Delays by the mortgagee in selling a security property may impact its rights against the borrower and guarantor.
Is a lender precluded from enforcing its rights against a guarantor if there is a period of inactivity after it takes possession of a security property? The Supreme Court of News South Wales was recently required to consider this issue in the matter of Commonwealth Bank of Australia v Thompson  NSWSC 149.
Guarantees – is there a requirement for a lender to ensure that a guarantor receives some form of personal benefit from the transaction? And, does a mortgagee’s failure to sell a security property at full value give rise to a caveatable interest?
The Supreme Court of New South Wales confirms that there is nothing improper in lending to an elderly borrower even in circumstances where he obtained no personal benefit from the transaction. We also revisit a decision of the Supreme Court of South Australia which considered the ability of a mortgagor to lodge a caveat to prevent the mortgagee exercising its power of sale.
Does a mortgagee compromise its rights under a judgment for possession if it allows the mortgagor time in which to discharge the debt rather than immediately taking possession of the mortgaged property?
In Wolfe v Permanent Custodians Limited  VSC 275 the Supreme Court of Victoria dismissed several claims made by a plaintiff borrower. An agreement whereby the lender agreed to refrain from enforcing a judgment and warrant for possession over the borrower’s property in return for payment of the owed money was held to not interfere with the lender’s right to enforce a judgment and Warrant of Possession.
Penalty Interest – Court of Appeal confirms that it is permissible for a lender to charge a higher and a lower rate of interest.
In Kellas-Sharpe & Ors v PSAL Limited  QCA 371, the Queensland Court of Appeal considered whether the charging of a lower concessionary rate of interest and a higher standard rate of interest gives rise to the operation of an unenforceable penalty rate of interest.
Misleading and deceptive conduct alleged against BankWest.
In Commonwealth Bank of Australia Ltd v Chamos  NSWSC 1345 the Supreme Court of New South Wales considered issues surrounding misleading and deceptive conduct alleged against a mortgagee.
Construction of contractual terms and the concept of priority between secured lenders.
In AET SPV Management Pty Limited v Wildfire Amusements Pty Ltd the court was required to construe an agreement to determine whether a mortgagee had agreed to postpone the priority of its first registered mortgage in favour of another lender.
Competing interests in security property – will the court allow the holder of a registered caveat to interfere with the rights of a prior registered mortgagee to sell the security property as mortgagee in possession?
In Bateson v Jones  WASC 8, Justice Pritchard of the Supreme Court of Western Australia was required to determine an application for the extension of a caveat filed by a lender in response to a lapsing notice issued by a prior registered mortgagee. The reasons for the Judge’s dismissal of the application are discussed below.
Solicitor’s Certificates – Do these cure undue influence, and does the solicitor advising a guarantor need to be independent from the borrower?
These issues were dealt with by Justice Applegarth in McIvor v Westpac Banking Corporation  QSC 404. It affirms how vital it is for lenders to ensure that all borrowers and guarantors receive independent legal advice in relation to their rights and obligations under loan agreements and mortgages prior to funding. His Honour also confirmed that it is not necessary for the solicitor advising the guarantor to be independent of the borrower.
Lender obtains summary judgment against borrowers for residual debt remaining after security property sold as mortgagee in possession.
If exercised with caution, applications for summary judgement can be a cost effective way for lenders to resolve proceedings against borrowers. This without the cost of having to run the matter to trial.
Shadow Directors – lenders and mortgagees cautioned about the pitfalls of working too closely with defaulting borrowers to achieve a return of capital and interest.
Given the post GFC economic climate, many creditors are pursuing recovery procedures outside the standard legal process after an event of default has arisen. So called “workouts” are one example, where creditors exercise considerable control over the debtor company in default. This gives rise to the possibility of the creditors involved in a “workout” or restructure of a defaulting company being held liable if the workout fails and the company is liquidated. The case of Buzzle Operations Pty Ltd (in liquidation) v Apple Computer Australia Pty Ltd  NSWCA 109 dealt with this issue.