A failure to make extensive efforts to contact a defaulting borrower whose direct debit form had been incorrectly completed was neither unjust, unconscionable or a breach of the implied contractual duty to co-operate.  Specifically, the Court noted that the duty to co-operate is not a general duty to ensure another party obtains an anticipated benefit and does not extend to  being “nice”.  Contracting parties should be wary of taking much comfort from the implied contractual duty to co-operate to address their own shortcomings in performing their  contractual  obligations.

Mr Wolfe defaulted on his mortgage to Permanent Custodians Limited (Permanent), who planned his eviction.  The parties came to an agreement that Permanent would stay the eviction and Mr Wolfe would make repayments according to an agreed payment plan.

A direct debit form that Mr Wolfe had submitted had not been properly completed by him and  accordingly had not been processed.  Australian Mortgage Securities Ltd (AMS) (which was responsible for processing the direct debit forms) attempted to contact Mr Wolfe by telephone in relation to the deficiencies in the form, but the two phone numbers they had were disconnected.  AMS did not make any further attempts to contact Mr Wolfe.  The failed payment caused a default on the loan.  Mr Wolfe did not check that the payment had been made and was not aware of the default until he received a written demand to vacate the property.

The Supreme Court of Victoria held that:

  • given Mr Wolfe’s credit history and the ‘last chance’ nature of the arrangement,  terms that permitted Permanent to enforce the judgment for possession upon any subsequent payment default without further notice, whilst onerous,  were not unjust under section 76 of the National Consumer Credit Code 2010;
  • Permanent’s conduct was not unconscionable under s 12CB of the Australian Securities and Investment Commission Act 2001 (Cth). Unconscionable conduct is more than unreasonable or unfair, it is also unethical.  Although “further indulgence may have been the ‘decent’ thing to do”, for Permanent to rely upon its legal rights lacked the requisite ‘moral taint’ and was therefore not unconscionable; and
  • Permanent’s conduct did not breach the implied contractual duty to co-operate.  The scope of  the duty to co-operate is defined by what has been promised under the contract.  It is not a general duty to ensure another party obtains an anticipated benefit and does not extend to being “nice”.  The task of completing the form correctly was the responsibility of Mr Wolfe and the co- operation of Permanent was not required for Mr Wolfe to complete the task.

See the case.