Cook v Permanent Mortgages [2007] NSWCA 219

The mortgage was subject to a successful Contracts Review Act defence by the borrower determined on 9 November 2006. That decision was reported on the front page of the Financial Review. This was an appeal by the borrower of some aspects of that decision.

Commenting on the trial judges decision the Justice Giles (speaking for the Court of Appeal) noted:

The trial judge found that the loan contract was unjust, essentially on the ground that the appellants’ credit history and means were such that the respondent was aware, or would have been aware had it made the most perfunctory of inquiries, that the appellants were not capable of servicing the loan even at the ordinary (non-default) rate of interest and could only satisfy their obligations by selling the mortgaged property for a sum sufficient to cover the principal and interest. His Honour observed that the beneficial nature of the Code indicated that it was intended to protect the unsophisticated and meagrely educated, such as the appellants, from their own foolishness, and that the respondent was, or should have been aware, of their foolishness, and had in effect encouraged it.

The trial court judge ordered that the lender repay the application and establishment fees and the default interest but the lender was allowed to recover the principal plus 8.8% interest. Each side was ordered to pay their own costs.

The borrower sought greater relief from the Court of Appeal however the Court of Appeal upheld the trial judge’s decision with the exception of costs. The Court of Appeal ordered the lender pay ninety percent of the borrower’s costs.

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