CBA v Larsen [2012] NSWSC 408

The borrower fell into arrears and the bank issued a default notice. After a conversation with the bank’s lawyers, the borrower paid an amount indicated on the default notice but this amount did not include the bank’s costs. After the borrower was served with a statement of claim for failing to pay these costs and her regular monthly payment, she spoke to a bank employee in order to lodge an application for financial hardship, in accordance with advice received from the Financial Ombudsman. However the bank employee said that it would not be necessary to “trouble” herself with that, as they could work it out together and asked her to call back in a week, which she did. Neither party managed to speak with the other due to missed calls. The bank in the meantime obtained default judgment without notice to the borrower.

The court accepted that the borrower did have a conversation with the bank’s lawyers and did not appreciate that she was required to pay the bank’s costs. The court also accepted that the borrower was discouraged from making a hardship application by the bank and did call back as requested.

The court has power to set aside default judgment pursuant to Rule 36.16(2) of the UCPR upon proper cause being shown, notwithstanding the fact that no defence to the claim is asserted.

The court set aside the default judgment for two reasons:

  1. The default notice created confusion as to the amount that needed to be paid. The borrower paid the amount confirmed by an employee of the bank’s lawyers.
  2. The bank employee discouraged the borrower from lodging a hardship application when she sought to do so, as advised by FOS. The borrower attempted to follow up with the bank but no one returned her calls. 

The court found that the actions on the part of both the bank and its solicitors combined to defeat the borrower’s efforts to forestall enforcement action by rectifying the default and, when that had failed, to invoke the hardship provisions in the National Credit Code. Those actions plus the absence of notice to the borrower of the motion seeking default judgment deprived her of the opportunity to have a hardship application determined by FOS or the court before judgment was entered and provided sufficient cause to set aside default judgment.

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