Secure Funding Pty Ltd (formerly known as Liberty Funding Pty Ltd) v Phillip Egan

1. [1]

   In 2004 the plaintiff, Secure Funding Pty Ltd formerly known as Liberty Funding Pty Ltd (“Liberty”), lent the defendants an amount of $255,000 secured by a mortgage over a property at St Andrews in Sydney (“the Property”) which the defendants jointly owned. At the time of the application to Liberty for the loan the Property was mortgaged to Australian Wholesale Lending Mortgages Pty Ltd a company connected with ING Bank Ltd and to which I shall refer in the balance of these reasons as “ING”. The debt to ING was $191,000 and that amount was paid to ING out of the $255,000 lent by Liberty. There were other payments made out of the $255,000 which are listed in Exh A and accepted by the second defendant to have been paid, details of which I have set out at [26] and [27] below.

2. [2]

   From 2004 to 2012 the defendants met the mortgage repayments to Liberty but in 2012 the first defendant lost his job and he and the second defendant were unable to meet their obligations to Liberty.

3. [3]

   On 1 August 2014 Liberty obtained judgment against the first defendant for $311,313.36 and obtained an order for possession.

4. [4]

   The second defendant resists Liberty’s claim. Notwithstanding the terms of her defence Mrs Egan does not now dispute that pursuant to the Contract she owes Liberty the amount of $366,556.74, or that Liberty would, but for a defence based on the Contracts Review Act 1980 (NSW) (“the Act”), be entitled to an order for possession as against her (in addition to the first defendant). Unconscionability was also raised by Mr Brennan initially as a ground but he accepted that the pleadings did not encompass such a defence: see T9.12- 15.

5. [5]

   Ms Egan (as she wishes to be known) was married to the first defendant Phillip Egan (“Mr Egan”) in 1975. They were divorced in 1994 and had one child together in 1977. Ms Egan says that although she and Mr Egan were divorced in 1994 they have continued to live under the same roof since then, and apart from some domestic squabbles which have increased since the problems with the Liberty loan in 2012, are and have always been friends.

6. [6]

   Ms Egan’s evidence contained in her affidavit of 2014 included the following assertions of fact:

   1. (1)

      that she (now 64 years of age) has always left all matters of a financial nature to Mr Egan

   2. (2)

      that she left school at fifteen, has very low self-esteem, “is terrible with money” and “unable to comprehend complex maths”. She says she has

   3. (3)

      that she met Mr Egan when she was in her early twenties and married him in 1975

   4. (4)

      that she signed whatever documents Mr Egan asked her to sign and was not aware of whether any document she signed was a mortgage

   5. (5)

      that she and Mr Egan maintained separate bank accounts, and he would pay for bills and living expenses and he would give her housekeeping money. She says she has no idea how much Mr Egan earnt at his job or what he spent his money on- that they rarely discussed finances. Mr Egan provided for Ms Egan’s financial needs and the needs of their daughter up until their daughter moved out of home

   6. (6)

      that she and Mr Egan purchased the Property for $38,000, with Mr Egan using

   7. (7)

      that her marital relationship with Mr Egan broke down but they continued living in the Property after the divorce in June 1994 (see para 13 of Ms Egan’s affidavit)

   8. (8)

      Ms Egan says she only became aware of the various mortgages after the commencement of these proceedings (para 20)

   9. (9)

      at para 21 of her affidavit, Ms Egan said:

   10. (10)

       Ms Egan says she signed the mortgage to the Commonwealth Bank (an earlier mortgage in 1985)

   11. (11)

       in relation to the application made to Liberty that she signed the application given to her. She noticed that it has been filled in by someone other than Mr Egan and that her name was spelt incorrectly and that it referred to her as “Mrs” when in fact they were divorced in 1994

   12. (12)

       she must have (T33.43) drawn attention to the misspelling of her name (or may have done so- T33.46) but not to the incorrect reference to “Mrs”

   13. (13)

       in para 37 Ms Egan said:

   14. (14)

       that she rarely has holidays and lives simply within her means

   15. (15)

       at para 39 she recounts:

   16. (16)

       at para 42 she said:

7. [7]

   Mr Dowdy of counsel appeared for Liberty and Mr Brennan of counsel appeared for Ms Egan.

8. [8]

   There were some aspects of cross examination which led me to have doubts that Ms Egan was as naïve and incapable as she sought to present herself including the fact that she appeared to have no difficulty reading (with her glasses) material that was put to her. She was unconvincing in her explanation of how it was that she (who claimed to have no knowledge about their finances) was able to inform Mr Egan that they did not have enough money for her to be able to go to the United States on a holiday. There also seemed to be a theme in her evidence to the effect that the Property was solely hers rather than jointly owned and that she obtained no benefit from the loan from Liberty, when she clearly did have a benefit since most of the money was used to pay off debt for which she was jointly and severally liable. Her evidence that the house was originally purchased out of a gift from Mr Egan’s father was demonstrated to be incorrect- as in fact a significant portion of the purchase price was borrowed and secured over the Property.

9. [9]

   There was an exchange at T43.15- 37:

10. [10]

    Mr Dowdy submitted that Ms Egan’s evidence demonstrated a knowledge that Mr Egan was looking to refinance the ING loan which undermines Ms Egan’s assertion that she had no knowledge of what she was signing when she signed the Contract and mortgage.

11. [11]

    I have set out at [6](13) what is contained in para 37 of Ms Egan’s affidavit. That paragraph although expressed to be a ‘guess’ is quite at odds with the facts since the precise distribution of all of the $255,000 is known: see Exh A. It was untrue to suggest that Mr Egan might have spent any of the $255,000 borrowed on gambling and Ms Egan’s persistence in cross examination that she did not know what Mr Egan had done with the money (see T35- 37) gave credence to the suggestion put to her at T37.17- 25 that she had deliberately sought to create the false impression that Mr Egan had gambled the money away.

12. [12]

    Mr Dowdy submitted that I should draw a Jones v Dunkel (1959) 101 CLR 298 inference from Mr Egan’s absence namely that his evidence would not have assisted Ms Egan’s case. Mr Brennan contended that Mr Egan should not be seen as in Ms Egan’s camp. I do not rely on the absence of evidence from Mr Egan in relation to the conclusions to be drawn.

13. [13]

    I am unable to accept that when Ms Egan signed the disbursement authority at Exh B p 42 and the document at p 1-12 of Tab 7 Exh B (the application to Liberty for a loan) she did not appreciate that she and Mr Egan were making an application for a loan, and that when she signed the document as ‘mortgagor’ on the mortgage (pp 29-30 Exh B) she did not appreciate she was signing a mortgage. Even more obvious and hence throwing doubt on her reliability generally is the mortgage to Bank of Queensland (see Exh B) since the page on which she signed bears the heading “Mortgage” in dark type and block letters and her signature is appended beneath the label “Signature of Mortgagor”.

14. [14]

    The Act in s 9(1) sets out the matters to which the Court shall have regard and in (2) sets out the matters to which the Court must have regard to the extent that they are relevant to the circumstances. The only subparagraph of the Act to which Mr Brennan made express reference was s 9(2)(i), which sets out, as one of the matters to which the Court should have regard:

15. [15]

    Mr Brennan’s closing written submissions (received on 19 March 2015 in response to Mr Dowdy’s written submissions of 17 March 2015) contained the following contentions:

    1. (1)

       that Liberty failed to ensure that Ms Egan had matters explained to her as to her liability under the loan and mortgage

    2. (2)

       that there was history of poor financial management by Mr Egan and Ms Egan- and that the loan and mortgage were disadvantageous to Ms Egan

    3. (3)

       that Liberty was

    4. (4)

       Mr Egan apparently had a nervous breakdown whilst making these payments which Mr Brennan contended is consistent with the idea that the regime of payment was too stressful for Mr Egan to manage them indefinitely

    5. (5)

       that the substantial application fee gave rise to a legitimate expectation that the loan would be properly and fully considered by the lender

    6. (6)

       proper inquiries would have revealed that Ms Egan and Mr Egan were divorced

    7. (7)

       that Liberty

16. [16]

    The last submission, [15](7), clearly misapprehends the position from a number of points of view. First, Liberty is entitled to judgment (as Mr Brennan’s opening written submissions conceded) unless Ms Egan can persuade the Court to set aside or ameliorate the terms of the loan and mortgage that she entered into by recourse to the Act. Further, and these points also apply to a number of the other of Mr Brennan’s points:

17. [17]

    Even were I to accept Ms Egan’s assertion that she did not appreciate that she was mortgaging her home that fact would not assist her: her evidence is that she regularly signed documents that Mr Egan asked her to signed without inquiring what those documents were because she trusted him implicitly and had no reason not to trust him: see T23.10- 11, T27.1-19, T27.43- 46, T28.36- 41, T30.5- 6, T31.8- 11, T31.42- 43. In Provident Capital Ltd v Naumovski [2013] NSWSC 40 Garling J said in respect of the Act:

18. [18]

    In Marzouk v Westpac Banking Corporation BC9201553 14 October 1992 Meagher JA said in relation to the claim for relief under the Act by a wife that there was nothing unjust

19. [19]

    In relation to [15](2) and (3) the history of mortgages over an almost thirty year period did not call into question the judgment of the defendants or their capacity to repay the loan.

20. [20]

    In relation to [15](4) this involves events eight years after the loan was made.

21. [21]

    In respect of [15](5) there is no evidence that Liberty did not fully consider the loan application made by Mr Egan and Ms Egan (or Mrs Egan as Liberty would have understood the position).

22. [22]

    In relation to [15](6) Liberty was not required to investigate whether Mr Egan and Mrs Egan (as she was described on the form) were divorced, or that Ms Egan was in receipt of a disability pension. Mr Brennan’s contention that somehow Liberty had an obligation to discover the untruthfulness of the representations made in the application signed by Ms Egan or the existence of something not disclosed in that application is fanciful.

23. [23]

    I accept that Ms Egan was not given legal advice but I do not think that there was anything unjust or unfair about the Contract. Nor, for that matter, were it relevant, has any unconscionable conduct on the part of Liberty been established. Even were I to accept that Ms Egan did not read anything which she signed and did not understand what it was she was signing I do not think that fact coupled with the fact that she was not given advice by a lawyer could justify the intervention of the Court on the basis of the Act.

24. [24]

    A further matter on which Mr Dowdy relied relates to the fact that most of the money borrowed from Liberty was used to pay out the ING loan. In Collier v Morlend Finance Corp (1989) NSW ConvR 55-473. Meagher JJA with whom Hope and Clarke JJA agreed said:

25. [25]

    A recent application of this is found in Bank of Western Australia Ltd v Tannous [2010] NSWSC 1319 [32] per Davies J. The approach of the New South Wales Court of Appeal is binding on me and based, with respect, on sound principle. Mr Brennan said nothing about this case or its applicability to the present case notwithstanding Mr Dowdy’s reliance on it in both his written and oral submissions. Ms Egan made no offer to repay the $191,000.

26. [26]

    Even were the Act otherwise applicable, I would not regard it as appropriate to relieve Ms Egan from liability to repay the $191,000, or the amount of $12,404.88 which are in the same category since they were paid so that the loan could be obtained namely:

    1. (1)

       the equalisation fee $3,528

    2. (2)

       the mortgage broker’s fee $3,025

    3. (3)

       the application fee $2,520

    4. (4)

       mortgage stamp duty $961

    5. (5)

       document preparation fee $745

    6. (6)

       mortgage processing fee $295

    7. (7)

       search fee $130.60

    8. (8)

       mortgage registration fee $64

    9. (9)

       discharge of mortgage registration fee $64

    10. (10)

        bank cheque fee $10.80

    11. (11)

        Phillip and Christene Egan total $823.43

    12. (12)

        Campbelltown City Council $238.05

27. [27]

    That would leave only the amount of $50,806 made up of the following amounts:

    1. (1)

       Daimler Chrysler $16,450

    2. (2)

       Encompass Credit Union $12,325

    3. (3)

       GE Finance $10,400

    4. (4)

       St George Bank $6,209

    5. (5)

       Source (GE Capital Finance Australia) $5,422

28. [28]

    There is insufficient information to be able to determine for what purposes these loans were effected although the first item would appear to be connected with the purchase of a vehicle (see p 4 of Tab 7 Exh B) and the GE debts are connected with household items (see p 3 Tab 7 Exh B). I am not satisfied that these were debts for items for which Ms Egan received no benefit.

Conclusion

1. [29]

   I am not satisfied that the Contract or mortgage or any provision of either of these is unjust in the circumstances relating to the Contract and mortgage at the time they were made and do not consider that there is any basis for the Court taking any of the steps enumerated in s 7 and 8 of the Act.

2. [30]

   There should be judgment for the plaintiff against the second defendant in the amount of $366,556.74 (agreed as at 16 March 2015) and interest from that date until today as well as an order for possession of the Property.

3. [31]

   The second defendant must pay the plaintiff’s costs.