Keystart Loans Ltd v Haydon-Wood

Keystart Loans Ltd sued Noel Edward Haydon-Wood and Linda Haydon-Wood for possession of a mortgaged property and recovery of the outstanding loan balance. The property was intended to be used as a residence and the loan was to be advanced progressively to enable construction of the house. The loan was secured by a mortgage registered on 13 September 1999. The plaintiff alleged that construction of the house was completed towards the end of 2000 and the defendants took possession of the premises. The plaintiff contended that the defendants became liable to pay the full monthly instalments provided for by the loan arrangements but they failed to do so. The defendants pleaded that an oral agreement was reached with the plaintiff that the repayments could be deferred until the completion of construction of a house on the property and with subsequent variations to the commencement date of payments. The court found that the loan contract and the mortgage allowed the plaintiff to determine by advice to the defendants when the obligation to repay the principal debt by making full instalment payments would commence. The fixing of a commencement date was left open by the documents and it was therefore to the plaintiff to fix a date by reference to completion of the building work. The evidence of Mr Munro and Ms Brownlie established that payment of the full instalments was not required until the loan was fully funded or the house completed in the sense of being practically complete and occupied. The court found that a verbal contract of this kind could be characterised as a contract collateral to the main contract. The court found that no payment was made by the defendants in response to the demand or subsequent notice of default prior to the commencement of proceedings. The court found that the plaintiff had substantiated its claim for relief and was entitled to possession of the subject premises and payment of the principal debt. The amount due was $162,348.95 as at 23 August 2005 with interest at the daily rate of $27.59 thereafter.