Case Notes
Search results
Lending - default - breach of agreement - Property Law Act notices - expiry date - mortgagee sale - application of proceeds of sale
Mr and Mrs G’s primary business was renovating properties. Mr and Mrs G borrowed money from the bank to purchase properties, renovate them, and to cover their living costs while they worked on the properties.
The bank became increasingly concerned about Mr and Mrs G’s debt levels, and eventually demanded repayment of their overdraft because it was significantly over the approved credit limit. When Mr and Mrs G failed to repay the overdraft, Property Law Act notices (“PLA notices”) were served on them.
Mr and Mrs G wanted to sell one of their properties to remedy their default. As they were not able to sell the property before the expiry date of the PLA notices, they requested an extension of time from the bank. Mr and Mrs G believed that the bank gave them an extension of the expiry date of the PLA notices. However, the evidence suggested that the bank did not agree to an extension of the expiry date, but agreed to give Mr and Mrs G more time to sell the property themselves rather than having it sold by the bank. When the PLA notices expired, all money Mr and Mrs G owed to the bank became due and payable.
Mr and Mrs G sold the property and paid the net proceeds of the sale to the bank. They thought the bank was going to apply the excess funds to the overdrawn account. Instead, the bank applied the excess funds to other secured debt. The bank also demanded repayment of all money Mr and Mrs G owed to the bank.
Mr and Mrs G complained that the bank breached an agreement to pay the excess funds towards the overdraft. They also believed that it was morally wrong that the bank required them to refinance elsewhere or face mortgagee sales of their other properties. They said that the bank knew very well that they gave up their jobs when working on a renovation project and that their debt therefore increased during that time but was repaid when the property was sold.
I found that:
(a) the bank was entitled to apply the surplus funds as it did, and that it had acted in accordance with its contract with Mr and Mrs G. I was, therefore, unable to uphold Mr and Mrs G’s complaint that the bank had broken an agreement
(b) the bank was acting within its rights to demand repayment of Mr and Mrs G’s outstanding debts, and it was entitled to seek repayment of those debts from Mr and Mrs G
(c) it seemed that Mr and Mrs G had given up their jobs to work on an earlier renovation project, but in applying for the loan for that project they had declared income from employment to support their application. It was not at all clear that the bank either knew or approved of their later employment status. Moreover they did not take up paid employment again once the renovation project was complete and the property was sold.
Mr and Mrs G did not respond to my recommendation that they withdraw their complaint.