In Bahadori v Permanent Mortgages Pty Ltd [2008] NSWCA 150 the NSW Court of Appeal disregarded a borrower’s declaration that a loan was wholly or predominantly for business or investment purposes because the credit contract was entered into before the declaration was provided, contrary to section 11 of the Consumer Credit Code.

The effect was that the credit contracts were regulated by the Consumer Credit Code.

In considering whether the lenders had reason to believe at the time that the declarations under s 11(2) were made that the subject loans were in fact to be applied wholly or predominantly for personal, domestic or household purposes the Court referred to the borrower’s loan application. It showed that "the employment history and the statement of assets and liabilities of the appellants do not indicate that they were in receipt of any income other than wages from their employer and, in particular, from any business or investments. Further, the statement of assets and liabilities did not indicate that the appellants were the proprietors of any business or that they had any assets in the nature of investments."

Tobias JA commented:

"189 It is of concern that such persons seeking such loans in the private non-bank lending market and who are often desperate to obtain the loan, are required, in effect as a condition of the loan being provided, to declare that the funds are to be used for business or investment purposes where that is clearly not the case.
190 One reasonably suspects that such borrowers are informed that if they want the money they must sign the necessary declaration to render the Code inapplicable to the transaction. In many cases that is not much of a choice for persons who are desperate to obtain the funds on pain of possibly losing their home.
191 In any event, the onus lies upon Permanent and Conway to establish that the loans in the present case were intended to be provided wholly or predominantly for purposes other than personal, domestic or household purposes. In my view, in the circumstances to which I have referred that onus has not been discharged. It therefore follows that the Code applies to both the Permanent and Conway credit contracts."