The court refused to throw it out. Then it ordered pro bono help
A homeowner who staked her house on a company loan has been given one more chance to prove the Commonwealth Bank of Australia pushed her into a guarantee she could never afford.
The Federal Court of Australia on October 20, 2026 refused to throw out a self-represented borrower’s unconscionable conduct claim against CBA, finding there was “at least room for the possibility” that the claim had merit. The court also issued a certificate for pro bono legal assistance - a step reserved for cases the court considers worth serious examination.
The dispute traces back to 2007, when the borrower mortgaged her home through CBA. Some time later, a company she controlled - Shada Pty Ltd - purchased an investment property and borrowed funds from the bank. She personally guaranteed the company’s borrowings and agreed that the existing mortgage over her home would serve as security for the corporate debt.
Those arrangements unraveled. CBA obtained summary judgment in the Supreme Court of Western Australia for almost $550,000 - the balance due under the loan to Shada - along with an order for possession of the borrower’s home. Her appeal was dismissed.
A claim that kept shifting
What followed was a series of attempts to challenge the bank through different legal avenues. The borrower first argued the National Credit Code applied to the corporate borrowing. That failed in the Supreme Court and again on appeal - the courts held the Code did not apply to the investment borrowing by Shada or to the guarantee.
She then brought proceedings in the Federal Court - with legal representation this time - arguing CBA had engaged in misleading and deceptive conduct by combining investment credit and residential credit into one arrangement. CBA obtained summary judgment on estoppel and abuse of process grounds, and those proceedings were dismissed earlier this year.
Now in her third set of proceedings, the borrower shifted ground entirely. She sought an injunction restraining the Registrar of Titles from transferring title to her home, effectively trying to block CBA from selling the property under the mortgage. The court ordered her to show cause as to why the case should not be dismissed summarily.
What changed the court’s mind
At the show cause hearing on October 14, the borrower dropped the Credit Code argument. Instead, she raised something new: the circumstances in which the bank had obtained her guarantee in the first place.
According to the decision, she described a sequence of events that began in 2005 with the purchase of an investment property in Mandurah through CBA. By 2009, when she sold that property at a profit, CBA refused to discharge the mortgage unless she provided $100,000 in additional funds - a demand the bank based on a drop in the loan-to-value ratio for a separate investment property in Karratha held by Shada. The bank offered a credit card with a $50,000 limit. The borrower was overseas and under pressure to settle. She borrowed from other sources to meet CBA’s demands.
Four months later, she entered a refinancing transaction that included the guarantee secured by the mortgage over her home. She told the court the refinancing left her liable for repayments she could not afford - and that CBA knew her financial circumstances at the time.
She framed this as unconscionable conduct under section 12CB of the Australian Securities and Investments Commission Act 2001, and also invoked unconscionable conduct in equity.
The High Court precedent in play
The court gave detailed attention to the borrower’s reliance on Stubbings v Jams 2 Pty Ltd [2022] HCA 6, a High Court decision that examined asset-based lending - where a loan is advanced based entirely on the value of the security rather than the borrower’s capacity to repay.
In Stubbings, the High Court found that a lender’s knowledge that a borrower lacked demonstrated capacity to meet repayments, combined with doubt about whether the guarantor had received independent advice, supported a finding of “unconscientious exploitation of the appellant’s special disadvantage.” The court noted these claims are “highly factually dependent” and may be established where the lender knows the borrower cannot repay, the guarantor cannot meet obligations from their own funds, the guarantor’s home is at stake, and the guarantor is financially unsophisticated and without independent advice.
The court expressed no view on whether these factors applied here. But it found the borrower’s oral submissions “point to the possibility of a claim of that kind.”
What was thrown out, what survived
The claim against the Registrar of Titles was dismissed. The court found no arguable basis for it - any successful unconscionability claim would target the bank, not the land titles office.
Several other arguments were also set aside. The borrower’s attempt to distinguish her 2007 personal home loan from the later corporate borrowing missed the point - CBA’s possession claim rested on the guarantee, not the personal loan. Her reliance on a 2004 New South Wales decision about the distinction between a mortgage and the obligation it secures did not apply where the advance of funds was undisputed. And submissions based on Western Australia’s Transfer of Land Act provided, in the court’s words, “no intelligible foundation for a cause of action.”
But the unconscionability claim survived. The show cause hearing against CBA was adjourned to December 2, 2026, with the borrower ordered to file further material by November 24. The court issued a certificate for pro bono legal assistance - directing that advice be provided on whether there is a proper basis for the claim and, if so, help formulating it properly.
For lenders and brokers who structure deals around guarantees secured by a borrower’s home, the case is a pointed reminder: how the guarantee is obtained matters as much as whether it is technically enforceable. When a borrower alleges the lender knew the guarantor could not meet repayments and structured the deal around asset value rather than capacity to repay, the Stubbings framework gives courts a path to unwind the arrangement - even years after the loan was advanced.
The show cause hearing against CBA is scheduled for December 2, 2026. The claim against the Registrar of Titles has been dismissed. No determination has been made on the merits of the unconscionable conduct allegations. CBA was excused from the October 14 hearing and has not yet responded to the new claims.
