Perpetual Trustee Company Limited v Bowie

Procedural history

1. Before describing the relevant background, it is necessary to say something about the procedural history of the matter and the way in which the case was conducted.
2. The proceedings were commenced on 2 August 2013. Ms Bowie filed a defence on 30 August 2013 and a cross claim on 21 November 2013. At that time, and at the time her evidence was filed, she was represented by solicitors.
3. Following service of the cross claim, there were various directions hearings, the details of which are no longer relevant. However, on 1 April 2014, Ms Bowie's lawyers sought an adjournment of an application that had been filed by Perpetual for summary judgment because of difficulties in obtaining instructions from Ms Bowie and the need to ascertain whether she was capable of giving instructions owing to an obsessive compulsive disorder and depression or whether a tutor should be appointed. Harrison AsJ granted the adjournment.
4. On 4 June 2014, Ms Bowie's counsel sought leave to file a consent by Mr Dirk Skelton, a close friend of Ms Bowie's, to act as her tutor. On 10 June 2014, the strike out motion was stood over until 7 July 2014 and, on 24 June 2014, Mr Skelton's consent to act as tutor was filed.
5. On 1 July 2014, an application was made before Davies J, who was sitting as Duty Judge at the time, to vacate the hearing of the motion because of difficulties in obtaining psychiatric evidence and to allow Ms Bowie time to appeal a decision refusing her legal aid. Davies J granted the application and stood the matter over until 30 July 2014. The proceedings were then stood over on a number of occasions whilst the parties engaged in settlement negotiations. Those negotiations broke down on 14 October 2014 and, on 17 October 2014, Ms Bowie's solicitors ceased to act for her. Since then, Ms Bowie has been unrepresented. The matter was set down on 10 December 2014 for a final hearing commencing on 24 March 2015.
6. At the hearing, Ms Bowie appeared for herself, although Mr Skelton sat with her at the Bar table. Neither Ms Bowie nor Mr Skelton suggested that Ms Bowie was incapable of acting for herself. It was apparent that whatever disabilities Ms Bowie suffers from, they did not prevent her from representing herself at the hearing. As might be expected of someone without any legal training, Ms Bowie was unfamiliar with procedural and evidentiary rules. However, she clearly understood what was said to her and she came across as an intelligent person who had no difficulty in representing herself.

Background facts

1. Ms Bowie was born in February 1957. She grew up in Thornleigh and attended Pennant Hills High, where she gained her HSC. She won a teacher's scholarship, but did not take that up and instead went to Hornsby TAFE for a year during which she completed secretarial studies. She then successfully applied for a scholarship and began her teaching qualifications at Lismore. She attended the North River College of Advanced Education for three years. After gaining her diploma in teaching in 1979, she started teaching. According to a report prepared by Dr Dinnen, a psychiatrist, she worked as a teacher, computer programmer, sold software and has worked in administration.
2. Ms Bowie was diagnosed with obsessive compulsive disorder and chronic depression in about 1980. She has worked for some 20 years as a volunteer for the Mental Health Association and has run a self help group for sufferers of obsessive compulsive disorder.
3. In 1987, Ms Bowie purchased her first property at Rosebank Avenue, Round Corner (the Dural property) with her then fiancé. The property was subject to a mortgage to the Commonwealth Bank of Australia for approximately $50,000, which had been repaid in full by approximately 1998.
4. From approximately 2001, Ms Bowie lived between the Dural property and her father's home in Castle Hill, in part because of her obsessive compulsive disorder and in part to provide domestic assistance to her father.
5. In 2005, Ms Bowie decided to commence on essential repairs to the Dural property. She says that one of the features of her obsessive compulsive disorder is that she cannot bear for people to come to her home for fear of contamination. Consequently, she says that her father suggested that she move into a retirement unit he had recently purchased while renovations were carried out on the Dural property. Her father did not plan to move into the unit until his property at Castle Hill was sold. It appears that Ms Bowie's father had offered to pay for the repairs to the Dural property.
6. For reasons that are not explained by the evidence, work did not commence on the Dural property. Ms Bowie's father died on 2 January 2007. Ms Bowie experienced difficulties with her neighbours and with her sister, who threatened to commence proceedings to recover their father's unit and have Ms Bowie evicted. Ms Bowie was at the time receiving, and continues to receive, an invalid pension.
7. In early 2008, Ms Bowie developed over a period of a number of weeks a plan to deal with her accommodation difficulties. What she proposed to do was buy a new property and borrow sufficient funds against that property and the Dural property to enable her to buy the property, pay the costs of renovating the Dural property and her father's unit, so that both could be sold, repay a loan owed by her father's estate in the sum of $65,000 secured against the Dural property and pay interest and expenses during the renovation period. She would then use the proceeds of sale of the Dural property and the money that she expected to inherit from her father's estate, which she accurately estimated to be approximately $190,000, to repay the loans she had obtained. Ms Bowie estimated that she would have sufficient funds to pay interest for a period of 5 to 6 months while the renovations occurred. She also thought that she would be able to obtain employment as a primary school tutor on the Central Coast to earn additional income. Ms Bowie says that she spoke to three separate tutors on the Central Coast who all indicated that there was a great need for tutors in that area.
8. Ms Bowie discussed her plans in some detail with Mr Skelton and there is no suggestion that he raised any objection to them. He gave evidence that he thought that Ms Bowie would be able to implement the strategy that she had devised.
9. Both Mr Skelton and Ms Bowie began searching for suitable properties. They located the property at Terrigal through an internet search and both of them inspected it on several occasions. The original asking price for the property was too high, but over time it fell.
10. At about the same time that Ms Bowie was looking at the Terrigal property she, together with Mr Skelton, approached a number of mortgage brokers as well as the National Australia Bank and Commonwealth Bank about obtaining a loan. None of the brokers or lenders they approached was willing to lend the amount sought by Ms Bowie. It is not entirely clear, but it appears that Ms Bowie was told that financial institutions would not lend to someone on a disability pension. However, it appears that Home Loans Ltd was willing to lend Ms Bowie an amount of $150,000 to refinance the loan of $65,000 (owed by her father's estate) and to provide additional funds to complete non‑structural improvements. That approval was notified to Ms Bowie on 11 April 2008. It appears that Ms Bowie was also hoping at the same time to obtain a second loan from Home Loans Ltd for $499,500, which ultimately was not approved.
11. In the expectation of obtaining a loan, Ms Bowie made an offer on or about 14 April 2008 to buy the Terrigal property for the sum of $735,000. She retained Peter Blackwell & Associates to act for her on the purchase, who she described as very careful solicitors. It is apparent that Ms Bowie read through the contract of sale carefully and requested a number of changes to be made to it. However, on or about 23 April 2008, she instructed her solicitors to inform the vendor that she was unable to proceed with the purchase. Ms Bowie explained when giving evidence that she and Mr Skelton had concluded that the price was too high.
12. Despite that decision, Ms Bowie continued her efforts to obtain a loan and maintained an interest in purchasing the Terrigal property. By that stage, it seems that Ms Bowie and Mr Skelton were aware, from what they had been told by one or more of the brokers to whom they spoke, that financial institutions did offer "low doc" or "no doc" loans, meaning loans where the financial institution required only limited or no information concerning the borrower's assets, liabilities and income. Loans of that type are particularly appropriate for self-employed persons who do not have adequate documentary evidence of their income.
13. It was suggested to Ms Bowie by the agent who acted on the sale of her father's unit that she approach Mr Slevin, who was a mortgage broker operating in the Hornsby area. Mr Slevin had acted as a mortgage broker since 2003. Ms Bowie initially spoke to him by telephone and then met with him on several occasions. Mr Skelton was present on each occasion.
14. Eventually, on 17 June 2008, Ms Bowie completed loan application forms for low doc/no doc loans from Collins Securities Pty Ltd, the mortgage manager acting on behalf of Perpetual. Perpetual was willing to provide no docs loans to eligible customers for amounts up to 60 percent of the value of the property against which security was granted.
15. The loan application for the loan to be secured against the Terrigal property was for an amount of $479,500. The loan application form was completed by Mr Slevin and signed by Ms Bowie. Ms Bowie accepts that she read through the application before signing it. The application described the purpose of the loan as "purchase of investment property" and described Ms Bowie's occupation as "Education/Training". Under the heading "Employer" it stated that Ms Bowie was "Self Employed/Contracting". Ms Bowie also signed a declaration to the effect that the loan was "wholly or predominantly for business or investment purposes" and a "low doc/no doc declaration of financial position". That declaration stated among other things: 2. I/we have requested the Credit Provider and Collins Securities Pty Ltd not to require production of any documentary evidence of my/our income and assets. Accordingly, I/we understand that the Credit Provider and Collins Securities Pty Ltd may not independently verify the information in my/our application concerning income and assets. 3. I/we have carefully considered my/our financial position and, in accordance with your recommendation, have sought and obtained such financial and other advice as I/we consider appropriate in connection with the proposed loan. 4. I am/we are aware of my/our financial obligations under my/our proposed Low Doc/No Doc loan with the Credit Provider. 5. I am/we are satisfied that I am/we are able to comfortably meet the repayments on the proposed loan, as well as all of my/our other financial obligations (including living expenses), as and when they fall due without substantial hardship. 6. I am/we are not relying on the Credit Provider or Collins Securities Pty Ltd to review my/our financial position to make a decision about whether I/we can meet the repayment obligations on the proposed loan without hardship.
16. The declaration also included a warranty that the income stated in the declaration was correct, but it is clear that no income was to be listed in the case of a "no doc" loan and the warranty had no application in that case.
17. The loan application for the loan to be secured against the Dural property is not in evidence. However, it appears from an email dated 20 June 2008 from Ms Mary Vidovich, a senior credit manager with Collins Securities, that it was originally to be for an amount of $420,000 and that Ms Vidovich had been told that the purpose of the loan was to refinance a loan of approximately $65,000 secured against the Dural property, to pay the costs of minor home improvements and to purchase shares.
18. There is a dispute between Ms Bowie and Mr Skelton on the one hand and Mr Slevin on the other about what Ms Bowie told Mr Slevin. Both Ms Bowie and Mr Skelton say that Mr Slevin was told that Ms Bowie suffered from obsessive compulsive disorder and that she was in receipt of a disability pension. Mr Skelton said that Ms Bowie's obsessive compulsive disorder was given as an explanation for why they could not meet at Ms Bowie's home and had to meet at a local cafe or the local McDonalds restaurant. At one stage, Mr Skelton also says that he asked Mr Slevin whether they could meet in the afternoons rather than the mornings because Ms Bowie's condition was better at that time. Mr Slevin denies that he was told about Ms Bowie's obsessive compulsive disorder or that she was receiving a disability pension.
19. I accept that Ms Bowie may have told Mr Slevin that she suffered from an obsessive compulsive disorder in order to explain why she did not want to meet at home and Mr Skelton may have offered the same explanation for why they wished to meet in the afternoons. However, I accept Mr Slevin's evidence that Ms Bowie did not tell him that she was on a disability pension and told him that she was self-employed as a tutor. That evidence is consistent with the information given in the loan application form which Ms Bowie accepts that she read and which she signed. Ms Bowie sought to explain the statement in the loan application form that her employment status was "Self Employed/Contracting" by saying that she expected to commence work as a tutor. Ms Bowie says that she would not have knowingly signed a declaration that was false and that her anxiety about not telling the truth would have prevented her from doing so. However, the difficulty with this submission is that Ms Bowie did sign a declaration to the effect that the loan secured by the Terrigal property was for investment purposes, whereas it was clear that it was in order to enable her to buy the Terrigal property so that she could live in it. If Ms Bowie's and Mr Skelton's evidence is to be believed, Ms Bowie told Mr Slevin the purpose of the loan and the fact that she was in receipt of a disability pension, but somehow or another Mr Slevin took that information and completed the loan application form in the way that he did, which Ms Bowie signed after reading it. Ms Bowie's and Mr Skelton's evidence only makes sense if what really happened was that she told Mr Slevin her true position and intentions, that Mr Slevin told her that she would not get a loan on that basis and that between them they came up with a quite different account of her employment status and the reasons she was seeking the loan or at least that Mr Slevin advised her that that was an appropriate thing to do and she naively accepted that advice. But neither Ms Bowie nor Mr Skelton gives evidence that that is what happened. In addition, I accept Mr Slevin's evidence to the effect that he would not have submitted the loan application form to Collins Securities if he had known that Ms Bowie was in receipt of a disability pension.
20. Collins Securities conducted a credit check on Ms Bowie, which revealed nothing untoward. It also obtained a valuation of the Terrigal property. On 4 July 2008, it sent an approval letter to Ms Bowie in respect of the loan secured against the Terrigal property. That approval letter was replaced by an amended approval letter dated 25 July 2008. Although not in evidence, it can be inferred that an approval letter was also sent on or about 4 July 2008 in respect of the loan secured against the Dural property. The total amount lent was approximately $820,000.
21. Following receipt of the original approval letter, Ms Bowie made a further offer to purchase the Terrigal property. By this stage, the price of the property had dropped and the purchase price was agreed at $670,000. Again, Ms Bowie instructed Peter Blackwell & Associates to act on the purchase of the property. Ms Bowie raised a number of issues in relation to the contract for sale and a number of amendments and special conditions were inserted at her request. Contracts for the purchase of the property were exchanged on or about 1 August 2008. Following exchange, Ms Bowie was keen to take possession and there was some correspondence between the solicitors for the parties in relation to that matter.
22. Ms Bowie signed the Loan Agreement on or about 22 October 2008. Ms Bowie signed a certificate attached to the contract which certified among other things that: I/we have been given the opportunity to obtain legal advice on the nature and effect of the Document but have chosen not to do so. I/we understand the nature and effect of the Document. I/we understand the obligations and risks involved in signing the Document. I/we signed the Document freely, voluntarily and without pressure from any person.
23. Following approval of the loan and settlement of the sale, Ms Bowie arranged to pay Mr Skelton the sum of $7,100 from the amount borrowed for work he had performed on the Dural property. Ms Bowie also said that she either paid for or reimbursed Mr Skelton for materials used in the renovation work. However, it appears that no other work was done on the property. Ms Bowie and her sister argued about the payment of bills for their father's property, which Ms Bowie says she eventually paid in order to protect her credit rating. Ms Bowie became increasingly anxious about her financial obligations and she says that the combination of those circumstances exacerbated her obsessive compulsive disorder and chronic depression. At that time, her relationship with Mr Skelton, with whom she intended to live in the Terrigal property, broke down for a time, with the result, she says, that she could not proceed with the renovations to the Dural property. She drew on her personal superannuation to make repayments to Collins Securities and she also used an amount of $16,000 she received from Suncorp Metway for wind and water damage to the ceilings of the Dural property to meet her obligations under the loans rather than repair the damage to the Dural property. She was able to obtain bridging finance from Create Capital 2 Pty Limited in the sum of $40,000, $30,000 of which she used to make mortgage payments to Perpetual and $10,000 of which she used to pay personal bills. There were delays in distribution of her father's estate and when it was finally distributed in or about late 2011, she paid $140,000 of the amount distributed to Collins Securities towards the amount she owed Perpetual. She used the balance of $40,000 to pay back a friend who had assisted in paying bills towards further renovations of the Dural property.
24. It appears that Ms Bowie made no further repayments after that time and, on 19 September 2012, Perpetual demanded repayment of the loan. Eventually, the Dural property was sold by Perpetual in exercise of its rights as mortgagee in or around February 2013 and the loan secured over that property was discharged.
25. On or about 5 October 2012, Perpetual served a default notice under s 88 of the National Credit Code and s 57(2)(b) of the Real Property Act 1900 (NSW) in respect of the loan secured by the mortgage over the Terrigal property.

The Contracts Review Act claim

1. Section 7(1) of the Contracts Review Act provides: 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. Section 9 of the Contracts Review Act sets out the matters that the Court is required to take into account in determining whether a contract is unjust in the circumstances relating to the contract at the time it was made. It provides: (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.
3. Commenting on these provisions, McHugh JA (with whom Hope JA agreed) said in West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 621: If a defendant has not been engaged in conduct depriving the claimant of a real or informed choice to enter into a contract and the terms of the contract are reasonable as between the parties, I do not see how that contract can be considered unjust simply because it was not in the interest of the claimant to make the contract or because she had no independent advice. A contract will not, therefore, be unjust merely because it was not in the interest of the claimant to enter it: Esanda Finance Corporation Ltd v Tong (1997) 41 NSWLR 482 at 491 per Handley JA (with whom Santow and Simos AJJA agreed). Nor will it be unjust because it has a number of features identified in s 9. Rather, the task of the Court is to consider the question whether the contract is unjust having regard to those features: Hogan v Howard Finance Ltd (1987) ASC 55-594 at 57-539 per Hope JA (with whom Street CJ agreed).
4. In the present case, the amended statement of cross claim sets out a large number of grounds by reason of which it is said that the Loan Agreement and Mortgage were unjust which reflect some of the matters set out is s 9. Those matters can be summarised as follows: 1. Ms Bowie's obsessive compulsive disorder and clinical depression affected her ability to protect her own interests; 2. Perpetual ought to have but failed to ascertain Ms Bowie's income, assets and liabilities with a view to satisfying itself that Ms Bowie could repay the loan and service the other loan she obtained from Perpetual; 3. There was a gross imbalance in bargaining power between Perpetual and Ms Bowie which was exacerbated by Ms Bowie's mental illness and lack of experience and her failure to obtain independent legal or financial advice, with the result that Ms Bowie was unable properly to protect her own interests; 4. The Loan Agreement and Mortgage were not in intelligible form and were not fully explained to Ms Bowie; 5. Ms Bowie was not advised that she ought to take independent legal or financial advice; 6. By granting the loan, Perpetual impliedly represented that Ms Bowie was a suitable applicant and able to service the loan, which she was unable to do and which Perpetual should have been aware that she was unable to do; 7. Perpetual knew or had constructive knowledge of the fact that Ms Bowie suffered from obsessive compulsive disorder and depression and that she was in receipt of a disability pension; 8. Ms Bowie used her superannuation to make mortgage repayments, the Dural property has been sold and the loan in respect of that property discharged and Ms Bowie's illness is not likely to improve in the immediate future.
5. As to (a), I do not accept that Ms Bowie's obsessive compulsive disorder or her clinical depression affected her ability to look after her own interests at the time the Loan Agreement was entered into. Ms Bowie developed a plan to acquire a new home in circumstances where her mental illness prevented her from repairing her existing home while she occupied it and in circumstances where it became apparent that she could no longer continue to reside in her deceased father's unit. Although the plan may have been risky, I do not think that it was irrational. It was developed over a substantial period of time. Ms Bowie discussed it in detail with Mr Skelton in whom she clearly had confidence. Mr Skelton was aware of Ms Bowie's condition and knew her well. Nonetheless, he thought that the plan was achievable. There is no suggestion that he sought to dissuade her from implementing it. During the relevant period of time, Ms Bowie was also negotiating to buy the Terrigal property. She took great care to protect her interests in relation to that transaction. It is plain that she read the sale contract carefully and understood it. At her request, her solicitors negotiated changes and additions to the contract. Ms Bowie decided not to proceed with the offer that she made originally because she and Mr Skelton concluded that the price was too high. It is apparent that her mental illness did not prevent her from looking after her own interests in relation to the acquisition of the property. It is implausible, then, that it prevented her from looking after her own interests in relation to the loan.
6. Nor do I accept that Perpetual was aware that Ms Bowie suffered from a mental condition that may have affected her ability to look after her own interests. It is likely that Mr Slevin knew that Ms Bowie suffered from obsessive compulsive disorder. However, I do not think that it follows that he knew that Ms Bowie may not be capable of protecting her own interests. On the findings I have made, so far as he knew, she was working and she was assisted by Mr Skelton. There is nothing to suggest that she behaved in a way that may have given rise to doubts about her ability to protect her own interests. In any event, Perpetual did not know of Ms Bowie's condition and I do not accept that Mr Slevin's knowledge is to be imputed to Perpetual. Mr Slevin was clearly Ms Bowie's agent, not Perpetual's. There was no arrangement between Perpetual and Mr Slevin by which Mr Slevin acted for Perpetual or its agent, Collins Securities. In 2008 Mr Slevin submitted loan applications to approximately 25 different lenders. Mr Slevin did not promote one lender over the other and did not give advice on which lender to use. His role was limited to providing information about different loans that were available and assisting customers to compile documents and to complete loan applications.
7. As to (b), I do not think that Perpetual was required to investigate Ms Bowie's financial position. The loan that Ms Bowie sought had as one of its features that Perpetual would not investigate Ms Bowie's financial position. Ms Bowie understood that that was the case. Indeed, it seems clear that she expressed an interest in a loan of that type because she did not want to reveal her financial position to the lender because she expected her application to be rejected if she did. The effect of the declaration signed by Ms Bowie was that she understood that Perpetual and Collins Securities could not be relied on to make an assessment of her ability to repay the loan and that she had to make that assessment herself. Ms Bowie read that declaration and it is apparent that she understood it. In her cross-claim, she seeks to make something of the fact that the declaration contained a section in which it was expected that she would include some information in relation to her financial position which was not completed. However, it is plain that that section was not to be completed for a no docs loan, as Ms Bowie's loan was.
8. As to (c), there was clearly an inequality of bargaining power, but I do not think that inequality was a factor that meant that the Loan Agreement was unjust. The inequality was not something used by Perpetual to obtain terms other than the standard terms on which it offered no doc loans. I have already dealt with Ms Bowie's mental illness. It is true that Ms Bowie lacked experience with no doc loans. But the concept was not complicated. Perpetual was placing the onus on Ms Bowie to satisfy herself that she would be able to repay the loan. Ms Bowie understood that that was the position and it is apparent that she gave the question of how she would repay the loan some thought. Although Ms Bowie did not obtain legal advice, the question of legal advice was raised with her and she signed an acknowledgement that she had decided not to obtain legal advice. She read and understood that declaration. Ms Bowie would have had no difficulty in obtaining legal advice if she had wanted. She was not put under any pressure to sign the loan documentation. She had retained solicitors to act for her on the purchase of the Terrigal property. She thought that they were very careful solicitors. There was nothing stopping her from asking them for their advice. Ms Bowie was assisted by Mr Skelton and discussed the proposal in some detail with him.
9. As to (d), no particulars are given for why it is said the Loan Agreement and Mortgage were not in intelligible form. The matter about which Ms Bowie complains was that Perpetual did not assess her application critically to determine whether she would be able to repay the loan. The loan application form was very clear on that matter. It made it plain that Perpetual was not going to assess whether Ms Bowie had the financial capacity to repay the loan. Ms Bowie understood that that was the case.
10. As to (e), it is correct that Ms Bowie was not advised to obtain independent legal advice. However, she acknowledged that she was given the opportunity to obtain advice of that sort and she chose not to; and that acknowledgement was clearly correct. The purpose of obtaining legal advice would have been to obtain assistance in understanding the effect of the documents Ms Bowie signed. However, it is plain that Ms Bowie understood the effect of the documents and, critically, understood that neither Perpetual nor Collins Securities would make an assessment of her ability to repay the loan. Consequently, the fact that Ms Bowie was not specifically advised to obtain legal advice cannot be a source of unjustness.
11. As to (f), I do not think that Perpetual made any representation by approving the loan. It made it clear that it was not making an assessment of Ms Bowie's ability to repay the loan and that it was relying on representations made by Ms Bowie concerning that matter in making the loan. Ms Bowie understood that that was the position.
12. I have already dealt with (g).
13. The matters referred to in (h) are not relevant to the question whether the Loan Agreement or Mortgage were unjust at the time they were entered into. Those matters relate to subsequent events. Perpetual did not know how Ms Bowie intended to discharge her obligations in respect of the loan. The basis on which the loan was made was that Ms Bowie was to make her own assessment of whether she could comply with her obligations under the Loan Agreement and Mortgage without difficulties. Consequently, Perpetual could not have known that Ms Bowie would need to use her superannuation to discharge her obligations under the Loan Agreement or that she would commit a default in respect of her obligations in relation to the Dural property. The fact that Ms Bowie is not likely to recover from her illness now says nothing about whether the agreements were unjust at the time that they were made.
14. Ms Bowie also submitted that the Loan Agreement and Mortgage were unjust relying on the Financial Services Reform Act 2001 (Cth), which incorporated the current chapter 7 into the Corporations Act 2001 (Cth), and what was said to be a failure to comply with the Code of Banking Practice. In addition, underlying a number of her submissions was a submission that Perpetual acted unjustly after she had defaulted and did not assist her in coming to a sensible resolution of the difficult position in which she found herself. However, none of those matters was pleaded and none is relevant to the question whether the Loan Agreement or Mortgage were unjust at the time that they were made, which is the relevant question. Ms Bowie does not explain which part of the Financial Services Reform Act is relevant and, on its face, it has no application to the Loan Agreement and Mortgage. Similarly, the Banking Code of Practice, even if it was applicable, says nothing which could affect the question whether the Loan Agreement and Mortgage were unjust. Although the conduct of a lender after there has been a default may be relevant to what relief the Court should give if it concludes that the agreements under which the loan was made were unjust, it is not relevant to the question whether the agreements themselves are unjust. That question must be determined by reference to what happened at the time the agreements were entered into and what could reasonably be foreseen at that time.
15. Ms Bowie does not point to any terms in the Loan Agreement or the Mortgage that could be said to be unreasonable. Neither Perpetual nor Collins Securities did anything to deprive Ms Bowie of an informed choice to enter into the Loan Agreement or Mortgage. Neither had any basis for believing that Ms Bowie had not exercised, or was not capable of exercising, an informed choice in relation to that question. For the reasons I have given, in my view, Ms Bowie did exercise an informed choice in entering into the agreements. It follows that neither the Loan Agreement nor the Mortgage was unjust.

Negligence

1. In the amended statement of cross-claim, Ms Bowie pleads that Perpetual had a duty of care at common law "to prudently assess whether or not to grant a loan and enter into a mortgage with [Ms Bowie]". In essence, it is pleaded that Perpetual breached that duty of care by: 1. Failing to investigate Ms Bowie's income, assets and liabilities to ascertain whether she could adequately service the proposed loan and mortgage; 2. Failing to consider the information supplied to Mr Slevin that Ms Bowie suffered from obsessive compulsive disorder and depression and was on Centrelink benefits and, in light of that information, failing to make further enquiries to determine whether Ms Bowie had reasonable prospects of adequately servicing the proposed loan and mortgage.
2. There are a number of difficulties with this allegation.
3. First, I do not accept that the Bank owed Ms Bowie a duty of care prudently to assess whether or not to grant a loan and enter into a mortgage with Ms Bowie: see Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd [1986] AC 80 at 107-108; Tomlin v Ford Credit Australia Ltd [2005] NSWSC 540.
4. Second, even assuming that Perpetual did owe Ms Bowie such a duty of care, the content of the duty has to be understood in the context in which the duty was to be discharged. In the present case, that context is one in which Perpetual was offering a no docs loan, one of the features of which was that Ms Bowie was not required to provide any financial information in connection with her loan. If Perpetual owed a duty of care, it was a duty to assess Ms Bowie's application in that context. There is no suggestion that Perpetual failed to do that. It is apparent that it, through its agent Collins Securities, considered Ms Bowie's declaration. It conducted a credit check. It obtained a valuation of the property. It made some further enquiries of Mr Slevin concerning the loan. Having regard to the terms of the loan, it is difficult to see what more it could have done.
5. Third, for the reasons I have already explained, I do not accept that Mr Slevin was aware that Ms Bowie was in receipt of Centrelink payments or that she suffered from a condition which meant that she did not have reasonable prospects of servicing the loan. On the basis of what Mr Slevin knew, Ms Bowie was able to work. He had no reason to think that her condition would affect her ability to repay the loan in some other way. In any event, for reasons that I have already explained, Mr Slevin's knowledge is not to be imputed to Perpetual.
6. It follows that the negligence case must fail.

Orders

1. The orders of the Court are: The defendant give the plaintiff possession of all the land comprised in certificate of title folio identifier 123/200508 being the land situated at and known as xxxx, Terrigal in the State of New South Wales (the Terrigal Property); The plaintiff has leave to issue a writ of possession in respect of the Terrigal Property; Judgment for the plaintiff against the defendant for the sum of $768,567.61; The cross-claimant's cross-claim is dismissed; The defendant pay the plaintiff's costs of the proceedings.

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