Permanent Trustee Australia v Mary Gusevski [2005] NSWSC 1281

In this case a woman borrowed against her house at the urging of her partner and he dissipated the money. She defended the lender’s claim for possession with a Contracts Review Act defence and argued that the lender had behaved unconscionably under the general law. The lender joined the solicitor who had given independent legal advice arguing that if it failed against the borrower it was entitled to succeed against the solicitor. The borrower also cross claimed against her solicitor.

The judge found that woman had various burdens including a gullible personality which led to the improvidence of the transaction from her perspective. However significantly he found that she had “no cognitive impairment”. She was also found to be untruthful in as much as she over embellished the pathos of her situation, this included claiming she did not know what a mortgage was. Likewise, her claim that her solicitor never advised her and that the solicitor advised her in the presence of the broker were found to be untrue. However these falsehoods did not disentitle her to a windfall judgment, get-out-of-jail-free, you do not have to pay your mortgage back judgment. Nor did the judge see fit to criticise her for perjury or refer the file to the Director of Public Prosecutions. In this sense the judge was no doubt attempting to reflect what he perceives as being a very permissive society.

The loan was set aside under the Contracts Review Act on the basis that the lender was prepared to asset lend.

The first defendant here speaks English as her native language and indeed obtained her Higher School Certificate. Not only that, she had worked for an insurance company as a pay clerk. Not only that, as I have found, the provisions of the mortgage and her responsibilities under the loan were explained to her by her solicitor. Relief pursuant to the Contracts Review Act 1980 turns upon the failure of the lender to properly investigate the first defendant’s financial situation at the time when the loan was approved. There being, in my view, nothing unfair in the terms of either the loan agreement or the mortgage conditions. In making this determination it is important to bear in mind that, the second plaintiff was prepared to lend on the value of the security only in this case.

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