Fast Fix Loans Pty Limited v Mladenko Samardzic and Anor [2011] NSWSC 19 | Case summary

Defence/cross-claim under CRA 64I propose to deal with the CRA issues first. As was said by Young JA in Spina v Permanent Custodians Ltd [2009] NSWCA 206 at [74]: " ... it is always preferable to deal with the Contracts Review Act point first. Not only is the jurisdiction probably wider under that Act than when dealing with equitable principles of unconscionability, but where, as has happened time and time again through history, statute has been enacted to cover the same ground as an equitable principle, the equitable principle is usually put into abeyance. After all, equity only operates where the common law is inadequate." 65The relevant provisions of the CRA are: "7(1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following: (a) it may decide to refuse to enforce any or all of the provisions of the contract, (b) it may make an order declaring the contract void, in whole or in part, (c) it may make an order varying, in whole or in part, any provision of the contract, (d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that: (i) varies, or has the effect of varying, the provisions of the land instrument, or (ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument. (2) Where the Court makes an order under subsection (1) (b) or (c), the declaration or variation shall have effect as from the time when the contract was made or (as to the whole or any part or parts of the contract) from some other time or times as specified in the order. (3) The operation of this section is subject to the provisions of section 19." 66Section 4(1) provides a non-exhaustive definition of "unjust". " Unjust includes unconscionable, harsh or oppressive, and injustice shall be construed in a corresponding manner." 67Assistance in ascertaining the intended content of "unjust" is derived from s 9: "9 (1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of: (a) compliance with any or all of the provisions of the contract, or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following: (a) whether or not there was any material inequality in bargaining power between the parties to the contract, (b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation, (c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract, (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract, (e) whether or not: (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, because of his or her age or the state of his or her physical or mental capacity, (f) the relative economic circumstances, educational background and literacy of: (i) the parties to the contract (other than a corporation), and (ii) any person who represented any of the parties to the contract, (g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed, (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act, (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act: (i) by any other party to the contract, (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract, (k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and (l) the commercial or other setting, purpose and effect of the contract. (3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made. (4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made. (5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made." 68Section 19, to which s7(3) made reference, provides: "19(1) An order made under section 7 (1) (b) or (c) has no effect in relation to a contract so far as the contract is constituted by a land instrument that is registered under the Real Property Act 1900 ..." 69In the present case there were two contracts between the plaintiff and the defendants - the deed of loan and the registered mortgage. The registered mortgage is clearly a "land instrument" as contemplated by s19(1). The deed of loan is not. Accordingly, as a preliminary issue it is necessary to decide whether s19(1) could prevent the defendants from obtaining an order under s7(1)(b) or (c) if they were otherwise entitled to it. 70Section 41 of the Real Property Act 1900 (RPA) provides: "41(1) No dealing, until registered in the manner provided by this Act, shall be effectual to pass any estate or interest in any land under the provisions of this Act, or to render such land liable as security for the payment of money, but upon the registration of any dealing in the manner provided by this Act, the estate or interest specified in such dealing shall pass, or as the case may be the land shall become liable as security in manner and subject to the covenants, conditions, and contingencies set forth and specified in such dealing, or by this Act declared to be implied in instruments of a like nature. " 71The mortgage provides that the memorandum annexed is incorporated. There is, however, no incorporation of the deed of loan in the mortgage. There is no payment obligation in the mortgage. The payment obligations are in the deed of loan. The relevant provisions of the mortgage are set out in the following paragraphs. 72In the mortgage, "secured monies" are defined as: ""Secured monies" means all monies due and payable or from time to time to become due and payable by the Mortgagor or the Borrower or the Principal to the Mortgagee on any account whatsoever including without limitation under a loan agreement or this Mortgage, and whether such monies are owing absolutely or contingently and whether presently or in the future, and whether or not the Mortgagee is the original chargee in whose favour this mortgage was given, or an assignee of that original chargee, and whether or not the Mortgagor consented to or knew about any assignment, but excluding monies payable under a covenant or stipulation which would otherwise be (and to the extent that they would otherwise be) mandatorily rendered void by applicable statute;" 73Included in the mortgagor's general undertakings is: "2.1 The Mortgagor shall: (a) (Payment of Secured Monies) Pay the Secured Monies as and when they become due and payable in accordance with the terms of any agreement between the Mortgagor and Mortgagee or in the absence of any such agreement or after default under any such agreement, on demand; (b) (Interest) Pay interest on any part of the Secured Monies which has become due and payable and remains unpaid (including interest payable under this clause 2). (i) In accordance with the terms of any agreement in writing between the Mortgagor and the Mortgagee; or (ii) In the absence of any such agreement, on demand by the Mortgagee and without allowing for any credit balance in any account of the Mortgagor with the Mortgagee, such interest to be calculated at daily rests at whatever rate or rates the Mortgagee may from time to time determine without prior or other notice to the Mortgagor and to accrue both before and (as a separate and independent obligation) after any judgment; ..." 74Under the mortgage an Enforcement Event and the consequences of an Enforcement Event occurring are set out: "5.1 Each of the following, unless waived by a notice from the Mortgagee, is an Enforcement Event: (a) (Non payment) If all or any part of the secured monies, or any amount payable under this mortgage or any collateral document, is or are not paid for a period of five business days after the due date for payment thereof whether or not any formal or legal demand should have been made therefore ... 5.2 If any Enforcement Event occurs: (a) The secured monies shall at the option of the Mortgagee and not withstanding any delay or previous waiver of the right to exercise such option become immediately payable without the necessity for any demand or notice; and (b) This Mortgage shall at the option of the Mortgagee become enforceable (whether or not the secured monies have become so immediately payable)." 75The mortgage effectively only contains a covenant to pay "secured monies", which is defined to mean "all money which the Mortgagor owes to the Mortgagee". If the deed of loan were set aside insofar as the defendants are concerned, the mortgage would secure nothing. Accordingly, the question of whether the deed of loan should be set aside under the CRA will determine success or failure for the defendants in their defence and cross-claim. 76In Kowalczuk v Accom Finance [2008] NSWCA 343 Campbell JA, with whom Hodgson and McColl JJA agreed, summarised the principles concerning relief under the Contracts Review Act: "85 Comparatively early in the life of the Contracts Review Act , McHugh JA in West v AGC (Advances) Ltd (1986) 5 NSWLR 610 recognised, at 621, that the Act "... is revolutionary legislation whose evident purpose is to overcome the common law's failure to provide a comprehensive doctrinal framework to deal with "unjust" contracts." 86 McHugh JA recognised, at 620, that a contract can be unjust "because of the way it operates in relation to the claimant or because of the way in which it was made or both." He recognised that a contract could be unjust because it contained "substantive injustice" - which arises "because its terms, consequences or effects are unjust" , or because of "procedural injustice" - which arises "because of the unfairness of the methods used to make it" - or both. He recognised, at 621, that a contract can be "unjust" even if it is not unconscionable, harsh or oppressive. Notwithstanding the traditional view that equity took about circumstances in which it would hold that enforcement of a contract was unconscionable, a contract may be unjust even though the circumstances that give rise to that injustice are not known to the other party: Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256 at 277; Nguyen v Taylor (1992) 27 NSWLR 48 at 71 per Sheller JA; Perpetual Trustee Company Limited v Khoshaba [2006] NSWCA 41 at [94]-[96]. 87 In applying the Contracts Review Act , two distinct steps are involved. As stated by Brereton J in Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153; (2008) NSW Conv R 56-198 at [51]: "... The first is whether the contract was unjust in the circumstances in which it was made, having regard to the factors referred to in s 9. This is a conclusion of fact, albeit one of ultimate fact involving a broadly based value judgment [ Antonovic v Volker (1986) 7 NSWLR 151, 154-155 (Samuels JA, Kirby P agreeing); Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256, 270E (Samuels JA); Perpetual Trustee Company Ltd v Khoshaba [2006] NSWCA 41, [34]-[40] (Spigelman CJ), [106]-[111] (Basten JA)]. The second, which arises only if the first is resolved in the affirmative, is whether any and if so what relief should be granted; this involves the exercise of a judicial discretion [ Khoshaba , [34]-[36] (Spigelman CJ), [109] (Basten JA)]." 88 Thus, if the contract is found unjust by reason of circumstances not known to one of the contracting parties, it does not automatically follow that relief will be given to remedy that injustice." 77It was not submitted by Fast Fix that the defendants were precluded from relief under the CRA by the operation of s6. It was common ground that they were private persons who did not benefit from the transaction and were not part of the company. They did not enter into the deed of loan for the purpose of trade or business carried on or proposed to be carried on by them. 78When considering the question of unjustness, the CRA requires the Court to have regard to the public interest (s9(1)). In the present case it seems clear that as between the plaintiff and the defendants, what occurred amounted to asset lending. What the plaintiff was told about the defendants was that they were the parents of Milan and that they owned and lived in the Bowral property which was unencumbered. By reference to Milan's age, Mr Calleja should have inferred that his parents were in their mid to late sixties. While I have found that he did not have any detailed knowledge of their financial circumstances, it is significant that neither he nor Fast Fix made any inquiries as to that issue. 79Accordingly, I infer that Mr Calleja and Fast Fix were not concerned with the ability of the defendants to fulfil their obligations under the deed of loan should Milan and the company default. All that Fast Fix and Mr Calleja were concerned about was whether there was adequate security available in the case of such default. Asset lending in those circumstances raises public interest considerations. 80The current position under the CRA in relation to asset lending was summarised by Campbell JA in Kowalczuk as follows: "96 It can be accepted that pure asset lending - described by Basten JA in Khoshaba at [128] as being "to lend money without regard to the ability of the borrower to repay by instalments under the contract, in the knowledge that adequate security is available in the event of default" - is in at least some circumstances unjust within the meaning of the Contracts Review Act, or unconscionable: Elkofairi v Perpetual Trustee Co Ltd [2002] NSWCA 413; (2003) 11 BPR 20,841 at [57]-[59], [79] per Beazley JA (with whom Santow JA and MW Campbell AJA agreed); Khoshaba at [92] per Spigelman CJ (with whom Handley JA agreed on this point), [128] per Basten JA. However whether lending on the basis that the loan can adequately be repaid from the security, is in the circumstances of any particular case unconscionable or unjust, depends on other matters as well. Thus, in Elkofairi the facts that neither the applicant nor her husband had any income, the loan in question was for five years, and the security was over the applicant's only asset (involving the proposition that the applicant had no other resources from which to service the loan) and that the secured property was the applicant's home, were all relevant matters in reaching the conclusion that the transaction was both unconscionable and unjust. In Khoshaba , other factors relevant to the conclusion of injustice were that the applicants were a husband and wife, one of whom earned $43,000 pa and the other of whom was a pensioner, the lender had no information at all about the purpose for which the loan was being sought, and the security was over their home." 81Campbell JA, however, qualified that approach: "99 I would accept that in some circumstances knowledge of a high degree of risk that there might be a default in payment of interest or principal so that a mortgagee sale would result, could be unjust lending, even though it could not be said that the lender knows that there will be default. However I do not accept that a lender is always bound to carry out a detailed investigation of the practicality of an intending borrower actually being able to carry through the plan the borrower says he or she has for repayment of the loan. In the present case, Kowalczuk stated to Accom that he proposed to pay the Berowra loan out through bank refinance, and the Haberfield loan through refinancing with FirstLoan (the same brokers through whom Kowalczuk was able successfully to refinance the Berowra loan) and there was no occasion for Accom to doubt that he would be able to do so. Thus, even if Mr Conti is right in saying that there can be pure asset lending if the lender knew that there was a high risk that the intended means of repayment might fail, in the present case Accom did not have knowledge of that type." 82Further guidance on this issue is provided by the observations of Young JA (with whom Tobias and Campbell JJA agreed) in Spina v Permanent Custodians Ltd [2009] NSWCA 206: "89 The second is failure to realise the injustice where, allegedly as here, there was indifference to the ability of the borrower to service the loan and the lender is content to proceed on the basis of enforcing the security. 90 This was one of the basic reasons for injustice in Khoshaba . The appellant recognises that this case is different from Khoshaba because here the lender was looking to a co-borrower to service the loan, but it was submitted that the fact remains that in assessing the injustice of the loan so far as Angelina was concerned, the lender was content to enforce the mortgage against Angelina if anything happened to Michael. Furthermore, Australian Lending Services showed in its documents its evident preparedness to rely on the market rental valuation of the Cherrybrook property without making any enquiries about the actual rental income. In Khoshaba this sort of attitude by the lender was regarded by the Chief Justice (see [82], [84] and [92]) as determinative of injustice. See also per Beazley JA in Elkofairi at [56]-[60]. The trial judge did not take this matter into account. 91 The third alleged error was the judge's failure to take into account that the transaction involved possible loss of Angelina's only significant asset. 92 Indeed, the judgment proceeds on the basis that the Cherrybrook property was not Angelina's home. It does not mention that in almost every document before the lender and its associates when the application for loan was made, the Cherrybrook property is described as Angelina's home. Indeed, this circumstance is said to negative any suggestion that the lender thought otherwise than Angelina was a whole and hearty person living in her own home. In my view, the transaction must be judged, so far as the lender is concerned, on its taking a security over an 86 year old lady's major asset and apparent home in circumstances where it only relied on the co-borrower's income to service the loan and had paid no attention at all, it would seem, to what would happen if the co-borrower ceased to produce income. The possibility of an 86 year old woman being deprived of her home given as sole security for a loan to her and her son where the latter, who is the only source of the interest repayments, defaults, is hardly a matter that can be blissfully ignored by a lender wishing to protect itself from an unjust contract claim." 83Applying those statements of principle to the present case, what must have been clear to Fast Fix was that insofar as the defendants were concerned, the transaction was an improvident one. They gained no benefit from it. If Milan and the company failed to meet their obligations under the deed of loan then the defendants were liable to lose their home. The fact that the defendants were not living in the Bowral property at the time but were having a dwelling constructed thereon does not alter that proposition. 84Fast Fix was well aware of the company's plans for the Forster property. It must have been aware of the precarious position in which the company found itself as a result of the delay in the DA being approved. The fact that a loan with such onerous interest provisions was entered into by the company demonstrated that. Fast Fix would also have been aware of the limited capacity of the company to meet its obligations under the deed of loan if there were further delay in the Council approving the DA. One can infer that this was one of the reasons why Fast Fix required an unencumbered property as security before it would advance the monies sought by the company. 85It follows that Fast Fix must have been aware that there was a real likelihood that the company and Milan would default in meeting their obligations under the deed of loan. In such circumstances the authorities say that a lender should have made inquiries as to the capacity of the defendants to meet those obligations if the company and Milan were unable to do so. The fact that no such inquiry was made reinforces the inference that Fast Fix was not concerned about that eventuality provided it had adequate security for the loan. 86The fact that Fast Fix took no steps to acquaint itself with the financial circumstances of the defendants ought not put it in a better position than a lender who does so and as occurred in such cases as Elkofairi and Khoshaba, becomes aware that the party putting forward the security has a very limited capacity to repay the loan. This is not the sort of situation which the Court of Appeal had in mind in Patrick John Ford by his tutor Beatrice Anne Watkinson v Perpetual Trustees Vic Ltd [2009] NSW 186 at [111] - [112]. In the present case there was no such commercial circumstance. It would seem Fast Fix made no such inquiries because it did not care about their capacity to pay. 87It should have been well within the contemplation of Fast Fix that the defendants as the parents of Milan might have no assets other than the Bowral property and might no longer be working. The failure of Fast Fix to make any inquiry as to their financial position should not place it in a better position than a lender who on the same or similar facts did make inquiries but proceeded to make the loan. 88These factors point strongly towards a conclusion that the deed of loan, insofar as it bound the defendants, was unjust for the purposes of s7(1) CRA. 89As Khoshaba and Ford made clear, while the conduct and knowledge of the lender is important and can be decisive in determining the application of the CRA, it is not the only consideration. In K hoshaba Spigelman CJ said: "76 Plainly, the conduct, whether by act or omission, of the party resisting a finding of unjustness under the Act is highly relevant, and will often be determinative. However, the scope of relevant circumstances is not confined to what the person resisting an order under s7(1) did or did not do and knew or ought to have known. The critical phrase in s7(1) - "the circumstances relating to the contract at the time it was made" cannot be so limited. Section 9(1) provides that when determining unjustness "the Court shall have regard to the public interest and to all the circumstances of the case". Furthermore, s9(2)(i) includes, as I have noted, amongst the relevant circumstances "the commercial or other setting, purpose and effect of the contract"." 90An examination of the s9(2) considerations reinforces my conclusion as to the unjustness of the deed of loan insofar as it affects the defendants. 91(a) Whether or not there was any material inequality in bargaining power between the parties to the contract. The defendants had limited schooling to age 12. Their knowledge of English was limited. They had only modest experience with financial transactions such as loans, guarantees and mortgages. They were being pressured by Milan and were required to sign the loan documents as a matter of urgency. Except for the explanation of the loan documents provided by Ms V -, they were not represented by a solicitor. Fast Fix was an experienced lender which at all times was represented by Mr Greenstein as its solicitor. I am satisfied that there was material inequality between the defendants and Fast Fix. 92(b) Whether or not prior to or at the time the contract was made its provisions were the subject of negotiation. (c) Whether or not it was reasonably practicable for the parties seeking relief under the CRA to negotiate for the alteration of or to reject any of the provisions of the contract. There was no opportunity afforded to the defendants to negotiate the terms of the deed of loan. They were not advised of such an option. They were being pressured by Milan to sign the loan documents as a matter of urgency because if they did not do so he was likely to suffer a significant financial loss. With that degree of urgency having been communicated to them, it was simply not practicable for the defendants to either negotiate the alteration of or to reject any of the provisions of the loan documents. 93(d) Whether or not any provision of the contract imposed conditions which were unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract. The company was obliged to repay the principal loan of $450,000 with interest calculated at 2 percent per month (24 percent p.a.) and in the event of default, at 4 percent per month (48 percent p.a.) compounded daily. Given the nature of the security provided by the Bowral property, these were very onerous interest rates, particularly that applying in the case of default. 94(e) Whether or not any party to the contract was not reasonably able to protect his or her interests. (f) The relative economic circumstances, educational background and literacy of the parties to the contract. The defendants were disadvantaged by their limited education, experience and ability to speak and read English. They were not represented by a lawyer. The loan documents were explained to them and signed by them in circumstances of urgency and pressure being exerted by Milan. By contrast, the plaintiff was an experienced lender who was represented by a solicitor, Mr Greenstein. 95(h) Whether or not and when independent legal and other expert advice was obtained by the party seeking relief under the CRA. (i) The extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect. While it is clear that Ms V- explained what she described as the "basic concept" of the loan documents, it is not clear how far that explanation went. Milan was present during that explanation and spoke to Ms V- from time to time using English which the defendants could not understand. It is not clear to what extent, if at all, the defendants understood the effect of the high rates of interest which applied. While the defendants were aware that they could lose the Bowral property if the company and Milan did not repay the loan, they appear to have been confused as to the significance of the three month duration of the loan. 96Their evidence indicates a belief that at the expiration of three months their liability under the loan documents would cease. They do not appear to have been aware that their obligations under the deed of loan were continuing obligations extending beyond the three month period if the loan were not repaid. It is clear that they had no information concerning the development of the Forster property and the part played by this loan in that development. They were not given any information about how the loan was to be repaid, nor the capacity of the company and Milan to make such repayments. In signing the documents they seem to have relied entirely upon their trust in and affection for Milan as their son. 97While I have no doubt that Ms V- provided an explanation of the loan documents to the defendants, I do not accept that the defendants fully understood the explanation. In particular, I do not accept that the defendants understood the continuing nature of the liability beyond three months, nor that they understood the significance of the high rate of interest and the effect that might have on Milan's and the company's ability to comply with their obligations under the deed of loan. I find that the defendants' knowledge of the transaction was limited to an understanding that they might lose the Bowral property if Milan did not pay off the loan but that they thought that their exposure would only last for three months. They clearly had no understanding of the commercial background to the loan in that Milan and the company's capacity to pay off the loan was contingent upon the Council approving the DA in respect of the Forster property within a short time. 98(j) Whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under the Act. Although I am not prepared to find that the defendants were subject to undue influence as that term is understood under the general law, they were certainly exposed to considerable pressure. They clearly had great affection for Milan, were proud of him and trusted him. As a result, when advised by him that he would lose a large amount of money unless the Bowral property was put forward as security for the loan, as his parents they felt a moral obligation to assist him. That pressure was increased when they were required to sign the loan documents as a matter of urgency in circumstances where they did not fully understand them. 99(l) The commercial or other setting, purpose and effect of the contract. The applicability of this consideration emerges from the matters already discussed in relation to s9(2). 100In setting out the countervailing considerations, Fast Fix stressed the public interest in keeping parties to their bargains ( Baltic Shipping Co v Dillon ("The Mikhail Lermontov") (1991) 22 NSWLR 1 at 9 per Gleeson CJ: "... The general policy of the law is that people should honour their contracts. That policy forms part of our idea of what is just." 101Fast Fix drew the Court's attention to the following paragraphs in s9(2) CRA: (h) Whether or not and when independent legal or other expert advice was obtained. (j) Whether any undue influence, unfair pressure or unfair tactics were used. (l) The commercial or other setting of the transaction. Fast Fix submitted that these paragraphs favoured its position and pointed towards the deed of loan not being unjust insofar as the defendants were concerned. 102It is accepted that independent legal advice was given to the defendants by a Serbian speaking solicitor. That advice went no further than an explanation of the loan documents. For the reasons already indicated, however, while an explanation may have been provided, I am not satisfied that the defendants fully understood the effect of the loan documents. This lack of understanding was a product not only of the failure by Milan to explain either to Ms V- or his parents the part played by the loan in the Forster development but also their limited education and experience with financial matters. 103It is true that no pressure was exerted by Fast Fix on the defendants. All the pressure came from Milan. While that is relevant, subs 9(2)(j) is sufficiently wide to encompass the pressure exerted by Milan. Similarly, while Fast Fix had no involvement in the company's acquisition and development of the Forster property (which is in its favour), the execution of the loan documents for the purposes of s9(2)(l) needs to be considered in the context of the broader commercial setting which included the development of the Forster property. 104Fast Fix argued against any factual finding as to the limited understanding of the defendants. It asked the Court to take into account that they had been resident in Australia for almost 40 years, had raised their children in Australia, had both been in the workforce for about 25 of those years, had a conversational ability with the English language and Mladenko could read English. Fast Fix submitted that the defendants were experienced in financial transactions. It asked the Court to take into account that the defendants over the years had bought three properties, two of which were subject to mortgages, had for a time leased one of those properties and had previously guaranteed a loan taken out by Milan. 105I have already referred to those matters in my recital of the facts and my conclusions as to the defendants' education, knowledge and linguistic capacity are there set out. As is evident from my findings, my conclusions as to the defendants' ability to understand the loan documents differ from the submissions of Fast Fix. 106Fast Fix submitted that the signing by the defendants of declarations that they had received independent legal advice regarding the loan documents and the fact that they were free to ask Ms V- questions about those documents should be given considerable weight. I have already accepted that the defendants had some understanding of the loan documents in that they were aware that by signing the loan documents they were running a risk of losing the Bowral property. For the reasons indicated, however, I am not satisfied that they fully understood the transaction. In significant respects, they misunderstood it. The right to ask questions is only useful if one has sufficient knowledge to know what questions to ask. Moreover, the presence of Milan may have inhibited the asking of questions. 107For the above reasons, I have concluded that the deed of loan insofar as it imposed obligations on the defendants was unjust at the time it was entered into in the sense in which that term is used in s7(1) CRA. I am fortified in that conclusion by the observations of Young JA in Spina: "105 The primary judge acknowledged that the circumstances described in section 9(2) of the Contracts Review Act are not exhaustive, and that each case must be determined on its own facts. That also is, of course, completely correct. However, how the courts have treated analogous situations is a useful guide to judges considering whether the contract in the case before them is unjust. One reason for this is that for certainty in the law, decisions on the Act should show consistency." 108His Honour then set out some of the "analogous situations" to which he was referring. One of those was Pasternacki & Anor v Correy [2000] NSWCA 333, [2001] ANZ Conv R Cases 240. The court there (Sheller Stein and Fitzgerald JJA) considered circumstances very similar to these except that the lender had actual knowledge that an aged pensioner had mortgaged her principal asset (her family home) for her son to obtain funds for his business. Even though the mother had acknowledged she might lose her home if the loan were not repaid, she was given little guidance when making such a momentous decision. The court set aside the contract. 109In the course of delivering the leading judgment Stein JA said: "56 Cases under the Act must, of course, be determined on their own facts. However, there is a common thread which runs through authorities such as Wynne, Hall, Melverton and Reisch . This is the improvidence of the transaction to the plaintiff and the knowledge of the lender of this fact, or their failure to make inquiries having been put on notice." 110It should be noted that the circumstances in National Australia Bank v Hall (1993) NSW Conv R 55-684 (Dunford J), Melverton v Commonwealth Development Bank of Australia (1989) NSW Conv R 55-484 (Hodgson J) and Reisch v Commonwealth Bank of Australia & Ors (Simos J) (NSW Supreme Court, 13 March 1998, unreported) involved similar factual situations to the present case, i.e. elderly women mortgaging their houses to secure the liability of their sons or son-in-law. In each case the contract was set aside. 111The only distinction between those cases and the present case is that the lender had actual knowledge of the circumstances of the elderly women. For reasons previously indicated, I do not find that to be a sufficient point of distinction so as to preclude my finding that the deed of loan was unjust insofar as it affected the defendants. 112This does not end the matter. The Court has to decide whether relief should be provided to the defendants under the CRA and if so, the nature of that relief. 113Fast Fix submitted that if a contract is found to be unjust by reason of circumstances not known to one of the contracting parties, it does not automatically follow that relief will be given to remedy the injustice ( Kowalczuk at [88]). It submitted that ordinarily in applications under the CRA relief will not be granted against an innocent party ( Beneficial Finance Corporation v Karavas (1991) NSWLR 256 per Meagher JA at 277, Hraiki v Beljon [2008] NSWSC 775 per McDougall J at [35]). 114While it is true that Fast Fix did not know the financial circumstances of the defendants, that was not because it was misled in some way (as happened in Kowalczuk and Ford ) but because it made no inquiry. It made no inquiry because it was not concerned about the defendant's ability to meet their obligations under the deed of loan should there be default by the company and Milan because it had the Bowral property as security. 115In the circumstances of this case, I am not persuaded that Fast Fix should be regarded as "an innocent party". It knew that the deed of loan provided no benefit for the defendants. It was an improvident arrangement from their point of view. It was indifferent to their ability to make payments under the deed of loan because of the security which they were providing. Its ignorance of their financial affairs was of its own making, i.e. it made no inquiry. In Khoshaba it was this indifference on the part of the lender which Spigelman CJ regarded as determinative ([92] and [96]). 116Basten JA put the matter somewhat more strongly: " 128 To engage in pure asset lending, namely to lend money without regard to the ability of the borrower to repay by instalments under the contract, in the knowledge that adequate security is available in the event of default, is to engage in a potentially fruitless enterprise, simply because there is no risk of loss. At least where the security is the sole residence of the borrower, there is a public interest in treating such contracts as unjust, at least in circumstances where the borrowers can be said to have demonstrated an inability reasonably to protect their own interests, for the purposes of, for example, s 9(2)(e) or (f). That does not mean that the Act will permit intervention merely where the borrower has been foolish, gullible or greedy. Something more is required: see Esanda Finance Corp Ltd v Tong (1997) 41 NSWLR 482 at 491 (Handley JA) cited with approval in Elkofairi (supra) at [77] by Beazley JA." 117I have concluded that the defendants are entitled to relief under the CRA. The balancing of their position against that of Fast Fix by reference to the criteria set out in the CRA decisively favours them. When Fast Fix entered into the deed of loan there was already a body of law in cases such as Pasternacki, Elkofairi and Khoshaba which pointed out the dangers for lenders where monies were advanced without regard to the ability of those persons who put forward the security, to meet repayment obligations. 118In the circumstances of this case as between Fast Fix and the defendants, it is appropriate that the loss of the monies advanced pursuant to the deed of loan should be borne by Fast Fix and not the defendants. 119In setting out these reasons, I have said little about the deed of variation of loan. It added nothing to the obligations already contained in the deed of loan. Nevertheless, as part of the relief to which the defendants are entitled, it will also need to be altered. The simplest way of effecting that relief is to remove the defendants as parties to the deed of loan and to the deed of variation of loan. 120If that occurs, there is nothing secured by the mortgage. Accordingly, the mortgage should be discharged.

Orders 122The orders which I make are as follows: (1) I make a declaration that the deed of loan between Fast Fix Loans Pty Limited, TT's Management Group Pty Limited, Milan Samardic, Mladenko Samardzic and Dragica Samardzic, dated 22 February 2008 (deed of loan) is unjust within the meaning of s4 of the Contracts Review Act 1980 (CRA) insofar as it relates to Mladenko Samardzic and Dragica Samardzic. (2) I order that the deed of loan be varied to remove Mladenko Samardzic and Dragica Samardzic as parties. (3) I make a declaration that the deed of variation of loan between Fast Fix Loans Pty Limited, TT's Management Group Pty Limited, Milan Samardic, Mladenko Samardzic and Dragica Samardzic (deed of variation of loan) is unjust within the meaning of s4 of the CRA insofar as it relates to Mladenko Samardzic and Dragica Samardzic. (4) I order that the deed of variation of loan be varied to remove Mladenko Samardzic and Dragica Samardzic as parties. (5) I order that pursuant to s7(1)(d) of the CRA that Fast Fix Loans Pty Limited do all things necessary, including the signing and filing of documents but not limited thereto, to discharge registered mortgage No AD789081 over the property located at 54 Boardman Road, Bowral being the land contained in Certificate of Title Folio Identifier 27/1052316. (6) I order Fast Fix Loans Pty Limited to pay the costs of Mladenko Samardzic and Dragica Samardzic incurred in these proceedings.

Fast Fix Loans Pty Limited v Mladenko Samardzic and Anor

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