A lender took an unregistered second mortgage over 3 properties of the borrower and the borrower defaulted on his loan. The lender then purported to assign the debt to a second lender but overlooked this when he refinanced that loan to the borrower to aid a refinance. The borrower defaulted on the second loan and the first lender sued the borrower. The second lender also sued the borrower on the first loan which was purportedly assigned to it. The District court found the debt was assigned and gave judgment for the second lender in respect of the original loan and dismissed the claim by the second lender in respect of the second loan.
The borrower appealed on the following grounds:
- The judge was biased; and
- The judge made incorrect findings including finding that the first lender gave valid notice of the assignment and that it did not matter to the borrower whether the original loan was made by the first or second lender.
The borrower also alleged that the loan ought to be set aside because the second lender did not hold an Australian Credit Provider’s Licence and sought a stay.
The Court of Appeal found that ground 2 (not 1) was arguable because if the assignment was ineffective, the loan remained with the first lender and was replaced by the second loan, in which case it would be wrong to give judgment for the second lender and the second lender would then have no right to sell the properties. The Court of Appeal granted the stay.