Jams 2 Pty Ltd & Ors v Stubbings (No 4)

[2019] VSC 482

Supreme Court of Victoria

Built by Barristers,
For Australian Law.

1. Equity
2. › Unconscionable conduct
3. › Setting aside loan agreement, mortgage and guarantee
1. Equity
2. › Rescission
3. › Restitutio in integrum — practical justice between parties
1. Equity
2. › Rescission
3. › Ancillary adjusting relief — secured versus unsecured restitutionary debt
1. Equity
2. › Unconscionable conduct
3. › Interest rate on restitutionary obligation — RBA cash rate

Where a loan and mortgage are set aside for unconscionable conduct, the court may order that any restitutionary sum payable by the borrower be an unsecured debt rather than maintaining the lender's security interest, particularly where the obtaining of security was itself part of the unconscionable imposition and where maintaining security would expose the borrower to loss of their home and equity through interaction with other encumbrances.
In fashioning equitable rescission orders, the court aims to restore the innocent party to the equity position they held before the unconscionable transaction, taking into account incidental costs of sale and repurchase, obligations to third-party mortgagees, and the practical consequences of any order on the party's ability to retain housing.
Where a lender's unconscionable conduct is established, the lender is disentitled to contractual interest rates; the court may apply the RBA cash rate or no interest at all, and fees generated by the unconscionable transaction (such as procuration and legal fees) are excluded from any restitutionary sum.

Citation[2019] VSC 482

CourtVSC

JurisdictionVictoria

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Quick Take

Where a loan and mortgage are set aside for unconscionable conduct, the court may order that any restitutionary sum payable by the borrower be an unsecured debt rather than maintaining the lender's security interest, particularly where the obtaining of security was itself part of the unconscionable imposition and where maintaining security would expose the borrower to loss of their home and equity through interaction with other encumbrances.
In fashioning equitable rescission orders, the court aims to restore the innocent party to the equity position they held before the unconscionable transaction, taking into account incidental costs of sale and repurchase, obligations to third-party mortgagees, and the practical consequences of any order on the party's ability to retain housing.
Where a lender's unconscionable conduct is established, the lender is disentitled to contractual interest rates; the court may apply the RBA cash rate or no interest at all, and fees generated by the unconscionable transaction (such as procuration and legal fees) are excluded from any restitutionary sum.