Permanent Mortgages Pty Ltd v Vandenbergh
[2010] WASC 10 (S)
•29 JANUARY 2010
PERMANENT MORTGAGES PTY LTD -v- VANDENBERGH [2010] WASC 10 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2010] WASC 10 (S) | |
| Case No: | CIV:1074/2007 | 18-20 AUGUST 2009, ON THE PAPERS & 12 MARCH 2010 | |
| Coram: | MURPHY J | 29/01/10 | |
| 1/04/10 | |||
| 16 | Judgment Part: | 1 of 1 | |
| Result: | Orders conditional upon restitution by secondnamed defendant Declaration of unconscionable conduct and/or contravention of s 51AC Trade Practices Act 1974 (Cth) Mortgage set aside ab initio Loan agreement set aside ab initio as against second-named defendant Consequential orders made | ||
| B | |||
| PDF Version |
| Parties: | PERMANENT MORTGAGES PTY LTD JULES JOSEPH VANDENBERGH MARIA HUBERTINA VANDENBERGH |
Catchwords: | Indefeasibility Personal equity Unconscionable dealing Joint tenants Whether registered mortgage should be set aside as a whole or in part Equity Unconscionable conduct Scope of restitution Appropriate relief Trade Practices Act 1974 (Cth) Section 87(2) relief |
Legislation: | Bankruptcy Act 1966 (Cth), s 153(1), s 153(2)(b) Trade Practices Act 1974 (Cth), s 51AC, s 87(2) Transfer of Land Act 1893 (WA), s 121, s 122 |
Case References: | Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447 Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413; (2003) 11 BPR 20,841 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89 Flourentzou v Commonwealth Bank of Australia [1998] ANZ ConvR 188 Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449 National Commercial Banking Corporation of Australia Ltd v Hedley (1984) 3 BPR 9477 Spence v Crawford [1939] 3 All ER 271 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA CITATION : PERMANENT MORTGAGES PTY LTD -v- VANDENBERGH [2010] WASC 10 (S) CORAM : MURPHY J HEARD : 18-20 AUGUST 2009, ON THE PAPERS & 12 MARCH 2010 DELIVERED : 29 JANUARY 2010 SUPPLEMENTARY
DECISION : 1 APRIL 2010 FILE NO/S : CIV 1074 of 2007 BETWEEN : PERMANENT MORTGAGES PTY LTD
- Plaintiff
AND
JULES JOSEPH VANDENBERGH
MARIA HUBERTINA VANDENBERGH
Defendants
Catchwords:
Indefeasibility - Personal equity - Unconscionable dealing - Joint tenants - Whether registered mortgage should be set aside as a whole or in part
Equity - Unconscionable conduct - Scope of restitution - Appropriate relief
Trade Practices Act 1974 (Cth) - Section 87(2) relief
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Legislation:
Bankruptcy Act 1966 (Cth), s 153(1), s 153(2)(b)
Trade Practices Act 1974 (Cth), s 51AC, s 87(2)
Transfer of Land Act 1893 (WA), s 121, s 122
Result:
Orders conditional upon restitution by secondnamed defendant
Declaration of unconscionable conduct and/or contravention of s 51AC Trade Practices Act 1974 (Cth)
Mortgage set aside ab initio
Loan agreement set aside ab initio as against second-named defendant
Consequential orders made
Category: B
Representation:
Counsel:
Plaintiff : Mr D H Solomon
Defendants : Mr D R Williams QC & Mr A J Camp
Solicitors:
Plaintiff : Solomon Brothers
Defendants : Butcher Paull & Calder
Case(s) referred to in judgment(s):
Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447
Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413; (2003) 11 BPR 20,841
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Flourentzou v Commonwealth Bank of Australia [1998] ANZ ConvR 188
Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449
National Commercial Banking Corporation of Australia Ltd v Hedley (1984) 3 BPR 9477
Spence v Crawford [1939] 3 All ER 271
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- MURPHY J:
Introduction
1 These reasons are supplementary to my reasons in this matter ([2010] WASC 10) and deal with the question of final relief. Defined terms remain the same. In the earlier reasons I found that the loan agreement and mortgage were obtained from the mother by the bank by unconscionable dealing and conduct, and/or in contravention of s 51AC of the Trade Practices Act 1974 (Cth) (TPA).
2 In her counterclaim in this action, the mother sought a declaration that the loan agreement and mortgage are void and unenforceable and an order that the plaintiff discharge the mortgage. In the alternative, the mother sought a declaration that the amount secured by the mortgage is $46,000 and that the mortgage is enforceable only against her, and on terms that she make monthly payments at the standard bank home loan interest rate.
3 The loan was a joint loan and was secured by the mortgage over the Claremont property in respect of which the mother and the son were joint registered proprietors.
4 In the earlier reasons I left open the question of relief including whether, in effect, the mortgage should, as the mother claimed, be discharged in its entirety, or whether some lesser relief was appropriate, having regard to the fact that the mother was a registered joint tenant, rather than the sole registered proprietor of the Claremont property. In this context, I raised for consideration my finding (earlier reasons [383]) that the son's interest at law was held on a resulting trust in favour of the mother. I invited the parties to provide written submissions on the question of final relief.
The plaintiff's submissions
Natural justice
5 The bank, in its submissions, first says that the finding in the earlier reasons of the existence of a resulting trust between the son and the mother has involved a denial of natural justice to the bank. It says that the question of a resulting trust was first raised by senior counsel in closing submissions on 20 August 2009 and that a ruling was made to the effect that the trust 'would not affect the plaintiff as its mortgage interest is registered and any order made would not be binding on the plaintiff'.
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6 I am unable to accept that submission. It has always been part of the mother's case that she is the beneficial owner of the Claremont property, and that her beneficial interest is relevant to the bank's claim for possession and the existence and scope of the relief sought against the bank. In par 7 of the mother's defence and counterclaim the mother pleaded against the bank:
7. At all material times the [mother] was the sole beneficial owner in possession of the property. The interest held by the [son] as joint registered proprietor of the property was held on a resulting trust for the benefit of the [mother].
Particulars
- (a) The purchase price of, and equity in, the property was contributed wholly by the [mother].
(b) The NAB had at the time of purchase of the property, required the [son] to become an equal joint registered proprietor of the property and co-borrower of the $46,000.00 balance of the purchase price by reason of the age and limited income of the [mother].
8 Ms Kiely's evidence concerning her knowledge of the circumstances in which the son was on the registered title of the Claremont property and her communications with Mr Curia (pars 13 - 15, exhibit 8) had been the subject of cross-examination by counsel for the bank (ts 157).
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9 Separately from her counterclaim against the bank, the mother had also pleaded as against the son, that she was the beneficial owner of the Claremont property and that he held his registered interest on trust for her.
10 In its recent submissions in support of its contention that it was denied natural justice, the bank referred to the proposed consent orders referred to in the earlier reasons [381] and to the separate pleading as between the mother and the son, to which senior counsel for the mother had referred in closing at the trial.
11 In closing at the trial, after senior counsel for the mother referred to the pleading as between the mother and the son and the proposed consent orders between them regarding a declaration of trust, the bank's counsel said:
SOLOMON, MR: It can't be made as against my client, your Honour. This would be knocked down in flames by Farah v Say-Dee. I mean, what are we supposed to know about this constructive trust? We've got an indefeasible title. I don't mind you making an order between them but it must expressly state that the order does not bind the plaintiff …
SOLOMON, MR: They can agree amongst themselves what they like but in proceedings where we're a party the court cannot make an order that - if this is some back-door to try and suggest that we're bound by some nifty little arrangement between [the son] and [the mother], well, we're not swallowing that.
MURPHY J: No. I presume it's not that.
SOLOMON, MR: Then in which case I insist that any such order that is made record that it is binding between the defendants only and not the plaintiff.
12 In response, senior counsel for the mother said:
WILLIAMS, MR: Your Honour, whether the [bank] likes it or not the evidence in our submission clearly shows that [the son] had no beneficial interest in the unit. That evidence binds the [bank] as much as it does. This just settles the issue on the basis that the [son], who didn't give evidence on his own behalf, accepts that his mother was the entire beneficial owner. That raises the issue that my learned friend has to confront, that how can they seek to enforce a security beneficially owned by one person against another person.
13 Counsel for the bank then said that the pleading as between the mother and son as to the mother's beneficial interest related to those parties only, and that 'they have not counterclaimed against us for a declaration of trust'.
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14 The submissions by senior counsel for the mother at one time in this argument during closing seemed to raise the prospect of the pleading between the mother and the son, and the proposed consent orders between the two of them, being somehow tendered as evidence or used in a way so as to bind the bank. However, as noted below, it was accepted by senior counsel for the mother in closing submissions that they could not be tendered as evidence against the bank, and, no tender was made of those documents.
15 In closing submissions I informed the bank's counsel that the bank would be heard before any declaration was ordered, binding on the bank as registered mortgagee, that the son's interest is held on trust for the mother.
16 I subsequently reserved the question of final orders in the earlier reasons ([384], [395], [404], [407]), and invited the parties to make submissions on that question, including having regard to the mother's beneficial interest under the resulting trust which I had found to exist as between the mother and son.
17 Whilst the mother did not seek, in her prayer for relief in the counterclaim against the bank, a specific order for a declaration of trust, the defence and counterclaim alleges that the mortgage should be set aside in its entirety, or that it is enforceable only against her, to the extent of $46,000, and that the trust is relevant to the relief claimed against the bank, and to the bank's claim for possession of the Claremont property. That point was confirmed in closing by senior counsel for the mother, in response to a question from the court on whether the trust would bind subsequent holders of a registered interest, such as the bank as a registered mortgagee. He said:
WILLIAMS, MR: No. They would if independent advice had been directed. The consequence, we say, is that if the transaction is set aside for unconscionability in relation to the mother, then they may have a right of action. In fact I doubt they do, but they may have some right of action as against [the son] but they have no right to enforce the security.
Her entire interest is removed if unconscionability is found, leaving the plaintiff with whatever in personam remedy they might have against [the son] but he having been bankrupted, having been discharged and the plaintiff not having proved in the bankruptcy but relying only on the security, they have no in personam claim either.
(Page 7)
- MURPHY J: In any event, you just draw my attention to the pleading [between the mother and the son]. You're not seeking any orders and you're not tendering it as evidence.
MR WILLIAMS: No.
18 As to senior counsel's negative response in the first passage quoted above, in its context it meant, as I understood it, that a subsequent registered holder such as the bank would not be affected absent unconscionable dealing, but that in this case there was (it was alleged) unconscionable dealing which meant that the mortgage as a whole should be set aside. As to senior counsel's negative response to the last question, I understood it to be referring to the absence of any specific order for a declaration of trust binding the bank independently from and standing outside of the framework of the counterclaim that the mortgage was the consequence of unconscionable dealing and should be set aside in its entirety. I do not understand senior counsel for the mother to have contended that the mother was resiling from the claimed relief that the mortgage in its entirety be declared void and be discharged.
19 In the circumstances, I do not consider that the question of the mother's beneficial interest was first raised in closing submissions. The exchanges in the closing submissions did not, in my view, involve a ruling that any resulting trust would not affect the bank. The question of whether, how and to what extent (if any) it might bind or affect the bank as registered mortgagee was expressly left open in the earlier reasons.
20 For these reasons, I do not see that there has been a denial of natural justice to the bank on this issue.
21 The mother's beneficial interest under the resulting trust is an aspect of her rights with respect to the Claremont property which, I have found, was known to the bank. Mere knowledge of the right, of itself, would not affect the bank's indefeasible title as registered mortgagee. Nor could any pleading between the mother and the son, or the proposed consent orders between the mother and the son, operate so as to deny the indefeasibility of the bank's title.
22 However, having obtained the mortgage in the first place from the mother by way of unconscionable dealing, the question remains whether the mortgage should be set aside in its entirety, as claimed by the mother, or whether it should be set aside in part, leaving the bank to exercise its rights against the property with respect to the son's registered half share interest. It was that point to which further submissions were required on
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- the last occasion. The bank's other submissions on this topic are set out below.
Miscellaneous matters raised by the bank
23 The bank has raised several further matters by reason of which, it says, the bank should not be bound or affected by the trust in the context of final relief.
24 The first, which is expressed in various ways, is that the pleadings between the mother and the son, and the proposed consent orders between the two of them, could not in themselves bind the bank. That point seems to raise, in substance, the matters previously raised in connection with the alleged denial of natural justice. Whilst I accept, and, as I understand it, senior counsel for the mother accepted, the proposition that the bank is not bound by a pleading or agreement between the mother and the son, the point does not, in my view, address the substantive question of whether, in the context of final relief, the mortgage should be avoided and discharged in its entirety.
25 The question for consideration for present purposes is really whether, in light of the findings made, including as to the mother's special disability, the bank's knowledge, and the finding that the mother would not have entered into the transaction if properly advised, the mortgage should be set aside in its entirety: cf Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447, 481.
26 Secondly, the bank submits that as the resulting trust arose from circumstances when the Claremont property was first purchased, the bank is not bound, as it was not a party to the transaction and had no knowledge of it. I have found, however, that the bank (through FASA by Mr Curia) had knowledge of the matters which made the mother's special disability sufficiently evident to the bank to render the procurement of the mortgage unconscionable. These included the circumstances of the mother's beneficial interest at the time of the original purchase (see, especially, [107], [111] and [346](f) of the earlier reasons).
27 In light of those findings, the contention, in itself, that the bank was not a party to the original purchase does not seem to me to advance the resolution of the issue under consideration. The contention that the bank had no knowledge of the mother's beneficial interest and the circumstances concerning the resulting trust is not consistent with the findings.
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28 Next, the bank says, in effect, that the mother's equitable interest cannot survive the indefeasibility conferred by the registered mortgage. In this regard, it refers to and repeats its earlier submissions in the case on indefeasibility. I have already reviewed the substance of those matters in the earlier reasons [366] - [380], and the bank's recent submissions have not altered my views as therein expressed.
29 Next, the bank says that there is an issue as to whether the son, as opposed to his trustee in bankruptcy, has the capacity to make consent orders. That point does not, in my view, arise because no orders have or will be made simply by consent between the mother and the son. There is no issue as to the efficacy of the proposed consent orders. Whilst the proposed consent orders were referred to in [381] of the earlier reasons, the reference was made in order to introduce the topic of the mother's beneficial interest in the Claremont property under the resulting trust, and not to suggest that the orders could or should be made simply by consent between the mother and the son either at all, or in a way that could bind or affect the bank.
Doing equity
30 The bank has repeated its earlier submissions in connection with Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, to the effect that unless the mother pays the bank the whole of the loan, plus interest and costs, she cannot obtain the relief she seeks, either in equity or under the TPA. I have addressed this argument in my earlier reasons at [391], [393] - [395].
Moral obloquy
31 The bank, with reference to Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89, submits (par 14) that registration of the mortgage was 'honestly achieved'. In this regard, the bank appears to take issue with the finding of moral obloquy on the part of the bank, referred to in [365] of the earlier reasons. It is not appropriate to revisit that finding.
32 The bank also contends (par 14 of its written submissions) that the 'nature of the moral obloquy found is, at this stage, relevant to the relief to be granted against the plaintiff, particularly in light of the comments in [400] of the Judgment'. This appears to involve a reference to the bank's next submission, referred to below.
(Page 10)
Unconscionable conduct and s 51AC of the TPA
33 The bank makes a number of submissions concerning the earlier findings as to the bank's knowledge, unconscionable dealing, and unconscionable conduct within the meaning of s 51AC of the TPA. It describes the basis for the findings on knowledge and conduct as a 'species of corporate vicarious conduct', cf earlier reasons [321] - [326], [346] - [349]. The bank contends, in effect, that the findings made were erroneous.
34 This is not the occasion for me to canvass afresh my earlier findings.
Relief under s 87 of the TPA, appropriate relief
35 The bank contends, in effect, that there is no finding that the mother is likely to suffer loss and damage by the bank's contravention of s 51AC of the TPA. To the extent that it was not explicit in my earlier reasons, I find that the mother is likely to suffer loss and damage by the bank's contravention in that the bank is likely to exercise its legal rights under the loan agreement and mortgage in order to recover the whole of the amount of the outstanding loan when, but for the contravening conduct, the mother would not have entered into the loan agreement or mortgage at all, and would have instead refinanced her then existing $43,000 NAB loan (see also earlier reasons [263], [265]).
36 The bank, in its submissions, says that if the loan agreement and mortgage are set aside against the mother only, the bank would still have a registered mortgage securing the full amount of the loan, interest and costs, over the son's half share interest in the Claremont property. The bank says it would then likely apply to foreclose under s 121 and s 122 of the Transfer of Land Act1893 (WA), and become the registered proprietor of the son's half share. It says the bank could then request the court to direct a sale of the whole property, and seek an order that the funds be distributed equally between the bank and the mother. The bank says that half the net proceeds of the sale is unlikely to be sufficient to reduce the full amount of the loan, plus interest, plus costs.
37 Without derogating from its adherence to all its other points, the bank also contends, alternatively, that:
A fair and appropriate result would be obtained by staying the enforcement of the mortgage by the [bank] against the [Claremont property] until the death of the [mother] or until she abandons or ceases to make the [Claremont property] her principal place of residence, with liberty to the [bank] to apply to lift the stay upon the occurrence of either of these
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- events. That order would adequately compensate the [mother] and effectively prevent the [son] from obtaining any unwanted benefit he may obtain if the Mortgage and Loan Agreement is set aside as against both [the mother and the son] (or set aside only against the [mother] if he should receive her interest after her death), and would do practical justice between all parties (without punishing the [bank] beyond providing fair compensation to the [mother]) on the basis of the findings which have been made.
38 The bank also contends that the mother has received benefits which should be brought to account, by reason of her occupying the property without payment of rent and without making any payment towards the payment of the loan since its inception.
The mother's submissions
39 The mother submits, in effect, that it would be unconscionable for the bank to assert any claim against the son that would adversely affect the mother's tenure or ownership. She also refers to National Commercial Banking Corporation of Australia Ltd v Hedley (1984) 3 BPR 9477 and Flourentzou v Commonwealth Bank of Australia [1998] ANZ ConvR 188 and says, with reference to those authorities, that even if the bank had an interest against the son which 'survives the rescission', its lack of clean hands would prevent the enforcement of the interest.
40 In response to this last point, the bank submits that those cases concerned relief against persons with registered interests who acted fraudulently, and have no potential application to a case where the registered interest is achieved by unconscionable dealing.
Findings on relief
41 Notice of the mother's equitable interest under the resulting trust would not, on its own, preclude the enjoyment of indefeasible title. Here, however, there has been a finding of unconscionable dealing by the bank, and the question is the extent to which equity will intervene to prevent the bank enforcing or retaining the benefit of the dealing: Amadio (480 - 481). The issue arises, in my view, as an aspect of the court's readiness 'to pull a transaction to pieces' in cases involving moral obliquity: Spence v Crawford [1939] 3 All ER 271, 288.
42 I have found (earlier reasons [263], [265]) that the mother would not have entered into the transaction in the first place had she been properly advised, rather, she would have refinanced the approximately $43,000
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- outstanding under the NAB loan. The bank would not have obtained the benefit of the loan agreement and mortgage at all. Subject to the mother doing equity, it seems to me that, prima facie, the bank should not be permitted to retain the benefit of the mortgage and use it to exercise rights with respect to the property at the expense of the mother.
43 The mother must do equity, by restoring the benefit she received, which, I have found, is the sum applied to discharge the NAB loan, plus interest.
44 Paraphrasing and adapting the observations of McClelland CJ in Eq in Flourentzou v Commonwealth Bank of Australia (191), in the circumstances found and once appropriate restitution (as indicated above) is offered, there is no legitimate basis in equity for treating the mortgage as two separate mortgages for the purposes of rescission, one by each of the mother and the son, so that the bank could rely on it as against the son, notwithstanding the consequences of the unconscionable conduct against the mother. Whilst Flourentzou v Commonwealth Bank of Australia involved a situation where the financier achieved registration of its mortgage by a fraudulent misrepresentation of its agent made to one of two registered proprietors, in which the other registered proprietor was complicit, the case is, in my view, sufficiently analogous for present purposes with this one, where the bank achieved registration of the mortgage by its unconscionable dealing with the mother, in which the son was complicit. In equity, the mortgage ought, in my view, be set aside in its entirety, notwithstanding its registration. Registration of the mortgage by the bank cannot be divorced from the unconscionable dealing by which it was obtained.
45 The bank does not contend that the signed mortgage instrument operates as an equitable mortgage in respect of the son's interest. (If it did, the mother's equitable interest under the resulting trust would be prior in time.) It is thus unnecessary to consider whether the bank lacks clean hands to enforce any equitable mortgage: cf Flourentzou v Commonwealth Bank of Australia (191 - 192).
46 There is no reason why the loan agreement should be set aside with respect to the son. However, if the son has been discharged from bankruptcy, then the debt he incurred under the loan agreement has been discharged by reason of his discharge from bankruptcy: s 153(1) of the Bankruptcy Act 1966 (Cth). Whether the bank has other claims against the son within the meaning of s 153(2)(b) of the Bankruptcy Act, or otherwise, is not a matter that arises in these proceedings. If by dint of the
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- operation of the Bankruptcy Act, the debt incurred by the son under the loan agreement has been discharged, that result, in my view, follows from the bank's unconscionable dealing and from its decision not to prove in the bankruptcy of the son, based on its view as to the validity of its security. As events have transpired, I have found the bank's view to be incorrect. Nevertheless, if the bank cannot recover against the son as an unsecured creditor for the balance of its debt, after receiving restitution from the mother, that, in my view, would be a consequence of the matters to which I have adverted, and would not, as the bank submits, be the imposition of a 'punishment' on the bank for its conduct.
47 If the mortgage is discharged in its entirety, as I think it should be, subject to the restitution referred to above, the mother and the son would remain as registered proprietors at law, unless otherwise ordered. Whilst, as between the mother and the son, I have found that the son holds his legal interest on trust for the mother, and the son would be estopped by the judgment from asserting to the contrary, it is prudent to ensure that as between the mother and the son, the equitable and legal estates are aligned. Accordingly, I would also order that the son execute a transfer of his registered interest in the property to the mother.
48 In essence, the point raised by the bank's recent submission referred to in [37] above is that the mortgage should not be set aside but, instead, that it would be fair to restrain the bank from enforcing the mortgage until the mother dies, or otherwise ceases to occupy the Claremont property, thereby preserving her residency in the interim and avoiding any windfall gain to the son. On balance, I think this would not produce an equitable result for three reasons.
49 First, it would defer rather than prevent the bank from enjoying the benefit of the unconscionable dealing. Secondly, even if the mortgage subsisted as a registered mortgage against the son only, and there were a restraint on enforcement of the kind postulated by the bank, if the mother ultimately became incapacitated for independent living, and was required to sell the property to finance accommodation elsewhere, the bank at that time would realise a half share from the sale. This would not appear just, in circumstances where I have found that the mother would not have entered into the transaction at all but for the unconscionable dealing, and if, as will be required, the mother does equity as indicated above and restores the benefit she received under the transaction. It would be inappropriate, I think, to characterise the difference between the benefit she received and for which she must give restitution (ie, in broad terms $43,000 plus interest), and a half-interest in the property, as an
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- 'unwarranted benefit' retained at the expense of the bank: cf Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413; (2003) 11 BPR 20,841 [101]. Thirdly, if the mother were to predecease the son, there is no prospect of the son enjoying a windfall by the operation of survivorship if, as I have found, he does not have any beneficial interest in the property and is required to transfer, as part of the orders in these proceedings, his legal estate to the mother.
50 The other alleged benefits to which the bank has referred (see [38] above) are, in my view, adequately covered by the nature of the restitution I have indicated.
51 As to the final quantum of restitution, at the hearing the mother's senior counsel handed up an 'aide-memoire' by way of a schedule, described as an 'Hypothetical Calculation of Repayments' (Schedule). It is based on the principal which was owing under the NAB Claremont loan as at September 2003. It assumes the continued application of the then NAB interest rate on the loan (6.49%), it shows an assumed continuation of monthly payments of $374.77 up to the time of default under the loan from the bank in July 2006, with no payments thereafter, and indicates that on those bases, as at August 2009 (the date of trial), the mother's outstanding loan to NAB would have been approximately $45,500. The application of the approach reflected in the Schedule would involve the mother paying the bank by way of doing equity, an amount equivalent to the amount which would have been due under the NAB Claremont loan, had it continued to accrue interest, without repayments, from the date of default under the loan agreement.
52 At the hearing on final relief, the mother's counsel took a different approach and sought orders involving the payment of simple interest at the Supreme Court rate from 24 September 2003. Also at the hearing, there was some debate about whether an account or inquiry should be ordered involving (probably) further evidence as to the compounding effect of interest under a reverse mortgage, having regard to my findings at [263] of the earlier reasons. In the end, the suggestion was not pressed. Counsel for the bank indicated that the bank would not wish to protract these proceedings any further, and that the court should select what it considered to be a reasonable approach.
53 I think the approach in the Schedule, whilst not ideal, is, generally speaking, a reasonable approach to adopt. The Schedule, in effect, simulates the operation of a loan with respect to the mother’s beneficial borrowing of approximately $43,000, for the purpose of calculating the
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- final sum of principal and interest the mother must pay to the bank by way of restitution. There are, however, a number of alterations I would make to the Schedule.
54 First, in my view, it would be appropriate to commence the calculation from the month of February 2004 with a capital amount of $43,000 to more accurately reflect the mother’s position at the start of the loan agreement.
55 Secondly, in relation to the interest rate, as it was the bank, rather than NAB, that in fact continued to fund the mother, and bearing in mind that the bank's costs of funds may be different from NAB's, I have given consideration to whether it would be more appropriate to use the bank's actual interest rate in such an exercise, which ranged from 8.35% at the start of the loan to 8.6% prior to default. Such a rate would not be regarded as illegal or exorbitant: cf Maguire v Makaronis (477). On the other hand, it is common knowledge that rates dropped in consequence of the global financial turmoil in late 2008. Looking at the matter in the broad, I would adopt an interest rate of 8.5% for the purposes of this exercise.
56 I would invite the parties to recalculate the figures in the Schedule, adopting the above changes, and to bring the Schedule up to date. It will be that final figure which ought to be paid by the mother to the bank by way of restitution. Some interest might need to be added to that figure, if there is any delay in paying the bank.
Conclusion
57 The mother should do equity by paying the sum calculated in accordance with [51] - [56] above as soon as possible, and certainly within a reasonable time. Subject to and conditional upon that payment, I would be prepared to make orders along the following lines.
1. A declaration that:
(a) the loan agreement between the plaintiff and defendants executed by the defendants on 20 December 2003; and
(b) the mortgage number I822249, registered on 17 March 2004 over the property known as Lot 9, Strata Plan 20282 being the whole of the land in Certificate of Title Volume 1885 Folio 9 (the property) executed by the defendants in favour of the plaintiff,
- were obtained from the second-named defendant by the plaintiff by unconscionable dealing and conduct and/or in contravention of s 51AC of the Trade Practices Act and ought to be set aside.
- 2. Orders under s 87(2) of the Trade Practices Act, or under the general law, as follows:
(a) that the said loan agreement be set aside ab initio as against the second-named defendant;
(b) that the said mortgage be set aside ab initio; and
(c) that the plaintiff forthwith execute all documents and do all acts and things necessary to discharge the mortgage.
3. An order that the first-named defendant forthwith complete, execute and deliver to the second-named defendant a transfer, in a registrable form, of his registered interest in the property.
58 I will invite the parties to provide a minute of proposed orders, including any further or consequential orders they consider appropriate.
59 It may be that if a third party financier is to be used by the mother to pay the bank the relevant sum, and the third party financier intends to secure the sum by its own mortgage, the effectuation of the orders proposed above may need to be coordinated, in practical terms, with the payment of restitution by the mother.
0
9
3