Westpac Banking Corporation v Billgate [2013] NSWSC 1304

The loan was guaranteed by the developer and his wife. The wife mortgaged the family home as security for her guarantee.

The facility went into default. The guarantors acknowledged default in a deed of settlement which released the bank from all claims in return for a reduced amount of the debt owing.

The guarantors defaulted on the deed of settlement. The bank sued for the debt owing and possession of the family home.

The developer and his wife cross-claimed against the bank for:

  1. misleading and deceptive conduct based on allegedly false representations made by the bank at a meeting at their home as to the amount of the existing debt and the availability of further funding;
  2. damages resulting from the bank’s appropriation of drawdown funds to discharge excesses on their account, resulting in non-payment to the builder, delayed completion of the project and a market loss;
  3. the guarantees and the deed to be set aside on the basis of unjustness, unconscionability and procured by misrepresentations by the bank.

In addition, the wife cross-claimed against the bank for:

  1. misleading and deceptive conduct based on allegedly false representations made by the bank that the funding would be sufficient to discharge her home mortgage, as well as funding the project whereas instead the funding was used to offset excesses, resulting in the sale of the family home in a depressed market at a later time than would otherwise have been the case but for the misrepresentations;
  2. damages for distress and anxiety;
  3. the guarantee and the deed to be set aside on the basis of the defence of non est factum in relation to the guarantee and duress in relation to the deed;
  4. the development properties to be held on constructive trust for her.

The developer and his wife failed in attacking the deed and the bank was given the benefit of its releases.

The court made the following findings of fact:

  1. the bank falsely represented the amount of the debt at the time of the increase;
  2. the bank represented that the funding increase covered the figures given by the developer to the bank which purportedly covered the mortgage, living expenses and completion of the project but did not represent that the increase was sufficient to cover those items;
  3. the shortage of funds was caused the by the developer’s consent for the funding to clear the excesses;
  4. the wife was ambushed to sign the guarantee and mortgage when her husband arrived home and was told she had no choice, and she signed under pressure from her husband;
  5. the wife received no prior financial or legal advice on the guarantee;
  6. the bank representative failed to advise the wife to obtain independent legal advice;
  7. there was no evidence that the wife would have sold the family home earlier had the representations not been made;
  8. the wife received independent legal advice before signing the deed;
  9. no unfair conduct on the part of the bank in relation to the deed.

The court found that the developer and his wife did not rely on the false representation made by the bank as to the amount of the existing debt because the material readily available to the developer contradicted this and in the case of the wife, she was unaware of the funding amounts and so was uninfluenced by the representation.

In relation to the wife’s further claims, the court rejected any constructive trust. The court also held that the deed precluded any claim for damages for distress which in any case would only be nominal given a substantial proportion of the distress was caused by circumstances not related to any conduct of the bank.

The court held the wife’s guarantee and mortgage unjust, on the basis of the circumstances leading to its execution, including the bank’s breach of the banking code and terms of the guarantee by reason of the bank’s failure to advise the wife to obtain independent legal advice. However this was irrelevant given the court found the subsequent deed precluded claims against the bank in any event.

The court refused to set aside the deed on the basis that it was unjust or on the basis that the bank engaged in unconscionable conduct or duress because both the developer and his wife were well aware of the risks but wanted to settle with the bank and achieved a compromise.

The court gave judgment to the bank for the debt owing to it and possession of the properties.

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