Hoho Property Pty Ltd v Bass Finance No 37 Pty Ltd (No 2)

Hoho Property Pty Ltd and Bass Finance No 37 Pty Ltd were before the court in a dispute over the enforceability of a refinance agreement. The dispute centred around whether the refinance agreement was unjust and therefore void under the Contracts Review Act 1980 (NSW). The respondents, the directors of Hoho Property, and their wife provided a guarantee and mortgage over their family home to secure the refinance. Despite having financial substance and business experience, the couple had limited English proficiency.

The primary legal issues before the court were whether the refinance agreement constituted a contract for the purpose of a trade, business, or profession, as required by section 6(2) of the Act, and whether the agreement was unjust due to material inequality in bargaining power and unfair tactics employed by the lender. The court had to determine whether the refinance agreement was reasonably practical to negotiate given the circumstances, particularly the lender's insistence on a new solicitor and the fixed completion date before Christmas.

The court found that the refinance agreement was indeed a contract for the purpose of a trade, business, or profession. The court also determined that there was a material inequality in bargaining power, as the lender employed unfair tactics by insisting on a new solicitor and declining to provide the loan if the borrowers' solicitor continued to act. The court held that it was not reasonably practical to negotiate the agreement under the circumstances, and as such, the agreement was unjust. The default interest provisions were declared void to the extent they were payable after the default was remedied, and the Intensive Loan Management Fee was also declared void.

The court ordered that the default interest provisions and the Intensive Loan Management Fee were void and unenforceable. The decision highlights the importance of equitable conduct in financial agreements and the need for lenders to ensure that borrowers with limited English proficiency are able to fully understand and negotiate the terms of such agreements.