The Trust Company v Romeo [2013] NSWSC 347

The bank loaned $5.5M of which $1.6M was used to discharge a previous mortgage. The borrower defaulted and when pressed filed a Contracts Review Act Defence.

The bank sought summary judgment for the amount of $1.6 (the amount applied to the previous mortgage) and possession on the basis that no Contracts Review Act defence could succeed in avoiding repayment of at least that part of the loan principal that had been applied to the previous mortgage and in that respect, the defence was doomed to failure.


The following exchange took place: 

HIS HONOUR: Is it conceivable that a gentleman who owned a property worth $5 million, and as I understand it owned two other properties and also ran a restaurant and a bottle shop, does not understand the importance of a mortgage and loan contract?

BARRISTER: Yes, because of the involvement of a further party who, on our case, was also acting with the knowledge of the lender.

The judge commented in his decision:


It does appear remarkable that a man who built up a property portfolio with equity in the sum of $15 million could rely upon the Contracts Review Act. But although on the very limited information available to me it might seem that the case of the defendant has very serious difficulties, I cannot say that it is doomed to failure.


The court declined to order summary judgment giving multiple reasons but only one that met the bank’s argument:


Fifthly, whilst it is true that it is most unusual for a defence under the Contracts Review Act to result in a borrower not being liable to repay a principal, of some of which he or she has had the benefit, I cannot rule out completely the possibility of that occurring as a result of this litigation.


With respect to His Honour the writer is unaware of any such case.


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