Mete v Fiasco

[2013] VSC 460

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No 06562 of 2010

BRUNO METE & ORS	Plaintiffs
v
RITA FIASCO & ORS	Defendants

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JUDGE:	HOLLINGWORTH  J
WHERE HELD:	Melbourne
DATE OF HEARING:	25, 27-28 September, 1-3 and 26 October 2012
DATE OF JUDGMENT:	6 September 2013
CASE MAY BE CITED AS:	Mete v Fiasco
MEDIUM NEUTRAL CITATION:	[2013] VSC 460

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UNCONSCIONABLE CONDUCT – Whether transfer should be set aside because of misrepresentations or unconscionable conduct by transferee – Whether later mortgage should be set aside – Whether person not a party to the mortgage has standing to seek to have the mortgage set aside

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr J Ribbands Mr L Wirth	T F Grundy
For the Third Defendant	Mr C G Juebner	Madgwicks

HER HONOUR:

1. For many years, the plaintiffs were involved in a family business, growing grapes near the New South Wales – Victoria border, and selling them in Melbourne.  The first plaintiff, Bruno Mete, is the father of the second and third plaintiffs, Francesco (or Frank) and Fiore Mete.

1. In early 2006, the first defendant, Rita Fiasco, was introduced to the Mete family.  The plaintiffs pleaded that between 2006 and early 2010, Ms Fiasco swindled money or property worth around $2 million from them.  Specifically, they pleaded that they made payments to her in reliance on various representations by her, including representations to the effect that she could remove curses from the Mete family and their properties, and that she could protect Bruno Mete from a mafia “hit man” who had been hired to kill him.  They claimed damages from her, on the basis of alleged misleading and deceptive conduct, and unconscionable conduct.

1. In her defence and counterclaim, Ms Fiasco denied the various claims against her.  She also alleged that, far from taking money from the plaintiffs, she had in fact lent them more than $770,000, which they had failed to repay. 

1. Ms Fiasco died from cancer in early 2011, some months after the proceeding was commenced.  No executor or administrator had been appointed to her estate at the time of trial.  The plaintiffs never sought to have a personal representative appointed, or to substitute any other person with an interest in her estate as the defendant.  Accordingly, the plaintiffs’ claims against Ms Fiasco, and her counterclaim against them, did not form part of the trial before me.

1. Until 15 February 2010, Bruno Mete and his late wife, Ida Mete, were the sole registered proprietors of an unencumbered piece of land known as Lot 3, Spittle Road, Euston, New South Wales (“the Spittle Road property”).   Although Ida Mete had died in September 2008, by early 2010 no steps had been taken to remove her from the title to the Spittle Road property.  Since its acquisition in the early 1960s,  the Spittle Road property had been used in the family business.  

1. At all times relevant to this proceeding, Bruno was living with his daughter, Natalina Ferante (also referred to in some of the evidence as Talina or Italia), at a property in the Melbourne suburb of Fawkner, not at the Spittle Road property.

1. Frank and Fiore Mete also owned land adjoining or close to the Spittle Road property, but their properties were subject to mortgages granted in favour of Westpac Banking Corporation.  The brothers had been in default under their mortgages since late 2008, and had failed to comply with numerous notices of demand.  Under a deed of settlement dated 20 August 2009, Frank and Fiore agreed to sell the properties by the end of October 2009, failing which Westpac would be entitled to take possession of them. 

1. On four occasions in late 2009, Frank and Fiore Mete met with Michael Landy, seeking assistance to resist Westpac taking possession of their properties.  Mr Landy operated businesses through two companies: he ran a financial problem-solving business, through a company called Eagle Financial Solutions Pty Ltd; and he occasionally lent money through the third defendant, Morlend Finance Corporation (Vic) Pty Ltd. 

1. Bruno only attended one of the meetings with Mr Landy, being a meeting held in October 2009.  This meeting is a critical one for Bruno’s case against Morlend.

1. Mr Landy introduced Fiore and Frank to a solicitor, Mark Harris of Impex Lawyers & Advisers Pty Ltd.  The brothers subsequently engaged Mr Harris to assist them in their negotiations with Westpac.  Impex was joined as the fourth defendant, when Morlend sought apportionment against a concurrent wrongdoer under Part IVAA of the Wrongs Act 1958 (Vic) and Part VIA of the Trade Practices Act 1974 (Cth) (“TPA”).

1. In or around early 2010, Bruno executed a transfer of the Spittle Road property to the second defendant, Temali Pty Ltd, a company owned and controlled by Ms Fiasco.  The consideration for the transfer was stated to be $450,000.

1. Bruno executed the transfer after he had been to see an Italian-speaking solicitor, Luciano Bini, regarding the transfer of the Spittle Road property.  Frank and Fiore’s solicitor, Mr Harris, had arranged for Bruno to see Mr Bini.  Mr Bini was joined as the fifth defendant, when Morlend sought apportionment against him.

1. By a mortgage dated 15 February 2010, Temali mortgaged the Spittle Road property to Morlend, as security for a loan of $123,000.  Temali subsequently defaulted in its obligations under the Morlend loan agreement.  In October 2010 Morlend obtained judgment for possession of the Spittle Road property in the Supreme Court of New South Wales. 

1. On the first day of the trial, after hearing the plaintiffs’ opening address, Morlend discontinued its apportionment claims against Mr Harris and Mr Bini.

1. At the start of the trial, Temali had been deregistered.  Until I raised the matter with them, the plaintiffs’ lawyers had apparently not given any thought to how they could proceed against Temali in those circumstances.  On the third day of the trial, the plaintiffs obtained orders from an associate judge, reinstating Temali, and appointing Anthony Cant and Simon Nelson as joint and several liquidators of the company. 

1. On the basis that the plaintiffs sought to set aside the transfer and the mortgage on the basis of unconscionability, the liquidators consented to the granting of leave to proceed against Temali, and chose to take no part in the proceeding. On 1 October 2012, I granted the plaintiffs leave to proceed against the company in liquidation, pursuant to s 471B of the Corporations Act2001 (Cth).

1. Although the plaintiffs started the trial with multiple causes of action, by the end of the trial, most of them had been abandoned. 

1. What was left of the plaintiffs’ claims by the end of the trial was as follows.  Bruno seeks to recover possession of the Spittle Road property.  In order to do so, he would need to set aside both the mortgage between Temali and Morlend, and the transfer from him to Temali.  The precise bases on which Bruno seeks such relief will be considered shortly. 

1. For the reasons which follow, the case against Temali and Morlend must fail.

The pleaded claims

1. Since issuing this proceeding in December 2010, the plaintiffs have made numerous attempts to formulate a claim against Morlend.[1]  Their pleadings have been confusing and poorly drafted throughout.  

   [1]The attempts to plead a case against Morlend are contained in the various proposed or filed statements of claim dated 6 December 2010, 2 February 2011, 26 August 2011, 21 September 2011, 27 October 2011 and 28 November 2011, as well as several different drafts which were circulated during the trial itself.

1. The various versions of the statement of claim have also contained inconsistent allegations of fact, without explaining how the allegations sit together.  For example, within the same pleading, the plaintiffs have pleaded that Bruno transferred, or agreed to transfer, the Spittle Road property to Temali:

(a)       Induced by some representations by Ms Fiasco about the need to pay off mafia “hit men”; and

(b)      Induced by some completely different representations by Morlend that it was in the plaintiffs’ financial best interests to do so.

1. Those two allegations are not pleaded as alternatives, and it is not clear how they could both be true.  At the end of the day, nothing much turns on that, as Bruno did not give evidence in support of either allegation.  But it is illustrative of the confusion and lack of precision surrounding the plaintiffs’ case.

1. There have also been significant differences in the various pleadings as to the nature and extent of their dealings with Morlend, and the alleged misrepresentations and unconscionable conduct.  Some of the important differences will be considered later in these reasons.

1. Before the first witness was called, counsel for Morlend rightly pointed out that the plaintiffs’ case, as opened and as set out in their witness outlines, was significantly different to their then current pleading. 

1. On the second day of the trial, I granted the plaintiffs leave to file a third further amended statement of claim, which was said to reflect the case that they now wished to run (“the final claim”).[2]  I made it clear at that time, and throughout the trial, that the plaintiffs would be held to their pleaded case, and could not simply change their case depending on “how the evidence unfolds” (as the plaintiffs’ counsel had said he wanted to be able to do).

   [2]The final claim is the version which was filed on 1 October 2012.

1. Even though the final claim was drafted after all witness outlines had been exchanged, the evidence at trial fell a long way short of establishing the case pleaded in the final claim.  Indeed, in some respects, the evidence led by the plaintiffs directly contradicted the case pleaded in the final claim.

1. Although the final claim appeared to plead at least five discrete causes of action against Morlend, only the following two appeared to be being pursued during the trial:

(a) A claim that Morlend provided advice and/or made representations as to how the plaintiffs’ “financial situation was best dealt with”, which was misleading or deceptive and in breach of s 52 of the TPA and/or s 9 of the Fair Trading Act 1999 (Vic) (“FTA”); and

(b) A claim that Morlend engaged in unconscionable conduct in providing the advice and/or taking a mortgage over the Spittle Road property, in breach of the common law and/or s 51AC of the TPA and/or s 8A of the FTA.

1. By the time of closing addresses:

(a)       The only cause of action being pursued against Morlend was the unconscionability claim by Bruno;

(b)      The only cause of action being pursued against Temali was a claim that it had engaged in misleading and deceptive conduct, or unconscionable conduct, when Ms Fiasco made certain representations which induced Bruno to transfer the Spittle Road property to Temali;

(c)       Frank and Fiore had abandoned any claims they had made against Morlend or Temali.

1. Notwithstanding repeated warnings throughout the trial that the plaintiffs would be held to their pleadings, in their closing submissions their counsel attempted to put their case in a number of different ways, some of which went far beyond the matters pleaded in the final claim.  Given that the trial had been run, at least by Morlend, on the basis of the pleaded case, it would have been unjust to allow the plaintiffs to recast their case in that manner.  I ruled that they could not seek to recast their case yet again, and would be held to the pleaded case.

General observations about the witnesses

1. The following witnesses were called by the plaintiffs: Bruno; Fiore; Frank and his wife, Donna Mete; and Natalina, the only sister of Frank and Fiore.   

1. Although she was well, and able to give evidence, Fiore’s wife, Mary (or Maria) Mete, was not called as a witness, even though she was present at some of the relevant meetings with Mr Landy.  And even though the plaintiffs had served a subpoena on Mr Harris, the solicitor who acted for Frank and Fiore in their negotiations with Westpac, and who was present at most of the key meetings, they chose not to call him either.  Nor did the plaintiffs call Mr Bini, the solicitor who had been acting for Bruno in relation to the transfer.  However, Morlend did not invite me to draw any Jones v Dunkel[3] inference in respect of any of those witnesses, and I have not done so.

   [3](1959) 101 CLR 298.

1. None of the plaintiffs’ witnesses kept notes of their dealings with Mr Landy, Ms Fiasco or Mr Harris, so they were all relying on their memories of meetings and events which took place around 3 years before the trial.  There were substantial gaps and inconsistencies in all of their memories.

1. I accept that, in comparison with Mr Landy, the plaintiffs themselves were unsophisticated and relatively uneducated.  Neither Frank nor Fiore completed high school.  Although Fiore kept some of the records for the business, I accept that he and Frank generally both relied on their wives to read documents to them.  Bruno, Frank and Fiore had all spent their working lives in the family business.  Donna and Natalina appeared to be more articulate and better educated than Bruno, Frank and Fiore, although no evidence was led as to their educational or employment backgrounds.  Both women were able to read English without apparent difficulty. 

1. I disagree with the assertion by the plaintiffs’ counsel that the plaintiffs’ witnesses were all in awe of the courtroom processes, demonstrated a significant degree of intimidation, and were sincerely trying to tell the truth. 

1. All of the plaintiffs’ witnesses said that they had deliberately lied to Mr Landy – in some cases, on multiple occasions over a period of many months – in order to try to get him to assist Frank and Fiore in relation to their problems with Westpac.  The content of their alleged lies to Mr Landy will be considered later in these reasons.  They all blamed Ms Fiasco for “making” them tell those lies, but the fact remained that they have all conceded a willingness in the past to say what they perceived to be necessary to advance the family’s interests.  Some of them clearly continued to take that approach with the evidence they gave in court.

1. As well as lying to Mr Landy, Fiore said that he had lied about important matters to his nephews and his father-in-law, in order to persuade them to lend him money.  Some of the lies which Fiore said he told those family members are the very same as what he told Mr Landy, namely that Bruno was a gambler, who owed gambling debts and was being pursued by the mafia. 

1. Fiore also admitted having lied to Westpac for financial gain.

1. Fiore also acknowledged knowingly filing false tax returns, which significantly understated the income from the family business.  He gave evidence that, in the years in which he was giving money to Ms Fiasco, on average the grape farming business was turning over between $300,000-$400,000 per annum.  Frank agreed that sales figures were of that order.  Fiore conceded that the 2008 financial statements, which only showed total sales of $144,449 for the 2008 financial year, did not truly reflect the income in that year.  He admitted that other tax returns for the business were also false.  

1. When asked why the Australian Taxation Office had been given false information in the 2008 tax return, Fiore initially replied “It was all cash money and Fiasco was taking it before we could put it in the bank”,[4] apparently implying that he believed there was no need to declare money that did not find its way into the partnership’s bank account.  Fiore eventually agreed that he was well aware that the tax returns were false when he signed them, but persisted in saying that Ms Fiasco would not “let him” sign true tax returns.[5] 

   [4]T411.

   [5]T413.

1. Some of Fiore and Natalina’s evidence appeared to be truthful.  But, I have no doubt that Fiore and Natalina were generally indifferent to the truth of the evidence they gave at trial.  The transcript does not adequately record the unusual way in which they both gave evidence.  They both had a tendency to make confident, self-serving, non-responsive speeches, rather than simply answering an often straightforward question.  On other occasions, when pressed to answer questions which presented possible difficulties for their side, they both had a tendency to drop their voice and mutter, at times almost inaudibly.    

1. Natalina gave evidence that went far beyond the matters that had been addressed in her outline of evidence.  Even allowing for the fact that it was only an outline, not a witness statement, it only mentioned her having been present at one relevant meeting with Mr Landy.  And the plaintiffs’ pleadings had also only alleged that she had been present at one such meeting.  Yet, in the witness box, she said she had been at three or four meetings, and purported to remember things said at the meetings which were apparently helpful to her family.  She also gave some other evidence which was inconsistent with her outline.  She said that she could now clearly remember being at three or four meetings, and was having “a flashback” about some of the matters discussed at them.  Quite implausibly, she said she could now remember these things because she was “more relaxed” in cross-examination in court, than she had been in a meeting with her family’s barrister a couple of Sundays ago, when her outline was prepared. 

1. Natalina gave the distinct impression that she was simply making up much of her evidence as she went along.

1. Notwithstanding Fiore’s limited formal education, I have no doubt that he and Natalina both clearly understood the questions that were being asked of them.  I would have trouble accepting much of the evidence of Fiore and Natalina, without corroboration from some other source. 

1. Bruno was the only witness for whom English was not their first language.  Bruno’s counsel said that Bruno had a reasonable comprehension of spoken English; and it was clear that he generally understood the questions asked in court, as he would frequently nod or shake his head, or start to answer in English, before the interpreter had interpreted the question. 

1. However, his counsel said Bruno would give evidence through an interpreter, to make sure he could answer questions clearly and comprehensively.  Unfortunately, even with the assistance of an interpreter, Bruno’s evidence could not be described as clear or comprehensive.  At times, his evidence was self-contradictory.  He was also very unreliable about dates and the sequence of events, even for major events such as the year in which his wife had died.  He demonstrated a clear memory of some matters, and said he had little or no memory of other matters.  He agreed he had a poor memory of events that happened some years ago.  He frequently said that he could not remember something which most, or all, of the other witnesses agree happened. 

1. There were some occasions when Bruno appeared to be tailoring his evidence to suit the plaintiffs’ case.  And, when the cross-examiner put to him propositions that were not helpful to the plaintiffs’ case, instead of simply answering “yes” or “no”, he would often answer along the lines of “I had not understood that”, in a way which seemed to indicate that he was well aware that it was important for his case to say that he had not understood something at the relevant time.  His apparent evasiveness when asked about his meetings with his own solicitor, Mr Bini, will be discussed later in these reasons.

1. Frank appeared to be far less sophisticated than his brother and sister, and clearly left most business-related matters to Fiore.  Frank said: with a few exceptions, he could not recall what was discussed at the various meetings he attended with Mr Landy, or how many meetings he attended; he did not pay much attention at the meetings because he was upset; he “blanked off” at the meetings; he listened but his mind went elsewhere; and he has a problem with his memory.  Frank openly conceded that his evidence in the case was not very accurate, because he did not recall much.

1. Donna was a more credible witness than the other members of her family.  If she could not remember something, she would say so.  However, her recollection of events was poor.  Donna only gave evidence of being present at two of the meetings with Mr Landy.  She conceded that she was so distressed to discover at the start of the October meeting that she might lose her home to Westpac (her husband, Frank, having failed to tell her of their true financial position), that she did not pay much attention to what was said at that critical meeting. 

1. In fact, at the end of the day, even if I accepted as true every word of the evidence of the plaintiffs’ witnesses, Bruno would still have failed to prove his case against Temali or Morlend.  The plaintiffs’ evidence, taken at its highest, still fell a long way  short of the pleaded case.  Accordingly, with a few exceptions, I do not propose to spend time discussing which parts of their evidence I would accept, which parts I would reject, or why I would do so.

1. Michael Landy was the only witness called by Morlend.  Mr Landy has been involved in the finance industry since 1972.  Through Morlend, he had engaged in lending money; although, since the late 1980s, Morlend had only engaged in isolated loan transactions.  Through Eagle, he had engaged in what he described as the “financial problem solving” business, since the late 1980s or early 1990s.  Mr Landy had no relevant tertiary qualifications.  However, notwithstanding his lack of formal qualifications, Mr Landy was obviously far more experienced in business and financial matters than the Mete family.

1. Mr Landy had given evidence in other legal proceedings, so had some familiarity with how the examination of witnesses occurred.

1. Mr Landy was the only witness who sat in court throughout the trial.  In assessing his evidence, I have borne in mind that there may be some benefit to a witness in having heard the evidence of other witnesses.  That said, much of the evidence given by the plaintiffs’ witnesses was so confusing or inconsistent, that the benefit of having sat through it may have been substantially less than in many other cases. 

1. Mr Landy’s evidence was generally credible and consistent with such contemporaneous documents as exist. 

1. In fact, in paragraph 8 of their closing written submissions, the plaintiffs’ counsel accepted that Mr Landy’s evidence “broadly encapsulates the sequence of events”.  There were only a few topics in respect of which the plaintiffs’ counsel seemed to be challenging Mr Landy’s account; they will be considered later in these reasons.

What happened before the Mete family met Mr Landy?

1. Most of the Mete family painted a colourful story, in which Ms Fiasco was a villain who extracted hundreds of thousands of dollars from them, by telling them that there were curses on them or their properties, which she could arrange to have removed if they met her insatiable demands for more money.   

1. There is no documentary evidence which independently corroborates their oral evidence. 

1. The plaintiffs did tender a note book, which Natalina said recorded payments made to Ms Fiasco, pursuant to her demands.  Natalina said the note book was mostly written in her hand, but also in Ms Fiasco’s and Bruno’s hands.  Bruno was not asked about the book.  The note book contained handwritten notes of various peoples’ names (mostly Mete family members) and amounts of money.  For the most part, the note book itself does not indicate whether a named person is a payer or payee.  Nor does the name “Rita” or “Fiasco” appear anywhere in the almost 80 pages of the book.  The note book, on its face, does not establish that any payments were made to Ms Fiasco.

1. Even if it is accepted that the note book does record payments to Ms Fiasco, as Natalina asserted, the book itself does not indicate why any payments listed in it were made.  It may be that the book records amounts paid by the Mete family to Ms Fiasco pursuant to her demands (as the Metes asserted), or in repayment of loans she had made to them (as Ms Fiasco asserted). 

1. A photocopy of a cheque book for the period from February 2003 to October 2005 had been discovered by the plaintiffs and was tendered by Morlend.  In it, somebody had handwritten the name “Rita” next to some amounts, or next to the words “cash cheque”.  Given that the Metes allege that they first met Ms Fiasco in early 2006, after the period covered by the cheque book, the book must be referring to some other person called “Rita” (perhaps an employee in the family business).  The cheque book, on its face, also does not establish that any payments were made to Ms Fiasco.  

1. For the reasons given earlier, I would have trouble accepting much of what Natalina said, including what she said about the note book, without corroboration.  Ms Fiasco was not here to give her side of the story.  Prior to her death, Ms Fiasco had sworn a statutory declaration which supported her defence and counterclaim; but she was obviously not available to be cross-examined in relation to her account.  And it was not any part of Morlend’s case to test the plaintiffs’ evidence about their relationship with Ms Fiasco.

1. At the end of the day, it is not necessary for me to make any findings as to what, if any, payments the Mete family had made to Ms Fiasco over the years, or whether the family members were, as they allege, effectively controlled by Ms Fiasco.  That is because there was no suggestion that Mr Landy was, or ought to have been, aware of such matters.  On the contrary, among the many things that the Mete family repeatedly told Mr Landy, at all relevant times, was that Ms Fiasco was a family friend who was helping them, and who had lent them substantial amounts of money.  What they told Mr Landy in this regard was entirely consistent with the position which Ms Fiasco took in her pleadings and her statutory declaration.  The Metes only told Mr Landy a different story, after they had a falling out with Ms Fiasco, around late February or early March 2010 (after the execution of the transfer and the mortgage).

1. For the same reason, it is not necessary for me to make any findings as to why Frank and Fiore had defaulted under their Westpac facilities; for example, whether they had done so because they had borrowed to meet Ms Fiasco’s demands (as they asserted at trial), or because Bruno was a gambler, who had taken money out of the family business (as they repeatedly told Mr Landy, prior to their falling out with Ms Fiasco). 

1. It is sufficient to note that Fiore and Frank signed a settlement deed with Westpac, dated 20 August 2009.  They did so after receiving independent legal advice about it from their then solicitor, Brian O’Haire. 

1. The deed records that they owed Westpac more than $620,000 as at 21 July 2009, which was secured by mortgages over their respective farms and water rights.  Westpac agreed to defer the commencement of enforcement action, provided that the brothers sold their properties by the end of October 2009.  The brothers also agreed to repay the debt by the end of December 2009.  In the event of default, the brothers consented to Westpac entering judgment against them for the outstanding amount and possession of the properties.

Dealings between the Mete family and Mr Landy

1. As mentioned earlier, by the end of the trial, the plaintiffs’ counsel accepted that Mr Landy’s evidence “broadly encapsulated” the sequence of events.  Accordingly, the following history of the dealings between the Mete family, and Mr Landy and his companies, is taken largely from Mr Landy’s own evidence.  If one of the plaintiffs’ witnesses gave relevantly different evidence about a meeting or event, that will be specifically mentioned.  Similarly, if evidence comes primarily from a document, as opposed to oral evidence, that will be indicated. 

The August meeting

1. With Ms Fiasco’s assistance, Frank and Fiore had been dealing with a finance broker, Carlo Di Giovanni, in relation to their problems with Westpac.   According to Fiore, Carlo had lent them money in the past, and was a possible source of future finance.

1. Mr Di Giovanni arranged to introduce the Metes to Mr Landy.  There is no evidence that Mr Landy had ever dealt with Mr Di Giovanni before this time.

1. On 20 August 2009, there was an initial meeting at Mr Landy’s offices, which was attended by Mr Landy, Fiore and Frank, Mr Di Giovanni and Ms Fiasco.  When the others arrived at his office, Mr Landy gave each of them his Eagle business card. 

1. Most of the talking in the August meeting was done by Fiore, Ms Fiasco and Mr Di Giovanni.  Frank did not say very much, other than to answer questions specifically put to him, including acknowledging that the things said by the others were correct.

1. Mr Landy was told that the Mete brothers were grape farmers, who had defaulted on a loan with Westpac.  He was told that the main reason for the problems with Westpac was that money had gone out of their business, because their father, Bruno, had gambled away more than $1 million.  He was also told that Bruno was being threatened by the mafia to pay money. 

1. As for Ms Fiasco’s role, Mr Landy was told that she was a very close friend of the Mete family, who was giving financial and moral support to the Metes, to try to help solve the problem for Fiore and Frank.  No details of the amount of financial support were given at this initial meeting. 

1. Fiore and Frank agreed in evidence that they either confirmed, or did not contradict, all that Mr Landy was told about Bruno and Ms Fiasco.  They wanted Mr Landy to believe those matters.

1. In the August meeting, Mr Landy started mapping out what he described as a “helicopter view” of the financial situation, and prepared a diagram in his note book.  Mr Landy’s diagram evolved over the course of subsequent meetings, as further information was provided to him.

1. Mr Landy was told that the Mete family had a number of properties, being Fiore and Frank’s farming properties, an investment property in Fawkner which was owned by Frank and Fiore, and the Spittle Road property which was owned by Bruno.  Mr Landy was provided with rough valuations and the amount of the debts owed for the various properties.  As far as the Spittle Road property was concerned, he was told the value was about $500,000, and there was no mortgage.  He was told the Fawkner property was worth about $400,000, and had a mortgage of about $280,000. 

1. Mr Landy also said he wanted to know about all the debtors and creditors of the business.

1. Mr Landy was told that the Metes had dealt with rural advisers and an accountant, and were dealing with Stuart Bear at Westpac. 

1. Mr Landy said he needed to understand what the true financial position was, so he could determine what might be able to be achieved with Westpac.  He told them they needed to be truthful with the financial information, to reveal it “warts and all”, so that there would be no surprises at a later point in time when he was negotiating with the bank.  Late surprises might make negotiating with the bank very difficult. 

1. Mr Landy said he was prepared to have a look, to see if he could help them.  He told them he had success in dealing in this area, as long as he was aware of all matters before he started to negotiate.

1. Mr Landy told Frank and Fiore that they needed legal advice and they agreed.  He asked them whether they had a lawyer.  They said they had a solicitor in the country, but were unhappy with him and wanted to deal with someone in Melbourne.  Mr Landy offered to recommend a solicitor to them, to which Frank and Fiore agreed. 

1. The August meeting was left on the basis that Mr Landy would contact a solicitor and then call another meeting.  Mr Landy also asked for certain documents to be provided in the meantime.

The September meeting

1. On or about 18 September 2009, there was a meeting which was attended by Mr Landy, Mr Harris, Frank, Fiore, Ms Fiasco and Mr Di Giovanni.  Mr Landy had occasionally referred work to Mr Harris, but otherwise had no business association with him. 

1. Mr Landy introduced Mr Harris as the solicitor who might be able to assist Frank and Fiore in dealing with Westpac.

1. Mr Landy asked Fiore a number of questions, in particular, to whom money was owed.  Mr Landy found it difficult to get clear instructions about what monies were owed; those difficulties arose because monies were owed to third parties, as well as Westpac.  Mr Landy was told that Ms Fiasco was owed $430,000.  Mr Landy was told that Ms Fiasco had made the $430,000 loan to assist to pay off Bruno’s gambling debts.  Mr Landy was also told that the Metes had borrowed $260,000 from a Tony Ferante, and $100,000 from a Michael Moda, and owed money for fruit boxes and $28,000 to Visy.  

1. Mr Landy was told that Bruno was receiving the sales proceeds of the grape farming business at the market, and was controlling the cash.  Mr Landy said that was a problem, which might have to be looked at as part of any discussion with Westpac.

1. In the September meeting, there was discussion about the payment of professional fees.  According to Mr Landy, Mr Harris asked how he would get paid if he took the matter on.  According to Fiore, Mr Landy said his fees would be about $20,000 to $24,000, and Mr Harris’s fees would take the total up to about $50,000.   Mr Landy’s evidence was silent as to whether the quantum of fees was mentioned at this meeting, but nothing seems to turn on whether quantum was mentioned at this meeting or the next one.

1. Mr Landy suggested that, in order to pay the professional fees, the Metes should think about selling some assets.  He specifically suggested selling the brothers’ Fawkner investment property.  When Mr Landy raised the issue of selling Fawkner, Fiore was very much against it.  

1. Mr Harris suggested that maybe Morlend could lend money.  Mr Landy said he would only consider making a loan if he had appropriate security.  Mr Landy said he did not want to lend, and would rather see the family sell Fawkner.

1. The September meeting concluded on the basis that Mr Harris was going to get copies of documents he needed, and would then assess the legal position.

The October meeting

1. The next meeting was held on or about 8 October 2009.  It was attended by Mr Landy, Mr Harris, Mr Di Giovanni, Fiore and his wife Mary, Frank and his wife Donna, Natalina and Bruno.  Ms Fiasco attended for only the last part of the meeting. 

1. Mr Landy said he called the October meeting because he wanted to get an understanding of how the business’s funds were being dealt with by Bruno at the market, and what was happening with the cash. 

1. The October meeting began with a discussion about the Westpac settlement deed and the possibility that Westpac might sell Frank and Fiore’s properties.  Mr Harris explained the legal consequences of the deed, which required the sale of the properties by the end of October, or the bank could take possession.  Donna appeared shocked, and became upset at the prospect of losing her home to the bank, her husband having failed to tell her of their financial predicament.   Bruno also said that Mary was shocked, but other family members did not agree with him about that.

1. Mr Landy told those present at the meeting that even though the settlement deed had been signed, he needed to come up with a plausible explanation for Westpac about how the account could be paid.  In that regard, he needed to understand that the gambling spending had come to an end. 

1. Mr Landy asked Bruno whether he was a gambler, and whether the gambling debts had all been paid.  Bruno confirmed that was the case.  Each of Frank and Fiore also confirmed that Bruno was a gambler, who had gambled in excess of $1 million.  Mr Landy believed what he was told about these matters.

1. Fiore gave evidence that Donna said to Mr Landy that it was news to her that Bruno was a gambler.  That evidence is inconsistent with Donna’s own evidence; she said that although she was fuming that her family was saying those things, she fumed inwardly and chose to say nothing about it in the meeting.  No other witness supported Fiore’s account of Donna’s alleged statement.  It is also inconsistent with  evidence that, before the October meeting, the Mete family members had met with Ms Fiasco, who had worded them up about what they were going to tell Mr Landy.  For these reasons, I am not persuaded that the statement was made.

1. Contrary to the particulars to paragraph 22 of the final claim,[6] each of the plaintiffs’ witnesses agreed in their evidence that they themselves had gone along with the account of Bruno’s gambling and mafia problems, as well as the account of Ms Fiasco’s friendship and her lending of hundreds of thousands of dollars to the family.  They said they went along with it because Ms Fiasco had told them to, and because they wanted Mr Landy to believe their story so he would help them.  None of them gave evidence that they told Mr Landy anything different, until after the falling out with Ms Fiasco in late February or early March 2010.

   [6]The fourth paragraph of the particulars asserts that at the October meeting, each of Bruno, Fiore, Frank, Donna and Natalina told Mr Landy that it was untrue that Bruno was a gambler who had lost more than $1 million, was taking cash from the business, and was being pursued by the mafia.

1. Mr Harris said he was still prepared to act for Frank and Fiore, but was still wanting to know how he would get paid.  Mr Landy again “raised the question of Fawkner”, and Fiore was still very much against selling that.  Mr Harris suggested that maybe Mr Landy could lend some money.  The family seemed interested in borrowing, rather than selling Fawkner.  Mr Landy said he was not prepared to lend to the Metes, because of the history of gambling. 

1. Mr Landy said that during the October meeting, he was told that Ms Fiasco held the title to the Spittle Road property, because of the debt she had with the Mete family.     

1. Fiore said he had gone and got the title to the Spittle Road property from Westpac, before the Metes had even met Mr Landy.  He said he had given it to Ms Fiasco, because she asked him to.  Although Fiore was confused as to which one of the meetings it was that Bruno had attended, he agreed with the cross-examiner that at whichever meeting Bruno did attend, Ms Fiasco had said she was holding the title to the Spittle Road property because of loans she had made; he also said that loans of around $400,000 or $430,000 were mentioned to Mr Landy.

1. In his evidence, Bruno agreed that there was discussion at the meeting he attended about the fact that he owned the Spittle Road property.  However, initially, he was adamant that there was no discussion at the meeting about Ms Fiasco holding the title to the property.  His evidence in this regard was contrary to paragraph 22(d) of his own pleading, as well as contrary to the evidence of Mr Landy and Fiore.  Pressed further about whether there was a discussion about Ms Fiasco holding the title he responded “I do not remember this” and then “Well, I can’t say that I did not visualise it.”[7]  His initial answer also does not sit well with his various concessions about not really paying attention to what was being said at the meeting, and not being connected to it or interested in it.

   [7]T314.

1. Donna, Natalina and Frank could not remember anything being said at the October meeting about Ms Fiasco holding the title to Bruno’s property.  However, Natalina could recall Mr Landy being told that Ms Fiasco had made loans to the Mete family of between $400,000 and $450,000.  That said, those three witnesses all had very poor, or obviously inaccurate, recollections of most of what was said at the meeting.

1. I am satisfied that Mr Landy was told in the October meeting that Ms Fiasco held the title to the Spittle Road property, because of the debts owed to her by the Mete family.  And he had previously been informed that the amount owing to her was about $430,000, and the property was worth about $500,000.

1. In cross-examination, Mr Landy agreed that Mr Harris again raised the question of “how are we going to get paid?”  Mr Harris said “we’re going to have to borrow money from somewhere.”  Mr Landy agreed that one of the purposes of raising money would be to pay Mr Harris’s fees, and another would be to pay Eagle’s fees.  Mr Landy agreed that there was some discussion about the possible use of real estate as security to borrow money with a view to paying fees, although his preference was still that the Fawkner property be sold to pay the fees.

1. When Mr Harris suggested the possibility of raising money using Bruno’s property, Mr Landy replied that he did not want to lend money to Bruno.  Mr Landy denied the suggestion that he said something along the lines of “If we get Bruno off the title, I can deal with it.”[8]

   [8]T738.

1. Very importantly, Bruno himself agreed that Mr Landy never said to him that he should transfer his property to Temali.

1. Finally, it is common ground that nothing was said in this meeting about Bruno’s capacity to read or write.  Nor was the topic ever raised with Mr Landy at any other time. 

Frank and Fiore engage Mr Harris

1. In their opening address, the plaintiffs tendered a letter, dated 8 October 2009, from Mr Harris to Frank and Fiore.  The letter noted that Frank and Fiore were engaging him to negotiate with Westpac and, if that failed, to defend any claim by Westpac on the basis of unconscionable conduct due to their illiteracy.  

1. Under the heading of “fees and disbursement”, the letter stated:

We confirm that we have now clarified that Michael Landy will finance your legal fees through a loan secured against the property owned by your father, which will be transferred to a company owned by Rita Fiasco (we will attend to this) as payment for the outstanding debt you all say is owed by the Mete family (specifically your father) to her.

1. Later in the letter, under the heading “summary of instructions”, Ms Fiasco was referred to as “a family friend that had lent money (all cash)”.  Mr Harris said “we will arrange a transfer to her (a company we will set up for that purpose) and Michael Landy will lend against that property.”

1. Frank gave evidence that he thought Mr Harris was Mr Landy’s solicitor, and that nobody told him that Mr Harris was acting for the brothers.  But it is clear that he left all business matters to his brother, Fiore, and did not pay attention to peoples’ roles in the various transactions.  Fiore confirmed that he understood that Mr Harris was to act for him and Frank in negotiations with Westpac.

1. However, neither of the brothers was asked about the letter, or said that they had received it, or had it read to them, in or around early October.  I also do not know whether the letter came from the plaintiffs’ discovery, or Mr Harris’s firm’s discovery.

1. Mr Landy said that he did not know about the letter at the time, and did not agree with its contents.  

1. In so far as Mr Harris referred to instructions given “at our first meeting of 20 August”, the letter was clearly wrong, as there is no dispute that Mr Harris was not even retained until after the August meeting.  

1. Mr Landy did not agree with the suggestion in the letter that by the third meeting, it had been “clarified” that legal fees would be able to be paid because there would be a loan secured against Bruno’s property, which would be transferred to a company owned by Ms Fiasco.  Mr Landy answered “This may be Mark’s interpretation, but not mine.”[9]  

   [9]T743.

1. Mr Harris was not called as a witness, so I do not know what he would say about the letter or its contents.

1. None of the plaintiffs’ witnesses gave evidence that supported Mr Harris’s suggestion either.

Frank and Fiore engage Eagle

1. In October 2009, Eagle entered into a written consultancy agreement with Frank and Fiore.  The services to be provided under the agreement were various types of advice, specifically in relation to the Westpac problem.  The appointment was for a period of three months, commencing on 27 October 2009. 

1. Under the agreement, Eagle was to be paid a retainer of $24,500 plus GST, plus $385 per hour for any work which was outside the scope of the agreement.  To secure payment of those fees, Frank and Fiore charged their interest in various properties, including the properties mortgaged to Westpac, as well as the Fawkner property.

1. Mr Landy had dealings with specialist counsellors in agricultural debt management, with whom the Metes had previously dealt.  He worked on putting together a proposal for Westpac.

1. Mr Landy met with Westpac on about three occasions.  The purpose of the meetings was to ascertain whether the bank was prepared to negotiate a solution to the problem. 

1. When Mr Landy was initially asked in cross-examination whether he had made any settlement offers to Westpac on behalf of the brothers, he adamantly denied it.  Later, he was shown a short email from himself to Stuart Bear of Westpac, dated 10 November 2009, in which the brothers offered to settle the bank’s claim for $480,000.  Shown the email, he said “Well, I have to say to you I don’t remember this letter at all.”[10]  The cross-examiner did not challenge that assertion, or seek to explore the matter further.  I accept that Mr Landy had simply forgotten about the offer.  Neither Frank nor Fiore referred to any such offer having being made, and it has no apparent relevance to the disputed issues, so I will say nothing further about Mr Landy having initially forgotten about it.

   [10]T781.

1. In total, Mr Landy performed more than 40 hours’ work pursuant to Eagle’s consultancy with Frank and Fiore. 

1. It was put to Mr Landy in cross-examination that as at 27 October 2009 (the date of the consultancy agreement) he had arranged for the transfer and mortgage of the Spittle Road property in order to protect his own position in relation to fees.  Mr Landy rejected that suggestion.  He said that as at 27 October 2009, he had satisfied himself that his fees were secured over the brothers’ Fawkner property.  That evidence is entirely plausible, given that the consultancy agreement contains charging clauses over all of the brothers’ property, which would have ensured Eagle’s fees were secured against the Fawkner property.  The brothers’ equity in the Fawkner property was substantially in excess of the amount payable under the consultancy agreement.  Mr Landy was able to be satisfied that, even if the farming properties were taken by Westpac, he could have resort to the Fawkner property.

The November meeting

1. This meeting, which took place on or about 6 November 2009, was attended by Mr Harris, Fiore and Mary, and Frank and Donna.  Mr Landy said the purpose of the meeting was for Mr Harris to get detailed instructions.  Mr Landy only attended the November meeting for about the last 15 minutes.

1. In that meeting, Mr Landy was told that Ms Fiasco was going to manage the grape growing business.  Mr Landy thought that this was mentioned to him by Mr Harris, but could not be sure.  Mr Landy said that he did not advise that the grape growing business should be operated by Temali.  However, when it was suggested to him, Mr Landy thought this was a good thing, because it would prevent cash falling into the hands of Bruno, and would enable Mr Landy to tell Westpac that the cash drain problem had been solved.

1. There was some dispute among the plaintiffs’ witnesses as to who first suggested that Ms Fiasco would take over the management of the business.

1. Frank gave evidence that Ms Fiasco suggested in the meeting that she would take over the business, and Mr Landy said that was a good idea.  Frank said that Ms Fiasco had already discussed this proposal with the Mete family, prior to meeting with Mr Landy.

1. On the other hand, Fiore was keen to portray Mr Landy as the person behind this suggestion.  Fiore steadfastly refused to concede that anybody except Mr Landy had first raised the possibility of Ms Fiasco running the business.  Contrary to Frank’s evidence, Fiore disputed having any discussion with Ms Fiasco about this until after Mr Landy had suggested it.  Then he was cross-examined about an affidavit he had sworn the previous week, in support of the application to reinstate Temali.  In the affidavit, he had sworn that “As part of the fraud of Fiasco, she conned my family and me into giving her control of our business.”  Fiore confirmed the affidavit was true.  Pressed further on the question of how control of the business came to pass to Ms Fiasco, Fiore eventually said the suggestion that the business be run by Ms Fiasco came from both Mr Landy and Ms Fiasco.

1. Donna said that members of the Mete family told Mr Landy that Ms Fiasco was going to start to manage the business, and that Bruno could not be trusted with cash.  However, she could not specifically recall from where the suggestion first came. 

1. I prefer the evidence of Frank and Mr Landy, that it was not Mr Landy who came up with the suggestion that Ms Fiasco take over the management of the business.  They were generally more credible witnesses than Fiore.  And, given that Fiore had failed to mention the November meeting at all in his evidence-in-chief, and conceded in cross-examination that he did not have a good recollection of this particular meeting, his repeated insistence that Mr Landy came up with the suggestion smacked of advocacy rather than evidence. 

1. According to Mr Landy, Mr Harris again raised the subject of borrowing money, and everybody in the meeting agreed they needed to borrow.  Mr Landy was still of the view that he was not going to lend any money to the Mete family, and said so.  

1. Mr Landy said he gave no advice about transferring the Spittle Road property to Ms Fiasco through the creation of Temali.  

1. Fiore initially said that Mr Landy had said that the Spittle Road property had to be transferred to the company, but could not recall whether Bruno was present when this was said.  Later in his evidence, he conceded that at no time did Mr Landy say that Bruno’s property had to be transferred to a company, only that the family business should be.

1. Mr Landy told those present at the November meeting that they needed to sort out what they wanted to do, and that when they had worked it out they should tell him.

1. Paragraph 23 of the final claim alleges that Morlend advised the plaintiffs that “their financial position was best dealt with” by:

(a)       The preparation of a loan agreement between Bruno and Ms Fiasco so as to document the amounts already lent by Ms Fiasco to Frank and Fiore;

(b)      Bruno transferring the Spittle Road property to Ms Fiasco through the creation of Temali, which would be a company owned and operated by Ms Fiasco;

(c)       Temali would operate the plaintiffs’ grape growing business so that it would control the receipt of all income from the business;

(d)      Morlend advancing the sum of $123,000 to Temali secured by way of a first mortgage over the Spittle Road property; and

(e)       Morlend advancing those funds to Fiasco, as and when she required them, so that she could in turn pay the costs of defending the Westpac proceedings against Fiore and Frank.

1. This is “the advice” which is pleaded in paragraph 24 as having induced Bruno to transfer the Spittle Road property.  The particulars to paragraph 23 alleged that all of “the advice” was given during the October and November meetings, with the exception of the advice about Temali operating the grape growing business, which was said to have only been given in the October meeting.

1. The plaintiffs’ counsel put to Mr Landy that he had given each piece of “the advice”, and Mr Landy denied that.  As discussed earlier, his denial was not contradicted by evidence from any of the plaintiffs’ witnesses.

1. The plaintiffs’ counsel also took Mr Landy to parts of Morlend’s defence, particularly paragraph 21(k), which was in the following terms:

In or about November 2009, Fiore, Mary, Frank, Donna, Harris and Landy met at Landy’s office, at which time:

(i)        Fiore, Mary, Frank and Donna affirmed the accuracy of the matters previously advised to Landy … and further advised that Bruno would provide the Spittle Road property as security for any loan that Landy could procure and that Fiasco was agreeable to that occurring;

(ii)       Landy advised that:

(A)      Morlend could provide finance if it was sufficiently secured;

(B)      Morlend could lend against the Spittle Road property if it was first transferred to a new entity;

(C)      that the Mete family would need to take all necessary steps to transfer the Spittle Road property to such new entity.

1. The following exchange then took place between the plaintiffs’ counsel and Mr Landy:

It is true as a fact, isn’t it, those matters that are put there? --- Well I don’t totally agree with the way it is put, but essentially that Morlend could provide finance if it is sufficiently secured.  The question of the transfer of the property to a new entity is actually something that I don’t subscribe to.

You understand that this document arose as a result of meetings between you and your lawyers and the instructions you gave them, don’t you? --- I understand how this document came to bear.

No, listen to my question, Mr Landy? --- What is the date of this document?

Listen to my question.  You understand that this document came about as a result of instructions that you gave to your lawyers, don’t you? --- Yes.[11]

[11]T753.

1. The plaintiffs’ counsel then moved on to a completely different topic.  He did not explore any possible inconsistency between what was said in the defence and in Mr Landy’s evidence, or ask what Mr Landy meant about “the transfer of the property to a new entity not being something [he] subscribed to.“   The evidence in this regard was left in a rather ambiguous state.

1. Even if there was some basis for preferring what was said in the defence to Mr Landy’s actual evidence, what is pleaded in the defence falls a long way short of “the advice” pleaded by the plaintiffs. 

The transfer and mortgage transactions

1. It is clear that Bruno went to see an Italian-speaking solicitor, Luciano Bini, about the proposed transfer.  This occurred some time in November 2009.  Mr Bini seems to have been acting for Bruno until at least some time in December. 

1. By email dated 18 November 2009, Mr Harris informed Myles Watson (one of Mr Landy’s staff) that “Have got Italian speaking solicitor for Bruno Mete and told Rita.  She will get some times and we will arrange it.”  Mr Landy saw the email at the time.  

1. Bruno’s evidence about his contact with Mr Bini was quite unsatisfactory.  In evidence-in-chief, when being asked where he had signed various documents, he answered that Ms Fiasco had asked him to sign some documents at “The rooms of a solicitor, Luciano Bini.”[12]  Then, when first asked by the cross-examiner about whether he was given the transfer at the office of Mr Bini, the solicitor, he answered “Who is this person?”[13] 

   [12]T299.

   [13]T327.

1. After the weekend break in his evidence, Bruno initially recalled who Mr Bini was, before then asking again who he was.  Bruno later said he recalled attending a meeting with Mr Bini, which was also attended by Natalina and Ms Fiasco.  He could not remember when it occurred, although it was a very hot day.  He could not recall whether he met with Mr Bini before or after the meeting he attended with Mr Landy.  The following exchange then occurred with the cross-examiner:

Why did you go to see Mr Bini? --- (Direct) I don’t know.  Not sure. … (Through interpreter)  Who is this person?  Is he a solicitor?

You remember going to Mr Bini’s office, don’t you? --- Yes, to sign that paper.

Which paper did you sign at ---? Then I don’t want to.

Which paper did you sign at Mr Bini’s office? --- I didn’t sign it.[14]

[14]T365-6.

1. And then a short time later:

Which paper was signed in Mr Bini’s office? --- Who is this Mr Bini?

Mr Mete, a minute ago I asked you whether you met Luciano Bini and you said yes, you agreed you had met him.  Do you agree you met a Mr Bini, together with your daughter Natalina? --- Yes, he was in Coburg, but I didn’t want to sign the document.

Why do you keep asking who is Mr Bini?  You know who Mr Bini is? --- He is the person that I met in Coburg.  I have seen him, that’s it.

You know he is a solicitor, don’t you? --- Yeah, but I didn’t know at the time.   My daughter told me after.

The reason you went to see Mr Bini is so he could help you with getting a loan from Mr Landy.  That’s right, isn’t it? --- Yes, but – but I didn’t sign papers.

You didn’t sign papers in Mr Bini’s office? --- I didn’t – I didn’t want to sign the paper.

HER HONOUR: But you did? --- No.

It was one of the three papers you signed? --- I signed two papers at the chemist place and one at Mr Luciano Bini’s place.

[CROSS-EXAMINER] Yes.  What was the paper you signed at Mr Bini’s place? --- It’s a white paper I signed.  I don’t know what sort of document it was because that document has not been read out to me.  It was just some white bit of paper.  I just put the signature to it.

Did Mr Bini speak Italian with you? --- (Direct) Just a little bit, that’s it.  (Through interpreter) Just a little bit and that’s it.

But did he speak Italian to you or did he speak to you in English? --- In Italian.

You had no difficulty understanding his Italian? --- Yes, I had.  I had difficulty understanding his Italian but beside that, he did not explain anything to me about the content of (indistinct).[15]

[15]T366-7.

1. Natalina’s evidence about taking her father to meet Mr Bini was also unsatisfactory.  She agreed that on a hot day in November 2009, she had taken Bruno to see a solicitor by the name of Bini.  She agreed that the persons present at the meeting were Mr Bini, Mr Harris, Ms Fiasco, Bruno and herself.  The following exchange then occurred:

[CROSS-EXAMINER]: And the reason you went to see Mr Bini was for your father to get legal advice abut the transfer of land; do you agree with that? --- Not transfer of land.  That the land was going to her, just not that she was going to own it.  She didn’t put it like that to us.

What did you understand you were going to see Mr Bini about? --- All she said ---

No, what did you understand? --- I understood that it was all about that she was going to be in partnership with the property, not that she was going to fully own the property.

What do you mean by “in partnership with the property”? --- Like, get involved, like being a director. I didn’t even know what a director was either.

Is it fair to say that you went to see Mr Bini about the way in which your father’s property was going to be dealt with? --- That’s right.

Did Mr Bini give advice about that to your father whilst you were all there? --- I didn’t understand the way he was talking and ---

HER HONOUR: Now answer the question.  Did he give advice: yes or no? --- yes, I think he did.  Yes.

[CROSS-EXAMINER]: And he spoke to your father in Italian? --- Yes, he did.

Do you understand Italian? --- Certain type of Italian, yes.

You could follow along the conversation between your father and Mr Bini? --- No.

Why not? --- Because I didn’t understand one word that Mr Bini was saying.

Why not? --- Because it is a different type of Italian.

A different dialect? --- Yes.

But your father and Mr Bini were discussing things with each other, weren’t they? --- They were talking, you know.  My father was talking his own way, yes.

…

Mr Bini was also speaking English in that meeting at times, wasn’t he? --- Because we had to ---

No, just listen to the question.  Was he speaking English ---? --- Yes, he was, but I still didn’t understand him because he had that kind of accent.

You didn’t understand Mr Bini’s English? --- Yes.

Is that right? --- Because I just had to say, “Yes, yes”, agree to whatever she told us to do.

No, just listen to the question.  Did you just tell Her Honour that you didn’t understand Mr Bini’s, a solicitor, English? --- Not quite – like, sometimes, you know, you’re telling me things I don’t understand the words.

When I’m speaking to you now you can understand everything I’m telling you, can’t you? --- Yes.

When Mr Bini spoke to you in English on that day you could understand what he was telling you? --- Yes.

You now agree to that, do you? --- Yes, certain things I understood what he was saying?

What was it that you understood that he was saying? --- He just said, “You know what’s going on in here, what has to be done.”

Yes? --- And I said, “Yes”.

In particular what did he mention about what had to be done? --- About the property.  I probably don’t remember everything what was said in there.

No, not everything, but he was talking to you and your father about transferring the  land, wasn’t he? ---  He was mainly talking in Italian with my dad.

Listen to my question.  He was talking to you and your father about transferring the land? --- Not to me; to my dad in Italian.

But you knew that he was speaking about the transfer of the land? --- Not the transfer of the land.

What was he speaking about? --- I just can’t remember.

What did you go there for? --- She told us to go here and just say that – “agree to whatever he is saying about the property.  Just sign over the property, or the papers or whatever.  Just sign the papers.”

He said to you and your father that he would act for your father in relation to these matter, didn’t he?  You agree with that? --- Yes.[16]

[16]T630-633.

1. I have set out the above extracts from the transcript at some length, as they give a flavour of how both Bruno and Natalina sought to avoid making concessions, which they perceived to be harmful to their case.  Bruno’s repeated asking about who Mr Bini was seemed utterly unconvincing, particularly given that it was he who first volunteered that he had signed some documents at the rooms of “a solicitor, Luciano Bini”.  Bruno’s evidence that he had difficulty understanding Mr Bini’s Italian was not supported by Natalina’s evidence that most of the conversation was between her father and Mr Bini in Italian.  Natalina initially alleged that she could not even understand what Mr Bini was saying in English, because of his accent, before finally conceding that she could understand at least some if it.

1. If Bruno had an independent, Italian-speaking solicitor acting for him in relation to the transfer, that could severely damage an unconscionability claim.  This may explain why Natalina and Bruno both seemed so keen to downplay Mr Bini’s role, or their understanding of what they went to see him about, or what advice he gave.

1. Further correspondence between Mr Harris and Mr Bini suggests that Mr Bini was still acting as Bruno’s solicitor in relation to the transfer in early December 2009.

1. By December 2009 at the latest, Mr Harris seems to have started acting for Ms Fiasco, as well as Frank and Fiore.  Mr Harris arranged the incorporation of Temali on 1 December 2009, with Ms Fiasco as the sole officeholder and shareholder.  Mr Landy denied that he had any role in the establishment of Temali, and there is no evidence to contradict his denial.

1. On 8 December 2009, Mr Harris (on behalf of the Fiasco interests) sent an email to Mr Bini (on behalf of Bruno).  The email said:

My client is anxious to have matters completed before we close for the year on 18 December.  The name of the transferee (my client’s company) is Temali Pty Ltd …  Please let me know as soon as possible where the matter is up to and if anything further is needed from me.

1. Two days later, Mr Harris sent a further email to Mr Bini, asking him to:

[P]lease let me know by return where the matter is up to and when we can expect to be able to finalise settlement.  My client and the Mete family have contacted me and are very anxious as to what is happening.  I have previously emailed and left messages without a response.

1. There is no evidence as to when, or in what circumstances, Mr Bini ceased acting for Bruno in relation to the transfer, or as to what the document was that Bruno signed in Mr Bini’s offices. 

1. On 15 January 2010, Westpac commenced recovery proceedings against Frank and Fiore.

1. On 29 January 2010, Morlend made an offer to lend money to Temali, which was signed as accepted by Ms Fiasco.  The principal sum was described as “$123,000 to be drawn at settlement. Further releases from retained funds at lender’s discretion.”  Final settlement date was said to be 5 February 2010.  Disbursements to be paid at settlement included $37,940, which was said to be “outstanding fees to Eagle”.

1. The loan was to be secured by a first registered mortgage over the Spittle Road property and associated water rights, and a personal guarantee by Ms Fiasco.   The letter said that the maximum loan value ratio (inclusive of principal sum, costs and interest in advance) was 40% of a sworn valuation.

1. Mr Landy said he had negotiated with Ms Fiasco in respect of the loan.

1. Also on 29 January 2010, Eagle entered into a further consultancy agreement, this time with Temali, rather than Frank and Fiore.  According to Mr Landy, that occurred because the three month term of the original consultancy agreement with Frank and Fiore had come to an end, and Temali was picking up the reins to assist the Metes and to continue dealing with the issues with Westpac. 

1. Under the agreement, Eagle was to be paid a retainer of $27,900 plus GST, plus $385 per hour for any work which was outside the scope of the agreement.  To secure payment of those fees, Temali charged its interest in all its present and future property. 

1. After the letter of offer to Temali was accepted, Madgwicks solicitors were instructed to prepare the transaction documents on behalf of Morlend.  Madgwicks thereafter prepared a formal loan agreement, a guarantee by Ms Fiasco, and a fixed and floating charge, all of which reflected the letter of offer, and bear an execution date of 15 February 2010.

1. On 15 February 2010, Mr Harris executed a solicitor’s certificate addressed to Morlend, in which he certified that he had explained the general nature and effect of the loan agreement and security documents to Ms Fiasco, the guarantor.

1. There is no doubt that Bruno executed a transfer of the Spittle Road property to Temali, although the date and circumstances of execution are unclear. 

1. There is no direct evidence as to who prepared the transfer.  Mr Harris’s name and signature appear as solicitor for Temali, the transferee.  There is nothing to indicate that Morlend or its solicitors, Madgwicks, played any role in the preparation of the document. 

1. The transfer states the consideration as $450,000.  Although the transfer document bears a handwritten date of 15 February 2010, that appears to be a date written in the same handwriting by an unknown person on all of the relevant transaction documents. 

1. On the document, Bruno’s signature is shown as having been witnessed by somebody called “Elaine” at “Pharmacy World” in Fawkner.  Both Bruno and Natalina gave evidence that he signed a document at a pharmacy in Fawkner.  Bruno said that he signed a document at the chemist after he had seen Mr Landy.

1. Bruno said the document he signed was only one page.  He identified his signature on the transfer document as his.

1. Bruno said that Natalina drove him to the chemist, and Rita met him there.  Natalina stayed outside, and he and Ms Fiasco went inside.  Initially, he said that Ms Fiasco gave him the document and told him to sign it, but did not tell him what it said. 

1. Later, in cross-examination, Bruno said that Mr Landy had given him the document.  Then asked to explain the change in evidence, Bruno said he had made a mistake in saying that Mr Landy gave it to him; he confirmed that Ms Fiasco had given him the document to sign.

1. Natalina agreed that she drove her father to a chemist.  She said she did so at the direction of Ms Fiasco, who told her that Bruno had to sign some papers “to help your brothers to borrow money to save the Westpac – for the Westpac Bank.”  She said she drove Bruno there, and they met Ms Fiasco outside the chemist, as arranged.   Natalina remained outside, whilst her father and Ms Fiasco went inside.  Natalina was not shown any documents, and did not know or ask what her father signed in the chemist.  The only discussion she mentioned with her father about the document was when Bruno said “Why do I have to do this”, to which she replied “You have to help your boys.”[17]  

   [17]T575.

1. Mr Landy said he had no involvement in transferring the Spittle Road property from Bruno to Temali, and there is no evidence to the cotnrary.  Mr Landy found out that the transfer of the property had occurred through Mr Harris. 

1. The mortgage of the Spittle Road property from Temali to Morlend also bears the date 15 February 2010, written in the same handwriting as the transfer, loan and guarantee documents.  Ms Fiasco executed it on behalf of Temali, and Mr Landy on behalf of Morlend.

1. Mr Landy agreed in cross-examination that the loan transaction settled on or about 15 February 2010.  He received the mortgage over the Spittle Road property on that date, and it was later registered.

1. Mr Landy also said that he had heard, prior to making the loan advance, that Morlend’s solicitors, Madgwicks, had a letter that showed that Bruno had a solicitor acting for him. 

The Metes fall out with Ms Fiasco

1. It is clear that some time after the execution of the transfer and the mortgage, there was a falling out between Ms Fiasco and the Mete family.  Exactly when and why it happened is less clear.

1. Several unexecuted loan agreements between Ms Fiasco, Temali and Bruno were tendered into evidence.  They were apparently prepared by Mr Harris.  Bruno said in cross-examination that he had never seen a loan agreement between himself and Ms Fiasco, but he was not shown or asked anything about these specific documents.

1. The first agreement was dated February 2010, and recorded that between January 2006 and March 2009, Ms Fiasco had lent Bruno and his wife a total of $770,000 by way of a number of cash advances.  It noted that Bruno and his wife had handed Ms Fiasco the duplicate title to the Spittle Road property at the time of the first advance, and had orally agreed to provide further security, or transfer the property, to Ms Fiasco or her nominee, if demanded by Ms Fiasco.  The document also recorded that Ms Fiasco had demanded that the property be transferred to Temali.

1. The second such agreement was dated March 2010, and recorded that between January 2006 and March 2009, Ms Fiasco had lent Bruno and his wife the total sum of $450,000 by way of a number of cash advances.  It was otherwise in relevantly similar terms to the first unexecuted agreement.

1. In an email from Mr Harris to Mr Landy’s employee, Myles Watson, dated 25 February 2010, Mr Harris said:

I have redone the loan agreement and was arranging with Rita to come in tomorrow to sign and then take to Bruno to sign.

She said that Fiore has told her that Bruno will not now sign.

I rang Fiore and he said – Bruno will not sign; the land really shouldn’t be in his name; you should “know the truth.”  When I said that he should tell me he said he will in your office when you return.  …

1. This is the first written suggestion of some sort of falling out between the Metes and Ms Fiasco.

1. Mr Landy was overseas in Europe between 21 February and 5 March 2010.  Mr Landy initially said that he first learned of the falling out on his return to Australia in early March.  Then he recalled receiving a communication from Mr Harris, dated 25 February, while he was overseas.

1. Bruno said he stopped being friends with Ms Fiasco about 3 or 4 months before her death.  Like much of his evidence about dates, his evidence in this regard seems utterly confused.  Ms Fiasco died in early 2011, after this proceeding had been commenced, and a year or so after the rest of the Metes say they had fallen out with her.  Nor did Bruno give any reason as to why they stopped being friends.

1. Fiore said that the falling out occurred on 20 or 21 February.  He said it was because his son, and then his sister, had argued with Ms Fiasco on the 20^th.  He said Ms Fiasco rang him and issued what he took to be black magic threats to harm his son, and by the 21^st, Fiore had argued with Ms Fiasco too.  However, Fiore did not say anything to Mr Landy about this until he met with him in early March.

1. Frank gave evidence that what caused the falling out with Ms Fiasco was that Natalina had an argument with Ms Fiasco.  He said that he came home one day and Fiore said they could not pick grapes any more “Because Rita won’t give us no more money to buy boxes.”[18]  He said that was what caused the argument.  Frank said he called Mr Landy, who was in Switzerland or Germany at the time, and the following occurred:

   [18]T539.

What did you say to him on the phone? --- I said to Michael, “Michael, Rita Fiasco is the problem of all the money, that she’s ripping us off.  That we don’t owe her no money.”

You said that in a phone call with Mr Landy? --- Yes, with Mike Landy.

What did he say to you? --- Because I said to him that I was going to go to the police, right, and he told me not to go to the police “because you’re going to get yourself into trouble.”

Did he say, “When I’m back in Melbourne I’ll meet with you and we’ll have a talk about it?” --- Yes, and he also told me that “I will organise some money for youse to keep on picking for the boxes.”[19]

[19]T540.

1. Natalina agreed she had an argument with Ms Fiasco, but did not say anything about it being about boxes.  Rather, Natalina said she could not take it any more because Rita was demanding money. 

1. Natalina said she then rang her sister-in-law and told her to “go to the cops and expose Rita Fiasco.”[20] 

   [20]T571.

1. Natalina said that about two days after the argument with Ms Fiasco, she spoke on the phone to Mr Landy, who was overseas at the time.  Initially, she said she rang him, then she said he rang her.  Natalina agreed that she had never given Mr Landy her phone number, but assumed Ms Fiasco had given it to him.

1. She said Mr Landy asked her what was going on, to which she said she replied “I’m going to go to the cops.”  She said the following exchange then took place:

[PLAINTIFFS’ COUNSEL]: What did he say? --- He said, “No, no, no.  Don’t go to the cops.” And I said, “Why not?” And he goes “Because you’ll be arrested for perjury.”

What did that mean to you? --- And I sort of – I said, “What do you mean?” And he goes, “Because you were handling cash.” And I said, “Oh my God.”

What did he say to you? --- And then he goes, “Don’t go to the cops.  Wait until I come back from” – I think it was in Switzerland – “and we’ll have a meeting.”

So he was overseas at the time, was he? --- Yes.  And then I said that Rita Fiasco was a crook, and Carlo too; that there was no mafia, “I’m telling you the truth,” and he goes to me that he saw statements that she withdrawed money from the bank to give to us, and I said, “They are all lies.”[21]

[21]T571.

1. She repeated the substance of that evidence in cross-examination, although in a more dramatic version, in which she said she had been screaming and talking loudly at Mr Landy on the phone. 

1. The evidence in relation to the falling out with Ms Fiasco was just one of many implausible parts of the evidence called by the plaintiffs.  On the one hand, they all sought to paint a very dramatic picture of Ms Fiasco, as somebody who had so controlled them, by manipulating their fear of curses and black magic, that they paid her many hundreds of thousands of dollars over a period of several years to keep themselves safe from harm.  On the other hand, simply because she failed to pay for some boxes that they needed to pack the grapes, or because Natalina got tired of her demands for money, they apparently found the collective strength to break her hold over them and say “no more.”  

The March meeting

1. The March meeting was held on or about 9 March 2010.  It was attended by Mr Landy, Mr Harris, Fiore and Mary, Frank and Donna, and Natalina. 

1. Natalina spoke about the falling-out which had occurred with between the Metes and Ms Fiasco, and it became clear to Mr Landy that there had been a fracture between the Fiasco and Mete camps. 

1. Natalina told Mr Landy that everything they had previously told him was a lie.  In particular, Bruno was not a gambler and they owed no money to Ms Fiasco.  Mr Landy was also told that the story about the mafia was untrue.

1. Fiore said he told Mr Landy that he did not want him to make any more loans to Ms Fiasco, and did not want her to have the money from the sale of grapes. 

1. Frank agreed that Mr Landy was told that Ms Fiasco should have no more access to the money from the grapes, but he could not recall whether Mr Landy was told not to make further loan advances to Ms Fiasco.

1. Mr Landy agreed that members of the Mete family were by this time very eager to undo the arrangements by which Ms Fiasco was receiving the sale proceeds from the market.  Mr Landy told the Metes that there was nothing he could do to stop the money from the business going to Ms Fiasco, because they had entered into that arrangement between themselves.  They needed to resolve it with Ms Fiasco.

1. If it were necessary to decide, I would prefer Mr Landy’s evidence (to Fiore’s contrary evidence) that the Metes told Mr Landy they were happy for the loan advances to continue.  But nothing turns on whether or not the Metes said they wanted there to be no further advances; Morlend was, by this time, contractually bound to Temali, and could not have simply ceased to make advances to Temali at the Metes’ request.

1. Mr Landy said that the first time he became aware that the instructions he had received from the Metes may not have been accurate was at the March meeting.  

1. Even if I accepted Natalina and Frank’s evidence of their phone calls with Mr Landy while he was overseas, those phone calls took place after the execution of the transfer and the mortgage.  None of the plaintiffs’ witnesses gave evidence of having told Mr Landy, prior to the execution of those documents, that what they had previously told him was a lie.

1. Mr Landy said that if he had known from August 2009 onwards that the instructions he was getting as to the gambling, the mafia and the loan from Ms Fiasco were false, he would not have dealt with the Metes, because it is too difficult to work with people who do not tell the truth.

1. Mr Landy said that after meeting with the Metes, he met with Ms Fiasco later that day.  Ms Fiasco told him that the Metes did indeed owe her money, and that Bruno was indeed a gambler.  

1. Mr Landy told both the Metes and Ms Fiasco on that day that they should each meet with the other to try to resolve their differences.

Subsequent events

1. By 14 March 2010, Frank and Fiore were writing to a Mr Mumford, somebody connected with the grape sales.  They were seeking to undo the arrangement by which Temali was to receive the proceeds from grape sales. 

1. A disbursement authority dated 30 March 2010 was signed by Ms Fiasco and addressed to Morlend and Madgwicks.  It authorised payment of the following sums:

PAYEE

AMOUNT

Morlend

Establishment fee ($11,000.00)

Interest in advance ($11,070.00)

Interest on partial advance ($166.06)

 $22,236.06

Partial advance (already drawn down)

   $1,845.10

Eagle

Valuation fee ($825.00)

Fees outstanding ($37,940.00)

 $38,765.00

NSW Office of State Revenue

 $16,243.00

NSW Department of Lands

     $748.00

Madgwicks

   $5,972.17

Balance to be held by the Lender pending the Land and Water Share being transferred to the Borrower

 $37,190.67

Total

$123,000.00

1. Mr Landy confirmed that Morlend made all of those advances, save for the balance of about $37,000; that was not advanced, because the water rights were never transferred to Temali. 

1. On 26 April 2010, Ms Fiasco authorised a further draw down of $2,861.52 to pay Madgwicks.  On 17 May 2010, she authorised a draw down of $970.47 to pay Elders insurance.

PARTICULARS

The matters that have been attributed to Morlend arise from all of the facts and matters pleaded in paragraphs 21 to 27B (both inclusive).

Landy of Morlend, in his capacity as a director of [Eagle] had also provided advice to Bruno at the third meeting. In the course of providing that advice Landy had made enquiries of Bruno as to his financial and general circumstances and as a consequence of the information provided to him by Bruno, Landy became aware of the nature and extent of Bruno’s special disabilities.   

The existence of those special disabilities was so obvious that Landy must have appreciated them.  The extent of Bruno’s special disabilities were such that they are self evident and would have or alternatively should have been observed and understood by a person in the position of Landy.

Consequently Landy was aware of the matters described in paragraph 27A or alternatively a person in the position of Landy should have been aware.  By reason of the fact that Landy is a director of Morlend, Landy’s knowledge of Bruno’s special disabilities is also the knowledge of Morlend.

The knowledge of Landy as described herein was known to him both at the time of providing the advice and subsequently at the time of Morlend taking the first mortgage over the Spittle Road property.

A reasonably prudent lender such as Morlend would not have taken the mortgage over Spittle Road in circumstances where Bruno reposed trust and confidence in Landy and/or Fiasco and/or Frank Mete and/or Fiore Mete and he was potentially vulnerable as a result of that trust and confidence.

Morlend obtained a benefit in charging fees and commissions. The particulars of the fees and commissions earned are known to Morlend.

27C.By its:

(a)conduct in providing the advice; and/or

(b)taking a mortgage over the Spittle Road property.

Morlend has taken advantage of Bruno’s special disabilities.

27D.By reason of the foregoing, Morlend has engaged in unconscionable conduct within the meaning of:

(a)the general law; and/or

(b)Section 51AC of the [TPA] (as then in force) and/or

(c)Section 8A of the [FTA] (as then in force).

28.      By reason of the matters set forth in paragraphs 21 to 27D (both inclusive) the plaintiffs have sustained loss and damage.

PARTICULARS

The plaintiffs have signed an agreement with Fiasco acknowledging a liability to her of $450,000 in circumstances where no such liability exists. In addition, the Spittle Road property has been transferred to Temali and is subject to a mortgage in favour of Morlend.

Morlend now seeks has obtained an order for possession of the Spittle Road property in proceedings before the Supreme Court of New South Wales in proceeding number 2010/289233.

The plaintiffs seek orders that the mortgage to Morlend be set aside. In addition the plaintiffs seek damages from Morlend which compensate them for the amounts paid to Morlend pursuant to the mortgage over the Spittle Road property and as a consequence of the mortgage over the Spittle Road property.  Full particulars of those payments are known to Morlend.

1. In paragraph D of the prayer for relief, Bruno Mete seeks an order pursuant to the TPA setting aside the mortgage. He does not seek to set it aside on any other basis, but I will treat paragraph H (“such further or other relief as the court considers appropriate”) as broad enough to include setting aside in equity.

1. In closing submissions, the plaintiffs’ counsel sought to raise a large number of matters which were said to be relevant to unconscionability, but which had never been pleaded.  As mentioned earlier, I ruled that they could not do so.

1. It is not necessary to set out the matters pleaded in Morlend’s defence.  It is sufficient to note that Morlend’s defence does not make any relevant admissions, which might help establish Bruno’s claim.

The law relating to unconscionability

1. The final claim pleads that Morlend engaged in unconscionable conduct in contravention of the general law, s 51AC of the TPA (as then in force) and/or s 8A of the FTA (as then in force). For present purposes, there is no relevant difference between those two statutory provisions.

1. Unconscionable conduct is a ground for relief both in equity and under statute.  There are some similarities and some differences between the statutory provisions and the equitable doctrine.

1. The equitable doctrine provides a basis for relief from a transaction which may have been procured by the stronger party taking unfair advantage of a weaker party’s special disability or disadvantageous position. 

1. There was no real dispute between the parties as to the principles which govern the equitable doctrine.  They are conveniently summarised in Unconscionable Conduct – The Laws of Australia in the following terms:

The elements are:

(1)       the party seeking relief must, at the time of entering into the transaction, suffer from a special disability vis-à-vis the other party;

(2)       the special disability must seriously affect the disabled party’s capacity to judge or protect its own interests;

(3)       the other party must know of the special disability;

(4)       that party must take advantage of the opportunity presented by the disability; and

(5)       the taking of the advantage must have been unconscientious.[23]

[23]At 35.9:10.

1. A disability is to be assessed by reference to the comparative ability of the parties to the transaction to safeguard their respective interests.  The possible types of disability are not closed, and have been held to include “illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect[ing] his ability to conserve his own interests.”[24]  But unconscientious exploitation of another’s inability, or diminished ability, to protect its own interests, is not the same thing as taking advantage of a superior bargaining position.

   [24]ACCC v CG Berbatis Holdings Pty Ltd (2003) 197 ALR 153 at 157 (Gleeson CJ).

1. The other party’s knowledge of the special disability may be actual or constructive.

1. For the conduct to amount to unconscionable conduct in equity, it must involve a high level of moral obloquy.

1. Bruno also seeks relief under s 51AC of the TPA, which relevantly provides that a corporation must not, in trade or commerce, in connection with the supply or acquisition of goods or services to a person, engage in conduct that is, in all the circumstances, unconscionable. Sub-sections (3) and (5) provide that, without limiting the matters to which the court may have regard for the purposes of determining whether there has been unconscionable conduct, the court may have regard to various matters, including the following:

(a)       the relative strengths of the bargaining positions of the supplier and the consumer;

(b)      whether the consumer was able to understand any documents relating to the supply or possible supply of the services;

(c)       the extent to which the supplier and the consumer acted in good faith.

1. Section 8A of the FTA was in relevantly similar terms to s 51AC, save that the person engaging in the unconscionable conduct need not be a corporation.

1. In Perpetual Trustees Australia Limited v Schmidt,[25] J Forrest J quoted with apparent approval the following passage from ACCC v Allphones Retail Pty Ltd (No 2)[26]:

   [25][2010] VSC 67.

   [26](2009) 253 ALR 324 at [113].

There is a body of authority in this court which establishes the following propositions:

(a) The scope of s 51AC is wider than that of s 51AA. The meaning of unconscionable for the purposes of s 51AC is not limited to the meaning of the word according to established principles of common law and equity.

(b) The ordinary or dictionary meaning of unconscionable, which involves notions of serious misconduct or something which is clearly unfair or unreasonable, is picked up by the use of the word in s 51AC. When used in that section, the expression requires that the actions of the alleged contravenor show no regard for conscience, and be irreconcilable with what is right or reasonable. Inevitably, the expression imports a pejorative moral judgment.

(c)       Normally, some moral fault or moral responsibility would be involved.  This would not ordinarily be present if the critical actions are merely negligent. There would ordinarily need to be a deliberate (in the sense of intentional) act or at least a reckless act.

Does Bruno Mete have standing to challenge the mortgage?

1. Bruno is not a party to the mortgage.  The only parties to the mortgage are Temali and Morlend, neither of whom seeks to set it aside.

1. The plaintiffs’ counsel could not refer the court to any case in which a person had been able to set aside a transaction to which they were not a party, on the grounds of unconscionability.

1. The plaintiffs’ counsel repeatedly sought to get around this fundamental problem by simply blurring the distinction between the transfer and mortgage transactions, and referring to them as “the transaction”.  But that ignores the fact that they are two separate legal transactions, with different parties.

1. Bruno does not have standing to seek to have the mortgage set aside.  That is sufficient to dispose of his claim against Morlend.

1. Even if Bruno did have standing to challenge the mortgage between Morlend and Temali, his unconscionability claim would fail for all or any of the following reasons.

The statutory claim

1. Accepting that the scope of s 51AC of the TPA (and s 8A of the FTA) is broader than the concept of unconscionability in equity, it is still necessary for Bruno to establish that he falls within the statutory provisions. In particular, he needs to establish that he was the consumer of goods or services from Morlend.

1. But Bruno’s final claim against Morlend does not allege that Morlend provided (or was going to provide) him with any goods or services.  The allegation that Bruno, as well as his sons, engaged Morlend to provide financial advice (which would have fallen within the concept of a “service”) was removed from paragraph 21 of the final claim.  That was presumably done in an attempt to strengthen the general unconscionability claim.

1. Nor did the plaintiffs’ counsel in their submissions identify any relevant goods or services provided by Morlend to Bruno.

1. The statutory unconscionability claims would fail for this reason alone.

Did Morlend engage in unconscionable conduct?

Did Bruno suffer from any relevant disability?

1. The final claim pleads that Bruno suffered from the following special disabilities:

(a)       lack of education;

(b)      illiteracy;

(c)       lack of financial sophistication; and

(d)      lack of experience in commerce and investments.

1. Specifically, it is pleaded that Bruno is unable to read or write and was educated to grade 9 standard.  It is pleaded that he has no trade skills and lacks any understanding of finance or commerce.

1. The plaintiffs’ counsel chose to lead virtually no evidence about the alleged disabilities, even though Bruno bears the onus of establishing them.

1. Although Bruno did not give any evidence as to his level of education, I am prepared to assume he did not complete high school.  I also accept that he cannot read English, and has only limited reading abilities in Italian. 

1. Bruno was 77 years old at the time of trial.  Since the early 1970s, Bruno’s working life has been spent in the family business, growing grapes and selling them at the markets.  He only stopped working in the business about two years before the trial.  

1. In cross-examination, Bruno admitted that he had borrowed money from banks from time to time for business purposes, and knew that banks would always ask for security for loans.  He said he had given security over the years.   He was not re-examined in relation to that evidence.

1. That is the extent of the evidence as to Bruno’s alleged special disabilities.

1. Even accepting that Mr Landy was in a superior position to Bruno, in terms of education, literacy, financial sophistication and commercial and investment experience, that fact alone would not suffice to establish unconscionability.  A party alleging special disability must lead sufficient evidence as to the nature and extent of the disability so as to establish that the disability seriously affected the party’s capacity to judge or protect his own interests.  Bruno failed to do that.

1. In final submissions, the plaintiffs’ counsel also sought to rely on Bruno’s English language skills as another aspect of special disability, even though that had not been pleaded and the trial had not been run with that as a contested issue.  Even if it was permissible to seek to recast the case at such a late stage, Bruno’s own evidence was that he was able to understand Mr Landy, and that, at times, Donna, Mary and Natalina also interpreted for him during the October meeting.  No witness suggested that Bruno complained of, or demonstrated, problems comprehending Mr Landy or what was being said at the October meeting.

What Mr Landy knew or ought to have known about Bruno’s disabilities

1. There is no dispute that Bruno only attended the third meeting with Mr Landy, the October meeting.

1. The final claim alleges that Mr Landy had both actual and constructive knowledge of Bruno’s special disabilities, which he gained or should have gained in the course of providing “the advice” to Bruno at the October meeting.

1. The actual knowledge is alleged to have arisen because Mr Landy “had made enquiries of Bruno as to his financial and general circumstances and as a consequence of the information provided to him by Bruno, Landy became aware of the nature and extent of Bruno’s special disabilities”.  No detail is given as to the alleged inquiries made, or information provided.

1. The constructive knowledge is alleged in the following manner: “The extent of Bruno’s special disabilities were such that they are self evident and would have or alternatively should have been observed and understood by a person in the position of Landy”.

1. The evidence does not substantiate the pleaded case, even assuming that Bruno suffered from the relevant disabilities at the time.

1. No witness suggested that anything was said at the October meeting about Bruno’s capacity to read or write, his level of education, his level of financial sophistication, or his level of experience in commerce and investments.  Nor was it suggested that these matters were ever raised with Mr Landy at any other time.  

1. Bruno gave evidence that Mr Landy asked him to sign a document at the October meeting “so your children can get help”.[27]  He could not say what the document was; nor did he say whether he signed it, or that he complained that he could not read or understand it.  Bruno’s evidence as to what documents he signed and where was fairly confused, and I am not satisfied he was asked to sign anything at the meeting, for the following reasons.

   [27]T299.

1. The plaintiffs’ counsel was unable to explain what the document might have been, and did not suggest to Mr Landy in cross-examination that he had asked Bruno to sign something at the October meeting.  Given the early stage of the discussions with Mr Landy, it is not apparent that any document would have been prepared which might have required Bruno’s signature at the meeting.  I am satisfied that Bruno was not asked to read or sign any documents at the meeting, so there was no opportunity for Mr Landy to observe his capacity to read or write. 

1. The only inquiry which Mr Landy made about Bruno’s financial circumstances was when Mr Landy asked about Bruno’s gambling debts and the mafia problem.  Bruno confirmed to Mr Landy that he was a gambler and had incurred gambling debts, which had now been paid.  Each of Frank and Fiore also confirmed those matters.  There was otherwise no discussion about Bruno’s financial circumstances at the October meeting.  There is no dispute that Bruno said very little at the meeting. 

1. Mr Landy was well aware from earlier meetings with Frank and Fiore that Bruno was the registered proprietor of the Spittle Road property, which was worth about $500,000, and that Bruno had provided the title to Ms Fiasco as security for loans she had made, which were around $430,000.  There was no need for Mr Landy to raise those matters with Bruno, in the context of what was being discussed at the October meeting.  None of the witnesses gave evidence that Mr Landy asked Bruno any questions about these matters, or that Bruno had responded to anything asked by Mr Landy in a way that did or might have demonstrated a lack of comprehension.

1. In the circumstances, even if I accepted that Bruno suffered from the alleged special disabilities at the time of the October meeting, I would not be persuaded that Mr Landy had actual or constructive knowledge of them.

What advice did Mr Landy give at the October meeting?

1. Even if, contrary to the above findings, Bruno did suffer from the alleged special disabilities, which were known or ought to have been known by Mr Landy, I am not persuaded that Mr Landy gave Bruno “the advice” which is alleged to have been given at the October meeting.

1. As mentioned earlier, none of the plaintiffs’ witnesses swore up to paragraphs 23(a),(b), (c) or (d).  Significantly, both Bruno and Fiore expressly acknowledged that Mr Landy did not advise Bruno to transfer the Spittle Road property to Ms Fiasco.

1. Although Fiore did initially swear up to paragraph 22(bb) (which asserts that Mr Landy advised that it would be best if Temali operated the business, so it would control receipt of the income), I have already explained why I would reject that initial evidence.

1. Mr Landy denied having given “the advice” pleaded in paragraph 23.  Whatever he may have said on the relevant topics fell a long way short of “the advice” as pleaded.

1. In so far as the unconscionability claim is based on “the advice” having been given, it must fail for that reason also.

Was there any moral obloquy?

1. Even if, contrary to the above findings, “the advice” was given, I am not persuaded that there would have been any moral obloquy in doing so.  Nor was there any moral obloquy in Morlend taking the mortgage in February 2010.

1. The circumstances as known to Mr Landy at the time of the October meeting were as follows:

(a)       Frank and Fiore were in substantial default of their Westpac facilities, and were facing the imminent loss of their properties to Westpac under the settlement deed;

(b)      The family business was in dire financial circumstances, because Bruno had taken substantial sums of money from it to feed his gambling habit and pay off the mafia;

(c)       Ms Fiasco was a family friend who was helping the Mete family through their financial problems;

(d)      The family had borrowed substantial sums of money from Ms Fiasco and other people;

(e)       Bruno owned the Spittle Road property, and there was no bank mortgage over the property;

(f)       Bruno had provided the title to the Spittle Road property to Ms Fiasco as security for loans she had made to him;  In other words, she was the equitable mortgagee of the property;

(g)      Frank and Fiore needed funds to pay their solicitor, Mr Harris, and Mr Landy’s financial advice company, Eagle, for them to provide professional assistance in trying to negotiate a resolution with Westpac;

(h)      Given their history, Mr Landy was not prepared to lend money to Bruno or any other member of the Mete family; and

(i)       Mr Landy may have been prepared to lend money to Ms Fiasco, or an entity connected with her, on the provision of suitable security.

1. Most of those circumstances were known to Mr Landy as a result of what the Mete family now say are lies which they deliberately (and in some cases, repeatedly) told Mr Landy, in order to get him to assist Frank and Fiore.

1. Even if Mr Landy had given “the advice”, as pleaded (but not established on the evidence), there would have been no moral obloquy involved, given all of the above circumstances.

1. By the time the mortgage was executed by Temali and Morlend in February 2010, Mr Landy was still aware of the matters set out in paragraph 291 above.  He had not been told that any of them were untrue.  He was also aware of the following additional matters:

(a)       Ms Fiasco was prepared to lend Frank and Fiore the money they needed to pay the professional fees, by borrowing that money from Morlend.  She was prepared to offer the Spittle Road property (which she held as equitable mortgagee) as security to Morlend.  She was also prepared to personally guarantee the loan.  In return, she was going to receive the income from the family business;

(b)      Temali had been incorporated; Mr Harris arranged for that to happen, on Ms Fiasco’s instructions.  Mr Landy had played no role in the incorporation of Temali;

(c)       Bruno had agreed to transfer the Spittle Road property to Ms Fiasco’s company, in order to help his sons;

(d)      In late 2009, Mr Harris had arranged for Bruno Mete to go and see an Italian-speaking solicitor, Luciano Bini, in relation to the transfer of the Spittle Road property.

1. Given all those circumstances, I am not persuaded that, at the time of the execution of the mortgage, Morlend had the requisite moral obloquy such as to bring its conduct within the ambit of unconscionable conduct.  There was nothing unconscionable in Morlend taking the mortgage from Temali, given the circumstances as made known to it by the Mete family, including Bruno.

Conclusion

1. For all or any of the many reasons given, the plaintiffs’ claim must be dismissed.

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