Default notices - Substantive rather than formal compliance
The recent case of Perpetual Trustees Victoria Limited v Monas  NSWSC 57 confirms that a default notice served by a creditor under section 80 of the then applicable Consumer Credit Code (the CCC) is valid as long as the notice substantively complies with the requirements of section 80. This was despite strict compliance arguably not having been achieved.
Section 80 is the equivalent of section 88 in the new National Credit Code (the NCC).
The mortgagee, Perpetual Trustees Victoria Limited (PTVL), sought possession of land as a result of the mortgagor having failed to pay certain home loan instalments.
Section 80 of the CCC prevented PTVL from beginning enforcement proceedings until it had given the mortgagor a default notice allowing her at least 30 days to remedy her default. Sub-section 80(3) relevantly provided that:
“A default notice must specify the default and the action necessary to remedy it and that a subsequent default of the same kind that occurs during the period specified in the default notice for remedying the original default may be the subject of enforcement proceedings without further notice if it is not remedied within the period. [emphasis added]”
PTVL served a default notice on the mortgagor in purported compliance with the requirements of sub-section 80(3). The notice arguably did not comply with those requirements in a strict technical sense – eg, it did not expressly state that enforcement proceedings would be taken “without further notice” if the mortgagor’s defaults, and defaults of the same kind, were not remedied in time. However, the notice did in substance comply, and it was not misleading.
The mortgagor did eventually pay the arrears, but not within the time stated in the notice. By then, PTVL had commenced proceedings against the mortgagor seeking possession of the relevant property.
Ultimately, the mortgagor’s only defence was that PTVL’s notice did not comply with sub-section 80(3). The mortgagor essentially argued that “even if a typographical error occurred such as the omission of the word ‘further’ from the phrase ‘without further notice’, this would be sufficient for a failure of the notice to comply”.
The mortgagor therefore argued that PTVL’s commencement of its proceedings was barred by section 80. She further argued that PTVL could not bring new proceedings until a proper notice compliant with section 80 had been served, and that PTVL could not do so in her case because all payments in arrears had been brought up to date.
Justice Joeben of the NSW Supreme Court did not agree with the mortgagor’s arguments. His Honour ruled that it “may have been prudent to use the exact words of [sub-section 80(3)], but a failure to do so is not determinative of whether a default notice complies with its requirements”. Rather, the notice need only provide the information set out in section 80(3) and not be misleading.
Justice Joeben found that the default notice served by PVTL did substantially comply with the requirements in section 80(3) of the Code, and granted orders permitting PVTL to take possession.
The decision is consistent with a growing trend in the cases to favour substance over form in determining if certain notices and demands are compliant. To this end, the decision is a welcome one that confirms that substantive compliance will be sufficient, as long as no one is misled.
The NCC came into effect after PTVL had commenced its proceedings against the mortgagor. In line with the transitional provisions in the NCC, an identical outcome would have been reached had the equivalent provision in the NCC (section 88) applied.