NSWNSWSC

Australian Mortgage Finance Services Pty Ltd v Patel

[2026] NSWSC 1085

Supreme Court of NSW|2026-09-04|Before: Fagan J

View on NSW Caselaw

At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2026-09-04

Before

Fagan J

Catchwords

MORTGAGES AND SECURITIES — Mortgages — Duties, rights and remedies of mortgagee — Possession of land EQUITY — Unconscionable conduct — Special disability or disadvantage — No inequality of bargaining power — Cross-claim CONTRACTS — Unfair contracts — Australian Securities and Investments Commission Act 2001 (Cth), ss 12BF, 12BG — No basis for claim CONTRACTS — Unjust contracts — Contracts Review Act 1980 (NSW) – Whether guarantors to mortgage understood transaction – No special disadvantage – No unjust or unconscionable advantage

Source

Original judgment source is linked above.

Catchwords

MORTGAGES AND SECURITIES — Mortgages — Duties, rights and remedies of mortgagee — Possession of land EQUITY — Unconscionable conduct — Special disability or disadvantage — No inequality of bargaining power — Cross-claim CONTRACTS — Unfair contracts — Australian Securities and Investments Commission Act 2001 (Cth), ss 12BF, 12BG — No basis for claim CONTRACTS — Unjust contracts — Contracts Review Act 1980 (NSW) – Whether guarantors to mortgage understood transaction – No special disadvantage – No unjust or unconscionable advantage

Judgment

Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.

Medium Neutral Citation: Australian Mortgage Finance Services Pty Ltd v Patel [2026] NSWSC 1085

Hearing dates: 3-4 September 2026

Date of orders: 4 September 2026

Decision date: 04 September 2026

Jurisdiction: Common Law

Before: Fagan J

Decision: (1) Judgment for the Plaintiff for Possession of that parcel of land being Lot 13 in Deposited Plan 1196365 being the land more particularly described in Folio Identifier 13/2296365 situated at and known as 12 Bejar Street, Schofields in the State of New South Wales.
(2) Order the defendants pay the plaintiff’s costs on an indemnity basis.
(3) Dismiss the cross-claim.
(4) Order that the cross-claimants pay the cross-defendants costs of the cross-claim on an indemnity basis.

Catchwords: MORTGAGES AND SECURITIES — Mortgages — Duties, rights and remedies of mortgagee — Possession of land
EQUITY — Unconscionable conduct — Special disability or disadvantage — No inequality of bargaining power — Cross-claim
CONTRACTS — Unfair contracts — Australian Securities and Investments Commission Act 2001 (Cth), ss 12BF, 12BG — No basis for claim
CONTRACTS — Unjust contracts — Contracts Review Act 1980 (NSW) – Whether guarantors to mortgage understood transaction – No special disadvantage – No unjust or unconscionable advantage

Australian Mortgage Finance Services Pty Ltd v Patel [2026] NSWSC 1085 | Case summary | Zoe

The plaintiff is the assignee of a second mortgage over residential property at 12 Bejar Street, Schofields (the Land), of which the defendants, Mr and Mrs Patel, are the registered proprietors. By its statement of claim filed on 11 August 2025 the plaintiff now claims judgment for possession of the Land. The defendants were legally represented for most of the history of the proceedings but were unrepresented at the final hearing.
On 28 March 2024, SSMM Pty Ltd, a company of which the first defendant, Mr Patel, is the director, borrowed $500,000 from ASCF Funding Solutions Pty Ltd. The defendants agreed to guarantee SSMM’s liability on the loan and executed the second mortgage of the Land as security. The loan fell due for repayment on 28 July 2025, after ASCF had granted four extensions of one month each. On 29 July 2025, when repayment was not made by the borrower, ASCF assigned its mortgage to the plaintiff. The plaintiff has served all notices that are requisite preliminaries to the exercise of its enforcement of the security. The defendants take no issue about compliance with those formalities.
The defendants are both aged in their early 50s. They were married in India and came to Australia in 2007. The first defendant studied chemical engineering at tertiary level in India and was admitted to a Bachelor degree in that field in 1990. He was thereafter employed as a sales engineer and design engineer in India for 17 years prior to moving to Australia with the second defendant. Upon arrival in Australia, the first defendant caused SSMM to be incorporated in 2008. He commenced to advertise on the internet a business under the name Waterman Engineers Australia, which he intended would be conducted by SSMM. He was unsuccessful in securing any contracts for that business and it has never generated any income.
The defendant also attempted to commence a business of selling cosmetic face moisturising products. That also did not generate any income. Both of those businesses, so far as they progressed, were undertaken in the name of SSMM. From 2016 to 2021 the first defendant derived some income as an Uber driver. The second defendant was employed as a factory process worker from about the time of her arrival in Australia until 2024. She had obtained a Bachelor of Commerce degree in India in 1989 but she has not taken employment in Australia that would utilise her level of education.
In 2022 and 2023 the first defendant borrowed $300,000 from a friend at 20% per annum interest and another $125,000 from a second friend at 18% per annum. Those funds were advanced in instalments over about 12 to 18 months. The borrowed funds were used by the first defendant to pay for Google advertising for the businesses that were conducted in the name of SSMM and for the production and purchase of the cosmetic products that he had hoped to sell. The borrowed money was also used, to some extent, for personal outgoings. The land is valued at about $2 million and is subject to a first mortgage to AMP Bank for $900,000. The money that the first defendant borrowed from friends was used in part to service that mortgage debt.
During 2023, the first defendant was pressured by his friends to repay their loans. He approached a finance broker, Universal Finance Commercial, to help him obtain a loan of $400,000. The first defendant completed a loan application on the broker’s form on 28 February 2024. Mr Girohta of Universal Finance Commercial advised the first defendant during March 2024 that “there was a potential loan offer from ASCF”. To pursue that potential loan offer, the first defendant was required to obtain a valuation of the Land at his own expense, which he did. Mr Girohta advised that personal guarantees from the first defendant and his wife would be required, as well as a second mortgage over the Land.
It is not clear on the evidence how the defendants received ASCF’s application form for a loan but they did receive it and filled it out. Both of them signed it with digital signatures. The application was submitted to ASCF on 22 March 2024. It was expressed to be made by the second defendant, personally, and they specified SSMM as a “trustee” and Waterman Engineering as a company name. The “net amount required” was specified on the application to ASCF as $374,995. The loan purpose was given as “business working capital”. The application form provided for an entry entitled “Loan Repayment Strategy”. That part of the form was filled out with the words “sale of property”.
One question on the application form was in the following terms: “4. Are you under any financial pressure from a family member, friend or third party to apply for a lending product?” Both defendants, as applicant 1 and applicant 2, checked the box under this question marked “no”. In an assets and liabilities schedule that was part of the loan application, the defendants’ debt to AMP Bank was disclosed but there was no reference to the $425,000 debt that was owed to the first defendant’s friends, which they were pressing to have repaid.
On 25 March 2024, ASCF made an offer of finance by letter addressed to SSMM as borrower and to the defendants as guarantors. A table summarising the terms of that offer included the following:

On the last page of the letter of offer a disbursement summary was set out showing that on settlement there would be withheld from the advance a total of $125,045, including $99,000 for the interest payable over the 12 months term of the loan at the Discount Rate of 1.65% per month (19.8% per annum). The disbursement schedule showed that the net amount that would be available to the borrower at settlement would be $374,955.
A document entitled “Borrowers/Guarantors Privacy Declaration” was attached to the letter of offer. It contained clauses stating that the guarantors accepted the terms and conditions contained in the letter of offer and that they directed ASCF to proceed with arranging formal loan documentation. The Declaration provided that the borrower and guarantors agreed to pay the application fee, establishment fee, and other fees.
Clause 4 of the Declaration commenced with the words, in bold type, “WARNING - We recommend you get legal advice”. There was provision made for the Declaration to be signed by the two defendants. It appears that they both signed it and initialled the letter of offer at 6.14pm and 6.16pm respectively on 25 March 2024. The documents appear to have been signed and transmitted to ASCF electronically.
ASCF then prepared on 26 March 2024 a Finance Offer addressed to SSMM, which included eight pages of details terms and a “Borrower acknowledgement and signing” page plus two “Guarantor acknowledgement and signing” pages, one for each guarantor. Accompanying the Finance Offer was a mortgage in registrable form, a Memorandum of Common Provisions, a Cheque Directions schedule, a “Borrower’s Advice Declaration” and two documents entitled “Guarantor’s Advice Declaration”, one for each of the defendants.
When this documentation was sent out to the defendants to be executed by themselves and on behalf of SSMM, they were informed that they would each have to engage, separately, an independent solicitor before whom the documents would be executed. For that purpose, the first defendant engaged Mr Satya, a solicitor of New Age Lawyers, on his own behalf and on behalf of SSMM. The second defendant engaged a Mr Sidhu for the purpose of having her signature witnessed as required by ASCF.
On 26 March 2024, in anticipation of those documents being signed the next day, Mr Harrison Gaffney, a loans administration officer employed by ASCF, conducted a Zoom meeting with both defendants. He asked each of them individually a series of questions to ensure their understanding of the nature and consequences of the transaction. Both of them answered “No” to a question whether they were under any financial pressure from any source. Both said that they understood that the Land was to be sold to repay the loan in 12 months. The first defendant also said that he did not expect it to be necessary to sell the Land because he anticipated that he would secure contracts for the Waterman Engineers business that would generate funds for early repayment. Both defendants answered that they were not aware of any difficulty that would stand in the way of selling the Land to repay the loan.
During the Zoom meeting the first defendant invited ASCF to look at his Waterman Engineers website to see the profile of the business that was conducted by SSMM, in which he said he expected to enter into remunerative contracts. After the meeting Mr Richard Taylor, a director of ASCF, looked at the website. He took into account the promotional statements that appeared on that website in reaching a decision that it was not necessary, in ASCF’s interest, to require an accountant’s certificate as to having advised the defendants on the financial viability, or risks, of the loan contract.
The Waterman Engineers website was a thoroughly misleading promotion of the business. It represented that those conducting the business had extensive experience in wide ranging aspects of water‑based industry. Unbeknownst to Mr Taylor, or anyone else at ASCF, those representations were entirely untrue. The business had never undertaken any projects or generated any income.
On 27 March 2024 the defendants met with their respective solicitors and executed all the documents. The Finance Offer Schedule included the following text, in a section entitled “Security”:

The effect of the first defendant’s evidence is that he fully understood the meaning and practical effect of the above Terms. Quite apart from his acknowledgments to that effect in the evidence he has given, I would attribute such an understanding to him in any event. He is a mature adult, tertiary educated. The Terms referred to are very clearly set out in documents that were provided to him and indeed set out repeatedly in the loan offer and then subsequently in the documents that had to be executed in order to conclude the transaction.
The second defendant gave evidence that she knew her husband was arranging a borrowing to pay out the friends to whom he owed substantial sums of money. She said that she placed full trust in the first defendant to secure a loan for this purpose. The second defendant gave evidence that she did not wish to know the details of the proposed borrowing and that she told her husband that she did not need to know. To the extent that the second defendant did not appreciate the detail of the borrowing transaction, it cannot be said that in entering into it she was under any disadvantage that would engage the doctrine of unconscionable conduct in equity.
The second matter that the defendants allege put them at a disadvantage in the transaction is that they did not know, “the level of legal and financial risk associated with the transaction”. On their own evidence both defendants knew that there was a risk associated with whether the first defendant would secure for SSMM’s Waterman Engineering business the contracts he was hoping to enter into for work to be carried out in the Middle East. The first defendant knew the level of that risk very well and better than anyone else could possibly know it because he was the principal of the business. Both defendants knew that their house would have to be sold to repay the loan from ASCF if those contracts did not come through or were unprofitable. They acknowledged that in their Zoom call with Mr Gaffney. The sale of the house as the “exit strategy” was recognised by them on the loan application documents signed by them.
The second defendant says that her command of written English is “basic”. However she freely and promptly answered Mr Gaffney’s questions during the Zoom meeting. Those questions were all posed in English and she answered in English, albeit in one word answers. The second defendant said with respect to the risk of Waterman Engineering not securing profitable contracts that she was content to rely upon her husband’s judgment that the prospects were favourable.
I am not satisfied that there was any disadvantage to either defendant with respect to their appreciation of financial risk associated with the borrowing transaction. The legal risk, that the house could be sold at the instance of the mortgagee if they were not able to repay the loan from any other source, was self‑evident to both defendants and I am satisfied that they understood it.
The defendants allege disadvantage in entering into the transaction in that they did not receive independent advice with respect to the meaning and practical effect of the transaction or with respect to its financial applications and that the mortgagee did not take reasonable steps to ensure that they received such advice and that they understood all aspects of the loan and mortgage. I reject those propositions.
The defendants were urged to obtain independent legal advice. They both signed declarations that they had done so. In addition, ASCF’s Zoom meeting was a means by which ASCF obtained direct assurance that both defendants understood the transaction. Further, in any event, the transaction was a very straightforward one to be comprehended by two individuals with university degrees. The absence of financial advice to the defendants was not a disadvantage to them because the first defendant well understood the financial position in so far as that understanding depended upon the first defendant’s judgment, the second defendant was content to rely upon him. The contingency that the house would have to be sold if the loan could not be repaid from any other source and the measure of commercial risk with respect to securing contracts with prospective Middle Eastern customers were matters contemplated and assessed by the first defendant, on behalf of himself and his wife.
Moreover, it would have been self‑evident to both defendants that they had no other asset that could be realised to discharge their debt of $425 000, owed to the first defendant’s friends. The only means of repayment was either to borrow against the house in the hope that they would be able to repay the borrowings with earnings over the next 12 months, or to sell the house forthwith. If they had not borrowed from ASCF, with the other debtors pressing they faced either bankruptcy or a judgment against them. Either of those means of enforcement would have led to sale of the house to discharge the existing debt. With that being their self‑evident situation, evidently well appreciated by them, they were at no disadvantage by not having independent financial advice.
For the defendants to be entitled to relief under the equitable doctrine of unconscionable conduct, it would be necessary for them to show that they were at some special disadvantage in undertaking the loan, guarantee and mortgage transaction and/or under some disability with respect to protecting their own interests. I am not satisfied that there was any special disadvantage to either of them, for the reasons already given. Further there is no evidence from which I could conclude that the lending company, ASCF, was on notice of any circumstance that affected the defendants’ capacity to protect their own interests or placed them at a disadvantage.
As ASCF would have perceived the matter based upon the representations made to it, the first defendant was carrying on a business through SSMM that had substantial experience in its field he expected to enter into contracts that would return a profit during the period of the loan. ASCF was expressly informed, falsely, that there was no financial pressure on either the business or the defendants individually.
For the above reasons, there is no basis for granting relief to the defendants on the basis of unconscionable conduct according to the principles of equity.

In par 16 of the cross‑claim, the Terms of the transaction are said to have been unfair “because the interest rates and the fees and costs are grossly excessive”. The interest rates are those as specified as a discount rate and a standard interest rate as listed at Items a and b above which I have quoted from par 8 of the cross‑claim: see [28]. In my view, those interest rate terms fall within the description in s 12BI(1) of the Act as defining “the main subject matter of the contract”. The whole commercial purpose of this lending transaction was for ASCF to earn interest on its capital by lending it out. ASCF is a finance company and interest charges are the essential feature of contracts entered into by a finance business. As those interest provisions fall within the description of “the main subject matter of the contract”, the effect of s 12BI is that they are not capable of being characterised as “unfair” for the purposes of the cause of action that is prescribed in s 12BF.
Further, in any event, I do not see how the interest rate terms could be characterised as unfair in the circumstances of this case. The discount rate of 19.8% p.a. was the only rate that the borrower would ever have to pay, because interest at that rate was withheld from the settlement funds retained by the lender, and was therefore available to be drawn down by the lender to discharge the borrower’s obligations for the whole agreed term of the loan. That rate was less than the rate payable by the first defendant on the first $300,000 from his friend, namely 20%. It was not much more than the rate at which he had borrowed the $125,000 from his other friend, being 18%. In the circumstances, there would be no justification for characterising ASCF’s interest rate terms as unfair.
Turning to the fees that are said to be unfair, the only fees payable were those listed from the letter of offer: see [11] above. I see no basis for concluding that they may be characterised as unfair. They comprise a loan establishment fee, a brokerage fee which was payable to the defendants’ own broker and legal fees totalling $3,450 including disbursements.
Lastly, it is said that the term relating to ASCF’s entitlement to recover its costs was grossly excessive, and therefore unfair. The wording of the provision regarding recovery of costs of itself defeats that contention. What the contract term provided was that the plaintiff can recover “reasonable costs incurred in connection with exercising, enforcing, or preserving its rights, powers, and remedies”: see [29] above. Where the costs that are recoverable are no more than those that are reasonable, according to the wording of the term in question, it seems to me to be impossible to say that it is unfair within the meaning of s 12BF or s 12BG. For those reasons, I do not think that the defendant’s claim for relief in their cross‑claim, relying upon the Australian Securities and Investments Commission Act provisions, can be sustained.

The defendants invoke s 7 of the Contracts Review Act 1980 (NSW). They say that the contract or some terms of it were “unjust in the circumstances relating to the contract at the time it was made”. They refer, firstly, to the alleged circumstance that they did not receive any or sufficient legal advice to enable them to know or understand the meaning and practical effect of the terms, or the level of legal and financial risk associated with the loan agreement, guarantee and mortgage. I have already dealt with those contentions in addressing the defendant’s case on unconscionable conduct.
I see nothing unjust about the inclusion of the impugned terms in all the circumstances in which the loan, guarantee and mortgage transaction was entered into. I take into account the level of knowledge of the transaction that was held by the first defendant, the degree to which the second defendant chose to place her trust in his judgment without inquiring into the matter herself, and the respects in which the first defendant misled ASCF by referring the company to the Waterman Engineering site and not informing the company of the existing debt that the first defendant’s two friends were pressing him to repay.
In relation to the Contracts Review Act, it is alleged that there was a material inequality in bargaining power between ASCF and the defendants. There was an inequality between them in the sense that ASCF apparently had funds and was in a position to lend them, and was carrying on a business successfully, whereas the defendants were in a poor financial position and were supplicants for lending. However, inequality of that nature as between a large financial institution and individual guarantors, or as between the large lending institution and a small proprietary limited company seeking a business loan, is not sufficient of itself to give rise to an inequality in bargaining power that would render a contract unjust. The difference in financial standing between the respective parties is simply typical of a borrowing transaction. There is nothing over and above that to identify an aspect of a difference in bargaining power that would make this contract unjust.
The defendants also submit that there was a lack of opportunity for negotiation. I do not accept that proposition. There is no evidence of any endeavour to negotiate. In any event, the first defendant was aware that the interest rate that he was being offered by ASCF was little different from that which he was obliged to pay to his two friends. That may explain why he did not seek to negotiate, as he was already indebted on the basis of a comparable rate and had held the existing borrowings over approximately two years by the time the transaction was entered into with ASCF.
Lastly, the defendants plead that the terms of the lending contract imposed conditions unreasonably difficult to comply with, and not reasonably necessary for the protection of ASCF’s legitimate interests. There is no justification for either of those propositions. Compliance with the terms simply required the payment of money. ASCF’s entitlement under the transaction to receive that money, by way of interest and then repayment of principal, was precisely the respect in which it needed to be protected by the terms of the transaction, because that was the nature of the business that it was doing.

None of the defendants’ pleaded bases for relief in their cross‑claim are sustainable. In the course of argument the first defendant sought to invoke ss 12CA, 12CB, and 12CD of the Australian Securities and Investments Commission Act. He made no formal application to amend the cross‑claim to enable those sections to be relied upon. I did not invite such an application, or explain to the defendants what they would need to do in order to pursue reliance upon those sections, for the reason that on the facts that I have already discussed in these reasons, none of those provisions would have any prospect of justifying a grant of relief for the defendants.
Section 12CA embodies in statutory form the principles of unconscionable conduct in equity. A claim based upon that section would fail for reasons that I have already given. Section 12CB prescribes a basis of action for unconscionable conduct without tethering it to the principles at general law and equity. However, for reasons that I have given in relation to the equitable doctrine, the Contracts Review Act and s 12BF and 12BG, an allegation of unfair or unconscionable conduct under s 12CB could not be substantiated.
In the closing stages of the hearing the first defendant made reference to s 12CD, which is concerned with misleading and deceptive conduct. There is no evidence before me that could justify a grant of leave to amend to plead a cause of action based upon that section. The misleading and deceptive conduct in relation to this transaction was that of the first defendant himself. He made material misrepresentations to ASCF by referring to his website, on which there were most egregious exaggerations of the business of SSMM. He failed to disclose his existing debts totalling $425,000 and he made no mention of the pressure that he was under to pay those debts.
In the first defendant’s closing submissions he also suggested that the interest rates charged by ASCF constituted a penalty. No application to amend to plead the doctrine of penalty was made and such an application would have no prospects in the context of a case where the interest regime provided a standard rate and a discount rate. Such a regime is typical of contracts of this type and has repeatedly been found by the courts not to involve any infringement of the prohibition on penalties.
Lastly, the defendants sought to characterise this transaction as “asset lending” and as unconscionable on that basis. The first defendant referred to Stubbings v Jams 2 Pty Ltd (2022) 276 CLR 1; [2022] HCA 6. The decision in that case would support a finding of unconscionable conduct where a loan is made to a person who lacks commercial understanding, where the person’s inability to repay loans from his or her own income or other assets is known to the lender and where those financial circumstances have the consequence that default in payment, and consequent loss of the equity in property given as security, is inevitable as a matter of objective fact.
The present case is nothing like the “asset lending” transaction that was impugned in Stubbings v Jams 2 Pty Ltd. The borrowing by SSMM was expressly stated to have an exit strategy of selling the property. It was in the nature of a bridging loan. Putting aside the prospect of securing income from expected trade contracts, that is, interim finance until an intended resolution could take place, the lending was made on the explicit basis that at the end of 12 months the property would be sold and the debt would be repaid out of the proceeds. There was no question of the lender taking advantage of the defendants, by putting itself in a position to sell up their property without them appreciating that that was inevitably going to follow. There would be no reasonable prospect of success of a pleading to support a grant of relief based upon an analysis of the transaction with ASCF as one of “asset lending”. Accordingly, I did not invite an application to amend the cross-claim to raise that issue, at the very late stage when it was first mentioned by the first defendant.

Australian Mortgage Finance Services Pty Ltd v Patel

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment

JUDGMENT

Unconscionable conduct in equity

Australian Securities and Investments Commission Act ss 12BF and 12BG

Contracts Review Act

Other unpleaded cross-claim contentions

Orders

Parties

Legislation Cited (4)

Cases Cited (2)