Kemp Strang recently acted for a lender in an important case that will have relevance to lenders that issue default notices under the National Consumer Credit Code.
In Perpetual Trustees Victoria Limited v Bianka Monas [2011] NSWSC 57, Perpetual sought orders for possession of land following defaults on payments by the mortgagor. Perpetual served a default notice on the mortgagor in purported compliance with the requirements of s80(3) of the Consumer Credit (New South Wales) Code (the Code) and the mortgagor did not pay the arrears within the grace period stated in the notice.
The mortgagor's defence to the application for possession alleged that the default notice issued by Perpetual was not valid as it did not strictly comply with section 80 of the Code.
The Court found, both at first instance and on appeal, that strict compliance with the exact wording used in section s80(3) of the Code was not necessary, and that the default notice was adequate.
In the appeal judgment, Young JA affirmed that the appropriate test was whether or not the borrower had been misled by the default notice:
"...one should not look at such notices strictly... they are valid so long as they reasonably convey to the recipient the message that the section intends the borrower to receive and the borrower is not misled" (Monas v Perpetual Trustees Victoria Limited [2011] NSWCA 417) per Young JA at [39]).
A further issue in the case was whether section 80(4)(c) of the Code provided the Court with power to retrospectively authorise the commencement of enforcement proceedings where it is found that a default notice failed to comply with the Code. Both at first instance and on appeal, it was held that the Court has such power.
The mortgagor sought special leave to appeal to the High Court. The application was refused as the High Court was not persuaded the mortgagor had reasonable prospects of success and it was not satisfied the mortgagee had failed to comply with the requirements of the Code.
Conclusion
This case has helped provide certainty to lenders using default notices as part of their debt recovery procedures.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
