Lopwell Pty Ltd v Clarke

Lopwell Pty Ltd (the appellant) appealed a decision of the primary judge concerning a guarantee provided by Mr and Mrs Clarke (the respondents). The dispute centred on whether the respondents were under a special disability that rendered their guarantee unconscionable. The appeal was heard in the Court of Appeal of New South Wales.

The Court of Appeal was required to determine whether the primary judge erred in finding that the respondents were under a special disability due to their dependence on the advice of their longstanding accountant, Mr. Davies. A further issue was whether this disability was sufficiently evident to the appellant, the financier, such that it was unconscionable for the appellant to rely on the guarantee, particularly given the exorbitant interest rate charged.

The Court of Appeal upheld the primary judge's findings. It reasoned that the respondents' reliance on Mr. Davies, coupled with his undisclosed interest in the transaction, placed them under a special disability. This disability was evident to the appellant because the appellant was aware of the respondents' reliance on Mr. Davies for financial advice and the unusual nature of the transaction, including the high interest rate. The court applied the principles of unconscionable dealing, emphasizing that a party with superior bargaining power must not exploit the special disadvantage of another party where that disadvantage is known or ought to be known.

The appeal was dismissed with costs.