In this case the borrowers gave a mortgage over their home at Currans Hill to the lenders. The lenders now seek an order for possession for default.
On the evidence it was found the lenders knew the purpose of the loan was to refinance the family home, there was no statement of assets and liabilities, there was no evidence of any business or investment, the business purpose section of the application form was not complete and the lenders lending procedures were not complied with. Therefore it was found the Code does apply to this transaction.
The borrowers contended the mortgage was unjust under s70 of the Code. Justice Patten agreed stating Esanda Finance Corp Ltd v Tong (1997) 41 NSWLR 482 as authority for the proposition:
To engage in pure asset lending, namely to lend money without regard to the ability of the borrower to repay by instalments under the contract in the knowledge that adequate security is available in the event of default, is to engage in a potentially fruitless exercise, simply because there is no risk of loss.
To ensure justice the borrowers were returned to the position they were in prior to the default so that they are only liable for the principle sum and the interest at non-default rates. The mortgage was not set aside as this would be unjust to the lenders.