Brighten v BankWest [2010] NSWSC 133

In late 2006 the Bank of Western Australia (the Bank) loaned over $32 million to Noble Growth Investment Limited to purchase the Fairmont resort in Leura. The loan was secured by a mortgage over the resort and a fixed and floating charge. In April 2009 Channel 9 program, A Current Affair, ran two “very critical” reports of the resort which the bank claimed had a negative effect on the resort and amounted to a “material adverse change for the purposes of the transactional documents”, alleging this amounted to a default under the mortgage entitling the Bank to appoint a receiver. The borrower responded by seeking an injunction preventing the Bank from appointing a receiver and a declaration that there had been no default.

One of the arguments raised was that the Bank was acting unconscionably because Mr Kwok, the sole director and shareholder, could neither read, speak nor understand English. The Bank took no steps to explain to Mr. Kwok the nature and effect of the security documents, in particular the terms and conditions upon which the Bank relies in claiming a default exists and in appointing a receiver. Additionally, there was evidence before the court that the fire alarms at the hotel were no longer being monitored by Chubb Security because its invoices were not being paid.

Justice Einstein found there was no evidence of the Bank acting unconscionably in the circumstances because the documents used in the transaction were both “standard” and “conventional” for the type of deal. He concluded by noting:

The borrower failed dismally in its efforts to show that it has a serious, not a speculative case which has a real possibility of ultimate success. There is no serious question to be tried that the bank has acted outside its rights or capriciously or with an ulterior purpose. It was reasonably open to the bank to come to the view that there had been materially adverse changes and it remains the right of the bank in the future to come to that view if circumstances point in that direction and there are accordingly no grounds for any injunction.

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