Charter Finance v Abou-Antoun [2009] NSWSC 247

This case epitomises the excesses and accompanying fraud of the recently departed credit boom.

The security history was as follows:

Date Event Debt
1999 Property purchased with first mortgage to Aussie Homeloans $130,000
2002 Aussie Homeloans refinanced by Perpetual Trustees $175,000
2003 Perpetual Trustee refinanced by Permanent Custodians $400,000
2005 Permanent Custodians refinanced by Challenger Managed Investments $640,000
2006 A second mortgage is provided by Silkwater P/L for $550,000 $1,190,000
2006 Charter Finance refinance Silkwater and loan an extra $180,000 $1,370,000

These proceedings Charter Finance sought to enforce its mortgage, and what a mortgage it was! It had a lower rate of 84% per annum and higher rate of 108% per annum. The property was owned by a father (who was 80 years old at the time the mortgage was signed), a mother (who was dead at the time the mortgage was signed) and a son (who was investing money with a fraudulent finance broker).

Charter Finance conceded that the mother had not signed the mortgage and was unable to prove, to the judge’s satisfaction, that either the father or the son had signed the mortgage. This was because neither the father nor the son gave evidence and the fraudulent broker was so deeply involved that the possibility he organised the refinance and forged all the documents by himself could not be discounted.

The lender did, however, succeed on its alternative claim for restitution. This was founded on the argument that the father and son could not deny they had received an incontrovertible benefit when the Silkwater loan was paid out by the Charter Finance loan. Accordingly Charter Finance obtained judgment in the sum of:

The amount paid in discharge of Silkwater debt:
 $688,000.00
 
Interest at Supreme Court rate until today:
 $175,882.89
 
Total:
 $863,882.89

Curiously, no order for sale of the property was made and the judgment was silent as to whether the judgment debt was a charge on the land, which under the law of subrogation it should have been. The likely explanation for this is that the property had already been sold by Challenger at a shortfall and for that reason no judicial sale application was made.

Click here to read the full judgment

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