Permanent Mortgages Pty Ltd v Vandenbergh - [2010] WASC 10

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION: PERMANENT MORTGAGES PTY LTD -v- VANDENBERGH [2010] WASC 10

CORAM: MURPHY J

HEARD: 18-20 AUGUST 2009 & ON THE PAPERS

DELIVERED : 29 JANUARY 2010

FILE NO/S: CIV 1074 of 2007

BETWEEN: PERMANENT MORTGAGES PTY LTD
Plaintiff
AND
JULES JOSEPH VANDENBERGH
MARIA HUBERTINA VANDENBERGH
Defendants

Catchwords:

Equity - Unconscionable conduct - Whether unconscionable for bank to enforce mortgage - Relationship of trust and confidence - Whether 'wife's special equity' applies to elderly mother

Agency - Mortgage aggregator - Whether agent's knowledge imputed to the principal - Agent to know

Indefeasibility - Fraud exception to indefeasibility - Personal equity - Registered mortgage - Joint borrowing by joint tenants

Legislation:

Bankruptcy Act 1966 (Cth), s 153
Trade Practices Act 1974 (Cth), s 51AC, s 87
Transfer of Land Act 1893 (WA), s 68, s 134

Result:

Declaration of unconscionable conduct in favour of the secondnamed defendant
Consequential relief to be subject of further submissions

Category: A

Representation:

Counsel:

Plaintiff: Mr D H Solomon
Defendants: Mr D R Williams QC & Mr A J Camp

Solicitors:

Plaintiff: Solomon Brothers
Defendants: Butcher Paull & Calder

Case(s) referred to in judgment(s):

Alderton v Prudential Assurance Co Ltd (1993) 41 FCR 435
Ardrey v Bartlett [2004] WASCA 256
ASB Bank Ltd v Harlick [1996] 1 NZLR 655
Australia & New Zealand Banking Group Ltd v Dzienciol [2001] WASC 305
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Australian Competition & Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850; (2003) 200 ALR 491
Australian Competition & Consumer Commission v Oceana Commercial Pty Ltd [2004] FCAFC 174
Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51
Australian Mutual Providence Society v Chaplin (1978) 18 ALR 385
Australian Regional Credit v Mula [2009] NSWSC 325; (2009) 14 BPR 26,779
Australian Securities & Investments Commission v National Exchange Pty Ltd (2005) 56 ACSR 131
Avon Finance Co Ltd v Bridger [1985] 2 All ER 281
Baden v Societe Generale Pour Favoriser Le Developpement du Commerce et de L'Industrie en France SA [1993] 1 WLR 509
Bahr v Nicolay (No 2) (1988) 164 CLR 604
Bainbrigge v Browne (1881) 18 Ch D 188
Baker v Monk (1864) 4 De GJ&S 388
Bank of Baroda v Shah [1988] 3 All ER 24
Bank of Credit & Commerce International SA v Aboody [1990] 1 QB 923
Bank of New South Wales v Rogers (1941) 65 CLR 42
Bank of South Australia Ltd v Ferguson [1998] HCA 12; (1998) 192 CLR 248
Barclays Bank plc v O'Brien [1994] 1 AC 180
Bar‑Mordecai v Hillston [2004] NSWCA 65
Beach Petroleum NL v Abbott Tout Russell Kennedy (1999) 48 NSWLR 1
Beach Petroleum NL v Johnson (1993) 115 ALR 411
Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256
Blomley v Ryan (1956) 99 CLR 362
Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457
Budget Nominees Pty Ltd v Registrar of Titles (1988) V ConvR 54‑311
Bulstrode v Trimble [1970] VR 840
Calverley v Green (1984) 155 CLR 242
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Coldunell Ltd v Gallon [1986] QB 1184
Colonial Mutual Life Assurance Society Ltd v Producers & Citizens Co‑operative Assurance Co of Australia Ltd (1931) 46 CLR 41
Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447
Conlan v Registrar of Titles [2001] WASC 201; (2001) 24 WAR 299
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226
Contractors Bonding Ltd v Snee [1992] 2 NZLR 157
Corin v Patton (1990) 169 CLR 540
Costin v Costin [1994] NSW ConvR 55‑715
Costin v Costin [1997] NSW ConvR 55-811
Couper Holdings Pty Ltd (in liq) v Bell [1999] WASC 232
Crowe v Commonwealth Bank of Australia [2005] NSWCA 41
Custom Credit Corporation Ltd v Lynch [1993] 2 VR 469
Davey v Challenger Managed Investments Ltd [2003] NSWCA 172
Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234
Draper v Official Trustee in Bankruptcy (2006) 156 FCR 53
Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413; (2003) 11 BPR 20,841
Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218
Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95
Fabry v Commissioner of Taxation of the Commonwealth of Australia [2001] FCA 1431; (2001) 48 ATR 130
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Field v Shoalhaven Transport Pty Ltd [1970] 3 NSWR 96
Flourentzou v Commonwealth Bank of Australia [1998] ANZ ConvR 188
Ford Excavations Pty Ltd v Do Carmo [1981] 2 NSWLR 253
Frazer v Walker [1967] 1 AC 569
Garcia v National Australia Bank Ltd (1998) 194 CLR 395
Garnac Grain Co Inc v HMF Faure & Fairclough Ltd [1968] AC 1130
Garofano v Reliance Finance Corporation Ltd [1992] NSW ConvR 59,659
Giarrantano v Smith (1985) NSW ConvR 55‑267
Guthrie v Australia and New Zealand Banking Group Ltd (1991) 23 NSWLR 672
Hart v O'Connor [1985] AC 1000
Hillston v Bar‑Mordecai [2003] NSWSC 89
Hurley v McDonald's Australia Pty Ltd [1999] FCA 1728; [2000] ATPR 41‑741
J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546
J & H Just (Holdings) Pty Ltd v Bank of New South Wales [1969] 2 NSWR 318
Jenyns v Public Curator (Qld) (1953) 90 CLR 113
Jessett Properties Ltd v UDC Finance Ltd [1992] 1 NZLR 138
Johnson v Buttress (1936) 56 CLR 113
Jones v Canavan [1972] 2 NSWLR 236
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1982] AC 462
Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; (2008) 252 ALR 55
Kranz v National Australia Bank Ltd (2003) 8 VR 310
Kyabram Property Investments Pty Ltd v Murray [2005] NSWCA 63
Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407
LHK Nominees Pty Ltd v Kenworthy [2002] WASCA 291; (2002) 26 WAR 517
Lisciandro v Official Trustee in Bankruptcy (1996) 69 FCR 180
Liu v Adamson [2003] NSWSC 74; (2003) 12 BPR 22,205
Louth v Diprose (1992) 175 CLR 621
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181
Maguire v Makaronis (1997) 188 CLR 449
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494
McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579
Micarone v Perpetual Trustees Australia Ltd [1999] SASC 265
Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants (Aust) [2001] FCA 1056; (2001) ATPR (Digest) 46‑212
Morlend Finance Corporation (Vic) Pty Ltd v Westendorp [1993] 2 VR 284
National Australia Bank Ltd v Garcia (1996) 39 NSWLR 577
National Australia Bank Ltd v Satchithanantham [2009] NSWSC 21
National Commercial Banking Corporation of Australia Ltd v Hedley (1984) 3 BPR 9477
Neeson v Wrightson NMA Ltd [1989] ANZ ConvR 605
NZI Capital Corporation v Fulton [1998] FCA 667
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (in liq) (2004) 214 CLR 514
Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd [2001] NSWCA 20; (2001) 50 NSWLR 679
Permanent Trustee Co Ltd v O'Donnell [2009] NSWSC 902
Permanent Trustee Co of New South Wales Ltd v Hinks (1934) 34 SR (NSW) 130
Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41
Perpetual Trustees Victoria Ltd v Kirkbride [2009] NSWSC 377
Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266
Powell v Powell [2002] WASC 105
Radin v Commonwealth Bank of Australia [1998] FCA 1361
Ribchenkov v Suncorp‑Metway Ltd (2000) 175 ALR 650
Riz v Perpetual Trustee Australia Ltd [2007] NSWSC 1153
Rolland v Hart (1871) 6 Ch App 678
Royal Bank of Scotland v Etridge (No 2) [1998] 4 All ER 705
Sargent v ASL Developments Ltd (1974) 131 CLR 634
Scott v Davis [2000] HCA 52; (2000) 204 CLR 333
Siglin v Choules [2002] WASCA 9
Smits v Roach [2006] HCA 36; (2006) 227 CLR 423
Spedley Securities Ltd (in liq) v Greater Pacific Investments Pty Ltd (in liq) (1992) 30 NSWLR 185
Spence v Crawford [1939] 3 All ER 271
Spina v Conran Associates Pty Ltd [2008] NSWSC 326; (2008) 13 BPR 25,435
Spina v Permanent Custodians Ltd [2009] NSWCA 206
State Bank of New South Wales Ltd v Hibbert (2000) 9 BPR 17,543
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Tessmann v Costello [1987] 1 Qd R 283
The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 225 FLR 1
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Union Fidelity Trustee Co of Australia Ltd v Gibson [1971] VR 573
Urane v Whipper [2001] NSWSC 796
Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102
Vane v Vane (1873) 8 Ch App 383
Warburton v Whiteley (1989) 5 BPR 11,628
Watt v State Bank of New South Wales Ltd [2003] ACTCA 7
Western Australian Insurance Co Ltd v Dayton (1924) 35 CLR 355
Wilby v St George Bank [2001] SASC 388; (2001) 80 SASR 404
Wilton v Farnworth (1948) 76 CLR 646
Yerkey v Jones (1939) 63 CLR 649

MURPHY J:

Introduction

In these proceedings, the plaintiff (the bank) seeks to enforce a mortgage to secure the payment of a debt due to it at law in respect of moneys advanced to the defendants (the loan) under a loan agreement dated 20 December 2003 (the loan agreement). The mortgage, registered 17 March 2004, is in respect of a unit in a 'residential strata titles seniors' village' in Claremont, Western Australia (the Claremont property). The first‑named defendant in these proceedings is the son of the second‑named defendant. I will refer to the first‑named defendant as 'the son' and the second‑named defendant as 'the mother'.
At the time of the loan and the mortgage, the son was in serious financial difficulty and was involved in a marital breakup from his former wife. The loan was in the sum of $192,000. Most of the money was used by the son for the payment of his creditors and in relation to an associated settlement with his former wife. The balance, approximately $43,000, was used to discharge an existing mortgage on the Claremont property in favour of National Australia Bank Ltd (NAB). The Claremont property is, and at all material times was, the residence of the mother, who was 85 years old at the time. The property was registered in the name of the mother and the son as joint tenants, although the son had not contributed any equity to the property. The mother was a pensioner when the loan was made and the mortgage was granted.
The loan was serviced until about July 2006. On 3 November 2006, the bank made formal demand for repayment of the moneys secured by the mortgage. Payment was not forthcoming, the mother refused to deliver up possession, and on 22 January 2007, the bank commenced these proceedings.
The son did not appear as a party at the hearing of this action. He did, however, give evidence on behalf of the mother. The mother admitted the loan and the mortgage, but counterclaimed, seeking orders, inter alia, in equity on the basis of alleged unconscionable dealing by the bank, or under s 87 of the Trade Practices Act 1974 (Cth) pursuant to s 51AC of that Act, that the loan agreement and the mortgage are void and unenforceable. In the alternative, the mother sought a declaration that the moneys secured by the mortgage are limited to $46,000 and for consequential orders in that regard. The mother also sought orders, against the son, to the effect that the son holds his interest as joint tenant in the Claremont property on trust for the mother.

The mother and the Claremont property

The mother was born in Holland in 1918. She married in 1943. She had three children born between 1945 and 1950, the youngest of whom is the son in this action. She completed high school, but has no tertiary qualifications. At age 42, she commenced work as a pharmacist's assistant in Holland. She and her family rented their home in Holland.
In 1963/64, the family moved to Australia. They lived in rental accommodation in Sydney. After two or three years, the mother commenced employment in Australia, undertaking various office duties.
Her husband died in 1995. She then went to live in a unit owned by her eldest son in Sydney. In 1998, she moved to Western Australia to be closer to her daughter and the son. The daughter lived in Perth, but the son lived in the south‑west of the State.
Just before moving to Perth, the mother received an inheritance from Holland. The money was used to buy the Claremont property, which was then under construction. The daughter helped her to locate this property.
In addition, the mother had to borrow approximately $46,000 to complete the purchase. She borrowed the extra $46,000 from NAB (the NAB Claremont loan). The son dealt with NAB in relation to the NAB Claremont loan on behalf of the mother. The son was told by NAB that he needed to 'guarantee' the mother's loan and for that purpose would need to be a co‑borrower and co‑mortgagor. He said:
I may have known my name was to go on the title but, if I did, I thought that it was to be as a co‑borrower or co‑mortgagor, not as a joint owner.
He said in his evidence that he was not made aware of that fact until much later. I do not accept that evidence. I find he was aware, in 1998 on registration, that he was on the title as a registered joint proprietor. The mother says that she did not realise that the son was registered as a joint owner with her on the title to the Claremont property (exhibit 9, par 22). I accept that evidence.
On 25 March 1998, the mother and the son became registered proprietors of the Claremont property. The son was, in effect, required by NAB to be put on the title in the circumstances referred to above. On the same day, the NAB registered a mortgage over the Claremont property, securing the sum of approximately $46,000 (the NAB Claremont mortgage). The repayments on the NAB Claremont loan and mortgage were deducted directly from the mother's personal cheque account with NAB at its Claremont branch (the mother's cheque account).
In late 2003, around the time of the loan offer, the mother was living independently at the Claremont property (she still does). She operated a cheque account. She wrote with a firm and steady hand. She had a driving licence with expiry date November 2004. She said in evidence that she had 'not been able to drive for a number of years', although she did not suggest that she was not still driving when the events the subject of these proceedings occurred, in late 2003 and early 2004.
The daughter visited the mother frequently and took her shopping. The mother also took short walks by herself. She was in reasonable health. The son only visited her about once a month, but telephoned her every other day. There is no evidence that the son in Sydney had frequent or close contact with the mother. She had no close friends as confidants in the community. I would add that it is, I think, common knowledge that at that age in life, a person may well find herself with limited social relationships as friends pass away.
The mother's first language is Dutch but she spoke English fluently.
The Claremont property is a strata title unit. It is in a residential village for people over 55 years of age. It is designed for people who are capable of living independently. It is not a 'retirement village' for the purposes of the Retirement Villages Act 1992 (WA), and it does not have all the facilities associated therewith.
By about 28 August 2003 the NAB had issued a notice of default under the NAB Claremont loan and a notice regarding possible enforcement of the NAB Claremont mortgage, including possession or sale of the Claremont property. The circumstances are referred to in the next section of these reasons.
After the NAB Claremont loan, and the NAB Claremont mortgage were discharged, in February 2004, the mortgage payments to the bank were first paid by the son directly, and then deducted from the mother's cheque account. The son paid moneys into the mother's cheque account for the purpose of enabling the periodic deductions to be made to the bank from that account. The mother was unaware of the repayments being made to the bank. All the bank statements for the mortgage were sent to the son's address in Collie. By July 2006, the son was unable to continue to arrange for the servicing of the loan, and default was then made under the loan and the mortgage.

The son, his debts and his divorce

In 2002, the son and the wife split up and an acrimonious property dispute ensued.
At all material times, prior to 2003, the son was a veterinary surgeon in Collie. He ran the practice through a company owned by himself and his then wife. The practice was located on a property in Lefroy Street, Collie, owned by the son. The son and the wife also owned a farm, as their matrimonial home, in Preston Road, Collie. Both properties were mortgaged to NAB to secure the practice's overdraft. The company operating the practice also had other substantial debts, including a large debt owed to a veterinary drug supplier. This debt, and the other debts of the practice, were secured by personal guarantees from the son.
By mid to late 2003, creditors of the practice were pressing for payment. The drug company had obtained judgment against the son on the guarantee for approximately $130,000, and had served a bankruptcy notice on him on 18 August 2003.
By about August 2003 the son was in default in the sum of approximately $135,000 under the mortgage over the Lefroy Street property from which the practice operated. This caused NAB to issue a notice of default under the NAB Claremont loan. The notice of default stated in effect that unless the son paid the amount due under the mortgage over the Lefroy Street property, enforcement proceedings may be taken by NAB to recover payment in full under the NAB Claremont loan. There was a corresponding notice under the NAB Claremont mortgage to the effect that if the son did not remedy the default under the Lefroy Street property mortgage, all amounts under the NAB Claremont mortgage would become payable on demand, and if not paid when demanded, NAB may commence enforcement proceedings including taking possession of or selling the Claremont property.
By 2003, the son had instructed Mr Michael Meegan of Butlers Solicitors to act for him.
Around this time, a proposal emerged for the son to restructure his debts and at the same time settle the dispute with his former wife by undertaking further borrowing. The intention was that he would borrow money to pay off the practice overdraft, and to discharge the mortgage to NAB over the matrimonial home. That would allow the matrimonial home to be transferred to the wife unencumbered. The intention was that the wife would then raise $95,000 on the strength of the matrimonial property. The wife was to raise $95,000 by immediately obtaining a fresh mortgage over the matrimonial property, or by later selling it if necessary, and paying that amount to the son. The $95,000 from the wife was to be used by the son towards repayment of the drug company debt.
By this proposal, it was intended that the son would avoid being bankrupted by his creditors, and could also settle with the wife. The proposal was refined over time and not all its details are entirely clear. In substance, however, initially the idea was to borrow only the amount necessary to pay out the Lefroy Street mortgage debt, using any value inherent in the practice, and the Lefroy Street property, as security. That required a financial report on the practice which the son's accountant would not provide. When that proved impossible, the proposal evolved to its final form in which the fresh borrowing was to repay not only the Lefroy Street mortgage debt, but also the NAB Claremont mortgage debt, on the basis that the security for the new borrowing would be the Claremont property.

The essential features of the proposal were developed by the son's lawyer Mr Michael Meegan of Butlers, solicitors.
In the circumstances described more fully later in these reasons, the son and the mother entered into the loan agreement and granted the mortgage over the Claremont property. After the payment of disbursements and other amounts to certain persons, (including Butlers' fees of $15,000) the advance from the bank was used to refinance the son's debts in accordance with the proposed settlement outlined above.
The intended efficacy of the proposal was soon undermined, however, because the wife was unable to raise the $95,000 which had been intended to be used by the son to discharge the debt owing to the drug supplier. Without this additional money, the son could not meet that debt. As a consequence, the debt to the drug supplier remained unpaid and the drug supplier proceeded to bankrupt the son in October 2004.
Despite the bankruptcy, the son managed to deposit sufficient moneys into the mother's cheque account with NAB to allow the loan to be serviced until default was made in July 2006.
The bank did not prove in the son's bankruptcy. Instead, it relied on its security.

La Trobe - the bank's representative

The loan agreement was entered into by La Trobe Home Loans of Australia Pty Ltd (La Trobe) as the 'Credit Providers Representative'. It was common ground in these proceedings that La Trobe was the agent for the bank.

FASA - mortgage aggregator

At all materials times, Finance Analysis Services of Australia Pty Ltd (FASA) was a mortgage aggregator. The materials lodged with La Trobe in relation to the loan were lodged on a La Trobe document headed 'La Trobe New Loan Lodgement Form on behalf of FASA'. Mr Richard Curia was the accredited agent or representative for FASA who lodged the form.
I consider later in these reasons whether FASA, by Mr Curia, acted as agent for La Trobe in the transaction and whether Mr Curia's knowledge is to be imputed, pursuant to the principles of agency, to La Trobe.

The making of the loan by the bank

In 2003 Ms Debbie Kiely and Mr Richard Curia were loans officers employed with Medfin Australia Pty Ltd (Medfin), a financier which specialised in providing credit to the broader medical community including doctors and veterinarians. As noted above, Mr Curia, but not Ms Kiely, was an accredited representative of FASA. (Mr Curia also had a finance broker's licence.)
Ms Kiely first met the son in 2003 at a conference for veterinarians at Gloucester Park. In October 2003 she was asked to assist in relation to refinancing the debts of the son's practice and the settlement with his wife. I set out later in these reasons the details of what Ms Kiely knew and of her communications with Mr Curia. In substance, she was told by the son of the proposal to restructure debts of the practice, including the settlement with the son's wife. She was asked by the son initially to seek finance to pay out the practice overdraft on the basis that the security would be the son's assets only (relevantly the practice and the Lefroy Street property), and not the Claremont property. She sought to arrange finance with Medfin. That proposal failed when Ms Kiely could not obtain a financial report on the practice from the son's accountant.
Ms Kiely had an adjoining office with Mr Curia. Mr Curia told her that he also worked for FASA which he said was an agent for La Trobe, and that he could help.
In about October/November 2003, Mr Curia provided Ms Kiely with La Trobe documentation for a loan application. She filled it out, in consultation with Mr Curia, using the details that had been used for the proposed loan application to Medfin. She posted it to the son in Collie.
When the completed loan application documentation was returned to her, Ms Kiely gave it to Mr Curia, who then communicated with La Trobe. Ms Kiely never had any direct communication with either La Trobe or the mother.
I describe in more detail subsequently the extent of Mr Curia's knowledge at this time.
Upon receiving the completed loan application documentation, Mr Curia filled out another La Trobe standard form document entitled 'La Trobe New Loan Lodgement Form'. He also prepared a diary note. The diary note described the customer as 'Dr and Mrs Van Den Bergh'; it referred to the address of the security property; it referred to a loan amount of $192,000, for a term of 20 years, with a variable interest rate; it described the facility as 'Lite Doc'; and it contained the following comments:
The clients seek approval to refinance their existing investment property. The equity is required for investment purposes. The LVR [loan to value ratio] is estimated to be 60%. Dr Van Den Bergh is a practising Vet in Collie WA.
He also filled out a La Trobe 'Application Checklist'. In that document, he described the 'loan purposes' as 'investment'; in relation to that part of the form dealing with 'Evidence of Income', he ticked the 'Lite Doc' box and he did not tick the box which referred to the existence of 'Rental Income'.
On 20 November 2003 Mr Curia faxed to La Trobe the New Loan Lodgement Form, together with:
•the diary note;
•the La Trobe 'Application Checklist';
•an 'Application for Mortgage Finance' signed by the mother and the son - it contained provision for disclosure of monthly income produced by, relevantly, the Claremont property, but this part was left blank;
•an authority to obtain credit information signed by the mother and the son;
•a schedule with principal and interest details in respect of a 'National Tailored Home Loan';
•a one‑page proforma Loan Repayment Ability Declaration - this referred to the son as the borrower, it contained no information with respect to the mother, and it was signed by the son only;
•a letter from Mr G Hall of RSM Bird Cameron, the son's accountant, dated 20 November 2003, referring to the son as the borrower;
•a resident's information booklet about the property as part of the Regent Park Estate;
•title searches of the property;
•a letter by Mr Meegan of Butlers to Ms Kiely dated 18 November 2003 enclosing the residential booklet and the title searches. The letter from Mr Meegan referred to the son as being Butlers' 'client'. It made no mention of the mother.
The above material was received by Ms Michelle Bannister (nee Worthington), whose position was 'Manager - Underwriting' at La Trobe's office in Victoria.
Mr Meegan's letter to Ms Kiely dated 18 November 2003 indicated that although the son was under 55 years there was no legal impediment to him owning an interest in the Claremont property. The residential booklet recorded that lots in the development could only be used, relevantly, as a residence for people capable of independent living aged 55 years or over.
Other, unidentified, staff at La Trobe conducted standard credit checks on the mother and son on or about 20 ‑ 21 November 2003 by obtaining credit reports from Baycorp Advantage Business Information Services Ltd. These reports showed no defaults by the mother or the son.
Following consideration of the loan application, Ms Bannister sent a letter by facsimile on 21 November 2003 addressed to the son and the mother care of FASA. It was received by Mr Curia. By this letter La Trobe indicated it was prepared to proceed generally with the application for finance, subject to various conditions of the bank and subject to certain specified conditions, which included, relevantly, an acceptable valuation of the property and evidence of six months' satisfactory financing of the debts to be refinanced. Ms Bannister referred to this communication as a conditional approval of the loan.
On 25 November 2003 La Trobe received from Mr Curia a cheque drawn by the mother on the mother's Claremont cheque account with NAB for $300, which was used to pay for the cost of a valuation of the property. The cheque had the appearance of being signed by the mother in a firm and confident hand. La Trobe also received on that day copies of NAB statements in respect of a 'National Tailored Home Loan' addressed to the mother at the Claremont property, on which the account names were recorded as the mother and the son, for the period 25 September 2002 to 24 September 2003. The statements showed the monthly payments on the NAB Claremont loan being made from a nominated account being the same account on which the $300 cheque was drawn, ie the mother's Claremont cheque account.
On 27 November 2003 a valuation of the Claremont property was requisitioned.
On 12 December 2003 Ms Bannister received a facsimile copy of a valuation of the Claremont property dated 9 December 2003, which valued it at $310,000. The valuation indicated that the 'current use' of the property was 'residential'.
On 16 December 2003 another officer at La Trobe conducted a national personal insolvency index database search in relation to the mother and the son. The searches indicated that neither the mother nor the son had previously been insolvent.
Ms Bannister was satisfied that all the conditions stipulated in the conditional approval had been satisfied. She was not, however, involved in the decision to approve the loan application.
Prior to the loan being offered by the bank, there were a number of alterations made to the signed Application For Mortgage Finance. None of the changes were initialled by the son or the mother. The amendments showed that the existing mortgage of $42,000 was owed to NAB, that that mortgage was to be repaid, that after legal costs of approximately $3,000, a sum of $147,000 was required for 'other' purposes, and that the whole 'transaction cost' of $192,000 was to be funded by the loan from the bank. The amendments also recorded changes to the 'preferred interest rate' and that it was to be 'variable', and adjusted the reference to the son's 'gross weekly income' of $1,600 per week to $1,538.46 per week.
According to Mr Coates, La Trobe's officer in charge of the recovery of the loan who gave evidence, but who had no involvement in the making of the loan, it was possible that the changes were made in the La Trobe office. The changes had found their way into the documentation by the time La Trobe instructed the bank's solicitors in relation to the transaction, on 16 December 2003.
The circumstances in which, and the persons by which, the changes were made remained unexplained in the evidence from the bank. I infer that the changes were made at La Trobe's office, by La Trobe officers involved in, or responsible for, the decision for final approval of the loan.
By letter dated 16 December 2003, addressed to the son and the mother, La Trobe offered the loan on terms, including a 25 year period for repayment and a variable rate of interest with security over the Claremont property. The offer contained special conditions, including conditions requiring receipt of a copy of a driver's licence for each of the mother and the son, or other 'evidence of identification', and proof of repayment of the 'Existing National Australia Bank Home loan' prior to the loan being drawn down. The letter of offer was also subject to general conditions, which included a provision, in bold type, to the effect that it was recommended that the borrowers obtain independent financial and legal advice. The letter was issued by 'Barry O'Connell, Head of Credit', although it appears to have been signed on his behalf by Ms L Mitchell.
The letter of offer dated 16 December 2003 was sent by La Trobe to Mr Curia, who forwarded it to the son in Collie. Mr Curia was asked by La Trobe to deal with La Trobe's solicitors in respect of the special conditions contained in the letter of offer and certain other matters.
Also on 16 December 2003, La Trobe sent under the authority of Mr O'Connell, Head of Credit, a letter of instruction to its solicitors. The enclosure to the letter included the amended 'Application for Mortgage Finance'.
The bank did not call as a witness Mr O'Connell or the person or persons under his authority who were involved in the final decision to make the offer of loan.
On 20 December 2003, each of the mother and the son signed and dated their acceptance of the offer of the loan on the page designated for that purpose in the letter of offer.
Around this time the son was given a statutory declaration for signature by himself and the mother. The statutory declaration included statements to the effect that the son and the mother were the registered proprietors of the property. The statutory declaration included the following provisions:
STATUTORY DECLARATION
We, Jules Joseph Vandenbergh of 7/70 Chestnut Court COLLIE WA 6225 and Maria Hubertina Vandenbergh of 7/70 Chestnut Court COLLIE WA 6225 do hereby solemnly & sincerely declare as follows:
1.We are, or about to be, entitled to be the registered proprietor(s) of the land known as 9/80 Mooro Drive, MOUNT CLAREMONT WA 6010 being the whole of the land comprised in Certificate of Title Volume 1885 Folio 009 which will constitute a first security for the loan from Permanent Mortgages Pty Ltd A C N 097176362. ('Bank')
2.On draw‑down of the loan, the property will be free from all other encumbrances and the Bank's mortgage will constitute a first security over the property.
…
17.We acknowledge receipt of a copy of the Memorandum of Common Provisions.
…
AND WE HEREBY authorise and direct the Bank's Solicitors to deduct from the loan their disbursements and to date and complete the documents executed by me/us in relation to the loan as may be required to give effect to the agreed terms and conditions of the loan.
AND WE HEREBY authorise and direct the Bank's Solicitors to date and complete the documents executed by me/us in relation to the loan as may be required to give effect to the agreed terms and conditions of the loan.
The son and the mother initially signed the declaration before the sister. The son's evidence, which I accept in this regard, was as follows:
In the case of the first statutory declaration, I initially took my mother to witness it before my sister. Only after we had signed we read and realised it had to be witnessed by a solicitor or someone qualified. I telephoned Butlers office and went to their offices.
Consequently, on 30 December 2003, the son and the mother signed the statutory declaration before Mr Butler, the principal of Butlers, solicitors. Mr Butler also signed a certificate that day to the effect that he had witnessed the son's and the mother's execution of the security documents, and that he had identified them. In that regard he ticked the box stating that he had 'sighted driver's licence(s)', and ticked another box in which he wrote 'know as client'. He did not specify in the form who he knew as a client and who he had identified from a driver's licence. The mortgage signed by the son and the mother, and witnessed by Mr Butler that day, gave the address of each of the son and the mother as the son's address in Collie.
In his evidence Mr Butler said, in effect, that from his review of the file and from his own limited involvement in his firm acting for the son in this matter, his firm was not acting for the mother in this transaction, and that neither he nor his firm ever advised the mother. In cross‑examination, Mr Butler, when asked whether there was any discussion about the mortgage assisting the son from going bankrupt, said that he had no memory of that, but that he could not say 'definitively what happened'. He also said that whilst he only had a vague recollection of this occasion, it was his standard practice to enquire of declarants whether they had read the declaration and declared it to be true to the best of their knowledge, information and belief. He said that he would not have witnessed the statutory declaration had both the mother, and the son, not responded affirmatively. I accept that evidence. I also accept that he subjectively did not see it as his firm's role to advise the mother, and that the mother did not receive any advice from him, and that there was nothing on the file to indicate she had received any advice from his firm.
Also, on 30 December 2003, the son and the mother signed a document authorising the surplus funds from the loan to be paid into the son's bank account at Collie. The authority was provided to La Trobe. As indicated below the mother and the son subsequently signed further directions with respect to the application of the loan proceeds prior to settlement.
On 31 December 2003, Mr Butler prepared an application to the Land Titles Office to remove a caveat over the Claremont property which had been lodged by the son's wife. The application was signed by the son and the mother.
On or about 7 January 2004, La Trobe received the signed acceptance of the letter of offer, signed by the mother and the son. Also on 7 January 2004, Ms J Johnstone, whose title at La Trobe was 'Senior‑Lending', caused a further letter to be sent to La Trobe's solicitors in relation to the satisfaction of the special conditions of the letter of offer. She subsequently made notations on the bank's copy of the letter of offer as she noted the satisfaction of the special conditions. I infer that Ms Johnstone was responsible, under the authority of Mr O'Connell, for ascertaining that the bank's conditions for lending had been satisfied and for confirming that, from La Trobe's point of view, everything was otherwise in order to proceed to the settlement of the loan and the taking of the mortgage.
On 16 January 2004, Ms Johnstone faxed Mr Curia confirming that she was still awaiting receipt of the mother's driving licence 'or equivalent evidence of identification'. On 19 January 2004, La Trobe received a copy of the driver's licence and passport details of the mother. This fact was noted by Ms Johnstone on the bank's copy of the letter of offer. The mother's driver's licence showed her date of birth, address and her signature. The son's passport showed his date of birth as 1950 and his driver's licence showed his address at Lefroy Street, Collie. On 16 January 2004, La Trobe received the original, signed, application for finance, the faxed copy of which it had first received on 20 November 2003. Ms Johnstone also noted this on the bank's copy of the letter of offer of the loan. It was the version without the alteration to which I have referred in [50] above.
Given her role and responsibility in the transaction (see [64] above), I infer that Ms Johnstone, in reviewing the 'evidence of identification' provided by the mother's driver's licence, checked her name, address, date of birth and signature as they appeared on the driving licence, against the details contained on La Trobe's file in the 'Application for Mortgage Finance'. I also infer that she accordingly noticed that the mother's address on the driving licence was the Claremont property and drew Mr O'Connell's attention to that fact.
Settlement of the transaction was scheduled for early February 2004. On 5 February 2004, Mr Michael Meegan of Butlers, solicitors, faxed a letter to the solicitors for La Trobe. The letter stated:
Settlement for Marie and Jules Joseph Vandenbergh
We act on behalf of Jules and Marie Vandenbergh in relation to a settlement for a loan our client has obtained from La Trobe Ltd.
Could you please contact Michael Meegan ... urgently to discuss the progress of this matter for the settlement.
It is to be inferred that one of the matters Mr Meegan was concerned about was the payment of Butlers' fees for acting for the son in the family law dispute and advising on the transaction to refinance the son's debts. Mr Meegan evidently wanted the firm's fees to be paid from the proceeds of the loan from the bank, and was not content for Butlers to remain an unsecured creditor of the son.

On 9 February 2004, Mr Meegan of Butlers, obtained an authority, signed by the son and the mother, authorising the payment of $15,000 from the settlement to Butlers solicitors. There was also another authorisation for the payment of $10,000 to an account with NAB in Victoria. There was no suggestion that this account in Victoria had anything to do with the mother. I infer that it was an account held by the son, or by one of the son's creditors who required payment.
Settlement occurred on 9 February 2004. The payment to NAB was $150,000 (not just $43,000).
The net amount of $190,105 from the loan was disbursed as follows, according to the bank's ledger card:

TRUST ACCOUNT

*Date*	*Particulars*	*Folio*	*Debit*	*Credit*	*Balance*
9/02/2004	La Trobe Home Loans Advance	$190,105.00	$190,105.00
17/02/2004	Purcell Partners	EFT	$993.50	$189,111.50
10/02/2004	State Revenue Office	013832	$715.50	$188,396.00
10/02/2004	Land Titles Office	013833	$231.00	$188,165.00
ASIC	$0.00	$188,165.00
10/02/2004	Bank Cheque: National Australia Bank	DD	$150,000.00	$38,165.00
10/02/2004	Trust Cheque: Butlers, Barristers & Solicitors Trust Account	013879	$15,000.00	$23,165.00

10/02/2004

Trust Chq: National Credit Management Trust

Account Victoria

013880

$10,000.00

$13,165.00

10/02/2004

Trust Cheque: J Vandenbergh

013881

$13,165.00

$0.00

La Trobe paid Mr Curia, as a representative of FASA, commission for his work in the transaction.
No fee or commission was payable, or paid, by the son and mother to Mr Curia.

La Trobe's Mortgage Acceptance Criteria, 'Lite Doc' loans and La Trobe's Starter Kit

Mortgage acceptance criteria

In 2003/2004 La Trobe provided to mortgage originators what was described as a 'Starter Kit' containing information about, and criteria relevant to, La Trobe's lending practices.
The Starter Kit in evidence, tendered by the bank, is dated 23 March 2007. I infer that it is not materially different from the Starter Kit that applied in 2003/2004, given that the bank tendered the document and given that each of the bank's witnesses identified that document as the relevant Starter Kit for the purposes of these proceedings (Mr Coates, exhibit 2, pars 10 ‑ 11; Ms Bannister, exhibit 3, pars 11 ‑ 12; Mr Curia, exhibit 4, pars 16 ‑ 17).
In the section headed 'Lending Acceptance' (TB 28 ‑ 34), La Trobe's 'Mortgage Acceptance Criteria' included the following:
3.Applicants
...
Loans will not be approved if the mortgage is in the name of a third party. i.e.. If a loan is to be given to Mr A. Smith, the mortgage cannot be in the name of Mr A. Smith's parent.
...
7.Verifications
You must verify, to the satisfaction of La Trobe, debt service capacity, equity and credit standing. This verification must be set out in the loan submission. Please note that casual employment income is not accepted by La Trobe or our Mortgage Insurers.
In relation to 'debt service capacity' mentioned in cl 7 of the criteria, La Trobe had different requirements depending upon the nature of the loan product offered. A product known as a 'Lite Doc' loan had less extensive verification requirements than certain other loan products.

'Lite Doc' loans

According to the bank's evidence, a 'Lite Doc' loan is a loan in which the borrower, typically a self‑employed person, does not have available full up‑to‑date financial statements to support the loan application and the lending institution will consider the loan application, based on limited information. The limited information takes the form of a signed declaration by the borrower of their income and their declared capacity to repay, plus a certificate in the form of a letter from the borrower's accountant regarding the borrower's income and expenditure, and ability to repay.

La Trobe's proforma Repayment Certification for 'Lite Doc' loans

La Trobe's Starter Kit contained a proforma 'Repayment Certification - Lite Doc'. The document comprised two pages. It contained recommendations of independent legal and financial advice. It also provided, on the first page, for details of borrowers' names to be inserted, for details of the loan, for certification of, inter alia, gross taxable income of the borrowers, and for the page to be signed by 'all Borrowers'. It also contained a provision 'I/We am/are not a pensioner/pensioners …'. There was also a provision (cl 4) to the effect that La Trobe or its agents or brokers had not provided financial product advice.
The second page contained, inter alia, a declaration to the effect that the application for loan had not been submitted to another lender (cl 7), and that the borrower/s had not had prior judgments against them or defaulted on loans or were insolvent (cl 11).

Proforma accountant's letter for 'Lite Doc' loans

La Trobe's Starter Kit also contained a proforma letter, setting out the details to be contained in a letter from the borrower's accountant, in respect of 'Lite Doc' loans. It included these terms:
4.I know the Borrower's income and expenditure and based on that knowledge and my understanding of the Borrower's financial position I am of the opinion that the Borrower is able to repay the loan in accordance with its terms and can do so without substantial hardship.
5.I am not aware of any factors which may affect the Borrower's ability to make the repayments or which may cause substantial hardship to the Borrower to make repayments.
6.I confirm that the Borrower is a registered tax payer with the Australian Taxation Office ('ATO') and have lodged their most recent tax return for ATO assessment of income tax.

The loan servicing declaration provided to La Trobe

It is convenient to record at this point that La Trobe received a 'Loan Repayment Ability Declaration' that the son signed on 17 November 2003. That document did not, in certain respects, correspond with the format or terms of the proforma 'Repayment Certification - Lite Doc' in the Starter Kit.
In this regard, the mother, in this case, drew attention in submissions dated 6 November 2009, to the following differences. First, attention was drawn to the fact that the 2003 declaration document signed by the son did not expressly incorporate a statement to the effect that the borrower/s were not pensioners. Secondly, it was submitted on the mother's behalf that cl 7 and cl 11 on the second page of the Starter Kit proforma document (referred to in [79] above) were omitted. It was said, in effect, that the matters omitted 'reflect the requirements of equity'.
Thirdly, attention was drawn to the fact that the 'Loan Repayment Ability Declaration' signed by the son did not include a statement to the effect that the borrowers had not received financial product advice.
None of these three points were put to the bank's witnesses for explanation in cross‑examination. As to the first point, bearing in mind the standard form, multiple choice nature of the wording, I would not construe it as necessarily reflecting an intention by La Trobe not to lend to pensioners. It may be construed as indicating that if there are multiple borrowers, one at least must have a taxable income and not be a pensioner.
As to the mother's second point, the substantive terms of cl 7 and cl 11 of the 2007 document were, in any event, contained in the Application for Mortgage Finance, signed by the mother and the son in 2003.
The third point is said to indicate that the bank accepted that brokers may act 'outside the Plaintiff's attempt to prevent the broker being held to be its agent'. I deal with agency later in these reasons, but I do not regard this matter as being of any weight in that analysis.

The accountant's letter provided to La Trobe

The letter from the son's accountant received by La Trobe did not conform with the proforma letter in La Trobe's Starter Kit. It was in these terms:
Dear Sir/Madam,
Jules Joseph Vandenbergh
I am a practising accountant and a member of the Institute of Chartered Accountants in Australia.
I am accountant to Jules Joseph Vandenbergh and his operating entity Eclipse Holdings Pty Ltd as trustee for The Vandenbergh Trust trading as Collie Veterinary Hospital.
I understand that Mr Vandenbergh has applied for a loan of $192,000 through La Trobe Home Loans Australia repayable by monthly installments [sic] of $1460 over 25 years at an interest rate of 7.8% per annum variable interest only.
I know the borrower's income and expenditure over the last few years. Whilst his track record may indicate an ability to repay the loan we can not [sic] give an opinion that the borrower can repay the loan with or without financial hardship.
We are aware that Jules Vandenbergh has practiced [sic] as a veterinarian for 15‑16 years, and for a significant period of that time has successfully operated a veterinarian practice in Collie.
We can not [sic] give an opinion predicting any factors which may affect the borrowers [sic] ability to make repayments or which may cause substantial hardship to the borrower to make repayments. We are not in the business of providing a warranty on whether the borrower can make the repayments.
It is to be noted that the letter did not express an opinion of the kind envisaged by the proforma accountant's letter.

The bank's knowledge without imputation of Mr Curia's knowledge

It is common ground that La Trobe's knowledge is the bank's knowledge.
This section of the reasons deals with La Trobe's knowledge based on the documents it obtained or was given for the purposes of this transaction. It does not address any issue of whether Mr Curia's knowledge is or should be imputed to La Trobe (and hence to the bank).

Information in the loan application and related documents

The documents received and processed by La Trobe for the purposes of entering into the loan agreement and the mortgage, disclosed inter alia, on their face, the following information:
•the mother was aged 85 years and single;
•the mother had no stated employment history;
•the Claremont property was registered in the names of the son and the mother as joint tenants;
•the Claremont property was mortgaged to NAB in the sum of approximately $42,000 and was worth approximately $310,000;
•the son was a vet living in Collie;
•the Claremont property was part of a residential retirement village;
•the Claremont property did not produce any income;
•the loan was to be used to pay out the NAB Claremont loan and that after settlement fees and the like, the surplus was to be used for 'investment';
•the surplus to be used for 'investment' was to be paid to the son;
•neither the mother nor the son had any real estate assets other than the Claremont property;
•the only other substantial asset was the veterinary business of the son, recorded in the application as being worth $200,000;
•according to the son, his gross income as a vet was $80,000 per annum.
Integral to the mother's case are allegations to the effect that the bank knew that the borrowers were in the relationship of aged mother/son, that the bank knew that the Claremont property was the mother's home, and that the bank knew that the mother was not being independently advised. It is convenient to set out next my findings at this point on these three fundamental aspects of the mother's claim. I reiterate that I am not dealing here with any question of knowledge imputed to La Trobe via Mr Curia.

Relationship of mother/son

I accept the mother's submissions that La Trobe knew that the mother and son were parent and child. That matter was ultimately not put in contest by the bank.
In relation to La Trobe's knowledge that the mother and the son were parent and child, that is to be inferred from the identity of their surnames, and the fact that they were joint tenants - combining to indicate a likely family relationship. Also, the information as to their respective ages indicated that the family relationship was more likely than not to be aged mother and son.

The mother's home

In relation to whether the bank knew that the Claremont property was the mother's residence, the following matters are relevant. First, Mr Curia in his diary note referred (inexplicably) to a 'refinance of their existing investment property'. On the other hand, the Application Checklist which he completed left blank the box regarding 'Rental Income'. Secondly, the Application for Mortgage Finance referred only to the son's address in Collie, although no provision was made in its layout for separate addresses for different applicants. Also, the son was described as a self‑employed vet in Collie, which could suggest that the residential address provided was that of the son.
Thirdly, the statutory declaration and mortgage instrument signed by the mother and the son on 30 December 2003 indicated that their address was the son's Collie address. There is no direct evidence of the provenance of these documents, although I infer that they were created by someone at La Trobe who took the address from the address shown on the Application for Mortgage Finance. That means that documents were drawn up using the one address given. It does not, of itself, necessarily mean that La Trobe did not know that the Claremont property was the mother's residence. As noted above, the form made no provision for separate addresses.
Fourthly, the Application for Mortgage Finance indicated the Claremont property was not producing income and that it was not geared to any substantial extent, and, as noted above, the Application Checklist omitted reference to any rental income. These matters would suggest that it was not being used as an investment property. Fifthly, the NAB statements evidencing proof of service of the NAB Claremont mortgage describe the loan account as a 'National Tailored Home Loan' and showed the mother's address as being the Claremont property as at 24 September 2003. The bank's letter of offer dated 16 December 2003 also contained a condition that the 'Existing National Australia Bank Home loan … be repaid in full'. Mr Coates (the recovery officer who gave evidence) agreed that this suggested that it was a loan to acquire a home, but said it was not 'always' that. I infer from this evidence that, generally speaking, but not necessarily always, a banker would understand a reference to a 'home loan' in a banking document to be a loan used to acquire a home.
Sixthly, the Claremont property was known to be a retirement village for residential use of persons over the age of 55 years. The mother fitted that description.
I would infer that, in bringing a practical and commercial eye to the transaction, the La Trobe officer responsible for final approval of the loan offer, is at least likely to have suspected that the Claremont property was the mother's residence, in light of the above matters. I find that any doubt about that was subsequently removed prior to the making of the advance and the taking of the mortgage by Ms Johnstone's consideration of the mother's driving licence. The mother's address shown on the driver's licence was the Claremont property. Accordingly, I find that La Trobe, at the time of making the advance and taking the mortgage, understood that the Claremont property was the mother's residence.

The mother's lack of independent advice

I infer that La Trobe knew that the mother did not have independent legal advice. La Trobe knew that solicitors were involved for the son and the mother in the settlement of the transaction. It also knew that certain documents signed by the mother and the son had been witnessed by a solicitor. It had also recommended the obtaining of legal advice and could assume that both borrowers had obtained legal advice.
It could not, however, have thought that the mother had the benefit of independent advice as there was no indication that the mother was being separately advised from the son. Mr Coates (La Trobe's recovery officer) said in effect in cross‑examination that there was nothing to indicate that the mother received independent legal or financial advice (ts 71).

Jones v Dunkel

Furthermore, Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 indicates that where a particular inference is fairly available on the evidence, the court may more readily draw the inference by the unexplained failure of a party to call a witness who is likely to have relevant knowledge and may be regarded as having been 'in the camp' of that party: Cross on Evidence (loose‑leaf) [1215]. In my view it is appropriate for me to have regard to the fact that the bank did not call evidence from the person or persons who were responsible at La Trobe for making the final decision to make the loan offer, and who were responsible for ascertaining that the special conditions had been satisfied. I am assisted in drawing the inferences that I have (see [66], [99] ‑ [100]) by the bank's failure to call that person or those persons as witnesses, although there is, I think, sufficient evidence to enable the inferences to be properly drawn in any event.

Mr Curia's knowledge

Mr Curia and Ms Kiely both worked at Medfin at the relevant time. They had adjoining offices. They spoke about the son and his need for a loan. Mr Curia said he could help.
Ms Kiely's evidence, which I accept and which was not challenged in cross‑examination in this regard, and which I find accords with the probabilities, was to the following effect regarding what she knew and told Mr Curia.
Ms Kiely told Mr Curia 'everything [she] knew including that [the son] was desperate to meet debts and pay out a bank overdraft'.
She knew that the son was in negotiations with creditors of his practice. She knew that the son had originally wanted only to put up his vet practice and its premises as security, but that proposal could not proceed because the son's accountant would not provide a financial report on the vet practice. She knew the proposed loan was to pay out a substantial overdraft debt on the son's practice, and to enable the son to transfer the matrimonial home to the wife so that the wife could in effect facilitate payment of the debt owing to the drug company. Ms Kiely did not know all the details of the debts. There is no suggestion that she knew that NAB had issued a notice of default under the NAB Claremont loan and had issued a corresponding notice under the NAB Claremont mortgage, or that the son had a judgment against him or was the subject of a bankruptcy notice. As I have noted, however, she knew that the son was 'desperate to meet debts and pay out a bank overdraft'.
She also knew that the Claremont property was his mother's home, and that the mother had paid for it apart from a $43,000 shortfall for which she obtained a mortgage from NAB, which the son had been required by NAB to 'guarantee'. She understood that the son had been made a joint owner in consequence of the NAB's requirements.
She and Mr Curia discussed the Claremont property as a potential source of security for financing for the son, and they agreed that very few lenders, including Medfin, would accept it as security. Mr Curia in chief said in effect that it was understood that 'no other lender would finance this'.
Ms Kiely said, in relation to the use of the mother's home as security:
I did not know, or think of, what might be the significance of this, other than that his mother's property would have to be put as security for any loan from La Trobe if it was to have any chance of success. In the end it was decided she be made a joint borrower and sign the application as well. Richard Curia and I discussed this. I remember the discussion because I had no prior experience of any similar application.
Ms Kiely completed the La Trobe loan application documents provided to her by Mr Curia in consultation with Mr Curia (who had familiarity with the La Trobe documents).

In substance Mr Curia, through discussions with Ms Kiely, knew that:
(a)the Claremont property was the mother's residence;
(b)the mother had bought it using her money apart from a $43,000 shortfall;
(c)the son had contributed no equity to the Claremont property;
(d)the son was borrowing to refinance the son's practice debts which he was 'desperate' to meet, and to settle with his wife;
(e)the settlement with the wife served the son's broader goal of attempting to deal with the debts of the practice, because the settlement with his wife was intended to facilitate payment of the drug company debt.
Mr Curia appeared to me to have generally a poor recollection of events. Overall, his evidence did not appear to me to be materially different from Ms Kiely's evidence except that it was less detailed, and save for the following matter. He said in chief that Ms Kiely told him that the son (not the mother) 'wanted to raise money, although she was not sure what it was for'. He was not directly cross‑examined on that part of his evidence. However, I am unable to accept that he was not told what it was for, in light of Ms Kiely's evidence, the fact that he admitted in cross‑examination that he discussed the application with her, and his evident lack of memory (ts 94): cf Bulstrode v Trimble [1970] VR 840, 849. He was also somewhat loose in his answers in cross‑examination. When asked about the accountant's letter in support of the loan application, he said (ts 98), 'it clearly says his track record indicates an ability to repay the loan'. When it was put to him that the letter did not 'clearly' say that at all, and that it merely said it 'may' indicate an ability to pay, he shrugged off the inconsistency in his answer and simply said, 'yes, that's fine'. To the extent that his evidence may have differed from Ms Kiely's in relation to their communications, I prefer Ms Kiely's evidence. In so finding, I am not unmindful that there was an error in Ms Kiely's witness statement about the transaction involving a reverse mortgage. Nevertheless, as a whole, she struck me as a truthful and reliable witness.
I should add here that I make no finding that Mr Curia (or for that matter Ms Kiely) were knowingly a party to any false statements in the application for finance. In this regard, I am mindful that Mr Curia's statement in his diary note that the loan was to 'refinance … their existing investment property' and that the 'equity' was for 'investment purposes' is, at least arguably, somewhat curious. It might seem unusual, for example, if it was thought that 'investment purposes' covered in a general sense the refinancing of the son's practice, and that the son's property from which the practice operated could be regarded as an 'investment property', in the context of the application. The Claremont property was itself clearly not an investment property. Nevertheless there was no pleaded issue in the case, and nothing was suggested to Mr Curia (or Ms Kiely) in the witness box, to the effect that he (or she) was involved in making knowingly false statements to La Trobe. That question and any potential explanation were not canvassed in the trial. Accordingly, it is not appropriate to speculate on such matters.

The defendants' evidence

The mother's evidence - its nature and observations thereon

In relation to the mother's evidence, I make the following observations. First, she did not appear to be physically or mentally frail, although she appeared to be slightly hard of hearing. She arrived in court in a wheelchair, which indicated that she had some difficulty with mobility, but she was able to ascend the steps to the witness box holding on to the rail, and otherwise she gave the appearance of being in reasonably sound health. Also, despite her age, she appeared to be a lively and intelligent woman. Her increasing irritation at the cross‑examiner's questions in a particular area of her evidence was evident, and led at one stage to a sotto voce 'oh Christ!', which is not recorded in the transcript.
Secondly, she nevertheless appeared to me to be genuinely shocked by, and anxious over, the predicament in which she finds herself as a result of helping her son in 2003. She is greatly vexed by her current situation and, to some extent I think, annoyed at what has occurred. I find that her shock and anxiety has made it very difficult for her to think clearly and objectively about the train of events which led to the execution of the loan agreement and mortgage in late 2003/early 2004, and that in the witness box this has led her to adopt what appeared to be often a reflexive response by which she denied almost everything put to her, including leading questions asked by her counsel and what was contained in her witness statement and in a previous affidavit she had sworn in these proceedings in defence to a summary judgment application.
Thirdly, she gave evidence‑in‑chief by witness statement. Her witness statement was obviously drawn with an eye to the legal issues in the case, but it contained important explanations for her conduct to which she could not assent in the witness box in cross‑examination (ts 186). I formed the impression that her witness statement was not truly her own account of her recollection of the events and circumstances in question. In this regard, the following exchange which occurred in re‑examination is also pertinent:
Now, Mrs Vandenbergh, you have signed your witness statement?---Yes, I did.
Now, that was prepared for you by your lawyers, wasn't it?---I don't know about it.
You don't know who prepared it?---I don't think so. What is the usual procedure?
Did you talk to your lawyers and tell them what you knew about what had happened with Jules?---I did not. I didn't even know that it was prepared so - - -
This evidence stems, in my view, in part from the reflexive response to which I have referred, and in part because she thought her witness statement was a document prepared from various sources by others, to which her general assent or otherwise was required. I do not think she properly understood that her witness statement was supposed to be her own deliberative and first‑hand account of events. I make no serious criticism of the mother in that regard. It is a regrettable feature that can arise in cases where witness statements, prepared by the lawyers, are used as evidence‑in‑chief.
She was then asked:
You've read it over?---Of course I read it over.
And you've said that to the best of your knowledge it's true what is written?---Yes, to the best of my knowledge it's true.
I find that she adopted her statement as true 'to the best of [her] knowledge' in the sense that whilst she could not vouch for all the detail in it, it was true in that it encapsulated a number of broad matters which were true to her knowledge. One was that she acquired the Claremont property using her inheritance money and money borrowed from the bank, and that she did not know that the son was on the title to the property as a joint owner. Another was that she signed papers in 2003/2004 for the son at a time when he was involved in a settlement with his former wife. Another was that she was not familiar with the term 'mortgage'. Another was that she received no advice from the son's solicitors or other advice about what she was signing. Next, at the time that she did so, she thought that he was a successful vet, and she had no understanding that her assistance to the son could lead to the loss of her residence. Also, she never understood, until relatively recently, that the son had not been carrying on a financially successful veterinarian practice, and that he had in fact been made bankrupt.
Her lack of understanding that her assistance to her son could conceivably lead to the loss of her home is a matter to which I refer later.
Fourthly, her witness statement is largely drawn in negative terms. It states what she was not told and what she failed to realise, without providing direct evidence as to what, positively, she was told and what she positively understood (save to the extent mentioned below), when she was signing documents to assist her son. To that extent it lacks some cogency, because a proper appreciation of what she did not understand is, I think, informed by positive evidence as to what she was told and what she did understand.
The question of what, positively, the mother was told and what she thought she was signing when responding to her son's request to assist him in settling with his former wife, appears, indirectly only in par 34 of her witness statement:
I was never told why I was needed or what my involvement actually was. I did not ask because I just trusted [the son] in everything. I thought that he must need me as a second person to somehow take [the former wife's] place. (emphasis added)
This explanation in her witness statement, which was given to explain her conduct, namely that she thought she was 'a second person to somehow take [the former wife's] place' was one which she flatly and forthrightly rejected in the witness box.
She candidly recognised, in my view, that this explanation proffered for her conduct did not make sense. The result is that her witness statement provided no credible account of what she was positively told by the son as to the level and nature of the assistance he required, and her positive understanding of the nature of the assistance which she was providing.
Paragraph 49 of her witness statement was also expressed in the negative in these terms:
I was never told and never knew or understood that Jules was borrowing about $190,000 that he might not be able to repay and that I was agreeing to repay if he couldn't do so. (emphasis added)
Having regard to the emphasised words, this paragraph indicates not so much that the mother was unaware that the son was borrowing $190,000, but that he was borrowing that amount in circumstances where he might not be able to repay it.
Also, in par 37, she said:
I would not have known there was any risk of losing my home because I did not know there was any problem. I knew Jules still had his practice and his property in Collie.
I refer later to her understanding of what she was agreeing to and what she was signing.
Fifthly, I find that the mother has no clear recollection of all the details of what occurred in late 2003/early 2004. I think that is because the transaction had been presented to her by the son in a very benign light at the time as being of no threat or concern to her, and that the events occurred some six years ago. She thought that she was assisting her son and she thought that there was no practical risk of loss to herself or to her residence. Also, as I have said, the stress of her current predicament has, I think, had a debilitating effect on her ability to recall events in a dispassionate and objective way. She said at the start of cross‑examination (ts 171), with reference to her statement:
Yes, Have you looked at it this morning?---Vaguely. No, not really seriously. I've read it at home.
All right. Are you satisfied that from your memory everything that is in there is correct?---As far as I can remember, but it's not many things I can remember.
Sixthly, the difficulties with her reliability as a witness also emerged with reference to an affidavit which she swore on 11 June 2007 in defence to a summary judgment application by the plaintiff. This affidavit was tendered in evidence by the plaintiff in these proceedings and the mother was cross‑examined on it. She was unable to recall or accept the accuracy of a number of important matters to which she had deposed in that affidavit (ts 168 ‑ 170, 172, 176 ‑ 179). I think that the mother had forgotten that she had sworn that affidavit in 2007, that she had not reviewed it before giving evidence in these proceedings, and that, like her witness statement, it contained information which had been drawn from a range of sources and she did not see it as the product of her own deliberative account of events. Her denial of much of its contents stems, in my view, from the fact that she lacked familiarity with it as a document and was unprepared to deal with it, and that, as I have said, her state of mind, influenced I think by feelings of stress and anxiety, contributed to a reflexive response to deny knowledge of matters relating to her execution of the loan agreement and the mortgage.
At the time that she swore the affidavit in 2007, I find that, again, she saw it as a document, prepared by others, for which her assent or otherwise was required generally. I find that she swore it to be true at the time on the basis that at the time of swearing the affidavit, she believed it to be true to the best of her knowledge, not so much as to all its detail, but in relation to the broad matters mentioned earlier ([117]).
Seventhly, in cross‑examination when it was put to her that she was told that the son was borrowing money because he was facing bankruptcy resulting from his marriage breakdown, she agreed with the former part of the proposition but not the latter part, ie as I understood it she accepted that he told her he needed to borrow money, but not that it was due to the fact that he was facing bankruptcy (ts 179).
Eighthly, other, objective and uncontested circumstances need to be taken into account when assessing the mother's evidence. There are the following:
(a)The mother was living independently, she had a current driver's licence, and she operated a cheque account;
(b)The Application for Mortgage Finance, which was on its face a La Trobe document, was signed in three places by the mother on 4 November 2003;
(c)The mother drew, in her own handwriting, on her cheque account, a cheque to La Trobe for $300 on 25 November 2003 - the cheque was crossed and marked 'not negotiable' and the words 'or bearer' were crossed through, indicating at least a basic understanding of commercial practices;
(d)The mother signed the loan offer document under the reference to the 'borrower', on 20 December 2003;
(e)The mother signed, twice, the statutory declaration, the text of which referred to the bank, the loan and the mortgage. First she signed it before the daughter, and on the second occasion she signed it before Mr Butler;
(f)The mother must have been told, or otherwise understood, that the declaration before the daughter was insufficient, and that she would need to make the statutory declaration before a solicitor - which would tend to indicate that it was a document of some formality and significance;
(g)The mother gave Mr Butler to understand that she had read the statutory declaration and considered the contents to be true;
(h)The mother signed the authority directing payment of surplus funds to the son on 30 December 2003;
(i)The mother also signed the Mortgage document at the place where it says 'Mortgagor/s sign here', in the presence of Mr Butler;
(j)The mother also signed, in the presence of Mr Butler, the application to remove the caveat lodged by the former wife over the property;
(k)In relation to the documents that she signed in the presence of Mr Butler, the mother was taken to his office, with the son, expressly for the purpose of Mr Butler, as a solicitor, witnessing their signatures, and to that extent it could be expected that she understood that the occasion for her signing the documents was an occasion of some formality, and that the documents had legal significance.
Ninthly, there are nevertheless other objective circumstances relevant to her testimony that she did not understand the term 'mortgage'. The potential sources of her knowledge of the term 'mortgage' were first, general life experience, secondly the fact that there had been a mortgage over the Claremont property as part of the acquisition of that property in 1998, thirdly that the son or some other member of the family such as the daughter explained it to her, or fourthly that it was explained to her by the son's solicitor.
As to the first of those matters, her life experience had not really equipped her to understand the nature and effect of a mortgage. She had no experience of owning a home until the age of 80 and even then, the acquisition of the Claremont property was managed by the son on her behalf. As to whether she had an understanding in 1998 of what the NAB Claremont mortgage entailed, I think this is unlikely. I accept that the son managed the acquisition and arranged the paperwork in that transaction. She had recently moved from interstate and had no prior experience herself with buying a house. I find it likely that the acquisition proceeded without any real comprehension by her of the significance of the mortgage over the Claremont property.
As to whether the nature of her mortgage was explained to her by the son, I think this is unlikely. It was not in his interest to draw out the significance of what the mother was undertaking in late 2003/early 2004. As to other members of the family, it was not suggested to the mother in cross‑examination by counsel for the bank that the daughter (or the other son) explained the significance of the mortgage to the mother. No Jones v Dunkel point was raised by counsel for the bank in relation to the absence of evidence from the daughter (or the other son).
With respect to any explanation by the solicitors, I find that the mother's only contact was with Mr Butler. I accept both defendants' evidence, and Mr Butler's evidence, that she did not receive an explanation of the documents or any advice.
Tenthly, notwithstanding the difficulties with her evidence which I have mentioned, I thought there was a real ring of verisimilitude in her evidence in the following exchanges in cross‑examination (ts 176, 177 ‑ 178):
You now know that there's a mortgage over the property that you live in, don't you? You now know that?‑‑‑Now, yes I know that. Yes.
When did you first find that out?‑‑‑Not long ago. I don't know what date or - maybe that I know it two years, but I'm not sure.
...
All right, so what you said there in 2007 - that you had heard of the term 'mortgage' but you didn't know what it meant other than it was another name for a loan?‑‑‑Yes, I always thought that it was another name for - if I heard it or when I heard it, that it was another name for a loan.

The letter from the mother's solicitors of 9 August 2006

After the defendants had defaulted in payment under the loan agreement in July 2006, the mother's present solicitors sent a letter by facsimile to La Trobe on or about 9 August 2006 in these terms:
We advise that we act for Mrs Maria Vandenbergh who is a joint borrower with her bankrupt son against her home at Unit 9/80 Mooro Drive Mt Claremont Western Australia.
Our client is some eighty‑seven years of age. Our client agreed to enter into a joint borrowing with her son in circumstances in which she received no independent advice and in which any advice given to her was negligent at the very least.
…
In or about mid 2003 our client's son was facing property settlement negotiations pursuant to the pending dissolution of his marriage.
A meeting was held chaired by Mr Geoff Hall of RSM Bird Cameron accountants who had been employed by the wife (Lucia). …
In attendance at the meeting were Lucia [the wife] and her lawyer and our client's son and his lawyer, one Michael Meegan, of Butlers Family Lawyers.
It was agreed at that meeting that our client's son would take the Collie Veterinary Hospital business and building and all the debts related thereto. Lucia was to take a farm property just out of Collie and would have reasonable time allowed to her to raise $95,000 against the property to advance to Dr Vandenbergh. In addition, Dr Vandenbergh would borrow $149,000 or thereabouts in order to meet outstanding creditors, and so avoid bankruptcy.
Pursuant to this arrangement, Dr Vandenbergh approached our client, his mother, and she agreed to put up her home as security for the proposed borrowing of $149,000 or thereabouts and in addition to consolidate a loan of her own then outstanding in the amount of $46,000 or thereabouts. …
We are instructed that when Dr Vandenbergh attended on Med Fin finance brokers of Subiaco servicing doctors, dentists and veterinary surgeons. He advised the loans officer:
a)that he was in the process of negotiating a final property settlement with his former wife Lucia and needed to borrow $149,000 or thereabouts to pay out creditors of the Collie Veterinary Hospital which was the business run by him and his wife;
b)the full amount to meet outstanding creditors was $245,000 or thereabouts and the balance was to be received in the event that Lucia was able to borrow and contribute $95,000 towards paying out the outstanding creditors;
c)that the arrangement, and his borrowing through Med Fin, was in order to avoid bankruptcy. Dr Vandenbergh on our instructions clearly recalls being asked the purpose for the loan and replying that the purpose was to enable him to pay out his creditors and avoid bankruptcy;
…
f)that Dr Vandenbergh had lawyers representing him who were able to speak to the officer from Med Fin and explain the full circumstances or answer any questions the Med Fin officer might have.
…
At no time was our client advised that it would be impossible, or likely impossible, that Lucia [the wife] would be unable to raise $95,000 given that she at that time had no record of employment and the farm property was mortgaged to almost its full value.
Dr Vandenbergh's circumstances were such that there was no possibility of him borrowing more than $192,000 or thereabouts and without the contribution of $95,000 from Lucia, he was not going to be able to meet his creditors.
Of course, in these circumstances, we are sure you will agree, it was quite negligent of Dr Vandenbergh's advisors, his lawyers and/or accountant, to not warn him against such a late step, namely to borrow $192,000 or thereabouts from La Trobe, when it was entirely uncertain that Lucia [the wife] might be able to borrow $95,000 and therefore entirely uncertain that Dr Vandenbergh could meet his creditors and thereby avoid bankruptcy. This core advice given to Dr Vandenbergh is of course not relevant to our client's circumstances. Her circumstances are brought about by the fact that she received no independent advice and if any advice at all was given, it was most certainly grossly negligent.
On our instructions the only time that there was an opportunity for our client to be given any advice or met with any lawyer was when she was in the company of her son attended on the offices of Butlers Lawyers, Mr John Butler came into a room and attended on the documentation being signed and did so in a rather hurried fashion and without stopping to discuss the matter with our client or to consider her position and give any advice at all to her.
…
The sole reason for our client to put up her home at this very late stage in her life was on the understanding given to her and confirmed by her son's lawyer that his bankruptcy would be prevented. At no time was she ever advised that a real and likely, or at the very least quite possible consequence of the arrangements were that Lucia [the wife] would not be able to raise the money required of her to contribute to the property settlement and our client [sic - the son] would in any event go bankrupt. (emphasis added)

Disability sufficiently evident having regard to Mr Curia's knowledge

Mr Curia's actual knowledge is imputed to La Trobe (and hence the bank). Mr Curia knew:
(a)that the purpose, or a major purpose of the transaction was to provide security for the son's refinancing of the existing indebtedness of his practice;
(b)that, in substance, the mother was rendering herself liable for, and granting a mortgage to secure, the son's borrowings, apart from the refinancing of the NAB Claremont loan;
(c)that the son would use the money (apart from the sum of $43,000) to pay the creditors of the son's practice, rather than apply it to a joint income‑producing investment;
(d)that the mother was a quiescent party and participated in the transaction to assist the son in his borrowings and at his behest;
(e)of matters, of which the mother was unaware, viz the true or a major purpose of the transaction being the restructuring of the debts of the son's practice, that the son was 'desperate' to meet those debts, and that the son was on the title to her home;
(f)that the mother had acquired the Claremont property using all but $46,000 of her own funds, and that the son had not contributed any equity to it.
By reason of the above knowledge it is to be inferred, and I find, that Mr Curia had actual knowledge; alternatively he wilfully shut his eyes to the obvious; or, alternatively, he wilfully and recklessly failed to make such inquiries as an honest and reasonable man would make, with respect to the following:
(a)that on the face of it, the transaction with the bank was an improvident transaction for the mother;
(b)that the mother's interests were not coincident with the son's, and hence there was a need for her to obtain independent advice;
(c)that the mother entered into the transaction on the basis of having reposed trust and confidence in the son.
See Baden v Societe Generale Pour Favoriser Le Developpement du Commerce et de L'Industrie en France SA [1993] 1 WLR 509, 575 ‑ 576; Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 [174].
Mr Curia also knew that the Claremont property was the mother's residence, although I have found La Trobe knew that in any event.
These matters, in combination with the matters in [342] above, in my view, made it sufficiently evident that, or were sufficient to raise in the mind of La Trobe the possibility that, the mother was at a special disadvantage in her dealing with the bank in relation to this transaction.
The bank's dealing with the mother in these circumstances involved unconscientious conduct by the bank.

The onus on the bank to establish that the transaction was fair, just and reasonable

The onus then moves to the bank to show that the transaction with the mother was fair, just and reasonable.
The bank did not attempt that exercise. The bank did not contend, or show, that the transaction, from the mother's viewpoint was fair, just and reasonable. It has failed to discharge the burden of proof upon it.

A Garcia claim?

It was not clear to me from the mother's submissions whether, in addition, or in the alternative, the mother advanced a case based exclusively on the Garcia principles. I should record my findings on the assumption that such a case was intended to be advanced.
In summary, I find that the Garcia principles have no application for the following reasons. First, assuming (without deciding) that the principles apply beyond guarantees, the mother was not a volunteer. Secondly, the aged parent/child relationship is not of itself to be treated as equivalent to the wife/husband relationship for the purposes of that doctrine. Furthermore, even if the mother could be considered a volunteer by virtue of being designated a 'partial volunteer', and the principles apply to any relationship of trust and confidence, a claim based on Garcia does not improve the mother's position in these proceedings beyond her claim for unconscionable dealing, because without Mr Curia's knowledge, the bank had no notice that the mother reposed trust and confidence in the son in the transaction.

Section 51AC of the Trade Practices Act 1974 (Cth)

The mother also alleges that she is entitled to relief under s 87 of the Trade Practices Act by reason of the bank having allegedly contravened s 51AC of the Trade Practices Act.
In s 51AC of the Trade Practices Act, the word 'unconscionable' is not limited to unconscionable behaviour under the general law or s 51AA of the Trade Practices Act: Australian Competition & Consumer Commission v 4WD Systems Pty Ltd[2003] FCA 850; (2003) 200 ALR 491 [183] ‑ [185].
Like s 12CC of the Australian Securities & Investments Commission Act 2001 (Cth), it is intended to build upon, and not be constrained by, the general law: Australian Securities & Investments Commission v National Exchange Pty Ltd (2005) 56 ACSR 131 [30].
The word 'unconscionable' should be given its natural and ordinary meaning, ie 'doing what should not be done in good conscience': ASIC v National Exchange [33], [39].
It is necessary to show more than unreasonableness, unfairness or simply misleading or deceptive conduct: ACCC v 4WD Systems [185]. The term imports a perjorative moral judgment or moral obloquy: Hurley v McDonald's Australia Pty Ltd [1999] FCA 1728; [2000] ATPR 41‑741, 40,585; ASIC v National Exchange [43].
It requires a consideration of whether the conduct is 'contrary to the norm of conscientious behaviour' or 'offends against basic notions of good conscience and fair play': ASIC v National Exchange [44].
Section 51AC(3) provides that the 12 factors referred to therein are factors to which the court may have regard 'without in any way limiting' the matters to which the court may have regard for the purpose of determining whether a contravention of s 51AC has occurred: Australian Competition & Consumer Commission v Oceana Commercial Pty Ltd [2004] FCAFC 174; [181]. Further, in considering the potential application of s 51AC, it is not permissible to 'search through the twelve criteria set out … find one that seems to fit the case in hand, and then move to a conclusion of unconscionable conduct': ACCC v Oceana [181]. All of the circumstances must be considered.
For there to be a contravention of s 51AC, the alleged unconscionable conduct must occur 'in connection with', the supply or possible supply 'of goods or services': s 51AC(1). The words 'in connection with' require the impugned conduct to go with, accompany, or be involved in the supply of goods or services: Monroe Topple & Associates Pty Ltd v Institute of Chartered Accountants (Aust) [2001] FCA 1056; (2001) ATPR (Digest) 46‑212 [260].
For the purposes of s 51AC, the word 'services', which is defined in s 4, includes, in effect, the provision of bank loans. The loan here was, in substance, to refinance debts associated with the son's practice. There was no contention raised in this case that the loan was not 'for the purpose of trade or commerce' within the meaning of s 51AC(7).
I have found that, with the imputation of Mr Curia's knowledge, the bank was involved in unconscientious conduct in dealing with the mother in relation to the loan and mortgage, for the purposes of the equitable doctrine of unconscionable dealing. In my view, the same considerations indicate that the bank engaged in conduct in contravention of s 51AC. It did what should not be done in good conscience.
Conduct in which a bank lends $192,000 to an elderly lady (aged 85) with no income apart from her pension and no assets apart from her home, who the bank knows has no resources herself to service the loan, and where the bank knows the following - that the property offered for security is her home, that the loan has been orchestrated by a third party (the son) to pay the third party's indebtedness to his creditors who are pressing for payment, that the elderly lady entered into the arrangement on the basis of trust in the third party and without any independent advice, and that the third party, although on the title to the property to be taken as security, contributed no equity to it, does, I think, 'offend basic notions of good conscience and fair play'. Such conduct involves moral obloquy.

Indefeasibility of title

The issue of indefeasibility arises in two ways. First, the bank alleges that it has indefeasible title as registered mortgagee, and that its registered interest cannot be disturbed by the mother's claim for unconscionable dealing. Secondly, it arises in connection with the mother's claim for a resulting trust, discussed below. At the outset, it is appropriate to note the relevant principles.

Principles

Section 68 and s 134 of the Transfer of Land Act 1893 (WA) contain the indefeasibility of title provisions in respect of Torrens Title Land in Western Australia.
Subject to the terms of those provisions, the effect of registration is to destroy prior unregistered interests which would have conflicted with, or encumbered, the registered proprietor's interest. It also allows the registered proprietor to transfer a title, free from such unregistered interests. See Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407, 418 ‑ 420; J & H Just (Holdings) Pty Ltd v Bank of New South Wales [1969] 2 NSWR 318, 325 ‑ 326 (affirmed on other grounds in J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546).
For the purposes of the fraud exception in s 68 and s 134, fraud means actual fraud, personal dishonesty or moral turpitude: Farah Constructions v Say‑Dee [192]; LHK Nominees Pty Ltd v Kenworthy [2002] WASCA 291; (2002) 26 WAR 517 [268].
In Ardrey v Bartlett [2004] WASCA 256, Murray ACJ, Steytler & Templeman JJ agreeing, said in reference to LHK Nominees v Kenworthy:
The effect of those provisions and the limits of the concept of indefeasibility were recently discussed by this Court in LHK Nominees Pty Ltd v Kenworthy (2002) 26 WAR 517. That was a case concerned with the concept of fraud in this context or, putting it otherwise, the case was concerned with the extent to which indefeasibility of title which would normally flow from the act of registration would be defeated or prevented from occurring by conduct of the registered proprietor or the party to the transaction upon whom indefeasible title would be conferred. Upon the authorities, the court held that indefeasible title would be prevented by fraudulent conduct, conduct which might be described as involving dishonesty or unconscionability sufficient to render it unconscientious that the person concerned and those taking through that person should enjoy the entirety of the rights in the property. In such a case, the court did not doubt that its power to make a restitutionary order, by way of the declaration of a remedial constructive trust or otherwise, was not to be overcome by calling in aid statutory indefeasibility of title. If the conclusion of the court was of the kind mentioned above, then the effect would be to deny indefeasibility, in terms on the face of the statute [26].
A registered proprietor who merely acquires title with notice of an existing unregistered interest, or takes a transfer with knowledge that its registration will defeat such an interest, is not guilty of fraud for the purposes of s 68 and s 134: LHK Nominees v Kenworthy [268].
The fraud must be a fraud against the plaintiff: Bank of South Australia Ltd v Ferguson [1998] HCA 12; (1998) 192 CLR 248.
Not all species of fraud which attract equitable remedies will amount to fraud in the statutory sense. Fraud in the statutory sense embraces less, not more than the species of fraud which would ground relief under the general law: Bank of South Australia v Ferguson [10] ‑ [11].
The principle of indefeasibility does not, however, deny the right of a plaintiff to bring a claim in personam, against a registered proprietor, arising out of the acts of the registered proprietor itself: Bahr v Nicolay (No 2) (1988) 164 CLR 604, 613. The registered proprietor may create rights in personam after registration and, even before registration, providing, in the latter case, that the recognition and enforcement of those rights would involve no conflict with the statutory indefeasibility provisions: Bahr v Nicolay (613); Conlan v Registrar of Titles [2001] WASC 201; (2001) 24 WAR 299 [173] ‑ [174]. The claim in personam must be one 'founded in law or in equity, for such relief as a court acting in personam may grant': Frazer v Walker [1967] 1 AC 569.
The expression 'personal equity' is meant to cover 'known legal … and known equitable causes of action (for example undue influence)': Garofano v Reliance Finance Corporation Ltd [1992] NSW ConvR 59,659, 59,662.
As noted previously, the equitable principle governing the doctrines of undue influence and unconscionable dealing is concerned with the production by malign means of an intention to act. Unconscionable dealing involves victimisation either by the active extortion of the benefit or the passive acceptance of a benefit in unconscionable circumstances. It involves conduct which is exploitative or oppressive.
In my view unconscionable dealing, at least as it applies in this case, is appropriately characterised as involving moral obloquy (see [365] above).
In a case where unconscionable dealing is established, the defendant, in my view, is properly regarded as the 'primary wrongdoer', and not someone 'who merely had notice of an earlier interest or notice of third party fraud': cf LHK Nominees v Kenworthy [289]; Farah Constructions v Say‑Dee [195]. (See also the helpful discussion by Butt P, 'Equity, restitution and in personam claims under the Torrens system', (1998) 72 ALJ 258, 262.)
In Spina v Conran Associates Pty Ltd [2008] NSWSC 326; (2008) 13 BPR 25,435, Austin J held that, in the case of a certain mortgage, which was registered, the plaintiff had a personal equity entitling her to an order for removal of the mortgage from the Register. Austin J stated:
It follows that if the holder of the registered interest has engaged in unconscionable or unconscientious conduct 'personally' (including conduct through an agent) which gives rise to a cause of action in equity, then that equity may be asserted against the registered interest holder. For reasons set out below, my view is that Conran Associates has engaged in unconscionable conduct giving the plaintiff a remedy in equity. That conduct gives the plaintiff a personal equity permitting her to set the Conran Associates mortgage aside notwithstanding that it has been registered [98].

The mother's claim of unconscionable dealing

It follows, in my view, that the principles of indefeasibility do not deny the mother's claim in personam against the bank for unconscionable dealing. The full scope of relief, nevertheless, remains to be considered.

The mother's claim to a resulting trust

The mother claimed in these proceedings that the son held his interest under a resulting trust. The mother and the son also signed a memorandum of consent orders as follows:
1.The whole of the interest he holds as a registered proprietor in Lot 2, Strata Plan 20282 being the whole of the land in Certificate of Title Volume 1885 Folio 9 is held on a resulting trust for the Second Named Defendant, and
2.The First Named Defendant forthwith upon the extraction of this Order complete a transfer of the said interest to the Second Named Defendant.
The resulting trust is said to arise from the mother's purchase of the Claremont property to which the son made no contribution in the payment of the purchase price.
Having regard to my findings in [9] ‑ [11] above, I infer, on the balance of probabilities, that the mother did not intend the son to have a beneficial interest in the Claremont property, and it may be presumed that the son held his interest on a resulting trust for the mother: Calverley v Green (1984) 155 CLR 242, 251; Draper v Official Trustee in Bankruptcy (2006) 156 FCR 53 [83].
It is another question whether the bank is bound by the mother's equitable interest under the trust. That question is relevant to the grant of relief as against the bank. I now turn to that issue.

Relief

Principles

The nature of the case will determine the appropriate remedy for selection by a plaintiff: Maguire v Makaronis (1997) 188 CLR 449, 467.
The mother's claim under the general law is in the court's exclusive jurisdiction of equity, in which rescission is an order of the court: Meagher, Heydon & Leeming, Equity: Doctrines & Remedies [24‑085].
The scope of the equity for rescission may be determined by the nature and extent of the conduct giving rise to the equity for rescission: Maguire v Makaronis (472).
In Commercial Bank of Australia v Amadio (480 ‑ 481), Deane J said:
Relief against unconscionable dealing is a purely equitable remedy. The concept underlying the jurisdiction to grant the relief is that equity intervenes to prevent the stronger party to an unconscionable dealing acting against equity and good conscience by attempting to enforce, or retain the benefit of, that dealing. Equity will not, however, 'restrain a defendant from asserting a claim save to the extent that it would be unconscionable for him to do so. If this limitation on the power of equity results in giving to a plaintiff less than what on some general idea of fairness he might be considered entitled to, that cannot be helped' (per Lord Greene MR, Wrottesley and Evershed L JJ, InRe Diplock [1948] 1 Ch 465 at 532). Where appropriate, an order will be made which only partly nullifies a transaction liable to be set aside in equity pursuant to the principles of unconscionable dealing (see Bank of Victoria Ltd v Mueller, supra, at 659 and the cases there cited). Where an order is made setting aside the whole of a transaction on the ground of unconscionable dealing, the order will, in an appropriate case, be made conditional upon the party obtaining relief doing equity.
While the matter was not raised in the bank's notice of appeal, I was, at one stage, inclined to think that the appropriate relief in the present case would be an order setting aside the guarantee/mortgage only to the extent to which it imposed upon Mr and Mrs Amadio a potential liability in excess of $50,000 or that any order wholly setting aside the guarantee/mortgage should be conditional upon Mr and Mrs Amadio paying to the bank the amount of $50,000 which represents the amount of the potential liability which they intended to undertake. Ultimately, I have come to the view that Mr and Mrs Amadio are entitled to have the whole transaction set aside unconditionally. … In the present case, however, it was, as has been said, evident to the bank that Mr and Mrs Amadio stood in need of advice as to the nature and effect of the transaction into which they were entering. It is apparent that any such advice would have included the importance to a guarantor of ascertaining from the bank the state of the customer's account which was being guaranteed and any unusual features of the account. If such information had been obtained by Mr and Mrs Amadio, they would not, on the evidence and in the light of the learned trial judge's finding, have entered into the guarantee/mortgage at all. The whole transaction should properly be seen as flowing from the special disability which was evident to the bank and as being unfair, unjust and unreasonable. (Emphasis added)
In Bridgewater v Leahy, Gaudron, Gummow & Kirby JJ said [124] ‑ [127]:
In some cases, the equity that arises by reason of an unconscientious or unconscionable dealing of the nature with which this appeal is concerned may be satisfied only by setting aside that dealing in its entirety. The dealing may be embodied in the one instrument which contains several provisions or in several instruments. In other circumstances, of which this case is an example, the equity may be satisfied by orders setting aside some but not all of these instruments or some but not all of the provisions thereof.
… In the circumstances of this case and consistently with the framing of relief which, in Lord Blackburn's phrase, is 'practically just', the appellants, as representatives of Bill's estate, properly may elect that only the Deed itself be set aside. However, in seeking equity, the estate must be prepared to do equity. In particular, weight has to be given to the testator's wish significantly to benefit his nephew which was expressed in cl 4 of the will.
In the course of argument on this appeal, there was discussion as to the appropriate form of equitable relief if the appeal was successful. In accordance with the authority referred to above, counsel for the respondents stressed the requirements of 'practical justice'. Reference was made to Vadasz v Pioneer Concrete (SA) Pty Ltd to emphasise the importance of the consideration that in the particular circumstances of a case the equity may be satisfied by orders having the effect of setting aside no more than so much of a disposition as prevents the moving party 'obtaining an unwarranted benefit at the expense of the other'. …
Once a court has determined upon the existence of a necessary equity to attract relief, the framing, or, as it is often expressed, the moulding, of relief may produce a final result not exactly representing what either side would have wished. However, that is a consequence of the balancing of competing interests to which, in the particular circumstances, weight is to be given.
The reference to Lord Blackburn's phrase 'practically just' in the above passage is a reference to Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218, 1278 ‑ 1279:
[T]he practice has always been for a Court of Equity to give this relief whenever, by the exercise of its powers, it can do what is practically just, though it cannot restore the parties precisely to the state they were in before the contract.

In Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102, 115 the court said:
The concern of equity, in moulding relief between the parties is to prevent, nullify, or provide compensation for, wrongful injury. If it appears that the other party would not have entered into the contract at all if the true position were known, the contract may be set aside in its entirety as in Amadio.
In seeking rescission, a plaintiff must do equity. This requires that a plaintiff should not 'be left with the fruits of the transaction of which [it] complain[s]': Maguire v Makaronis (475). In the case of a secured loan, the party seeking rescission should do equity by repaying the money it received, secured by the mortgage, plus interest: Maguire v Makaronis (474 ‑ 477).
Section 87(2) of the Trade Practices Act creates new remedies which have an affinity to the equitable remedies of rescission and rectification. The principles regulating the administration of equitable remedies afford guidance for, but do not dictate, the exercise of the statutory discretion conferred by s 87. Orders under the provisions of s 87(2) which vary the contracts or declare them void ab initio or as and from some other time, may be granted on terms. See Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494, [116]. No narrow construction of the Act should be adopted: Marks v GIO Australia [56].

Discussion

In my view, at a minimum, equity would not allow the bank to enforce the loan agreement or the mortgage against the mother, subject to her doing equity. In relation to doing equity, the bank contends that, in reliance on Maguire v Makaronis, if the loan and mortgage transactions are to be set aside, the mother should pay to the bank the whole of the principal outstanding under the loan together with interest. The bank also contends that the mother is estopped by deed, by virtue of the terms of the mortgage, from denying that she is a borrower of the whole amount.
Maguire v Makaronis was a case where the borrowers were the true beneficiaries of the whole lending. Here, the mother was in truth not the beneficiary of the whole lending of $192,000. Also, the alleged estoppel at law cannot avail the bank against the mother if the instrument is not binding on her in equity.
The practical justice of the situation requires, in my view, a proper recognition of the financial benefit which the mother received under the transaction. This would not exceed the sum of approximately $43,000 which was used to discharge the NAB Claremont mortgage, together with interest. In Elkofairi v Permanent Trust, I note that the court regarded the benefit to the wife of the impugned transaction as being not the whole of the previous mortgage debt which was discharged, but only 50% of that sum, reflecting, in effect, her half interest as joint mortgagor with respect to that debt: Elkofairi v Permanent Trust [85], [111]. In that case, however, there was no suggestion of a resulting trust in favour of the wife as the party asserting the claim for relief, which might arguably be a relevant point of distinction.
Other and related questions arise as to the scope of relief including whether there should be an injunction or rescission, and if rescission, whether there should be rescission of the mortgage confined to the mother's interest as registered joint tenant, or whether there should also be rescission of the whole, involving also the son's interest as registered joint tenant of the Claremont property.
The latter question assumes particular significance given that, as I have found, the son had purely a legal interest as a joint tenant in the Claremont property, without beneficial ownership.
If the transaction were set aside only with respect to the mother's interest, the bank would still have an enforceable security as against the son. The law recognises a mortgage by one joint tenant of his interest in the property: Guthrie v Australia and New Zealand Banking Group Ltd (1991) 23 NSWLR 672, 679. Accordingly the bank could enforce its mortgage against the son, if it were not set aside in full. The bank in that event would be entitled to its remedies in respect of the son's interest in the property, which might affect the mother's enjoyment of her full beneficial interest in the property. As regards a mortgage by one joint tenant, see Tyler E, Young P & Croft C: Fisher & Lightwood's: Law of Mortgage (2nd Australian ed 2005), [11.4].
Cases in which there has been a consideration of the appropriate relief in circumstances in which one joint tenant establishes a right to set aside a registered mortgage include: National Commercial Banking Corporation of Australia Ltd v Hedley (1984) 3 BPR 9477, 9482 ‑ 9483; Flourentzou v Commonwealth Bank of Australia [1998] ANZ ConvR 188 (McClelland CJ in Eq) and Elkofairi v Permanent Trustee. In the first‑mentioned case, the effect of setting aside the registration of the mortgage was considered in relation to equitable priorities if the unregistered instrument continued to operate as an equitable mortgage. If relevant, any analysis of competing equities here would involve consideration of the mother's equitable interest under the resulting trust. See generally Meagher, Heydon & Leeming, Equity: Doctrines & Remedies [8‑030] ‑ [8,065].
Questions would also arise as to whether giving recognition to the mother's equitable interest under the resulting trust, as against the bank, would serve to elevate impermissibly her unregistered interest over the bank's registered mortgage, or whether it would be properly regarded as a consequence of the court's readiness 'to pull a transaction to pieces' where rescission is ordered in cases involving moral obliquity: Spence v Crawford [1939] 3 All ER 271, 288.
In circumstances where I have found that the mother would not have entered into the transaction in the first place had she been properly advised, and thereby the bank would not have obtained the benefit of the transaction, it would, at least arguably, be inappropriate if her tenure and interest could be adversely affected by the bank exercising rights under the transaction in relation to the interest in the property held by the son, on trust for the mother.
As against the son, there is no reason why the loan agreement, if it subsists, should be set aside so as to allow him to avoid liability. However, if the son has been discharged from bankruptcy, then there is an issue which arises concerning whether the debt he incurred under the loan agreement has been discharged by reason of his discharge from bankruptcy except to the extent that the debt is secured and the security is being enforced: s 153(1) and (3) of the Bankruptcy Act 1966 (Cth). That matter may also arguably be relevant in the exercise of discretion and moulding relief.
The case appears to have been conducted on the implicit assumption that if the mother succeeded in her counterclaim, the mortgage and loan transactions would be set aside entirely. There was no debate on the issue of any differential treatment between the mother and the son and any consequential effect on the mother in the context of her claim for relief against the bank.
The above considerations and cases were not the subject of any, or at least any full or proper debate, at trial. No debate was directed to the 'smorgasbord' of remedies available under s 87(2) of the Trade Practices Act: Marks v GIO Australia [137].
Further submissions on final relief will be required.

Conclusion

In light of the foregoing, I would make the following order at this stage:
A declaration that:
(a)the loan agreement between the plaintiff and defendants executed by the defendants on 20 December 2003, and
(b)the mortgage number I822249, registered on 17 March 2004 over the property known as Lot 2, Strata Plan 20282 being the whole of the land in Certificate of Title Volume 1885 Folio 9 (the property) executed by the defendants in favour of the plaintiff,
were obtained from the second‑named defendant by the plaintiff by unconscionable dealing and conduct and/or in contravention of s 51AC of the Trade Practices Act.
I will give the parties an opportunity to consider and make submissions on what final consequential orders should be made in light of these reasons.