Cash King v Satchithanantham [2006] NSWSC 1303

In this case the borrower raised a defence under the Contracts Review Act and alternatively under the principle in Yerkey v Jones (Undue influence).

The principle in Yerkey v Jones (1939) 63 CLR 649 applies where two circumstances exist firstly where there is undue influence by a husband over a wife and second where there is a failure by the lender to explain adequately and accurately the transaction which the husband seeks to have the wife enter into for his immediate economic benefit. In this case Justice Bell did not agree that the wife was subject to the undue influence of her husband instead finding her to be intelligent and well educated.

In considering the Contracts Review Act defence His Honour considered the lead decision of Perpetual Trustee Company Limited v Koshaba [2006] NSWCA 41 in which Basten JA stated:

To engage in pure asset lending, namely to lend money without regard to the ability of the borrower to repay by instalments under the contract, in the knowledge that adequate security is available in the event of default, is to engage in a potentially fruitless enterprise, simply because there is not risk of loss. At least where the security is the sole residence of the borrower, there is a public interest in treating such contracts as unjust, at least in circumstances where the borrowers can be said to have demonstrated an inability reasonably to protect their own interests…This does not mean the Act will permit intervention merely where the borrower has been foolish, gullible or greedy.

However rather than the borrower having “demonstrated an inability reasonably to protect [her[ own interests” (see above) His Honour found “she is an intelligent and well-educated woman who had a sufficient understanding of the nature of each transaction”. Nevertheless the court found unjustness on the basis the other criteria in the above quote were satisfied.

Also relevant to the finding of unjustness was the sharp practices engaged in by the lender in relation to issuing a letter of offer they had no intention of honouring then using the signed offer to put a caveat for fees on the property and in that way boxing the borrower’s husband into accepting an even bigger loan.

In determining relief the court decided that upon the basis that monies had been advanced and received there could be no question of setting aside the whole loan. His Honour indicated relief would be limited to reducing the interest rate and perhaps reducing the fees. A further occasion was set for argument upon the precise scope of relief.

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