The founder of a company arranged for his co-director to loan his defacto funds to purchase an apartment and a mortgage was given over the apartment in favour of the co-director.
The loan went into default and possession proceedings were commenced. The defacto settled the proceedings but later sought to set aside judgment for possession on the basis that it had been entered irregularly. The irregularity claimed was that the loan was in fact a Code loan and no Code notice had been given.
A further second mortgage allegedly granted in favour of the co-director was also disputed by the defacto. She argued that it had been created falsely solely for the purpose of her proceedings against her defacto, to increase her liabilities.
The court found the loan was Code regulated because even though the co-director’s company was not in the business of providing credit the court found that it had been provided by a company incidentally to its other business (the company that loaned was a nominee company) and the loan was for the defactos personal use.
However the judgment was not irregularly entered, notwithstanding that the Consumer Credit Code applied to the loan.. Any irregularity as to compliance with the Code related to the commencement of proceedings not the entry of judgment.
In relation to the second mortgage, the defacto sought a declaration that nothing was owing on the basis that it was created falsely to increase her liablities for the purpose of family law court proceedings. The court preferred the evidence of the co-director and did not find that he colluded with the defacto to create a false mortgage.