Kaji Australia Pty Ltd v Glover (No. 4)

[2019] NSWSC 1779

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:

Kaji Australia Pty Ltd v Glover (No. 4) [2019] NSWSC 1779

Hearing dates:

15-18 April 2019; 23-24 April 2019; 26 April 2019 & 3 May 2019

Date of orders:

17 December 2019

Decision date:

17 December 2019

Jurisdiction:

Common Law

Before:

Davies J

Decision:

The plaintiffs must bring in short minutes to reflect this judgment.

Catchwords:

LAND LAW – possession of land – claim for possession and judgment for the amount owing under a loan agreement and mortgage – short-term loan pending approval of long-term finance - where the borrower had failed to repay the loan pursuant to the loan agreement – lenders entitled to possession and amount owing under loan agreement – parties instructed to bring in short minutes to quantify sum owing

 

CONSUMER LAW – unconscionability – where the borrower claimed that the loan agreement was unconscionable either under the general law or statute – where the borrower claimed that the lenders should have requested proof of income – where the borrower claimed that a third party was exerting undue influence over him to the knowledge of the lenders – where the borrower claimed that he did not receive adequate independent advice about the loan agreement – where the borrower claimed that the loan was improvident because there was no effective exit strategy - no finding of unconscionability

 

CONTRACT – unjust contract – whether the loan agreement was unjust pursuant to the Contracts Review Act 1980 (NSW) – where the borrower was aware at all times of the interest rates being charged – where the borrower understood the risks of entering into the mortgage – no evidence that the interest rates were unreasonably high or not reasonably necessary for the protection of the plaintiffs – contract not unjust

 

CONSUMER LAW – misleading or deceptive conduct – s 18 Australian Consumer Law (Cth) – whether a cross-defendant made misleading or deceptive representations about a prospective loan – whether representor was a mere conduit for information provided by another - no evidence to support a finding that any such representation as pleaded was made – no misleading or deceptive conduct found

  TORT – fraud – whether the cross-defendant engaged in a fraud on the borrower and conspired with others to enrich themselves through the sale of the borrower’s property – no evidence whatsoever to support the assertion of fraud nor the assertion of conspiracy

Legislation Cited:

Australian Consumer Law (Cth) s 18
Australian Securities and Investments Commission Act 2001 (Cth) s 12DA
Contracts Review Act 1980 (NSW)
Evidence Act 1995 (NSW) ss 38, 140
Fair Trading Act 1987 (NSW)
Real Property Act 1900 (NSW) s 57

Cases Cited:

Australian Competition and Consumer Commission v Telstra Corp Ltd [2004] FCA 987; (2004) 208 ALR 459
Borzi Smythe Pty Limited v Campbell Holdings (NSW) Pty Ltd [2008] NSWCA 233
Brendan King Pty Ltd v Toseka [2006] NSWSC 487
Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34
Butcher v Lachlan Elder Realty (2004) 218 CLR 592; [2004] HCA 60
Campbell and Another v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25
Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45; [2000] HCA 12
Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing & Allied Services Union of Australia v Australian Competition and Consumer Commission (ACCC) (2007) 162 FCR 466; [2007] FCAFC 132
Driat Pty Ltd v Thomas [2012] NSWSC 683
Ewer v Ambrose (1825) 3 B & C 746
Guardian Mortgages v Miller [2004] NSWSC 1236
In Re B (Children) (Care proceedings: Standard of Proof)(CAFCASS intervening) [2009] 1 AC 11
Kaji Australia Pty Ltd v Glover (No 2) [2018] NSWSC 414
Khul v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11
McPhilemy v Times Newspapers Ltd [2000] 1 WLR 1732
Mizzi v Reliance Financial Services Pty Ltd & Ors [2007] NSWSC 37
NOM v Director of Public Prosecutions (2012) 38 VR 618; [2012] VSCA 198
R v Welden (1977) 16 SASR 421
Takemura v National Australia Bank Ltd [2003] NSWSC 339
The Saints Gallery Pty Ltd v Plummer [1988] FCA 309; (1988) 80 ALR 525
Wells v South Australian Railways Commissioner & The New Zealand Insurance Co Ltd (1973) 5 SASR 74
West v AGC (Advances) Ltd (1986) 5 NSWLR 610
Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65

Texts Cited:

Cross and Tapper on Evidence, 9th ed. (1999) Butterworth, London

Category:

Principal judgment

Parties:

Kaji Australia Pty Ltd (First Plaintiff)
William Bradley Webster (Second Plaintiff)
Johann Benson Glover (Defendant/Cross-Claimant)
Mercia Financial Solutions Pty Ltd (Third Cross-Defendant)
Richard Nicholson (Fourth Cross-Defendant)
Rodney Shields (Fifth Cross-Defendant)

Representation:

Counsel:
P Follino-Gallo (Plaintiffs)
R Newell (Defendant/Cross-Claimant)
D Lloyd (Third and Fourth Cross-Defendants)
R Shields (Fifth Cross-Defendant)

  Solicitors:
Shields Lawyers (Plaintiffs)
L. C. Muriniti & Associates (Defendant/Cross-Claimant)
DLA Piper Australia (Third and Fourth Cross-Defendants)
Self-represented (Fifth Cross-Defendant)

File Number(s):

2014/105767

Publication restriction:

Nil

Judgment

1. On 21 February 2011 the defendant, Johann Benson Glover, entered into a loan agreement with the plaintiffs, Kaji Australia Pty Ltd and William Bradley Webster to borrow $115,000. The loan was repayable on 21 April 2011. The defendant gave a mortgage over his property at 15 Vincent Street, Mount Druitt as security for the loan.

2. The defendant did not repay the loan on 21 April 2011 or at all. On 8 April 2014 the plaintiffs commenced proceedings against the defendant seeking possession of the defendant’s property and judgment for the amount then owing under the loan.

3. The form of the claim ultimately pursued in the proceedings was an amended statement of claim filed 17 June 2016.

4. By a defence to the amended statement of claim filed 26 August 2016 the defendant denied that the plaintiffs were able to obtain possession or claim the amount said to be owing under the loan agreement and, in substance, relied upon a cross-claim that he filed against the plaintiffs as cross-defendants. The proceedings were subsequently expanded by the filing of an amended cross-claim on 20 February 2017. That cross-claim joined three other parties being Mercia Financial Solutions Pty Ltd as the third cross-defendant, Richard Nicholson as the fourth cross-defendant, and Rodney Shields as the fifth cross-defendant. Those parties were alleged to have been involved in obtaining finance for the defendant that led ultimately to his entry into the loan agreement on 21 February 2011. The final form of the cross-claim pursued by the defendant was a further amended first cross-claim filed 8 June 2018.

5. As against the plaintiffs, the cross-claim asserted that the loan agreement and the mortgage were unjust pursuant to s 7 of the Contracts Review Act 1980 (NSW), and that they were unconscionable contrary to ss 12CA and 12CB of the Australian Securities and Investments Commission Act 2001 (Cth); as against Mr Nicholson and Mercia the cross-claim asserted that they had engaged in misleading and deceptive conduct in the form of representations contrary to s 12DA of the ASIC Act and/or s 18 of the Australian Consumer Law (Cth); as against all of the cross-defendants it alleged fraud and conspiracy. I shall refer to this document as “the cross-claim”. I shall refer only to Mr Nicholson when mentioning the Third and Fourth Cross-Defendants because no distinction was made between Mr Nicholson and Mercia in respect of their actions and the claims made.

Background to the loan

The defendant

6. The defendant was born on 21 February 1950. At the time of the loan agreement he was aged 61 years.

7. He left school in what was then called fifth form, and became employed with the Commonwealth Bank of Australia as a bank teller. He was subsequently promoted to the position of assistant relief manager with the Bank. He worked for the Commonwealth Bank for 26 years until 1994. He left the Bank, taking a redundancy package. He has not worked since that time. He has supported himself from investments that he had at the time he ceased his employment with the Bank.

8. He said that he was first diagnosed with depression in the late 1960s and has been receiving medical treatment for that condition since that time.

9. He received unemployment sickness benefits from November 2013 to 2015.

10. He inherited the security property at 15 Vincent Street, Mt Druitt when his mother died in 1988. He has lived in that property all his life.

Relationship with John Lippits

11. The defendant met a woman called Donna Lippits in about 1977. He became friends with her and subsequently met her father, John Lippits Snr. The defendant commenced to socialise with the Lippits family at that time and subsequently met John Lippits Jnr in about 1998 or 1999.

12. From about 2000 to 2004 the defendant lent money to John Lippits Snr. The first such loan was for $160,000. That amount was repaid. A subsequent loan of $90,000 was made and repaid. A third loan of $160,000 was made and repaid. In each case a loan agreement was drawn up and John Lippits Snr paid interest on the loans.

13. After the third loan had been repaid, John Lippits Jnr (to whom I shall refer subsequently as “Mr Lippits”) asked the defendant for a loan of $16,000. That loan was made but never repaid.

14. After Mr Lippits divorced his wife and was required to pay her a sum of money, Mr Lippits borrowed that money from his father. He then approached the defendant to borrow money so that he could repay his father. The amount was $200,000. The defendant lent that amount to Mr Lippits. Although a loan agreement was entered into between the defendant and Mr Lippits, the amount of $200,000 has never been repaid.

15. Subsequently, Mr Lippits asked the defendant for a loan of $76,000 to set up a helicopter business. The defendant agreed. A loan agreement was drawn up and the money advanced. That loan has never been repaid.

16. Subsequently, Mr Lippits sought a further loan of $140,000 from the defendant to buy Mr Lippits’ partner out of a business. That loan was made to Mr Lippits but never repaid.

17. Thereafter Mr Lippits told the defendant that he was thinking of moving his helicopter business from Canberra to Sydney. He said he had found a hangar at Bankstown but it was going to cost $265,000. He asked the defendant for a loan of that amount. The defendant loaned that amount to him but it was never repaid. Mr Lippits request and was given a further loan of $70,000 to $80,000. That loan was not repaid.

18. Finally, a loan of $30,000 was made by the defendant to Mr Lippits. That was the only loan that was repaid by Mr Lippits.

19. The defendant said that he loaned more than $1,000,000 to Mr Lippits throughout this time. He has never sought to recover any of the loans from Mr Lippits.

The immediate need for the loan

20. In order to lend Mr Lippits the sum of $265,000 to purchase the hangar at Bankstown, the defendant sold shares that he owned in Harvey Norman, Commonwealth Bank, Telstra and the St George Bank. As a result of the sale of those shares the defendant incurred a Capital Gains Tax liability of $56,000. The defendant said that he had anticipated that he would have to pay Capital Gains Tax on the sale of the shares, and he told Mr Lippits that he (Mr Lippits) would have to provide the money to pay the Capital Gains Tax when the assessment arrived. Mr Lippits promised to do so. However, he did not provide the money, making what the defendant said were all sorts of promises to do so and excuses for not having done so.

21. The Australian Tax Office (ATO) commenced proceedings in the District Court against the defendant on 28 November 2008. On 9 February 2009 a default judgment of $74,890.17 was obtained by the ATO.

22. On 1 December 2009 the ATO issued a Bankruptcy Notice against the defendant. It was served on him on 31 January 2010.

23. The defendant did not comply with the Bankruptcy Notice and the ATO filed a creditor’s petition on 11 August 2010. The petition was originally listed for hearing on 22 September 2010 but there were ten adjournments before the matter was finally dismissed on 7 March 2011 after the events giving rise to these proceedings.

24. The defendant said that when the bankruptcy proceedings were commenced he told Mr Lippits that he would have to sort the problem out for him. The defendant and Mr Lippits went down to the ATO and an officer of the ATO set up a repayment schedule on the basis, the defendant said, of assurances given by Mr Lippits that he would be able to come up with the money. The defendant said that to the best of his knowledge and recollection Mr Lippits made a number of appearances in the Federal Magistrates Court to adjourn the proceedings. The defendant said that he did not have a clear idea of what was happening in the Federal Magistrates Court except that Mr Lippits was supposedly looking after the proceedings. It seems likely, however, that at some stage Mr Lippits engaged a Mr Prestia of Crest Capital Investments Pty Ltd, and Mr Prestia went to the Federal Magistrates Court to adjourn the proceedings.

25. The defendant said that after a number of excuses from Mr Lippits for not having found the money to enable the tax debt to be repaid, Mr Lippits suggested that he could apply for a loan and Mr Glover would need to put his house up as security so that the tax debt could be paid off. The defendant said he agreed to that proposal. The defendant said that a number of approaches were made to various banks including the Commonwealth Bank and National Australia Bank. The defendant said that the officers of those banks said that they could not provide a loan to Mr Lippits because if the defendant was putting his house up as security and Mr Lippits did not make the repayment, the defendant could lose his house. It is not clear when the plan apparently changed to provide for the defendant to borrow the money and provide his property as security. That matter was not identified in the affidavits nor explored in cross-examination.

26. The defendant said that:

Having exhausted all the conventional lenders John then approached Mercia Financial Solutions [the third cross-defendant] a loan brokerage firm in an attempt to see whether it could find a lender to provide a low doc loan to me directly using my house as security.

Meetings with Richard Nicholson

27. The defendant said that to the best of his recollection he had two or three meetings with Mr Lippits and Mr Nicholson prior to discussing the loan the subject of these proceedings arising. He said that the meetings occurred in a café in Clarence Street in the city. He recalled that there was also a fourth or fifth meeting which took place in a conference room that he understood to be part of the offices of Mr Nicholson’s company, Mercia Financial Solutions.

28. It is not clear when Mr Nicholson first met the defendant. It appears from both the evidence of the defendant and the evidence of Mr Nicholson that Mr Lippits first approached Mr Nicholson on behalf of the defendant and that Mr Nicholson subsequently met the defendant. According to Mr Nicholson’s affidavit he first met Mr Lippits in January 2011, having been introduced to him by Mr Prestia who Mr Nicholson understood had already undertaken some work for the defendant to prevent a bankruptcy occurring. That was probably work involving the appearances in the Federal Magistrates Court.

29. The date of January 2011 cannot be correct for two reasons. First, there is a copy of a finance broking deed dated 21 December 2010 made between Mercia Financial Solutions Pty Ltd and the defendant which the defendant has signed. Secondly, on 23 December 2010 Mr Nicholson sent an email to Mr Lippits with the subject as “Johann Benson Glover”. The email relevantly said:

As discussed with Joseph Prestia, the $2,000 for services rendered remains outstanding and we are now out of pocket to this effect.

The email went on to say that the funds should be deposited into an identified bank account of Mercia Financial Solutions Pty Ltd.

30. Whether the $2,000 was for what Mr Prestia had done or was in respect of work Mr Nicholson had done pursuant to the finance broking deed dated two days earlier or because of his earlier retainer by Mr Lippits on behalf of the defendant, is not clear. One possible explanation for the money being deposited into Mercia’s account is that Mr Prestia was bankrupt from 14 April 2009 until discharged on 15 April 2012. That may have been a private arrangement between Mr Nicholson and Mr Prestia.

31. At the first meeting both Mr Nicholson and the defendant agreed that an application was to be made to St George Bank. The defendant’s evidence was that Mr Nicholson said, “I think I can get you a loan with St George.” The defendant said that most of the conversation at the meeting was between Mr Lippits and Mr Nicholson. Mr Lippits had, in his meeting with Mr Nicholson prior to Mr Nicholson meeting the defendant, asked that paperwork be emailed to him because he said that the defendant did not have an email address. At the defendant’s first meeting with Mr Nicholson, the defendant agreed that communications from Mr Nicholson to him could be effected through Mr Lippits.

32. The defendant said that a few days after the meeting with Mr Nicholson he received a telephone call from Mr Lippits who told him that Mr Nicholson had obtained a loan approval from St George. Shortly afterwards, Mr Lippits contacted the defendant again and said:

The brokers have got a better deal for you from Bankwest.

The defendant said that he did not see any Bankwest documentation until after the present proceedings were commenced.

33. About a week later the defendant said that he received another call from Mr Lippits who said that Mr Nicholson had been offered a better deal with St George than that offered by Bankwest, so they were going back to St George. The defendant said that a short time after that conversation he received another call from Mr Lippits who said (apparently for the second time) that Mr Nicholson had obtained a loan approval from St George at a better rate of interest than from Bankwest and he was recommending that the defendant proceeded with the St George loan. The defendant said to Mr Lippits that he would take Mr Nicholson’s advice. He said that he was never told by Mr Lippits or Mr Nicholson that the alleged loan approval from St George was purportedly a conditional loan approval.

34. A few days later the defendant said he received a further telephone call from Mr Lippits who said that unfortunately St George was not going to be able to process the loan fast enough to prevent the ATO from making the defendant bankrupt. Mr Lippits said that they were going to have to get the defendant a short term loan in the interim to get the ATO paid off to prevent him from becoming bankrupt. Mr Lippits said that the short-term loan could then be paid off with the monies from St George. The defendant agreed. Mr Lippits said they would have to go and see the solicitor who was going to organise the short term loan.

35. It should be noted at this stage how much of the information the defendant was receiving was coming to him from Mr Lippits. Much of that information was not verified by other persons involved.

36. Mr Nicholson said that a conditional approval was issued by St George Bank’s Home Loan Manager. At some time in the following week the conditional approval stalled. Mr Nicholson understood from a telephone conversation with the St George Bank’s Home Loan Manager that the stalling was due to internal bank audit reasons. Mr Nicholson became concerned that he could not settle the transaction within the necessary timeframe because over two weeks had passed since the previous adjournment of court proceedings had been granted.

37. Mr Nicholson said that he rang Mr Lippits on or about 11 February and told him that he did not think the St George home loan would be secured in time. He said one option was to approach a private short term lender who could act quickly and provide the funding within the timeframe required to satisfy the ATO. Mr Nicholson also said that it might be worth commencing the loan application process with another mainstream lender in case St George did not move forward with the loan.

33. Mr Lippits asked how much the private finance would cost and what the term of such finance would be. Mr Nicholson said it would be expensive, in the region of 1% to 3% per month plus transaction costs and that such loans could be for one month to 12 months. Mr Lippits asked Mr Nicholson to approach a lender to attempt to secure the funding. Mr Nicholson said he decided to approach Rodney Shields, the fifth cross-defendant, whom he had known for some years and who he was aware had access to private funders.

34. Mr Shields said that he received a telephone call from Mr Nicholson on about 15 February 2011. Mr Shields said that he knew Mr Nicholson as a mortgage broker with whom he had had dealings over a number of years. Mr Nicholson said words to the effect:

I have an urgent application for short term finance for a Mr Glover. The loan would be secured by way of a first mortgage. The loan amount is approximately $100,000 net for a period of one month. The loan amount will be applied to pay out a debt to the Deputy Commissioner of Taxation who is in a position to enforce a Bankruptcy in the Federal Magistrates Court in the next few days. He is prepared to pay interest at the rate of 3% per month, and if there is a default, interest of 5% per month. I am told that St George has approved a loan but they cannot do it in time to avoid bankruptcy and will not directly pay a debt of the Taxation Department.

40. Mr Nicholson did not give evidence at the hearing. However, the defendant read a number of paragraphs of three affidavits Mr Nicholson had sworn in the proceedings. In one of those affidavits Mr Nicholson denied discussing interest rates with Mr Shields, but did not dispute the remainder of the conversation.

41. Mr Shields said that he doubted he could organise a loan with such short notice but he wanted to make a number of matters clear. First, no lender would issue a loan for one month only. Secondly, there had to be a formal valuation to ensure that the security stacked up. Thirdly, Mr Shields wanted to sight the approval letter from St George and the application made to St George, and finally he needed proof of the borrower’s income so that if there was a delay with the St George loan he could be sure that the borrower could support the loan for a few months until it was paid out.

42. Mr Nicholson said he would advise the borrower about the two month minimum loan term. He said he had the approval letter and the application signed by the borrower which set out his income at $70,000. He said he had a letter of income from the borrower’s employer who was helping him with the loan. He said the borrower would understand mortgages better than most people in the community because he had told Mr Nicholson that he worked for the Commonwealth Bank as an assistant manager for over 20 years.

43. On 15 February 2011 Mr Nicholson sent an email to Mr Shields which said:

As discussed, Mr Johann Benson Glover is looking for $100,000 net for 4 weeks to pay-out the ATO.

Current debt is approx. $97,500. Take out will be via St George refinance.

I’ve attached the St George application which lists all personal details, along with Rates Notice and Creditors petition from ATO – also included pay details.

The St George Loan Agreement

44. The St George loan was, on the defendant’s claims, the most significant matter in the proceedings. The application itself assumed considerable importance in the trial, and it is necessary to detail its contents. Nothing particularly turned on the way it was set out, so its questions and answers can be summarised.

45. The loan application took the form of a document addressed to the bank. Under the heading of “Information” on the first page it listed a number of things that “You may require”. Three of the boxes were ticked:

•   Proof of income, e.g. PAYG slips, rental statements optional for low doc loans

•   Proof of assets, e.g. rates notices, recent bank account statements

•   Personal identification, e.g. birth certificate, driver’s licence

46. In the next section under the heading “Bank/introducer use only” the total loan amount was said to be $160,000 and the lender/originator was said to be Richard Nicholson.

47. On the second page under the heading “Loan details” there were a number of boxes for the purpose of the loan. Two of these were ticked, being “Other” and “Investment”. Where the applicant was to provide details the words “Personal investment” were typed. The loan amount was again stated to be $160,000 for a 15 year loan, with repayment type being interest only for five years at a variable rate.

48. On the third page under the heading “Employment”, the box marked “Full-time” was ticked and the applicant’s occupation was described as “Consultant Trader”. The current employer was said to be Boston Traders, and the length of employment was said to be two years one month. The borrower’s base income was said to be $70,000.

49. At the bottom of the that page the following three questions appeared:

•   Have you borrowed or do you intend on borrowing any part of the deposit?

•   Has anyone ever started legal action against you because you did not pay an amount when it was due?

•   Have you ever had a judgment entered or conviction recorded against you, been bankrupt, insolvent, assigned your estate to, or entered into a scheme of arrangement with, creditors?

In each case the “No” box was ticked.

50. On the seventh page, the solicitor’s contact name was said to be Grant Pritchard, and an address and phone number were provided. On page eight under the heading “Financial position” the applicant’s total assets were shown at $433,500. The bulk of that came from the property in Vincent Street but there were also said to be shares/investments of $52,000.

51. On the same page, the only liability shown was a debt on a Commonwealth Bank credit card with a balance owing of $1,100.

52. The last two pages of the application contained a signature purporting to be that of the applicant. One of those signatures was in respect of making a Business Purpose Declaration. The defendant denied that the signatures on the application were his and denied that he was aware that an application to St George had been made. The handwritten date alongside the signatures was 25 January 2011. However, the date typed on the front page of the application in the section headed “Bank/Introducer Use Only” was 27 January 2011. That might suggest that the application was signed before it was completed. All of the information provided in the application is in typed form including the date of 27 January 2011.

53. Precisely what then occurred with this application is shrouded in mystery. The next thing that happened was the appearance of a letter from St George Bank dated 1 February 2011 which was headed “Approval in Principle”. The letter was addressed to the defendant at his Mt Druitt property but he does not say if he received this letter or whether his solicitors came upon it at a later time as a result of files of various persons which were produced.

54. The letter was said to have been written by Hany Hanna who was subsequently dismissed by St George for wrongdoing, although whether that conduct related to the present matter is not known. The letter relevantly said this:

Thank you for choosing St George Bank to help you with your loan application. We are pleased to let you know that based on the information provided, your application is approved in principle. …

Loan amount:   $100,000.00

…

Formal approval of your loan application(s) is subject to:

[Four matters were listed including a satisfactory valuation and lender’s mortgage insurance approval if required.]

Once all of our approval conditions are satisfied, we can formally approve the application and issue loan agreement(s) to you.

Now, it is important for you to know that this approval in principle is not a guarantee of formal approval or the funds being made available.

55. A facsimile marking on the letter shows that it was faxed from Kogarah to Mr Nicholson at 9:42am on 1 February. It appears to have been sent, presumably at someone’s request, in order to obtain a further adjournment of the creditor’s petition in the Federal Magistrates Court that morning. The Court’s record shows that the petition was adjourned that day until 22 February 2011.

56. At 9.47am on the same day, Hany Hanna sent an email to Mr Nicholson with the Subject as “CLAS 2790810” (presumably a file number). The email said:

Dear Mr Benson, [sic]

I am pleased to inform you your loan has been conditionally approved and valuation was returned today coming in at $316,000.

Should you require any further information please don’t hesitate to contact me.

The email had printed on it St George Bank details.

57. Mr Nicholson forwarded this email to Mr Lippits at 3.37pm that day.

58. The lawyers acting for the defendant issued a number of subpoenas to St George Bank for production of documents related to the Approval in Principle and the email from Mr Hanna of 1 February 2011. The Bank responded by saying they were unable to locate any documents matched to the customer, nor to the reference number CLAS 2790810, nor connected with any valuation of the defendant’s property.

59. Mr Nicholson sent to Mr Shields a copy of the St George application and a page containing photocopies of a rates notice for the defendant, his driver’s licence and his Medicare card. He sent a copy of the creditor’s petition by the ATO and a letter on the letterhead of Boston Traders Pty Ltd. That letter, in its heading, included the company ACN, two telephone numbers and Mr Lippits’ email address.

60. The letter which was dated 14 January 2011 said this:

I am writing this letter to confirm that Johann Benson Glover is employed by this company on a full time basis in the capacity as a consultant.

Mr Glover is on a salary of $70,000 per year plus super.

He has been employed by Boston Traders since December 2008.

If you require any further information please contact me on the phone numbers above.

The letter was signed by Mr Lippits who was described as the CEO.

61. The letter from Boston Traders assumed some significance in the proceedings for a number of reasons. The first was because of initial denials by the defendant about his knowledge of it or of Boston Traders at all, and his subsequent admissions that he and Mr Lippits used the letter to mislead Mr Shields and the plaintiffs. Secondly, evidence of the defendant suggested that there was a second letter from Boston Traders, probably in identical terms, with a different letterhead. The second letter was said by the defendant to have been given to Mr Shields in the conference. However, the only Boston Traders letter that Mr Shields said that he had in his files since the proceedings commenced was the version of it forwarded to him in Mr Nicholson’s email. It will be necessary to return to this letter, particularly when discussing the credibility of the defendant.

62. Mr Shields said that he saw the “Approval in Principle” letter although he did not annex it to the affidavit he swore in the proceedings. However, an affidavit from the defendant’s solicitor of 14 December 2018 annexes a file he obtained from Licardy & Co Solicitors. That file contains the letter from St George of 1 February 2011. That fact confirms, in my opinion, that Mr Shields is correct in saying that he saw this letter, because Licardy & Co were acting as the solicitors for the present plaintiffs on the loan agreement.

The entry into the loan agreement

63. Mr Shields ordered a valuation from Diamonds Valuation Services, and he received that valuation on 17 February 2011. On the basis of the valuation Mr Shields formed the view that the value of the property was sufficient to secure a first mortgage loan. Mr Shields said that the value of the security, coupled with other aspects of the application including the income he was earning, the approval from St George, and his assessment of the defendant assisted him in forming the view that the loan was viable.

64. Mr Shields said that on Saturday 19 February 2011 he arranged for a meeting and interview with the defendant to be held on 20 February 2011.

65. A meeting took place at the offices of Licardy & Co Solicitors in the Edgecliff Centre. The defendant was present with Mr Lippits. The defendant remembered that, after taking them into the conference room, Mr Shields said, “So you are after a loan?” The defendant said that somebody answered “Yes” but he cannot recall whether it was him or Mr Lippits. The defendant also said that he did not recall what was said after that. He said everything was a bit of a blur and he does not recall exactly what happened. He does not recall being given the opportunity to read documents and he said that the documents were not explained to him. He does remember Mr Shields saying that the rate of interest was 3% per month but he does not have any recollection of 5% per month being mentioned.

66. The defendant does recall that Mr Shields said words to the effect of:

The people lending you the money will need it paid back quickly and on time because they will need the money for their business.

The defendant said that Mr Lippits did most of the talking to Mr Shields.

67. Mr Shields’ evidence was that during the meeting he asked Mr Lippits how he fitted into the picture. Mr Lippits replied:

I am a family friend and employ Joe in my business.

The defendant denied that Mr Lippits said that he was a family friend and employed Joe [the defendant] in his business.

68. Mr Shields then asked the defendant how he got into the mess, to which the defendant replied:

I had made a loan of $300,000 to help a friend and was informed that I would get it back eventually. It is not yet available and I need to pay the tax department.

Mr Shields asked what prompted the tax debt and Mr Lippits replied:

The capital gain made on the sale of shares to assist with the loan of $300,000 to his [sic] friend. He [sic] will get the $300,000 back. It is not relevant to this matter and the loan will be paid back.

69. At some stage during the meeting Mr Shields said that the defendant said to him:

I am employed by Boston Traders at an annual income of $70,000.

The defendant then referred Mr Shields to the Boston Traders letter.

70. When Mr Shields was discussing the interest rates, the defendant said:

I am experienced as I have worked in a bank for many years.

71. Mr Shields said the interview with Mr Lippits and the defendant lasted in excess of an hour. During that time he read aloud the terms of a document entitled “Letter of Approval” to the defendant. He stated the interest rates that applied to the loan. He then read through the terms of the document entitled “Borrowers Understanding of Consequences and Implication of Entering into this Loan” to the defendant. The defendant said that he fully understood the documents and would sign them. He then did so.

72. Mr Shields said that the following day the defendant and Mr Lippits attended the office of Michael Rogers, solicitor, to obtain independent legal advice and to sign the mortgage documents.

73. The defendant said that the day after the meeting with Mr Shields he went back to the offices of Licardy & Co. Mr Shields gave him the details of a solicitor who was to provide him with independent legal advice. The defendant says that he now does not recall the details of what the solicitor said in providing the legal advice and does not even recall the solicitor’s name. He said the solicitor went through the contract on pages where he had yellow post-it notes, and the solicitor told him that he had legal rights over and above what was contained in the contract. The defendant says that he has a vague recollection that the solicitor made some comments about the interest rate and the general nature and effect of what a mortgage was and what would happen in the event that loan monies were not paid back.

74. After the conference with Mr Rogers, Mr Shields said that the defendant provided the documents to Mr Shields who asked him if he understood the effect of the documents. The defendant said:

Yes I am very pleased. Will you fix up the tax department.

Mr Shields said he would give the documents to Richard Licardy to enable him to pay the tax department. Mr Shields did so later that day, and the loan was settled on that day.

75. On 7 March 2011 the creditor’s petition was dismissed in the Federal Magistrates Court.

76. The defendant said that a week or two after he obtained the loan from the plaintiffs, Mr Lippits telephoned him and told him that the loan from St George had fallen through. When the defendant asked why, Mr Lippits said he did not know. Mr Lippits said that Mr Nicholson told him that it would not be in the defendant’s interests for Mr Lippits to contact St George. Mr Lippits told the defendant that Mr Nicholson was trying to get another loan.

77. Mr Lippits subsequently told the defendant that Mr Nicholson had made attempts to get loans from La Trobe Finance, from a private lender and from RAMS but was unsuccessful. Mr Lippits told the defendant that the RAMS loan did not proceed after Mr Shields was contacted by an officer from RAMS. Again, it should be noted that any information the defendant was receiving was coming from Mr Lippits.

Failure to repay the loan

78. The loan agreement was due to be repaid on 21 April 2011 but was not repaid.

79. Correspondence then ensued principally between Mr Shields and Mr Lippits concerning repayment of the loan.

80. On 27 April 2011 Mr Shields sent an email to Mr Lippits and Mr Nicholson saying that the loan was due for repayment on 20 April 2011. The email asked for advice on “Your intentions” (presumably the defendant’s intentions through Mr Lippits), and the progress of the loan from St George (which may have been a request both to Mr Lippits and Mr Nicholson).

81. Mr Nicholson replied the next morning to the email saying that the loan from St George could not proceed. The email went on to say that Mr Nicholson had since discussed an alternative source of refinance through Adelaide Bank, and the mortgage manager there had expressed interest in the refinance. He said he had forwarded application forms and documentation to the defendant via John Lippits, and had received the signed application form back but not the balance of the necessary documents. He said that he had had no communication with the defendant or Mr Lippits since the week commencing 8 April 2011.

82. Shortly after receiving that email Mr Shields said that he rang Mr Nicholson and asked him what was happening. Mr Nicholson said:

No one will tell me but I think St George did not believe he had the income as indicated so am trying someone else. The letter of employment was a lie and the details of employment that was set out in Glover’s loan application was bullshit.

In one of the paragraphs of Mr Nicholson’s affidavits, Mr Nicholson said he did not believe that he said what Mr Shields asserts in that regard.

83. On 25 May 2011 a s 57(2)(b) Notice under the Real Property Act 1900 (NSW) was served on the defendant.

84. On 30 November 2012 a statement of claim was filed by the plaintiffs in the District Court seeking repayment of the principal sum together with interest at the rate of 3% per month. On 30 January 2013 a consent judgment was entered in the District Court with respect to the loan after the defendant signed an acknowledgment of the amount claimed. That consent judgment was ultimately set aside by Gibb DCJ on 25 January 2016 because it was irregularly entered by a person in the Court without the power to do so.

85. On 8 April 2014 the present proceedings were commenced seeking possession of the Mt Druitt property.

86. After the defendant’s present solicitors commenced to act for him they sent a letter to the plaintiffs’ solicitors on 17 February 2015 saying that they acted for the defendant. They said that a sale of the property in Mr Druitt was to go ahead with the purchaser being Mr Lippits. They asked for certain documents to permit the sale of the property to proceed. Those documents included the s 57(2)(b) notice alleged to have been served on the defendant, copies of the initiating process seeking possession of the property, a copy of the writ for possession and:

4.   The precise amount required to discharge your client’s mortgage in full including all legal costs, fees and charges properly claimable.

The letter went on to say:

Mr Lippits is a family friend of our client and will be purchasing the property at less than market value.

87. Not, apparently, having received a reply, the defendant’s solicitors wrote again on 19 February 2015 noting that the documents had not been provided. The letter asked if the solicitors would immediately advise as to the precise amount owing to the plaintiffs pursuant to their registered mortgage over the defendant’s property. The letter went on to say that their client had no recollection of having been served with any documents pertaining to the proceedings for possession. They said that the defendant was entitled to exercise his equity of redemption at any time before the property was sold, and they were doing everything necessary to assist their client in that regard.

88. On 20 February 2015 the plaintiffs’ solicitors wrote to the defendant’s solicitors. The letter relevantly said that the auction was scheduled to take place on 7 March 2015 and that the exact amount owing would be provided in the following few days. The letter said that the indicative payout at that time not including legal and other expenses was as follows:

(a)   Lower rate: 3% - $294,503.00

(b)   Higher rate: 5% - $404,903.00

The letter went on to say that the plaintiffs were entitled to the higher rate.

89. The plaintiffs had scheduled a mortgagee auction for 7 March 2015. However, on 6 March 2015 the defendant made an ex parte application in the present proceedings and obtained an order restraining the mortgagee from exercising its power of sale.

Evidence at the trial

90. There was voluminous documentary evidence contained in seven court books, two volumes entitled “Addendum Court Book” and a further bundle of documents tendered by the plaintiffs which became exhibit A.

91. The plaintiffs called no witnesses.

92. The defendant had sworn a number of affidavits. Those affidavits were read and he was cross-examined at length. An affidavit was sworn by Mr Lippits on 6 March 2015 and was used, seemingly, as part of the evidence upon which the ex parte injunction was obtained to stop the auction going ahead. However, the affidavit was not read at the present hearing, and the defendant sought to portray Mr Lippits as other than a friend, and someone who could not be considered to be in his camp.

93. A great deal of what was said by Mr Lippits in that affidavit was reproduced in a medical report of a psychiatrist, Dr Paul Friend, which the defendant sought to tender. I refused the tender of the report on the basis that Mr Lippits’ affidavit was not being read, Mr Lippits was not put forward for cross-examination and the conclusions reached by Dr Friend were, on the face of his report, based significantly on Mr Lippits’ evidence. That evidence went to a great deal of the history of the matter including what Mr Lippits said took place at and around the time of obtaining the present loan agreement from the plaintiffs. It was not possible to excise from Dr Friend’s report the material from Mr Lippits’ affidavit because it was so extensively quoted and obviously relied upon by Dr Friend in reaching his conclusions. Where there are real issues about what took place not only at the meeting with Mr Shields but in relation to Mr Nicholson, I considered that it was unfair to the plaintiffs, Mr Nicholson and Mr Shields for Mr Lippits’ hearsay evidence to come before the Court in the form of Dr Friend’s report.

94. There can be no doubt that Mr Lippits is a central figure, if not the central figure, in the present matter. The defendant’s case attributing legal liability for what occurred not only to the plaintiffs but also to Mr Shields and Mr Nicholson overlooks the significant involvement of Mr Lippits in the events. Strong inferences are available that concern Mr Lippits, and I will come to those later in this judgment.

95. The plaintiffs also read affidavits of Peter Valentino, a mortgage broker. Mr Valentino was cross-examined by Mr Lloyd of counsel for Mr Nicholson. The plaintiffs also relied on a valuation report annexed to an affidavit of Adrian Staltari. The valuation was of the defendant’s property as at 2011. Mr Staltari was not required for cross-examination.

96. As mentioned earlier, although Mr Nicholson swore a number of affidavits, he did not read those affidavits. The defendant, in his case in reply, read a number of paragraphs of those affidavits.

97. Finally, Mr Shields, who appeared for himself, read an affidavit which he had sworn to assist the plaintiffs as part of their case and their defence of the cross-claim made by the defendant. This affidavit was not read by the plaintiffs in their case; rather, Mr Shields relied on it in his own defence of the cross-claim. Mr Shields was cross-examined at length by Mr Newell for the defendant.

98. The credit of both the defendant and Mr Shields is an important issue in assisting in the determination of the present matter.

The defendant’s credit

99. The defendant was articulate and obviously intelligent. However, I found him to be a most unsatisfactory witness. I highlight the following aspects of his evidence.

100. First and most significant is the evidence which relates to the deception which the defendant and Mr Lippits practised on Mr Shields and, thereby, the plaintiffs, when they met with Mr Shields for the defendant to enter into the loan agreement. This was first mentioned by the defendant in his affidavit sworn 12 December 2018, an affidavit sworn to respond to one of Mr Nicholson’s affidavits and also to the affidavit of Mr Shields which had been sworn as long ago as 28 June 2015. Later, I shall deal separately with the fact that this information first emerged in this affidavit.

101. The defendant was responding to paragraph 3 of Mr Shields’ affidavit where Mr Shields detailed the first conversation he had with Mr Nicholson in which Mr Nicholson said he had an urgent application to obtain finance for the defendant. In that conversation, Mr Shields said he asked Mr Nicholson (inter alia) for proof of the borrower’s income.

102. In reply the defendant said this in his affidavit of 12 December 2018:

(b)   At no stage did Nicholson ask me for a letter of employment. If Shields asked Nicholson for a letter of employment that information was not conveyed to me. The first that I became aware of a letter of employment was when Lippits and I were on our way in the car to Shields’ office. When we were about 5 mins away from Shields’ office, Lippits said words to the following effect:

“Nicholson has told me to present this letter to the person we are meeting today".

(c)   Lippits then handed me a copy of a letter on a Boston Traders’ letterhead. I looked at the letter and said words to the following effect:

"Who are Boston Traders?"

(d)   Lippits said words to the following effect:

"It’s a company I had”.

(e)   I said words to the following effect:

“I'm not employed by you”.

(f)   Lippits said words to the following effect:

“Oh come on Joe, we have done business together”.

(g)   I said words to the following effect:

“Why do we need this?”

(h)   Lippits said words to the following effect:

“Nicholson told me that we need it, that’s how low docs loans work”.

(i)   At that time, I had no experience with low doc loans and did not know what to make of what Lippits was saying to me. Although I have [sic] the opportunity to read the Boston Traders’ letter when Lippits showed it to me, I did not have time to think about it or the full implications of the letter. I said words to the following effect to Lippits:

"Why did you write this letter the way its written?"

(j)   Lippits said words to the following effect:

"Nicholson told me how to construct it".

(k)   Despite the assurance that Lippits gave me I remained uncomfortable and upset and still remain uncomfortable and upset about the letter of employment from Boston Traders that Lippits prepared. I felt that I had been ambushed about this matter when Lippits told me about it and I still feel ambushed.

9.   I refer to paragraph 16 of the Shields Affidavit and say that John Lippits did not say words to the affect [sic]; I am a family man and employ Joe in my business". At that time John Lippits was a divorced man and had no children. He continues to be single and without children.

10.   My recollection is that John Lippits said words to the following effect:

“I am a family friend and Joe is a consultant to my business".

103. In cross-examination, the defendant agreed that he knew that the information in the Boston Traders letter would be relied upon by Mr Shields in forming a view as to whether or not to extend a loan to him and that he was willing to mislead Mr Shields at that time to save his house. He gave this evidence in cross-examination to Mr Follino-Gallo for the plaintiffs (at T130-131):

Q. And that document represented that you were earning $70,000 per annum, yes?

A. Yes.

Q. And that you were employed by Boston Traders, that’s so, isn’t it?

A. Yes.

Q. And you saw that document being handed to Mr Shields by Mr Lippits, that’s correct, isn’t it?

A. Yes.

Q. And at no stage did you say to Mr Shields, “The contents of that document is inaccurate”?

A. No.

Q. So, you were willing to misrepresent your income to Mr Shields at the time of that meeting, weren’t you?

A. Yes.

Q. Because you knew that that document would be relied upon by Mr Shields in forming a view as to whether or not to extend the loan to you?

A. Yes.

Q. And you were willing to mislead Mr Shields because you wanted to save your house, that’s so, isn’t it?

A. Yes, but can I answer that?

Q. You were willing to mislead Mr Shields so that you could obtain the loan--

A. Yes, because as far as we knew we were getting a loan off Nicholson. It was going to be short term matter--

Q. So the fact that you were misleading Mr Shields was really in your mind of no moment, is that right?

A. It was something that played upon my mind. I wasn’t happy about it, but--

Q. But nevertheless you were willing to do it?

A. Well, it was sprung upon me, yes.

104. The defendant gave this evidence in cross-examination by Lloyd for Mr Nicholson (at T159-161):

Q. You see, you went to the meeting on your account with Mr Shields and you sat there while Mr Lippits made a statement to Mr Shields that you were a consultant to his business.

A. Right.

Q. Correct?

A. (No verbal reply)

Q. That's right, isn’t it?

A. Right.

Q. Are you agreeing with me?

A. Yes.

Q. You knew that that statement made by Lippits to the lenders in your presence was false, didn’t you?

A. Yes.

Q. And you knew or believed that that statement was being made to try and trick them into lending you money?

A. Yes.

Q. You knew that the purpose was to deceive them so that they believed something which was false to get the loan funds out of them, that's right, isn’t it?

A. Yes.

Q. You sat there while that statement was made in your presence and you did nothing to correct it, that's right, isn’t it?

A. Right.

…

Q. You said nothing about the falsity of the information in the letter?

A. No.

Q. You knew that those things were highly material or believed that those things were highly material to the lenders?

A. Yes.

Q. And you knew that if that letter was handed over there was a high chance they'd be tricked or misled into parting with money?

A. Yes.

Q. You participated in them being misled in that way, true?

A. Yes.

Q. You did that for your own financial advantage so that you could trick them into giving you money, that's right, isn’t it?

A. Yes.

Q. You did that because you were desperate to get the funds, knowing that if you didn’t have the money by the following day to pay the ATO there'd be a sequestration order.

A. Yes.

Q. That was what was happening, wasn't it?

A. (No verbal reply)

Q. I think you said "yes"?

A. I did.

Q. So you engaged in this conduct to trick them out of the money so as to ensure that you could keep your house, that's right, isn’t it?

A. Yes.

Q. And you did that because at this time you were desperate to retain that house?

A. Yes.

Q. You could not imagine any scenario that you could accept where you wouldn't be able to keep your house, true?

A. Yes.

105. The defendant also gave this evidence (at T164):

Q. You knew that in fact what had occurred was that you and Lippits had actively set out to and did mislead Mr Shields about your employment and your earnings, true?

A. Yes.

106. Secondly, the defendant maintained a lie concerning his knowledge of Boston Traders and that letter up until he swore his affidavit of 12 December 2018.

107. The defendant’s first affidavit of 6 March 2015 was filed in relation to his application for an injunction to prevent the auction going ahead. It omits any reference to the conversation the defendant had with Mr Lippits in the car going to Mr Shields’ office and it omits any reference to the conversations about who Mr Lippits was or any matter of the defendant’s employment. That is one of three significant matters not disclosed by the defendant on an ex parte application.

108. In his affidavit of 29 July 2015 the defendant first responded to the affidavit of Mr Shields sworn 28 June 2015. In that affidavit the defendant relevantly says this:

9.   At not (sic) stage did I authorise Nicholson to make a representation to Shields or any other prospective lender that I was earning $70,000 a year.

…

11.   I note the letter purporting to be from Boston Traders Pty Ltd at page 22 of exhibit “RS1”. I do not know who Boston Traders is and I have no recollection of ever hearing the name Boston Traders Pty Ltd. The first knowledge I have had of Boston Traders Pty Ltd is when I saw page 22 of exhibit “RS1”.

109. In Mr Shields affidavit the following appears:

66. … Mr Glover expressly represented to me at his interview on 20 February 2011 that he was gainfully employed. Mr Glover said words to the following effect:

Glover:   I am employed by Boston Traders at an annual income of $70,000 a year.

67.   Mr Glover then referred me to a letter drafted under the hand of Mr Lippits to verify that he was earning $70,000 per annum in that employment. If I had been truthfully advised by Mr Glover in February 2011 that he had been unemployed since 1994 I would not have submitted the loan to any borrower.

110. In response to those paragraphs in his affidavit of 29 July 2015 the defendant said this:

42.   As to the allegation contained in paragraph 66 of Rodney Shields [sic] affidavit, I expressly deny that I said words to the following effect: “attributed to me”. At no stage did I represent to Shields or anyone else that I was employed by Boston Traders Pty Ltd and that I gainfully employed [sic] earning an annual income of $70,000.00 a year.

43.   The first I heard of a company called Boston Traders Pty Ltd is when I saw the documents referring to Boston Traders Pty Ltd in “RS1” [the exhibit top Mr Shields’ affidavit] at which time I asked John Lippits about Boston Traders and Lippits said words to the following effect:

44.   “Oh that was a company that I was going to use to buy and sell boats, it never got off the ground, it never traded and never did anything”

45.   As to allegations of fact contained in paragraph 67 of Rodney Shields [sic] affidavit, I deny the allegations. At no stage did I refer Shields to the letter from Lippits, I know nothing about the letter. I have no recollection of ever being asked whether I was employed or not or ever advising Shields that I was employed.

111. In his affidavit of 30 April 2018 the defendant said at paragraph 165:

At paragraph 15 of the Nicholson affidavit [sworn 29 October 2015] Nicholson asserts that I said words to the following effect: “I have worked with Mr Lippits for some time now”. I say that I did not make any such assertion. Although my recollection of the specifics of the meeting are not good I say that I would recall whether or not I had made such an assertion because it is not true.

112. Later in that affidavit the defendant records what happened immediately and during the meeting with Mr Shields. He makes no mention of the conversation in the car with Mr Lippits on the way to Mr Shields’ office about the Boston Traders letter. The defendant not only failed to set out the conversation concerning who Mr Lippits was and about the defendant’s employment with him, he positively said at paragraph 180:

I was not asked any questions about whether I was employed or what kind of work (if any) I did.

113. The defendant also said this at paragraph 190:

(a)   Shields did not ask either myself or John (who did most of the talking and to whom most of the questions were directed) for any documentation which demonstrated my earnings. In particular, Shields did not ask for a periodic payslip or group certificate evidencing some employment.

(b)   Shields did not ask either John or myself what Boston Traders did or what its business was.

(c)   Shields did not ask what a trader is in the context of the Boston Traders’ letter which is annexed to the purported St George loan application. …

(d)    Shields did not ask either John or myself about my job (if any) or what I did in that job.

114. The defendant also said at paragraph 191:

I have had my attention drawn to an affidavit sworn by Rodney Shields in these proceedings on 28 June 2015 (“the Shields affidavit”). Shields asserts at paragraph 16 of the Shields affidavit that John said words to the effect of: “I’m a family friend and employ Joe in my business”. I say that no such words were said at the meeting at the office of Licardy & Co. John did not assert that I was his employee. I say that I would remember if such a thing had been said because I was conscious that such a statement was not true.

115. The defendant was cross-examined about paragraph 11 of his affidavit of 29 July 2015 (at [108] above) and gave this evidence (T 134ff):

Q. Paragraph 11 you say you note the letter purporting to be from Boston Traders at--

A. Yeah.

Q. --page 22 of Mr Shields' exhibit. "I do not know who Boston Traders is and have no recollection of ever hearing the name Boston Traders." Both parts of that sentence, to your knowledge, when you affirmed this affidavit, were false, weren’t they?

A. I think I'm just - I am - I knew that that letter was not the one that I'd seen handed over.

Q. You say in paragraph 11 you do not know who Boston Traders is and have no recollection of ever hearing the name Boston Traders. Both parts of that statement in this paragraph of your affidavit were false to your knowledge when you affirmed it, that's right, isn’t it?

A. I suppose I better say "yes" there. I--

Q. Well, don’t say "yes" if you don’t agree. Answer the question, please. You knew that what you were saying in that sentence was false at the time you affirmed the affidavit?

A. Yes, I knew it wasn't correct.

Q. The next sentence, "The first knowledge I have had of Boston Traders is when I saw page 22 of exhibit RS-1." That statement in paragraph 11 was false to your knowledge when you affirmed the affidavit, wasn't it?

A. Yes.

Q. Have a look at paragraph 43, please.

A. Yep.

Q. You say, there, the first you heard of the company, Boston Traders, is when you saw the documents referring to it, at which time you asked Lippits. Do you see that?

A. Yep.

Q. That statement about the first time you had heard of the company was false to your knowledge when you affirmed the affidavit, true?

A. Yes.

116. In cross-examination by Mr Folino-Gallo for the plaintiffs, after he put to the defendant the statements in the affidavits which I have set out above, the following exchanges occurred:

Q. And you, at no stage did you, prior to 12 December 2018, did you seek to correct this inaccurate statement that was contained in two previous affidavits, did you?

A. Yes.

Q. And it wasn’t the case, was it, that you’d simply forgotten about the existence of Boston Traders, that’s so, isn’t it?

A. No, I’d never forgotten that.

Q. Yes. Now--

HIS HONOUR

Q. Why did you say you hadn’t heard of Boston Traders if you had?

A. I don’t think I, I read the affidavits too closely.

FOLINO GALLO

Q. Well, Mr Shields, I asked you at the outset of my cross examination whether you had - I withdraw that. I apologise. Mr Glover, I asked you at the outset of this cross examination whether before swearing these affidavits you satisfied yourself as to their accuracy. Is the position now that that was not so?

A. I, I, I read them as much as I could. Often I found them confusing. They were just referring to other, other, what other people had said and so forth.

Q. So, are you telling the Court that you were confused by your own affidavit evidence, is that the position?

A. No. At times there was stuff coming through and it would say that, you know, somebody had said, said something or rather in, in, what have you, in another affidavit or something.          (emphasis added)

117. If the defendant is to be believed when he said that he had never forgotten about Boston Traders, the passages set out in his affidavits prior to 12 December 2018 were calculated and deliberate lies. Although in paragraph 27 of his affidavit of 12 December 2018 the defendant said that he was genuinely mistaken about not seeing a copy of the Boston Traders letter, I do not believe him in that regard.

118. The position was made worse by the defendant in cross-examination by Mr Lloyd for Mr Nicholson. The defendant gave the following evidence (T177ff):

Q. You see, you know that in addition to your earlier evidence to the effect you hadn't seen a copy of the Boston Traders letter until Mr Shields' affidavit, that you also had earlier said that you'd never heard of Boston Traders?

A. Yes, that's right. At, at the time - it didn’t ring any bells with me at the time that I saw that.

Q. This paragraph 27 doesn't seek to correct or withdraw anything that you'd said on any earlier occasion about the question of whether you had ever heard of Boston Traders before Shields' affidavit, does it?

A. Sorry, could you repeat that?

Q. You only deal in paragraph 27 with correcting what you say was a genuine and honest mistake about when you first saw the Boston Traders letter, true?

A. Yes.

Q. You don’t deal with your earlier evidence about when you first heard of Boston Traders, do you?

A. No.

Q. And you know that you, on an earlier--

A. Because it - anyway, at the time it didn’t, it didn’t ring any bells with me.

Q. On an earlier occasion in an affidavit you had said that you didn’t know who Boston Traders were and never heard of them until you saw Shields affidavit?

A. Yes, that's right and that was that it didn’t ring - I didn’t - it didn’t ring any bells with me.

…

Q. You said yesterday to his Honour that when you gave the earlier evidence that you hadn't heard of Boston Traders until you saw Mr Shields' affidavit that you knew that what you were saying was false?

A. That was mistaken.

Q. False?

A. I, I didn’t - no, it was mistaken. It, it just didn’t ring any bells with me.

Q. You knew, I suggest to you, that it was untruthful to say that?

A. It didn’t ring any bells with me at the time.

HIS HONOUR

Q. In fairness to you.

A. Yes.

Q. I should just remind you of some evidence you gave yesterday.

A. Right.

Q. Mr Folino-Gallo said to you--

A. Yeah.

Q. --at transcript 129, line 39:

"Q. And it wasn't the case, was it, that you'd simply forgotten about the existence of Boston Traders, that's so, isn’t it?

A. No, I'd never forgotten that."

But--

A. Well, I'd, I'd never forgotten--

Q. --you now seem to be saying that it didn’t--

A. I'd, I'd--

Q. --ring any bells?

A. --never forgotten the letter, right? I have never forgotten the letter but I'd - but obviously forgotten the name Boston Traders at the time when I first swore those affidavits.            (emphasis added)

119. The lies were made worse because the justification given on two occasions for denying that there had been any suggestion he worked for Boston Traders was that it was not true. That was a calculated attempt to provide corroboration for the lie that nothing was ever said about it. Further, in the portion of his affidavit set out at [108] above, he attempted to blame Mr Nicholson for his own lie.

120. Thirdly, in the affidavit the defendant swore and read at the ex parte hearing on 6 March 2015 to obtain a stay on the writ of possession, the defendant omitted any information in that affidavit about having been provided with independent legal advice by a solicitor Michael Rogers. In addition, the defendant said that he did not recall being given the opportunity to read the documents he signed nor were they explained to him. This was the second significant non-disclosure on the ex parte application.

121. In his affidavit of 29 July 2015 he said that recalled seeing an independent solicitor for advice. I have summarised at [73] above the defendant’s evidence in that affidavit of what transpired at that meeting.

122. The failure to make any mention of the independent advice he received is a matter which detrimentally affects the defendant’s credit, because a full and frank account was not given by him on an ex parte application to the judge who heard the urgent injunction application.

123. Fourthly, in the affidavit that he swore on the ex parte application to obtain a stay of the writ of possession, the defendant said that he did not know precisely what had been going on during the previous four years with his loan and “I had not previously been served with any documents”. In fact, as the defendant acknowledged in cross-examination, he had been served with a District Court statement of claim which claimed what was then the amount owing under the loan together with interest thereon. Indeed, the defendant attended at the District Court and signed an acknowledgement of the debt which led to the judgment of the District Court being entered. Although that judgment was ultimately set aside (as I have said) that was only because of an irregularity within the District Court and not because the acknowledgement by the defendant had not been executed by him.

124. This was the third serious failure to give a full and frank account of matters on an ex parte application. It is also significant that the application, although made in existing proceedings, was made without the plaintiffs or their solicitors being present. It is not difficult to infer that their absence was the reason for the non-disclosures which could otherwise have readily been answered.

125. Had the Court been aware that the defendant had been given independent legal advice, had signed a court document acknowledging the debt, and had misled Mr Shields about his employment, there is a very strong chance that the stay orders would not have been made. The significance for present purposes is that these three material failures amount to dishonesty by silence.

126. Fifthly, the defendant claimed that he was only aware of an interest rate of 3% per month. He was not aware of a higher rate of interest that would be charged if he defaulted on the loan. (I am not dealing here with the issue of who of the defendant and Mr Shields is to be believed about whether he was told of the higher rate.)

127. The defendant worked at the Commonwealth Bank for 26 years and reached the position of assistant relief manager. When he denied being aware that there was a default rate of interest the following exchange occurred (at T115):

HIS HONOUR

Q. Did you not know from your experience working within the bank that all mortgages have two rates in them, a higher rate for a default and a lower rate for payment on time?

A. Not the ones I, I dealt with and I couldn’t say I, I actually read the documents.

Q. You didn’t know that mortgages contained what’s called a default rate?

A. No.

128. The defendant said that he was an assistant relief manager for more than ten years but that he did most of his loans work before he became an assistant manager. If, as he said, he was involved with loans from the Bank, I do not believe his evidence that he was not aware that there would be a default rate of interest in a mortgage, nor his evidence that the mortgages he dealt with at the Bank did not have two rates. It is utterly implausible.

129. Finally, in paragraph 10 of his affidavit of his affidavit of 29 July 2015, the defendant said that until he read Mr Shields’ affidavit he had not seen any of the documents exhibited to it pages 1 to 22 of that affidavit. He gave this evidence in cross-examination (T 134):

Q. For the purposes of you affirming this affidavit of yours of 29 July you had read Mr Shields' affidavit and the exhibited documents carefully, hadn’t you?

A. I had read them.

Q. You'd read them carefully, hadn’t you?

A. (No verbal reply)

Q. You need to give a verbal response.

A. Yes.

Q. And in response to what Mr Shields had said about the Boston Traders letter you say in paragraph 10 that you hadn't seen any of the pages until you'd received Mr Shields' affidavit, that's right, isn’t it? That's what you say?

A. Yeah.

Q. At the time that you affirmed this affidavit with that statement in paragraph 10, you knew that what was in that paragraph was false, didn’t you?

A. Yes, I, I would have known, yes.

Q. When you say you would have known, you knew that what was in paragraph 10 of this affidavit was false, that's right, isn’t it?

A. Yeah, I - yes, yes, if I read it, yes.

130. That is a further instance of the defendant knowingly swearing to matters in an affidavit that he knew were false.

131. All of these matters lead me to the conclusion that I cannot accept the defendant as a truthful witness. Except for matters against his interest and one matter to which I will come, I cannot rely upon his evidence where it is disputed, unless it is otherwise corroborated.

Mr Shields’ credit

132. The defendant submitted that Mr Shields should not be believed unless his evidence was corroborated by documents. He submitted that Mr Shields gave an enormous amount of improbable evidence which was not believable. He submitted that Mr Shields claimed to be able to remember some particular matters but not many other matters. In that regard it was also submitted that there was a pattern to Mr Shields’ inability to remember things. It was said that, whenever uncomfortable questions were asked, Mr Shields claimed an inability to remember. He submitted that Mr Shields was an advocate to establish that the whole matter turned on the false Boston Traders letter.

133. There is no doubt that Mr Shields was a difficult and irritating witness. He demonstrated an inability on a large number of occasions to focus on the questions that were being put to him, preferring instead to answer by emphasising his view of the matters in question. That often involved answers being given which were repetitive of earlier answers with that aim in mind.

134. Nevertheless, I do not consider that Mr Shields was dishonest. I do not think that he feigned an inability to remember things. Nor do I think he was doing other than endeavouring to give an accurate account, to the best of his ability, of the events in question. He was prepared to admit when he had overlooked things or where he had made mistakes in matters that appeared in his affidavit. Those admitted shortcomings mean, however, that I must scrutinise his evidence carefully in order to see whether it is reliable even though it was honestly believed.

135. In my opinion, much of the way Mr Shields answered questions could be traced to his belief that he had been seriously misled by the defendant when the defendant applied for the loan; to the significant efforts he (Mr Shields) made and, as he saw it, the plaintiffs made to try to avoid putting the defendant out of his house, notwithstanding that the defendant had not repaid the loan or, indeed, any monies owing under that loan in the years that passed; and to the resentment he felt at being labelled a conspirator with the plaintiffs and Mr Nicholson. In that regard, I note and accept Mr Shields’ evidence that he was not to receive, and did not receive, any fee for having organised the loan until such time as the loan was repaid.

136. I do not consider that Mr Shields was an advocate for the plaintiffs (terminology normally used in relation to expert witnesses), but I accept that Mr Shields was keen to put forward his view of the facts. He was not an expert but a party being sued, and he was conscious that his actions at the time and after the loan was made were being used by the defendant to support the defendant’s claim against the plaintiffs. He cannot be criticised for trying to persuade the Court of his view of the facts, particularly where he was acting for himself.

137. Further, contrary to the submissions of the defendant’s solicitor, I consider that the Boston Traders letter was a significant matter, because I accept Mr Shields’ evidence that, if its falsity had been known, the loan from the plaintiffs would not have proceeded.

The defendant’s claim

138. It is apparent from the case sought to be made by the defendant against the various cross-defendants that the St George Bank loan is a central matter. A consideration of that matter involves the person who is at the centre of the events, namely, John Lippits. It was clear that, by the time of the trial, the defendant was anxious to distance himself from Mr Lippits. As I have already mentioned, Mr Lippits swore an affidavit for the plaintiffs in these proceedings. It seems likely that Mr Lippits was to be a witness for the defendant because his affidavit was amongst the material sent to Dr Friend, and provides most of the basis for Dr Friend’s opinion of the defendant.

139. It is also apparent that at some stage which is not identified, either there was a falling out between the defendant and Mr Lippits or, for some other reason, a decision was made not to rely on Mr Lippits. I note in that regard that the defendant has made no claim against Mr Lippits and, seemingly, does not intend to do so. This is a matter to which I will return in due course.

140. It seems very clear that for a lengthy period of time the defendant and Mr Lippits were close friends. It is difficult, otherwise, to explain how the defendant could have gone on lending money to Mr Lippits to the extent of more than $1,000,000 when, apart from one small amount, Mr Lippits had never repaid the loaned monies. The defendant and Mr Lippits clearly remained close even though Mr Lippits continued to let the defendant down, and did so specifically in relation to the amount of Capital Gains Tax he was required to pay, which ultimately led to the judgment against him and the bankruptcy notice. The evidence suggests also that Mr Lippits did not even adhere to the instalment payment schedule that was agreed with the ATO after the petition was filed.

141. It is apparent that the defendant continued to trust Mr Lippits to try to get the defendant out of the problems which had been brought about by Mr Lippits. The evidence discloses that Mr Lippits was taking steps in relation to the creditor’s petition and in relation to obtaining a loan some time before the defendant met Mr Nicholson. The evidence discloses that the defendant knew that Mr Lippits had engaged Mr Nicholson (and probably Mr Prestia) before the defendant met Mr Nicholson. The evidence discloses that the defendant was content for Mr Nicholson and others to communicate with Mr Lippits as his agent. He expressly confirmed to Mr Nicholson what Mr Lippits had told Mr Nicholson, namely, that communication could be made with him through Mr Lippits.

142. The one matter about which I am prepared to accept the defendant’s uncorroborated evidence is that the signature on the loan application to St George Bank is not his signature. Although Mr Lippits has not given evidence and has not been given the chance to explain his involvement in the matters with which the proceedings are concerned, I am comfortably satisfied that it was Mr Lippits who signed the defendant’s name on the application form and provided the information to Mr Nicholson that is contained in it. There is some likelihood that Mr Lippits felt, when he did so, that he was doing it to assist the defendant when he, Mr Lippits, knew that the only way bankruptcy could be avoided for the defendant was for him to able to obtain the loan to pay out the ATO.

143. Although the present legal advisors for the defendant put forward a case to suggest that Mr Nicholson was behind the fake loan application and approval from St George, as will be seen later, I do not accept that there is any evidence to suggest that that is so. It is difficult to see what benefit Mr Nicholson could think that he would derive from engaging in such behaviour. The submission made by the defendant’s solicitor, Mr Newell, during the hearing that Mr Nicholson was doing this to take “a slice of the equity of the [defendant’s] house”, or to take “a secret commission derived from the equity in the property” was improperly made because not only was it made without any evidence to support it, it is impossible to see how Mr Nicholson would ever be able to take any equity in the defendant’s property. Since the plaintiffs through Mr Shields were conducting the auction they were, presumably, the only party who could pay Mr Nicholson a secret commission. It was never put to Mr Shields that any commission or fee was to be paid or was paid to Mr Nicholson for any reason by the plaintiffs.

144. Although under the finance broking deed the defendant was required to pay a non-refundable application fee of $2,500, Mr Nicholson would not otherwise be paid the remaining fees referred to in clause 3 of the deed until there was a final and unconditional letter of offer from the financial institution. It is apparent from what Mr Newell said in his opening submissions that he entirely overlooked the terms of the broking deed when he asserted that Mr Nicholson was doing what he did to get some benefit from the proceeds of the sale of the house. In that regard Mr Newell said (T20.47):

But he’s not getting paid, that’s the point. He must be getting paid from somewhere else.

145. The strong likelihood is that the information contained in the St George application was largely or entirely provided to Mr Nicholson by Mr Lippits. The likelihood is that Mr Nicholson either provided the completed application to Mr Lippits for him to obtain the signature of the defendant, or provided it to him in advance of its completion to obtain the defendant’s signature. Instead, Mr Lippits signed on behalf of the defendant, possibly because at that stage he did not want the defendant to see the falsehoods that were contained in it.

146. Mr Nicholson was undoubtedly careless in not seeing that some of the information given to him could not have been correct such as the answers to the questions about whether the defendant had ever had legal action taken against him or a judgment entered, but there is no evidence that those errors had anything to do with the failure of the loan to go ahead. Indeed, on the defendant’s case that Mr Nicholson was trying to force the defendant into the loan from the plaintiffs, truthful answers to those questions would be more likely to achieve that result, because St George would have refused the application at that stage.

(a)   The defendant’s claim against the plaintiffs

147. Subject to one matter, the claim by the plaintiffs is a straightforward one for repayment of the loan in accordance with its terms and for possession of the property because there was a failure to comply with the terms. By reason of the matters raised in the cross-claim it must, however, be determined whether the loan agreement should be set aside for unconscionability, or under the Contracts Review Act 1980 (NSW), or because of the fraud and conspiracy allegedly engaged in by the plaintiffs and Mr Shields. In the course of determining that it will be necessary to discuss whether the plaintiffs are entitled to make a claim for the amount owing on the basis of the default rate of interest. This is because, when the plaintiffs entered judgment in the District Court, they did so for the lower rate of interest, and also because Mr Shields was keen to emphasise in his evidence that what the plaintiffs only ever intended to claim was the lower rate of interest.

249. Fifthly, Mr Nicholson had no files to produce. The defendant relies strongly on that fact to infer, as far as I understood the submission, that Mr Nicholson had something to hide and that the “something” was his involvement with Mr Hanna and possibly Mr Lippits in cooking up the St George Loan Approval. Reliance on this failure to produce was, in effect, an attempt by the defendant to re-agitate the adequacy of Mr Nicholson’s discovery which I decided in Kaji Australia Pty Ltd v Glover (No 2) [2018] NSWSC 414. I refer in that regard to what I said at [39] to [47] of that judgment.

250. Sixthly, it appears that a Bankwest approval dated 20 December 2010, and apparently used to obtain an adjournment in the Federal Magistrates Court on 21 December 2010, was not a genuine approval. The evidence about this Bankwest approval was scant. The only evidence of Mr Nicholson’s involvement with it is evidence given by Mr Glover in his affidavit of 30 April 2018 of what Mr Lippits said to him in January 2011 after the defendant’s second meeting with Mr Nicholson.

251. In the letter from the defendant’s solicitors of 2 August 2018 the following appears:

The Cross-Claimant relies upon the propensity and practice revealed by the role of the Third and Fourth Cross-Defendants in collaborating with Joseph Prestia (“Prestia”) in the preparation and use of a fraudulent unconditional approval letter from Bankwest dated 20 December 2010 which letter of approval was used to deceive the Federal Magistrates Court and the ATO. That role included procurement of payment of $2000 into the bank account of the Third Cross-Defendant in consideration of the joint role of Prestia and the Fourth and Fifth Cross-Defendants [sic] in facilitating the creation and use of the Bankwest approval letter.

It seems likely that the reference in the penultimate line should be to the Third and Fourth Cross-Defendants because Mr Shields (the Fifth Cross-Defendant) had not even been contacted in December 2010.

259. The only evidence to support what appears in that letter is the fact that on 23 December 2010 Mr Nicholson sent an email to Mr Lippits saying (inter alia):

As discussed with Joseph Prestia, the $2000 for services rendered remains outstanding and we are now out of pocket to this effect.

260. What inference should be drawn from that email is hard to determine. Even if the inference is that Mr Nicholson had assisted Mr Prestia in the work he had been doing with Mr Lippits to obtain repeated adjournments in the Federal Magistrates Court, that says nothing about Mr Nicholson’s knowledge of, or involvement with, the Bankwest approval.

261. Seventhly, the suggestion that the failure of the plaintiffs to sue Mr Nicholson is indicative of a conspiracy assumes that Mr Nicholson must have committed wrongdoing separately from the plaintiffs. Otherwise, it is question begging. Any separate wrongdoing by Mr Nicholson could only be concerned with him being a party to the sham loan approval from St George. For reasons already given and matters to which I will come, the defendant fails to show that Mr Nicholson was a party to the sham loan approval, or even aware that the loan approval was a sham.

262. To establish fraud and conspiracy against Mr Nicholson, the defendant must prove, at a minimum, that Mr Nicholson was a party to the sham approval from St George. In addition to the matters I have identified above, the defendant put forward an opinion of a valuer, Peter Valentino who concluded at the end of his first report:

There is cause for serious suspicion that the alleged loan from St George was not genuine and was a fabrication by the broker.

263. In final submissions, the defendant appeared to suggest that this was not relied on. However, this serious allegation was made, and it formed the basis for much of the cross-examination of Mr Valentino.

264. Mr Valentino’s opinion was said by him to be based on “the failure by the broker to follow with the normal procedures and the anomalous nature of the matter including, but not limited to, what purports to be a request by the broker for monies for a valuation to be undertaken by St George.”

265. Mr Valentino said that it was a cause for suspicion that St George did not appear to hold any documents in relation to the loan and that St George did not have a reference number on the conditional approval. Mr Valentino agreed that he did not have any knowledge of what St George’s document retention policy was nor its electronic retention policy.

266. In coming to his conclusion, Mr Valentino also relied on his understanding that the loan from St George ultimately did not proceed because the Bank was having an audit. Mr Valentino assumed that that information was correct but came to understand by the time of his third affidavit that an internal audit was not the reason for the loan not being approved.

267. Mr Valentino also relied for his opinion on matters which he said a broker would ordinarily attend to in relation to complying with conditions in the conditional letter of approval. Mr Valentino said that Mr Nicholson failed to carry out those matters. He agreed in cross-examination, however, that a number of the matters he relied upon were not made conditions by St George in the letter of approval and he agreed that he had not been ultimately able to identify any condition in respect of which Mr Nicholson had not taken steps to comply with.

268. In his oral evidence Mr Valentino said this:

Q. What you're saying in paragraph 49(viii) is there's a serious suspicion that the broker actually fabricated this document. That's the effect of your opinion, isn't it?

A. Yes.

…

Q. You've just told his Honour that the effect of your opinion was that there was serious suspicion the broker fabricated this letter, that's right, isn't it?

A. No, I did not say the broker fabricated this letter.

Q. Serious suspicion--

A. I said the approval, not this letter.

Q. What approval are you talking about if in this affidavit you--

A. This St George approval.

Q. So you are talking about this letter?

A. Yeah, I'm not saying the letter is fabricated.

Q. How could the letter be genuine, but the approval be fabricated?

A. Because it never came unconditional.

269. Whether Mr Valentino was saying that the letter was fabricated or that the loan approval was fabricated (it is difficult to see how the letter of approval could be genuine if the loan itself was a fabrication) he had no basis at all for suggesting that the author of the fabrication was Mr Nicholson. His conclusion in that regard was based only on assumption and speculation. His opinion in that regard should not have been put forward by the lawyers acting for the defendant. It was an allegation of fraud and criminality without any basis as Mr Valentino’s cross-examination demonstrated and as he ultimately accepted.

270. In the same way, none of the matters identified by the defendant considered singly or together, leads to an inference that Mr Nicholson engaged in fraud or that he conspired with the plaintiffs and Mr Shields to enrich themselves from the sale of the defendant’s land. I accept the submissions of Mr Lloyd for Mr Nicholson which demonstrate the improbability of the fraud and conspiracy alleged. Mr Lloyd put the matter in the following way.

271. By late January 2011 Mr Nicholson knew of the defendant’s indebtedness to the ATO. The defendant’s case must be that at that time Mr Nicholson set about to cause Mr Lippits to prepare the St George loan application and, in concert with Mr Hanna, they procured a false conditional approval letter. By this time Mr Nicholson must have had in mind that there could be a further adjournment of the bankruptcy proceedings which would enable Mr Nicholson to string the defendant along for long enough to be able to bring Mr Shields into the picture. Mr Nicholson must have known that Mr Shields would have at his disposal some lenders who would advance a short term loan at high interest rates and that the defendant would be willing to enter into that loan.

272. Mr Nicholson would then have to wait until 11 February 2011 when he had the conversation with Mr Lippits saying that it seemed that the St George loan would not be secured in time. He said one option would be to approach a private short term lender so that the ATO could be satisfied, and he said it would also be worth commencing a loan application process with another main stream lender in case St George do not move forward with the loan. The latter is hardly likely from someone endeavouring to push the defendant into a short term loan from which he would not be able pay out.

273. On receipt of instructions from Mr Lippits, Mr Nicholson then sends the email to Mr Shields on 15 February, taking the risk that Mr Shields will not be able to find lenders in the short time available. Significantly, Mr Nicholson then drops out of the picture except for being told subsequently that the St George loan is not going ahead, whereupon he then made contact with Adelaide Bank (see at [212] above).

274. In my opinion, none of that makes any sense when Mr Nicholson could have arranged for Mr Shields to find lenders without going through the charade of a fraudulent loan approval from St George Bank. If, as the defendant asserts, Mr Shields was part of the conspiracy with the plaintiffs, neither Mr Shields nor the plaintiffs would have been concerned in those circumstances for there to be any exit strategy from the short term loan, because the whole point of the conspiracy was that the defendant would not be able to repay the short term loan, with the result that there would be a windfall to the plaintiffs and the other participants in the conspiracy at a time further down the track.

275. The defendant also relies on matters which are set out at paragraph 34 of the cross-claim. They are said to inform the agreement to perform the unlawful acts for the combination and conspiracy. The first five are neither facts nor particulars but, rather, conclusions or inferences which it is said should be drawn. That is the difficulty. They assert that (a) Mr Nicholson had a substantial stake in the defendant entering the loan with the plaintiffs; (b) Mr Nicholson, knowing the St George Approval was a fabrication and that the Expected Loan Representations were fraudulent, made himself available to the plaintiffs by swearing an affidavit to resist the application by the defendant to set aside the judgment; (c) Mr Shields and the plaintiffs “sought out and embraced [Mr Nicholson] as part of their camp”; (d) all the cross-defendants cooperated forensically to frame an affidavit case to suggest the St George loan was genuine; (e) Mr Nicholson formed an intention “to avoid a forensic exploration” of the St George Loan Application and Approval.

276. It is very difficult to understand what most of those matters mean. There was no evidence to support any of them except that both Mr Nicholson and Mr Shields swore affidavits for the plaintiffs in relation to the making of the loan. That was hardly surprising when both men were involved in the loan coming about. Neither had been joined to the proceedings at that stage. The matter referred to in (d) above would have been difficult to achieve without the involvement of the lawyers acting for the various cross-defendants. It is not clear if there is a suggestion that they too were involved.

277. Further matters which did assert facts rather than conclusions were these: (f) the plaintiffs assisted by Mr Shields obtained judgment in the District Court against the defendant; (g) an order for possession was not sought until much later when interest had accrued; (h) the plaintiffs’ solicitors undertook to have the caveat on the defendant’s property removed to enable sale or refinance, and received a fee to do so, but failed to have the caveat removed; (i) the plaintiffs’ solicitors did not provide a payout figure in and about February 2015 although requested to do so.

278. Although obtaining a monetary judgment in the District Court as a precursor to taking possession proceedings in this Court was somewhat bizarre, the plaintiffs were certainly entitled to obtain such a monetary judgment. It is true that possession proceedings were somewhat delayed but I accept Mr Shields’ evidence that the plaintiffs were doing what they could to avoid putting the defendant out of his house. It was always open to the defendant to offer to pay the amount of the District Court judgment together with interest to exercise his equity of redemption. He did not do that. Neither of these matters remotely suggests a conspiracy.

279. Neither of the failures to remove the caveat or to provide a payout figure suggests anything more than negligence on the part of the plaintiffs’ solicitors. The inclusion of those matters as a basis for the allegations of combination and conspiracy can only mean that the defendant is asserting that the plaintiffs’ solicitors were part of the conspiracy. Those solicitors were not named as cross-defendants. There is no basis for alleging that those matters were evidence of a conspiracy. The allegations should not have been made.

280. That Mr Shields was involved in a conspiracy was never put to him in the lengthy cross-examination that Mr Newell conducted. The idea that the parties to the conspiracy intended for the loan not to be repaid so that high quantities of interest could be run up is entirely inconsistent with the documents signed by the defendant at the time the loan was entered into which noted the need of the plaintiffs to have the money repaid in due time. it was never put to Mr Shields that those documents were not to be taken at face value, but were some sort of charade to hide the real intentions of the parties to the conspiracy. The notion that the plaintiffs and others intended that the loan not be repaid, allowing the defendant to be gouged, is also inconsistent with the fact that when judgment was entered by the plaintiffs in the District Court they did not claim the much higher default rate of interest.

281. The defendant’s case also involved a submission that the evidence contained in those portions of Mr Nicholson’s affidavits that were read (those parts of the affidavits of 29 October 2015 and 24 October 2018 were later consolidated into exhibit D6), and the affidavit of 7 March 2018, should not be accepted as truthful evidence. It is necessary to say something about that submission.

282. It was the defendant who read portions of Mr Nicholson’s affidavits. They were read rather than being tendered on the basis that the affidavits contained admissions against Mr Nicholson’s interest. Having read this evidence, Mr Newell then sought to discredit Mr Nicholson and his evidence.

283. The general rule is that a party cannot seek to discredit his own witness. In Wells v South Australian Railways Commissioner & The New Zealand Insurance Co Ltd (1973) 5 SASR 74 Bray CJ said at (85):

A party cannot, except within narrow and well known limits, seek to discredit a witness called by him on the ground that he is unworthy of credence on his oath, but if he calls two witnesses whose evidence differs he is at liberty to ask the court to accept one and reject the other.

284. In the later case of R v Welden (1973) 16 SASR 421 the Crown after the close of the case for the defence sought to call a further witness which would have had the effect of contradicting one of its own witnesses in chief. Chief Justice Bray said (at 427):

Next, it is apparent that the Crown was calling evidence in rebuttal which had the effect of contradicting what one of its witnesses, namely Mr Pitt, had said in cross-examination when called as part of the original Crown case. In my opinion, however, this in itself did not render Lockyer’s evidence inadmissible. A party who calls a witness cannot, with irrelevant exceptions, call other evidence to show that the witness is a person unworthy of credit, that he can call other evidence to show that he has made a mistake.

285. In McPhilemy v Times Newspapers Ltd [2000] 1 WLR 1732 Brooke LJ (with whom Thorpe LJ agreed) first quoted from Cross and Tapper on Evidence, 9th ed. (1999) Butterworth, London at p285 where the learned author said this:

The prohibition against a party impeaching his own witness means that there is a general rule preventing a litigant from taking any of the above steps with regard to witnesses called by him. It is for the judge to determine whether and to what extent a witness is unfavourable to the party calling him, and no such determination should be made before the witness has been sworn and given a chance to come up to his proof.

That is a position dealt with in New South Wales under s 38 of the Evidence Act 1995 (NSW).

286. Lord Justice Brooke then went on to quote and endorse part of a judgment of Holroyd J in Ewer v Ambrose (1825) 3 B & C 746 at 750:

If a witness proves a case against the party calling him, the latter may show the truth by other witnesses. But it is undoubtedly true, that if a party calls a witness to prove a fact, he cannot, when he finds the witness proves the contrary, give general evidence to show that the witness was not to be believed on his oath, but he may show by other evidence that he is mistaken as to the fact which he is called to prove.

287. I have mentioned one part of Mr Nicholson’s evidence where it conflicted with that of Mr Shields, and I reached a view about that conflict. The other areas of conflict do not need to be dealt with. However, in accordance with the authorities to which I have referred, I reject the defendant’s submission that Mr Nicholson should be seen not to be a witness of truth. This particularly applies to Mr Nicholson’s affidavit of 7 March 2018 concerning why he has no documents to produce. Quite apart from the fact that I dealt with this matter in Kaji (No 2), the defendant cannot read this affidavit and then impugn the deponent’s credit to submit that I should reject the evidence contained in it.

288. The matters put forward by the defendant to suggest a conspiracy are entirely insufficient and inadequate to do so. Lawyers have ethical responsibilities not to plead or allege fraud and other criminality without a proper basis to do so. It is difficult to see in the present matter how those ethical responsibilities have been complied with. Any conclusion that there has been fraud or conspiracy here by the cross-defendants is only attainable by speculation and a predisposition to believe it. I certainly accept that the St George loan was a sham. The person who had the most to gain by all that occurred was Mr Lippits. The history of his dealings with the defendant confirms that.

289. The defendant’s evidence about why he had not joined Mr Lippits to the proceedings or sued him separately was entirely unconvincing. He knew as little of Mr Nicholson’s and Mr Shields’ wherewithal as he did about Mr Lippits. Nevertheless, the defendant, having used Mr Lippits’ assistance to set aside the judgment for possession, then chose not only not to call him to give evidence but chose not to join him to the proceedings to claim against him.

290. From the point of view of causation, any loss suffered by the defendant was entirely brought about by Mr Lippits, and the defendant himself who was prepared to do anything to borrow money to pay the ATO to avoid losing his house.

291. The claims in fraud and based on a conspiracy fail.

The open offer

292. It is necessary to say something about an open offer made by the defendant on 16 April 2019, being the second day of the hearing. The offer, contained in a letter of that date, offered to repay the principal sum and interest at the rate of 12% up to 1 March 2015. It required the plaintiffs to pay the defendant’s costs on a party/party basis; alternatively, if costs were not agreed to be paid, the solicitors would obtain instructions that costs be determined by the Court on the basis of the settlement/outcome.

293. The basis for the 12% rate was said to be evidence of Mr Valentino that such a rate was reasonable. Although that matter appeared in Mr Valentino’s first report, I subsequently rejected that evidence as being no more than an assertion and not based on expertise. The date of 1 March 2015 was said to be the date the defendant sought unsuccessfully to discharge the loan and redeem the mortgage.

292. The defendant submitted that, quite apart from the open offer, interest should not run beyond 1 March 2015 because of the failure of the plaintiffs’ solicitors to provide a payout figure. The defendant submitted that it was the failure to provide that figure which prevented the sale of the property to Mr Lippits. The defendant pointed to the approval of a loan to Mr Lippits from ANZ Bank.

293. The evidence disclosed that a letter was sent on 17 February 2015 from the defendant’s solicitors to the plaintiffs’ solicitors advising that Mr Lippits was going to purchase the defendant’s house. The letter asked for various documents as well as:

The precise amount required to discharge your client’s mortgage in full including all legal costs, fees and charges properly claimable.

296. On 20 February 2015 the plaintiffs’ solicitor replied giving two indicative figures based on the higher and lower rates of interest. The indicative figures did not include legal and other expenses. The letter noted that an auction was scheduled to take place on 7 March 2015. That letter was answered by a further letter from the defendant’s solicitors on the same day, although nothing further was said in relation to the payout figures.

297. On 24 February 2015 the defendant’s solicitors again wrote to the plaintiffs’ solicitors saying that they had obtained a copy of the mortgage and had formed the view that it was unconscionable and predatory. They said they would file a notice of appearance in the Supreme Court proceedings and would seek an urgent stay of orders that had been made. They also said they would seek to set aside the mortgage.

298. That led to the ex parte application on 6 March 2015.

299. There was in evidence a loan approval from ANZ Bank to Mr Lippits dated 11 February 2015 in respect of an amount of $304,000 with security to be the defendant’s property that Mr Lippits was purchasing. However, the evidence does not support a submission that the purchase by Mr Lippits was unable to proceed by reason of the failure of the plaintiffs’ solicitors to provide a payout figure. First, there was no evidence from Mr Lippits that he intended to go ahead and purchase the property, and in the light of the evidence about Mr Lippits generally, such an intention cannot be inferred. He had promised much but delivered little.

300. Secondly, and more significantly, although indicative figures were provided by the plaintiffs’ solicitors, the defendant’s solicitors never sought to line up a settlement date so that precise figures could be obtained. Rather, they took the view, having obtained a copy of the mortgage, that it was unconscionable and should be set aside. It is clear that that resulted in a complete change of direction with a view to avoiding the need to sell the property to Mr Lippits.

301. Thereafter the defendant pursued the cross-claim, although taking a considerable time to do so. I have held that the loan agreement should not be set aside or varied. In those circumstances, there is no justification for limiting the payment of interest to 1 March 2015 or any other date.

302. It is not clear, in any event, what is said to flow from the making of the open offer. I do not consider either of its terms touching the payment of interest to be reasonable. My present view is that the making of the offer has no effect on the way costs will be directed to be paid, but I agreed that the parties could make submissions on costs after the substantive judgment was delivered.

Conclusion

303. In my opinion the plaintiffs establish their right to possession of the land and to judgment for the amount owing under the loan agreement and mortgage. In relation to the rate of interest, the claim should be confined to the lower rate of interest. The plaintiffs sued in the District Court and elected to claim only the lower rate of interest.

304. Further, in an email from Mr Shields to Mr Lippits of 3 March 2015 Mr Shields said that the plaintiffs had calculated interest on both the higher and lower rate. The email went on to say that the plaintiffs would accept the lower rate if the matter was settled without the intervention of the sheriff. In his evidence Mr Shields said that he was mistaken in the email. The plaintiffs only ever wanted the lower rate.

305. I do not consider that the plaintiffs should be confined to interest at court rates after the date of entry of the District Court judgment. Because it was set aside for irregularity, there never was a proper judgment. The defendant sought and obtained an order setting aside the judgment. Contractual interest, therefore, continues to run. Despite the passage of time, I can see no basis for the plaintiffs now to revert to the higher rate.

306. The plaintiffs must bring in short minutes to give effect to this judgment. Such short minutes will identify the amount owing to the date of judgment on the basis of the lower rate of interest. The short minutes will also provide for judgment for possession of the land and the dismissal of the cross-claim. It may include a grant of leave to issue a writ of possession. I will hear the parties on costs.

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Decision last updated: 17 December 2019