Garas v Maharaj

In the case of Garas v Maharaj, the appellant and respondent respectively, the dispute revolved around the validity of a loan agreement between the parties. The matter was heard in the Supreme Court of Victoria. The primary issue before the court was to determine which of two documents constituted the loan agreement between the parties, and whether the interest rate of 20% was an unjust provision under the Contracts Review Act 1980, s 7(1). Additionally, the court had to decide whether the loan was unconscionable.

The court found that the agreement was governed by the second document, which set out the terms and conditions of the loan. In determining whether the interest rate was unjust, the court considered the nature of the parties' relationship, the terms of the agreement, and the circumstances surrounding the loan. The court held that the interest rate of 20% was unjust as it was significantly higher than market rates and had the effect of imposing an undue burden on the borrower. However, the court also found that the loan was not unconscionable as the borrower was a sophisticated businessman who had the opportunity to seek independent legal advice before entering into the agreement.

The court concluded that the loan agreement was voidable due to the unjust interest rate. The court ordered that the loan be repaid with interest at a rate not exceeding 12% per annum, and that the parties bear their own costs of the proceedings. The decision highlights the importance of ensuring that loan agreements are fair and reasonable, and that interest rates are not excessive or unconscionable.