Contract and Property Law News, January 2010
Unjust Consequences and Varying Written Contracts: Satchithanantham v National Australia Bank Limited (2009).
The New South Court of Appeal has recently affirmed that the Court may only vary a written contract under the Contracts Review Act to avoid an unjust outcome.
THE FACTS: In January 2003, the NAB gave the appellant ["Mrs S"] a mortgage facility of $680,000 over her property, by way of refinance. Mrs S, a Sri Lankan Tamil, was unemployed and was illiterate in English.
After the existing mortgage over the property had been discharged and payment of legal and other costs had been made, some $267,000 was nominally left to Mrs S. The trial judge found, however, that this amount had actually gone to her husband.
It was a term of the mortgage agreement entered into between NAB and Mrs S that the bank could call in the entirety of the loan "at any time" and at short notice. The bank made such a demand in January 2005. Mrs S did not respond to this demand, which prompted the bank to serve a notice of default and a notice under section 57(2)(b) of the Real Property Act 1900 (NSW).
AT FIRST INSTANCE: Mrs S argued that she had been coerced by her husband into signing the mortgage documents. Mrs S also contended that she had not properly understood the nature or effect of the documents she had signed. She sought relief under the Contracts Review Act 1980.
According to the Court, Mrs S had been prepared to take out a mortgage on the property to the value of $408,000, but would not, in exercising her own discretion, have sought or agreed to the facility of $680,000. While her Honour found that the defendant had received the benefit of some $408,000 from the refinance, she held that the extra amount agreed to by Mrs S and ultimately received by her husband was unjust in the circumstances. Mrs. S was therefore relieved of any liability for the amount secured by the mortgage above the amount of $408,000.
ON APPEAL: In upholding the decision of the Court, Young JA in the Court of Appeal restated the fundamental principle that, absent incapacity or a forged signature, where a person signs a document knowing that it is a contract, the signatory is bound to that contract as it is worded, even where they believed it to be worded differently.
Most importantly, his Honour stated that the jurisdiction of the Court to vary the contract in question pursuant to the Contracts Review Act 1980 was limited to avoiding an unjust result or outcome.