The lender obtained default judgment which was set aside on the basis that the court found the borrower had an arguable case that her obligation to repay the loan only arise if and when the subdivided lots were sold and construction contracts entered into for the amounts in a spreadsheet attached to the loan agreement and also on the basis of an unjustness defence. The loan arose out of her husband’s dealings with the lender, who was also a developer and her husband negotiated the loan on his wife’s behalf. The lender sought to have the question of the deferred payment term determined separately because it would effectively determine the borrower’s claims in contract and negligence against the lender.
The court permitted the separate question to be heard on the basis that if the deferred payment term was found to exist, there would be no obligation to pay until the lots were sold and the reason they were not then becomes irrelevant. Likewise if the deferred payment term is found not to exist, then any claim as to an alleged duty of care on the part of the lender will also fail.
The court identified the issue as follows:
The duty alleged (“to use all reasonable endeavours to carry out the subdivision work with reasonable care and skill and in a proper and workmanlike manner to ensure that the sales and construction amounts identified in the spreadsheet were achieved”) is relatively straightforward; the complexity lies, in determining whether such a duty arose in the case of a lender so as to qualify the operation of a clear written loan agreement.