Property law - Service of default notice - Whether notice has to come to attention of mortgagor - Proper mode of service

Corporations Act 2001 (Cth), s 109X

Transfer of Land Act 1893 (WA), s 106(2)

Citibank Ltd v Pilgrim [2001] WASC 129

Giustginiano Nominees Pty Ltd v Redan Pty Ltd [1999] WASC 95

Gunn v Land Mortgage Bank of Victoria Ltd (1890) 12 ALT 49

Hall v Hall [2007] WASC 34

Irving v Commissioner of Titles [1963] WAR 67

Yap Cheng See v Challenge Bank Ltd (Unreported, WASC, Library No 970695, 12 December 1997)

1 MASTER SANDERSON: This is the plaintiff's application for summary judgment. It was common ground between the parties the plaintiff had satisfied the requirements of O 14 of the Rules of the Supreme Court 1971 (WA) - that is to say, the statement of claim had been verified by affidavit and an officer of the plaintiff confirmed on oath she believed there was no defence to the action. The evidentiary onus then shifted to the defendant to establish she arguably had a defence to the plaintiff's claim.

2 The circumstances giving rise to the claim were as follows. The plaintiff lent money to the defendant. It took security over certain real property owned by the defendant. The plaintiff says there was an event of default as the defendant failed to pay a loan instalment when it was due. The plaintiff then issued a notice of default. The issue and service of that default notice is pleaded in par 7 of the statement of claim which is in the following terms:

By Notice of Default dated 28 July 2010 (Notice) the Plaintiff gave notice to the Defendant that she was in default and that if the default was not rectified within the time specified in the Notice the whole of the amount owing pursuant to the Loan Agreement would become immediately due and payable and the Plaintiff would commence enforcement proceedings.

3 It was common ground between the parties the default notice was posted by registered letter to the defendant. The letter was addressed to the defendant at her residential address which was the address of the mortgaged property. The letter - that is to say, the default notice - was returned unopened. The defendant says she was on holiday in Spain and the property was unoccupied. In any event, it is common ground between the parties for the purposes of this application the default notice was sent by the plaintiff to the correct address and was not received by the defendant.

4 In adopting this method of service of the default notice, the plaintiff was relying upon s 106(2) of the Transfer of Land Act 1893 (WA). That subsection is in the following terms:

(2) Notwithstanding section 240, service of the notice referred to in subsection (1) is not properly effected unless -

(a) the notice is delivered personally to the mortgagor or the grantor or his transferees, as the case requires; or

(b) the notice is sent by registered post to -

(i) the address entered in the Register as the address of the mortgagor or the grantor or his transferees, as the case requires; or

(ii) the address known to the mortgagee or the annuitant or his transferees as the current address of the mortgagor or the grantor or his transferees, as the case requires;

or

(c) the notice is left in a conspicuous place on the mortgaged or charged land; or

(d) the notice is sent to the number of the facsimile machine of the mortgagor or the grantor or his transferees, as the case requires (but only where the mortgagor or the grantor or the transferee has specified in writing to the mortgagee or the annuitant or his transferees, as the case requires, that notices under this section may be served on him by facsimile transmission).

5 It was the defendant's case as the default notice had not actually come to the attention of the defendant there was not proper service within the terms of s 106(2). Counsel for the defendant acknowledged there were a number of cases at odds with that proposition. Before going to these cases and counsel's argument, I should say something as to how I would interpret the subsection.

6 As counsel for the plaintiff submitted, this subsection is not in the nature of a consumer protection provision. It sets out a method by which default notices can be served. It is clear the subsection does not anticipate a default notice will, in every instance, actually come to the attention of the party to be served. Clearly, s 106(2)(a) anticipates this will occur. But subss (2)(b), (c) and (d) provide a method of service which is by no means certain to ensure the default notice will come to the attention of the registered proprietor. It may be a notice left in a conspicuous place on the mortgaged land will come to the attention of a registered proprietor who attends on the property. But if, as is the case here, the registered proprietor is overseas and does not attend on the property, then the notice will not come to his or her attention. But service is still effected.

7 In my view, there is no doubt as to the proper interpretation of s 106(2), nor is there any doubt as to the legislature's intent. If one or other of the means of service provided for in the section is complied with by a mortgagee, then service will be effected.

8 As I mentioned above, there are a number of cases in this jurisdiction whether the interpretation of the subsection is consistent with what I have said. They begin with the judgment of Hale J in Irving v Commissioner of Titles [1963] WAR 67. His Honour found while strict compliance with the section was necessary, if there was strict compliance, it was irrelevant that a notice did not, or could not, reach the addressee. In reaching that conclusion, his Honour relied on a decision of Higinbotham CJ in Gunn v Land Mortgage Bank of Victoria Ltd (1890) 12 ALT 49. Thus, by the time Hale J made his decision, the principles which he applied had stood for more than 70 years.

9 Parker J applied the same reasoning in Yap Cheng See v Challenge Bank Ltd (Unreported, WASC, Library No 970695, 12 December 1997). His Honour said (at 29):

The methods of service provided for in s 106 suggest that it is not the intention of the provision that the notice to which it refers must reach the mortgagor. That is readily apparent from the method of service identified whereby the notice can be left on a conspicuous place on the mortgaged land, which method by no means ensures that the notice will be brought to the attention of the mortgagor. It seems to me, therefore, that there is no reason to understand the third method of service 'sending through the post office a registered letter' as requiring that the notice actually be received by the mortgagor.

10 His Honour then referred to both the decision of Gunn and Irving and cites both with approval.

11 Further authority supports this interpretation of s 106. In Citibank Ltd v Pilgrim [2001] WASC 129, Master Bredmeyer reached the same conclusion and he, too, referred to the decisions in Irving and Gunn. In Hall v Hall [2007] WASC 34, Jenkins J adopted the same approach and quoted from the decision of Parker J in the Yap Cheng See case. Her Honour concluded even if the notice had not come to the attention of the registered proprietor, the fact it had been sent by registered letter in compliance with the terms of the section was good and sufficient service.

12 It would seem there is no decision in this jurisdiction which is at odds with the interpretation found in the cases to which I have referred. Of course, the means by which default notices may be served is of utmost importance to mortgagees and, to a lesser extent, to mortgagors. Given the same approach has been applied in this jurisdiction for many years, I would have to be thoroughly convinced before adopting some other interpretation. As I have indicated above, I am not so convinced and I would follow the decided cases.

13 Counsel for the defendant submitted I should follow the approach courts have adopted in relation to s 109X of the Corporations Act 2001 (Cth). That section is in the following terms:

109X Service of documents

(1) For the purposes of any law, a document may be served on a company by:

(a) leaving it at, or posting it to, the company's registered office; or

(b) delivering a copy of the document personally to a director of the company who resides in Australia or in an external Territory; or

(c) if a liquidator of the company has been appointed - leaving it at, or posting it to, the address of the liquidator's office in the most recent notice of that address lodged with ASIC; or

(d) if an administrator of the company has been appointed - leaving it at, or posting it to, the address of the administrator in the most recent notice of that address lodged with ASIC.

(2) For the purposes of any law, a document may be served on a director or company secretary by leaving it at, or posting it to, the alternative address notified to ASIC under subsection 5H(2), 117(2), 205B(1) or (4) or 601BC(2). However, this only applies to service on the director or company secretary:

(a) in their capacity as a director or company secretary; or

(b) for the purposes of a proceeding in respect of conduct they engaged in as a director or company secretary.

(3) Subsections (1) and (2) do not apply to a process, order or document that may be served under section 9 of the Service and Execution of Process Act 1992.

...

(6) This section does not affect:

(a) any other provision of this Act, or any provision of another law, that permits; or

(b) the power of a court to authorise;

a document to be served in a different way.

(7) This section applies to provisions of a law dealing with service whether it uses the expression 'serve' or uses any other similar expression such as 'give' or 'send'.

14 There is a clear distinction between the two sections in relation to the posting of demands. Section 106 of the Transfer of Land Act anticipates the use of registered post. Section 109X simply refers to 'posting' a document to a company's registered office. In my view, the difference between the two sections is such it is inappropriate to use the case law in relation to s 109X as a guide to the proper interpretation of s 106.

15 The point can be illustrated in this way. From time to time, a party seeking to service a statutory demand may post the demand and the accompanying affidavit by registered mail. As Master Bredmeyer said in Giustginiano Nominees Pty Ltd v Redan Pty Ltd [1999] WASC 95, this was not 'delivery in the ordinary course of post'. The learned master then went on to conclude if the demand had not actually come to the attention of the company, service had not been effected. But clearly that case and others to the same effect turn upon the particular wording of the section.

16 In my view, nothing in the decided cases dealing with s 109X in any way affects the proper interpretation of s 106. The defendant's arguments to the contrary ought be rejected.

17 I am satisfied the notice of default was properly served in this matter and the defendant has no defence to the plaintiff's claim. There should be judgment for the plaintiff in terms of the chamber summons.