Permanent Custodians v Leybourne [2009] NSWSC 288

This decision of Grove J involved a practising solicitor who borrowed money to pay out his ex-wife and make some alterations to his house. The borrower defended possession proceedings and cross-claimed for unspecified damages. He represented himself but chose not to give evidence.

The borrower claimed the letter of offer (which constituted the loan agreement) was not legally binding because of a statement in the covering letter enclosing the documents which read “the submission of the above documents does not comprise and is not intended as an agreement to lend”.

However, the Court held that the execution and the exchange of the security documents, and the payment to the defendant of the principal, made the letter of offer a binding legal document. His Honour quoted a decision of the High Court in Toll v Alphapharm (2004) 219 CLR:

“It should not be overlooked that to sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation … that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents. That representation is even stronger where the signature appears below a perfectly legible written request to read the document before signing it.”

Another argument raised by the borrower concerned the execution of the mortgage by the lender.  The mortgage was prepared in anticipation that it would be signed by one solicitor whose name was typed on the form. However that name was struck out and another name substituted. The borrower argued that this constituted an unauthorised variation and made the mortgage void. However the Court determined that there was no variation to the mortgage but what happened was merely the deletion of the name of one solicitor and the substitution of the name of another, who in fact made the certification. His Honour noted that the lender did not assert it was not bound by the party who signed so the authority referred to by the borrower had no application.

The borrower also argued that the mortgage was an unjust contract pursuant to the Consumer Credit Code and the Contracts Review Act. However the Court held there was no evidence to support the proposition that, at the time it was entered into, the contract was unjust. His Honour noted:

  1. There was no suggestion that the rates of interest were usurious or similar. 
  2. The memorandum was obviously in common use and the borrower did not point to any unusually burdensome term in it.
  3. Legal fees incurred as enforcement expenses were recoverable under the mortgage and this was asserted as being unjust but no authority was cited for this proposition.

The borrower, in his cross claim against the lender, alleged a breach of duty of care in ascertaining the ability of the defendant to service the loan. However the judge noted that the information supplied by the defendant in the initial mortgage application represented a surplus of assets over liabilities of $397,900 and an income of $170,000 per annum.

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