Vella v Permanent Mortgages Pty Ltd

[2008] NSWSC 505

CITATION:	Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505
HEARING DATE(S):	3, 4, 5, 6, 7, 10, 12 and 13 March 2008
JUDGMENT DATE :	28 May 2008
JURISDICTION:	Equity Division
JUDGMENT OF:	Young CJ in Eq
DECISION:	Orders to be made restoring the plaintiff to the title as holding his interest unencumbered by the mortgages of Permanent. Judgment for Permanent against Ms Palumbo for $1,151,500 plus interest. Other orders made in associated litigation.
CATCHWORDS:	BANKING AND FINANCE [20]- Bank paid money by finance company because of customer's fraud- Whether bank "received" money to be liable to refund it on count for money had and received- Held "No". BANKING AND FINANCE [20]- Joint account with both customers to sign cheques- Bank paid out on one genuine signature- Whether other customer could recover whole or only half the money paid. CONVEYANCING [206]- Torrens system- Mortgage registered- Forged document- Secures money under loan agreement as defined- That agreement forged- Thus no money secured by indefeasible mortgage. MORTGAGES [4][5][6]- Forged mortgage- Registered- Refers to all monies owing under forged loan agreement- Mortgagor not liable despite indefeasibility. PROFESSIONS AND TRADES [67]- Solicitors- Forged mortgage- Solicitors relied on false statement by another solicitor- Problem could have been avoided if appropriate form used- Evidence of NSW practice- Whether could be practice widely accepted in Australia. TORTS [71]- Apportionment- Proportionality- Liability of fraudster and solicitor making false statement and solicitor drawing mortgage apportioned: 72.5%- 15%- 12.5%- Civil Liability Act 2002 (NSW) ss 34-35. -
LEGISLATION CITED:	Australian Securities and Investments Commission Act 2001 (Cth), s 12GF Cheques Act (1986) (Cth), s 32 Civil Liability Act 2002, ss 5B, 5C, 5 O, 34, 35 Consumer Credit (New South Wales) Act 1995, ss 5, 6, 11 Contracts Review Act 1980, s 6 Fair Trading Act 1987, ss 42, 68, 72 Law Reform (Miscellaneous Provisions) Act 1946, s 5 Law Reform (Miscellaneous Provisions) Act 1965, s 9 Real Property Act 1900, s 80A
CATEGORY:	Principal judgment
CASES CITED:	Abigail v Lapin [1934] AC 491; 51 CLR 58 Adamastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd [1959] AC 133 Agius v Great Western Colliery [1899] 1 QB 413 Aktieselskabet Ocean v B Harding & Sons Ltd [1928] 2 KB 371 Alati v Kruger (1955) 94 CLR 216 Ardern v Bank of New South Wales [1956] VLR 569 Associated Midland Corporation v Bank of New South Wales [1983] 1 NSWLR 533 Astley v Austrust Ltd (1999) 197 CLR 1 Auburn MC v ARC Engineering Pty Ltd [1973] 1 NSWLR 513 Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 Australian Bank of Commerce Ltd v Perel [1926] AC 737 Babcock International Ltd v Babcock Australia Ltd [2003] NSWCA 6 Baker v Barclays Bank Ltd [1955] 1 WLR 822 Barclays Bank Ltd v W J Simms Son & Cooke (Southern) Ltd [1980] QB 677 Berkeley v Hardy (1826) 5 B & C 355; 108 ER 132 Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325 Bolam v Friern Barnet Hospital Management Committee [1957] 1 WLR 582 Breskvar v Wall (1971) 126 CLR 376 Brewer v Westminster Bank Ltd [1952] 2 All ER 650 Caleo Bros Pty Ltd v Lyons Bros (Aust) Pty Ltd (1980) 1 BPR 9496 Cash Resources Pty Ltd v B T Securities Ltd [1990] VR 576 Catlin v Cyprus Finance Corp (London) Ltd [1983] 1 All ER 809 Chandra v Perpetual Trustees Victoria Ltd (2007) 13 BPR 24,675 Chandra v Perpetual Trustees Victoria Ltd (No 2) [2008] NSWSC 178 City of Canada Bay Council v Bonaccorso Pty Ltd (2007) 156 LGERA 294 Clough v London & North Western Railway Co (1871) LR 7 Ex 26 Cobb v Becke (1845) 6 QB 930; 115 ER 350 Colyer v Finch (1856) 5 HLC 905; 10 ER 1159 Commercial Bank of Australia Ltd v Younis [1979] 1 NSWLR 444 Commercial Banking Co of Sydney v Mann [1961] AC 1 Commonwealth Trading Bank of Australia v Sidney Raper Pty Ltd [1975] 2 NSWLR 227 Continental Caoutchouc & Gutta Percha Co v Kleinwort Sons & Co (1904) 9 Com Cas 240 Coopers Brewery v Panfida Foods Ltd (1992) 26 NSWLR 738 CTM Nominees Pty Ltd v Galba Pty Ltd (1982) 2 BPR 9588 D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1 David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 Dobler v Halverson [2007] NSWCA 335 Fabre v Ley (1972) 127 CLR 665 First Mortgage Managed Investments Ltd v Oberlechner [2006] NSWSC 1397 Freemantle's Pastoral Pty Ltd v Hyett [1999] VSC 129 Fuller v Strum [2001] WTLR 677 Fuller v Strum [2002] 1 WTLR 1097 Garafano v Reliance Finance Corporation (1992) NSW ConvR 55-640 Ginelle Finance Pty Ltd v Diakakis (2002) 12 BPR 22,137 Gowers v Lloyds and National Provincial Foreign Bank Ltd [1938] 1 All ER 766 Graham v Hall (2006) 67 NSWLR 135 Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095; [1975] 3 All ER 99 Grgic v Australia and New Zealand Banking Group Ltd (1994) 33 NSWLR 202 Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145 Hamilton & Co v Mackie & Sons (1889) 5 TLR 677 (CA) Hammond & Co v Bussey (1887) 20 QBD 79 Hawkins v Clayton (1988) 164 CLR 539 Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 Hexiva Pty Ltd v Lederer (No 2) [2007] NSWSC 49 Holland v Russell (1861) 1 B & S 424; 121 ER 773 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 Hungerfords v Walker (1989) 171 CLR 125 Hunter BNZ Finance Ltd v C G Maloney Pty Ltd (1989) 18 NSWLR 420 Huntsman Chemical Company Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 Jackson v White and Midland Bank Ltd [1967] 2 Lloyd's Rep 68 Jonsson v Arkway Pty Ltd (2003) 58 NSWLR 451 Justin Seward Pty Ltd v Commissioners of Rural and Industries Bank (1980) 60 FLR 51 Kurz v United States 156 F Supp 99 (1957) Kyriacou v Kogarah MC (1995) 88 LGERA 110 LHK Nominees Pty Ltd v Kenworthy (2002) 26 WAR 517 Lickbarrow v Mason (1787) 2 Term Rep 63; 100 ER 35 Linkenholt Pty Ltd v Quirk [2000] VSC 166 Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 Lloyds v Ellis (C/A, 25.2.1998, unreported, per Powell JA) London & River Plate Bank Ltd v Bank of Liverpool Ltd [1896] 1 QB 7 Lubidineuse v Bevanere Pty Ltd (1984) 3 FCR 1 Lyons Bros (Australia) Pty Ltd v Caleo Bros Pty Ltd (1981) 2 BPR 9334 Macindoe v Parbery [1994] Aust Torts Reports 81-290 Magripilis v Baird [1926] St R Qd 89 (HC) Majesty Restaurant Pty Ltd v Commonwealth Bank of Australia Ltd (1998) 47 NSWLR 593 Manks v Whiteley [1912] 1 Ch 735 McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 McIntosh v Goulburn City Council (1985) 3 BPR 9367 Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32 Mercer v Commissioner for Road Transport and Tramways (1936) 56 CLR 580 Modern Buildings Wales Ltd v Limmer & Trinidad Ltd [1975] 1 WLR 1281 (CA) National Australia Bank v Nemur Varity Pty Ltd (2002) 4 VR 252 National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251 Newton v Ricketts (1861) 9 HLC 263; 11 ER 731 Nina Kung v Wang Din Shin [2005] HKCFA 54 O'Brien v Smolonogov (1983) 53 ALR 107 P T Ltd v Maradona Pty Ltd (1991) 25 NSWLR 643 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 Painter v Abel (1863) 2 H & C 113; 159 ER 47 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 Parr v Ash (1876) 14 SCR (NSW) 352 Perel v Australian Bank of Commerce (1923) 24 SR (NSW) 62 Perpetual Trustees Victoria Ltd v Tsai (2004) 12 BPR 22,281 Petelin v Cullen (1975) 132 CLR 355 Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALJR 492 Pontello v Giannotis (1989) 16 IPR 174 Printy v Provident Capital Ltd (2007) 13 BPR 24,603 Queanbeyan Leagues Club Ltd v Poldune Pty Ltd [2000] NSWSC 1100 Re Piccolo; McVeigh v National Australia Bank [2000] FCA 187 Reese River Silver Mining Co v Smith (1869) LR 4 HL 64 Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187 Richardson v Harris [1930] NZLR 890 Rogers v Whitaker (1992) 175 CLR 479 Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 Sabah Flour and Feedmills Sdn Bhd v Comfez Ltd [1988] 2 Lloyd's Rep 18 Saunders v Anglia Building Society [1971] AC 1004 Schultz v Corwill Properties Pty Ltd [1969] 2 NSWR 576 Simos v National Bank of Australasia Ltd (1976) 45 FLR 97 Small v Tomassetti (2001) 12 BPR 22,253 Smith v Chadwick (1882) 20 Ch D 27 Spina v Conran Associates Pty Ltd [2008] NSWSC 326 State Bank of NSW Ltd v Yee (1994) 33 NSWLR 618 Stevenson v Rowand (1830) 2 Dow & Clark 104; 6 ER 668 Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722 Symonds v Atkinson (1856) 1 H & N 144; 156 ER 1152 T W Thomas & Co Ltd v Portsea Steamship Co Ltd [1912] AC 1 The Solway Prince (1914) 31 TLR 56 Thompson v Palmer (1933) 49 CLR 507 Thoroughgood's case (1582) 2 Co Rep 9a; 76 ER 408 Tradigrain SA v King Diamond Shipping SA [2002] 2 Lloyd's Rep 319 Treacey v Edwards (2000) 49 NSWLR 739 Trust Co of Australia v Perpetual Trustees WA (1997) 42 NSWLR 237 Twibell v London Suburban Bank [1869] WN (Eng) 127 Vassos v State Bank of south Australia [1993] VR 316 Vinidex Tubemakers Pty Ltd v Thiess Contractors Pty Ltd [2000] NSWCA 67 Waters Motors Pty Ltd v Cratchley (1963) 80 WN (NSW) 1165 West v AGC (Advances) Ltd (1986) 5 NSWLR 610 Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669 White v Garden (1851) 10 CB 919; 138 ER 364 White v Tomasel [2004] 2 Qd R 438 Wyong Shire Council v Shirt (1980) 146 CLR 40 Yan v Post Office Bank Ltd [1994] 1 NZLR 154 Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463 Yazgi v Permanent Custodians Ltd (2007) 13 BPR 24,567
PARTIES:	Alessio Emanuel Vella (P) Permanent Mortgages Pty Ltd (D) Maria Anna Palumbo (First Cross-Defendant)
FILE NUMBER(S):	SC 4122/06
COUNSEL:	M J Slattery QC, D A Smallbone and L M Wilson (P) R A Parsons (D) No appearance (XD1)
SOLICITORS:	Slater & Gordon Lawyers (P) Kells The Lawyers (D) No appearance (XD1)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Wednesday 28 May 2008

4122/06 – VELLA v PERMANENT MORTGAGES PTY LTD

JUDGMENT

1 HIS HONOUR: Six sets of proceedings have been consolidated and heard together. The present proceedings are the lead proceedings. The other proceedings are 4059/06 Vella v Mitchell Morgan Nominees Pty Ltd, 3957/06 Vella v ANZ Banking Corporation Ltd, 5103/06 Vella v Annous, 5143/06 Permanent Mortgages Pty Ltd v Vella and 5154/06 Permanent Mortgages Pty Ltd v Vella.

2 These proceedings concern mortgages over land at Leppington and Mangrove Mountain. Proceedings 4059/06 concern land at Enmore, proceedings 3957/06 deal with the proceeds obtained from mortgaging the land which proceeds found their way into a joint bank account in the name of the plaintiff and one A Caradonna. Proceedings 5103/06 deal with the tracing of the money that flowed through that bank account to various ultimate recipients.

3 Proceedings 5143/06 are the mirror reverse to part of 4122/06 in that the mortgagee seeks possession of the Mangrove Mountain property. Proceedings 5154/06 are the mirror image of the other part of 4122/06 being the mortgagee’s claim for possession of the Leppington property.

4 All of the proceedings were heard by me for eight days, namely 3, 4, 5, 6, 7, 10, 12 and 13 March 2008. At the end of that hearing, the two possession proceedings, 5143/06 and 5154/06 were adjourned until 30 September 2008 for mention because their outcome depends on decisions in the other matters and I reserved my decision in the other four matters.

5 In 4122/06, Mr M J Slattery QC, Mr D A Smallbone and Ms L M Wilson appeared for the plaintiff and Mr R A Parsons appeared for Permanent Mortgages Pty Ltd.

6 In 4059/06 the plaintiff’s team was the same, Mr B A Coles QC and Mr G A Sirtes appeared for the mortgagee, Mitchell Morgan Nominees Pty Ltd and its associated company, Mr J W Stevenson SC and Mr N Kabilafkas appeared for Hunt & Hunt, Mr R G Forster SC and Mr P J Dowdy appeared for the ANZ Bank and Mr P Morris appeared for Mr J Rutty. In 3957/06 the plaintiff’s appearances were the same save that Mr S Burchett of counsel appeared for Mr Annous and Mr R D Marshall and Mr C H Cassimatis appeared for Mrs Vanessa Tsokos.

7 In 5103/06, the plaintiff’s team was the same, Mr S Burchett appeared for Mr Annous and Mr R D Marshall and Mr C H Cassimatis appeared for Mrs Vanessa Tsokos.

8 The final two sets of proceedings were stood over to be considered after the publication of these reasons.

9 The facts in 4122/06 are basically that the plaintiff, Alessio Vella, claims a declaration that no monies are owing under either: (a) registered mortgage AC149762 affecting the land in Folio Identifier 2/553495 being land at XXX Bringelly Road, Leppington (the Leppington Property); and (b) registered mortgage AC149770 affecting the land in Folio Identifier 1/584827 being land at XXX Waratah Road, Mangrove Mountain (the Mangrove Mountain Property) (together, the Permanent Mortgages). The plaintiff is the sole registered proprietor of both those parcels of land. The defendant, to which I shall refer simply as “Permanent” is the mortgagee named in the mortgages and was the company which provided the funds which were paid out.

10 The basic case made out by the plaintiff is in outline as follows:

A. Both the Permanent Mortgages were forged;

B. The plaintiff never received any money from Permanent;

C. It is acknowledged that the Permanent Mortgages obtained indefeasibility on their registration;

D. However, the Permanent Mortgages secured “all monies” due by the plaintiff under certain loan agreements;

E. Those loan agreements were forgeries;

F. Ergo, nothing is owing by the plaintiff to Permanent under the Permanent Mortgages;

G. The plaintiff is entitled to a declaration to have the Permanent Mortgages set aside.

11 There is a cross-claim by Permanent against Maria Anna Palumbo. Ms Palumbo is alleged to be the witness to the signature purporting to be that of Mr Vella to each of the Permanent Mortgages. It is alleged that she misrepresented that she witnessed Mr Vella sign the Permanent Mortgages. Damages are claimed against her for $1,151,500.00. Ms Palumbo never appeared and default judgment is being sought against her. There was a second cross-claim, but that has been settled.

12 I believe that it is most convenient if I consider the issues that arise between the parties under the following headings:

1. What are the basic facts?

2. Mr Vella’s credibility.

3. What are the consequences of my finding on 2:

(a) (i) on the Permanent Mortgages;

(ii) on the Mitchell Morgan Mortgage;
(iii) on the ANZ Bank.

(b) What monies do the mortgages secure under:

(i) the Permanent Mortgages;
(ii) the Mitchell Morgan Mortgage.


(c) The Tsai point.

4. The effect of the Consumer Credit Code.

5. The effect of the Contracts Review Act.

6. Personal equities.

7. The case against the ANZ Bank.

8. The case against Hunt & Hunt.

9. The cross-claim by Hunt & Hunt against Mr Flammia.

10. The cross-claim by Permanent against Mr Vella re misleading conduct.

11. The cross-claim by Mitchell Morgan against Mr Vella.

12. The cross-claims against Mrs Tsokos and other recipients of the monies.

13. Issues of damages.

14. Other matters:

(a) the cross-claim by Permanent against Ms Palumbo;

(b) the cross-claim by Mr Vella against Mr Caradonna;

(c) the cross-claim by the ANZ Bank against Mr Caradonna.

15. Costs.

16. Conclusion.

I will deal with these matters in turn.

1. What are the basic facts?

13 The essential facts are in a relatively small compass and, apart from the vital facts, are not really in contest.

14 I should first briefly introduce the major players in this contest.

15 Mr Vella is a property investor and is also interested in motor bikes and boxing. He is the national president of a group of motor bike enthusiasts known as the Rebels. Mr Vella is unable to read English except to a very limited extent.

16 Mr Angelo Antonio (Tony) Caradonna is an entrepreneur involved inter alia in the sport of boxing.

17 Mr Vella came to know Mr Caradonna in 2002. Mr Caradonna would assist Mr Vella in transactions involving documents and would read them to him.

18 In late 2005, Messrs Vella and Caradonna entered into a business venture related to a boxing event between Anthony Mundine and Danny Green in autumn 2006. The venture involved selling tickets to the fight and to a dinner to be hosted on the night after the fight with one Joe Frazier, the ex-international heavyweight boxing champion as the guest of honour.

19 During the joint venture period, Mr Vella shared an office space leased and occupied by Mr Caradonna at Scott Street, Liverpool. The postal address of that office was PO Box XXX, Liverpool. The office belonged to Mr Caradonna who sometimes traded under the name of “Blaster Promotions” and who employed a person named Jodie Weir as a secretary.

20 Mr Lorenzo Flammia was at the relevant time a solicitor practising in Penrith.

21 There was a very close relationship between Mr Caradonna and Mr Flammia. First they were cousins. Secondly, Mr Flammia had acted for Mr Caradonna as a solicitor on previous occasions. In particular, when Mr Caradonna was imprisoned for forging group certificates in 2000 and 2001, Mr Flammia managed his finances, visited him in gaol on at least ten occasions, dealt with Mr Caradonna’s parole officer, his doctor and his wife.

22 Mr Caradonna is now bankrupt. Leave was given to continue the proceedings against him up until judgment, but he did not appear in the proceedings, nor did he give evidence, and nor did his Trustee in Bankruptcy appear.

23 Mr Flammia, solicitor, who is a respondent to the fifth cross-claim in 4059/06 is also now a bankrupt. Again, leave was granted to continue the proceedings against him, but he did not give evidence, nor did he appear in the proceedings by himself or his Trustee in Bankruptcy.

24 At the time of his bankruptcy in November 2007, Mr Flammia stated he was owed approximately $400,000 by Mr Caradonna. In January 2006, there were 170 telephone calls made by Mr Flammia on his mobile phone to Mr Caradonna’s mobile phone and one call to his office at Blaster Promotions, many of the calls being outside business hours.

25 Mr James Rutty is a finance broker with an office at Camden.

26 The companies described in these reasons under the tag of “Mitchell Morgan” or “La Trobe” are companies which appear to specialise in lending money either as principal or agent at high interest for short terms after minimum investigation into the borrower.

27 Hunt & Hunt are a leading Sydney firm of solicitors who were retained by Mitchell Morgan to act for it in respect of the loan purportedly to Mr Vella.

28 I now turn to the facts behind the present disputes. I should begin with 21 December 2005.

29 On 21 December 2005, Mr Vella had (with Mr Caradonna) attended the office of Maurice May, Lawyers, and uplifted from their custody, three certificates of title being the certificates of title to the Leppington Property, the Mangrove Mountain Property and also the Enmore Property which is the subject of proceedings 4059/06 involving Mitchell Morgan Nominees Pty Ltd.

30 After they had picked up the certificates of title, Messrs Vella and Caradonna went to a branch of the Commonwealth Bank recommended by Mr May to investigate the availability of loan funds on security of the properties comprised in the title deeds. Mr Vella’s evidence is that the Commonwealth Bank’s interest rates quoted were too high and its offer of finance was not accepted.

31 Mr Vella and Mr Caradonna then called at the ANZ Bank at Liverpool, and saw the manager, Mr G Welsh. They opened a cheque account with both to conjointly sign any cheques and they supplied specimen signatures to the ANZ Bank.

32 Many documents in this case purport to be signed by Mr Vella. Mr Slattery tendered a report from document examiners Paul Westwood and Michelle Novotny which opined that many of the documents were not signed by Mr Vella but were signed by the same person. However, it is clear that some documents do bear Mr Vella’s genuine signature. One such document appears to be that on CB1142 which is a printed form to be sent to La Trobe Loans of Australia giving particulars of property being mortgaged. Another is CB1124, a similar piece of paper in respect of the Leppington Property. (“CB” is a reference to the relevant pages in the Court’s casebook.)

33 If these documents, or either of them, were in fact signed by Mr Vella, then Mr Vella’s explanation is that he had three loans outstanding in December 2005, two with the Commonwealth Bank (one for $550,000 and one for $300,000) and another with the Bank of Queensland for $500,000, and he was looking to consolidate those loans and take out a single loan for $1.2 million to $1.3 million. He spoke to Mr Caradonna about this and was of the view that Mr Caradonna was seeking to obtain that consolidated loan from the St George Bank. He was told that the documents being signed were to do with raising money from the St George Bank by Mr Caradonna.

34 In fact, Mr Caradonna arranged with a Mr Rutty, to apply for finance through La Trobe. Mr Rutty says that he received a telephone call from a Mr Brett Jones who worked for an organisation called “Fincorp”. He had been introduced to Mr Caradonna at Fincorp. Mr Rutty says that, in December 2005, Brett Jones said to him: “Tony Caradonna and a client of his Alex Vella have applied to Fincorp for finance. Fincorp has rejected their application and can’t assist them anymore. Can you have a look at the deal and see if you can help them.” Mr Rutty agreed to do so.

35 Mr Rutty says that on a day late in 2005 at Camden he ran into Tony Caradonna and he had another man with him and Mr Caradonna introduced the other man as “Alex Vella” and said: “I am looking after Alex’s financial affairs too.”

36 Mr Rutty says that on about 24 December 2005, Brett Jones visited him and handed him a bundle of documents. These included an application to Fincorp Mortgages for finance purportedly signed by Mr Vella on 19 December 2005. These included full details of Mr Vella, though giving his address at a suite of offices in Scott Street, Liverpool, together with a photostat which included a driver’s licence, Medicare card and passport of Mr Vella, certified by Lorenzo Flammia, to be true copies of the original documents on 19 December 2005.

37 Mr Rutty first contacted a company called “Mortgage Mart” and obtained an approval in principle from Mortgage Mart for $4 million broken into separate loan amounts of $2 million secured over Mr Vella’s property in Abbotsbury, $1.5 million over the Leppington Property and $500,000 over the Mangrove Mountain Property. These did not proceed, it would seem, because Mortgage Mart became aware of what is called a “default” involved in a transaction in which Mr Vella had guaranteed a debt of a company called “Wreck Air”.

38 Mr Rutty then put through the transaction with Mitchell Morgan which I will deal with in proceedings 4059/06, a transaction which was settled on 19 January 2006. I need to set out the facts leading to that loan in some detail. The following summary of the facts is taken from Hunt & Hunt’s submissions, but appears to me to be non-controversial.

39 Mr Neil Virago, Mitchell Morgan’s credit manager, instructed Richard Gabelich who was a senior associate employed by Hunt & Hunt, to commence drafting loan and mortgage documentation to document the alleged loan to Mr Vella over the Enmore Property at approximately 4pm on 16 January 2006 for settlement the following afternoon.

40 The instructions from Mr Virago included the contact details for Mr Vella’s alleged solicitor, Mr Flammia.

41 Having received the email, Mr Gabelich telephoned Mr Virago and stated that: “I will draft the documents as soon as possible, but the timing is extremely tight.” (As opposing counsel submitted, this shows that the brief time allowed for the task should not operate as a discounting factor).

42 In January 2006, it was Mitchell Morgan’s policy that: paragraph (a) it would only deal with a borrower represented by a “registered” practising solicitor; paragraph (b)the borrower’s solicitor was to certify, by reference to photo ID documents such as a passport or a driver’s licence, that he or she had identified the borrower; and paragraph (c) the borrower’s solicitor was to witness the borrower’s signature on all loan and mortgage documents.

43 Mitchell Morgan instructed Mr Gabelich that the borrower’s solicitor was Mr Lorenzo Flammia.

44 After speaking with Mr Virago, Mr Gabelich conducted an electronic NSW Law Society search on Mr Flammia and emailed that search to Mr Virago. He ascertained that Mr Flammia was recorded in the records of the Law Society as having a current practising certificate.

45 By letter dated 16 January 2006, Mr Gabelich informed Mr Flammia, in para 3(b) thereof, that he, as solicitor for the borrower “must”:

(a) witness the execution of the mortgage, loan agreement, statutory declarations and Credit Code declaration as to purpose;

(b) confirm in writing that he had identified the borrower; and

(c) provide certified copies of, relevantly, the first page of the borrower’s passport, and both the borrower’s Medicare card and driver’s licence.

46 On 17 January 2006, Mr Gabelich received from Mr Flammia:

(a) photocopies of Mr Vella’s passport, driver’s licence and Medicare card, certified by Mr Flammia as being true copies of the original documents;

(b) Loan Agreement (with the attestation “Signed, sealed and delivered by Alessio Emanuel Vella in the presence of [Flammia]”);

(c) Mortgage (with attestation “I certify that the person(s) signing opposite, with whom I am personally acquainted or as to whose identity I am otherwise satisfied, signed this instrument in my presence”);

(d) Authority for Payment and to Complete Documents (with attestation “Signed, sealed and delivered by Alessio Emanuel Vella in the presence of [Flammia]”);

(e) Statutory declaration (with attestation “Declared at Penrith this 17 day of January 2006 before me”);

(f) Declaration of purpose (evidently signed in the presence of Flammia);

(g) Declaration by borrower (with attestation “Made and subscribed by the said declarant at Penrith this 17 day of January 2006 before me”);

(h) Original Certificate of Title for identifier F/443979, bearing a notation (made by an employee of Mr Vella’s solicitor, Mr May) “taken by Mr Vella 21.12.05”; and

(i) An email from Mr Flammia stating that he had received instructions to “direct payment into the borrower’s account” and stating:

“ Details are ANZ Bank Liverpool
BSB 012 323
A/c 567 474 717
Alessio Vella”.

47 When examining the identification documents, Mr Gabelich noticed a disparity in the names appearing on the passport, driver’s licence and Medicare card.

48 Mr Gabelich telephoned Mr Flammia and they had a conversation to the following effect:

Gabelich: “I have received the documents in relation to the loan to Mr Vella, but there are a few issues with them. One, you have not satisfied 3(b) of the letter attached to my email. Can you confirm that you were there when the borrower executed the documents and that you identified Mr Vella as the borrower?”

Flammia: “Yes, I confirm that I witnessed the borrower’s signature and identified Mr Vella as the borrower.”

Gabelich: “I also notice that the name appearing on the passport is Alessio Vella, the name appearing on the licence is Alexia Emanuel Vella, and the Medicare card is in the name of Alex Vella. Can you confirm that Alexia/Alessio/Alex Vella are the same person?”

Flammia: “Yes, they are one and the same person.”

49 Mr Gabelich then sent an email to Mr Flammia, attaching a letter to the borrower’s solicitor, the loan agreement, the mortgage, Consumer Credit Code declaration, authority for payment and NSW property statutory declaration for execution by Mr Vella and Mr Flammia. The letter required, inter alia, that Mr Flammia confirm in writing that he has identified Mr Vella as the borrower and that he provided certified copies of identification documents.

50 In the period until finance was approved, Mr Rutty remained in regular telephone contact with Mr Caradonna. On 17 January 2006, he forwarded his “Engagement and Fee Authority” and a direction for payment to Mr Caradonna for execution by Mr Vella. He received copies of those documents purportedly executed by Mr Vella the same day, together with a “Certificate of Currency of Insurance”. Mr Rutty forwarded these documents to Mr Virago the same day.

51 Mr Gabelich then proceeded to instruct the Hunt & Hunt registration office to have the mortgage stamped and registered.

52 On the next day Mr Gabelich received a call from a person purporting to be Mr Vella who wished to know when the monies would be advanced.

53 The records subpoenaed from Optus of service number 0402 XXX XXX (Mr Flammia’s phone), shows that that phone rang Hunt & Hunt at 4.03pm on 18 January 2006. This reinforces Mr Vella’s denial that he made the call in question and strongly suggests that the call was made by Mr Flammia or someone using his telephone.

54 Mr Gabelich then spoke with Mr Virago and relayed the discrepancies he had noted and the assurances of Mr Flammia. Mr Virago instructed him to proceed.

55 Later that day, Mr Gabelich was informed by Ruth Brock, a registration clerk at Hunt & Hunt, that there was a delay in the registration as the Department of Lands wished to verify the certificate of title, which was in an older form more vulnerable to falsification.

56 The mortgage was registered on 19 January 2006.

57 After Mr Gabelich confirmed this fact via a title search of the Enmore Property, he informed Mr Virago that the funds could be advanced.

58 Mr Virago proceeded to disburse $1,001,748.85 to the account at the Liverpool branch of the ANZ Bank held in the joint names of Mr Vella and Mr Caradonna. Mr Virago also arranged for payment of Mr Rutty’s $10,000 brokerage fee on that day.

59 On 20 January 2006, Mr Flammia emailed Mr Gabelich enquiring as to the progress of the registration and Mr Gabelich responded the same day to the effect that the registration had been effected and the funds advanced.

60 Shortly after this transaction was completed, Mr Rutty says that Mr Caradonna said to him: “Alex would also like to seek further finance using some other properties he owns as security. My client needs the cash for a property deal. Can you assist?” Mr Rutty agreed that he could assist, and using the Fincorp documents, prepared a loan application lodgement form and an application for mortgage finance to La Trobe seeking $1.5 million. He did this on 19 January 2006. The same day La Trobe provided indicative offers of finance of $490,000 with respect to Mangrove Mountain, and $910,000 as against Leppington.

61 On 1 February 2006, Mr Rutty indicated to La Trobe that “my client wishes to proceed with the loan as proposed.” The application for mortgage finance, an application for what La Trobe called its “lite doc loan” is a three-page document. It later became two three-page documents when the loan was split, with so much against Leppington and so much against Mangrove Mountain. The document as received by La Trobe in respect of the Leppington Property (sometimes called Bringelly) is on CB 1122-1124 and that in respect of the Mangrove Mountain Property on 1140-1142. It is quite clear that pages 1124 and 1142, namely the third page in each case, may well have been signed by Mr Vella, though each dated 20 February 2006. However, the first pages appear to be copies of each other, though that page 1140 has been altered, possibly by someone in La Trobe’s office.

62 It is quite clear that Mr Rutty resorted to white-out and to the photostat machine so that he could prepare applications which he would fax to La Trobe which would disguise the fact that they were composite documents. Page 1123 bears date 10 January 2006 and probably was not signed by Mr Vella. The third page of the application re Leppington is dated 20 February 2006 and probably was signed by Mr Vella. The same applies to pages 1126 and 1127, save that page 1126 shows evidence of white-out being used on the line beneath the word “Mangrove”. It was put to Mr Rutty that in making the Mangrove Mountain and Leppington applications he photostatted the corresponding page from the previous Enmore application. He said he could not remember that.

63 However, if one looks at the documents which were submitted to La Trobe with respect to a possible loan over Enmore (the loan that was later granted by Mitchell Morgan), it is quite clear that the application was submitted on 11 January and that the second page of the Enmore application is identical to page 1123 save that XX Enmore Road, Enmore 2042 has been obliterated and other words have been written in. This is clearly the reason why in the two applications in respect of Leppington and Mangrove Mountain, the second page is dated 10 January 2006 and the third page 20 February 2006.

64 In cross-examination Mr Smallbone put to Mr Rutty at T446:

“Q. And you took no step to get Mr Vella’s signature on the Mangrove Mountain and Leppington application did you?
A. Well, I had the signature on the original application, and I was just taking instructions from Tony.
Q. And you well knew that you needed to get Mr Vella’s signature on the application, didn’t you?
A. Yeah.

…

Q. You well knew when you faxed this to La Trobe, that they would believe that Mr Vella had signed this page at a time when the words ‘Mangrove Mountain’ and ‘Leppington’ were already upon it, didn’t you?
A. For the purpose of getting a preliminary approval, it would appear that way.
Q. And you had no belief, did you, that Mr Vella had authorised the Mangrove Mountain and Leppington transaction to be made, did you?
A. Only from advice from Tony.

...

Q. And you deliberately took this short cut to avoid getting the requirement to get his signature on this document, didn’t you?
A. Possibly, but I do remember seeing another La Trobe application … .”

65 The applications were received by La Trobe in Traralgon, Victoria, where they were evaluated by a Ms Beverley Christou and a Mr Sambel. Both were strongly cross-examined, but I need not deal with the cross-examination in detail because it does not go to a principal issue, but rather to the point as to whether La Trobe and thus Permanent, failed to take reasonable care of their own interests.

66 Certainly the broad impression one gets from the evidence of Mr Sambel and Ms Christou was that in La Trobe, the sales department in making sure the company made loans, seemed to have a higher priority than the department (if it existed) of ensuring that there was no fraud being practised on La Trobe. The impression one gets is that everything was geared to lending money on little documentation and a relatively gung ho approach was taken as to whether the borrower was whom he or she said that he or she was.

67 As I say, I will not go into the full details at this stage but merely give three examples.

68 First, it would seem that whilst La Trobe had a manual directed to its lending officers as to how they should behave, this was just disregarded in practice. The result was that even though danger signs were pointed out, employees evidently were expected to ignore them.

69 Secondly, the organisation carried out a Baycorp Advantage credit search. This credit search indicated that there were “red lights” and gave suggestions as to how the warning signs should be dealt with. These were ignored.

70 Thirdly, the documents were sent to a Mr Mountford, a solicitor then practising in Noosa, Queensland, to act for the lender. Why a company in Traralgon, Victoria, taking a mortgage over NSW land would retain a solicitor in Noosa, Queensland, has never been explained.

71 However, Mr Mountford employed Melinda Thornhill who was an experienced former bank officer. She gave advice both to her employer Mr Mountford and to Ms Christou of what she considered were considerably impressive danger signs of fraud. She was ignored. Indeed, it might be said that in the whole of the lending process, Ms Thornhill seems to be the only person who exercised what a court would expect to be the normal precautions taken by lending institutions.

72 Mr Rutty did not pursue in any active way the La Trobe approval of 19 January 2006 in respect of the Enmore Property. He merely “accepted” it on 2 February 2006 to “keep it alive”. It should be noted that this approval carried the condition requiring an accountant’s letter to be provided. Curiously, his mandates for the Mangrove Mountain/Leppington transaction asserted that the loan purpose was “refinance”. The only facility that Mr Rutty was contemplating refinancing was the Mitchell Morgan facility. Yet on settlement of the Mangrove Mountain/Leppington transaction he took no step to ensure that directions be made to pay Mitchell Morgan.

73 Mr Rutty’s explanation is that he made an application for finance to Challenger on 7 February 2006. A forged accountant’s letter on the letterhead of Mr Boulos was provided with this application. The Challenger application does not explain why the Permanent Mortgages’ Enmore application, already approved was not pursued.

74 Despite what he says in his affidavit, it is clear that Mr Rutty was pursuing the Mitchell Morgan application up to settlement on 19 January and received commission.

75 On 14 February 2006, Mr Rutty told Lisa Stone of La Trobe, that Mr Vella was going overseas for three weeks on 22 February 2006. On this basis La Trobe proceeded with urgency.

76 There is no doubt that Mr Vella left Australia on 25 February 2006 and returned on 16 March 2006. He spent a week in Germany, four or five days in Italy and about a week in Malta. In Germany he went to the World Middleweight Title Fight in Oldenburg. His son had fought in one of the preliminary bouts and he was there as his son’s manager. The fight took place on 4 March 2006 (CB 820).

77 On 20 February 2006, Mr Rutty wrote to Amba Little, of La Trobe reiterating that Mr Vella would be going overseas “for three weeks this week”.

78 On 21 February 2006 Mr Rutty received a fax from Mountfords advising that documents were to be forwarded to the post office box address and requesting advice if that address were incorrect. He did not demur to the address.

79 Mr Rutty in cross-examination initially denied any further involvement in the forwarding of mortgage documentation. As an examination of documents discussed below will demonstrate, this was a preposterous denial. Mr Rutty later in his evidence admitted to making arrangements to get documents executed and returned by courier to Mountfords.

80 Despite the fact that he was the broker, acting without the intervention of a solicitor for Mr Vella, he left to Mr Caradonna important steps in relation to the transaction, including the payment directions, and including the execution and return of the Mangrove Mountain and Leppington mortgages.

81 When confronted with the email of 23 June 2006 he had to admit to some level of involvement, at least to the level of passing these things on to Mr Caradonna.

82 On 21 June 2006 draft transaction documents were forwarded by Mountfords addressed to Mr Vella at PO Box XXX Liverpool. These included draft mortgages in favour of Permanent.

83 On 21 February 2006, Deane Portch of La Trobe spoke to “the broker” about an explanation of the Wreck Air default. His note also records the decision of “Bev” (presumably Ms Christou) to let this matter “slide”.

84 A large number of communications occurred on 22 February 2006. In what follows, the times referred to in the documents are given, but it is necessary to bear in mind that the time difference in respect of daylight saving between Queensland on the one hand and NSW and Victoria on the other hand, may affect the chronology.

85 On 22 February 2006 at 9.49am, Kylie Knight of La Trobe sent an email to Mr Rutty stating that mortgage documents had been sent out the previous day and that it was a condition that satisfactory property insurance for Mangrove Mountain be provided.

86 At 9.58am on 22 February 2006, Toni Turvey emailed Melinda Thornhill to report that she had spoken to Mr Caradonna and that he had said that “they require funds today” and that he was arranging a courier to deliver documents to Mountfords’ office that day. Ms Turvey further reported that she had told Mr Caradonna that if the documents were received by 2pm funds could be released on the morrow. A further message on the same page, would seem to indicate that this conversation took place between 9.39 and 9.58am.

87 At 11.02am (probably 10.02am NSW time), Mr Rutty responds to Kylie Knight’s email, asking for the fax number.

88 At 10.49am Mr Rutty emailed Melinda Thornhill to advise that he had just faxed to her two separate brokerage authorities. It would seem therefore that the two items next referred to are in NSW time, this email probably refers to Queensland time at which the message was received.

89 At 11.43am on 22 February 2006, Mr Rutty faxed the forged insurance certificates which have been produced on subpoena by Permanent. These, apparently had been faxed to Mr Rutty by Mr Caradonna at 9.31am. Mr Rutty’s fax appears to be responsive to the Kylie Knight email of 9.49am.

90 At 11.44am on 22 February 2006 Mr Rutty faxed to Mountfords two mandates purportedly signed by Mr Vella, witnessed by Mr Caradonna dated 20 February 2006. These are fairly obvious forgeries. Mr Rutty’s affidavit, paragraph 51 says he expected to get 1% up front commission and 0.5% trailing commission. However, these mandates provide for nearly double the up front commission. Mr Rutty’s affidavit, paragraph 111 explains this as the result of a negotiation with Mr Caradonna. Mr Rutty provides no explanation for this change, other than that he was putting a lot of effort into the attempts to raise finance. This is not a satisfactory explanation. He had already received a $10,000 fee from Mitchell Morgan and stood to receive fees per approval on the other applications that he was making.

91 Given all of the other badges of fraud that were accumulating, the inference is available that Mr Rutty felt entitled to a higher return to reward him for the risk that he was undertaking.

92 At 3.10pm on 22 February 2006, Toni Turvey emailed Jessica Larkin and Melinda Thornhill to report information that documents had “been put in an express post envelope to us today”. She further reported that “they are going to sign their ‘copy to keep’ documents and fax them to our office this afternoon for me to certify on”. She further reported, “settlement will be tomorrow” and that she had booked funds to be sent “RT” (ie, real time) with “Leanne”, presumably Leanne Seymour of La Trobe. Although the informant is not named, the email responds to a message from Jessica Larkin at 11.38am that she had left a message for Mr Caradonna returning his call and requesting him to return hers. The earlier note at CB 4048 indicates that Mr Caradonna was not willing to speak to Ms Larkin but insisted on speaking to Ms Turvey.

93 On 22 February 2006, at 4.07pm Mr Caradonna sent a fax to Toni (presumably Toni Turvey), including copies of statutory declarations mentioned below and a certificate of Ms Palumbo as a justice of the peace (no number supplied), also bearing purported signature of Mr Vella, by which Ms Palumbo certified that:

(a) she had known Mr Vella for 10 years;

(b) Mr Vella had produced to her his driver’s licence, Medicare card and passport;

(c) that she had been provided with certain of the transaction documents; and

(d) that she had been asked to witness signatures of Mr Vella “the mortgagor”.

94 On 22 February 2006, at about 5:45pm, Mountfords faxed to La Trobe (to the attention of Nicole Waugh and Leanne Seymour) copies of executed transaction documents. These include a signed form of mortgage which had been:

(a) altered to show La Trobe as the mortgagee;

(b) incorrectly attested, as bearing no attestation on the front page; and

(c) signed with a forged Vella signature.

95 This form of mortgage bore the fax header of Blaster Promotions dated 22 February 2006 at 4.18pm.

96 Dated 22 February 2006 there are a number of transaction documents, including statutory declarations purportedly signed by Mr Vella and attested by Ms Palumbo in NSW. Ms Palumbo is there represented to be a justice of the peace. These transaction documents include four purportedly executed mortgage instruments, two for each of the two titles. In respect of these four documents:

(a) Each bears different forged Vella signatures;

(b) Each is incorrectly attested as there is no attestation on the first page;

(c) Each bears a purported attestation by Ms Palumbo on the second page;

(d) Each states Permanent to be the mortgagee;

(e) Three state the address of Ms Palumbo to be 2XX George Street, Liverpool; and

(f) One states the same address for Ms Palumbo, but the number 2XX has been changed from 22X.

97 At 5.46pm on 22 February 2006, Toni Turvey emailed Leanne Seymour of La Trobe (with a copy to Melinda Thornhill) referring to a preceding telephone conversation between them and noting that “the mortgagee will be changing and that you were going to send an email through”. Presumably this occurred when Ms Seymour received the fax from Mountfords. The message also referred to the incorrect completion of the GST declaration.

98 Then, at 6.25pm on the same day, Toni Turvey emailed Mr Rutty advising that the GST declaration must be done again and faxed back by 11am the next day.

99 At 7.50am on 23 February 2006, Leanne Seymour emailed Melinda Thornhill saying: “Please note that the mortgagee will be changing to La Trobe Investment Services Australia. Please also note that the 2nd page of the cert wasn’t signed.” This message responded to Turvey’s email of the previous day at 5.46pm (Qld time) or 6.46pm (Victorian time).

100 Then, at 11.27am on 23 February 2006, Toni Turvey emailed Mr Rutty referring to a conversation between them, and confirming: “as discussed, we note that the front page of the Mortgage was not witnessed on either loans and accordingly we attach same for re-execution and witnessing IN DUPLICATE”. The message goes on to request that copies be faxed and the originals express-posted that day. It concluded that provided the originals were received in the mail on the following day, Mountfords would be in a position to release funds to Mr Vella’s nominated account on 24 February 2006.

101 Mr Rutty accepted that he made arrangements to have these documents executed and returned by courier to Mountfords.

102 At 1.47pm on 23 February 2006, Mr Caradonna faxed to Toni Turvey re-executed undated mortgage instruments in the form in which the mortgages were ultimately dated (22 February 2006) and registered. Each bore purported attestation by Ms Palumbo on both pages.

103 The authorities for surplus funds, bear file notes dated 24 February 2006, by which it is recorded that someone called Theo Mandemaker of the ANZ Bank at Noosa and advised that the holders of the nominated account were Mr Vella and another but that due to privacy reasons the name of the other account holder could not be disclosed. There were a series of other calls and enquiries, from the ANZ Bank, the NAB and Mr Caradonna.

104 Settlement occurred on 24 February 2006, with direct deposits to the joint account of Mr Vella and Mr Caradonna.

105 Mr Rutty was anxious to pursue his commission. Melinda Thornhill insisted on original mandates. Mr Rutty told her that he no longer had access to the originals. That does not make sense. If he ever had the originals, why release them to anyone but Mountfords or La Trobe? This statement was probably a ruse to put off Melinda Thornhill.

106 She persisting, was told that he would have to get them re-executed. She was informed that the borrower was overseas and that the mandates were to be posted from overseas.

107 She was also informed that the result of the enquiry made of Ms Palumbo was that Ms Palumbo said she knew Mr Vella was overseas.

108 Mr Rutty obtained fresh mandates, purportedly witnessed by Jodie Weir at Liverpool.

109 These mandates were dated 27 February 2006, by which time Mr Vella was in fact overseas and could not have signed the mandates at Liverpool on that date. It is hardly to be wondered that Ms Thornhill was alarmed. They were faxed by Blaster Promotions at 12.47pm and by Rutty at 1.29pm on 27 February. Mr Rutty had no expectation that Jodie Weir was overseas.

110 Mr Rutty then, the next day, 28 February 2006 submitted a further finance application to La Trobe, in respect of Mr Vella’s Bonnyrigg property. This was a further forgery, prepared by Mr Rutty from the template of the Mangrove Mountain and Leppington applications. On this occasion, Mr Rutty altered not only that property particulars but also the date next to the signature. According to him it just so happens that the date he put on it was 22 February 2006. That was, according to the Mountfords file notes the date that Rutty had told them was the date on which Mr Vella was going overseas. It is reasonable to infer that Mr Rutty put that date in an effort to avoid any further alarm bells going off at La Trobe.

111 Mr Rutty put the Bonnyrigg application forward intending it to be taken as genuine. His evidence is that he believed Mr Vella was still in Australia. If that were so, there was no reason why he could not have Mr Vella sign the application and date it correctly. If he believed that Mr Vella was still in Australia, it is evident that he lied to Melinda Thornhill about Mr Vella not being available to sign his mandates.

112 The original mandates turned up at Mountfords’ office on 2 March 2006 in an envelope postmarked from Liverpool, NSW.

113 In view of the considerable submissions made, I should say something about Mr Rutty’s credibility.

114 Mr Rutty was extensively cross-examined. He entered the witness box at 11.50am on the first Friday, day 5 of the hearing. His cross-examination from Mr Smallbone continued into lunchtime. At 2pm solicitor witnesses were interposed and Mr Smallbone continued his cross-examination at 2.55pm and that continued through until 4pm.

115 He re-entered the witness box at 10.05am the following Monday and did not leave it until about 3.30pm on the Monday.

116 On the first day, Mr Rutty’s evidence could be criticised for being a bit evasive and punctuated with too many “I don’t remember”s to be fully accepted.

117 He repeatedly said on the Monday, particularly in the afternoon, that he only had one hour’s sleep and that he was so tired that he could hardly read anything because everything was a blur, and he performed much worse on the second day. One reason for this may have been that he was exhausted with a very long cross-examination. Those who wished to attack the credit of Mr Rutty said that it was more him having a guilty conscience which caused the lack of sleep and accordingly the poor performance he gave in the witness box on the Monday.

118 My overall impression was that Mr Rutty’s oral evidence had to be considered with great care.

119 Even if one takes the most charitable possible view of Mr Rutty’s conduct, and the extremely peculiar circumstances surrounding the execution and delivery of the transaction documentation and the making of the advances, it strongly confirms the evidence that Mr Caradonna was perpetrating fraud upon Mr Vella and the mortgagees.

120 At the very least, Mr Rutty must have appreciated that the dealings on which he was embarked were extremely odd, and likely to be unauthorised, and he can only have been proceeding with his eyes wilfully shut to this risk.

121 I have already made some remarks about the gung ho attitude of lending adopted by La Trobe. I should add to this that the impression that I formed in this case is that the “industry” involved in low document short term loans at high interest appears to depend more on good luck than good management and that there are quite a number of people involved, at least in the lower echelons who do not have profound ideas of the ethics of the situation and who are prepared to “cut corners” in order to earn a quick commission.

122 It may be that the industry operates on so many bad loans being covered by high interest rates, or it may be that the gung ho attitude of operatives is a cause of the American mortgage crisis. In other words, Mr Rutty’s attitudes do not so much point to him being a fraudster, rather they point to him being part of the culture of the industry. It may well be that Mr Rutty realises now what he should have done and the seriousness of what he did and did not do, and that is what has caused sleeplessness as much as any matter of guilty conscience.

123 I do not assess Mr Rutty as being anything more than a person who really was not fully aware of what he was doing, and thought that there was no real problem in “cutting corners”, cutting and pasting documents, using signatures from other documents etc. However, because of this attitude, he certainly in fact assisted any fraudulent purpose that Mr Caradonna may have had.

124 I should refer to what Johnson J wrote recently in the Judicial Officers Bulletin, Volume 20, No 2, p 10 when his Honour noted, with respect to the increased business in the Possession List in the NSW Supreme Court that lenders outside the authorised deposit-taking institutions (ADI) since 2001 have offered loans written with considerably less than the normally required documentation and checking. Further, there has been an increasing tendency for ADIs to offer loans which had originated from mortgage brokers and other third-party channels with assessments done by those who had referred the borrower to them without the ADIs themselves verifying the borrower information. It would seem to me that this tendency has reached a high point in the present case.

125 Thus, despite all the warning signs, the loans were approved. Mr Mountford or Ms Thornhill drew up the mortgage documents.

126 The upshot was that on 24 February 2006, Permanent paid $502,731.85 and $608,392.28, a total of $1.111 million into the joint account at Liverpool. This was in addition to $800,000 and $201,748.85 paid into that account on 19 January as a result of the Mitchell Morgan transactions. $300,000 was also paid into that account as a result of a loan from Mr and Mrs Cartisano.

127 So far as the Cartisano loan is concerned, Mr Vella agrees that he and Mr Caradonna borrowed $300,000 fro the Cartisanos. He agrees that there was a joint venture between himself and Mr Caradonna to operate a business which would arrange prize boxing events and associated functions. The $300,000 was to be borrowed and put in a bank account to show persons with whom the joint venture was dealing, that they were solid citizens with cash in the bank.

128 The dealings on the Liverpool account show that $1 million went out by 19 January to Blaster Promotions or cash. Two sums of $100,000 each went out on 6 February to Mr Annous and to Rimridge Pty Ltd. $70,000 went out to Mr Caradonna on 6 February and the account was closed on 27 February 2006 by Mr Caradonna when he withdrew the remaining $915,356.77. Of this amount, $400,000 was paid to Mrs Vanessa Tsokos.

129 Mrs Tsokos had “invested” that amount with a Mr Azar who had evidently on-lent it to Mr Caradonna and Mrs Tsokos had been asking for her money back. She was repaid it on 27 February 2006. She in her turn, repaid half of that money to her brother-in-law Con Tsokos who had in fact made half the original investment.

130 All in all, Mr Caradonna benefited by withdrawing the monies from the ANZ Bank at Liverpool using cheques signed by himself and a forged signature of Mr Vella and abstracted $2,417,382.97. That is the amount Mr Vella claims from the ANZ Bank in proceedings 3957/06.

131 The ANZ Bank has cross-claimed against the persons who received the money including Mr Annous against whom $550,000 is claimed, Rimridge Pty Ltd against whom $400,000 is claimed and Vanessa Tsokos against whom $400,000 is claimed.

2. Mr Vella’s credibility

132 I have made passing references to Mr Vella’s credibility in the above outline of facts. I now need to consider it in great detail.

133 Mr Vella swore a number of affidavits in the various proceedings. He was cross-examined for a considerable time entering the witness box at 11.45am on day one and exiting it at 2.45pm on day two. He was cross-examined by Mr Parsons, Mr Coles, Mr Forster and Mr Morris.

134 My view was that on the first day Mr Vella was well able to cope with the cross-examination and responded thoughtfully and carefully. However, on the second day he was not so composed and tended to react against some of the cross-examination in a more emotional way.

135 His general thesis was that he wanted to consolidate the three loans he had into one loan and for that purpose needed a loan of $1.3 million or thereabouts. He took the certificates of title from Mr May’s custody on 21 December so that he could show them to prospective lenders which he thought might be the Commonwealth Bank or the St George Bank. He rejected the Commonwealth Bank because its rates of interest were too high, and he thought that Mr Caradonna was processing a loan application with the St George Bank.

136 His initial evidence was that he put the certificates of title in his desk drawer at the Scott Street, Liverpool office and he could only imagine that Mr Caradonna must have stolen them from the drawer and used them to gain credit from Permanent and from Mitchell Morgan. He did not sign loan documents to either of those bodies. However, he agreed that he may have signed documents put in front of him by Mr Caradonna which he thought were for borrowing from the St George Bank.

137 Not all the evidence was completely consistent with that story. It was clear that as at December 2005, Mr Vella’s Horsley Park and Abbotsbury properties were mortgaged to the Commonwealth Bank, and his Bonnyrigg property to the Bank of Queensland. He intended to raise money to consolidate his loan on Abbotsbury plus Mangrove Mountain, Leppington and Enmore.

138 Mr Vella says he telephoned Mr May to make an appointment to pick up his deeds, but Mr May is fairly sure he came unannounced. He says that Mr Caradonna came with him merely to give him a lift because Mr Caradonna was going near Mr May’s office in any event. There was some talk at the meeting about where Mr Vella could get a consolidated loan and Mr May rang his relationship manager at the Commonwealth Bank and arranged for Messrs Caradonna and Vella to call on him. He handed Mr Vella three certificates of title.

139 Mr Vella said that he did not wish to trade with the Commonwealth Bank because they wanted 8%. He was sure that he could do better elsewhere because at the time he thought money could be borrowed at only 5-6%. Mr Coles put to Mr Vella that that was hard to square with the fact that the money that he borrowed with Mr Caradonna from Mr and Mrs Cartisano was at a very high rate of interest. Mr Vella gave the answer that that loan was only for a very short time so that the interest rate didn’t matter too much.

140 In answer to Mr Coles, Mr Vella said that he put the certificates of title in his drawer in Scott Street. He denied any suggestions that he took them home.

141 On the second day, however, under cross-examination from others, he indicated that he did take the documents home and brought them back from time to time.

142 I need to examine the evidence about the dealings with the three certificates of title in some detail.

143 Mr Vella says that the reason for collecting the certificates of title was that he wanted to consolidate various loans he had into the one loan. He says that he understood through Mr Caradonna that money could be available through the St George Bank and he was happy for Mr Caradonna to assist him in preparing the documentation for that. He went to Mr May’s office with Mr Caradonna and had made the decision to go and pick the deeds up before he called at Mr May’s office (T72). There was some discussion as to whether Mr Caradonna just drove Mr Vella to Mr May’s office out of the goodness of his heart, or whether he was more involved than that.

144 Mr Vella’s evidence as to why he picked up the certificates of title did not really add up. He says that he took the certificates out from Mr May’s office because Mr Caradonna had told him that he was able to consolidate his loans with the St George Bank and he would need the certificates of title. However, he agreed with Mr Coles that, having been involved in earlier transactions, he knew that he would not need the certificates of title until settlement of the transactions in due course.

145 Indeed, immediately after leaving Mr May’s office, Mr Caradonna and Mr Vella went to the Commonwealth Bank to investigate the availability of loan funds on the security of the properties comprised in the title deeds. Mr Vella says they did not take up the Commonwealth Bank’s offer because he thought the interest rate was too high. He seemed to give the impression that he needed to show the deeds to the bank to indicate that they were unencumbered. This does not fit well with his evidence about the St George Bank.

146 After leaving the Commonwealth Bank, Mr Vella and Mr Caradonna went to the ANZ Bank at Liverpool where they opened the account that has been previously referred to. Again, the deeds seem to have been produced.

147 Mr Vella’s affidavit at CB574-5 says that after he collected the certificates of title from Mr May, he placed them in the top drawer of his desk in his office noting that he shared an office space with Mr Caradonna at Scott Street, Liverpool. He said he did not authorise Mr Caradonna or any other person to remove the deeds from his possession.

148 At T91-92 he said he put the deeds in the top drawer of his desk, but that was an unlocked drawer but the office was always closed and locked. He was asked (T92) why he didn’t take the certificates of title home with him and the answer was: “Because I wanted to get in touch with this St George Bank we talked about and try to borrow money on them, sir.”

149 However, at T108 and following in cross-examination by Mr Coles, he says that between 21 December and the end of January he would have picked up the certificates of title and taken them home and brought them back about five times. The cross-examination continued at T124-5 and Mr Vella said that he kept bringing them back to Scott Street because Mr Caradonna kept telling him to bring them over because he had to show them to the St George Bank.

150 Finally, in mid-January he said that Mr Caradonna told him the St George Bank wanted the deeds, he took them to Scott Street and that’s the last he saw of them. In the middle of February, just before he went overseas, he told Mr Caradonna to forget about the St George Bank as he had enough of the problems with the alleged default over Wreck Air and told Mr Caradonna to “forget about St George”.

151 He was asked why, when this happened, he did not repossess the title deeds. The evidence was a little inconsistent, but it would seem that Mr Vella’s evidence can be summarised by saying that he did ask Mr Caradonna for the deeds in February on more than one occasion and then in the preparation to go overseas he forgot all about it. He did not think at all about the deeds whilst he was overseas and in March he must have thought that Mr Caradonna had put the deeds back and he didn’t give it another thought until he was alerted to the possible fraud in about April 2006.

152 As I say, not all of this evidence tied together and there must be some doubt about its accuracy.

153 Mr Coles would have me infer from it that Mr Vella always knew that Mr Caradonna had the deeds and was seeking to arrange finance (not only finance through the St George Bank). Accordingly, he had placed the deeds in Mr Caradonna’s custody and control and so facilitated the fraud. Mr Vella, on the other hand, says that the documents may have been even carelessly left in his drawer where Mr Caradonna could get hold of them, but he trusted Mr Caradonna. His desk was separate to anything that was being used by Mr Caradonna, and that he has not been guilty of any fraud or gross negligence in and about the deeds.

154 Mr Slattery puts that the involvement of Mr Rutty in the transaction supports the inference of fraud of Mr Caradonna upon Mr Vella and the mortgagees.

155 Mr Slattery’s submissions, which I reproduce below, more or less verbatim, deal with the details of this involvement and to my mind, support the principal submission noted above.

156 Mr Slattery puts that Mr Rutty’s evidence tends to establish very firmly that Mr Caradonna was a manipulative fraudster acting on his own, using persons such as Mr Rutty as his instruments to defraud Mr Vella and undertake a series of acts without Mr Vella’s authority.

157 As against Permanent and the ANZ Bank, that evidence shows a complete lack of association between Mr Vella and the execution of the mortgages with the single-minded and fraudulent actions of Mr Caradonna.

158 Mr Rutty’s evidence is that he did not deal at any stage directly with Mr Vella in respect of any of the transactions in which he purported to act for Mr Vella.

159 Mr Rutty said that he acted only on the instructions of Mr Caradonna and relied entirely on the belief that Mr Caradonna was duly authorised to instruct him on behalf of Mr Vella in relation to the making of applications and the communication of whatever documents he communicated.

160 In fact this was less than the whole truth, because Mr Rutty was himself prepared, as he himself put it, to cut corners on at least some occasions.

161 The 19 January 2006 applications for finance from La Trobe against the security of Mr Vella’s properties at Mangrove Mountain and Leppington, were in fact forgeries that Mr Rutty prepared and propounded. Mr Rutty prepared these by photocopying the execution page in the 11 January 2006 application to La Trobe in respect of the Enmore Property. He then altered the particulars as to the properties being offered as security. He then submitted this as the execution page on a fresh application, intending it to be taken as genuine. He did this without any attempt to get authentication of the application by Mr Vella.

162 Mr Rutty’s sole defence for acting in this way is that Mr Caradonna instructed him to do it. If this is the truth, it confirms the other evidence that Mr Caradonna was himself embarked upon a fraud against Mr Vella, since there could be no legitimate reason for not presenting the instrument to Mr Vella for signature. Mr Vella was, so far as Mr Rutty was aware, available if required at that time.

163 The Enmore application was itself a forgery.

164 In the Mangrove Mountain and Leppington transactions, Mr Rutty took the further step of informing La Trobe of a change of address for correspondence to P O Box XXX, Liverpool 2170. This, he said, was done at the direction of Mr Caradonna. He said it was more convenient for Mr Caradonna. He said it was the quickest way to get correspondence to Mr Caradonna’s office, where Mr Vella was working as well.

165 This was hardly consistent with his approach that he thought that all was well because Mr Caradonna and Mr Vella were sharing the Scott Street office. That would have been a reason to refrain from redirecting the correspondence. The previous address that he had given to La Trobe was the Scott Street office itself.

166 Whether the redirection was Mr Caradonna’s idea alone, or was connived at by Mr Rutty, it supports the inference of attempts to keep Mr Vella ignorant of the business that was going forward. That inference is already strong from Mr Caradonna’s forgery of Mr Vella’s signatures, and from Mr Rutty’s forgery of loan applications without attempting re-authentication.

167 This inference receives further support from the use of the Lewers Close, Abbotsbury address on the various finance applications. This was not Mr Vella’s address, Mr Caradonna knew that Mr Vella lived at Horsley Park. Further, Mr Rutty had the driver’s licence and rates notice giving the Horsley Park address.

168 Mr Rutty in the first application that he made (the Mortgage Mart application of 28 December 2005) initially wrote in an address, then, under the direction of Mr Caradonna (according to Mr Rutty), he altered the address to the Abbotsbury address.

169 Mr Rutty initially tried to justify this by saying that he got the Abbotsbury address from a previous application rather than from Mr Caradonna. The only previous application, however, was the one Mr Jones had given him on Christmas Eve (the Fincorp application), which stated the Scott Street address. The inference should be drawn that Mr Rutty initially wrote the address that to him seemed natural, namely the address of Horsley Park stated in the driver’s licence, but that he changed this at the direction of or with the agreement of Mr Caradonna.

170 The various applications stated various lengths of residence by Mr Vella at the Abbotsbury address. Mr Rutty must have known that this variety of durations was being stated.

171 The appropriate inference is that at least Mr Caradonna and possibly Mr Rutty also, were attempting to place difficulties in the way of any information or enquiry coming to Mr Vella.

172 These inferences receive further support from the use of Mr Flammia on occasions when a solicitor was required, and otherwise, using no solicitor. Mr Flammia was the creature of Mr Caradonna. Mr May was not retained, notwithstanding that he had been named in the Fincorp application. Mr Rutty could give no clear explanation for this, other than that Mr Caradonna told him to use Mr Flammia.

173 Mr Flammia attested the forged Vella signatures on the Mitchell Morgan mortgage. Mr Flammia had acted for Mr Caradonna whilst in prison. Mr Caradonna had been convicted for defrauding the Commonwealth by dishonestly claiming that he had been in receipt of income from which income tax deductions had been made, whereas that was not the case. Mr Flammia must be taken to have known that Mr Caradonna was an unsuitable person to be giving instructions in a mortgage transaction. According to Mr Flammia’s statement of affairs, Mr Caradonna owed him $400,000.

174 Another matter is that on 31 December 2005, Mr Rutty falsely attested and submitted a “low doc” declaration to Mortgage Mart. He also signed and submitted a 100-point identity verification check without seeing Mr Vella, without seeing the original documents to which it referred and without even a legible copy of the driver’s licence. The licence number was available to Mr Rutty from the Fincorp application documents. There is no suggestion that Mr Rutty pointed out to Mortgage Mart that the address in the drivers licence did not match the address given in the Mortgage Mart application. That licence should not have qualified for the purpose of identity verification.

175 Mr Rutty made the Mitchell Morgan application and a La Trobe application for finance against Enmore. A La Trobe offer was received for finance against Enmore. Mr Rutty proposed this to Mitchell Morgan as the “exit strategy” for the Mitchell Morgan loan.

176 Mr Vella also said that when the ANZ Bank cheque account was opened,he received a cheque book. He said he took that cheque book home and put it in a cupboard and it never left his place until he passed it to Mr May (T101). Mr Coles put to him that the cheque book that he had commenced with cheque form No 26 and there must have been an earlier cheque book.

177 There were some odd matters surrounding this cheque book. A major oddity was that the cheque book in evidence contains forms 26-50, rather than 1-25. This was never explained. Further, Mr Vella must have been mistaken when he said the manager handed him a cheque book when the account was opened because the bank manager, Mr Welsh, gave evidence that he had to put in train the appropriate requisition and the cheque book would issue normally a week or so after the account had been opened by being posted to the account address. This evidence seems in accordance with usual banking practice.

178 However, I did not really consider this material badly affected Mr Vella’s credit, though, of course, it was a significant matter to be taken into the total mix of facts.

179 It will be remembered that one of the documents which was uttered to lenders was a certificate by a solicitor, Lorenzo Flammia. Mr Vella said that he did lend his passport, driver’s licence and Medicare card to Mr Caradonna who said that he needed them because of the default problem with Wreck Air in order to secure the loan from the St George Bank. He said that just before Christmas 2005: “Tony Caradonna came past my house and picked me up and told me ‘I’m going to my cousin’s place. He is a solicitor. Come for a drive’.” ( T103).

180 Accordingly the two of them went for a drive from Mr Vella’s home, presumably at Horsley Park. They drove to Penrith where Mr Flammia’s office was and both men went into the office though Mr Vella said he waited in the waiting room. They then appear to have driven to Camden where they went to a Christmas party, or at least went there for a few minutes. It was there that Mr Vella may have caught sight of Mr Rutty and been introduced to Mr Jones, but he cannot really remember. He certainly says that he never gave Mr Rutty any instructions about a loan.

181 Another disturbing matter comes from the cross-examination by Mr Morris commencing at T158. Although Mr Vella had sworn that he had not signed anything Mr Caradonna had put in front of him about mortgages until after he had picked up the certificates of title from Mr May, Mr Vella acknowledged his genuine signature was at the foot of an application to Fincorp on 19 December 2005, two days before he went to Mr May.

182 Mr Vella said he knew nothing about it, he must have signed something but “not about no loans sir. I never tried to borrow money off nobody except St George, sir”. Mr Morris then asked:

“Q. Well it couldn’t have been Mr Caradonna putting this under your nose to sign because you’ve told us that Mr Caradonna didn’t do that sort of thing until after you saw Mr May; correct?
A. Well maybe sir but as I said I’m not saying that’s not my signature, I never claimed from nobody to get a loan before St George sir.”

183 I then thought Mr Vella modified his previous evidence at T160 when he said that he had spoken to Mr Caradonna about loans before the two went to Mr May. At T162 Mr Morris put:

“Q. You made, to your knowledge, I want to suggest to you, an application for finance to Fincorp on the Monday 19 December. You knew it was made?
A. No sir.
Q. The reason you went to Mr May on the Wednesday to pick up title deeds is because you thought that Fincorp was going to lend you money?
A. No sir. Wrong. I only applied with St George to borrow money, sir. No-one else.

…

Q. Do you have an explanation as to why you should be picking up the three particular titles out of a group of five or six that just happened to be mentioned in an application for finance?
A. I don’t know.”

184 It was then put to Mr Vella that the Christmas party at Camden was at Fincorp’s office. He replied that he did not know where it was, he just went with Tony for a drive to Camden. He said (T165):

“I went from my house in Horsley Park to Penrith, from Penrith we went to Camden on the same day.”

185 This cross-examination was biting on Mr Vella’s credibility. However, one has to set it against the undisputed fact that Mr May gave evidence which accords with Mr Vella’s evidence that obtaining a loan from Mr May was mentioned in Mr May’s office and that Mr May telephoned his relationship manager at the Commonwealth Bank and that Messrs Vella and Caradonna then attended on that manager. If the deeds were to be picked up from Mr May purely for the purpose of Fincorp, that evidence is just inexplicable.

186 However, it does sit nicely with the scenario that Mr Caradonna was using Mr Vella’s name to borrow money from Fincorp and was picking up the certificates of title from Mr May for his own purposes.

187 The attacks made on the plaintiff’s case by counsel for Permanent and Mitchell Morgan differed considerably. The thrust of the Permanent attack was that Mr Vella trusted and relied upon Mr Caradonna; that both of them were involved in loan raising; that Mr Vella signed critical documents; even though he was perhaps unaware of the contents of the documents, he knew that he was unaware of the contents of the documents; he placed the certificates of title out of his custody and in the custody of Mr Caradonna; he knew that the documents he signed and the certificates of title were being used to pursue finance; and he cannot complain that that is what happened.

188 On the other hand, the Mitchell Morgan attack was that Mr Vella wished to raise a large amount of money for a boxing promotion business with Mr Tony Caradonna and that Mr Vella himself, or by authorising and entrusting Mr Caradonna to do it for him, sought to borrow short term funds from Mitchell Morgan. He signed or had Mr Caradonna sign for him loan applications and received payment into an ANZ bank account set up specifically for the purpose of receiving such funds. He knew that the Mitchell Morgan loan was short term and it would need refinancing by mid to late March, and indeed, took steps to achieve this result though failed to do so.

189 Mr Coles put that Mr Vella’s version of events is implausible. Indeed, he submits that the story which Mr Vella promulgates ought to be rejected as utterly false and there is a far simpler explanation which could be summarised as follows:

(a) Mr Vella was enthusiastically thrusting himself into the boxing promotion business through a business bearing part of his own name, Velladonna Promotions Pty Ltd;

(b) That venture would require access to substantial capital, more than the $300,000 needed as show money;

(c) In furtherance of the business aim, Mr Vella completed the loan application with Fincorp to borrow money dated 19 December 2005. Mr Coles puts that the significance of this application is that it sets forth in the statement of assets and liabilities the properties at Leppington assessed at $2 million, Enmore assessed at $4 million and Mangrove Mountain assessed at $1 million. Most significantly, it notes, at the bottom of the page, that Mr Vella would be offering as security the properties at Leppington, Enmore and Mangrove Mountain. These are the very same properties that Mr Vella collected the certificates of title for on 21 December 2005 from Maurice May;

(d) Mr Vella visited solicitor Mr Flammia on 19 December 2005 with his passport, driver’s licence and Medicare card;

(e) Consistent with the contents of the Fincorp application, Mr Vella and Mr Caradonna attended the ANZ Bank on 21 December 2005 and opened a joint account;

At the meeting when the account was opened the bank manager gave evidence that there was discussion about a large amount of money coming in and it was going to be coming from the Enmore Property;


(f) After Fincorp declined to lend money, Mr Vella completed forms to facilitate borrowing money from Mitchell Morgan and either instructed Mr Caradonna to act on his behalf, or authorised Mr Caradonna to do so;

(g) …

(h) …

(i) After 17 January 2006, Mr Vella no longer held the certificate of title to the Enmore Property. Further, Mr Vella must have known that he no longer held that certificate of title. There is nothing in Mr Vella’s 13 affidavits that mentions a word about him discovering the Enmore certificate of title having gone missing. The evidence that Mr Vella gave that he did not give a thought about the certificates of title from mid-January is “absurd”;

(j) On 18 January 2006 Mr Vella rang Mr Gabelich about the loan monies. It is put that only Mr Vella could have given that information;

(k) Mr Vella knew that the Mitchell Morgan loan would need to be refinanced by late March and this explains his activities through James Rutty to facilitate such refinancing through other lenders;

(l) Mr Rutty swore that Mr Vella spoke to him in March 2006 and said: “Tony has told me about the Enmore valuation for Challenger (Challenger being one of the new lenders that was approached). That is even lower than the last one. What the hell is going on?”

Mr Coles puts that despite Mr Rutty’s lengthy cross-examination by a number of counsel no-one challenged that statement. This being so the only purpose that Mr Vella could have had in enquiring about the valuation was in the context of a loan refinanced of the Mitchell Morgan loan;

619 In reply, Mr Slattery puts that it is not misleading and deceptive conduct for an illiterate person to sign a document which is non est factum because of a false representation as to its contents. The document is not his act and therefore it is not his conduct, and thus there is no basis for imputing to Mr Vella any representation to Permanent. He refers to Schultz v Corwill Properties Pty Ltd [1969] 2 NSWR 576, a decision of LW Street J. However, that was a case of a client who had no knowledge at all of her solicitor’s forgery and the judge held that she was not vicariously tainted by the forgery: see p 584.

620 The reference to non est factum is not one which assists the plaintiff in the present case. It is clear that right from Thoroughgood’s case (1582) 2 Co Rep 9a; 76 ER 408 a deed executed by an illiterate has been held to be not binding if it had been falsely explained whether by the grantee or by a stranger.

621 The seminal cases of Saunders v Anglia Building Society [1971] AC 1004 and the decision of the High Court in Petelin v Cullen (1975) 132 CLR 355 authoritatively settle the scope of non est factum in modern law. What is needed is a situation where the signer is under a disability (illiteracy is a disability for this purpose), and that there is sufficient difference between the document as it is and as the signer believed it to be. The High Court at 360 says “radically different from what it was in fact” and that the signer must not be careless. That last matter is usually a question as to whether the signer asked for the document to be explained because it is clear that if he or she signed it without seeking an explanation, then the plea is not available.

622 In the instant case Mr Vella asked for or even if he had not asked for, was given an explanation by Mr Caradonna that the document which he signed was not radically different from the document he thought he was signing, namely a piece of paper in aid of the loan anticipated from the St George Bank. Thus non est factum as such would not avail.

623 It is doubtful whether one can translate that concept into the statutory wrong of false and misleading conduct in trade and commerce. Indeed, at least as a general rule, the intention of the defendant in a claim for damages for such a statutory wrong is not relevant at all. All that is relevant is whether tested objectively the conduct was misleading or deceptive: see Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216, 223.

624 It must be remembered that this is not a case where the false and misleading document (if that be its classification) was uttered to a person who knew that Mr Vella was illiterate. Accordingly, the fact of his illiteracy would not be one of the factors that one would take into account when considering whether the document was false and misleading.

625 I should note that no case was cited to me by counsel nor did my own research discover anywhere the question as to whether an illiterate person misunderstanding what he or she was signing was said to be conduct or a representation within the meaning of the Trade Practices Act or Fair Trading Act.

626 Mr Slattery then says that even if the document could constitute false and misleading conduct, it was not in trade or commerce. One of the mortgaged properties was vacant land with an unimproved shed, that is the Mangrove Mountain land, whereas the Leppington land was the Rebels Club House. Thus, it is put that whilst the mortgagee may have been acting in trade and commerce, the focus must be on whether Mr Vella’s conduct was in trade and commerce and this requirement has not been met.

627 There are many situations where activities with respect to sale of private land will not be within the concept of trade or commerce; see eg O’Brien v Smolonogov (1983) 53 ALR 107.

628 However, whether in any individual case activity comes within trade and commerce is essentially a matter of fact to be decided in all the circumstances of the case. As the Full Federal Court said in Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325 at 330, the ratio of the O’Brien case was that “a private sale of property by an individual is not conduct in trade or commerce except if done in the course of a business activity or otherwise arising in a ‘business context’ ”. See also the decision at first instance in that case Lubidineuse v Bevanere Pty Ltd (1984) 3 FCR 1 at 13 per Wilcox J.

629 A further distinction is that the present case, unlike O’Brien’s case does not involve the disposal of a capital asset that was not used in trade and commerce, rather it involves the raising of finance over a capital asset in circumstances where the raising of finance was for non private and domestic purposes (unless one applies the presumption in the Consumer Credit Code).

630 The documentation presented to Permanent by Mr Caradonna showed that what was being sought was a business loan. Even if one goes back to what Mr Vella intended, his aim was to consolidate his loans which appear to have been for business purposes. [However one of the assets sought to be mortgaged was trust property, namely his association’s club house!].

631 It seems to me as a matter of fact that Mr Vella was acting in trade or commerce when he signed the documents.

632 The next question is whether the plaintiff has proved reliance. I have already set out Permanent’s case on this. In reply, Mr Slattery puts that a person seeking to recover damages under s 42 must establish that the loss was suffered by conduct in breach of the Act.

633 In the present case, Permanent made its loan after receiving a host of documents only some of which were signed by Mr Vella. Furthermore, the mortgagee had the advantage of the assessment of the application by La Trobe and by Mr Mountford, its solicitor, but more particularly, by Ms Thornhill, Mr Mountford’s employee.

634 Ms Thornhill, a former bank officer of experience, made it quite clear to anyone who wanted to listen, including Mr Mountford and Ms Christou of La Trobe that there was something wrong about the proposed transaction. No one in fact listened to her, and Ms Christou in fact expressly overruled the objection. Ms Thornhill comes through this whole transaction as the only person involved in assessing these loans who showed any of the traditional common sense and skill that advisors of mortgage transactions have possessed in ages past. The clear inference is that La Trobe, and hence Permanent, were far more concerned with the sale side of the transaction than the security side of it. As a matter of fact, I find that the documents which Mr Vella signed were not documents relied on by the mortgagee or its agents in recommending the loan. Accordingly, this count fails.

635 I should note, as Mr Slattery has pointed out, that although Permanent has pleaded a knowing assistance case under s 68 of the Fair Trading Act, no submissions have been made on this and there is no obvious basis for the claim; accordingly, there is no need for me to say anything about it.

636 11. The cross-claim by Mitchell Morgan against Mr Vella. The gravamen of this claim is that as the monies paid out by Mitchell Morgan were received into a bank account of which the plaintiff was a co-owner, he has an obligation to repay Mitchell Morgan. The cause of action would appear to be money had and received. However, the cross-claim which is CB 155 and following, is really put forward on the basis that Mr Vella signed the mortgage and did not repay the money advanced, rather than what appears now to be the real claim, that is, that as the money was paid into Mr Vella’s bank account that he held jointly with Mr Caradonna and it was paid under a mistake, that the money is refundable.

637 I could not find any submissions by the plaintiff to address this claim. When my Associate at my request telephoned Mr Smallbone, she was informed that there was nothing because the plaintiff did not understand that Mitchell Morgan was making any such claim against them and that if they were wrong in this understanding, they would wish to make submissions.

638 However, in answer to an allied suggestion made by Permanent, Mr Slattery put that cases such as National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251, make it clear that if money comes into a joint account as a result of a joint holder’s fraud, and the other joint holder is unaware of that fact, and the money is then misappropriated still without his knowledge or intervention, then the innocent party will not be answerable for the money, at least unless he ought to have known that he had possession or control of it. This matter was not argued by Mr Coles on behalf of Mitchell Morgan. The position I have reached is that it may be the parties had agreed that this cross-claim could not be interpreted as meaning a claim for money had and received in the circumstances as I have found them to be, but that if it is, Batty’s case is a complete answer. The matter has not been properly argued and accordingly I should merely note this and make no determination of the point allowing the parties if they should feel so advised, to raise it at the short minutes stage.

12. The cross-claims Mrs Tsokos and other recipients of the monies

639 Much of the submissions made in connection with this aspect of the case do not need to be considered in view of my finding on the ANZ Bank claims.

640 However, the finding that the ANZ Bank is liable to Mr Vella for $150,000 plus interest leaves one to consider claims as against the $100,000 received by Mr Annous on or about 6 February 2006 and a further $100,000 paid to Rimridge Pty Ltd on the same day.

641 Rimridge filed a defence denying the claim and saying that it had made a number of loans to Caradonna Investments Pty Ltd and that it received $100,000 in February 2006. It did not appear at the hearing.

642 Rimridge is a company which is the alter ego of Mr Jeff Fenech the well-known boxing promoter.

643 The Bank claims in its statement of cross-claim (CB 46) that on or about 6 February 2006, Rimridge received a cheque for $100,000 drawn on the joint account of the Liverpool Branch. Shortly thereafter Rimridge presented the cheque and obtained payment. The monies representing the proceeds of the cheque were monies, the property of the Bank and in the circumstances Rimridge has received the Bank’s monies and would be unjustly enriched at the expense of the Bank if the Bank was not granted relief. There is also a claim that Rimridge holds the money on trust.

644 Identical pleadings were put against Mr Annous.

645 The ANZ Bank submits that its entitlement to recover in respect of those cheques is supported by authority of the highest level. It refers to High Court decisions in David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, 385; Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 and Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516, 529-530 [26]-[28] as well as Barclays Bank Ltd v W J Simms Son & Cooke (Southern) Ltd [1980] QB 677.

646 This submission is probably an overstatement because only the last of the cases mentioned actually involves the wrongful payment of a cheque. However, the Lipkin Gorman case is authority for the proposition that an innocent recipient of stolen money is obliged to pay an equivalent sum to the true owner where he has not given full consideration for it and has thus been unjustly enriched at the expense of the true owner. The High Court authorities are authority for making orders by way of restitution where monies are paid under a mistake of law.

647 In the Barclays Bank case, a cheque was drawn in favour of X and for commercial reasons the cheque was stopped. By mistake the bank paid it and was held to be able to recover the amount from the payee.

648 However, it does seem axiomatic that if a bank, contrary to its mandate, pays a cheque it is entitled to recover the money from the payee unless the payee can show that it is to be classed as a person who took the money for value or has changed its position; see eg the discussion by Hunter J in Majesty Restaurant Pty Ltd v Commonwealth Bank of Australia Ltd (1998) 47 NSWLR 593 at 603 and following.

649 In the case of Rimridge, there is no evidence of such claim and accordingly, the Bank’s suit against that company must succeed. Whether it is for the full amount of $100,000 or some lesser amount seeing that the Bank’s liability is in total $150,000 plus interest can be left to the short minutes stage.

650 As against Mr Annous, the position is more complicated. Mr Caradonna originally gave Mr Annous a personal cheque which bounced. Mr Annous then sought a bank cheque and what seems to have happened is that Mr Caradonna drew a cheque for $100,000 on the joint account and bought a bank cheque in favour of Mr Annous with that sum.

651 Mr Annous says that banks have constantly advertised that bank cheques are as good as cash and should not be permitted to resile from that commonly held belief which it has itself spread amongst the community. Mr Burchett for Mr Annous endeavoured to tender a whole lot of material put out by bank clearing houses, but I rejected this as irrelevant to what I have to decide.

652 It should be pointed out that there is some judicial authority for the proposition that a bank cheque is as good as cash. In Perel v Australian Bank of Commerce (1923) 24 SR (NSW) 62 at 75, P W Street CJ in Eq said:

“Bank cheques payable to bearer are to all intents and purposes equivalent to cash …”

and in the Privy Council on appeal Australian Bank of Commerce Ltd v Perel [1926] AC 737 at 740-741, Viscount Cave LC, giving the judgment of the Privy Council said:

“A bank cheque so issued by a responsible bank is treated as equivalent to cash, and is used by the customer for any purpose for which cash or its equivalent is required.”

653 As Weerasooria points out in his article The Australian Bank Cheque – Some Legal Aspects (1976) 2 Monash University Law Review 180 at 184-5, even the High Court in Fabre v Ley (1972) 127 CLR 665 at 671 seems to have taken the same view. See also Commercial Banking Co of Sydney v Mann [1961] AC 1, 4.

654 It may be that after Commonwealth Trading Bank of Australia v Sidney Raper Pty Ltd [1975] 2 NSWLR 227 this statement ceased to be literally true and in a note in (1976) 3 Monash Law Review 66, Robert Makim then Chief Solicitor of the Commonwealth Bank said at p 69 that what the maxim meant was that the community accepts that the issuing bank has adequate funds to pay the cheque on presentation and no more. Notwithstanding that comment, the commercial community and probably the community generally possess a very high degree of faith in the bank cheque system and it is important for commercial purposes in Australia that that be maintained.

655 The ANZ Bank’s riposte to all this is that Mr Annous is not being sued on the cheques in question, rather the claim that is made against him is that notwithstanding his status as their holder in due course, the proceeds of the cheques were had and received by him and ought to be repaid. The submissions about the significance about the bank cheques which I will come to in a moment is, according to Mr Forster, completely irrelevant.

656 Mr Burchett puts that on the proper interpretation of the facts, Mr Annous did not receive any proceeds of the personal cheque. The ANZ Bank received them, presumably in consideration for the issue of a bank cheque. The proceeds of that bank cheque (which was drawn on a separate ANZ bank account) were received by the Bank of Queensland in settlement to that extent of a debt owed to it by Mr Annous recorded against his overdraft account.

657 Mr Burchett also puts that there is no evidence that the source of the bank cheque was the joint account. Unfortunately for that submission, there is evidence of it though it may well be that Mr Annous had no idea as to the source of the funds.

658 I believe that consistently with the approach of most courts since the decision of the House of Lords in Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, it is best to deal with claims of this nature under the head of monies had and received at common law rather than involving any trust. However, it really does not matter very much as the general principles are the same.

659 I cannot see any comparable case in the authorities that were cited by counsel on either side of this argument. I do not consider, with respect, that the question as to whether Mr Annous was the holder in due course or not really bears on the result. The vital question is whether the fact that the cheque drawn from the joint account was paid to the Bank for it to issue a bank cheque breaks the ability of the Bank to follow the monies into the hands of Mr Annous.

660 A similar problem confronted the Court of Appeal in Raper. The simplified facts in that case were that an American equivalent of a bank cheque was deposited with a Sydney bank and the Sydney bank then drew a bank cheque in favour of Raper. However, the American bank cheque was dishonoured because of action taken by American revenue authorities. The bank then dishonoured the bank cheque.

661 The Court held that when the American cheque was dishonoured the local bank was entitled to debit the customer’s account for the amount of that cheque, and as the credit allowed by the bank to the customers was conditional upon the American cheque being cleared, the consideration for which the bank cheque was issued wholly failed. Raper had given no value for the bank cheque and accordingly the bank was entitled to do what it did.

662 The decision in Raper appears to be determinative of the present case. The bank cheque was issued for a consideration which has wholly failed and the Bank is entitled to rescind it.

663 In the New Zealand case of Yan v Post Office Bank Ltd [1994] 1 NZLR 154, the New Zealand Court of Appeal distinguished the Raper case in a relatively similar case. However, the New Zealand court appears to have taken into account the fact that in Raper the case was one where there was a not negotiable cheque made out to Raper, whereas in the New Zealand case the cheque was not marked “not negotiable” and was a bearer cheque. However, the judgment of Hutley JA in Raper shows that this distinction was not vital to the decision in Raper. In any event, whether I consider Raper is right or not, in view of what was decided in New Zealand, it is binding on me.

664 Raper was followed in Western Australia in Justin Seward Pty Ltd v Commissioners of Rural and Industries Bank (1980) 60 FLR 51.

665 In many ways, stopping a bank cheque, indeed stopping an ordinary cheque, or a bank seeking to recover from the ultimate payee, monies where the bank has issued the cheque in error, are similar to cases of rescission.

666 In cases of rescission at law, one had to distinguish between a void transaction and a voidable transaction. A void transaction was for almost all purposes treated as if it had never occurred. On the other hand, a voidable transaction was valid until it was repudiated. Fraud and mistake usually lead to a transaction being voidable only. If the transaction involved goods, then the rule was that the innocent party could only rescind the transaction up until the time that an innocent third party obtained a title. Explicit statements to this effect can be found in cases of fair antiquity such as the decision of the Full Court of Common Pleas in White v Garden (1851) 10 CB 919, 926; 138 ER 364, 367 and the decision of the Exchequer Chamber in Clough v London & North Western Railway Co (1871) LR 7 Ex 26, 35.

667 The reason for this is quite obvious, and that is, that at the time when the third party took title, the contract had still not been repudiated so that the fraudster had a title to convey to the third party.

668 However, the general rule was applied over the years where there were not goods involved but money; see eg Hunter BNZ Finance Ltd v C G Maloney Pty Ltd (1989) 18 NSWLR 420, 433.

669 Mention should be made of the Court of Appeal’s decision in Commercial Bank of Australia Ltd v Younis [1979] 1 NSWLR 444 where the Court of Appeal considered the bank’s right to recover on cheques issued by mistake.

670 However, whilst rescission is always the act of the party and not the act of the court, Alati v Kruger (1955) 94 CLR 216 at 224, applying Reese River Silver Mining Co v Smith (1869) LR 4 HL 64 at 73, ordinarily a person cannot effect rescission where a third party has become interested without taking advantage of the ability that a court of equity has to grant substantial restitutio in integrum.

671 As Else-Mitchell J pointed out in Waters Motors Pty Ltd v Cratchley (1963) 80 WN (NSW) 1165 at 1177, equity will not give relief unless it can achieve justice by all relevant parties including the third party. As his Honour said, the basis of the court not interfering where rights have passed to a third party, has as “its true basis in equity … not simply the third parties have acquired an interest in the subject matter but that rescission would cause injustice to such third parties who would be punished for no fault of their own”.

672 This passage was also applied by Giles J in the Hunter BNZ case at 434.

673 Those two learned judges based their view on what appears in Spencer Bower on Actionable Misrepresentation a passage which appeared up to the 3rd ed in 1974 at p 309 where it was said that rescission would not be granted “if the undoing of the contract would prejudicially affect the rights or interests which any third party has, in good faith and for value, acquired under it whilst it was still unavoided”.

674 In the 4th ed Spencer Bower Turner and Handley Actionable Misrepresentation (Butterworths, London, 2000), the learned editor said in para 314 under the heading “Rescission unjust to representor or third parties” that:

“Although this was treated as an affirmative defence in previous editions, it is suggested this is not strictly correct. The representee, in seeking to enforce his rescission, must establish that substantial restitution is possible …
Rescission is not permitted if it would prejudice rights or interests which a third party has acquired in good faith and for value. This appears to be a true defence by way of confession and avoidance, which admits the right to rescind against the representor but asserts further facts which negative that right, and if this is correct, the onus of proof would be on the representor.”

675 Although Mr Annous has sued for money had and received which is a common law count, it is clear from the authorities that this is treated for all intents and purposes as if there were an equity. This was so right from the time of Lord Mansfield. Accordingly, the equitable defences are applicable.

676 It must be remembered that Raper was a case where the person who had the money had not given any consideration. In the instant case, Mr Annous was owed money by Mr Caradonna. The inference that must be drawn from the facts is that Mr Annous had “invested” money with Mr Caradonna, had demanded it back and Mr Caradonna was ostensibly paying it back. Especially in view of s 35 of the Cheques Act this must be classed as consideration. Mr Annous took the money in good faith and it would seem to me that he has a good defence to the ANZ Bank’s claim.

677 Mr Annous also relies on the doctrine of change of position. In view of what I have said about him taking bona fide and for proper consideration before the transaction was avoided by the Bank, it is unnecessary to deal with this. However, the material put up by Mr Annous under this head reinforces the view that I have come to on the other aspects of his defence.

678 It may seem odd that the decision in respect to Mr Annous is different to the decision in Rimridge. One clear differentiation was the issue of the bank cheque. The second is that Rimridge did not argue the matter. An inference may have been open that Rimridge gave consideration and acted in good faith, but it did not advance that argument in court nor present any evidence.

13. Issues of damages

679 I now need to consider the damages claimed against Hunt & Hunt by Mitchell Morgan

680 The claim is for one eighth of the $1,001,748.85 plus interest which Mitchell Morgan paid out in respect of the forged mortgage, ie $125,218 plus interest.

681 Hunt & Hunt say that their damages must be calculated by working out what was the net sum that Mitchell Morgan would have received if Mitchell Morgan had retained the benefits of indefeasibility and had sold the Enmore Property.

682 Hunt & Hunt point out that what indeed did happen was that, after the issue of the appropriate statutory notice, Mitchell Morgan moved into possession of the Enmore Property and listed it for sale by auction. The auction was cancelled because of these proceedings.

683 There is some evidence of value of the Enmore Property before the Court, but this has not been tested. However, what there is seems to indicate a value at the date of the proposed auction of about $1,650,000.

684 This would seem to indicate that the property would have fetched more than was needed to clear the loan. Thus the damages are equal to the lost principal plus interest.

685 As to interest, the evidence is that Mitchell Morgan itself borrowed at 17% in order to make the advance. It claims interest at the rate it charged under the mortgage (78% per annum, reduced to 54% for prompt payment) or 17%.

686 I can see no justification at all for allowing the rate under the mortgage, particularly as the loan was only for two months and at a very high rate of interest, even though Hunt & Hunt would have known these figures..

687 Hunt & Hunt say that Mitchell Morgan has failed to prove any entitlement to interest as damages pursuant to Hungerfords v Walker (1989) 171 CLR 125. They say that no such claim has been properly pleaded as Smith J held was necessary in Freemantle’s Pastoral Pty Ltd v Hyett [1999] VSC 129 at [76].

688 Furthermore, there is only slender evidence of this claim and that is in the affidavit of Mr Rogers filed shortly before the hearing. Thus the appropriate rate of interest from the date of the hypothetical sale of the Enmore Property, is therefore the statutory rate pursuant to s 100 of the Civil Procedure Act. This it is put far short of what would be required to persuade it that some rate other than the rate prescribed by s 100 is appropriate, let alone interest on a compounding basis.

689 Mr Stevenson notes that in Hexiva Pty Ltd v Lederer (No 2) [2007] NSWSC 49, Brereton J noted at [9] that:

“[The] courts have apparently adopted a far more stringent approach to what is required to prove a claim for interest as damages, than to claims for statutory pre-judgment interest. Whereas the cases on statutory pre-judgment interest suggest that loss from late payment will be assumed, the cases in which interest is claimed as damages for deprivation of money suggest that the plaintiff bears the onus of establishing the loss, which is not presumed to arise from the mere withholding of money.”

690 I agree with the submission that the only evidence before the Court which might possibly form the basis for a Hungerfords v Walker submission is that of Mr Rogers. Yet it is clear from his evidence that the loan he describes was drawn down well before the Mitchell Morgan proceedings and used as working capital to fund its entire business. It was not therefore specifically referable to the Vella transaction.

691 Furthermore, Hunt & Hunt submit that it is clear that over the entire life of the loan, Mitchell Morgan only made payments of interest and not principal. That being so, even if the mortgage had been indefeasible and the Enmore Property sold, it follows that none of those funds would have been applied to reduce Mitchell Morgan’s liability under this loan, and hence Mitchell Morgan has failed to discharge its burden of proof on causation with respect to this head of the claim (which, as stated, has not been pleaded or particularised).

692 I also agree with the submission that in any event, Mitchell Morgan’s loan from its investors could not otherwise form the basis for interest as damages, because of Mr Roger’s frank acknowledgement that the only reason Mitchell Morgan has not paid off the loan is to await the outcome of these proceedings and that that is an admission of an unambiguous failure to mitigate.

693 In my view the applicable interest rate is the rate under s 100 of the Civil Procedure Act 2005. However, I can see no reason why that interest should not run from the date of the payment out of the monies.

694 For completeness, I should note the damages which Mr Caradonna must pay Mr Vella pursuant to my consideration in 14(c) and the moiety of the Cartisano monies which the ANZ Bank needs to pay to Mr Vella as considered in 11.

14. Other matters

695 There are three outstanding cross-claims:

(a) in 4122/06 the cross-claim by Permanent against Ms Palumbo;

(b) the cross-claim by Mr Vella against Mr Caradonna; and

(c) the cross-claim in 3957/06 by the ANZ Bank against Mr Caradonna.

696 As to the first, Ms Palumbo did not take any part in the hearing nor did she file any evidence.

697 It will be remembered that Ms Palumbo is alleged to have been the witness to the signature purporting to be that of Mr Vella to each of the mortgages. It is alleged that she misrepresented that she was the witness and that the loss suffered by Permanent as a result of her misrepresentation was the loss of its investment of $1,151,500. The first cross-claim seeks damages for negligence, damages for deceit and damages pursuant to s 68 of the Fair Trading Act for contraventions of s 42 of that Act.

698 The cross-claim is pleaded and the essential facts pleaded are as follows:

(a) On about 19 January 2006, a loan application in the name of Mr Vella was submitted to La Trobe on behalf of Permanent for loan advances over Leppington and Mangrove Mountain;

(b) On about 22 February 2006, Ms Palumbo affixed her signature as witness to two memoranda of mortgages which purported to grant mortgages by Mr Vella over those properties in favour of Permanent;

(c) At the time she affixed her signature to those memoranda of mortgages she knew, or ought to have known, that Permanent was the mortgagee named in each memorandum of mortgage;

(d) In so affixing her signature, she represented to Permanent that the plaintiff was known to her and had affixed his signature to the memorandum of mortgage in her presence;

(e) She confirmed that representation to Permanent’s solicitor Mr Mountford;

(f) The representations were false;

(g) Permanent relying on those representations advanced funds of $1,151,500 which were lost.

699 There was no defence filed, the allegations are deemed to be admitted. I did not deal with the matter earlier in case other evidence in the proceedings showed that what was claimed was contrary to the facts that came out in the whole of the proceedings, but that has not happened.

700 Accordingly, there is no reason to doubt that the cross-claimant’s case is established and there should be verdict against Ms Palumbo for the sum claimed plus the appropriate amount of interest.

701 As to the cross-claim by Mr Vella against Mr Caradonna, Mr Slattery says that the court must focus on the following matters:

(a) Mr Caradonna was one of the holders of the joint account. He did not give consideration for and was not entitled to receive payments into the account totalling $2,417,382.97. Consequently, these monies were received to the use of Mr Vella;

(b) Mr Caradonna caused the whole of the funds in the account to be paid out without the knowledge or approval of Mr Vella;

(c) Mr Caradonna falsely and maliciously caused various statements including forged loan agreements to be published to various lenders and uttered cheques drawn on the joint account as cheques signed by Mr Vella; and

(d) Mr Caradonna caused advances totalling $1,130,000 from Mitchell Morgan and $1,151,500 from Permanent to be made on the security of Mr Vella’s land.

702 On the facts as I have found them, Mr Caradonna is liable. The question is as to the amount, and this may well be academic because Mr Caradonna is bankrupt and there may never be leave to proceed against his bankrupt estate.

703 If, pursuant to the orders that I am making in these proceedings, the unencumbered fee simple in Leppington, Mangrove Mountain and Enmore is retransferred to the plaintiff, then apart from the Cartisano monies, the only loss Mr Vella will have suffered is any excess costs that he may have had to bear in recovering back his land.

704 When I considered this sort of problem between Mr Vella and the ANZ Bank, I had problems with causation. There is no problem with causation so far as Mr Caradonna is concerned. Cases such as The Solway Prince (1914) 31 TLR 56; Agius v Great Western Colliery [1899] 1 QB 413; Lloyds v Ellis NSWCA 25/2/1998 per Powell JA at 22; Hamilton J’s decision in the Queanbeyan Leagues Club case; Babcock International Ltd v Babcock Australia Ltd [2003] NSWCA 6 and Hammond & Co v Bussey (1887) 20 QBD 79 as cited by Mr Slattery seem sufficient warrant for ordering this expense to be paid to Mr Vella by Mr Caradonna.

705 There is not the material for me to quantify this and so the order should be that if Mr Vella wishes to pursue it, that I will, at a subsequent occasion, deal with the quantum of this particular claim.

706 Of course, this amount is in addition to the Cartisano monies other than where they have been recovered from the ANZ Bank by Mr Vella.

707 The ANZ Bank’s cross-claim against Mr Caradonna seems to me to be indefensible. He received the money as a result of the mistake of other parties engendered by him. He is liable to indemnify the Bank for any loss.

15. Costs

708 So far as costs are concerned, I will merely make a few remarks at this stage and leave the matter to be dealt with after the form of the orders are discussed when short minutes are brought in by the plaintiff.

709 It would seem tolerably clear to me that the plaintiff is entitled to his costs of the proceedings, but just how they should be borne and how the costs of the various cross-claims, most of which turned out to be unnecessary, are to be borne, may well be a matter of great debate.

710 Mr Vella essentially succeeded in almost all his claims, but I should note that with respect to the Cartisano money claim, although he recovers against the ANZ Bank, he is not recovering anything more than the Bank appears to have offered to pay in any event.

711 It may well be that separate consideration needs to be given on the one hand to the costs of the people I might call “the major players” and others.

712 The others, who were only involved in the case to a minor extent and who mainly were successful, should present no difficulty to the court in making an appropriate order for costs. How far the quantum of those costs will be affected by the fact that the minor claims were caught up in major litigation will be a matter for the costs assessors.

713 So far as the major players are concerned, the case should be considered globally and not as six separate actions.

16. Conclusion

714 There does not appear to be much point in being precise as to the actual orders that should be made consequent upon these reasons. In summary, the plaintiff is successful and that orders must be made restoring him to the title as holding his interest unencumbered by the mortgages of Permanent or Mitchell Morgan. Permanent should have judgment against Ms Palumbo for $1,151,500 plus interest.

715 In the associate proceedings 4059/06, Hunt & Hunt are liable to pay Mitchell Morgan one-eighth of its loss, but, in theory anyway, can recover that loss against others. I will formally make the necessary orders in each of the associated proceedings.

716 I must thank all counsel and other lawyers involved in the case for the expeditious manner in which they handled the case. It lost nothing for that and saved a considerable amount of time and money.

717 I might say that it is always possible that despite careful preparation of these reasons I may have unintentionally overlooked a point on which a party reasonably requires my reasons. If this has occurred, I am sure that the appropriate request will be made at the short minute stage.

718 The course I will take is to publish these reasons and then stand the matter over so that short minutes may be brought in.

719 Unfortunately, in one sense, I will not be sitting for most of June 2008, thus I will put the matter in my list for mention at 9.30am on 1 July 2008 for the purpose of considering when and how the remaining issues can be determined.

**************************