JP Morgan Trust Australia Limited v Hammond

The Hearing of the Proceedings 8The Defendant has not appeared at today's hearing. Mr Hammond made the application to which I have adverted, and he remained seated in the body of the Court until the morning tea adjournment. There was no application made for an adjournment of today's hearing by the Defendant. 9In my judgment of 9 March 2012 (at [22]), I referred to the fact that Mr Hammond had informed the Court that consideration was given by the Defendant at an earlier time to obtaining legal representation, but that no further steps had been taken in that regard. The Court was informed as well on 9 March 2012 that an application for legal aid had been made unsuccessfully at an early stage of the litigation, which I took to be soon after April 2008. 10The Defendant has had an opportunity to seek legal representation, including the making of any application for legal aid, in more recent times, but there is nothing to suggest that that has been done. 11Against that background, there being no appearance of the Defendant today, Mr Newton submitted that the appropriate course was to proceed with a hearing in the absence of the Defendant, pursuant to Rule 29.7 Uniform Civil Procedure Rules 2005. 12In the circumstances, I was satisfied that that was the appropriate course to take. Indeed, as I have said, there was no application made by the Defendant for an adjournment, or for any other step to be taken with respect to the hearing, apart from the thrice made and rejected application that Mr Hammond appear by leave for the Defendant.

13At the hearing which followed, the Plaintiff read the affidavits of James Oliphant Duncan sworn 7 July 2011 and 21 October 2011. In addition, the Plaintiff tendered in its case paragraphs 1, 20, 21, 22 and 23 of the affidavit of the Defendant, affirmed 25 August 2011, which had been served for the purpose of these proceedings. 14I have had regard to the evidence adduced by the Plaintiff and the submissions made, both in writing and orally, by Mr Newton on behalf of the Plaintiff. I have had regard, as well, to the brief outline of submissions of the Defendant dated 26 March 2012 served for the purposes of this hearing. 15An examination of the submissions has assisted me to understand the issues in the proceedings, which had been addressed by counsel for the Plaintiff, concerning the Plaintiff's claim in the Statement of Claim and in opposition to the Cross-Claim brought by the Defendant. 16Although the Defendant has not appeared to press the Cross-Claim, Mr Newton has submitted that it is appropriate that the Court make orders in favour of the Plaintiff on the Cross-Claim. I accept that this approach is appropriate in the circumstances of this case, and I will refer to aspects of the Cross-Claim for that purpose.

17The facts established by the evidence are, in reality, relatively straightforward. 18What I am about to say should be taken as my findings of fact in these proceedings, reached after application of the civil standard of proof. 19In February 2005, the Defendant wished to purchase the property at xxx, Faulconbridge. At that time, the Defendant's husband, Patrick Hammond, operated a mortgage business named Crown Mortgages Pty Limited. 20On 10 February 2005, an application was made for a loan on Crown Mortgages Pty Limited letterhead, in which Mr Hammond indicated that a loan was sought for his wife, the Defendant. In support of that application, documents were provided which indicated a desire to obtain a loan to assist the purchase of the Faulconbridge property for a sum of $540,000.00. The Defendant was described in the documents, which she signed and which were provided by her husband, as being self-employed with an annual income of $135,000.00. 21The evidence reveals that a number of steps were taken on behalf of the Plaintiff in assessing the application for a loan. The evidence reveals that the application was carefully considered before it was approved. The first affidavit of Mr Duncan reveals the steps which were taken in that regard. 22A preliminary loan approval for a sum of $486,000.00 issued on 18 February 2005. 23On 7 March 2005, the Defendant signed a financial summary stating a gross pre-tax salary of $135,000.00. This was a repetition of what had already been certified by the Defendant in earlier documents, which her husband had supplied in support of the loan application made on 10 February 2005. 24The loan offer made to the Defendant contained an offer to lend the sum of $486,000.00, with an annual percentage rate of 8.9 percent and an interest-only period for the first five years of the loan. The loan offer revealed expressly that the Plaintiff, JP Morgan Trust Australia Limited, was to be the credit provider and lender. 25The Defendant signed, and thus accepted the loan offer, agreeing to its terms. 26The terms of the loan were set out in further documentation, which made entirely clear the obligation to make payments of principal, interest and fees, and the consequences if there was default in that respect. 27On 8 April 2005, the Defendant signed a mortgage in favour of the Plaintiff. There can be no doubt that the Defendant was aware of the identity of the Plaintiff as the lender and mortgagee. The witness to the Defendant's signature on the mortgage was Kate Zitner of 170 Macquarie Road, Springwood. Ms Zitner also witnessed the Defendant's signature on the loan agreement. 28The evidence demonstrates that the moneys which came to be advanced to the Defendant by way of loan were the moneys of the Plaintiff. The affidavits of Mr Duncan demonstrate this fact clearly. 29On 8 April 2005, the sum of $486,000.00 was paid by the Plaintiff, with cheques being disbursed in various respects. The bulk of the money advanced, being $484,128.17, was payable to Mr and Mrs Steel, the vendors of the Faulconbridge property. 30This was a straightforward conveyancing arrangement. The Defendant and her husband wished to purchase the Faulconbridge property. They borrowed money from the Plaintiff for that purpose. A mortgage was taken over the Faulconbridge property, to secure the moneys advanced by the Plaintiff to the Defendant. 31The Defendant's own affidavit, in the parts relied upon by the Plaintiff, indicates that the application for a loan was submitted on 10 February 2005, and was approved shortly thereafter. The Defendant states that she went to McPhee Kelshaw solicitors in Springwood, and that they were to handle the conveyancing. The Defendant attended the office of McPhee Kelshaw to sign a number of documents. According to the Defendant, she and her husband moved into the Faulconbridge house in or around May 2005. 32As I have said, the loan contained a term that, for the first five years, it would be an interest-only loan. The evidence establishes that, as at February 2008, the Defendant had not paid the sum of $14,725.30 under the loan agreement and mortgage. This sum comprised arrears, in different sums, over a period from October 2007 to January 2008. 33I am satisfied (and in any event it is admitted) that the Plaintiff served upon the Defendant default notices pursuant to s.57(2)(b) Real Property Act 1900 and s.80 Consumer Credit Code, with those notices dated 19 February 2008. 34Although some payments were made on 7 May 2008, I am satisfied that the Defendant did not comply with the default notices. Thus, default under the mortgage is clearly established. 35No payment at all has been made under the loan since 7 May 2008. 36I have mentioned that the evidence establishes clearly that it was the funds of the Plaintiff which were utilised to advance the loan to the Defendant. The second affidavit of Mr Duncan, sworn 21 October 2011, addresses particular features of the flow of moneys for this purpose. It is to be read in conjunction with Mr Duncan's first affidavit, and together, the affidavits clearly establish this fact. 37I am satisfied that the Plaintiff has established the elements of its claim for relief as pleaded in the Statement of Claim.

38Having regard to the topics raised in submissions and matters asserted in the Cross-Claim brought by the Defendant against the Plaintiff, I will refer to certain other issues, which ought be the subject of determination by the Court. 39The Amended Defence and Reply dated 9 September 2011 and the Amended Reply to the Defence to the Amended Cross-Claim filed 9 September 2011, both contain allegations that the Plaintiff is not the lender, and that the loan was not advanced by the Plaintiff. Indeed, these matters are asserted by the Defendant as part of a submission that the Plaintiff fraudulently represented itself in some way to be the lender. 40I am entirely satisfied that the Plaintiff was the lender, and that the loan was advanced by the Plaintiff. Any suggestion of fraud in this respect is without support. The evidence establishes that it was the funds of the Plaintiff which were advanced to the Defendant. The identity of the Plaintiff was entirely clear on the loan offer and agreement, and on the mortgage itself. To the extent that submissions have been advanced on behalf of the Defendant which bring issues of that type into dispute, I reject the Defendant's submissions. There is clear default by the Defendant under the loan agreement and mortgage. 41To the extent that the Defendant's pleadings seek to raise questions in this respect, I find clearly in favour of the Plaintiff that there was default following the service of the relevant statutory notice, such as to found an entitlement to possession of the Faulconbridge property. 42It is undisputed that, since May 2008, no payments at all have been made by the Defendant to the Plaintiff. 43Insofar as the Defendant's pleadings in the Defence and the Cross-Claim raise other issues concerning the Plaintiff's claim, a number of findings and observations are appropriate. Firstly, it is the Defendant who applied for the loan to assist her purchase of the property. Assisting her in this regard, in a manner inextricably tied up in the processes revealed by the evidence, was the Defendant's husband, an experienced person in the mortgage industry. 44In addition, the Defendant had a solicitor who was advising her, and assisting her with respect to the conveyancing. It may be taken that it was this solicitor who assisted in the process of the signing of documents. This is not a case where the Defendant did not have available to her independent legal advice. 45In my view, no deficiency is demonstrated in what the Plaintiff, or anyone on behalf of the Plaintiff, did in the assessment and approval of the loan. 46I move to some specific matters which have been raised by the Defendant in various parts of the pleadings and submissions. Some of these matters were crystallised in a document entitled Statement of Facts and Law in Dispute, which the Defendant served and filed in advance of this hearing. 47It was submitted for the Defendant that the Plaintiff owed the Defendant a duty of care and/or a duty to undertake its own due diligence to examine all aspects of the loan application in a manner above the normal standard of care. The Plaintiff submits that no such duty was owed by the Plaintiff to the Defendant. The Plaintiff submits as well that, even if there was such a duty, it was not breached in this case. 48I am not persuaded that there is any duty of care which the Plaintiff owed the Defendant in the circumstances of this case. As I have said, this was, on the face of it, a straightforward loan application. The Defendant's husband, an experienced person in the mortgage industry, provided documentation in which there were express statements (signed by the Defendant) concerning her income and self-employed status. That was the material which the Defendant invited the Plaintiff to act upon. The evidence reveals that the Plaintiff went beyond that, and that there was a process of assessment and consideration of the merits of the application. If the argument that is put by the Defendant, is that the Plaintiff was under a duty to investigate and detect a false statement made by the Defendant as to her income and employment status, then that is a proposition which, in my view, is not tenable in law. In any event, it seems to me that there is nothing in the circumstances of this case that gives rise to any duty of care on the part of the Plaintiff to the Defendant, let alone a breach of any such duty. 49As I have said, the Defendant had legal advice available to her and an experienced person in the mortgage industry, namely her husband, assisting in the process. 50The evidence demonstrates that the Plaintiff, and persons on behalf of the Plaintiff, assessed the question of whether the Defendant could meet obligations under the loan agreement. Any submission that there is, in some way, a basis upon which the Plaintiff is not entitled to relief against the Defendant in that respect ought not be accepted. 51Complaints were made in the Defendant's pleadings that she was not in a position to reasonably protect her own interests. I accept the Plaintiff's submission that the evidence establishes that the Defendant had the assistance of her husband, and access to a lawyer who did assist her. There is no substance in that argument. 52Insofar as there is a complaint that the Plaintiff failed to determine whether the Defendant obtained legal advice, I note that there is acknowledgment by the Defendant, by her signature of the loan agreement, that the Plaintiff had recommended that she seek legal and financial advice before accepting the loan offer. The evidence indicates that the Defendant had available to her a solicitor and there was, as well, the assistance of her husband. 53The Defendant complains that in assessing and approving the loan application, the Plaintiff failed to comply with its own lending guidelines and underwriting assessment criteria, to the extent that its failure was a departure from normal and appropriate lending practice. The Plaintiff submits, and the Court accepts, there is no evidence to support that allegation. The evidence reveals a process of careful consideration given to the application before its approval. 54A submission was made for the Defendant that the Plaintiff committed fraud, when assessing the Defendant's loan application, and by falsifying the Defendant's income for the purpose of assessment. There is simply no evidence at all to support that serious allegation, and I reject it. The evidence indicates a consistent representation by the Defendant of an income level and employment status, with those representations being made by the Defendant to the Plaintiff. 55There is an assertion that the Plaintiff was aware that the Defendant was not self-employed, and therefore did not qualify for a "quick-doc" loan. There is no evidence to support that allegation, and the Court rejects it. 56There is a related submission from the Defendant that the Plaintiff was aware that the Defendant had no income of her own, and did not have capacity to make loan repayments, and thus it was foreseeable that the loan would default from the outset. There is simply no evidence to support that allegation, and the Court rejects it. 57The evidence reveals representations made by the Defendant to the Plaintiff about her capacity to meet repayments due under the loan agreement. I have already referred to this evidence. 58However, it is also noteworthy that loan repayments were in fact met from April 2005 until about October 2007. The actual experience, when the loan was underway, was that its terms were being met for a period. In addition, I have already observed that a careful process of assessment of the loan was undertaken by and on behalf of the Plaintiff. 59A further complaint made by the Defendant is that the mortgage was prohibited under s.44 Consumer Credit Code. This submission is misconceived. This is not a third-party mortgage. The Defendant was the sole borrower and mortgagor. Section 44 of the Consumer Credit Code has no application. 60There is a further submission from the Defendant that, as a result of the alleged breach of a duty of care said to be owed by the Plaintiff to the Defendant, the Defendant has suffered loss with regard to her quality of life. I have already indicated my findings with respect to the suggestion that a duty of care was owed by the Plaintiff to the Defendant, and that such a duty was breached. I have rejected the Defendant's contentions on those issues. 61However, it is necessary to keep an air of reality about the events disclosed by the evidence. The Defendant wanted to borrow money to buy a house at Faulconbridge, in which she could live with her husband. A loan was sought, the terms of which were made entirely clear. The Plaintiff, as I have found, agreed to advance the money pursuant to the loan to the Defendant. 62The Defendant agreed to the loan, mortgaged the property, paid almost the entire sum borrowed to the vendors of the Faulconbridge property, and then she and her husband moved in. In late 2007 and early 2008, the Defendant defaulted on the loan agreement, with certain consequences. And since May 2008, no money has been paid at all pursuant to the loan agreement and mortgage. 63It is difficult to see how that scenario in any way gives rise to an actionable complaint against the Plaintiff, whereby the Plaintiff is in some way liable for some suggested wrongdoing impacting adversely upon the Defendant's quality of life. 64The evidence establishes a clear failure by the Defendant to comply with her contractual obligations under the loan agreement, with consequences that follow under the loan agreement and mortgage. None of this gives rise to any entitlement to damages against the Plaintiff, and no basis has been demonstrated in fact or in law for such a claim. 65There is no evidence that the Plaintiff has engaged in any unfair pressure or tactics towards the Defendant. Application was made for a loan which was approved. The Defendant agreed to the terms of the loan. The Defendant had access to independent legal advice which she utilised for purposes related to the loan and mortgage. 66There can be no doubt that the Defendant was aware of the identity of the mortgagee, namely, the Plaintiff. Nor can there be any doubt that the Defendant was aware of the nature of the agreement that she was entering into, and the consequences in the case of default, including the Plaintiff seeking an order for possession of the Faulconbridge property. 67The evidence reveals that, in assessing the Defendant's loan application, the Plaintiff relied on the documents submitted by and on behalf of the Defendant. These included the "low-doc" declaration of financial position dated 10 February 2005, signed by the Defendant, in which she states that the Plaintiff recommends that the Defendant seek independent legal and financial advice prior to obtaining a loan. The Defendant declared that she was satisfied that she "can comfortably afford all repayments resulting from this loan without incurring substantial financial hardship". 68It was submitted for the Plaintiff that, if any misrepresentations were made in this case, they were made by the Defendant, and if anyone was misled, it was the Plaintiff. It must be said, on the totality of the evidence, that there is no conduct on the part of the Plaintiff, or anyone acting on behalf of the Plaintiff, which appears to be in any way blameworthy. It is not necessary to make such a finding in this case, however, there is considerable force in the Plaintiff's submission that, if there is any misrepresentation in this case, it is to be laid at the feet of the Defendant and the Defendant's husband.

69I have referred to these submissions so that, even in the absence of the Defendant, the Court has considered whether any matter ought stand in the way of a grant of relief to the Plaintiff. 70Having considered these matters, I am well satisfied that the Plaintiff has established its entitlement to relief as sought in the Statement of Claim. 71In reality, this is a straightforward case of mortgage default with the Plaintiff establishing an entitlement to an order for possession of the Faulconbridge property. 72I am satisfied, in all the circumstances, that the following orders should be made: (a) I return a verdict for the Plaintiff on the Statement of Claim. (b) I make an order that the Defendant is to give the Plaintiff possession of the land contained in Certificate of Title Folio Identifier xxx and known as xxx, Faulconbridge. (c) I grant leave to the Plaintiff to issue a writ of possession forthwith in relation to those premises. (d) On the Amended Cross-Claim filed 4 May 2011, I return a verdict for the Cross Defendant. (e) I order that the Amended Cross-Claim filed 4 May 2011 is dismissed. (f) I order that the Defendant/Cross Claimant is to pay the Plaintiff's costs of the proceedings. [Submissions were made concerning further orders and an email received from Mr Hammond ] 73It has been brought to my attention that, at 2.26 pm today, an email was sent by Mr Patrick Hammond to my Associate which attached a document signed by the Defendant, but in fact dated yesterday. That document (MFI4) asks to be informed of any orders that are made. It seems clear that the document is misdated, and should be dated today. 74I will take steps to have the orders which I have made, and will make, communicated to the Defendant by email, this being the means of communication with the Defendant used thus far by my Associate. 75In addition to the orders which I have already made, I make an order that, in the event that the Defendant applies for a stay of execution of the writ of possession, which will be issued as a result of the orders which I have made, any application for a stay should be brought to the attention of my Associate in the first instance so that, if I am in a position to hear it, I will do so. 76If I am not in a position to hear any stay application, then the application should be communicated in the usual way.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 April 2012