NZI Capital Corp Ltd v Poignand, Roger James & Ors [1997] FCA 963

NZI Capital Corp Ltd v Poignand, Roger James & Ors [1997] FCA 963

NZI knew of unusual features of the refinancing transaction, including that only limited investors were giving guarantees, only two investors were giving mortgages, sums were to be deducted for fees and creditors, and Ripoll had serious liquidity difficulties, while Ms Fulton did not know these matters and lacked proper independent legal advice. Those circumstances placed her at a serious disadvantage, making enforcement of the guarantee and mortgage unconscionable. Practical justice required setting aside the guarantee and mortgage only on conditions, including a fresh limited guarantee for $25,000 and non-enforcement of the 5 per cent fee.

Jurisdiction
Australia
Judgment Date
20 August 1997
Procedural Posture
Equity Claim Concerning a Deed of Guarantee and Indemnity and Mortgage, and Fourth Cross Claim / Reasons for Judgment and Orders on Nzi's Claim Against the Ninth and Tenth Respondents and on the Fourth Cross Claim
Outcome
The deed of guarantee and indemnity and mortgage were set aside conditionally; enforcement of the orders was stayed pending further order or appeal; the ninth respondent was awarded nine-tenths of her costs against the applicant; the cross-claim stood over.
Legal Topics
['unconscionable Dealing' 'special Disadvantage' 'lack of Independent Advice' 'rescission' 'conditional Equitable Relief']
['equity' 'banking and Finance' 'guarantees and Indemnities' 'mortgages'] ['unconscionable Dealing' 'special Disadvantage' 'lack of Independent Advice' 'rescission' 'conditional Equitable Relief']

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Procedural Posture

Equity Claim Concerning a Deed of Guarantee and Indemnity and Mortgage, and Fourth Cross Claim / Reasons for Judgment and Orders on Nzi's Claim Against the Ninth and Tenth Respondents and on the Fourth Cross Claim

Legal Issues

  1. 1 ["Whether NZI's reliance on the guarantee and mortgage executed by Ms Fulton and Margaret Fulton Enterprises was unconscionable." 'Whether Ms Fulton was at a serious disadvantage because assistance or explanation was necessary and not obtained.' 'Whether NZI knew, or ought to be taken to have known, of unusual features of the refinancing transaction not disclosed to Ms Fulton.' 'Whether the guarantee and mortgage should be set aside, and if so on what conditions.']

Ratio Decidendi

NZI knew of unusual features of the refinancing transaction, including that only limited investors were giving guarantees, only two investors were giving mortgages, sums were to be deducted for fees and creditors, and Ripoll had serious liquidity difficulties, while Ms Fulton did not know these matters and lacked proper independent legal advice. Those circumstances placed her at a serious disadvantage, making enforcement of the guarantee and mortgage unconscionable. Practical justice required setting aside the guarantee and mortgage only on conditions, including a fresh limited guarantee for $25,000 and non-enforcement of the 5 per cent fee.

Court Disposition

The deed of guarantee and indemnity and mortgage were set aside conditionally; enforcement of the orders was stayed pending further order or appeal; the ninth respondent was awarded nine-tenths of her costs against the applicant; the cross-claim stood over.

Orders

  • ['The deed of guarantee and indemnity between the applicant and the ninth and tenth respondents, dated 22 April 1987, and mortgage W868553 between the applicant and the tenth respondent dated 22 April 1987 set aside on condition that the ninth respondent execute and deliver to the applicant a fresh deed of guarantee...