Fast Funds Pty Limited v Coppola

[2010] NSWSC 470

CITATION:	Fast Funds Pty Limited v Coppola; Coppola v Hall [2010] NSWSC 470 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	9-12 February & 4 March 2010
JUDGMENT DATE :	14 May 2010
JURISDICTION:	Equity
JUDGMENT OF:	Slattery J at 1
DECISION:	ORDERS: 1 The Possession proceedings are stayed until further order. 2. Direct the parties to consult one another with a view to agreeing within seven days upon the quantum of the sum due by Elio and Maria Coppola to Fast Funds and the other lenders within seven days but in the absence of agreement for each party to file its own calculation of the amount due. 3. Direct the parties to consult and agree if possible within seven days upon short minutes of order to give effect to this judgment. If agreement is not forthcoming within seven days, each party should file short minutes of order for which that party contends and serve the same on the other party. 4. Grant liberty to apply. See paragraph [304] of judgment for final short minutes of order.
CATCHWORDS:	EQUITY - equitable remedies - whether a series of loan and mortgage transactions should be set aside - whether the loans were regulated by the Consumer Credit Code - whether unjust transactions within Code s 70 and Contracts Review Act s 7 - business purpose declaration executed under power of attorney - one borrower ignorant of transactions but benefits from them - HELD - loans not for business or investment purposes - Code applies - lender breached the Code - mortgage unjust within Code s 70 and Contracts Review Act s 7 - loan obligations varied - lender's rights to enforce stayed pending compliance with the Code s 80
LEGISLATION CITED:	Australian Securities and Investments Commission Act 2001 (Cth) Consumer Credit (New South Wales) Act 1995 ss 5, 6 Consumer Credit (New South Wales) Code ss 6, 11, 14, 15, 21, 40, 43, 70, 71, 80, cl 7 Consumer Credit (Queensland) Act 1995 Contracts Review Act 1980 (NSW) s 4, 7, 9 Fair Trading Act 1987 (NSW) Powers of Attorney Act 2003 (NSW) ss 43, 51, 52 Real Property Act 1900 (NSW) s 57 Trade Practices Act 1974 (Cth) Uniform Civil Procedure Rules 2005 (NSW) s 100
CATEGORY:	Principal judgment
CASES CITED:	Australian Financial Direct Ltd v Director of Consumer Affairs Victoria (2004) VSC 526 Bahadori v Permanent Mortgages Pty Ltd (2008) 72 NSWLR 44 Baltic Shipping Co v Dillon (“the Mikhail Lermontov”) (1991) 22 NSWLR 1 Beneficial Finance Corporation v Caravas (1991) 23 NSWLR 256 Benjamin v Ashkian [2007] NSWSC 735 Bridgewater v Leahy (1998) 194 CLR 457 Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 Fabre v Arenales (1992) 27 NSWLR 437 Hraiki v Beljon [2008] NSWSC 775 Jones v Dunkel (1959) 101 CLR 298 Kowalczuk v Accom Finance [2008] NSWCA 343 No Fuss Finance Pty Ltd v Miller [2006] NSWSC 630 Permanent Mortgages Pty Ltd v Cook (2006) NSWSC 1104 Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 Rafiqi v Wacal Investments Pty Limited (1998) ASC Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153 S H Lock (Australia) Ltd v Kennedy (1998) 12 NSWLR 482 Smith v Samuels (1975) 12 SASR 573 Spina v Permanent Custodians [2009] NSWCA 206
PARTIES:	Fast Funds v Coppola: Plaintiff: Fast Funds Pty Limited First Defendant: Maria Coppola Second Defendant: Elio Coppola Third Defendant: Pepper Finance Corporation Limited Fourth Defendant: Permanent Trustee Australia Limited Fifth Defendant: Bank of Western Australia Limited Sixth Defendant: Commonwealth Bank of Australia Coppola v Hall: Plaintiff: Maria Coppola First Defendant: Simon Clear Hall Second Defendant: George Romiz Third Defendant: John Storm Fourth Defendant: Fast Funds Pty Limited Fifth Defendant: Finance Consultancy Group Pty Ltd
FILE NUMBER(S):	SC 2009/289358 Fast Funds v Coppola; 2009/290634 Coppola v Hall
COUNSEL:	Fast Funds v Coppola: Plaintiff: Mr V Bedrossian Defendants: Mr M Condon Coppola v Hall: Plaintiff: Mr M Condon Defendants: Mr V Bedrossian
SOLICITORS:	Fast Funds v Coppola: Plaintiff: Bransgroves Lawyers First and Second Defendants: Moloney Lawyers Third Defendant: Kemp Strang Fourth Defendant: Bray Jackson & Co, Solicitors Fifth Defendant: Gadens Lawyers Sixth Defendant: D A Cohen Coppola v Hall: Plaintiff: Moloney Lawyers First, Second, Third & Fourth Defendants: Bransgroves Lawyers Fifth Defendant: No appearance

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

SLATTERY J

FRIDAY 14 MAY 2010

2009/289358 FAST FUNDS PTY LIMITED v MARIA COPPOLA; ELIO COPPOLA; PEPPER FINANCE CORPORATION LIMITED; PERMANENT TRUSTEE AUSTRALIA LIMITED; BANK OF WESTERN AUSTRALIA LIMITED AND COMMONWEALTH BANK OF AUSTRALIA

2009/290634 MARIA COPPOLA v SIMON CLEAR HALL; GEORGE ROMIZ; JOHN STORM; FAST FUNDS PTY LTD AND FINANCE CONSULTANCY GROUP PTY LTD

JUDGMENT

1 HIS HONOUR: Events in late 2007 placed members of the Coppola family in acute financial distress. They turned to high interest rate lenders for assistance. The internal dynamics of the family moulded their dealings with these lenders. Now family members seek to set aside the loan dealings in which they were involved. The question in this case is whether the law will allow that to occur.

2 These proceedings principally concern three loan transactions made between members of the Coppola family and Fast Funds Pty Limited and related lenders in 2008 and 2009. Elio and Maria Coppola claim relief setting aside the second and third of these transactions. These two later transactions and the securities supporting them are still in place.

3 In the first loan transaction entered on 12 March 2008, Elio and Maria Coppola borrowed $51,244 from Fast Funds. This advance was structured to meet mortgage obligations to their existing lenders.

4 In the second loan transaction entered on 11 June 2008, Fast Funds advanced $141,390 to Elio and Maria Coppola. The second loan transaction was principally to discharge Elio’s existing indebtedness under the first loan transaction. Elio and Maria claim that the justice of the second loan transaction is to be assessed partly by reference to the circumstances of the first loan transaction, which it discharged.

5 The third loan transaction entered into on 12 March 2009 with lenders related to Fast Funds discharged monies due under the second loan transaction and funded other payments. Elio and Maria contend that injustices allegedly associated with the first and second loans, together with the circumstances in which the third loan was made, are all bases to infer injustice in the third loan and that it too should be set aside.

6 Fast Funds contests Elio and Maria's claims that the Consumer Credit (New South Wales) Code (“the Consumer Credit Code” or “the Code”) applies to these three loan transactions and contests that any of them were unjust in the circumstances in which they were made. The two proceedings were heard together. In June 2009 Fast Funds commenced proceedings (No. 2009/289358) against Maria and Elio and the first mortgagees of several of their properties, seeking the recovery of monies owed and the enforcement of its securities (“the Possession proceedings”). In September 2009 Elio and Maria launched a counter action (No. 2009/290634) against Fast Funds and associated parties, seeking declarations as to the enforceability of the Fast Funds securities and seeking remedies under the Consumer Credit Code, the Contracts Review Act 1980 (NSW), the Trade Practices Act 1974 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) setting aside the second and third loan transactions (“the Coppolas’ proceedings”).

7 This judgment examines the events surrounding the first, second and third loan transactions and determines whether relief should be granted in relation to the second and third loan transactions.

8 To assess the contentions put for the Coppola family and in response by Fast Funds it is necessary to examine in some detail the family history and the circumstances existing at the time of entry into each of these three loan transactions.

Background

Elio and Maria Coppola

9 Elio and Maria Coppola married in Australia on 11 July 1970. They each migrated to Australia from Italy at different times in the late 1950s.

10 Elio was born in August 1942 and at the date of trial in February 2010 he was aged 67 years. After working in Germany in the restaurant industry he migrated to Australia in 1958 at the age of 24. He had only limited education and never gained any qualifications beyond school. He worked in restaurants and as an unskilled labourer from the early 1970s. After their marriage Elio and Maria worked together for a period on an assembly line at the AWA television factory in Sydney. Elio did not qualify for or undertake white-collar work at any stage during his working life. He worked as a stevedore until he retired in December 2000.

11 Elio describes his own English as "not good” but that he can understand basic conversations in English. Having seen him in Court struggling with an interpreter and hearing and misinterpreting snippets of English, my own findings are that his English is very poor. It would only be adequate for the most undemanding conversations of daily life. His own account of his English language skills does not understate his facility with the English language. He could not understand written English or spoken formal English especially where technical words are involved. He particularly relied upon his daughter Vanessa, together with family friends, to explain to him formal documentation in English. Although he picked up German when working in restaurants in Germany in the 1950s he never gained the same facility with formal English. He was generally a credible witness to the extent he was able to give an account of relevant facts. Much of what he said was limited by reason of the low level of his involvement in important transactions. But I do not accept all that he said as is evident in my findings below.

12 Elio Coppola has not conducted any formal business activities during his life. His only real exposure to investment is through the properties the subject of these proceedings. His daughter Vanessa's description of him as "unsophisticated when it comes to matters of finance and business" I accept is correct.

13 Maria’s migration and educational history parallels that of her husband. She was born in Sicily in 1947 and migrated to Australia in 1957. She was educated at Paddington Primary School and afterwards at Darlinghurst High School. Because her first language was Italian she experienced difficulties at school. She said, and I accept, that she struggled with her eyesight, as her family could not afford to purchase prescription glasses for her. She left school at the age of 15 without gaining the Higher School Certificate. Like Elio, Maria had no education beyond secondary school. She too did not undertake white-collar employment at any stage during her working life. Apart from the demanding and continuous role of raising her four children, Maria Coppola’s paid employment outside the home was as a seamstress and assembly line worker.

14 Maria's language skills are better than her husband's. Her affidavit was sworn in English without the assistance of an interpreter. Her evidence started in English but soon ran into difficulties when she was being cross-examined from the text of her affidavit. This was odd given that she had sworn her affidavit in English, unlike her husband who had his affidavit read over to him in Italian before it was sworn. I had a clear impression that she was understating her English-language abilities for defensive purposes in these proceedings.

15 Vanessa Coppola’s description of her mother as someone who "has never been involved with business or commercial matters" was correct. But I do not agree with her statement "from my observation my mother relied entirely on my father with respect to financial and business decisions associated with our family". To the contrary, I find that between 2007 and 2009 both Elio and Maria relied heavily upon Vanessa in financial and business decisions associated with the family.

16 Maria Coppola took her time to answer questions. She was thoughtful. She considered each question very closely as it was interpreted to her, scrutinising it for possible harm to her interests before answering it. She had a reasonable appreciation of the questions being asked of her in English. Occasionally when she was using the interpreter she quickly answered questions in English directly to the cross-examiner. This created difficulties in managing her evidence through an interpreter. But more importantly it demonstrated a facility with formal spoken English. She often understood quite formally posed English questions. I find that she has some facility with English but that she is still more comfortable speaking Italian.

17 An issue arising later in the case is whether she had sufficient capacity with the English language to have a conversation in English with a mortgage broker, Mr Brockmuller in relation to the second loan. In my view she was sufficiently fluent in daily conversational English to have had the conversation that Mr Brockmuller alleges. I find that she did have that conversation but her capability with English would be tested by material written in English dealing with concepts that were unfamiliar to her such as legal expressions. Understanding such things without a clear explanation from an empathetic speaker would probably be beyond her.

18 There have been health problems in the Coppola household, which assist understanding of relationships within the family. Elio Coppola suffers from diabetes and high blood pressure. Maria has been diagnosed with type 2 diabetes and suffers transient ischaemic attacks (“TIA”), a condition characterized by a fleeting blockages to the arteries supplying blood, oxygen and other nutrients to the brain. Stress associated with problems in the family was said to exacerbate these episodes. Maria Coppola has also suffered from depression from time to time. I accept that all the health issues described here exist for Elio and Maria.

19 At the time of the three loan transactions in question in these proceedings Maria Coppola had little communication with Elio about family financial matters. Various reasons were advanced for this including a poor relationship between husband and wife. Elio was not asked to acknowledge or agree with this explanation. The precise reason for the lack of communication does not matter. The more important fact is, and I find, that there was little communication about financial matters between them from 2007 to 2009. Elio says that after his retirement he delegated the complexities of family financial affairs and the management of family investment properties to his capable daughter Vanessa. He was content to withdraw from such things and leave detailed management to Vanessa. He says he trusted her to keep him informed about transactions. He was not told much at all. Maria did not contradict this general account and I accept it as correct, although he was told the specifics of some transactions as I find later.

20 The underlying explanation for Elio’s limited knowledge of family finances between late 2007 and early 2009 is that Maria and Vanessa decided between themselves that keeping him in the dark was the best way to manage the series of crises that engulfed the family in those three years. A conscious decision was made between mother and daughter to treat Elio on a "need to know" basis in relation to the family’s personal and financial affairs. Instead of speaking to Elio in matters concerning the family in 2007 and 2009 Maria preferred to confide in her daughter Vanessa. The explanation for such lopsided family communications is found in the evidence of Vanessa.

The Wider Family

21 Elio and Maria Coppola have four children, a son and three daughters. The eldest is a son, Angelo. In descending order of age their three daughters are Gabriella, Vanessa and Laura. Only Vanessa played an important role in the events that led to these proceedings. Just before the first loan was taken out Vanessa suffered her own problems that impacted directly upon the family’s financial stability. These problems became particularly acute in late 2007. They are explained below in the chronological account of the loan transactions.

22 Vanessa was born and educated in Australia and left school at the age of 15. At the time of the hearing she was 32 years of age. She had lived with the family all her life. She has no post school educational qualifications. She has a good command of English. For many years she successfully acted as an interpreter for her parents and conducted a wide variety of day-to-day transactions in English on their behalf. They became used to her explaining in Italian what she had done for them in English.

23 Until 2003 Vanessa worked principally in restaurants and hotels. Following the path of her father's career, in 2003 she commenced employment as a stevedore and she worked in that capacity until the birth of her first child in December 2008. She was keen for family members to attain financial security. She encouraged her parents to acquire a number of pieces of real estate. While she was working full time she purchased an investment property for herself at Greenacre.

24 The Coppolas’ contention in this case is that at the time of each of the loan transactions in question, the family was under considerable background stress due to Vanessa’s personal situation. The Coppolas’ say that those stressors impaired their capacity to safeguard their own interests and substantially disadvantaged them in their dealings with the lenders. That is an issue that the Court must determine.

25 Vanessa’s affidavit generally represents a candid and compelling history of the Coppolas’ family life and financial circumstances in the last few years. She was often a credible witness but was prepared to be artful in some of her responses, especially when she perceived, rightly or wrongly, that her answers might adversely affect the family's interests. Her principal credit problem was that she admitted she was prepared to forge her father Elio’s signature on documents given to Fast Funds and to create false documents to mislead it in relation to the three loan transactions the subject of these proceedings. Her credibility was widely impaired by this and I viewed all her evidence with caution. That being said she was a surprisingly reliable witness about many aspects of her dealings with Fast Funds and the family.

26 Before examining the circumstances of each of the loan transactions it is necessary to review the family’s general financial position and circumstances just before the first loan.

Coppola Family Assets

27 By the second half of 2007 the Coppola family’s property interests were extensive. They held seven valuable pieces of real estate described below. But the family’s assets had become highly geared and were sensitive to unexpected financial setbacks. Neither the full addresses of these properties nor any information from which those addresses may be derived are disclosed in this judgment due to the Court’s policy of avoiding identity theft through the Court’s published judgments. If further information is required about the precise address of any of the properties it can be obtained from the Court’s file.

(a) The first property is a domestic residence situated in Concord, a suburb of Sydney. This property is called “Number 11” in this judgment, because its street number is 11. This property is registered in the name of Elio and Maria Coppola jointly.

(b) The second property is situated in the same street in suburban Concord, as is the property, Number 11. The street number of this property is number 9. Number 11 is adjacent to number 9 in the street. This property is called "Number 9" in this judgment. It is registered in the sole name of Elio Coppola.

(c) The third property is in Stanmore Road, Stanmore (“the Stanmore property”). This property is registered in the name of Elio Coppola.

(d) The fourth property is at Lawrence Hargrave Drive, Coledale (“the Coledale property”). This property is registered in the name of Elio and Maria Coppola.

(e) The fifth property is in Wilson Drive, Colo Vale (“the Colo Vale property”). This property is registered in the name of Maria Coppola.

(f) The sixth property is in Greenacre Road, Greenacre (“the Greenacre property”). This property is registered in the name of Vanessa Coppola.

(g) The seventh property is in Angus Avenue, Kandos (“the Kandos property”). This property is registered in the name of Elio Coppola.

28 Each of these seven properties had a place in the Coppola family history. Family members have held some of these properties for a long time. The characteristics of the properties and family members use of them are material to assessing the justice of the transactions the subject of these proceedings. For example there are issues in the proceedings as to whether Number 11 and Number 9 were let out or were used solely for domestic purposes. Findings about their use are relevant to the question of whether the Fast Funds loans secured over these properties were made for business purposes or not. Despite this dispute, some less controversial facts can be stated about all these properties. The more contentious matters about the use of Number 9 and Number 11 are determined later.

Number 11 and Number 9

29 The Coppola family contend that the properties at Number 11 and Number 9 were the domestic residences of family members. Elio and Maria Coppola purchased Number 11 in their joint names in about 1970 and raised their family there. Elio, Maria and Vanessa Coppola’s evidence is that they lived in Number 11 until December 1997, when Elio Coppola purchased Number 9 next door in his own name. After that purchase both Elio and Maria Coppola say that they moved into Number 9 and have lived in Number 9 ever since. Once the two properties, Number 9 and Number 11 both came into Coppola family ownership the two houses were joined to form a family compound. The dividing fences both front and back between the two properties were removed and both houses enjoyed a single large backyard.

30 Elio Coppola purchased Number 9 in his own name for $438,000. After Elio and Maria moved into Number 9, they say that Vanessa continued to live at Number 11 as did other members of the Coppola family at various times. Vanessa agrees with this and says that she also stayed from time to time at Number 9 overnight. At various times after 1998 not only Vanessa but Angelo and his girlfriend lived at Number 11, as did Gabriella and her husband and children and also the youngest daughter of the family, Laura and her then partner (now husband) Mohamad Harmouche. I accept Elio, Maria and Vanessa Coppola’s account of their use of Number 9 and Number 11, to the extent that it is summarised here. Other controversies about the use of the two properties are separately considered.

The Colo Vale Property

31 The Colo Vale property came into the family through Maria Coppola's late father. He purchased the property in the 1960s. After his death the property passed to Maria's mother, and after her death in August 2004, ultimately to Maria herself. The property is cleared and has been used for limited grazing purposes for a long time. It also has capacity to provide some basic short-term accommodation. Maria spent much family time at the Colo Vale property, first with her parents and later with her own children. She says and I accept that she has a strong sentimental attachment to this property. Since August 2004 Maria Coppola and her brother have principally used the Colo Vale property for cattle grazing. It was finally transmitted to her from her mother’s estate early in 2009.

32 Members of the family had at various times either lived in or made personal use of the three properties already mentioned, Number 9 and Number 11 and the Colo Vale property. The family used the other four properties, the Stanmore property, the Greenacre property, the Coledale property and the Kandos property rather less in the past. By the time of trial these four remaining properties were leased out permanently for investment purposes.

The Coledale, Stanmore, Greenacre and Kandos properties

33 The Coledale Property. The Coledale property in Lawrence Hargrave Drive Coledale consists of a small weatherboard coal miner's cottage now rented out for approximately $300 per week. Coledale, near Wollongong, south of Sydney was originally settled as a coal mining community. Elio Coppola purchased the Coledale property in about 1980 or 1981, from which time the property was used for Coppola family holidays. The property is mortgaged to Pepper Home Loans to secure a loan of approximately $380,000. This property is held in the names of both Maria and Elio. No default occurred in the mortgage over the Coledale property prior to the hearing of these proceedings.

34 The Stanmore Property. Elio Coppola purchased this property in Stanmore Road, Stanmore in 1996 for $340,000. He did so in response to Vanessa’s encouragement for him to acquire a property for his retirement. He borrowed from St George Bank to fund the purchase. At the time of trial the Stanmore Property was mortgaged to BankWest securing a loan of approximately $540,000. The mortgage over the Stanmore property was in arrears at the time the Possession proceedings were commenced.

35 The Greenacre Property. Vanessa Coppola owns the Greenacre property, situated in Greenacre Road Greenacre. This property was Vanessa’s own investment. Vanessa substantially funded the acquisition of the Greenacre property with advances from St George Bank Ltd. On 24 March 2009, in part as a result of the financial pressures identified later in this judgment, Vanessa exchanged contracts to sell the Greenacre property for $720,000.

36 The Kandos Property. Elio Coppola purchased the Kandos property in Angus Avenue, Kandos near Mudgee in about June 1995 for $45,000. The Kandos property consists of two small semi-detached and dilapidated dwellings. The Kandos property was run down at the time of its purchase. In the early years after purchase Elio Coppola used it as an informal country retreat to enjoy with his friends. It was occasionally let out. He repaired it and made it habitable. After he ceased regular visits to the Kandos property both dwellings on it were rented out more often. Vanessa Coppola assisted in managing the rental of this property. Contracts for its sale were exchanged in early May 2009.

37 Number 11, the Coledale property and the Kandos property were owned unencumbered by the time Elio Coppola purchased Number 9 in 1997. The family took on substantial debt with the purchase of the Stanmore property and Number 9. Borrowings in the order of $770,000 to $800,000 were funded by St George Bank. This debt to St George Bank is largely accounted for by the initial requirement to fund the purchase prices of the Stanmore property ($340,000) in 1996 and Number 9 ($438,000) in 1997. The St George Bank debt was secured not only over the Stanmore property and Number 9 but also over Number 11.

Family Income

38 Prior to his retirement from active employment Elio Coppola funded mortgage payments out of his wages and the rent from the family investment properties. After he retired from stevedoring work in December 2000 Elio’s sources of income were his savings, his accumulated superannuation, and the rent received from the investment properties. Maria Coppola’s sources of income were the rent derived from the same investment properties together with her disability pension.

39 The family worked together to improve the value of their investment properties. Vanessa also contributed a significant part of her income from personal exertion towards interest payments on the family’s properties until December 2005 when she acquired the Greenacre property. She borrowed 100% of the purchase price of the Greenacre property from St George Bank Limited. As a result she was required to direct her wage income into meeting the mortgage payments on the Greenacre property, for which she was personally responsible. She had little spare income to make the payments due under the loans secured over other family properties.

40 Joint family investment in properties such as those held by the Coppolas were a good idea in theory. The practical problem for the Coppolas was the debt they acquired in 1996. Family gearing stepped up when Elio borrowed to acquire the Stanmore property and Number 9. A further step up in gearing occurred when Vanessa acquired the Greenacre property in 2005. Instability in the income from the family’s various investment properties and in the income and assets of family members ultimately led to default on the debt structure of these investments.

Elio Coppola’s Role in Family Finances

41 It is necessary to distinguish Elio’s role in family financial decision-making from that of Maria and Vanessa.

42 From the time of his retirement in 2001 Elio Coppola relied heavily upon his daughter to manage his and his wife’s financial interests. He says and I accept that from the time of his retirement he no longer participated in managing the family’s finances. He was content for rental income derived from the Stanmore property and the Coledale property to be deposited into a St George Bank account that he and Maria maintained. Vanessa Coppola was responsible for paying household bills and expenses as well as for expenses associated with ownership of their various investment properties. Apart from the specific exceptions mentioned in this judgment, I largely accept this description by Elio as a correct account of his role in relation to family finances. He left that function to his daughter Vanessa and to his wife Maria.

43 Vanessa was not an authorised signatory on her parents’ St George Bank account, so she arranged with Maria to sign cheques when necessary. Household bills were normally paid with cash. Elio Coppola says that he was not consulted about what cheques had to be signed, be they investment related or domestic or what household expenses and bills were to be paid between 2001 and 2006. Equally, during this period Vanessa was the one who communicated with the real estate agents who managed the Stanmore property, the Coledale property and the Kandos property. Given Elio’s poor command of English this was a necessary delegation. To facilitate Vanessa's execution of family financial matters I accept that because she was living at Number 11 she arranged for Number 11 to be the mailing address for notices and correspondence with which she would normally deal to assist her parents. In any event Elio was not capable of reading or understanding financial correspondence sent him at Number 9.

44 About mid 2007 Vanessa sought to change the status of her representative work on behalf of her father. Elio Coppola gives an account of conversations with Vanessa in mid 2007, which I accept as correct, in which she explained that because of difficulty in managing the family's investment properties on his behalf and in getting information in relation to those properties, that the family’s own lawyer had suggested that Elio give her a power of attorney to allow her, as she said to Elio, “to manage your properties”. This is her account of her conversations with him about the execution of the power of attorney which I accept that it is correct.

45 Shortly afterwards Vanessa presented a form of power of attorney to Elio, identifying it to him as the document “that we were talking about” that is, as a document allowing her to manage his properties. Elio Coppola trusted Vanessa’s description and signed the document as she requested. He signed the power of attorney on 26 June 2007. The power of attorney was a general power of attorney made under Part 2 Powers of Attorney Act 2003 (NSW) appointing both Maria and Vanessa as attorneys to do anything on Elio’s behalf that he may lawfully authorise an attorney to do. The power of attorney operated immediately. It contained no additional powers and restrictions. Mr Mohamad Harmouche then the boyfriend (and later the husband) of Elio’s youngest daughter, Laura witnessed the execution of the power of attorney. In June 2007 Vanessa probably did intend only to use the power of attorney within the limits she had described to her father. There was no pressure on her to do otherwise. But once it became available to her it was easy to use it more widely.

46 Elio Coppola did not obtain legal advice concerning his entry into this power of attorney. I accept that he relied upon what Vanessa said to him about the way it would be used.

THE 2007 REFINANCING

47 The Coppolas' case is that the Court should set aside the second loan in part because the first loan was itself liable to be set aside. Some analysis of the 2007 refinancing is required in order fully to assess the circumstances in which the Coppola family took out the first loan.

The St George Bank Loans Begin to Default

48 Commencing in late 2006 and progressively throughout 2007, Elio and Maria Coppola began to default on the St George Bank loans and the various mortgages that then existed over the family properties identified above. There were several conventional financial explanations for this.

(a) Periods of vacancy reduced the rental income from the Stanmore property, the Coledale property and the Kandos property. This reduced the capacity of Elio and Maria Coppola to pay interest to St George Bank on the mortgages over those properties.

(b) From late 2000 Elio Coppola had retired and was unable to supplement any shortfall in mortgage payments falling due from his income from personal exertion.

(c) Prior to 2005 Vanessa subsidised out of her own income any shortfall in interest payable on family investment properties. But by 2007 she had understandably diverted most of her income towards paying the interest on the Greenacre property.

49 In the second half of 2007 their defaults led the Coppola family to refinance their St George Bank loans. This increased their indebtedness but it rationalised their financial position to an extent. The refinancing was structured through the following facilities.

(a) In June 2007 the family took out a $250,000 short-term high interest rate loan from DG Capital Solutions Pty Limited secured by second mortgage over Number 9, Number 11, the Coledale property and the Stanmore property.

(b) In approximately October 2007 the family took out a loan from BankWest of approximately $650,000 secured against Number 11.

(c) In October 2007 the family borrowed approximately $540,000 from BankWest secured by the Stanmore property.

(d) In November 2007 the family took out a loan from MDN Mortgages Pty Limited (“MDN”) for $650,000 secured against Number 9.

50 The family’s refinancing plan was that the funds advanced by BankWest would be used to discharge the initial short term higher interest rate loan from DG Capital Solutions and would also be applied to repay the balance of monies due to St George Bank.

The DJ Capital Solutions Advance

51 The first step in the 2007 refinancing was an advance from DJ Capital Solutions. When Maria saw the St George Bank loan defaulting she arranged the advance from DJ Capital Solutions in June 2007. She had been borrowing small amounts of money from Laura’s partner, Mr Mohamad Harmouche for some time to meet the growing shortfall in the family budget. Maria and Vanessa organised the DJ Capital Solutions facility through a mortgage broker, Roy Skaf, an acquaintance of Vanessa’s then boyfriend Mayez Elriche. It was a temporary loan of $250,000 to pay off the St George Bank arrears and provide some money to live on whilst the larger refinancing was being negotiated.

52 From the DJ Capital Solutions advance of $250,000, the sum of $220,000 was made available to the borrowers after the deduction of $30,000 in loan fees, interest and facility expenses. The remaining $220,000 was applied to both domestic and investment purposes. Of the $220,000 the sum of $100,000 was given to Gabriella to assist her in the purchase of a family home. The balance was utilised to repay the arrears to St George Bank and to renovate the kitchen and bathroom of the Coledale and Stanmore properties. This would have made them more attractive as rental properties.

53 The DJ Capital Solutions advance was clearly for Elio's benefit. It remedied defaults on the St George Bank loan. It prevented St George Bank from taking legal action against him and seeking possession of its security properties held in Elio's name, Number 9 and the Stanmore property. I do not accept Elio’s evidence that he does not know how the DJ Capital Solutions advances were applied.

54 Elio was aware of the DJ Capital Solutions advance. DJ Capital Solutions lodged caveats against the title to Number 9 and Number 11 to secure its advance to Elio and Maria. Elio signed these mortgages and consented in writing to caveats being placed on these titles. Elio says that he has no recollection of this transaction and does not know how the money from the advance was paid or dispersed. He says that he did not participate in applying for a loan from DJ Capital Solutions and that he was not involved in applying the funds advanced. Whilst he may not have actually applied for the loan from DJ Capital Solutions, it is likely that Maria and Vanessa gave him sufficient information about the elements of the transaction to procure his signature. Elio signed the DJ Capital Solutions mortgage documents with his wife Maria in early June 2007 in the presence of a solicitor known to him, Mr Angelo Andresakis. Neither Maria nor Vanessa specifically says that he was actively misled about this early loan.

55 It is likely that at the time that the DJ Capital Solutions loan was arranged that Elio understood that the loan was a necessary temporary measure while a larger refinancing was arranged. I find that is what he understood. He had some general awareness of default having occurred in the St George Bank loans. Given that the DJ Capital Solutions loan was applied to remedy the St George Bank defaults and it was for his benefit, there is little reason why at this early stage Maria and Vanessa would not tell him about this transaction. Similarly there was little reason for him not to be told that the same transaction would help facilitate the generous gift that was being made to their daughter Gabriella on her marriage.

56 By October 2007 the mortgage broker Roy Skaf had also arranged loans from BankWest and MDN. I find that Elio was given basically correct information about these loans too.

The BankWest and MDN Loans

57 Roy Skaf arranged the mortgage advance for $656,000 by MDN Mortgages Pty Limited secured over Number 9. This was a 12 month interest only loan. He also arranged a BankWest advance for $650,000 secured over Number 11 and a further BankWest loan for $540,000 secured over the Stanmore property.

58 The funds BankWest advanced secured over Number 11 and the Stanmore property were used to pay out the DJ Capital Solutions advance and to pay out the balance of Elio and Maria's existing borrowings with St George Bank. The BankWest money was also applied to assist Vanessa to partially pay out (as to $145,000) her loan with St George Bank secured over the Greenacre property so as to give her some equity in that property. She had originally borrowed 100% of the purchase price.

59 Unfortunately the family refinancing plans went awry from this point. This was not due to predictable forms of financial mismanagement.

60 From the balance of the BankWest and MDN advances, $180,000 was paid to Laura’s fiancée Mohamad Harmouche, to cover the principal ($40,000) and accrued interest on his original advances to Maria that had commenced in late 2006. She paid a punishing amount of interest to him and not long afterwards the family received close attention from some of his friends.

61 Vanessa and Maria had earmarked an amount of approximately $400,000 sourced from the BankWest advance to make future mortgage payments and to pay out the existing mortgage on the Coledale property. This fund would have kept the family financially afloat for quite some time. It was paid into a savings account held at the St George Bank as part of a sensible financial plan. Instead of using this fund for this planned purpose, Maria and Vanessa succumbed to extreme personal pressure and used this money to make advances to friends of Vanessa and Laura and their associates.

The Pressure on Vanessa

62 Before the first loan transaction in March 2008 Vanessa became involved in a ruinous personal relationship with one Mayez Elriche, who was a friend of Laura’s fiancée Mr Mohamad Harmouche. This personal relationship developed to the great disadvantage of Vanessa and her family. In late 2007 Mr Elriche and his associates pressed Vanessa and through her the Coppola family, to advance them sums of money.

63 The $400,000 was disposed of the following way. Vanessa was persuaded to pay debts of her then boyfriend Mayez Elriche in the sum of $85,000. Vanessa was also persuaded to lend $200,000 to one Omar Chamma, a friend of Mayaz Elriche and Mohamad Harmouche. She was further persuaded to lend $40,000 to Omar Eltrach, another friend of Mr Harmouche and Mr Elriche. Finally, as all these funds were going to associates of Laura and Vanessa it seems to have been decided to give Gabriella $60,000. Gabriella who had lived until 2007 with her husband and children at Number 11 was by then living away from the family. Altogether, including the $180,000 paid to Mr Harmouche, for Maria’s part borrowings in excess of $500,000 had been paid away by the family in late 2007 to Mr Harmouche, Mr Elriche and their associates.

64 Mr Elriche and his associates as borrowers did not provide any security for the repayment of these loans. The loans were obtained due to overwhelming physical and emotional pressure placed directly upon Vanessa and Maria. The family’s evidence is and I accept that persons acting in Mr. Elriche’s perceived interests made threats of violence against Vanessa and members of her family when attempts to have the advances repaid were made.

65 These advances cannot readily be characterised as loans. They were not documented as loans in any conventional commercial sense. There is no evidence that the recipients actually took responsibility to repay the advances. To this day they remain unpaid. I infer that there was never any intention to repay them.

66 Vanessa did not go to the police about any of the threats and physical intimidation that she suffered. She took the view that the police would not be able to protect her. Her intimidation involved incidents of intensely ugly forms of humiliation at the hands of people professing to act in Mr Mayez Elriche’s interests. Most forms of objective language are ill equipped to convey the distress that these incidents undoubtedly caused to her. Its effects were still quite evident when she gave evidence. I accept all Vanessa’s evidence on this subject and find that overwhelming threats and intimidation caused her and Maria to pay away all the liquid funds that the family raised in the second half of 2007.

67 Elio Coppola claims to be unaware of the dissipation of the proceeds of the 2007 refinancing to the male friends of two of his daughters and their associates. I accept that this is correct. Vanessa kept this information from him. Maria did not inform him either. They both felt they could manage the situation. Vanessa is to be accepted when she says that she was too frightened to tell her father that she was involved in losing these large sums of money and equally frightened to inform him that there would be difficulty in servicing the loan to MDN. Vanessa confided in her mother. I find that she talked to her mother throughout this period about all the family’s financial problems and how to solve them. Once the first concealment occurred it became more and more difficult for Maria and Vanessa later to tell Elio Coppola about how desperate the family’s financial position had become and how they were trying to fix it, without confronting the concealment from him of earlier events.

68 There has been no suggestion in these proceedings that Fast Funds or any persons associated with it have any connection whatsoever with these threats and this intimidation. Nevertheless they still had personal and financial effects on family members at the time of the first, second and third loans.

69 The removal of these funds caused the Coppola family’s finances rapidly to spiral out of control. The payments removed from the family all their planned financial reserves. This had immediate consequences.

70 The loan from MDN was drawn down on 8 November 2007. The interest due for the month of November 2007 was paid on time. But by the end of the following month Elio Coppola defaulted. No payments were made to MDN for the months of December 2007 and January and February 2008. MDN issued a statement of claim on 19 February 2008. By 14 March 2008 MDN claimed that Elio Coppola owed accumulated default interest, penalties and charges totalling $22,281.80. Fast Funds advanced the first loan to meet this liability.

The Family Turns to Fast Funds

71 In these circumstances the Coppola family turned to Fast Funds. The case started with a disclosure relating to Fast Funds and the Court.

72 At the opening of these proceedings counsel for Fast Funds and Mr Hall indicated to the Court that one of the principals of the company, Mr Simon Hall, had been to school with me at St Ignatius College, Riverview, leaving that school the same year that I did in 1971. His counsel indicated to the Court that Mr Hall realised at the time that the proceedings were called on that I had been to school with him. I was told that this fact had been communicated to counsel for the Coppola family just before the hearing commenced. In response to this disclosure I indicated that I had probably not seen Mr Hall for at least 15 years, if not at any time since I had left school some 39 years ago. Until I was told about this early connection with Mr Hall I did not recognise him in the courtroom.

73 I indicated to the parties that I did not have difficulty in proceeding to hear the case and that there had been no association between Mr Hall and myself at any time during the last 39 years, although obviously our time together as schoolboys during the 1960s and early 1970s involved near daily contact. I invited both parties to indicate whether there was any objection to my hearing the case. Both parties made clear that there was no objection.

74 Mr Hall was across the detail of all the loan transactions between Fast Funds and Maria and Elio Coppola. He made appropriate concessions during much of his cross-examination. He has a relaxed manner in the courtroom, perhaps because of his long familiarity with courtrooms and court procedure. He has been a private investigator. He has often given evidence. He was generally a credible witness. He was though very uncomfortable with aspects of his cross-examination. In several places though I do not accept his evidence.

THE FIRST LOAN

75 In late February 2008 MDN commenced proceedings for possession of Number 9 and for recovery of monies outstanding on its loan. Maria and Vanessa Coppola kept in contact with MDN. Elio was not involved in this contact. Elio says he was unaware of MDN commencing proceedings in early 2008. I accept this is correct.

76 After the MDN proceedings were commenced, one of its principals, Mr John Dickenson referred Maria and Vanessa Coppola to a firm of mortgage brokers, Artex Consultancy Pty Ltd. The principals of Artex were Mr Stephen Moujalli and Mr Nicolas Navarro. Artex conducts business from offices at Unit 3A, 24 Canarvon St. Silverwater, New South Wales.

77 Mr Dickenson’s reference to Artex connected the Coppola family with Fast Funds. Mr Dickenson gave Artex the background. Vanessa then spoke to Mr Moujalli and Mr Navarro about the possibility of getting a short-term loan to meet the arrears that had already accumulated to MDN.

78 Artex arranged with Fast Funds to put in place a second mortgage to pay all the outstanding arrears to MDN. The purpose of fixing the problem of arrears first was, as Mr Navarro explained to Vanessa, that it would be difficult for the family to get a loan approval at more favourable rates than existed at MDN, while they remained in default and proceedings for possession were on foot. Mr Navarro's advice sounded logical and would objectively appear to have been in the Coppola's best interests at this time.

79 As Elio and Maria were the borrowers under the existing mortgage to MDN, Artex not unnaturally raised with Vanessa the need for Elio to sign the Fast Funds documentation for the first loan. I find that Vanessa said to Mr Navarro, "Nick do we have to get my father involved? The reason he is in this mess is all my fault ...Why can't I execute the documents on his behalf?" I find that Vanessa said this because she did not want her father to get too close to this transaction. She feared he would discover just how much money had been lost through the loans to Mr Mayez Elriche and his associates. She did not explain all her motivation to Mr Navarro however. She had no need to.

80 Mr Navarro spoke to Mr Hall at Fast Funds about this subject and Fast Funds agreed that Elio could execute the first loan through his attorney Vanessa. What Mr Navarro conveyed to Mr Hall was no more than what Vanessa had conveyed to him, that it would be more convenient and less painful for her father if Vanessa used the power of attorney that her father had given her in the transaction rather than have him personally present, confronting all the mistakes the family had made in the recent past. I do not accept that Mr Hall was aware that the whole first loan transaction was being concealed from Elio Coppola. He denies such knowledge and I accept that as correct. More detailed findings about Mr Hall’s knowledge at the time of the first loan are made below.

81 Vanessa Coppola attended at Mr Simon Hall's address in Glebe to sign the documents for the first loan on 14 March 2008. Mr Hall indicated to her where he wanted her to sign the loan documents including the letter of offer. She signed the letter of offer that provided for a total mortgage sum of $51,244. The advance included sufficient funds to cover an establishment fee of $7,990 and the first month’s interest of $4,645. After providing for fees for document preparation, registration and stamp duty, the amount paid at Elio Coppola’s direction was $37,680. Vanessa initially said that she could account for the $10,000 difference between the amount to be paid at Elio’s direction of $37,680 and the payment to MDN of only $27,680. She deposed to being unaware of how it was allocated or paid. She admitted later this was false evidence. The evidence concerning what happened to this sum is discussed below when relief in relation to the first loan transaction is considered.

82 Mr Hall acknowledged to Vanessa that the matter was urgent and it was necessary to pay the funds over quickly. An amount to cover the arrears to MDN of $27,680 was transferred immediately. It is recorded on MDN’s statement of account as having been paid on 14 March 2008. No lawyers were involved on the Coppolas’ side in any part of the first loan advance.

83 The terms of the first loan transaction, are reflected in the mortgage over Number 9 that Vanessa Coppola signed and were: a three-month term expiring on 12 June 2008; simple interest payable monthly in advance at 15% per month, reducible to 10% if payments were made on time; and the borrower’s agreement that the loan was for "business/investment purposes only and specifically for the operating costs of the borrowers’ investment/rental property". Fast Funds lodged a caveat against the title of Number 9 claiming the interest created by this second mortgage.

84 Fastcorp Financial’s letter of 12 March 2008 offering to enter into the first loan transaction contained the full terms agreed. Vanessa signed this letter under the power of attorney from her father. The letter of offer required the borrower to sign a “Declaration of Purpose” form that the loan was predominantly for business or investment purposes. Vanessa also signed this declaration under the power of attorney.

85 The letter also contained a provision, Clause 10, (the all properties security clause) that appeared in the letters of offer in each of the loan transactions.

“10. To secure our above fees and charges and interest thereon until such amounts are paid to us in full you consent to us/the lender lodging a caveat on the title of the proposed security property/s or any other real property in which you have an interest or may at any time in the future acquire an interest. Our fees and expenses, if any, together with interest will create a caveatable and equitable interest and charge in the proposed security property/s.”

A not dissimilar term appeared in clause 101 of the mortgage.

86 As a result of the statements that Vanessa made to her mother, Maria understood that Artex was undertaking to get a refinancing within one or two months. Her hope was that the high rates of interest payable to Fast Funds would only be incurred for a short period.

87 Vanessa and Maria did not think it necessary to do more than put the MDN mortgage back in order. They did not attempt to negotiate for the discontinuance of MDN’s Supreme Court Possession proceedings. Nor did they get legal advice about their dealings with MDN at this time. This is odd because they had a solicitor acting for them when they took out the MDN advance. They placed their hopes in Artex succeeding in securing a refinancing in the short-term.

88 Artex did not arrange a refinancing of the existing mortgage obligations to MDN. The MDN mortgage soon fell back into arrears. The accumulated interest on the Fast Funds loan, which was only intended to be temporary, began to mount up rapidly. The worsening situation prompted the family’s efforts to seek the second loan in June 2008.

THE SECOND LOAN

89 Between March and June 2008 MDN’s first mortgage over Number 9 began to fall into default. Vanessa stayed in touch with Mr Navarro to discuss the refinancing contemplated at the time of the first loan transaction. She stipulated that the refinancing must be effected through a loan, which could be executed under power of attorney. It was very difficult to achieve this. Vanessa says Mr Navarro himself explained to her, "Vanessa I'm still working on it and I'm sure I'll get something approved. The difficulty that am having is finding a loan which can be executed pursuant to power of attorney." Mr Navarro was not successful in effecting a refinancing before June 2008. Mr Dickinson of MDN warned her that MDN would move for possession if default continued and urged her to bring the arrears up to date. Mr Navarro appeared unable to offer her any refinancing prospects in the short term.

90 Vanessa Coppola kept her mother Maria informed about the discussions with Mr Dickinson and Mr Navarro. She discussed her parents’ financial options with her mother. By this time Maria Coppola was wholly content to make financial decisions for herself and her husband without consulting him. She was also content for Vanessa to continue her discussions with MDN and Artex. Elio was undoubtedly given some information about the family's financial position at the time of the first loan but by mid-2008 what Vanessa herself says applied, "I gave less information to my father concerning financial matters as time went by." Elio was told nothing of the negotiations for or the financial imperatives for the second and third loans.

91 By June 2008 the MDN first mortgage was in serious default. So was the second mortgage securing the first loan to Fast Funds. Mr Navarro warned Vanessa "If judgment is entered in this matter it's going to be almost impossible to refinance." The existence of MDN’s enforcement proceedings was proving an impediment to refinancing.

92 MDN had not discontinued its Possession proceedings in the Supreme Court, despite the bringing of arrears up to date in March. Maria and Vanessa Coppola say that they were unaware that MDN’s Possession proceedings had not been discontinued. This is difficult to accept because of the very clear warnings to which Vanessa deposes from Mr Dickinson that if the arrears were not brought up to date then the sheriff would evict them from the family home. I do not accept the evidence of either of them about this.

93 Frustrated with lack of progress by Artex, Vanessa Coppola went back to Simon Hall early in June. Just how she returned to him is a matter of dispute in the proceedings. She says she contacted him and he explained that he did not "do loans directly". She says that he claimed that he only “managed” mortgages and he referred her to Mr Jason Brockmuller, a Melbourne-based mortgage broker. Mr Hall denies he said this to Vanessa and Mr Brockmuller says Vanessa said she had seen one of his advertisements in the paper. I accept their evidence about this, not Vanessa’s. In any event she gave Mr Brockmuller information about the Coledale property, its value and the amount of the first mortgage. Between them she and her mother had decided that the Coledale property could now be offered as security to save the family from eviction from Number 9. Mr Brockmuller undertook to speak to Mr Hall. His discussions were effective.

94 11 June 2008 Rebfin Pty Ltd, a company also associated with Simon Hall, declaring itself to the agent for Fast Funds issued a further letter of offer to Elio and Maria Coppola. The letter offered a net advance of $122,118 secured by second mortgage over the Coledale property. The amount of the mortgage offered was $141,390, which would cover an establishment fee of $5000, the first month’s interest of $12,807, payment out of the accumulated liability to Fast Funds of $72,118, and after providing for other minor expenses, authorising payment to the Coppolas of $50,000. The advance offered was for a nominal period of three months and otherwise on terms identical to those in the Fast Funds letter of offer of 12 March 2008, including an identical form of clause 5 (the business purposes clause) and clause 10 (the “all properties” security clause). The interest rate offered was 10% per month reducible if payments were made on time but otherwise 15%. I accept that Elio and Maria Coppola signed the letter of offer the same day, 11 June but when Vanessa spoke to Simon Hall he required the security documents to be signed before a solicitor.

95 The same day, 11 June 2008, coincidentally MDN obtained judgment for possession of Number 9. On 17 June 2008 MDN applied for a writ of possession. The speed of MDN’s action caught Vanessa somewhat by surprise. She was able to arrange for both her parents to see the solicitor, Mr Angelo Andresakis by 24 June 2008. Mr Andresakis had already assisted family members with the DJ Capital Solutions advance some twelve months before.

96 What happened at this meeting with Mr Andresakis on 24 June 2008 became a controversial issue in the proceedings. My findings in relation to it are recorded later in relation to the issue of giving legal advice for the second transaction. Vanessa Coppola says that the meeting was short and that Mr Andresakis tendered little advice to her parents. Surprisingly, neither party called Mr Andresakis to give evidence.

97 Vanessa returned the executed loan and security documents to Mr Hall. There were difficulties in making the $50,000 available immediately to MDN because Elio and Maria Coppola by then did not have a savings account into which it could be paid. Mr Hall refused to pay the funds to Vanessa. Such payment would not have been in accordance with the terms of the second loan agreement, which required an advance to be made to Elio and Maria. Vanessa arranged for the funds to be paid urgently into Elio Coppola’s Mastercard account. To transfer the $50,000 quickly Mr Hall used his personal cheque.

98 Vanessa calculated that the amount outstanding to MDN at that time was $20,000. She arranged for that sum to be deposited into the MDN mortgage account on 1 July 2010. But Vanessa had miscalculated. Unknown to her MDN had paid $7,310.91 in land tax in respect of Number 9 the same day, 1 July 2008. The account actually remained in arrears. On 10 July 2008 Elio and Maria Coppola received an eviction notice. Vanessa’s consequent conversations with MDN soon revealed the land tax payment. Vanessa then used more of the second loan advance and paid a further $18,713.17 into the MDN mortgage account before the eviction notice expired.

99 Vanessa says that she kept her mother informed of these developments but not her father. Vanessa’s activity was so intense at this time that it is difficult to believe that Elio was not peripherally conscious of at least some of it. He had only recently been to see Mr Andresakis to sign mortgage documents. He was aware in a very general sense of the family’s continuing financial defaults. But he had no idea what Maria and Vanessa were actually doing about them. They did not tell him.

100 The second loan bought more time for the family but not unlimited time. The MDN borrowings remained within terms until September. From then a series of events precipitated the Coppola family’s third approach to Mr Simon Hall.

THE THIRD LOAN

101 On 29 September 2008 MDN caused a second notice to vacate Number 9 to be served on Elio and Maria Coppola. Vanessa believed at the time that the loan was not in arrears. But the loan was technically in default because of the non-payment of a Supreme Court filing fee incurred by MDN. Out of caution Vanessa engaged solicitors at this time on behalf of her father. Those solicitors obtained on 7 October 2008 a stay of MDN’s possession action over Number 9. The MDN account was put in order on 14 October. The stay was extended by consent until 1 December.

102 On 3 November 2008 Rebfin served a default notice claiming $220,535 as then due under the second loan transaction. Vanessa complained to Simon Hall at this time that the family had only received “$50,000 from your loan in June” and now he was demanding more than four times that sum. Whilst it is true that $50,000 was paid from the second loan advance to Elio’s credit card, Vanessa overlooked the fact that $72,118 of the second loan advance was also used to pay out the first loan. Nevertheless the amount due had by November risen by approximately $80,000 ($220,535 less $141,390) in this period.

103 In November and December 2008, Maria and Vanessa Coppola began actively searching for finance again. They went back to Mr Jason Brockmuller. He was not able to offer a satisfactory short-term facility. Mr Simon Hall referred them to another mortgage broker called Dion Lines but she was unable to secure approval for a refinancing to pay out MDN and Fast Funds. They went back to Roy Skaf but he could only secure finance that included a high interest rate second mortgage.

104 In January 2009 Vanessa found and engaged Mr Kevin McCrohan of Darkbluefire Mortgage Brokers, to look for finance for the family. Mr McCrohan was not a broker for whom Mr Simon Hall and Fast Funds commonly wrote loans. Darkbluefire found suitable finance for the Coppolas from Sydney Wyde Mortgages.

105 In late February or early March 2009, Maria and Vanessa received notification that, as a result of Mr McCrohan’s work, Sydney Wyde Mortgages had approved a mortgage advance in the amount of $770,000 to be secured by first mortgage over Number 9 and the Colo Vale property. The Colo Vale property had only just been transferred to Maria from her mother’s estate in March of 2009. A solicitor, Mr Angelo D’Angelo acted for Elio and Maria Coppola on the conveyancing associated with the proposed Sydney Wyde refinancing.

106 A number of impediments arose to settlement of the Sydney Wyde Mortgage advance. A property search before settlement revealed that there would be insufficient funds payable on settlement to meet all the secured claims over Number 9. There were several such claims.

107 First, Mr Roy Skaf’s company CB Direct Pty Ltd had lodged a caveat against the title of Number 9 to secure mortgage broking fees of $12,000 alleged to be due to CB Direct. Mr Skaf had placed a caveat on the property even though he had not secured an acceptable refinancing loan approval.

108 Second, Fast Funds still had a caveat (AD829135) and a mortgage (AE305419) on the title to Number 9. This mortgage dated back to the first loan transaction in March 2008. Vanessa said she was surprised that this caveat had not been removed. Fast Funds’ desire to continue this caveat and the mortgage was perhaps not surprising. But the precise claimed legal basis for its continuation at this time is unclear. Rebfin's letter of offer of the second loan of 11 June 2008 only refers to a second mortgage over the Coledale property. Rebfin’s 11 June 2008 letter does not make at all clear that security for repayment of the second Fast Funds loan advance was to be retained over Number 9. Mr Hall’s own affidavit evidence was that the second loan was secured by unregistered mortgage over the Coledale property. He did not refer to any other expressly named security for the second loan. This is correct on the face of the loan document. The only part of the 11 June 2008 letter justifying a continuing security interest in and the retention of the caveat over Number 9 is the all properties clause (clause 10). But even to treat this clause as creating a security interest in Number 9 would require the existing caveat to be withdrawn and another to be lodged to claim a particular security arising either from a letter of offer of 11 June 2008, or from the all properties clause 101 in the Coledale Mortgage, rather than from an unregistered mortgage of 12 March 2008. I accept Vanessa’s evidence that neither she nor her father Elio were aware that the caveat had remained in place until it was asserted against them. The March 2008 caveat and mortgage were on the title of Number 9 in June 2008 and March 2009. The mortgage was not discharged until 4 May 2009 after the third loan transaction. On the evidence the caveat had not been discharged by that date. The March 2008 caveat and mortgage become a relevant factor when considering the application of the Contracts Review Act and the Code to the circumstances of the third loan.

109 It was clear to Maria that something needed to be done to save them from eviction from Number 9. I find that Maria authorised Vanessa to offer the Colo Vale property as security to try and overcome these two impediments to Sydney Wyde’s refinancing. In about early February 2009 Vanessa Coppola telephoned Mr Navarro. The subject of the meeting was the possible provision of caveat withdrawals to permit the Sydney Wyde refinance of Number 9 to go ahead. With Maria’s permission Vanessa offered the Colo Vale property as security to have Simon Hall remove the caveats. She pointed out that it was worth about $700,000. Mr Navarro pointed out that the Colo Vale property may already be captured within the Fast Funds all properties security clause. He suggested that the best course was to enter another formal loan agreement with Simon Hall to pay out MDN and save Number 9 from repossession.

110 Vanessa went to Artex’s offices. There I find that Mr Navarro and Mr Moujalli told her that because the Colo Vale property was now available, that a refinancing through the Commonwealth Bank at a lower interest rate was in prospect. This was to be a substantial refinancing in which security would be taken over all the family’s properties. In the course of this meeting at Artex, Vanessa says that Mr Moujalli suggested that they telephone Mr Hall. She says that a conversation then took place between the four of them with Mr Hall involved by telephone to the following effect:

“[126] Shortly after the conversation referred to in paragraph 124 above I observed Stephen Moujalli dial a number on the telephone. A conversation then took place whilst the telephone was on loud speaker to the following effect:-

Stephen Moujalli: “Simon it’s Steve. I’m just here with Nick and Vanessa. We’ve been talking about the refinance of the MDN loan. Apparently that settlement is due to take place but there’s certain problems including a caveat which you have placed on the property.”

Simon Hall: “That caveat is securing the position of Fast Funds Pty Limited.”

Stephen Moujalli: “Nick’s had a look at the Coppolas’ overall position and with the addition of the Colo Vale farm he can get an approval through the CBA. It seems to me that it is in everyone’s best interests for all of these properties to be refinanced. Vanessa and her father are in default with the MDN facility. They are in default with you and without selling them up there is no real prospect of you getting paid. On the other hand Vanessa can’t afford these high interest-bridging facilities and it will be much better for her and her father to be refinanced at a very low rate with the Commonwealth Bank. As far as Nick and I are concerned we obviously want our brokerage.”

Simon Hall: “Are you suggesting that I simply lift my caveats to allow the current refinancing because I’m not going to do that.”

Stephen Moujalli: “What about if we arrange another short term facility so that you get some funds for lifting your caveat on the Concord property. We could arrange some short term funds on the farm. In the meantime Nick can get an approval with the CBA.”

Myself: “Simon we need to get the refinance of the MDN mortgage through. If it doesn’t settle immediately my parents will lose their home.”

Simon Hall: “How much brokerage do you boys need?”

Stephen Moujalli: “Simon we’ve done a lot of work in the past. We’ve been working on a refinance for eight or nine months. If we are going to get an approval from the CBA we want to be paid upfront. We want a fee of at least $30,000.”

Simon Hall: “I need to get a minimum of $80,000 for Fast Funds. Vanessa you need to get your parents to enter into a brokerage agreement with Steve and Nick and get them an upfront commission. I want you to use my brokers because I want them to protect my interest. In any event I think it’s going to assist you anyway. If they get you an approval from the CBA you can see the end of these high interest loans. Steve you should arrange some short term funding to get that across the line.”

Not long after that the telephone call was terminated.”

111 I accept most of Vanessa Coppola’s evidence about this conversation. But it was not entirely in this form. Mr Hall denies this conversation with Vanessa entirely. He says that he had a conversation by telephone with Mr Moujalli at this time but that he did not understand that Vanessa was present while the conversation was taking place. I find that he was mistaken about that and that Vanessa was present. Mr Hall’s version of the conversation is that Mr Moujalli telephoned him and explained that another broker had arranged a loan for the Coppolas from Sydney Wyde mortgages to pay out MDN and to save the house at Number 9 but that a bridging loan of $150,000 was required. Mr Hall says that after the refinancing proposal was explained to him that he would do the third loan provided Fast Funds was paid $80,000 out of the Sydney Wyde advance. I accept that Mr Hall’s evidence is a correct account of what happened to this extent in the conversation. However, although he now denies it, I find that Mr Hall did say something to the effect that he wanted the Coppolas to use Artex and not any other broker. He got this message across although I doubt that he described Artex as “my brokers”. I find that he did not say what Vanessa suggests he did: that Artex must be used, in Mr Hall’s view “because I want them to protect my interest”. It is highly unlikely Mr Hall would have said that.

112 Importantly also in this conversation I accept Vanessa’s evidence that she said to Mr Hall “I can’t let this refinance of MDN fall over. My parents will lose their house”. She clearly only played a small part in this conversation but she was involved in it to this extent.

113 I find that by this time Maria and Vanessa Coppola did have confidence in Darkbluefire Mortgage Brokers. It is difficult to understand why they would have gone back to Artex unless some pressure was applied to them. They had lost confidence in Artex by then. It is highly probable that Mr Hall did require them to work through Artex. From his perspective it also seemed to be a more realistic way of him being fully paid out.

114 But there are other aspects of Mr Hall’s evidence at this time that I do accept. He says that shortly before the telephone conversation with Mr Moujalli, set out above, that Maria Coppola telephoned him and said “I know you told Vanessa that we could not have another loan but we are desperate. MDN are going to take [Number 9] in a few days and all our mortgages are behind and we are going to start losing all our properties.” Simon Hall said in reply to this that there was nothing he could do. He says that Vanessa and Maria telephoned him several more times that very same day to make the same request. He says on various occasions they were crying on the telephone. I accept that this evidence is a correct account of what happened.

115 Mr Hall further says that the following day Vanessa and Maria Coppola arrived unannounced at his home in Glebe. Mr Hall is likely to have remembered such a visit and I accept his evidence about it. He said that when he opened the door Maria Coppola dropped to her knees on the hallway floor crying and pleaded with him “we have to have this loan. You have to help us. We will lose all our property.” As they were saying to Mr Hall, they were indeed desperate to get the third loan. Mr Hall’s preference was to use Artex. Maria and Vanessa did not appear to be in any position to oppose his preference for Artex to act as their broker.

116 Vanessa then conveyed the substance of the telephone conversation with Mr Hall to her mother Maria. She explained to Maria that Simon Hall had said, the following to her:

“There will be two conditions for me to allow the refinance of your parents home to go through. The first is that I require monies to be repaid to me in respect of existing borrowings. The second is that you engage Steve and Nick (referring to Stephen Moujalli and Nicolas Navarro) to obtain approval for a refinance over all of your parents’ property so as to repay my debt. They’re going to charge you an upfront fee. You’ll need to pay them at least $30,000 upfront. They will arrange a refinance so that all of these monies can be repaid back. Unless those conditions are met I’m not going to lift my caveat and allow the refinance to take place. You are to use my brokers to arrange the refinance.”

Vanessa’s report to Maria of the telephone conversation is consistent with my findings as to what was said in the course of it.

117 I accept that this was what Maria was told. Maria says and I also accept that as a result of her being told that Simon Hall had said this, she felt that she had no option but to borrow additional money so as to satisfy his requirement. Maria and Elio Coppola engaged a solicitor, Mr Angelo D’Angelo to act for them on the Sydney Wyde refinancing transaction.

118 Rebfin as mortgage manager for the lenders sent to Mr D’Angelo the letter of offer dated 12 March 2009 for the third loan transaction. This time the proposed three lenders were Simon Hall, George Romiz and John Storm. This third letter of offer had business purposes and all properties clauses in identical terms to the first and second letters of offer. The three lenders were offering an advance of $184,124 from which, after the deduction of establishment fees, the first month’s interest and other fees, $150,000 would be paid to the Coppolas. The term of the proposed loan was three months with the usual interest charge, 10% per month simple interest but 15% on late payments.

119 Maria and Vanessa Coppola met Mr D'Angelo on 12 March 2009 to execute the Sydney Wyde mortgage documents and the documents necessary for the third loan transaction. The Sydney Wyde refinancing settlement was scheduled for 16 March 2009. Maria had arranged to sign the Sydney Wyde refinance transaction documents for her husband Elio under his power of attorney. He was not present on 12 March 2009 at the offices of Mr D’Angelo. Whatever might have been his limited knowledge of the first and second loan transactions that I have already identified, he knew almost nothing of this third loan transaction. The use of the power of attorney meant that he could be left in almost total ignorance of this last transaction and he was.

120 Mr Elio Coppola had one wisp of information about the third loan. He knew that his wife Maria and his daughter Vanessa were doing something about the properties sufficient for him to refuse to become involved. But that is all he knew. This is to be inferred from something that happened after completion of the third loan. Vanessa Coppola telephoned Simon Hall a short while after the third loan. On the telephone he repeated to her something, which Mr Moujalli had said to him, “Steven tells me that he cannot get your refinance done because your father won’t sign the application form or anything else for the loan. You have to get him to commit to the refinance”. I accept Mr Hall’s evidence that this conversation took place and that Vanessa blamed Artex for not being able to find a lender for a full refinance. But importantly Vanessa confirmed that the problem with the refinancing was that Elio would not sign the application form. I doubt that this was a recent position on Elio’s part. I infer that his attitude throughout March 2009 was that he simply did not wish to be involved in any transactions involving his interests in property. Only Maria and Vanessa attended Mr D'Angelo’s office to sign the security documents in respect of the third loan. Mr D'Angelo did give them some warnings however before they signed.

121 Vanessa says and I accept that Mr D’Angelo emphasised to Maria and Vanessa Coppola how high and harsh the interest rate was on the third loan but he explained to them that they had little choice but to sign it they wanted the caveat lifted on Number 9. Vanessa voiced concern that the loan was for too large a figure. She did not want to borrow $180,000. She remembered that Simon Hall had said in the conversation on the telephone with Mr Moujalli and Mr Navarro that he would lift the caveat on Number 9 if he received $80,000. To give effect to Vanessa’s concern Mr D’Angelo proposed amending the letter of offer to reduce the loan advance to $130,000. The alterations were cleared by telephone with Mr Hall and Mr D’Angelo made the amendment to the letter of offer. Mr Hall himself changed the security documents, which were signed at Mr D’Angelo's office later that same evening 12 March 2009. Vanessa Coppola delivered them to Mr Hall’s home at Glebe later that night.

122 Maria Coppola signed a declaration in relation to the third loan on 12 March 2009 to the following effect:

“I/We declare that the credit to be provided by me/us by Rebfin Pty Limited or one of their assigned lenders is to be applied wholly or predominantly for business or investment purposes (or for both purposes).”

123 Maria Coppola also made a “Declaration by Borrower” in the form of a statutory declaration to the following effect:

1. I am the borrower named in certain loan and security documents in favour of George Romiz, Simon Hall and John Storm (lenders) relating to property located at Wilson Dr. Colo Vale
2. I have received independent legal advice regarding the loan and security documents referred to in paragraph 1.
3. After receiving that advice I have freely and voluntarily signed the following documents: (Specify the documents produced for signature)

273 Capacity and Educational Background of the Parties. Although Maria undoubtedly had some difficulties in comprehending the second loan transaction. I find that she had a reasonable understanding of it. But by this time Elio’s lack of comprehension was a totally disabling force.

274 Fast Funds’ Tactics. As my findings in the chronological section show, by the time of the second loan Fast Funds had strong reason to suspect that Number 9 was the residence of Elio and Maria Coppola, that the loan probably was governed by the Code and that Vanessa’s conduct indicated that she may not have been acting in both her father and her mother’s best interests. All that being said it is difficult to argue with the steps that Fast Funds took, undoubtedly based upon that suspicion, of getting the family legally advised by Mr Andresakis. From Fast Funds’ perspective the certificate from the solicitor was certainly enough to allow Fast Funds objectively to conclude that the family had been legally advised but not enough for Fast Funds to overcome strong suspicions that the advance was governed by the Code.

275 The appropriate relief to reflect these imbalances is that an interest rate lower than the maximum allowed under the Code should be all that is permitted to Fast Funds in respect of the second loan transaction. There is no clear evidence before me of market rates but justice would be served and to relieve against the injustices of the circumstances of the second loan by reducing the interest rate to half of the maximum allowed under the Code which would be 24% per annum.

What is owed to Fast Funds on the Second Loan Agreement and how may it be enforced?

276 The amount that is owed on the second loan agreement will need to be calculated as a result of this judgment and calculations should be submitted to the Court for consideration and approval.

RELIEF AND THE THIRD LOAN

Is the third loan regulated by the Code?

277 As the third loan was a refinancing of the second loan it will be held to have the same purpose as the second loan. By the time of the third loan the domestic purpose of the loan secured over Number 9 was evident to Mr Hall. This was clear to him from what Vanessa had told him. Code s 11(3) applies and the s 11 declaration was ineffective.

When was the Business Purposes Declaration Signed on the Third Loan?

278 But one issue about the form of the declaration for the third loan was argued extensively and is dealt with briefly here. The Coppolas raise a timing issue in relation to the 12 March 2009 declaration for the third loan. Section 11 of the Code requires the declaration to be entered into “before entering into the credit contract”. Vanessa Coppola’s evidence is that Maria Coppola executed the letter of offer, amended by her solicitor, before other documents (especially the declaration) were signed. Those documents, “including the declaration” she says were executed later that day.

279 Strict compliance with s 11 is necessary. s 11(2) of the Code provides:

“Credit is presumed conclusively for the purposes of this Code not to be provided wholly or predominantly for personal, domestic or household purposes if the debtor declares, before entering into the credit contract , that the credit is to be applied wholly or predominantly for business or investment purposes (or for both purposes).” [ emphasis added ]

280 If the declaration is not executed before the transaction documents were executed then the lender does not have the benefit of the s 11 presumption: Bahadori v Permanent Mortgages Pty Ltd (2008) 72 NSWLR 44; [2008] NSWCA 150.

281 The sub-section raises for consideration that the relative timing of the event of the borrowers’ declaration that the credit is to be applied for business or investment purposes and of the event of entry into the credit contract itself.

282 The evidence from the Coppola family about the sequence of events in relation to the declaration and making of the third loan are not in contention. The unsigned documents were supplied to Mr D’Angelo, acting on behalf of the Coppola’s on 11 March 2009. During the course of the next day, 12 March 2009 documents were signed by Maria Coppola including the declaration. The Coppolas made some amendments to the letter of offer before it was signed. After signature, all the signed documents were delivered to Mr Simon Hall late on the evening of 12 March 2009.

283 Fast Funds contends that upon this account by Vanessa Coppola of the events of 11 and 12 March 2009 that the business purposes declaration must have been signed prior to the credit contract documents being delivered to Mr Hall and that the timing requirements of sub 11(2) of the Code were satisfied.

284 s 11(2) must be interpreted strictly in accordance with its terms. The declaration of purpose of the loan must be entered into “before entering into the credit contract”. All that is required here is for the Court to assess the moment of “entering into the credit contract”. Fast Funds submission is that as the declaration signature took place before delivery of the document to Simon Hall that the declaration must have been made before entering into the credit contract.

285 I agree with the Fast Funds submission on this issue. The contract here was not formed until the executed documents were received back by Fast Funds. A contract is not formed until acceptance is communicated back to the offeror. The earliest possible time in which there could have been a contract in this case is upon receipt of the documents back by Mr Simon Hall. The declaration was signed before that.

Form of the Business Purpose Declaration

286 It is not necessary to decide the question of whether the form of declaration for the third loan was Code compliant.

Was the third loan for business or investment purposes and did Mr Hall know?

287 The third loan was not for business and investment purposes and Mr Hall knew that because of what Vanessa had told him about the use of Number 9.

Has Fast Funds breached the Code in the third loan and what relief should be granted in relation to the loan and mortgage?

288 Fast Funds has breached the Code in relation to the third loan in substantially the same way that it did for the first and second loans.

Contracts Review Act – Justice and Relief

289 The third loan and mortgage were unjust and relief should be granted.

290 The specific features of the third loan which was the subject of complaint of unjustness under the Act s 9 and Code s 70 are the following: MDN had judgment for possession of Number 9; the Coppola’s could not refinance the MDN loan through Sydney Wyde Mortgages in early 2009; Sydney Wyde Mortgages required security over Number 9; Fast Funds had a caveat over Number 9 and the Colo Vale property; Fast Funds were maintaining caveats over other properties contrary to Code s 40; the third loan was really the provision of funding to satisfy the Fast Funds demand of a price for lifting its caveat on Number 9 which is said to be an otherwise illegitimate demand; Maria Coppola and Vanessa Coppola were very distressed; Fast Funds had further engaged in the practice of asset lending in circumstances of ongoing facility delinquency; the terms of the third loan were as objectionable as the first and second loans, and Maria Coppola could not make an informed decision because she did not have the benefit of the information required to be provided under Code s 14.

291 No more elaboration is required of the unjustness of the third loan than the chronological account earlier in this judgment of its immediate aftermath because it is quite evident that the Coppola family were without any means to negotiate in their own self interest at the time of the third loan transaction. That was the single overwhelming factor leading to unjustness in the third loan transaction for Elio and Maria at that time. Other factors have much less significance. The appropriate way for that to be dealt with is for the third loan contract to be varied so that the interest chargeable on the contract is no more than that prescribed under s 100 of the Uniform Civil Procedure Rules 2005 (NSW). That represents in my opinion a sufficient adjustment of the rights of the parties and no additional civil penalty orders need to be made for any of the loans.

Recovery on the Third Loan

292 Several issues of the issues stated between the parties remain to be determined in relation to recovery under the third loan. Fast Funds submits that these issues should be determined after the Court’s determination of earlier issues is known.

293 There are three remaining issues, as follows. The more efficient course with the first of the remaining questions is to defer it until the parties have had sufficient time to undertake calculations based on this judgment.

a) How much is owing if anything to Fast Funds pursuant to the third loan and against which properties is it secured?

b) If any monies are owed to Fast Funds pursuant to the third loan, to what relief is Fast Funds entitled for the purpose of enforcing payment of such outstanding amounts?

c) Is the s 57(2)(b) Real Property Act 1900 (NSW) notice which was served by Hall/Romiz/Storm in respect of the Colo Vale property invalid and if so what is the consequence of such invalidity?

294 As to the first of the issues, I will direct the parties to bring within 7 days an agreed calculation of the amount owing under the second and third loans. I will further direct that if agreement is not able to be reached within that period that the parties serve on one another and file in Court their respective calculations of the amounts said to be due.

295 One aspect of the first question can be answered now in light of my reasoning above. The properties against which the amount owing to Fast Funds (and the co-lenders) in relation to the third loan is Maria Coppola’s interest in the Coledale property and the Colo Vale property. There is no security against any of Elio’s interests in any property of which he is a registered proprietor.

296 The second of these questions can be answered now even though the precise amount owing has not yet been calculated. The issue of the relief to which Fast Funds is entitled is independent of the precise amount owed on the second and third loans.

297 I have found that the Code applies to both the second and third loans. I have also found that Fast Funds did not serve notice complying with Code s 80 (1) and (2) on Elio or Maria Coppola before commencing the Possession proceedings. None of the recognised exceptions to the requirement to serve on defendant notice before commencing proceedings in s 80 (3) apply. If proceedings are commenced without the prior service of a default notice on the debtor then the proceedings cannot continued: Benjamin v Ashkian [2007] NSWSC 735 at [88] and [89]. That is arguably the consequence that should follow here. The Possession proceedings will at least be stayed immediately. The Coppolas may wish to argue that the proceedings should be struck out entirely. This order is made without prejudice to Fast Funds’ right to seek to lift the stay or bring fresh proceedings after it has served a default notice in conformity with the Code and 30 days have elapsed. I will not hear any application for orders striking out the proceedings for a period of seven days. Fast Funds and the Coppolas must have an opportunity to consider their positions.

298 Questions may arise as to whether interim preservation orders will be needed and may be made pending any recovery Fast Funds’ recommencement of the Possession proceedings after the service of default notice and the expiry of the 30 day period.

299 The third question can be answered. On 16 June 2009 Mr Simon Hall on behalf of the mortgagees, himself, George Romiz and John Storm served a notice under s 57(2)(b) Real Property Act on Maria Coppola in respect of the Colo Vale property. The notice recited the existence of the mortgage of 12 March 2009 over the property and recited a default under the mortgage in failure to pay the mortgagees the sum of $182,000 said to be due as at 13 June 2009. The notice then required Maria Coppola to pay the sum of $182,000 within one month and notified the mortgagor that unless that occurred the mortgagees proposed to exercise their power of sale over the property.

300 It is not necessary to consider issues such as the validity of the s 57(2)(b) Real Property Act notice on grounds that it has failed to give sufficient particulars of the amount due or any other technical grounds. To sufficiently consider whether the mortgagees can proceed on the notice in the face of Code s 80. In terms s 80(2) prohibits a credit provider from beginning enforcement proceedings against a mortgagor to recover payment of money due or to take possession unless a default notice has been served in the requisite 30 days have expired. The immediate effect of s 80(2) is that a stay should be granted on enforcement. Code s 80 does not provide for a specific civil remedy for contravention of s 80. It imposes criminal sanctions on contravention. It is arguable that proceedings commenced in contravention of s 80 are not invalidated by reason of a contravention of the section. Nevertheless, the Court, for example, has broad powers to order grants of ancillary relief under Contracts Review Act Schedule 1 including “such orders in connection with the proceedings as may be just in the circumstances”. Under Code s 71 (g) upon re-opening a credit contract under s 70, the Court is empowered to “make ancillary or consequential orders”. Both these powers are sufficient for the Court to grant a stay in circumstances where s 80 has been contravened. If the Coppolas wish to argue the proceedings should be struck out and Fast Funds in relation to the second loan transaction, or the three lenders in respect of the third loan transaction, wish to maintain the present proceedings, the issue can be re-listed for argument and determined.

301 It is not immediately necessary to determine the validity of the s 57(2)(b) notice. Its validity may have to be determined, in any application by Fast Funds and the three lenders to lift the stay ordered by this judgment.

ANSWERS TO THE JOINT STATEMENT OF ISSUES

302 At the Court’s request the parties organised their submissions in relation to a series of questions about each of the three loans. Those questions and the answers required by my reasoning follow.

The First Loan (12 March 2008)

1. Is the First Loan regulated by the Consumer Credit Code (hereinafter “the Code”)?

The first loan was regulated by the Code for the reasons set out below in answer to 1(a) and (b).

(a) Was the business purpose declaration dated 14 March 2008 (TB 242) effective for the purpose of s 11 of the Code in creating a conclusive presumption against the application of the Code ?

(i) Was the business purpose declaration in the correct form or in such form so as to satisfy the requirement, identified in s 11(4) of the Code , for substantial compliance with the form required by the Consumer Credit Regulation and thereby effective to create the conclusive presumption identified in s 11(2) of the Code ?
The business purpose declaration signed by Vanessa Coppola on behalf of Elio Coppola in relation to the first loan did not satisfy regulation 10 of the Regulation and was not effective to create the conclusive presumption identified in Code s 11(2).
(ii) If the answer is “Yes” to (i) above, was there nevertheless relevant knowledge on the part of Fast Funds sufficient to enliven the operation of sub-section 11(3) of the Code and consequently overcome the aforementioned conclusive presumption?
It is not strictly necessary to answer this question in light of the answer to 1(a)(i).
(iii) Further, if the answer is “Yes” to (i) above, was the business purpose declaration ineffective for the purpose of the Code , because it was executed by Vanessa Coppola in her capacity as attorney, pursuant to the Powers of Attorney Act 2003 (NSW), on behalf of Elio Coppola?
The business purpose declaration was ineffective for the purposes of the Code because it was executed by Vanessa under power of attorney on behalf of Elio Coppola. The business purpose declaration was not effective in creating a conclusive presumption against the application of the Code.

(b) If the answer is “No” to (a) above, was the loan provided pursuant to the First Loan nevertheless a loan predominantly for business or investment purposes (including by reference to the definition of “predominant purpose” in sub-section 6(5) of the Code ), thus overcoming the presumption, identified in sub-section 11(1) of the Code and in favour of the borrower, that the Code applies?

The first loan was not predominantly for business or investment purposes within Code s 6(5). As these are proceedings in which Elio and Maria Coppola claim that the Code applies to the first loan transaction and the mortgage securing it, that is presumed in these proceedings because the contrary has not been established: Code s 11(1).

Fast Funds has breached the Code.

(a) Has Fast Funds charged interest at a rate greater than that permitted by the Code ?

Fast Funds has charged interest at a rate greater than that permitted by the Code.

(b) Has Fast Funds breached sections 14, 15, 21, 40, and/or 43 of the Code ?

Fast Funds has breached each of ss 14, 15, 21, 40 and 43 of the Code.

(c) Was the mortgage unjust within the meaning of section 70 of the Code ?

The mortgage was unjust within the meaning of s 70 of the Code as was the contract itself.

As no application for relief pursuant to the Code was made in relation to the first loan, no relief is granted. The affirmative response to this question is nevertheless relevant to the determination of issues in relation to the second and third loans.

The mortgage was unjust within the meaning of s 7 of the Contracts Review Act. The precise injustice in relation to the mortgage was Clause 101 in which Elio Coppola created a mortgage of all his interest in any real property he currently owned as security for repayment of the first loan. The other injustice in relation to the first loan was the interest rate charged which was excessive.

No relief granted pursuant to the Contracts Review Act in relation to the first loan. Elio Coppola did not seek relief in respect of the first loan under the Contracts Review Act. However, the relief that could have been sought in respect of the first loan is nevertheless relevant to the consideration of the grant of relief in respect of the second and third loans.

The Second Loan (11 June 2008)

The second loan is regulated by the Code.

(a) Was the loan provided pursuant to the Second Loan a loan predominantly for business or investment purposes (including by reference to the definition of “predominant purpose” in sub-section 6(5) of the Code ), thus overcoming the presumption, identified in sub-section 11(1) of the Code and in favour of the borrowers, that the Code applies?

The second loan was not predominantly provided for business or investment purposes. The presumption in the Code s 11(1) is not displaced and the Code applies to the second loan transaction.

Fast Funds has breached the Code in relation to the making of the second loan.

(a) Has Fast Funds charged interest at a rate greater than that permitted by the Code ?

Yes

(b) Has Fast Funds breached sections 14, 15, 21, 40, and/or 43 of the Code ?

Yes

(c) Was the mortgage unjust within the meaning of section 70 of the Code ?

Yes

(d) Has Fast Funds failed to comply with the notice requirements of section 80 of the Code ?

Yes

See the judgment.

No. Fast Funds is not entitled to enforce the second loan and mortgage in this proceeding. Its rights to enforce have been stayed pending its compliance with the Code s 80.

Yes. The injustice was that identified in more detail in the judgment above.

The relief to be granted pursuant to the Contracts Review Act is the same as the relief granted under the Code identified in answer to Question 8.

The precise amount owed to Fast Funds pursuant to the second loan is still to be calculated. Number 9 is released from any liability in respect of the second loan. This is a product of the relief granted in respect of Elio Coppola releasing him from all loan obligations.

A temporary stay is granted in respect of Fast Funds rights to enforce repayment of any outstanding amounts owing on the second loan. Once those amounts have been ascertained and a notice has been served, Fast Funds can apply to lift the stay hereby granted on enforcing repayment of such outstanding amounts.

The Third Loan (12 March 2009)

The third loan is regulated by the Code.

(a) Was the business purpose declaration dated 12 March 2009 effective for the purpose of section 11 of the Code in creating a conclusive presumption against the application of the Code ?

The business purpose declaration dated 12 March 2009 was not effective for the purpose of s 11 of the Code to displace the presumption that the Code applies to the third loan.
(i) Was the business purpose declaration signed prior to the credit contracts and so as to comply with the timing requirements identified in sub-section 11(2) of the Code ?
Yes
(ii) If the answer to (i) above is “Yes”, was the business purpose declaration in the correct form or in such form so as to satisfy the requirement, identified in sub-section 11(4) of the Code , for substantial compliance with the form required by the Consumer Credit Regulation and thereby effective to create the conclusive presumption identified in sub-section 11(2) of the Code ?
Not necessary to decide.
(iii) If the answer is “Yes” to (ii) above, was there nevertheless relevant knowledge on the part of Hall/Romiz/Storm sufficient to enliven the operation of sub-section 11(3) of the Code and consequently overcome the aforementioned conclusive presumption?
Yes

(b) If the answer is “No” to (a) above, was the loan provided pursuant to the Third Loan nevertheless a loan predominantly for business or investment purposes (including by reference to the definition of “predominant purpose” in sub-section 6(5) of the Code ), thus overcoming the presumption, identified in sub-section 11(1) of the Code , that the Code applies?

The third loan was not provided predominantly for business or investment purposes and the presumption in Code s 11 (1) that the Code applies is not displaced in respect of the third loan.

Fast Funds has breached the Code in respect of the third loan.

(a) Has Fast Funds charged interest at a rate greater than that permitted by the Code ?

Yes

(b) Has Fast Funds breached sections 14, 15, 21, 40, and/or 43 of the Code ?

Yes

(c) Was the mortgage unjust within the meaning of section 70 of the Code ?

Yes

(d) Has Fast Funds failed to comply with the notice requirements of section 80 of the Code ?

Yes

See the judgment.

No. Enforcement proceedings on the third loan and the mortgage in relation to the third loan is stayed pending the three lenders, Hall, Romiz and Storm ascertaining the precise amount due on the third loan pursuant to the third loan agreement as varied under this judgment and then serving a notice under s 80 of the Code. The three lenders may then apply for the lifting of the stay on enforcement.

Yes.

The relief granted pursuant to the Contracts Review Act is the same as that granted pursuant to the Code.

Unconscionability within the meaning of the Trade Practices Act and the Fair Trading Act was not determined.

Not applicable.

See the judgment.

See the judgment.

See the judgment.

Conclusions and Orders

303 Work must be done by the parties to bring in short minutes of order to give effect to these reasons for decision. I will make the following interlocutory orders and directions pending finalisation of the short minutes.

1. The Possession proceedings are stayed until further order.

2. I direct the parties to consult one another with a view to agreeing within seven days upon the quantum of the sum due by Elio and Maria Coppola to Fast Funds and the other lenders within seven days but in the absence of agreement for each party to file its own calculation of the amount due.

3. I further direct the parties to consult and agree if possible within seven days upon short minutes of order to give effect to this judgment. If agreement is not forthcoming within seven days, each party should file short minutes of order for which that party contends and serve the same on the other party.

4. Grant liberty to apply.

27 May 2010

304 The parties brought in short minutes of order on 27 May 2010 in the following terms:

The Court declares:-

1. That:-


(a) the loan between Fast Funds Pty Limited and Elio and Maria Coppola dated 12 March 2008 (the “First Loan”);

(b) the loan between Fast Funds Pty Limited and Elio and Maria Coppola dated 11 June 2008 (the “Second Loan”);

(c) the loan between Simon Hall, George Romiz, John Storm and Maria Coppola dated 12 March 2009 (the “Third Loan”); and

(d) the mortgages given pursuant to the First, Second and Third Loans;
are all regulated by the Consumer Credit Code .


2. That the Second Loan and mortgage (identified at paragraph [4] of the Judgment of 14 May 2010) and the Third Loan and mortgage (Judgment [5]) are unjust within the meaning of Section 70 of the Consumer Credit Code and Section 7 of the Contracts Review Act 1980 (NSW).

3. That clauses 101 and 102 of Mortgage Memorandum AC218459F, insofar as such memorandum formed part of the terms of the Second Loan and the Third Loan (including Mortgage Registered No. AE742964), are void and unenforceable.

4. That the First Loan and Mortgage AE305419 (Judgment [3]) are unjust and liable to varied insofar as they:-


(a) claim an entitlement to interest at a rate greater than 48% per annum simple interest; and

(b) claim interest upon $10,000 of the principal advanced under the First Loan.

5. That Second Loan and Mortgage are unjust and are liable to be varied insofar as they:-


(a) claim an entitlement to interest at a rate greater than 24% per annum simple interest; and

(b) purport to create security for that loan against the interest of Elio Coppola in the property located at and known as the Coledale property.

6. That the Third Loan and Mortgage registration No. AE742964 are unjust and liable to be varied insofar as they:-

(a) claim an entitlement to interest at a rate greater than the rate prescribed in Schedule 5 to the Uniform Civil Procedure Rules 2005 (NSW).


7. That as at 27 May 2010 the amount owing by Maria Coppola and Elio Coppola to Fast Funds Pty Limited pursuant to the Second Loan is $32,284.22. That amount is secured against Maria Coppola’s half interest in the Coledale property.

8. That as at 27 May 2010 the amount payable by Maria Coppola to Simon Clear Hall, George Romiz and John Storm in respect of the Third Loan and Mortgage registration No. AE742964 is $144,007.94. That amount is secured against the property known as the Colo Vale property.

The Court Orders:-

9. That Fast Funds Pty Limited remove the following Caveats:-

(a) Caveat Number AE653419 lodged against the title of the property known as the Stanmore property;

(b) Caveat Number AE668652 lodged against the title of the property known as Number 11.

(c) Caveat Number AE653432 lodged against the title of the property known as Number 9.

10. That the terms of the First Loan and the mortgage given pursuant to it be varied as follows:-


(a) by excising any obligation to pay interest in respect of $10,000 of the principal sum advanced; and

(b) by excising any obligation to pay interest on the balance of the principal sum advanced at rates and in the manner prescribed and in lieu thereof that interest be paid at the rate of 48% per annum calculated on a simple basis from 14 March 2008; and

(c) by excising clauses 101 and 102 of Mortgage Memorandum AC218459 insofar as such memorandum forms part of the terms of the First Loan.

11. That the terms of the Second Loan and the mortgage given pursuant to it be varied as follows:-


(a) by excising any obligation to pay interest on the balance of the principal sum advanced at rates and in the manner prescribed and in lieu thereof that interest be paid at the rate of 24% per annum calculated on a simple basis from 24 June 2008;

(b) by excising clauses 101 and 102 of Mortgage Memorandum AC218459 insofar as such memorandum form part of the terms of the Second Loan.

12. That the terms of the Third Loan and the mortgage given pursuant to it be varied as follows:-


(a) by excising any obligation to pay interest on the balance of the principal sum advanced at rates and in the manner prescribed and in lieu thereof that interest be paid at the rate prescribed from time to time in Schedule 5 to the Uniform Civil Procedure Rules 2005 (NSW) per annum calculated on a simple basis from 14 March 2009;

(b) by excising clauses 101 and 102 of Mortgage Memorandum AC218459 insofar as such memorandum form part of the terms of the Third Loan.


13. Reserve for further argument and consideration the issue of whether the notice purportedly issued pursuant to Section 57 (2) (b) of the Real Property Act by Simon Clear Hall, George Romiz and John Storm to Maria Coppola dated 16 June 2009 is void and of no effect.

14. That the injunctions granted by the Court against Simon Clear Hall, George Romiz and John Storm on 9 October 2009 be discharged.

15. Reserve for further argument and consideration the issue of whether proceedings No. 289358 of 2009 be dismissed.

16. The Court reserves the costs of the proceedings for argument on 2 June 2010.

17. The parties are granted liberty to apply on three days notice in writing (or shorter notice in the event of an urgent application) to have the matter re-listed.

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31/05/2010 - Minor typographical error in cover sheet - Paragraph(s) Cover sheet