Peter Newton SC, Thomas Buterin
Mr Peter Newton SC and Mr Thomas Buterin of 11 St James Hall appeared for the successful respondent in Hunyh v Ledinh Sovereign Super Pty Ltd [2024] NSWCA 78.
The appellants sought to challenge the primary decision of Davies J in Ledinh Soveriegn Super Pty Ltd v Hunyh [2023] NSWSC 1079. The principle question on appeal was whether an interest provision was unjust pursuant to s 7 of the Contracts Review Act 1980 (NSW).
The interest provision was contained in the Memorandum of Common Provisions which was incorporated by reference into the Mortgage. The interest provision stipulated that interest would accrue at a rate of 6% monthly on a compounding basis.
The appellants defaulted prompting the respondent to seek in the primary proceedings orders for possession and judgment for the principal together with interest and costs owing under the Mortgage. The appellants filed a crossclaim, alleging the respondent’s delay in bringing proceedings was unconscionable and that the interest provision was unjust. In the primary judgment, Davies J held that the respondent’s delay in taking possession proceedings was not unconscionable. His Honour held that the interest provision alone was not unjust but the combination of the high interest rate of 6% per month and its compounding nature was unjust. His Honour varied the Mortgage by deleting the clauses providing for the compounding of interest. Davies J found that the respondents were entitled to possession of the mortgaged property and judgment for principal, simple interest accruing at 6% per month and costs of the proceedings.
On appeal, the appellants claimed that the 6% monthly interest provision was unjust. Bell CJ (Payne and Kirk JJA agreeing) dismissed the appeal. The Chief Justice confirmed the approach to analysing and determining whether a provision of a contract is unjust in the circumstances relating to the contract at the time it is made under the Contracts Review Act 1980 (NSW).
Bell CJ found there was no inconsistency in the primary judgment that the 6% compounding interest rate provision alone was not unjust, but rather the combination of the high default rate and compounding interest was unjust which unjustness was ameliorated by deleting the compounding of interest provision.
His Honour also found that there remained numerous “undisputed facts and unchallenged findings” to support Davies J’s original finding that the interest provision alone was not unjust. These findings included: the appellants were experienced with mortgage agreements and refinancing; the appellants sought the loan to complete renovations on one of many properties contained in their portfolio; the appellants received independent legal advice; it had been established in cross-examination that the appellants understood they were bound by the contents of Memorandum referred to in the Mortgage, regardless of whether they read it or not, and that they had an explicit understanding of the terms of the interest provision and the risk being undertaken by entering into the Mortgage.
Link to case: Huynh v Ledinh Sovereign Super Pty Ltd [2024] NSWCA 78
