Overstatement of amount owed does not make s.76 notice invalid

Section 76(1) of the Transfer of Land Act 1958 sets out the procedure to be followed by a mortgagee in the case of default in payment of moneys secured by a mortgage. Section 76(1) provides that the mortgagee may in the event of default to serve a “notice in writing to pay the money owing or to perform and observe the covenants (as the case may be)”. The notice must be served if the mortgagee intends to sell the mortgaged land. See: s.77(1).

In Whild v GE Solutions Ltd [2012] VSC 212 Croft J considered what should be contained in a notice served under s.76(1). His Honour dealt at length with a contention that a notice given under s 76 was invalid because it contained an overstatement of the amount owed. His Honour drew a distinction between the requirements of the New South Wales provisions and s 76(1). His Honour said:

[33] At the outset, in considering the authorities, it should be noted that the provisions of s 57 of the New South Wales Real Property Act 1900, provisions which regulate the exercise of the mortgagee’s power of sale of registered mortgages of Torrens system land in that State, require, specifically, that the mortgagee brings to the attention of the mortgagor the particular default which the mortgagee alleges has occurred. Additionally, these provisions require that the notice specify that it is a notice pursuant to s 57(2)(b) of the Real Property Act 1900. Thus, the provisions of the corresponding Victorian provisions, s 76 of the TLA, are in marked contrast to the more detailed and prescriptive provisions of s 57 of the New South Wales legislation.

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Section 76(1) of the TLA requires “notice in writing to pay the money owing or to perform and observe the convenants (as the case may be)”. It should also be noted that there is no provision in the Victorian legislation providing for a mortgagee’s statutory power of sale and its exercise, under ss 76 and 77 of the TLA with respect to Torrens title land, which requires the notice to specify that it is a notice to pay under these provisions. Nevertheless, for reasons which are discussed further below, I do not regard the absence of an express requirement of this kind as decisive with respect to the form and content of such a notice in Victoria.

At [56] His Honour described the form of a valid notice under s.76(1):

Although it is the position that the Victorian legislation, ss76 and 77 of the TLA, does not specify the form or contents required of a default notice, its provisions do, nevertheless, contemplate that something in the nature of a “notice” (whether styled as a notice or demand) must be served on the mortgagor.As the High Court indicated in Barns v Queensland National Bank Ltd,the object of the notice is to guard the rights of the mortgagor. In my opinion, it follows that the “writing” constituting the notice must make it clear that its purpose is not merely to provide information, but that, rather, the mortgagee is taking a step which may result in the exercise of the statutory power of sale under the TLA and that, if the mortgagor wishes to prevent this course being taken, then action needs to be taken to attend to compliance with the notice. This may involve communication with the mortgagee to establish the quantum of any amount or amounts claimed with respect to the default or defaults specified in the notice and, if necessary, the taking of proceedings to enjoin the mortgagee from taking any further steps. Clearly, the exercise of the mortgagee’s power of sale is a very drastic remedy; it is a remedy involving a process of notification and execution which significantly affects, or has the potential to significantly affect, the rights of the mortgagor with respect to his, her or its property the subject of the mortgage. Consequently, although the Victorian legislation does not contain some of the specific requirements with respect to default notices as are contained in s57 of the Real Property Act 1900 of New South Wales, it is implicit in the Victorian provisions that a notice given under sub-s 76(1) of the TLA be drawn as a “notice” (whether styled as a notice or demand) which meets the objective of guarding the mortgagor’s rights by providing a clear indication, and thereby a warning, of the course upon which the mortgagee is embarking.

(citations removed and italics added)

His Honour undertook an extensive review of the authorities and concluded that a notice under s 76 would not necessarily be bad because a greater sum was demanded than was payable. He held that the position might be different if the notice was, in all the circumstances, misleading. Croft J concluded:

[47] In my opinion, on the basis of Websdale, Bunbury and the other authorities to which reference has been made, it is clear that a notice which correctly identifies the event of default relied upon but which overstates the amount owed is, nevertheless, valid for the purposes of the TLA provisions.

[48] For these reasons, I find that the notice of default with respect to Loan A overstated the amount owing but did, nevertheless, correctly identify the event of default upon which it relied and did not rely upon any non-default in the relevant sense. Accordingly, the notice of default was valid and the Tribunal was in error in finding that this notice was invalid.

(italics added)

His Honour’s reasoning was applied recently by Judd J in Equity-One Mortgage Fund Limited v Stoyanov and another [2014] VSC 70 where his Honour rejected a claim that a notice given under s.76(1) was invalid on the ground of ambiguity because it overstated the amount that was owed.