Giannopoulos v Rapid Funds Pty Ltd

[2013] SADC 9

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

GIANNOPOULOS v RAPID FUNDS PTY LTD & ANOR

[2013] SADC 9

Judgment of Her Honour Judge Cole

31 January 2013

CONSUMER CREDIT - CREDIT PROTECTION - GENERAL - OPERATION OF CREDIT LEGISLATION - INTERPRETATION AND DEFINITIONS - LOAN CONTRACT

The plaintiff obtained a series of loans from the defendants - whether Consumer Credit Code applies - whether loan agreements and mortgage should be re-opened - unjust transactions - changes to terms - judgment to the defendant on the counterclaim for an amount to be calculated in accordance with the revisions made to the loan agreements and the mortgage.

Real Property Act 1886 (SA); Fair Trading Act 1987 (SA); Misrepresentation Act 1972 (SA), referred to.
West v AGC (Advances) Ltd (1986) 5 NSWLR 610, considered.

GIANNOPOULOS v RAPID FUNDS PTY LTD & ANOR
[2013] SADC 9

1. In 2008, the plaintiff, Mr Giannopoulos, obtained a series of loans, including cash advances of $2,300 and $30,000.  A loan, which had previously been advanced to the plaintiff by the National Australia Bank (“NAB”), and secured by a mortgage over land owned by the plaintiff (“the property”), was also paid in full on the plaintiff’s behalf, and the mortgage discharged.  The first defendant, Rapid Funds Pty Ltd (“Rapid Funds”), as a result of some of these transactions, now holds a registered mortgage over the property.

2. The two defendants are companies which conducted their business from the same premises and had common directors and shareholders.  The role of the defendants in the indebtedness of the plaintiff is in dispute in this action.  Boardroom Finance Pty Ltd (“Boardroom Finance”) conducted a finance brokering business.  Rapid Funds was in the business of providing short term loans.[1]  

   [1]    Transcript p 317

3. The plaintiff has pleaded as follows:[2]

   Breaches by the Defendants

   72.    By failing to disclose to the Plaintiff the matters referred to in paragraph 38 of this pleading and occasioned by the Defendants’ conduct described in this pleading (together “the non-disclosure and conduct”) the Defendants:

   72.1engaged in conduct which was misleading or deceptive, or which was likely to mislead or deceive, contrary to Section 56 of the Fair Trading Act (1987) SA (“the FTA”) and Section 52 of the TPA 18 of Schedule 2 of the CCA:

   72.2engaged in conduct which was unconscionable contrary to Section 57 of the FTA and Sections 51AB and 51AC of the TPA 21 of Schedule 2 and 22 of Schedule 2 of the CCA;

   72.3engaged in conduct which was unconscionable contrary and unjust contrary to Section 70 of the Consumer Credit Code 1994;

   72.4made false or misleading representations contrary to Section 58 of the FTA and/or Section 53 of the TPA 29 of Schedule 2 of the CCA;

   72.5misrepresented matters within the meaning of Section 7 of the Misrepresentation Act 1972.

   [2]    Para 72 Third Statement of Claim

   Unconscionability

   73.    In the circumstances of the non-disclosure and conduct it is unconscionable and unjust for Rapid to seek to obtain enforcement of the Rapid Loan Agreement and the Rapid Mortgage Documents.

   Wrongdoing and Losses

   74.     By reason of the Defendants’:

   74.1contravention of Section 51AB of the TPA 21 of Schedule 2 of the CCA;

   74.2contravention of Section 51AC of the TPA 22 of Schedule 2 of the CCA;

   74.3misrepresentation;

   74.4breach of Section 56 of the FTA and/or Section 52 of the TPA 18 of Schedule 2 of the CCA;

   74.5breach of Section 57 of the FTA and/or Section 51AB of the TPA 21 of Schedule 2 of the CCA;

   74.6breach of Section 68 of the FTA and/or Section 59(2) of the TPA 37(2) of Schedule 2 of the CCA;

   74.7breach of Sections 14, 15, 18, 31, 32 and 39 of the Consumer Credit Code.

   74.8fraud by forgery;

   The Rapid Loan Agreement and the Rapid mortgage Documents are void or voidable and unenforceable and the Plaintiff has suffered loss and damage.

4. The plaintiff has also pleaded that certain of the documents relied upon by the defendants are forgeries, and that the transaction between the parties amounted to asset lending.

5. The defendants, in their defence, deny the allegations in the above paragraphs of the statement of claim.  The defendants plead that the loan agreements and the mortgage held by Rapid Funds are “valid and enforceable”.[3]  The defendants deny that the plaintiff is entitled to the remedies sought.[4]  The defendants have filed a counterclaim seeking the following orders:

   41.    Judgment in the amount of $532,002.85 (the debt) together with interest accrued and accruing on the debt at the contractual rate of 10% per month from 27 September 20910 [sic] until the date of Judgment.

   42.    Plus further interest on the Judgment amount at the contractual rate of 10% per month from the date of Judgment until the date of payment.

   42A. A declaration that the Rapid mortgage is valid and binding.

   42B. In the alternative a declaration that Giannopoulos granted an equitable mortgage to the plaintiffs, and an order requiring Giannopoulos to execute a mortgage in registrable form reflecting the terms the Court finds was agreed between the parties, which terms Rapid says are those set out in 25 above, with the principal sum being the amount owing pursuant to the agreement referred to in paragraph 13 above.

   42C. An order rectifying the schedule to the second loan by changing ‘10% p.a.’ to ‘10% per month’ and ‘20% p.a.’ to ‘20% per month’.

   42D  A declaration that the consolidated loan had an interest rate of 5% per months [sic] at the lower rate, and 10% per month as the higher rate.

   43.    Such further or other order as this Honourable Court sees fit.

   44.    Costs on an indemnity basis.

   [3]    Third Defence paragraph 61.1

   [4]    Third Defence paragraph 62

   The Facts

6. At the trial of the matter, evidence was given in the plaintiff’s case by Mr Giannopoulos, his sister, Ms Giannopoulos, and his nephew, Mr Stamatelopoulos.  Evidence was given in the defendants’ case by Mr Pappas, a director and shareholder at all relevant times of Boardroom Finance Pty Ltd (“Boardroom Finance”), Rapid Funds and Opal Home Loans Pty Ltd (“Opal Home Loans”), Mr Maio, a director of Boardroom Finance, Rapid Funds and Opal Home Loans, Mr Diakos, who was, at all relevant times prior to 2010, a director and shareholder of all three companies, and Mr Vakitsidis, a loan processing officer employed by Opal Home Loans from 2006 to 2008, and thereafter employed by Boardroom Finance. 

   Witnesses in the Plaintiff’s Case

   Mr Giannopoulos’ Evidence

7. Mr Giannopoulos said, in evidence, that he became aware of Mr Diakos because Mr Diakos had previously arranged a loan for Ms Giannopoulos.  Mr Giannopoulos said that he telephoned Mr Diakos in about December 2007 with a view to arranging a loan.  By that time, Mr Giannopoulos said, he had not worked for about two years.  For the period of approximately sixteen years prior to stopping work, Mr Giannopoulos had conducted his own business as a painter/handyman.  Mr Giannopoulos said that he had been living with Ms Janet May for about nine years at the date of trial, and that Ms May was employed and contributing to household expenses.  Ms May was not called to give evidence. 

8. Mr Giannopoulos had debts by December 2007 of about $60,000, which he said was from the use of credit cards and shop cards, together with outstanding telephone bills and council rates in relation to the property.  He also had a loan of about $27,000 with NAB, secured by a mortgage over the property.  An NAB bank statement was tendered which shows that Mr Giannopoulos had not been meeting his repayment obligations to NAB from at least March of 2007.[5]  Oddly, a bank statement for a different account with NAB in Mr Giannopoulos’ name showed that he had an account in credit in the sum of $3,533.64 from at least 11 August 2007 to 8 February 2008.[6]  Mr Giannopoulos explained this by saying that “in my head” he reasoned that he had paid more than he needed to in the past by way of monthly payments towards the mortgage, so he considered that he was “way ahead”, and, by inference, was not obliged to pay monthly payments for some unspecified period.  He said that he kept the sum of $3,533.63 in the separate account “in case I couldn’t refinance and I owed the bank any money, I could withdraw it and put it into that account and catch up…” [7]

   [5]    Exhibit D17

   [6]    Exhibit P1 p 24

   [7]    Transcript p 63

9. In cross-examination, Mr Giannopoulos denied that any part of his debt to NAB was attributable to the St Mary’s Chicken and Seafood business.[8]  He also denied that any part of his debt to NAB related to a New Age Gardening Business.[9] 

   [8]    Transcript p 151

   [9]    Transcript p 152

10. In the latter part of 2007, Mr Giannopoulos went to see NAB with a view to arranging for NAB to assist him with his financial position.  However, he was required to provide a tax return for the previous year in order to apply to refinance.  He was unable to provide that tax return, so he did not pursue the matter further with NAB.

11. Mr Giannopoulos said that, in December 2007, Mr Diakos gave him a telephone number for a man named “Frank” and suggested that Mr Giannopoulos speak to Frank about the loan application.  Mr Giannopoulos did not know Frank’s surname, but it is quite clear that Frank must be Frank Vakitsidis who was, at that time, an employee of Opal Home Loans.  It was Mr Giannopoulos’ evidence that a meeting was arranged and took place between Mr Vakitsidis and Mr Giannopoulos in January 2008 at premises on South Road.  Mr Giannopoulos said that the meeting took ten to fifteen minutes, and his account of the conversation was as follows:[10]

    …I don’t remember exactly but I could tell you what I basically said to him when I went there.  I told him that this is the position I’m in, I think my house is worth about $470,000, I owe $27,000 to the bank and I’ve got all of these debts with my credit cards and I’d like to refinance my home and pay off my existing debts.

    [10]   Transcript p 65

12. At this first meeting, Mr Giannopoulos said that he told Frank that his debts, in addition to the $27,000 owed to the NAB, totalled about $60,000 (so, a total of about $87,000).  He also told Frank about the NAB mortgage over the property.  At this first meeting, Mr Giannopoulos said that he told Frank that he wanted to borrow $150,000 in total.  He did not explain to Frank why he wanted $63,000 more than he owed.

13. In cross-examination, Mr Giannopoulos agreed that he said at the first meeting that he was a painter, but he said that he had also mentioned that he was “not working at the moment”.[11]  Mr Giannopoulos denied that he had ever said that he wished to borrow money to invest with Mr Jim Panos or Accessible Funds Australia.[12]  Mr Giannopoulos denied that he said at the first meeting or at all that his income was $70,000 per annum or that he was clear of debt.[13] 

    [11]   Transcript p 157

    [12]   Transcript p 157

    [13]   Transcript p 159

14. Mr Giannopoulos said that a further appointment was made for about two weeks’ time, as the defendants were moving into new premises on Henley Beach Road.

15. The second meeting took place in late January or early February 2008, and lasted for about 20 to 30 minutes.  Mr Giannopoulos gave evidence that he repeated what he had said at the first meeting, and added that he wanted cash amounting to about one year’s income.  It was Mr Giannopoulos’ evidence that Frank responded by saying that it should not be a problem, because of the ‘collateral’ Mr Giannopoulos had in his house.  Mr Giannopoulos said that he mentioned Perpetual, and Frank said that they dealt with a number of lenders, including Perpetual and the ANZ Bank.  It was Mr Giannopoulos’ evidence that, at this second meeting, Frank said that Mr Giannopoulos would be paying 1% more interest than Mr Giannopoulos’ sister on account of his bad credit.  Mr Giannopoulos thought that Ms Giannopoulos was paying 8% interest, so that he would be paying 9%.  Frank said that the first step would be to get the property valued.  Mr Giannopoulos said that he signed “some papers” at the second meeting.  Mr Giannopoulos said, in evidence, of those papers:[14]

    I think one was for the application for the $150,000 and the other one was to get my house valued.  I think I did have to sign another one for him to check my credit, I think I had to sign something on that.

    [14]   Ttranscript p 69

16. Mr Giannopoulos said, in evidence, that he could not recall how many pages each document comprised, or how many times he was required to sign each document.  He thought he recalled that Paul Maio was in the room when he signed the documents, as well as Frank and possibly others.[15] It became clear, however, during the trial, that Mr Giannopoulos had confused Mr Paul Maio with Mr Con Pappas.[16]

    [15]   Transcript p 80

    [16]   Transcript p 192

17. In cross-examination, it was put to Mr Giannopoulos that Con Pappas had told him at the meeting in February 2008 that Mr Giannopoulos could apply for a loan of 70% of $470,000.  The exchange continued, on Mr Giannopoulos’ evidence:[17]

    Q.     Didn’t he tell you that if you wanted to make an application based on that valuation, the maximum you could apply for would be 70% of 470,000.

    A.     I don’t recall but like I said, all I wanted was 150 so if that works out to the 70%, I don’t know.

    Q.     He told you that 70% would be $329,000.

    A.     No I didn’t need that kind of money, no point for it.  I was only making 25 to $30,000 a year, I wouldn’t have been able to keep up the repayments if I borrowed that kind of money.    

    [17]   Transcript p 161

18. A valuer subsequently visited the property to assess it.  A telephone conversation then took place between Frank and Mr Giannopoulos as a result of which, on Mr Giannopoulos’ evidence, Mr Giannopoulos went back to the Henley Beach Road office and signed what he thought was a further authority for a second valuer to value the property.  This was referred to as the third meeting in the evidence.

19. A fourth meeting then took place in about March of 2008, again at the Henley Beach office.  It was Mr Giannopoulos’ evidence that, at this meeting, Frank told him that he would be given a loan by Perpetual.

20. Mr Giannopoulos said that he then telephoned Frank at least twice a week from March to May 2008 to enquire about the progress of the loan application.  He said that he also visited the office several times.

21. It was Mr Giannopoulos’ evidence that Frank telephoned him and asked him to go into the Henley Beach Road office in May 2008.  This was referred to as the fifth meeting.  Mr Giannopoulos said that Frank told him that the loan would be approved as soon as Mr Giannopoulos paid his outstanding Council rates, which were about $2,300.  Frank arranged a loan of $2,300 for Mr Giannopoulos, saying that this would be taken into account when the larger loan came through, and a cheque for that amount, made out to the Council, was provided to Mr Giannopoulos the following day.  Mr Giannopoulos then took the cheque to the council, and returned to Frank with the receipt, which Frank photocopied.  The receipt is dated 5 May 2008.[18]  Mr Giannopoulos said, in evidence, that he did not know who was lending him the $2,300.  He does not seem to have turned his mind to that question at the time that the cheque was provided to him.  He did recall signing a paper to say that he accepted the $2,300. It was Mr Giannopoulos’ evidence that Frank told him that the whole of the loan would be approved two weeks after the payment of the Council rates.

    [18]   Exhibit P1 p 129, Exhibit D24

22. Mr Giannopoulos gave evidence that, about two weeks later, Frank called Mr Giannopoulos and had him attend at the office once again (“the sixth meeting”).  Mr Giannopoulos said that Frank told him that the loan had been approved, and that he could pick up the money.  Mr Giannopoulos signed some papers at the sixth meeting, which he took “to say that he was advancing me the money, or you know for my loan, and that’s what I took it as.”[19] It was Mr Giannopoulos’ evidence that Frank told him that he would give him $30,000 now and then, once he, Frank, had paid off all Mr Giannopoulos’ credit cards and bills, he would put the rest of the money into Mr Giannopoulos’ bank account.  Mr Giannopoulos said that Frank knew to whom he owed money from a credit check which had been done, and which he had seen.  He said that he told Frank that Visa and MasterCard had both told him that they could reduce the amount owing if he paid cash.  Frank gave him some papers to sign, and he thought that he signed them in front of Paul Maio.  Mr Giannopoulos thought that this paper was an acknowledgement of the receipt of $30,000.  He was given two cheques; one for $5,000 and one for $25,000.  He went to Westpac, Henley Beach, and attempted to cash the $5,000 cheque, but the bank declined to cash it.  He returned to the office, and either Frank or Paul accompanied him back to the bank, and the cheque was cashed.  The next day he cashed the cheque for $25,000 at Westpac, North Adelaide. 

    [19]   Transcript p 80

23. It was Mr Giannopoulos’ evidence that he then kept the $30,000 in cash at his home.

24. Mr Giannopoulos said that he expected that his bills would be paid off within the week.[20]  He also expected to get a further amount, in excess of $30,000, after the payment of the bills.  However, neither of those events occurred.  Mr Giannopoulos gave evidence that he continued to telephone Frank to ask him what was happening.  He said he was told that “they’ll get around to it by the end of the week all should be done.” [21]  In about June 2008, Frank told him that he had passed the matter on to either George Diakos or Con Pappas, Mr Giannopoulos could not recall which.  He believed he may have dealt with both of them, as well as Frank.  Mr Giannopoulos said that he telephoned persistently between June and December, and was repeatedly reassured that the matter was being attended to, but it never was.  He said that he was told that they had just fallen behind in their work.  He said that he met with George Diakos and Con Pappas numerous times from June to December 2008.[22]  He also had his nephew and his sister call in on the office and make enquiries.

    [20]   Transcript p 84

    [21]   Transcript p 85

    [22]   Transcript p 90

25. Mr Giannopoulos said, in evidence, that he did not raise the issue of his NAB mortgage with George Diakos, Con Pappas or Frank during the period from June to December 2008.  He said that at no time during that period was it suggested to him that the loan money would not be forthcoming, or that it may come from a source other than Perpetual.  In cross examination, Mr Giannopoulos agreed that he may have received a letter from NAB telling him that his mortgage had been paid out, and he said that he assumed that Perpetual had paid out the NAB mortgage at the same time as he had been given the $30,000 in cheques. [23]  He said that he could not recall signing a mortgage.[24] He agreed that he assumed from May 2008 that Perpetual had a mortgage over his property.

    [23]   Transcript p 143

    [24]   Transcript p 144

26. In about December 2008, Mr Giannopoulos received a telephone call, probably from Frank, but possibly from one of the other men.  He was asked to attend a meeting at the office.  He went to the meeting.  He gave the following account of the meeting in evidence:[25]

    Q.     Who was there.

    A.     It was George, Frank and another person; I’m not quite sure, I think it was Con but it was three of them in a room.

    Q.     What was said by them to you.

    A.     Well they turned around and said to me that I have to sell my house because my loan didn’t come through and that’s when I said “Well, where did this money come from?” and they said “Us” and I said “Who’s got my mortgage?” – “Oh, we have” and I turned around and said “Well this is bullshit”.  I raised my voice and that’s when they stood up, so I felt a bit – so I walked out and I said – “I’d better go and see a lawyer” and I’m sure it was Con that followed me to the door and said “Don’t go and see a lawyer, we could sort this out”.  That was the last time I ever walked back into that store.

    [25]   Transcript p 92

    Ms Giannopoulos’ evidence

1. Ms Giannopoulos is Mr Giannopoulos’ sister.  She gave evidence that, in about 2003, she purchased St Mary’s Chicken Shop (“the Chicken Shop”).  Two and a half to three years later, she closed it.  Ms Giannopoulos said that she borrowed $25,000 from NAB for the Chicken Shop.  She said that Mr Giannopoulos was the guarantor for the loan, so that the loan was in their names jointly.  In cross examination, she said that Mr Giannopoulos’ house was used as security for the loan.[26]  She said that she paid off the loan in full, and that Mr Giannopoulos made no contributions to the repayments. 

   [26]   Transcript p 276

2. Ms Giannopoulos said, in evidence, that she arranged with George Diakos at “Rapid Loan” to borrow $130,000 from Perpetual about seven years ago.  Perpetual took a mortgage over her home in Flinders Park.  Ms Giannopoulos said that she suggested to Mr Giannopoulos that he seek refinancing through George Diakos.

3. Ms Giannopoulos’ son’s girlfriend, whom Ms Giannopoulos referred to as her daughter in law, worked in the coffee shop next to the Rapid Finance office on Henley Beach Road.  Ms Giannopoulos said that she would visit her daughter in law in the coffee shop.  Ms Giannopoulos said, in evidence, that, a few times over a couple of months, at Mr Giannopoulos’ request, she went into the Rapid Funds office to ask George what was happening with her brother’s loan application.  She said that George would say to her “Soon it will be finalised”.[27]

   [27]   Transcript p 275

   Mr Stamatelopoulos

4. Mr Stamatelopoulos is Ms Giannopoulos’ son.  Mr Stamatelopoulos gave evidence that his girlfriend worked in the coffee shop next door to George Diakos’ office.  Mr Stamatelopoulos met Mr Diakos through the coffee shop.  Mr Stamatelopoulos was aware that Mr Diakos helped Ms Giannopoulos get a home loan, and also that Mr Diakos had dealings with Mr Giannopoulos. 

5. Mr Stamatelopoulos said that he went to George Diakos’ office numerous times to find out what was happening with his uncle’s loan application.  He spoke to Frank.  He said he went in to the office about 20 to 30 times, but he thought that it was over a period of “months and years”.  He said that he would get different answers, but the answers were along the lines that they were waiting for more paperwork. He said that he was told more than once that the loan had been approved.

   Ms Bird’s Report

6. A report of Ms Bird, a handwriting expert, dated 20 September 2010, was tendered by consent in the plaintiff’s case.[28]  According to her report, Ms Bird was provided with comparison signatures and initials by Mr Giannopoulos, together with 12 documents or extracts from documents to assess.  Ms Bird’s conclusion, with respect to some of the signatures on the documents, was that there was “qualified support” for the proposition that Mr Giannopoulos had signed them.  In relation to other initials and signatures, Ms Bird was unable to express any opinion.

   Evidence in the Defendant’s Case

   [28]   Exhibit P1 p 257

   Mr Pappas’ evidence

7. Mr Pappas is and has been at all relevant times a director and shareholder of Boardroom Finance and Rapid Funds.  He is also a director of Opal Home Loans.  Mr Pappas gave evidence that he has worked in “the loan business” for 27 years.  He said that the business of Boardroom Finance was finance brokering between major banks and lenders and individuals and commercial entities. The business of Rapid Funds was the provision of short term finance to cover small debts for short periods of time.  The business of Opal Home Loans was the sourcing of funds from wholesale funders and the management of mortgages for those wholesale funders.  All three businesses operated from offices on South Road, Mile End until some time in 2007, when they moved to Henley Beach Road, Mile End. 

8. Mr Pappas gave evidence that he met Mr Giannopoulos in February 2008, when George Diakos introduced them at the Henley Beach Road offices.  Mr Pappas gave the following account of the conversation:[29]

   The question was he wanted to get refinance his current debts and then invest with Jim Panos or Accessible Funds the remainder of his equity which is why we did the valuations straightaway because we didn’t know exactly how much he could borrow against his property.  He thought his property was worth about 500,000.

   [29]   Transcript p 321

9. Further, Mr Pappas said:[30]

   Q.     Was there any discussion when you were in the room about what Mr Giannopoulos did for a living.

   A.     I really can’t recall but I’m pretty sure he said he was a painter.

   Q.     Was there any discussion in the room about whether he was presently working or not working.

   A.     He was working, yeah.  We simply wouldn’t have entertained it if he wasn’t working.

   [30]   Transcript p 321

10. Mr Pappas said that he told Mr Giannopoulos at the February 2008 meeting that it would be necessary to get his home valued.  Mr Pappas filled out an ANZ valuation order form whilst he was with Mr Giannopoulos. 

11. After obtaining the valuation, Mr Pappas said that he had difficulty contacting Mr Giannopoulos.  Eventually, he asked Mr Stamatelopoulos to arrange to have Mr Giannopoulos contact him.  A meeting took place.  Mr Pappas said that he told Mr Giannopoulos that the valuation was $470,000, so the financiers would lend up to $329,000.  Mr Pappas said that Mr Giannopoulos authorised him to apply for a loan of $329,000, comprising a loan of $29,000 on which principal and interest would be repayable monthly, and a loan of $300,000 on which only interest would be payable for five years.  Both loans were to have variable rates.

12. Mr Pappas gave evidence that Perpetual is an underwriter, and Challenger is a wholesale funder.  He denied that he ever mentioned Perpetual in any conversation with Mr Giannopoulos.  Mr Pappas believed that an application for a loan was sent from his offices to Challenger on 14 February 2008.  Mr Pappas said that Mr Giannopoulos authorised him to obtain a credit check on him at the February meeting. 

13. Mr Pappas said that he obtained a credit report from Veda, a credit reporting agency[31].  He saw that the report noted a series of credit defaults in the name of Bill Giannopoulos and Vasilios Giannopoulos.  It can be inferred from the evidence that Mr Giannopoulos is referred to by either name.  Again, Mr Pappas said that he had difficulty getting into contact with Mr Giannopoulos to discuss the credit report with him.  He said that when he discussed the report, Mr Giannopoulos:

    …said he needed to pay out these defaults – that was what he wanted to do, and also, you know, invest that money with Jim to get a higher return on his equity and that for us to go ahead and do it.

    [31]   Exhibit D19

14. Mr Pappas said that he did not then have any direct involvement with Mr Giannopoulos for some time.  He discussed the matter from time to time with his co-directors.  In the middle of 2008, Mr Pappas went overseas and did not return until late September 2008.  When he returned, he approached Mr Stamatelopoulos to ask him to get Mr Giannopoulos to come into the office, and Mr Pappas expressed to Mr Stamatelopoulos a concern that “… the Rapid Funds loan is getting out of hand as well.”

15. The next direct involvement Mr Pappas had was the meeting in December 2008 with Mr Giannopoulos, Mr Diakos and Frank.  Mr Pappas gave the following account of that meeting:[32]

    Well, basically brought Bill in to tell him that where the loan – what problems we have had with his loan getting approved.  We told him what – you know, we showed him documentation as well, that this is what’s happened, “You haven’t been able to provide all this”.  We said to him, you know, ‘The Rapid Funds loan is getting out of hand.  We really need to sort this out.  We don’t want, you know, we don’t want the interest to blow out’.  Plus it was causing us stress as well because we have investors we have got to pay and we weren’t receiving any funds for the funds that we gave to Bill.  We spoke basically “Look, we have got to do something about his.  No lender is going to give you any finance.”  The GFC has come through, it has really – it has closed the doors of a lot of non-conforming lenders and the only other option we have got is probably a private lender that, you know, we knew a few of them about.

    [32]   Transcript p 337

16. Mr Pappas said that, at the December meeting, Mr Giannopoulos was told that his loan application had not been approved because he had not provided three months of satisfactory bank statements, which was, as Mr Pappas saw it, the final piece of information required from Mr Giannopoulos.  Mr Pappas said that there was further discussion at the meeting about the global financial crisis, and continued:[33]

    Then we had – then I said to him “We have got two options, that private mortgage and the other option is –‘ I said “ – you have got to sell your house’.  He said to me that he was planning on selling his house anyway so – I said “Well, do you want us to continue with the private mortgage or do you want to just wait and sell the house?” and he said “No, try and get me the private mortgage”.  We reduced the loan just to $100.000 just so we can pay out the Rapid Funds debt and so his interest doesn’t keep accumulating.”

    [33]   Transcript p 338

17. Mr Pappas said that he had a further conversation with Mr Giannopoulos on the telephone in very late January 2009, in which he told Mr Giannopoulos that he had found a private lender to lend him $100,000 for 12 months at 9% interest per annum, and that Mr Giannopoulos should come in and sign the paperwork to get this underway.  Mr Pappas said that Mr Giannopoulos told him that he did not intend to deal with him any more, and that he would sell his house and they would get nothing.  Mr Pappas said to Mr Giannopoulos that they had a mortgage over his house, so he could not sell it without paying them out.  Mr Pappas said that at the time of this telephone conversation, the mortgage was not registered over the title to the property.  On 28 January 2009, Mr Pappas took steps to have the mortgage registered.  Mr Pappas instructed Mr Dianos, a conveyancer, to arrange for the stamp duty to be paid on a loan agreement.  Mr Pappas said, in evidence, in relation to what he gave Mr Dianos:[34]

    Well we grabbed his loan agreement dated 22 May and inserted the schedule for 26 June in there and also gave him a statement up until 26 July just showing how much on 26 June was to be stamped up to and then I gave an explanation of the funding as well, how it went.

    [34]   Transcript p 344

18. The loan agreement referred to was then stamped to the value of $67,805.  Mr Pappas said that that figure was arrived at by the addition of the first loan of $2,330 being added to the second loan of $30,000 and the loan of $27,000 to pay out the NAB, plus accrued interest and “legals”.

19. Mr Pappas said that it was his decision to put the 26 June 2008 schedule with the 22 May 2008 loan agreement.  He thought that the schedule would have been created by Mr Maio.

    Mr Maio’s Evidence

20. Mr Maio is and was at all material times a director of Rapid Funds, Boardroom Finance and Opal Home Loans.

21. Mr Maio said that he first met Mr Giannopoulos on 5 May 2008.  Mr Giannopoulos was introduced to him by George Diakos as a client for whom Mr Diakos was obtaining a loan, who needed “some short-term money”.  Mr Maio recalls that he had a meeting with Mr Giannopoulos with just the two of them present.  He said that Mr Giannopoulos told him that he needed $2,300 “to pay someone as soon as possible”.  Mr Maio said that he told Mr Giannopoulos that the interest rate would be 10% per month.  Mr Maio obtained a copy of the standard Rapid Loan agreement and typed up a schedule for Mr Giannopoulos’ loan while Mr Giannopoulos was in the office.  Mr Maio was asked to relate his conversation with Mr Giannopoulos about the agreement, and he said:[35]

    ... So, yes, when I was talking about the schedule with Mr Giannopoulos, we stated obviously the commencing date being item 1 which was 5 May 2008, that was the actual day he was in front of me.  The borrower being himself, Vasilios Giannopoulos.  The lender being Rapid Funds.  The loan amount being of $2,300.  The purpose of the loan, well, it has got, “Business purposes” there.  Termination date, 5 June 2008.  Interest payment date, it was ‘capitalise’.  The reason why we would have or I put ‘capitalise’ on there was basically because it’s going to get paid out upon the settlement of the Challenger loan, which was item 11, and that’s why there was no security at that stage because we are paying it out upon settlement.  The higher rate, that’s a default rate so after that month it will go to 20% per month if we don’t receive that payout of that loan.  The lower rate being 10% per month.  The trust, at that stage it wasn’t applicable because it was a very small amount of loan and that’s what I explained to Mr Giannopoulos, ‘This is 2,300.  At this stage we are not putting any security on the loan and we are looking at paying it back upon the settlement of the Challenger loan.

    [35]   Transcript p 445

22. In explaining why he had put “Business purposes” on the schedule, Mr Maio said that Mr Giannopoulos told him it was to pay some creditors for his business.  He denied that there was any discussion of the payment of council rates with the money.  Mr Maio said that he told Mr Giannopoulos that he had the option to seek his own legal advice in relation to the agreement, but Mr Giannopoulos signed Schedule C, waiving that right.  Mr Maio also said that Mr Giannopoulos signed the “Business Purpose Declaration” before him, commenting that the loan was for business purposes.[36] 

    [36]   This document is discussed further below at para 127

23. Mr Maio gave evidence that he had the agreement photocopied, and that he gave Mr Giannopoulos the photocopy with the cheque.  The cheque was an ANZ cheque from the Rapid Funds bank account. 

24. Mr Maio said that he next met Mr Giannopoulos on about 26 May 2008.  Again, prior to that meeting, Mr Diakos approached Mr Maio and said that Mr Giannopoulos needed a loan of $30,000.  Mr Maio spoke to Frank Vakitsidis about Mr Giannopoulos’ loan application to Challenger, and Mr Vakitsidis told him that there were still some conditions to be satisfied, and that they should be satisfied. [37] That gave Mr Maio a level of confidence that a further short term loan might be able to be paid out when the large loan from Challenger was granted. Mr Maio called this the “exit strategy”.  Mr Maio gave the following account of his meeting with Mr Giannopoulos:[38]

    During that discussion with Mr Giannopoulos he told me he required $30,000 short-term and I said “What for?”  He said “I have to pay back some creditors.”  It put some light on the subject.  He said it’s also for some cash flow for his painting business.  So from that moment I told Mr Giannopoulos “Obviously we are looking at a much larger amount now.  The short-term, as I discussed with you, if you did remember from the first instance, was that 30,000 – this is a very high interest rate and we really need to ensure that you are on top of the application process and given them the relevant documents as they need it.  Then I asked him “have you given Frank everything at this stage?” He said “Yes, everything is all done, it’s just a matter of waiting for it.  From that moment I started talking about his loan a little bit, being a broker, and I said “So what is it that you are actually looking for?”  He said “I have to pay my debts”.  I said “What are your debts?  Do you have your house?  How much do you owe on your mortgage?  He told me it was roughly around the 25 mark.  I said “Okay, is there any other security against that title?”  He said “No, there isn’t.  I do owe some other debts but nothing has gone against my title”.  Then from that moment I said “Well, look, in order to be able to do this I need some firm security over your property and I really need to take out a first mortgage over your property”.  “I” being Rapid Funds.  That is when I did say about investors.  I said “We have investors’ funds to protect and I cannot do this type of loan unsecured”.

    HER HONOUR

    QTell us about the whole conversation.

    ASo that was my point of view across to him.  I said “I can have those funds for you today but it won’t happen right away, it will happen later on.  Are you happy with that, Bill?”  He said “Yes”.  From that moment I told Bill “To do all of this we are going to have to get in touch with our conveyancer and start preparing mortgage documents and it is not now a simple matter of signing a loan agreement, you have to sign the mortgage documents.  I can’t give you the money right now.  We will put an urgency on it, it will take a minimum of two hours for me to sign over that mortgage to Rapid Funds.  From that moment he said “Can’t you give me some money now, I really need to get some money straight away”.  I said “I can’t without loan agreements being signed.  Can’t you come back this afternoon?”  He said “If I have to I will”.  He left and he came back that afternoon.

    [37]   Transcript p 453

    [38]   Transcript p 454 - 455

25. Mr Maio said that Mr Giannopoulos came back that afternoon for a further meeting, and was shown a loan agreement by Mr Maio.  He said that he explained the agreement and a schedule to the agreement to Mr Giannopoulos.  Mr Maio said that he explained to Mr Giannopoulos that a caveat would form the loan security at first, but, then, when the NAB mortgage was discharged, “we are going to have to take out the first mortgage.  That incurs costs, we are going to have to charge an amount of $2,000 for all that to occur.” [39]  Mr Maio also had Mr Giannopoulos sign a discharge of mortgage and a memorandum of mortgage to  Rapid Funds.  I will discuss the documents further below.

    [39]   Transcript p 459

26. Mr Maio said that he remembered Mr Giannopoulos walking out of the office with a copy of the documents.  Mr Maio said that he accompanied Mr Giannopoulos that day to the Torrensville branch of the ANZ Bank because Mr Giannopoulos needed $5,000 immediately.  Mr Giannopoulos drove them both the ANZ bank in his vehicle, and Mr Maio withdrew $5,000 in cash and gave it to him.  He withdrew that amount because, in his experience, that is the maximum amount of cash a bank will provide without notice.  A cheque was made out to Mr Giannopoulos from the Rapid Funds account for $25,000.

27. No caveat was ever lodged on the title to the property.  The NAB mortgage was discharged.  Mr Maio said that Mr Giannopoulos was then sent a new schedule to the loan document in the post.[40] 

    [40]   Transcript p 472 p 171 book of documents

28. Mr Maio said that he next met with Mr Giannopoulos in late 2009 or early 2010 at a meeting with Mr Stamatelopoulos to discuss the matter.

    Mr Diakos’ Evidence

29. Mr Diakos was a director and shareholder of Rapid Funds, Boardroom Finance and Opal Home Loans until sometime in 2010.  He said that he had worked in the finance industry since 1997.

30. Mr Diakos said that he first met Mr Giannopoulos in late 2007.  Mr Diakos said that Mr Giannopoulos’ nephew, Dion, brought Mr Giannopoulos into the office and introduced him.  Mr Diakos said that Mr Giannopoulos told him that he wanted to refinance his home loan and borrow funds.  Mr Diakos said that, prior to Mr Giannopoulos’ visit, Mr Diakos had received a telephone call from Mr Jim Panos, in which Mr Panos told Mr Diakos that Mr Giannopoulos would be coming to see him to borrow money to invest in Mr Panos’ business, Accessible Funds Australia.

31. Mr Diakos said that Mr Giannopoulos told him that he was a painter.  He also told him that his house was worth about $450,000, that he owed money to the NAB (either $30,000 or $60,000, Mr Diakos thought), and that he had some other debts.  Mr Diakos thought that he would have explained the difference between a “full doc loan” and a “low doc loan” at the first meeting.  He also thought that he may have asked about Mr Giannopoulos’ credit history.  Mr Diakos thought that he would have told Mr Giannopoulos that the next step would be to obtain an ANZ valuation of Mr Giannopoulos’ property.  Mr Diakos said that he then introduced Mr Giannopoulos to Con Pappas and left the matter up to him.

1. At some stage subsequently, Mr Diakos became aware that there had been defaults by Mr Giannopoulos on his payments to the NAB.  Mr Diakos recalled seeing Mr Giannopoulos’ bank statement, but could not remember whether Mr Giannopoulos or Mr Pappas had shown it to him.  Mr Diakos gave evidence that he had met with Mr Giannopoulos after becoming aware of the missed payments to the NAB.[41]

   Q.     …Did you see Mr Giannopoulos in person or did you speak to him on the phone; just tell her about that discussion.

   A.     Basically, it was in person.  Well basically I would have said… I would have said well you know, we can’t go through a normal bank because no bank’s going to want to take on another bank’s problems because you haven’t made the payment so we’re going to have to go non-conforming.  Basically, Bill was fine with that.

   [41]   Transcript p 542

2. Mr Diakos said that he did not arrange the credit check personally, but left it to staff.  He said that he did discuss the outcome with Mr Giannopoulos, however.  He said that he had difficulty contacting Mr Giannopoulos.  He had only a home phone number and not a mobile number.  Mr Diakos said that, eventually, he had a two and a half hour meeting with Mr Giannopoulos in which Mr Giannopoulos explained to him the reason for each default.  Mr Diakos had the explanations typed up.  As to the signing of the explanations, Mr Diakos said:[42]

   … I had them done, I said “Okay, well if you wait I’ll just type this up and you can sign it”.  He had to leave, he goes “Well just give me a blank form, I’ll sign it and you can print it”, so okay.  So he signed a blank piece of paper, I typed it up, when I put it through the printer the signature was a bit low, the signature came out low so I had to contact him to come in and re-sign it.

   [42]   Transcript p 544

3. Mr Diakos initially said that the meeting was on the date of the document, which is 17 April 2008, but then reconsidered and said that the meeting was some days prior to the date of the document. 

4. Mr Diakos recalled discussing Mr Giannopoulos’ arrears in his council rates with him, and said that he referred him to Paul Maio to get a loan from Rapid Funds to pay the council rates.  He recalled that the loan was about $2,300.

5. Subsequently, Mr Diakos said, Mr Giannopoulos telephoned him and said that he needed to pay someone back some money “really quick like today, like pretty urgent”[43] Mr Diakos spoke to Mr Maio, who arranged the further loan. Mr Diakos said that he had explained to Mr Giannopoulos that once his property was refinanced, the loan would be repaid to Rapid Funds. [44].

   [43]   Transcript p 550

   [44]   Transcript p 553

6. The next involvement Mr Diakos could recall having in Mr Giannopoulos’ matter was arranging with Mr Mortimer to offer Mr Giannopoulos a loan of $105,000.  Mr Diakos also said that he recalled hearing Mr Pappas’ side of a telephone conversation with Mr Giannopoulos concerning this offer of a loan, and being present at a meeting with Mr Pappas and Mr Giannopoulos where the prospect of a loan from Mr Mortimer was discussed.  The meeting became heated.  Mr Diakos said:[45]

   A.     Basically at the meeting, … take a loan with George Mortimer – Con said to me ... take this loan with George Mortimer or else we will take legal action to try to take possession of your property.  Sorry, to finish off Bill just said “well I am going to sort it out, you guys get nothing” and Con said “Well you can’t do that, we have a mortgage on your property”.

   Q.     What was Mr Giannopoulos’ response to that.

   A.     He was upset, he walked out and that was that.

   [45]   Transcript p 558

   Mr Vakitsidis’ Evidence

7. Mr Vakitsidis was working for Opal Home Loans in 2008 and now works for Boardroom Finance.  In 2008, he was a loans processing officer.  He said that he dealt with loans from brokers throughout Adelaide, including Boardroom Finance. 

8. Mr Vakitsidis said that he met Mr Giannopoulos in George Diakos’ office in February of 2008.  He was called in and asked by Mr Diakos to process a loan for Mr Giannopoulos.  He thought he recalled that the amount of the loan was to be $329,000.  He said that Opal Home Loans deals with the funders, as a mortgage manager.  Mr Vakitsidis applied online for a valuation of Mr Giannopoulos’ property.  That valuation was undertaken and the property was valued at $470,000.[46]

   [46]   Exhibit P1 p 26

9. As part of the processing of the loan application, Mr Vakitsidis applied for and obtained a Veda credit report in relation to Mr Giannopoulos.[47]  Mr Vakitsidis submitted a loan application to Challenger.

   [47]   Exhibit D19

10. Challenger responded with a facsimile dated 28 February 2008 entitled “Approved in Principle”.[48]  On the face of it, this document offered a loan of $329,000 to Mr Giannopoulos for a term of 30 years, subject to the fulfilment of a series of pre-conditions.  The facsimile said:

    [48]   Exhibit P1 p 42

    I refer to your recent application in the above name and advise that the loan has been approved in principle as submitted subject to the following matter/s for attention:

    *      Please note delivery rate for Quik Equity major impaired at 70% LVR is 12.15%

    *     Satisfactory explanation from applicant (signed and dated) regarding each of the defaults and judgements against his credit file.  It is noted that the applicant has been at his current residential address for 17 years, therefore mail going astray as per submission advice does not make sense.

    *     Satisfactory explanation from applicant (signed and dated) regarding rates arrears.

    *     Please provide a full description regarding the purpose of the cash out.

    *     Please note where a loan is being taken against a Clear Title we must have confirmation on file that Opal Home Loans has contact [sic] the applicant directly to verify the loan.

    *     Please provide Veda searches for the 2 businesses noted on the applicants [sic] report.  New Age Gardening and St Mary’s Chicken & Seafood Take Away.

    *     Please have the valuation assigned to Challenger Non-Conforming Finance Pty Ltd.

    *     Please note that Challenger requires a fully completed and executed 100 Point Check Form (not signed and witnessed by authorised party) together with a clear copy of supporting documentation prior to settlement of this loan being effected.  Please provide appropriate documents linking applicants [sic] true name Vasilios Giannopoulos.

    The following debts are to be repaid from the loan funds at settlement:

Institution	Account Name	BSB & Account No.	Approx Balance
City of Charles Sturt	Vasilios Giannopoulos	[numbers given]	$2,241.19
Telstra Credit	Bill Giannopoulos	[numbers given]	$1,067.00
GE Capital	Bill Giannopoulos	[numbers given]	$7,293.00
Telstra Credit	Bill Giannopoulos	[numbers given]	$599.00
Telstra Credit	Bill Giannopoulos	[numbers given]	$211.00
FCA Holdings	Bill Giannopoulos	[numbers given]	$5,564.00
David Abram & Ass	Bill Giannopoulos	[numbers given]	$2,219.00
NAB Collections	Vasilios Giannopoulos	[numbers given]	$22,388.00
NAB Collections	Vasilios Giannopoulos	[numbers given]	$20,013.00

Please note that this expression of interest in providing finance will expire after 28 days from the date of this advice.

1. Mr Vakitsidis could not recall whether he discussed the conditions with Mr Giannopoulos.  Mr Vakitsidis said that it was his handwriting on the facsimile saying “Completed and Attached” against “Satisfactory explanation ... regarding each of the defaults and judgments against his credit file..”, “paid in full” against the condition regarding “rates in arrears”, “Has Been Completed” against the requirement for verification by the client and “completed” beside “Please have the valuation assigned to Challenger Non-Conforming Finance Pty Ltd”. 

2. Mr Vakitsidis denied having been involved in the loan of $2,300 for the Council rates, or the subsequent loan of $30,000.  He denied that he ever told Mr Giannopoulos that Boardroom Finance would pay out his creditors and that Perpetual would pay the balance of the loan into his account.  He denied ever telling Mr Giannopoulos that his loan had been approved.  He denied that he kept assuring Mr Giannopoulos that he would get onto the payment of his creditors.

3. Mr Vakitsidis said that he met with Mr Giannopoulos on 4 September 2008 and that, at that meeting, Mr Vakitsidis completed a “LoDoc/Quik Doc Declaration” which Mr Giannopoulos signed in his presence.[49]  That document says that Mr Giannopoulos is a painter with an income of $70,000 per annum. 

   [49]   Exhibit P9

4. Mr Vakitsidis also said that, at the meeting on 4 September 2008, he took a loan application form which had been filled out and signed by Mr Giannopoulos in February 2008 and amended the loan amount to read $209,000.

5. Mr Vakitsidis said, in evidence, that he received a telephone call in September or October 2008 from Challenger saying that funding for the kind of loan Mr Giannopoulos was applying for was no longer being made available by Challenger.  As a consequence, Mr Vakitsidis and Mr Maio prepared an application form to GE Finance.  Mr Vakitsidis did not discuss this application with Mr Giannopoulos.  It was his belief that Mr Maio did that.[50]

   [50]   Exhibit P1 p 222 Transcript p 625

6. A further application dated 24 October 2008 was prepared by Mr Vakitsidis to Challenger for $200,000.[51]  It was not signed by Mr Giannopoulos, and Mr Vakitsidis had no specific recollection of discussing it with him, though he thought that he would have.  A request for further information was received from Challenger.[52]  Mr Vakitsidis said that he recalled asking Mr Giannopoulos for bank statements to prove his income, which was one of the items requested by Challenger, but no such bank statements were provided.[53]  Challenger also sought proof of the making of regular payments to Rapid Funds.  This was not forthcoming either.  Clearly, neither of those things could have been produced, because Mr Giannopoulos was not earning an income and no payments were being made to Rapid Funds. 

   [51]   Exhibit P1 p 242

   [52]   Exhibit P1 p 247

   [53]   Transcript p 628

   The Loan Documents

7. It is convenient to discuss the documentary evidence by reference to each of the loans actually made, being the loan of $2,300 and the loan of $30,000 cash plus the payment out of the NAB loan, and the loan applied for but never granted.

   The loan of $2,300.

8. A loan agreement between Rapid Funds and Mr Giannopoulos pertaining to the loan of $2,300 to Mr Giannopoulos on 5 May 2008 was tendered in the plaintiff’s case (“the First Loan Agreement’).[54]  A signature, witnessed by Paul Maio, and purporting to be the borrower’s signature, appears on p 23 of this document.  Ms Bird was unable to express an opinion as to the authenticity of this signature.  A Consumer Credit Code declaration formed Annexure A of the First Loan Agreement, and was p 26 of the First Loan Agreement.  It has a signature, “Bill Giannopoulos” on it.  Ms Bird gave “qualified support” to the proposition that the signature was the plaintiff’s.  Annexure C to the First Loan Agreement, entitled “Confirmation of Decision Not to Seek Independent Advice”, is p 28 of the First Loan Agreement and is also signed “Bill Giannopoulos”.  Ms Bird was unable to express an opinion as to the authenticity of this signature.  Mr Giannopoulos, in evidence, said that he was unable to be sure as to whether it was his signature on p 23 of the First Loan Agreement.  As to the signature on p 26 of the First Loan Agreement, Mr Giannopoulos said “It really doesn’t look like my signature but I can’t tell or not” [55] and “It doesn’t, to me it doesn’t but I’m not 100% on that”.  As to whether the signature on p 28 of the document was his, Mr Giannopoulos said “Again, I can’t tell because it’s not a full signature”.  Curiously, Mr Giannopoulos then said that the printing of his name on p 26 of the First Loan Agreement was his.[56]  Mr Giannopoulos said that he had never seen the First Loan Agreement as a whole.  The following exchange took place:[57]

   Q.     When did you print your name on p 26.

   A.     I don’t remember, I think this would have been when they told me to – when they gave me the $30,000 to say that I received it.  I think that’s what that was about because there was nothing else attached to it.

   [54]   Exhibit P4, Exhibit P1 p 45

   [55]   Transcript p 96

   [56]   Transcript p 97

   [57]   Transcript p 97

9. Mr Giannopoulos further said that he had never seen the schedule to the First Loan Agreement prior to this action.[58]  The schedule is as follows:

   [58]   Transcript p 98

ITEM 1	Commencing Date	5th May, 2008
ITEM 2	The Borrower	Vasilios Giannopoulos
ITEM 3	The Lender	Rapid Funds
ITEM 4	The Loan	$2,300.00
ITEM 5	Purpose of the Loan	Business Purposes
ITEM 6	Termination Date	5th June, 2008
ITEM 7	Interest Payment Date	Capitalised
ITEM 8	Higher Rate	20% per month
ITEM 9	Lower Rate	10% per month
ITEM 10	Monthly Instalments of the Loan	Capitalised
ITEM 11	The Security	Paid out upon settlement of Challenger Home Loan
ITEM 12	Trust	N/A

1. Mr Maio said, in evidence, that the First Loan Agreement was prepared in front of Mr Giannopoulos.[59]  Mr Maio said that he went through the schedule to the First Loan Agreement with Mr Giannopoulos.  He said:

   [59]   Transcript p 445

   AOkay.  So, yes, when I was talking about the schedule with Mr Giannopoulos, we started obviously the commencing date being item 1 which was 5 May 2008, that was the actual day he was in front of me.  The borrower being himself, Vasilios Giannopoulos.  The lender being Rapid Funds.  The loan amount being of $2,300.  The purpose of the loan, well, it has got “Business purposes” there.  Termination date, 5 June 2008.  Interest payment date, it was “capitalise”. The reason why we would have or I put “capitalise” on there was basically because it’s going to get paid out upon the settlement of the Challenger loan, which was item 11, and that’s why there was no security at that stage because we are paying it out upon settlement.  The higher rate, that’s a default rate so after that month it will go to 20% per month if we don’t receive the payout of that loan.  The lower rate being 10% per month.  The trust, at that stage it wasn’t applicable because it was a very small amount of loan and that’s what I explained to Giannopoulos, “this is 2,300.  At this stage we are not putting any security on the loan and we are looking at paying it back upon the settlement of the Challenger loan”.

   XN

   QSo were each of those items on the schedule discussed with Mr Giannopoulos.

   AYes, they were.

   QOne of the items, item 5, says “Business purposes”.

   AYes

   QWere you told exactly what the purpose of the amount was.

   AHe said he needed to pay some creditors

   QDid he say what creditors.

   AHe said there were just some creditors he needed to pay for his business.

   QNow we have heard some evidence from Mr Giannopoulos that in fact the money was used to pay council rates.  Was there any discussion about council rates at the meeting.

   ANo, there wasn’t.

2. Mr Maio said, in evidence, that he saw Mr Giannopoulos sign the First Loan Agreement.  In relation to Annexure A, Mr Maio said:

   A.     Yes, as we were going through annexure A, I explained to Mr Giannopoulos “This is a type of funding that we do for business purposes, so you can’t get the funds unless it is for business purposes” and he just said “Yes, it’s for business purposes”.

3. The Schedule to the First Loan Agreement is not signed or initialled.

4. In cross examination, Mr Maio explained that he produced the First Loan Agreement using templates on his computer.  He typed in only the name of the borrower and the details on the schedule.  The Agreement minus p 25 is set up to print separately from p 25, which is the Schedule.  Mr Maio said that he typed in Mr Giannopoulos’ name, and the information in the Schedule, and printed out the document whilst Mr Giannopoulos was present in his office on 5 May 2008.  Mr Maio said that he assembled the document, putting p 25 in its place in the Agreement.[60]  He then had the document signed by Mr Giannopoulos, following which he gave him the cheque for $2,300.  Mr Maio said that he would then have put the First Loan Agreement into a manila folder and said to the receptionist “Can you file that into a descent [sic] file”.[61]  Mr Maio said that loan agreements were filed with the schedule being extracted from the document and placed at the front of the file.  Mr Maio said that he did not know that the loan was for outstanding Council rates.

   [60]   Transcript p 479

   [61]   Transcript p 481

5. The Schedule to the First Loan Agreement gives the “Higher Rate” as 20% per month, and the “Lower Rate” as 10% per month.

   The $30,000 loan

6. A loan agreement dated 22 May 2008 for the sum of $32,000 was tendered in the plaintiff’s case (the Second Loan Agreement).[62]  Two versions of this agreement appeared in the Trial Book, P1;  one without a schedule[63] and one with a schedule.[64]  A separate schedule was also tendered as part of the tender book.[65]  The schedule presented as part of P5, which is one version of the Second Loan Agreement is as follows:-

   [62]   Exhibit P5

   [63]   Exhibit P1, p 73

   [64]   Exhibit P1, p 101

   [65]   Exhibit P1 at p 100

ITEM 1	Commencing Date	22nd May, 2008
ITEM 2	The Borrower	Vasilios Giannopolous [sic]
ITEM 3	The Lender	Rapid Funds
ITEM 4	The Loan	$32,000
ITEM 5	Purpose of the Loan	Payout Business Debts
ITEM 6	Termination Date	22nd June, 2008
ITEM 7	Interest Payment Date	22nd June, 2008
ITEM 8	Higher Rate	20% per month
ITEM 9	Lower Rate	10% per month
ITEM 10	Monthly Instalments of the Loan	$3200
ITEM 11	The Security	Caveat over [home address]
ITEM 12	Trust	Vasilios Giannopoulos

1. The Schedule at p 100 of the Tender Book, P1, is as follows:

ITEM 1	Commencing Date	22nd May, 2008
ITEM 2	The Borrower	Vasilios Giannopolous [sic]
ITEM 3	The Lender	Rapid Funds
ITEM 4	The Loan	$32,000
ITEM 5	Purpose of the Loan	Payout Business Debts
ITEM 6	Termination Date	22nd June, 2008
ITEM 7	Interest Payment Date	22nd June, 2008
ITEM 8	Higher Rate	20% pa
ITEM 9	Lower Rate	10% pa
ITEM 10	Monthly Instalments of the Loan	$3200
ITEM 11	The Security	Caveat over [home address]
ITEM 12	Trust	Vasilios Giannopolous [sic]

1. This version of the schedule has Mr Giannopoulos’ handwritten initials.  I have set out, above, Mr Giannopoulos’ version of events with respect to the Second Loan Agreement.  In evidence, he said that he took the papers he signed on 22 May 2008 to be an acknowledgement that the money was being advanced.

2. Mr Giannopoulos said, in evidence, that he was “not 100% sure” that the signature on p 23 of the Second Loan Agreement (the borrower’s execution clause) was his.[66]  He said that p.24 was not signed in front of him (the lender’s execution clause).[67]  In relation to Annexure A to the Second Loan Agreement, which is the business purpose declaration, Mr Giannopoulos said, when asked if it was his signature on the page “Again, I don’t think so”.[68]  He said that the handwriting (printing) for the name and date were not his.  In relation to the initials on Annexure C, the confirmation of decision not to seek independent legal advice, Mr Giannopoulos said, in response to questions about whether he had initialled this page “I can’t tell” and “… it doesn’t really look like it is my signature, my initials.”

   [66]   transcript p 99

   [67]   Transcript p 99

   [68]   transcript p 99

3. Mr Giannopoulos said that he could not recall having seen the Schedule to the Second Loan Agreement prior to the commencement of the action.[69]  He denied being told the information in the Schedule.  He denied telling anyone representing the defendants that he required money to pay out business debts.  He denied being told about the interest rates in the Schedule or the requirement to make instalment payments.[70]  He denied ever receiving any statements of account from Rapid Funds.

   [69]   transcript p 101

   [70]   transcript p 103

1. Ms Bird’s opinion in relation to the borrower’s signatures on the Second Loan Agreement was that “there is qualified support for the proposition that the ... signatures on ...  p 23 of item LM2” were written by Mr Giannopoulos.  Page 23 of the Second Loan Agreement contains the execution by the borrower.  Ms Bird was unable to express an opinion as to the borrower’s signature on p 26 of the Second Loan Agreement (the business purpose declaration), having not been provided with a comparison signature of similar length.

2. Mr Diakos gave evidence that he was the first person approached by Mr Giannopoulos in relation to the Second Loan Application.  Mr Diakos said:[71]

   AHe came in.

   QWhat did he say.

   AHe said look I need some money real quick, it’s only to – he had paid somebody I think some – people some money and then someone – he had to pay part back really quick like today, like pretty urgent.  I said okay, well don’t panic I’ll speak to Paul and see what we can do and that’s what happened.  I spoke to Paul and then Paul just took – and saw it in there.

   QDid he tell you at all why he needed money urgently, ie that day.

   AHe had to pay some people chasing him for something.

   QDid he explain who those people were and why they were chasing him.

   ANo.

   [71]   Transcript p 550

3. Mr Maio gave evidence that, some time in May 2008, Mr Diakos referred Mr Giannopoulos to him, this time for a loan of $30,000.  Mr Maio gave evidence that he checked with Mr Vakitsidis as to the progress of the refinancing application for Mr Giannopoulos, and that Mr Vakitsidis told him that there were still some conditions to be satisfied, but that “… they definitely should be”.[72] 

   [72]   Transcript p 453

4. Mr Maio’s account of his meeting with Mr Giannopoulos in relation to the Second Loan Agreement is partially described above.[73]  Mr Maio said that the Second Loan Agreement was produced on 22 May 2008 and that Mr Giannopoulos executed it in his presence.[74]  Mr Maio said that he then went into Mr Pappas’ office and Mr Pappas executed the Second Loan Agreement for Rapid Funds, with Mr Maio witnessing his signature.  In relation to the Annexures to the Second Loan Agreement, Mr Maio gave the following evidence:[75]

   AYes, the handwriting is mine and the signature is Mr Giannopoulos.

   QWas any explanation given about p. 28 before it was signed.

   AI referred a lot back to the original loan and I said ‘Like the first one, you have the opportunity to seek independent legal advice, so are you willing to take that up?’  He said ‘No, I’ll just sign’.

   [73]   Footnote page reference

   [74]   Transcript p 457

   [75]   Transcript p 458

5. Mr Maio said that he went through the Schedule with Mr Giannopoulos.  He said:[76]

   QTell her Honour what you said about the schedule and the process of going through it.

   ABasically, again, we said ‘Okay, we are up to the schedule page, the commencement date being today, 22 May.  You are the borrower, Giannopoulos, Rapid Funds being the lender.  The loan 32 represents the $30,000 you are after today and the other 2,000 is to do with security we require over the property.  That security is a caveat at this stage but when we discharge your mortgage with NAB we are going to have to take out the first mortgage.  That incurs costs, we are going to have to charge an amount of $2,000 for all that to occur’.  The purpose of the loan was to pay out the creditors that he required to pay out urgently.  Termination date 22 June.  Usually what happens, sometimes when you discharge a mortgage from another lender, the lender can hold it up or it takes a bit of time to actually get everything to its stage of settlement so I allowed that four week period.  Interest payment date was 22 June 2008.  ‘The higher rate 20%’, but that’s got per annum, I wouldn’t have said per annum, I would have said per month.  ‘Lower rate 10% per month.  Monthly instalment of the loan 3,200.  The security is the caveat over [home address].  You will receive a settlement statement when it settles with NAB, a copy of that settlement statement and a copy of the new schedule which represents the total amount.  The trust of the person entrusting this money is yourself, Mr Giannopoulos’.

   [76]   Transcript p 458 - 459

6. Mr Maio said that the “per annum” in the interest rates of the original schedule to the Second Loan Agreement was a “mistyping of myself”.[77]  Mr Maio said that he would not have explained the interest rate as per annum to Mr Giannopoulos.  Mr Maio was cross-examined about how the second version of the Schedule for the Second Loan Agreement came into existence.  He did not specifically recall bringing the second version of the Schedule into existence, but thought it would have occurred “quite soon” after 22 May 2008.  Mr Maio thought that the new Schedule would have been sent to Mr Giannopoulos, but he had no actual recollection of bringing that about.[78]  The first version of the Schedule to the Second Loan Agreement is initialled by Mr Giannopoulos.[79]  The second version of the Schedule is not so initialled.[80]

   [77]   Transcript p 462

   [78]   Transcript p 489

   [79]   Exhibit P1, p 100.

   [80]   Exhibit P1, p 126

7. It seems that the additional $2,000 added to the loan amount Item 4 of the Schedule was for the cost of a caveat which never actually came into existence.

   The Mortgage Documents

8. An exchange of facsimiles took place between Mr Maio and North Adelaide Conveyancing on 22 May 2008, the day Mr Giannopoulos was given $30,000 by Rapid Funds. Mr Maio provided North Adelaide Conveyancing with a copy of the title to the property,[81] and North Adelaide Conveyancing provided[82] an NAB Discharge Authority in relation to the property together with an Authority to NAB to provide and to produce the title and discharged Memorandum of Mortgage to North Adelaide Conveyancing upon payment of monies due under the mortgage.  Mr Maio gave evidence that Mr Giannopoulos signed the Discharge Authority and the Authority in the afternoon of 22 May 2008.[83]  Ms Bird was unable to express an opinion as to whether the signature on the Discharge Authority was Mr Giannopoulos’.  Mr Maio also gave evidence that Mr Giannopoulos executed a Schedule to a Memorandum of Mortgage[84] in relation to the property on 22 May 2008, together with a note on that Schedule which said:

   THE MORTGAGOR HEREBY ACKNOWLEDGES that the Mortgagee provided the Mortgagor with a copy of the said standard terms and conditions contained in Memorandum No. 7678698 (comprising 17 pages plus index) before the Mortgagor executed this mortgage.

   [81]   Exhibit D34

   [82]   Exhibit D25

   [83]   Transcript p 466

   [84]   Exhibit P8

9. That document is signed in blue ink and dated 26 June 2008 in black ink.  Mr Maio said that the document was not dated when it was signed.  Ms Bird was not asked to give her opinion with respect to the signature on this document.  Mr Maio gave evidence that a copy of the standard terms and conditions of mortgage which appear at p 183 of Exhibit P1 were provided to Mr Giannopoulos on 22 May 2008.

10. The panel of the Schedule in which the consideration for the grant of the mortgage is to be recorded says:

    CONSIDERATION                IN CONSIDERATION of the sum of

    REFER TO DEED OF HEAD LOAN AGREEMENT OF EVEN DATE BETWEEN THE MORTGAGOR, THE MORTGAGEE AND AND [sic] THE DIRECTOR OF THE MORTGAGOR

    (herein called “the principal sum”) lent by the Mortgagee to the Mortgagor

11. The Schedule was dated 26 June 2008.  There is no relevant “Deed of Head Loan Agreement” at all, and there is no relevant loan agreement dated 26 June 2008.

    Further loan to pay out NAB

12. On 26 June 2008, Rapid Funds paid $27,941.36 to NAB to pay out NAB’s loan to Mr Giannopoulos and obtain a discharge of mortgage over the property.[85]

    [85]   Exhibit P1 p 176

13. Mr Maio said, in evidence, that once he obtained documents from the NAB, he prepared a new loan schedule.  This schedule appears at p 171 of Exhibit P1 and is as follows:

ITEM 1	Commencing Date	26th June, 2008
ITEM 2	The Borrower	Vasilios Giannopolous [sic]
ITEM 3	The Lender	Rapid Funds
ITEM 4	The Loan	$67,805.00
ITEM 5	Purpose of the Loan	Consolidation of Rapid Funds and NAB debts
ITEM 6	Termination Date	26th June, 2009
ITEM 7	Interest Payment Date	26th July, 2008
ITEM 8	Higher Rate	10% pa
ITEM 9	Lower Rate	5% pa
ITEM 10	Monthly Instalments of the Loan	$3,390.25
ITEM 11	The Security	First Mortgage over [home address]
ITEM 12	Trust	Vasilios Giannopolous [sic]

1. Mr Maio acknowledged that he did not get Mr Giannopoulos into the office to discuss the new loan schedule.  He did say that he posted Mr Giannopoulos a copy.[86]  Mr Maio said that 10% pa and 5% pa were misprinted.  They should have been 10% per month and 5% per month, he said.  Stamp duty was paid on the mortgage of the property to Rapid Funds on 30 January 2009 and the mortgage was registered on 6 February 2009.

   [86]   Transcript p 472

2. Mr Maio’s evidence was that the mortgage was not registered immediately after NAB was paid out because it was still expected that the larger loan to refinance all Mr Giannopoulos’ debts would be obtained from another financier.

3. A full loan agreement between Rapid Funds and Mr Giannopoulos with the schedule at p. 23 for the $67,805 figure appears in Exhibit P1 at p 171.  It is obvious, and I find, that this document is a photocopy of the Second Loan Agreement with the Schedule substituted.  No new loan agreement was executed with respect to the sum used to pay out the NAB mortgage.  There is no evidence that Mr Giannopoulos saw the “loan agreement” for $67,805, or any extract from it, prior to the discovery process.

   Documents relating to the Unsuccessful Loan Application

4. Challenger sent a facsimile to Opal Home Loans, to the attention of Mr Vakitsidis, dated 27 February 2008, which referred to a “recent application” in the name “Giannopoulos V”.[87]  It was not immediately obvious from the documents tendered that the application to which that facsimile responded was in evidence.  However, Exhibit P10, a document which came from the defendants’ office and which appears to be part of a loan application, on closer inspection, contains a number of alterations, some of which involve liquid paper, and some of which do not.  The obviously altered date upon the four pages of this document which were signed by Mr Giannopoulos now resembles 4/9/08.  Mr Ross-Smith pointed out, and I agree, that the date of the document was originally 4/2/08.  This is consistent with Mr Vakitsidis’ evidence that he re-used a loan application form from February 2008 in September 2008.[88]  I find that this document in its original form was submitted to Challenger and prompted the facsimile of 27 February 2008.  In its amended form, it was re-submitted later in 2008 and prompted the facsimile of 28 October 2008 from Challenger.  The document tendered as Exhibit P10 has a section entitled “The purpose of this loan is:”.  Under that heading the following have been filled in:

   3.       To refinance a property for personal use:      $152,795

   13.     To provide funds for a future personal use:    $47,205

   TOTAL                   $200,000

   [87]   Exhibit P1 p 42

   [88]   Transcript p 615

5. Item 14  -  “To provide funds for a future business/investment purpose” has a patch of liquid paper next to the $ sign.

6. A document headed “To Whom It May Concern” was tendered in evidence and became Exhibit P16.  Mr Diakos is the author of that document, which sets out “explanations” as to Mr Giannopoulos’ finance defaults in the Veda Credit Report.  There are three versions given of the second page of this document.  Two are signed and one is not.  Mr Diakos admitted that one of the signed pages was the result of him having Mr Giannopoulos sign a blank page, and then putting that page through a printer to have the text of page 2 printed on it.  However, Mr Diakos said that he was not satisfied with the result of that process, and so had Mr Giannopoulos return to sign another page 2.

7. Mr Giannopoulos’ evidence about this document in cross-examination was as follows:[89]

   QJust looking at Exhibit P16, now produced.  Was it P16, which is a document that says “To whom it may concern” wasn’t that a document prepared in response to the dot point on p. 42 of Exhibit P1.

   ANo, all I got – I told Frank back then what – I just couldn’t afford to pay the bills and he goes “That’s not going to go good” that was at the beginning “It’s not going to go good with the bank.  I will get George to write up a good excuse for you” and I left it at that.  I’ve never [seen] this and I’ve never signed it.

   QWell Frank didn’t say to you “I will get George to write you up a good excuse”.

   AYes, he did because he said “George will work out something better because that won’t go good with the banks just to lend” he just couldn’t afford to pay it.

   QDidn’t he tell you that Challenger wanted to have an explanation.

   ANo, no, he just – from the beginning – this is from the beginning we talk about this that he asked me my reason and I said I just couldn’t afford to pay for it and then he turned around and he goes “Well that’s not going to be good for the bank, we have to come up with something” and he said “I will leave that with George because he will be able to write up something, he’s good at it” or something.  Because all of this is all lies, all of it, and that’s not coming from me.

   [89]   Transcript p 177

8. Exhibit P9 is a LoDoc/Quik Doc Declaration, signed by Mr Giannopoulos and dated 4 September 2008, in which Mr Giannopoulos’ income is stated to be $70,000 per annum.  The amended version of the original loan application to Challenger is also dated 4 September 2008.

9. Exhibit P13 is a loan application to GE.  It is initialled by Mr Giannopoulos in blue pen.  Most of the document has been completed in black pen.  It has been dated 14 October 2008.  It has been completed predominantly by Mr Maio.  Under “Any other supporting information?” the following has been written:

   Client is looking to pay out all his registered unpaid defaults which he acquired during his separation and since has gotten back on his feet.

10. This document records Mr Giannopoulos as having “Trade tools” worth $20,000.  It describes Mr Giannopoulos as a painter and says he has a debt to Rapid Funds of $150,000.  On page 13 of Exhibit P13, Mr Giannopoulos’ income is stated to be $70,000, but the “7” has been written over a different figure, which is now illegible.

11. Exhibit P15 is entitled “Challenger Mortgage Management Loan Submission Summary”.  It is dated 24/10/08 and signed by Mr Vakitsidis.  It seeks a loan of $200,000.  It says, under “Non-conforming Situation Please explain in detail”:

    Client is looking at paying out all his defaults totalling approximately $62,795 and Rapid Funds of $90,000 and the remainder of money to upkeep his home and upgrade vehicle.

12. The purpose of the loan is said to be, as to $152,795 – “To refinance a property for personal use” and as to $47,205  -  “To provide funds for future personal use.”  This document is signed by Mr Vakitsidis but not by Mr Giannopoulos.

    Credibility

13. There are significant inconsistencies between the evidence of each of the witnesses, and between the evidence of the witnesses and the documents.

14. It seems to me that Mr Giannopoulos gave an account of the relevant events which was greatly simplified and to some extent self serving.  Where his signature or initials appear on a document, I find that he signed or initialled the document (subject to my findings in respect of the last “loan agreement”).

15. From the manner in which Mr Giannopoulos gave his evidence and responded to cross examination, it seems that he formed a fixed view, at an early stage, that he would be given a loan by Perpetual through his dealings with the defendants.  He appears to have ignored all of the information which came to him which contradicted that view.  He displayed a high level of trust in those officers of the defendants with whom he dealt and an unusual lack of interest in the precise terms and likely consequences of the transactions he was entering into.  He made little or no effort to understand the documents which he signed.

16. I find that Mr Pappas, Mr Maio and Mr Diakos, to some extent, self servingly reconstructed events in their evidence.  In addition, Mr Diakos’ recollection of events was poor.  I do not believe that Mr Giannopoulos ever said that he intended to invest with Mr Panos.  I do not believe that Mr Diakos had a conversation with Mr Panos about Mr Giannopoulos.  I do not believe that Mr Giannopoulos represented the purpose of his loan application as a business purpose.  I do not believe that any of the documents were explained, in detail or, indeed, at all to Mr Giannopoulos.  With respect to the loan of $30,000 and the discharge of the NAB mortgage, I find that Mr Maio conveyed to Mr Giannopoulos, and Mr Giannopoulos understood, that another lender would take the place of NAB and the mortgagee of the property and that the mortgage would secure three loans;  the two which had been advanced when Mr Giannopoulos signed the mortgage, for $2,300 and $30,000, and the amount to pay out the NAB.  I do not believe, however, that Mr Giannopoulos was ever told that a loan had been given to him by Perpetual.  The fabrication of the third loan agreement is only one of the many concerning aspects of the manner in which the defendants’ business with Mr Giannopoulos was conducted.  Another was the failure to provide him with accounts particularly in the period up to December 2008.

17. In view of the unreliability of much of the oral evidence presented on both sides at trial, it is simply not possible to distil a reliable narrative of the events of 2008 relating to the loans and the mortgage the subject of these proceedings from the evidence.  The approach that I will take is to consider whether the factual basis of an entitlement to the remedies sought has been established to the requisite standard of proof.

    The Plaintiff’s Claim

    Forgery

18. On the basis of the evidence, I am not satisfied on the balance of probabilities that any of the signatures or initials which appear to be the signatures or initials of Mr Giannopoulos on any of the documents has been forged, including on the mortgage.  The factual basis for the claim by the plaintiff for a declaration that the mortgage is void on account of forgery has not been established.

    Consumer Credit Code

19. The Consumer Credit Code was in force at the time that the loan agreements and mortgage the subject of these proceedings were entered into.[90]

    [90]   The Consumer Credit Code has now been superceded by the National Credit Code.

20. The Consumer Credit Code provides:

    6(1)This Code applies to the provision of credit (and to the credit contract and related maters) if when the credit contract is entered into or (in the case of pre-contractual obligations) is proposed to be entered into-

    (a)     the debtor is a natural person ordinarily resident in this jurisdiction or a strata corporation formed in this jurisdiction; and

    (b)     the credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes; and

    (c)     a charge is or may be made for providing the credit; and

    (d)     the credit provider provides the credit in the course of a business of providing credit or as part of or incidentally to any other business of the credit provider.

    6(4)For the purposes of this section, investment by the debtor is not a personal, domestic or household purpose.

    11(1)In any proceedings (whether brought under this Code or not) in which a party claims that a credit contract, mortgage or guarantee is one to which this Code applies, it is presumed to be such unless the contrary is established.

    11(2)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).

    11(3)However, such a declaration is ineffective for the purposes of this section if the credit provider (or any other relevant person who obtained the declaration from the debtor) knew, or had reason to believe, at the time the declaration was made that the credit was in fact to be applied wholly or predominantly for personal, domestic or household purposes.  For the purposes of this subsection, a relevant person is a person associated with the credit provider or a finance broker (or a person acting for a finance broker) through whom the credit was obtained.

    11(4)A declaration under this section is to be substantially in the form (if any) required by the regulations and is ineffective for the purposes of this section if it is not.

    70 (1)Power to reopen unjust transcriptions  The Court may, if satisfied on the application of a debtor, mortgagor or guarantor that, in the circumstances relating to the relevant credit contract, mortgage or guarantee at the time it was entered into or changed (whether or not by agreement), the contract, mortgage or guarantee or change was unjust, reopen the transaction that gave rise to the contract, mortgage or guarantee or change.

    70(2)Matters to be considered by Court  In determining whether a term of a particular credit contract, mortgage or guarantee is unjust in the circumstances relating to it at the time it was entered into or changed, the Court is to have regard to the public interest and to all the circumstances of the case and may have regard to the following –

    (a)     the consequences of compliance, or noncompliance, with all or any of the provisions of the contract, mortgage or guarantee;

    (b)     the relative bargaining power of the parties;

    (c)     whether or not, at the time the contract, mortgage or guarantee was entered into or changed, its provisions were the subject of negotiation;

    (d)     whether or not it was reasonably practicable for the applicant to negotiate for the alteration of, or to reject, any of the provisions of the contract, mortgage or guarantee or the change;

    (e)     whether or not any of the provisions of the contract, mortgage or guarantee impose conditions that are unreasonably difficult to comply with, or not reasonably necessary for the protection of the legitimate interests of a party to the contract, mortgage or guarantee;

    (f)     whether or not the debtor, mortgagor or guarantor, or a person who represented the debtor, mortgagor or guarantor, was reasonably able to protect the interests of the debtor, mortgagor or guarantor because of his or her age or physical or mental condition;

    (g)     the form of the contract, mortgage or guarantee and the intelligibility of the language in which it is expressed;

    (h)     whether or not, and if so when, independent legal or other expert advice was obtained by the debtor, mortgagor or guarantor;

    (i)    the extent to which the provisions of the contract, mortgage or guarantee or change and their legal and practical effect were accurately explained to the debtor, mortgagor or guarantor and whether or not the debtor, mortgagor or guarantor understood those provisions and their effect;

    (j)    whether the credit provider or any other person exerted or used unfair pressure, undue influence or unfair tactics on the debtor, mortgagor or guarantor and, if so, the nature and extent of that unfair pressure, undue influence or unfair tactics;

    (k)     whether the credit provider took measures to ensure that the debtor, mortgagor or guarantor understood the nature and implications of the transaction and, if so, the adequacy of those measures;

    (l)    whether at the time the contract, mortgage or guarantee was entered into or changed, the credit provider knew, or could have ascertained by reasonable inquiry of the debtor at the time, that the debtor could not pay in accordance with its term or not without substantial hardship;

    (m)    whether the terms of the transaction or the conduct of the credit provider is justified in the light of the risks undertaken by the credit provider;

    (n)     the terms of other comparable transactions involving other credit providers and, if the injustice is alleged to result from excessive interest charges, the annual percentage rate or rates payable in comparable cases;

    (o)     any other relevant factor.

    …

    70(4)Unforeseen circumstances  In determining whether a credit contract, mortgage or guarantee is unjust, the Court is not to have regard to any injustice arising from circumstances that were not reasonable foreseeable when the contract, mortgage or guarantee was entered into or changed.

    70(5)Conduct  In determining whether to grant relief in respect of a credit contract, mortgage or guarantee that it finds to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the contract, mortgage or guarantee since it was entered into or changed.

    …

    70(7)Meaning of unjust  In this section, “unjust” includes unconscionable, harsh or oppressive.

    …

    71The Court may, if it reopens a transaction under this division, do any one or more of the following, despite any settlement of accounts or any agreement purporting to close previous dealings and create a new obligation –

    (a)     reopen an account already taken between the parties;

    (b)     relieve the debtor and any guarantor from payment of any amount in excess of such amount as the Court, having regard to the risk involved and all other circumstances, considers to be reasonably payable;

    (c)     set aside either wholly or in part or revise or alter an agreement made or mortgage given in connection with the transaction;

    (d)     order that the mortgagee takes such steps as are necessary to discharge the mortgage;

    (e)     give judgment for or make an order in favour of a party of such amount as, having regard to the relief (if any) which the Court thinks fit to grant, is justly due to that party under the contract, mortgage or guarantee;

    (f)     give judgment or make an order against a person for delivery of goods to which the contract, mortgage or guarantee relates and which are in the possession of that person;

    (g)     make ancillary or consequential orders.

    The Consumer Credit Code and the Loan Agreement of 5 May 2008

1. By the time the loan agreement of 5 May 2008 for $2,300 was signed, Boardroom Finance had received the Veda credit report in relation to Mr Giannopoulos.  By 5 May 2008, I find that Mr Giannopoulos had discussed his debts and his mortgage defaults with Mr Vakitsidis and Mr Diakos.  I do not rely on the Veda credit report as evidence of the truth of its content, but as an explanation for some of the actions taken by Mr Diakos and I find that, by 5 May 2008, Mr Diakos and Mr Vakitsidis knew that Mr Giannopoulos owed approximately $27,000 to NAB, which was secured by a mortgage over his property. They also knew, because he had told them, that he had other debts totalling approximately $60,000.

2. By 5 May 2008, Boardroom Finance had been in possession of the conditional “approval in principle” from Challenger, dated 27 February 2008,[91] for slightly longer than two months.  Some of the conditions had been attended to.  It is not clear why an effort had not been made to fulfil all of the conditions.  Apart from the Council rate arrears, the only stated condition outstanding seems to have been “Please provide a full description regarding the purpose of the cash out”.  From the evidence, it does not appear that this was ever addressed.

   [91]   Exhibit P3

3. By 5 May 2008, Boardroom Finance had had sufficient time to seek the further information from Mr Giannopoulos that a prudent broker would be expected to seek.  Apparently, no notes exist of any meeting at which Mr Giannopoulos’ income or lack of it, was discussed.  No tax returns had been sought or provided.  Mr Diakos admitted, in evidence, that he had seen an NAB bank statement of Mr Giannopoulos[92] prior to the Veda credit check being organised, so he was aware that Mr Giannopoulos was in default on his mortgage.  It must have been clear that Mr Giannopoulos was making no progress in reducing his level of indebtedness.

   [92]   Transcript p 542

4. It is clear from the evidence of Mr Giannopoulos, Mr Diakos and Mr Vakitsidis, and I find, that Mr Diakos and Mr Vakitsidis both knew that the purpose of the loan of $2,300 was the payment of the arrears of Council rates.  That knowledge is imputed to Boardroom Finance Pty Ltd and Rapid Funds Pty Ltd.

5. It was obvious from the manner of the giving of his evidence, and the evidence itself, that Mr Giannopoulos is an unsophisticated person.  It is true that he had engaged in financial transactions prior to his contact with Rapid Funds and Boardroom Finance, but the level of his indebtedness illustrates how unsuccessful many of those transactions ultimately proved to be for him.  It seems to me that Mr Giannopoulos approached Boardroom Finance with an objective in mind, namely the obtaining of a loan to pay his creditors, refinance his property and provide him with a significant amount of cash.  Mr Giannopoulos then signed whatever he was asked to sign by Mr Diakos, Mr Maio and Mr Vakitsidis without concerning himself as to the nature of the document or the terms of the agreements.

6. In contrast to Mr Giannopoulos, Mr Pappas and Mr Maio, at least, had considerable experience in the finance industry.

7. I do not believe that Mr Diakos ever had a conversation with Mr Panos about Mr Giannopoulos investing with Mr Panos or Mr Panos’ company.  I do not believe that Mr Giannopoulos ever intended to invest with Mr Panos or ever said that he intended to invest with Mr Panos.  Mr Giannopoulos was aware by February 2008 that he was in quite serious financial trouble.  By 5 May 2008 (and well before that) it was obvious to Mr Diakos, Mr Vakitsidis and Mr Panos also.  Even had the idea of borrowing to invest been raised initially, it would have been obvious by 5 May 2008 that it was not a realistic prospect.

8. I find that Mr Giannopoulos signed the “Business purpose declaration” annexed to the first loan agreement, dated 5 May 2008. However, I find that Rapid Funds knew (because Mr Diakos knew) that the loan was to be applied for domestic purposes within the meaning of s 11(3) of the Consumer Credit Code. The declaration is therefore ineffective pursuant to s 11(3). Pursuant to s 11(1), the Consumer Credit Code is presumed to apply to the first loan agreement unless the contrary is established. The onus is therefore upon the defendants. That onus has not been discharged. The attempts to attribute by inference part of Mr Giannopoulos’ debt to St Mary’s Chicken and Seafood and New Age Gardening fell well short of proof on the balance of probabilities. The Consumer Credit Code applies to the first agreement.

9. Pursuant to s 70(1) of the Consumer Credit Code, the Court may re-open the first loan agreement if the contract is found to be “unjust”.

10. In West v AGC (Advances) Ltd,[93] McHugh JA said, in the context of the Contracts Review Act 1980:

    Under s 7(1) a contract may be unjust in the circumstances existing when it was made because of the way it operates in relation to the claimant or because of the way in which it was made or both. Thus a contractual provision may be unjust simply because it imposes an unreasonable burden on the claimant when it was not reasonably necessary for the protection of the legitimate interests of the party seeking to enforce the provision: cf s 9(2)(d). In other cases the contract may not be unjust per se but may be unjust because in the circumstances the claimant did not have the capacity or opportunity to make an informed or real choice as to whether he should enter into the contract: cf s 9(2)(a), 9(2)(e), 9(2)(f), 9(2)(g), 9(2)(i), 9(2)(j). More often, it will be a combination of the operation of the contract and the manner in which it was made that renders the contract or one of its provisions unjust in the circumstances. Thus a contract may be unjust under the Act because its terms, consequences or effects are unjust. This is substantive injustice. Or a contract may be unjust because of the unfairness of the methods used to make it. This is procedural injustice. Most unjust contracts will be the product of both procedural and substantive injustice.

    [93] (1986) 5 NSWLR 610

11. It is clear that unfairness and poor decision making do not necessarily amount to injustice,[94] and that it is generally desirable for parties to honour their contracts.[95]  Asset lending is not necessarily unjust.[96] Bearing all these matters in mind, and having regard to the matters set out in s 70(2) of the Consumer Credit Code, I find that the first loan agreement was unjust on the following grounds:

    1.I prefer the evidence of Mr Giannopoulos to the evidence of Mr Maio regarding the meeting at which the first loan agreement was signed.  I find that the schedule to the loan agreement was neither shown to Mr Giannopoulos nor explained to Mr Giannopoulos.  He was not provided with a copy. (s 70(2)(g)(i)(k))

    2.I find that it would have been obvious to Mr Diakos, Mr Vakitsidis and Mr Maio that Mr Giannopoulos was not able to understand documents written in the style of the first loan agreement and its annexures.  Notwithstanding that, the document was not explained to Mr Giannopoulos.  In particular, the consequence of default was not explained to Mr Giannopoulos. (s 70(2)(i)(k))

    3.I find that the conversations that Mr Giannopoulos had with Mr Diakos and Mr Vakitsidis led Mr Giannopoulos to understand that he was assured of obtaining the overarching refinancing he sought in the first place.  It was not suggested to Mr Giannopoulos that there was a prospect that the $2,300 loan might not be able to be paid out in a refinancing process. (s 70(2)(a)(k))

    4.I find that it was obvious to Mr Diakos (and therefore to Rapid Funds) and Mr Vakitsidis by 5 May 2008, on the basis of what they knew about Mr Giannopoulos’ financial position, that, in the event that the overarching refinancing was not obtained, Mr Giannopoulos had no prospect of repaying the $2,300 loan in the foreseeable future. (s 70(2)(l))

    5.Mr Giannopoulos obtained no independent legal or other advice, and Mr Diakos and Mr Maio knew that.  (s 70(2)(h))

    [94]   Perpetual Trustees Victoria v Longobardi [2009] NSWSC 654

    [95]   Infra

    [96]   PSAL Limited ACN 118 825 120 v Kellas-Sharpe & Ors [2012] QSC 31, para 90

12. The first loan agreement was unjust in respect of the process which preceded it as between lender and borrower, and will be re-opened.

    The Consumer Credit Code and the Second Loan Agreement

13. The circumstances in which the second loan agreement for $30,000 came about are in dispute.  It was Mr Giannopoulos’ evidence that Mr Vakitsidis telephoned him and told him that his loan was approved and that he could collect $30,000.  Mr Giannopoulos said that, when he met Mr Vakitsidis to collect the money, Mr Vakitsidis said that he would then pay Mr Giannopoulos’ debts and put the balance of the funds in Mr Giannopoulos’ bank account.[97]

    [97]   Transcript p 80-81

14. A facsimile request for further information from Challenger, dated 20 May 2008 was tendered in evidence.[98]  This request referred to a loan amount of $150,000.  There are two post-it notes on the facsimile.  One says “Ring Vasili re $30,000”.  The other says “Ring Vasili and get him to come in tomorrow (Wed)”.  Mr Vakitsidis said that the post-it notes were in his handwriting.[99]  Mr Vakitsidis said that Mr Diakos asked him to contact Mr Giannopoulos and get him to come into the office.  That was all he could remember, he said.  Mr Diakos told a different story.  He said that Mr Giannopoulos spontaneously turned up in his office on 22 May 2008, desperate to borrow $30,000 to pay off creditors.  An extract from Mr Diakos’ evidence follows:[100]

    [98]   Exhibit D41

    [99]   Transcript p 609

    [100] Transcript p 550 - 551

    QSo your last answer, you talked about referring Mr Giannopoulos to Paul Maio for a further loan of a sum of money.

    AYeah

    QWhat I would like you to do just to tell her Honour step by step, what your involvement was in that process.

    AWell mine was to refer Bill to Paul.  I had a discussion with Paul first, I said look Bill’s coming in he needs some money like quickly today, he’s in a bit of trouble and –

    HER HONOUR

    QHow did you know that.

    ABill told me that some was –

    QDid he come in or did he call you on the phone.

    AHe came in.

    QWhat did he say.

    AHe said look I need some money real quick, it’s only to – he had paid somebody I think some – people some money and then someone – he had to pay part back really quick like today, like pretty urgent.  I said okay, well don’t panic I’ll speak to Paul and see what we can do and that’s what happened.  I spoke to Paul and then Paul just took – and saw it in there.

    XN

    QDid he tell you at all why ne needed money urgently, ie that day.

    AHe had to pay some people chasing him for something.

    QDid he explain who those people were and why they were chasing him.

    ANo.

15. Mr Maio said that Mr Diakos approached him with respect to the provision of a further loan to Mr Giannopoulos.  I do not entirely believe either Mr Diakos or Mr Giannopoulos.

16. Given the post-it notes, I think it is most likely that Mr Giannopoulos was pressing Mr Diakos to pursue the loan application because Mr Giannopoulos needed $30,000.  It was then decided between Mr Diakos and Mr Maio to provide Mr Giannopoulos with a second Rapid Funds loan.

17. Mr Maio gave the following account of his meetings with Mr Giannopoulos on 22 May 2008:[101]

    [101] Transcript p 454.  See also para 90.

    QCan you tell her Honour, firstly, what was discussed, as best you can, with Mr Giannopoulos about the loan.

    ADuring that discussion with Mr Giannopoulos he told me he required $30,000 short-term and I said “What for?”  He said “I have to pay back some creditors”.  It put some light on the subject.  He said it’s also for some cash flow for his painting business.  So from that moment I told Mr Giannopoulos “Obviously we are looking at a much larger amount now.  The short-term, as I discussed with you, if you did remember from the first instance, was that 30,000 – this is a very high interest rate and we really need to ensure that you are on top of the application process and give them the relevant documents as they need it. Then I asked him “Have you given Frank everything at this stage?”  He said “Yes, everything is all done, it’s just a matter of waiting for it.  From that moment I started talking about his loan a little bit, being a broker, and I said “So what is it that you are actually looking for?”  He said “I have to pay my debts”.  I said “What are your debts?  Do you have your house?  How much do you owe on your mortgage?  He told me it was roughly around the 25 mark.  I said “Okay, is there any other security against that title?”  He said “No, there isn’t.  I do owe some other debts but nothing has gone against my title”.  Then from that moment I said “Well, look, in order to be able to do this I need some firm security over your property and I really need to take out a first mortgage over your property”.  “I” being Rapid Funds.  That is when I did say about investors.  I said “We have investors” funds to protect and I cannot do this type of loan unsecured”.

    HER HONOUR

    QTell us about the whole conversation.

    ASo that was my point of view across to him.  I said “I can have those funds for you today but it won’t happen right away, it will happen later on.  Are you happy with that, Bill?  He said “Yes”.  From that moment I told Bill “To do all of this we are going to have to get in touch with our conveyancer and start preparing mortgage documents and it is not now a simple matter of signing a loan agreement, you have to sign the mortgage documents.  I can’t give you the money right now.  We will put an urgency on it, it will take a minimum of two hours for me to be able to give you any cheques and you will have to sign over the mortgage to Rapid Funds.  From that moment he said “Can’t you give me some money now, I really need to get some money straight away”.  I said “I can’t without loan agreements being signed.  Can’t you come back this afternoon?”  He said “If I have to I will”.  He left and he came back that afternoon.

    XN

    QYou mentioned the first security, was there any discussion about what steps would be taken with National Australia Bank with respect to the existing mortgage.

    ANot at that stage, no.

    QAt the time of the morning meeting was there any discussion about interest.

    AYes, the discussion about the interest, when I was given the explanation that’s when I said “You really need to get on top of those mortgage guys and ensure everything gets done”.  He told me “They got everything, this will happen”.  I told him “they got everything, this will happen”.  I told him “This is a very high interest product”.

    QDid you mention what interest rate you would charge.

    ANot at that stage, no.

    QDid he leave in the morning.

    AHe did leave in the morning.

    HER HONOUR

    QDid you get any more information from Mr Giannopoulos.  You talked about what you told him. Did he tell you anything more in this morning meeting than what you told us.

    ANo, the main thing is he needed that $30,000 that day.  He needs a short-term loan.  He was just answering my questions when I said “We need to do these processes”, as discussed before.  He was saying “Yes, yes, yes”.  That was really what feedback I got.

    QThat was all he told you about his needs.

    AThat’s correct, yes.

    XN

    QAs it turned out, did he get $30,000 that very same day.

    AThat same day he did, yes, that same day.

    QDid he come back in the afternoon.

    AYes, he did.

    QWhen he came back did you have some documents ready.

    AAbsolutely.

    QLooking at Exhibit P5 produced, can you identify to her Honour what that document is.

    AYes, it’s a Rapid Funds loan agreement between Rapid Funds and Vasilios Giannopoulos.

    QIgnore for the moment any schedule in the document but just look through the rest of the document, can you tell her Honour whether or not that was produced on the day Mr Giannopoulos came to get $30,000.

    AYes, it was.

    QIf you go to the execution page of the document, which is p. 23, can you identify to her Honour the signatures and the handwriting.

    AThe signature on the witness is myself, the handwriting is mine and the right-hand side signature is Mr Giannopoulos’.

    QWas that placed on there in your presence.

    AAbsolutely.

    QP. 24, it has got the execution by lender clauses.

    AYes.

    QCan you identify again for her Honour the signatures and handwriting.

    AYes, the signature of the witness is mine, the handwriting is mine, the signature I’m confident is Con Pappas’.

    QThat is on the right-hand side.

    AOn the right-hand side, yes.

    QWas Mr Pappas ever in the room when you spoke to Mr Giannopoulos.

    ANo, he wasn’t.

    QWs that signature arranged after.

    AThat signature was in Con Pappas’ office.

    QThat was arranged after Bill had signed p. 23.

    AAfter Bill had signed p. 23.

    HER HONOUR

    QHow long after.

    AStraight after.  I needed someone to witness and there was no-one around at the time.  I left Bill at the time, went into Con’s office, he signed it and I witnessed his signature.

    XN

    QP. 26 is annexure A.

    AYes.

    QCan you tell her Honour again about the handwriting and signature.

    AYes, the handwriting is mine up the top and the date is mine but the signature is Bill’s.

    QWas any explanation given about what annexure A meant.

    AYes, I said “If you remember from the first time you signed a loan agreement the only reason why we give funds is for a business purpose” and that’s when we got the admission that yes, it was to pay off some business creditors.

    QIf you go to page 28, are you able to identify the handwriting, signature and what, if anything, was said about p. 28.

    AYes, the handwriting is mine and the signature is Mr Giannopoulos’

    QWas any explanation given about p. 28 before it was signed.

    AI referred a lot back to the original loan and I said “Like the first one, you have the opportunity to seek independent legal advice, so are you willing to take that up?”  He said “No, I’ll just sign”.

    QIf you look at Exhibit P1 there are, in fact, two versions of a schedule, one appears on p. 100 and one appears on p. 126.  Take a moment to flick through the two of them and compare them and then I will ask you some questions in a moment.

    AYes.

    QAre you able to tell her Honour whether you took Mr Giannopoulos through a schedule in the afternoon meeting.

    AYes, I did.

    QWhich of those two versions did you take Mr Giannopoulos through.

    AI would say 100.

    QThe one at p. 100.

    ACorrect.

    QTell her Honour what you said about the schedule and the process of going through it.

    ABasically, again, we said “Okay, we are up to the schedule page, the commencement date being today 22 May.  You are the borrower, Giannopoulos, Rapid Funds being the lender.  The loan 32 represents the $30,000 you are after today and the other 2,000 is to do with security we require over the property.  That security is a caveat at this stage but when we discharge your mortgage with NAB we are going to have to take out a first mortgage.  That incurs costs, we are going to have to charge an amount of $2,000 for all that to occur”.  The purpose of the loan was to pay out the creditors that he required to pay out urgently.  Termination date 22 June.  Usually what happens, sometimes when you discharge a mortgage from another lender, the lender can hold it up or it takes a bit of time to actually get everything to its stage of settlement so I allowed that four week period.  Interest payment date was 22 June 2008.  “The higher rate 20%”, but that’s got per annum, I wouldn’t have said per annum, I would have said per month.  “Lower rate 10% per month.  Monthly instalment of the loan 3,200.  The security is the caveat over [home address].  You will receive a settlement statement when it settles with NAB, a copy of that settlement statement and a copy of the new schedule which represents the total amount.  The trust of the person entrusting this money is yourself, Mr Giannopoulos.’

1. I do not believe that Mr Giannopoulos said that he needed any part of the $30,000 for cash flow for his painting business.  Neither do I believe Mr Giannopoulos’ account that he wanted the money for living expenses whilst he and his partner underwent IVF treatment.  It seems to me that the most plausible explanation is that Mr Giannopoulos had pressing creditors.  Most probably, those debts were not the debts shown on the Veda Credit Report.

2. I find that, on 22 May 2008, Mr Giannopoulos signed the second loan agreement,[102] but with the Schedule at p. 100 of Exhibit P1, including a business purpose declaration, and an undated mortgage panel form.[103]  The second loan agreement, when signed by Mr Giannopoulos, had, at p. 25, a page entitled “The Schedule” which gave a “Higher Rate” of 20% pa and a “Lower Rate” of 10% pa.[104]

   [102] Exhibit P5

   [103] Exhibit P8

   [104] Transcript - Evidence of Mr Maio, p. 459

3. I do not believe that Mr Maio explained the second loan agreement to Mr Giannopoulos.  If he had done so, he would have noticed the interest rates set out in the Schedule as he did so, and corrected the schedule, before it was initialled.

4. I find that both Mr Maio and Mr Diakos had reason to believe, at the time that Mr Giannopoulos signed the business purpose declaration for the second loan agreement, that the credit was to be applied for personal purposes. By that time, both Mr Maio and Mr Diakos were aware of Mr Giannopoulos’ financial situation. From their own evidence, I believe that Mr Maio and Mr Diakos believed that Mr Giannopoulos had a debt of $30,000 arising from some personal problem. Pursuant to s 11(3) of the Consumer Credit Code, the declaration is therefore ineffective. The Consumer Credit Code applies pursuant to s 11(1).

5. The Court may re-open the second loan agreement if it is satisfied that the agreement was unjust. Bearing in mind the matters set out in s 70(2), I am satisfied that the second loan agreement was unjust on the following grounds:

   1.I find that the agreement was never explained to Mr Giannopoulos.  Mr Giannopoulos was informed of neither the interest rates nor the repayment obligations. (s 70(2)(g)(i)(k))

   2.The consequences of a failure to meet the repayment obligations were not explained to Mr Giannopoulos, and he was unaware of them. (s 70(2)(a)(i))

   3.I find that Mr Giannopoulos was genuinely unaware that the funds were not being provided by the overarching refinancer, who, in his mind, was Perpetual.  This was not directly the result of representations made on behalf of the defendants, but was Mr Giannopoulos’ own fixed view.  The defendants’ representatives, however, failed to displace that fixed view by explaining that the funds were being provided by a short term lender. (s 70(2)(i))

   4.It was clear to Mr Maio and Mr Diakos that Mr Giannopoulos had no prospect of meeting the monthly repayments on the second loan agreement.  Mr Maio and Mr Diakos were aware that the security was Mr Giannopoulos’ own home. (s 70(2)(l))

   5.Mr Giannopoulos obtained no independent legal or other advice, and Mr Diakos and Mr Maio knew that. (s 70(2)(h))

6. The second loan agreement was unjust in respect of the process which preceded it as between lender and borrower and will be re-opened. 

   The Consumer Credit Code and the third loan agreement

7. The third loan agreement[105] is a document constructed by Mr Maio from a photocopy of the second loan agreement, together with a new schedule reflecting the loan of $67,805 (being the $30,000 given to Mr Giannopoulos on 22 May 2008, the payout of the NAB mortgage and fees and charges).

   [105] Exhibit P6

8. Mr Giannopoulos did not see this document or sign it.  The schedule gives a “Higher Rate” of 10% p.a. and a “Lower Rate” of 5% p.a.

9. It gives a termination date of 26 June 2009.

10. Clearly, no declaration was signed by Mr Giannopoulos in relation to the third loan agreement.

11. There is no doubt that Rapid Funds advanced $27,941.36 on Mr Giannopoulos’ behalf to pay his mortgage.  I find that Mr Giannopoulos knew that a financier organised by Mr Maio and Mr Diakos would be paying off his NAB mortgage, and that a new mortgage would be registered.  Mr Giannopoulos agreed to that course of events.

12. I find that the NAB mortgage was paid out pursuant to an oral contract between Mr Giannopoulos and Rapid Funds. The circumstances leading up to the making of that agreement were unjust for the same reason as the second loan agreement. An additional factor contributing to the unjust nature of the circumstances of the third loan is the failure to document it properly (see s 70(2)(g)). Consequently, it may be re-opened pursuant to s 71 of the Consumer Credit Code.

13. The mortgage is affected by the circumstances of the 22 May 2008 meeting and the events leading up to it in the same way as the second loan agreement. A further factor contributing to the unjust circumstances relating to the mortgage is the incomprehensible portions of the panel form, described above (see s 70(2)(g)).[106] The mortgage will be re-opened pursuant to s 71 of the Consumer Credit Code.

    [106] See paras 96 and 97

    Orders on Re-opening

14. The Consumer Credit Code provides, in s 71, set out above, the orders which may be made on the opening of a transaction. Mr Lazaravich has urged that relief be limited to relief from the compounding of the interest. In all of the circumstances, I do not consider that limiting relief in that way would be appropriate. In addition, the interest rates Mr Lazarevich argues for are the interest rates in the schedule to the first loan agreement: 10% per month and 20% per month. The only schedule to the second loan agreement that there is any evidence of Mr Giannopoulos seeing (because his initials are on it), gives interest rates in relation to the second loan agreement of 10% per annum and 20% per annum. The third loan agreement was not properly evidenced in writing and there is no cogent evidence of any agreement as to the interest rate. Neither party argued, however, that there was no contract.

15. There is some relevant evidence of interest rates before me.  On 27 February 2008, Challenger indicated approval in principle, subject to the fulfilment of some conditions, of Mr Giannopoulos’ loan application at a “borrower rate” of 13.55% per annum.  On the defendant’s case, Mr Mortimer offered Mr Giannopoulos a loan of $100,000 at the end of 2008 for a term of one year at an interest rate of 9%.

16. In relation to the first loan agreement, I will vary the agreement so that there is an interest rate of 10% per month for the first month, but, thereafter, there will be an interest rate of 13.55% per annum.  This reflects the fact that Mr Giannopoulos was led to believe that the short term loan would shortly be repaid by the overarching loan.

17. The second loan agreement with the initialled schedule provides, in effect, for an interest rate of 20% per annum, with a reduction to 10% per annum in the event of prompt payment.  I reject the argument that there was agreement between the parties that the interest rate would be per month.  The interest rate for the second loan agreement should stand in accordance with the rates in the initialled schedule.  I do not overlook the fact that Item 10 of the Schedule is a “per month” calculation, but this was clearly meaningless to Mr Giannopoulos.  Item 10 will be deleted.  The second loan agreement will also be varied to a loan amount of $30,000.  The additional $2,000 was for costs for a caveat which was never produced.

18. In relation to the oral agreement for the funds to discharge the NAB loan, I will vary the oral agreement so that it is an agreement for Mr Giannopoulos to borrow an amount equivalent to the payout figure required for NAB to discharge his mortgage on the day it was discharged ($27,941.36) at an interest rate of 13.55% per annum. 

19. I will amend the consideration panel of the mortgage to refer to the second loan agreement as amended, together with the oral agreement as amended.

20. It does not seem to me that the declarations sought on behalf of the plaintiff in paragraphs 1 and 2 of Part 2 of the Statement of Claim are necessary. I have declined to make a declaration that the mortgage is void on account of forgery under s 69 of the Real Property Act 1886.

21. In view of my decision in relation to the Consumer Credit Code, there is no need to consider the remedies sought pursuant to the Fair Trading Act 1987 (SA) or the Misrepresentation Act 1972 (SA) which were not, in any event, pressed.

    Counterclaim

22. Rapid Funds will be given judgment on the counterclaim for an amount to be calculated in accordance with the revisions made to the loan agreements and the mortgage.

23. I will hear the parties as to the final orders.