Property law - Mortgage - Default in payment of monthly instalments - Whether repayment arrangements affected by alleged collateral contract - Turns on own facts

Hoyt's Pty Ltd v Spencer [1919] HCA 64; (1919) 27 CLR 133

Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406

Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489

Tobin v Dodd [2004] WASCA 288

Commissioner of Stamp Duties (NSW) v Bone [1977] AC 511

Ogilvie v Adams [1981] VicRp 92; [1981] VR 1041

1 The plaintiff, Keystart Loans Ltd, claims to be entitled to recover possession of a mortgaged property and the debit balance of a loan advanced to the defendants. The loan was to be advanced progressively to enable a residence to be constructed on the defendants' property at 19 Princeton Circle, Alexander Heights. The advances were secured by mortgage H222193 which was registered at the Department of Land Administration ("DOLA") on 13 September 1999.

2 The plaintiff contends that construction of the house on the subject property was completed towards the end of the year 2000 and the defendants took possession of the premises. On the plaintiff's case, this meant that the defendants became liable to pay the full monthly instalments provided for by the loan arrangements but they failed to do so. The plaintiff issued a notice of default dated 16 July 2001 in respect of the failure to pay an instalment due on 1 July 2001 of $861.21. This was not complied with and the plaintiff proceeded to issue a notice to vacate dated 21 August 2001. The plaintiff advised the defendants of its intention to exercise a power of sale and requested vacant possession within 14 days.

3 On the plaintiff's case, the defendants failed or refused to vacate the property. The plaintiff commenced legal proceedings on 11 October 2001. By its prayer for relief the plaintiff sought an order that the defendants give the plaintiff possession of the subject property and pay the outstanding debt plus accruing interest.

4 It seems that by the time the writ of summons was issued the defendants had separated. The first named defendant, Noel Edward Haydon-Wood, did not enter an appearance. However, the second named defendant, Linda Haydon-Wood, entered an appearance and filed a statement of defence dated 16 November 2001. This was prepared and filed on her behalf by her then solicitors, Taylor Smart. For ease of reference, I will henceforth refer to the second named defendant as "the defendant".

5 By her statement of defence the defendant substantially admits the terms of the loan arrangements. She acknowledges an obligation to commence repayment of the mortgage debt by instalments as from 1 July 2001 but brought into issue certain alleged differences between the parties concerning the system of repayment. Exchanges about these matters were said to stand in the way of the plaintiff relying upon the notice of default dated 16 July 2001 in order to obtain possession of the property. I will come to the details underlying this line of defence in due course.

6 I note in passing that after the commencement of proceedings, between 1 March 2002 and about May 2003, the defendant made regular periodic payments in reduction of the amount due. These payments were accepted by the plaintiff and she continued to reside at 19 Princeton Circle, Alexander Heights. However, when the payments ceased the plaintiff proceeded to pursue its claim with renewed vigour. These events serve to explain the delay in the matter being brought to trial.

7 The matter was first listed for trial on 18 May 2005. However, by that time, the defendant was not represented by legal advisers, and this gave rise to a number of adjournments. For the sake of completeness, and as a matter of record, it will be useful if I make some observations about that aspect of the matter, being a summary of the observations I made at the commencement of the trial on 24 August 2005. The defendant appeared before the Court on that day, and, having regard to the matters I am about to mention, was clearly aware that the matter was listed for trial and would proceed in the absence of any good and sufficient reason being raised by her as to why any further adjournment of the hearing might be justified.

8 The defendant was informed that she was entitled to present evidence in support of her pleaded case as an unrepresented litigant, and to call witnesses if she wished to do so. As it happened, the defendant decided to withdraw, and did so in a peremptory manner. She declined to take any further part in the hearing. For this reason also, it is desirable that I should set out the facts and matters bearing upon my ruling that the trial should proceed in the absence of the defendants.

9 It will be apparent from my earlier observations that the litigation has been in progress for a considerable period of time, namely, since the writ of summons was issued on 11 October 2001. It seems that the proceedings lay in abeyance for a period but the plaintiff then took further steps to pursue its claim for possession of the subject property and recovery of the alleged debt and to have the matter listed for trial.

10 The documents on the Court file show clearly that the defendant has been on notice for a considerable period of time that the trial of the action would proceed. The pleadings are reflected in a bundle called "Fresh papers for the Judge" dated 18 May 2005. The procedural history of the matter is traced at some length in the affidavit of Nadine Mathiot sworn 22 June 2005.

11 I will not traverse all the matters referred to in the Mathiot affidavit. However, it is important to note that, by letter dated 17 May 2005, the plaintiff's solicitors delivered the bundle of trial documents and witness statements to the defendant in person by courier. It emerges from the affidavit that the action was scheduled to commence on 18 May 2005 before Commissioner N McKerracher QC.

12 On 18 May 2005, after some discussion, Commissioner McKerracher granted an adjournment of the trial to 23 May 2005. This was done in the presence of the defendant. On 23 May 2005, the matter was adjourned sine die again.

13 Discussion at both these adjournments, all of which took place in the presence of the defendant, proceeded from the premise that legal representation was desirable and that she would be taking steps to obtain representation. It was apparent from the papers that the first named defendant had not entered an appearance and was not contesting the action.

14 The matter was listed for trial again on 23 June 2005 before Commissioner Owen-Conway. The defendant appeared on her own behalf on that occasion without representation, notwithstanding the tenor of previous discussions that she would obtain or endeavour to obtain legal representation.

15 It appears from the transcript of the hearing on 23 June 2005 (at 65) that Commissioner Owen-Conway took very careful and conscientious steps to ensure that the defendant had a lawyer present who would be able to explain to her the points being made by the learned Commissioner. This was done by adjourning the hearing for a short period so that a barrister from chambers nearby could be found and brought to the Court to sit with the defendant and convey to her the substance of what was being said.

16 Commissioner Owen-Conway set out at some length an overview of the case and identified various additional lines of defence that might be open to the defendant if the pleadings were amended, and if she considered there was some basis in the evidence for such lines of defence to be advanced. In the course of his observations the learned Commissioner touched upon such matters as waiver, relief against forfeiture and estoppel.

17 It was against this background that the matter was adjourned again on the assumption that the defendant would be allowed a further opportunity to obtain or to endeavour to obtain legal assistance. However, it was made quite clear to her by the learned Commissioner, and he so directed, that the matter was to be listed for hearing again on 24 August 2005 to the intent that the trial would proceed on that date.

18 By way of further attention to the difficulties facing the defendant as an unrepresented litigant, the learned Commissioner directed also that the matter in controversy between the parties should proceed to mediation. It is apparent from the Court file (and this was confirmed to me by counsel for the plaintiff and by the defendant herself) that a mediation was conducted under the auspices of the Supreme Court in the usual way, on 5 August 2005. Both parties were afforded an opportunity to present their views but, unfortunately, the mediation did not produce an outcome.

19 It was against this background that the matter came before me as the trial Judge listed to deal with the matter on 24 August 2005. This was the trial date conveyed to both parties at the previous hearing. On that occasion, in the course of discussion with those before me, I ascertained that the plaintiff wished to proceed and was opposed to any further adjournment. I ascertained that the defendant was not represented and had no immediate prospects of obtaining legal representation. She was afforded an opportunity to raise any matter that might justify a further adjournment but failed or refused to do so.

20 The principles to be applied in dealing with a case involving an unrepresented litigant are set out succinctly in the judgment of E M Heenan J in Tobin v Dodd [2004] WASCA 288. The Court will afford to an unrepresented litigant a degree of assistance, but that does not mean that the Court will confer upon the party in person advantages which, if he were represented, he or she would not have. The Court ought not to deprive the other side of its lawful entitlement.

21 Accordingly, in circumstances where there had been three previous adjournments and various opportunities allowed to the defendant to obtain legal assistance and, if thought necessary, to amend her statement of defence, I indicated that, in my view, the time had come for the matter to proceed to trial on the listed date. If such a stance was not adopted, then it might seem to an observer that special privileges were being conferred upon the unrepresented litigant, and this would be inconsistent with the principles mentioned earlier.

22 As I have indicated, the defendant refused to participate in the trial and withdrew in a peremptory manner. A response of this kind was understandable, bearing in mind the nature of the plaintiff's claim, but it did not deter me from proceeding further. Again, it might strike an observer that unfair benefits were being conferred upon an unrepresented litigant if such a litigant could simply bring the proceedings to a halt by refusing to participate.

23 Accordingly, I invited counsel for the plaintiff to present the plaintiff's case. In doing so, I made it clear that the plaintiff was obliged to lead evidence and make out its case before it could obtain relief. Counsel for the plaintiff then proceeded to call witnesses and adduce documentary evidence. This judgment is directed to the question of whether, having regard to the evidence, the plaintiff is entitled to the relief sought.

24 It seems that in mid-1999 the defendants decided to apply for a loan from the plaintiff company which would permit them to acquire the land known as 19 Princeton Circle, Alexander Heights, being Lot 386 on Plan 22317 and being the whole of the land in Certificate of Title Volume 2115 Folio 584. They aimed to construct a house upon the subject land and to occupy the same. At that time Western Home Buyers Building Society was acting as agent for the plaintiff company.

25 Cherri Margaret Brownlie gave evidence at the trial. She said that she was employed by Western Home Buyers to assess and process loans including the signing up and final explanation phase of the loan. The procedure was to explain the documents that the applicants were signing, confirm the amount of the loan and advise the applicants that they had the opportunity to seek legal advice concerning the documents.

26 Ms Brownlie identified the Keystart Progressive Checklist (Exhibit 11) relating to the defendants' application for a loan of $134,496. Her initials were set opposite certain of the steps in the process, signifying that the step in question had been completed. Thus, she was able to confirm that the defendants, in their capacity as borrowers, on 17 August 1999 signed the Keystart "Offer to Borrow" and the mortgage documents (which were subsequently registered at DOLA as mortgage number H222193). For ease of reference, and to conform to the usage in the pleadings, I will call the former document the "loan contract" and the latter document the "mortgage".

27 The Brownlie evidence substantiated the plaintiff's plea at par 4 of the statement of claim that the loan contract included various express terms, namely, that the plaintiff would advance the principal sum of $134,496 to the defendants. Interest at the rate of 7 per cent per annum was payable on the principal sum. The term of the loan was for 25 years. The defendants were liable to pay monthly instalments of $947.59. The defendants would repay the principal sum at the end of the loan period. The agreed interest rate and the monthly instalments were subject to variation as might from time to time be determined by the plaintiff.

28 I note in passing that this plea was admitted by the defendant in par 4 of her statement of defence save for a denial that the defendants were liable to pay $947.59 per month. The defendant pleaded that the repayments were to be deferred until the completion of a house on the property. She referred to variations to the commencement date of payments as specified elsewhere in the statement of defence.

29 The mortgage document speaks for itself and substantiates the plaintiff's plea at par 6 of the statement of claim that it included various express terms, including a term that immediately upon default in payment of any of the moneys secured various remedies conferred by the mortgage or the Transfer of Land Act 1893 (WA) could be exercised by the plaintiff without any proof of such default or of the continuance of such default. A statement in writing of the amount outstanding was to be prima facie evidence of the amount in question. This plea was admitted by the defendant.

30 Ms Brownlie confirmed in evidence at the trial that she had acted as witness when the defendants executed the loan contract and the documents. Copies of the documents were provided to the defendants together with a loan repayment book to enable them to make repayments other than payments made by direct debit from a bank account. Ms Brownlie received from the defendants a direct debit authority in which the repayment amount was the same as the amount set out in the loan contract.

31 Ms Brownlie said in evidence that when a loan is a construction loan it was the Western Home Buyer's standard practice to explain to the borrowers when their loan repayments would commence. The defendants' loan was to finance the purchase of vacant land and the construction of a house on that land. She explained to them that the full repayments on their loan would not commence until the house was completed or the loan was fully funded; that is, when the builder had given the borrowers the keys to the house or when the limit of the loan as set out in the loan contract was fully advanced to the builder. She said that the commencement date did not always correspond to the date set out in the offer to borrow which was set on the assumption that the house would be completed in about 6 months from the first drawing of the loan.

32 Ms Brownlie said further that she always told borrowers that they were required to make payments of $200 per calendar month from the date of settlement of the property (being the moment when the land was acquired by the borrowers) even though the construction of a house was to follow. She was sure, based on her usual practice and the relevant documentation, that she told the defendants that they had to make a payment of $200 per month until the time when the loan was completed or fully funded. That was when the full repayments of $947.59 would start.

33 The evidence given by Ms Brownlie concerning repayments is borne out by the documents and is consistent with par 4 of the defendant's statement of claim. The loan contract (Exhibit 2) says at Item 4 that the amount of each repayment is $947.59 "which can change without your consent". It is said in Item 5 that the date of the first repayment was not ascertainable at the time the offer to borrow was prepared but was to be specified in the security stated in Item 12. The security mentioned at Item 12 is a first registered mortgage over the subject property. Item 16 reflects an assertion that the loan is being used to assist with the construction of a house and contains an entry that the date "from which full repayments are required to be made" is 1 February 2000. This entry, consistently with the evidence given by Ms Brownlie (and later by Mr Munro) appears to be simply an estimate as to when construction will be completed.

34 The mortgage contains a schedule confirming that the loan amount is $134,496. The commencement date is said to be the date upon which the principal sum is advanced or a part thereof is firstly advanced to the borrower. The date of the first payment is to be "as advised by the mortgagee to the mortgagor".

35 It emerges, then, to this point, that, on the plaintiff's case the repayments to be made by the defendants were to be made in accordance with directions given to them by the plaintiff having regard to the progress of the building works save that payment of full instalments in the order of $947.59 per month were not to commence until the house was completed or the loan was fully funded. The exact amount of the full monthly instalment could itself be changed from time to time.

36 I pause here to note that the plaintiff adduced in evidence a transaction statement or statement of account concerning the subject transaction commencing on 27 August 1999 and running through to 29 March 2004. The transaction statement shows that a sizeable payment of $49,200 was made on 13 September 1999 in order to complete the acquisition of the property. In due course, on the debit side, payments of $32,030 and $24,022 were made to Commodore Homes on 23 May and 18 July 2000 respectively. On the credit side deposits were made by or on behalf of the defendants of $120 on 24 December 1999 and $50 on 25 February 1999. Interest on the principal debt continued to accrue.

37 Further payments were not made by or on behalf of the defendants in reduction of the debt until 1 March 2002; that is, after the commencement of legal proceedings. In the period 1 March 2002 to 18 July 2003 regular payments of $170 were made by or on behalf of the defendants in reduction of the debt. On the plaintiff's case no payments were made thereafter. A certificate of indebtedness dated 23 August 2005 (Exhibit 22) was adduced in evidence on behalf of the plaintiff in order to establish that as at 23 August 2005 the debit balance of the subject loan account number 886929 (being the number appearing on the transaction statement) stands at $162,348.95. It is said that the said loan account continues to accrue interest at a daily rate of $27.59.

38 Andrew Michael Munro said in evidence at the trial that during the period between 1999 and 2003 he was employed as a Collections Manager with Western Home Buyers, having worked for that firm since October 1993. He first became involved with the defendants' account in about December 1999 at which time he became aware that they were supposed to be making weekly payments of $50 (or $200 per month) while construction was proceeding. He could not recall speaking to either of the defendants at that time.

39 His main involvement in the matter commenced in May 2001 when the defendants refused to authorise the final progress payment to Commodore Homes. It was apparent to him from the loan contract that the defendants were nominally obliged to commence full repayment of their loans on 1 February 2000 but it was obvious that the construction work had proceeded beyond that date. It was apparent also that by 15 October 2000 the house had been completed and a final progress claim had been submitted by the builder. The amount the subject of the final progress claim had not been paid to Commodore Homes or West Australian Housing Centre and whilst the loan amount originally approved of $134,496 had not been drawn down in full, the defendants had not made any repayments of the loan and interest had capitalised.

40 By letter dated 15 May 2001 Mr Munro wrote to the defendants at 19 Princeton Circle, Alexander Heights summarising the position as follows (Exhibit 17):

"Dear Mr & Mrs Haydon-Wood,

Member Number - 886929

I refer to your Keystart loan, managed by the Society, taken out to build a home through The West Australian Housing Centre at Lot 386 Princeton Circle, Alexander Heights.

The second instalment was paid to The West Australian Housing Centre on 18 July 2000 with advice received, from The West Australian Housing Centre, on 15 October 2000 that construction of the home had reached practical completion, confirmation of this was received from the Society's valuer on 19 October 2001. However, due to a dispute between you and the builder you have not authorised the release of the final instalment of $23,523.00.

The loan amount originally approved was $134,496.00, the amount outstanding on your loan as at today is $122,354.10, this due to capitalisation of interest on the loan. Given the escalation of the debt it is imperative that the dispute with The West Australian Housing Centre be resolved to enable consideration, by the Society, of the release of the final instalment. That is, prior to the release of the final instalment, the Society will require confirmation of your incomes and financial positions to ensure that you are able to meet the mortgage repayments.

Should this matter not be resolved by 25 May 2001 the Society will have no alternative but to issue action to obtain vacant possession of the mortgaged property with the same to be sold by Keystart Loans Limited as Mortgagee in Possession."

41 Mr Munro said in evidence that in the course of a telephone conversation with the defendant on 1 June 2001 she told him that she was in dispute with Commodore Homes and that she would not authorise the release of the final instalment. It was apparent from the conversation that the defendants had taken possession of the house and it seemed that Mrs Haydon-Wood was living at the premises but had parted company with her husband. She asked Mr Munro to send out the necessary documentation for the removal of Mr Haydon-Wood from the mortgage and certificate of title.

42 Mr Munro said in evidence that he informed the defendant that to do this she would have to arrange alternative finance through a bank. He told her that of the original $134,496 approved there remained available only $11,440 to pay the builder due to unpaid and capitalised interest. The balance of the loan was then $123,055.54 and the amount outstanding to Commodore Homes was $23,523. He told her that based on the current amount outstanding the monthly repayment would be $871.31. This instalment amount was based upon the then outstanding balance of the loan account being repaid within the original term of the loan contract.

43 Mr Munro went on to say that on 13 June 2001 he wrote to the defendants confirming the then current amount of the loan and setting out the amount of the repayments that would be required to pay out the current balance of the loan and the date on which these revised monthly payments would commence, that is, 1 July 2001. He enclosed a direct debit authority to be used for future repayment and made it clear that the first of the revised repayments was due on 1 July 2001.

44 Mr Munro's letter dated 13 June 2001 reads as follows (Exhibit 18):

"Dear Mr & Mrs Haydon-Wood

Member Number - 886929

Further to my letter of 15 May 2001 and subsequent telephone discussion with Mrs Haydon-Wood.

I advise that the balance outstanding on your loan is currently $123,055.54, to repay this amount at the interest rate currently applicable to your loan, 6.75%, the monthly repayment due from 1 July 2001 will be $862.21 or $215.31 per week.

A direct debit authority is enclosed for completion and return this may be used for future repayments, the first repayment of $861.21 is due in full on or before 1 July 2001.

The Society, under the mortgage signed by you, requires a Certificate of Currency from an insurer with a (sic) concessions agreements with Keystart Loans Limited, a list of those insurers is enclosed. The certificate must be current for 12 months and for a minimum of $100,000.00, the policy must be in joint names.

The Society, as advised in my previous correspondence, has not released the final instalment to the West Australian Housing Centre as no authority has been received from you authorising its release. In the event that the final instalment is released the monthly loan repayment will increase as the balance of your loan will increase. The new repayment will be calculated when the final instalment, or available funds as determined by the Society, has been released. The amount currently available for drawn (sic) down from you (sic) loan is $11,440.46, the amount outstanding to the West Australian Housing Centre is $27,855.00, this as per their advice dated 15 October 2000.

With regards to the release of Mr Haydon-Wood from the mortgage and transfer of the Certificate of Title into Mrs Haydon-Wood's sole name, I advise that you will need to approach your Bank/Building Society/Mortgage Provider to re-finance this loan to achieve this.

Please direct all inquiries regarding your loan to myself."

45 Mr Munro said in evidence that no repayment was received by 1 July 2001. Further, as no payment had been received by 16 July 2001, he instructed the plaintiff's solicitors to issue a default notice.

46 A copy of the plaintiff's default notice dated 16 July 2001 was adduced in evidence at the trial. It contains an assertion that an instalment of $861.21 was due on 1 July 2001 and that the defendants were in breach of the loan contract and the mortgage in having failed to pay the same. They were required to remedy the default within 30 days of the notice by paying the outstanding amount plus $77.99 for enforcement expenses being $939.20 in all. It was said that if the default was not remedied the plaintiff would exercise its powers under the mortgage.

47 Mr Munro said in evidence that 2 weeks later on 30 July 2001 he received a telephone call from Mrs Haydon-Wood. She was very aggressive. She acknowledged that she had received the direct debit authority but she was still filling it in. She said that she had to deal with bricks falling out in the garage. Moreover, she believed that Western Home Buyers was in error in issuing a notice of default. She then became abusive and hung up. In the event, neither of the defendants made any payment in response to the notice of default.

48 On 20 August 2001 Mr Munro instructed Keystart's solicitors to issue a notice to vacate to each of the defendants. The relevant notices were adduced in evidence at the trial. They recite a failure to comply with the notice of default dated 16 July 2001 and called upon the defendants to vacate the property by 11 September 2001. It was said that if vacant possession of the property was not available to the credit provider on or before 11 September 2001 the credit provider would exercise the powers conferred on it by the mortgage.

49 Mr Munro said that no repayments were made to the subject loan account by 9 October 2001 and he therefore instructed the plaintiff's solicitors to commence the present action in order to obtain vacant possession of the property and to recover the amount then outstanding which, in the prayer for relief, is said to be the sum of $126,775.50 with interest accruing at the daily rate of $22.43 from and including 10 October 2001.

50 While Mr Munro was giving evidence at the trial I asked him various questions with a view to ensuring that I had a clear picture of what had occurred as he saw it. He confirmed that the assumption underlying the subject transaction was that full instalments would not commence to fall due until the house was completed and occupied. He said that the date given at Item 16 of the loan contract was an estimate as to the likely completion date. The initial payments prior to the full instalments could be characterised as nominal repayments, just to offset some capitalisation of interest.

51 Mr Munro said that as at May 2001, when the file came to him, his analysis was that a final progress claim had been received from the builder saying that the property was completed as per the contract. The valuer had confirmed that the property had been completed and was now ready for occupation. The only thing outstanding was the clients' authorisation to pay the builder. The situation came to his attention because interest was capitalising on the loan and Mrs Haydon-Wood had moved into the property. In this rather confused situation it could be said that the loan was technically in arrears but he did not view the matter in that light, notwithstanding the failure to make the nominal payments.

52 Mr Munro said in answer to my questions that his plan of action was to crystallise the debt and to call upon the defendants to begin paying the full instalments calculated accordingly, now that the house had been completed and Mrs Haydon-Wood was living in the home. It was upon that basis that he informed her of the amount to be paid and wrote to her on 13 June 2001 confirming that a full instalment of $861.21 had to be paid on 1 July 2001. The payment was not made.

53 Mr Munro said that it was apparent from what Mrs Haydon-Wood said that her issue was with Commodore Homes not with the plaintiff. It was apparent from his conversations with her that she was living in the home because she expressed concerns about the quality of the workmanship. Moreover, the writ of summons was served upon her at the subject address. I note in passing that the letters of 15 May and 13 June were addressed to and apparently received by the defendant at 19 Princeton Circle, Alexander Heights. She complained about the quality of the workmanship but did not deny that the house had been completed and that she was in occupation.

54 The plaintiff in its statement of claim described the loan arrangements and the related documents. It pleaded at par 8 that in breach of the loan contract and the mortgage the defendants defaulted in payment of the monthly instalments. By notices of default dated 16 July 2001 the plaintiff demanded payment of the money secured by the mortgage and advised the defendants of its right to exercise powers and remedies contained in the mortgage or conferred by law.

55 The plaintiff pleaded in par 12 that by notices to vacate to the defendants dated 21 August 2001 the plaintiff advised the defendants of its intention to exercise its power of sale of the property and requested vacant possession of the property. The defendants failed or refused to comply.

56 As I have indicated, the defendants by their statement of defence accept that the parties entered into the loan contract and mortgage. However, it is said that it was also verbally agreed between the defendants and Ms Brownlie that the repayments could be deferred until the completion of construction of a house on the property and with subsequent variations to the commencement date of payments being alleged elsewhere in the statement of defence.

57 The defendant pleads at par 6 that pursuant to a verbal agreement between her and Michael Munro, the Credit Control Manager of the plaintiff, it was agreed on or about 15 May 2001 that the defendant would commence repayment on 1 July 2001 notwithstanding the agreement made on or about 5 August 1999. Pursuant to this verbal agreement the plaintiff was to send a direct debit request form which would enable the defendant to make repayments directly out of her social security payment. I note in passing that this plea is generally consistent with the plaintiff's case on the pleadings and on the evidence at trial.

58 The defendant in par 8 of the defence denies that the defendants were in breach of the loan contract and the mortgage and says that it was due to the neglect and default of the plaintiff that a system of repayment was not put in place by 1 July 2001. It is said that the plaintiff failed to send a direct debiting request form to the defendant before 1 July 2001 so repayments could be made by direct debiting out of the defendant's society security payment. Further, or in the alternative, the plaintiff failed to send a payment book before 1 July 2001 through which the defendant could make repayments. Reference is then made to further events concerning the alleged system of repayment.

59 The defendant pleads at par 9 that the notice of default was not validly issued and was issued contrary to the verbal agreement made between the plaintiff and the defendant on or about 15 May 2001. She says that the plaintiff was not entitled to demand payment as alleged or at all and says further that it was the neglect and default of the plaintiff which led to repayment not being commenced on the agreed dates of 1 July 2001 or 1 October 2001 as was agreed subsequently.

60 The defendant pleads in par 11 that on or about 4 September 2001 the defendant spoke to Mr Munro and it was then agreed that the first payment would be further deferred to 1 October 2001 on the account of the defendant's ill health and the plaintiff's failure to establish a system of repayment for the defendant. It is said that as at the date of filing the defence (11 November 2001) the plaintiff had not put in place a system of repayment despite the defendant's repeated request.

61 By par 13 the defendant admits that she has been in possession of the property since 11 September 2001 but denies that her possession is unlawful. She denies that the plaintiff is entitled to relief claimed in the statement of claim or any relief at all.

62 The plaintiff by its reply joined issue as to the matters raised in the statement of defence and said further that the oral agreements sought to be relied upon by the defendant were uncertain as no period after the date of completion of the house was alleged for the commencement of payments; further the agreement alleged, in any event, fails for want of consideration; and, in any event, if (which is denied) any agreement was made as alleged, the construction of a house on the property reached practical completion by 19 October 2000 and the defendant became liable at that time to make the payments pleaded in the statement of claim. It is said that the plaintiff sent to the defendant on 13 June 2001 a direct debit authority. It is said also that the defendants were provided with a repayment book on 17 August 1999 which the defendants could have used at any time to make repayments on the loan.

63 It emerges from this review of the pleadings that the defendant appears to accept that upon completion of the home it was open to the plaintiff (as envisaged by the loan documents) to fix the amount of the full instalments and to nominate a commencement date for payment of the same.

64 The defendant seems to accept that agreement was reached as to these matters on or about 15 May 2001 to the intent that repayment of the full instalments would commence on 1 July 2001. She accepts that no payment was made on that date or on any date prior to issue of the writ of summons.

65 However, an issue is raised on the pleadings that as a consequence of the discussion on 15 May 2001 Mr Munro was to send her a direct debit form to facilitate repayment.

66 It is not made clear in the defendant's pleadings as to whether any discussion about the direct debit form amounted to a collateral agreement that the arrangements concerning payment of the full instalments were to be held in abeyance until the form was supplied. The plaintiff's case was that no such agreement (if any) was made or could be relied on to displace the obligations under the loan documents (as crystallised by Mr Munro's letter dated 13 June 2001) to pay the first full instalment on 1 July 2001. Further, and in any event, a direct debit form was sent to the defendant.

67 I proceed from the premise that when parties negotiate an agreement and then reduce it to writing, the rights and duties of the parties are to be determined by the operative documents.

68 In certain circumstances a distinct collateral agreement, whether oral or in writing, and whether prior to or contemporaneous with the main agreement, can be valid and enforceable even though the main agreement be in writing, provided that the two agreements may consistently stand together so that the provisions of the main agreement remain in full force and effect notwithstanding the collateral agreement: Hoyt's Pty Ltd v Spencer [1919] HCA 64; (1919) 27 CLR 133 at 139.

69 In determining whether a valid and enforceable collateral agreement has been entered into care must be exercised, for there will be no consideration for such an agreement if a party simply offers to do what he or she is obliged to do in any event pursuant to the provisions of the principal contract.

70 In the present case, the loan contract and the mortgage clearly allowed for the plaintiff as lender to determine by advice to the defendants as borrowers when the obligation to repay the principal debt by making full instalment payments would commence. The fixing of a commencement date was left open by the documents and it was therefore to the plaintiff to fix a date by reference to completion of the building work.

71 The evidence of Mr Munro and Ms Brownlie establishes that payment of the full instalments was not required until the loan was fully funded or the house completed in the sense of being practically complete and occupied. I am of the view that a verbal contract of this kind can be characterised as a contract collateral to the main contract for the following reasons. First, such a collateral contract is consistent with the main contract in the sense that the main contract itself allowed for a date to be fixed in due course by advice from the lender to the borrower. Second, an inference can be drawn from the facts and matters comprising the negotiations that the making of the main contract was dependent upon the provision of an undertaking by the lender that it would not call for the payment of full instalments referable to the total principle debt until the house had been completed.

72 I digress briefly to say that the date of 1 February 2000 in Item 16 in the loan contract does not appear to be determinative of when the full repayments are to be made. It arguably is ambiguous when considered in conjunction with those other provisions of the loan contract and the mortgage which clearly contemplate that a date will be fixed. The decided cases indicate that in resolving such an ambiguity I am entitled to take account of parol evidence bearing upon the point in issue. In the present case, the parol evidence establishes that the date 1 February 2000 was simply an estimate as to when the construction work would be completed and the operative date was in fact to be the date advised by the plaintiff as lender to the borrower after the loan was fully funded or the house completed.

73 On the evidence before me I am able to conclude that as at May 2001 when the file came to Mr Munro it was open to him to fix a date for commencement of the full instalments. By that time the house had been completed, even though, it seems, that there was an ongoing degree of disputation between the builder and the defendant. Accordingly, it was open to Mr Munro on behalf of the plaintiff, consistently with the loan contract and the mortgage, and the collateral agreement also, all of which allowed for the fixing of a date for the commencement of repayments by advice to the defendants, to fix a commencement date, and to nominate the amount to be paid.

74 Mr Munro attended to these matters in his telephone conversation on 1 June 2001 and by his letter dated 13 June 2001. He said in the letter that the sum of $861.21 was to be paid on 1 July 2001 (this being the first repayment). It is significant that the defendant did not dispute the assertion contained in Mr Munro's letter of 15 May 2001 that the house had reached practical completion. Mr Munro's subsequent telephone conversations with the defendant established that the house was completed in the sense of being occupied, and this state of affairs is confirmed by the matters I mentioned in passing in the course of earlier discussion.

75 The evidence establishes that no payment was made by the defendants in response to the demand or subsequent notice of default dated 16 July 2001 prior to the commencement of proceedings. Thus, prima facie, I am satisfied on the balance of probabilities that as at 10 October 2001, being the date on which proceedings were commenced, the plaintiff's cause of action had matured, and the plaintiff was entitled to recover possession upon the basis contended for in that the defendants were in breach of their obligations under the loan contract and the mortgage.

76 The statement of defence filed on behalf of the defendant does not challenge the essential constituents of this conclusion. There is an acceptance that the loan arrangements were made and that the plaintiff was entitled to fix a commencement date for payment of the full instalment. However, a line of defence is advanced to the effect that the plaintiff is precluded from enforcing its claim for relief because of a so-called oral agreement concerning the system of payment; that is, that special arrangements were made for payment by direct debit.

77 This contention is not supported by the loan contract and the mortgage. Moreover, as a matter of law, I am not persuaded that it can be characterised as a collateral contract because such an arrangement does not appear to be supported by consideration, for a party cannot be said to be providing value if he or she simply promises to perform an existing obligation to pay in a different manner. Moreover, on this occasion, (unlike the fixing of a commencement date which is allowed for by the documents) the arrangement appears to be inconsistent with the requirements of the loan documents which simply require that payments in reduction of the debt be made.

78 In addition to these matters, in the absence of any evidence in support of this plea from the defendant, I am not able to make a finding in the defendants' favour. Further, and in any event, even if evidence had been adduced on the defendant's side in support of the plea concerning direct debit, there is persuasive evidence in rebuttal before me from Mr Munro (as corroborated by the third paragraph of his letter dated 13 June 2001) that a direct debit form was supplied to the defendant prior to issue of the notice of default. I am satisfied by this evidence (and so find) that the form was sent.

79 I pause to make the obvious point that discussion designed to facilitate repayments does not necessarily amount to an agreement that repayments need not be made until the proposed system of repayment is in place. Indeed, a conclusion to the contrary is always open: a lender who is insisting upon immediate payment has a strong incentive to do whatever is necessary to facilitate the payment but without in any way intending or purporting to hold his right to payment in abeyance.

80 Thus, in the absence of a clear plea or evidence from the defendant that there was a collateral agreement precluding enforcement of the plaintiff's requirement that the first full instalment be paid on 1 July 2001, I find against the defendant with respect to this aspect of the matter.

81 For all of these reasons, I am satisfied that the plaintiff has substantiated its claim for relief and is entitled to possession of the subject premises and payment of the principal debt. I noted in earlier discussion that, in the manner allowed for by the loan documents, a certificate of indebtedness has fixed the amount due as at 23 August 2005 at $162,348.95 with interest accruing at a daily rate of $27.59 per day.

82 For the sake of completeness, I feel obliged to comment briefly on certain matters that were addressed by Commissioner Owen-Conway concerning waiver, relief from forfeiture and estoppel. Commissioner Owen-Conway correctly envisaged that if a defence plea based upon either waiver or estoppel was to be made out it would be necessary to plead particular facts and matters in order to underpin such a plea. As it turns out, the statement of defence has not been amended and it is therefore not possible to pursue this aspect of the matter. However, I have to say, in any event, that one cannot easily assume that the payments made by the defendant after the commencement of proceedings would give rise to a waiver or estoppel. If, as I have found, the plaintiff was entitled to possession as at 11 October 2001, it would be open to the plaintiff to make arrangements for vacation or occupation of the property pending sale. Arrangements of that kind could be made with the defendant or a third party, without the plaintiff necessarily being held to have compromised its claim for possession and recovery of the mortgage debt.

83 As to relief against forfeiture, Commissioner Owen-Conway noted that there is an inherent jurisdiction in equity to grant relief against unconscionable forfeiture of a proprietary interest consequent upon a promisee's exercise of a strict legal right to terminate a contract for the promisor's breach. The exercise of this jurisdiction is often demonstrated in relation to mortgages and tenancies. Thus, where a mortgagor failed to pay sums at the agreed date and the mortgagee sought to exercise a common law right to extinguish the mortgagor's right to redeem the property, equity would restrain the unconscionable forfeiture of the mortgagor's proprietary interest in the land provided that the mortgagor, at the time of relief was sought, was able to pay all sums owing plus compensation for its default: see Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489; Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406.

84 However, the judgments of the High Court bearing upon a matter of this kind emphasise that the courts are generally reluctant to interfere with a party's bargain as to when their contract may be terminated for breach. A strong case needs to be established before equity will consider that an innocent party's exercise of its acknowledged legal right to terminate the contract for the other's breach is so unconscientious as to merit equitable relief against the forfeiture of a proprietary interest that would be consequent upon termination.

85 Moreover, relief is generally thought to be only appropriate, firstly, in situations where the primary object of the bargain is to secure a stated result, and, secondly, in situations where the party attempting to forfeit the property would in all the circumstances of the particular case be acting unconscionably in seeking to enforce its strict legal rights.

86 Equitable intervention in the first situation has not usually been associated with relief to purchasers of land but rather with relief to mortgagors or tenants who have breached the contract by delay in payment sums due but are willing and able to pay all sums outstanding at the time the relief is sought.

87 In the present case, my findings do not lead me to the conclusion that the plaintiff has acted in an unconscionable manner. The plaintiff sought and is seeking to enforce payment of moneys due to it pursuant to freely negotiated loan arrangements centred upon completion of a residential dwelling. Unfortunately, it seems that the respective rights and responsibilities of the parties became clouded as a result of the defendant's dispute with the builder as to the quality of the workmanship in the house, and possibly because of a breakdown in the relationship between the defendants, being the parties who were to live in the house. However, these are not matters of default for which the plaintiff can be held responsible, or used to justify an assertion that the plaintiff has behaved in an unconscionable manner.

88 Moreover, there is no evidence before me, and very few indications, that the defendant is in a position to meet her obligations under the loan arrangements or offer compensation, being a factor which usually accompanies relief against forfeiture. It is apparent that for the past 2 years or so the defendant has been in occupation of the premises without making payments in respect of the same.

89 There will be judgment for the plaintiff in terms of the plaintiff's prayer for relief and upon the basis that the amount due is the sum of $162,348.95 as at 23 August 2005 with interest at the daily rate of $27.59 thereafter. I will hear from the parties as to whether any further orders are required as to costs or otherwise in order to carry the judgment into effect.