Buccoliero v Commonwealth Bank of Australia [2011] NSWCA 371

This case concerns an appeal from a judgment of the Supreme Court (see CBA v Munro [2011] NSWSC 128) which granted the lender judgment for possession. The facts were that a wife, suffering from a mental disability and of lower than average intellect, refinanced her existing mortgage with a CBA mortgage and in addition, provided her husband with a smaller additional sum. The court held that the mortgage was not unjust because the bank was not on notice that the wife was vulnerable to the influence of her husband.

The wife appealed on the following grounds:

1. The judge should have found that the wife entered into the mortgage as a result of the undue influence of her husband;

2. The bank did not check to see that the wife could service the loan;

3. The judge should have found that because of the wife’s below average intelligence, she was not able to protect her own interests;

4. The judge should have found the loan and mortgage unjust;

5. The judge did not direct his mind to the exercise of his discretion because he did not find the contract unjust.

As to 1, the wife argued that the judge’s finding that she understood the transactions and that the bank was unaware of her vulnerability should have been irrelevant to a finding of undue influence. The Appeal Court held that it was unclear in the legislation whether the party exerting undue influence must be the other party to the contract (ie the bank) or a joint contracting party and since knowledge is not referred to in the section, the judge may have misdirected himself. However the Appeal Court found that the judge took into account all the circumstances as he was required to do in holding that the contract was not unjust and that finding should not be disturbed. The Contracts Review Act provides the court with an overriding discretion to give relief only if it considers it just to do so. So even if undue influence had been found, the judge’s reasons for denying relief, namely that the bank was unaware of any influence and its other reasons, would still have held and the result would be the same.

As to 2, the Appeal Court did not accept that if the lender has little regard for the capacity of the borrower to repay and looks to the security to protect itself (“asset lending”), the contract must always be found to be unjust, as a rule of law. The court found that while the bank made inadequate enquiries as to the wife’s ability to service the loan, they were stymied by fabricated payslips and by the husband. Given the judge found it was a straightforward refinance of an existing mortgage and a loan for a small additional sum, there was no error in the judge finding that the loan and mortgage was not unjust. The court also found no error as regards 3 and 4 above. The Appeal Court also found that 5 was correct – no exercise of discretion is required where the judge does not find the contract unjust.

The appeal was dismissed with costs.

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