Heritage Bank Limited v Gleeson & anor [2019] QDC 119

[4] Ms Taylor, as I have a said, was not a registered proprietor or a mortgagor. She was, however, a joint borrower with Mr Gleeson of the funds which are secured by the mortgage. Between August and November 2018, the bank undertook efforts to cause the proceedings to be personally served on Mr Gleeson and Ms Taylor. Those efforts are described in affidavits of Mr Phillips and Mr Veivers, the process servers.

[5] Mr Veivers tried to serve Ms Taylor at the address of the house on 4 September at 4.25pm and on 7 September at 7.45am. Both attempts at service were ineffective. At the time of his second attempt at service he took a photograph of certain notices in the vicinity of the front door. Those notices fairly aggressively asserted that the property was private property. There was to be no trespass. There was no consent to anyone coming on the land. The notices had a flavour of threat in them, in the sense of asserting aggressively rights, powers, privileges and immunities and so on.

[6] Ms Taylor, by her affidavit, suggests that this photograph must be mistaken because it shows a switch which she says was not there at the time this photograph was purportedly taken on 7 September. Her evidence, as it was explained to me in her affidavit, was that the light switch was removed, perhaps, up to a year before this photograph was supposed to have been taken. However, her other evidence about whether there was one notice or two notices leaves it open to conclude that there were two notices at the time the photograph was taken.

[7] It seems extraordinarily improbable that the photograph was concocted. The photograph itself shows notices which her evidence does not exclude might have been there and are certainly consistent with Mr Gleeson's apparent approach to dealing with potential trespassers, evident from other documents before me. It seems to me the more probable inference is that she is mistaken about the timing of events relating to this photograph. This is not least because, at the time she says the switch was removed, nobody (at least no process server) would have had any cause to be taking photographs of the front window. I am persuaded the photograph is authentic.

[8] Attempts at service were then taken up by Mr Phillips, also a process server. He attended at the house on 25 September, 27 September, 29 September, 3 October, 7 October and 10 October at varying times during the day. He says that he left two of his cards in the screen of the front door on the second occasion. Mr Phillips returned to find that they were not there on 10 October but were still there in the intervening period.

[9] Ms Taylor put before me stills from what was said to be CCTV footage of the house's front door. I pass over the oddity of private citizens keeping backed up CCTV footage of their front door. Ms Taylor submitted that stills from the CCTV footage indicated that Mr Phillips had put the cards in the door and then come back and removed them. The stills that I was shown suggested that. However, the whole of the CCTV footage was not produced. It is difficult, when just stills are produced, to be at all confident that he did as alleged.

[10] I also note that the date on the stills is 25 September and his evidence is that he left the cards on 27 September. This makes me wonder how the stills from 25 September are in any way relevant to anything sworn to by Mr Phillips. I am not persuaded that any part of his evidence about the leaving of the cards was inaccurate. He also observed, incidentally, that a black Hyundai Getz (registration 980RQU) was parked on the property on 25 and 27 September.

[11] His many attempts to serve did not meet with success. There was some criticism of his evidence about a discussion he had with one neighbour, to the extent that he did not confirm the names of the defendants. I did not find those criticisms to be persuasive. Even if it were the case that he did not mention the names of the defendants, and I am far from persuaded that that is the case from the evidence I have seen, it makes little difference to the substance of his evidence. The effect of Mr Phillips' evidence is that he was told that the defendants both still lived there and that Ms Taylor often travelled to the Gold Coast for study.

[12] It appears that his calling cards were collected on 10 October, because on 11 October he received an odd letter from Mr Gleeson, now calling himself Jarod Luke, asserting various misconceived notions of criminal law and containing a notice referring to the same. The letter was mostly directed, though, at making clear that no one was welcome to try to serve or otherwise attend the premises. Mr Phillips also tried to call Ms Taylor's mobile number which went to a message that indicated that the phone was unavailable and said to try again later. He did not leave a message. On 16 October Mr Phillips called the home number and was told it was disconnected. As I said, I am not persuaded by any of the evidence that anything in his affidavit is materially incorrect.

[13] The above evidence of attempted service was put before her Honour Judge Richards of this Court and her Honour made orders for substituted service on 9 November 2018. Her Honour's orders were that personal service be dispensed with and under the relevant rule service be effected by posting the claim and the statement of claim to the property, delivering a copy of the documents to the house, and notifying the defendants by SMS to a certain mobile that that had occurred. I presume that that mobile number was Mr Gleeson's mobile number. The service of the statement of claim was deemed to have occurred five business days after those steps were taken.

[14] There was some criticism in Ms Taylor's counsel's submissions of one aspect of the submissions by the plaintiff to her Honour. In particular it was said that the plaintiff claimed the proceedings had already come to the attention of the defendants and that the defendants were evading service but that submission was based wholly on a letter by Mr Gleeson only, without any reference to the second defendant. However, when one looks at paragraph 5.3(c) of the plaintiff's substituted service submissions, it can be seen that that paragraph that refers to the first defendant being aware of attempts to serve him with the claim. It does not say that he was aware of the proceedings. Further, the submission on its face, refers only to the first defendant.

[15] It is not disputed that Her Honour's substituted service order was complied with and that default judgment was entered on 30 January 2019. Default judgment was ordered both for possession of the land and for a sum said to be due under the loan agreement. The bank sought an enforcement warrant. The warrant has been executed and the bank is in possession.

[16] Mr Gleeson seemed to respond to the proceedings from time to time with documents which were misconceived. Things took a rather more disciplined turn when Ms Taylor found out about the default judgment and the enforcement warrant. Her evidence is that the proceedings did not come to her attention as a result of compliance with the substituted service orders. I am willing to accept that that was so based on the fact that Ms Taylor's industry, since 24 April 2019 when she says she did find out about the default judgment and enforcement warrant, has been consistent and energetic.

[17] It is, of course, irrelevant to the validity of the substituted service order as such, that the documents did not come to her attention as long as that order was properly made. If default judgment has been regularly entered following substituted service it will only be set aside if there is an arguable defence on the merits.

[18] Ms Taylor applied to set aside the default judgment on 24 April 2019. On 8 May 2019 Ms Taylor sought to stay the enforcement warrant and various consequential orders. However the fundamental requirement for Ms Taylor was always to set aside the default judgment, upon which the enforcement warrant for possession was based.

[19] There were some adjournments of those applications for Ms Taylor to obtain legal assistance. Ultimately she has obtained that assistance from Ms Chekirova. The application is supported by a great deal of material. The structure of the application is really this:

(a) Has the judgment been regularly entered? If not, the default judgment should be set aside.

(b) If it has been regularly entered, is there a sufficiently arguable defence on the merits to justify setting aside the default judgment?

[20] It is convenient to start with the assumption that the judgment was regularly entered. On that assumption one's attention turns to whether there is any arguable defence on the merits. There is not. The only argument that seems to have been raised to judgment for possession or for the debt, is the alleged failure properly to serve a default notice under the National Credit Code, a schedule to the National Consumer Credit Protection Act 2009 (Cth). It seems to me, however, that the default notice was properly served as explained in paragraphs 21 and 22 of Ms Kennedy's submissions for the bank:

Sections 88(1) and (2) of the National Credit Code provide that a "credit provider" must not begin enforcement proceedings pursuant to a credit contract or a mortgage, including proceedings for possession of property subject to a mortgage, unless the debtor or mortgagor is in default, the credit provider has given that person a default notice which complies with s 88 and allows the debtor or mortgagor a period of at least 30 days from the date of the notice to remedy the default, and the default has not been remedied within that period.

The plaintiff validly served the second defendant with the s 88 default notice pursuant to:

(a) Section 347 of the Property Law Act 1974 (Qld) which provides that a notice required by the Act to be served may be served by post to the person's usual or last known place of abode; and

(b) Clause 12.1 of the loan agreement terms and conditions which allow service of notices by post to the second defendant's home address last known to the plaintiff.

[21] There is also the proposition in paragraph 24 of her submissions, that the failure to serve the default notice does not go to the validity of subsequent proceedings:

Whilst the plaintiff maintains that the s88 default notice was validly served to the last known home address of the second defendant, even if this were not the case, the consequences of failing to comply with s88 does not render subsequent enforcements proceedings invalid or unlawful, s88 expressly only provides for a criminal penalty. This very issue was considered in Westpac Banking Corporation v Tesoro [2012] VSC 182 at [33] - [36] where Lansdowne AsJ said:

"In addition, the plaintiff stresses that s 88 itself does not expressly provide that the consequence of noncompliance is that any enforcement proceedings are invalid or unlawful and indeed, expressly only provides for a criminal penalty. I accept these submissions. I consider that they are fortified by the following. First, s 193 of the Code (formerly s 170 of the State Codes) specifically adverts to whether non compliance with a Code requirement renders the underlying transaction illegal, void or unenforceable. The section states:

(1) A credit contract, mortgage or guarantee or any other contract is not illegal, void or unenforceable because of a contravention of this Code unless this Code contains an express provision to that effect.

(2) Except as provided by this section, this Code does not derogate from rights and remedies that exist apart from this Code.

There is no express provision in s 88 that failure to comply with its requirements renders the enforcement proceedings ineffective i.e. makes the mortgage unenforceable. It follows from s 193(1) that the proceedings are not ineffective by reason only of that failure to comply.

Next, there is a civil remedy provided elsewhere in the Code. This adds weight to the contention of the plaintiff that failure to comply with s 88 results in criminal penalty rather than civil consequence. The Code provides in Part 6 for an application by a debtor for a civil penalty or financial compensation to be paid to him or her in respect of certain failures of the lender to comply with the requirements of the Code. A civil remedy for failure to comply with the notice requirements under s 88 would lie under s 124 (formerly s 114 of the State Codes), which enables the court to order the credit provider to "make restitution or pay compensation" to a person affected by the failure to comply. For present purposes it is sufficient to note that no reference is made in the defence to this section and there is no application by cross claim pursuant to it.

[22] That seems to be correct based on the authorities she cites.

[23] There was no other ground of defence that realistically arose. I should observe that in respect of the judgment for possession, which underpins the enforcement warrant, the prospect of a defence is even more remote. The bank is the registered mortgagee. The mortgagor is Mr Gleeson. The bank is entitled under the mortgage and under section 78 of the Land Title Act to possession if the preconditions in that section are met. It is not in dispute that they are met.

[24] In those circumstances, where the bank has the benefit of indefeasible title to its mortgage, I do not understand how Ms Taylor, who at best (on the evidence she filed) might have an equitable interest in the land, has any standing at all to interfere in that judgment. There seems to me to be no real basis to think that the equity for which she argues in her affidavit dealing with this aspect of the matter, is such as would give rise to any arguable case, at least on the material before me now, that the fraud exception in s. 184(3)(b) of the Land Title Act applies.

[25] Therefore, if the judgment was regularly entered the applications should all be dismissed. It is to that issue I now turn.

[26] Ms Taylor, through her counsel, contended that the judgment was not regularly entered and raised three points, in that regard.

[27] First, she challenged the credibility of the evidence of the process servers and the correctness of a particular submission that was made to her Honour Judge Richards in the substituted service hearing. I have already explained why I reject those submissions.

[28] Second, she submitted that the substituted service order had not been properly complied with because one of the forms of the order required service by post. She submitted that, where Ms Taylor had not received the notice (and I am willing to act on the basis that she did not) service had not been effected. Ms Chekirova relied on Thomas Bishop Limited v Helmville Limited [1972] 2 WLR 149.

[29] The difficulty with relying upon that authority is that it is concerned with circumstances where service by post is authorised by a statute and there is a presumption of due delivery which can be rebutted by any evidence that it was not delivered. That is what happened in Helmville. But that is not what happened here. Here service was ordered to be carried out by posting the documents. Service was deemed to have occurred a certain time after that act (and the other service acts) had been done. Helmville does not assist Ms Taylor.

[30] Third, and the point which troubled me the most, Ms Chekirova pointed out an email sent by Ms Taylor, then Ms Gleeson, to the bank officer she was dealing with from the plaintiff on 9 March 2015, who had attempted to contact her by mobile and home phone. In this email Mr Taylor had said she would prefer if communications were by email or post to PO Box 15, Withcott 4352 and the bank officer replied:

Thanks for the reply. Happy to communicate as per your wishes below.

[31] It is to be noted that this occurred some three and a-half years before the substituted service application. However, it is a clear communication from Ms Taylor as to how she would prefer to have communications from the bank. The email address is identified in the email is "min@live.com.au" and one could infer that that was the email address to which she was referring.

[32] It is not in question that this information was not put before her Honour on the application for substituted service. There is no reason to think that this was anything other than an oversight. In fact, it is not at all surprising that a communication made to a customer service officer, might not come to the attention of the bank's recoveries unit and therefore the bank's solicitors, some three and a-half years later.

[33] However, let it be assumed that this communication was part of the corporate knowledge of the bank. Another difficulty with this having any relevance to the substituted service application is that there does not appear to be any evidence in the extensive material before me of any ongoing communication between the bank and Ms Taylor to that email address or that PO Box, nor that the PO Box was still current or checked either regularly or at the time. I was told from the bar table that the email address was still current. Ms Kennedy did not object to that, so I am willing to assume that is correct for present purposes. However, there is no evidence of any ongoing contact from March 2015 by those methods of communication. Nonetheless, the evidence before this Court is that Ms Taylor's preferences were communicated to the bank.

[34] Ms Chekirova's best point on this application arose out of that communication and was developed as follows:

(a) First, the bank, applying ex parte for substituted service, had a duty to make full and frank disclosure of material facts. That is, facts that were material to, or could be material, to the decision before the Court;

(b) Second, that Ms Taylor's indication of her preferred mode of communication in March 2015, is a matter which was material and could have made a difference to the outcome of the matter and which should have been put before her Honour;

(c) Third, the failure to do so was a material non-disclosure in breach of the duty; and

(d) Fourth, having enlivened my discretion to set aside the substituted service order, I ought to do so.

[35] In support of that last proposition, Ms Chekirova submitted there were grounds to believe that if the PO Box or the email had been used, it would have come to the attention of her client. I am not sure the evidence quite goes that far, particularly in the case of the PO Box, but let it be assumed, for argument, that it does.

[36] Even on that assumption, however, I am not persuaded that I should set aside her Honour's substituted service order. In deference to the effort that has been put into the matter, particularly by Ms Taylor, I want to explain why. The relevant principles appear conveniently in Hall v Hall [2007] WASC 198, a judgment of Newnes J in the Supreme Court of Western Australia:

[31] Accordingly, an applicant for an order for substituted service - which will necessarily be made ex parte - has an obligation to the Court to disclose all facts material to the Court's decision: Wiseman v Wiseman [1953] P 79; Savcor Pty Ltd v Cathodic Protection International APS [(2005) 12 VR 639] at 648.

[32] The extent of the disclosure required in each case will depend upon the particular facts. The applicant must make a full and fair disclosure of all matters within his or her knowledge which are material to the proceedings and which tend in favour of the other party: Bell Group NV (in liq) v Aspinall (1998) 19 WAR 561 at 570. Materiality is to be decided by the Court and not by the assessment of the applicant or the applicant's legal advisors: Brink's Mat Ltd v Elcombe [1988] 1 WLR 1350.

[33] The duty to make full and frank disclosure of material facts is not restricted to facts actually known. The applicant must make proper enquiries and the duty of disclosure applies not only to material facts known to the applicant but also to any additional facts which the applicant would have known had such enquiries been made: Brink's Mat Ltd v Elcombe (supra) at 1356; Liberty Financial Pty Ltd v Scott [2002] FCA 345; Bell Group NV (in liq) v Aspinall (supra); Surefire Holdings Pty Ltd v Oxley Sports Drome Pty Ltd [2001] QSC 85 per Atkinson J at [14].

[34] A party is not necessarily excused from the consequences of non-disclosure because it believed that the non-disclosed material was not material or because the failure to make full disclosure was unintentional: Behbehani v Salem [1989] 1 WLR 723 at 726-728.

[35] But the failure to disclose a material fact will not necessarily lead to the order being set aside. The Court has a discretion whether or not to set aside an ex parte order where there has been material non-disclosure. Each case must depend upon its own facts and the determining factor is the interests of justice: Brink's Mat Ltd v Elcombe (supra), Savcor Pty Ltd v Cathodic Protection International APS (supra).

[36] It is necessary first to identify the alleged non-disclosure and then to determine whether it was a matter material to the decision and, if so, whether it would have made any difference to the outcome: Savcor Pty Ltd v Cathodic Protection International APS, at 650.

[37] His Honour, in those passages which are amply supported by other authority, states several propositions.

[38] First, the duty of full and frank disclosure does apply to substituted service applications. This point, frankly, should probably be better known, particularly amongst those institutional plaintiffs who frequently apply for substituted service. It is frequently the case that I hesitate about ordering substituted service sought on the papers, including for reasons such as that there is no admissible evidence before the Court, due to the affidavits consisting of inadmissible hearsay on hearsay. The casual approach evident in that kind of evidence suggests that a casual approach to the duty of full disclosure might also occur on occasion. Particular care needs to be exercised in seeking substituted service orders, bearing in mind that duty.

[39] Second, his Honour notes the materiality of information is to be decided by the Court and not by the applicant.

[40] Third, his Honour observes that a party is not excused from nondisclosure because of error, either in overlooking the material or making a mistake as to whether it was material.

[41] Fourth, his Honour recognised that failure to disclose a material fact will not necessarily lead to setting aside the substituted service order.

[42] Ms Taylor has succeeded in identifying an alleged non-disclosure: her request as to mode of communication. Further, I am willing to assume that the fact that she had asked to be communicated with in a certain way albeit three and a-half years before and apparently without intervening use, is something that could have been material to her Honour's decision and which was not disclosed.

[43] Even if this information was before her Honour, there is no question in my mind the substituted service order would have still been made. However, it seems to me that if these matters had been put before her Honour, it is likely that her Honour would have thought that notice should also be given by email and to the PO Box, as indicated.

[44] Therefore, the disclosure would have made no difference to the overall outcome, but might have made a difference to the particular orders that her Honour made. Of course, there is a real possibility that it would not have made any difference, if further evidence had been led about lack of use of Ms Taylor's preferred methods of communication. However, I am willing to assume, on the evidence before me, that it is likely her Honour would have added those as methods of communication. One might say then: if there was, albeit unintentionally, a material nondisclosure then it would have made a difference to the order why should the discretion not be exercised to set aside the order?

[45] Ms Chekirova persuasively asserts that if substituted service had been made that way, there was a reasonable basis to think the proceedings would have come to the attention of Ms Taylor. I am willing to assume that for present purposes, even in the absence of evidence concerning whether Ms Taylor maintained and checked her two preferred modes of communication.

[46] The reason I am not going to set aside the orders for substituted service and thereby, the orders for judgment, is that it would be an exercise in futility. I started these reasons by explaining why there was absolutely no basis at all, on the material before me, to think that there was a defence Ms Taylor could raise to the possession claim and that no arguable defence has been advanced in respect of the debt claim.

[47] To set aside the default judgment would be to set in train an expensive process that would result in exactly the same outcome as is currently in place. It is also the case that many steps have been taken, in respect of possession of the house. Those matters would have to be unwound again, to absolutely no purpose whatsoever. By far the most likely outcome is that Ms Taylor would ultimately be the subject of a judgment and be in the same position as she is now, but would be exposed to a great deal more in costs. For that reason, I am not willing to set aside her Honour's orders for substituted service and the consequence of that, given the structure of the applications that I set out at the beginning, is that Ms Taylor's applications are dismissed.

[48] The bank has had ultimately substantial success on these applications. However, it has had that success in circumstances where I have found, albeit unintentionally, that the substituted service order was obtained in circumstances where there was a material nondisclosure. As I have said, it seems to me very likely that if they had made the relevant disclosure the notice would have come to Ms Taylor's attention. In those circumstances, I am not willing to order Ms Taylor pay the bank the costs of the application. I order that each party bears their own costs of the applications.