Perpetual Trustee Co Ltd v Khoshaba

Perpetual Trustee Co Ltd appealed to the Court of Appeal of New South Wales against a decision of the primary judge who had found a loan contract to be unjust under the *Contracts Review Act 1980* (NSW). The dispute concerned a loan made by Perpetual Trustee to Mr Khoshaba for investment purposes, where the lender allegedly failed to adhere to its own lending guidelines and was indifferent to the purpose of the loan.

The central legal issues before the Court of Appeal were whether the primary judge’s conclusion that the contract was unjust was a discretionary one, and if so, whether it was amenable to appellate review. The Court also considered the principles to be applied when determining whether a contract is unjust, particularly in the context of commercial lending and the need to apply contemporary standards.

The Court of Appeal held that the determination of injustice under section 7 of the *Contracts Review Act 1980* involves a question of law, not merely discretion, and is therefore reviewable on appeal. The Court emphasised that courts must apply contemporary standards of what is considered unjust and are not bound by previous decisions as if they were rigid rules. In this instance, the Court found that the primary judge had correctly considered the relevant circumstances, including the lender's failure to follow its own guidelines and its indifference to the purpose of the loan, in reaching the conclusion that the contract was unjust.

Leave to appeal was granted, but the appeal was ultimately dismissed. Perpetual Trustee Co Ltd was ordered to pay the respondents' costs.