Permanent Custodians v Barton [2008] NSWSC 1355

This was an application by the mortgagors to set aside default judgment and file a defence to the claim on the following grounds:

  1. undue influence and/or unconscionability, of which the lender had notice
  2. the “unjustness” of the mortgage under the Contracts Review Act 1980

The mortgagors guaranteed a loan for $220,000 on the promise from the mortgagee that it would look to the borrower’s stock before it would look to the guarantee. The loan defaulted and proceedings were immediately commenced against the mortgagors. It was alleged that the broker had put the lender on notice of the unjust/unconscionable circumstances.

The court held that the mortgagee had no knowledge of any unfairness, special disability or disadvantage, and therefore there was no arguable case against the mortgagee to overturn possession. The court noted the remedies, if there be any, of the mortgagors lay against the borrower, his companies, or other persons involved in the unconscientious behaviour. The application to set aside default judgment was dismissed.

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