Unilateral Mistake by Citigroup

News report: Elderly couple broken by bank’s ‘costly mistake’

Caselaw
Citigroup Pty Ltd (ACN 004 325 080) v Wernhard [2019] NSWSC 132
Citigroup Pty Ltd (ACN 004 325 080) v Wernhard - NSW Caselaw

The Mistake – 13 July 2012

1. The sale of the Raymond Terrace property was completed on 13 July 2012. At settlement, Citigroup received the sum of $189,692.80 from the Wernhards. MBG Lawyers, acting on behalf of Citigroup, delivered to the Wernhards: the Certificate of Title to the Raymond Terrace property, the original Raymond Terrace mortgage, and a Discharge of the Raymond Terrace property mortgage in registrable form.
   
   
2. So far this was in accordance with Galilee Solicitors’ instructions.
   
   
3. Galilee Solicitors were based in Carrington Street in Sydney. They appointed McMahon Broadhurst Glynn Solicitors in Tamworth to be their agents to attend upon settlement. But Galilee Solicitors’ letter of 9 July 2012, to their agents in Tamworth, indicated that the firm was enclosing in the original typescript of the letter Mortgages and Discharges of Mortgage for the Raymond Terrace property. But then in handwriting, someone has added the Mortgages and Discharges of Mortgage for the South Tamworth and Watanobbi properties. Whoever added these other documents in handwriting (and presumably enclosed them) made a mistake. That instruction was not in conformity with the authorisation from Citigroup and even the authorisation which had been signed by the Wernhards themselves.
   
   
4. Once that error was made, it was carried through to the settlement itself where McMahon Broadhurst Glynn Solicitors delivered the additional documents on settlement to MacLean Curtis & Daley.
   
   
5. But McMahon Broadhurst Glynn Solicitors therefore delivered, in accordance with their incorrect instructions, to the Wernhards on behalf of Citibank:
   

1. The Certificate of Title to the South Tamworth property, the Mortgage over that property and a Discharge of the Mortgage in registrable form; and
   
   
2. The Certificate of Title to the Watanobbi property, the Mortgage over that property and a Discharge of the Mortgage in registrable form.
   

1. The Wernhards admitted that Citigroup had made a mistake. This admission went further and amounted to a concession that, from quite an early time, the Wernhards were aware that Citigroup had made a mistake. At the pre-trial directions hearing held before me on 18 May 2018, the Court sought to ascertain whether the issue of Citigroup’s mistake was seriously in issue. The Court received some very candid answers from Mr Wernhard.
   
   
2. The following exchange took place, indicating that the Wernhards were aware that the Certificates of Title and Discharges of Mortgages for the South Tamworth Watanobbi properties had been delivered to them by the plaintiff’s solicitors by mistake:
   

“HIS HONOUR: Then you sold one of the properties, but you've still got the certificate of title, I think, for the other property?

FIRST DEFENDANT: Yes, your Honour.

HIS HONOUR: They say that you having that certificate of title is only because they made a mistake, do you agree with that or not?

FIRST DEFENDANT: Yes, your Honour.

HIS HONOUR: Because they say that they were supposed to give you one certificate of title and one discharge of mortgage and a solicitor messed up and gave you three certificates of title and three discharges of mortgage.

FIRST DEFENDANT: Yes, your Honour.

HIS HONOUR: What I want to know is, that means you’ve now got, according to them, you’ve got one extra certificate of title--

FIRST DEFENDANT: Yes, your Honour.

HIS HONOUR: --which they say you shouldn’t have.

FIRST DEFENDANT: Yes, your Honour.

HIS HONOUR: Do you agree or disagree with their point that they made a mistake by giving you three instead of one?

FIRST DEFENDANT: I, I agree with that, your Honour.

HIS HONOUR: So you agree that they made a mistake by giving you three and not just one?

FIRST DEFENDANT: Absolutely, your Honour.

HIS HONOUR: All right, well why don’t you give it back?

FIRST DEFENDANT: Your Honour, they, they - the mistake that they, they made, we, we tried to bring that to their attention on more than one occasion and they refused to actually correct that mistake. We, we have actually--

HIS HONOUR: Well, you’re right here, you’re telling them and I’m listening too. Why don’t you just give it back and the case will be over?

FIRST DEFENDANT: Because we can’t afford to give it back, your Honour.”

 

This is where doesnt sit well with me

"
Citigroup took legal action, alleging the couple had acted “unconscionably”.

Judge Slattery last week upheld Citigroup’s pursuit of its “equitable rights”, ordering reinstatement of the mortgage over the Watanobbi home and awarding costs to the bank.

He found the Wernhards had sold the second property “contrary to good conscience”."

so contracts become invalid/reversible if its contrary to good conscience?

 

Sounds like a fair decision to me.

TMNT yes that is right basically. Imagine an intellectually disabled adult signing a contract. It might be legally valid but may not be equitable

 

Btw years ago, before I was a lawyer, I sold a property which was mortgaged to CBA and the mortgage was discharged. But they didn't close a LOC that I had. It was kept open for many years with a limit of about $250k. I was too worried to use it though as I thought when I did use it they would then discover their mistake and ask me to pay it back

 

They knew Citigroup made a mistake. They knew Citigroup never intended to discharge the other mortgages. Their solicitors had told them. They sold one of the other houses and did not reduce their debt to Citigroup. All the court did was put Citigroup back in the position they should have been in for the last house ie as mortgagee. The court did not nor was it asked to reverse the sale to the innocent purchaser of the second house.

 

This.