Appellant v Respondent

1 This is an appeal against the orders of Senior Member C. McKenzie dated 31 March 2011 in Victorian Civil and Administrative Tribunal ("VCAT" or "the Tribunal") Proceeding No. M171/2008 ("the VCAT proceeding").[1]

2 The VCAT proceeding was brought by the appellant against the respondent on 23 May 2008. The VCAT proceeding principally concerned enforcement action taken by the respondent against the appellant pursuant to two loan agreements secured by a mortgage over the appellant's freehold properties in Hoppers Crossing and Spotswood, Victoria.

3 The VCAT proceeding was dismissed by the orders of Senior Member C. McKenzie dated 31 March 2011 ("the orders"). Those orders relevantly provided that:

1. 2. The Tribunal notes that the related proceeding in the Supreme Court between the respondent as plaintiff and the applicant as defendant (No. 7145 of 2004) has effectively been stayed by consent until the determination of this proceeding. The determination of this proceeding ends that stay."

4 Section 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) provides:

"(1) A party to a proceeding may appeal, on a question of law, from an order of the Tribunal in the proceeding-

(a) to the Court of Appeal, if the Tribunal was constituted for the purpose of making the order by the President or a Vice President, whether with or without others; or

(b) to the Trial Division of the Supreme Court in any other case-

if the Court of Appeal or the Trial Division, as the case requires, gives leave to appeal.

It follows from these provisions that any appeal is dependent upon two important qualifications. First, that the appeal be "on a question of law" and the second, that the court "gives leave to appeal".

5 Randall AsJ gave leave to appeal the orders by his Honour's orders dated 3 August 2011. Clearly, the matters set out in the appellant's Notice of Appeal raise questions of law and the appeal was argued on that basis.

6 By the appellant's Notice of Appeal, dated 14 August 2011 (filed pursuant to the orders of Randall AsJ dated 3 August 2011), the appellant appealed on the following question of law:

"In circumstances where the Senior Member found that Default Notices served pursuant to section 76(1) of the Transfer of Land Act 1958 ("section 76") were invalid was it open to the Senior Member to then determine that the Respondent in order to obtain a power of sale over the properties could rely upon the contractual conditions of the mortgages and loan contracts and

(i) subsequent notices that were not tendered in evidence; and/or

(ii) subsequent notices that did comply with section 76?"

7 By a Notice of Contention dated 16 August 2011, the respondent contends that VCAT erred by finding that:

"(a) the Default Notice [dated 1 April 2004 in respect of the loan of $304,000] contained an overstatement of the amount in arrears in that it contained an amount referrable to the 'missed' 27 March 2004 payment;

(b) the Default Notice was invalid because it contained the overstatement which, properly construed, amounted to an incorrect statement that a default existed when it did not;

(c) (if the Tribunal correctly held that the Default Notice contained an overstatement of the arrears) the line of cases concerning such overstatements (to the effect that mere overstatement will not invalidate an otherwise valid notice) did not apply to the Default Notice."

8 The respondent also sought leave to amend its Notice of Contention to, as it put it, more accurately articulate its contentions as set out in the 16 August 2011 Notice of Contention and also to add a further ground of contention that:

"(a) the Notice, even if invalid as a 'Default Notice' for the purposes of the Transfer of Land Act 1958 (Vic) and/or the mortgage, constituted a valid notice stating that the appellant was 'in default' for the purposes of the mortgage;

(b) because the Notice was valid for the purpose of stating that the appellant was 'in default', the powers contained in clauses 8.20 and 8.21 of the mortgage were enlivened at the time of the sale of the Hoppers Crossing property (the Property); and

(c) because the powers contained in clauses 8.20 and 8.21 of the mortgage were enlivened at the time of the sale of the Property, the appellant's claim for damages for wrongful sale of the Property must be dismissed."

9 The appeal procedure from VCAT does not preclude the Court hearing the appeal from giving leave to a respondent to amend its Notice of Contention at the hearing of the appeal. As the matters the subject of the proposed amendments to the respondent's Notice of Contention raise arguments of a purely legal character, the question of the respondent's contractual power to sell arose with sufficient force and prominence before the Tribunal to found this Court's jurisdiction. On the basis that the arguments with respect to the power of attorney provisions contained in the mortgage gave rise to issues in relation to those provisions (being founded on the "same bedrock" as the arguments put before the Tribunal),[2] I granted leave to the respondent to amend its Notice of Contention (as set out in its Proposed Amended Notice of Contention dated 27 September 2011). Moreover it is desirable, in any event, and in the interests of the parties that all issues the subject of these proceedings be determined in the course of this appeal. I should also mention some further amendments to the Notice of Contention proposed by the respondent, in particular the amendments to paragraphs 1(a) and 1(b) which clarify the nature of the "overstatement of the amount in arrears" as set out in the Notice, make it clear that the ground upon which the respondent contends that VCAT erred in relation to this issue was that it found that the overstatement "amounted to an incorrect statement that a default existed when it did not". These further amendments are also desirably made for the same reasons, and also to clarify the position that is being put by the respondents. Additionally, it should be noted that none of the proposed amendments to the respondent's Notice of Contention required the leading of any further evidence. The issues raised by those amendments were, in any event, fully argued by both parties in the course of the appeal.

10 The appellant and the respondent entered into two loan agreements which were the subject of the VCAT proceeding. The first of these loans, which is described as "Loan A", was for the sum of $304,000[3] and the second loan, described as "Loan B" was for the sum of $204,000.[4] Both Loan A and Loan B were secured by a registered mortgage over freehold properties, being 12 Strong Street, Spotswood and 71 Huntingfield Drive, Hoppers Crossing. The mortgage was registered by the Land Titles Office in dealing number AC651596Q and incorporated Memorandum of Common Provisions No. AA706 ("the mortgage").

11 The appellant was, under the terms of the relevant agreements, obliged to make repayments of:

(a) $2,299.00 per month commencing on 27 February 2004, then payable on the 27th day of each month thereafter in relation to Loan A; and

(b) $1,543.00 per month commencing on 27 February 2004, then payable on the 27th day of each month thereafter in relation to Loan B.

12 In January 2004, the appellant established a direct debit authority on her National Australia Bank account, which replaced earlier direct debit arrangements. On 27 February 2004, the respondent attempted to use this direct debit authority but, as the Tribunal found, unsuccessfully because the National Australia Bank account, which the authority relied upon, did not have funds to meet the repayments. On becoming aware that the direct debit authority had been dishonoured, the appellant arranged a new direct debit authority on a Westpac account from which repayments were to be made. It appears that, due to an oversight, the respondent did not use the new direct debit authority for the March and April repayments in 2004 because, due to an oversight, it did not upload the new account details in relation to Loan A or Loan B onto its computer system to enable the March and April 2004 repayments to be made utilising the new authority. This meant that, as at 1 April 2004, two repayments on Loan A and Loan B had not been made.

13 As a result of these events, both Loan A and Loan B were in arrears and, on this basis, the respondent sent default notices, for both Loans A and B separately, dated 1 April 2004, to the appellant requiring her:

(a) to pay $4,598[5] within 31 days of the giving of the Loan A default notice in relation to Loan A; and

(b) to pay $3,086[6] within 31 days of the giving of the Loan B default notice in relation to Loan B.

14 The events in relation to the preparation, content and service of these default notices are set out in the decision of the Tribunal, matters which are not controversial for present purposes:[7]

"159. On 9 March 2004, GEMSL sent to Ms Whild a letter indicating that loans A and B were in arrears. On 1 April 2004, it issued a document headed 'Default Notice, Notice of Intention to Enforce Acceleration Clause and Notice under Section 76 of the Transfer of Land Act 1958 (if applicable) and Section 103 of the Property Law Act 1958 (if applicable)' (the default notice). A separate default notice was issued for loan A and for loan B.

160. The default notice for loan A mentions the borrower's name and details, the mortgage and the mortgaged properties, and then states that the borrower has 'breached the following term - the borrower has not paid amounts due under the contract in the above securities. The amount overdue is $4,598. The default can be remedied by paying to GEMSL within 31 days of the date that this notice is taken to be given the above amount plus any further amount which falls due on this account pursuant to that contract and mortgage between this notice and the date upon which payment is made. Please note that if the borrower fails to comply with this notice the borrower's liabilities under the contract will be accelerated by the operation of the acceleration clause in the contract. This will have the effect of the amount owing under the contract (which as at the date of this notice is $315,787.10) becoming immediately due for payment. Please note that a subsequent default by the borrower of the same kind that occurs within a period of 31 days from the date that this notice is taken to be given may be the subject of enforcement proceedings without further notice if not remedied within the period. If the borrower fails to comply GEMSL intends to sue you for all monies due to it under the contract or to enforce the securities or both'.

161. The default notice contains a note about when it is deemed to have been delivered. It is deemed to have been delivered on the date of receipt of or delivery in the ordinary course of post. The notice was sent to both the Spotswood and Hoppers Crossing addresses.

162. Except for amounts, the default notice for loan B is in the same terms. The amount overdue is stated to be $3,086. The accelerated amount owing as at the date of the notice is stated to be $212,018.42.

163. The collections log shows that Ms Whild could not be contacted by phone on 1 April 2004. The log notes that the default notice is to be hand delivered. On the evidence, this occurred or the notice was attached to her front door on 10 April 2004. Ms Whild's evidence is that she received the notice."

15 The appellant did not pay the amounts required by the default notices and, as a consequence, the respondent took possession of the Hoppers Crossing property on 4 May 2005 and sold it to a third party on 29 September 2005.

16 The Tribunal made some critical findings in relation to the application of the Consumer Credit (Victoria) Code ("the Code") in relation to the loans. First, it found that Loan A was not regulated by the Code, and nor was the mortgage, to the extent that it secured the obligations under Loan A.[8] The Tribunal did find that Loan B was regulated by the Code and so was the mortgage to the extent that it secured obligations under Loan B.[9] These findings were critical to the findings made by the Tribunal in relation to the validity of the default notices.

17 The Tribunal found that the default notice issued in relation to Loan A was invalid because the notice "stated that two payments were in default" (including the payment due on 27 March 2004) in circumstances where the appellant had provided a direct debit authority to the respondent on March 2004, being a date prior to 27 March 2004. Accordingly, it was found that the respondent could not say that the March payment was "in default" in relation to that payment. It therefore followed that this "missed payment" could not be specified as a "default" for the purpose of a notice under s 76 of the Transfer of Land Act 1958 (Vic) ("the TLA") under the terms and conditions of the agreement for Loan A, or the mortgage. It followed, in the view of the Tribunal, that the notice did not merely contain an "overstatement of the amount in default"; rather, it contained an "incorrect statement that a default exist[ed] when it [did] not".[10] In particular, the Tribunal found that the line of cases "to the effect that the overstatement of any amount claimed [under notice of default] does not invalidate the claim" which were relied upon by the respondent did not apply.[11]

18 The Tribunal found that the default notice issued in relation to Loan B was invalid for other reasons, namely as a result of its failure to comply with the provisions of the Code.[12] In this respect, the Tribunal found that the notice failed to accurately "specify" the default, because of the "overstatement" already discussed, and it overstated the accelerated balance (probably by incorrectly including an early termination fee) which was said to be outstanding as at 1 April 2004. Additionally, the Tribunal found that neither s 158(1)(a) of the Code nor Regulation 36(4) of the Consumer Credit Regulations 1995, which are general provisions that set out certain "tolerances" in relation to the provision and supply of information required by the Code in default notices, applied to save the operation of the notice.

19 The application of the Code meant that the mortgage could not be enforced in relation to Loan B on the basis of its provisions. However, the Tribunal found that, despite the invalidity of the default notice issued in relation to Loan A, the respondent was entitled to take possession of the Hoppers Crossing property because:[13]

(a) clause 10.4 of the relevant terms and conditions provided that the respondent need not give a default notice if, inter alia, it had made reasonable but unsuccessful efforts to locate a debtor, in which case it could enforce its security;

(b) clause 2.1 of the mortgage provided that if the appellant did not comply with her obligations, the respondent could take possession of the land and sell it; and

(c) the approach outlined by the Tribunal was not inconsistent with s 77 of the TLA, and, in the alternative, the various "posting notices" the appellant acknowledged receiving constitute notice of default for the purposes of the TLA.

20 The respondent submitted that the default notice with respect to Loan A, the only default notice with which this appeal is concerned, was valid, on two bases. The first was that, regardless of the reason for the failure to make repayments, the default notice accurately reflected the amount of arrears in relation to Loan A as at 1 April 2004 and was, consequently, valid. The second basis relied upon by the respondent was that if it were found that the default notice did contain an overstatement of the amount due, it was only an overstatement and not a notice with respect to a breach which had not occurred. I turn now to consider these bases in turn.

21 It is uncontroversial that on a proper construction of the relevant loan agreements, repayments were due on the 27th day of each month[14] and it is also uncontroversial that the appellant missed the first repayment in relation to Loan A of $2,299 on 27 February 2004. It is also uncontroversial that this was because, on 27 February 2004, the respondent attempted to utilise a direct debit request on a National Australia Bank account in the appellant's name in accordance with an authority she had provided on 22 January 2004.[15] The direct debit request was dishonoured as the National Australia Bank account did not have sufficient funds to meet the repayment. The replacement direct debit authority on the appellant's new Westpac account was not provided until 1 March 2004.[16] This new direct debit authority authorised the debiting of future minimum repayments with respect to the loans, but did not authorise the debiting of historical arrears.[17] As a result of an oversight, the respondent did not use this new direct debit facility to process the 27 March or 27 April 2004 repayments and did not commence to use the authority to process minimum monthly repayments until it processed the repayments due on 27 May 2004.[18]

22 It follows that, regardless of the reason for the 27 March 2004 repayments being "missed", the fact remains that it was not paid to the credit of the appellant's account with respect to the loans. This meant that by 1 April 2004, neither the 27 February nor the 27 March 2004 repayments had been made and, consequently, the appellant was in arrears in her repayments in relation to Loan A in the sum of $4,598. This was the sum of money referred to in the default notice, a sum which, as the respondent emphasises in its submissions, was an accurate statement of the amount of arrears in relation to Loan A as at 1 April 2004. Hence, the respondent says, the notice of default was valid in relation to Loan A.

23 An initial reaction to this submission might be to think that such a proposition offends the general approach or maxim of law that a person cannot take advantage of their own wrong. The application of this approach or maxim does, nevertheless, presuppose that the respondent has, as a result of acts or omissions, been guilty of some "wrong". This proposition does not, however, necessarily follow in the particular circumstances which are being considered. In the present circumstances, in the context of this approach or maxim, the critical question is which party bears the risk of repayment arrangements failing to operate or not being utilised. This may, in some cases, be regulated by the terms of the relevant loan agreement or the provisions of the mortgage securing that loan.

24 In the present circumstances the provisions of the agreement with respect to Loan A[19] actually contain express provisions which require repayments to be made by direct debit from an account nominated by the borrower. These provisions appear in sub-clauses 4.9 and 4.10, as follows:

"4.9 You must make the required repayments by direct debit from an account nominated by you at a financial institution, unless we agree to permit payment made by some other method.

4.10 You must:

(a) provide us with a direct debit authorisation satisfactory to us in relation to that account;

(b) not cancel any direct debit authorisation you give us or close the account referred to in any direct debit authorisation; and

(c) ensure there is enough money in the nominated account to meet each debit."

25 In my opinion, provisions such as clauses 4.9 and 4.10 of the loan agreement provide machinery and mutual obligations on the part of the borrower and the lender designed to facilitate the repayment process. Under these provisions, the borrower has an obligation to establish a direct debit arrangement with respect to an account which the borrower nominates at a financial institution providing direct debit facilities. The borrower is then obliged to provide the lender with a direct debit authorisation which is satisfactory to the lender and in relation to the nominated account. The borrower is obliged not to cancel any such direct debit authorisation, not to close the account to which the authorisation applies and, further, is obliged to ensure that there is enough money in the nominated account to meet each debit as and when it falls due. Clearly, the respondent has a correlative obligation to accept repayment(s) under these arrangements, which involves ensuring that a direct debit authority is utilised to achieve repayment(s) to it in accordance with the financial arrangements provided for in the loan agreement.

26 On the basis of these provisions, it is clear that the appellant failed to meet its obligations in relation to the 27 February 2004 repayments, but the same could not be said with respect to the 27 March 2004 repayments. On the uncontroversial findings of the Tribunal in this respect, it is clear that the respondent failed to comply with its implicit and correlative obligations under clauses 4.9 and 4.10 of the loan agreement with respect to Loan A in that it failed to process the funds representing the 27 March 2004 repayment when those funds presented themselves to the respondent through the direct debit arrangements which the appellant had established to effect that repayment.

27 Consequently, the appellant was not in breach of its obligations under the provisions of the loan agreement or the mortgage with respect to and securing Loan A in relation to the 27 March 2004 repayment. Thus, the only default in repayments as at the date the notice was given was the failure to make the 27 February 2004 repayment. For these reasons, I find that the sum stated in the notice of default was not accurate and I reject the respondent's contention that, on this basis, the notice was accurate and, therefore, valid.

28 In support of its submission that the default notice merely contained an overstatement and did not rely upon a default that had not occurred, the respondent made reference to the text of the default notice, as follows:[20]

"This is a default notice, notice of intention to enforce acceleration clause and notice under Section 76 of the Transfer of Land Act 1958 (Vic) (if applicable) and Section 103 of the Property Law Act 1958 (Vic) (if applicable).

The Borrower is in default under the contract for the above account ('Contract') and the following security/ies:

Land and any improvements situated at 71 HUNTINGFIELD DRIVE HOPPERS CROSSING VIC 3029, which land is subject to mortgage registered number AC651596A in favour of GE Mortgage Solutions Limited

AND

Land and any improvements situated at 12 STRONG STREET SPOTSWOOD VIC 3015, which is subject to mortgage registered number AC651596A in favour of GE Mortgage Solutions Limited

The Borrower has breached the following term

The Borrower has not paid on time all amounts due under the Contract and the above security/ies.

The amount that is overdue is $4598.00

[Underlining added.]"

29 Having regard to the text of the default notice, the respondent submitted that its operative part did not state that a particular repayment or repayments had been missed, rather, all that it stated was that the appellant had not "paid on time all amounts due" under the "contract", which was the loan agreement for Loan A. It submitted that this is important, given the Tribunal's finding that:[21]

"The default notice for loan A correctly stated that one payment of $2,299 (due on 27 February 2004) had not been made and Ms Whild had not made good that default at the time the notice was issued. She had not cancelled the direct debit authority on her NAB account. But the notice stated that two payments were in default. The second of these payments was due on 27 March 2004.

[Underlining added.]"

30 The respondent submitted that the Tribunal incorrectly characterised the text of the default notice. It drew attention to the fact that the notice did not state that "two payments were in default". All that the notice did state was that not all amounts had been paid on time; the notice did not detail which payments had been missed. It follows that, only by inference (and, even then, only with prior knowledge of the minimum repayment amount required on Loan A) could a reader of the notice discern that the amount stated to be in arrears was equal to the sum of two missed minimum repayments. This position might, however, be said to have implications both ways. In this respect, the appellant submitted that it would not be obvious to anyone reading the notice that the monetary sum specified was a reference to two missed repayments and that, more particularly, it would not have been obvious to the appellant because the quantum of the repayments was not readily evident from the financial information provided to her therein.[22]

31 In any event, the respondent submitted that on a proper construction of the default notice, all that it did was to overstate the amount that "had not [been] paid on time" by $2,299. The default notice did not, it said, "contain a statement that a default exists when it [did] not". The default relied upon was the failure to pay amounts due on time. Additionally, I observe that the notice of default did not purport to trigger an acceleration provision in the loan agreement or the mortgage which would have made all principal and interest repayable as at the date of the notice. This is both clear from the text of the notice and also clear having regard to the quantum of the sum demanded with reference to the principal advanced by way of Loan A, which was $304,000. The sum specified in the notice must refer to default in payment of a lesser sum or sums, the repayments.

32 It is clear from the authorities that a notice to pay intended to trigger the statutory power of sale on the part of a mortgagee is not a valid notice if it includes a "non-default".[23] Nevertheless, as the authorities also indicate, a mere overstatement of an amount due does not, subject to the provisions of the relevant legislation, result in invalidity of the notice. It was against the backdrop of this distinction that the Tribunal held:[24]

"This is not an overstatement of the amount in default. It is an incorrect statement that a fault exists when it does not. The line of cases concerning the overstatement of amount does not apply."

In support of its finding, the Tribunal made reference in its reasons to Websdale v S & JD Investments Pty Ltd.[25]

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.[26] 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.[27] 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. 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.

34 In light of the Tribunal's reliance upon the New South Wales Court of Appeal decision in Websdale for the finding that the notice of default contained an incorrect statement that a default existed (that is, it included a "non-default") rather than an overstatement of the amount in default, I turn now to consider that case in some detail.

35 In Websdale, the New South Wales Court of Appeal was dealing with a registered mortgage under the Real Property Act and, consequently, needed to consider the default notice requirements contained in s 57 of that Act. Briefly, the appellants in that case had borrowed money, secured by the mortgages, money which was initially repayable on 5 October 1989. The appellant borrowers were required to make periodic interest payments before the principal sum had to be repaid. In December 1989, the terms of the relevant instruments were varied, with the result that the time for the repayment of the principal sum was extended to 5 October 1990. By 15 June 1990, the appellant borrowers, the mortgagors, had defaulted in the payment of interest and the mortgagee served a default notice under s 57(2)(b) of the Real Property Act which contained a correct statement that the mortgagors had defaulted in the payment of interest, together with an erroneous and incorrect statement that the full principal was presently repayable. This error arose because, in the absence of an unrectified default, the principal was not repayable until 5 October 1990. A further default notice was served on 9 July 1990 which was in identical terms, except that the amount of interest had increased. The Court of Appeal held that the notices were invalid.

36 The principal judgment was delivered by Clarke JA (with whom Samuels and Priestley JJA agreed).[28] In considering whether the default notices specified a non-default, Clarke JA made reference to provisions of s 57 of the Real Property Act, which both specify requirements with which a default notice must comply and contain provisions which deem or affect the existence or otherwise of a default in the event that a default notice is complied with. Beginning with a reference to sub-s 57(3) of the Real Property Act, Clarke JA said:[29]

"The latter subsection lays down the following requirements with which the notice must comply: (a) it must specify that it is a notice given pursuant to s 57(2)(b) of the Act; (b) it must, relevantly, require the mortgagor to pay the principal and/or interest in respect of the payment of which he/she made default; (c) if the costs of the service of the notice are to be demanded it requires payment of a reasonable amount for those costs and specifies that amount; and (d) it must notify the mortgagor that, unless the requirements of the notice are complied with within one month after service of the notice it is proposed to exercise the power of sale.

...

Both notices which were given asserted that the principal and an identified amount of interest were outstanding and required repayment of those sums together with specified costs within one month after service of the notice. In including a statement that the principal was outstanding they were in error. By virtue of s 57(5), cl 6 had no force or effect until the power of sale had arisen and this had not occurred when the notices were given. The position would have been otherwise if, for instance, a notice specifying non-payment of interest had been given and not complied with prior to the service of the notice in July. In that event cl 6 would have been effective.

The question which then arises is whether a notice which contains both a correct assertion that the mortgagor has defaulted in the payment of interest and an erroneous statement that the principal is outstanding complies with s 57."

"The respondents, however, rely on Mir [Bros Projects Pty Ltd v 1924 Pty Ltd][31] and a line of authority the effect of which is stated in Fisher and Lightwood's "Law of Mortgage", 10th ed (1988) at 309, to be that at notice is still an effective demand even if it does not state the amount due or if it overstates that amount.[32] Mir is direct authority for the proposition that a notice given pursuant to s 57 is not invalidated because it includes a requirement to make a payment which is not due. Powell J, who decided Mir, was influenced by the decision of the Privy Council in Campbell v Commercial Banking Co of Sydney (1881) 2 LR (NSW) 375 at 385, and the cases cited in Fisher and Lightwood.

Putting to one side the fact that none of those cases dealt with a statute in the terms of s 57 and s 58 of the Act, it should be observed they provide no direct support for the proposition that a notice which included a mistaken statement that principal was then due was a good notice. Counsel for the mortgagor in Mir pointed this out to the judge when he submitted that the authorities applied only in the case of a mis-statement of an amount of principal or interest otherwise due and should not be held to extend to a case in which a claim is made for a payment of principal not then due. His Honour thought that this was a distinction without a difference. For my part I regard the distinction as a fundamental one in the light of the terms of s 57."

38 Clarke JA then identified a "fundamental" distinction between the overstatement of an amount owed because of a correctly identified event of default as distinct from the inclusion of an act or event of default in the notice of default which did not exist at all. With this distinction in mind, Clarke JA continued:[33]

"The section requires the mortgagee to bring to the attention of the mortgagor the particular default and to require him to make it good. It does not in terms require the mortgagee, in a case in which it is claimed that the mortgagor is in default in the payment of interest or principal, to specify the particular amount outstanding. What it requires is that the mortgagee identify the particular default or defaults. In these circumstances it is difficult to see why, provided the default is correctly identified, the specification of a greater or lesser amount than actually due should affect the validity of the notice. This is consistent with Campbell which was relied upon by Powell J and which has been considered an authority for the proposition that the overstatement of the amount owing in a notice given by a mortgagee will not invalidate it.

Although I am of the view that the differences between s 57, s 58 and the relevant statutory provisions under consideration in Campbell are sufficient to require the exercise of caution in the application of the decision in Campbell to a notice given under s 57, I would myself be inclined to the same view simply as a matter of construction of s 57 itself. That is, that in the absence of a requirement that the notice identify with particularity the precise amount outstanding, it will be good so long as it identifies correctly the defaults which the mortgagor is given the opportunity of remedying.

None of the cases, apart from Mir, however, provide any support for the view that a notice will be good notwithstanding that it mis-states the defaults which are said to have occurred. This distinction I regard as of substance and one which leads me to conclude that Mir should not be followed and that the notices given in this case were defective."

39 The validity of a notice overstating an amount owed on the basis of a correctly identified default was confirmed by Clarke JA in Wongala Holdings Pty Ltd v Mulinglebar Pty Ltd where his Honour said:[34]

"Although the notice did identify the default, that is, the failure to pay interest due and payable, it misdescribed the default in two respects. First, it identified the wrong month and, secondly, arguably, it incorrectly specified the amount outstanding. However, upon the assumption that both misdescriptions occurred, there is nothing in Websdale or in the authorities which requires the court to hold that the notice was bad for that reason. What Websdale decided was that a notice which required the mortgagor to remedy a non-existent default was defective (p 578). On the other hand, as the passage I have set out makes clear, that case decided that a mere misdescription of the amount outstanding did not invalidate the notice."

40 The decision of the High Court in Bunbury Foods Pty Ltd v National Bank of Australasia Ltd[35] also supports the validity of the notice of default in spite of the error with respect to the actual amount of money due by way of repayments. In Bunbury, the High Court held unanimously:[36]

"It is of some materiality to note that it is not essential to the validity of a notice calling up a debt that it correctly states the amount of the debt. Even a notice given to the mortgagor by the mortgagee as a condition precedent of a power of sale is not rendered invalid because it demands payment of more than is due (Humphery v Roberts (1866) 5 SCR (NSW) 376387 at 385, Campbell v Commercial Banking Co of Sydney (1879) 2 LR (NSW) 375 at 385 Clyde Properties Ltd v Tasker [1970] NZLR 754-8 at 757 Mir Bros Projects Pty Ltd v 1924 Pty Ltd [1980] 2 NSWLR 907 at 926). It may be thought that this provides sufficient reason for insisting that the creditor should specify the amount of the debt in his notice demanding payment for the validity of the notice will not be imperilled by an error in the statement of the amount. However, there is little point in requiring that the notice should state the amount if the correctness of the amount is not essential to the validity of the notice."

Similarly, in Barns v Queensland National Bank Ltd, Griffiths CJ said:[37]

"The letter of demand contained also a notice that unless the amount were immediately paid the bank would proceed to exercise the power of sale under that mortgage. It was objected for the appellant that this demand was insufficient, inasmuch as it only referred to one of the mortgages. In our opinion, however, a demand is sufficient if it sufficiently identifies the debt of which payment is demanded, notwithstanding any error or omission in the description."

See also Indrisie v General Credits where, applying Barns, the Full Court said that: "It is the identification of the debt rather than the money sum which is required".[38]

41 There are many other authorities to similar effect, some of those having already been referred to in the passages from the judgments set out above. It is helpful to make reference to some additional authorities as further illustrations of the approach taken by the courts to default notices triggering the mortgagee's power of sale. These and the cases already considered indicate that, so long as the object of guarding the rights of the mortgagor is achieved[39] and, in particular, no "non-defaults" are relied upon, the courts will not adopt a narrow and pedantic approach in considering the validity of a notice of default. They are "... valid so long as they reasonably convey to the recipient the message that the section intends the borrower to receive and the borrower is not misled".[40]

42 In Clarke v Japan Machines (Australia) Pty Ltd,[41] the Queensland Full Court was called upon to consider the validity of a notice of exercise of the mortgagee's power of sale, a default notice, under the provisions of s 84(1) of the Property Law Act 1974 (Qld). Those provisions stipulate a "... notice requiring payment of the amount the failure to pay which constituted the default under such instrument of mortgage ...". On this issue, Thomas J (with whom Campbell CJ and Andrew SPJ agreed) said:[42]

"The question is whether this notice satisfied the requirements of s 84. We were referred to a number of authorities showing diverging approaches to the specification of default and the degree of accuracy needed in notices under this Act and cognate legislation. We are here concerned with the default in the payment of money as principal or interest. Prima facie the reference in the statute to a 'notice requiring payment of the amount the failure to pay which constituted the default' requires a statement of the amount required to be paid. The prescribed form supports this view, but the use of that form is not mandatory. Mr Jackson QC, for the mortgagee, submitted that the statement of the wrong amount in the notice does not affect its validity. He relied principally upon statements in Mir Bros. Projects Pty Ltd v 1924 Pty Ltd [1980] 2 NSWLR 907 at 925-926; and Campbell v The Commercial Banking Corporation of Sydney [1879] 2 LR (NSW) 375, for the proposition that a notice precedent to exercise of a power of sale is not invalidated because it demands payment of more than is due. On the other hand Mr Pincus QC, for the mortgagor, submitted that the notice must convey the information that there has been a particular default, and that it should specify it with sufficient particularity to enable the mortgagor to rectify it. He questioned the correctness of the following statement made by Powell J in the Mir Bros Projects, case supra (at 925F):

'The authorities are, however, also consistently to the effect that, notwithstanding the objects of such legislation, a notice is not invalidated because it specifies, as a breach, a 'breach' which has not occurred, or because it requires to be done something which the lessor cannot then lawfully require of his lessee:'

The three cases cited in support of that passage are all landlord and tenant cases, the most authoritative being Fox v. Jolly [1916] 1 AC 1. Their relevance to a power of sale case is by analogy only, although all such legislation has the same broad object of requiring an opportunity to the lessee or mortgagee (as the case may be) to rectify a breach before the giver of the notice may proceed to exercise an extreme remedy. In Fox v Jolly the House of Lords considered it necessary that the notice state with sufficient particularity the breach of which the landlord complains, and that it give the tenant adequate notice of what he is required to do. Their Lordships also held that the addition of unspecified breaches or immaterial matter in the notice would not vitiate a notice that was otherwise good.

So far as notices precedent to exercise of power of sale are concerned, the general object must be similar. If it were otherwise the exercise would be an empty one.

We were referred to a number of authorities and these may be briefly reviewed. M'Donald v. Rowe (1872) 3 VLR (Eq) 143 was a case which turned on ss 114 and 116 of the Transfer of Land Act of 1890 (Vic). Those sections gave a mortgagee, in case of default in payment of principal or interest, the right to serve on the mortgagor a 'notice in writing to pay the money owing on such mortgage'. If default then continued for a month the mortgagee might sell the land. The mortgagee served a demand requiring 'the money due under your mortgage ... to be forthwith paid'. It was not clear in that case (any more than it is clear in the present case) that the option to call up the whole of the principal had been exercised. Molesworth J said 'Upon default in payment of interest the mortgagees had an option of requiring payment of that principal and interest, or interest only, and the exercise of that option in the former way would entitle the plaintiff to pay both. I think the notice was defective in not distinctly exercising the option'.

It is convenient to mention at this point that the notice in the present case cannot be regarded as itself an exercise of the option to accelerate. Even if it were, it would be premature, as the notice must refer to a past default.

A similar approach can be seen in Stacey v. Hansen [1894] VicLawRp 111; (1894) 20 VLR 561. This was a power of sale case concerning non-performance of a covenant. A'Beckett J ruled that it was necessary to specify the particular covenant alleged to have been broken, and that it was not sufficient that the mortgagee should call upon the mortgagor to perform 'all the covenants' or 'the covenants' generally. His Honour remarked 'Where a person is seeking to take such an extreme step as to sell for non-performance of a covenant, and where the mortgagor may avoid the consequences of non-performance by doing the act within a month, an intimation should be given of the particular covenant said not to have been performed'.

Two New Zealand cases were referred to, namely Jaffe v Premier Motors Limited [1960] NZLR 146 and Clyde Properties Limited v. Tasker [1970] NZLR 754. These may be reconciled on the footing that the notice in Jaffe claimed principal that was not due, and the notice was therefore bad; whilst the notice in Clyde claimed £5,500 instead of £5,000 and this was held not to invalidate the notice.

In Campbell v The Commercial Banking Company of Sydney (supra) the Privy Council was concerned with s 55 of the Real Property Act of 1862 (NSW), under which the prescribed procedure in case of default included the following words. 'The mortgagee ... may give to the mortgagor... notice in writing to pay the money then due or owing... and that sale will be effected unless such default be remedied...' The mortgagee gave a notice demanding 'the immediate payment by you of the sum of £20,029.8.3 being the amount of principal and interest monies now due and owing by you to the said bank ...'.

Their Lordships pointed out that nearly the whole of the amount demanded was unquestionably due by the plaintiff. Indeed, their Lordships were by no means satisfied that if the accounts between mortgagor and mortgagee were re-established and properly adjusted, the bank might not have been found entitled to all it demanded. Thus, the case was decided in relation to an alleged and arguable inaccuracy of approximately £29 in a total debt of approximately £20,000. Their Lordships said:

'The learned judges of the Supreme Court have held, and in Their Lordships' opinion correctly held, not only that a notice under the Act is not bad because it demands more than is due and that the Jury should have been so instructed (a ruling which affects principally the finding on the second issue), but that where a demand is made for a larger amount than that which is really due, such demand does not do away with the necessity for tendering what is actually due, unless there is at the same time refusal to receive less.'

I interpret Their Lordships as holding that a notice will not necessarily be bad merely because a greater sum is demanded.

In the same way, the passage objected to in the judgment of Powell J in the Mir Bros Projects case (supra) seems unexceptionable if the word 'necessarily' is read before the word 'invalidated'."

With respect, I accept not only the general principles and approach enunciated by the Full Court but also the analysis and explanation of the effect of the judgment of Powell J in the Mir Bros Projects[43] case; an approach which is consistent with that of Clarke JA in the New South Wales Court of Appeal in Websdale[44] and that of the High Court in Bunbury.[45]

43 The position may, however, be different if the notice of default is, in all the circumstances, misleading. Thus, consistently with the object of a notice of default, Thomas J, in Clarke v Japan Machines, continued:[46]

"It would be a misreading of Campbell to interpret it as holding that a mortgagee can demand what he likes, that demands for larger amounts are always lawful and that it would therefore be safer for a mortgagee to err in his demands on the generous side. Their Lordships concluded the relevant paragraph with these words - 'Their Lordships cannot think that even if there were some excess, it was so large or so wrongful as to justify an inference that the defendants would refuse to accept what was justly due'. Although looking forward to the moment of tender, Their Lordships are discussing the validity of a notice with a minor error, and it is plain that a question of degree is involved.

Perhaps the most helpful statements of criteria relevant to the question of the validity of a notice are those in Fox v Jolly (supra) to the effect that the notice ought to enable the recipient to understand with reasonable certainty what he is required to do; and by Griffith CJ in Barnes v Queensland National Bank Ltd. [1906] HCA 26; (1906) 3 CLR 925 at 935 who said 'In our opinion ... a demand is sufficient if it sufficiently identifies the debt of which payment is demanded, notwithstanding any error or omission in the description'. Obviously a notice which materially misleads the recipient as to the nature of the debt demanded will be invalid.

Mention should also be made of Stephenson Developments Pty Ltd v Finance Corporation of Australia Limited [1976] QdR 326. The facts as to the nature of the debt do not clearly emerge from the report. There is no reason to believe that the principal had not fallen due, or that the error in the notice was other than trivial or technical, or that Douglas J was wrong in ruling that notice to be sufficient. However in the course of the judgment His Honour said (at 327-8):

'The fact of the matter is that it is said that the default alleged is the non-payment of interest and the amount is not specified. Really looked at in practical terms the amount is the interest due. I cannot see why it is necessary to the integrity of the documents that the amount should be specified.'

That statement must be read against the background that the total amount of principal and interest said to be due, and demanded by the notice, was in fact specified (namely at the sum of $459,990.92). That told the mortgagor what he was required to do, and no substantial error in the accuracy of that total was suggested. If it were suggested that the amount to be paid, or the amount of the default (usually the same amount) did not need to be specified at all, I could not agree, because the statute seems to require an amount to be specified."

Thus, apart from the Queensland statutory requirements with respect to notices of default, the Full Court was apparently of the view that it was not necessary that any monetary sum be specified with respect to the default relied upon.[47]

44 The issue of a misleading default notice was addressed specifically by Debelle J in the Supreme Court of South Australia in Adelaide Bank Ltd v Gibbs.[48] In so doing, his Honour reaffirmed the principles established by the authorities discussed thus far:[49]

"The notices in this case were defective in that they wrongly stated the date of default. A reasonable degree of latitude is allowed in respect of errors in notices under s 55a of the Law of Property Act [1936 (SA)]. For example, a notice is not invalid because it demands more than is due: Bunbury Foods Pty Ltd v National Bank of Australasia Ltd [1984] HCA 10; (1984) 58 ALJR 199, 204; Lamshed v Plakakis (1988) 47 SASR 316. Nor will a notice necessarily be invalid because of a failure correctly to specify the time within which to remedy the breach: Eadie v Braun (1978) 20 SASR 190; Hindmarsh Building Society v Manhire (1979) 20 SASR 206. Nevertheless, a notice should specify with reasonable particularity and accuracy the fact of the default, the nature of the default, and the manner in which the default can be remedied. A notice which specifies that the mortgagor is in default on a particular day when in fact payments have been made between the date of the alleged default and the date of the notice is more likely to mislead than inform. Circumstances had changed between 24 March 1994 and the date of these notices. The recipient of the notices would not have read and understood them to refer to the state of affairs prevailing at the date of the notices. On receiving the notices, Mr Gibbs would be entitled to think that, as he had made further payments in April 1994, he could ignore the notices. His attention was not being directed to what was due on 24 May 1994. The fact that he was in arrears on 24 May 1994 cannot save these notices, which were quite misleading."

45 As discussed previously,[50] I am of the opinion that in spite of the extent of the error in specifying the monetary amount of the default, it was clear in the context of the language of the default notice and the particular circumstances that the default relied upon was a default with respect to repayments. This is not a case of any ambiguity with respect to a demand or otherwise for the principal and neither is it a demand with respect to a periodic repayment in circumstances such as those arising in Adelaide Bank v Gibbs where the borrower, the recipient of the notice, might have been confused into thinking no action was required, some prior repayment having been made. Here, it should have been quite clear to the appellant that receipt of the default notice was a serious matter, and one that required attention and action if the process were not to proceed to a mortgagee's sale.

46 It has been held that the Bunbury principles do not apply to agreements regulated by the Code, or similar legislation.[51] It is clear that the reason for the difference in approach arises from the obligations imposed by the provisions of the Code, or similar legislation, to "specify" defaults which, having regard to the protective aims and purposes of this ameliorating or remedial legislation have been interpreted strictly. This "stricter" approach does not, however, have any application to Loan A, which is unregulated by the Code.[52]

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.

49 The respondent submitted that if the Court was not satisfied that the default notice was valid, the Tribunal was, nevertheless, correct to conclude that it was authorised by the terms of the mortgage to act as it did, substantially for the reasons set out in the Tribunal's decision.

50 Particular reliance was placed upon the Tribunal's decision with respect to the "posting notices". In this respect, after dealing with the construction of the loan agreement and the mortgage, the Tribunal said:[53]

"183. In my view, s 77 of the TLA is not inconsistent with this approach. When this action [sic] speaks of remedying a default within the time 'fixed' in the mortgage, it permits the mortgage itself to fix the time within which a default must be remedied. Under clause 2.1 of this mortgage (read with clause 10.4 of the terms and conditions), there is no time to be given to remedy a default where reasonable but unsuccessful efforts have been made to locate the mortgagor. If it were otherwise, a mortgagor could prevent the exercise of a power of sale by simply disappearing. If I am wrong about this, my view is that the posting notices which Ms Whild has acknowledged receiving and which continued to notify her of the arrears constitute notice of default for the purposes of the TLA." [Emphasis added]

51 The "posting notices" referred to were issued by the respondent with respect to both Loan A and Loan B, in identical form. An example of one of these posting notices is one dated 13 April 2004,[54] which provided, in part:

"Re: GE Jump Start Home Loan Account Number :37143518 MG01

Amount due :$3,776.11

Monthly repayment :$1543.00

Due Date :27th of each month

As your account was in arrears over the last month you have incurred late charge fees of $690.11. Immediate clearance of the arrears is required.

The arrears amount due at your next due date includes any outstanding payment, your current payment and late charge fees which have been calculated on the total amount outstanding on your loan.

If you pay before your next due date a different amount may be due. Please contact our office on 08 8300 6868 prior to making your next repayment.

Please note late charge fees will continue to accrue on your account until the current amount due is paid in full." [Emphasis added]

52 As indicated previously, neither s 76 nor s 77 of the TLA are prescriptive in relation to the nature or content of notices under those provisions (in contrast to the provisions of s 57 of the Real Property Act 1900 (NSW), which have been considered). Section 76(1) of the TLA provides, in part:

"(1) If default is made in payment of the principal sum interest ... and continues for one month ... the mortgagee ... may serve on the mortgagor ... notice in writing to pay the money owing or to perform and observe the covenants ..." [Emphasis added]

(1) If within one month after the service of such notice or demand ... the mortgagor ... do[es] not comply with the notice or demand the mortgagee ... may, in good faith and having regard to the interests of the mortgagor ... sell ... the mortgaged ... land ..." [Emphasis added]

53 The respondent submitted that the Tribunal had correctly found that the posting notices satisfied the requirements of sub-ss 76(1) and 77(1) of the TLA in that they were in writing and required the appellant to pay the outstanding arrears and observe the covenants in the loan agreement and the mortgage. It was submitted that, unlike the default notice provisions contained in the New South Wales legislation,[55] the Victorian legislation does not require default notices to state, expressly, that they are given or issued "pursuant to" s 76 of the TLA. Neither do the TLA provisions require that there be any express reference to the mortgagee's "power of sale".[56]

54 The appellant submitted that the "posting notices" could not constitute a notice that complies with s 76 of the TLA because, first, the arrears referred to in the "posting notices" were not payable (for the reasons advanced in relation to the issue of the validity of the notice of default) and, secondly, because the loan was a term loan facility and not an on demand facility which did not contain an acceleration clause which, on default, would, automatically or at the option of the mortgagee, render the whole of the principal sum and interest repayable on demand. Consequently, the provisions of sub-s 76(2) of the TLA could not be engaged. Additionally, it was submitted that, in consequence, the statement of the High Court in Bunbury had no application. This is a proposition with which I disagree, because the statements in Bunbury to which reference has been made are statements of general principle with respect to the correctness or otherwise of the quantum of the demand made. As such, they are applicable to any monetary sum due, whether it is the whole of the principal sum and interest under a mortgage or merely with respect to periodic payments of principal and interest or interest only.

55 It was also submitted by the appellant that, if the effect of the "posting notices" was, in general terms, by reference to the "immediate clearance of the arrears" being required effective to impose a greater liability than the appellant's liability then existing to make periodic payments, then this constituted a penalty which meant that the "posting notices" were incapable of satisfying the requirements of ss 76 and 77 of the TLA. I also note the demand in the posting notices for late charge fees is the amount of $690.11. Whether or not this is properly characterised as a penalty or a reasonable pre-estimate of loss it would, if it arises out of an entitlement under the loan agreement or the mortgage provisions, not produce a default under those provisions unless and until it was not paid.[57] Moreover, if a mortgagee is entitled to demand payment of such a charge under the provisions of the relevant mortgage and the provisions of the mortgage relied upon are found to be penalty provisions, then the demand fails with the avoidance of the underlying provisions. Prior to this, on the face of the mortgage provisions, the demand is properly made and cannot, as may be considered relevant in the present circumstances, be characterised as a demand for a sum not due, or a "non-default", in the sense discussed in these reasons. Consequently, in the present circumstances, I am of the opinion that the reference to that sum does not compromise the posting notices in the event that they might otherwise be treated as equivalent to a default notice under the TLA provisions.

56 Although it is the position that the Victorian legislation, ss 76 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.[58] As the High Court indicated in Barns v Queensland National Bank Ltd,[59] 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;[60] 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 s 57 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.[61]

57 In my opinion, the contents of the "posting notices" do not fulfil these requirements. They are documents which primarily provide information in spite of some use of imperative language with respect to the "[i]mmediate clearance of the arrears". Nevertheless, other language used in the contents of the "posting notices" are, in my view, more consistent with the provision of information than something approaching a notice (or demand) under the statutory mortgagee's power of sale provisions of the TLA. For example, the notices indicate, in the passive voice, that "... you have incurred late charge fees of $690.11". Following the expressed requirement for the immediate "clearance of arrears", the "posting notices" contemplate something in the nature of an ongoing running account with respect to arrears in that the next sentence says: "The arrears amount due at your next due date includes any outstanding payment, your current payment and late charge fees which have been calculated on the total amount outstanding on your loan". The notices then contemplate non-payment in stating that: "If you pay before your next due date a different amount may be due". However, if the recipient does not pay, the consequence specified is: "Please note late charge fees will continue to accrue on your account until the current amount due is paid in full". In my view, the recipient of a "posting notice" in this form would understand that if arrears claimed and late charge fees were not paid, then the indebtedness under the loan the subject of the notice would continue to increase. Consistently with this "information" is a request that the recipient contact the mortgagee's office prior to making the next repayment.

58 For these reasons, I am of the opinion that the "posting notices" could not be regarded as an effective notice or notices (a "notice or demand") for the purposes of s 76(1) or s 77(1) of the TLA and that the Tribunal was in error in treating these notices as a notice of default for the purposes of the TLA.

59 Another basis upon which the respondent sought to uphold the exercise of the power of sale was on the basis of the provisions of clauses 8.20 and 8.21 of the mortgage. In this respect, it was submitted that even if the default notice were not held to be valid for the purposes of the TLA provisions, it was still a notice stating that the appellant was "in default" for the purposes of these provisions of the mortgage. As I have already found that the default notice was valid, the issue of the validity or otherwise of the exercise of a contractual power of sale under the provisions of the mortgage does not arise. Nevertheless, it may assist if I express some views in relation to this contention in case the matter goes further.

60 The authorities indicate that a notice which is invalid for the purpose of the statutory power of sale provisions may, nevertheless, operate as an effective demand.[62] On this basis, the respondent submitted that the default notice, even if invalid for the purpose of the statutory provisions, was, nevertheless, valid as a notice stating that the appellant was "in default" for the purposes of the provisions of the mortgage. Nevertheless, as the authorities relied upon by the respondent in support of this proposition illustrate, it does not follow that a demand which is effective as such is necessarily effective as a notice of default as a triggering of the machinery for the exercise of the mortgagee's power of sale. The demand may, for example, be effective to trigger the operation of an acceleration clause in the mortgage which renders the whole of the principal immediately due and payable, or to trigger an entitlement to possession of the mortgaged property.

61 The provisions of the mortgage which were relied upon in this respect are as follows:

"8.20 You appoint us, each of our directors, each of our company secretaries, each of our employees and each receiver under this mortgage, separately as your attorney. If we ask, you must formally approve anything they do under 8.21. You may not revoke these appointments.

8.21 If we have served a notice stating that you are in default, each attorney may:

(a) do anything which you can do as owner of the property (including executing deeds, selling or leasing or otherwise dealing with the property, lodging or withdrawing caveats and starting, conducting and defending legal proceedings); and

(b) delegate their powers (including this power) and revoke a delegation; and

(c) exercise their powers even if this involves a conflict of duty or they have a personal interest in doing so."

[Emphasis added]

62 The respondent submitted that, in spite of its ostensible reliance upon the statutory power of sale under the TLA in the statement for the purposes of s 32 of the Sale of Land Act 1962 (Vic) which was prepared in connection with the sale of the Hoppers Crossing property, it was entitled to sell that property in the exercise of its contractual powers as the appellant's attorney under clause 8.21 of the mortgage. Further, it was submitted that at the time it relied upon the statutory power, it was not aware that the default notice was "invalid" for the purposes of the TLA (assuming for present purposes that that was the position). In this vein, it submitted that for the purposes of answering the appellant's claim for the alleged "wrongful sale", all it had to show was that it enjoyed a valid power of sale at the time the sale was effected. In this respect, reference was made to the statement of Meagher JA in the New South Wales Court of Appeal in McMahon v State Bank of New South Wales:[63]

"... the correct legal position is that a party who takes a step pursuant to a contract is entitled to justify the taking of that step if the objective facts which justify the taking of that step existed at the relevant time even although that party at the time was taken did not know of these facts. The valuable judgment of Brooking J in Nund v McWaters [1982] VicRp 60; (1982) VR 575, particularly at 585, cites the authorities which support that proposition."

63 In relation to express powers of sale, more generally, the respondent relied upon the following statement by Powell J in Midland Montagu Australia Ltd v Cuthbertson:[64]

"The second point to be noted is that, by virtue of the provisions of s 57(1) of the Act, a mortgage of land under the Act differs substantially from a common law mortgage, the former involving merely a charge upon the relevant land, while the latter involves a conveyance of the mortgagor's legal estate to the mortgagee, subject to a proviso for redemption. The necessary consequence of this is that, in contrast to a mortgagee under a common law mortgage, a mortgagee of land under the Act has no inherent capacity to pass the legal estate in the land under the mortgage, but requires something more to enable him to do so. In the absence of an express power of sale in the instrument of mortgage coupled, with the appointment of the mortgagee as the attorney of the mortgagor to execute any relevant instrument in the name, and on behalf of, the mortgagor, that something else is provided by the provisions of s 57 and s 58 of the Act which both confer the power, and dictate the conditions to be fulfilled before it may be exercised." [Emphasis added]

64 Concluding this argument, the respondent submitted that it was entitled to exercise the express power of sale conferred by clauses 8.20 and 8.21 of the mortgage without the need to rely upon the statutory power under the TLA. Clearly, if this were the position, the power would be otiose in the event that the statutory power had been exercised effectively (as I have found to be the case).

65 It appears that the Tribunal was attracted to the argument that the respondent was entitled to sell as mortgagee under a contractual power, on the basis of these mortgage provisions, for two reasons. The first was because it was accepted that the "posting notices" had been received by the appellant, notices which could be treated as a notice "stating that you are in default" for the purposes of clause 8.21. The second was on the basis that such a contractual power should be available and given effect to because of the possibility that the statutory power conferred by the TLA provisions could be thwarted in the event that the mortgagor could not be served with a notice of default.[65] As to the first reason, it does not follow, in my view, that a notice which fell short of the requirements of a notice under the statutory power provisions of the TLA, such as the "posting notices", could nevertheless be effective as a default notice under a contractual power of sale. Though the basis of the power is different, it remains a drastic remedy so it follows that the same considerations that have been discussed would apply with equal force to default notices, whichever type of power is relied upon.[66] The second reason has no basis because s 113 of the TLA provides a comprehensive series of options for the purpose of serving "[a]ny notice under this Act ...", which includes a notice of default for the purposes of ss 76 and 77. If all else fails, the address of the mortgagor as shown in the Torrens register may be utilised.[67] In any event, it is not necessary to take these issues further for present purposes, save to indicate, should matters go further, that I am of the opinion that if the default notice were assumed to be ineffective so that the trigger relied upon to enliven the contractual power could only be "posting notices", then the exercise of the power fails. The "posting notices" are not, as I have found valid default notices for the purposes of the statutory power and for the same reasons would fail to trigger the contractual power of sale.

66 Returning to the possible bases of a mortgagee's power of sale, it is well established that the inclusion of power of attorney provisions in mortgages has been used successfully as a means of enabling an equitable mortgagee of a legal estate of general law land to convey the legal fee simple estate in the exercise of a power of sale.[68] The position would not, however, appear to be very different in relation to land under the Torrens system provided the mortgagee held a power of attorney which enabled it to procure registration of the transfer of the mortgaged property as a result of the exercise of the contractual power - as it would not have the benefit of the TLA provisions designed to effect this.[69]

(a) the default notice dated 1 April 2004 in respect of Loan A was valid and that the Tribunal was in error in finding that it was not;

(b) none of the "posting notices" could constitute a valid notice under the statutory power of sale provisions of the TLA and that the Tribunal was in error in finding that such a notice constituted a notice of default for the purposes of the statutory provisions; and

(c) a contractual power of sale was available to the respondent under clauses 8.20 and 8.21 of the mortgage, but that, having found that the default notice was valid for the purposes of the TLA provisions, issues in relation to the exercise of this power do not arise and that the contractual power is, in this sense, otiose in the present circumstances.

68 Consequently, the orders of the Tribunal of 31 March 2011 should be set aside and orders made to give effect to my findings as set out in these reasons. It is unnecessary having regard to these findings that any matter be remitted to the Tribunal for further consideration or determination.

69 I will hear the parties in relation to the form of orders that should be made to give effect to these reasons and also in relation to the issue of costs.

[1] Whild v GE Mortgage Solutions Limited (ACN: 070 797 894) (Credit) [2011] VCAT 797.

[2] See Ovidio Carrideo Nominees Pty Ltd v The Dog Depot Pty Ltd (2006) VConvR paragraphs 54-713 (CA) at 63,087, [59], 63, 088-9 [71], and 63,090, [80] (Ashley JA); and see also Velardo v Andonov [2010] VSCA 38; (2010) 24 VR 240 (CA) at 246-7, [36] (Ashley JA); and see Respondent's Post-Hearing Submissions (7 March 2012), paragraph 12.

[3] The account number for Loan A was 37143518MG01.

[4] The account number for Loan B was 37143518MG02.

[5] Being an amount referable to two minimum repayments of $2,299 as required by the terms of Loan A.

[6] Being an amount referable to two minimum repayments of $1,543 as required by the terms of Loan B.

[7] Whild v GE Mortgage Solutions Ltd [2011] VCAT 797, at [159]-[163].

[8] See Tribunal decision, [133] where the Tribunal said: "the Code does not apply to this loan [being Loan A], and, to the extent that the mortgage secured by this loan, did not apply to that mortgage".

[9] See Tribunal decision, [134] where the Tribunal said: "the Code applies to that loan [being Loan B]. To the extent that the mortgage secures that loan, the Code applies to that mortgage".

[10] See Tribunal decision, [168]-[170].

[11] See Tribunal decision, [168] and [170], noting the references to Indrisie v General Credit Services [1985] VicRp 20; [1985] VR 251 at 254 (Young CJ, Crockett and Nicholson JJ) and Websdale v S & JD Investments Pty Ltd (1991) NSWLR 575, respectively.

[12] See Tribunal decision, [172] and [178]-[179].

[13] See Tribunal decision, [180]-[184].

[19] GE Mortgage Solutions - Home Loan Contract Terms and Conditions (Unregulated), Court Book document, pp 153-167, at p 159.

[20] Respondent's Outline of Sumbissions dated 27 September 2011, [12] (at CB 13).

[22] See, for example Bunbury Foods Pty Ltd v National Bank of Australasia Ltd [1984] HCA 10; (1984) 153 CLR 491, at 504 (Mason, Murphy, Wilson, Brennan and Dawson JJ) where the Court said:

"In determining whether the debtor has had such an opportunity it will be relevant to take account of the debtor's knowledge, lack of knowledge and means of knowledge of the amount due and of the information which the creditor has provided in that respect, including the response which he has made to any inquiry by the debtor."

And see Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 QdR 404 and Manton v Parabolic Pty Ltd(1985) NSWLR 361.

[23] Websdale v S & JD Investments Pty Ltd (1991) 24 NSWLR 573 (CA) at 578-9 (Clarke JA); and Wongala Holdings Pty Ltd v Mulinglebar Pty Ltd (NSWCA, unreported, 16 August 1994) (BC 9405061).

[25] (1991) 24 NSWLR 573 (CA).

[28] Samuels JA also added some remarks in relation to the fact that the date for repayment had been extended was "overlooked" (see (1991) 24 NSWLR 573 (CA) at 574-5).

[29] (1991) 24 NSWLR 573 (CA) at 577.

[30] (1991) 24 NSWLR 573 (CA) at 578.

[31] [1980] 2 NSWLR 907.

[32] And see now Tyler, Young and Croft, Fisher and Lightwood's Law of Mortgage (2nd Austn ed, LexisNexis, 2005), 490-1, [20.15].

[33] (1991) 24 NSWLR 573 (CA) at 578-9.

[35] [1984] HCA 10; (1984) 153 CLR 491.

[36] [1984] HCA 10; (1984) 153 CLR 491 at 503-4 (Mason, Murphy, Wilson, Brown and Dawson JJ).

[37] [1906] HCA 26; (1906) 3 CLR 925 at 935.

[38] [1985] VicRp 20; [1985] VR 251 at 254 (Young CJ, Crockett and Nicholson JJ).

[39] See Barns v Queensland National Bank Ltd [1906] HCA 26; (1906) 3 CLR 925; and see Tyler, Young and Croft, Fisher and Lightwood's Law of Mortgage (2nd Austn ed, LexisNexis, 2005), 490-1, [20.15].

[40] Monas v Perpetual Trustees of Victoria Ltd [2011] NSWCA 417 (Young JA, with whom Beazley and McColl JJA agreed) at [39], referring to Campbell v Commercial Banking Co of Sydney (1879) LR 2 NSW (L) (PC) 375; Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 QdR 404 and Manton v Parabolic Pty Ltd (1985) NSWLR 361 at 377.

[41] [1984] 1 QdR 404.

[42] [1984] 1 QdR 404 at 410-12.

[43] Mir Brothers Projects Pty Ltd v 1924 Pty Ltd [1980] 2 NSWLR 907.

[46] [1984] 1 QdR 404 at 412-3; cf Perpetual Ltd v Dilati (NSWSC, 27 October 2011, BC201110152) at [64], [66] (James J).

[47] And see Wongala Holdings Pty Ltd v Mulinglebar Pty Ltd (1994) 6 BPR 13,527 at 13,532.

[48] (1995) ANZ ConvR 615.

[49] (1995) ANZ ConvR 615 at 617-8.

[51] See Wilson v AGC Ltd (No 1) (1987) ASC 55-598; Wilson v AGC Ltd (No 2) (1987) ASC 55-606; Mercantile Credits Ltd v Patterson (1986) ASC 55-516; Equuscorp Pty Ltd v Rigert [2003] VSC 343; Equuscorp Pty Ltd v Olsen [2004] VSC 454.

[54] Exhibit Q. This was a notice issued in relation to Loan B but, nevertheless, it was in identical form to similar notices with respect to Loan A.

[55] Referring to s 57 of the Real Property Act 1900, which requires default notices to state that they are given "pursuant to s 57(2)(b)" of the Real Property Act: see sub-ss 57(2)(b) and 57(3)(a) of the Real Property Act.

[56] See the Appellant's Written Submissions (5 September 2011), paragraph (e).

[57] The appellant submitted that the late payment charges debited to her account were wrongly calculated and void as a penalty because the provisions of the mortgage provided for a late payment charge calculated on the outstanding balance of the loan account, rather than on the instalment amount due and unpaid: see Memorandum of Common Provisions, clause 10.6; and see AMEV-UDC Finance Ltd v Austin (1986) 164 CLR 170, and Ringrow Pty Ltd v BP Australia Pty Ltd [2005] HCA 71; (2005) 224 CLR 656, particularly at 665-6, [21]-[22] (Gleeson CJ, Gummow, Kirby, Hayne, Callinan and Heydon JJ).

[58] As to the latter, see sub-s 77(1), where reference is made to a "notice or demand".

[59] [1906] HCA 26; (1986) 3 CLR 925.

[60] See Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 376 (Young J); referring to Hunter v Hunter [1936] AC 222 (HL) at 247 (Viscount Hailsham LC).

[61] See Barnes v Queensland National Bank [1906] HCA 26; (1906) 3 CLR 925; and see Tyler, Young and Croft, Fisher and Lightwood's Law of Mortgage (2nd Austn ed, LexisNexis, 2005), 490-1, [20.15].

[62] See Croft and Johannsson, The Mortgagee's Power of Sale (second edition, LexisNexis Butterworths 2004) at [3.25] citing Turnbull v National Mutual Royal Bank Ltd (1991) 26 NSWLR 361 and Silkdale Pty Ltd v Long Leys Co Pty Ltd (1995) 7 BPR 14.414.

[63] (1990) 8 ACLC 315 at 319.

[64] (1989) 17 NSWLR 309 at 312-3 (Powell J).

[65] Relying on clause 2.1 of the mortgage (see Tribunal decision, [181]-[184]).

[66] Equity always looks to the substance, rather than the form and content of which are in reality security transactions or provisions: see Young, Croft and Smith, Equity (2BC, 2009), 641-2 [9.60] and, as to powers, see 631-2, [8.880].

[67] See s 113(2). This is an omnibus provision which, as is clear from its language, is applicable to "[a]ny notice under this Act" (s 113(1)). It follows that the notices to which those provision apply would include any notice for the purposes of ss 76 or 77 of the Act: see McDonald v Rowe (1872) 3 AJR 90; Gunn v Land and Mortgage Bank of Victoria Ltd (1890) 12 ALT 49; Irving v Commissioner of Titles (WA) [1963] WAR 67; and see Tyler, Young and Croft, Fisher and Lightwood's Law of Mortgage (2nd Austn ed; LexisNexis, 2005), 492, [20.16]. There are, however, many other types of notices under the Act which these provisions accommodate, including for example, notices to caveators, hence the provisions with respect to the Registrar of Titles: see Chesterfield v Pitisano [1964] VicRp 91; [1964] VR 709; and Ex parte Little (1958) 58 SR (NSW) 173.

[68] See Croft and Johannsson, The Mortgagee's Power of Sale, (2nd ed, LexisNexis Butterworths, 2004), [2.6]-[2.8].

[69] See Sood v Christianos [2008] NSWSC 1087, at [13] (Brereton J); and see Emerald Securities Pty Ltd v Tee Zed Enterprises Pty Ltd (1981) 28 SASR 214 at 220 (Mitchell ACJ) and 225 (White J).