Rich v Westpac [2014] NSWCA 136

The husband granted two “all money” mortgages over the family home, which was in his name only, to secure his debts of over $4m to the bank. The husband and wife separated just before the final loan. The wife claimed that her husband was stripping the family assets. The husband became bankrupt and the family court ordered that his interest in the family home be transferred to the wife. The wife did not claim that her equitable interest in the home trumped that of the bank under its registered mortgages but that the bank had constructive notice of her interest and failed to advise her to get independent legal or financial advice. The bank sought possession of the family home.

The court found the wife had no arguable defence to the possession proceedings for the following reasons:

  1. the mortgages did secure the unpaid loans, not just the loans that had been paid out;

  2. possession could not be resisted by disputing the amount of the debt unless the amount owed was tendered, which the wife was unable to do;

  3. the wife’s interest did not trump the bank’s and the effect of any judgment for possession upon her was indirect.

The wife appealed but her appeal was misconceived. The appeal sought to raise defences of statutory unconscionability and a Contracts Review Act defence, as well as a defence that the bank had constructive notice of her interest. The wife also argued that the bank knew that both the bank and the husband were in breach of fiduciary duties owed to the wife and liable as constructive trustee to account.

The Court of Appeal found that the bank as mortgagee was not affected by the fact that it was on notice of the fact that the husband was married, nor that the wife might have had a potential claim against him for an interest in the property and in any case, there was no legal basis for the wife claiming that she had an equitable interest in the home prior to the family court order.

The Court of Appeal said:

The proposition seems to be put that it is unconscionable conduct for a bank to lend money secured over property solely owned by one party to a marriage, without first consulting his or her spouse (or advising the spouse to seek legal advice). No authority for that proposition has been cited.

In any event, the Court of Appeal found that given the bank only proceeded against the husband, the wife’s defences, which concerned the bank’s conduct towards her were irrelevant to the bank’s claim for possession against the husband.

The Court of Appeal dismissed the appeal.

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