Permanent Mortgages v Garton

Consumer Credit (New South Wales) Act 1995 Consumer Credit (New South Wales) Code LEGISLATION CITED : Consumer Credit (New South Wales) Special Provisions Regulation Consumer, Trader and Tenancy Tribunal Act 2001 Uniform Civil Procedure Rules 2005

CASES CITED : Cohen-Hallaleh v Cyril Rosenbaum Synagogue [2003] NSWSC 395 Permanent Mortgages Pty Ltd v Michael Robert Cook

Permanent Mortgages Pty Ltd (Plaintiff) PARTIES : Richard Albert Garton (First defendant) Yvonne Beatrice Garton (Second defendant)

COUNSEL : S J Burchett (Plaintiff) P Batley (Defendants)

SOLICITORS : Gadens (Plaintiff) Consumer Credit Legal Centre (Defendants)

LOWER COURT JURISDICTION : Consumer Trader and Tenancy Tribunal of NSW

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION POSSESSION LIST

10394/2008 - PERMANENT MORTGAGES PTY LTD v RICHARD ALBERT GARTON

JUDGMENT (Whether proceedings should be heard in CTTT or this Court) 1 HER HONOUR: By notice of motion filed 27 February 2008, the first and second defendants seek firstly, a declaration that the Court has no jurisdiction over the defendants in respect of the subject matter of the proceedings; secondly, an order that the proceedings be dismissed; and thirdly, in the alternative, an order that the proceedings be stayed pending determination of Consumer, Trader & Tenancy Tribunal (CTTT) proceedings. 2 The plaintiff is Permanent Mortgages Pty Ltd (Permanent Mortgages). The first defendant is Richard Albert Garton. The second defendant is Yvonne Beatrice Garton (the Gartons). They are husband and wife. For convenience I shall refer to the parties by name. 3 On 15 June 2007, the Gartons filed an application in the CTTT seeking orders and declaratory relief against Permanent Mortgages Pty Ltd (first respondent), La Trobe Home Loans of Australia Pty Ltd (second respondent), Save Finance Pty Ltd (third respondent) and Armand Shoostovian (fourth respondent). Save Finance Pty Ltd (Save Finance) described as the finance broker is in voluntary administration. La Trobe Home Loans of Australia (La Trobe Loans) is described as being the mortgage manager. Mr Shoostovian is described as being a director and employee of Save Finance. 4 When the Gartons lodged this application in the CTTT there was no issue arising that was the subject of dispute in proceedings pending before a court. 5 Later in time, namely on 24 January 2008, Permanent Mortgages filed a statement of claim against the Gartons as defendants in this Court seeking possession of the property at Hinchinbrook.

Rule 12.11 of the Uniform Civil Procedure Rules 2005 relevantly reads: "12.11 Setting aside originating process etc

(1) In any proceedings, the court may make any of the following orders on the application of a defendant:

(a) an order setting aside the originating process,

(b) an order setting aside the service of the originating process on the defendant,

(g) an order declaring that the court has no jurisdiction over the defendant in respect of the subject-matter of the proceedings,

(h) an order declining to exercise jurisdiction in the proceedings,

(i) an order granting such other relief as the court thinks appropriate. …" 6 The Gartons seek a declaration that the Court has no jurisdiction over them in respect of the subject matter of the proceedings (Rule 12.11(1)(g)). 7 The subject matter of this Courts proceedings is firstly, the provision of credit by an agreement; secondly, whether the Gartons have made repayments in accordance with the terms of the agreement; thirdly, whether the provisions of the mortgage give Permanent Mortgages the right to possession of the property at Hinchinbrook; and fourthly, whether Permanent Mortgages is entitled to possession of the property. The Gartons defence and cross claim in the proceedings in this Court would raise the identical subject matter as pleaded in their application in the CTTT. 8 The Gartons' application in the CTTT is lengthy seeks various declarations. They are: "2 A declaration that, in breach of section 14 of the Consumer Credit (NSW) Code ("the Code"), the Respondents failed to give the Applicants either a pre-contractual statement as required by section 15 of the Code or an information statement in the form required by the regulations as to the rights and obligations of the Applicants before the loan contract was entered into.

A declaration that, in breach of section 21 of the Code, the First Respondent imposed on the Applicants a monetary liability, namely, an amount of interest, prohibited by the Code.

A declaration that, in breach of section 22 of the Code, the First Respondent a. Entered into a credit contract with the Applicants that imposed a monetary liability prohibited by section 21 of the Code;

b. Required payment of an amount in respect of a monetary that cannot be imposed consistently with the Code.

A declaration that, in breach of section 27 of the Code, the First Respondent debited an interest charge before the interest charge applied.

An order pursuant to section 70(1) of the Code that the credit contract between the Applicants and the First Respondent is unjust and the credit contract is re-opened.

An order pursuant to section 71 of the Code that the amount payable by the Applicants be reduced or set aside as the Tribunal sees fit.

A declaration pursuant to section 102(1) of the Code that the First Respondent has breached the following key requirements of the Code: a. Contrary to section 15 of the Code, the credit contract did not include the following matters: i. Section 15(B) Amount of credit ii. Section 15(C) Annual percentage rate or rates iii. Section 15(D) Calculation of interest charges iv. Section 15(E) Total amount of interest charges payable v. Section 15(F) Repayments

b. Contrary to section 21(1) the credit contract imposed a prohibited monetary obligation. 9. An order pursuant to section 102(2) of the Code that the First Respondent pay a civil penalty as the Tribunal sees fit.

An order pursuant to section 104(1) of the Code that any civil penalty ordered by the Tribunal set off any liability of the Applicants under the credit contract.

An order pursuant to section 107(1) of the Code that the First Respondent pay the Applicant compensation for the loss arising from the contravention of the key requirements.

An order pursuant to section 114 of the Code that the First Respondent make restitution or pay compensation to the Applicants as the Tribunal sees fit.

A declaration that, in breach of section 144(1) of the Code, the Third Respondent and the Fourth Respondent made false and misleading representations in relation to matters material to the entry into a credit contract and mortgage or in attempting to induce the Applicants to enter into a credit contract and mortgage.

An order pursuant to section 144(3) of the Code that the First Respondent, Second Respondent, Third Respondent and Fourth Respondent are involved in the contravention, and that the loss can be recovered from the Respondents as the Tribunal sees fit.

Orders pursuant to section 68 of the Fair Trading Act ("the FTA") that the Third Respondent and the Fourth Respondent pay the Applicants compensation for their loss and damage flowing from the breach by the Third Respondent and the Fourth Respondent of the following provisions of the FTA: a. Section 40S; b. Section 42; c. Section 44; d. Section 50." 9 In the CTTT, the Gartons claim that the credit contract and mortgage between them and Permanent Mortgages entered on or about 11 March 2004 are subject to the Consumer Credit (New South Wales) Code (the Code). The Gartons are the registered proprietors of property at Hinchinbrook. Permanent Mortgages has a registered mortgage over that property. The Gartons seek the imposition of civil penalties under the Code, that the credit contract and mortgage were unjust at the time they were entered into within the meaning of s 70 of the Code and seek the credit contract and mortgage be reopened under the Code.

The relevant statutory provisions 10 Section 8(1) of the Consumer Credit (New South Wales) Act 1995 reads: "Conferral of judicial functions

(1) The jurisdiction that is expressed to be exercisable by "the Court" under the Consumer Credit (New South Wales) Code and the Consumer Credit (New South Wales) Regulations is exercisable by the following: (a) in the case of any jurisdiction prescribed by the regulations for the purposes of this paragraph - only the Consumer, Trader and Tenancy Tribunal,

(b) except in the case referred to in paragraph (a) - either the Consumer, Trader and Tenancy Tribunal or any court." 11 Part 2(4) of the Consumer Credit (New South Wales) Special Provisions Regulation provides: "4 Conferral of judicial functions The jurisdiction prescribed for the purposes of section 8(1)(a) of the Act is: (a) any jurisdiction under section 69, 83(1), 89, 100-114 or 162 of the Code, and …" 12 Sections 100-114 of the Code relate to civil penalties for defaults of credit providers for breach of key disclosure and other requirements. Hence, the CTTT has exclusive jurisdiction in relation to the civil penalties. 13 Section 6 of the Consumer Credit (New South Wales) Code provides: "6 Provision of credit to which this Code applies

(1) This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of pre-contractual obligations) is proposed to be entered into - (a) the debtor is a natural person ordinarily resident in this jurisdiction or a strata corporation formed in this jurisdiction; and

(b) the credit is provided or intended to be provided wholly or predominantly for personal, domestic or household purposes; and

(c) a charge is or may be made for providing the credit; and

(d) the credit provider provides the credit in the course of a business of providing credit or as part of or incidentally to any other business of the credit provider. (2) If not all the debtors under a credit contract ordinarily reside, or are strata corporations formed, in this jurisdiction, this Code applies only if credit is first provided under the contract in this jurisdiction.

(3) If this Code applies to the provision of credit (and to the credit contract and related matters) - (a) this Code applies in relation to all transactions or acts under the contract whether or not they take place in this jurisdiction; and

(b) this Code continues to apply even though the debtor ceases to be ordinarily resident in this jurisdiction. (4) For the purposes of this section, investment by the debtor is not a personal, domestic or household purpose.

(5) For the purposes of this section, the predominant purpose for which credit is provided is - (a) the purpose for which more than half of the credit is intended to be used; or

(b) if the credit is intended to be used to obtain goods or services for use for different purposes, the purpose for which the goods or services are intended to be most used." 14 However, in this Court Permanent Mortgages seeks possession of the property at Hinchinbrook. The CTTT in determining the Gartons' application does not have the power to grant possession. 15 The central issue to be decided is whether pursuant to s 22(3) of the Consumer, Trader and Tenancy Tribunal Act 2001 this Court has no jurisdiction to hear and determine the issues raised in Permanent Mortgages' statement of claim. 16 Section 22 of the Consumer, Trader and Tenancy Tribunal Act reads: "22 Other jurisdictions excluded in certain cases

(1) For the purposes of this section, court means any court, tribunal, board or other body or person (other than one referred to in subsection (2)) that: (a) is empowered under any other Act, or

to decide or resolve any issue that is in dispute, whether through arbitration or conciliation or any other means.

(2) However, court does not, for the purposes of this section, include: (a) a court, tribunal, board or other body or person that, in relation to a particular matter, is empowered by law to impose a penalty, admonition or other sanction for a contravention of a law or for misconduct or breach of discipline proved to have been committed in connection with that matter but is not empowered to award or order compensation or damages in respect of that matter, or

(b) a court, tribunal, board or other body or person prescribed, or of a class prescribed, by the regulations for the purposes of this section. (3) If, at the time when an application was made to the Tribunal in accordance with this Act, no issue arising under the application was the subject of a dispute in proceedings pending before a court, a court has no jurisdiction to hear or determine such an issue.

(4) Subsection (3) ceases to apply to the extent to which the application concerned is dismissed for want of jurisdiction or withdrawn.

(5) Subsection (3) does not prevent a court from hearing and determining any proceedings in which it is claimed that any order, determination or ruling of the Tribunal is invalid for want of jurisdiction or from making any order as a consequence of that finding.

(6) For the purposes of subsection (3), an issue arises under an application made to the Tribunal only if the existence of the issue is shown in the applicant's claim or is recorded in the record made by the Tribunal in accordance with this Act.

(7) 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 dispute in proceedings pending before a court, the Tribunal, on becoming aware of those proceedings, ceases to have jurisdiction to hear or determine the issue.

(8) Subsection (7) ceases to apply to the extent to which the proceedings concerned are dismissed or quashed by the court, or by another court, for want of jurisdiction or without deciding the issue on its merits, or withdrawn.

(9) At a hearing of an application by the Tribunal, a finding or decision made by a court, tribunal, board, body or person referred to in subsection (2) is admissible as evidence of the finding or decision." 17 In Cohen-Hallaleh v Cyril Rosenbaum Synagogue [2003] NSWSC 395, in relation to s 22(3) of the Consumer Credit (New South Wales) Act, Barrett J at [36]-[40] stated: "[36] Mr Lucarelli emphasised that s22(7) does not deprive the CTTT of jurisdiction generally where there are associated or related proceedings in a "court" - an expression which, in light of s22(1) and s22(2) extends to the Industrial Relations Commission. The most s22(7) does is to deprive the CTTT of jurisdiction to hear and determine a particular "issue", being an "issue" arising under the application before the CTTT that, when that application was made to the CTTT, "was the subject of a dispute in proceedings pending before a court".

[37] Mr Lucarelli submitted that "issue" here must be taken to refer to a justiciable issue, that is, an issue properly within the jurisdiction of both the CTTT and the particular court. Mr Lucarelli also submitted that there were no common issues (justiciable or otherwise) before the CTTT and the Commission. He pointed out that it was common ground before the CTTT that the employment contract had been terminated: the plaintiff's solicitor submitted to the CTTT that the termination was unlawful, therefore acknowledging the termination itself. Because the contractual right to occupy the subject premises was an incident of the employment contract, it is submitted that the question whether that right was still on foot was not before the CTTT. Nor, by definition, was any question whether the employment contract should be declared void or varied or whether it was unfair, harsh, unconscionable or contrary to the public interest.

[38] I accept Mr Lucarelli's submissions. The purpose of s22(7) is to avoid the risk of concurrent findings by the CTTT and a "court" (as defined by s22(1) and s22(2)) with respect to a particular "issue". For the section to operate, more must be shown that that the proceedings in the respective forums concern the same subject. It must be seen that disposition of each will require determination of the same question. In this case, the plaintiff points to common general subject matter but has not identified the particular "issue" that presented itself to the CTTT and was also thrown up by the Industrial Relations Commission proceedings.

[39] The plaintiff's proceedings in the Commission are founded solely on s106 of the Industrial Relations Act. That section is not concerned with re-establishing an employment contract: Beahan v Bush Boake Allen Australia Ltd (1999) 47 NSWLR 648. It's concern is exclusively with "the fairness of the terms of a contract of employment in its various respects" and, if unfairness is found, with the grant of remedial relief.

[40] The plaintiff has not shown that any "issue" arising in the CTTT proceedings was already "the subject of" the parties' existing dispute in the Commission. The plaintiff has therefore not made out his case under this heading." 18 If both the CTTT proceedings and the proceedings in this Court were to both continue, there is a risk of concurrent findings. Section 22(7) does not apply, as at the time that the Gartons brought their application in the CTTT there was no issue that was subject of dispute in this Court. As the Gartons' counsel put it the Gartons "were first in best dressed". 19 Counsel for Permanent Mortgages submitted that as the loan was not predominantly for personal, domestic or household purposes, the CTTT does not under s 6(4) of the Code have jurisdiction to hear this matter. Whether this is so depends upon the resolution of a factual dispute and can only be properly ventilated by a hearing. A date is to be allocated by the CTTT for it to decide whether it has jurisdiction in the near future. Permanent Mortgages submitted that there was no same justiciable issue in the concurrent proceedings. According to Counsel for Permanent Mortgages the justiciable issue in this Court is whether it is entitled to possession of the property. 20 More it must be shown than the proceedings in the different forums concern the same subject. It must be shown that the disposition of each will require the determination of the same question. In both proceedings, the question of whether the Gartons are entitled to relief under the Contracts Review Act 1980 or the Code are the same - see Permanent Mortgages Pty Ltd v Michael Robert Cook and Karen Cook [2006] NSWSC 1104. The CTTT has power to provide relief by way of amendment of the terms of a contract or compensation or penalty. In terms of relief the CTTT can determine whether any civil penalty should be imposed upon Permanent Mortgages, whereas this Court can grant an order for possession. 21 Neither forum can grant all the relief sought by the parties. It is my view that other than the relief referred to earlier, the issues and questions are the same. Both proceedings cover the same subject matter, namely how the agreement was entered into, the actual terms of the agreement, the circumstances surrounding the advance of $50,000, whether there has been a default under the term of agreement. The same justiciable issues are whether the Gartons are entitled to relief under the Contracts Review Act or the Consumer Credit (New South Wales) Code. It is my view in accordance with s 22(3) of the Consumer, Trader and Tenancy Tribunal Act that this Court has no jurisdiction to hear these proceedings. I make a declaration that this Court has no jurisdiction to hear these proceedings.

Stay of proceedings 22 If I am wrong, I will turn to consider whether a stay of proceedings should be granted. The applicants alternative claim in the motion is for a stay of the proceedings on the grounds of a perceived disadvantage to them in the proceedings by reason of the operation of s 22 of the Consumer, Trader and Tenancy Tribunal Act. 23 This Court retains a discretion to stay proceedings pursuant to s 67 of the Civil Procedure Act 2005 and its inherent jurisdiction to manage its process. However, the discretion is judicial and to be exercised only upon relevant grounds at law. The overriding principle involves the question of what the interests of justice require. 24 Permanent Mortgages submitted that the disadvantage caused to it by reason of the operation of legislation, apparently intended to have that effect, is not a proper judicial consideration. Counsel for Permanent Mortgages pointed out that the CTTT has not been provided with a jurisdiction in relation to claims for possession of land, or for the recovery of debt under a loan contract, despite its extensive jurisdiction to alter the terms and to punish breaches of the regulations concerning regulated credit contracts. Its power to stay enforcement of loan contracts pending consideration of an application to it is specific and limited (s 68, 86, 88 and 112 of the Code). 25 It is more convenient and consistent with the 'overriding purpose' of the Civil Procedure Act (ss 56-58), that all or as many disputes as possible between the same parties are determined in the one proceeding and any ultimate relief to be obtained is obtained as quickly and cheaply as possible. 26 According to Permanent Mortgages, the enforcement proceeding is not an impediment to the defendants' pursuit of their allegations raised in their Tribunal claim; the disadvantage alleged is merely, that they would be obliged to withdraw those claims from the Tribunal (which in any event appears to lack jurisdiction to consider them) and to raise them freshly in the current proceedings. It is submitted, that such a disadvantage is not of substance, but of form. I disagree. If possession is granted and the property is sold, should the Gartons be successful in the CTTT and have the contract amended or alternatively, they are found not to be in default, they have already lost their property. This is a major disadvantage for the Gartons. Permanent Mortgages submitted that no proposal has been made or evidence given of ability to pay any part of the accruing interest, such that any delay in realizing the security threatens the capacity of the plaintiff to recover its loan. The Gartons have been making partial repayments. 27 As previously stated, once the proceedings are finalised in the CTTT and should the Gartons fail, possession proceedings can be commenced in this Court. If the CTTT proceedings are finalised with a decision adverse to the Gartons and failing an agreement for possession Permanent Mortgages can commence possession proceedings. Those proceedings ought to be determined quickly, cheaply and expeditiously. 28 In the exercise of my discretion it is my view that the disadvantages to the Gartons outweigh the disadvantages to Permanent Mortgages. It is appropriate to grant a stay of proceedings in this Court pending determination of the proceedings in the CTTT. I do so. 29 Costs are discretionary. Costs normally followed the event. The plaintiff is to pay the first and second defendants' costs as agreed or assessed.

(1) That this Court has no jurisdiction to hear these proceedings until the first and second defendants' application in the CTTT is determined.

(2) The plaintiff is to pay the first and second defendants' costs as agreed or assessed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.