Bank of Western Australia v Ellis J Enterprises [2012] NSWSC 313

A husband’s company borrowed $11.675m to fund a property development. The wife granted a mortgage over her house and guaranteed the facility. Other guarantees and charges were provided by other members of the family. The loan went into default and the bank sought possession of the wife’s house. The wife sought to have the loan set aside as unjust under the Contracts Review Act, or on grounds of unconscionablility or the wife’s equity principle.

The wife claimed that her signatures on the documents were not witnessed by the solicitors in their presence and that she did not receive legal advice as to the documents.

The court did not believe the wife. The court did not accept that she never signed the document in front of those who witnessed her signature. To accept her evidence would have meant that two solicitors, and four justices of the peace falsely witnessed her signature. The judge found the solicitor-witness cross-examined on one of the signatures to be honest.

Nor did the court accept that the wife had no understanding of the contents of the financial documents she signed and did not know what they were. The court found that the wife deliberately played down her understanding of financial documents and of her knowledge of what was going on in the family business. The court found that tailored her evidence to bolster her case by portraying herself as having little or no knowledge as to her legal obligations arising out of the documents she signed when her husband asked her to do so. The court accepted that the husband was the dominant partner in their marriage and had previously beat his wife, but they both gave evidence that this had occurred prior to the bank facility being given.

The judge also determined:

  • The wife understood that the bank could take possession of her property if the moneys due were not repaid. Even though the explanation by the solicitor was brief, it was in clear terms “you could lose everything”.
  • The wife was subservient to her husband in financial matters. So far as business matters were concerned, the wife did what her husband told her to do and by doing so she believed that she and her family would be financially better off.
  • Had the wife refused to sign the guarantees, the husband would have become difficult and overbearing. There was a possibility he could have assaulted her, although it is both their evidence that assaults had ceased before the facilities were in place.
  • The wife can speak and understand conversational English well and read relatively complex documents written in English such as loan documents though she has only a partial understanding of their meaning.
  • The wife received independent legal advice in relation to guarantees she provided and understood that by signing the guarantees if the family company defaulted in repayment of its loan obligations, she would lose her property.
  • The bank itself did not exert any undue influence, unfair pressure or unfair tactics upon the wife. It did not know that the wife was under any alleged disadvantage and was refinancing another bank’s facilities where the wife was already a guarantor and had already provided a mortgage over the property as security. The bank received three certificates of independent legal advice in relation to the guarantees. The court found that the bank was not obliged to take any additional steps such as phoning the wife and providing her with advice as to whether or not she should sign the guarantees or check whether the advice she received in relation to certificate of independent advice was correct.

The wife accordingly failed on all defences.

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