The bank claimed possession and the borrower raised a Contracts Review Act defence and claimed damages for unconscionable and misleading conduct by the bank. This case concerned a long term loan and two short term loans to be repaid from an inheritance and tax refund owed to the borrower. At around the time of the loan, the borrower learned that the tax refund would only be half of what she had initially expected. The borrower alleged that the bank offered to consolidate one of the short term loans with the long term loan prior to her acceptance of the bank’s offer. The bank denied this.
The court believed the bank and found that the conversation about consolidating the loans did not take place. In any event, the court found that the borrower knew that the bank officer did not have authority to approve any loan variation – only the bank’s credit department could do that. The court found that any representation by the bank officer that he would try to restructure the loans would not found an estoppel because it was not sufficiently clear, the bank officer lacked the authority and this was known to the borrower and it was not reasonable for the borrower to rely on it and she did not in fact rely upon it. The court went further and found that even if there was such a representation, it was fulfilled when the bank officer tried to obtain an extension for the borrower if the borrower provided the company’s financial statements, which she did not.
In any event, the court found no causation and said:
The reason the Company could no longer provide Mrs Robinson with the funds to service the loans was because of its unpaid tax debts.
The court found nothing unconscionable about the valuation or the bank’s loan because it was for the bank to set an acceptable LVR and it was not obliged to accept the price paid for a property as its market value.
The court also said:
There was nothing unjust or unconscionable in the Bank charging increased interest rates on short term loans or on a facility which was in default.
The court found no duress because the borrower was not compelled to take the loan and said:
None of the pressure was of the Bank’s making. The short-term loans were made on the basis of Mrs Robinson’s representations about the sums that would be paid to her in the short-term, from her mother’s unit and from a refund of GST. The remaining facility was advanced consistently with the Bank’s self-imposed ratio of lending no more than 70% of valuation by an approved valuer. Further, even if, contrary to my findings above, “duress” were made out, the remedy is restitutionary not compensatory and is not feasible in this case.
The court found the borrower’s allegation of fraud against the bank on the basis that the bank took account of the financial position of the borrower’s company in assessing serviceability misconceived. The court found that the bank was entitled to assess serviceability by reference to the company’s financial position and rejected the borrower’s allegation that the bank had engaged in asset lending.
The court found no breach of the mortgagee’s duties on the basis that it should have sold the property sooner. The bank could not sell with vacant possession any earlier. The bank was also prohibited from enforcing the mortgage during the investigation of the borrower’s FOS complaint which took two years.
The court granted possession and a money judgment and dismissed all of the borrower’s claims.