National Mutual Funds Management -v- Kwok [2011] NSWSC 885

A borrower defaulted on its mortgage and the mortgagee sold the properties and the sale proceeds only partially discharged the mortgage. The balance owing was secured by a guarantee. The lender filed for summary judgment against the guarantor for the original mortgage debt but now only seeks the balance owing after deduction of the sale proceeds.

The guarantor resists summary judgment on the following bases:

  1. The amount claimed is now less than that claimed in the original summons. The court noted this was due to no more than the fact that the properties had been sold and there had been a payment since the commencement of proceedings, so reducing the amount of the debt and accordingly the amount secured by the guarantee.
  2. The mortgagee did not serve notice on the guarantor prior to exercising its powers. The court noted that section 57(2) of the Real Property Act only requires a mortgagee to service notice on the mortgagor before exercising powers. The guarantor was not the mortgagor.
  3. The guarantee does not secure the borrower’s loan obligations because the loan was entered into after the guarantee. The court noted that the guarantee contained a wide definition of debt that included all money which the borrower at any time and from time to time becomes liability to pay to the lender and so included the loan obligations.

The court held that the guarantor had no defence to the lender’s claim for the balance owing and gave summary judgment for the lender.

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