The borrowers defaulted on their mortgage to the CBA. The borrowers lodged a complaint with FOS. The complaint was terminated by an agreement between the borrowers and the Bank under which the borrowers were required to make certain payments.
The bank sent a notice of default. The borrowers did not respond in time to prevent the Bank applying for default judgment.
An application to the Supreme Court by the borrowers to set aside the default judgment was rejected on the basis that there was no power to set aside the judgment once the writ of possession had been executed.
The borrower appealed and the Court of Appeal held the trial judge was wrong, he had the power to set aside default judgment.
The Court of Appeal further held:
Once the parties entered into the FOS agreement the Bank was not entitled to enforce its rights under the original loan facilities and mortgages so long as the borrowers complied with their obligations under the FOS agreement. In any event, if there were default, the Bank needed to comply with its procedural obligations under the FOS agreement.
The bank noted that the FOS agreement had a two notice regime and the bank had sent only one notice. Accordingly default judgement was set aside.