RHG Mortgage Corporation v Ianni [2015] NSWSC 1911

We have previously reported on this case. Parents were duped into giving a guarantee and mortgage for their son in circumstances where they believed that had given a limited guarantee. The parents succeeded in their unjustness and unconscionability defences at first instance but the lender appealed and the court agreed that two errors had been made by the judge. The case was remitted to the same judge to decide two matters, namely:

  1. Whether the parents would still succeed on their unjustness and unconscionability defences if the evidence of the son at the first trial had been excluded, which it should have been;
  2. Whether the inference should have been drawn that the son’s failure to give evidence at the second trial meant that his evidence would not have assisted the parents. 

As regards 1), the court found that the critical issue to the parents’ defences was whether they understood the true nature of the loan that they were borrowers, not merely guarantors and what the lender knew about it. The court found that they did not understand the loan and this was supported by other evidence, absent the son’s evidence, namely the history of the son’s borrowing and his preparedness to lie on applications, the broker’s fabrication of the meeting with the parents, and the fact that the son arranged for his parents to see a non Italian speaking solicitor with whom they had not previously dealt with and who was not aware of the fact that the parents thought they were giving a limited guarantee. The court found the advice given by the solicitor did not succeed in getting the parents to understand that they were borrowers, and that their house was security for their guarantee due to language difficulties and the fact that the solicitor was not aware of the change being brought about by the son. The court also found that the lender had sufficient notice that the contracts were unjust or should have been if they had made appropriate enquiries. 

As regards 2), the court refused to draw any adverse inference, because there was powerful evidence supporting the findings. The court noted that it was not mandatory to draw a negative inference and this is generally only material where the evidence is equivocal.

The court said:

This was a clear, and perhaps classic, case of an unjust contract. The borrowers were elderly migrant parents of a rogue businessman son. Even the solicitor whom the son arranged to give them legal advice was misled by not being given the full background to the transactions the parents were undertaking so that his advice could properly inform them. The son engaged a dishonest mortgage broker who fed false and misleading information to the finance company. That company’s failures to follow its own Guidelines and to follow prudent lending practices were manifold. The case would not have been such a difficult one if the parents had given honest and straightforward evidence, instead of trying to gild the lily. [The son’s] evidence, or its absence, did not ultimately make a difference to that position. There was too much other evidence on both sides that made the matter clear.

The court gave judgment for the parents.

Click here to read the full judgement

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