“Those unjust terms are void, but not the whole contract.”
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A Co borrowed money. The Co’s dir and that dir’s spouse (together, “the Ps”) guaranteed the Co’s borrowing including by mortgage: [4]
The Ps said the contract was unjust pursuant to the Contracts Review Act 1980 (NSW): [6]
The Co borrowed ~$9m from the D on a 15 month term with ~$1m immediately payable to the D: [7]
On default a higher interest rate would be payable, even after the default was remedied: [15], [16]
A “hefty fee” - 5% of the ~$9m - could be charged by D in the case of *potential* default even for some circs the Ps and the Co could not control: [17], [18], [55]
A contract (unless it’s commercial, which this was not for the Ps) can be unjust due to its contractual operation (“substantive injustice”) or due to the way it was entered into (“procedural injustice”): [26], [33]
Through the prep of the contract, changes requested by the Ps were ignored: [38], [39]
The contract was not negotiated. The Ps’ 1st lawyer did not read it. The Ps’ 2nd lawyer was engaged so late they could only advise, not propose changes: [40]
This in part arose from D’s insistence at the last minute that the Ps change lawyers, having threatened not to continue with the deal if the 1st lawyers remained - an “unfair” tactic with “no good reason”: [42], [66]
The P who was a dir of the Co knew the D’s proposed term was likely too short for the development to be completed: [46]
The Ps had poor English skills and no experience with finance and property development. D was aware of this: [56] - [58], [71]
Independent legal advice was obtained, though in English with no interpreter: [60]
It is likely the Ps understood some of the legal impacts of the agreement, though likely not all of it without a translator: [62] - [65]
It was foreseeable that the Co would default (as the loan term was shorter than needed to finish building) and it was foreseeable that problems would emerge as a result: [68]
There was inequality in bargaining power between the Ps and D; and with the D’s added time pressure, no time to negotiate amendments or seek a translator’s help. D was aware of these issues: [69]
The Court did not find that the entire agreement itself was unjust; merely the “continuing” default interest rate and the “hefty fee”: [74]
The Court declared those terms void: [79]

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