Banksia Mortgages Ltd v McClymont & Anor

LOWER COURT Supreme Court JURISDICTION : LOWER COURT 11203/2003 FILE NUMBER(S) : LOWER COURT Registrar Riznyczok JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION POSSESSION LIST

11203/2003 - BANKSIA MORTGAGES LIMITED v GRAHAM JAMES McCLYMONT & ANOR

JUDGMENT (Review of Registrar's decision to set aside default judgment) 1 MASTER: By notice of motion filed 17 March 2003 the defendants seek to review the decision of Registrar Riznyczok dated 19 February 2004 that default judgment should not be set aside and in lieu thereof seek an order that default judgment be set aside and an order for costs in favour of the defendants. 2 The plaintiff is Banksia Mortgages Limited. The defendants are Graham James McClymont and Selma Maria McClymont. Mr McClymont stated that he represented his wife but she was not present at court and uncontactable for the day. The court requested Mr McClymont to have a letter faxed by noon the day after the hearing from Mrs McClymont (the second defendant) confirming that she wished that her husband to represent her interests at this hearing. Such a letter was received. 3 By statement of claim filed 19 May 2003 the plaintiff pleads that the defendants are the registered proprietors of the land and dwelling erected thereon, situated at, and known as Unit 5/567 Pacific Highway, Killara (the property). 4 By mortgage dated 5 September 2001, the defendants mortgaged the land to the plaintiff to secure the sum of $200,000.00 for a period of one year repayable on 20 September 2002 and in the meantime attracting interest at the rate of 8.6% per annum payable monthly. It is common ground that the principal sum of $200,000.00 was not repaid by 20 September 2002 and still has not been repaid. On 2 October 2003 default judgment was entered for possession of the property. A stay of execution on the writ of possession has been granted.

Review 5 There are some cases that are authority on the consideration that ought to be given on review. They include Beaufort Air-Sea Equipment Pty Ltd v Emhart Australia Pty Ltd (Unreported, NSWSC, Master Malpass, 18 December 1992); Brijeski v Sunbeam Corporation Limited (Unreported, NSWSC, Master Greenwood, 29 January 1997); Westpac Banking Corporation v Abemond Pty Ltd and Westpac Banking Corporation v Cameron (Unreported, NSWSC, Santow J, 3 November 1994); Modern Woodcraft Pty Ltd v Nott (Unreported, NSWSC, Young J, 7 March 1997); Mariala Estates Limited v Athanasi & Ors [2001] NSWSC 1013; and Abram v National Australia Bank Limited [2001] NSWSC 916. 6 From these decisions, the approach I should take is to inform myself of all the material before the Registrar at the time when he made the decision as well as the Registrar's decision. I can also allow fresh evidence to be tendered. I allowed a further affidavit of the plaintiff, namely that of Robert Evans sworn 24 March 2004. As the first defendant handed up an affidavit to the Registrar on the day of the hearing, it is my view that the plaintiff was entitled to meet the issues raised therein. As the first defendant has had an opportunity to meet the matter raised, I should make my own decision based on the material before me after having the benefit of counsel's submissions. 7 The defendants submitted that the statement of claim firstly, does not plead the "variation of loan" contract; and secondly, that they were not in default of the mortgage contract because the mortgage was the subject of an extension whilst an offer to vary the contract was in existence. The defendants further submitted that the mortgage, up until the date of default judgment, had not withdrawn this offer in writing, as required. Further, the Registrar was in error when he determined that it was not the intention of the mortgagee that the extension period would be unlimited and that they were in arrears of payment of interest.

Registrar's decision 8 On 27 November 2003 the first defendant filed a notice of motion seeking that the default judgment entered on 2 October 2003 be set aside. On 19 February 2004 the motion was heard by Registrar Riznyczok who refused to set aside the default judgment and ordered the first defendant to pay the costs. The Registrar does not address the issue of delay in his judgment, but the application to set aide the default judgment was made about 8 weeks after judgment was entered. The mortgage entered into between the parties expired on 20 September 2002. In relation to whether there is a bona fide defence, the Registrar addressed two issues: the first being a variation to the mortgage and the second being the effect of a failure to make one interest payment. 9 In relation to the variation to the loan contract, the learned Registrar stated [at 2]: "The variation clearly states until this offer is accepted, the existing terms and conditions of the loan contract will continue. That paragraph could be read a number of ways, ie the mortgage continues on an indefinite basis, on the basis of the existing payment terms and conditions that were agreed to at the beginning of the contract, or, secondly, it could be read as stating that the parties agree that the existing mortgage as agreed to continues, ie it is an expired mortgage and determinable at the will of either party. To me, the course of the correspondence and the inferences I draw from the evidence in this matter indicate to me that the plaintiff asserted that the contract, that the existing mortgage had expired on 20 September 2002 and there was no intention to extend that on an indefinite basis or for a fixed term. Indeed, looking at the variation of loan contract, I note that item 1 in that variation states that the term of the loan contract is extended to 17 September 2003. It is quite obvious to me that the plaintiff never intended an extension of the loan for an indefinite or for a lengthy period of time. That is the first basis of default and, if I was to base my decision on that, the first defendant would fail." 10 The first defendant submitted that the Registrar was incorrect as the variation to loan contract provides for an extension to the existing mortgage until such time as all the documentation has been completed. 11 A letter from the plaintiff's solicitor dated 19 September 2002 addressed to the defendants annexed the Variation of Loan Agreement and stated: "We have been instructed by Banksia Mortgages Limited that they have agreed to vary the terms of the above loan as follows; 1. Extend the term of the Mortgage to 17 September, 2003; 2. Reduce the effective interest rate from 8.6% per annum to 7.95% per annum; 3. Reduce the Default Rate from 11.6% per annum to 10.95% per annum; and Therefore, please find enclosed the following documentation for execution by your clients: 1. Deed of Variation of Loan Contract in duplicate; and 2. Statutory declaration in relation to the Property; Prior to settlement we will require the return of documents numbered 1 - 2 duly signed together with; 1. Clear Land Tax Certificate 2. Your most recent Council Rate Notice 3. Your most recent Water Rate Notice 4. Your most recent Strata Levy Notice 5. Certificate of Currency of Body Corporate Insurance 6. Cheque payable to Banksia Mortgages Limited in an amount of $1,053.80 made up as follows; Our costs and disbursements (as per attached) $613.80 Balance of Application Fee $440.00 Please note that our client's agreement to extend the mortgage is subject to receipt by us of signed documents, satisfactory enquiry certificates and the above cheque by no later than 20 October 2002. Should the matter not be finalised by this date our client has instructed us that interest will be payable at the higher rate under the existing Facility Agreement (11.6% per annum) until the matter is finalised." 12 The copy of the Variation of Loan Agreement was attached to the letter referred to above and states: "Variation of Loan Agreement The loan contract is varied as follows with effect from 20 September, 2002. 1. The term of the loan is extended to 17 September, 2003; 2. The Interest Rate is reduced from 7.00% per annum to 5.45% per annum; and 3. The Margin is increased from 1.60% per annum to 2.25% per annum. The Annual Percentage Rate (the interest rate you pay) is the Interest Rate plus the Margin and will be 7.95% per annum once the loan contract is varied. As the terms of the loan contract have been varied, the Lender is required under the Consumer Credit Code to give you written notice of certain information about the changes made. This information must be given to you before you accept the variation, and is attached to this variation agreement. Please read this information carefully before signing. Until this offer is accepted, the existing terms and conditions of the loan contract will continue."

and "Despite anything else, the Lender reserves the right to withdraw this offer of variation if the offer is not accepted within 14 days from the disclosure date (or such later time as the Lender agrees in writing), or if the Lender discovers anything which materially impacts on its decision to vary the loan contract." 13 As the Registrar correctly stated, until this offer is accepted the existing terms and conditions of the loan will continue. That could mean that the interest payments must continue to be made but that the principal did not have to be repaid until the offer was accepted and despite anything else, the lender reserved the right to withdraw the variation if the offer was not accepted within 14 days. The variation was not accepted within 14 days of the disclosure date but there was no notification to the plaintiff by the Bank of the withdrawal of the offer. Hence, it is arguable that until such a time as there was a withdrawal of the offer (communicated by the bank to the defendants) and provided interest payments were made, the contract continued. If I am wrong, I shall consider the second issue raised by the defendants. 14 In relation to the interest payments not being made, the learned Registrar stated [at 3]: "The first defendant also concedes that an interest payment under the mortgage was not made. There is a dispute as to whether the amount was removed from the account. I do not have a copy of the mortgage before me, which is regrettable, and as to whether there are any terms that apply to that. Nevertheless, under a mortgage it is the responsibility of the mortgagor to make payments when due. The failure to make a payment due, whether it is one day late or whether it is for a lesser sum than was provided under the mortgage, is not a valid compliance with the terms of the mortgage. I hold that the failure to make that interest payment was another default that entitled the mortgagor to have default judgment." 15 At page 10.24 of the transcript before the Registrar, Mr McClymont stated: "Yes, all interest payments have been made under the mortgage. There is a payment made - there was a payment not made in June 2003. We had no control over the payments. There were funds in the account and they just weren't drawn. There were funds there to meet the payment but it was not drawn from the account. So all payments have been made bar an amount that they did not draw in June 2003." 16 Thus, the first defendant asserted that it was the Bank's fault that the moneys were not deducted from his account in June 2003. 17 As the Registrar stated, it is the responsibility of the defendants to ensure that payments are made when they fall due. There was a default in payment under the mortgage which entitled the mortgagor to obtain default judgment. 18 For the reasons outlined, I have arrived at the same conclusion as the Registrar. It is my view that the defendants do not have a bona fide defence. I affirm the decision of Registrar Riznyczok dated 19 February 2004. 19 Costs are discretionary. Costs usually follow the event. The defendants are to pay the plaintiff's costs as agreed or assessed. 20 I note that there is no current stay upon the execution of the writ of possession.

(1) The decision of Registrar Riznyczok dated 19 February 2004 is affirmed.

(2) The defendants are to pay the plaintiff's costs as agreed or assessed.

(3) It is noted that there is no current stay upon the writ of possession. **********

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