Sialepis v Westpac - [2001] NSWSC 101

CITATION: Sialepis -v- Westpac [2001] NSWSC 101

CURRENT JURISDICTION: Equity Division
Commercial List

FILE NUMBER(S): SC 50065/96

HEARING DATE(S): 14.8.00, 15.8.00, 16.8.00, 17.8.00, 21.8.00, 22.8.00, 23.8.00, 24.8.00, 25.8.00, 31.8.00,1.9.00

JUDGMENT DATE:
6 March 2001

PARTIES :

Dimitra Jane Sialepis -v- Westpac Banking Corporation & Ors

JUDGMENT OF: Hunter J

COUNSEL : Plaintiff: A. S. Howen
Second Defendant: L G Foster SC

SOLICITORS: Plaintiff: Photios Vouroudis & Co
Second Defendant: Hunt & Hunt

CATCHWORDS: Contract - third party mortgage - mortgagee bank misrepresentations - misleading and deceptive conduct - negligence - unjust circumstances - unconscionable conduct.

LEGISLATION CITED: Trade Practices Act 1974 (Cth)
Fair Trading Act 1987 (NSW)
Contracts Review Act 1980 (NSW)
Real Property Act 1900 (NSW)

CASES CITED: Robinson -v- Watts (2000) NSWSC 584
Garcia v National Australia Bank (1988) 194 CLR 395

DECISION: Summons dismissed with costs.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

6 MARCH 2001

HUNTER J

50065/96 DIMITRA JANE SIALEPIS -v- WESTPAC BANKING CORPORATION & ORS

REASONS FOR JUDGMENT

1 On 3 July 1992 the plaintiff, Dimitra Sialepis, executed a third party mortgage (the mortgage) to the second defendant ( the bank) over her then matrimonial home, situated in the Sydney suburb of Cronulla (the Cronulla property) as joint proprietor of the Cronulla property with her then husband, the first defendant (Sialepis), and his mother, the fourth defendant (Effie Sialepis), to secure the repayment of “advances or accommodation” granted by the bank to “Sialepis Pty Ltd … either alone or jointly with any other person”.

2 Sialepis Pty Ltd (the company) was the recipient of facilities approved by the bank in its letter of offer dated 26 May 1992 (the bank’s facilities offer) which included the following :

“a) Commercial Bill Line of $3,600,000 (the Condor Lakes facility)

b) Overdraft facility of $250,000

c) Corporate Mastercard facility of $15,000.”

3 The bank’s facilities offer involved continuance of a commercial bill line of $1,300,000 which had been advanced to Sialepis in connection with the acquisition by Sialepis of residential terraces in Paddington (the Paddington facility): extension of an investment property loan to Sialepis and Geoff Thibou (Thibou) of $500,000 which had been advanced in connection with the acquisition by the borrowers of a development block at Rooty Hill (the Rooty Hill loan) and an increase in an investment property loan to Sialepis and Sam Tsatsoulis (Tsatsoulis) his brother in-law.

4 The total monies advanced or to be advanced under those facilities totalled $6,650,000 and represented an increase of $3,940,000 over existing facilities. In relation to the Paddington facility, the company provided a third party second mortgage to the bank as part of the supporting security.

5 The mortgage was executed by Sialepis and the plaintiff at the Maryborough, Queensland branch of the bank in the presence of the commercial manager of the Double Bay, Sydney branch of the bank, Gregory Warren Kay (Kay). It is common ground that the bank’s interest as mortgagee under the securities provided to support those facilities has been assigned for valuable consideration to the third defendant, Ironaid Pty Ltd (Ironaid).

6 The proceedings were brought against Sialepis, the bank, Ironaid, Effie Sialepis, James John Smiles (Smiles), the fifth defendant, John Niccolo Cosco, the sixth defendant, Kay Violet Cosco, the seventh defendant and Smiles Poulous Services, the eighth defendant.

7 Rolfe J summarily dismissed the proceedings against Ironaid and the sixth and seventh defendants, an order which was upheld by the Court of Appeal on 10 December 1997. Further leave to amend against the third, sixth and seventh defendants was refused by Rolfe J, a decision also confirmed on appeal.

8 The proceedings have been maintained only against the bank, it being conceded by the plaintiff that there should be an order dismissing the summons against the first, fourth, fifth, and eighth defendants, and I so order (see T450:30).

9 The plaintiff initiated proceedings in June 1994 against Sialepis in the Family Court of Australia raising issues related to those the subject of these proceedings. On 6 July 1995, the plaintiff joined the bank, Ironaid, and Effie Sialepis. These proceedings are the result of a cross vesting order by the Family Court of 8 September 1995, following which the plaintiff joined the fifth, sixth, seventh and eighth defendants on 16 May 1996.

10 The issues sought to be raised by the plaintiff are those contained within a further amended summons of 2 August 1996 (the summons).

11 The delay in bringing these issues to trial has been exacerbated by the need to adjourn the hearing fixed for 29 November 1999 as a result of an application on behalf of the plaintiff to call Sialepis as a witness in her case and, in doing so, to rely upon his statement filed in court on 29 November 1999. In granting that application, which was opposed, an adjournment was a necessary consequence.

12 At the commencement of the hearing of these proceedings on 14 August 2000, counsel for the plaintiff limited the issues raised in the proceedings in terms of a document entitled “NOTES TO THE PLAINTIFF’S PLEADINGS” as follows:

“7. The following paragraphs

are relied upon

by the Plaintiff:

NATURE OF DISPUTE

Paras (i) and (iv)

ISSUES LIKELY TO ARISE

Pars (i) and (v)

SUMMARY OF PLAINTIFF’S CONTENTIONS

Paras: 1.1(i), (ii) and (vii)

1.2, 1.3, 1.4, 1.5, 1.6, 1.7, 1.8, 1.11, 1.12, 1.13, 1.14, 1.15, 1.16, 1.17, 1.18, 1.19, [(i) only of the Particulars],

1.20, 1.25, 1.26, 1.27, 1.33.”

13 So limited, the nature of the dispute was described in the summons as follows:

“

NATURE OF DISPUTE

The dispute is concerned with:

(i) the validity and enforceability of securities, ostensibly given by the Plaintiff to the Second Defendant;

(ii) the validity and enforceabily of the Deed of TS and the Deed of DR each dated 2 May , 1995;

(iii) whether the Deed of TS and the Deed of DR were entered into fraudulently and/or for the purpose of defeating claims by the Plaintiff against the First Defendant and companies associated with the First and Fifth Defendants;

(iv) the extent of the damage suffered by the Plaintiff as a result of the actions of the Defendants.

14 Similarly, section B of the summons “ISSUES LIKELY TO ARISE” was limited to the following:

“(i) whether or not the mortgage in favour of Second Defendant and assigned to Third Defendant over the family home at Cronulla is valid and enforceable;

…

(v) whether or not the Defendants are liable to Plaintiff for damages.”

15 This limitation of the plaintiff’s contentions was presumably intended to simplify the identification of issues raised against the bank. That has not been the case.

16 In relation to the execution of the mortgage, the plaintiff relied upon an alleged representation by Sialepis, referred to in paragraph 1.3 of the contentions as “the first representation”, namely, that the mortgage “would only be for a short period of 1-2 months and would shortly be released … upon the Rooty Hill project being re-financed.”

17 Par 1.6 of the contentions alleged that further representations, referred to as “the second representations”, were made by Kay at the time of execution of the mortgage, namely:

“1.6 During the course of the conversation referred to in paragraph 1.5 herein, Kay represented to the Plaintiff that

if she executed a mortgage in respect of the Cronulla property in favour of the Second Defendant:

(i) the mortgage would be for a short term only;

(ii) the mortgage would be discharged by the Second Defendant within 1-2 months;

(iii) the mortgage was to secure the purchase of the property at Pialba, Hervey Bay, in the State of

Queensland;

(iv) the mortgage would be discharged when the Rooty Hill project was refinanced within one to two

months;

(v) Sialepis Pty Ltd would be able to obtain the refinancing of the Rooty Hill Project within one to

two months;

(vi) there was a reasonable basis for the statements in (i) to (v) above; (“the second representations”).”

18 It is apparent from par 1.7 of the contentions relied upon by the plaintiff and from pars 1.9 and 1.10 (not relied upon by the plaintiff) that the allegations in relation to the first representation were made to support a case against Sialepis. There was no allegation of agency by which the first representation could be attributed to the bank. There has been no application to amend the summons to rely upon agency. Further, in the course of oral submissions in reply, counsel for the plaintiff submitted that the plaintiff’s case in relation to the first representation was based, not on agency, but upon the basis that Sialepis made the representation as a “conduit” of the bank.

19 Having regard to the findings reached in these reasons, it has not been necessary to address the sufficiency of the contentions in this regard. It is enough to say that labelling the role of Sialepis as being that of a conduit did not address the deficiency in the contentions relating to the first representation. In particular, pars 1.9 and 1.10 of the contentions addressed the actionability of the first representation in terms that Sialepis did not have reasonable grounds for making it. There is no matching allegation against the bank in relation to the first representation.

20 Par 1.11 of the contentions, which is relied upon by the plaintiff, limited the contentions against the bank to the second representations. Of the second representations, it was contended that the bank did not have reasonable grounds for making them for the following reasons:

“(i) the Second Defendant was aware or ought to have been aware of the financial state of the Sialepis Group;

(ii) the Second Defendant knew or ought to have known that a discharge of mortgage in respect of the Cronulla

property would only be provided by the Second Defendant upon the Rooty Hill project being re-financed;

(iii) the First Defendant knew or ought to have known that the Sialepis Group did not have the funds or sufficient

security or access to sufficient funds or security to re-finance the Rooty Hill project;

(iv) the Second Defendant knew or ought to have known that the financial condition of the Sialepis Group and the

extent of the borrowings of the Sialepis Group from the Second Defendant were such that it was unlikely that the

Second Defendant would release the mortgage in respect of the Cronulla property unless alternate security were

available.

(v) the Second Defendant knew or ought to have known that the Sialepis Group did not have such alternate

security available;

(vi) the Second Defendant knew that the Sialepis group had significant existing liabilities to it;

(vii) the liabilities of Sialepis Group greatly exceeded its assets;

(viii) the Second Defendant was aware or ought to have been aware that it would not refinance the Rooty Hill

project;

(ix) the Second Defendant was aware or ought to have been aware that the second representations were false.”

21 The plaintiff has not attempted to substantiate a case based upon the financial state of the company and a related corporation Mosman Pty Ltd (referred to in the contentions as the Sialepis Group). For that reason, the allegation in par 1.12 of the contentions fails, namely, that the bank’s lack of reasonable grounds for making the second representations as alleged in par 1.11 constituted a contravention of s 52 the Trade Practices Act 1974 (Cth), or alternatively, contravention of s 42 of the Fair Trading Act 1987.

22 The substance of the representation case against the bank as relied upon by the plaintiff was expressed in par 1.13 of the contentions in the form of an alternative allegation of contravention of s 52 of the Trade Practices Act and s 42 of the Fair Trading Act in relation to the second representations as follows:

“(iii) the mortgage was not to be for a short term only;

(iv) the mortgage would not be discharged by the Second Defendant within 1-2 months;

(v) the mortgage was not given for the purpose of securing the purchase of the property at Pialba,
Hervey Bay in the State of Queensland;

(vi) the mortgage would not be discharged by the Second Defendant on a refinancing of the Rooty Hill project;

(vii) Sialepis Pty Limited would not be able to obtain the refinancing of the Rooty Hill project within one to two

months;

(viii) there was no reasonable basis for the second representations”

23 Par 1.15 of the contentions expressed an alternative cause of action under s 52 of the Trade Practices Act and s 42 Fair Trading Act based upon the contention in par 1.11, and as stated, the plaintiff has not sought to substantiate such a case.

24 Par 1.16 of the contentions formulated an alternative representation case against the bank in tort, based upon an alleged duty of the bank to the plaintiff in making the second representations to exercise due care and to “keep the Plaintiff apprised of all matters relating to the financial state of the Sialepis Group and to ensure that she was aware of the subsequent facilities and the terms thereof afforded by the Second Defendant to the Sialepis Group.”

25 The allegation of breach in par 1.17 was particularised as follows:

“(iii) failing to comprehend either adequately or at all, information within the knowledge of the Second

Defendant;

(iv) failing to inform the Plaintiff of the matters referred to in paragraph 1.11 herein”

26 Par 1.18 of the contentions alleged a further breach of duty particularised as follows:

“(i) failing to keep the Plaintiff apprised of all matters relating to the financial state of the Sialepis Group after 24

July, 1992;

(ii) failing to check the Plaintiff signature (sic) was placed on the Second Defendant’s form of surety’s consent

dated 24 December, 1993;

(iii) failing to notice that the Plaintiff’s signature was not placed on the Second Defendant’s form of surety’s consent

dated 24 December, 1993;

(iv) failing to check the authenticity of the Plaintiff’s signature on the Second Defendant’s letter of

acknowledgment, dated 18 June, 1993;

(v) failing to check the authenticity of the Plaintiff’s signature on the Second Defendant’s letter of acknowledgment,

dated 23 September, 1993;

(vi) failing to check the authenticity of the Plaintiff’s signature on the Second Defendant’s letter of acknowledgment

dated 3 November, 1993.

(vii) failing to check the authenticity of the Plaintiff’s signature on the Second Defendant’s form of surety’s consent

dated 7 November, 1993;

(viii) failing to check the authenticity of the Plaintiff’s signature on the Second Defendant’s form of request to open

an account dated 21 July, 1991;

(ix) failing to ensure that the Plaintiff was aware of the subsequent facilities and the terms thereof, afforded by the

Second Defendant to the Sialepis Group.”

27 Par 1.19 particularised the damage allegedly suffered by the plaintiff as consisting of :

“the unencumbered one third (1/3) market value of the Cronulla property or such greater beneficial interest in the Cronulla property as she might be found to have, [together with] “such sum … necessary to indemnify her … in respect of all sums…. costs and expenses in respect of any claims …by the [bank] in seeking to enforce the terms of the mortgage against her : and … loss of the benefit of an order pursuant to section 79 of the Family Court Act 1975 (Cth) …”.

28 Par 1.20 of the contentions alleged that the bank forwarded to Sialepis forms of acknowledgment and surety’s consent for execution by him and the plaintiff. In relation to those documents it was alleged in pars 1.21 and 1.22 that Sialepis forged the plaintiff’s signature on those documents in pursuit of a fraud upon the plaintiff. Those paragraphs were not relied upon by the plaintiff. However, the subject matter retained relevance in the proceedings.

29 Pars 1.25 and 1.26 of the contentions raised a case based upon s 7 (1) of the Contracts Review Act 1980. That case is particularised as follows:

“(i) she did not read the documents thus tendered to her for signature;

(ii) she was not aware that she was signing a mortgage which purported to secure, inter alia, all present and future advances by the Second Defendant to Sialepis Pty Limited;

(iii) she executed the documents tendered to her for signature without being made aware of the matters

referred to in paragraph 1.11 herein;

(iv) she did not receive independent legal advice on or prior to execution of the documents;

(v) she was not afforded the opportunity of seeking independent legal advice on or prior to execution of the

documents;

(vi) she received no material or financial benefit from the moneys advanced by the Second Defendant pursuant to

the mortgage;

(vii) she held 1% of the issued shares of Sialepis Pty Limited;

(viii) she had no material or financial interest in the assets or undertaking of Sialepis Pty Limited in that it is
alleged by the First Defendant in these proceedings that Sialepis Pty Limited was the trustee of the Sialepis
Unit Trust;

(ix) immediately prior to and upon execution of the documents, Kay, who was obliged and in a position to do so,

did not advise the Plaintiff:

(a) to seek independent legal advice;

(b) to read the documents;

(c) that she was signing a mortgage which purported to secure, inter alia, all present and

future advances by the Second Defendant to Sialepis Pty Limited;

(d) of all the terms, conditions, covenants and obligations of the mortgage;

(e) of the matters referred to in paragraph 1.11 herein.

(x) she was 29 years old, a house wife with no experience in or knowledge of matters of business and finance;

(xi) the provisions of the mortgage were not, prior to or at the time they were entered into, the subject of negotiation or subject to negotiation;

(xii) It was not reasonably practicable for the Plaintiff to negotiate for the alternation of or to reject any of the provisions of the mortgage;

(xiii) she was not informed of the reality of the risk to which she was exposing herself;

(xiv) she did not appreciate the reality of the risk to which she was exposing herself;

(xv) the Second Defendant was aware or ought to have been aware of the matters alleged in the preceding subparagraphs of this paragraph.”

30 A further cause of action was expressed in par 1.27 of the contentions in the following terms:

“Further or in the alternative, by reason of the matters referred to herein, it is unfair and

unconscionable

for the [bank] and any assignee, to rely upon the mortgage and the first surety’s consent or their provisions.”

31 Par 1.33 of the contentions set out an allegation of Sialepis’ interest as the “principal shareholder” in the company. That allegation was part of a case of a fraudulent conspiracy alleged against the defendants, other than the bank, and which has been abandoned or summarily dismissed.

32 The Contracts Review Act case of the plaintiff paid no regard to s 19 of that Act nor to the indefeasibility provisions of the Real Property Act 1900.

33 It was submitted by counsel for the plaintiff that s 19 of the Contracts Review Act does not apply to a mortgage instrument, which it clearly does, and that the Contracts Review Act overrides the indefeasibility provisions of the Real Property Act. No authority was cited for that proposition. I rejected a similar contention in Robinson v Watts (2000) NSWSC 584 and I have no reason to change the views expressed in that decision.

34 Furthermore, the relief sought by the plaintiff against the bank, paid no regard to the fact, which is common ground, that the bank’s interest as mortgagee of the Cronulla property has been assigned for valuable consideration. As it happens, my findings in relation to the plaintiff’s Contracts Review Act case, her representation cases and that based upon the alleged unconscionable conduct of the bank make it unnecessary to consider the relief sought by the plaintiff.

35 In relation to the plaintiff’s claim for damages, it was submitted on her behalf that the claim embraced one for equitable compensation. It was contended on behalf of the bank that no claim for equitable compensation was raised by the summons. That is a matter of dispute which I think could have been resolved by amendment had it been necessary to address that issue.

36 There are four key questions arising out of the issues in these proceedings: one is the credibility of Sialepis: another is the credibility of Kay: a third is the involvement of the plaintiff in the affairs of Sialepis and the fourth is whether the representations attributed to Kay were actually made by him at the 3 July 1992 meeting and, if they were made, whether they had any influence on the conduct of the plaintiff.

37 As general observations in respect of those four matters, in my view, Sialepis lacked any credibility: Kay’s credibility has been severely compromised by his conduct in dealing with Sialepis: the plaintiff, probably, had more awareness of Sialepis’ affairs than she was prepared to volunteer : the plaintiff failed to establish that the representations attributed were made at the 3 July 1992 meeting, or that she would have been influenced by any such representations.

38 I think it is beyond dispute that Sialepis forged the signature of the plaintiff from time to time and engaged in improper conduct in his dealings with Kay. I would not be prepared to accept his evidence, even where it was ostensibly against interest. I would need reliable corroborative evidence to accept his evidence on any matters in dispute in these proceedings.

39 One thing that emerged from the evidence was that Sialepis is no stranger to illegality. In 1989 he and the plaintiff’s brother, Tsatsoulis purchased premises in Newcastle which were known to operate as a coffee shop and brothel. The operation of the brothel was illegal. Tsatsoulis and Sialepis had sufficient control over its operation to expose Sialepis to proceedings for contempt of court for breach of an undertaking to bring that operation to an end. That contempt was dealt with by a substantial fine. It is clear from the evidence in these proceedings that Sialepis knew of the existence of the illegal operation at the time of the acquisition.

40 Sialepis’ role within his family was described by him in terms that “his family left the business side of things [to him and so he] did what [he] thought [he] had to do for the business side.”

41 If her application in the Family Court may be relied upon, the plaintiff had an involvement in the affairs of Sialepis dating back to a time, shortly after her marriage to him, when she conducted a tobacconist business in conjunction with her parents and Sialepis.

42 In the same period she acquired an interest in the Cronulla property by way of gift from her sister in law. The particulars of her involvement were verified by her in the Family Court proceedings in the following terms:

“9.5.1 The Applicant made a direct financial contribution to the acquisition, conservation and improvement of the property of the parties:-

Particulars

…

(ii) In 1986 the wife, together with her parents and the Respondent, acquired a tobacconist’s business known as “Up in Smoke”.

(iii) In 1986 the wife acquired an interest in property at 17 Darook Park Avenue, Cronulla (the former matrimonial home).

(iv) The wife later applied her proportion of the proceeds of sale of the tobacconist’s business to renovations and improvements to the Cronulla property.

(v) The wife worked as a bookkeeper for the service station business the property of Sialepis Pty Limited.

(vi) The wife consented to the mortgage of her interest in the formed matrimonial home guaranteeing the performance of loans obtained by Sialepis Pty Limited.

(vii) The wife applied all of the income which she derived during the course of the marriage to assist the respondent with the acquisition of property acquired by him or companies in which he had an interest.

9.5.2 The Applicant made an indirect financial contribution to the acquisition, conservation and improvement of the property of the parties.

9.5.3 The Applicant made an indirect non financial contribution to the acquisition, conservation and improvement of the property of the parties.

Particulars of paragraphs 9.5.2 to 9.5.3 inclusive

(i) In the early part of the marriage the Applicant’s parents provided employment for the Applicant and the Respondent in a business owned by the Applicant’s parents at Botany and thereby enabled the parties to save income towards the property acquired by them during the marriage.

(ii) The Applicant throughout the marriage applied any earnings that she received to the acquisition, conservation and improvement of the assets of the parties.

(iii) The Applicant applied her skills as a bookkeeper to keep records in relation to the service station businesses conducted by the Respondent through Sialepis Pty Limited.

(iv) The Applicant carried out banking duties in respect of companies in which the Respondent has an interest.

(v) The Applicant liaised with tradesman in relation to renovations and improvements to properties acquired by the parties and in companies in which either or both had an interest during the marriage.

(vi) The Applicant executed mortgages and guarantees in relation to the borrowings of the parties and companies in which either or both had an interest during the marriage.

(vii) The Applicant acted as a director and company secretary of companies in which either or both parties had an interest during the marriage.

…

(x) The Applicant liaised with accountants and solicitors in relation to the legal and accounting affairs of the parties.

(xi) The Applicant attended upon local councils and architects in relation to various developments of real estate conducted by the Respondent or companies in which he had an interest during the course of the marriage.

(xii) The Applicant liaised with tradesmen and architects in relation to the renovations and improvements in respect of the former matrimonial home.

(xiii) The Applicant conveyed the Respondent by motor vehicle to various building sites for the purpose of inspect of properties (sic) prior to their purchase and subsequent to their purchase during their development.

(xiv) The Applicant maintained the Respondent’s affairs during periods when he was absent overseas and liaised with tradesmen carrying out building work and arranged for their salaries to be paid and for payment of bills to tradespersons in respect of such renovations and improvements.

(xv) The Applicant acted as secretary for the Respondent in the administration of his affairs.

(xvi) The Applicant carried out cleaning duties in respect of properties owned by the Respondent or companies in which he or the parties have an interest and prepared them for presentation and inspection for sale.

(xvii) The Applicant carried out cleaning duties in respect of property owned by the Respondent or companies in which he or the parties had an interest in during the marriage.

(xviii) The Applicant liaised with tradesmen, builders and architects and assisted in the designing of the interiors, choosing colour schemes and materials, regularly being on site and supervising all details concerning the construction and improvement of the former matrimonial home.”

43 The plaintiff in cross examination on that material played down her role in Sialepis’s affairs. However, as appears later in these reasons, I am satisfied that the plaintiff had an involvement in, or an awareness of Sialepis’ business affairs beyond the extent she was prepared to acknowledge in these proceedings.

44 Consistently with that, I think Sialepis did as he pleased, in large measure, in the conduct of his affairs, whether they involved the plaintiff, or third parties such as the plaintiff’s brother. For example, Sialepis had no compunction in forging the plaintiff’s signature on financial documents.

45 Sialepis’ evidence in relation to that conduct, on any view of it, revealed reprehensible behaviour. I think it is worth referring to that evidence in some detail, because, in my view, it gave a clear indication of his disregard for the value of truth.

46 He was first questioned about this matter as follows:

“Q. You admit don't you, that you forged your wife's name on many documents?
A. Yes.

Q. Many documents?
A. I wouldn't say "forged" but yes, I did sign her name.

Q. Forged, I'm putting to you?
A. No, I wouldn't say "forged".

Q. Not ever?
A. I would say I have signed for her but I have not forged.

Q. Is the distinction which you make of not accepting my word "forged", that you concede you actually wrote her name, but you only did so after she gave you permission to do so?
A. No, I don't.

Q. Well what is the distinction?

HIS HONOUR: Q: Mr Sialepis, I earlier told you about problems that might arise if answers to questions might tend to incriminate you. Do you recall that?
A. Yes.

Q. And I reminded you that you still have the right to object to give evidence if at any time you feel that an answer might tend to incriminate you?
A. Yes, thank you..”

(T 99:33 -T 100:3)

47 The matter was revisited by senior counsel for the bank as follows:

“Q. Yesterday I asked you about forgeries?
A. Yes.

Q. And you accepted, I think, that you had signed for your wife, but did not forge?
A. That's correct.

Q. Can you explain to his Honour what the distinction is that you see between signing for your wife, on the one hand, and forging, on the other?
A. I always believed, during the course of the marriage, that I always had an implied permission, or implied consent, from my wife to sign her name when she was not able to, because of the fact was that I was taking care of the business and I was the provider. That was my role. My wife's role was to be the housewife and to be the mother of my children. So, in the business sense, that is what I believed and I always believed that I had that implied permission.

Q. That is not a truthful answer, is it?
A. That is a truthful answer.

Q. You accept that you wrote your wife's signature on many documents?
A. I accept that, yes.

*Q. And you did so, for example, on bank documents that should have been signed by her?

HIS HONOUR: Q. Before you answer that, I think we are in the same area we were in yesterday and I think, for the same reasons, I should ask you whether you object to giving this evidence. Do you?
A. I will answer the question, sir.

Q. I am asking you whether you object to answering the question?
A. No, I will give the answer (Above question marked * read). That could be correct.

Q. And it is correct?
A. Yes.

Q. And you are also aware that the bank was expected to have her sign the documents and not you, weren't you?
A. Again, my answer to that is I always believed that I always had an implied permission to sign.”

…
Q. When you say you had her implied permission, do you mean to suggest to his Honour that at least in some cases you signed her signature on documents in circumstances where she had not given you any express permission to do so?
A. Yes.

Q. Did you mean to say to his Honour, in that context, that you did so in circumstances where you did not even inform her that you were planning to do so, or had done so?
A. Yes.

Q. And did that happen frequently?
A. It happened a few times, but I don't know if it happened frequently.

Q. Have you ever said to anyone that the only times you signed her signature on documents was after she had given her express permission?
A. That I don't recall, sir.

Q. You don't recall?
A. No.

Q. Have you ever said this, "I have been informed by my lawyers that it is alleged that Dimitra's signature has been written without her consent. I have never written her signature without her consent. There have been occasions in the past where I have signed Dimitra Sialepis and asked her permission to sign her name on certain documents. I have never, however, signed any such documents without seeking her express consent. The only occasions on which this occurred was where I was at, say, Ultimo and Rozelle and she was at Cronulla and having invited her to come and sign documents, she said words to the effect, "Harry, you sign it for me. I trust you." I now realise it was both unwise and potentially unlawful for me to do that. However, at the time I did not appreciate that it was a wrong thing to do, provided that I had the other person's consent." Do you remember saying that?
A. I could have said that, sir.

Q. Do you remember saying that in an affidavit that was filed in some proceedings in this court?
A. I don't remember, but I may have, yes, sir.

Q. Have a look at this document and in particular paragraph 12, (Shown).
A. Yes.

Q. That is an affidavit sworn on 15 May 1995 by you?
A. Yes.

Q. And it was filed in proceedings in this court between the National Bank, Sialepis Holdings, you, your wife and others?
A. That's correct.

Q. And in that affidavit, paragraph 12 is in the terms I have just read out to you, isn't it?
A. Yes.

Q. Was what you swore in paragraph 12 of that affidavit true?
A. Yes.

Q. Do you say that that means that you evidence you gave (sic) earlier to his Honour today is false?
A. No.

HIS HONOUR: I think I have to say that I think it is - -
A. I think it is the word, "Express" and the words implied was the same.

Q. The same?
A. Yes, that's right.

FOSTER: Q. That is a piece of rubbish?
A. No, it is not.

Q. You cannot really expect anyone to seriously believe that?
A. I believe it.”

(T 104:46 - T105: 35…T 105:49 -T 107:14)

48 As I sought to express at the time, I think there was an inherent falsity in one or other of those versions given by Sialepis and his explanation for that obvious inconsistency is, in my view, absurd.

49 Further demonstrations of Sialepis’ comfort with improprieties was evidenced in the provision of benefits to Kay in the course of their dealings. One involved the payment by Sialepis of five thousand dollars towards the expenses of a Kay family holiday in mid 1992 and the other, the provision by him of a mobile phone to Kay, the value of which was in the order of one thousand dollars. There was further evidence from Sialepis that he contemplated paying Kay $100,000 in the nature of a success fee which, according to his evidence, was replaced by a proposal from Kay that such an amount be paid towards the acquisition by Kay of a home unit in the vicinity of the Gold Coast in Queensland.

50 Kay accepted that he received the first two benefits and denied any truth in Sialepis’ evidence concerning the fee of $100,000. As appears later in these reasons, I am unable to resolve conflicts of evidence between Sialepis and Kay on these matters, particularly as I am unable to place any credibility on Sialepis’ uncorroborated evidence.

51 My inability to resolve those conflicts, however, also arises out of the severely compromised position of Kay in accepting the two benefits I have mentioned. He could not have regarded it as appropriate to receive them and the fact that he did, whether unsolicited or not, in my view, undermined to a significant extent his credibility. I refer later in these reasons to my approach to the credibility of Kay in relation to the evidence generally.

52 The circumstances in which the bank’s facilities offer was made involve an understanding of the property dealings of Sialepis leading up to that offer.

53 In 1988 Sialepis and Thibou acquired the Rooty Hill property on which it was proposed to construct eleven or twelve villas for on-sale. This property was provided as security for the Rooty Hill loan. This facility was extended in late 1990 until 30 September 1991.

54 There was no direct evidence, as far as I am aware, of the particulars of acquisition by Sialepis of a Fiji garment factory. However, it appears that such an investment was made in 1990 or thereabouts.

55 In the beginning of 1990 the company purchased a shopping centre in Hervey Bay (Condor Lakes) from Challenge Bank which was acting as mortgagee exercising power of sale. That bank provided a facility of $2,700,000 by way of vendor finance towards the company’s acquisition of Condor Lakes.

56 In March 1990 Sialepis purchased the Paddington terraces which were provided as security for the Paddington facility.

57 A summary of these and other commercial activities of Sialepis is conveniently set out in a communication from Sialepis to Kay in January 1992 which included the following description:

“Projects to be accomplished for 1992 for Harry Sialepis and Co.

1. CONDOR LAKES (QLD) - Current Mortgage of $2.7 million to Challenge Bank and have since exchanged on adjoining block of vacant land 6.5 acres for total price of $380,000. Settlement for vacant land is 1 April 1992 and balance of $365,000 is required.

I have immediate plans to greatly expand this current shopping centre and to add in a major combination food and variety store Cos-Mart to be run under professional management and have plans to greatly expand the Cos-Mart stores at a later date throughout Australia.

Time frame to do major extensions to Condor Lakes over and above the re-financing of the existing centre and the purchase of extra land will be from May 1992 through to December 1992. In the meantime we have employed the services of retailing professional consultants MMI Design to carry out all research and demographics from January 1992 through to December 1992 at a fee of $200,000 paid proportionally at $10,000 a month. This will guarantee the success of the success of Cos-Mart and the extentions (sic) of Condor Lakes Shopping Centre.

Please also find feasibility attached to these documents for the extentions (sic) of Condor Lakes Shopping Centre, and the set up of a Cos-Mart Hypermarket.

2. RUTHERFORD (NSW) - Currently we own vacant land to which a D.A is approved for 3 lock-up shops. Prime location and valuation report is available. Needed approx $85,000 - $95,000 to build the 3 lock-up shops.

- Retail selling price $500,000. Rental achieved approx $50,000.

Time frame - March - April 1992, 8 - 10 weeks for construction of shops.

3. TELARAH (NSW) - Currently own vacant land to which 18 factories have been approved. We currently only want to build 5 pre-fab factory warehouses. Approx only $100,000 is required to build the 5 factories. Retail selling price approx $300,000 for the 5. Rental achieved $38,500 based at only $5 per square foot.

Time frame - June - July 1992, construction time 10 weeks.

4. RUTHERFORD 32 Villas Approved - We currently have exchanged on land which is subject to council approval for 32 villas. Plans are in council at present and will be approved within 8-10 weeks definitely.

On approval of D.A land is valued at $15,000 minimum per site, therefore 32 x 15 = $480,000. We have plans to build the villas this year for the purpose of renting and selling off. It would cost approx $35,000 a villa to build, therefore $1,120,000 would be required to finance the construction. Retail selling price is approx $90,000 ( $2,880,000) retail price. On settlement $160,000 is required to settle and own the land approx 8 - 10 weeks from now.

We have also been able to cut the site up into 4 blocks giving 2 x (9 x 2 bed) + 2 x (7x2 bed) total = 32 Villas. Rental achieved $150 per week x 32 villas equals $4,800 per week which equals $249,600 per year. Profit on this project is approx $1,600,000.

Time frame - June 1992 through to July 1993.

5. RUTHERFORD 6 Shops + 6 Flats. We have currently exchanged on land subject to 6 shops + 6 flats being approved, again this will be approved in approx 8 -10 weeks. On approval of D.A subject land is worth $225,000. I need only $48,000 to settle the land with in 8-10 weeks or so. To build the 6 shops and 6 flats would cost approx $396,000. Rental achieved would be $109,200 yearly. Retail selling price $900,000,

Time frame - To construct shops January 1993 and it will take approx 15 weeks to build this project.

6. THAILAND PHUKET PATONG HILL TOWER’S - Consisting of 60 apartments (high -rise) overlooking Patong Beach. We currently already own the land there and the land is valued at $1.25 million with the D.A approved for the 60 apartments etc on it. We also have a buyer who has already signed up to purchase the project completed for $11.5 million so this project has already been pre-sold. We need only approx $2.4 million AUD to build the building known as Patong Hill Tower’s. Current retail selling price is $15 million AUD but because the purchaser will buy the whole lot we have discounted the price to $11.5 AUD. Again the purchaser has signed up to purchase and this project is pre-sold already!

Time frame - Project to start in April 1992 and run for 18 months maximum.

7. LA NITA SHOPPING CENTRE NEWTOWN, HEAD OFFICE FOR HARRY SIALEPIS AND CO.

La Nita is perfectly positioned for Head-office for H. Sialepis and Co. whilst having its head-office located in the building, we would also generate an income of $530,000 per year. Purchase price is $3.9 million. Settlement is to take place in October 1992. Deposit is $50,000.

8. ROOTY HILL VILLAS CURRENTLY UNDER CONSTRUCTION

We have 11

2 bedroom villas under construction and expect them to be fully completed by March 1992. We currently require approx $200,000 - $220,000 to complete them. We have at the moment 3 interested parties to purchase villas at $103,000 each. If these sales fall through we will not strata title but re-finance the villas at approx $700,000 and rent them out at $160 per week each to cover the interest. They will be a stand alone investment. Current market value for these villas on completion is approx $1.1 million.”

58 That description was included in a bundle provided as an “update” to Kay on 9 January 1992. Sialepis described it as a “quick update as [he was] travelling up to Hervey Bay with [his] family and CosMart Consultants to meet with H. Bay council….” in relation to an extension of the Condor Lakes shopping centre.

59 As at that date the only facilities that Sialepis had with the bank was the overdraft facility in favour of the company, the Paddington facility, the Rooty Hill loan and an account in the name of the company, styled “Condor Lakes outgoings account”, which, as its name conveys, was an account for the payment of outgoings in relation to Condor Lakes.

60 According to Sialepis’ evidence of his dealings with Kay during 1991 and in the first quarter of 1992, he was, in effect, pursued by Kay with promises of facilities to cover the pay out of Challenge bank in relation to Condor Lakes and the cost of acquisition of the vacant land adjoining Condor Lakes for the purpose of expansion of the Condor Lakes shopping centre. Sialepis claimed that he was encouraged by Kay to acquire that adjoining land.

61 Kay denied Sialepis’ version of their relationship and, in particular, the evidence of promises on behalf of the bank to provide the Condor Lakes facility and loan funds to acquire the adjoining land. Kay testified that he did not have the authority to promise the facilities as claimed by Sialepis. The letter of Sialepis quoted above does not, in my view, accord with Sialepis’ version of the circumstances of his acquisition of the Condor Lakes adjoining property.

62 There is little doubt that Kay saw in Sialepis a potentially valuable customer of the bank and one whose account would improve Kay’s standing within the bank. Beyond that, I would not be prepared to go, mainly because of my inability to accept Sialepis as a witness of truth. Moreover, the contemporaneous records, both internal records of the bank and records of the communications between the bank, Sialepis and his accountant in early 1992 did not support Sialepis’s version.

63 I think it is obvious that Sialepis required no encouragement to acquire the joining land to Condor Lakes and I think he well understood that any refinancing of Condor Lakes by the bank to replace the Challenge bank facility would have to satisfy the normal lending requirements of the bank.

64 The concept of Sialepis exchanging contracts on the adjoining land on the basis of Kay’s promises of finance I find extremely difficult to accept. According to Sialepis he had a conversation with Kay over payment of the deposit for the purchase of that adjoining land which was to the following effect:

“13. I telephoned Greg Kay. The conversation was to the effect:

HS: Remember our conversation about buying the land, well I managed to negotiate the priced down from $800,000 to $380,000.

GK: That’s great. Good work son. You’ve done well.

HS: Is it okay to draw a cheque for $10,000 as a deposit as I know my overdraft is over the limit of $180,000?

GK: That’s okay. Just go ahead and cut the cheque.”

65 Kay denied such a conversation and I am unable to accept the evidence of Sialepis, particularly having regard to Kay’s refusal in March of 1992 to honour cheques drawn by Sialepis on the Condor Lakes outgoings account.

66 The terms of Sialepis’ communications to Kay concerning those dishonoured cheques do not reflect the language of a customer of the bank who was assured of the provision of additional major facilities.

67 Sialepis’ note to Kay of 17 March 1992 which follows is a good example of that:

“Dear Greg, could you please “

let through

” some of cheques (sic) that were returned from Condor Lakes Outgoings A/C as they are necessary to run the centre. As I said the Auditor should have the books finalised by Friday, therefore all tenants will not have any excuses not to contribute into this Account. As you can see the outgoings A/C has dropped --- it down and will continue to do so over the next few weeks.”

68 That request was rejected. Another example is the following note from Sialepis of 24 March 1992:

“Greg, we have to make arrangements to allow wages for the

cleaner

- $550 pw (Robert Graham) and Centre Manager

Patrick

$500pw. They have not [been] paid for 2 weeks now. I am still awaiting the auditor’s figures (which he has promised by Friday) (I ring him every day about it).

So, can you

please

allow at least the wages through Greg.

I am having some small family problems at the moment, (illness) and will only be in the office a minimum amount of time.

I have also requested to

Panos

to give you the figures you require for the loans. (URGENTLY)”.

69 The first submission by Kay to the bank’s credit department of Sialepis’ application for increased facilities, to enable Sialepis to pay out Challenge bank and complete the purchase of the Condor Lakes adjoining property was dated 27 April 1992. It was preceded by communications to the bank from Sialepis and his accountant with the latter providing financial information, accompanied by a covering letter in the following terms:

“Please find enclosed information requested and I trust that this is what you need to complete the application for the loans.”

70 There is nothing in those communications to suggest that the provision of the required facilities was a formality as suggested by Sialepis. Kay may well have given Sialepis reason to be confident that the required facilities would be forthcoming. However, I am not prepared to accept that the facilities had been promised in the manner alleged by Sialepis.

71 Kay’s submission of the application, included the following which, I think, reflected Kay’s personal interest in seeing the application approved:

“ MANAGEMENT

Good.

In the hands of Principal Harry Sialepis who has had over 10 years experience in the building/construction industry.

He is also an experienced and astute property investor/developer as evidenced by substantial financial position.

Excellent back up financial support/guidance is provided by experienced Accountant and personal friend Panos Phillis.
…

SPECIAL FEATURES

Mr Sialepis is a highly successful businessman for his age (32) which is demonstrated by his very substantial financial position.

Subject to Bank’s approval of the facilities requested, the Sialepis Group will become the No 1 client/connection in the portfolio with a substantial return of approx. $160K per annum to the Bank (Refer “Value of Connection” above.).
…

Given that all the Banks financial requirements have been provided by the Group and following a comprehensive review by this office we now submit a fully detailed credit application, which upon approval, would clearly elevate the Sialepis Group to the No 1 connection (both by TAE and profitability) in this relationship management portfolio.”

72 In summarising the application Kay included the following amongst the “Positive” elements:

“Excellent opportunity for the Bank to take over existing business held by Challenge Bank and consolidate all borrowing facilities within the Westpac Group.

…

Profitability to the Bank is excellent at $162,836 (actual) based on “What if” costing for total facilities requested (see Schedule “HI” for full details)”

73 For reasons later addressed, it is significant that Kay proposed in his submission to the bank’s credit section that a fee of $15,000 be imposed in relation to the proposed facilities.

74 The credit section rejected the application as conveyed to Kay by memorandum of 4 May 1992 in the following terms:

“- As discussed a lot of work is required before further consideration can be given, however your response to the issues raised by NSW Manager Commercial Lending and explanation of current excesses could enable some limited assistance to complete purchase of vacant land to be given pending the establishment of ongoing viability of the shopping centre.”

75 Kay responded by a further submission to the bank’s credit section of 6 May 1992 in which he stated that the bank’s decision to decline the additional facilities had been “conveyed to Group principal who was understandably most disappointed.”

76 Kay’s re-submission of the proposal recorded the receipt of additional information from Sialepis to support the re-submittal and contained the following statement:

“The specific issues highlighted by NSW Manager Commercial Lending in memo 1/5/92 have been further discussed in detail with Mr Sialepis who has also requested that finance proposal be re-submitted along with the original lines (i.e. TAE $6076).”

77 Sialepis denied ever having been informed of the rejection of his application. I am unable to accept that evidence, particularly in light of Kay’s evidence that he so informed Sialepis as corroborated in his contemporaneous record.

78 Notwithstanding the terms of Kay’s strong recommendation of approval of the re-submitted application, the credit section again declined Sialepis’ application, as communicated to Kay by memorandum of 12 May 1992.

79 This second rejection, according to Sialepis, was not conveyed to him. This does not accord with the terms of Kay’s third submission of the Sialepis application of 18 May 1992 which contained the following:

“Again Bank’s decision has been conveyed to Mr Sialepis (who delayed a 2 week overseas business meeting to USA from Friday 8/5 until 12/5/92).

Mr Sialepis cannot justify in his own mind the rationale behind the Bank’s decision particularly given-

1. Longstanding, loyal and reliable client since 1983. All financial obligations to the bank have been met.

2. Substantial personal financial position has been built up over the past 15 years based on acquiring and managing sound/successful business opportunities (also acknowledge that some have been speculative investment opportunities).

3. Collateral security held/offered to the Bank is good quality landed property assets which are substantial and well inside the Bank’s lending ratio policy guidelines.

4. Substantial income (guaranteed) which is generated by the Company from the two major Group business assets

viz-

a) South Hurstville Service Station

b) Condor Lakes Shopping Centre

is more than twice the Bank’s interest cover and unquestionably demonstrates serviceability of the total borrowing facilities requested by the Group.

Given the above valid issues highlighted, and again at Mr Sialepis’ request, I am prepared to fully support Group’s proposal for an increase in borrowing facilities to $6076 (+ $3870) and wish to provide the following further specific advices to hopefully overcome any areas where the Bank is uncomfortable with this connection in order that the original declined decision can be overturned.”

80 In light of that contemporaneous record, I am unable to accept Sialepis’ evidence that he was not informed of the bank’s second rejection of his application.

81 The terms of Kay’s summary of this final submission and of his recommendation are set out below as, I think, they reflect a lack of objectivity and a close association between Kay and Sialepis. The relevant section follows:

“

Summary

I apologise for the need again to request the Bank’s re-consideration of original decision to decline increased borrowing facilities sought by the Group however, such is the strong feelings that I have that this is sound quality/ profitable business for the Bank backed by the Principal who has a substantial personal financial position.

Also, in need, and in order to add comfort for the Bank, Mr Sialepis is prepared to strengthen original proposal by offering -

1. Unencumbered personal waterfront home at South Cronulla (valued at $1.75 - $2.0M)

2. Specific Deed of Assignment over rental income of Condor Lakes Shopping Centre

3. Unconditional personal undertaking that current Group borrowing facilities of $1.8M viz -

a) Paddington $1300

b) Rooty Hill $ 500

will definitely be repaid in full by 31/12/92 (

firm)

4. Unconditional personal undertaking that all terms and conditions relating to any current or future loan
borrowing facilities provided by the Westpac Group will be strictly adhered to.

5. Mr Sialepis has also offered (at the Company’s expense) for me to personally visit and view and inspect for

adequacy all Group security properties viz-

a) Condor Lakes Shopping Centre

(including adjoining land being purchased)

b) South Hurstville Shell Service Station and adjoining land

c) Rooty Hill villa development

d) Paddington townhouse properties (2) (now

both

sold)

(e) Rutherford land/proposed commercial/retail development

f) Newcastle (Union Street) Commercial Building

Recommendation

Given the further additional information now provided and on the basis that:-

1. Mr Sialepis is prepared (in need) to offer substantial comfort to the Bank via additional issues highlighted
above.

2. Annualised profitability to the Bank on approval of total facilities requested is substantial at approx. $160K.

3. Significant net surplus annual income of approx. $325K (plus CPI) is available (i.e. uncommitted income) from
Company’s South Hurstville Service Station to assist with serviceability of all borrowing facilities requested
(particularly The Condor Lakes Shopping Centre) in need.

4. Substantial personal financial position (i.e. back up support) of Group Principal Harry Sialepis.

5. All existing/new Banks loan terms and conditions would be strictly observed.

I again fully support and strongly recommend Bank’s approval to Group/TAE of $6076 (+ $3870).

All other information/details as per original credit proposal 27/4/92 and follow-up memo 6/5/92 remain pertinent and unchanged.”

82 The circumstances in which the Cronulla property was offered as additional security are in issue. According to the evidence of Sialepis, the additional security arose with Kay in the following way “about April 1992”.

“GK: I have been talking to the boss in order to get your loan approval for the re-financing of the property and the

construction finance for the proposed extension on the land after you complete the purchase in the near

future. I have it on authority that the Bank is going to cut back on construction finance and commercial

property loans. In order to get these loans through quickly and ensure the construction money I need for

you to tip in your house as further security. Now I know that it is not really needed at all, and I know your

house is unencumbered but if you do so it will show good faith to the Bank and guarantee the loan is

available. This will show to the bank that you are confident and a professional in your field as the Bank has

lost a lot of money by lending money to people who go into deals they know nothing about like doctors,

solicitors and farmers and Pitt Street Farmers.

HS: Greg, I do not know why I have to put my house in. I am only a one-third owner with my mother and wife and
the decision is not all mine anyway and I need to talk.

GK: Look you have nothing to worry about. After you get the DA on the land and you have an even better

valuation for more than $6.189 million and if you can discharge the $500,000 loan account secured by the

Rooty Hill property I will release your house straight away.

HS: I am still concerned to put my house in when it is unencumbered and has been for four years and particularly

as you have sufficient security with approved valuations.

GK: I will come down to your house to meet your mother and wife and convince them that it is okay to put the

house in and that they have nothing to worry about. My hands are tied and I really need the house to

guarantee the approval of the loan and construction funds when you require it. Just get out and get all the

necessary development approvals because that will be the main condition on the construction finance.

HS: Look I am still not really happy about putting my house in as I am convinced that the bank has enough

security. You didn’t require it when I talked to you before exchange but so long as you guarantee after I obtain

the necessary approvals for the extension of the shopping centre at least my house will be released then I’ll do

it.

GK: Fine. No Problems. That’s fair.”

83 According to Sialepis his attitude to mortgaging the Cronulla property was as follows:

“This conversation was the first time Greg Kay had said anything to me about the house being required as a ‘further security’. I was not happy about this, however I was already past the point of no return as I had exchanged contracts on the land. I was also worried about what my wife would say. I was well aware that my wife and mother were both on the title and would have to agree to the house being used as a security. In my earlier conversations with Greg Kay and when I exchanged contracts on the land I did not for a moment think that the bank would now require my house as a security. As a result of that conversation I understood that Westpac had set three conditions for the release of my home. First, a Development Approval being granted in respect of the land I was purchasing; second, I get a valuation better than $6.189 million and third, I arrange for the discharge of a $500,000 loan which was secured by a property at Rooty Hill. The Rooty Hill property was an investment I had entered into in my own name together with a partner. It was not an asset which was a part of my corporate arrangements.”

84 I do not accept that evidence. For example, I think it is clear that Kay was unaware in April 1992, of the interest of Effie Sialepis in the Cronulla property. That information only came to light after the bank’s facilities offer. It is Kay’s evidence that the offer of additional security came from Sialepis. I am unable to reach a finding on that matter.

85 Sialepis gave evidence of a visit by Kay to the Cronulla property, sometime in April 1992, at which, according to Sialepis, Kay explained to Effie Sialepis the provision of the Cronulla property as additional security in the following terms:

“22. In or about a week later Mr Kay visited my home and spoke to my mother and myself regarding the inclusion of

the family home for the new loan. I am not sure whether my wife Dimitra was present. A conversation took

place between Mr Kay and myself to the following effect:

GK: The house is only used as a guarantee for the construction finance at a future date which will be
approximately in twelve months by the time all the approvals come through. You can have the house released
at any time if Harry gives an updated valuation with the approvals, or discharges the Rooty Hill debt or does
not proceed with the construction of the extension.

The inclusion of the house will make the loan proposal look good before the senior lending manager and it

would make me look good as I will be in a position to help you even more to expand your business as Westpac

really values your business and seen you grow over a period of ten years. We have been told that you’re the

type of customer Westpac wants, that middle range business and you beautifully fall into this range. You have

a lovely home here with a lovely view and I would never do anything that would jeopardise your home.

HS: Greg, can you guarantee me as an officer of the Bank here today that if we include the home for this loan

facility to include the construction finance, the Bank will release my house upon request?

GK: Yes. Fine. I can give you that guarantee Harry.

23. My mother’s English was not good enough to follow the detail of this sort of business conversation. I recall

explaining to my mother in Greek the effect of what Greg Kay was saying to me. Even though I spoke Greek,

my Greek language skills were not at a high level and I would describe my Greek language as ‘broken’ Greek.

I may have spoken to my mother in a mixture of Greek and English.”

86 Kay denied that visit and I am not prepared to accept Sialepis’ evidence, particularly in the absence of evidence from Effie Sialepis and of any contemporaneous record.

87 There is a record of a visit to the Cronulla property by Kay and Darren Mills (Mills) on 24 July 1992. The record is in the form of a diary note dated 24 July 1992, signed by Kay and Mills, recording a visit to the Cronulla property for a “surety explanation” to Effie Sialepis.

88 In my view the terms of that explanation are difficult to reconcile with the evidence of Sialepis of an earlier visit by Kay to explain the circumstances of the mortgage to Effie Sialepis. I think it is clear from Kay’s cross examination on this matter that, in April 1992, he did not know of Effie Sialepis’ interest in the Cronulla property.

89 I am unable to accept the evidence of Sialepis of the April 1992 conversations with Kay in which the provision of the Cronulla property as additional security was discussed. In particular, I do not accept that Kay undertook to release the Cronulla property as security upon the company obtaining “the necessary approvals for the extension of the shopping centre”. That evidence is uncorroborated, denied by Kay and in conflict with contemporaneous records.

90 On 1 July 1992 the bank wrote to the mortgagors under the mortgage, at the request of Sialepis, in the following terms:

“

RE:

PROPERTY AT 17 DAROOK PARK ROAD, CRONULLA TO BE TAKEN/ HELD AS SECURITY BY WESTPAC BANKING CORPORATION TO SECURE LOAN/ BORROWING FACILITIES TO SIALEPIS PTY LTD

I refer to my recent discussions with Mr Harry Sialepis and now wish to confirm that Westpac Banking Corporation (“the Bank”) will be prepared to favourably consider a full unconditional release/discharge of the abovementioned property which is to be taken/held to secure loan borrowing facilities for Sialepis Pty Ltd subject to the following current borrowing facilities being cleared in full by 31st December 1992:-

Harry Sialepis Bill Acceptance Line $1,300,000.00

Harry Sialepis & Geoffrey Thibou Investment

Property Loan

500,000.00

TOTAL $1,800,000.00”

__________

91 There is an issue as to when the 1 July letter was received and, in particular, whether it had been sighted by Sialepis prior to his departure to execute the security documents in Queensland on 3 July 1992.

92 It is reasonably clear from Sialepis’ statement of evidence in chief that it was intended to convey that the letter was received prior to his departing for Queensland in July 1992. In cross examination, Sialepis asserted that it was received by him only after the execution of the security documents in Queensland. I make no finding in respect of that matter other than to say that I do not accept Sialepis’ evidence that it was received after that visit.

93 The terms of the 1 July 1992 letter are consistent with Kay’s evidence and with the terms of the approved facilities which required the Paddington facility and the Rooty Hill loan to be retired by 31 December 1992. Moreover the letter was sent in response to Sialepis’ facsimile to the bank of 26 June 1992. There is no record of any dissent by Sialepis to the terms of Kay’s letter of 1 July 1992. It was Sialepis’ evidence that he orally complained to Kay about the contents of the 1 July letter. I am unable to accept that evidence.

94 For similar reasons I do not accept the evidence of Sialepis as to a further conversation he claimed to have had with Kay following the alleged meeting with Kay and Effie Sialepis at the Cronulla property in April 1992. This further conversation was said to have taken place prior to the bank’s facilities offer. The evidence of Sialepis was as follows:

“24. After this meeting I had a further conversation with Mr Kay to the following effect:

HS: If I proceed with the construction of the extension on the land, the house will remain during the construction. However the moment it is completed and I obtain an updated valuation the house will be released. I know the valuation will be sufficient in order for the Bank to release the house ten times over. The Shopping Centre with the extensions once completed should be worth in the vicinity of $20,000,000.

GK: I know it will be worth big dollars but all you have to do is just get valuations.

HS: Fine, I will even organise for you to know in advance what the Centre will be worth when I have got all my approvals and I know my floor space area. I can then do my costings and budgeted rentals to be achieved for these areas.

GK: Great. That’s what we want.”

95 The conversation is denied by Kay and is not consistent with the terms of the letter of 1 July 1992. In the absence of some corroboration I would not be prepared to accept Sialepis on this matter.

96 There was corroboration of the 1 July 1992 terms upon which the bank would consider discharging the mortgage in Kay’s file note of 19 June 1992. The relevant portion of that memorandum was as follows:

“Following detailed meetings with Harry Sialepis and his Accountant Panos Phillis on 27/5/92 and 17/6/92 we have today received Terms and Conditions letter back duly executed and accepted (as documented) except for the following minor amendments which have been agreed to by me (with the appropriate/relevant comments) viz.-

1. Expiry date of offer extended to 20/6/92 (from 5/6/92) in view of Mr. Sialepis absence for past 10 days on family holiday.

2. Establishment Fee for Sialepis Pty. Ltd. Reduced to $15 (ie. - $10) which is as per Commercial Lending approval.

3. Agreement in principle by the Bank for the return of South Cronulla home (ie. now required as additional security by the Bank) on full clearance of current borrowings -

- BAL $1300 (Harry Sialepis)

- IPL $ 500 (H. Sialepis & G. Thibon)(sic)

by 31/12/92 (at latest).

4. Extension of date for receipt of Fiji proceeds from 31/8/92 to 31/12/92 (at latest).”

97 Sialepis’ accountant was not called. In my view this contemporaneous record is further confirmation of the terms upon which the bank had been prepared to release the Cronulla property as security for the borrowings of Sialepis and the company.

98 I think the terms of that diary note are of further significance in the light of Sialepis’ denial in cross examination that, at the time of this memorandum, he was in close consultation with his accountant over the terms of the bank’s facilities offer. His evidence was as follows:

“Q. And I want to suggest to you, Mr Sialepis, that the question of early release of the house was not raised by you with Mr Kay until after 27 May - on or after 27 May?
A. No, that is incorrect.

Q. You see, you took some time to get this signed acceptance back to the bank, didn't you?
A. Yes.

Q. And that is because you were looking at it very carefully and consulting with your accountant, wasn't it?
A. No.

Q. What were you doing with it?
A. I don't recall. I don't recall.

Q. I mean, you took over three weeks to get it back, didn't you?
A. One of the reasons could have been that my brother-in-law was away for him to sign. I mean, there could be various reasons. I can't recall exactly.

Q. Do you remember discussing with Mr Kay, a day or two before you sent the acceptance back, the terms and conditions of this letter of offer?
A. No, I don't recall.

Q. Do you recall having meetings involving yourself, him and Mr Panos Philis dealing with the letter of offer?
A. The only thing I do recall is maybe having a lunch with Mr Kay with Mr Philis, but I don't recall discussing the letter of offer.

Q. Do you recall that the expiry date of the offer was extended by Mr Kay from 5 to 20 June at your request?
A. I don't know if it was at my request, but it was certainly extended, yes.

Q. Do you recall you went away for about 10 days in that period on a family holiday?
A. I may have.

Q. What I want to suggest and put to you, Mr Sialepis, is that it was after you received the letter of offer, but before 19 June, that the first time occurred when you raised the question of the early release of the security?
A. No, no, I disagree.

Q. And that what Mr Kay told you was that the bank would look favourably upon the return of the South Cronulla home on full clearance of the Paddington debt of $1.3 million and the Rooty Hill debt of $500,000, if that was done by 31 December 1992?
A. I disagree, sir.”

(T 188: 48 - T 189:44)

99 In the absence of corroborating evidence, particularly that of Sialepis’ accountant, I am not prepared to accept Sialepis’ evidence on this matter.

100 By arrangement with the bank, the settlement of the purchase of the Condor Lakes adjoining property and the execution of the relevant security documents took place in the bank’s Maryborough branch on 3 July 1992.

101 The manner in which the security documents were explained to the plaintiff forms the basis of her representation case against the bank. For convenience of reference, the relevant representations are repeated below:

“1.6 During the course of the conversation referred to in paragraph 1.5 herein, Kay represented to the Plaintiff that

if she executed a mortgage in respect of the Cronulla property in favour of the Second Defendant:

(i) the mortgage would be for a short term only;

(ii) the mortgage would be discharged by the Second Defendant within 1-2 months;

(iii) the mortgage was to secure the purchase of the project at Pialba, Hervey Bay, in the State of Queensland;

(iv) the mortgage would be discharged when the Rooty Hill project was refinanced within one to two
months;

(v) Sialepis Pty Limited would be able to obtain the refinancing of the Rooty Hill project within one to two
months;

(vi) there was a reasonable basis for the statements in (i) to (v) above”

102 There was a lack of consistency in the evidence adduced on behalf of the plaintiff and which, in turn, was at odds with the evidence of the bank’s officers as to who was in attendance at the Maryborough meeting; by whom the security documents were explained on behalf of the bank and the nature of that explanation.

103 According to the plaintiff the mortgage was executed at the Maryborough branch of the bank in the following circumstances:

“10. When we were all seated and casual pleasantries had been exchanged Mr. Kay produced some documents

which he did not identify and placed them on the table. He said to me:

‘I have to explain to you what these document are and if there is anything you don’t understand just ask me.”

I nodded.

He then said:

“You are here to settle on the land adjoining the Condor Lakes Shopping Centre and we are taking your home at Cronulla and also the shopping centre and the adjoining land as security for the purchase of this land. Do you understand what I mean by security?”

I nodded.

“So you realise that if Sialepis Pty Limited defaults on their loan the bank has the power to sell your home to recover the debt?”

I nodded.

He then smiled and said:

“But I wouldn’t let the bank sell your home - that would be the last thing that would happen.”

He then said:

“Sialepis Pty Limited is borrowing $650,000.00 to purchase the land adjoining the Condor Lakes Shopping Centre and we are taking your house as security for this purchase. It will only be for a short period of one to two months and the home will be released as security when the Rooty Hill project is refinanced.”

11. On the basis of the what was said (sic) to me by Mr. Kay I decided to sign the mortgage over the Cronulla property.

12. Mr. Kay then opened the documents that were in front of him and pointed his finger to various places on the pages of those documents and said:

“Just sign here”.

I signed where he indicated that I should on my own behalf and also as a director of Sialepis Pty Limited. I did not read any part of any of these documents nor was I given the opportunity to do so. I recall that one document was blue and there were a number of pencil marks on this document indicating where I should sign.

…

22. During this meeting both the manager of the Maryborough branch of the Second Respondent and Mr. Williams moved freely in and out of the office and neither were present for the entire meeting.

23. At no stage prior to the execution of these documents did Mr. Kay, Mr. Williams, the manager of the Maryborough branch of the Second Respondent or any other person suggest to me that I should or explain to me that I could seek independent legal advice in relation to these documents.”

104 In cross examination that evidence was, in substance, adhered to by the plaintiff. I set out below some relevant portions of that cross examination:

“FOSTER: Q. Now I just want to jump ahead for the moment. Do you remember on 3 July 1992 when you went up to Maryborough in company with your husband and your children?
A. Yes.

Q. And ultimately with Mr Kay?
A. Yes.

Q. You went to the bank there, do you remember that?
A. Yes.

Q. And what time of day did you arrive at the bank on that occasion?
A. In the morning.

Q. What time do you recall?
A. No.

Q. And what happened went you arrived (sic) at the branch of the Bank, to the best of your recollection?
A. We went inside. We went upstairs. We were showed into an office. There was a gentleman yelling in the background. We sat down in the office with my ex husband my children, Mr Kay and Mr Williams. I am not sure, I think there was another person present.

Q. You are not sure about that?
A. No.

Q. What happened then?
A. We sat down. We were introduced. We sat and then Kay pulled out some documents from the table.

Q. Mr Kay did?
A. Yes, he did.

Q. And do you remember what those documents were?
A. There were some papers and I remember there was a big blue document which opened up in half.

Q. What were the other papers do you recall?
A. No, I don't.

Q. And what happened then?
A. As we sat down Mr Kay said to us that we were up there about the adjoining block of land next to the shopping centre and that we were there to settle. He said to me that he was going to need the house as security for a short period of time, namely one to two months in order to settle on the block of land next door and for the Rooty Hill project to be refinanced.

Q. Yes?
A. He then said that we were borrowing approximately $650,000 for the block of land next door and that he had to explain to me what I was signing. He then said words to me about giving a guarantee of my home to Westpac guaranteeing Sialepis Pty Limited and that if Sialepis Pty Limited does not pay back the debt then the Bank would be able to sell our home, but then he looked at me and said that, "That would be the last thing that I would let happen."

Q. That's the last thing -?
A. "That I would let happen."

Q. Yes?
A. He then showed me where to sign. I do recall that there was pencil marks, crosses and words "initial", everywhere else to sign.

Q. What happened?
A. I signed.

Q. Did your husband sign then?
A. Yes, he did.

Q. Did anyone else sign?
A. Not that I can recall, no.

Q. And nothing else was said, is that your evidence?
A. That's right.

Q. What happened then?
A. We left.

Q. How long did this take?
A. Approximately ten minutes.

Q. And where were your children whilst this conversation and signing took place?
A. In the room with us.

Q. Now on that version, Mrs Sialepis, you have Mr Williams not saying anything at all about the mortgage?
A. No, he did not.

Q. And is that your evidence?
A. That's my evidence.

Q. He said absolutely nothing about the mortgage?
A. Nothing at all.

Q. Not a word?
A. Not a word.

Q. And Mr Kay did all the talking?
A. Yes, he did.

Q. As far as talking was done by anyone?
A. Yes.

Q. From the Bank?
A. Yes.

Q. And did either you, or your husband say anything while Mr Kay was talking, or during the course of his conversation?
A. No, I did not.

Q. You said nothing?
A. Nothing.

Q. And your husband said nothing too, is that right?
A. No.

Q. Sorry, you are agreeing with me?
A. I cannot recall him saying anything.

Q. So your evidence is that there was in effect a monologue. Mr Kay said some words and then you signed?
A. Yes.

Q. Do you agree that one or the other of the bank officers present, either Mr Kay or Mr Williams, I don't want to debate with you at the moment which one, asked you if you understood what was meant by the grant of security?
A. Could you repeat that?

Q. Certainly. Do you remember that one or the other of the officer present asked you if you understood what was meant by giving security over the Cronulla property?
A. Yes, Mr Kay said that.

Q. You say Mr Kay said that?
A. Yes.

Q. And did you answer him when he asked that question?
A. I nodded.

Q. You nodded?
A. Yes.

Q. Did you nod "yes"?
A. Yes.

Q. Were you intending to indicate to him that you did understand what was meant by the giving of security over your house?
A. With a nod meaning "yes".

Q. You meant to say "yes", did you?
A. I nodded. I didn't say "yes". I nodded.”

Q. You meant to signify that you understood the question, did you?

A. I understood what he said why the Cronulla house was being held, yes.”

(T 26:37 -T 29:29)

105 I would not place much significance in the plaintiff’s lack of certainty, in that evidence, as to the presence of the Maryborough branch manager during the meeting, to the extent that it may be seen as a departure from her evidence in chief.

131 The September reasons traced the way in which evidence arose of the plaintiff acting in fear of Sialepis in executing the mortgage. In addition to the evidence there set out, I think it is also relevant to note the terms of instructions provided by the plaintiff to her then solicitors on 31 December 1994 (the plaintiff’s December 1994 statement) which included the following:

“Harry told Greg beforehand that I was hesitant in signing the house to the bank as security, as we had an argument about that prior to going to Queensland.”

132 There is no suggestion in those instructions of acting under any form of duress or fear of Sialepis. Rather, the statement referring to an argument over the provision of the mortgage with Sialepis would suggest otherwise.

133 Having regard to the way in which the evidence of the plaintiff’s alleged fear of Sialepis arose, as set out in my September reasons, and the fact that there was no allegation against Sialepis of an act of violence towards the plaintiff having been committed by him for several years prior to the mortgage, I am not prepared to find that the plaintiff acted in fear of Sialepis in agreeing to provide the Cronulla property as security.

134 In any event, for the reasons stated, I am unable to conclude that the second representations were made by the bank as alleged.

135 Further, I think the plaintiff had a greater level of awareness of Sialepis’ affairs than she was prepared to acknowledge in these proceedings.

136 Quoted earlier in these reasons was her version of that involvement as sworn to in the Family Court proceedings. I am prepared to accept, as the plaintiff suggested in her cross-examination, that her lawyers in the Family Court proceedings put the “best foot forward” in describing her involvement in Sialepis’ affairs.

137 Further, I place little reliance on the fact that the plaintiff was recorded as receiving direct financial benefits from Sialepis’ business activities or that she was recorded as holding any office in those enterprises, mainly because I regard Sialepis as having pleased himself in the way those activities were conducted.

138 However, I am satisfied that the plaintiff was not left in ignorance of Sialepis’ affairs and that she was more involved in his affairs than she was prepared to admit.

139 I think that is borne out further by the level of her awareness of those matters as reflected in her December 1994 statement and which was as follows:

“31 December 1994

We were sitting in the office with Harry, Greg Kay, the bank manger of Maryborough Westpac, his assistant and myself.

Greg said “I have to explain to you what these documents are and if there’s anything you don’t understand, ask.”

I nodded.

“You’re here to settle on the land (address) next door to Condor Lakes” - Greg said.

As he was going through the papers he said “we are taking your home at Cronulla as security for the purchase of the land”, he asked me did I know what this meant, I nodded, he then continued, “that if we defaulted the bank had the power to sell our home”. He also said “that he wouldn’t allow the bank to sell our home, it would be the least thing that would happen” (sic).

Harry told Greg Kay beforehand that I was hesitant in signing the house to the bank as security, as we had an argument about that prior to going to Queensland.

As he was reading through the papers, he said ‘Sialepis Pty Limited was borrowing $650,000.00 to purchase the land and when the Rooty Hill project was refinanced, the house would be released. In approximately 1 month we are taking security over your home for a short term”, Greg said.

Harry and I signed the papers and put the Sialepis Pty Limited common seal stamp over the signatures.

Greg Kay and Darren Mills came to our home, when we returned, at 8.00am and got my mother in law to sign the papers at home.

During our first separation in December 1992, I had spoken to Darren Mills, assistant to Greg Kay and said to him that I wish to withdraw all my guarantees given to the bank but to do so my solicitor should write to the bank. The same afternoon Greg Kay rang me and asked if Harry was still in the dog house. I was angry and upset and said to him, when was he going to release the house because in Queensland he said that they were only going to keep it as security for one month. he (sic) then went on to say that they were going to keep the house as security because Harry owed them a lot of money. He said that Harry had still not paid the Paddington project debt (he took that money and sent it to Nigeria for the scam) that the villas at Rooty Hill were not refinanced and that Harry had tied up a lot of funds in Fiji. When I heard that, I was very angry, I said to Grey Kay that he did not explain that at all up in Queensland and that he’d said the house was only held as security for one month for $650,000.00 I said to him that I would never have signed over the house for Paddington as I knew the money was stolen by the Nigerians and as for Fiji, I wouldn’t sign over the house for Geoff Thibou and Bob Folewell’s share. They were the parties in the Fiji project. I went on to accuse Greg Kay of being a liar, cheat, corrupt and that is why on the documents in Queensland they were filled out in pencil. I said I was going to report him to his superiors for fraud and that he wasnt (sic) going to get away with it. I then hung up no him.

When Harry and I reconciled he rang me back and gave me the “I’m glad its all over” story. He tried to give me advice on my marriage problems and then went on to say that Harry and I should communicate, that we should put Sundays aside for the family as he does with his wife every Sunday, starts off with breakfast, dining out.

During 1992 Harry had paid for Greg Kay and his family to holiday in Bali (details of cheque either Dennis Paltos or Mr. Paul has). This was Greg’s reward for saving Harry approximately $17,000 in bank interest charges. Before the purchase of the Marrickville property, Greg Kay visited us at our home and handed to Harry a draft letter he had written for BAC (Peter Boyle) about the proposal for Marrickville. Greg Kay was worried about me mentioning what he’d done. Harry said to him that it was OK. Harry would correspond by fax because I heard Greg say to Harry that at night he puts the fax machine into his office so Darren or anyone else would not read faxes or be aware of what was happening. In confidence Harry would tell me that Greg Kay was helping us and that I should not repeat anything or Greg would lose his job,. I was also warned never to tell anyone about Jim Smiles being the other partner even though Greg Kay knew, if BAC found out the deal would’nt (sic) come through as a lot of money was to be made. Harry showed me a table of expenses, rents etc which clearly showed a profit of $120,000.00 a year for him and Jim Smiles. Jim Smiles’ involvement in Marrickville was also kept quiet at the start so as the previous partners would not sue Smiles.”

140 Those instructions reveal more than a passing awareness, or involvement in Sialepis’ activities. They extend to a detailed knowledge of the five thousand dollar payment to Kay: to knowledge of participants in Sialepis’ activities: to sharing the confidence of Sialepis in relation to his business improprieties involving Kay: to Sialepis’ presentation to her of financials relating to “Marrickville” and to his confiding in her of the deceptions he claimed to be practising in relation to that venture.

141 While most of those matters would have come to her knowledge after the 3 July 1992 meeting, there is no reason to suspect that this sharing of confidences between the plaintiff and Sialepis marked a change in the relationship that existed as at 3 July 1992 - particularly having regard to the plaintiff’s Family Court affidavit.

142 In reaching the conclusion that the plaintiff’s representation case should be rejected, included in that, her alternative case in negligence, I have found it necessary to look for corroborative evidence on issues which call for consideration of the credibility of Kay for the reasons that follow.

143 I am reasonably satisfied that he was too close to Sialepis to retain commercial objectivity in his pursuit of Sialepis’ custom for the bank. It is not entirely irrelevant that they were both of a similar age group and I think, both were quite ambitious.

144 Kay’s acceptance from Sialepis of five thousand dollars was entirely inappropriate and, at the very least, compromised Kay’s commercial integrity. I am not prepared to find that it was solicited by Kay.

145 According to Sialepis, the approach was made by Kay on the occasion of his visit to Sialepis to present the bank’s facilities offer. Part of the bank’s facilities offer was a proposed facility fee of $25,000 which, according to Sialepis, Kay gratuitously reduced to $15,000 at that meeting. Sialepis alleged that, in doing so, Kay sought a personal benefit from him in the form of payment towards expenses of a family holiday.

146 It is not in dispute that the credit section of the bank approved the additional facilities with an establishment fee of $15,000 which, on the initiative of Kay, was increased to $25,000 in the bank’s facilities offer. There is no dispute that, at the meeting referred to between Kay and Sialepis, Kay reduced the establishment fee to that which the credit section had approved. Kay denied that he made any overture to Sialepis for a personal benefit and explained the dealing with Sialepis over the establishment fee as a ploy on Kay’s part to forestall any negotiating demands by Sialepis to reduce the establishment fee below the approved amount of $15,000.

147 I am not prepared to accept the evidence of Sialepis as to the manner in which he came to pay Kay five thousand dollars in the absence of corroborating evidence of those circumstances.

148 I note that there does not appear to be any surreptitious element in Kay’s initiative in increasing the establishment fee to $25,000 in the bank’s facilities offer. He recorded in a note to file both the fact of the fee increase in the bank’s facilities offer and the fact of its reduction to the approved fee in negotiations with Sialepis.

149 Moreover, I think the plaintiff’s December 1994 statement supported the view that the payment was made at the instigation of Sialepis as a “reward for saving (him) approximately $17,000 in bank interest charges.”

150 In the plaintiff’s evidence in these proceedings and in her December 1994 statement she alleged that she had a telephone conversation with Kay in December 1992 in the terms quoted above.

151 Kay denied that such a conversation had taken place. However, I think there was a conversation with Kay in December 1992 or thereabouts, when the plaintiff was separated from Sialepis and in which she required release of the Cronulla property as security for the Sialepis related borrowings.

152 I am satisfied that the plaintiff was extremely angered by the bank’s retention of the Cronulla property as security. That is consistent with Sialepis’ assurance to her that the mortgage was only a short term security. However, beyond that, I am not prepared to accept the detail of that conversation as asserted by the plaintiff. Further, it is clear from the plaintiff’s December 1994 statement that Kay was given little or no opportunity to respond to what I think was an outburst by a very angry mortgagor. I think it is also worth noting that there was no contemporaneous record of the plaintiff ‘reporting’ Kay to the bank for his alleged conduct.

153 In relation to Kay’s acceptance of a mobile phone from Sialepis, I am not prepared to find that it was solicited by Kay. It is enough to know that he accepted it. I have no doubt that Kay realised that his conduct in accepting that gift was inappropriate and I think one does not need to go beyond Kay’s letter to Sialepis of 28 November 1994 with which he returned the mobile phone and related equipment. That letter was in the following terms:

“Following the recent expiry of trial offer period the NEC Mobile Phone and related equipment (duly enclosed) is returned herewith.

Given that the overall usage of the equipment is not of sufficient frequency etc to justify the capital cost and ongoing maintenance, purchase of the equipment shall not be possible.

Accordingly would you kindly attend to return of the equipment to the providers MCL Communications (

Attention

Con).

Thank you for your assistance.”

154 Notwithstanding Kay’s evidence seeking to justify the terms of that letter, I have no doubt that it was little more than a device to put an end to an embarrassing situation.

155 Sialepis raised a more serious allegation of dishonesty against Kay than Kay’s acceptance of five thousand dollars and a mobile phone from him. According to the evidence of Sialepis, he became involved in 1992 and 1993 with the acquisition of commercial premises situated at Marrickville (as referred to by the plaintiff in her December 1994 statement).

156 The commercial complex was controlled through an entity known as Namtaf Corporation Pty Ltd (Namtaf) which was heavily indebted to a related corporation of the bank, namely Bill Acceptance Corporation (BAC) and to National Australia Bank Ltd (National). BAC was owed $8,250,000, while the indebtedness to National was $250,000. The proposition that emerged involved, in practical terms, Sialepis acquiring control of Namtaf and retiring those facilities through BAC’s provision of commensurate facilities to Sialepis.

157 According to Sialepis, Kay was familiar with BAC’s involvement with Namtaf and undertook to approach his “mate Peter Boyle” at BAC to facilitate Sialepis’ acquisition of the Marrickville property. It was in the course of these dealings that Sialepis said that Kay importuned him for a commission of $100,00 if the proposal went through.

158 According to Sialepis, in the first half of 1993 Kay requested a meeting with Sialepis and his accountant, Smiles, and that a meeting took place in a hotel restaurant at Rosehill. He said that during the course of that meeting the following conversation took place:

“GK: This is a great deal for you fellows. I have helped you greatly. A broker would normally get something like $100,000 for a deal like this. I want $100,000.

JS: Greg, Harry and I will think about it.”

159 There was a further similar conversation according to Sialepis. This time in Smiles’ office “in about July 1993” attended by Kay, Sialepis and Smiles at which the following was alleged to have been said by Kay:

“GK: I want an apartment on the Gold Coast in lieu of $100,000 cash. This is such a good deal for you . You should contribute $100,000 to this apartment and I will put in the balance. I want something in the vicinity of $120,000 - $140,000. Jim, I want you to establish a unit-trust as a vehicle from which to purchase the apartment so as to keep it away from my family and Westpac.”

160 In July 1993 Sialepis said that he arranged and paid for return air tickets to the Gold Coast as a result of an inquiry from Kay whether he had any “real estate friends in the Gold Coast that could find a ‘bargain unit’ ”.

161 Sialepis gave evidence that he travelled with Kay to the Gold Coast where Kay was introduced to Mike McDonald (McDonald) LJ Hooker’s Labrador office representative, and was taken on an inspection of units.

162 Kay agreed that he travelled to Queensland with Sialepis on 5 November 1993, at Sialepis’ expense, where he was introduced to McDonald.

163 According to Kay, the visit to Queensland took place in the following circumstances:

“88. I refer to paragraph 56 of Mr Sialepis’ Statement and deny ever saying the words to Mr Sialepis attributed

to me in that paragraph. During 1993 Mr Sialepis told me that he was interested in establishing a new

concept called Cosmart under the advice of Mr Aaron Hechtman of MMI Design Consultants and he was

interested in purchasing the old Norman Ross store in Coolangatta and converting it into a Cosmart style

operation. He told me that he would be looking to the Bank to finance the purchase of the property and set

up of the business. He also said to me words to the effect:

“If I cannot get the Norman Ross store, I have another alternative to establish a store on a vacant site at

Southport, which I would also be looking to the Bank to fund the purchase of. I would like you to come up

with me and Aaron Hechtman and visit the Coolangatta store and the Southport land. After that I will

take you up to Hervey Bay to look at the Condor Lake Shopping Centre so you can see for yourself all the

improvements that have been done there since its original acquisition. It will be an all day visit and I

would like to take you and Hechtman. I will be paying for the tickets".

164 The visit took place in circumstances that, to say the least, were unusual. The consultant Hechtman did not accompany Kay and Sialepis. According to Kay that occurred in the following way:

“89. I agreed to go and on or about 5 November 1993, I arrived at Sydney Airport in the morning to be told by Harry Sialepis words to the following effect:

“Hechtman won’t be coming and we won’t be going to Hervey Bay but only to the Gold Coast sites.”

I was irritated at this because my main interest was going to see the Bank’s security property at Hervey Bay and the improvements made to that property.”

165 To add further futility to the visit, the properties that it was said Sialepis anticipated visiting for the establishment of a retail store were not inspected, according to Kay, because he was told by Sialepis after their arrival at LJ Hooker’s office that:

“Unfortunately the site inspections at Coolangatta and Southport will not be proceeding as they are no longer available.”

166 It was Kay’s evidence that he left Sialepis in the company of McDonald to discuss Sialepis’ retail store proposal while Kay inspected units accompanied by a LJ Hooker salesman, following which, he and Sialepis returned to Coolangatta airport and flew back to Sydney.

167 Kay explained his inspection of the units as reflecting a long standing interest of his in such investments.

168 On that version, Sialepis could have ascertained by a phonecall from Sydney that there was no point in visiting Coolangatta to inspect the subject commercial properties since they were “no longer available.”

169 Kay’s version of the visit, then, is a description of an exercise in futility. Moreover, Kay did not make the visit the subject of a diary note to file. However, I am not prepared to make an adverse finding against Kay in relation to these allegations of Sialepis. I am unable to accept the evidence of Sialepis without some substantial corroborative evidence. Presumably, that would have been available, if his evidence was truthful, through the evidence of Smiles. He was not called despite the fact that, on Sialepis’ version, Smiles could have given direct evidence of Kay’s alleged dishonesty. The absence of Smiles would be sufficient to deter me from any adverse finding against Kay in relation to this issue.

170 I have found it unnecessary to resolve issues raised as to the nature of Kay’s involvement in Sialepis’ negotiations with BAC for the acquisition of the Marrickville property, beyond concluding that Kay assisted Sialepis in the preparation of his proposal to BAC in a way that would normally not form part of banker services to a customer.

171 For those reasons the following findings should be made:

(a) the security documents were explained to the plaintiff by Williams prior to the execution of them;

(b) the plaintiff had, at least, a general awareness of the nature of the facilities provided by the bank to the company in relation to Condor Lakes and the adjoining property;

(c) the plaintiff realised that she was providing a third party mortgage to support Sialepis’ related borrowings from the bank;

(d) the plaintiff had an awareness of the substance of Sialepis’ commercial activities;

(e) I do not accept that the representations attributed by her to Kay were made at the 3 July 1992 meeting;

(f) The plaintiff had an expectation that the mortgage would be for a short period, probably as the result of being told so by Sialepis;

(g) the Plaintiff declined the invitation of Williams to obtain independent legal advice prior to executing the mortgage. I think it was immaterial that the invitation was made in the presence of Sialepis. The plaintiff, in my view, had decided prior to the meeting of 3 July 1992 to execute the mortgage and had travelled to Queensland to execute it along with the other security documents;

Contracts Review Act

172 Paragraph 1.25 of the contentions is repeated for convenience of reference:

“(i) she did not read the documents thus tendered to her for signature;

(ii) she was not aware that she was signing a mortgage which purported to secure, inter alia, all present and future advances by the Second Defendant to Sialepis Pty Limited;

(iii) she executed the documents tendered to her for signature without being made aware of the matters

referred to in paragraph 1.11 herein;

(iv) she did not receive independent legal advice on or prior to execution of the documents;

(v) she was not afforded the opportunity of seeking independent legal advice on or prior to execution of the

documents;

(vi) she received no material or financial benefit from the moneys advanced by the Second Defendant pursuant to

the mortgage;

(vii) she held 1% of the issued shares of Sialepis Pty Limited;

(viii) she had no material or financial interest in the assets or undertaking of Sialepis Pty Limited in that it is
alleged by the First Defendant in these proceedings that Sialepis Pty Limited was the trustee of the Sialepis
Unit Trust;

(ix) immediately prior to and upon execution of the documents, Kay, who was obliged and in a position to do so,

did not advise the Plaintiff:

(a) to seek independent legal advice;

(b) to read the documents;

(c) that she was signing a mortgage which purported to secure, inter alia, all present and

future advances by the Second Defendant to Sialepis Pty Limited;

(d) of all the terms, conditions, covenants and obligations of the mortgage;

(e) of the matters referred to in paragraph 1.11 herein.

(x) she was 29 years old, a house wife with no experience in or knowledge of matters of business and finance;

(xi) the provisions of the mortgage were not, prior to or at the time they were entered into, the subject of negotiation or subject to negotiation;

(xii) It was not reasonably practicable for the Plaintiff to negotiate for the alternation of or to reject any of the provisions of the mortgage;

(xiii) she was not informed of the reality of the risk to which she was exposing herself;

(xiv) she did not appreciate the reality of the risk to which she was exposing herself;

(xv) the Second Defendant was aware or ought to have been aware of the matters alleged in the preceding subparagraphs of this paragraph.”

173 As to (i) and (ix) I accept the evidence of Williams that the security documents were explained to the plaintiff.

174 As to (ii), (ix), (xiii) and (xiv), I am of the view that the plaintiff had a general awareness of the nature of the facilities being provided to the company, in respect of which the mortgage was offered as security.

175 As to (iii), the plaintiff did not pursue a case on this basis.

176 As to (iv), (v) and (ix), I accept the evidence of Williams that the plaintiff was invited to obtain independent legal advice. Further, I am of the view that the plaintiff’s decision not to obtain that advice was unrelated to the presence of Sialepis when that invitation was extended to the plaintiff.

177 As to (vi), (vii) and (viii) I place little reliance on the benefits received directly by the plaintiff as a shareholder in the company or upon the fact that she was an officer of the company.

178 As to (x) I am of the view that the plaintiff had sufficient awareness of and an involvement in the affairs of Sialepis as indicated in her affidavit in the Family Court proceedings and as further reflected in her December 1994 statement.

179 As to (xi) and (xii) I am of the view that the plaintiff was, in general terms, at least, aware of the consequences of providing a third party mortgage and the absence of negotiation with the bank over its terms, I think, is irrelevant.

180 It is not without significance that the plaintiff gave surety support to AGC and National Australia Bank in relation to Sialepis’ related financial obligations - according to the plaintiff, that was in 1993. She may have been mistaken as to time. The significance lies in the fact that the mortgage was not the only occasion that the plaintiff provided surety support for Sialepis.

181 For much the same reasons as given above, I am of the view that no case of ‘unconscionability’ as alleged in par 1.27 of the contentions has been made out. Senior counsel for the bank disputed that par 1.27 of the contentions had any relevance “as neither Westpac nor its assignee [was] seeking to rely upon the mortgage.” However, I was prepared to treat par 1.27 of the contentions as raising a case based upon Garcia v National Australia Bank (1988) 194 CLR 395, leaving aside what relief could be obtained by the plaintiff if such a case was made out. For the reasons stated the plaintiff failed to establish such a case.

182 During the course of final submissions, counsel for the plaintiff presented a document entitled “Amended Relief Sought By The Plaintiff”. In view of the findings reached in this matter, it is unnecessary to consider the plaintiff’s entitlement to relief in that or any other form. A few general observations may not go amiss.

183 The document was in the following form:

“1. A declaration that the mortgage given by the Plaintiff to the Second Defendant in respect of her share of the property known as 17 Darook Park Road, Cronulla in the State of New South Wales is void.

2. A declaration that the First, Second and Third acknowledgment and Acceptance and Second Surety’s Consent

are void as against the Plaintiff.

Further and in the alternative

a declaration that the said mortgage given by the plaintiff to the Second

Defendant was unjust within the meaning of s 7(1) of the Contracts Review Act 1980 (NSW).

Further and in the alternative

a declaration that the Second Defendant has engaged in conduct which is misleading and deceptive or likely to mislead or deceive pursuant to s.52 Trade Practices Act 1974 (Cth).

Further and in the alternative

a declaration that the Second Defendant has engaged in conduct which is unconscionable pursuant to s51AA Trade Practices Act 1974 (Cth).

Further and in the alternative

a declaration that the Second Defendant is estopped from relying upon the terms

of the said mortgage given by the Plaintiff to the Second Defendant.

7. An order refusing to enforce the terms of the said mortgage against the Plaintiff.

An order declaring that the Second Defendant holds the consideration received from the assignment of the mortgage to Ironaid Pty Limited in trust for the Plaintiff to the extent of the value of her share in the Cronulla property.

An order that the Second Defendant pay the Plaintiff a sum equal to the value of the Plaintiff’s share of the Cronulla property.

10.

In the alternative, a declaration that the Second

Defendant has been unjustly enriched by taking a mortgage on the Cronulla property from the Plaintiff and then assigning its interest for consideration.

11.

An order for restitution to the Plaintiff of her share in the Cronulla property.

12.

An order for the Second Defendant to pay the Plaintiff a sum equal to the value of her share in the Cronulla property.

13.

In the alternative

an order that the Second Defendant pay the plaintiff damages equal to the value of her one-third share of the property known as 17 Darook Park Road, Cronulla in the State of New South Wales.”

184 As to par 1: Seeking relief in that form was futile having regard to the assignment of the mortgage to the bank.

185 As to par 2: The plaintiff did not pursue a case which would justify the granting of such relief.

186 As to par 3: Relief in this form was futile having regard to the assignment of the mortgage and the presentation of a case that paid no regard to the provisions of s 19 of the Contracts Review Act and made an unwarranted assumption that the Act overrode the indefeasibility provisions of the Real Property Act.

187 As to par 4: That case failed.

188 As to par 5: Although not pleaded, the “unconscionability” case of the plaintiff was not made out.

189 As to par 6: This form of relief had not been pleaded and, in any event, in my view, misconceives the nature of the dispute. The bank was not seeking to enforce the mortgage in these proceedings.

190 As to par 7: For the reason last given, this form of relief is misconceived.

191 As to par 8: The relief in par 8 was not pleaded. I prefer to make no finding as to the availability of this form of relief had the plaintiff been successful on one or other of the grounds relied upon.

192 As to pars 9,10, 12 and 13: By reason of my findings there was no basis for the making of such orders.

193 As to par 11: This form of relief is misconceived. It ignores the fact that the mortgage has been assigned and no case made against the assignee or its successors in title.

194 For those reasons the summons is dismissed against the first, second, fourth, fifth and eighth defendants. The plaintiff is to pay the costs of those defendants.

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Last Modified: 04/03/2001

CITATION:	Sialepis -v- Westpac [2001] NSWSC 101
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	SC 50065/96
HEARING DATE(S):	14.8.00, 15.8.00, 16.8.00, 17.8.00, 21.8.00, 22.8.00, 23.8.00, 24.8.00, 25.8.00, 31.8.00,1.9.00
JUDGMENT DATE:	6 March 2001
PARTIES :	Dimitra Jane Sialepis -v- Westpac Banking Corporation & Ors
JUDGMENT OF:	Hunter J

COUNSEL :	Plaintiff: A. S. Howen Second Defendant: L G Foster SC
SOLICITORS:	Plaintiff: Photios Vouroudis & Co Second Defendant: Hunt & Hunt
CATCHWORDS:	Contract - third party mortgage - mortgagee bank misrepresentations - misleading and deceptive conduct - negligence - unjust circumstances - unconscionable conduct.
LEGISLATION CITED:	Trade Practices Act 1974 (Cth) Fair Trading Act 1987 (NSW) Contracts Review Act 1980 (NSW) Real Property Act 1900 (NSW)
CASES CITED:	Robinson -v- Watts (2000) NSWSC 584 Garcia v National Australia Bank (1988) 194 CLR 395
DECISION:	Summons dismissed with costs.