Claim under Contracts Review Act
25Thomas in her affidavit says that she was given no proper advice by Mr Brophy. He did not ask her why she was entering into the agreement, how she would service the loan, what was any interest she was obtaining in the Pentridge Project, her intention to the loan purposes set out in the loan document, asked anything about Wine Bloc Pty Ltd, asked whether she would be able to make the required payments. The last was really irrelevant as the moneys were subtracted in advance. She also says, of course, that she was given no independent financial evidence. As to the second loan and her discussions with Mr Evans, she makes the same complaints. Neither solicitor has been joined as a cross defendant. As far as the certificate of independent financial advice of Mr Geldings is concerned, Thomas says that Allison was in the room throughout the conference and apart from the conversation which I have referred to, said that Mr Evans asked no further questions about Pentridge, about Allison, about Wine Bloc Pty Ltd or the value of the strata units. As far as her relationship with Woodworth was concerned, she had met him earlier and that Allison had told her in June 2010 that he had arranged for them to meet with Woodworth about the Pentridge Project. "Michael is a great banker who has been involved with Citibank and left Citibank to do his own business" and says that when Woodworth went to the Point Piper unit on 7 June he had said "The Pentridge Project is a really fantastic business, it has a range of aspects to it. It is a historical venue, attracts a lot of tourism, it is no risk to you and you really should just enter into the loan." Whether that is true or not as a matter of general principle it might give rise to some claim against Woodworth as the agent of the borrowers and is no answer to a claim by the lender. The Contracts Review claim is really put forward on the basis that Thomas is or was 69 years of age when entering into the loan agreements, she has not been in employment, she did not understand the various documents which she signed, she had no opportunity to negotiate the terms, she did not obtain competent and/or independent legal advice, she received no funds from the plaintiff, no statements about the agreements, and that Driat through Straton made no enquiry about any proposed loan between her and Wine Bloc Pty Ltd. Not all these allegations are correct but they are clearly directed to s 9 of the Contracts Review Act 1980.
26In this matter the defendant's age is quite irrelevant. She appeared as an intelligent woman. Before she bought the Point Piper unit she had a significant share portfolio. She understood what a mortgage was. As chairman of the strata corporation she had carried out the required duties and she had appeared before the Woollahra Council to make representations in respect of a proposed development. She was perfectly capable of understanding what she was doing. I should add, so far as any claim for general equitable relief is concerned, she was under no special disadvantage. That claim would have to fail. It is true there was probably little opportunity for negotiation on the terms of the contract, but that would be the position with the vast majority of loan and mortgage documentation. Neither contract was on its face unfair so far as the terms were concerned. The interest rate on Wildes Meadow was reasonable. The interest rate on the Point Piper loan was, of course, very high, but it was only for a three month period. It was a second mortgage, and experience is that interest rates on such short term loans are often high. There was, of course, no difficulty about ability to make the interest payments payable under the loan as they were paid in advance. That means in this case that unless there were default in payment on the due date there could not be any default for failure to make payments during the term of the mortgage. So far as the advice given by the various solicitors and the financial adviser is concerned, without having their evidence, it is very difficult to come to any firm conclusion. So far as evidence as to independent advice and the purposes of the transaction are concerned, the documents signed were very short. I find that they were read by Thomas or explained to her even if she just signed them because the purpose of her attending on the solicitors was to sign documents. As far as Wildes Meadow is concerned, Mr Brophy was acting as her solicitor on the mortgage and not just to sign her up on the documents and I do not accept that all he did was to act as Thomas said that he did when she signed those documents.
27It is, of course, true that relief can be given under the Contracts Review Act if matters will make a contract unjust even if the other side does not know of those matters. However, it is far more difficult to obtain relief in such circumstances. In this case, Mr Straton, representing Driat, did seek and was given information as to the purposes of the loan. He was in fact told that the Pentridge Project was a short term project which would deliver high rewards to the borrower. There was no reason for him to disbelieve this. His solicitor was under instructions to obtain various documents prior to a loan being made, these including, of course, the loan deed, the mortgage and the various certificates which were obtained, and particularly in this case a declaration as to the purpose of the loan. Those were all obtained. There was no reason whatsoever for the solicitor acting as agent for Straton or the plaintiff to disbelieve what was stated in those documents except, perhaps, the certificate of independent financial advice signed by Allison, and that I think, was not sufficient to put the solicitor on notice of anything untoward.
28The real argument of counsel on behalf of Thomas was that this was a pure asset lending transaction and in those circumstances the contracts were unjust at the time they were entered into. I adhere to what I said in Accom Finance Pty Ltd v Mars Pty Ltd [2007] NSWSC 726 at [52]:
"...Cases such as Elkofairi v Permanent Trustee Company Limited [2002] NSWCA 413 and Perpetual Trustee Company Limitetd v Khoshaba [2006] NSWCA 41 are not authority for some general proposition that a lender of money on security of real estate to a borrower who has no ability through his own income or assets to repay the loan, is guilty of taking part in some unconscionable and predatory conduct. That may be the position if there is no means disclosed for payment of interest, but a good proportion of borrowers for fixed terms in any mortgage situation would be proceeding on the basis that the principal debt would be repaid by new borrowings or by sale of the mortgaged land. The position is of course different if the lender knows that there will be default in payment of the interest or principal so that mortgagee sale will be the inevitable result. This latter conduct is the type of pure asset landing that has been found unconscionable; the former is not."
Subject to some qualifications as to risk this was accepted on appeal: [2008] NSWCA 343 at [99-100].
29In the present case the borrower, so far as the lender knew, had an interest in the Pentridge Project. The lender was told that by both Woodworth and by Allison, both of whom were agents of Thomas. The argument of counsel for Thomas is that the lender was required to do more to ascertain whether or not the Pentridge Project was viable and to make some inquiries as to the arrangements between Thomas and the Wine Bloc company and to find out whether a charge said to be going to be given in the future was in fact intended. This obligation is said to exist without any evidence at the time the loan was made the Pentridge Project was not viable. Unless there is some reason to put the lender on notice that the stated purpose for the loan is not in effect true, I do not think it reasonable to suggest, in a case where the borrower has a separate solicitor acting that there is any such duty on the lender. The decision in Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 at [92] supports this. Driat was told the reasons for the loan; it had no reason to think that the moneys advanced would not be repaid. In fact Thomas, so far as the second loan was concerned, said that its purpose was to get her out of her difficulties. It may well be that she could have got out of her difficulties at that stage by selling Wildes Meadow but she chose to borrow further funds. No doubt she was prepared to go along with what Allison suggested, but that does not make the transaction a pure asset lending transaction.
30Finally, counsel for Thomas placed some reliance on Yerkey v Jones (1938-9) 63 CLR 649. That case is not really in point. This is not a case of undue influence; neither is it a case of a wife or perhaps de facto not knowing what she is signing. In fact Thomas has not said she did not understand what she signed, although she complained of the explanation given to her. Second, this is not a case of a creditor giving to a husband the task of obtaining the wife's signature or leaving it to the husband to take the wife to the wife's solicitor or to the creditor's solicitor. While Driat knew that Thomas and Allison were in a de facto relationship, and assuming the Yerkey v Jones principles apply in such cases, which is not established, Driat and its solicitor had every reason to think that Thomas knew what she was doing, she was not a volunteer as far as they knew, and she was independently advised, at least on the first loan. As to the second loan, while Mr Evans might have been advised to see Thomas on her own, the position remained that Thomas was well aware of what she was doing and in fact wanted to proceed.
31In all these circumstances I consider it clear that the claim under the Contracts Review Act must fail. In those circumstances it is not necessary to consider restrictions upon relief imposed by s 6 of the Contracts Review Act.