29 August 2013


A husband and wife borrowed against their home for their business and defaulted. The wife's defence was that the monies lent were paid to the business without her authority because she did not insert the business's account details in the direction to pay form. The wife also made a Contracts Review Act claim and claimed unconscionability.

The wife also sued the broker for breach of contract, negligence and misleading and deceptive conduct, none of which were found to have been made out and in any case time barred. The various other defences based on the broker being the lender's agent also failed because the court found no contractual or consensual relationship between the broker and lender beyond the payment of commission.

The court did not believe the husband and wife and made the following findings:

  1. The husband and wife were aware that they were the debtors and legally liable to repay the loan.
  2. The wife was not overborne by her husband, though somewhat reluctant to mortgage her home.

The court found it unnecessary to decide who completed the direction to pay to the business because in any event, the husband and wife ratified the payment.

The court found no resulting unjustness because the wife did not bother to obtain legal advice:

The Belcastros were not naïve borrowers. This was a conventional transaction. They had been in business, albeit in a small way, for many years, and had borrowed funds to purchase an investment property. Mrs Belcastro gave no evidence that she was herself unable to ascertain the financial viability of the company had she been minded to do so. Nor was there any evidence that suggested that it was unwise for her to trust (as I think she did) her husband's judgment on this point."

The court found no imbalance of bargaining power "except that which ordinarily arises between a borrower looking for funds and a lender willing, on certain conditions, to advance them".

The court gave judgment for the lender against the wife and granted possession.

Click here to read the full judgment

Kate resize

Kate Cooper joined Bransgroves Lawyers in 2006 and has been a partner since 2009. Kate specialises in Supreme Court litigation in the fields of mortgage enforcement, professional negligence and originator/funder disputes. She has an extensive transactional practice including, origination deeds, aggregation deeds, commercial and construction lending and mortgage securitisation.

Read more about Kate Cooper