Australia and New Zealand Banking Group Ltd v Blachford [2003] VSC 375

[2003] VSC 375

PRACTICE AND PROCEDURE - mortgagee's claim for debt and possession of land- judgment in default of appearance - whether judgment entered for debt or recovery of possession - whether irregular by reason of failure in affidavit of service to describe exhibit as "sealed" copy of originating service - DECLARATION- whether should be granted on interlocutory application in exercise of discretion - INJUNCTION - whether should be discharged.

2. By a writ issued on 8 January 2003 the plaintiff claimed the sum of $291,387.83 together with interest as a debt owing to it by the defendant under a home loan agreement and a mortgage in relation to the land known as Lot 6, Wells Road, Bacchus Marsh ("the land"). The plaintiff also sought possession of the land as a result of the defendant's default in repayment of the monies owing under the home loan agreement and secured by the mortgage. The claims for debt and possession of the land were not made in the alternative.

5. The plaintiff subsequently entered judgment in default of appearance against the defendant on 24 January 2003. The plaintiff used a form described as "Form 60H". The document was entitled "Default Judgment for Debt and Recovery of Land" and relevantly stated:

"THE JUDGMENT OF THE COURT IS THAT: the Plaintiff recover possession of the land described in the Statement of Claim as Certificate of Title Volume 10054 Folio 938 being the land situate at and known as Lot 6, Wells Road, Bacchus Marsh, 3340, in the State of Victoria and that the Defendant pay the Plaintiff $1,750 costs."

9. A warrant of possession in relation to the judgment was issued on 6 February 2003 at the request of the plaintiff. By a summons dated 2 May 2003 the defendant sought orders restraining the plaintiff from executing the warrant of possession in respect of the land, declaratory relief and, alternatively, the setting aside of the default judgment entered on 24 January 2003.

12. The defendant swore an affidavit in support of her application on 2 May 2003. The affidavit recorded her falling into arrears in making repayments under the home loan agreement and her efforts to obtain a loan from an alternative source. She claimed that a caveat lodged in relation to the land by Peter Evans, her former partner, had prevented her from being able to obtain a loan from a third party. The defendant deposed that the plaintiff had previously agreed to refrain from executing the warrant of possession, in light of the difficulties caused by the caveat.

15. The defendant's application came on for hearing before Smith J in the Practice Court on 7 May 2003. The defendant's applications for declaratory relief and the setting aside of the default judgment were adjourned for hearing before a Master. His Honour then granted the injunction, upon the defendant giving the usual undertaking as to damages and undertaking to commence proceedings for the removal of the caveat and to proceed with reasonable expedition in relation to that proceeding and her applications to the Master.

18. On 28 July 2003 Master Wheeler dismissed the defendant's applications for declaratory relief and the setting aside of the default judgment. The defendant filed a notice of appeal from the decision of the Master in respect of the applications by paragraphs 2 and 3 of her summons filed on 2 May 2003.

21. Rule 77.05(7) of the Supreme Court (General Civil Procedure) Rules 1996 ("the Rules") provides that the appeal shall be by way of a hearing de novo, and that the parties may rely upon any affidavit used before the Master.

24. The plaintiff also issued a summons, dated 11 August 2003, seeking an order lifting the injunction granted by the Judge on 7 May 2003. In support, it relied upon the affidavit affirmed on 11 August 2003 by Fatmir Badali of its solicitors.

27. The defendant's appeal came on for hearing on 15 August 2003. The plaintiff's application was adjourned pending the outcome of the defendant's appeal. I informed the parties of my decision to dismiss the appeal and at a later date heard argument in relation to the plaintiff's application for the discharge of the injunction. I now provide reasons for my decision in relation to each application.

31. By paragraph 2 of her 2 May 2003 summons the defendant sought:

"A declaration that the Defendant upon payment of the costs of $1,750 on the face of the Judgment is no longer indebted to the Plaintiff either in terms of the home loan agreement more particularly described in the Statement of Claim filed herein or in terms of the Mortgage No. X745004C more particularly described in the Statement of Claim."

39. In my view the Court ought not exercise its discretion to grant a declaration in all the circumstances.

42. It was common ground that the defendant had not paid the costs of $1,750 referred to in the default judgment. The declaration was therefore sought in relation to a hypothetical situation. The factual basis upon which the final decision was sought was uncertain. The context in which the payment of $1,750.00 might be made could differ from that in relation to which the Court was being asked to declare the effect of such a payment. For example, before the payment, the plaintiff might have succeeded in having the judgment set aside.

45. Further, the declaration was sought without proper argument as to the alleged indebtedness of the defendant under the home loan agreement and the mortgage.

48. In Bass v Permanent Trustee Company Ltd[1], Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ said at 355:

"The purpose of the judicial determination has been described in varying ways. But central to those descriptions is the notion that such a determination includes a conclusive or final decision based on a concrete and established or agreed situation which aims to quell a controversy... Because the object of the judicial process is the final determination of the rights of the parties to an action, courts have traditionally refused to provide answers to hypothetical questions (Luna Park Ltd v The Commonwealth [1923] HCA 49; (1923) 32 CLR 596 at 600, per Knox CJ; Australian Commonwealth Shipping Board v Federated Seaman's Union of Australasia [1925] HCA 27; (1925) 36 CLR 442 at 451 per Isaacs J; University of NSW v Moorhouse [1975] HCA 26; (1975) 133 CLR 1 at 10 per Gibbs J.) or to give advisory opinions. The jurisdiction with respect to declaratory relief has developed with an awareness of that traditional attitude. In In re F (Mental Patient: Sterilisation) [1991] UKHL 1; [1990] 2 AC 1 at 82., Lord Goff of Chieveley said that: `A declaration will not be granted where the question under consideration is not a real question, ... nor where the declaration is sought without proper argument, eg. in default of defence or on admissions or by consent.'"[2]

52. It would, in my view, be inappropriate for the declaration to be granted by the Court in such circumstances, regardless of the merits of the application. If the default judgment were to be set aside and the defendant wished to rely upon its entry in defence of the plaintiff's claim, then the matter would appropriately be dealt with at the trial of the proceeding. It would be inappropriate for the Court to effectively make a final determination of one of the issues in the proceeding by granting declaratory relief on the interlocutory application.

55. Even if it were appropriate to make such a declaration upon the interlocutory application, the relief sought by the defendant should be refused after consideration of the merits of her claim.

Did the plaintiff enter judgment for debt against the defendant?

59. The defendant's claim was first premised upon the argument that the plaintiff had entered judgment against her for debt in the sum of either $0 or $1750.

62. Counsel for the defendant submitted that by the use of Form 60H with the additional words "debt and" in its heading, the plaintiff had entered judgment for the debt claimed in the statement of claim.

65. Rule 60.08 of the Rules prescribes the use of Form 60H for the entry of default judgment for the recovery of land. The wording of the judgment entered followed the form of words in Form 60H for the recovery of possession of land. A document following Form 60G was appropriate for the entry of judgment for debt. Form 60G is in the following terms:

"THE JUDGMENT OF THE COURT IS THAT: eg. The defendant pay the plaintiff $ and $ costs [or costs to be taxed]"

69. In my view, the addition of the words "debt and" to the title of the document which otherwise followed Form 60H did not render the default judgment entered one for debt.

What would have been the effect of the entry of judgment for debt?

73. Counsel for the defendant relied upon the decision of the High Court in Chamberlain v Deputy Commissioner of Taxation[3] in support of his argument that the defendant's indebtedness had been done away with or reduced to $1,750.

76. In Chamberlain the Deputy Commissioner had brought an action for payment of income tax due for a specified period and had subsequently entered judgment for less than the amount actually due. The Deputy Commissioner had commenced fresh proceedings for the balance of the debt. The Court held that the action was not maintainable, having merged in the judgment, its independent existence having been destroyed while the judgment stood. The principle of res judicata applied to prevent the Deputy Commissioner from bringing further proceedings in respect of the same cause of action.

79. However the principle for which Chamberlain is authority would not determine the issue as to whether or not the declaration sought should be made. The declaration sought by the defendant did not deal specifically with an analogous factual situation in which the default judgment stood and the creditor sought to commence proceedings for the balance of the debt.

If the plaintiff did not enter judgment for debt, what was the effect of the entry of judgment for possession?

83. Alternatively, counsel for the defendant submitted that, even if the plaintiff had only entered default judgment for possession of the land, it had elected to pursue one of two alternative remedies sought in the proceeding and could not pursue judgment for debt. He sought to argue that the entitlement to the debt was extinguished as a result and that the declaration should be made. He went on to submit that, accordingly, the plaintiff's rights in relation to the security would also have been extinguished and it would not be entitled to possession of the land. However, I note that the plaintiff's right to possession of the land is not the issue before the Court.

86. A default judgment can be set aside and a proceeding relating to alternative claims not the subject of the default judgment continued: see Macquarie Bank Ltd v Beaconsfield and Ors.[4] Accordingly, even if I were otherwise disposed to make a declaration as a result of the interlocutory application, the defendant would not be entitled to one in the terms sought, in circumstances in which the default judgment might be set aside.

89. Further, as Ormiston J stated in Macquarie Bank[5], the common law doctrine of election assumes the choice between two or more inconsistent rights.[6] In that case his Honour expressed some doubt as to whether the rights to the remedies of debt and damages arising from the same contractual breach were inconsistent. Although, in light of my previous conclusions, it is not necessary for me to determine the question, I consider that there is also doubt as to whether the plaintiff's claims for debt and possession of the land, each pleaded as having arisen as a result of the defendant's default under the home loan agreement and the mortgage, are properly described as alternative or inconsistent rights. The plaintiff claimed the right to take possession in order to sell the land under the terms of the mortgage over the land given as security for the debt. The statutory scheme under Division 9 of Part 4 of the Transfer of Land Act 1958 (Vic) indicates the consistency of the rights claimed. Section 77(3) provides for the proceeds of the sale of land by a mortgagee to be applied first in payment of the costs of the sale and then, under sub-s (3)(b), secondly, in payment of moneys owing under the mortgage.

92. Finally I note my view that the end result contended for by the defendant, namely, that the debt was extinguished by the entry of judgment for possession of the land and the plaintiff was therefore not entitled to possession would be absurd.

96. The Master refused the defendant's application to set aside the default judgment.

99. The defendant argued that the default judgment should be set aside as irregularly entered. Counsel for the defendant submitted that the irregularity lay in the plaintiff's failure to comply with the Rules in relation to the service of the writ and statement of claim upon the defendant.

102. Rule 21.01 required, inter alia, the filing of an affidavit proving service of the writ upon the defendant. Rule 6.03 required personal service of a sealed copy of the originating process. Rule 6.17(3) required an affidavit of service of originating process to exhibit a sealed copy of that originating process.

105. The affidavit of service was sworn by Cameron Mark Cook, a process server, on 17 January 2003. Mr Cook deposed as follows:

"(1) I did at 1.51 pm on 11 January 2003 serve Charmaine Blachford with a sealed Writ and Statement of Claim by delivering such documents to her personally at Lot 6, Wells Road, Bacchus Marsh, 3340 in the State of Victoria. (2) At the time and place of service I asked Ms Blachford, `Are you Charmaine Blachford who is the person named as the Defendant in this proceeding?' She replied in the affirmative. (3) Now produced and shown to me and marked `CMC1' is a true copy of the Writ and Statement of Claim which I served as a foresaid."

Exhibit "CMC1" to the Cook affidavit was a sealed copy of the writ and statement of claim.

110. The defendant challenged the validity of the affidavit of service on the basis that the deponent had referred in paragraph 3 to having served "a true copy of the Writ and Statement of Claim", without referring to the fact that the document was a sealed copy. Counsel for the defendant relied upon the decision of Beach J in Sargent v Veneris[7] in support of the submission that there had been a breach of the Rules which had produced an irregular judgment.

113. The plaintiff in Sargent had served a photocopy of a sealed copy of the writ, rather than the sealed copy required under Rule 6.17(3). Beach J held that the plaintiff had thereby failed to comply with the mandatory requirement for service of originating process. There was no such breach in this case as a sealed copy of the originating process had been served on the defendant in accordance with Rule 6.17(3).

116. I am not satisfied that there was any breach of the Rules by the plaintiff's failure to describe the document served as a "sealed" copy of the writ and statement of claim. The sealed copy of the originating process was properly described as a "true copy of the Writ and Statement of Claim". The affidavit of service complied with Rule 6.17.

119. Even if the omission of the word "sealed" in the description of the exhibited document might be regarded as an error, it would in my view be a technical error which the Court should disregard under Rule 2.01 of the Rules. See National Australia Bank Ltd v Meehan[8]; Australia and New Zealand Banking Group Ltd v Kostovsky.[9]

122. In Kostovsky, Chernov J (as His Honour then was) reviewed a number of authorities in relation to the power under Rule 2.01 to disregard an irregularity. He concluded that this Court had power under Rule 2.01 to disregard an irregularity in appropriate circumstances, in which it would be just to do so. His Honour considered it just not to overturn a default judgment when there were irregularities in the form of the writ which did not relevantly prejudice the defendant who had not made out an arguable defence to the plaintiff's claim.

125. Counsel for the defendant did not submit that his client had been prejudiced by the irregularity in the affidavit of service. Nor did he submit that she had a defence to the plaintiff's claim apart from that argued in relation to the form of entry of judgment.

128. I am not persuaded that there was any irregularity in the entry of judgment. Even if the form of the affidavit of service constituted an irregularity, I consider that it was of a technical nature and resulted in no prejudice to the defendant. It would be properly disregarded under Rule 2.01 of the Rules.

131. The defendant's applications by paragraphs 2 and 3 of her summons filed on 2 May 2003 are dismissed.

135. Smith J took the view that the warrant of possession should be stayed to allow the defendant time to seek the removal of the caveat lodged by Peter Evans and to approach the Master for the declaration sought in paragraph 2 of her summons, as well as for the order setting aside the default judgment referred to in paragraph 3.

138. His Honour said at paragraph 5 of his reasons:

"There being issues raised going to the entitlement of the plaintiff to proceed to possession, I am also satisfied that the balance of other factors favours the grant of a stay of execution, provided that it is on strict terms. Among those other considerations I refer to the intrusion of the claim of Mr Evans, the fact that the plaintiff's financial position appears to be protected and the personal circumstances of the defendant. The terms that should be required to be fulfilled by the defendant for the purposes of any stay of execution seemed to me to be the following: first of all, an undertaking as to damages; secondly, an undertaking to commence proceedings within seven days to cause the caveat lodged by Mr Evans to be removed; thirdly, an undertaking to proceed with reasonable expedition with the applications brought by summons of 2 May 2003 in paragraphs 2 and 3 and with any proceedings to cause the caveat to be removed. It seems to me also that the stay should be granted until the hearing and determination of such proceedings which the defendant is undertaking or has undertaken to bring, or further order."

142. In fact, the caveator had already commenced proceeding 5452 of 2003 ("the Evans proceeding") by writ dated 17 April 2003. The statement of claim dated 15 May 2003 was subsequently filed. It sought an order inter alia setting aside that the transfer to the defendant of Mr Evans' interest as joint tenant in the property, on the grounds that it had been procured by undue influence, unconscionable conduct or fraud. Mr Evans alleged that he had been intoxicated and otherwise disabled at the time of its execution. He claimed a 75% interest in the property as tenant in common with the defendant.

145. On 23 May 2003, on the defendant's application, Coldrey J ordered the removal of the caveat as well as the expeditious trial of the Evans proceeding. His Honour obtained undertakings from the defendant not to sell or otherwise dispose of the property and:

"(2) To only re-finance the property for a sum not exceeding $330,000."

149. The caveat has been removed. Nevertheless the defendant opposes the plaintiff's claim for the removal of the injunction.

152. In opposing the plaintiff's application for the discharge of the injunction the defendant relies upon an affidavit sworn on 7 October 2003 by her solicitor, Gary David Goldsmith. In paragraph 5 of his affidavit Mr Goldsmith deposed that:

"[t]he defendant has done everything in her power to have the defacto proceedings heard as quickly as possible. But for the [Evans proceeding] I am advised by the defendant and verily believe that she would be in a position to immediately re-finance the ANZ if she is unsuccessful in her request to the Court for declarations that the debt has merged with the judgment. She is not able to do so for the reasons set out in my affidavit sworn 17 September 2003 in the [Evans proceeding]."

156. Mr Goldsmith's affidavit sworn on 17 September in the Evans proceeding was part of Exhibit "GG1" to his 7 October 2003 affidavit sworn in this proceeding. In paragraph 5(b) of his 17 September 2003 affidavit Mr Goldsmith stated:

"5(b) I am instructed by the defendant and verily believe that although she was previously able to re-mortgage the loan to the ANZ that by reason of these proceedings she is unable to pay out the ANZ Bank. She has approached in excess of 15 banks, solicitors and financial institutions, all of which have told her that they will not consider lending her any money while this proceeding continues."

160. I note that the defendant's evidence as to her failure to obtain alternative finance does not condescend to detail of applications made or the information provided by her to those from whom funds have been sought. However there is no contradictory material filed by the plaintiff to persuade me to disregard her report as to her lack of success in this regard.

163. Counsel for the plaintiff submitted that the defendant should not be regarded as being hampered in her efforts to re-finance as a result of the continuing Evans proceeding. In this regard he referred to the undertakings given by the defendant to Justice Coldrey as indicating Mr Evans' consent to the defendant's re-financing the ANZ loan for a sum not exceeding $330,000. He referred also to Exhibit "CB9" to the defendant's own affidavit of 2 May 2003 which comprised a letter from the solicitors for Mr Evans to the defendant's former solicitors, Bryan J Hyams, dated 30 January 2003. In that letter Mr Evans' solicitors advised that he "[would] consent to [the defendant] re-financing the current ANZ mortgage provided that the re-finance amount [did] not exceed the current debt".

166. The defendant submitted that the order of Justice Smith was intended to restrain the plaintiff from executing the warrant of possession until the finalisation of the Evans proceeding and, accordingly, should not be discharged. The plaintiff disputed this interpretation and submitted that His Honour had intended only to stay the execution until the finalisation of any proceeding undertaken by the defendant to have the caveat removed.

169. Counsel for the defendant argued that the plaintiff had not discharged its onus in relation to its application. He submitted that there was no evidence to rebut the defendant's opinion that the plaintiff's position was protected as the property had been worth approximately $550,000 in May 2003.

172. Counsel for the plaintiff submitted that the Evans proceeding concerned Mr Evans' rights to the property as against the defendant and did not involve the plaintiff. He argued that, even if the plaintiff sold the property as mortgagee, it would still be open to Mr Evans to contest the defendant's entitlement to any surplus funds available after satisfaction of the mortgage debt.

175. During the discussion following the granting of the injunction, His Honour said

"Let me put it on the record so that, should the matter get to the point where the caveat proceeding is outstanding, and the defendant has failed on the challenges in the summons on two and three, it does not necessarily follow that the stay would not continue."

179. Smith J's ruling and his subsequent discussion with counsel indicate to me his Honour's concern about the position of Mr Evans which had been protected prior to the removal of the caveat, in the practical sense that a sale by the mortgagee was unlikely to eventuate in circumstances in which a purchaser would be obliged to contest his entitlement to an interest in the property. The caveat was removed by Justice Coldrey, but only on condition that the property was not sold by the defendant and that she was not prevented from re-financing the mortgage to the plaintiff. By that stage the injunction had been granted by Justice Smith, protecting the position of Mr Evans. There is no evidence that Mr Evans has been notified of the plaintiff's application for the discharge of that protective injunction.

Has the defendant breached her undertaking to prosecute the Evans' proceeding with expedition?

183. The Evans proceeding was listed for trial on 25 September 2003 but was adjourned to 14 November 2003 on the application of Mr Evans opposed by the defendant.

186. The plaintiff submitted that it was clear from the 7 October 2003 Goldsmith affidavit that the early trial date in the Evans' proceeding had been lost as a result of default and delay on the part of the defendant and her solicitors. In the circumstances, the plaintiff argued, the defendant should now be deprived of the indulgence represented by the injunction.

189. Counsel for the defendant contested the assertion that his client was to blame for the adjournment of the Evans' proceeding. He relied upon the delay by Mr Evans in filing affidavit material.

192. Suffice it to say that the affidavits exhibited to the Goldsmith affidavit indicate that there was a dispute as to the reason for the delay and the adjournment to 14 November 2003.

196. I am mindful that the Evans proceeding is set down for hearing in three weeks' time, although I am also conscious that a decision may not be handed down for some time thereafter. Nevertheless, in all the circumstances, the plaintiff has failed to persuade me to discharge the injunction.

199. There is insufficient evidence to persuade me that the plaintiff will sustain loss if the injunction is not discharged at this time. The alleged interest of Mr Evans, on the other hand, might well be adversely affected if the plaintiff were permitted to execute the warrant for possession at this stage. Further the Court's processes might arguably be affected if the property were able to be disposed of prior to any determination of the issue as to Mr Evans alleged entitlement, in the sense that his interest might be devalued as a result of a mortgagee's sale. Finally, I am not persuaded by the submission of the plaintiff that the injunction ought to be discharged by reason of any failure on the part of the defendant to prosecute the Evans proceeding with expedition.

[1] [1999] HCA 9; (1999) 198 CLR 334.

[2] [1999] HCA 9; (1999) 198 CLR 334, at 355-6.

[3] [1988] HCA 21; (1987-1988) 164 CLR 502.

[4] [1992] VicRp 77; [1992] 2 VR 461 at 465-6 per Ormiston J.

[6] See: Halsburys Laws of England (4th ed) [1507-8]; Rosenfeld v Newman [1953] 2 All ER 885; Banque De Marchands De Moscou v Kindersley [1950] 2 All ER 549.

[7] (Unreported) Supreme Court of Victoria, 20 December 1995.

[8] (Unreported) Supreme Court of Victoria, 4 February 1994.

[9] (Unreported) Supreme Court of Victoria, 2 July 1997.