Whild v GE Mortgage Solutions [2012] VSC 212

The lender did not receive repayments on its two loans. One was code-regulated and the other was not. The fault was the banks because it failed to upload the borrower’s new account details on its system.

The lender issued default notices, the borrower did not pay these, and the lender took possession and sold the charged property.

The borrower sought relief from the Victorian Civil and Administrative Tribunal. The tribunal found that neither the notice pursuant to the regulated or the unregulated loan was valid because there was no default, because the failure to pay was a failure by the bank to take payment.

However the Tribunal found that despite the invalidity of the default notice issued in relation to the unregulated loan the lender was entitled to take possession of the property because the loan required that the lender need not give a default notice if it had made reasonable but unsuccessful efforts to locate the borrower. This approach was found to be “not inconsistent with s 77 of the TLA, and, in the alternative, the various “posting notices” the appellant acknowledged receiving constitute notice of default for the purposes of the TLA.”

The borrower appealed and the lender cross-appealed the finding that the notices were invalid.

The court undertook an extensive survey of the law in relation to default notices, finally concluding:

It is clear that a notice which correctly identifies the event of default relied upon but which overstates the amount owed is, nevertheless, valid for the purposes of the TLA provisions.

For these reasons, I find that the notice of default with respect to the non-code regulated loan, while it overstated the amount owing, nevertheless, correctly identify the event of default upon which it relied and did not rely upon any non-default in the relevant sense. Accordingly, the notice of default was valid and the Tribunal was in error in finding that this notice was invalid

The judge held that although ss 76 and 77 of the TLA, does not specify the form or contents required of a default notice, it is to be implied that certain base information is required:

As the High Court indicated the object of the notice is to guard the rights of the mortgagor. In my opinion, it follows that the “writing” constituting the notice must make it clear that its purpose is not merely to provide information, but that, rather, the mortgagee is taking a step which may result in the exercise of the statutory power of sale under the TLA and that, if the mortgagor wishes to prevent this course being taken, then action needs to be taken to attend to compliance with the notice.

Clearly, the exercise of the mortgagee’s power of sale is a very drastic remedy; it is a remedy involving a process of notification and execution which significantly affects, or has the potential to significantly affect, the rights of the mortgagor with respect to his, her or its property the subject of the mortgage. Consequently, although the Victorian legislation does not contain some of the specific requirements with respect to default notices as are contained in s 57 of the Real Property Act 1900 of New South Wales, it is implicit in the Victorian provisions that a notice given under sub-s 76(1) of the TLA be drawn as a “notice” (whether styled as a notice or demand) which meets the objective of guarding the mortgagor’s rights by providing a clear indication, and thereby a warning, of the course upon which the mortgagee is embarking upon.

On this reasoning letters of demand sent after the notice were found not to satisfy the requirements of the notice. However this was merely the fallback argument of the lender and the lender succeeded on its primary argument.

The judge also noted that had the non-code notice invalidated the power of sale in the contract exercisable through the power of attorney,  the sale would still be legal:

The lender was entitled to sell that property in the exercise of its contractual powers as the borrower’s attorney under clause 8.21 of the mortgage. The correct legal position is that a party who takes a step pursuant to a contract is entitled to justify the taking of that step if the objective facts which justify the taking of that step existed at the relevant time even although that party at the time was taken did not know of these facts.

Click here to read the full judgment

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