Perpetual Trustee Company Limited v Albert and Rose Khoshaba [2006] NSWCA 41

Perpetual Trustee Company Limited v Albert and Rose Khoshaba [2006] NSWCA 41

The lender's failure to inquire as to the purpose of the loan and to verify the applicants' financial status, thus lending purely on the security value without regard to the borrowers' circumstances or ability to repay, combined with the circumstances of pensioner borrowers risking their family home, rendered the contract unjust under s7 of the Contracts Review Act 1980, entitling the Respondents to relief; the trial judge erred by equating internal guideline non-compliance with prudent lending practices, but relief was nevertheless appropriate on the correct principles.

Jurisdiction
Australia
Judgment Date
20 March 2006
Procedural Posture
Civil Appeal / Leave to Appeal and Appeal From District Court Judgment
Outcome
Leave to appeal granted; appeal dismissed; Respondents' costs to be paid by Appellant.
Legal Topics
['unjust Contracts' 'appellate Review' 'asset Lending' 'relief Under Contracts Review Act 1980']
['contracts' 'banking and Finance'] ['unjust Contracts' 'appellate Review' 'asset Lending' 'relief Under Contracts Review Act 1980']

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Procedural Posture

Civil Appeal / Leave to Appeal and Appeal From District Court Judgment

Legal Issues

  1. 1 ["Whether the loan agreement and mortgage were 'unjust' within the meaning of the Contracts Review Act 1980" "Whether failure to follow internal lending guidelines is relevant to 'unjustness'" 'Appropriate role of appellate review under s 7 of the Contracts Review Act 1980' 'Relevance of lack of independent legal or financial advice for borrowers']

Ratio Decidendi

The lender's failure to inquire as to the purpose of the loan and to verify the applicants' financial status, thus lending purely on the security value without regard to the borrowers' circumstances or ability to repay, combined with the circumstances of pensioner borrowers risking their family home, rendered the contract unjust under s7 of the Contracts Review Act 1980, entitling the Respondents to relief; the trial judge erred by equating internal guideline non-compliance with prudent lending practices, but relief was nevertheless appropriate on the correct principles.

Court Disposition

Leave to appeal granted; appeal dismissed; Respondents' costs to be paid by Appellant.

Orders

  • ['Grant leave to appeal.' 'Direct the Appellant to file a Notice of Appeal within 14 days hereof.' 'Appeal dismissed.' "The Appellant to pay the Respondents' costs."]