AI Property Investments v National Funding Group [2014] VSC 315

The borrower defaulted and the lender took possession. However, it was then agreed by deed of settlement that the borrower would repay the loan by year end. The borrower did not repay and requested further time, the lender refused and sold the property to a third party. The borrower sought to restrain the sale and argued that the lender’s failure to remove all advertising from property as required by the deed caused another third party financier to pull out, which resulted in the borrower not being in a position to settle. The borrower argued that the lender’s conduct in not accepting the settlement sum late was unconscionable under the Australian Consumer Law and the ASIC Act. The borrower sought specific performance of the deed.

The court characterised the borrower’s obligation to pay as paramount and the lender’s breach as an inadvertent error. The court found as follows:

  1. that the loss of third party funds was not caused by the advertising remaining at the property;

  2. that the borrower had access to sufficient money to replace the loss of funds;

  3. that the deed did not make the withdrawal of advertising a condition precedent of payment of the settlement sum;

  4.  that the parties did not intend that a failure to pay could be forgiven on the basis of an inadvertent error;

  5. that the failure to pay entitled the lender to enforce its rights;

  6.  that the borrower failed to establish that they were now in a position to pay.

The court dismissed all of the borrower’s claims.

Click here to read the full judgment

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