Robinson -v- Watts [2000] NSWSC 584

New South Wales Supreme Court

CITATION : Robinson -v- Watts [2000] NSWSC 584 CURRENT JURISDICTION: Equity Division Commercial List FILE NUMBER(S) : SC 50127/99 HEARING DATE(S) : 29.2.00, 1.3.00, 2.3.00 JUDGMENT DATE : 28 June 2000

PARTIES : Russell Milton Robinson -v- Maria Watts & Gary John Watts JUDGMENT OF : Hunter J

COUNSEL : Plaintiff: M R Errington First Defendant: J Johnson SOLICITORS : Plaintiff: Gayle Meredith & Associates First Defendant: Wood Marshall Williams Solicitors CATCHWORDS : Contracts Review Act 1980 - third party mortgage - whether circumstances of mortgage unjust or unconscionable - enforcement by transferee - no notice by transferee of circumstances - indefeasibility of transferee's title - operation of s 7 Contracts Review Act 1980 and s 42 Real Property Act 1900 - whether underlying debt satisfied on transfer of mortgage - whether mortgagor in position of material inequality - whether mortgagor a volunteer. Real Property Act 1900 (NSW) LEGISLATION CITED : Law Reform (Miscellaneous Provisions) Act 1965 (NSW) Contracts Review Act 1980 (NSW) CASES CITED : Garcia -v- National Australia Bank [1998] 194 CLR 395 Commercial Bank of Australia Ltd -v- Amadio [1982] 151 CLR 447 DECISION : Judgment for the plaintiff. Cross claim dismissed.

- 1 - REASONS FOR JUDGMENT 1 Judgment was given against the second defendant in these proceedings, Gary John Watts (Watts), on 17 December 1999. The proceedings continued against Maria Watts seeking enforcement of her obligations under a Real Property Act mortgage dated 15 April 1998 (the mortgage), registered under the provisions of the Real Property Act 1900 (the R.P Act) in favour of Surfers Paradise Investments Pty Ltd (Surfers) over property of which Maria Watts was registered proprietor, situated respectively at St Ives and Wyoming. Watts' liability was as guarantor under the mortgage. He was the de facto husband of Maria Watts - a relationship which had existed for many years prior to the events giving rise to these proceedings. 2 The mortgage was transferred by Surfers to Leonardus Gerhardus Smits (Smits) by transfer dated 13 May 1998. That transfer was duly registered under the provisions of the R.P Act. Smits transferred the mortgage to the plaintiff Russell Milton Robinson (Robinson) by transfer dated 1 May 1999 which was also duly registered. 3 Notice of the assignment of debt was given to Maria Watts by Robinson by notice dated 16 September 1999, although of no particular legal significance, having regard to the registration of the transfer of mortgage. 4 Another aspect of the transfer of mortgage to Robinson is the fact that he required and obtained an indemnity from Smits against loss on the transfer of mortgage. However, the evidence is clear that, on the transfer of mortgage, Robinson had no knowledge of the events surrounding the giving of the mortgage by Maria Watts. The taking of an indemnity from Smits was on the advice of his solicitor. 5 The property was subject to a first mortgage in favour of Sandhurst Trustees Pty Ltd who, on 14 February 2000, obtained a writ of possession of the property. Maria Watts does not dispute that she executed the mortgage as mortgagor, nor does she dispute the transfer of the mortgage to Smits and then to Robinson. 6 The circumstances in which the mortgage was given have their genesis in a contract of sale dated 18 August 1997 (the contract), between Surfers as vendor and Zonebar Pty Ltd (Zonebar) as purchaser for the sale of land at Slacks Creek in Queensland (the Slacks Creek property) for the price of $5,000,000. The object of the acquisition of the Slacks Creek property was for development by Zonebar. 7 The purchase price was payable as to $4,700,000, subject to certain adjustments, on "Completion", with $300,000 being payable by the earlier of 13 December 1998, or seven days after Zonebar received a certificate of practical completion of the proposed development of the subject property. Smits and Watts, as directors of Zonebar, guaranteed performance of the contract by Zonebar. 8 Disputes between the parties to the contract led to a deed of settlement dated 15 April 1998 (the deed of settlement), the same date which the mortgage bears. The deed of settlement recited that Surfers had purported to terminate the contract on 24 September 1997, a step which Zonebar disputed and which led to the institution by Zonebar of Supreme Court proceedings in Queensland. Those proceedings were settled as recited in the deed of settlement in the following way: "(g) ... following discussions which have taken place between the parties it has been agreed that in consideration of [Surfers] agreeing to reinstate the Contract: