Stubbings v Jams 2 Pty Ltd & Ors - [2021] HCATrans 163

[2021] HCATrans 163

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Melbourne No M13 of 2021

B e t w e e n -
JEFFREY WILLIAM STUBBINGS
Appellant
and
JAMS 2 PTY LTD (ACN 600 173 117)
First Respondent
CONTERRA PTY LTD (ACN 078 900 017)
Second Respondent
JANACO PTY LTD (ACN 006 209 105)
Third Respondent

KIEFEL CJ
KEANE J
GORDON J
STEWARD J
GLEESON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA BY VIDEO CONNECTION TO BRISBANE, MELBOURNE AND SYDNEY

ON THURSDAY, 14 OCTOBER 2021, AT 9.51 AM

____________________

KIEFEL CJ: In accordance with the remote hearing protocol, I will announce the appearances for the parties.

MR N.C. HUTLEY, SC appears with MR A.M. DINELLI and MR A. CHRISTOPHERSEN for the appellant. (instructed by Garland Hawthorn Brahe Lawyers)

MR B.W. WALKER, SC appears with MS J.D. WATSON for the respondents. (instructed by Christopher William Legal)

KIEFEL CJ: Yes, Mr Hutley.

MR HUTLEY: Thank you, your Honour. Mr Jeruzalski practised at the relevant time as a solicitor arranging loans on behalf of lenders for about 30 years. He generally followed the same system when arranging those loans. He would not arrange loans to individuals. He would never meet a borrower or guarantor, nor would he lend to a person who approached him directly. Your Honours, they are the findings of the trial judge at respectively paragraphs 54, 61 and 62.

He would not do, as he said in evidence, and your Honours will see this at the book of further materials page 61, lines 25 to 26, what he described as “code loans”. That is referring to the national credit code. He also required every loan to be secured by a guarantee in the form of a mortgage over land, and that is trial judge paragraph 57.

Given that he would not meet a borrower or a guarantee, he relied on intermediaries such as Mr Zourkas to bring in business and do all things necessary to enable the loans to be made, as was found by his Honour the trial judge at paragraph 61 and paragraphs 221 to 224.

In this case, Mr Zourkas approached him seeking a loan for $1.192 million and his practice, or system, does not involve the provision of any kind of application form, does not receive any written applications for loans, but might contain details or particulars of the borrower or guarantor’s income, assets or finance or proposed means of repayment. If your Honours go to the further materials at page 71, at lines 8 to 19, he said:

most of the work I do is verbal, oral. We have, um, people ringin’ me every day, and, um, if it sounds okay . . . I’ll ask them to get a valuation. I’ll ask them to, ah, provide us with the funds to get a valuation. All our lending is based on valuations. We don’t . . . look at . . . the applicant, unless there…

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: [2021] HCATrans 163
Decision Date

CaseChat Overview and Summary

The High Court of Australia considered a dispute between the applicant, Ms Stubbings, and the respondents, Jams 2 Pty Ltd and others, concerning the enforceability of a mortgage over the applicant's property. The applicant sought to set aside the mortgage, alleging it was procured by undue influence and unconscionable conduct.

The central legal issues before the High Court were whether the mortgage was voidable at the applicant's instance due to undue influence or unconscionable dealing, and if so, whether the respondents, as mortgagees, had actual or constructive notice of the circumstances giving rise to the applicant's equity. Specifically, the court had to determine if the respondents had taken the mortgage in good faith and for valuable consideration without notice of the applicant's equity.

The High Court held that the applicant had established undue influence and unconscionable conduct in relation to the mortgage. The court reasoned that the respondents, as mortgagees, had constructive notice of the applicant's equity because the circumstances surrounding the execution of the mortgage were such as to put a reasonable person on inquiry. The court applied established principles of equity concerning undue influence and unconscionable dealing, emphasizing the duty of a mortgagee to inquire into the circumstances of the transaction when there are suspicious features, particularly where a third party benefits from the transaction and the mortgagor is vulnerable.

The High Court allowed the appeal, setting aside the mortgage and ordering that the respondents' caveat be removed from the applicant's title.

Orders