A husband and wife borrowed money to finance the purchase of a supermarket. They argued that the bank in lending them money engaged in unconscionable conduct. In particular:
- They were inexperienced in retailing, to the knowledge of Westpac.
- They were in a losing business from the time that they entered into the purchase agreement but they had a right to rescind.
- They did not know of the intention of the owner premises to sell it, but Westpac did have that knowledge.
- Westpac knew that the applicants had the right to rescind the purchase agreement.
- Westpac provided the security documents at the last moment, knowing that they would not be in a position to make a worthwhile decision whether to accept the finance
In order to succeed in their unconscionability argument, the borrowers had to demonstrate they were a persons suffering a special disadvantage.
The Court of Appeal noted that the borrowers had been involved in the business for a year and were no longer without experience in the operation of a supermarket and knew that the business was operating at a loss.
The Court said that the borrowers’ limited experience did not mean that the borrowers were not able to decide whether it was in their own best interests to enter into the bank loan. Further, given their previous experience borrowing from banks and providing mortgages, they must have expected that they would have had to provide security and must have understood the effect of their mortgages.
The Court found their education and employment demonstrated that the borrowers were intelligent, well-educated people (both husband and wife held doctorates in sciences) and found that their ability to make a decision in their own interests was not seriously affected by the short time within which they had to sign the bank documents.
The borrowers failed.
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