CBA v Hocknell [2012] SASC 52

A mortgagor defaulted on his two mortgages following his accident and sought orders under section 74 of the National Credit Code for the arrears on both his mortgages to be capitalised on the grounds of hardship.

Section 74 of the National Credit Code provides that a debtor unable because of illness, unemployment or other reasonable cause, to meet his obligations and who reasonably expects to be able to discharge them if the terms were changed, may apply to the creditor for an extension and if refused, may apply to the court which has discretion to order changes and make such orders as it thinks fit. The court’s discretion is a broad one.

The court found that the mortgagor satisfied the requirements for relief but refused to order the relief based on the justice of all the circumstances. The judge noting:

Most “hardship” cases under the NCC concern depriving mortgagors of their family home. This is obviously a serious matter and one that should only be allowed where there is no viable alternative reasonably available. However, that is not the case here.

The objects of the NCC do extend to loans for investment in residential properties which is now the case here. However, it is a much less serious matter to deprive mortgagors of their investment properties than of their own homes.

In the light of the lender’s offer to allow time for the borrower to sell the property, I do not consider there is any significant injustice to the defendant in refusing to capitalize the arrears. The plaintiff should be entitled to hold the defendant to his bargain as expressed in the terms of the mortgages.

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