ANZ Banking Group Ltd v Trandafil No. Scgrg-99-262 Judgment No. S65

[1999] SASC 65

ANZ BANKING GROUP LTD  V  IVAN TRANDAFIL

[1999] SASC 65

1. JUDGE BURLEY. This is an application for possession of land pursuant to the provisions of the Real Property Act. The subject property is Unit 5, 53 Manual Drive, Blair Athol, 5084. The property is registered in the name of the defendant. The defendant gave a mortgage to the plaintiff in order to secure a repayment of a loan of monies amounting to $64,000 which was used to purchase the property. There are two documents relating respectively to the loan and to the security. The loan agreement is Exhibit B to the affidavit of Mr Symonds sworn on 8 March 1999 and it provides on the front page thereof that there are to be 299 monthly repayments of principal and interest of $505.14 each. It is stated that those repayments are only correct if the interest rates do not change and there is provision in the loan agreement for change of interest rates. Nevertheless, effectively the borrower, the defendant in this case, is required to repay the loan by monthly instalments of principal and interest.

2. At paragraph 5 of the loan agreement, there is provision for loan repayments, under the headings “agreement to repay principal and interest”, “how loan repayments are to be made”, “crediting of repayments of additional payments”, “changes to your repayments”, and “repaying your loan early”.  None of the provisions under these headings alters the primary agreement that the loan is to be repaid by monthly instalments.  There is of course the ability of the defendant to repay the loan early, but that is permissive and if the defendant does not take up the opportunity to repay the loan early, there is no question of breach of any terms of the loan agreement.  This is to be contrasted with the provisions in the agreement at paragraph 5 relating to repayment which are mandatory provisions.  A combination of what is set out at paragraph 5 of the loan agreement and the front page of the loan agreement has the effect of mandatorily requiring the defendant to pay off the loan by 299 monthly instalments.  There is no discretion in the defendant about that when looked at from a minimum point of view.  The only discretion that is vested in the defendant with regard to repayment is to pay more than the minimum monthly repayments. 

3. In those circumstances my view is that the loan agreement itself clearly sets out a requirement that the loan of $64,000 was to be repaid by 299 monthly repayments unless the defendant chose to make additional payments, as he was permitted to do under the terms of the loan agreement without incurring any penalty. 

4. The second of the two documents which I have considered on this application is the mortgage document and a copy of that is Exhibit C to the affidavit of Mr Symonds.  Paragraph 5, at p.7 of the mortgage sets out the payment requirements and paragraph 5.1 is the most important provision for the purposes of this application.  It is as follows:

   “5.1 Principal

   I will pay the principal money at the times ANZ and I agree.  Otherwise I will pay it when ANZ demands it.”

5. In my view, because of the existence of the loan agreement (Exhibit B), the payment of the monies secured by the mortgage is determined, not by reference to the terms of the mortgage, but by reference to the terms of the loan agreement, because of the statement in paragraph 5.1 that the monies are to be paid at the times ANZ and the defendant agree.  They have agreed and they have done so by virtue of the loan agreement. 

6. I next have to consider the provisions of s55A of the Law of Property Act, the relevant part of which is as follows:

   “55A(1) - A right of sale or foreclosure in respect of mortgaged land, a right to enter into possession of mortgaged land or a right to appoint a receiver in respect of mortgaged land shall not be enforceable by the mortgagee under a mortgage to which this section applies against the mortgagor by action or otherwise unless—

   (a) the mortgagor has served upon the mortgagee a notice in writing ...”

7. The effect of the provision is that a mortgage to which s55(A) applies precludes the enforcement of the mortgage until such time as, in the circumstances of this case, the mortgagor has had the opportunity to remedy any breach that has occurred. 

8. Two notices were given by the plaintiff to the defendant in relation to an alleged default on the part of the defendant.  Each of those notices required the whole of the balance due to be paid, as opposed to any arrears of monthly instalments.  The whole of the balance due was some $73,742.81.

9. The affidavit in support of the summons sworn by Mr Symonds on 8 March 1999 reveals that the “defendant has defaulted in the payment of monies pursuant to the agreements referred to in clause three” of his affidavit and “that no payments have been made since August 1998”.

10. The agreement referred to in paragraph 3 of the affidavit is the loan agreement that I have referred to as being Exhibit B to Mr Symonds' affidavit. I take those facts, or assertions, to mean that the defendant has been in breach of the loan agreement by failure to make monthly instalments. Whilst there may be an acceleration clause in the mortgage which, on its face enables the plaintiff to recover the whole of the amount due where there is default, if the mortgage is one to which s55A of the Law of Property Act applies, the acceleration clause cannot be invoked, until such times as there has been given to the party in default a notice pursuant to the provisions of sub-section (1) of s55A: see s55A(2).

11. There is no evidence before me that any such notice has been given by the plaintiff to the defendant. Indeed, the evidence is to the contrary. The whole of the mortgage debt has been sought by way of the notices served upon the defendant, rather than isolating the instalment payments that were in arrears and requiring those to be paid within the calendar month period as specified in s55A.

12. It is for those reasons that I think that the procedure followed by the plaintiff has not complied with the provisions of s55A and that consequently, unless there is a dispensation granted pursuant to s55A(2a), the plaintiff cannot proceed to an order for possession at this stage.

13. Ms Forsyth, for the plaintiff, sought as an alternative an order dispensing with the requirement that the provisions of s55A be complied with on the basis that the defendant declared himself bankrupt on 2 February 1999. I note that this is referred to in paragraph 15 of Mr Symonds' affidavit. I think it is appropriate to have additional documentary proof of the bankruptcy of the defendant, but I am prepared to deal with the application for dispensation on the basis that such documentary proof will be filed by further affidavit within the next 14 days. Ms Forsyth has given me that assurance.

14. It seems to me that because the defendant is bankrupt, there is no prospect of the plaintiff being able to recover from the defendant the amount of the loan repayable by the defendant to the plaintiff, or at least the full amount of that loan and that, as such, the plaintiff should be in a position where it is able to realise the security that it has in respect of the loan. For that reason, I think it is appropriate to grant an order dispensing with the requirements that the plaintiff comply with the provisions of s55A and I so order.

15. It follows that because of the dispensation, the plaintiff has established that it is entitled to an order for possession against the defendant and I propose to make such an order.