Bank failed to answer question about how to block rates demand

Overdue council rates,
Jordan stopped paying his rates because of a dispute with his local council. Jordan had repaid his bank loans on the property, although he had not instructed the bank to discharge the mortgage, with the result that the title still showed the bank held a mortgage over the property.
July 2015

The council wrote to the bank advising that it would issue a demand on the bank as mortgagee of the property for payment of rates arrears if Jordan did not pay them. The Local Government Rating Act 2002 gives councils the power to demand that the mortgagee pay rates arrears. The Act also says that such payments are to be treated as part of the money secured by the mortgage.

The bank told Jordan about the council's notice. Jordan went to his local branch where he was again told the bank would be obliged to pay any rates demand, and that the amount would be debited to his account. Jordan asked if there was any way to prevent the council from issuing the demand on the bank. The branch said it would make some inquiries and learned there was, in fact, one way – if the mortgage was discharged. However, the branch failed to pass on this information. 

Several months later, the council issued a demand on the bank for rates arrears of $2,000, which the bank paid before debiting the same amount to Jordan’s account. Jordan complained to the bank, which said it had no option but to pay when served with a formal demand. 

Our investigation

Jordan complained to us. The bank’s legal obligation to pay the amount and its right to debit Jordan’s account were not in doubt, but we were concerned the bank had failed to answer Jordan’s question about how to prevent the bank from being served with a demand. The bank offered Jordan $500 for the inconvenience he suffered in not receiving an answer. Jordan declined the offer, believing the bank should pay him the amount debited to his account.


We did not consider Jordan had suffered a financial loss because the money was owed to the council. He reluctantly accepted the bank’s offer.

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