Stubbings v Jams 2 Pty Ltd & Ors

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.