Hi there, I would like to know where I stand in relation to a bank wanting possession of my property....

the story so far...
1. 4th June I receive a letter from the banks solicitors advising me to appear at the supreme court on the 25th July
2. 12th June I call up the bank and discuss the matter and request a way forward, we agree that I pay the arrears amount plus my normal monthly repayments by the 16th June and on each 16th of the month thereafter I continue to pay for the normal monthly repayments
3. 13th June, I receive a letter from bank advising of the agreement
4. 3rd July, I receive a phone call from banks solicitors wanting to know of where I can be reached so they can hand deliver me court documents. I tell them I have already sorted the matter with the bank and that I have received a letter from them advising of the agreement. I send the solicitor a copy of bank letter.
5. 4th July, banks solicitor advises the bank wants to proceed with the legal action as the arrangement with the bank was made without prejudice basis.
6. Now I am not sure where I stand with this. The bank letter was as follows:

Dear Mr ......,
If we have sent you a statement of claim, we also agree to postpone any further action as long as you make the payment of $5,443.55 by 16/06/12 for loan ######## XXXXX keep to your new payment arrangement.

Interest will continue to be charged to your account.

What do you need to do?

It's important to keep to your payment arrangement and make your repayments on time. This is a temporary arrangement. On 17/08/2012 please contact us if you require further assistance or to discuss a new payment arrangement.

We understand that managing repayments can be difficult and there may be a number of reasons you may not-be-able-to make-your-repayment. If your-situation changes and you are worried that you will not be able to pay on time, it's essential that you contact us straight away.

What we will do

In the meantime, we will monitor the loan repayments you have agreed to make as part of this agreement. If you don't, we may take enforcement action to recover the money you owe, which may include legal costs. If we have already sent you a default notice, we can take action without any further warning. This might include starting or continuing court proceedings, enforcing any court judgment against you or taking possession of the assets you offered as security for your account.

7. I continue to abide by the agreement and will call them on the 17th Aug as they have requested on their letter....but why proceed with the court action? What will it achieve? Am I obligated to appear?

Please help.

Optional Information:
State/Territory: SA