PERMANENT MORTGAGES PTY LTD -v- VANDENBERGH [2010] WASC 10 (29 January 2010) - WASC 2010 case summary — Zoe

WAWASC

PERMANENT MORTGAGES PTY LTD -v- VANDENBERGH [2010] WASC 10 (29 January 2010)

[2010] WASC 10

Supreme Court of WA|2010-01-29|Before: Murphy J

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At a glance

Source facts

Court

Supreme Court of WA

Decision date

2010-01-29

Before

Murphy J

Catchwords

Equity - Unconscionable conduct - Whether unconscionable for bank to enforce mortgage - Relationship of trust and confidence - Whether 'wife's special equity' applies to elderly mother

Source

Original judgment source is linked above.

Catchwords

Equity - Unconscionable conduct - Whether unconscionable for bank to enforce mortgage - Relationship of trust and confidence - Whether 'wife's special equity' applies to elderly mother

Judgment (583 paragraphs)

[1]

1 In these proceedings, the plaintiff (the bank) seeks to enforce a mortgage to secure the payment of a debt due to it at law in respect of moneys advanced to the defendants (the loan) under a loan agreement dated 20 December 2003 (the loan agreement). The mortgage, registered 17 March 2004, is in respect of a unit in a 'residential strata titles seniors' village' in Claremont, Western Australia (the Claremont property). The firstnamed defendant in these proceedings is the son of the secondnamed defendant. I will refer to the firstnamed defendant as 'the son' and the secondnamed defendant as 'the mother'.

[2]

2 At the time of the loan and the mortgage, the son was in serious financial difficulty and was involved in a marital breakup from his former wife. The loan was in the sum of $192,000. Most of the money was used by the son for the payment of his creditors and in relation to an associated settlement with his former wife. The balance, approximately $43,000, was used to discharge an existing mortgage on the Claremont property in favour of National Australia Bank Ltd (NAB). The Claremont property is, and at all material times was, the residence of the mother, who was 85 years old at the time. The property was registered in the name of the mother and the son as joint tenants, although the son had not contributed any equity to the property. The mother was a pensioner when the loan was made and the mortgage was granted.

[189]

...

At no time was our client advised that it would be impossible, or likely impossible, that Lucia [the wife] would be unable to raise $95,000 given that she at that time had no record of employment and the farm property was mortgaged to almost its full value.

Dr Vandenbergh's circumstances were such that there was no possibility of him borrowing more than $192,000 or thereabouts and without the contribution of $95,000 from Lucia, he was not going to be able to meet his creditors.

Of course, in these circumstances, we are sure you will agree, it was quite negligent of Dr Vandenbergh's advisors, his lawyers and/or accountant, to not warn him against such a late step, namely to borrow $192,000 or thereabouts from La Trobe, when it was entirely uncertain that Lucia [the wife] might be able to borrow $95,000 and therefore entirely uncertain that Dr Vandenbergh could meet his creditors and thereby avoid bankruptcy. This core advice given to Dr Vandenbergh is of course not relevant to our client's circumstances. Her circumstances are brought about by the fact that she received no independent advice and if any advice at all was given, it was most certainly grossly negligent.

On our instructions the only time that there was an opportunity for our client to be given any advice or met with any lawyer was when she was in the company of her son attended on the offices of Butlers Lawyers, Mr John Butler came into a room and attended on the documentation being signed and did so in a rather hurried fashion and without stopping to discuss the matter with our client or to consider her position and give any advice at all to her.

...

The sole reason for our client to put up her home at this very late stage in her life was on the understanding given to her and confirmed by her son's lawyer that his bankruptcy would be prevented. At no time was she ever advised that a real and likely, or at the very least quite possible consequence of the arrangements were that Lucia [the wife] would not be able to raise the money required of her to contribute to the property settlement and our client [sic - the son] would in any event go bankrupt. (emphasis added)

[435]

296 As regards its rights, FASA has no right to bind La Trobe to any agreement with the borrower, or otherwise bind La Trobe (cl 2.2). Nor is there a general right in FASA to make representations concerning La Trobe's 'loan' products or 'loan' policies, inquiries in respect of which must be directed to La Trobe (cl 2.2). Whilst it is readily understandable that FASA may not make representations as to La Trobe's lending policies, the prohibition in relation to representations concerning La Trobe's loan 'products' requires further consideration. The prohibition cannot be construed too widely, and must be construed in light of the agreement as a whole. If read too widely, it would preclude, for example, FASA informing potential borrowers that La Trobe provided home loans to approved customers. Taken too literally, it could undermine the commercial purpose of the agreement, which is the origination of secured lending for La Trobe, and the creation of a source of income for FASA. It is also to be noted in this context, that the La Trobe Appointment Agreement contemplates FASA 'Marketing', ie promoting, La Trobe's products (cl 3.3(j) and cl 4 referred to below). It seems to me that properly construed, the prohibition against making representations concerning La Trobe's loan products precludes FASA making representations about the availability, characteristics, benefits or features of the products which go beyond fairly passing on the information in materials and documents provided by La Trobe for the express or implied purpose of enabling FASA to carry out its obligations under the agreement. It would preclude, for example, FASA from offering its own opinion about the intrinsic advantages (or disadvantages) of La Trobe's products. It should also be read in conjunction with cl 3.3(f), which is to similar effect, but with reference to a 'Mortgage' or a 'Loan', which terms, in this context, seem to refer to a particular mortgage or loan, as opposed to loan products generally.

[557]

Relief against unconscionable dealing is a purely equitable remedy. The concept underlying the jurisdiction to grant the relief is that equity intervenes to prevent the stronger party to an unconscionable dealing acting against equity and good conscience by attempting to enforce, or retain the benefit of, that dealing. Equity will not, however, 'restrain a defendant from asserting a claim save to the extent that it would be unconscionable for him to do so. If this limitation on the power of equity results in giving to a plaintiff less than what on some general idea of fairness he might be considered entitled to, that cannot be helped' (per Lord Greene MR, Wrottesley and Evershed L JJ, In Re Diplock [1948] 1 Ch 465 at 532). Where appropriate, an order will be made which only partly nullifies a transaction liable to be set aside in equity pursuant to the principles of unconscionable dealing (see Bank of Victoria Ltd v Mueller, supra, at 659 and the cases there cited). Where an order is made setting aside the whole of a transaction on the ground of unconscionable dealing, the order will, in an appropriate case, be made conditional upon the party obtaining relief doing equity.

While the matter was not raised in the bank's notice of appeal, I was, at one stage, inclined to think that the appropriate relief in the present case would be an order setting aside the guarantee/mortgage only to the extent to which it imposed upon Mr and Mrs Amadio a potential liability in excess of $50,000 or that any order wholly setting aside the guarantee/mortgage should be conditional upon Mr and Mrs Amadio paying to the bank the amount of $50,000 which represents the amount of the potential liability which they intended to undertake. Ultimately, I have come to the view that Mr and Mrs Amadio are entitled to have the whole transaction set aside unconditionally. ... In the present case, however, it was, as has been said, evident to the bank that Mr and Mrs Amadio stood in need of advice as to the nature and effect of the transaction into which they were entering. It is apparent that any such advice would have included the importance to a guarantor of ascertaining from the bank the state of the customer's account which was being guaranteed and any unusual features of the account. If such information had been obtained by Mr and Mrs Amadio, they would not, on the evidence and in the light of the learned trial judge's finding, have entered into the guarantee/mortgage at all. The whole transaction should properly be seen as flowing from the special disability which was evident to the bank and as being unfair, unjust and unreasonable. (Emphasis added)

[559]

In some cases, the equity that arises by reason of an unconscientious or unconscionable dealing of the nature with which this appeal is concerned may be satisfied only by setting aside that dealing in its entirety. The dealing may be embodied in the one instrument which contains several provisions or in several instruments. In other circumstances, of which this case is an example, the equity may be satisfied by orders setting aside some but not all of these instruments or some but not all of the provisions thereof.

... In the circumstances of this case and consistently with the framing of relief which, in Lord Blackburn's phrase, is 'practically just', the appellants, as representatives of Bill's estate, properly may elect that only the Deed itself be set aside. However, in seeking equity, the estate must be prepared to do equity. In particular, weight has to be given to the testator's wish significantly to benefit his nephew which was expressed in cl 4 of the will.

In the course of argument on this appeal, there was discussion as to the appropriate form of equitable relief if the appeal was successful. In accordance with the authority referred to above, counsel for the respondents stressed the requirements of 'practical justice'. Reference was made to Vadasz v Pioneer Concrete (SA) Pty Ltd to emphasise the importance of the consideration that in the particular circumstances of a case the equity may be satisfied by orders having the effect of setting aside no more than so much of a disposition as prevents the moving party 'obtaining an unwarranted benefit at the expense of the other'. ...

Once a court has determined upon the existence of a necessary equity to attract relief, the framing, or, as it is often expressed, the moulding, of relief may produce a final result not exactly representing what either side would have wished. However, that is a consequence of the balancing of competing interests to which, in the particular circumstances, weight is to be given.

PERMANENT MORTGAGES PTY LTD -v- VANDENBERGH [2010] WASC 10 (29 January 2010)

At a glance

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Catchwords

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Catchwords

Judgment (583 paragraphs)

Legislation Cited (6)

Cases Cited (61)