FMMI v Pittman (No.2) [2014] NSWSC 1929

We have previously reported on the trial judge’s decision in this case.

The trial judge found the borrowers were the victims of a fraudster but as the lender was found to have engaged in pure asset lending the judge set aside the mortgage in its entirety.

The lender appealed arguing that it should at least get credit for the earlier mortgage that was discharged from the funds advanced. This was on the grounds that the borrowers recieved an incontrovertible benefit.

The trial judge had dismissed this argument by saying that the earlier mortgage was also unjust.

The Court of Appeal disagreed and gave credit to the lender for the earlier mortgage amount. The Court of Appeal found there was not enough evidence led at the trial to establish that the earlier mortgage was unjust. Accordingly, the lender was given credit for the amount of the earlier mortgage it’s funds discharged.

As a result of the Court of Appeal’s decision, the borrowers knew how much they would have to pay to discharge the lender’s mortgage, namely, $1,951,000. The borrowers accordingly sought judgement against the woman who got them into the loan for that amount.

The woman (who had been joined to the proceedings) had admitted in her defence that she and the borrowers had a contract whereby she would pay the loan. She now sought to wriggle out of that admission and claimed there was no such contract.

The Court refused to allow her to withdraw her admission because:

  1. what was sought was a complete re-hearing of the facts and evidence relating to the borrowers’ cross-claim against her.
  2. in making the admissions, and deciding not to appear at the trial she made carefully considered decisions taken on the basis of legal advice. No other rational inference is available.
  3. the proceedings have now been fully determined on all questions of fact relevant to all claims.
  4. the findings of fact have been upheld in the Court of Appeal.
  5. there is clear prejudice to the borrowers who would incur additional costs which would be incurred by a further hearing.
  6. there is a risk that findings of fact favourable to the borrowers may be set aside which may lead to further proceedings in the Court of Appeal, by the lender and potentially imperil the partially favourable result of that appeal.
  7. the borrowers would be exposed to ongoing stressful litigation.
  8. there is also potential for inconsistent findings of fact between the claim and the Second Cross-claim, because the evidence will be different. It is contrary to the proper administration of justice for a court to make any such inconsistent findings.
  9. the findings of fact urged by the woman would be inconsistent with her admissions on the pleadings.
  10. of the public interest in the finality of litigation and the timely disposal of the litigation is a weighty factor.

Click here to read the full judgment

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