The lender advertised the security property for sale before the s57(2)(b) notice expired. Thus it advertised the property prior to having a power of sale. However the judge noted this was acceptable:
A lender is entitled to take steps towards sale of a property before the time when a power of sale has accrued: Farrar v Farrars Ltd (1888) 40 Ch D 395
The property was then sold, but not settled before the borrower’s claim of unconscionability was heard. The borrower sought an injunction to prevent the sales settling pending the hearing of the cross-claim. Whether relief was to be granted turned on whether there was a prima facie case of unconscionability to answer.
Certain factors pointed to unconscionability, these included the fact that within less than two months after drawdown, and before section 57(2)(b) notices had been served, the lender had taken steps to sell the security properties and that within the period allowed under those notices, the borrower had paid the amounts which he believed he was liable to pay, namely a capital sum and interest at the lower rate.
The court was unable to identify what amount of interest was alleged to have been due under the loan. Since the only default relied upon was the failure to pay interest at the higher rate, the court found that the borrowers had established a probability that at the time of the action they would be entitled to relief. The court also found that to charge a hefty establishment fee and to debit interest at the higher rate may amount to unconscionable conduct in contravention of the Act.
The next stage of the Court’s consideration was the balance of convenience. The fact that the potential buyers have entered into agreements for sale was relevant. The court noted that buyers were on notice of the present proceedings and the contracts could be terminated without detriment to those buyers. On the other hand, the commercial property, the subject of a contract for sale, was said to be essential to the conduct of the husband’s business and his ability to continue to service the loan, and the other property was their home. The court found that the balance of convenience favoured the borrower.
The court granted the interim relief sought.