If you have any questions regarding this matter, please do not hesitate to contact this office."
60 The defendant said that even though she signed the form sent to her with that letter and sent it back to Mr Gorman, "at that stage [she] understood that it was up to [her] to progress the subdivision". However, the defendant also said that she did not know how to go about it. At some time early in 2007 she rang the council and asked whether she could subdivide the property. She was told that the council was intending to change the minimum lot size of 1000 acres but they gave her no other information about what to do.
61 In about March 2007 the defendant "entered a selling agency agreement with Raine and Horne in relation to the property". She was told that the estimated gross sale price was somewhere between $1.15M and $1.2M. She said that that estimate increased her confidence in the value of the property but there were no offers to buy it.
62 The defendant paid $13,400 to the plaintiff in June 2007 that she raised from horse sales. She said that she knew that that was not the full amount of interest that she had agreed to catch up on but "thought it would satisfy [the plaintiff] for a period of time, so that [she] could complete the subdivision of the property and the sale of as many of the subdivided lots as was necessary to repay [the plaintiff]."
63 The defendant had a meeting with her accountant in late June 2007 and asked him about subdividing the property. She was told to consult R J Crooks and Associates Pty Ltd, a land surveyor. Mr Crooks in due course prepared an application on her behalf to subdivide the farm into several blocks. This was submitted to the council and approved.
64 In August 2007 the defendant went back to Michael Kearins at Raine and Horne and gave him the approval from the council. She asked him for another appraisal of the value of the farm. According to his appraisal the property had a potential value of between $1.385M and $1.5M.
65 During the period from May 2007 until the end of October that year the plaintiff continued to send the defendant monthly notices. She said that the plaintiff "had not spoken to [her] about the interest". In evidence to which the plaintiff objected, the defendant said that Mr Gorman knew that she was proceeding with the subdivision. She said, "I had this understanding because Mr Kearins told me on a number of occasions that he had spoken to Mr Gorman about the sale of the subdivided lots". The defendant said, "I assumed that [the plaintiff] would allow me time to sell the properties and would not take any enforcement action while I was going through that process".
66 It should immediately be noted, however, that the defendant does not contend that the plaintiff's commencement of these proceedings adversely affected or interfered with her ability to continue to attempt to sell the farm. The objectionable nature of the evidence on which the defendant relies therefore attains no significance or importance in any event. The defendant's complaints relate to anterior events concerned with the formation of the third loan agreement and the circumstances in which that occurred. The defendant has been free at any time in the two years since the commencement of these proceedings up to the present time to sell the farm and reduce or extinguish her debt to the plaintiff if she had been so minded. The defendant does not seek to make any case based upon reliance by her on anything that the plaintiff did or refrained from doing in this respect.
67 By October 2007 the total amount due on the loan was $714,200. That sum has now increased to almost $907,000.
68 In a recent affidavit the defendant said that in June 2005 she understood that she was under an obligation to subdivide the farm into blocks that could be sold. From that time up to the present it was her understanding, based on discussions she had with Mr Gorman in relation to the subdivision, that this meant that she had an obligation to obtain any approvals or consents from the council that were necessary for a purchaser of any of the blocks to build a residence and to have road access. This would significantly increase the value of the subdivided lots.
69 Despite an advertising and sales campaign commencing in September 2009 the farm has not sold. It was auctioned on 22 October 2009 but there were no bidders and it was passed in with a reserve price of $1.25M. The property remains on the market for sale in lots.
70 In these circumstances, despite the terms of the defendant's amended cross claim, it was expressly not the defendant's case that the third loan agreement should be declared void or set aside in its entirety. Rather the defendant contends that the third loan agreement should be varied to avoid as far as practicable the unjust consequences of the agreement. The defendant identifies these allegedly unjust consequences as the accumulation of interest at what she describes as "penalty rates" which had the effect of increasing the principal under the third loan agreement from $640,000 in August 2006 to its present level. The defendant limits her claim for relief to orders that would relieve her of the obligation to pay all, or at least a considerable part, of her indebtedness represented by that interest and that would confine the plaintiff to the proceeds of the subdivided lots, presumably excluding the homestead block upon which her residence is located.
Particulars
71 It is instructive and important to understand the ways in which the defendant contended that the third loan agreement was unjust. In her second further amended defence the defendant put her case as follows.
72 First, she was unable to protect her interests at the time of entering into each loan agreement because, by virtue of her mental capacity at each of those times, she did not understand that she would be unable to make the repayments required under each loan agreement. As will be apparent, this contention became limited to the third loan agreement. Secondly, the defendant said that she was unable to protect her interests at these same times because, by virtue of her mental capacity, she did not understand the effect of the loan agreements, or for presently relevant purposes, the third loan agreement. Thirdly, the defendant contended that no proper opportunity was afforded to her to negotiate with the plaintiff about the terms of the loan agreement. Fourthly, the defendant says that the plaintiff knew or ought to have known that she would be unable to make the repayments required under each loan agreement. Fifthly, the plaintiff knew or ought to have known when entering into each loan agreement that default by the defendant was an inevitable consequence of her doing so.
73 As already mentioned, the defendant never specified or particularised an absence of legal advice or assistance from her rural counsellor in her pleaded defence as matters supporting the proposition that the third loan agreement was unjust. This is referred to later in these reasons.
Consideration
74 Neither the evidence nor the defendant's submissions provided any elaboration or explanation of what was contemplated by the defendant's "mental capacity". She is an educated woman with tertiary qualifications. She had worked as a teacher for over 30 years. There was no suggestion that she was suffering from any mental infirmity or psychological or psychiatric condition. Moreover, the defendant withdrew any suggestion that the first two loan agreements were, or either of them was, unjust, suggesting that she did not suffer from any difficulties with her mental capacity at that time. No evidence explains what changes, if any, occurred between the execution of the second and third loan agreements.
75 In the same vein, no evidence or submissions were directed to giving any content to the allegation that the defendant did not understand the relevant loan agreement by reason of her mental capacity. The defendant did not contend that she did not or could not understand the loan agreement, and clearly would have difficulty in rationalising an ability to teach maths and science with an incapacity to understand a quite simple and concise contract. The alleged difficulty or problem with the defendant's mental capacity that she said affected or interfered with her understanding of the loan agreement was never identified.
76 The suggestion that no proper opportunity was afforded to the defendant to negotiate with the plaintiff is also difficult to understand. Once again, no complaint is made that any such lack of opportunity attended the entry into the first and second loan agreements. The third loan agreement was almost identical to the second save for the interest rates and the dates for repayment. More fundamentally, the defendant does not identify the way or ways in which she alleges that the third loan agreement would or might have been different if she had been given an opportunity freely to negotiate some variation to its terms.
77 Without intending any disrespect to the author of the defendant's defence, the particularisation of her case in these ways would appear to have been an optimistic and understandable attempt to formulate a case in advance or in anticipation of evidence that would hopefully, but which did not ultimately, exist or emerge to support it. The inevitable frailties of a case constructed in this way were duly recognised and appreciated by the defendant's counsel at the hearing of the case. The Contracts Review Act defence quickly became confined to one that sought to emphasise that the third loan agreement was an asset-lending contract with which the defendant could not comply, where the capital that secured it was the only source of repayment and default was inevitable. However, for the reasons that follow, even a case pared in this way could not succeed.
78 The defendant's farm was her only recurrent source of income. It is quite apparent now, and would have been apparent from not long after her purchase, if not from the start, that the farm was never likely to become a viable proposition and that the defendant could never have afforded to keep it. Whatever source or sources of finance the defendant was able to attract, she was realistically never going to be in a position to do any more than postpone the inevitable sale of the property by refinancing and capitalising unpaid or overdue interest.
79 The farm was acquired in March 2002 with finance from another provider. By 30 June 2002 the defendant's farming enterprise has incurred operating losses of $63,044. In 2003 these losses were $174,763 and in 2004 the losses were $129,568. By letter from the Authority dated 10 November 2004, rejecting her application for an exceptional circumstances interest subsidy, the defendant was advised in the following terms
"It is noted that from information provided the Authority was not satisfied that the farming enterprise could demonstrate viability in the long term. It was noted that: