Groves v Groves [2013] QSC 277

This case arose out of margin loans taken out by the owner of ABC Learning Centres, just before its spectacular collapse and his and his wife’s shares sold to satisfy various margin calls. The wife’s shares were sold pursuant to guarantees which secured the husband’s margin loans. The wife’s case was that she did not execute any of the margin loans or the guarantees and sought restitution. The alternative case advanced by her was that, if it were to be found that she had executed the guarantees, then she was not liable on the following bases:

  1. The “married woman’s equity”, which depends upon the wife being mistaken about the effect of a transaction, which does not benefit her;
  2. Undue influence (a claim later abandoned since her evidence was that her husband kept the documents from her, not that he pressured her into signing them)
  3. Statutory Unconscionability – relying on the ASIC Act and the TPA.

The court did not believe the wife and found much of her evidence to be fabricated, to support her claim that she could not have signed the documents and they were forged. The strong flavour of her evidence was that she thought her husband was the “forger”, although that was not pleaded.

The court found the handwriting to be hers.

Wife’s Equity

The court did not believe her evidence that she did not understand what margin loans were or the effect of the guarantees and regarded her evidence as self-serving and false. The court found that she had the intellectual ability to understand the relevant documents and in particular that:

  1. that she was liable for the debts of her husband under the margin loans,
  2. the general extent of that liability, and
  3. the possible consequences for her should her husband default on those loans.

The court further found that she had previous engaged in margin lending and in some cases, had been the principal borrower and that she had a substantial background in this field of finance before entering into the guarantees in question.

One of the lenders was found to have taken reasonable steps to have ensured her understanding, which is an exception to the married woman’s equity.

The court also found that she was not a volunteer because she had an active interest in the loans and their purposes, which in many cases produced benefits for her.

The court also found that even if the guarantees were unenforceable,

she could not challenge one of the guarantees because she had traded away that right as apart of the compromise she had struck with the lender.

Statutory unconscionability

The court noted that the cap of $3m on the value of the financial services provided, namely the capital value of the loans guaranteed, was exceeded and so the statutes did not apply. Even if they did apply, the court said:

Where, as here, a person is found to have entered into transactions with the knowledge: that she was doing so to assist her husband to obtain or enlarge a loan, that she would be liable for those loans if there was default, of the general extent of the liability, and of the consequences of default, then the other matters relied upon do not demonstrate that element of real unfairness necessary to establish unconscionability.

The wife failed in all aspects of her claim.

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