24 May 2006
The borrower successfully defeated possession proceedings in the Appeal Court on the grounds that they were brought without a notice pursuant to the s 7 Credit (Home Finance Contracts) Act 1984 first being served one month prior to the institution of the proceedings. This was the lender's second attempt to eject the borrower brought by way of cross-claim to the borrower's proceedings to extend a caveat she had lodged.
In these proceedings she sought to attack the existence and validity of the mortgage. She raised issues as to the identity of the mortgagee, and as to the identity of the credit provider under the contract by which the money was lent, and whether the documentation failed to comply with the requirements of the Real Property Act Regulations 1970 (repealed 27 August 1993) with the consequence that terms and conditions as to repayment of principal and payment of interest were not incorporated in the mortgage. The court held that as these issues were not raised in the earlier proceedings and as a result:
estoppels ... prevent the plaintiff from pursuing challenges to the validity of the mortgage and/or to her liability to make payments to the first defendant under it. The foundation of the ... appeal was the finding that there existed a contract between the parties under which the first defendant had advanced to the plaintiff the monies secured by the mortgage. It is simply not conscionable to permit the plaintiff to pursue matters against the first defendant which contradict the basis upon which she succeeded in defending its earlier claim for possession. In any event, if it be said that there is some difference in substance between the defences argued in these proceedings and those canvassed in the earlier proceedings, in my opinion it was unreasonable for the plaintiff to have refrained from raising them in the earlier proceedings in which she had ample opportunity to do so.
The s 7 notice (served after the Appeal and before these proceedings) was attacked on the grounds that it was not in the name of the transferee of the mortgage. The court rejected this argument on two grounds, firstly upon estoppel arising out of the proceedings before the Court of Appeal and secondly upon the grounds that the law was blind to the purported transfer until it was either registered or a s12 notice was issued.
The terms, conditions, extent, and effect of any assignment remain matters of speculation absent the documentation. The form of transfer takes the matter no further. The evidence is that at all relevant times the first defendant was, and is, the registered mortgagee with all its rights under the mortgage, and no transfer of them has ever been effected.
Of greater significance, irrespective of the terms and conditions of an assignment, is the fact that no notice under s 12 Conveyancing Act 1919 had been given to the plaintiff. Absent giving such notice the third defendant obtained no legal right to the debt to the first defendant.
Next the s57(2)(b) notice was attacked on the grounds that it did not sufficiently specify the defaults alleged, alternatively, specified non-existent defaults. The court rejected this argument noting that each notice unambiguously specified the default to be the failure to pay the amount. Each stated that the plaintiff, as mortgagor, was required to pay the amount owing. Each included the following statement:
"Unless the mortgagor complies with the requirements of this notice within 31 days after service of this notice, it is proposed to exercise a power of sale in respect of the Mortgaged Property"
Next the borrower argued that service of a s57(2)(b) notice and non-compliance within the prescribed period of one month was a precondition of instituting proceedings and therefore the proceedings were statute barred. The court rejected this noting that:
the giving of the [s57(2)(b)] notice is a condition precedent to the exercise by the mortgagee of rights both to sell and to demand payment of the whole of the monies payable under the mortgage. The exercise of the power of sale is a right which may be enforced without regard to litigation. In my opinion, upon the proper construction of s 57(2) and (3), failure to comply with the notice requirement does not prevent the institution of legal proceedings.
Next the defendant argued that s92 of the Conveyancing Act barred the proceedings because the the Lender's solicitor had written to her after she sought payment of costs awarded against the lender in the Court of Appeal proceedings stating:
"Please offset this cost against the debt you owe Aluma-Lite Products Pty Ltd, pursuant to the mortgage"
The judge rejected this argument stating:
the first defendant’s letter provides no basis for the conclusion that it accepted interest on the principal sum for any period, or at all. Accordingly, I find that s 92 Conveyancing Act 1919 has no application on the facts in this case.
Finally the borrower raised a Statute of Limitations argument which the Court rejected holding:
The relevant limitation period, which is under s 42(1)(b) Limitation Act 1969, is 12 years and that period commenced on 23 January 1994 being the day after the due date for repayment of the principal. Accordingly, I hold that the plaintiff has no defence under this Act.
Kate Cooper is a partner and has written multiple articles for the NSW Law Society Journal. Kate also regularly lectures on topics pertaining to mortgage law for the NSW College of Law.