Bendigo and Adelaide Bank Ltd v Karamihos

Bendigo and Adelaide Bank Ltd appealed to the Court of Appeal of New South Wales against a decision of the primary judge who had found a loan contract and mortgage to be unjust under the Contracts Review Act 1980 (NSW). The dispute concerned whether the loan agreement and associated mortgage were unconscionable given the circumstances of the borrowers, Mr and Mrs Karamihos.

The Court of Appeal was required to determine whether the primary judge erred in finding the loan contract and mortgage unjust. Specifically, the court considered whether the borrowers had the means to repay the loan, the relevance of the lender's failure to make inquiries concerning an asset intended for repayment, whether the borrowers' prior loan history indicated a lack of financial acumen, and whether their age suggested an inability to protect their own interests. The significance of the absence of independent legal or financial advice was also a key consideration.

The Court of Appeal found that the primary judge had erred in concluding that the loan contract and mortgage were unjust. The court reasoned that the borrowers had demonstrated a capacity to repay the loan, and the lender's conduct did not reach the threshold of unconscionability. The court noted that the borrowers had received independent advice and had a history of managing their financial affairs. The court also considered the factors outlined in section 7 of the Contracts Review Act, including the circumstances of the making of the contract, the financial position of the parties, and the relative bargaining power.

The Court of Appeal ordered that the appellant Bank file and serve calculations of the judgment amount, including interest, within seven days. The respondents were given a further seven days to respond, and the appellant a further seven days for any reply.