This case concerns the reversal of fortunes of the director/shareholder of the failed Gold Coast fund Equititrust.
His mother gave a mortgage and guarantees to the bank in relation to the indebtedness of her son’s fund. The son’s fund failed to meet demands for payment of $12m and the bank sued the mother for possession.
Her case was that, the nature of the relationship was such that her son was able to cause her to execute any document he chose and the mortgage procured by her son’s undue influence.
The mother claimed it would be unconscionable for the bank to enforce, because it was on notice that she was subject to his influence and did nothing. The bank argued that the mother freely executed the documents and the bank was not on notice of any undue influence and was entitled to rely on solicitors’ certificates that she had received independent legal advice.
The court found that a relationship of mother and son did give rise to a presumption of undue influence, but found the presumption rebutted because the mother knew she was signing a mortgage and guarantees and the court preferred the evidence of her solicitors, that she was properly and independently advised as to the documents she was signing and that solicitors’ certificates were provided.
The court held that the fact that she trusted her son and had confidence he would succeed in business does not mean that her will was overborne. The court also found no knowledge on the part of the bank which would preclude their reliance on the certificates and acknowledgments. The court held the bank entitled to assume that the certifying solicitor would act honestly and give proper advice.
Further the court stated that it is not the law that independent advice can only be given by a person with no connection to the borrower, as distinct from acting for the lender or the borrower, which is not permitted.
The court gave judgment for the lender and ordered vacant possession of the mother’s home.