Banksia Mortgages v McClymont [2004] NSWSC 525

The defendants sought to review the decision of a Registrar that default judgment should not be set aside and in lieu thereof sought an order that default judgment be set aside and an order for costs in favour of the defendants. The defendants were the McClymont family.
By statement of claim filed 19 May 2003 the plaintiff plead that the defendants were the registered proprietors of the land and a house at Killara (the property).

By mortgage dated 5 September 2001, the defendants mortgaged the land to the plaintiff to secure the sum of $200,000.00 for a period of one year repayable on 20 September 2002 and in the meantime attracting interest at the rate of 8.6% per annum payable monthly. It was common ground that the principal sum of $200,000.00 was not repaid by 20 September 2002 and still had not been repaid at the hearing date. On 2 October 2003 default judgment was entered for possession of the property. A stay of execution on the writ of possession was granted.

The approach the Judge took was to inform himself of all the material before the Registrar at the time when he made the decision as well as the Registrar’s decision. He said he could also also allow fresh evidence to be tendered, which he did, by way of a fresh affidavit from the plaintiff.

As the first defendant handed up an affidavit to the Registrar on the day of the hearing, it was the Judge’s view that the plaintiff was entitled to meet the issues raised therein. As the first defendant has had an opportunity to meet the matter raised, the Judge said he should make his own decision based on the material before me after having the benefit of counsel’s submissions
The defendants submitted that the statement of claim firstly, did not plead the “variation of loan” contract; and secondly, that they were not in default of the mortgage contract because the mortgage was the subject of an extension whilst an offer to vary the contract was in existence. The defendants further submitted that the mortgage, up until the date of default judgment, had not withdrawn this offer in writing, as required. Further, the Registrar was in error when he determined that it was not the intention of the lender that the extension period would be unlimited and that they were in arrears of payment of interest.

In relation to whether there is a bona fide defence, the Registrar addressed two issues: the first being a variation to the mortgage and the second being the effect of a failure to make one interest payment.

The first defendant submitted that the Registrar was incorrect as the variation to loan contract provided for an extension to the existing mortgage until such time as all the documentation had been completed.

As the Registrar correctly stated, until this offer is accepted the existing terms and conditions of the loan continued. That could mean that the interest payments must continue to be made but that the principal did not have to be repaid until the offer was accepted and despite anything else, the lender reserved the right to withdraw the variation if the offer was not accepted within 14 days. The variation was not accepted within 14 days of the disclosure date but there was no notification to the plaintiff by the Bank of the withdrawal of the offer. Hence, it is arguable that until such a time as there was a withdrawal of the offer (communicated by the bank to the defendants) and provided interest payments were made, the contract continued.

In case he was wrong the Judge considered the second issue raised by the defendants.

As the Registrar stated, it was the responsibility of the defendants to ensure that payments were made when they fall due. There was a default in payment under the mortgage which entitled the mortgagor to obtain default judgment.

The Court arrived at the same conclusion as the Registrar. The defendants do not have a bona fide defence.  The Registrar’s decision was affirmed.

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