The lender called up a mortgage that secured both business and personal debt. The default was said to be a default by the business. The directors of the business (who had mortgaged their homes to guarantee the business debt) sought to defend possession proceedings on the grounds of unconscionability under the ASIC Act.
The court at first found this defence to be arguable. The lender appealed, arguing:
- The directors could not seek relief as the alleged unconscionable behaviour was towards the business not towards them.
- Any relief would only be by way of cross-claim sounding in damages (not as a grounds for defending the claim for possession).
On the first ground, the appeal judge disagreed with the lender:
Nothing in the Act says a claimant must be the service recipient. The prohibition in s 12CB is directed to conduct in trade or commerce in connection with the supply of financial services to “a person”. The statutory remedies created by s 12GM may be availed of by “a person who has suffered, or is likely to suffer, loss or damage by” the relevant conduct. Section 12GM does not, in terms, confine those remedies to the person to whom the financial services were supplied.
On the second ground, the appeal judge also disagreed with the lender:
In my view, the submission misconceives the way in which s 12GM is invoked in the present case. The directors do not seek the statutory remedy by way of cross claim or set-off. The directors invoke the section by way of defence. The defendants rely upon the fact that an essential element of the claim for possession (the element of default in the performance of the defendant’s obligations under their loan agreements) was created by Secure Funding’s unconscionable conduct against the company. The power of the Court to grant relief in accordance with the statute on that basis is not confined by equitable principles.
The lender’s appeal failed.