Success for our client who was wrongly pursued for a debt she did not owe

When approached by an eminent professor at Victoria University’s School of Management & Business, LAC Lawyers were requested to act for a young Thai student from Bangkok, Ms. S. 

Ms. S. instructions, via the Professor were depressingly familiar to experienced commercial litigators.

Ms. S. had come to this country to study at Victoria University. She had been befriended by someone she thought was another student but who, in reality, was a charlatan and fraud.   This person borrowed a substantial sum from an Australian financial institution and persuaded Ms. S. to sign a guarantee making her personally liable for all repayments. Ms. S. trusted the person she assumed to be a close friend and thought she was signing a document of no legal significance.

The inevitable occurred. The “friend” disappeared. The first Ms. S. became aware of her alleged liability was when the finance institution wrote threatening letters demanding immediate repayment in full of the loan. Unaware of her legal rights, Ms. S. entered into a repayment arrangement with the finance institution whereby she pledged 60% of her weekly Austudy income of only $200.00 to repay this debt.   Ms. S. continued to make these repayment for approximately 18 months.   At the end of this time, however, only a small proportion of the debt had been repaid. Ms. S. returned to Thailand. She felt honour bound to continue to make the repayments. She feared that unless she did so, the Australian financial institution could take legal action against her and her family in Thailand.

The Professor became aware of Ms. S. situation via Victoria University and sought advice from Michael Pickering, LAC Lawyers’ senior commercial lawyer in Melbourne. 

Mr. Pickering explained to the Professor and, through him, to Ms. S., that under Australian law, Ms. S. should never have been obliged to repay the original debt in circumstances where the purported guarantee could have been set aside upon the basis that it had been obtained fraudulently. The Australian financial institution had made no direct enquiries of Ms. S. when her “friend” had offered her as guarantor of the loan but had merely accepted that an overseas student, with an income of only $200.00 per week living in rented accommodation would have the financial resources to repay a substantial five figure loan.   The facts of the case also raise potential breaches of Australian Trade Practices legislation and warranted an investigation by both the Australian Securities and Investments Commission and the Banking Ombudsman. When the finance institution attempted to force Ms. S. to continue making payments, that institution quickly desisted when its unconscionable actions were identified and explained to its head office.

Ms. S. subsequently wrote to Mr. Pickering expressing her gratitude for his advice provided via the Professor.