Cook v Permanent Mortgages Pty Ltd - [2007] NSWCA 219

NEW SOUTH WALES COURT OF APPEAL

CITATION: Cook and Anor v Permanent Mortgages Pty Ltd [2007] NSWCA 219

FILE NUMBER(S):
40787/06

HEARING DATE(S): 9 August 2007

EX TEMPORE DATE: 9 August 2007

PARTIES:
Michael Robert Cook and Karen Ann Cook - Appellants
Permanent Mortgages Pty Ltd - Respondent

JUDGMENT OF: Beazley JA Giles JA Hoeben J

LOWER COURT JURISDICTION: Supreme Court

LOWER COURT FILE NUMBER(S): SC 12632/02, SC 13381/04

LOWER COURT JUDICIAL OFFICER: Patten AJ

LOWER COURT DATE OF DECISION: 26 October 2006 (Orders 9 November 2006)

LOWER COURT MEDIUM NEUTRAL CITATION:
Permanent Mortgages Pty Ltd v Michael Robert Cook and Karen Cook [2006] NSWSC 1104

COUNSEL:
S Donaldson SC & R Francois - Appellants
R Dubler SC & A G Rogers - Respondent

SOLICITORS:
Legal Aid Commission of New South Wales - Appellants
Gadens - Respondent

CATCHWORDS:
Contract of loan - refinanced existing loan - took out "Ponzi" loan - could only be repaid by taking out larger loan or selling mortgaged property - held unjust in circumstances at time loan made - relieved from paying loan fees, default interest and expenses following default - whether should have been relieved from paying any interest at all - no error in giving little weight to public interest in discouraging "Ponzi" loans - relief from all interest would have done more than restore pre-loan position - evidence did not enable comparison with position if mortgaged property sold rather than took out loan - appealable error in exercise of discretion as to relief not established - judge made no order as to costs - whether error in exercise of discretion as to costs - borrowers in substance successful - appealable error in misapprehension of extent of success.

LEGISLATION CITED:
Consumer Credit (New South Wales) Act 1995
Consumer Credit (New South Wales) Code
Contracts Review Act 1980

CASES CITED:
Elders Rural Finance Ltd v Smith (1996) NSWLR 296;
House v The King (1936) 55 CLR 499;
Perpetual Trustee Company Ltd v Khoshaba [2006] NSWCA 4;
Smith v Elders Rural Finance Ltd (Bryson J, 25 November 1994, unreported).

DECISION:
Appeal allowed in part. Costs order made by the judge set aside and in lieu thereof ordered that the plaintiff pay ninety per cent of the defendant's costs of proceedings 13381/04. The respondent pay fifty per cent of the appellants' costs of the appeal.

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40787/06
SC 12632/02
SC 13381/04
BEAZLEY JA
GILES JA
HOEBEN J
Thursday 9 August 2007

COOK AND ANOR v PERMANENT MORTGAGES PTY LTD

Judgment

GILES JA: The appellants took out a loan from the respondent in May 2003, mortgaging their home as security for the loan. They fell into default almost immediately. In October 2004 the respondent brought proceedings claiming an order for possession of the mortgage property. The appellants’ cross-claimed for relief under the Consumer Credit (New South Wales) Code (“the Code”), which has statutory force by virtue of s 5 of the Consumer…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2007] NSWCA 219
Decision Date: 9 August 2007

CaseChat Overview and Summary

In *Cook v Permanent Mortgages Pty Ltd*, the New South Wales Court of Appeal considered a dispute arising from a loan agreement. The appellants, the Cooks, had refinanced an existing loan with the respondent, Permanent Mortgages Pty Ltd, by taking out a new, larger loan. This new loan was structured in a manner that effectively required repayment through further borrowing or the sale of the mortgaged property, characteristic of a "Ponzi" scheme. The primary judge had found the loan unjust at the time it was made and had granted relief, including exemption from loan fees, default interest, and expenses.

The central legal issues before the Court of Appeal were whether the primary judge had erred in refusing to relieve the Cooks from paying any interest at all on the loan, and whether there was an appealable error in the primary judge's exercise of discretion regarding costs. The Cooks argued that the nature of the loan warranted complete relief from interest, while Permanent Mortgages contended that the primary judge's decision was within the bounds of a proper exercise of discretion.

The Court of Appeal held that the primary judge had not erred in giving little weight to the public interest in discouraging "Ponzi" loans, as this consideration was secondary to the specific circumstances of the contract. Furthermore, the court found that relieving the Cooks from all interest would have gone beyond restoring them to their pre-loan position, and the evidence did not permit a comparison with the financial outcome had the mortgaged property been sold instead of refinancing. Consequently, no appealable error was established in the exercise of discretion concerning the relief granted. However, the Court of Appeal did find an error in the primary judge's costs order, concluding that the Cooks had been substantially successful and that the costs order did not reflect this.

The appeal was allowed in part. The costs order made by the primary judge was set aside. In its place, the plaintiff was ordered to pay ninety per cent of the defendant's costs of the original proceedings. The respondent was ordered to pay fifty per cent of the appellants' costs of the appeal.

Orders

Orders of the court

Appeal allowed in part. Costs order made by the judge set aside and in lieu thereof ordered that the plaintiff pay ninety per cent of the defendant's costs of proceedings 13381/04. The respondent pay fifty per cent of the appellants' costs of the appeal.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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