Citigroup v Azar [2011] NSWSC 95 (2 March 2011)

Last Updated: 14 April 2011

Supreme Court New South Wales

Case Title:	Citigroup v Azar
Medium Neutral Citation:	[2011] NSWSC 95
Hearing Date(s):	8/2/11, 9/2/11 and 10/2/11
Decision Date:	02 March 2011
Jurisdiction:
Before:	Acting Justice Barr
Decision:	See paragraphs [82] and [83] of the judgment.
Catchwords:	Possession of land - loan on mortgage - whether unjust and unconscionable.
Legislation Cited:	Consumer Credit Code Contracts Review Act 1980 Fair Trading Act 1987 Real Property Act 1900 Trade Practices Act 1974 (Commonwealth)
Cases Cited:	Elkofari v Perpetual Trustee Co Limited [2002] NSWCA 413 Petelin v Cullen [1975] HCA 24; [1975] HCA 24; (1975) 132 CLR 355 Ford by his Tutor Watkinson v Perpetual Trustees Victoria Limited [2009] NSWCA 186; (2009) 75 NSWLR 42 Perpetual Trustee Co Limited v Khoshaba 2006 NSWCA 41 Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; (2004) 219 CLR 165
Texts Cited:
Category:	Principal judgment
Parties:	Citigroup Pty Ltd (Plaintiff) Aziz Azar (First Defendant) Ovsanna Azar (Second Defendant)
Representation
- Counsel:	Counsel: P T Newton D C Eardley
- Solicitors:	Solicitors: Norton Rose Australia (Plaintiff) Downeys Lawyers (Defendants)
File number(s):	2009/29622
Publication Restriction:

Judgment

1. HIS HONOUR: The plaintiff, Citigroup Pty Limited, seeks an order for possession of land at 167 Blaxcell Street Granville (the land) and consequential orders. The defendants, Aziz Azar and Ovsanna Azar, are the registered proprietors of the land. The plaintiff relies on the defendants' failure to abide by the conditions of a loan secured by a mortgage granted over the land which, it says, entitles it to exercise its power of sale and to recover moneys due under the loan. The defendants deny executing any mortgage in favour of the plaintiff and deny any obligation to repay money to the plaintiff. In a cross-claim they seek orders against the plaintiff granting them relief under the Trade Practices Act 1974 (Commonwealth), the Fair Trading Act 1987, the Contracts Review Act 1980 and the Consumer Credit Code . They seek a declaration that the mortgage is unjust and void or a declaration that the loan agreement is unconscionable or an order setting aside the loan agreement and the mortgage. They seek damages, interest and costs.
   
2. The defendants are a married couple. One of their children is an adult son, Steven Azar. Steven Azar was at all material times director of Azar Financial Services Pty Limited. Until the commencement of the hearing the defendants were pursuing cross-claims against Steven Azar and Azar Financial Services Pty Limited, but counsel abandoned those claims early in the hearing. The defendants maintain their cross-claim against the plaintiff.
   

Facts not in dispute

3. The defendants bought the land in December 1977, having obtained a loan on mortgage from Westpac Banking Corporation. They paid off the loan in 1989 and the mortgage was discharged. In about 1992 they borrowed money from SGE Credit Union to purchase a house for their sons Steven and James at Blacktown. They granted SGE Credit Union a mortgage over the land to secure the repayment of the loan. In 1997 or 1998 Steven transferred his interest in the property to James. Moneys were still owing to SGE Credit Union on the mortgage and Steven arranged for a loan from Citibank to pay out the mortgage. That happened, and SGE Credit Union discharged its mortgage. A mortgage to Citibank was registered on the land. In 2001 the defendants paid out that mortgage and it was discharged.
   

Disputed facts

The GEL loan

4. Mr Wayne Southwell, an officer of the plaintiff, searched the plaintiff's records and collated relevant documents in a folder, Exhibit C, which was exhibited to his affidavit sworn 22 October 2010. At tab 9 of Exhibit C appear copies of documents sent to the plaintiff by facsimile transmission on 25 September 2008. The first eight pages comprise a document called "Loan Agreement", signed by a person described as an authorised officer of GEL Custodians Pty Limited (GEL) and expressed as an offer to Aziz Azar of 167 Blaxcell Street Granville NSW 2142 and Ovsanna Azar of 167 Blaxcell Street Granville NSW 2142. The amount of credit is stated on the first page to be $180,000.00. On page 8 it is stated that the purpose of the housing loan account is to assist with future investments and personal use. The stated security is a registered first mortgage of 167 Blaxcell Street Granville. The remaining pages comprise a surveyor's drawings of a building subdivision and a house plan in the township of Danabay in the municipality of Mossel Bay.
   
5. On 25 September 2008 there were a number of exchanges by email between Steven Azar and Sermin Setiawan, an employee of the plaintiff. In one of them Steven Azar said that he had just faxed the mortgage documents and site plan and building plan of the homes overseas. I think that he must have been referring to the documents I have just mentioned.
   
6. At tab 25 is a copy of a mortgage over the land to GEL, dated 21 September 2006. It bears signatures purporting to be those of the defendants. Each signature is witnessed by Steven Azar. The mortgage was registered.
   
7. In an affidavit sworn on 4 February 2011 the first defendant referred to the 8 page loan agreement, the drawings and the plan and said that he had not seen them before copies were shown to him by his solicitor in May 2010. He said that Danabay and Mossel Bay were in South Africa. He said that he had no interest in property in South Africa. In an affidavit sworn on the same day the second defendant gave evidence to the same effect.
   
8. In further affidavits both defendants referred to the mortgage at tab 25. Each said:
   

I do not recall having seen the document before. I do not recall signing it.

9. The documents received by the plaintiff from GEL were marked in handwriting with a reference number, C090820415. As appears from Mr Southwell's evidence, that was the reference number given to the loan secured by the mortgage over which the plaintiff brings this claim.
   

The Citigroup Loan

10. At all material times the plaintiff entertained applications for loans made through the medium of a broker called an Introducer. On 30 August 2005 the plaintiff appointed Finance Analysis Services of Australia Pty Limited as Introducer. The Introducer later changed its name to National Brokers Group Pty Limited.
    
11. On 27 August 2007 the plaintiff received an application from Steven Azar to be registered as a representative of the Introducer. A copy of the form of application for registration appears at tab 2 of Exhibit C. In the document Steven Azar stated that the name of the Introducer was National Brokers Group Pty Limited and that his trading name was Down Under Home Loans. His application was accepted on the same day and the plaintiff issued him with representative identification number 873909.
    
12. Documents exhibited at tab 3 comprise a mortgage application bearing the reference number C090820415. The details of the Introducer include the company name Down Under Home Loans, the authorised representative name Steven Azar and the identification 873909. The names of the applicants were Mr Aziz Azar and Mrs Ovsanna Azar. Their residential address was stated as 167 Blaxcell Street Granville NSW 2142. Mr Azar's principal business activity was stated as carpentry. The purpose of the loan was stated to be refinance of current loan, $180,000.00, and home improvements, $100,000.00. The application was to borrow the sum of $280,000.00 over 30 years. The security offered was a house at 167 Blaxcell Street Granville, stated to be worth $450,000.00. Listed assets included superannuation, worth $100,000.00, and shares, worth $100,000.00. The loan application bore signatures purporting to be those of Aziz Azar and Ovsanna Azar. The signatures appeared in the copies put into evidence under the headings:
    

Q. Terms & conditions of loan application

R. Signature of all applicants - please sign and date

S. Address for notices

T. Declaration of purpose - investment and business

Applications.

13. Accompanying the application was a document entitled Citibank self-certification declaration. Under the heading B. Declaration the document stated:
    

I/We are satisfied that the Applicant(s) named on this form has the capacity to repay:

The facility amount of $280,000-

Combined declaration $

Income (only applicable

for Self-Certified 80)

Term (years) 30 yrs

1. I/We request Citibank to rely on the information contained in this declaration and the accompanying Mortgage Application form, without independently verifying the details of my/our income, expenses, assets and liabilities.

2. I/We have considered my/our financial position and, if I am applying for the facility as a joint borrower, this means taking into account all joint borrowers' combined income and expenses, and assets and liabilities. After such consideration, I am/we are satisfied that I am/we are able to meet the repayments on the proposed facility amount (including having considered the repayment guide provided with the application form) as well as all my/our

Other combined financial obligations (including repayments of existing loans and credit cards, and living expenses such as food, household bills and clothing, support, travel and insurance expenses) without financial difficulty.

3. I/We also expect to continue to be able to meet the repayments on the proposed facility amount if interest rates increase and repayment amounts increase.

4. I/We are not aware of any significant issues that are relevant to my/our mortgage application which should have been brought to Citibank's attention that are not already in this declaration or my/our mortgage application form.

5. I/We acknowledge that Citibank has advised me/us to obtain independent legal and financial advice in connection with the proposed facility.

6. I/We warrant that all the information I/We have provided in this declaration and in connection with my/our mortgage application is a true and correct representation of my/our financial position. I/We acknowledge that Citibank and any lender's mortgage insurer will rely on this information in deciding whether to make approve my/our loan application"

14. Under the text appeared the signatures "A Azar" and "O Azar".
    
15. A forensic document and handwriting examiner, Mr Stephen Dubedat, examined the signatures "A Azar" and "O Azar" on the portions of the documents I have mentioned. He used for comparison signatures of the defendants which it is common ground were genuine. He formed the view that the "A Azar" signatures on those documents were very probably not genuine signatures of the writer of the authentic documents. He formed a similar view about the "O Azar" signatures.
    
16. Mr Dubedat was not cross-examined.
    
17. The plaintiff relied on the information presented to it in these documents. It made searches and inquiries. One of the documents provided to it was a disbursement authority directing the payment of the loan moneys into the Westpac account of Azar Financial Services. The plaintiff, however, insisted on paying loan moneys only into an account of the defendants. On 30 September 2008 the plaintiff conditionally approved the loan application. There were further inquiries and the loan was approved on 1 October 2008.
    
18. On 2 October 2008 Mr Steven Ramage, head of mortgages of the plaintiff, wrote separately to Mr Azar and Mrs Azar. The letters were addressed to 167 Blaxcell Street Granville NSW 2142. They stated that they enclosed documents to sign and return, documents to sign in front of a witness and return and documents to read and keep. A check list was enclosed. Each recipient was requested to tick off each item on the check list and send it to Galilee Solicitors, who acted for the plaintiff, with the completed documents in an enclosed reply-paid envelope.
    
19. On or about 8 October 2008 Galilee Solicitors received the following signed documents:
    

Citibank Home Loan Facility Agreement;

Mortgage;

Settlement Instruction dated 8 October 2008;

Representation by Mortgagors dated 8 October 2008;

Legal Advice Acknowledgment Certificate dated 8 October 2008;

Direct Debit Request dated 8 October 2008; and

Full Discharge Authority dated 8 October 2008.

20. These things appear from the affidavit of Mr Southwell. The documents are exhibited at tab 18.
    
21. The loan agreement on which the plaintiff sues is an 11 page document. The last page is headed "Acknowledgment of Acceptance". It contains a panel of instructions in these terms:

IMPORTANT

BEFORE YOU SIGN	THINGS YOU MUST KNOW
* READ THIS CONTRACT DOCUMENT, so that you know exactly what contract you are entering into and what you will have to do under the contract.	* Once you sign this contract document you will be bound by it. However, you may end the contract before you obtain credit, or a card or other means is used to obtain goods or services for which credit is to be provided under the contract by telling the credit provider in writing, but you will still be liable for any fees or charges already incurred.
* You should also read the information statement: “THINGS YOU SHOULD KNOW ABOUT YOUR PROPOSED CREDIT CONTRACT”	* You do not have to take out consumer credit insurance unless you want to. If this contract documents says so, you must take out insurance over any mortgaged property.
* Fill in or cross out any blank spaces.	* If you take out insurance, the credit provider can not insist on any particular insurance company.
* Do not sign this contract document if there is anything you do not understand.	* If this contract document says so, the credit provider can vary the annual percentage rate (the interest rate), the repayments and the fees and charges and can add new fees and charges without your consent.
	* If this contract document says so, the credit provider can charge a fee if you pay out your contract early.

22. Under the panel appear the signatures "A Azar" and "O Azar". The witness to each is Steven Azar.
    
23. In his affidavit the first defendant said of that page:
    

I do not recognise the documents and there is a signature that appears to be similar to mine but I do not believe it is mine.

24. The second defendant said of it:
    

I do not recognise the document. There is a signature on it that appears to be mine.

25. The first defendant was asked in cross-examination about the signatures. There was this evidence:
    

Q. In or about October 2008 did you receive a letter at your home from Citibank addressed to you attaching many documents?

A. No, oh later I don't know what date they come, they come, the documents, they said, the man, I said "what for", and he said "there is Citibank to go to the court" and I just took them without to read them and I put them on the shelf in the kitchen until Steven come and Steven come and "this is come for Citibank court" and he looked after it.

Q. Do you recall Steven receiving a letter from Citibank attaching a loan agreement and a mortgage?

A. Small envelope.

Q. A larger envelope containing documents which included a loan agreement and a mortgage?

A. When was that?

Q. In October 2008?

A. No.

Q. Is it the case that you signed, in about October 2008, you signed documents and gave them to Steven.

A. Steven asked me, many times, his daughter want to go, let her sign the docket, sign it for her she'll go, he asked me to do this. He asked me to do that. I do. He is my son, I trust him, I didn't trust him that he would do that to me.

26. A copy of the mortgage is at tab 18 in Exhibit C. The original became Exhibit H. The second defendant was handed the original and gave this evidence:
    

Q. ... Mrs Azar, is your signature on that document?

A. It is.

Q. Mrs Azar, is your signature on that document?

A. Looks like my signature, but I'm not sure if I did sign this.

...

Q. Mrs Azar, you signed that document in 2008, didn't you?

A. I didn't sign any document for Citibank. Maybe my son, he bring the page to me and told me to sign it without knowing what I am signing. I'm telling you, I told you too many times that I didn't sign any documents when I am borrowing money. I don't work in a bank, but I went to the bank, Westpac and credit union, they gave me four pages and they try to read them for me, and let me sign the form - the document. My son didn't never came to me with this and told me that he's borrowing money from the Citibank. Like I said, he might bring me the page and I sign it without knowing what I am signing. I should have checked what I'm doing. Like I say, I can't see properly. I can't read. If I read, I get tired, then I - it's all blurry. I'm telling you that I might have signed it but I didn't know what I am signing. I'm not saying for, you know, it's not my - you cannot force me to tell you that I did borrow. I did not borrow.

27. Mr Gary Storey, a forensic document examiner, examined the signatures on the documents received by the solicitor and listed at paragraph 19 above, save for the Full Discharge Authority, which he did not see. Mr Storey came to the opinion that there was strong support that the writer of the "A Azar" signatures on those documents signed the specimen documents signed by the first defendant.
    
28. Mr Storey formed the opinion that, save for the Full Discharge Authority, the "O Azar" signatures on the documents were written by the person who signed the specimen documents.
    
29. Mr Dubedat examined the same documents. Like Mr Storey, he did not see the Full Discharge Authority. He reached the opinion that the signatures "A Azar" on the documents were more likely than not to be the genuine signatures of the first defendant. He was of the opinion that the "O Azar" signatures were more likely than not to be the genuine signatures of the second defendant.
    
30. On or about 27 October 2008 the plaintiff advanced the sum of $278,620.01. A small part of it went to the payment of costs. Of the bulk, $182,776.00 went to GEL and $95,244.41 was paid into the first defendant's account at SGE Credit Union.
    
31. On the same day GEL discharged its mortgage and the plaintiff's mortgage was registered.
    
32. It is not in dispute that the mortgage in its terms secures amounts owing on the loan agreement. The evidence at para 49 of Mr Southwell's affidavit, which is not challenged, shows that by 16 July 2009 a total of $3,206.25 had fallen due for payment under the loan agreement and was unpaid. On about the same day Deacons, solicitors for the plaintiff, sent to the defendants by pre-paid post a letter and a default notice under s57(2)(b) Real Property Act 1900. The defendants do not recall receiving the notice, but I think it probable that they received it. The notice has not been complied with. Ordinarily proof of those matters would entitle the plaintiff to the orders it seeks, but it is necessary to resolve the issues raised by the defence and the cross-claim.
    
33. Mr Eardley, for the defendants, invited the court to find that the defendants signed the loan agreement and the mortgage. Mr Eardley impliedly accepted that the proceeds of the mortgage extinguished the GEL mortgage and increased the credit balance of the first defendant's credit union account by more than $95,000.00. Nevertheless, he submitted alternatively that the defendants were not bound by the agreement because they did not know what they were signing and that they were entitled to statutory relief from the consequences of what they signed.
    

Non est factum

34. In Petelin v Cullen [1975] HCA 24; (1975) 132 CLR 355 the justices of the High Court of Australia said this at 132 CLR 359:
    

The other ground on which the Court of Appeal decided the case

adversely to the appellant was that he was careless in failing to take reasonable precautions to ascertain what was in the document. Consideration of this ground requires some examination of the defence of non est factum.

The principle which underlies the extension of the plea to cases in

which a defendant has actually signed the instrument on which he is sued has not proved easy of precise formulation. The problem is that the principle must accommodate two policy considerations which pull in opposite directions: first, the injustice of holding a person to a bargain to which he has not brought a consenting mind: and, secondly, the necessity of holding a person who signs a document to that document, more particularly so as to protect innocent persons who rely on that signature when there is no reason to doubt its validity. The importance which the law assigns to the act of signing and to the protection of innocent persons who rely upon a signature is readily discerned in the statement that the plea is one "which must necessarily be kept within narrow limits" ( Muskham Finance Ltd. v. Howard [1963] 1 Q.B. 904, at p. 912.) and in the qualifications attaching to the defence which are designed to achieve this objective.

The class of persons who can avail themselves of the defence is limited. It is available to those who are unable to read owing to blindness or illiteracy and who must rely on others for advice as to what they are signing; it is also available to those who through no fault of their own are unable to have any understanding of the purport of a particular document. To make out the defence a defendant must show that he signed the document in the belief that it was radically different from what it was in fact and that, at least as against innocent persons, his failure to read and understand it was not due to carelessness on his part. Finally, it is accepted that there is a heavy onus on a defendant who seeks to establish the defence. All this is made clear by the recent decision of the House of Lords in Saunders v Anglia Building Society (Gallie v Lee [1970] UKHL 5; [1971] A.C. 1004, esp. at p. 1019.

35. This statement was referred to with approval in Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; (2004) 219 CLR 165 at [46] and [47]. See also Ford by his Tutor Watkinson v Perpetual Trustees Victoria Limited [2009] NSWCA 186; (2009) 75 NSWLR 42 at [36] - [46].
    
36. According to the first defendant's evidence, he was born in Lebanon and went to school there for only one year. He started work when he was 7 years old. He arrived in Australia with Mrs Azar and their two sons in 1973. He can speak English. He started work in 1975 as a hospital porter. He became an anaesthetic technician. He retired on a disability support pension at the end of 1994. His evidence in cross-examination was that as an anaesthetic technician he had to obtain blood for patients, and did so by taking to the blood bank dockets bearing patients' names and numbers. Sometimes he read them. He never read labels on anaesthetics or drugs. He used to open and look at mail delivered to him at home. He looked at statements of account to check money amounts. The thrust of his evidence was that he was a poor reader of words. He could not write figures. He could not write one thousand in figures. He knew that the word hundred began HUND but doubted his ability to write the word. When banking he either used automatic teller machines or asked someone to fill in documents for him. He was really slow with writing.
37. The second defendant learned English in school in Lebanon. She reads English. She studied practical nursing at the American Hospital in Beirut. She completed a sterilising technology course at Rozelle Hospital and Macquarie University in about 1982. She is registered in New South Wales as an Enrolled Nurse. Between 1976 and 1986 she worked in nursing and in sterilising theatre equipment. She was asked in chief to identify her affidavit and replied as followed:
    

Q. Yes, could you check that that is 23 paragraphs?

A. Can I just say something, sorry, I have glaucoma, on my right eye I can't see at all. It is blind. The other one is nearly, getting bad. I have to take my time and I need may be ask things because I - I take time to read because I can't see with the second eye too because I am too upset and emotional, and then the reading, it might take time for me, sorry about that.

38. The second defendant was asked in cross-examination about opening envelopes delivered to her home and reading the contents. There was this evidence:
    

Q. The bills that you just referred to, are they the bills from Myers?

A. Myers.

Q. And are they posted to you at your home?

A. Yes.

Q. And they arrive at your home in the mail in an envelope?

A. Yes.

Q. And you open the envelope and read the bill?

A. Like I said, if I can read, sometimes I can't see because my right eye is - I can't see, I told you, blind the other eye my doctor said that soon it is going to be the same as your right eye, so when I get the letter my daughter or my granddaughter or my -- whoever is at home, I ask them to read it to me because I can't read too much. My eye - now, it is getting tired, and this been since early 90's, I had five lasers and then I had an operation.

...

Q. In 2008 if an envelope was a delivered to your home by mail, and an envelope was addressed to you, would you have opened it?

A. No, because, like I said, I was very sick, I always had a problem with my eye, sometimes I open, if I can't see properly I ask somebody to read it to me.

Q. Do I understand you answer, that sometimes you would but other times you would give it to someone to read?

A. To read it to me.

Q. To read it to you, and in 2008, the people that you would have given any mail that was received at your home addressed to you would be your daughter?

A. I don't know, whoever is around that time.

...

Q. In 2008 did you provide an envelope addressed to you to a member of your family to read to you and they read to you that it was a letter from Citibank?

A. I don't remember, and, I don't know.

Q. When you say you don't remember, are you - is what you mean that it could have happened but you just do not recall, sitting here in Court today?

A. Most probably.

39. In her affidavit the second defendant referred to the mortgage and said this:
    

21. On 9 December 2009 David Downey, solicitor, showed me a document headed 'Mortgage' and bearing the number AE300761Y. I had never seen the document before. A true copy of the document is annexed hereto and marked "B". In relation to the document I say;

i) I do not recall signing the document

ii) There is a signature on page 2 of the document that appears to be my signature.

40. In cross-examination there was this evidence:
    

Q. Is it the case that your son, Steven, put money into accounts in your husband's name--

A. I have no--

Q. --to pay for a loan from Citibank?

A. I have no idea what my son has done it. I find it after Citibank rang me. And we haven't borrowed any money. You keep asking me the same question. Why? I haven't borrowed any money from Citibank. Whoever filled the form, they filled the form, they bring the page to me. Not the whole file, maybe they gave me - he gave me a page like you see in the mortgage, I have sign it without knowing what I am signing. Like I told you, I can't see properly. Maybe I thought it was a page concerned with Sarah at school. Maybe he wants me to sign it as a guardian. I did sign it. I am mistaken. I sign it without knowing what it is. I'm not lying, trying to go out of it. I'm telling you that I might have signed it, not the whole - if I knew that it is Citibank loan, I wouldn't do such thing. Why do I have to borrow money? What I'm going to do with the money? I'm getting old, I need a rest, I don't need to buy another house, to buy a business, I'm a pensioner. The Social Security doesn't allow me to borrow money. I'm not a thief, and I'm not stealing any money. I am grateful to Australian Government that they giving me pension to live. And I don't need 280 to borrow. If my son is doing that, he's doing it for his own sake. And I'm not helping anybody because I cannot help anybody. If I am trying to help anybody, that's when I have to lose my house. Why should I do that? I need a place to give me and my husband and my granddaughter.

41. It was submitted that the first defendant spoke English but had no formal instruction in the language and could read only simple documents in English. It was submitted that the court should accept his evidence that he could not write anything but the simplest of numbers. It was submitted that although the first defendant signed the several documents comprising the loan agreement and the mortgage he did so not knowing the true nature of the documents. His ignorance was compounded by an "impaired level of literacy". So the first defendant was not careless in signing the documents. It followed, it was submitted, that the first defendant had brought himself within the class of persons entitled to raise the defence of non est factum.
    
42. It was submitted that the second defendant was blind in one eye and had limited sight in the other, the implication being that she could not read what she was signing. Although she had previously borrowed on mortgage, the second defendant had not done so since 2005, according to evidence she gave on affidavit. In the circumstances she also was entitled to rely on the defence non est factum.
    
43. It seems to me that the understanding and the intention of the defendants is illuminated by much more than the evidence pointed to in the defence submissions. It seems to me that the defendants had a practice, established well before 2008, of raising money on the security of their house to lend to members of their family for their purposes. That was established when they raised money on mortgage to SGE Credit Union so that their sons could buy a house and when they obtained a loan from Citibank to discharge the SGE Credit Union mortgage. The first defendant gave this evidence:
    

Q. In 1997 and 1998 did Steven arrange--

A. A. I ask Steven to arrange a loan for me to take off my loan from credit union, but I didn't say from where - where he get it, then I find out he get it from Citibank and I start paying until I couldn't get because I am on pensioner...

44. I think that such a pattern was repeated in 2006 and 2008, when money was borrowed successively from GEL and from the plaintiff. In all four mortgages, the borrowers were the defendants. In all four mortgages the mortgaged land was theirs. In all four mortgages the proceeds went to members of the defendants' family.
    
45. It is not difficult to understand why the defendants relied on Steven Azar to arrange mortgages on their behalf. He was a resourceful man with a good command of English. The defendants must have realised that as pensioners they would have had no chance of convincing a commercial lender of money that they could service a loan of the order they had in mind. Their intention, I think, was that Steven Azar should make to the proposed lender such representations as were necessary to secure the loan. They were content to offer their house as security, but I do not think that they were otherwise particularly concerned about what Steven Azar told the intended lender.
    
46. It is necessary to examine the role played by Steven Azar. He has advised the defendants on occasions. He drafted the defence that they first filed, one now superseded. It is not disputed that he arranged the Citibank mortgage in 1997 - 1998.
    
47. I am satisfied that Steven Azar used money raised successively from GEL and the plaintiff to invest in property development in South Africa. So much appears from the documents he sent to Mr Setiawan and from what he told this court on 20 November 2009. When this matter was called on before Johnson J the first defendant was present. Steven Azar said this to his Honour:
    

I do understand that it's my parents' home. I'm not taking advantage of them. It may be the case I obtained financial benefit from it, but my parents know where I have put the money. They know the money went not to lavish lifestyles, or anything like that, it went to another development property that I am working on overseas, which is total value of $1.5 million.

48. The first defendant told the court as now constituted that he could not understand what Steven Azar was saying on that occasion, but I do not accept that evidence. The first defendant appeared to me to understand questions that he was asked. I found his responses quick and relevant. Before Johnson J he made no attempt to throw doubt on what Steven Azar was telling the court.
    
49. I do not accept the first defendant's evidence that, although he knew that Steven Azar visited South Africa, he did not know what his business was there. I think that he knew that Steven Azar intended to use the $90,000.00 to invest in property in that country.
    
50. The application for the loan was made by Steven Azar. I note the unchallenged evidence of Mr Dubedat that the defendants probably did not sign the application forms. I accept that the description of the first defendant's work as carpentry and other entries were false. I am prepared to accept that the documents applying for the loan were all prepared and completed by Steven Azar alone and that he may not have told the defendants the detail that he was supplying to the plaintiff. That does not mean, however, that the defendants did not know that Steven Azar was arranging for another mortgage. And to my mind it does not throw doubt on the defendants' understanding when they signed the loan agreement and the mortgage that moneys were to be lent by the plaintiff on the security of their house.
    
51. It was submitted that Steven Azar was an authorised representative of the plaintiff. I do not accept that that was so. Formally, he was a representative of the Introducer. It appears that it was necessary for someone to "introduce" intending borrowers to the plaintiff. I think that Steven Azar's registration as a representative of the Introducer was a step intended to enable him to deal with the officers of the plaintiff in any application on behalf of the defendants.
    
52. The general attitude of both defendants during their evidence was to affect ignorance of the significance of what they were signing and to imply knowledge on the part of Steven Azar. They blamed him for the difficulty they found themselves in. They brought a cross-claim against him and his company. They issued a subpoena requiring him to attend to give evidence. By the time the hearing began Steven Azar had been made bankrupt, so the defendants were unable to maintain their cross-claim against him.
    
53. These matters might suggest that they and he were at arms' length, but I do not think that they were. The evidence shows that Steven Azar resides with the defendants from time to time. It shows that he was resident there at the time of the hearing. When he came into court during the hearing he sat with them. They appeared friendly.
    
54. The defendants did not call Steven Azar to give evidence. They knew, of course, that he was familiar with the steps taken to establish the mortgage and that they had made over to him virtually the whole of the net proceeds of the loan after payment of the GEC debt. They knew that he could have given evidence about anything said between him and them at the time of the loan application. He could have said how much they knew about the statements in the loan application and the associated documents.
    
55. On 29 October 2008, the day after the deposit into the first defendant's account of the sum of $95,244.41, the first defendant and Steven Azar went to SGE Credit Union where the first defendant signed for the withdrawal of $90,000.00. That was paid by cheque made out as requested by Steven Azar.
    
56. The first defendant in evidence affected not to know where the $95,000.00 had come from. He said that Steven Azar had just told him that he had put the money into his account. He affected not to know why Steven Azar was asking him to authorise the withdrawal from the account of the sum of $90,000.00. I found his evidence incredible.
    
57. I think that the interests of the defendants and the interests of Steven Azar are close. I would have expected them to call him to give evidence. They did not explain why they had not. I infer that his evidence would not have assisted their case.
    
58. The evidence that the first defendant paid virtually the whole of the net cash proceeds of the loan to Steven Azar implies, in view of the earlier arrangements the family had made, that the defendants expected Steven Azar to make the repayments to service the loan. As I have said, they must all have realised that the defendants could not themselves service the loan.
    
59. Consistently with this conclusion, the first defendant's credit union statement shows that on 31 January 2009 the sum of $3,000.00 was paid into the account on a direct credit from Azar Financial Services Pty Limited. The first defendant said that the amount was to pay school fees for Steven Azar's daughter, but it does not appear why Steven Azar could not meet his own obligations to pay school fees without involving the first defendant and his account. I do not accept the explanation.
    
60. I think that the most acceptable explanation of this series of events is that the defendants were prepared to raise money to lend to their family from time to time on the security of their house. One of the terms of those arrangements was that the family member to whom the money was lent would service the loan.
    
61. In my opinion the defendants entered the loan agreement and the mortgage knowing that they were borrowing money that would have to be repaid with interest and knowing that if there were default the plaintiff might exercise its power of sale. I am not satisfied that any difficulty the first defendant had in reading or writing affected his understanding of the arrangements he was entering into. I am not satisfied that the second defendant's eyesight was as bad as she claimed. While I accept that she needed time closely to look at documents she was required to read, I do not think that her eyesight inhibited her understanding of what she was doing. I found her an intelligent person who quickly understood the meaning of questions and wasted no opportunity to put her point of view. I thought her explanation, extracted above, untrue.
    
62. Early in 2009 a woman telephoned the plaintiff to inquire whether the payments due in January of that year had been received. The call was recorded and a transcript made. The second defendant referred to it in an affidavit made on 4 February 2011. She said that she did not recall having the conversation. The conversation began as follows:
    

Ms Azar: Yes, I'm Mrs Ozsanna Azar. I want to ask about my loan if you received it for January?

Rick: OK. Do you have your account number?

Ms Azar: The account number?

Rick: Yes please..

Ms Azar: ABN, its 88 004 325 080. AFSL number is 238098. I Mrs Ozsanna Azar and the loan is my husband Aziz Azar and Ozsanna Azar.

Rick: OK. Is this like a new application, Ms Azar?

Ms Azar: What's that?

Rick: Is this an old account or is it application?

Ms Azar: No, this is a mortgage.

Rick: Yes, but did you apply for an account or ... do you have your account number, because I do need your account number.

Ms Azar: The account number, I forget to... where is the account number. I can't see the account number. The only... I receive... oh, account number is 820 944 981.

Rick: Thank you. Let me just access your account. One moment.

Ms Azar: OK.

Rick: Can I have your complete name please?

Ms Azar: Ozsanna Azar. OZSANNA. AZAR, the surname.

Rick: Thank you. Ms Azar, can I have your date of birth?

Ms Azar: 167 Blaxland Street, Granville.

Rick: Thank you. OK. Have you made any recent withdrawals or deposits on this account?

Ms Azar: Oh no, I'm just asking if you received the payment for January.

Rick: Let me just check. Before we proceed Ms Azar, I just need to verify you for identification. Is there another person on the account?

Ms Azar: Yes. Aziz Azar, my husband.

Rick: Thank you. Let me just check... OK, let me just check the account for you Ms Azar. Just hold one moment.

Ms Azar: Thank you darling. OK>

Rick: Can you hold Ms Azar, while I check for you?

Ms Azar: Yes.

Rick: Thank you. Thank you for patiently waiting Ms Azar.

Ms Azar: Yes.

Rick: The bank dishonoured the payment.

Ms Azar: OK. We are... I'm sorry about that. I'm trying to arrange to pay by the end of this month January and February.

63. The second defendant was cross-examined about the telephone call and there was this evidence:
    

Q. In that affidavit you say this, at Tab 30, Transcript of Phone Conversation, I do not recall having had the conversation?

A. Like I said, I might have.

...

Q. When you say you do not recall, is what you mean that you may have had the conversation, it's quite possible you had the conversation, but at the time you made this affidavit you don't remember it?

A. Because I said maybe I talked, but I don't - I'm not denying it, maybe I did, maybe I didn't. I'm not sure. It's been long time. Okay, I'm not 15 years old, I am 60, now I'm 66 years old, sorry. You don't remember everything. What do you remember what you ate last week? Sorry. I'm not being funny or anything, but I'm saying I'm old, and I'm a sick woman, and I don't remember everything what I did in 2008 or 2009.

...

Q. Mrs Azar, we are going to play you a recording of a conversation with a person from Citibank?

A. Okay.

Q. I won't play the entire recording, but I will ask that a part of that recording be played for you. I want you to listen carefully to the recording?

A. Okay, like I - okay.

Q. Then I will ask you a question?

A. Can I say something? You don't need to put the recording for me. And I'm saying to you I might have rang the bank, and I might have talked to the bank. I am not denying after the Citibank rang me and told me that I owe them money, I might have rang the bank. I didn't - I'm not denying or I'm not lying, or I'm not going out of it. There is no need for you to play the tape, okay. I might have talked and he heard that say because I was nervous and I was upset. No need for you to put the tape. I'm not denying, or I'm not saying for you I didn't rang. I said I might have rang. That means maybe I did ring, maybe I didn't. There is no need for you, if you're saying that I owe money to the bank, which you going to say, that I tried to pay the Citibank, because I was scared to lose my house, I tried, even though my son done it, I try to pay the bank, but I couldn't, because I have no money to pay.

64. The taped recording was played and the second defendant agreed that it was her voice that had been recorded. There was this evidence:
    

Q. Mrs Azar, when you had this conversation, you knew that you had given a mortgage to Citibank?

A. I knew that my son has done it, and I had to cop it, because I haven't don it, my son has done it. And he played the dirt on me. I'm his mother, and my husband, his father. But I was told too scared, I was worried that I might lose my house, I rang the bank. I'm not denying. I said at the beginning that I might have rang, and I might not rang. I'm not lying.

65. I think that the second defendant telephoned the plaintiff fully knowing that she and the first defendant were obliged to service the loan and that they had granted a mortgage to secure it.
    
66. For both defendants the defence of non est factum fails.
    

Unjust and unconscionable conduct

67. Notwithstanding the defences pleaded, defence counsel made no submissions about the Trade Practices Act or the Fair Trading Act . It was submitted that the contract was unjust. Reliance was placed on the provisions of the Contracts Review Act , 1980. Relevantly, the Act provides:
    

7 Principal relief

(1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following:

(a) it may decide to refuse to enforce any or all of the provisions of the contract,

(b) it may make an order declaring the contract void, in whole or in part,

(c) it may make an order varying, in whole or in part, any provision of the contract,

(d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that:

(i) varies, or has the effect of varying, the provisions of the land instrument, or

(ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument.

(2) Where the Court makes an order under subsection (1) (b) or (c), the declaration or variation shall have effect as from the time when the contract was made or (as to the whole or any part or parts of the contract) from some other time or times as specified in the order.

(3) The operation of this section is subject to the provisions of section 19.

68. In s 4(1), "unjust" is defined as follows:
    

"unjust" includes unconscionable, harsh or oppressive, and "injustice" shall be construed in a corresponding manner.

69. Section 9(1) is as follows:
    

9 Matters to be considered by Court

(1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of:

(a) compliance with any or all of the provisions of the contract, or

(b) non-compliance with, or contravention of, any or all of the provisions of the contract.

70. It was submitted that the lending of money without regard to the ability of the borrower to pay by instalments under a contract in the knowledge that adequate security is available in the event of default is, at least in some circumstances, unjust within the meaning of the term as used in the Contracts Review Act , or unconscionable: Elkofari v Perpetual Trustee Co Limited [2002] NSWCA 413; Perpetual Trustee Co Limited v Khoshaba 2006 NSWCA 41.
    
71. The following features are put forward as demonstrating such injustice and unconscionability.
    
72. It was first submitted that Steven Azar and Down Under Home Loans was an authorised representative of the plaintiff and was in a business relationship with the plaintiff. As a consequence there was an inequality of bargaining power between the two sides. It was pointed out that the application for a loan was provided to the plaintiff by Steven Azar and Down Under Home Loans and that no officer of the plaintiff made any inquiry of the defendants to confirm that they had in fact applied for the loan. The plaintiff knew before it disbursed the loan monies that Steven Azar had made loan repayments from his Westpac Banking Corporation bank account and that the GEL loan documents demonstrated that Azar Financial Services was making loan repayments. There was no independent verification by the plaintiff of the income of the defendants or that the first defendant was a carpenter. It was submitted that the plaintiff made the loan on the strength of a declaration that loan payments could be made and afforded by the defendants, and the plaintiff did not verify that the defendants had signed the self-certification declaration. The plaintiff did not inquire independently of Steven Azar whether the defendants had signed the settlement instruction form, the representation by mortgagors or the nominated bank account form. The plaintiff did not by independent inquiry establish that the defendants understood the nature of the loan documents. It was pointed out that the defendants had received no independent legal advice.
    
73. It was submitted that at the time of the loan application the first defendant was 63 years old and the second defendant 64 years old, yet the nominated term of the proposed loan was 30 years. The statement of assets and liabilities accompanying the application listed an interest in superannuation worth $100,000.00 and shares worth $100,000.00, yet there were no such interests. It was submitted that other than an ABN business register search, the plaintiff made no inquiry into the legitimacy of the loan application and disbursed the loan proceeds in reliance solely on information provided by Steven Azar.
    
74. I accept as fact all the assertions of fact forming part of those submissions. There seems no doubt that Steven Azar made false statements to the plaintiff in the application documents. The evidence does not enable me to find whether the defendants knew the details of what Steven Azar was representing to the plaintiff in the application documents, but I am satisfied that they were not concerned for him to tell the truth, because they knew that if he did the loan application would not succeed. It can at least be said that they were content for him to say whatever he considered necessary to secure the loan.
    
75. In my opinion if anybody was misled it was the plaintiff, by Steven Azar on behalf of the defendants. It was entitled to accept at face value the statements of fact and the declarations in the loan application and associated documents. It had no reason to doubt that they were genuine. It had therefore no reason to seek the defendants' confirmation that they were genuine.
    
76. Then it was submitted that the benefit of the loan was not received and used by the defendants for their own personal benefit, except for a very small amount remaining after the withdrawal of $90,000.00. That submission must be rejected. The defendants received first the benefit of the discharge of their obligations to GEL under the pre-existing mortgage. That was worth $182,776.00. Then they received, by payment into the first defendant's credit union account, the net balance of the proceeds of the loan. The fact that the first defendant almost immediately withdrew $90,000.00 and gave it to Steven Azar is not a matter the defendants can set up against the plaintiff.
    
77. In my opinion the loan agreement and the mortgage were not unjust and were not unconscionable. They resulted from the plaintiff's reliance on an application made by Steven Azar on behalf of and with the concurrence of the defendants. The documents of application contained a number of errors of fact which were false to the knowledge of Steven Azar. That the defendants knew or did not wish to know. Such was the financial position of the defendants that, as they knew, it was necessary for Steven Azar to put forward a case for a loan stronger than the one he and they could truthfully make.
    
78. It seems to me that the plaintiff acted conscientiously and reasonably when assessing the loan application and entering into the loan agreement and the mortgage. As the evidence of Mr Southwell demonstrates, the plaintiff received the loan application on 24 September 2008. Its policy was to permit repayments only from accounts in the names of borrowers. It would lend only up to 70% of the value of the security offered. The plaintiff obtained a certificate of valuation of the defendant's land and the loan met that criterion. The plaintiff required a signed declaration to confirm that the defendants were able to repay the loan. It conditionally approved the application on 30 September 2008. It made checks as listed in the self certification check list. After final approval the loan documents were sent to the defendants for signature. The documents they signed included a legal advice acknowledgment certificate in which they made a statement to the effect that they understood the nature and effect of the loan documents.
    
79. The defendants have not demonstrated that the conduct of the plaintiff was unjust or unconscionable. They freely and voluntarily signed the loan agreement, the mortgage and the associated documents. They received the whole of the benefit of the loan. Their will was not overborne. The defence of injustice and unconscionability has not been made out.
    
80. It was finally submitted that the loan application and the mortgage were unjust within the meaning of that term as defined in s 70 of the Consumer Credit Code . By subs(7) unjust includes unconscionable, harsh or oppressive.
    
81. However, the code applies only to the provision of credit as defined by s6, including that it be provided wholly or predominantly for personal, domestic or household services: s6(1)(b). In that the bulk of the proceeds of the loan went to pay out the defendants' obligations to GEL, and that was a debt incurred for commercial purposes, this was not a loan to which the Consumer Credit Code applied.
    
82. For these reasons all the defences fail and the plaintiff is entitled to the orders it seeks. For the same reasons the cross-claim fails.
    
83. I make the following orders:
    
    • (1) Order that the plaintiff have possession of the whole of the land at 167 Blaxcell Street, Granville in the State of New South Wales being the land contained and described in Folio Identifier 1/1981126.
      
    • (2) Grant leave to the plaintiff to issue a writ of possession forthwith.
      
    • (3) Direct the entry of a verdict and judgment for the plaintiff in the sum of $329,729.83.
      
    • (4) Direct the entry of a verdict and judgment for the plaintiff/first cross-defendant against the first and second defendants/cross-claimants on the further amended cross-claim.
      
    • (5) Order the defendants to pay the plaintiff's costs in accordance with the provisions of the mortgage.
      
    • (6) Grant leave to the parties to vary the amount of the verdict provided for in order 3 by filing in the Registry a draft order with which they agree.
      

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