JURISDICTION	:	SUPREME COURT OF WESTERN AUSTRALIA 
IN CHAMBERS 

CITATION	:	CHOULES & ORS -v- SIGLIN & ANOR [2001] WASC 234 

CORAM	:	MASTER BREDMEYER 

HEARD	:	24 AUGUST 2001 

DELIVERED	:	31 AUGUST 2001 

FILE NO/S	:	CIV 1566 of 2001 

BETWEEN	:	ADRIAN CLAUDE CHOULES
LESLEY BARBARA CHOULES
ARTHUR THORNDYKE DAVIES
INEZ THEONE DAVIES
OLIVER WILLIAM HARTLEY
DAISY HARTLEY
PETER NELSON
HELEN NELSON
JOHN FRANCIS PARKER
DOROTHY JANE PARKER
WILLIAM ROBERT ROY SMITH
Plaintiffs
 
AND
 
JUNE ILMA SIGLIN
First Defendant
 
DAVID SIGLIN
Second Defendant 

Catchwords:
Summary judgment - Mortgage action - Unconscionable conduct - Mortgage from elderly mother - Money loaned going to her businessman son 
Legislation:
Nil 
Result:
Application allowed 
Category:    B 

Representation:
Counsel:
Plaintiffs	:	Mr J C Giles
First Defendant	:	Mr M J McPhee
Second Defendant	:	In person 
Solicitors:
Plaintiffs	:	Solomon Brothers
First Defendant	:	Michell Sillar McPhee
Second Defendant	:	In person 

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

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Garcia v National Australia Bank Ltd (1998) 194 CLR 395
National Australia Bank Ltd v Nobile & Anor (1988) 100 ALR 227
Yerkey v Jones (1939) 69 CLR 649

Case(s) also cited:

Bank of Victoria Ltd v Mueller [1925] VLR
Bridgewater v Leahy (1998) 194 CLR 457
Conlan (as Liquidator of the Oakleigh Acquisitions Pty Ltd) v The Registrar of Titles & Ors [2001] WASC 201
Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218
Greer v Kettle [1938] AC 156
Maguire v Makaronis (1997) 188 CLR 449
Mayfair Trading Co Pty Ltd v Dreyer (1958) 101 CLR 428
Micarone v Perpetual Trustees (1999) 75 SASR 1
Monarch Petroleum NL v Citco Australia Petroleum [1986] WAR 310
Pegrum v Fatharly (1996) 14 WAR 92
South Sydney District Rugby League Football Club v Newsland (2000) 177 ALR 611
Vadasz v Pioneer Concrete (SA) Pty Ltd (1985) 184 CLR 102 

1	MASTER BREDMEYER:  This is an application by the plaintiffs against the defendants for summary judgment.  It is a mortgage action and the plaintiffs seek an order for possession of the mortgaged property.  Mrs June Siglin, the first defendant, was aged about 75 years when the mortgage was signed.  It is of her unit at Unit 21, 23 Swan Street, South Perth.  The second defendant, Mr David Siglin, is her son who was aged about 47 at the time the mortgage was signed.  He lives with his mother in the same unit.  The sum borrowed was $400,000.  The mortgage, which included a guarantee, was signed on 15 May 1998.  The mortgage was for one year.  It was renewed for a further year.  The borrower defaulted under the mortgage and a notice of demand calling up the mortgage was served on the defendants.
2		The plaintiffs have filed two affidavits in support: one from Mr Geoffrey Hayles sworn 1 June 2001 and another from Mr John Parker sworn 1 August 2001.  Mr Hayles was the solicitor who prepared the mortgage and got the defendants to sign it.  Mr Parker is one of the plaintiffs.  He obtained Mr Hayles' file and has annexed to his affidavit various documents from it.  I consider his affidavit and the documents annexed are all admissible.
3		Mrs Siglin, who was represented by counsel, has filed an affidavit in opposition sworn 9 July 2001.  Mr Siglin, who was not represented, has also filed an affidavit in opposition sworn 10 July 2001.
4		The plaintiffs are a group of investors who contributed various sums to make up the $400,000 loan.  The loan was arranged through a mortgage broker, Peter Fermanis.  The mortgage is dated 15 May 1998 and is signed by both defendants.  In that mortgage Mrs Siglin is described as the mortgagor and I add she is the sole registered proprietor of the South Perth unit which was mortgaged.  The sum loaned was $400,000.  The term of the mortgage was one year, the principal being repayable on 20 July 1999.  The interest rate was 11.5% p.a. reduced to 9.5% p.a. for prompt payment.  Page 1 of the mortgage states that the interest "is to be prepaid at settlement".  There is a guarantee clause at the end of the mortgage and Mr Siglin has signed under that as guarantor.  Clearly, he is a guarantor of the mortgagor's obligations under the mortgage.
5		I quote here cl 21 and cl 22 of the mortgage:
"21.	That in consideration of the principal sum agreed to be advanced under this security to the mortgagor and to DAVID SIGLIN of Unit 21, 23 Swan Street, South Perth (The Borrower and Guarantor) by the Mortgagee the Mortgagor for the purpose of securing the payment of the principal sum and interest the Mortgagor mortgages to the Mortgagee the estate and interest specified in the said land and the Mortgagor and the Borrower hereby covenant with the Mortgagee as follows:
That the Mortgagor will on demand in any of the ways herein mentioned and so long as such payments have not been made by the Borrower pay to the Mortgagee the principal sum and any other moneys as shall remain unpaid but at the rate stated computed from the date mentioned in Clause 3 hereof PROVIDED FURTHER that if the Mortgagor shall observe and perform all the covenants contained or implied herein and shall pay to the Mortgagee such sums due and owing as shall not have been paid by the Borrower then the Mortgagee shall not demand nor seek to enforce payment of any of the moneys aforesaid and interest from the Mortgagor otherwise than by the said instalments.
22.	That the said DAVID SIGLIN has agreed to the covenants herein and by his willingness to sign as borrower and guarantor at the foot of this mortgage is severally and jointly bound by the terms of this contract."
6		Clause 21 refers to Mr David Siglin as "the Borrower and Guarantor" as distinct from the mortgagor who is his mother.  Clause 21 contains a covenant by both the mortgagor (Mrs Siglin) and the borrower and guarantor (Mr Siglin) that they will repay the moneys due under the mortgage.  Clause 22 reinforces that by saying that Mr Siglin "has agreed to the covenants herein and by his willingness to sign as borrower and guarantor at the foot of this mortgage is severally and jointly bound by the terms of the mortgage".  The mortgage document has two places for signature.  The first place is under the heading "MORTGAGOR/S SIGN HERE" and that was signed by Mrs Siglin but not by her son David.  Then appears the guarantor clause and underneath that is typed "Guarantor's full name and address" (Mr Siglin's name and address is inserted there) and "Guarantor's signature" and Mr Siglin has signed just below those words.  Because Mr David Siglin did not sign at the foot of the mortgage proper, and because this is a summary judgment application, I consider it arguable that he has not signed at the foot of the mortgage as required by cl 22, and is not, arguably, thereby jointly and severally bound with his mother as a borrower to repay the moneys.  He has, however, signed as a guarantor and is liable in that capacity.
7		Mrs Siglin in her affidavit states that she was born on 16 June 1923.  Her husband, who was a doctor in private practice, died in 1970 and she has been a widow ever since.  She has worked for several years on an unpaid basis for her son David in his business doing secretarial work.  David is her only child.  He was educated at Guildford Grammar School where he matriculated and went to university for some time but did not complete a degree.  David has operated in business on his own account for several years.  I was told that this is a computer business.  Mrs Siglin's only source of income is a pension of $557 per fortnight.  She knew from overhearing conversations with her son that he and a Mr Dunstan had an interest in a project developing "a system".  She did not have any accurate idea as to what the system was but it had something to do with computers.  Approximately 12 months prior to the mortgage, the subject of this action, she signed another mortgage to St George Bank in the sum of $70,000.  This sum was borrowed by her on the basis of "money for living" for elderly people.  She understood the position with that mortgage was that the interest and principal would accrue and could be paid upon her death out of her estate.  She is not required to pay any interest and the money would be taken out of her estate .  The money from that mortgage was given to David for an investment in the Dunstan system.
8		She relates what happened when she signed the mortgage to the plaintiffs.  She was called into Mr Hayles' office.  She signed the mortgage there with her son who also signed as guarantor.  They did not appoint Mr Hayles as their solicitor.  She was simply asked by Mr Hayles to sign the mortgage which she did.  She received no explanation of the terms of the mortgage, or what it meant in relation to her unit.  She did not think of any risk to her unit at the time.  It did not occur to her that there might be a failure of the project that her son was involved in with Mr Dunstan.  Apart from the mortgage signed to St George Bank in the previous year, the only other mortgage she had ever signed was one 22 years before.  That was a loan arranged by Westpac for her to buy the subject unit.  Westpac made all the arrangements for that mortgage at the time and everything went smoothly with it.
9		She was not told by Mr Hayles or anyone else that she should seek independent legal advice in relation to the effect of the mortgage and she did not seek such advice.  She trusted her son completely and thought this was simply an ordinary matter for the operation of the business.  She signed a certificate of appointment appointing the broker.  That certificate is annexed and is dated 11 May 1998.  She signed it with her son.  The document appoints Mr Fermanis as their broker and states that he is to get a 10% commission as a brokerage fee which is to be deducted from the loan funds.
10		She said that she did not know that the amount of mortgage was $400,000.  She did not know how the sum was made up.  She was not told that nearly $100,000 of that sum was made up of interest in advance, and fees.  [I add here that the prepayment of interest was for $38,000 and the mortgage broker's fee was $40,000 split between Mr Fermanis and Mr Mitchell $20,000 each].  She said she may have signed an extension of mortgage in October 1999 but she does not recall that.  She said she did not receive any of the $400,000.  She says at par 3(aa):
"I have searched my conscience in this matter.  I verily believe that if I had obtained independent and appropriate legal advice prior to the execution of this mortgage I would have at the very least sought information as to the project which was involved before committing my signature and that signature would not have been given if the true facts had been known; the transaction would not have taken place."
11		She later states she did not read the mortgage and had no understanding of it.  She was not told that some of the funds would be used for the prepayment of interest and for mortgage fees.  She was not shown any valuation of the property and had not made any enquiries as to its value since she purchased it 22 years ago for $90,000.  Her son has subsequently shown her a valuation report dated 4 May 1998 showing a valuation of $580,000.  She did not see that before signing the mortgage and was not told of it.  [I add that this valuation was prepared by Ron O'Connor for the finance broker and was submitted to Mr and Mrs Parker, two of the plaintiffs, on 12 May 1998.  I suspect it was probably also sent to the other plaintiffs].
12		Mrs Siglin does not allege any undue influence, misrepresentation or unconscionable conduct against her son.
13		Mr David Siglin's affidavit is a brief one.  The relevant parts of it are as follows:
"4.	In the event that the mortgage is set aside then the guarantee cannot exist in its own right as it is a guarantee relating to that mortgage.
5.	In the event that the first and second defendants had been properly advised then the mortgage document would not have been signed and as a result all that flows from that event would not have occurred.
6.	In the event that the defence of the first defendant succeeds, then the case against the second defendant is a different case and cannot be subject of the current mortgage and must be based on different grounds.
7.	I swear this affidavit in support of my opposition."
14		The legal point behind this affidavit is, I think, a good one.  If Mrs Siglin succeeds in getting the mortgage set aside, for example, on the ground of unconscionable conduct, then the guarantee will fall with it.  See Phillips & O'Donovan, The Modern Contract of Guarantee, 2nd ed, at par 22.5 which I summarise:  if the principal contract is voidable, for example, because of undue influence, creditor's misrepresentation etc, and the court sets it aside, no liability attaches to the guarantor.
15		Mrs Siglin relies heavily on the equitable doctrine of unconscionable conduct as set out in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 and Garcia v National Australia Bank Ltd (1998) 194 CLR 395.  Reference was also made to National Australia Bank Ltd v Nobile & Anor (1988) 100 ALR 227.
16		Mason J in Amadio at 461 stated:
"Historically courts have exercised jurisdiction to set aside contracts and other dealings on a variety of equitable grounds.  They include fraud, misrepresentation, breach of fiduciary duty, undue influence and unconscionable conduct.  In one sense they all constitute species of unconscionable conduct on the part of a party who stands to receive a benefit under the transaction which, in the eye of equity, cannot be enforced because to do so would be inconsistent with equity and good conscience.  But relief on the ground of 'unconscionable conduct' is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage …
It goes almost without saying that it is impossible to describe definitively all the situations in which relief will be granted on the ground of unconscionable conduct.  As Fullagar J said in Blomley v Ryan [(1956) 99 CLR 362 at 405]:
'The circumstances adversely affecting a party, which may induce a court of equity either to refuse its aid or to set a transaction aside, are of great variety and can hardly be satisfactorily classified.  Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary.  The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-à-vis the other.'
…
It is not to be thought that relief will be granted only in the particular situations mentioned by their Honours.  It is made plain enough, especially by Fullagar J, that the situations mentioned are no more than particular exemplifications of an underlying general principle which may be invoked whenever one party by reason of some condition or circumstance is placed at a special disadvantage vis-à-vis another and unfair or unconscientious advantage is then taken of the opportunity thereby created.  I qualify the word 'disadvantage' by the adjective 'special' in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasize that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party."
17		Garcia followed an earlier High Court case of Yerkey v Jones (1939) 69 CLR 649.  In that case, quoted at par 25 of Garcia, Dixon J said there were two kinds of cases.  The first was a case of actual undue influence where explaining the effect of the document to the surety will not protect the creditor from having the transaction set aside.  In the second kind of case, where there is no actual undue influence, if the creditor takes adequate steps to inform the wife of the transaction and reasonably supposes that she has an adequate comprehension of the obligations she is undertaking, then the fact that she has failed to grasp some material part of the document, or indeed the significance of what she is doing, cannot give her an equity to set the instrument aside.
18		Elaborating on that second situation, the majority of four Judges in Garcia at par 31 stated:
"[Yerkey v Jones] holds further, in the second kind of case, that to enforce it against her if it later emerges that she did not understand the purport and effect of the transaction of suretyship, would be unconscionable (even though she is a willing party to it) if the lender took no steps itself to explain its purport and effect to her or did not reasonably believe that its purport and effect had been explained to her by a competent, independent and disinterested stranger.  And what makes it unconscionable to enforce it in the second kind of case is the combination of circumstances that:
(a)	in fact the surety did not understand the purport and effect of the transaction;
(b)	the transaction was voluntary (in the sense that the surety obtained no gain from the contract the performance of which was guaranteed);
(c)	the lender is to be taken to have understood that, as a wife, the surety may repose trust and confidence in her husband in matters of business and therefore to have understood that the husband may not fully and accurately explain the purport and effect of the transaction to his wife; and yet
(d)	the lender did not itself take steps to explain the transaction to the wife or find out that a stranger had explained it to her."
19		Those principles in Garcia taken from Yerkey v Jones are not limited to wives and husbands.  It so happened that Yerkey v Jones and Garcia each concerned a wife and a husband but the majority of the High Court in Garcia at par 22 said, in effect, that the principles applied in Yerkey v Jones may well find application to other relationships.
20		I will attempt now to apply the principles of Garcia to Mrs Siglin.  I consider Mr Hayles was the solicitor engaged by the plaintiff mortgagees to prepare the mortgage and have it signed and to settle the transaction.  I consider that he was the plaintiffs' agent in those roles.
(a)	The surety did not understand the purport and effect of the transaction.
On Mrs Siglin's evidence, she did not understand the purport and effect of the transaction.  However, she is not a surety.  She is the borrower.  I consider, therefore, that this principle does not apply.
(b)	The transaction was voluntary (in the sense that the surety obtained no gain from the contract, the performance of which was guaranteed).
This principle does not apply to Mrs Siglin.  I consider she gained from the mortgage.  She gained a payout of the earlier mortgage and removal of that prior mortgage from her title.
(c)	The lender is to be taken to have understood that, as a wife, the surety may repose trust and confidence in her husband in matters of business and therefore to have understood that the husband may not fully and actively explain the purport and effect of the transaction to his wife.
As previously stated, I consider that the principles of Garcia are not restricted to a wife and husband but can apply equally to a mother, particularly an elderly mother, and a son.  There is not much evidence before me that Mr Hayles, as the agent for the lenders knew, or should be taken to have known, that Mrs Siglin was putting trust and confidence in her son tht he could service and repay the loan.  According to the settlement statement, found at p 9 of Mr Parker's affidavit, out of the loan of $400,000, $38,000 was paid as pre‑paid interest and $40,000 was paid as brokerage.  Mr Hayles may well have known that at the time.  Mrs Siglin signed the mortgage.  Those details may have been part of his instructions from the finance broker.  From that he ought to have inferred that this loan was risky, suggesting (1) that the borrower could not get a cheaper loan from a bank; and (2) that the borrower was not confident of generating enough income from the loan in the first year to pay the monthly interest instalments.  These two matters would have sounded alarm bells in the mind of an experienced solicitor.  It is not clear on the papers before me that Mr Hayles knew that the balance of the loan of $245,138.34 was payable to Mr Siglin.  At p 9 of the Parker affidavit is a settlement statement from Mr Hayles' firm showing that that sum was due to be paid to J I Siglin.  That is confirmed by the next page which shows the recipients of the various cheques to be disbursed on settlement and states: "J I Siglin ... $245,138.34 Cheque 402398".  However, at p 22 of that affidavit is, what appears to be a print‑out from Mr Hayles' trust register, and it shows, on 20 May 1998, the same cheque number for the same amount, payable to David Siglin.  The evidence on whether Mr Hayles knew that the balance of the loan was going to Mr Siglin is not particularly clear on the papers before me but it may become clear at trial after the defendants have had the benefit of discovery and cross‑examination.
21		So, in relation to Garcia principle (c), it may be that a trial will establish that Mr Hayles knew that Mrs Siglin was putting full trust and confidence in her son in signing this mortgage.  However, principle (c) again only applies to a surety.  As previously stated, Mrs Siglin is not a surety.
(d)	The lender did not itself take steps to explain the transaction to the wife or find out that a stranger had explained it to her.
I consider this principle applies to Mrs Siglin.
22		The four principles in Garcia are cumulative.  Mrs Siglin needs to establish all four to set aside the transaction  On my analysis, only principle (d) of the four principles applies to Mrs Siglin, and I consider she therefore has no arguable defence of unconscionable conduct on Garcia in relation to this mortgage.
23		I also propose to apply the Amadio principles to Mrs Siglin.
24		Was Mrs Siglin in a position of disadvantage vis‑a‑vis the lenders?  Yes, in the sense that she was elderly and she obtained no explanation of the mortgage from Mr Hayles and was not told to seek independent advice on that matter.  I do not consider that she was really inexperienced in mortgage matters.  This was her third mortgage, and the second one, to St George Bank, entered into only a year before, was, like this one, for the benefit of her son David.  Do these two factors, old age, and lack of explanation, amount to a special disability which would justify setting the mortgage aside?  Allied to that is another question.  In the circumstances of these two disabilities, did the lenders, through Mr Hayles, take unconscientious advantage of Mrs Siglin in getting her to sign the mortgage?  As previously stated, it is possible at a trial that Mrs Siglin will be able to establish that Mr Hayles knew that the balance of the money borrowed was going to her son and that she was relying on her son's advice in entering into this mortgage.  At trial it might be established that Mr Hayles knew, or ought to have known, that Mrs Siglin was inexperienced in business matters.  But in getting her to sign, did he take unconscientious advantage of her?  I think not.  When I compare this case with that of the Commercial Bank in Amadio, the bank knew all about the son and his insolvent business.  The bank knew of his precarious financial position.  The bank had been monitoring his account and selectively honouring some cheques and bouncing others.  The bank knew, for example, that he had signed $45,000 in unmet cheques to be paid as soon as the mortgage was registered.  In that case, too, Mr and Mrs Amadio were not only elderly but were elderly Italians with limited English.  Mrs Siglin is elderly but there is no suggestion of limited English or of mental impairment.  She has worked in several offices doing office work.  She does have her leaving certificate.  Her husband was a doctor in private practice.  In Garcia the bank's intimate knowledge of the son's dodgy account was a major factor in getting the mortgage signed by the parents, unconditionally set aside.  Mason, William and Deane JJ set it aside on the basis of unconscionable conduct.  Dawson J dissented.  Gibbs CJ set aside the mortgage on another basis.  He considered the bank owed a duty to the mortgagors to disclose the unusual features relating to the overdrawn account and that the bank's non‑disclosure amounted to a misrepresentation which was sufficient to have the deed set aside.
25		On the facts of this case, I have said a trial may reveal that Mr Hayles knew that the money was going to the son for his business and that Mrs Siglin was relying on her son's advice that he could service the loan and repay it.  But Mr Hayles could never have had the intimate knowledge of Mr Siglin's business ventures which the bank had of business ventures of the Amadio's son.  Mr Siglin was a stranger to Mr Hayles.  There was no antecedent relationship.
26		I am satisfied that Mrs Siglin has not made out, and will not be able to make out at a trial, a defence of unconscionable conduct.  In the circumstances of this case, I consider there is no question of law or fact that needs to be tried and that summary judgment should be entered against her.
27		Mr David Siglin, in his affidavit in opposition, relies on two matters:
(1)	Lack of an explanation about the mortgage; and
(2)	his mother's defence of unconscionable conduct.
I have read his brief affidavit and heard him argue his case on two occasions.  I note that this was the second business loan he had got by getting his mother to mortgage her home unit.  The notice of demand calling up the mortgage was issued in June 2000.  The defendant sought to refinance the loan and, according to Mr Hayles, in his affidavit at par 10, Mr Siglin sent many letters to him by fax about the  progress and prospects of refinancing.  One such letter from Mr Siglin, dated 6 November 2000, is attached to Mr Hayles' affidavit.  It is a two page typed letter written on the letterhead of e‑National Ltd of Suite 3, 77 Mill Point Road, South Perth WA 6151.  There is no ABN number or reference to a registered office mentioned on the letterhead.  The letter is competently written.  I have no doubt, from all these sources, that Mr Siglin is an intelligent man, not under any disability and not in need of any explanation about a mortgage.  He has had a good schooling and some tertiary education.  He told me on the prior occasion that his tertiary education was in accountancy or commerce.  He has been running a computer business or businesses for some years.
28		I consider Mr Siglin was under no disabiity, let alone a special disability.  No explanation was owed to him by Mr Hayles and no unconscientious advantage was taken of him.  I propose to enter summary judgment against him.