Second issue: whether the default notice given pursuant to s 57(2)(b) was valid
28The s 57(2)(b) notice served upon Mrs Dilati specified that the overdue amount was $7,506.68 in respect of the failure to pay the monthly instalments due in August and September 2009, each in the amount of $3,753.34. It may be inferred from the evidence that the amount of each of those payments was calculated on the basis of the then interest rate as applied to the outstanding principal of approximately $546,000, which was barely $50,000 less than the borrowed amount. The stated indebtedness at that time was due to the two redraws referred to above at [9].
29The evidence revealed that Mr Khalid was shocked to learn of the extent of Mrs Dilati's indebtedness under the mortgage. In a conversation with Mrs Dilati's husband, he was told that Mrs Dilati's son had made the two redraws without any authority to do so and had forged Mrs Dilati's signature on the redraw applications. Mr Dilati also told Mr Khalid that there was no more then $160,000-$165,000 owing on the loan and that Perpetual were "cheating". Mr Dilati told Mr Khalid that as the redraws were not authorised, those amounts were not "part of what we owe under the mortgage". However, Mr Dilati also told Mr Khalid that they were not going to "help [him] with the court".
30It is apparent from the repayment agreement entered into by Mrs Dilati with Perpetual in February 2010, after she had been served with the s 57(2)(b) notice and the statement of claim, that Mrs Dilati accepted liability to pay the full amount claimed by Perpetual, notwithstanding Mr Dilati's assertion to Mr Khalid that the redraws made by their son were unauthorised. It should also be noted that Mrs Dilati was provided with monthly statements of her account, which clearly showed the redraws and the consequent increase in the balance owing. There was no evidence as to whether Mrs Dilati ever protested to Perpetual that it had permitted the alleged unauthorised redraws to be made. However, Mrs Dilati had legal representation at the time she entered into the repayment agreement with Perpetual in 2010.
31Mr Khalid contended that default judgment should not have been entered because the s 57(2)(b) notice was invalid. Underlying this argument was Mr Khalid's contention that the two redraws were not authorised and that the balance owing on the mortgage and the monthly instalments due were substantially less than specified in the notice. He submitted, therefore, that Mrs Dilati did not have a reasonable opportunity to comply with the demand because the instalment amount stated to be owing was "wildly misstated".
32Mr Khalid further submitted that even if Mrs Dilati knew that she was only required to pay the amount, on Mrs Khalid's argument that was actually due, the calculation of the instalment amount alleged to be due was so complicated that a computer program was required to do so. It followed that Mrs Dilati had no reasonable opportunity to comply with the notice.
33Mr Khalid submitted, therefore, that the requirements of a valid notice had not been satisfied: see Bunbury Foods Pty Ltd v National Bank of Australasia Ltd [1984] HCA 10; 153 CLR 491. Mr Khalid submitted that James J had erred in his interpretation of this decision, in that his Honour held that an overstatement of the amount due in a s 57(2)(b) notice could never be the source of invalidity.
34In Bunbury Foods, a statutory demand to pay monies due had failed to specify the amount owing. In considering the validity of the notice in that case, the High Court (Mason, Murphy, Wilson, Brennan and Dawson JJ) stated at 503-504:
"It is of some materiality to note that it is not essential to the validity of a notice calling up a debt that it correctly states the amount of the debt. Even a notice given to the mortgagor by the mortgagee as a condition precedent of a power of sale is not rendered invalid because it demands payment of more than is due ... the interests of the parties will be more adequately protected by the principle that the debtor must be allowed a reasonable opportunity to comply with the demand before the creditor can enforce or realize the security than by the adoption of the suggested proposition that the notice of demand must specify the amount of the debt. In determining whether the debtor has had such an opportunity it will be relevant to take account of the debtor's knowledge, lack of knowledge and means of knowledge of the amount due and of the information which the creditor has provided in that respect, including the response which he has made to any inquiry by the debtor." (emphasis added)
35Bunbury Foods did not involve a s 57(2)(b) notice, but rather a demand in respect of monies due under a debenture. Nonetheless, the principles stated in the decision have been accepted as applying to the validity of a s 57(2)(b) notice: see Websdale v S & JD Investments Pty Ltd (1991) 24 NSWLR 573 at 578-9; Wongala Holdings Pty Ltd v Mulinglebar Pty Ltd (1994) 6 BPR 13, 527 at 13,529 and 13,532-3; and Notaras v Sly & Weigall [2005] NSWCA 275; 12 BPR 23,765.
36Mr Khalid submitted that the correct test for the determination of the validity of a s 57(2)(b) notice is as stated in the bolded portion of the passage from Bunbury Foods set out above, to which James J did not refer. According to Mr Khalid, this led his Honour into error. Mr Khalid submitted that not only had his Honour applied an incorrect principle, but had failed to address the argument he had advanced. Mr Khalid said he had argued before his Honour that, given the difference in the amount claimed and the amount Mr Khalid contended was due after the deduction of the redrawn amounts, Mrs Dilati did not have a reasonable opportunity to pay the amount actually due within the period specified in the notice. Mr Khalid further submitted that in accordance with Bunbury Foods, the question whether Mrs Dilati had that reasonable opportunity was to be evaluated not only by looking at the notice, but also having regard to her knowledge, or lack thereof, as to the amount actually due.
37It is apparent from his Honour's reasons that he did not deal with the second part of the passage in Bunbury Foods. To that extent, there is some basis for the complaint raised by Mr Khalid. However, in my opinion, there was no error in the conclusion his Honour reached in respect of the validity of the notice. As Mr Khalid's submissions recognised, in determining whether the recipient of a notice has had a reasonable opportunity to comply with it, it is necessary to look at the circumstances, including the recipient's knowledge as to the amount due.
38In this case, Mrs Dilati received monthly statements that specified the amount of principal outstanding, the current interest rate, the amount of interest debited to the account each month and the amount of the instalment payment also debited monthly. Mrs Dilati continued to make payments of principal and interest on the balances specified in the statements from time to time. Given that the statements disclosed the fact, the dates and the amounts of the redraws, as well as the resultant increase in the balance outstanding, it must also be inferred that Mrs Dilati was aware her son had redrawn the two amounts from the account. The conversation Mr Dilati had with Mr Khalid also supports that inference.
39However, notwithstanding that Mr Dilati contended that Perpetual was responsible for the increased indebtedness that resulted from the redraws, I am of the opinion that, as Mrs Dilati continued to make instalment payments calculated on the amount specified in the statement from time to time, she accepted her liability for the outstanding balances stated to be due, including the increased balance amounts due to the redraws.
40It follows, in my opinion, that Mrs Dilati had the requisite knowledge to enable her to determine what amount was due by way of the two monthly instalments specified in the s 57(2)(b) notice. There was no evidence that Mrs Dilati denied or disputed her liability for the amount stated in the notice or that she had sought any clarification of the amount claimed. Indeed, to the extent there is any evidence on the point, it is apparent that Mrs Dilati did not contest the amount claimed in the notice. Otherwise, she would not have entered into the repayment agreement with Perpetual to pay the arrears and to maintain payments as and when they fell due. Any unhappiness Mr and Mrs Dilati may have had with their son's conduct does not impact upon the position that Mrs Dilati did not contest her liability under the mortgage.
41In my opinion, this challenge to the trial judge's decision must be rejected.
42Before leaving this particular ground of appeal, it should be noted that Perpetual, by way of notice of contention, contended that Mr Khalid did not have standing to set aside the default judgment. That issue had been raised before James J. However, his Honour considered it unnecessary to deal with, as it was sufficient for his determination to dismiss the appeal on the basis that the s 57(2)(b) notice was valid and because, in any event, there was a non-monetary default in respect of which notice was not required. The second of these two matters is dealt with below.
43On the hearing in this Court, Mr Khalid contended that he had sufficient interest to set aside the default judgment because Mrs Dilati held the land on constructive trust for him. He submitted that the transaction between him and Mrs Dilati constituted a valid and enforceable agreement for sale and that he had thereby acquired a beneficial interest in the land: see KLDE Pty Ltd v Commissioner of Stamp Duties (Qld) [1984] HCA 63; 155 CLR 288 at 296, although the interest so acquired was conditional on payment of the whole of the purchase price. Mr Khalid submitted that he thus had an equitable interest in the land, so that Mrs Dilati held the land for him upon a constructive trust. Accordingly, it was said he could bring a redemption suit against Perpetual, claiming that in the calculation of the amount due to redeem the equity of redemption, a deduction should be made for the two redraws made by Mrs Dilati's son.
44In Chang v Registrar of Titles (Vic) [1976] HCA 1; 137 CLR 177 Mason J noted, at 184, that "[i]t has long been established that a vendor of real estate under a valid contract of sale is a trustee of the property sold for the purchaser". However, as his Honour observed, there is a controversy as to the time when the trust relationship arises and the character of the relationship. It was unnecessary for his Honour to resolve that controversy in the case before him. It was sufficient to accept as correct the proposition that a vendor becomes a constructive trustee of the property sold when the purchaser has paid the purchase money, and is a trustee within the meaning of the provisions of the statute relating to vesting orders. In that circumstance, it would be open to a court to make a vesting order where a vendor, who had been paid the purchase price, failed to execute a transfer or was disabled from so doing.
45Given the observations made in Chang, it remains an open question as to the proper characterisation of the relationship between Mrs Dilati and Mr Khalid. However, it is not necessary to determine that question on this appeal. As counsel for Perpetual pointed out, the only issue before this Court is whether the default judgment should be set aside. Whatever rights Mr Khalid might have by way of an equity suit for redemption of the mortgage, those rights do not impact upon Perpetual's entitlement to default judgment. In my opinion, this submission is correct.
46Nor is it necessary to determine the question of Mr Khalid's standing to set aside the default judgment having regard to my conclusion that the s 57(2)(b) notice was valid.