Bevillesta v Perpetual Nominees [2010] NSWSC 839

This was an injunction to restrain the lender from claiming an amount be repaid or exercising its rights under the mortgage upon default, in circumstances where a valuation was obtained by the lender that showed the loan to value ratio (LVR) had increased, with the consequence that the borrower was obliged to make additional repayments to reduce the debt.
The critical clause of the mortgage was clause 12.5 which was drafted as follows:

MORTGAGEE’S CERTIFICATE: A certificate signed by or on behalf of the Mortgagee as to a matter or as to an amount payable to the Mortgagee in connection with the mortgage is conclusive and binding on the Mortgagor as to the amount stated in it or any other matter of a factual nature in the absence of manifest error.

The question was whether the valuation obtained by the lender and sent to the borrower in support of the change in the LVR was a certificate as required by clause 12.5.   

The lender sent the borrower a letter stating:

The Lenders have obtained a valuation of the Security Property from M3 Property Pty Limited dated 3 May 2010 (theValuation).

The Valuation indicates that the Borrower is in breach of clause 11.5(a) of the Syndicated Loan Agreement dated 24 June 2007 (as varied and amended) (the Loan). Clause 11.5(a) of the Loan requires that at all times the loan to value ratio (LVR) must not exceed 65%.

The Valuation indicates that the market value of the Property is $168,000,000 (exclusive of GST). The current debt owing under the Loan is $116,808,000, as at 2 July 2010. Accordingly, the loan to value ratio equates to 69.53%.

The lender demanded that the plaintiff reduce its loan by $7,608,000.

Justice Ball decided that it was arguable that the LVR was not an issue under the mortgage but only under the loan agreement. Also, that there was a serious question to be tried as to whether the valuation was a certificate as required by cl 12.5. The certificate had to be given by someone who had knowledge of the facts and that those facts were true. A person who was familiar with the financial records of the lender could certify the amount owing, but that person could not give a certificate about the value of the mortgaged property as the letter purported to do. A valuer engaged by the lender would have to give that certificate. As a result, the injunction was granted.   

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