Appellant v Respondent

Appellant v Respondent - [2012] VSC 212 - VSC 2012 case summary — Zoe

[27]

"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."

[73]

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'."

[76]

"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."

[95]

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]

[107]

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.

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