Upon default by the borrower in making loan repayments the lender sought to exercise its power of sale with respect to the secured property. The borrower commenced proceedings for an injunction restraining the sale of the property.
The borrower argued there was a serious question as to whether there were any arrears in repayments, based on the loan contract. Specifically, that notice was required before a higher rate of interest could be charged. Justice Pembroke rejected that argument stating that while notice was required it was not a precondition to charging a higher rate. Any other interpretation would be inconsistent with a variable interest rate loan.
The borrower also relied on a clause in the loan contract that required 20 days notice be given for changes in fees and charges. Justice Pembroke again rejected the argument that notice was a precondition to a change in fees and charges.
Justice Pembroke stated:
In both clauses 7.1 and 7.3, the defendant’s right to charge the specified amounts, and its obligation to give notice, are neither conjoint nor mutual, in the sense that the existence of the former depends on the performance of the latter. The provisions as to notice are merely promissory. They could not be understood reasonably as specifying an essential obligation, the fulfilment of which was a necessary condition precedent to the performance of the defendant’s entitlement to charge, and the plaintiff’s obligation to pay, the increased amounts.
The borrower also relied on the hardship that would be suffered in losing his equity of redemption if the sale went ahead. His Honour stated:
It is not a sufficient basis for an injunction to restrain the exercise of a mortgagee’s power of sale for a mortgagor to offer to redeem, and to point to evidence that he will be able to obtain refinance in a short time. In such a case, the hardship that a borrower might suffer is irrelevant. There must be an underlying cause of action based on some wrongful conduct by the lender. This will usually be an actual or threatened breach of its equitable duty of good faith, or of the terms of the loan contract and the security. To the extent that some statements in decisions such as Parist Holdings Pty Ltd v Perpetual Nominees Ltd  NSWSC 599 arguably suggest otherwise, I do not think that they reflect the law. The orthodox approach is set out in Solid Holdings v IMFML Finance  NSWSC 573. Of course, even if a borrower has a legitimate basis for seeking an injunction to restrain a mortgagee’s power of sale, a separate question arises as to whether the amount secured must be tendered in accordance with the principle explained in Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 and in Harvey v McWatters (1948) 49 SR (NSW) 173. It has not been necessary for me to address that question.
The Judge rejected hardship as a basis for granting an injunction, in the absence of a final cause of action. Hardship is a discretionary factor and does not provide a final cause of action. There were no other discretionary factors which favoured the grant of an injunction. The proceedings were dismissed with costs.