ANZ v Pollard [2012] SASC 133

This case was only concerned with the reasonableness of enforcement expenses included by the bank in their default notice to the borrowers.

The notice was a combined notice which aimed to comply with both Section 55A of the Law of Property Act 1936 (SA) and s88 of the National Credit Code.

The lender asked its solicitor to review the enforceability of its mortgage in the circumstances  where the borrower had been unemployed for some time and was engaged in major protracted litigation with a disability insurer which, if and when successful, would give the defendants the means to bring their account with the plaintiff into credit. The judge rejected the reasonableness of claiming this cost commenting:

There was nothing to suggest that ordinary professional competence had not been observed in the preparation, execution or registration of the mortgage. As such I do not consider it was reasonable for the plaintiff to incur legal costs in obtaining general advice about the validity of its security and whether the default notice should be served. It was essentially a commercial decision for the lender, which was very experienced in such matters.

Much of the work that was done, and charged for in the enforcement expenses in the default notice, would have been appropriate and reasonable after the default notice had not been complied with and when the plaintiff was considering the next step of whether to institute this action. It was not reasonable to do that work prematurely before the default notice was issued.

Part of the initial instructions from the lender to its solicitors was to order a kerbside valuation of the security. The judge rejected this commenting:

A valuation had no relevance to the contents or the service of the default notice. In any event, there is no good reason why the lender should have instructed its solicitors to obtain such a valuation. A large financial institution should be more than capable itself of arranging any valuation.

Click here to read full judgment.

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