Banksia Mortgages v Croker [2010] NSWSC 1447

The borrowers were graziers who resisted possession on the basis of the Contracts Review Act and  the Consumer Credit Code.

They had sought to refinance a loan over their home through a broker. The broker convinced them to over borrow to invest in a venture in which he was involved for a return of 30% per annum. The borrowers’ solicitors advised against it however they decided to invest so that the income would make their repayments on the loan.

The broker made their interest repayments for about a year and then it fell into default. Justice Schmidt did not accept the borrowers’ evidence that they were gullible investors duped by the broker. Rather, Her Honour found that they were experienced business people making very large scale investments despite advice they had received.

In relation to the lender the Judge found that:

  1. The lender complied with its lending manual;
  2. The lender was not on notice of the investment they were making with their broker;
  3. The lender had assessed that the borrowers had the capacity to repay;
  4. The lender did not engage in asset lending;

Therefore, the loan was not unjust or unconscionable and should not be set aside.

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