim of a breach by the defendants of their common law duty of care.

    ·       I dismiss the plaintiff’s claim of breach of fiduciary duty by the defendants.

    ·I order that in so far as any party intends to put submissions in respect of those sums of $3,300 and $6,500 respectively, that they file brief written submissions within 14 days of the delivery of these reasons.

    ·I reserve the question of costs.

    ·I will make the final orders once the parties have had the opportunity to consider these reasons.

    ·I adjourn further consideration until 28 August 2020 at 9.15am