The borrower brought an application to set aside default judgment. The proposed defence was a failure to serve a s80 Notice under the Consumer Credit Code and unjustness under the Contract’s Review Act.
On the Credit Code issue, decisions of the Associate Judges in 2006 and 2007 were rejected and two 2010 decisions of full judges enthusiastically endorsed, to the effect that failure to serve a s80 Notice is not fatal to possession proceedings. Moreover the borrower’s own evidence was that more than half the loan was for business purposes. Accordingly the consumer Credit Code issue was not considered sufficient to deny the lender its judgment.
On the proposed Contract’s Review Act defence, the borrower claimed that the loan was mainly for the benefit of her prospective son-in-law. Moreover, even though she signed the mortgage in front of her solicitor she claimed she did not understand that she could lose her home. The lender’s response was that although she might (for the purposes of the interlocutory decision) have a Contracts Review Act defence, her case, at its highest, would still require her to repay $50,000 which was used to discharge an earlier mortgage (which she had the benefit of). Moreover on her own evidence she could not afford to repay $50,000 debt, so it was inevitable that the property needed to be sold. The lender proposed that the judgment for possession be left in place and $50,000 of the sale proceeds be paid directly to it, with the balance to be paid into court pending the outcome of the Contracts Review Act challenge. The judge disagreed, noting that she had previously serviced the $50,000 debt and possibilities, such as a reverse mortgage, whereby elderly people may use their equity in a property to fund a loan, may not be overlooked.