Perpetual Trustee Victoria v Yap - [2010] NSWSC 761

NEW SOUTH WALES SUPREME COURT

CITATION:
Perpetual Trustee Victoria v Yap [2010] NSWSC 761

JURISDICTION:

FILE NUMBER(S):
2009/292006

HEARING DATE(S):
24-28 May 2010, 1 June 2010

JUDGMENT DATE:
16 July 2010

PARTIES:
Perpetual Trustees Victoria Limited - Plaintiff
Swee Lan Yap - First Defendant
Edmond Dinkha Esho - Second Defendant

JUDGMENT OF:
James J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable

COUNSEL:
P Newton - Plaintiff
G Donnellan - First Defendant

SOLICITORS:
Kemp Strang - Plaintiff
Watson Stafford Zipkis - First Defendant
In person - Second Defendant

CATCHWORDS:
EJECTMENT — Consumer Credit Code ss 6(1), 6(5), 11(3), 11(4), 43(2), 80(3) — Contracts Review Act ss 7 and 9

LEGISLATION CITED:
Contracts Review Act

CASES CITED:
Beckley v Consumer Trade and Tenancy Tribunal [2009] NSWSC 703
Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 257
Benjamin v Ashikian [2007] NSWSC 735
Commercial Bank of Australia Limited v Amadio (1982-1983) 151 CLR 447
Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413, (2002) 11 BPR 20841
Esanda Finance Corporation Ltd v Tong (1997) 41 NSWLR 482
Garcia v National Australia Bank (1998) 194 CLR 395
Jonsson v Arkway Pty Ltd [2003] NSWSC 815, 58 NSWLR 451
Kowalczuk v Accom Finance Pty Ltd (2008) 252 ALR 55
Nguyen v Taylor (1992) 27 NSWLR 48
Permanent Mortgages Pty Ltd v Cook [2006] NSWSC 1104
Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41, 14 BPR 26639
Spina v Permanent Custodians Ltd [2009] NSWCA 206
Yerkey v Jones (1939) 63 CLR 649

TEXTS CITED:

DECISION:
Findings that loan agreements were unjust and that it would be just to grant relief

JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
JAMES J
FRIDAY 16 JULY 2010
2009/292006 PERPETUAL TRUSTEES VICTORIA LIMITED v SWEE LAN YAP and EDMOND DINKHA ESHO

JUDGMENT

HIS HONOUR: In these proceedings the plaintiff Perpetual Trustees Victoria Limited sued the two defendants Swee Lan Yap (who I will refer to as “the first defendant” or simply as “the defendant”) and Edmond Dinkha Esho (“the second defendant”). The first defendant and the second defendant are married to each other but estranged and separated. The second defendant is an undischarged bankrupt. At the hearing the first defendant was represented by counsel. The second defendant was not legally represented and appeared for himself.
In the proceedings the plaintiff claims possession of a property owned by the first defendant known as 17 Gunbalanya Avenue Beecroft (“the Beecroft property”), which the first defendant mortgaged to the plaintiff by a mortgage dated 6 October 2004 (“the mortgage”) and also claims judgment against both defendants for an amount alleged to be due under a loan agreement dated 28 July 2006 between the plaintiff and the defendants.
The mortgage had originally been granted to secure the obligations of the defendants under an earlier loan agreement between the plaintiff and the defendants dated 6 October 2004. It is convenient to refer to the loan…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2010] NSWSC 761
Decision Date: 16 July 2010

CaseChat Overview and Summary

In the case of Perpetual Trustee Victoria v Yap, the plaintiff sought to enforce the terms of two loan agreements and a mortgage, which were signed by the defendants, Edmond Dinkha Esho and Swee Lan Yap. The dispute arose when the defendants defaulted on their mortgage payments, leading to the plaintiff issuing default notices and subsequently seeking to exercise its power of sale under the mortgage. The defendants argued that they were entitled to relief under the Contracts Review Act and the principles of unconscionability. The primary legal issues before the court were whether the defendants were entitled to relief under the Contracts Review Act and, if not, whether they could claim relief based on the principles of unconscionability.

The court considered the evidence presented by the parties, particularly the affidavits of Mr. Graham Wort, an employee of Challenger Mortgage Management Pty Ltd, and the declarations signed by the defendants. The court noted that the defendants had signed declarations of purpose indicating that the loans were for business or investment purposes. Additionally, the court observed that the defendants had signed a direction and authority document directing the net amount of the loan to be paid as instructed by them. The court found that the defendants had signed the loan agreements and mortgage in the presence of Mr. Wort, who had explained the documents to them, and that they had signed the declarations of purpose and the direction and authority document without any indication of misunderstanding or undue influence.

In reaching its decision, the court held that the first defendant was entitled to relief under the Contracts Review Act, specifically under sections 7 and 9. The court found that the first defendant had signed the loan agreements and mortgage under a mistake regarding the nature of the loans, believing they were for business purposes rather than personal use. Consequently, the court found that the first defendant was entitled to relief in respect of both the loan agreements and the mortgage. As a result, the court did not need to address whether the first defendant was also entitled to relief under the principles of unconscionability as per the case of Commercial Bank of Australia v Amadio.

The court concluded that the first defendant was entitled to relief under the Contracts Review Act and deferred making orders to give effect to this conclusion until further submissions from the parties were received. The court’s decision highlighted the importance of ensuring that borrowers fully understand the terms and nature of the loans they are entering into, particularly in the context of consumer credit transactions.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

The principal witnesses (and the only oral witnesses) at the hearing were Mr Graham Wort, who had been an employee of a company associated with the plaintiff, and the first defendant. I will now summarise the evidence of these witnesses.Mr Wort’s evidenceMr Wort’s affidavit Mr Wort was an employee of Challenger Mortgage Management Pty Ltd, formerly known as Interstar Wholesale Finance Pty Ltd, to which I will refer as “Challenger” or “Interstar”. Mr Wort had retrieved the records kept by Challenger relating to loans to the defendants. Mr Wort explained the relationship between Challenger, the plaintiff and another company Royal Guardian Mortgage Corporation (“Royal Guardian”) as follows:-“6.Challenger is a wholesale finance company which offers first registered mortgage loans over real property located in Australia and New Zealand.7.Challenger offers a range of different mortgage loans to borrowers, all of which are financed through trusts administered by the plaintiff as trustee. Each trust has its own individual trust deed as well as a financial institution which funds the operation of the trust.8.Funds paid to borrowers pursuant to mortgage loans (offered by Challenger) are sourced from trusts administered by the plaintiff as trustee. The plaintiff holds the legal title to the mortgages, but has no involvement in reviewing and considering applications for mortgage loan. The plaintiff’s practice is to administer the trusts and permit the loan funds to be advanced as and when requested by Challenger.9.From time to time Challenger receives loan applications on behalf of brokers or originators. When a customer applies for a loan from Challenger, Challenger receives (from the originator) an application form signed by the proposed borrower(s) along with other documents. Challenger considers the application and decides whether or not to approve the loan. The documents and information required (before Challenger will consider and approve a loan application) depend on the specific type of loan applied for.10.The loans to the defendants were introduced to Challenger by loan applications received from Royal Guardian: Challenger managed the loans the subject of these proceedings.” On 26 August 2004 Challenger received from Royal Guardian a loan application signed by the defendants and numerous other documents. The loan application was a printed form on which words and figures had been written. On the first page of the application particulars of each of the defendants were set out. For the second defendant a dash was placed alongside the printed words “no. of dependents”, a box marked “self-employed” was ticked and the second defendant was described as “shop/business owner”. For the first defendant a dash was placed alongside the words “no. of dependents”, a box marked “self-employed” was ticked and the words “business/shop owner” had been written but had then been ruled through. On the first page of the application the amount of the loan sought was shown as $750,000. Alongside the printed words “refinance/existing limit” the figure “$427,000” was written and (in the column for the second defendant) the words and figures “investment purchase $323,000” were written, together with a total of “$750,000”.

Decision

Reasons for decision

Having decided that the first defendant is entitled to relief under the Contracts Review Act, it is unnecessary for me to decide whether she is also entitled to relief under the principles of unconscionability in Commercial Bank of Australia v Amadio. If I am not correct in holding that the first defendant is entitled to relief under the Contracts Review Act, then, in my opinion, she would not be entitled to relief under the principles of unconscionability in Commercial Bank of Australia v Amadio.ConclusionI have held that the first defendant is entitled to relief under the Contracts Review Act in respect of both loan agreements and the mortgage. I will defer making orders to give effect to this conclusion until after I have received further submissions from the parties.

Ratio Decidendi

Legal Principle Established

Both defendants signed and returned a declaration of purpose which was in the following terms:-“DECLARATION OF PURPOSE(Section 11, Consumer Credit Code. Regulation 10, Consumer Credit & Regulation)TO:Perpetual Trustees Victoria Ltd (Credit Provider) MN320006000073012201RE: Loan of $860,000.00 expiring 15 October 2032Edmond Dinkha Esho Full Borrower Name (1) Swee Lan Yap Full Borrower Name (2)We declare that the credit to be provided to us by the credit provider is to be applied wholly or predominantly for business or investment purposes (or for both, purposes).IMPORTANTYou should not sign this declaration unless this loan is wholly or predominantly for business or investment purposes.By signing this declaration you may lose your protection under the Consumer Credit Code.We agree to provide declarations of purpose of the credit whenever required by the Credit Provider.(signed) Signature of person making DeclarationFull name of person making Declaration(signed) Signature of person making DeclarationFull name of person making Declaration” A further document signed and returned was a direction and authority that the net amount of $108,256.50 should be paid as directed in writing by the defendants. On 28 July 2006 the second mortgage loan transaction was settled. At some time after 29 July 2006 the mortgage was up stamped. The defendants defaulted in making payments due on 15 July 2008, 15 August 2008 and 15 September 2008. Default notices which were sent to the two defendants were in similar terms. The default notice sent to the first defendant was in the following terms:-“Mrs Swee Lan Yap 17 Gunbalanya Avenue BEECROFT NSW 2119This is a Default Notice issued by Perpetual Trustees Victoria Limited (Lender) pursuant to section 57(2)(b) of the Real Properly Act (NSW) 1900, by its solicitor, Kemp Strang, so authorised by the Lender to do so. If the Uniform Consumer Credit Code applies to your credit contracts and/or mortgage, this Default Notice is also a default notice within the meaning of section 80 of the Uniform Consumer Credit Code.Credit Contract status as at 27 OCTOBER 2008Credit Contract(s) MN320006000073012201Mortgage(s) AB28791Property 17 Gunbalanya Ave Beecroft NSW 2119Arrears $19,888.19Total Amount Outstanding $881,209.30 increasing at a rate of 12.28%pa1. As set out in the above table:1.1 Pursuant to the Credit Contract(s), the Lender provided financial accommodation to you. To secure the amounts owing to the Lender under the Credit Contract(s), you gave the Mortgage(s) over the Property in favour of the Lender.1.2 Default(s) occurred under the Credit Contract(s) and the Mortgage(s) as the Arrears were not paid when due (default(s)).2. To remedy the Default(s), you are required to pay the Arrears due under the Credit Contract(s) to he Lender within 31 days of receipt of this notice*(Grace Period).3. If you do not remedy all the Default(s) within the Grace Period, or if a default of the same type as specified in this notice occurs during the Grace Period, then:3.1 The total amount outstanding plus lender’s costs and charges will automatically be due and payable and the lender may commence proceedings for the total amount outstanding, and