Lawteal Pty Limited v McClymont & anor

Bahadori v Permanent Mortgages Pty Limited [2008] NSWCA 150; 72 NSWLR 44 CASES CITED : Benjamin v Ashikian [2007] NSWSC 735 Carter & anor v Schmierer [2003] QSC 035 Cook & anor v Permanent Mortgages Pty Limited [2007] NSWCA 219

LAWTEAL PTY LIMITED - Plaintiff PARTIES : Graham James McCLYMONT - First Defendant Selma Maria McCLYMONT - Second Defendant

A Rogers - Plaintiff COUNSEL : In person - First Defendant In person - Second Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

Tuesday 7 July 2009 15371/07 - LAWTEAL PTY LIMITED v GRAHAM JAMES MCCLYMONT & ANOR JUDGMENT

1 HIS HONOUR: The action before the court seeks possession of identified premises being a strata unit which I will refer to as the property. The plaintiff is a mortgagee and the defendant mortgagors are husband and wife who have appeared in person to resist the claim. 2 The defence does not traverse the allegations in the statement of claim which I can briefly recapitulate together with some background facts which have emerged from the evidence. 3 The property is the defendants' residence. In about August 2004 a then current mortgagee had obtained judgment for possession of the property and a writ of execution had issued. The defendants sought refinance through a broker which was then called The Loan Enquiry Centre Pty Ltd and later named Save Finance Pty Ltd. It was not placed in evidence but I understand it to be common ground that that corporation is now in liquidation. 4 Annexed to an affidavit of the first defendant of 26 June 2009 is a letter of advice to creditors from Worrells Insolvency and Forensic Accountants which states inter alia: "The company initially entered into voluntary administration on 12 December 2007. The company subsequently executed a deed of company arrangement on 4 April 2008. At a meeting of creditors on 4 December 2008 it was resolved that the deed of company arrangement be terminated and subsequent to the termination it was resolved that Michael Hird and Nick Malanos be appointed liquidators pursuant to section 446A."

The principal contact between the defendants and the broker was between a Mr Shoostovian and the first defendant. A loan, and I will later refer to a dispute about the sum, of $290,500 was obtained by the defendants and secured by a mortgage over the property in favour of the plaintiff. 5 Pursuant to the terms of the mortgage the principal was repayable on 10 November 2005. It has not been paid. 6 An affidavit of debt dated 3 July 2009 by Anthony Etzine also shows accumulated interest of $116,592.14, and $60,000 on 12 January 2009, being the only payment since 10 May 2006. In those circumstances it is unnecessary to recite in detail the terms of the mortgage and the obvious breaches of it. Subject to a matter of defence being established the plaintiff would be entitled to the judgment sought. I therefore turn to the defences as pleaded. 7 I note that paragraph 1 of the defence was this morning expressly abandoned in a written submission tendered on behalf of the defendants. What the defendants have sought to rely upon would appear to be fundamentally a knowledge of the broker and of a solicitor of the urgency of staving off threatened execution upon the judgment in favour of the earlier mortgagee and being persuaded to represent falsely that the loan being sought from the plaintiff was for business and investment purposes. 8 The issues sought to be raised are set out in paragraphs 2 and 3 of the defence, namely: "2. The mortgage loan agreement documents that give rise to the statement of claim and is relied upon by the plaintiff for recovery of the alleged debt through possession is not enforceable against the defendants. 3. The plaintiff has not complied with statutory procedures required, are to institute legal proceedings arising from any alleged default by the defendants of the mortgage loan agreements." 9 The first contention raised by the defendants is the amendment of documentation, including the mortgage, of the loan amount from a printed $270,000 to 290,500. I should observe in passing that the dispersal of the latter amount on behalf of the mortgagors is evidenced in annexure F to the first defendant's own affidavit of 3 July 2009. In any event, as counsel of the plaintiff has pointed out, the mortgage is registered and the indefeasibility deriving from the Real Property Act applies. 10 That same consideration effectively disposes of the defendants' next argument, concerning the capacity of the solicitor Mrs Saade to sign documents on behalf of the mortgagee. She may be an alternate director of the plaintiff corporation but the issues sought to be raised can respectifully be categorised as something of a red herring. 11 The application for finance specified the purpose of the loan to be, "Business and investment". A Consumer Credit Code declaration signed by the defendants repeats this assertion. 12 That particular document contains a boxed and predominantly displayed caution which reads as follows: "Important. You should not sign this declaration unless this loan is wholly or predominantly or (sic) business or investment purposes. By signing this declaration you may lose your protection under the Consumer Credit Code."

In cross-examination the first defendant conceded that if the real purpose of the loan was residential finance then the declaration by himself and the second defendant was untruthful. 13 The significance of this matter is initially whether the defendants are excluded from any of the protections which might otherwise be derived from the Consumer Credit Code. Clause 11(2) of that code provides: "Credit is presumed conclusively for the purposes of this Code not to be provided wholly or predominantly for personal, domestic or household purposes if the debtor declares before entering into the credit contract that the credit is to be applied wholly or predominantly for business or investment purposes (or for both purposes)." 14 I do not ignore the following subsection 3 which provides: "However such a declaration is ineffective for the purposes of this section if the credit provider (or any other relevant person who obtained the declaration from the debtor) knew, or had reason to believe at the time the declaration of made, that the credit was in fact to be applied wholly or predominantly for personal, domestic or household purposes. For the purposes of this subsection a relevant person is a person associated with the credit provider or a finance broker (or a person acting for a finance broker) through whom the credit was obtained." 15 Whether the solicitor acting for the mortgagors who witnessed the declaration could be categorised in terms of section 11(3) as acting for the finance broker may be debatable but, in any event, as a matter of apparent precaution the solicitors for the mortgagee dispatched requisite notices under clause 80 of the Code in any event. 16 The defendants deny receipt of the clause 80 notices. I am satisfied that they were dully dispatched. If clause 80 has become operative then dispatch is what was required. 17 The defendants raise the credibility of the witness, Ms Pozdnyak, who was at one time a receptionist employed by the mortgagee's solicitors. Cross-examination of this witness showed that she had very poor memory but, in my view, what is important is that the integrity of the file memo, which recorded what she had done, was not challenged. I therefore accept that she did as she deposes in dispatching the notices, supported, as the evidence is, by the apparently contemporaneous record. 18 Neither am I persuaded that there was any cause for Mrs Saade, (formerly Ms Khoury) to suspect that the documentation submitted on behalf of the defendants, which included the declaration of business and investment purpose, should not have been received by her as other than genuine. The fist defendant is an accountant. This is stated on the application for finance. That of itself would hardly provoke Mrs Saade to suspect possible falsehood. 19 This is not an a case where the lender should have been aware, (nor were they the facts) of multiple defaults on the part of the applicant for finance or of inability to service the loan. I observe that in the application for loan the first defendant described himself as self employed accountant and the schedules of assets, which included two motor vehicles said to be worth $30,000 showed a surplus of joint assets over liabilities of something in the order of $400,000. 20 I am satisfied that the plaintiff has demonstrated that the application of the Consumer Credit Code has been excluded. As I have just indicated, even if that conclusion were wrong the plaintiff has complied with what would be required pursuant to clause 80 as a precaution and would be entitled, therefore, to enforce the mortgage. 21 Paragraph 4 of the defence states: "Notwithstanding the unenforceability of the plaintiff's documents the defendants are not liable for certain debt components the statement of claim." Exactly what this is intended to comprehend has not been identified and in that absence I can find that it offers no inhibition against the remedy being sought by the plaintiff. 22 The first defendant, in the course of his submissions, sought to make reference to some cases and I should record some matters in respect to them. Before doing that I should deal with the reserved question of the costs thrown away as a result of the adjournment from yesterday when the trial would obviously have concluded but for the defendants' application so to do. The defendants must pay these costs which have been thrown away. 23 The other issue relates to the terms upon which judgment in earlier litigation concerning the same parties and on the same issue was set aside. The term sought was that the defendants not be allowed to rely upon paragraph 3 of the defence in particular. As the defence in that paragraph has not been sustained it is sufficient for present purposes to record that I would not have imposed that term upon the defendants in case it could be demonstrated that the defence might have some merit. I was not in a position in advance to gauge that although, of course, in the event I have come to the conclusion that the defence as pleaded in paragraph 3 has not been sustained. 24 In terms of the cases referred to by the first defendant in his submissions I make the following comments: Carter v Schmierer [2003] QSC 035 dealt with authority to execute on behalf of a corporation. For reasons already given the mortgage in this case has the benefit of registration under the Real Property Act and the consequences which follow that. This case is of no assistance to the defendants. It suffices to say that Benjamin v Ashikian [2007] NSWSC 735 and Bahadori v Permanent Mortgages Pty Ltd [2008] 72 NSWLR 44 are each distinguishable upon their facts. Simply reading the background in paragraphs 10 onwards of Benjamin cogently demonstrates the difference between what the lender should have been alerted to in that case contrasted with the situation in the present case, in particular given the surplus claim of assets over liabilities and the occupation of the first defendant, a man who represented that he was in active practice as a self employed accountant. 25 Without recounting all the contrasts which are detectable Bahadori, at paragraph 82, it includes an observation in the Court of Appeal: "It may be inferred that Kremnizers were a willing, if not the moving party, with respect to the refinancing." That is very different from the present case. I note that Kremnizers is a reference to the solicitors acting for the lender, both in that case and in the present instance. 26 Finally, the first defendant referred to Cook v Permanent Mortgages Pty Ltd [2007] NSW 219. That case was focussed upon costs and I do not perceive it to offer any assistance to the defendants' submissions. 27 It follows, therefore, that the defences relied upon have failed and, necessarily, there must be judgment for the plaintiff. I propose to direct entry of judgment for possession and the issue of the appropriate writ. 28 I direct that judgment be entered for the plaintiff, that it have possession for the property identified as 5/SP12139 also known as 5/567-569 Pacific Highway, Killara. I direct that a writ of execution may issue, the writ to lie in the office for twenty-eight days from today. 29 I order the defendants to pay the plaintiff's costs thrown away as a result of the adjournment from yesterday until today. ADJOURNED

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