Case note: how internal mortgagee procedures affect enforcement

In a long-running case last year (Banksia Mortgages Limited v Croker), a mortgagee seeking to exercise power of sale was met with fierce resistance by the property owner.

Interim court applications concerned whether internal emails between the in-house lawyer and the Risk Manager were confidential and subject to legal professional privilege ([2010]NSWC 535) and the terms on which the owner could get an injunction preventing an auction sale ([2010]NSWC 1177).

The substantive trial ranged over whether the loan was unjust or unconscionable and whether unfair influence, pressure and tactics were exerted.

In the course of hearings, the in-house lawyer’s employment agreement was examined together with emails sent in-house.

Part of the evidence concerned the lender’s loan manual and whether it had complied with its own procedures in approving the loans and whether it was guilty of asset lending, where there was no obvious ability of the borrower to repay other than through the sale of the security.

Ultimately the owner’s actions failed. The final judgment ([2010]NSWC 1447) is worth reading as a summary of the current case law in this area and the importance of ensuring that a lender’s internal documents reflect actual procedures.

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