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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.
Kemp Strang has received acknowledgements for the quality of
our work in the most recent editions of Chambers & Partners,
Best Lawyers and IFLR1000.
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