Victorian Civil and Administrative Tribunal|2009-09-23

Grace v ING Bank (Australia) Ltd (Credit) [2009] VCAT 1975 (23 September 2009)

Credit - application to strike out claim - whether debtor hardship relief application misconceived - whether application to postpone enforcement proceedings misconceived - Consumer Credit (Victoria) Code ss66, 68, 86 and 88; Victorian Civil and Administrative Tribunal Act 1998 s75

Grace v ING Bank (Australia) Ltd (Credit)

Pursuant to section 75 of the Victorian Civil and Administrative Tribunal Act 1998 this proceeding is struck out.
The Tribunal notes that in its written submissions the Respondent foreshadowed an application for costs. The Respondent must, by 8 October 2009, write to the Tribunal and to the Applicant indicating whether it pursues that costs application. If it does, it must include in that letter written submissions on the matter. The Tribunal will then list the application for hearing.

Ms Grace applied to VCAT under ss 68 and 88 of the Consumer Credit (Victoria) Code (the Code). Her application shows that she seeks to postpone or reduce payments under her loan contract with the respondent (the Bank) until October 2009. She is not a lawyer and has represented herself throughout this proceeding. It was clear at the hearing of oral submissions on the Bank's strike-out application that Ms Grace also sought to stop the Bank taking possession of or selling her house at 25 Windsor Avenue, Warragul (the Warragul property). I treat her application as including this claim.
The Bank now applies under s75 of the Victorian Civil and Administrative Tribunal Act 1998 (the VCAT Act) to strike out Ms Grace's claim and, if it is successful, for costs. Ms Grace opposes that application.
I first say something about s75 of the VCAT Act and ss68 and 88 of the Code. I then summarise the material before me and state my conclusions.

VCAT's power to strike out or dismiss a proceeding under s75

Under s75, VCAT may strike out or dismiss the whole or a part of a proceeding which (among other things) it considers misconceived or an abuse of process. The principles which VCAT applies on applications under s75 are these.[1]
VCAT should be cautious before summarily terminating a proceeding under the section. This is particularly so where the proceeding is at a relatively early stage (as here), and where the whole of the evidence has not been heard or tested by cross-examination. By terminating a proceeding under the section, VCAT deprives the litigant of the chance to have the case heard in the ordinary course. It should only do this where it is satisfied that, for a reason mentioned in the section, the claim can be said to be manifestly hopeless, undoubtedly untenable, doomed to fail, or on no reasonable ground can justify relief.
The fact that a respondent disputes what a claimant asserts is not enough. Rather, such a dispute should go to a hearing where evidence about it can be called and tested. On a strike out application such as this, the Tribunal must take the claimant's case as its highest and assume that she will be able to prove what she asserts.

There is no dispute that this is a credit contract and mortgage regulated by the Code. The Code is part of the law of Victoria by virtue of the Consumer Credit (Victoria) Act 1995.
The effect of ss66 and 68 of the Code is relevantly this. Under s66(1), a debtor 'who is unable reasonably because of illness, unemployment or other reasonable cause to meet the debtor's obligations under a credit contract and who reasonably expects to be able to discharge the debtor's obligations if the terms of the contract were changed' in a way set out in s66(2), may apply to the credit provider for the change. Under s66(2) the changes which may be applied for are -
- Extend the period of the contract and reduce the amount of each payment due under it;
- Postpone during a specified period the dates on which payments are due;
- Extend the period of the contract and postpone during a specified period the dates on which payments are due.
The section does not permit a change in the annual percentage rate. The section, s68 and ss86 and 88 do not apply where the amount of credit or loan is greater than a specified 'ceiling' figure.[2] There is no dispute here that the loan is within the ceiling.
Under s68, if a credit provider does not change the contract in accordance with the debtor's application, the debtor may apply to the court. In this section and s88 'the court' means VCAT.[3] VCAT may by order change the contract in a way set out in s66 and make other orders, or refuse to change the contract.
Section 86 relevantly provides that a debtor or mortgagor 'who has been given a default notice under Division 2...may, at any time before the end of the period specified in the notice...negotiate with the credit provider a postponement of the enforcement proceeding or any action taken under section proceedings'. Under s88, if the debtor or mortgagor is unable to negotiate a postponement, the debtor or mortgagor may apply to VCAT. VCAT may order or refuse to order the postponement and make other orders. Schedule 1 defines 'enforcement proceeding' as proceedings in a court to recover a payment due under a credit contract or 'taking possession of property under a mortgage or taking any other action to enforce a mortgage'. Section 88, then, is broad. In my view, it covers any step from the beginning to the end of an enforcement proceeding, including such matters as the issue of a Warrant of Possession or Notice to Vacate to enforce a judgment already entered.

I have before me the original application with a number of attachments and further documents submitted to the Tribunal by Ms Grace. I have oral submissions on the strike out application from both parties. From the Bank, I have a lengthy affidavit by Garth Morgan, one of the Bank's senior collections officers. That affidavit exhibits many documents including the credit contract (which comprises a loan agreement and a booklet of standard terms and conditions), correspondence and notes of telephone conversations between Ms Grace or her representatives and the Bank's representatives. It includes the title search, the relevant mortgage and its associated Memorandum of Common Provisions, loan statements, and documents in a relevant Supreme Court proceeding. Effectively, the material before me is not in dispute, although the parties disagree as to its interpretation. This is my summary.
On 23 October 2006, Ms Grace accepted the Bank's offer of a loan of $166,000. Security for the loan was a first registered mortgage to the Bank over the Warragul property. Ms Grace was the sole registered proprietor. Under the credit contract, the loan term was 30 years. The loan was repayable by fortnightly repayments initially of $524.69 each. The credit contract states the loan's purpose to be the refinancing of a home/personal loan. The loan agreement and mortgage made provision for the calling up of the loan balance in the event of default.[4]
The mortgage over the Warragul property was registered on 20 November 2006. The loan money was advanced to Ms Grace on 8 November 2006.
All went well until April 2008, when loan repayments fell into arrears. Between April and July 2008, the Bank and Ms Grace's representative from Anglicare Victoria had discussions concerning debtor hardship relief for Ms Grace. On about 9 July 2008, Ms Grace and the Bank agreed to a hardship relief arrangement under which the Bank capitalised the arrears owing and halved the fortnightly repayment. This arrangement lasted until 19 September 2008.
On 11 September 2008, in a telephone conversation with Mr Pavlovic, a representative of the Bank, Ms Grace's representative from Anglicare (Ms Garlick) told Mr Pavlovic that Ms Grace was in training for a new work role, was not well enough to work full time, needed six months more to bring the loan up to date, and that Ms Garlick had advised Ms Grace that the best option was for the Bank to issue a 'legal notice' and for Ms Grace to apply for early release of her superannuation so that the arrears and future payments could be met. Mr Pavlovic offered to provide assistance in the superannuation release process by providing relevant information which could be sent to the Australian Prudential Regulation Authority (APRA). Mr Pavlovic said that the Bank would commence legal action once Ms Grace fell behind by three loan repayments.
On 25 October 2008, Ms Grace's home on the Warragul property was forcibly entered by the former partner of her daughter. Ms Grace's son and her very young grandson were with her. The daughter's ex-partner assaulted Ms Grace in a violent manner. The fear caused by this incident and the continuing threat to their safety meant that they relocated from the Warragul property and from Warragul itself, and Ms Grace left her employment at a laundry in Warragul. The family lived in accommodation provided by family violence outreach services. Ms Grace has not returned to Warragul. It is clear from the certificate from the psychologist Ms Kelly that is in the material before me and that is dated September 2009, that Ms Grace continues to suffer significant psychological depression and anxiety, and is unable to work full time for three months from the date of the certificate.
On 29 October 2008, Ms Garlick telephoned Mr Pavlovic and told him of the assault on Ms Grace and her relocation from the Warragul property. She said that the Warragul property was on the market and that Ms Grace was looking for early release of her superannuation.
On 8 November 2008, the Bank sent an arrears letter. The loan statements show that arrears continued to increase, that no repayments of the loan were made in 2009, and that enforcement expenses and interest continued to be charged.
On 10 November 2008, there was a phone conversation between Ms Garlick and Mr Pavlovic during which the possibility of selling the Warragul property and of early release of Ms Grace's superannuation were again mentioned. Mr Pavlovic said that, given the history of the account, the Bank may not stay legal action after the default notice remedy period had expired.
On 14 November 2008, the Bank posted a default notice to the Warragul property. It gave Ms Grace 31 days from the service of the notice to remedy the default. The notice is a combined notice under s76 of the Transfer of Land Act 1958 and ss 80 and 85 of the Code. Section 85 of the Code deals with clauses accelerating the loan balance. The notice states that the arrears at 14 November 2008 are $3061.96, that there are enforcement expenses of $330, and a total loan balance of $168,731.91.
It appears from an email sent by Ms Garlick to Mr Pavlovic and dated 26 November 2008 that Ms Grace had received the default notice by that date. I take the remedy period as commencing from that date. Ordinarily, it would have expired on 26 December 2008, but because this was a public holiday and because 27 and 28 December 2008 were a Saturday and Sunday, I take the remedy period as expiring on 29 December 2008.[5]
Between 20 November 2008 and the end of the remedy period stated in the default notice, correspondence and telephone conversations continued between Mr Pavlovic and Ms Garlick. In them, Mr Pavlovic continued to say that legal action by the Bank would go on until the loan account was brought up to date. But at the same time, he continued to offer assistance in giving the information which APRA would need to release Ms Grace's superannuation. In a letter dated 26 November 2008, the Bank said that no further action would be taken under its current letter of demand if the application to APRA was successful, all available monies were used to clear the arrears, and repayments under the loan contract were recommenced and maintained.
By February 2009, it was clear that Ms Grace no longer wished to apply to APRA. On 12 February 2009, Anglicare wrote to Ms Grace indicating that, as all available assistance which it could give her was now exhausted, it was closing its file.
In a telephone conversation dated 3 March 2009, Mr Pavlovic discussed directly with Ms Grace the possible release of superannuation funds and that the Bank was continuing enforcement action, but that if she paid all the arrears and maintained the loan, the Bank would not sell the Warragul property. In a telephone conversation between Mr Pavlovic and Ms Grace on 6 March 2009, Mr Pavlovic said that he would review the situation if some but not all the arrears could be cleared and payments under the contract maintained. The correspondence and notes of telephone conversations before me indicate that, ultimately, APRA advised that only $7834.30 of Ms Grace's superannuation were available for release, and that it would only release this if the Bank could confirm that it would cease legal action. The Bank refused to give this assurance, arguing that the amount was not enough to clear the arrears and that Ms Grace had not shown that she was able to service the loan.
On 8 January 2009, the Bank commenced a proceeding in the Supreme Court seeking possession of the Warragul property and recovery of the debt under the credit contract.[6] On 23 June 2009, the Bank obtained judgment against Ms Grace in default of appearance. On 24 June 2009, a Warrant of Possession was issued with respect to the Warragul property. Under the judgment, the court ordered that the Bank recover possession of the Warragul property, that Ms Grace pay to it $171,170.70 (the whole of the balance then owing), interest of $7101.33, and costs of $2500. According to the Bank, the Sheriff intends to execute the Warrant on or about 25 September 2009.
The loan continues in arrears. As at 1 August 2009, the balance was $183,623.30.
In her application for hardship relief, Ms Grace says that she is unemployed, that her fortnightly income after tax is $348.40 and that her fortnightly expenses are also that amount. She claims that, if loan repayments are reduced and postponed until October 2009, she will be able to afford them because she will have rented out the Warragul property and found work.
In the material before me there is a letter from a firm of solicitors dated 26 August 2009 which appears to relate to possible arrangements for the sale of the Warragul property. It is unclear on whose behalf this letter was written or in what circumstances.

Counsel for the Bank submits that, while s68 of the Code would have permitted the Tribunal to change Ms Grace's credit contract on account of her hardship, the debt under that contract has now merged in what is payable under the judgment of the Supreme Court. The Tribunal has no power to set aside that judgment or change what or how much is ordered to be paid. Accordingly, the application under s68 is misconceived and should be struck out. I agree.
The Bank then submits that the claim under s88 should also be struck out. It does so for two reasons.
First, the Bank says that no negotiation occurred between Ms Grace (or her representatives) and the Bank (or its representative) before the end of the remedy period stated in the default notice, and concerning the postponement of enforcement proceedings or action taken under them. I do not accept this submission. On the material it is strongly arguable that, before the default notice was issued, throughout the remedy period stated in the notice and afterwards, a series of discussions took place between the Bank and Ms Grace or her representatives. While the Bank maintained that it would continue to enforce its rights, it also offered to assist Ms Grace to apply to APRA by providing relevant information to her, and at various times suggested that it might stay enforcement action or not sell the Warragul property if the arrears were cleared and payments under the loan maintained. The fact that these discussions ultimately came to nothing does not prevent them from being characterised as negotiation. They are negotiations within the ordinary meaning of that word - discussions with a view to settlement or agreement. Although Ms Grace and her representatives did not use the words 'enforcement proceedings', it is (in my view) clear from their proposals about the release of superannuation and the clearing of arrears, that the purpose of the proposals was to get the Bank to suspend or discontinue its enforcement action.
Second, the Bank submits that, even if under s86 Ms Grace had attempted to negotiate a postponement of an enforcement proceeding or action taken under it, the Tribunal cannot order that postponement. This is because the Tribunal cannot determine how long the postponement should last. Section 88 does not permit the Tribunal to order an indefinite postponement. It must specify the period of the postponement. The Tribunal cannot here specify the period of the postponement because it is uncertain when, if ever, Ms Grace will be able to pay the whole of the loan balance. It is the whole of the loan balance, and not the arrears, which is concerned here. The Writ, the judgment of the Supreme Court and the Warrant of Possession are about the loan balance.
I agree with this submission. Under s88, the Tribunal cannot set aside the judgment of the Supreme Court or the Warrant. It can only postpone them for a specified period. On the material, and given that Ms Grace was not seeking to sell but to retain the Warragul property, it is uncertain whether she would ever be able to afford, in a lump sum, the whole of the loan balance currently owing. I say that in the light of her income and expenditure and employment status set out in her original application. The Tribunal cannot determine a specified period for postponement. This part of the application is also misconceived and should be struck out.

The whole of Ms Grace's application is struck out. Bearing in mind that Ms Grace is not a lawyer and is not represented by a lawyer, I make some final comments.
The only way that Ms Grace can have the judgment of the Supreme Court and the Warrant of Possession set aside is to apply to the Supreme Court itself. Because of the imminent action by the Sheriff, the application would need to be made urgently. If the Court set aside the judgment and Warrant, then the debt under the credit contract would remain. An application under s68 could then be made to VCAT. An application could also then be made to VCAT under s88 to postpone the operation of the acceleration clause of the credit contract which made the whole loan balance immediately payable.
For the sake of completeness, I should add that I do not agree with the respondent that Ms Grace has unreasonably delayed the making of this application, or that her claims are an abuse of process.

[1] See Rabel v State Electricity Commission [1998] 1 VR 102; and, for example, Norman v Australian Red Cross Society [1998] 14 VAR 243

[2] As to the calculation of this figure, see Consumer Credit (Victoria) Regulations 1995 r22A and 23A

[4] See Loan Agreement Terms and Conditions clause 26 and Memorandum of Common Provisions AA719 Part 4

[5] See Consumer Credit (Victoria) Code Schedule 2, clause 30

Civil and Administrative Tribunal Act 1998

Credit (Victoria) Act 1995

Credit (Victoria) Regulations 1995

Grace v ING Bank

At a glance

Court

Decision date

Source

Judgment (16 paragraphs)

Grace v ING Bank (Australia) Ltd (Credit) [2009] VCAT 1975 (23 September 2009)

Parties

Legislation Cited (4)