› Unconscionability as defence to mortgagee's claim
Agency
› Ostensible authority
› Attribution of intermediary knowledge to principal lender
Equity
› Rescission
› Restitutio in integrum with ancillary adjusting relief
Quick Take
1Contractual provisions in loan origination and management agreements disclaiming agency between a lender and its loan originators/brokers are not determinative; the substance of the relationship, the course of dealings, and the functions performed on behalf of the lender must be evaluated, and where originators perform evaluative and prudential functions delegated by the lender, their knowledge of borrower vulnerabilities is attributable to the lender.
2Where a lender, through its agents, lends to borrowers with known physical and cognitive disabilities, pension dependence, and no realistic capacity to service loans — in breach of its own lending guidelines excluding such borrowers from 'low doc' products — the lending constitutes unconscionable conduct justifying rescission of the loans and mortgages, with restitution of principal at RBA cash rates rather than contractual interest rates and without security.
3On rescission for unconscionable conduct, restitutio in integrum may be achieved through ancillary adjusting relief including accounts and enquiries, and the court may substitute a modest interest rate (RBA cash rate) for the contractual rate, strip legal fees and default charges, and convert the remaining obligation to an unsecured debt.
Case Details
Citation[2015] WASC 234
CourtWASC
JurisdictionWestern Australia
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