Permanent Custodians Limited v Upston

CATCHWORDS : Application for summary judgment - cross-claim application to transfer hardship application to Consumer Trader Tenancy Tribunal

Consumer Credit Act 1995 Consumer Credit (New South Wales) Act 1995 Consumer Credit Code LEGISLATION CITED : Consumer Trader Tenancy Tribunal Act 2001 Conveyancing Act 1919 Corporations Act 2001 (Cth) Real Property Act 1900 Uniform Civil Procedure Rules 2005

Credit (Home Finance Contracts) Act 1984 Graham v Aluma Lite (1996) 39 NSWLR 58 Jin Xin Investment & Trade (Australia) Pty Ltd v ISC Property Pty Ltd [2006] NSWSC 7 CASES CITED : Lambert v Dean (1989) 13 Fam LR 285 Lolly Pops (Harbourside) Pty Ltd v Werncog Pty Ltd (unreported) 1 July 1998 McNally v Australian and New Zealand Banking Group (2001) ASC 155-047 Swerus v Central Mortgage Registry of Australia Pty Ltd (unreported) 2 June 1988

PARTIES : Permanent Custodians Limited (Plaintiff) Carolyn Joy Upston (Defendant)

COUNSEL : M Groben (Sol) (Plaintiff) T Maltz (Defendant)

SOLICITORS : Gadens Lawyers (Plaintiff) Rice Moore and Gibson Solicitors (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

11782/06 Permanent Custodians Limited (ACN 001 426 384) v Carolyn Joy Upston

JUDGMENT 1 BELL J: The plaintiff by motion that was filed on 7 September 2006 claims summary judgment in the amount of $282,610.93 (and interest) against the defendant pursuant to Pt 13.1 of the Uniform Civil Procedure Rules 2005 (the UCPR). The plaintiff's claim is for a debt owing under a loan agreement made on or about 11 August 2005 (the agreement) and is secured by a registered mortgage over premises at 22 Buckingham Road, Berkeley Vale (the premises). The defendant by motion filed on 15 September 2006 claims orders pursuant to s 68(3) of the Consumer Credit Code staying the proceedings until her application under s 68 to change the terms of the agreement (the hardship application) has been determined. She also claims an order that the hardship application be transferred to the Consumer Trader and Tenancy Tribunal (the Tribunal).

2 Both motions came before me as Duty Judge and were heard together with the evidence in one received as evidence in the other. 3 The proceedings were commenced by statement of claim filed on 19 April 2006. The plaintiff pleads that the defendant has defaulted under the agreement by failing to make repayments when due which are particularised as: 22 January 2006 $2,277.60 22 February 2006 $2,277.60 22 March 2006 $2,277.60 The plaintiff's case is that the whole of the amount advanced under the agreement was due and payable as at 27 March 2006 by reason of its demand made on the defendant following her failure to remedy her default. 4 The defendant filed a defence on 24 May 2006 at a time when it appears that she was not legally represented. On 15 September 2006 a further defence was filed by solicitors acting on her behalf. By this defence the defendant admits that she did not make payments due under the agreement on 22 December 2005, 22 January, and 22 February 2006. In the way the matter was argued nothing turns on the difference between the dates of default particularised in the statement of claim and those admitted by the defendant in her defence. She admits to default in making three payments that were due under the agreement. 5 The defendant raises one defence in answer the claim. She pleads that the proceedings were commenced in contravention of s 80(2) of the Consumer Credit Code (the Code) in that a notice complying with the requirements of s 80 (a default notice) had not been served on her pursuant to s 173(1)(a) of the Code at the date the proceedings were commenced. The hardship application was commenced as a cross-claim against the plaintiff. The defendant claims orders under s 68 of the Code changing the terms of the agreement so as to extend the time for making the payments and she claims compensation in respect of the purported breach of s 80 of the Code. 6 The plaintiff did not dispute that the agreement and the mortgage are regulated by the Code. 7 Section 80 provides that a credit provider must not begin enforcement proceedings against a debtor in relation to a credit contract and/or a mortgagor under a mortgage unless the debtor/mortgagor is in default under the contract/mortgage and the credit provider has given the debtor/mortgagor a default notice allowing the debtor/mortgagor a period of at least 30 days from the date of the notice to remedy the default (and the default has not been remedied within that period). The commencement of proceedings in contravention of s 80(1) and (2) is made an offence.

8 The debtor or mortgagor may remedy the default within the period stated in the s 80 default notice with the consequence that the contract or mortgage is then reinstated (s 81). The default notice must contain an statement of the manner in which the liabilities of the debtor/mortgagor would be affected by the operation of any acceleration clause under the contract/mortgage and of the amount required to pay out the contract (as accelerated) before any acceleration clause becomes operative (s 85).

9 It is arguable that the commencement enforcement proceedings against a debtor without giving notice under s 80 of the Code, allowing a period of 30 days from the date of the notice to remedy the default, is a defence to the proceedings: Graham v Aluma Lite (1996) 39 NSWLR 58. The Court in that case was concerned with the effect of a credit provider's failure to comply with the provisions of s 7 of the Credit (Home Finance Contracts) Act 1984. The scheme is broadly comparable to the requirements of giving a default notice under the Code. Clarke JA (with whose judgment Priestley JA agreed) observed that a conclusion that a credit provider could maintain proceedings despite failing to comply with s 7 was inimical to the scheme of the Act (at p 65). 10 The evidence is that on 15 February 2006 a commercial agent placed a default notice, in a sealed envelope addressed to the defendant, in the letterbox of the premises. The default notice complied with the requirements for a valid notice under s 80 and included a statement of the manner in which the defendant's liabilities may be affected by the acceleration clause and the amount required to pay out the contract as accelerated. The proceedings were not commenced until more than 30 days after 15 February 2006.

11 The defendant in her affidavit, which was sworn on 11 August 2006, states that the first time she saw the default notice was on 21 July when she met her solicitor at his office. In a further affidavit, which was sworn on 3 October 2006 the defendant states that she had used a post office box at Chittaway Bay as her postal address since January 2002. She continued to use this post office box as her postal address until she moved to Armidale in February 2006. The post box address was the address given to the loan manager, Bluestone Mortgages, and to the finance broker, Barry Williams. She says that it was the only postal address given by her to any person for contact purposes. She had never given the address of the premises as an address for mail and has no recollection of ever receiving "legitimate" mail at the premises. She viewed anything that was left in the mailbox at the premises as "junk mail" and it was disposed of by being placed directly into the recycling garbage container. In July 2005 when the defendant moved to Brewarrina her neighbour, Avril Williams, commenced clearing the mailbox for her. This practice continued thereafter.

12 Section 172 makes provision for the manner of giving notice under the Code: 172(1) If this Code requires or permits a notice or other document to be given to a person (whether the expression "deliver", "serve", "notify", "send" or "give" or another expression is used), the notice or other document may be given - (a) to a natural person - (i) by delivering it to the person personally; or (ii) by leaving it at, or by sending it by post, telex, facsimile or similar facility to, an appropriate address of the person; … (2) The appropriate address of a debtor, mortgagor, guarantor or consumer lessee for the purposes of subsection (1) is - (a) an address nominated in writing by that person to the person giving the notice or other document; or (b) if there is no such nomination, the address of the place of residence of that person last known to the person giving the notice or other document. … (5) If this Code requires or permits a notice or other document to be given by post (whether the expression "deliver", "serve", "notify", "send" or "give" or another expression is used), service may be effected by properly addressing, prepaying and posting the notice or other document as a letter. 13 The defendant accepts that leaving the default notice in the letterbox at the premises constituted leaving it at an appropriate address for her and was accordingly effective service under the Code. In her counsel's submission this does not deprive her of her defence. This is because while s 172 prescribes the manner of giving a default notice, it does not determine the date upon which it is to be taken to have been given, which is dealt with in s 173: 173(1) For the purposes of this Code a notice or other document is taken to be given - (a) in the case of a notice or other document given personally - on the date it bears or the date it is received by the addressee, whichever is the later; or (b) in the case of a notice or other document sent by post - on the date it bears or the date when it would have been delivered in the ordinary course of post, whichever is the later; or (c) in the case of a notice or other document sent by facsimile transmission or some other form of electronic transmission - on the date it bears or the date on which the machine from which the transmission was sent produces a report indicating that the notice or other document was sent to the facsimile or other number of the addressee, whichever is the later. (2) For the purposes of this Code, the date of a notice or other document is the date it is taken to be given in accordance with this section. 14 It is noted that s 172(1)(a) in dealing with the manner of giving notice to a natural person distinguishes between (i) delivering to the person personally and (ii) leaving it at, or sending it by post, telex, facsimile to, an appropriate address. Section 173 makes provision for determining the date on which a notice is taken to be given in the case of one given personally and in the case of one sent by post but is silent as to the case of a notice left at an appropriate address. In the defendant's counsel's submission, it is arguable that the earliest date on which a notice is to be taken to have been given for the purposes of s 80(1)(a) is the date on which it was in fact received by the debtor. In his submission such a construction is one consistent with the beneficial purposes of s 80. 15 The plaintiff submitted that it is abundantly plain that service of the default notice is to be taken to have been given to the defendant on the date the notice was left in the mailbox at the premises. Reliance was placed on the decision of Young J in Lolly Pops (Harbourside) Pty Ltd v Werncog Pty Ltd (unreported), 1 July 1998, in which his Honour determined that for the purposes of s 170 of the Conveyancing Act 1919 delivery of a notice to the defendant's mailbox was sufficient service and that it was not necessary for the giver of the notice to show that it had actually come to the attention of the addressee. Reliance was also placed on the judgment of Cohen J in Swerus v Central Mortgage Registry of Australia Pty Ltd (unreported), 2 June 1988, which also dealt with the provisions of s 170 of the Conveyancing Act. His Honour dealt with a submission that service of a s 57(2)(b) notice had not been effected in accordance with the provisions of s 170 of the Conveyancing Act because the credit provider knew that the debtor was no longer living at the address at which the notice was left and did not reasonably believe that it would reach him. In this context his Honour observed that the purpose of s 170 is to provide a likely means of notices coming to the attention of a person without the necessity of personal service and that by incorporating this method of service into s 57(2)(b) of the Real Property Act 1900 it might be assumed that the intention is that the service should be affected in such a way as to enable the mortgagor, whether directly or indirectly, to know of the demand made upon him, or at least to provide a means by which it is likely to happen (at p 20). His Honour concluded in the circumstances of that case that it could not be said that the credit provider knew or should have known that the notice would not come to the attention of the debtor. Finally, the plaintiff referred me to the decision of Barrett J in Jin Xin Investment & Trade (Australia) Pty Ltd v ISC Property Pty Ltd [2006] NSWSC 7, which concerns the requirements of effective service of a statutory demand under s 459G of the Corporations Act 2001 (Cth). 16 The cases to which I was referred to my mind illustrated that the determination of the issue raised by the defence may involve questions of fact as well as the construction of ss 172 and 173 of the Code. I am not persuaded that it is plain beyond argument that the default notice was given to the defendant for the purposes of s 80(1) and (2) on 15 February 2006.

17 The Code makes provision for debtors to apply to vary the terms of the credit contract in cases of hardship. A debtor who is unable reasonably, because of illness, unemployment or other reasonable cause, to meet his or her obligations under a credit contract, and who reasonably expects to be able to discharge his or her obligations if the terms of the contract were changed, may apply to the credit provider for a change (s 66). If the credit provider does not agree to change the contract in accordance with the application, the debtor may apply to the Court to change the terms of the credit contract (s 68). The Court may change the terms of the contract in the respects set out in s 66 and make such other orders as it thinks fit (s 68(2)). 18 A credit contract may be varied in cases of hardship in one of the following three ways (s 66(2)): (a) extending the period of the contract and reducing the amount of each payment due under the contract accordingly (without a change being made to the annual percentage rate or rates); (b) postponing during a specified period the dates on which payments are due under the contract (without a change being made to the annual percentage rate or rates); (c) extending the period of the contract and postponing during a specified period the dates on which payments are due under the contract (without a change being made to the annual percentage rate or rates). 19 The hardship provisions of the Code do not apply to a credit contract under which the maximum amount of credit that may be provided exceeds the amount prescribed by the regulations. The agreement is one that is that does not exceed that maximum that is prescribed.

20 Hardship applications brought under s 68 are not within the exclusive jurisdiction of the Tribunal. Jurisdiction to determine such an application is conferred on any court and on the Tribunal by s 8 of the Consumer Credit (New South Wales) Act 1995. 21 The defendant consulted a solicitor on 31 July 2006. She says that upon obtaining a better understanding of her options under the Code, she instructed her solicitor to assist her with an application for an extension of the loan contract. Such an application was submitted to the plaintiff and has been refused.

22 There is evidence in the defendant's affidavit that is capable of establishing hardship for the purposes of relief under s 68. 23 Since the date of the last default it is agreed that the defendant has paid all payments due under the mortgage on time. In an affidavit sworn on 24 October 2006 she deposes to her expectation that she will be able to meet all future payments due under it. The market valuation of the property as at 20 September 2006 is $280,000.

24 The defendant seeks a stay of the proceedings until her hardship application has been determined and an order transferring it to the Tribunal. Mr Groben, who appeared on behalf of the plaintiff, submitted that the Court would not stay the proceedings brought by his client because any application under s 68 of the Code was doomed to fail. In his submission such an application may only succeed in a case in which default following the expiration of the notice period has not led to the lender exercising its rights to demand repayment of the whole of the sum, it being immediately due and payable. The default notice in this case included a demand for the whole of the balance outstanding in the event that payment of the overdue amounts (together with enforcement expenses) was not made in accordance with it terms. In the plaintiff's submission no change to the terms of the contract, being one provided by s 66(2)(a) - (c), operates to prevent the debt being accelerated or the plaintiff's entitlement to possession of the premises. 25 The defendant submits that it is open to the Court or the Tribunal to change the terms of the agreement (the plaintiff having refused her application under s 66) with effect notwithstanding that the notice period has expired. He points to the provision in s 68(3) for the court to stay any enforcement proceedings under the credit contract pending the determination of the application. I was informed that the issue has not been considered by this Court. The approach that has been adopted by the Tribunal has been that for which the defendant contends: McNally v Australian and New Zealand Banking Group (2001) ASC ¶155-047 per Senior Member Flemming at 200,457 [41].

26 The defendant's hardship application has been brought in these proceedings by way of a cross-claim. There is a power to transfer proceedings being an application made under s 68 of the Code to the Tribunal under s 23(2) of the Consumer, Trader and Tenancy Tribunal Act 2001. 27 The plaintiff opposes the transfer of the hardship application to the Tribunal and relies on the provisions of s 22(7) of the CTTT Act: If, at the time when an application is made to the Tribunal in accordance with this Act, an issue arising under the application was the subject of a disputed in proceedings pending before a court, the Tribunal, on becoming aware of those proceedings, ceases to have jurisdiction to hear or determine the issue. 28 In the defendant's submission, s 22(7) deals with applications and does not preclude the transfer of her cross-claim to the Tribunal. It is contended on her behalf that the Tribunal is a more appropriate forum to determine the application because it has specialist expertise. I do not consider that the determination of a hardship application under the Code calls for specialist expertise outside the experience of this Court. Counsel's principal submission was that his client should not be deprived of the procedural advantages available to parties before the Tribunal, which include the informality of proceedings (s 28); the provision for preliminary conferences for the purposes of conciliation and settlement (s 55); and the presumption that each party is to bear its own costs (s 35).

29 I have decided that it is not appropriate to transfer the defendant's cross-claim, to the extent that it is a claim for relief under s 68 of the Code, to the Tribunal and to stay the proceedings in this Court pending the resolution of it. I take into account that the value of the security may not exceed the amount of the debt. This favours the proceedings being determined without delay and in my opinion the transfer would be likely to occasion delay. I also take into account the desirability of the question of the utility of any relief under s 68 in a case in which a default notice has been served and demand made (conformably with s 85) for the whole of the sum being determined by this Court. 30 In my view the plaintiff has not discharged the heavy burden of establishing that this is a claim suitable for summary judgment. I propose to direct that the plaintiff's claim and the defendant's cross-claim be listed for hearing with expedition. I will stand the plaintiff's motion over before the trial judge. In light of the orders that I propose, there is no occasion to stay the proceedings pursuant to s 68(3) of the Code.

2. Direct that the statement of claim and the cross-claim be listed for hearing with expedition. The parties may approach the Associate to the List Judge to obtain a hearing date;

3. Stand over the plaintiff's motion before the trial judge;

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