Pasternacki and Solka-Pasternacki (as Executors of the Estate of the Late Mary Nagy) v Correy

The applicants, as executors of the estate of the late Mary Nagy, appealed a decision concerning a mortgage granted by Mrs. Nagy over her home. The dispute arose from a loan made by the respondents, Mr. and Mrs. Correy, to Mrs. Nagy's son, for which Mrs. Nagy provided security by way of a mortgage over her property. The applicants sought to have this mortgage set aside. The appeal was heard by Sheller, Stein, and Fitzgerald JJA in the Court of Appeal of New South Wales.

The central legal issue before the Court of Appeal was whether the mortgage granted by Mrs. Nagy was unjust within the meaning of the Contracts Review Act 1980 (NSW). This involved determining whether the transaction, viewed as a whole, was unconscionable in the circumstances, particularly considering Mrs. Nagy's age and the nature of the loan secured by her home. The court also considered whether the respondents had sufficient knowledge of the improvidence of the transaction, or were put on notice to make further inquiries, which they failed to do.

The Court of Appeal reasoned that the mortgage was indeed unjust. It found that Mrs. Nagy, an elderly woman, had granted a mortgage over her home as security for a short-term loan of estate money to her son. The court held that the respondents, the lenders, had knowledge of the improvidence of this transaction. By failing to make inquiries when put on notice, the respondents were deemed to have acted unconscionably. Consequently, the court applied the provisions of the Contracts Review Act 1980 (NSW) to grant relief to the beneficiaries of the estate.

The appeal was dismissed, and the applicants were ordered to pay the costs of the respondents.