Asset lending and the improvident borrower

The Court of Appeal recently confirmed in Tonto Home Loans Australia v Tavares [2011] NSWCA 389 at [3] per Allsop P: such labels [as low doc loans and 'asset lending'] should be eschewed as determinative of legal reasoning. Nevertheless, the notion that the the lender is looking by way of asset lending only to the potential realisation of security rather than the repayment of the loan amount by a borrower well able to service the borrowing, attracts a range of judicial disapprobation, even if it is not a normative category in itself. In particular, it may well provide a basis for relief either under the Contracts Review Act 1980 ( NSW), or those federal statutory counterparts which strike down unconscionable transactions, or by the borrower invoking the assistance of broad doctrines of equity designed to prevent overreaching behaviour by a lender. There can be nothing wrong with a lender seeking to obtain the benefit of security so long as it, or its agents, do not engage in a catching bargain with an improvident, or unsophisticated borrower. That said, there is no legal duty on the lender to lend reasonably' - like the receiver, the 'duties' imposed arise as a matter of equity and statute, not the law of tort.