National Australia Bank v Kamboj and Kaur

Judgment 1This is a decision about whether a writ of possession in respect of two properties in the Griffith area should be stayed. The evictions are due to take place tomorrow, 27 August 2014. 2The writ was issued on 8 July 2014 for the enforcement of a default judgment obtained by the plaintiff on 1 July 2014 pursuant to leave granted by Davies J on 27 June 2014 when he struck-out defences filed on 26 May 2014. His Honour struck out the defences because he formed the view they were clearly untenable (see [2014] NSWSC 865). 3Although the defendants had had legal assistance to draw the defences, they were self-represented at that time in relation to the proceedings. The defences gave an address, telephone number and email address which were personal details of each defendant. 4Broadly speaking, the defences were in the form of confession and avoidance. Every material fact pleaded by the plaintiff was admitted and the validity of the mortgages held by the plaintiff were not seriously impugned except as to an unspecified misdescription of one of the properties. What seems to be a defence of estoppel by misrepresentation relating to the circumstances of a mediation under the Farm Debt Mediation Act 1994 (NSW) was raised. It should be pointed out that there was no appearance for either defendant before Davies J or previously on 10 June 2014 before the Registrar. 5Yesterday, I gave leave for the filing in court of a notice of motion by which the defendants seek a variety of relief. This extends to a stay, leave to withdraw the admissions made in the defences previously filed (if that was necessary) and setting aside the default judgment to enable the proceedings to be defended on new grounds set out in a draft amended defence. 6The plaintiff did not object to the notice of motion being filed in court nor to me dealing with the application for the stay. It was not practicable to deal with the application to set aside the default judgment allowing the defendants to defend the case because they, as yet, have not completed preparation of their evidence. I must say, however, that the plaintiff, commendably, was able to put together a full affidavit dealing with all issues. 7The defendants reside in the Griffith area and the solicitor now acting practises at Bondi Junction. For this reason, the affidavit of Ms Kaur, the second defendant, has not been affirmed and I understand from what I was told by Mr Jammy, of counsel, that the evidence is not yet complete. Affidavits of both defendants appear as annexures to the affidavit of Ms Drayton, solicitor. 8The question for me is whether I could grant a stay for a number of weeks to allow the application to set aside default judgment to be determined. However, it is necessary to some extent to advert to issues more properly ventilated in that application. 9The defendants say that having relied upon a legal practitioner to file their defences (although acting for themselves, they heard nothing about the matter until they received an email from the Court informing them that default judgment had been entered on 1 July 2014. 10As against this, Mr Lewin, who acts for the plaintiff, attached the printout of two emails written by him following the non-appearance of defendants at the directions hearing before the Registrar advising the defendants of the listing before Davies J and attaching a copy of the current Practice Note for initial directions before the possessions list judge. 11The second email dated 26 June 2014, sent at 11.09 am, gave notice that the plaintiff proposed to apply to have the defences struck out. The defendants' new legal representatives were not aware of these emails and have not had an opportunity to take instructions in relation to them. 12The proposed new defence does seek to impugn the validity of the mortgages. So far as the second defendant is concerned, she invokes s 7 Contracts Review Act 1980 (NSW) to claim an order avoiding the mortgages as being unjust under that legislation. Particulars of this are set out at paragraph 18 of the draft defence. Both defendants claim that the loans were made in breach of the Banking Code of Practice and were unconscionable under both the general law and under s 21 of the Australian Consumer Law, Competition and Consumer Act 2010 (Cth). 13This last defence relates to a claim of unconscionability in the provision of, presumably, financial services by providing the loans the subject of the mortgages. The definition of "services" in that law would cover the provision of a mortgage in the sense of conferring a right in relation to real property under a contract between a banker and a customer. 14The affidavit evidence, it must be said, at this stage is scant as to how those matters will be fleshed out if the defendants are given leave to defend. So far as the second defendant is concerned, the gravamen of her claim, both in relation to the Contracts Review Act and more generally, is that her native language is the Punjabi language and that she does not speak or read English well enough to be able to understand commercial transactions of the type the subject of the mortgages in the present case. So far as her language difficulties are concerned, she is corroborated by an affidavit of her daughter filed with the defences in May of this year. 15The first defendant seems to be asserting that at the time the loans were advanced and the mortgages entered into, the bank knew that one of the properties, the farm at Nericon, was too small and insufficient to support the payments in respect of it. This was a relevant misdescription which should have been drawn to his attention. 16Both defendants seem to maintain the matter of estoppel by representation arising out of the farm debt mediation. 17Mr Lewin, who appears for the bank, essentially asserts that I should refuse the application for the stay because the application to set aside the default judgment is essentially hopeless. In advancing that submission he relies upon a number of factors. First, he says that his emails provide compelling evidence that the defendants had notice of the listing before Davies J and of the bank's application to strike out the defences. In the light of this, no satisfactory explanation has been provided for their non-appearance. 18He also points out that the first defendant's claim of unconscionability in relation to the misdescription of the Nericon property was not raised in earlier proceedings between the defendants and the vendor of the farm, decided by Bryson AJ on 18 November 2011 (See [2011] NSWSC 1412). Mr Lewin's argument is that if there had been some material misdescription in the contract for the sale of the farm of which the bank is said to be aware, it should, and would, have been raised in that litigation. I did not understand him, however, to be raising a matter of abuse of process in the extended sense in relation to that argument, rather, I understood him to be arguing that the purported reliance upon unconscionability about that is thereby made clearly untenable. 19Finally, he points out that the security provided by the two properties is insufficient by a large measure to support the defendants' level of indebtedness to the bank. In this regard no payments have been made in respect of the mortgage over the farm since October 2011 and payments in respect of the house in Griffith were made only sporadically between September 2013 and May of this year, and not since. 20He also argues that even if the mortgages themselves were set aside on the grounds advanced by the defendants, it does not follow that the bank would not obtain possession. In respect of the mortgage over the house at Griffith, he argues that the bank ought to be seen as having been subrogated to the outgoing mortgagee, a matter of which I am not convinced, but more pertinently, he says that even if the mortgages are set aside, the indebtedness of the defendants for the outstanding principal and interest at court rates on a recovery, according to the principles of restitution or the like, would exceed the value of the property. There is, therefore, no point in allowing the defendants in to defend. 21It seems to me that the resolution of the issues in this application depends upon the reconciliation of two fundamental principles which in the circumstances of the present case collide. The first principle, of course, is that no-one should be deprived of their property except after a full hearing on the merits at which they have had the opportunity to lead all relevant evidence and advance all arguments which might assist in defending their position. This is the foundation of the law's reluctance to allow a default judgment, or a summary judgment, disposing of litigation otherwise than on the merits. 22The second principle to which I have referred is the rule referred to in Inglis & Anor v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 at 164-5. Walsh J, whose decision was subsequently affirmed by a Full Bench of the High Court, said: If the debt has not been actually paid, the Court will not, at any rate as a general rule, interfere to deprive the mortgagee of the benefit of his security, except upon terms that an equivalent safeguard is provided to him, by means of the plaintiff bringing in an amount sufficient to meet what is claimed by the mortgagee to be due. The benefit of having a security for a debt would be greatly diminished if the fact that a debtor has raised claims for damages against the mortgagee were allowed to prevent any enforcement of the security until after the litigation of those claims had been completed. 23That rule was recently discussed by Ward J in Goater v Commonwealth Bank of Australia [2014] NSWCA 265 at [70]-[76]. I will not repeat all of her Honour's analysis, but at [76] her Honour said: However... the mortgagee need not offer to redeem, and therefore need not pay into court, where it is alleged that the power of sale is not properly exercisable (see Inglis at 164-165). Examples given by the authors of exceptions to the rule in Inglis are where the validity of the mortgage is in issue, or there is a question whether or not there has been a breach or a question as to whether or not the notice was effective (Allfox Building Pty Ltd v Bank of Melbourne (1992) NSW Conv R 55-634), or where the power of sale is being used for an improper motive (Milton Park Country Club Pty Ltd v Yasuda Trust Australia Ltd (Supreme Court (NSW), Bryson J, 8 March 1991, unrep)). Campbell JA in Bayblu Holdings Pty Ltd v Capital Finance Australia Ltd [2011] NSWCA 39 at [58] confirmed that there is a long recognised exception where the dispute goes to whether the power of sale has arisen at all (referring to Harvey v McWatters and Allfox). 24A related principle was discussed by Johnson J in Perpetual Ltd v Kelso [2008] NSWSC 906 at [15] where his Honour said: A further argument advanced by the Defendants is that they seek to be allowed in to defend the proceedings upon arguments identified in the affidavit, where it is said that the loan contract is, in various respects, unfair and unjust. In my view, the fact that the writ of possession has been executed and the Plaintiff has taken possession of the subject land means that, as a matter of law, it is too late for the Defendants to be seeking to be let back in to defend the proceedings. To a similar effect is the decision of Harrison J in JP Morgan Trust Australia Limited v Bridge [2013] NSWSC 668. I note that that last or latter principle is the subject of the proposed appeal in Goater. 25The following seem to me to be relevant: First, that the defendants seek to assert matters which would undermine the validity of the mortgages if made good at a hearing, depriving the plaintiff of its right to possession. Secondly, if that right is made good, the defendants will have established an exception to the principle in Inglis. Thirdly, if Kelso and Bridge remain good law, permitting the writs to be executed tomorrow will finally deprive the defendants of the opportunity to have any hearing on the merits. Fourthly, given the importance of the first principle I have discussed, one would only countenance that outcome if I was well-satisfied, applying all due caution, that the proposed defences were clearly untenable to such a degree that the outcome of litigation based upon them could be predicted with near-complete accuracy. 26It is irrelevant for me to consider whether the defendants' arguments on the present evidence seem compelling, or less than compelling. Notwithstanding the force of the plaintiff's arguments, I am not persuaded that the case sought to be advanced by the defendants is clearly untenable in the relevant sense to the point of hopelessness. To say this does not in any way call into question the decision of Davies J. The defences he had before him clearly did not challenge the validity of the mortgages and, therefore, did not show any possibility of establishing any exception to the rule in Inglis. 27In due course the judge hearing the application to set aside the default judgment will make an assessment about whether, on all of the material then available, the cases should be allowed to proceed, but that is not my task today. 28It seems to me for the reasons I have rehearsed and without making any comment at all on the strength or otherwise of the proposed defences that given that these writs of possession are based upon default judgments, I should at least allow a short time for the defendants to bring forward their application to set aside the default judgment. I fully appreciate, as I have said, the importance of the principle established in Inglis. However, the principle of open justice, of which the first rule I have referred to is a manifestation, is of equal importance. On this occasion I consider it trumps the rule in Inglis. 29However, the matter should not be allowed to drag on. It seems to me that I should allow a period not exceeding six weeks for the defendants' application to set aside the default judgment to be determined and I will make directions in that regard. 30Mr Lewin also argued that as the evidence disclosed that neither defendant was residing at the home in Griffith, there could be no question of any hardship in allowing the writ for possession to be executed in respect of that property at least. There is force in that submission. However, as will be clear from my reasons, in deciding to grant a stay, I have not taken hardship to the defendants into account. It seems to me in the circumstances of this case not to be a compelling reason for granting a stay. 31My orders are: (1)The writ of possession issued on 8 July 2014 in respect of the land comprised in certificates of title folio identifier 1/1135691 known as 567 New Farms Road, Nericon and folio identifier 40/855284 known as 20 Wyvern Crescent, Griffith is stayed until 7 October 2014. (2)Expedite the hearing of the application to set aside the default judgment entered on 1 July 2014 filed in court on 25 August 2014. (3)Fix the application referred to in order 2 for directions before the Common Law Case Management Registrar at 9 am on Friday, 29 August 2014. The Registrar is to fix the matter for hearing on the earliest available date with an estimate of half a day plus and provide a timetable for the filing of any further evidence. (4)Costs before me abide the outcome of the application to set aside the default judgment.