Alleged National Credit Code breach halts repossession

Two borrowers have been successful in convincing the WA Supreme Court of Appeal to suspend enforcement of a judgment against them that ordered them to hand over their home due to loans in arrears. The previous hearings had gone in favour of the RHG Mortgage Corporation (formerly RAMS).  

Importantly, the reason for the reversal was the Court of Appeal's concern over allegations that an agent of the lender had breached the National Credit Code when filling in loan application forms with more favourable income and liability details than was the truth - and did so knowingly, pushing them in larger loans that they should have been given.

These allegations are yet to be tested in a further hearing.

The case arose as the consequence of action run by RHG against Kerryann and Nathan Watts, where the lender was seeking possession of two properties that had been mortgaged to secure four separate loans and credit facilities that had originally totalled A$615,000, dating back to 2004 and 2006. One property was the couple's family home, and the other was acreage they intended to build on.

By 2014, a total of $336,401.23 had been repaid, with almost $612,000 still owing. In July last year, the lender was successful in securing judgment, and the borrowers moved to stop their home and land being handed over to RHG before the full hearing of their case had even started.  On 12 September 2014, the appellants filed an appeal notice, with their full argument, listing eight grounds of appeal, filed on 1 May 2015.

The WA Court of Appeal was therefore asked to decide if enforcement should be suspended, and agreed the couple had come up with "two substantive complaints", although the other grounds were unconvincing.

Of these two, the most compelling was an allegation that, unbeknown to the appellants, in order to meet the respondent's lending criteria, "an agent" of RHG (then RAMS) had inserted false information about Mr Watts' income and work history on the loan application forms, which the couple had signed and left blank.

This led the Court to decide that "some of the allegations, if made out, may arguably entitle them to relief under the National Credit Code, including the setting aside of the mortgages."

And taking a commonsense view, Court also said that "the balance of convenience" favoured the borrowers, as recent valuations of the two properties totalled around $800,000, against an amount currently owing of $670,000.

"For the time being at least, the security would appear to be sufficient to protect the [lender's] interests. On the other hand, the appellants stand to lose their home and another property which was acquired for their future home if enforcement of the judgment is not suspended," the Court of Appeal concluded.