Driat Pty Ltd v Thomas
[2012] NSWSC 683
•22 June 2012
Supreme Court
New South Wales
Medium Neutral Citation: Driat Pty Ltd v Thomas [2012] NSWSC 683 Hearing dates: 18, 19 June 2012 Decision date: 22 June 2012 Jurisdiction: Common Law Before: Windeyer AJ Decision: Orders:
(1) Judgment for the plaintiff against the first defendant for $1,716,024.00.
(2) Order that the cross claim be dismissed.
(3) Order that the first defendant give possession of property 140 Blencowes Lane, Wildes Meadow being the land in Certificate of Title Folio Identifier 21/622165 to the plaintiff.
(4) Stand over the claim for possession of property 3/12 Longworth Avenue, Point Piper Folio Identifier 3/SP17043 for 2 months with leave to restore on 7 days' notice, which notice shall also be given to any first mortgagee.
(5) Order the first defendant to pay the plaintiff's costs of the claim and cross claim.
Catchwords: MORTGAGE- Real Property- mortgages- claim by mortgagee for possession on default- cross claim under Contracts Review Act- claim by second mortgagee for possession when order for possession already made in favour of first mortgagee- whether orders should be made.
CONTRACT- loan agreements secured by mortgage- lender told purpose of loan- no evidence this was untrue or unintended - borrower understood the nature of documents signed and lender's solicitor relied on documents forwarded to him signed by borrower as to loan purposes, and independent advice- no disability- whether contracts unjust.
EQUITY- unconscionable conduct- no evidence of special disability.Legislation Cited: Contracts Review Act 1980 Cases Cited: Accom Finance Pty Ltd v Mars Pty Ltd [2007] NSWSC 726
Berkshire Capital Funding Limited v Street (1999) 78 P & CR 321
Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41
Universal Showcards & Display Manufacturing Limited v Brunt & Ors (1984) 128 Sol Jo 581
Yerkey v Jones (1938-9) 63 CLR 649
Zanzoul v Westpac Banking Corporation (1995) 6 BPR 14,142Category: Principal judgment Parties: Driat Pty Limited (Plaintiff)
Carey Yulan Adria Thomas (First Defendant/Cross Claimant)
Anthony Malbon Allison (Second Defendant)Representation: Counsel:
D C Price (Plaintiff)
Kemp Strang (Plaintiff)
P Folino -Gallo (First Defendant/Cross Claimant)
Solicitors:
Levitt Robinson Solicitors (First Defendant/Cross Claimant)
File Number(s): 2011/271645
Judgment
HIS HONOUR:
Outline
The plaintiff, Driat Pty Ltd, advanced money to the defendants Carey Thomas and Anthony Allison under two loan agreements and on mortgages from the first defendant to secure the advances. Both loans are in default. Judgment has been entered against the second defendant. Default judgment against the first defendant was set aside, the first defendant being given leave to file a defence and cross claim raising issues under the Contracts Review Act 1980 and a claim under the general law for unconscionable conduct.
The proceedings thus continue against the first defendant and on the cross claim. It is conceded that unless orders are made in favour of the first defendant on the cross claim, the plaintiff will be entitled to succeed on the statement of claim and obtain orders for possession of the mortgage properties in money judgments. There is one rider to this and that is if the ANZ Bank as first mortgagee of one of the properties has already obtained an order for possession, then it may be an order for possession of that property in these proceedings should not be made. For these reasons the action proceeded on the cross claim.
Outline Facts
In this judgment I will refer to the plaintiff Driat Pty Limited as "Driat" and the other parties by their surnames. Driat advanced to Thomas the sum of $800,000 pursuant to a loan agreement dated 22 July 2010. The loan was for a term of one year with interest at the rate of 12.45% per annum paid in advance. Interest after 22 July 2011 was payable at the rate of 17.45% per annum. Thomas gave Driat a first mortgage over her property 140 Blencoves Lane, Wildes Meadow ("Wildes Meadow") to secure the loan. I will call this the first loan.
The second loan was for $590,000 again by Driat, this time to both defendants Allison and Thomas. The defendants were at the time of the loans in a de facto relationship and it can be assumed they still are. This loan was made pursuant to a loan agreement dated 16 May 2011. The term was three months and the interest rate 30.85% per annum, with 36% on default. The second loan was secured by a second mortgage to Driat from Thomas over her property 3/12 Longworth Avenue, Point Piper, which mortgage also secured moneys advanced under the first loan. There is a first mortgage over the property to the ANZ Bank under which the sum entitled to priority is $1,400,000.
Both mortgages are in default. Subject to any prior right of the Bank, Driat will be entitled to orders for possession and money judgments unless Thomas obtains relief under the cross claim, which while not separately pleaded, relies on matters raised in paragraphs 3, 6, 9, 11, 14, 15 and 16 of the defence. Apart from paragraph 16 the facts relied upon are relevant to the Contracts Review Act claim. Paragraph 16 includes in reliance of the facts pleaded in respect of the Contracts Review Act a claim that Thomas was in a position of special disadvantage which was known or which ought to have been known to Driat making it unfair and unconscientious to rely on the agreements.
It appears that Allison was involved in a project to convert part of the Pentridge Gaol in Victoria into strata units to convert what were once the cells in the gaol into strata units to be used for wine storage after which it was proposed to sell off the units. Thomas in an affidavit gave evidence as follows:
12. In or around April 2010, Anthony and I had a conversation where he said words to the following effect:
Anthony: "Carey, I need you to assist me with the conversion of the old Pentridge Gaol to a wine storage facility ("the Pentridge Project"). I need you to use your real estate as security so that I can borrow $850,000. It will only be for 12 months and at the end of that period, I will be able to buy out the other stakeholders and you will have all your money back. Since you are putting up the money, you will be the sole owner of the Pentridge Project and you'll make a lot of money out of it."
In cross examination Thomas said she agreed to this. She said she knew she would have to borrow money, but thought it was temporary. She signed a loan application form provided to Allison by Mr Woodworth ("Woodworth"), a mortgage broker, who conducts business under the name of Edge Financial Services. Woodworth had some prior association with Allison as they had offices in the same building and Allison had engaged him to provide some consulting services in respect of the Pentridge Project.
Mr Straton ("Straton") is a solicitor. His office is in the same building as Woodworth and Allison. He is a director of Driat and appears to control it. Driat's business is to provide loans to commercial customers. In 2009 Allison had discussed with Straton his and Thomas' involvement in a company Wine Bloc Pty Ltd. In March 2010 he discussed the topic again stating he needed money for a deposit to buy out the Pentridge proposal and some money due to a builder on Wildes Meadow. Woodworth gave Allison an application form for funds which he took home and had signed by Thomas. The applicant was shown as Thomas. Allison was given authority in that form to negotiate a loan. I think it could have been intended that Woodworth had that authority. In any event, Woodworth discussed the loan with Straton who issued a loan offer on behalf of Driat. The offer was addressed to Allison because Straton at that stage thought that he was the owner of the Wildes Meadow property. Among other things this loan offer provided for an application fee of $16,000 and stated 50% of this was to be payable to Edge Finance Pty Ltd, as brokerage on drawdown and that Edge "is acting on behalf of the borrower and its fee is paid by the borrower". This offer letter was addressed to Allison. Thomas did not see it. Neither did she see a letter from Edge addressed to her care of Allison giving details of the approval as it seems this was probably handed by Woodworth to Allison in his office.
Woodworth told Straton something about the loan application. He said the funds were for a development converting part of Pentridge into wine cellars and that it was a strong project. He said sales from a previous stage "completely underpinned the feasibility. The upside is huge. It is basically a very clever marketing exercise". Straton said that Woodworth showed him details of previous sales which confirmed this. Woodworth confirmed this and I accept it.
Straton then gave instructions to his solicitor Mr McMahon of Messrs Kemp Strang to act on the mortgage. The evidence which was repeated on a number of occasions was that once he had approved a loan in principle and ascertained the purpose of it and thought that reasonable then he instructed his solicitors to carry the matter through. Part of the instructions given to his solicitors was that he required a certificate of independent legal advice and a certificate of independent financial advice to be obtained from the borrower. He said that he endeavoured to keep himself separate from the negotiations and left it to his solicitors to ensure that everything necessary was obtained. It is clear that he relied on his solicitors to carry out his instructions because on his evidence even when the security documents were forwarded to him after the loan was completed and any mortgage registered they were kept in the packet in which they came and he did not refer to them.
Straton said that on about 1 July he was advised by McMahon the registered proprietor of Wildes Meadow was Thomas and not Allison and asked whether she was to be the borrower. He said that he would speak to Woodworth to ask him about this and Woodworth told him that "Carey and Anthony are de factos and the property is in her sole name". He said that prior to the matter being completed he said to Woodworth: "Can you confirm that you have dealt directly with Thomas on this deal" to which Woodworth had replied: "Most certainly. I have had risk assessment meetings with her, Anthony, and a very senior Sydney solicitor who is her friend and adviser. We met at her Point Piper apartment.". The senior solicitor was Mr Andrew Stevenson. He might have been a friend, but he was certainly not acting for Thomas on the transaction. In fact when the matter was going ahead Woodworth asked Thomas whether she wanted to use Andrew Stevenson, to which according Woodworth, she had replied: "God no. He is too conservative". Thomas denied this. I accept the evidence of Woodworth that those words were said. McMahon said on receiving instructions to act on the mortgage he ascertained the property was in the name of Thomas. He enquired of Mr Mirow the solicitor for Thomas about this. Paragraphs 5, 6 and 7 of his affidavit are as follows:
"5. On 1 July 2010 I had a telephone conversation with Bill Mirow at Brophy Bridge & Mirow. We had a conversation in words to the following effect:
I said: "We have been instructed in relation to a loan from Driat Pty Limited. We have been informed that you are the solicitor for the borrower."
He said: "Yes that's right."
I said: "Your client has applied for a loan that is predominantly for business purposes therefore we need you to confirm how the loan is outside the scope of the Credit Code."
He said: "It is for the redevelopment of Pentridge Gaol in Victoria into heritage listed strata titled commercial units."
I said: "Are the units in her name, or is she a partner or is there a company involved? If they are not in her name we need to ensure that she is getting a benefit for obtaining the loan from our client."
He said: "I will get some instructions and get back to you."
A copy of my file note of that conversation is at page 9 of exhibit SAM-1.
6. Later that day I had a further telephone conversation with Mr Mirow in words to the following effect:
He said: "The units are in a company and she is on-lending the funds to that company and she is taking a charge over that company."
I said: "What is the name of the company?"
He said: "I will get back to you."
7. On the same day I received a further call from Mr Mirow where he said to me words to the following effect:
He said: "The name of the company is Wine Bloc Pty Limited ACN 119 384 440."
Mr Brophy took over from Mr Mirow. By that time Mr Mirow's firm had merged with Messrs Carroll & O'Dea. On 8 July 2010, Thomas executed the loan deed, mortgage, declaration of borrower as to independent legal advice, declaration that the loan was for business or investment and a statutory declaration as to the purpose of the loan which included the following paragraphs:
"2. I declare that the whole of the loan advance of $800,000.00 to be advanced to me by Driat Pty Limited as lender (less any fees, costs and expenses that I have agreed to pay to Driat Pty Limited in respect of such advance) will be loaned to Wine Bloc Pty Limited ACN 119 384 440 for the purposes of construction costs on commercial strata units in Victoria.
3. I intend to take a Charge over the assets and undertaking of Wine Bloc Pty Limited ACN 119 384 440 to secure the advance to be made by me to that company."
The loan deed also set out the purpose.
A document headed "Certificate of Independent Advice" was also obtained prior to settlement. In fact this was signed by Allison. It states he is an accountant/financial adviser and certifies advice to the borrower of the risk in signing the loan and mortgage documents including the viability of the transaction and the ability to make the required payments and that the borrower stated that she understood the advice. Thomas, I think, did not see this document. McMahon says he accepted it as from his point of view, independent meant independent of the lender. Straton had been asked to dispense with this requirement but refused to do so. The mortgage was settled in the ordinary way on 22 July 2010. Substantial moneys were paid into the account of Thomas but went out of the account almost immediately. Allison was authorised to operate on the account.
In affidavit evidence Thomas said she met Mr Brophy on 8 July, that he placed a bundle of documents in front of her, telling her, as he placed each document in front of her what it was, and said: "Sign here". She said the conference lasted 30 minutes. She did not see the documents again.
In cross examination, Thomas agreed she knew that she was borrowing money, she knew that the documents related to this, she knew that she was signing a mortgage over Wildes Meadow. She said that she knew what a mortgage was, as she already had a mortgage to the ANZ Bank. She said she was doing what she was told to do (presumably by Allison), but she thought it was a temporary loan, that she trusted Allison, she knew what she was signing although so far as Wine Bloc and a charge was concerned, she had no idea how it was done, and she "was just being a good girl and signing everything". She said after the loan was settled Allison went often to Melbourne, she did not go, she got tired of hearing about Pentridge although Allison did continue to say that the project was for her benefit and she would be the sole owner.
Second Mortgage
In May 2011, Thomas in her first affidavit, said that Allison said to her:
"42. On or about 4 May 2011, Anthony and I had a conversation where words to the following effect were said:
Anthony: "I have negotiated to buy out the other stakeholders at Pentridge for you and we are going to exchange contracts on the purchase on 18 May 2011. Settlement is scheduled for 31 July 2011. I am going to need you to increase your borrowing on a short term only basis for three months from May to August, by another $600,000 so that we can tidy up a few things at Pentridge and for living expenses, while we are not receiving an income to pay our bills. On settlement, you will have substantial equity in Pentridge because it is worth about $13,000,000 and we only have to pay another $5,000,000 for it. It is worth your while because you will be lending $1,450,000 to make a profit of about $8,000,000."
In cross examination, Thomas was asked whether she believed what Allison had told her and she said: "I supposed I hoped". She knew that she was going to increase the borrowings. She had no expectation of turning $1.45 million into $8 million dollars. She said she knew that was ridiculous but she wanted to "come clean out of these debts that were mounting up around me". This at least in part referred to the ANZ mortgage which was in default. She had come to the realisation that she could not own two properties, but she wanted to get square and "if I got square and I sold I would be clean".
Straton, on behalf of Driat forwarded a mortgage loan offer over Point Piper for $700,000 for a term of three months at the lower interest rate of 26% and a higher interest default rate of 3% per month. The interest was payable in advance and there was to be an application fee of $7,700 payable by the borrowers to Driat and a further $7,700 payable on drawdown as a mortgage management fee to Edge Financial Services. Straton instructed Mr McMahon to act. He was working on the assumption that Allison was the registered proprietor, that he was borrowing for a commercial purpose which was to assist in the development of Pentridge. He instructed McMahon to confirm this. Later when it was ascertained that Thomas was the registered proprietor Straton instructed that a guarantee be obtained from Allison, Woodworth in an email having said "Pentridge is being purchased under company name of Wine Cell Pty Ltd. This is 50/50 between Carey and Anthony Malbon Allison."
Mr McMahon prepared the loan documents in similar form to those in connection with the first loan. The loan agreement set out the purpose of the loan as follows:
"To on-lend money to Wine Bloc Pty Ltd ACN 119384440 (over which the borrower intends on taking a charge) to fund further construction costs on commercial strata unit in Victoria."
Allison told Thomas that he had arranged for the documents to be sent to Mr David Evans of O'Neill Partners, Solicitors and that he had arranged for her to meet Mr Evans to sign the documents and he would take her there which he did. The loan deed, the mortgage, the declaration by the borrower as to independent legal advice, business purpose declaration, a statutory declaration as to the purpose of the loan in the terms set out in the loan deed was signed in the presence of Mr Evans. Allison was present while they were signed. Mr Evans asked the purpose of the loan and Allison stated they were borrowing the money to purchase the Pentridge complex to be converted to a place for wine storage. Mr Evans said the loan was for three months, the interest 30-85%, the principal sum $580,000, that the interest was payable in advance, that the approximate amount available on settlement would be $540,000. Thomas said Mr Evans then showed her the mortgage document and said that if there were default the lender could exercise the power of sale. Thomas said Allison had said "that won't be a problem, it won't be happening." After this was done, Thomas went with Allison to a Mr Mark Geldings of Lawler Financial Services Pty Ltd. The purpose of the meeting was for Mr Geldings to give independent financial advice. She said the interview lasted about 15 minutes, that Geldings had asked whether they understood that they were entering into a loan agreement for $590,000 and that if there were default the lender could take possession of the property, to which Allison had said "there's no need to worry about that, it's only short term. There won't be any default." Geldings signed separate certificates of independent advice for each of Thomas and Allison and these were provided to McMahon before the second mortgage loan was settled. Thomas said that Mr Morris of Messrs Piper Alderman acted for Allison on the loan documents and he did at one stage write saying that he acted for both borrowers but I do not think anything turns on that as Mr Morris had written to McMahon stating that his instructions came from Allison and that Thomas would be obtaining her own advice on the mortgage. The declarations by the borrowers as to receiving independent legal advice in each case stated that the loan related to 9 Cooper Street, Double Bay. That is obviously an error and may show that not much attention was given to the documents by either lawyer or borrowers. I doubt if anything turns on that. Thomas said that she thought she would have signed anything that was put in front of her that day.
The loan was settled in the usual way. $180,000 was transferred to some solicitors in Melbourne who were solicitors acting on instructions from Allison in respect of the Pentridge Project.
Both loans went into and have remained in default. This brought about the present proceedings. There is some evidence that the ANZ Bank has taken possession proceedings and obtained an order for possession of the Point Piper property which order, on the evidence of Thomas, has in some way been stayed through reference to the Financial Services Ombudsman. I will come back to that.
No evidence has been adduced as to the result of the Pentridge Project. It can probably be assumed that it is failed but I do not know. In fact there is little evidence as to what that project really was; nor is there any evidence about the Wine Bloc company other than that neither Thomas nor Allison are shareholders in it. Neither Mr Straton nor McMahon asked anything about it once they had been told of the loan purposes. Mr Woodworth had been engaged as a consultant at various stages by Allison in respect of the project and at one stage it seemed he thought that he was to be appointed as the chief executive officer of the project. That did not happen and no evidence was adduced from him as to the position with the project. There is no doubt that he had considerable involvement with it at one stage, but whatever his position, it is I think, quite clear, that he was the agent of the borrowers in respect of the transactions not the agent of the lender. He was approached by Allison in an endeavour to obtain the loans. He had over a period of about 9 or 10 years arranged about 8 loans through Driat. He had arranged numerous loans through other companies. He was not acting for Driat to introduce loans to it. He was paid out of the moneys advanced. I find that he was the agent of the borrowers.
Claim under Contracts Review Act
Thomas in her affidavit says that she was given no proper advice by Mr Brophy. He did not ask her why she was entering into the agreement, how she would service the loan, what was any interest she was obtaining in the Pentridge Project, her intention to the loan purposes set out in the loan document, asked anything about Wine Bloc Pty Ltd, asked whether she would be able to make the required payments. The last was really irrelevant as the moneys were subtracted in advance. She also says, of course, that she was given no independent financial evidence. As to the second loan and her discussions with Mr Evans, she makes the same complaints. Neither solicitor has been joined as a cross defendant. As far as the certificate of independent financial advice of Mr Geldings is concerned, Thomas says that Allison was in the room throughout the conference and apart from the conversation which I have referred to, said that Mr Evans asked no further questions about Pentridge, about Allison, about Wine Bloc Pty Ltd or the value of the strata units. As far as her relationship with Woodworth was concerned, she had met him earlier and that Allison had told her in June 2010 that he had arranged for them to meet with Woodworth about the Pentridge Project. "Michael is a great banker who has been involved with Citibank and left Citibank to do his own business" and says that when Woodworth went to the Point Piper unit on 7 June he had said "The Pentridge Project is a really fantastic business, it has a range of aspects to it. It is a historical venue, attracts a lot of tourism, it is no risk to you and you really should just enter into the loan." Whether that is true or not as a matter of general principle it might give rise to some claim against Woodworth as the agent of the borrowers and is no answer to a claim by the lender. The Contracts Review claim is really put forward on the basis that Thomas is or was 69 years of age when entering into the loan agreements, she has not been in employment, she did not understand the various documents which she signed, she had no opportunity to negotiate the terms, she did not obtain competent and/or independent legal advice, she received no funds from the plaintiff, no statements about the agreements, and that Driat through Straton made no enquiry about any proposed loan between her and Wine Bloc Pty Ltd. Not all these allegations are correct but they are clearly directed to s 9 of the Contracts Review Act 1980.
In this matter the defendant's age is quite irrelevant. She appeared as an intelligent woman. Before she bought the Point Piper unit she had a significant share portfolio. She understood what a mortgage was. As chairman of the strata corporation she had carried out the required duties and she had appeared before the Woollahra Council to make representations in respect of a proposed development. She was perfectly capable of understanding what she was doing. I should add, so far as any claim for general equitable relief is concerned, she was under no special disadvantage. That claim would have to fail. It is true there was probably little opportunity for negotiation on the terms of the contract, but that would be the position with the vast majority of loan and mortgage documentation. Neither contract was on its face unfair so far as the terms were concerned. The interest rate on Wildes Meadow was reasonable. The interest rate on the Point Piper loan was, of course, very high, but it was only for a three month period. It was a second mortgage, and experience is that interest rates on such short term loans are often high. There was, of course, no difficulty about ability to make the interest payments payable under the loan as they were paid in advance. That means in this case that unless there were default in payment on the due date there could not be any default for failure to make payments during the term of the mortgage. So far as the advice given by the various solicitors and the financial adviser is concerned, without having their evidence, it is very difficult to come to any firm conclusion. So far as evidence as to independent advice and the purposes of the transaction are concerned, the documents signed were very short. I find that they were read by Thomas or explained to her even if she just signed them because the purpose of her attending on the solicitors was to sign documents. As far as Wildes Meadow is concerned, Mr Brophy was acting as her solicitor on the mortgage and not just to sign her up on the documents and I do not accept that all he did was to act as Thomas said that he did when she signed those documents.
It is, of course, true that relief can be given under the Contracts Review Act if matters will make a contract unjust even if the other side does not know of those matters. However, it is far more difficult to obtain relief in such circumstances. In this case, Mr Straton, representing Driat, did seek and was given information as to the purposes of the loan. He was in fact told that the Pentridge Project was a short term project which would deliver high rewards to the borrower. There was no reason for him to disbelieve this. His solicitor was under instructions to obtain various documents prior to a loan being made, these including, of course, the loan deed, the mortgage and the various certificates which were obtained, and particularly in this case a declaration as to the purpose of the loan. Those were all obtained. There was no reason whatsoever for the solicitor acting as agent for Straton or the plaintiff to disbelieve what was stated in those documents except, perhaps, the certificate of independent financial advice signed by Allison, and that I think, was not sufficient to put the solicitor on notice of anything untoward.
The real argument of counsel on behalf of Thomas was that this was a pure asset lending transaction and in those circumstances the contracts were unjust at the time they were entered into. I adhere to what I said in Accom Finance Pty Ltd v Mars Pty Ltd [2007] NSWSC 726 at [52]:
"...Cases such as Elkofairi v Permanent Trustee Company Limited [2002] NSWCA 413 and Perpetual Trustee Company Limitetd v Khoshaba [2006] NSWCA 41 are not authority for some general proposition that a lender of money on security of real estate to a borrower who has no ability through his own income or assets to repay the loan, is guilty of taking part in some unconscionable and predatory conduct. That may be the position if there is no means disclosed for payment of interest, but a good proportion of borrowers for fixed terms in any mortgage situation would be proceeding on the basis that the principal debt would be repaid by new borrowings or by sale of the mortgaged land. The position is of course different if the lender knows that there will be default in payment of the interest or principal so that mortgagee sale will be the inevitable result. This latter conduct is the type of pure asset landing that has been found unconscionable; the former is not."
Subject to some qualifications as to risk this was accepted on appeal: [2008] NSWCA 343 at [99-100].
In the present case the borrower, so far as the lender knew, had an interest in the Pentridge Project. The lender was told that by both Woodworth and by Allison, both of whom were agents of Thomas. The argument of counsel for Thomas is that the lender was required to do more to ascertain whether or not the Pentridge Project was viable and to make some inquiries as to the arrangements between Thomas and the Wine Bloc company and to find out whether a charge said to be going to be given in the future was in fact intended. This obligation is said to exist without any evidence at the time the loan was made the Pentridge Project was not viable. Unless there is some reason to put the lender on notice that the stated purpose for the loan is not in effect true, I do not think it reasonable to suggest, in a case where the borrower has a separate solicitor acting that there is any such duty on the lender. The decision in Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 at [92] supports this. Driat was told the reasons for the loan; it had no reason to think that the moneys advanced would not be repaid. In fact Thomas, so far as the second loan was concerned, said that its purpose was to get her out of her difficulties. It may well be that she could have got out of her difficulties at that stage by selling Wildes Meadow but she chose to borrow further funds. No doubt she was prepared to go along with what Allison suggested, but that does not make the transaction a pure asset lending transaction.
Finally, counsel for Thomas placed some reliance on Yerkey v Jones (1938-9) 63 CLR 649. That case is not really in point. This is not a case of undue influence; neither is it a case of a wife or perhaps de facto not knowing what she is signing. In fact Thomas has not said she did not understand what she signed, although she complained of the explanation given to her. Second, this is not a case of a creditor giving to a husband the task of obtaining the wife's signature or leaving it to the husband to take the wife to the wife's solicitor or to the creditor's solicitor. While Driat knew that Thomas and Allison were in a de facto relationship, and assuming the Yerkey v Jones principles apply in such cases, which is not established, Driat and its solicitor had every reason to think that Thomas knew what she was doing, she was not a volunteer as far as they knew, and she was independently advised, at least on the first loan. As to the second loan, while Mr Evans might have been advised to see Thomas on her own, the position remained that Thomas was well aware of what she was doing and in fact wanted to proceed.
In all these circumstances I consider it clear that the claim under the Contracts Review Act must fail. In those circumstances it is not necessary to consider restrictions upon relief imposed by s 6 of the Contracts Review Act.
General Equitable Relief
I have already dealt with the position relating to conscientious conduct or catching bargains. The evidence is quite clear that Thomas was not in a position of special disadvantage. She understood what she was doing and there is no evidence she was overborne by Allison although she was no doubt influenced by him.
Result
The plaintiff is entitled to judgment for the money sum due and an order that the cross claim be dismissed.
So far as an order for possession is concerned, a second mortgagee is entitled to such an order upon default pursuant to s 60 of the Real Property Act 1900: Zanzoul v Westpac Banking Corporation (1995) 6 BPR 14,142. However, in this case there is evidence that the first mortgagee Bank has obtained an order for possession albeit that it may have been temporarily stayed. In such circumstances, it would seem to me that the position would be as stated by Handley JA in Zanzoul at p 14,145, namely that where the first mortgagee has sought possession the Court would be bound to refuse an order in favour of the second mortgagee. It has been suggested that it would be possible to make an order for possession subject to the rights of the first mortgagee. A case to that effect appears to be Universal Showcards & Display Manufacturing Limited v Brunt & Ors (1984) 128 Sol Jo 581. To a large extent that case was one where the jurisdiction of the county court was in issue. The decision in Universal was followed in Berkshire Capital Funding Limited v Street (1999) 78 P & CR 321. I have difficulty in understanding how an order for possession can be made subject to the rights of a prior encumbrancer who has already obtained an order for possession and as a matter of principle I would have thought what was said by Handley JA was correct and in any event should be followed by me. It appears in fact that a writ of execution has been issued but not yet executed. I accept that it would not be sensible to dismiss the claim for possession in circumstances where there could be some possibility that the writ will not be executed. It seems to me that the sensible arrangement is just to stand over the claim for possession for a period of say two months, and if the writ has not been executed, to allow the plaintiff to apply for the order for possession upon giving appropriate notice to the first mortgagee. This difficulty does not apply to the first loan over the Wildes Meadow property and there an order for possession should be made now.
The amount due under the first loan is $938,472 and under the second loan $777,552 being a total of $1,716,024. The loan agreements do provide for costs presumably on the solicitor/client basis, but it was indicated the plaintiff would be satisfied with an ordinary costs order.
Orders
1. Judgment for the plaintiff against the first defendant for $1,716,024.00.
2. Order that the cross claim be dismissed.
3. Order that the first defendant give possession of property 140 Blencowes Lane, Wildes Meadow being the land in Certificate of Title Folio Identifier 21/622165 to the plaintiff.
4. Stand over the claim for possession of property 3/12 Longworth Avenue, Point Piper, being the land in Certificate of Title Folio Identifier 3/SP17043 for 2 months with leave to restore on 7 days' notice, which notice shall also be given to any first mortgagee.
5. Order the first defendant to pay the plaintiff's costs of the claim and cross claim.
Note the purpose of order 4 is to allow the plaintiff to move for an order for
possession if the ANZ Bank as first mortgagee does not move to enforce its order for possession. Any further application is to be made to the Common Law Possession List Judge for determination.
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Decision last updated: 22 June 2012
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