Steve Karamihos and Aristea Karamihos v Bendigo and Adelaide Bank Limited, Bendigo and Adelaide Bank Limited v Steve Karamihos and Aristea Karamihos [2013] NSWSC 172

Steve Karamihos and Aristea Karamihos v Bendigo and Adelaide Bank Limited, Bendigo and Adelaide Bank Limited v Steve Karamihos and Aristea Karamihos [2013] NSWSC 172

The lender failed to make reasonable enquiry as to whether the applicants could meet their loan obligations, particularly by accepting an unsupported exit strategy without verifying the commercial property value. Given the applicants' advanced age, lack of advice, inability to negotiate, and risk of losing their sole residence, the court found the contract to be unjust under both the National Credit Code and the Contracts Review Act. Relief was appropriate and the loan contract should be reopened with the applicants placed in the position as if the prior BOQ loan continued.

Jurisdiction
Australia
Judgment Date
08 March 2013
Procedural Posture
Principal Judgment / Post Trial Judgment
Outcome
Loan contract re-opened as unjust; parties to agree on calculations to put plaintiffs in position as if prior loan had continued; final orders reserved; costs reserved.
Legal Topics
['unjust Contracts' 'elderly Borrowers' 'exit Strategies for Loans' "lender's Enquiry Obligations" 'relief Under Contracts Review Act' 'national Credit Code Application']
['contract Law' 'banking and Finance Law' 'consumer Law'] ['unjust Contracts' 'elderly Borrowers' 'exit Strategies for Loans' "lender's Enquiry Obligations" 'relief Under Contracts Review Act' 'national Credit Code Application']

Case Brief

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Procedural Posture

Principal Judgment / Post Trial Judgment

Legal Issues

  1. 1 ['Whether the loan and mortgage contract was unjust for the purposes of section 76(1) of the National Credit Code and section 7(1) of the Contracts Review Act 1980' 'Whether the bank failed to make reasonable enquiry of collateral value underpinning the exit strategy' 'Whether relief should be granted under the National Credit Code and Contracts Review Act']

Ratio Decidendi

The lender failed to make reasonable enquiry as to whether the applicants could meet their loan obligations, particularly by accepting an unsupported exit strategy without verifying the commercial property value. Given the applicants' advanced age, lack of advice, inability to negotiate, and risk of losing their sole residence, the court found the contract to be unjust under both the National Credit Code and the Contracts Review Act. Relief was appropriate and the loan contract should be reopened with the applicants placed in the position as if the prior BOQ loan continued.

Court Disposition

Loan contract re-opened as unjust; parties to agree on calculations to put plaintiffs in position as if prior loan had continued; final orders reserved; costs reserved.

Orders

  • ['Transaction reopened; parties to agree on notional indebtedness as if BOQ loan continued, having regard to payments made.' 'Matter listed for final orders on 5 April 2013.' 'Costs reserved.']