Caterjian v Parfit Investments Pty Ltd

The appellants, Mr and Mrs Caterjian, sought to appeal a decision concerning a loan agreement and a mortgage over their residential property. The loan was provided by Parfit Investments Pty Ltd to Mr Caterjian to fund a company's application to become an area representative for a psychologist franchising business. The loan was secured by a guarantee from Mrs Caterjian and the mortgage over the couple's home. The appellants contended that the funds were not advanced in accordance with the loan agreement, that the guarantee should be discharged due to breaches of the loan agreement, and that the respondents engaged in unconscionable conduct in obtaining the loan and security. They also argued that the respondents knew or ought to have known the franchising business was insolvent and raised for the first time on appeal the argument that the first respondent had actual or constructive knowledge of Mr Caterjian exercising undue influence over his wife. The appeal was heard by Meagher, White and Mitchelmore JJA of the Court of Appeal of the Supreme Court of New South Wales.

The central legal issues before the Court of Appeal were whether the funds advanced by the respondent were in accordance with the loan agreement, whether the guarantee provided by Mrs Caterjian was discharged due to alleged breaches of the loan agreement by the respondent, and whether the respondent engaged in unconscionable conduct in procuring the loan and its associated securities. Furthermore, the Court had to consider whether the respondent possessed knowledge, actual or constructive, of the insolvency of the franchising business, and crucially, whether the argument concerning the respondent's knowledge of undue influence exerted by Mr Caterjian over his wife was available to be raised on appeal.

The Court of Appeal dismissed the appeal, finding no error in the primary judge's decision. The Court concluded that the funds were advanced in accordance with the loan agreement and that there were no breaches by the respondent that would discharge Mrs Caterjian's guarantee. The arguments regarding unconscionable conduct and the insolvency of the franchising business were also rejected. Importantly, the Court held that the argument concerning the respondent's knowledge of undue influence was not available to be raised on appeal as it had not been pleaded or argued at trial. Consequently, the appeal was dismissed with costs.