Komba v National Australia Bank Limited [2010] VSCA 232

2 By amended summons dated 13 August 2010, Mr Komba seeks the same orders and a number of additional orders that appear to be in the nature of orders for discovery. Part of Mr Komba's complaint has been that he has not been provided with documents relevant to his claims against the respondent.

3 On 7 August 2009 the respondent as mortgagee obtained a default judgment in respect of the property. A warrant for possession was issued on the same day.

4 By summonses filed on 6 October 2009, Mr Komba sought orders setting aside the default judgment and for injunctive relief, the effect of which would have been to prevent the respondent from executing the warrant to recover the property. The summonses were returnable in the Practice Court on 20 November 2009. They were adjourned twice by consent and ultimately heard and determined by the Practice Court judge on 12 May 2010. Beach J dismissed both summonses and ordered Mr Komba to pay the respondent's costs of and incidental to the summonses.

5 His Honour gave ex tempore reasons. He referred to the four affidavits upon which Mr Komba had relied and stated that the question before him could be reduced to four sub-issues:

(a) has the defendant shown he has a defence on the merits?

(b) what were his reasons for failing to file a defence?

(c) was the application to set aside the default judgment made promptly?

(d) was there any prejudice to the respondent?

6 His Honour concluded that Mr Komba had not raised an arguable defence on the merits and dismissed the summonses on that basis. His Honour said that in his affidavit material, Mr Komba had made many points, none of which rose to the level of a defence. In relation to the issue of whether credit was provided wholly or predominantly for domestic or household purposes for the purpose of s 6 of the Consumer Credit Code, his Honour concluded that Mr Komba's own affidavit of 6 October 2009 demonstrated the non-applicability of that section and the Code. As to the suggestion that Mr Komba was not given two relevant pages of the loan documentation, his Honour concluded that it was beyond belief that the pages were not given to Mr Komba given that his signature appeared on one of them and, finally, in relation to an argument concerning the absence of signatures on the account that was in default, his Honour observed that while that might be an anomaly in the transactions that had occurred between Mr Komba and the respondent, it did not rise to the level of a defence.

7 At the time that Mr Komba entered into the loan arrangements with the respondent which are the subject of the present proceedings, he had an existing loan from the respondent in relation to the property, which is the family home in Braybrook. That loan was taken out by him in July 2004. In 2006, Mr Komba consulted a finance broker with a view to acquiring a second property. He alleges that the broker suggested to him that he acquire a particular property in Jacana and arranged the finance for him to acquire that property. Mr Komba intended to develop the Jacana property, but also to use it to house his extended family.

8 It was the respondent's evidence that in May 2006, it advanced $504,400 to Mr Komba pursuant to two 'interest only' home loans. The facility was made up of home loan 1 of $248,900 and home loan 2 of $256,500 and involved the respondent taking mortgages over Mr Komba's properties in Jacana and Braybrook as security for the loans. Payments of interest on the loans were deducted from an existing 'FlexiDirect' account held by Mr Komba with the respondent (sometimes referred to as the 'nominated account').

9 According to the affidavit sworn on behalf of the respondent by its 'Realisation Consultant', Annette Kilby, on 29 January 2010, Mr Komba was required to make 60 consecutive monthly interest only repayments during the interest only repayment period, followed by principal and interest payments until the loans were paid out. The nominated account for debiting all interest charges and service fees during the interest only repayment period was the FlexiDirect account. On 4 May 2006, Mr Komba signed a direct debit request authorising the respondent to debit the FlexiDirect account for interest payments in respect of home loan 1 and 2 in accordance with something called a Direct Credit Service Agreement.

10 According to the respondent, the FlexiDirect account did not have an approved overdraft. The terms of the FlexiDirect account provided that if the account was overdrawn without an approved overdraft limit, the account holder, in this case Mr Komba, had to put the account into credit within seven days and pay the respondent interest on the amount overdrawn at a default rate charged by 'National Personal Accounts' from time to time. The default rate was apparently set out in the National's flyer, 'Indicator Rates for Deposit Products'.

11 By 5 April 2008, Mr Komba was in default of home loans 1 and 2 because he held insufficient funds in the FlexiDirect account to meet the payments that fell due. Default notices were sent to him informing him that his account was overdrawn, requesting that funds be credited to the account and informing him that if the default was not remedied within the specified period, the entire amount of the home loans would become repayable.

12 The events that then ensued are described above. Mr Komba found himself in the position where the respondent was entitled to take possession of his family home in Braybrook. His application to have the default judgment set aside was dismissed on the grounds that he did not have an arguable defence.

13 Mr Komba's application for an extension of time for leave to appeal the orders of Beach J first came on for hearing on 28 June 2010. Mr Komba initially filed two affidavits in support of his application, the first dated 14 May 2010 and the second dated 16 June 2010.

14 Mr Komba's affidavits are argumentative and difficult to understand. They canvass a broad range of matters, some of which were not raised before the judge below.

15 Mr Komba's affidavit sworn 14 May 2010 makes the following points:

(a) He sought leave to appeal out of time because he did not understand that he had to appeal within 14 days. He thought he should apply to the Victorian Civil and Administrative Tribunal. He made attempts to obtain legal assistance from Legal Aid in Footscray and from a Salvation Army legal firm in New South Wales that helps refugees. He had been advised to lodge an appeal with the Court of Appeal.

(b) He thought that the only loan agreement he had with the respondent was the first one that he had taken out in relation to the Braybrook property in 2004. He thought this first home loan was simply to have an increased amount under the new arrangements.

(c) It was not communicated to him that the house in Jacana and the house in Braybrook did not involve two separate loans. He was misled by the way in which the respondent set up two accounts showing two different repayment systems. One loan and one repayment scheme would have been enough. That is why he believes the Consumer Credit Code applies.

(d) The respondent and/or the finance broker knew that the credit was to be wholly or predominantly applied for personal, domestic or household purposes and that the declaration of business purposes was rendered ineffective.

(e) On the application form for the loan, the property in Braybrook is shown as his residential address and is not offered as any security for the mortgage.

(f) The purpose of seeking to borrow more funds was to buy another house to accommodate his large family, not to put the existing mortgage on the Braybrook house in danger by refinancing it to secure another more expensive house.

(g) He did not authorise the taking of money from the Braybrook house to pay for the Jacana house.

(h) He did not authorise extinguishment of the loan agreement of 5 July 2004. That is the only legitimate mortgage document given to him by the respondent.

(i) Pages 8 to 10 of the mortgage loan agreement are missing, and notwithstanding that they were to be given to him within 14 days, the respondent failed to do so.

(j) The Practice Court judge paid attention to what the respondent said about him, but paid no attention to what he said about the respondent.

(k) The so-called 'nominated account' is illegitimate because the signature of the other joint holder of the nominated account is absent.

(l) There was no signed agreement or request to open the nominated account.

(m) The loan agreement is defective by reason of it being dependent on another agreement which the respondent has failed to provide.

(n) The loan contract is unjust and should be varied.

(o) The broker and the respondent deceived him because although the broker told him that he would arrange for all the paperwork necessary to get the money to build a unit at the back of the Jacana property, the application document does not show that any attempt was made to apply for money to build the unit at the back of the Jacana house.

(p) When the application was prepared, his wife was a signatory, but on the final document she was omitted without explanation.

16 In his affidavit sworn 16 June 2010, Mr Komba deposes to further matters that essentially fall into three categories:

(a) The FlexiDirect account. Amongst other things, Mr Komba says that:

• It was fraudulently created by the respondent and was a forgery. He did not have any knowledge of its creation;
• He had no need for the account and did not sign any document to open such an account;
• It has not been established anywhere that he gave the respondent the authority to act for him in relation to the preparation or creation of the account and associated matters. Terms and conditions documents were presented which had no merit and which were used as proof of the agreement to establish the FlexiDirect account, which gave the respondent discretionary power to debit the account if there was no money in it;
• The respondent breached s 9 of the Fair Trading Act by falsely representing to him facts about the FlexiDirect account, knowing that he would rely on that information and thereby induced him into a loan agreement which was fraudulently created to deceive him;
• Ms Ngoy Nonda, one of the co-signatories, was not given an opportunity to speak to the judge in relation to the nominated FlexiDirect account;

(b) The loan agreement. Amongst other things, Mr Komba says that:

• He was induced to enter into the loan agreement by fraud, mistake and misrepresentation. The contract was a sham. The respondent made and used false documents;
• Loan contracts and mortgage documents were completed without his knowledge;
• What was produced by the respondent was not a complete record of the contract and was not legal as it was presented to him on 4 May 2006.
• The alleged agreement would not comply with the statute of frauds (s 53 of the Property Law Act 1958 and s 126 of the Instruments Act 1958);
• Although he signed the loan application documents, the documents submitted to the respondent was not the document he and his wife signed for the purpose of the loan at all;
• He has a non est factum defence in relation to the loan agreement;
• There was no loan interview.

(c) The respondent's unconscionable conduct. Amongst other things, Mr Komba says that:

• He was unable to protect himself from the risk due to ignorance, social or economic constraints;
• He relied upon the respondent to educate him about the existence of the FlexiDirect account terms and conditions and it failed to do so;
• There was an inequality of bargaining positions and special disadvantage existed;
• The respondent set out to systematically implement a strategy to take advantage of the fact that amongst its potential clients there would be a group of inexperienced persons who would act irrationally from a purely commercial viewpoint and would accept the offer. He, Mr Komba, was a vulnerable target and ripe for exploitation as he was able to act inadvertently and buy the property without obtaining proper advice. The respondent gave him very little room to seek alternatives;
• The respondent procured a substantial financial advantage by reason of its commercial experience and he trusted the respondent to do the right thing. This was not a case of shrewd commercial negotiation between businesses within acceptable boundaries;
• The respondent turned a blind eye to the irregularities in the loan application (although he does not say what they were) and the inclusion of a fraudulent instrument and insured that the 'supplementary information' was massaged. He says that the respondent could have asked for further proof of the valuation of the two properties. This would undoubtedly have led to rejection of the loan, as would a personal interview, which would have ascertained what he wanted in the loan;
• He was not given the opportunity to read any of the documentation; he was simply shown the place to sign and was instructed to do so;
• The respondent failed to provide any advice and/or guidance as to the wisdom or prudence of investing in the property which was promoted by the broker;
• The respondent allowed the broker to arrange finance when it was aware that the valuation of the property was questionable and the broker had a vested interest in the transaction;
• The respondent failed to make any enquiries that would have revealed that the property belonged to the broker's wife and that there was therefore a conflict of interest.

17 When the application for leave to appeal first came on for hearing in the Court of Appeal on 28 May 2010, Mr Komba was informed by the Court that the material upon which he relied was not cogent and that the application would be adjourned to enable him to obtain legal advice to assist with his applications. He was reminded that he would be required to show that he had an arguable defence to the proceeding in respect of which the default judgment had been entered.

18 Mr Komba has now filed further affidavits sworn 12 and 13 August 2010 in support of his applications.

19 The first of these affidavits responds to material filed on behalf of the respondent by Annette Kilby. In this affidavit, Mr Komba deposes that Ms Kilby failed in her legal obligation to provide documents in relation to the FlexiDirect account. He makes various allegations about Ms Kilby's integrity and asserts that consents from him and Ms Nonda Ngoy do not exist. Mr Komba then broadly contends that the respondent has failed in its legal obligation to 'resolve the issue of discretionary authority' and has 'negligently misrepresented the facts' and 'failed in its legal obligation' in that it was negligent in supervision of a legal transaction, that its conduct was misleading, that it was negligent in trade and failed in its legal obligation to supervise the transaction, resulting in financial loss to him and damage to his financial opportunity and reputation.

20 Mr Komba's affidavit sworn 13 August 2010 also makes allegations of a sweeping kind. However, it focuses to some extent on the creation of the FlexiDirect account and the respondent's obligations under the Code of Banking Practice to properly inform him of the characteristics of the account and to make proper disclosure of its terms and conditions. Mr Komba also refers to requirements of what is described as 'pre-contractual conduct' not being satisfied, but neglects to specify which contract required such conduct and what, in particular, was not done. He appears to be simply reciting some of the requirements of the Code of Banking Practice. For instance, he deposes that:

b. Where you charged me for the provision of a bank cheque, an international bank transfer or like service, you will disclose the fee or charge to me when the service is provided as the relevant banking service is regulated by Chapter 7 of the Corporations Act 2001.

c. The respondent will provide to me upon request, general descriptive information (which may consist of or include material made available by a government) about:

d. the identification requirements of the Financial Transaction Reports Act 1988; and

e. the options available to me under the tax file number legislation.

21 No indication is given as to how these matters might be relevant. So far as I can tell, there is no dispute between the parties relating to bank cheques, international transfers, tax file numbers or the like. Of more substance may be the allegation that loan 1 and loan 2 combine existing and new loans in circumstances where there was a failure to disclose the combination and what the consequences of the combination might be. Likewise, Mr Komba may have grounds for complaint if the respondent pressed upon him a loan that it knew or should have known he could not repay or if it failed to work on a repayment plan with him before enforcing its right to possession under the loan agreement.

22 Whether such grounds have any substance is uncertain, however, because Mr Komba does not set out the factual basis for them or has 'buried' the relevant facts in the plethora of allegations and 'half baked' legal principles upon which he apparently relies. With the best will in the world, it is not possible to extract from his material a cogent defence.

23 It is apparent, therefore, that despite the opportunity that he was given, Mr Komba has made little ground towards establishing that he has an arguable defence to the proceeding for possession brought by the respondent. He has made all sorts of allegations, but has failed to establish a credible factual basis for those allegations.

24 So far as the possible defences raised before Beach J are concerned, even if Mr Komba was correct about the application of the Consumer Credit Code to the loan agreement, he does not explain how the Code would provide a defence to non-compliance with his obligations under the loan agreement. Mr Komba does not appear to dispute that he failed to make the payments in accordance with the loan agreement; he does not assert that he made the payments that were due. Likewise, even if pages were missing from the loan agreement in his possession, he does not contend that he did not sign the loan agreement and he does not explain how the missing pages would constitute a defence to a proceeding arising from non-payment of amounts owing under the loan agreement. Finally, the argument made before Beach J in relation to the establishment of the FlexiDirect account and the absence of a second signature is unlikely to constitute a good defence to the proceedings for possession.

25 Mr Komba plainly seeks to raise a number of further defences on appeal. In his outline of submissions, he focuses principally on the FlexiDirect Account, which he submits was 'illegal'. This illegality is said to taint the loan agreement. He also alleges that the respondent was negligent or committed a crime in not warning him of the possibility of financial loss and the risk of combining the mortgages on the two properties, one of which was the family home. He submits that he was fraudulently induced to invest money.

26 In relation to the FlexiDirect account generally, it seems to me that Mr Komba has given disparate accounts about his knowledge of this account. In an affidavit sworn by him in October 2009, he deposed that he used this account to make repayments in relation to each of the Braybrook and Jacana properties. To show the repayments, he exhibited statements from the FlexiDirect account, which he referred to as 'the savings account'. Moreover, the tenants of the Jacana property were required to pay rent into this account. It seems to be tolerably clear that Mr Komba had held that account since he obtained the loan for the Braybrook property in 2004 and that he had used it, apparently without incident, to make his repayments to the respondent.

27 In his October 2009 affidavit, Mr Komba deposed that in or around June 2007, he experienced cash flow problems with his computer network services business, that he had too many business expenses and was unable to pay his outgoings. He was unable to make mortgage repayments 'as usual'. He deposed that he made it clear to the respondent that he was facing financial hardship and requested a stay of repayments. However, the respondent continued to withdraw monies from his 'savings account' (the FlexiDirect account) and it became overdrawn. Mr Komba says that this occurred without his consent. He then embarked upon a course of complaint about the fact that the respondent had overdrawn his account without his consent. That complaint has never been resolved and has transformed into the complaint that the account is 'illegal' and involves fraud on the part of the respondent. However, Mr Komba happily operated the account for a number of years before he fell into arrears with his mortgage payments. Furthermore, the account became overdrawn because he did not keep it in funds to enable the respondent to deduct interest payments as and when they became due under the loan arrangement.

28 In making the applications to this Court, Mr Komba has deployed a 'scattergun' approach. He has raised a great many points, but has failed to develop any of them to the point where this Court could reasonably conclude either that the decision of the judge below was attended by sufficient doubt to justify the grant of leave to appeal or, alternatively, that it should allow new arguments to be raised on appeal as to why the default judgment should be set aside.

29 Whether the time for an application for leave should be extended is in the discretion of the Court. Such discretion is to be exercised in the light of the circumstances of the particular case, and is given for the purpose of enabling the Court to do justice between the parties.[1] Relevant factors may include the length of and reasons for delay, the prospect of success in obtaining leave to appeal if the extension is granted and the prejudice likely to be suffered by the respondent if the extension is granted.[2]

30 In this case, Mr Komba has poor prospects of being granted leave to appeal, even if an extension of time is given. In my view, the decision below is not attended by sufficient doubt to warrant the grant of leave.[3] Mr Komba has failed to identify an error below.

31 Accordingly, the application for an extension of time for leave to appeal must be dismissed.

32 I agree. Reduced to its essentials, Mr Komba's complaint appears to me to be that, at the time of entering into the subject facilities, he did not understand that his family home would thenceforth stand as security for repayment of the facility drawn down to fund the purchase and development of the Jacana property. He contends that, if had he understood that to be so, he would have insisted that the two facilities stand separate and apart so that, if he were to default in relation to his obligations in connection with the Jacana development, his home would nonetheless remain safe and free from execution. Now, he says, because he did not understand that the two obligations would be cross-collateralised, he will lose his home.

33 As appears from the reasons given by the judge below, it is inherently improbable that Mr Komba did not understand the terms and conditions of the facility agreement into which he entered and which he signed and which, it may be noted, he observed assiduously until his business ran into financial difficulties with consequent lack of funds to continue to observe those obligations. It was only then that he made any allegations of misfeasance on the part of the bank.

34 Relatively speaking those allegations started at a fairly conservative level but, over time and at each stage of the proceedings, as it appears that Mr Komba thought that something more needed to be said in order to secure the outcome which he seeks, the allegations have developed and ultimately metamorphosed into very serious allegations indeed. So to say that does not necessarily mean that allegations of that kind are sometimes not warranted. But it is to say that, when they are made late and change repeatedly as they have done in this case, there is good reason to doubt their verity.

35 In the result it appears to me, as it does to Emerton AJA, that there is insufficient reason to doubt the reasons for judgment of the judge below to warrant an extension of time in which to make application for leave to appeal.

36 Accordingly, I too, consider that the application for extension of time should be refused.

37 Now, Ms Hamill there remains a question, quite apart from the substantive relief which has been sought, as to whether there should be any stay of execution to accommodate the expressed wish of Mr Komba, as I understood it, that he be able to arrange for the sale of the home himself, no doubt because he believes he would be able to get a better price for it than if the bank enforces the mortgage.

38 Having determined that we will refuse the application for extension of time in which to make application for leave to appeal from the judgment below, the applicant has made application for a short stay in which to put the property up for sale himself, in the hope of realising a better price than might the bank were it to exercise its power of sale under the mortgage or otherwise seek to execute against the mortgaged premises.

39 Other things being equal, we would be disposed to grant a stay of between four and six weeks in order to afford the applicant an opportunity to do as he wishes. He has told us that he has already engaged an estate agent and has put the property on the market and has been advised by the agent that there are a number of interested prospective purchasers. As against that, however, these proceedings have now been on foot for a very long time and the bank has for a very long time been kept out of its money. It also says - or at least we have been told by counsel from the Bar table - it will take between four and six weeks to process the warrant of execution through the Sheriff's Office, before the property can be the subject of execution, and that, if we were to order a stay of four to six weeks, the Sheriff would not be prepared to undertake any preparatory works before that time expired. In the result there would be in effect a stay of somewhere between eight and 12 weeks and, in our view, such a period is too long.

40 Based upon the assurances which have been given to us on behalf of the bank, that de facto there will be no execution against the property for the next four to six weeks while the formalities of execution are prepared, and recognising that the applicant should within that time be able to sell the property with the sort of effort that is required in the circumstances which obtain, we have decided that we should refuse the application for stay, noting, however, that there will be in effect as a result of our determination a period of some four to six weeks in which the applicant will be free to sell the property for the best price available.

43 Further to what we have already observed, there has now been brought to our attention a letter dated 30 June 2010 from the Sheriff's Office to the applicant, wherein it is said that the warrant of execution has been postponed until 27 August 2010 but that the applicant must vacate the mortgaged premises by that date. So, for one reason or another, which is not wholly clear, it appears that there is a process of execution in force which requires the applicant to vacate the mortgaged premises by today, unless the Sheriff is directed further to stay execution of the warrant of execution.

44 It may or may not be that, in view of what we have been told about the necessity to novate the warrant and to attend to the formalities appertinent thereto, a period of four weeks would elapse before anything by way of execution would be done. But in the circumstances as they now appear, we think that to be an unnecessary and therefore intolerable risk for the applicant to bear, given that a short further delay is not said to be likely to cause the bank any prejudice over and above that which it has already suffered by reason of the non-payment or repayment of the facility.

45 In light of the fact that the applicant has sought a short period in which to complete the sale of the property at the best possible price through the estate agent he has retained, we order that execution be stayed for a period of a further 30 days from this day.

46 Ms Hamill, can your instructing solicitor make sure that the Sheriff is notified of that please.

47 Yes, your Honour. I understand the Sheriff's Office is closed for the day. So that advice would be given as soon as possible, possibly not today.

49 All right, thank you. The bank seeks its costs of the application, it being the successful party. We see no reason why the ordinary rule should not be followed. Therefore it is ordered that the applicant should pay the respondent's costs of the application, including any reserved costs.

[1] Gallo v Dawson [1990] HCA 30; (1990) 93 ALR 479, 480; Hughes v National Trustees Executors & Agency Co of Australasia Ltd [1978] VicRp 27; [1978] VR 257, 263.

[2] Jackamarra v Krakouer [1998] HCA 27; (1998) 195 CLR 516, [7], [35]; Cooper v Sztainbok [2009] VSCA 73; Knight v Spadano [2003] VSCA 228, [12]-[13]; Van Rooy v County Court of Victoria [2006] VSCA 56, [9]-[10].

[3] Nieman v Electronic Industries Ltd [1978] VicRp 44; [1978] VR 431, 433.