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72 Changes on Ground of Hardship
(1) If a debtor considers that he or she is or will be unable to meet his or her obligations under a credit contract, the debtor may give the credit provider notice (a hardship notice), orally or in writing, of the debtor’s inability to meet the obligations.
As per s 72 (above) of the National Credit Code 2009 (Cth), a debtor who thinks they will be unable to meet their obligations under a credit contract can give notice to the creditor of their inability.
This notice can be given either orally or in writing.
When giving notice, the debtor is not obliged to frame the notice in a certain way, or to make use of a certain form, though it remains up for debate as to whether the words "hardship" or "hardship notice" have to be used for a debtor to properly give s 72 notice of hardship (see RHG Mortgage Corp Ltd v Saunders  below).
The bar for giving notice has reduced somewhat since 16 May 2013, prior to which the debtor seeking to notice had to specify one of three ways in which they sought to have the credit contract changed.
Since the 2013 amendments, the debtor is no longer obliged to first propose how the credit contract should be changed.
It would now appear that a debtor need only give notice to the creditor, at which point it is now the creditor's duty to either:
1️⃣ Request further information from the debtor (including how the credit contract should be changed); or
2️⃣ If the debtor requested specific changes when putting the creditor on notice in the first place, to return to the debtor with a verdict as to whether the creditor has or has not agreed to the changes proposed.
The creditor must take do one of the above actions within 21 days of receiving the initial hardship notice from the debtor.
Failure to do so attracts a civil penalty for the creditor.
Had the substantive issues in this matter been heard, perhaps it would have provided some precedent as to whether a debtor needs to use the word "hardship" to put a creditor on notice of hardship, or whether other words to the equivalent are sufficient.
Unfortunately, it would appear as though the matter settled after a couple of interlocutory hearings.
Nonetheless, Garling J. suggested here that the latter position (words equivalent hardship are sufficient) may well be an arguable position, though he went no further as to the merits of this argument, as it did not fall for determination.
Perhaps this suggestion could provide the basis for a future legal challenge?
What happens if I haven't given notice? Is there such a thing as an implied hardship notice?
The legislation mentions nothing of circumstances in which a creditor might be impliedly put on notice as to a debtor's hardship. As such, it would appear difficult to imagine a situation where a creditor might be impliedly put on notice of hardship.
The 2013 amendments to the National Credit Code 2009 (Cth) appears to have had the effect of reducing the task of the debtor to expressly put a creditor on hardship notice.
Even if the debtor offers no further information as to the circumstances of hardship or how they would like the credit contract amended, the onus is on the credit provider to request that information from the debtor once the debtor has given effective notice under s 72(1).
Whilst it is dangerous to make assumptions about the operation of the law, it seems unlikely that any court would read into the National Credit Code 2009 (Cth) the existence of an implied hardship notice.
The matter has not been brought before the courts, and as such, there is no guidance from case law.
Besides, the importance of time is well established in s 72.
It constitutes a breach of the law, amounting to 5000 civil penalty units, for a creditor to fail to return to the debtor with a verdict within the relevant time frame.
Given time is of the essence, an implied hardship notice is unlikely to sit well with the law here, as it is difficult to place a time regarding when notice may be said to have been given, where it may be given tacitly.
From s 89A of the National Credit Code 2009 (Cth), it is evident that a debtor may make give notice of hardship even after a creditor has given the debtor a default notice.
89A Effect of hardship notices on enforcement
(1) This section applies if ...
(b) before or after the credit provider gives the default notice, the debtor gives the credit provider a hardship notice (the current hardship notice) under section 72; and
The effect of s 89A is to prevent creditors from initiating enforcement proceedings until 14 days after the creditor has responded to the hardship notice. Besides this, it affords a debtor the opportunity to give hardship notice to a creditor even after default.
Best case scenario, a creditor, upon examination of the debtor's circumstances, may consider that changing the credit contract as favourable over enforcement proceedings.
It would appear possible to give notice of hardship even subsequent to the commencement of enforcement proceedings. Atkinson J here notes that a judge hearing the matter previously adjourned the matter to allow the defendant to give a hardship notice to the creditor:
"Because there has not been any complying application, the obligations which inhere in the credit provider under s 72 (3) have not arisen.
This matter came to court on a previous occasion and it appears that the Judge hearing it adjourned it to allow Mr Sava, the defendant, to obtain legal advice with regard to making a complying application for hardship to the mortgagee/plaintiff or to the court under s 74" per Atkinson J.
For a debtor unable to rely on the provisions relating to hardship notices, a debtor may consider making a claim on s 76, should it be possible to construe the terms of the credit contract as unfair in some way:
76 Court may reopen unjust transactions
(1) The court may, if satisfied on the application of a debtor, mortgagor or guarantor that, in the circumstances relating to the relevant credit contract, mortgage or guarantee at the time it was entered into or changed (whether or not by agreement), the contract, mortgage or guarantee or change was unjust, reopen the transaction that gave rise to the contract, mortgage or guarantee or change.
The above overview of the law pertaining to Hardship Notices under the National Credit Code was prepared by Suk Jae Chung | Practical Legal Training (PLT) Placement, Blue Ocean Law Group℠.
This FAQ is intended for general interest + information only.
It is not legal advice, nor should it be relied upon or used as such.
We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.
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