GE Personal Finance v Smith [2006] NSWSC 889

In this case Johnson J considered common stay applications that come before the courts and the circumstances that the court is likely to take into consideration when exercising its discretion.

Where a defence is to be filed
Where the borrower indicates that the proceedings are to be defended, a draft Notice of Grounds of Defence should be provided and the borrower ought be in a position to make submissions concerning the merits of the proposed grounds.

If a borrower seeks to be let in to defend the proceedings (and, usually, to set aside a default judgment for that purpose), then a stay may be more readily granted to preserve the subject matter of the litigation pending the determination of the proceedings by the Court.

Where the debt is to be refinanced
Where the borrower indicates that the loan is to be refinanced, proof of steps undertaken to refinance will be required. The refinance must  be seeking to satisfy the debt payable to the lender in its entirety so as to render unnecessary the exercise of the power of sale by the lender.

Where the lender takes possession of the property for the purpose of exercising its power of sale, the borrower may obtain an injunction restraining a mortgagee from exercising the power of sale if the amount of the mortgage debt (if this is not in dispute) is paid or (if the amount is disputed) the amount claimed by the lender is paid into Court: Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 at 164-167, 168-169.

In Parist Holdings Pty Limited v Perpetual Nominees Limited [2006] NSWSC 599, Hamilton J considered the circumstances in which injunctive relief may be granted to restrain the exercise of power of sale by a mortgagee.

It remains open to a borrower to discharge the debt owing to the lender in its entirety before the property is sold and to recover possession of the property. No doubt, it is personally convenient to a borrower to retain possession of the property continuously rather than lose possession, and then regain it upon discharging the debt to the lender. It is for this reason that a borrower who is seeking to discharge the debt to a lender will seek a stay of execution of the Writ of Possession to allow this to be done.

If a borrower is contending that there is a realistic prospect of obtaining refinance to discharge the debt, it is reasonable to expect that the borrower will take early steps in this regard and be in a position to provide credible and reliable evidence of available refinancing so as to discharge the total debt.

Where the borrower is selling or has sold the property
Where the borrower indicates that the subject property is to be sold, copies of agent sale agreements, a contract for sale of the property, advertisements and other documentary evidence ought be provided.

A borrower may encounter difficulties on a stay application if the decision to sell the property, and to make necessary arrangements for this to be done, is left until the last minute when the Writ of Possession is about to be executed.

A stay on the grounds of hardship
A borrower may contend that there will be hardship to him or her and other family members if the writ is executed and they are removed from the property.

It may also be that the borrower and his or her family may have not confronted the reality of the situation at an earlier time.

Ordinarily, if a borrower is not in a position to demonstrate a reasonable foundation for a stay to defend, refinance or sell  then there could be no reasonable expectation of an extended stay on hardship grounds only.

Payment record
It is a relevant factor, in the exercise of discretion on a stay application, to have regard to the level of indebtedness under the mortgage and the extent to which the borrower has made payments and attempted generally to comply with the conditions of the mortgage. A poor record of payment by a borrower under the mortgage may operate adversely to the borrower on a stay application.

Apprehended shortfall
If there is a risk of shortfall the likely sale price of the property may also be relevant to the exercise of discretion as to whether a stay should be granted.

Evidence in support of stay
The Court may take the view that sworn evidence is required from a borrower by way of an affidavit or oral evidence where an urgent stay application is made. In an appropriate case, the Plaintiff may wish to test the evidence of a Defendant with respect to the grounds of the stay application and the material advanced in support of it.

No automatic right to a stay
Borrower’s can have no reasonable expectation that a stay of execution of a Writ of Possession will be granted upon request in every case. The nature of the proceedings, and the stage which the proceedings have reached by the time of such an application, are important factors which the Court must take into account .

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