Mighell v Gargoura [2009] NSWSC 248

In this case a sweet little old lady and a sweet little old man were unable to pay their mortgage, so they resorted to continual refinancing, getting deeper and deeper into debt. Eventually they could refinance no more and were scheduled to be evicted by the Sheriff. At this point, had they sold their house, they would have had around $250,000 left over. However before they could be evicted a white knight came along in the form of a financier, who although not prepared to lend them money, agreed to buy the property off them. Under the deal he agreed to leased it back to them, and granted them an option to re-purchase it in a year’s time. The elderly couple received independent legal advice and the sale proceeded.

Reviewing the arrangement in light of the Contracts Review Act Palmer J found it was a travesty. He threfore ordered that the financier pay the elderly lady $250,000. However the lady (and her husband before he died) had occupied the house rent-free for an additional 7 years after their scheduled eviction. The financier accordingly made a submission that he should at least be entitled to offset an occupation fee against the $250,000. To this His Honour replied:

I do not think that any allowance for an occupation fee should be made. But for the unjust contract of which he took the benefit, he would not have been in a position to charge rent.

While this may not have been Equity in the general law sense, it was “justness” according to the length of Justice Palmer’s foot and that, after all, is what the Contracts Review Act is all about. As Chief Justice Spigelman said in Perpetual Trustee Company v Khoshaba [2006] NSWCA 41:

When the Parliament adopts so general, and inherently variable, a standard as that of ‘justness’, Parliament intends for Courts to apply contemporary community standards about what is just. Such standards may vary over time.

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