In Monas v Perpetual Trustees Victoria Limited the NSW
Court of Appeal considered whether a combined default notice was
invalid because it failed to provide the borrower with all of the
information set out under s 80(3) of the Consumer Credit Code.
The borrower was in default under her mortgage and loan
The lender issued a default notice to the borrower.
The borrower failed to remedy the default within the
The lender commenced proceedings against the borrower for debt
The borrower filed a defence claiming amongst other things that
the default notice did
not comply with the Code, and the
lender had no right to commence enforcement action against her. In
particular, the borrower claimed that the lender had failed to
comply with s 80(3) of the Code which states:
"A default notice must specify...that a subsequent default
of the same kind that occurs during the period specified in the
default notice for remedying the original default may be the
subject of enforcement proceedings without further notice if it is
not remedied within that period."
The Court of Appeal considered the following issues.
Did the default notice comply with the Code?
What are the consequences of non-compliance with the Code?
Does the Court have discretion to allow a lender's claim
for debt and possession to proceed in circumstances where the
lender relies on an invalid default notice to commence enforcement
The Court of Appeal came to the following conclusions.
The default notice did comply with the Code. The Court of
Appeal rejected the borrower's argument that a default notice
must use the exact words set out under s80(3) to comply with the
Code. Instead, the Court of Appeal found:
the "basal purpose" of a default notice is to give
the borrower "a grace period to remedy the default" and
therefore a default notice will comply with the NSW Code if it
satisfies this purpose and is not misleading; and
the lender's failure to include everything set out under s
80(3) is "at worst" an irregularity and therefore is not
A lender may commence proceedings against a borrower even if a
default notice does not comply with s 80 of the Code (now s 88 of
the NCC). However, non-compliance is an offence - approximately a
Yes - the Court does have this power under the Code. The Court
of Appeal appears to suggest that, had they found the default
notice to have been invalid, they would have allowed the
proceedings to continue in any event, as the borrower would not
have been prejudiced by the error in the default notice.
This decision provides comfort to lenders who issue default
notices, that "irregularities" may not invalidate a
notice. However, clearly it is preferable to ensure default notices
closely comply with the relevant legislation, to avoid the delay
and expense of any challenges.
The Sportscraft refunds and returns policy limitations went beyond consumer's rights under the Australian Consumer Law.
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