Permanent Trustee Australia Limited and 1 Or v Mary Gusevski and 1 Or

[2005] NSWSC 1281

CITATION:	Permanent Trustee Australia Limited & 1 Or v Mary Gusevski & 1 Or [2005] NSWSC 1281 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	26, 27, 28 & 31 October 2005
JUDGMENT DATE :	12 December 2005
JUDGMENT OF:	Newman AJ
DECISION:	See Para 28

CATCHWORDS:	Conveyancing - Mortgages - Unconscionable conduct - Effect of mortgagee's unconscionable conduct
LEGISLATION CITED:	Contracts Review Act 1980 Managed Investments Act
CASES CITED:	Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 Gray v Small [2004] NSWSC 97 Teachers Health Investments Pty Ltd v Wynne (1996) NSW Con R 55-785 West v AGC (Advances Ltd) (1986) 5 NSWLR 610
PARTIES:	Permanent Trustee Australia Limited & 1 Or Mary Gusevski & 1 Or
FILE NUMBER(S):	SC 10133/03
COUNSEL:	Mr P Walsh (Pl's) Ms R Francois (1st Def) Mr G Curtin (2nd Def)
SOLICITORS:	Sunman & Walker Solicitors (Pl's) Legal Aid Commission of NSW (1st Def) Middletons Lawyers (2nd Def)

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

NEWMAN AJ

12 December 2005

10133/03 Permanent Trustee Australia Limited & 1Or v Mary Gusevski & 1 Or

JUDGMENT

1 His Honour: This is primarily an action for possession of land brought on behalf of a mortgagee against the first defendant. The second defendant has been joined by the mortgagee on the basis of an allegation of professional negligence made against the second defendant, a solicitor, by the first defendant. In essence the plaintiff’s claim is that, should they be denied relief against the first defendant by virtue of the second defendant’s negligence, they are entitled to relief against the second defendant. However, the plaintiffs’ readily conceded that if they succeed against the first defendant their claim against the second defendant is nugatory.

2 The reason why there are two plaintiff’s in the matter is that the first plaintiff is the custodian of an entity known as the Howard Mortgage Trust and is the mortgagee of the mortgage which is involved in these proceedings. The second plaintiff is the single responsible entity of the said Howard Mortgage Trust under the provisions of the ManagedInvestments Act and is the lender under the deed of loan which arose in the proceedings.

3 There are a number of matters which are not in dispute. The first is that, pursuant to the terms of a deed of loan, the first plaintiff, in its capacity as trustee of the Howard Mortgage Trust, advanced the sum of $170,000. By written direction of the first defendant, that sum was in fact paid not to her, but to one Robert Charles Silkman. Equally there is no dispute that the plaintiff executed a deed of loan and also granted the first defendant a mortgage over land of which she was a registered proprietor, known as 7 Francis Avenue, Brighton-Le-Sands, in this State. There is equally no dispute that the first defendant is in default under the deed of loan and that, ex facie, the first plaintiff is entitled to an order for possession. I say ex facie because the first defendant has raised a number of matters by way of defence which, if any one of them were successful, would result in the plaintiffs’ being denied relief against her, either under the deed of loan or under the mortgage. The first defendant, in her defence, relies upon the provisions of the Contracts Review Act 1980. As I have indicated above, she has brought a cross-claim against the second defendant, alleging professional negligence on his part. It is her cross-claim against the second defendant that, if the plaintiffs’ are entitled to the relief they seek, she is entitled to damages against the second defendant, representing her liability to the first and second plaintiff’s.

4 I turn then to the facts of the matter. The first defendant is a woman who has met much misfortune in her life. She is now aged 42, having been born on 24 June 1963. Her marriage, which she entered into in the 1980’s, was disastrous. Her husband was, to quote Dr Klug, psychiatrist, “very irritable with a fiery temper which focused on her and their two children. He was physically violent at times but this did not extend to sexual violence.” This miserable union ended in divorce. As I understand the evidence, the first defendant was acted for by a solicitor, Sue Vasil, in the Family Court proceedings. Subsequently Ms Vasil acted for the first defendant when she first attempted to obtain a loan in the year 2001. Following the dissolution of her marriage the first defendant has taken to using her parent’s name, Tuntev, rather than her former married name Gusevski, under which she is named in these proceedings. In the year 2001 the first defendant entered into a romantic relationship with a man known as Robert Silkman. While her evidence in the matter did not establish exactly when it was that she first became romantically involved with Mr Silkman, nor when that relationship came to an end, it is apparent that at all relevant times during the transactions which led to the creation of the subject loan and mortgage her affair with Mr Silkman was ongoing. According to the history the first defendant gave to Dr Klug, psychiatrist, she has lost contact with Silkman and is aware that he had been convicted of criminal offences and was serving time in prison. Accordingly, it is the first defendant’s misfortune to have had both a miserable marriage and then an unfortunate and equally miserable association with a rogue.

5 To add to the first defendant’s misfortune her ageing mother was diagnosed with Alzheimer’s disease in 1998 and this has resulted in the first defendant being her aged parents’ principal support from then on. To add to her misfortunes she has herself been diagnosed with a malady known as sarcoidosis. Apparently this is a systemic granulomatous reaction to various stimuli and can involve any tissue of the body. It has affected the first defendant in an unusual manner (and I quote here from Dr Klug) “that it has caused her teeth to fall out as well as suffering from anaemia.”

6 If all of these matters were not enough the first defendant has been diagnosed by Dr Klug, psychiatrist, as suffering from a dependant personality disorder. This is no recent diagnosis, as Dr Klug first began to see the first defendant on 21 April 1993. He then saw her regularly until mid-1998. While there was some dispute from the plaintiffs’ as to the nomenclature used by Dr Klug in his diagnosis of the first defendant’s psychiatric malady, there was in fact no challenge mounted to the veracity of his diagnosis. Dr Klug, in his report, put his diagnosis in this way :-

“A dependant personality disorder is characterised by a pervasive and excessive need to be taken care of, that leads to submissive and clinging behaviour and fears of separation. In Ms Tuntev’s case the specific features of her dependant personality disorder include the following:
1. Has difficulty making everyday decisions without an excessive amount of advice and reassurance from others.
2. Needs other to assume responsibility for most major areas of her life.
3. Has difficulty expressing disagreement with others because of fear of loss of support or approval.
4. Goes to excessive lengths to obtain nurturing and support from others, to the point of volunteering to do things that are unpleasant.
5. Feels uncomfortable or helpless when alone because of exaggerated fears of being unable to care for herself.
6. Is unrealistically preoccupied with fears of being left to care for herself.
She is plagued by pessimism and self-doubt and is highly self-critical. She interprets criticism and disapproval as confirmation of her worthlessness.”

7 The first defendant’s psychiatric problems provide an explanation for what I would find to be some bizarre actions on her behalf involving not only the subject loan and mortgage of these proceedings but also some subsequent borrowings by her and indeed her earlier attempts to obtain a loan. However, as I understand Dr Klug’s evidence, despite the presence of the psychiatric disorder which he diagnosed, the first defendant’s cognitive ability is not impaired by this problem.

8 The first defendant had been brought up in Sydney. She completed her secondary education, gaining the Higher School Certificate. Prior to her marriage she had worked for an insurance company as a pay clerk. In 2001 she was residing at premises at 7 Francis Avenue, Brighton-Le-Sands with the two children of her marriage. That house, of which she was the registered proprietor, had been given to her by her father. At the beginning of 2001 the premises were unencumbered. She was then working part-time for a supermarket chain. As I understand her evidence, she would work on a number of days per week, which occasionally included weekend work. Again while her evidence on this topic is not clear, I gather her part-time employment with the supermarket chain involved some supervisory duties. In any event, whatever capacity in which she was working, it plainly enough was not a lucrative occupation. Prior to 2001 she had purchased a Mazda motor vehicle, utilising a loan from Esanda for that purpose. Documentary evidence before the court indicates that she had difficulties in making repayments under that loan. Indeed she seems to have successfully fended off a number of efforts by Esanda to repossess the vehicle.

9 As at 2001 she had a cheque account with St George Bank and was maintaining a Visa card with the same institution. In her affidavit of 27 January 2004 the first defendant deposes that in 2001 she met Silkman and a man called Roy Skaf, who apparently was a mortgage broker. She then deposes of a series of events involving only one application for a loan, which eventually resulted in attendance at the offices of the second defendant. There she alleges she went with Silkman, and once at those premises, she was taken to the office of a man who, without either explaining or allowing her to read documents, got her to sign them. All this occurring in the presence of Silkman. She claims that she thought she was signing an application for a loan for $60,000 and had no idea that she had completed mortgage and associated loan documents for a loan of $170,000.

10 Her affidavit makes no mention whatsoever of earlier applications she had made for loans. She claims that she had no idea what a mortgage was.

11 As it happens, the documents that she signed at the second defendant’s office were the documents relating to the mortgage and loan which are the subject of these proceedings. In her affidavit she omits to refer to two earlier applications she had made in the year 2001 for mortgage loans, the first of which was to an organization known as Eclipse Prudent Mortgage Corporation Limited. This was an application for a loan of $50,000 to be secured by a mortgage. It was in relation to that application that she had the solicitor Sue Vasil acting for her. Apparently that loan did not proceed because Sue Vasil had advised her that it would be imprudent for her to proceed with the loan. She then made an application for a loan to the second plaintiff in this matter through an organisation known as Associated Finance Group Limited. She there sought a loan for $150,000. In the event she did not proceed with that application, finally she made an application for a loan secured by mortgage to the present second plaintiff through the aegis of an organisation known as The Australian Credit Corporation, who describe themselves as merchant bankers and mortgage originators. That application was for a loan in the sum of $170,000.

12 When challenged in cross-examination as to the omissions from her first affidavit of any reference to her earlier applications for loans in 2001 and to her knowledge about events which occurred, the first defendant continually responded that she could not remember. She was adamant however that when she went to the second defendant’s offices nothing was explained to her and it was as if she was just asked to sign here without explanation, which she did. She states that she had been told to remain silent during her interview at the second defendant’s offices by Mr Silkman – whom she said was present.

13 The first defendant’s account of what happened at the offices of the second defendant is totally opposed to what one Mary-Lou Carter, a law clerk employed by the firm (and in fact the second defendant’s wife), and one Marcel Joukadour, deposed to as to the events there.

14 Let me say at once that I found Mrs Carter and Marcel Joukadour to be credible witnesses. Mrs Carter’s evidence that the first defendant was alone when she saw Joukadour and her explanation of why she would insist that this was so, was, I find, compelling evidence.

15 Joukadour’s evidence that he explained in detail the documents which the first defendant subsequently executed, again, I found to be evidence which I have no hesitation in accepting. Marcel Joukadour made three concessions as to what happened during the course of his meeting with the first defendant which I believe are indicative that he is a witness of truth. Those concessions were :-

1) That he failed to keep a file note – he conceded that this was an oversight
2) That he failed to have the first defendant execute the document known as Declaration of Purpose
3) His then ignorance of the circumstances under which the Consumer Credit Code would apply to the transaction in question.

The fact that Mr Joukadour was prepared to make those concessions does not in my view diminish his credibility as a witness in any way – rather in my view they enhance it. In short, where the evidence of the first defendant is in conflict with the evidence of Mary-Lou Carter and Marcel Joukadour I accept the evidence of the latter two witnesses in relation to the events which occurred.

16 The upshot of this finding is that I find that at the time when the first defendant executed the documents giving rise to the loan and mortgage, which are the subject of these proceedings, she was well aware of what a mortgage was and of the consequences which would flow should she fail to make proper payments on the loan, which I further find she was well aware she was accepting.

17 Unfortunately the first defendant’s borrowings in the year 2001 did not end with the loan which is the subject of these proceedings. In November of 2001 she borrowed a further $68,000 from one Mark Lawrence Cerci. That loan was secured by way of a further mortgage over her property at Brighton-Le-Sands. Part of that loan, namely $23,000, took the form of a cheque payable to this court. There is no doubt that that cheque was made payable as part of the conditions of a stay imposed by this court on a judgment for possession and against Mr Silkman in relation to his own property. I should add that Mr Silkman’s bank accounts, which are in evidence, indicate that by the end of September 2001 he had dissipated most of the proceeds of the loan which is the subject of these proceedings. While the loan the first defendant received from Mark Cerci plays no part in these proceedings as such, I mention its existence for two reasons. First, it is another indication of the bizarre nature of the loan transactions the first defendant entered into in 2001. Second, the fact that the loan was taken out and the manner in which Silkman had dissipated the proceeds of the loan the subject of these proceedings are indications of the influence which Silkman had over the first defendant in 2001.

18 However, the matter does not end with these findings. It was the uncontested evidence in the matter that, at the time when the first defendant entered into the subject loan, her living expenses (including the living expenses of her children) were about $1,421.00 per month. At the time her income averaged $1,630.00 per month.

19 At the relevant time the Howard Mortgage Trust and the Challenger Mortgage Plus Trust had in place a lending procedures manual. By paragraph 3.5 of that manual the note of assessment by officers charged with approving loans on behalf of the Howard Mortgage Trust is set out. Having stated that the loan assessment is fundamentally based on the “3 C’s” of credit, namely Collateral, Capacity and Credit Standing, the manual states this:-

Capacity When assessing capacity it is necessary to take into account the type of borrower:
Individuals – assessment should consider the net income after allowing for our interest and sufficient income after tax to meet normal living standards. Income from spouse and the demands of children and other dependants should also be considered when evaluating income available for supporting living standards.

The loan officer who approved the subject loan was a gentleman called John M Thomas, whose title at the time was Chief Executive, Mortgage Compliance and Administration. Mr Thomas was not called in these proceedings. While he is no longer an employee of either plaintiff, his whereabouts are known and are local. However, one Roy Clarence Stone, who is employed by the second plaintiff as senior manager of mortgage compliance and administration, was called. He conceded in cross-examination that he had “grave doubts that the first defendant would obtain external finance at the expiration of the subject loan unless she obtained further asset lending.” Second he, having been provided with information as to the first defendant’s cash flow position at the time when the subject loan was entered into, was of the view that the loan was perilous from the first defendant’s point of view. Finally, and importantly, had he been considering the subject loan and had the relevant information as to the first defendant’s cash flow position he would have refused the application. Furthermore, Mr Stone deposed that had Mr Thomas examined the earlier loan application made by the first defendant to the second plaintiff and compared it with the loan application which gave rise to the loan, he should have had doubts about the ability of the first defendant to service the loan. In fairness, I should point out that Mr Stone was not an employee of the second plaintiff at the relevant time.

20 The upshot of this is whether or not the failure of the lender to carry out checks as to the first defendant’s capacity to meet her commitments under the loan constitute a defence under the Contracts Review Act 1980 to the claim of both Plaintiff’s?

21 Ss 9(1) and 9(2) are in the following terms :-

9 Matters to be considered by Court
“(1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of:
(a) compliance with any or all of the provisions of the contract; or
(b) non-compliance with, or contravention of, any or all of the provisions of the contract.
(2) Without in any way affecting the generality of subs(1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following:
(a) whether or not there was any material inequality in bargaining power between the parties to the contract;
(b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation;
(c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract;
(d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract;

(e) whether or not:

(i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or
(ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented,
because of his or her age or the state of his or her physical or mental capacity,
(f) the relative economic circumstances, educational background and literacy of:
(i) the parties to the contract (other than a corporation); and
(ii) any person who represented any of the parties to the contract;
(g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed
(h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act;
(i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect;
(j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act:
(i) by any other party to the contract;
(ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract; or
(iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract;
(k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party; and
(l) the commercial or other setting, purpose and effect of the contract.”


Section 7 is in these terms :-

7 Principal Relief
“(1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following:
(a) it may decide to refuse to enforce any or all of the provisions of the contract;
(b) it may make an order declaring the contract void, in whole or in part;
(c) it may make an order varying, in whole or in part, any provision of the contract;
(d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that:
(i) varies, or has the effect of varying, the provisions of the land instrument; or
(ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument.”


(2) Where the Court makes an order under subsection (1) (b) or (c), the declaration or variation shall have effect as from the time when the contract was made or (as to the whole or any part or parts of the contract) from some other time or times as specified in the order.

(3) The operation of this section is subject to the provisions of section 19.”

In Gray v Small [2004] NSWSC 97 at [85] McDougall J, in my view, correctly summarised the law relating to whether relief should be granted pursuant to that Act. There he said :-

“(1) There is a distinction between the s 9 issue (whether the contract is unjust) and the s 7 issue (whether relief should be granted, and if so in what form): Nguyen v Taylor (1992) 27 NSWLR 48, 54-55 (Kirby P), 71 (Sheller JA).

(2) Thus, a contract may be found to be unjust but nonetheless, in the exercise of its discretion, the court may refuse to grant relief (for example, because the party against whom relief is claimed was innocent of relevantly unfair conduct): West at 621-622 (McHugh J) ; Nguyen at 70 (Sheller JA) .

(3) Where a contract has been found to be unjust, it would in general be unsound to grant relief under s 7 where the party against whom relief is claimed was both innocent and ignorant of the circumstances giving rise to that injustice: Collier v Morlend Finance Corporation (Vic) Pty Ltd (1989) ASC ¶55-716, 58, 433 (Meagher JA); Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256, 277 (Meagher JA).

(4) In considering whether or not to grant relief, it is appropriate to take into account the policy of the law that contracts should be honoured; Nguyen at 61 (Meagher JA), 71 (Sheller JA) ; Baltic Shipping at 9 (Gleeson CJ) .

(5) The distinction between the contract and the underlying transaction may be illusory rather than real where the person against whom relief is sought was closely involved in the decision to enter into the underlying transaction: Elders Rural Finance Ltd v Smith (1996) 41 NSWLR 296, 309 (Handley JA);

(6) Nonetheless, a contract will not be unjust merely because it was not in the claimant’s interests to enter into it, or because the claimant cannot perform when called upon to do so, or because enforcement of the contract will lead to the loss of the claimant’s home: Esanda Finance Corp Ltd v Tong (1997) 41 NSWLR 482, 491 (Handley JA).

(7) In considering whether a contract is unjust, the court may look not only at the terms of the contract to see whether they are unjust, but also at the circumstances in which the contract was made, and at the effect that performance of the contract would have, having regard to those circumstances: Elkofairi at 20, 855 (Beazley JA).”

In Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 Beazley JA (with whom Santow JA and Campbell AJA agreed) said as follows :-

“53 The appellant’s educational background, her inability to read or write English or to understand other than the most basic spoken English and her difficult domestic circumstances were such that the appellant was in a special position of disadvantage in the sense explained in Blomley v Ryan . However, none of those matters were known to the respondent. Accordingly, it is necessary to consider whether there were any other features of the transaction which made it unconscientious for the respondent to enter into this transaction with the appellant given the circumstances in which her execution of the contract was procured.”

“78 It would appear that the trend of authority since West is that the Contracts Review Act permits a court not only to look at the terms of the contract per se , to see its terms are unjust, but to look at the circumstances in which the contract was made and its effect, having regard to those circumstances. It is not sufficient, however, for a claimant for relief under the Act merely to point to a loss or inopportune transaction. This approach, in my view, is not inconsistent with what McHugh JA said in West . Rather, as Mahoney P pointed out in Elders v Smith , it gives full effect to what McHugh JA said.

79 This case does not fit neatly into either of the factual scenarios presented in West and in Smith . However, it is characterised by two significant features. First, it was a substantial loan, security for which was the appellant’s only asset – her interest in the property. The debt to asset ratio was almost 75%. Secondly, the respondent knew that the appellant had no income nor other assets. None was disclosed on the loan application. The only confirmation the respondent had that the payments under the loan would be met was the series of letters from the accountant, which only related to Mr Elkofairi, and which contained no particulars of Mr Elkofairi’s income and included a disclaimer “as to the accuracy of the information” provided. The consequence was, as submitted by the respondent’s counsel, that the respondent was content to lend on the value of the security only. In my opinion, these factors taken in consideration with the matters to which I have referred in para 53, are sufficient to make the contract unjust in the circumstances in which it was made: s 9; and sufficient for the Court to exercise its discretion under s 7.”

22 In West v AGC (Advances Ltd) (1986) 5 NSWLR 610 at 620 McHugh JA stated :-

“a contract may be unjust in the circumstances existing when it was made because of the way it operates in relation to the claimant, or because of the way in which it was made or both”.

In relation to the latter form of injustice, which His Honour subsequently described as “procedural injustice”, His Honour went on at 621-622 to draw the following distinction between the contract itself and the underlying transaction. He said :-

“(1) It is important to bear in mind that it is the contract or its provisions that must be unjust.
(2) If the defendant has not engaged in conduct depriving the claimant of a real or an informed choice to enter into a contract, and the terms of the contract are reasonable as between the parties, I do not see how that contract can be considered unjust simply because it was not in the interests of the claimant to make the contract or because she had no independent advice.
(3) ……under this Act, a contract will not be unjust as against a party unless the contract or one of its provisions is the product of unfair conduct on his part in the terms which he has imposed or in the means which he has employed to make the contract.”

23 There are of course here marked differences between the situation which pertained to Mrs Elkofairi and the present first defendant. Most important to these distinctions is the fact that the first defendant here speaks English as her native language and indeed obtained her Higher School Certificate. Not only that, she had worked for an insurance company as a pay clerk. Not only that, as I have found, the provisions of the mortgage and her responsibilities under the loan were explained to her by Mr Joukadour. Thus it is that the question of whether the first defendant is entitled to relief pursuant to the Contracts Review Act 1980 turns upon the failure of Mr Thomas, on behalf of the plaintiffs’, to properly investigate the first defendant’s financial situation at the time when the loan was approved. There being, in my view, nothing unfair in the terms of either the loan agreement or the mortgage conditions the question is whether there has been, to use McHugh JA’s description in West’s case, a procedural injustice in this case.

24 In making this determination it is important to bear in mind that, like Mrs Elkofairi’s situation, the second plaintiff was prepared to lend on the value of the security only in this case.

25 It must also be borne in mind that the plaintiffs’ were unaware of the part played by Mr Silkman in this loan being obtained.

26 In Teachers Health Investments Pty Ltd v Wynne (1996) NSW Con R 55-785 Beazley JA said as follows :-

“Although the appellant was not aware of the history of the relationship between the parties or of the principal debtor’s conduct in obtaining the mortgage, it knew, or had the information in its possession to enable it to know, that this mortgage was sheer folly when looked at from the ability of the principal debtor to make the interest payments. The only part of the transaction which was not folly was the extent of the security. The appellant was well protected in this regard. In the circumstances, I am of the opinion that the contract was unjust within the meaning of the ContractsReview Act 1980 .”

27 Thus, in my view, if the lender acted unconscionably in Teachers Health Investments Pty Ltd v Wynne (supra) so did the second plaintiff here. I should add that if it were not for the decision in Teacher’s Health I would not have found that the plaintiff acted unconscionably. However, I am bound to apply decisions of the Court of Appeal, which I have done. Accordingly, I am of the view that the concept of procedural injustice, as stated by McHugh JA in West’s case, has been established here. Accordingly, I am of the view that the mortgage is unjust and should be set aside. As far as the plaintiffs’ claim as against the second defendant is concerned it follows from my findings that I do not find that the second defendant was negligent and accordingly the plaintiffs’ claim against the second defendant should be dismissed with costs. It follows that the first defendant’s cross-claim against the second defendant should also be dismissed. In my view, the plaintiffs’ claim must accordingly fail against both defendant’s.

28 I make the following orders:-

1. Judgment for the first and second defendant’s.

2(a). Mortgage 7860869 be set aside.

2(b). The first plaintiff forthwith deliver to the first defendant a discharge of the said mortgage in registrable form.
3. The plaintiffs’ to pay the first and second defendant’s costs, including the costs of the cross-claim.

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