A claim by a wife that a mortgage should be set aside because of the presumed undue influence of the husband dismissed …
Mrs Mavaddat purchased a family home with her husband in Perth in 2004. HSBC advanced $1.16 million to assist with the purchase. Later Mrs Mavaddat became the sole owner of the property. Mrs Mavaddat’s evidence was that she was born in Iran, came to Australia in 1957, that her command of English was not good and she signed whatever documents her husband asked her to. It was on this evidence that she asked the court to set aside the loan transaction and the mortgage on the basis of the presumed influence of a husband over his wife and the bank’s knowledge of and involvement in this undue influence. Her argument was rejected and the bank was given judgment for possession of the property and judgment for the debt.
There are two categories of undue influence. The first is where there is actual undue influence by a husband over a wife and the second is where there is no actual undue influence but there is a failure to explain adequately and accurately the transaction which the husband seeks to have the wife enter into for the immediate economic benefit not of the wife but the husband. A bank can be tainted by the conduct of the husband in the second category of case.
In the first category the applicant must prove the undue influence that is relied on to set aside the transaction.
In the second category the undue influence is presumed. It arises when there is a relationship of trust. Furthermore, in this category there are two sub categories. The first is where there is a special relationship of trust such as parent and child or doctor and patient. The second subcategory requires the applicant to prove that he or she had a special relationship of a nature that enlivens the presumption of undue influence. The relationship of husband and wife is not in the first subcategory.
For a wife to prove that she has the special relationship that enlivens the presumption of undue influence she must prove the following:
1. she did not, in fact, understand the purport and effect of the transaction;
2. the transaction was voluntary (in the sense that the wife obtained no gain from the contract the performance of which was guaranteed);
3. the lender is to be taken to have understood that, as a wife, the claimant may repose trust and confidence in her husband in matters of business and therefore to have understood that the husband may not fully and accurately explain the purport and effect of the transaction to his wife; and
4. the lender did not take itself steps to explain the transaction to the wife or find out that a stranger had explained it to her
The Court held that Mrs Mavaddat failed to prove the matters that would have established that she was in a special relationship with her husband that would have enlivened the presumption that she could have relied on to set aside the loan and mortgage transaction.
COVID-19 and mortgagee repossession of land…
In the matter of Catalyst Provisional Lending Pty Limited v Dick-Telfar  NSWSC 324 it was argued before His Honour, Justice Harrison, in the Supreme Court of NSW, that a lender should be prevented from taking possession of mortgaged land because the government might make regulations to assist defaulting borrowers during the pandemic. The second argument put forward was that the court should exercise its discretion to stop the repossession because there were sub tenants and they were protected under the emergency regulations.
Both arguments were rejected by His Honour. On the first argument, he held that the fact that there was the possibility of regulations being made did not assist the applicants and on the claim for discretion because there were sub tenants, His Honour said that there was no evidence that the subtenants were not able to relocate.
The mortgagee was permitted to proceed to take possession of the property to recover money owing under the mortgage.