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Mortgage repossessions and the consequences of not applying hardship

Thursday, September 27, 2012 - Posted by Philip Harvey

The borrower was unemployed for 6 months and the loan fell into arrears. A Statement of Claim was filed on 25 December 2010 and served on 18 January 2011. After receiving the Statement of Claim, the debtor contacted FOS for assistance with hardship.

FOS emailed the dispute to the bank, detailing the unemployment, advising that the Bank was unwilling to compromise and sought more time.

After receiving the email, the Banks "loss mitigation, collections and consumer services officer" contacted the debtor and reached an agreement. The bank and the debtor had different records as to what the repayments under the agreement were supposed to be. As part of the agreement, the statement of claim was placed on hold.

The Judge made comments about both agreements not being hardship assistance;
"As noted on behalf of Ms Wales the agreement, on either version, reflected little concession to hardship. There was no reduction in the amount of payments and, so it would seem, no extension of the period of the contract. On the contrary, Ms Wales was required to make increased payments for a period of time so as to repay the debt within its original term."

After the agreement, the debtor was under the understanding that they had made a hardship application, and was dealing with the hardship department of the bank. However the bank did not consider this to be the case and would have sent a prescribed form if this was so.

The debtor believed that the agreement was complied with, and reverted to normal monthly contractual repayments in April 2011 after having made 3 months of repayments that were higher than the contractual repayment. In September 2011 the bank contacted the debtor to advise the agreement was not being complied with, and the bank would be continuing legal action. On October 2011 Default Judgment was entered into with no further communication with the debtor.

In making the application to set aside Judgment, the debtor relied upon the Uniform Civil Procedures;
Rule 36.15(1) provides:
A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith.

Rule 36.16(2) provides:
The court may set aside or vary a judgment or order after it has been entered if:
(a) it is a default judgment (other than a default judgment given in open court), or
(b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or
(c)in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order.

The judge applied 36.16(2) - with the debtor not receiving notice of the Banks intention to enter default judgment (with the judge noting that judgment had not been entered against good faith).

The judge noted;
"The critical consideration in the present case is that the defendant endeavored in good faith to engage the processes contemplated by the Code but was defeated by the bank's passive resistance to those processes, coupled with its decision to move the court for judgment without notice to her."
"In my view, the bank's approach to the resolution of the dispute duly lodged with the FOS by Ms Wales was calculated to defeat the ameliorative objects of the hardship provisions in the Code. Its approach to resolution of the dispute combined with the absence of notice to Ms Wales of the motion seeking default judgment deprived her of the opportunity to have a hardship application determined by the FOS or the court before judgment was entered. In my view, those circumstances provided sufficient cause to set aside the default judgment under r 36.16(2)"


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