Last month our firm shared two successful court applications with our mortgage lending clients.
Most Mortgage Recovery matters for the Mortgagee follow a similar process or procedure.
This procedure includes:-
- Step 1: The initial default by the borrower;
- Step 2: Serving Default notices on the borrower;
- Step 3: Filing a claim with a Court that has appropriate jurisdiction.
The form of the Default Notices vary, depending on the type of loan and the location of the security property.
Once the appropriate Default Notices have been served and the relevant statutory time limit has lapsed, the next step is ascertaining the correct court in which to bring the recovery action. The appropriate Court that has jurisdiction varies from state to state and depends on the relevant property law legislation, the amount of the loan and the type of security held by the mortgagee.
Once Default Notices have been issued and the relevant compliance period has lapsed (i.e. 14, 28 or 30 days depending on the State) the next step in the Mortgage Recovery / Enforcement Proceedings will depend on how the borrower responds to the Claim that has been filed in the Court.
If the borrower fails to file a Defence, Judgement by Default can be obtained/entered and the lender may proceed to take steps to obtain possession of the property and attend to a mortgagee sale. This usually involves a further application to the Court for an Enforcement Warrant or a Warrant of Possession.
If the borrower files a Defence the process can vary greatly depending on what is raised in the borrower’s Defence. The process ranges from a simple Reply followed by an Application for Summary Judgment (this involves a short hearing before a Judge) to disclosure and proceeding to a full trial.
We recommend throughout the entire mortgage recovery process that our clients always take a commercial approach in enforcing their securities. A commercial approach involves considering the costs, risks and benefits at each stage of the Mortgage Recovery action.
Any number of things can happen during the recovery process. For example the borrower may refinance the loan, sell the property to repay the loan, cooperate with the mortgagee and vacate the property, defend the proceedings and so on. Our firm, on behalf of the lender and with the lender’s specific instructions, engages in proper communication with the borrower and responds to the borrower’s requests in a timely manner. This not only looks favourable for the lender but may save expenses for each party if the borrower pays out the loan during the recovery process.
This stage may also involve responding to complaints made to the Credit Ombudsman, ASIC or other regulatory bodies.
Our firm specialises in loan, mortgage and recovery services in all states and territories.
Below are two case summaries from Queensland last month.
Case 1 – This case related to a second mortgage that was not repaid by the borrower at the end of the loan term. Jack OReilly of our firm appeared for the Plaintiff in the District Court on a Summary Judgment Application.
Our client lent money secured by way of a second mortgage with the loan amount being approximately $100,000. The loan carried a 10 month term and the borrowers failed to repay the loan on expiration. Numerous concessions to the borrower by the lender went unanswered and the borrower refused to cooperate or repay the loan.
Our firm initiated court proceedings by filing a claim in the District Court on behalf of the lender. The borrowers subsequently filed a defence with the court that lacked any merit or substance and consequently an Application for Summary Judgment in favour of the lender was made to the court.
In Queensland, Summary judgement is made under Rule 292(2) of the Uniform Civil Procedure Rules 1999.
2. Rule 292 of the Uniform Civil Procedure Rules 1999 provides as follows:
(1) A plaintiff may, at any time after a defendant files a notice of intention to defend, apply to the court under this part for judgment against the defendant.
(2) If the court is satisfied that–
(a) the defendant has no real prospect of successfully defending all or a part of the plaintiff’s claim; and
(b) there is no need for a trial of the claim or the part of the claim;
the court may give judgment for the plaintiff against the defendant for all or the part of the plaintiff’s claim and may make any other order the court considers appropriate.
Outcome: Judgment was obtained for our client in this Mortgage Recovery matter for the amount outstanding pursuant to the loan agreement and an Order for possession of the property was granted in favour of the lender.
Case 2 – This case related to another second mortgage and Daniel Nash of our firm appeared for the Plaintiff in the Supreme Court of Queensland on an application brought by the borrower to set aside a Judgement by Default and stay the Enforcement of a Possession Order by the Bailiff.
Background: Our client lent money secured by way of a second mortgage with the loan amount being approximately $700,000.00. The loan carried a 12 month term and the borrowers failed to repay the loan on expiration of the loan term and could not pay the monthly interest payments.
Prior to taking enforcement action and serving it’s Claim and Statement of Claim the lender allowed the borrower a period of 3 months to sell the property to repay the debt and also offered to share the marketing costs with the borrower.
The borrower did not sell the property or repay the loan and would not cooperate with the lender in relation to a joint marketing campaign.
On the lender’s instructions our firm initiated court proceedings by filing a Claim and Statement of Claim in the Supreme Court of Queensland seeking a possession order and repayment of the debt together with interest and costs.
Following service of the Claim and Statement of Claim the borrower/defendant failed to file a Notice of Intention to Defend or Defence with the court and Judgment by Default was obtained.
The Judgment by Default was served on the borrower and a period of seven days was allowed to the borrower to repay the Judgment Debt. When the borrower failed to respond or pay the debt we applied to the Court for an Enforcement Warrant – Possession of Land which was granted and provided to the Bailiff for enforcement.
When the Court Bailiff/Enforcement Officer contacted the borrower and set a date for the eviction the borrower made an application to the Supreme Court of Queensland to set aside the Judgment and Stay the Enforcement by the Bailiff pursuant to Rule 290 the Uniform Civil Procedure Rules 1999.
After a period of argument in Court, given the steps that the lender had taken following our advice during enforcement, the borrower was unable to raise a sufficient argument or grounds to satisfy the Judge that Judgment should be set aside or the Enforcement Stayed.
Outcome: The Judgment was not set aside and enforcement was not stayed. The Court made further Orders that the borrower pay our client’s costs in relation to the Application and highlighted that applications of this nature, without merit and when a lender had allowed the borrower so many opportunities to repay the loan and avoid enforcement, were a waste of the Court’s time.
If you would like any further information in relation to Mortgage Enforcement or Recovery please do not hesitate to contact Jack O’Reilly or Daniel Nash of our office on (07) 5570 6766.[gravityform id=4 name=Contactus(2)]