National Australia Bank v Sayed (No. 3) [2015] NSWSC 1473

The bank obtained a money judgment and possession. The borrowers failed to pay and sought a stay the day before the writ was due for execution until his cross-claim could be heard.The cross-claim concerns a damages claim for sale at what is said to be an under value of other property sold by the bank. The borrower argues that his cross claim amounts to a set-off and would be sufficient to pay off the debt owing to the bank. He also argued that the bank breached its agreement not to report to Veda its defaults.

The court noted that the cross claim was pleaded as a damages claim not as a set off and did not plead that what happened in relation to the other property had any effect on the subject land.

The law is that equitable set-off is available where an equitable ground is established for being protected from a claim. The set-off goes to the root of the claim, and the counter-claim is so directly connected with the claim that it would be unjust to allow recovery without taking into account the counter-claim. In possession proceedings, an injunction will not be granted unless the debt if not in dispute is paid or if disputed is paid into court.

The court said:

Nothing short of actual payment is regarded as sufficient to extinguish a mortgage debt.The benefit of having security would be greatly diminished if the fact that a debtor has raised claims for damages against the mortgagee were allowed to prevent any enforcement until after the litigation of those claims had been completed.

The court noted that the land, the subject of damages cross-claim, is not the same land, and any award of damages will not go to diminish what is owing under the judgment; rather it will merely provide a source of funds to reduce but not satisfy the judgment and there was no evidence that the borrower would have funds to make up the shortfall. The court also found that the Veda report related to a different debt and was irrelevant. The court also noted that bank had given the borrower time to satisfy the judgment debt.

The court refused the stay.

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