RHG Mortgage Corporation Ltd v Schafer [2014] WASC 297

RHG Mortgage Corporation Ltd sought summary judgement in respect of loans that Barbara and Uwe Schafer had defaulted. The defendants claimed the plaintiff had not discharged the burden of proving that it lent money to the defendants (as distinct from some other entity providing the funds), contending they were a mere go-between between the borrower and the true lender, earning commissions of which the borrower had no notice, and was thus “masquerading as a lender” or a “pretender lender”. As a consequence, they argued that the plaintiff did not provide “valuable consideration” to its customers because the money it was advancing was not its own, and the loan arguments should fail for want of consideration, and that the failure to disclose that the funds being advanced were being sourced other than through the plaintiff’s own funds was a “fraudulent misinterpretation with intention to deceive”.

In RHG Mortgage Corporation Ltd v Schafer [2014] WASC 297 the defendants also claimed (at 34) that via their unilateral foisted contract strategy, “the failure, refusal, silence or neglect in the presentment of a sufficient response, constituted Recipients acquiescence and tacit agreement” and that “shall be taken as an equitable estoppel” from pursuing the matter. 

Chaney J held that the defendants contentions were untenable. (at 23-24):

“The loan agreement simply requires that the plaintiff advance the agreed sum on the appropriate settlement date. The source of the funds, and any arrangements which the plaintiff might make to secure advances of funds to it, are not matters which are required to be disclosed to a borrower. Entities which lend the funds to the public no doubt have a wide range of sources of funding. … The underlying funding source arrangements have no effect on the rights or obligations of the borrowers under the loan agreement and mortgage.”

Chaney J concluded that the defendants had failed to demonstrate any arguable defence, that there was no real question to be tried in the case, and the plaintiff was entitled to judgment.

Barbara and Uwe Schafer appealed this decision in Schafer v RHG Mortgage Corporation Limited [2015] WASCA 11, alleging that Chaney J disregarded the Code and misconstrued their claims, erred in granting summary judgment as there were “numerous triable issues of which the court was aware” and various other criticisms of Chaney J’s handling of the matter, asserting that he was guilty of apprehended bias.

Newnes JA and Murphy JA considered those claims were totally unfounded, and dismissed the application. A second application sought a stay on the primary decision, which the Court held should be adjourned until further order. 

The application for a stay on the primary decision was heard in Schafer v RHG Mortgage Corporation Limited [No 2] [2015] WASCA 106 along with their application for “reopening of transaction” and “compensation orders” and a further application by RHG Mortgage Corporation Ltd to dismiss the appeal. There were nine grounds, most of which had no merit, and the remainder no reasonable prospect of succeeding. Newnes JA and Murphy JA granted the respondent’s application to dismiss the appeal, and dismissed the appellants application for a stay, and their application for “reopening of transaction and compensation orders” was consequentially dismissed.