Perpetual Limited v Karen Treloar

Perpetual Limited v Karen Treloar - [2009] NSWSC 386 - NSWSC 2009 case summary — Zoe

[16]

7 In May 2002, Mrs Treloar refinanced her borrowings with a loan from the plaintiff of $285,000, the loan being secured by the property at 47 XX Road. In March 2003, she obtained a further loan, increasing her borrowings from the plaintiff to $396,796.30. Again, the loan was secured by 47 XX Road. 8 In April 2003, Mrs Treloar then purchased a house and land at 43 XX Road, with further borrowings advanced by the plaintiff, secured by the property at 43 XX Road. 47 XX Road then remained her family home. Mrs Treloar was represented by a solicitor and signed a business purpose declaration indicating that the purpose of the loan was for investment. 9 In June and July 2003, Mrs Treloar obtained further advances, again each secured by the property at 43 XX Road. In September 2003, Mrs Treloar sought a further loan from the plaintiff, to refinance the property at 43 XX Road. It is the mortgage and loan which resulted from the approval of this last application which is the subject of these proceedings. Again, Mrs Treloar signed a business purpose declaration, stating that the credit was to be applied predominately for investment or business purposes. In October 2003, she received an advance of $520,000 from the plaintiff. The loan contract executed by Mrs Treloar on 3 October, provided in clause 4 that the purpose of the loan was to 'assist you in refinancing an investment property and constructing an investment property.' 10 In August 2003, Mrs Treloar had made a development application in relation to 43 XX Road, seeking permission to subdivide the land and to build a new dwelling on each block. Approval was granted and subsequently two certificates of title were issued, and the plaintiff's mortgage over the land was recorded on both certificates. 11 Mrs Treloar sold 47 XX Road in September 2003 and went to live elsewhere. Two residences were built at 43 XX Road and the land was later subdivided. Mrs Treloar and her family moved into one of the new residences at 43 XX Road in 2005. This remains her family home and is the subject of these proceedings. Later in 2005, the second block and residence were sold to Mrs Treloar's son. 12 By February 2005 the loan was in default. A default notice was issued, both in 2006 and 2007, but there were further defaults. After the second default notice was issued in February 2007, there were some payments made and attempts to make further payments by way of bank cheques, which were refused. There were further defaults and proceedings for possession were then commenced in April 2007. A further default notice was issued in June 2008.

[23]

... 20 It was the plaintiff's case that a postcode is not a part of a person's 'address'. It also argued that, in any event, the evidence established that Mrs Treloar had received the notice, despite the incorrect postcode used and that accordingly, there could be no question that the notice had been left at the address, as 170(1)(b) contemplated. It was irrelevant who had effected such delivery. 21 The defendant argued that in order for service to be effected, as s 170(1)(b) required, the residential address to which the notice was sent by post, had to include the current postcode of the suburb in question. The defendant relied on what Bryson J had observed in Wallville Pty Ltd v Liristis Holdings Pty Ltd [2001] NSWSC 894: 19 Circumstances relating to Exhibit 2 received some attention in the hearing, as I understand it in support of a suggestion that the lessor's evidence that the letter of 25 May was not received was unsatisfactory and that that letter, or letters generally, may have been refused in the mail. There is no support for this possibility in the evidence. Events affecting Exhibit 2 are no more than an illustration of the obvious possibility that postal articles may not be duly delivered. One matter that consideration of Exhibit 2 did raise is that, as appears by an extract from a map book (Exhibit C) Parraweena Road runs for several kilometres, the eastern part where the premises 16-18 Parraweena Road are situated is in Taren Point and served by Caringbah Post Office with Post Code 2229, but the western part is served by Miranda Post Office with Post Code 2228. This points, but not in any definite way, to the possibility that mail addressed to an address in Parraweena Road with Post Code 2228 might not be delivered in the ordinary course of post for a postal article with a correct post code, and might go astray in some way. However this raises no more than consideration of possibilities and does not point to any definite conclusion. The fact that the address was not correct, or was not completely correct, has a bearing on the application of s.170 of the Conveyancing Act 1919. When s.170 is addressed in a literal way it has not been complied with. Assuming that the address in the letter was the address written on the envelope, it should of course be found that 16-18 Parraweena Road Taren Point was the last known business address of the lessor, but in the postal context the business address included the post code and the post code was wrongly stated. 22 The plaintiff argued that in so far as his Honour concluded that a person's address included the postcode for the purposes of s 170 of the Conveyancing Act, his Honour's approach would not be followed. Attention was drawn to the approach of the Full Federal Court in SZLBR v Minister for Immigration & Citizenship [2008] FCAFC 85. There, it was concluded that:

[24]

15 Even if the conclusion expressed in [14] is not correct, we rely on the views we expressed in SZKGF where we said at [11] - [12]: In any event there are cogent reasons for concluding that the postcode is not part of the address and therefore the use of the incorrect postcode did not result in non-compliance with s 424A(2)(a). On this point see the views expressed by Emmett FM in S ZLBR v Minister for Immigration and Citizenship [2008] FMCA 154 at [39] - [40]. Even if the postcode is properly to be regarded as part of the address, the question would arise as to whether the use of the incorrect postcode constituted a jurisdictional error. In Tasker v Fullwood [1978] 1 NSW LR 20 at 24, the NSW Court of Appeal said that in such circumstances it is relevant to consider the extent of the failure to observe the statutory requirement. Moreover in Victoria v Commonwealth [1975] HCA 39; (1975) 134 CLR 81 at 179 Stephen J pointed to the need to examine the extent of non-compliance in the particular case "to determine whether what has in fact occurred nevertheless gives effect to the general object of the statute". Relying on these authorities, Mr Lloyd advanced persuasive arguments that use of the incorrect postcode would not result in jurisdictional error however it is not necessary to decide that issue and, in the absence of a contradictor, we do not do so. 23 The observations of Emmett FM in SZLBR v Minister for Immigration and Citizenship [2008] FMCA 154, to which attention was drawn by the Full Court were: 39 In considering the meaning of address, I have regard to the definition of "address" in the New Shorter Oxford Dictionary as, inter alia, "the name of the place to which anyone's letters etc are directed; ones place of residence". The use of the word " place " in that definition, to my mind, signifies a physical location. The Macquarie Dictionary defines " place " as, inter alia, " an open space, or square, in a city or town; an area, especially one regarded as an entity and identifiable by name, used for habitation, as a city, town, or village ". 40 In light of those definitions, the address of "one's place of residence" is properly identified by the street name and number, where relevant, and suburb. The postcode is not an essential part of the identification of that physical location. 24 In evidence were documents produced on subpoena by Australia Post, which explained the system under which Australia Post dealt with errors in postcodes on correspondence sent by mail. Those documents explained how it came to be that other correspondence sent to her by the plaintiff had been received by Mrs Treloar at her home, despite the plaintiff's error in relation to the Hebersham postcode. While it was submitted for the defendant that no reliance could be placed on this evidence, because it was hearsay and because of the views of the Court of Appeal in Connor v Blacktown District Hospital (1971) 1 NSWLR 713, in my view neither submission assisted the defendant. 25 The evidence as to the Australia Post system had been admitted without objection, correctly it seemed to me in the light of the provisions of s 69 of the Evidence Act 1995 and the approach of the Court of Appeal in Connor. Asprey JA, with whom Mason JA agreed, there took the view, at 721, that:

[26]

26 On the evidence, Australia Post has a computerised matching system which deals with errors in the way mail is addressed. Relevantly, when the only error made in an address is an incorrect postcode, with all other parts of the address being correct, a barcode reflecting the correct postcode is then assigned to the correspondence and delivery is then effected by Australia Post to the address, in the correct postcode area. 27 In this case, the only error made in the address to which the default notice was sent was in relation to the postcode of Hebersham. There is only one suburb in Australia called Hebersham and no street called XX Street in the suburb, the postcode of which was used in error by the plaintiff. This explains how Australia Post came to correctly deliver other of the plaintiff's correspondence to the defendant's residence at XX Street Hebersham, despite the error in relation to the postcode. 28 That evidence lends support for the view reached by the Full Federal Court in SZLBR and that of Emmett FM there referred to, that the postcode is not a part of a person's 'address'. That word is not defined in the Conveyancing Act and accordingly, must be given its ordinary meaning. As Emmett FM observed, the dictionary definition of the word does not encompass the concept of the postcode assigned to the place in question. 29 On the evidence, an error in the postcode of the address to which correspondence is sent by post, will not result in Australia Post not delivering that correspondence to the address to which the correspondence is directed, if it is otherwise correctly addressed, given the system of mail delivery which Australia Post operates. Under that system, an error in the postcode will not result in a failure to deliver a notice sent by post to a person's address, as s 170 (1)(b) of the Conveyancing Act envisages. 30 Also to be considered is that s 170(1)(b) does not differentiate between notices which are 'left at or sent by post', to a person's residential or business address. There could be no question that a notice which had the wrong postcode on the address to which the notice was directed, but which was physically left at that address, had been served as s 170 required. Can there be any different conclusion if the notice which contains the wrong postcode is sent by post, but is delivered, in any event, by Australia Post to the correct address, under the system which it operates? 31 At the least, in such a case, it would have to be concluded that the notice had been 'left at' the person's address, as s 170(1)(b) contemplates. That it had been left there by an Australia Post employee, would not be relevant to whether or not the service had been effected as the section requires. Receipt of the notice would certainly evidence service, as the section contemplates. Once that is accepted, logically it must follow that a postcode cannot be regarded as comprising a part of a person's 'address'. 32 It appears to me, for this additional reason, that it must be concluded that the 'address' with which s 170 of the Conveyancing Act is concerned, does not include the postcode assigned to the place in question and that the error made in relation to the Hebersham postcode, did not have the result that the notice was not served in accordance with the requirements of s 170(1)(b) of the Conveyancing Act.

[27]

Did Mrs Treloar receive the notice? 33 I am satisfied, on the evidence, that it cannot sensibly be doubted that Mrs Treloar received the February 2007 s 57(2)(b) notice, despite her denial. She was plainly mistaken. 34 That conclusion was unavoidable when consideration was given to the records maintained by the mortgage manager of its communications with Mrs Treloar. Those computerised Customer Call Log records, also admitted without objection, showed that in 2006, a default notice dated 14 March had been sent to Mrs Treloar, incorrectly addressed, as was the 2007 notice. Two days after the 2006 notice was sent, on 16 March, Mrs Treloar phoned the mortgage manager and advised Ms Mathey, that she had received the notice, that she was going to refinance, and that a payment would be made. A certain payment was received on 21 March, but when the default notice expired in April, Mrs Treloar remained in default. 35 In 2007, the mortgage manager's Customer Call Log records again showed that on 14 February, two days after the February 2007 default notice was sent, Mrs Treloar again contacted the mortgage manager and spoke to Mr Andre El Baghd to advise that she proposed to make two payments to rectify her default. Together those amounts comprised the amount specified in the February default notice as being outstanding. In her initial affidavit sworn in September 2007, Mrs Treloar's evidence was that she could not recall having received this notice. In her later affidavits sworn in August and October 2008, her evidence was that she had checked her records and was then certain that she had not received the notice. That evidence cannot be accepted. 36 In cross examination, Mrs Treloar explained that she had kept all of the correspondence which she had received and that while she could remember contacting the mortgage manager and having the conversation recorded by the mortgage manager in February 2007, she remembered that she had not then been responding to a default notice, but rather to another letter sent to her by the mortgage manager, from a person called 'Andre'. There was no record of such correspondence having been sent to Mrs Treloar on the mortgage manager's records and Mrs Treloar was unable to produce such a letter when it was called for, despite making a search. The default notice itself mentioned the name 'Andre'. After her phone call to Mr Andre El Baghd on 14 February, Mrs Treloar then made the first of the payments she had indicated that she proposed to make, but not the second. 37 The proper inference from all of this evidence was that when Mrs Treloar contacted the mortgage manager on 14 February to speak to Mr El Baghd, she was responding to the February 2007 default notice which had been posted to her at her residential address, which, like other correspondence sent to her, she had received, despite the incorrect postcode used. The mortgage manager sent her no other correspondence at that time, to which she could have been responding. 38 Given what was recorded by the mortgage manager as to what Mrs Treloar said to Mr El Baghd on 14 February 2007, it is apparent that she was responding to the notice, promising to make payment of what was thereby notified to her as being outstanding, by two instalments. Mrs Treloar's evidence in cross examination was that when she received a notice, she always tried to clear what was owed. She recalled having this conversation. Mrs Treloar must have been mistaken in her recollection of what document it was that she was then responding to. On her evidence, at that time, she was distracted with other difficulties in her personal life. The only document which could have drawn her attention to the default in question at that time, was the default notice. 39 It follows that it has to be concluded that the notice was served on Mrs Treloar as s 170 of the Conveyancing Act required. Mrs Treloar received and responded to that notice. Does the Consumer Credit Code apply to the loan? 40 The defendant next relied on non compliance with s 85 of the Consumer Credit Code ('the Code'), (which is an appendix to the Consumer Credit (Queensland) Act 1994, given force by s 5 of the Consumer Credit (New South Wales) Act 1995), as a reason for relief being refused to the plaintiff in relation to the 2007 default notice. 41 It was the plaintiff's case that the Code did not apply and, even if it did, a second s 57(1)(b) notice had been served on the defendant in June 2008, which had cured any deficiency in compliance with the Code. This notice was served by the plaintiff, after Mrs Treloar had put on a defence in these proceedings, claiming that she had never received the 2007 notice. The second notice was served personally. It referred to further defaults between March and June 2008. The plaintiff was given leave to amend its statement of claim to rely on the second notice. There was no issue between the parties that the second notice had been served, but the defendant also disputed that the second notice complied with the Code. 42 Section 85 of the Code required that: 85 Requirements to be met before credit provider can enforce an acceleration clause (1) An acceleration clause is to operate only if the debtor or mortgagor is in default under the credit contract or mortgage and-- (a) the credit provider has given to the debtor and any guarantor, or to the mortgagor, a default notice under section 80; and (b) the default notice contains an additional statement of the manner in which the liabilities of the debtor or mortgagor under the contract or mortgage would be affected by the operation of the acceleration clause and also of the amount required to pay out the contract (as accelerated); and (c) the default has not been remedied within the period specified in the default notice (unless the credit provider believes on reasonable grounds that the default is not capable of being remedied). (2) However, a credit provider is not required to give a default notice under section 80 or to wait until the period specified in the default notice has elapsed before bringing an acceleration clause into operation, if-- (a) the credit provider believes on reasonable grounds that it was induced by fraud on the part of the debtor or mortgagor to enter into the contract or mortgage; or (b) the credit provider has made reasonable attempts to locate the debtor or mortgagor but without success; or (c) the Court authorises the credit provider not to do so; or (d) the credit provider believes on reasonable grounds that the debtor or mortgagor has removed or disposed of mortgaged goods under a mortgage related to the credit contract or the mortgage concerned, or intends to remove or dispose of mortgaged goods, without the credit provider's permission or that urgent action is necessary to protect the goods. (3) This section is in addition to any provision of any other law relating to the enforcement of real property mortgages and does not prevent the issue of notices to defaulting mortgagors under other legislation. 43 Once the Code is raised, matters dealt with in s 6, s 11 and s 176 of the Code arise for consideration. (See Neuendorf v Rengay Nominees Pty Ltd [2003] VCAT 1732 at [36] to [49].) Section 11 provides:

[32]

44 Section 6 of the 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. 45 Section 176 of the Code provides: 176 Conduct of agents and related matters (1) The conduct of an officer, agent or employee of a credit provider acting within his or her actual or ostensible authority will be imputed to the credit provider and taken to be conduct of the credit provider. (2) A person cannot authorise a credit provider, or a person associated with a credit provider, to enter into a credit contract, mortgage or guarantee on the person's behalf. This subsection does not prevent a credit provider from authorising a person associated with the credit provider to enter into a credit contract on behalf of the credit provider. (3) A credit provider or person associated with a credit provider that purports to act as agent of a debtor, mortgagor or a guarantor in entering into a credit contract or a mortgage or guarantee is guilty of an offence. Maximum penalty--50 penalty units. (5) A credit provider is not, for the purposes of this Code taken to know or have reason to believe something because an officer, agent or employee of the credit provider does so, unless the knowledge or reason to believe that thing is acquired by the officer, agent or employee acting in that capacity and in connection with the transaction concerned.

[41]

50 There were four differences identified by the defendant between the declaration signed by Mrs Treloar and that required by the Regulation. Three of them, it was initially submitted, were crucial. A transposition of the words 'business or investment purposes', was accepted as being of no moment. The three other departures were the placement of the word 'important' at the outset of the declaration; the failure to print the words 'not' and 'lose' in bold and the shading of the box. Together, these differences were argued to be such as to result in the conclusion that the declaration was not substantially in the required form. 51 I am unable to accept the submission. 52 In Permanent Mortgages Pty Ltd v Michael Robert Cook and Karen Cook [2006] NSWSC 1104, Patten AJ had to determine whether the declaration there in question was substantially in the required form. His Honour did so by considering whether the declaration provided 'less information than the form requires or to have operated to confuse or mislead the Defendants' (at [60]). While there was an appeal from his Honour's decision, the correctness of his Honour's approach on this issue was not questioned. (See Cook and Anor v Permanent Mortgages Pty Ltd [2007] NSWCA 219). That approach, when applied to the declaration here in question, must lead to the conclusion that the declaration was substantially in the form required. 53 The declaration did not provide less information than that required to be given by the Regulation. Nor did the form in which the required information was provided, leave open the conclusion that Mrs Treloar could have been confused, or misled by what was there advised to her. 54 In Permanent Mortgages it was also concluded by Patten AJ that the lack of bolding of the words here in question, namely the words 'not' and 'lose', did not make the declaration ineffective. That conclusion was accepted for Mrs Treloar as being applicable in this case, but it was still argued that the placement of the word 'important' at the beginning of the declaration and the shading of the box in which the declaration appeared, was still a sufficient basis for the conclusion that there had not been substantial compliance with the requirements of the Regulation. I do not agree. 55 The word 'important' is used at the beginning of the declaration, albeit its placement is altered from the middle of the page. Nothing can turn on this. The shading used in the printed form drew attention to the declaration appearing immediately before the signature. It did not obscure the declaration, as was suggested at one stage for Mrs Treloar, when the original document was not in evidence and the photocopy reproduction of the shading was poor. The original document, when tendered, made it clear that this submission was not sensibly available to be accepted. 56 Reliance was also placed on the approach of McDougall J in Hraiki v Beljon [2008] NSWSC 775 at [19], where his Honour said:

[43]

The time at which the matters arising under ss 6(1)(b) and 11(3) of the Code are to be determined 58 The time at which the matters arising under ss 6(1)(b) and 11(3) of the Code are to be determined has been considered in a number of cases, although it was submitted by both parties that the proper construction of the Code in this respect remains unclear, on the existing case law. 59 In Bahadori v Permanent Mortgages Pty Ltd [2008] NSWCA 150 the Court of Appeal had to consider how Associate Justice Harrison had approached the question of what ss 6(1) and 11(3) of the Code required. The conflicting case law was dealt with, Tobias J, with whom Campbell JA agreed, observing: 132 The Tribunal noted that there had been a divergence of judicial opinion as to the correct approach to s 11(3). Reference was made to two tests. The first was that adumbrated by Shaw J in Johnson v Arkway Pty Ltd [2003] NSWSC 815; (2003) 58 NSWLR 451 where his Honour preferred the approach taken by Gillard J in Linkenholt Pty Ltd v Quirk [2000] VSC 166; (2000) ASC 155-040 over that adopted by Brabazon DCJ in Rafiqi v Wacal Investments Pty Ltd (1998) ASC 155-024 (Queensland District Court) and applied by Master Harrison in Park Avenue Nominees Pty Ltd v Boone [2001] NSWSC 700; (2001) ASC 155-052. 133 The passage from the judgment of Gillard J in Linkenholt, adopted by Shaw J, was in the following terms: "It is appropriate to consider what the money was used for in order to determine the purpose of the provision of the credit. In considering the question it is important to look at the substance of the transaction in the context of its performance …" 134 Shaw J then concluded (at [30]) in the following terms: "His Honour's [that is, Gillard J in Linkenholt ] emphasis was that the Court should consider the substance and reality of the transaction …" 135 The test adopted by Associate-Justice Harrison in Park Avenue Nominees (at [46]) was as follows: "If the correct objective test is applied, the relevant intention will be that which a reasonable person standing in the shoes of a credit provider would have understood the predominant purpose for which credit was provided." 136 The Tribunal determined to follow the decision of Associate-Justice Harrison in Park Avenue Nominees rather than that of Shaw J in Johnson . The Tribunal then said: "Further, they [the remarks of Shaw J] are not directed to the question of what is the substance and the reality of a transaction. In a case like this, the debtors may well take the view that the substance and reality of a transaction is that the purpose to which they intend to apply the money is personal - the refinancing of a mortgage over their house where the money originally borrowed was for a purely personal reason. The mortgagees may take the position that the loans were for an investment purpose as that was the notification to them on the loan applications and on the declarations under s 11(2)." 137 The Tribunal then asked itself the question "what then did either of the credit providers in this case know, or what did they have reason to believe"? It answered that question in the following terms: "ee. The evidence before me as to knowledge was that whilst the Applicants may well have told both Super City (their broker and agent) and their solicitor that the purpose of the loans was personal, all that the credit providers were told was that the purpose was investment. There is no evidence that the purpose made known to Super City was ever made known to the mortgagees. I accept the evidence from each of the Applicants that they did not write the word 'investment' on any of the loan applications, and that they do not know in whose writing the word appears. To a lay eye, there appears to have been at least two scribes. However, there is no evidence that any of the handwriting appearing on the loan applications and other documents was added after signature by the applicants. ff. The only other evidence which may have alerted the mortgagees is that the security for the loans was a residential property, and that most of the money was to be used to discharge an existing mortgage. I consider these facts to be at best inconclusive, and given the declarations not to be ones which should have set the mortgagees off on a line of enquiry. In this regard I accept the submission by Mr Titterton that the remarks set out in Beatty et all at paragraphs 11.30 of their commentary on the Code are correct. There was no other argument put to me." 138 The relevant remarks in Beatty and Smith, Annotated Consumer Credit Code Regulations 3rd Ed, Butterworths (2006) at para 11.35 dealing with the expression " knew, or had to reason to believe " states as follows: "Section 11 renders a business purpose declaration ineffective if the person who obtains it 'knew, or had reason to believe' that it was untruthful. This formulation suggested the word 'knew' refers to actual knowledge and the words 'reason to believe' deals with a situation of constructive notice. … Cases do not establish conclusively whether there is any difference in substance between the various tests, but they do tend to suggest, without resolving the issue, that the tests are probably objective rather than subjective; i.e. they rely on the standard of behaviour expected of an outsider acting reasonably, rather than on the facts and circumstance which are subjectively known to the outsider. In Park Avenue Nominees Pty Ltd v Boon … it was said that the relevant test involves an objective consideration of what a reasonable person in the shoes of the credit provider would have understood as the predominant purpose. In Daimler Chrysler Services Aust Pty Ltd v Berckelman [2004] NSWSC 447, the New South Wales Supreme Court stated that the credit provider's knowledge can be actual or implied. It was held that the Tribunal had not erred by finding that: '… a reasonable person making an objective determination in respect of the use of this contract would conclude that the contract was wholly or predominantly for personal, domestic or household purposes.' " 60 Tobias JA went on to observe that: 148 As to the third ground, her Honour set out the various tests which had been the subject of judicial authority and to which I have already referred at [132]-[138] above. She considered (at [36]) that there were five possible ways in which s 6(1)(b) could be interpreted. They were as follows: "… Firstly, objectively from the viewpoint of the lender at the time the contract is entered into; secondly, objectively from the viewpoint of the borrower at the time that the contract is entered into; thirdly, by the objective facts known to both parties at the time of entering into the contract; fourthly, on the subjective knowledge of either the lender or borrower; and finally on the test in Johnson of the actual use of the funds." 149 Having rejected the fourth test, her Honour noted that the first approach was that adopted by her in Park Avenue Nominees and by the Queensland District Court in Rafiki . It contemplated an objective test as to what a reasonable person standing in the shoes of the credit provider would have understood to be the predominant purpose for which the credit was to be provided. This reflected, her Honour considered (at [37]), the phrasing of s 6(1)(b) which seemed to suggest through the express words " provision of credit ", that it be interpreted from the viewpoint of the lender. 150 Her Honour dealt with the second approach at [38] and [39] of her judgment noting that that approach was consistent with the more recent decision of the Queensland District Court in Dale v Nicholls Construction Pty Ltd [2003] QDC 453 where McGill DCJ accepted in part what Shaw J had said in Johnson. His Honour in Dale agreed that what is actually done with the money once it is borrowed could be an indication of its intended use although stating that the test was an objective one. Her Honour continued (at [39]): "A reasonable person in the shoes of the borrower would always believe that they are receiving the money for the purpose for which they are actually borrowing it (except if they are being dishonest). If that is so, the objective outcome would always be the same as the actual one." 151 At [40] her Honour considered that the third approach would be to consider the objective facts known to both parties as to the purpose for which the credit was to be provided at the time at which the credit contract was entered into or proposed to be entered into. She likened that approach to " the interpretation of a contract where an implied term was ambiguous ", referring to Codelfa Construction at 352 per Mason J. 152 Her Honour concluded that the test adumbrated by Shaw J in Johnson should be applied. However, she had a reservation that if one considers what the money was used for in order to determine the purpose of the provision of the credit and in doing so considers the substance of the transaction in the context of its performance, it may involve facts that occurred after the transaction was entered into. Rather than looking at it from the point of view of the credit provider, it looks at the reality of the transaction. Her Honour considered (at [41]) that that course of reasoning went beyond what s 6(1)(b) contemplated. 153 Accordingly, factors that occurred after the transaction was entered into should not, in her Honour's view, be considered. In her judgment the section required that the intended purpose of the legislation be discerned at the time the contract is entered into or proposed to be entered into.

[44]

61 In resolving this aspect of the appeal, Tobias J observed: 177 In the foregoing circumstances it is strictly unnecessary to consider the appellants' subsidiary argument founded on s 11(3) of the Code that Permanent and Conway or persons associated with them such as Kremnizers and/or La Trobe, knew or had reason to believe that at the time the s 11(2) declarations were made, the loans being sought by the appellants were in fact to be applied wholly or predominantly for personal, domestic or household purposes. However, as the issue was fully argued I shall express my views thereon. 178 Permanent and Conway submitted that one could not go past various documents signed by the appellants in which they had stated that the purpose of the respective loans was wholly or predominantly for business or investment purposes. In this respect, much reliance was placed upon passages from the joint judgment of Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at 182 [47] where reference is made to the significance which the law attaches to the signing of a contractual document so that where a person signs a document knowing that it is a legal document relating to an interest in property, that person is in general bound by the act of signature and that to undermine that assumption "would cause serious mischief". 179 The principles so adumbrated by the High Court in Toll relate to the proposition that a person who signs a document which is known by that person to contain contractual terms and to effect legal relations, is bound by those terms, it being immaterial that the person has not read the document. In my opinion this has little relevance to the issue to which s 11(3) of the Code is directed. That is not to say that the signed assertions of the appellants that the subject loans were for business or investment purposes carry no weight. But the weight to be attributed to those assertions depends on the circumstances known to the credit provider or its agent at the time they were made. 180 In the present case Kremnizers were aware from some time in October 2002 that the appellants only needed to borrow $30,000 for a term of two years. The amount of the loan increased as a consequence of the refusal of Perpetual to permit the registration of a second mortgage to secure a loan of $30,000. A loan was therefore sought to enable Perpetual to be repaid the amount owing to it in circumstances where it held a first mortgage over what Permanent, Conway and their agents knew to be the appellants' home. Furthermore, the applications for finance to which I have referred at [121] to [123] above to support a finding which, in more neutral terms, I made at [124] to [126] above that both Permanent and Conway had reason to believe at the time the s 11(2) declarations were made on 15 November 2002 that the appellants' assertion that the loans were to be applied wholly or partly for business or investment purposes, was clearly not the case. 181 Accordingly, in my view the requirements of s 11(3) of the Code have been made out with the result that the s 11(2) declarations were ineffective. 62 Giles JA agreed with his Honour's conclusions, also observing that:

[46]

63 These observations, albeit strictly obiter, are of some moment in this case. The Court of Appeal resolved the issues raised by s 6(1)(b) and s 11(3) of the Code by having regard to what was known to the credit provider at the time the credit contract was entered, not by assessing what the evidence showed as to 'the substance of the transaction in the context of its performance', at some later time. What was known included what was contained in the declaration signed by the borrower, as well as other matters about which the lender had knowledge when the declaration was made, which had revealed to the lender that loan was for personal purposes, despite the terms of the declaration which had been made. 64 Approaching the issue in that way, namely by considering all that was known to the credit provider at the time the declaration was made, before the loan contract was entered, it seems to me, is consistent with an objective consideration of what a reasonable person in the shoes of the credit provider would have understood as the predominant purpose of the loan, given all that was actually or impliedly known by the credit provider at the time the declaration was made. 65 That approach is consistent with the express words of s 11(3) of the Code which makes a declaration ineffective '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 was made that the credit was in fact to be applied predominantly for personal, domestic or household purposes'. 66 How those words are to be interpreted is a question of statutory construction. As the Chief Justice recently observed in Caterpillar of Australia Pty Ltd v Industrial Court of New South Wales [2009] NSWCA 83: 86 It is now well established that the contemporary approach to statutory interpretation requires a court to have regard to the context in which words appear in the first instance and not merely after some ambiguity has been identified. (See eg CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 405; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [69]; Network Ten Pty Ltd v TCN Channel Nine Pty Ltd [2004] HCA 14; (2004) 218 CLR 273 at [11].) 87 As Justice Learned Hand once put it (Helvering v Gregory (1934) 69 F 2d. 809 at 810-811): "The meaning of a sentence may be more than that of the separate words, as a melody is more than the notes, and no degree of particularity can ever obviate recourse to the setting in which all appear, and which all collectively create". 88 Judges no longer approach a statute with scissors in one hand and a dictionary in the other.

[50]

72 Mrs Treloar also claimed that the first time she attended the mortgage manager's offices in 2002, when borrowing in relation to 47 XX Rd 'I said to Beth Nguyen: "Do I need a solicitor?" Beth Nguyen said to me: "No, I will be your solicitor, it will save you money'".' 73 Mrs Nguyen was not called, but it was Mr Stariha's evidence that there had been no record made by Ms Nguyen that she had met with Mrs Treloar on 3 September 2003. Ms Nguyen was then employed as general manager of a sales division of the plaintiff's mortgage manager. She was not a solicitor; she was not employed to give advice and the mortgage manager had no practice of having its employees give such advice. The loan document signed by Mrs Treloar was dated 11 September. 74 Mrs Treloar's evidence about Ms Nguyen's role seems rather improbable, particularly in the face of Mr Stariha's evidence. Even if Mrs Treloar's evidence as to the circumstances in which she came to make the September 2003 declaration is accepted, what must also be considered is that Mrs Treloar did not claim in her evidence that she had ever told the plaintiff, the mortgage manager, Ms Nguyen or anyone else on behalf of the plaintiff, that the purpose of the proposed 2003 loan was personal, domestic, or household, or indeed that it was anything other than what the document which she signed on 11 September 2003 disclosed, namely, that the purpose of the loan was to finance a construction for investment purposes and to refinance a property for investment purposes. It was not even her evidence that she told Ms Nguyen or anyone else on behalf of the plaintiff that the declaration was incorrect. As was conceded in submissions, the highest her evidence went was that she did not complete the declaration and it was not explained to her, she simply signed it. 75 This is of some moment in this case. As Tobias J observed in Bahadori, at [178], attention must be paid to the fact that even if Mrs Treloar did not read the declaration, plainly she signed it, knowing that it was of legal significance, so far as the loan she was seeking was concerned. 76 The declaration Mrs Treloar made in September 2003 was in similar terms to the declaration which she had earlier made in 2003, when she obtained the loan in order to purchase 43 XX Road. At that time, she was represented by a firm of solicitors, Nugent Nooma and Carter. Her solicitor, Mr Carter witnessed the mortgage documents which she then executed. Plainly, Mrs Nguyen was not then acting for, or advising Mrs Treloar about the loan transaction. 77 Also to be considered is that even though on her evidence Ms Nguyen filled in the form on 3 September, Mrs Treloar did not sign it until 11 September. There was no suggestion that she had any difficulty reading the form. Nor was it Mrs Treloar's evidence that the form was incorrectly completed and that the information provided on the form was inaccurate, in any respect, when she signed it. What her evidence amounts to is simply a statement that the declaration was not explained to her by Ms Nguyen. 78 Mrs Treloar had given a similar declaration in relation to funds earlier borrowed when 43 XX Road was purchased, at a time when she did have a solicitor advising her on the transaction. The later 2003 borrowing was sought at a time when she was proceeding to subdivide the land and build two residencies on it. That cannot have given rise to any inference that the purpose of the loan was something other than what was disclosed. 79 Also to be considered is that it was Mrs Treloar's evidence that she was residing at 47 XX Road, when 43 XX Road was purchased in March 2003. In August 2003, an application was made to Council for approval to subdivide the land at 43 XX Road and for permission to build a residence on each lot. There was no evidence of any intention existing when the declaration was signed on 11 September 2003, of Mrs Treloar using the loan for personal, domestic or household purposes. An investment or business purpose was consistent with what had been undertaken in relation to 43 XX Road to that point. 80 When the decision to sell No 47 was made was not revealed, although No 47 was sold on 26 September and the proceeds were used to discharge the mortgage over that property. It follows that the decision to sell must have been some time beforehand. There was no evidence, however, that Mrs Treloar had disclosed anything about this sale before giving the declaration, which would have put the plaintiff on notice that the declaration which she later gave in relation to the loan sought for No 43, was incorrect. Mr Stariha's evidence in cross examination, as to what he would have assumed from the fact that Mrs Treloar was not living in No 43 when she applied for the loan, did not establish that the plaintiff or those who represented it, had any information that Mrs Treloar intended to use the loan for domestic, personal or household purposes. 81 After the sale, Mrs Treloar and her family moved and lived elsewhere, while the two residences were constructed at No 43. Whether they owned or rented the property where they then resided, was not explored in the evidence. 82 The two residences were built at No 43 and it was later subdivided. It was not until May 2005 that No 43A was sold to Mrs Treloar's son. There was no evidence as to the terms of that sale. When Mrs Treloar moved into No 43 was also not clear, although the evidence showed that in October 2003, and in respect of the period July to December 2004, the plaintiff was writing to her elsewhere and that it was not until during the period January to June 2005, that the plaintiff wrote to her at 43 XX Road. The inference is that it was not until January 2005 that Mrs Treloar moved to 43 XX Road. 83 On all of the evidence, I can find no basis for concluding that the plaintiff was not entitled to rely on the declaration which Mrs Treloar signed in September 2003. That it was inaccurate at the time it was provided by Mrs Treloar was not established and even if it was, that of itself is not a basis upon which it may be inferred that the plaintiff or its agents had other information from which it was known by them in September 2003 at the time that Mrs Treloar made the declaration, that she did not intend to use the loan for the stated business or investment purposes, but rather for personal, domestic or household purposes. There was no evidence from which it can be inferred that Mrs Treloar ever conveyed such an intention to the plaintiff, the mortgage manager or its employees or officers, before, or at the time of giving the declaration. 84 The case advanced for Mrs Treloar rested on the fact that she later resided in one of the residences at 43 XX Road and sold the second residence to her son. This, it was argued, evidenced that her purpose in obtaining the loan in 2003 was in fact personal, domestic or household. It was finally acknowledged, however, to be a weakness in the defendant's case that there was no evidence that Mrs Treloar had ever conveyed to any relevant person that her purpose in obtaining the loan was personal, domestic or household. 85 While it has been held that the words used in the Code 'personal, domestic or household purposes' must be given a wide meaning, sufficient, for example to include purposes such as providing a home for parents, and I accept for the sake of the argument, providing a home for a child, there has to be evidence upon which it may be concluded that such a purpose existed at the relevant time. 86 Here, there was evidence that a property at 43 XX Road was acquired in March 2003 at a time when Mrs Treloar lived elsewhere; a loan was obtained in September 2003, using the property at 43 XX Road as security, for the stated purpose of business and investment; two residences were later built on the property at 43 XX Road, which was then subdivided. It was not until January 2005 that Mrs Treloar moved into one of the new residences and in May 2005, the other property was sold to a son. In my view, that evidence cannot establish that in September 2003 a 'personal, domestic or household purpose' existed, let alone that Mrs Treloar then communicated that purpose to the lender or its representatives. 87 Mr Stariha's evidence was that there was nothing on the file which contradicted the advice given by Mrs Treloar in September 2003, that the purpose of the loan was business or investment and nothing else was known to the mortgage lender which could have revealed that Mrs Treloar's declaration was false. That evidence was not challenged and must be accepted. 88 Despite Mrs Treloar's evidence that it was Ms Nguyen who completed the declaration which she signed on 3 September, there was no evidence from which it could be concluded that the plaintiff or Ms Nguyen or the mortgage manager, knew from any other information provided by Mrs Treloar, or which was otherwise known to them, that the loan was, in fact, to be wholly or predominantly used by Mrs Treloar, for personal, domestic or household purposes, rather than for the purpose which she had disclosed. 89 There is nothing from which it could be concluded that in September 2003, when Mrs Treloar made her declaration, that there was any reason to believe that Mrs Treloar proposed to apply the loan for other than the stated purpose. It follows on the evidence that this case is quite different to that considered in Bahadori. There is no basis upon which the declaration signed by Mrs Treloar may be questioned. I am satisfied that the plaintiff is entitled to rely on it.

[62]

97 Mrs Treloar first fell into default under the loan in February 2005. In her evidence she claimed that in January 2005 she had spoken to a person she knew as 'Dian' and had instructed that repayments being taken from her bank account should cease. She asked whether payments could be made by bank cheque and was asked to put her request in writing. She did so, but did not keep a copy of the letter. This evidence was disputed. No such correspondence was in evidence and in cross examination Mrs Treloar explained that she could not remember who she spoke to and agreed that she had not sent such a letter. 98 Ms Dianne Downes' evidence was that she had first been employed by the mortgage manager in August 2005. As Mrs Treloar accepted in cross examination, she could not have had a conversation with Ms Downes in January, but explained that she must have spoken to some other employee. The mortgage manager's system involved computer records of such discussions being maintained. There was no record of such a conversation in evidence. 99 It was common ground nevertheless, that various payments were made by bank cheque after February 2005, which were accepted. In February 2008, the plaintiff's solicitor advised that bank cheques would no longer be accepted and asked Mrs Treloar to set up a 'direct debit request'. The mortgage manager's records also showed that Mrs Treloar had earlier been asked to establish such a payment system. 100 There were various communications and discussions between Mrs Treloar and the mortgage manager about the continuing defaults. On 14 March 2006, a default notice was issued to Mrs Treloar. On 16 March, Mrs Treloar spoke to a Ms Mathey about the default notice and informed her that she was refinancing. A payment was made on 21 March, but not of a sufficient amount and Mrs Treloar remained in default. 101 On 11 January 2007, Mrs Treloar spoke to Mr Andre El Baghd and claimed that she had not received the March 2006 default notice. Mr El Baghd said that he would send her a copy. On 12 February 2007, the default notice dated 8 February was sent to Mrs Treloar and on 14 February she rang Mr El Baghd again, to indicate that two payments would be made, which would address the total amount in default. The second payment was not made as Mrs Treloar had indicated and there were further defaults up to March. 102 These proceedings were commenced on 26 April 2007. On 20 June 2008, a second default notice was served, referring to further defaults between March and June 2008. Payment of $13,471.39 was required within one month and payment of the loan under the acceleration clause of the mortgage in the sum of $375,427.39 was also required. No payments were made. On 28 July 2008, a demand for payment of the accelerated sum was issued, but it too, was not complied with. 103 The plaintiff's solicitor had also advised Mrs Treloar's solicitor on 22 February 2008, that mailing bank cheques to the mortgage manager was an unacceptable means of payment under the loan agreement and would not be accepted. Mrs Treloar was asked to set up a direct debit request, or to arrange for direct transfers from her account to make loan payments. There is no question that this advice was conveyed to Mrs Treloar, but still on 1 May 2008 she mailed a bank cheque for $1,800 to the mortgage manager. 104 There was a question as to whether on 1 May, Mrs Treloar then also sent an undated direct debit request to the mortgage manager, as was her evidence. On the plaintiff's evidence, such a request was not received by the mortgage manager, although it is, of course, conceivable that it was sent, but misplaced. That this is what occurred seems rather unlikely, given that it was common ground that no direct debit payments were ever made pursuant to such a request and it seems, Mrs Treloar made no enquiry to discover why such direct debit payments were not being made, in accordance with her request. Nor did she attempt to rectify the resulting default, for example by making payments by direct transfer, as she had been asked to do and had done, on some occasions. 105 The $1,800 cheque was returned, the plaintiff's solicitor advising again on 6 May 2008 that payment by cheque would not be accepted. No reference was made in that correspondence to the direct debit request Ms Treloar claims to have earlier sent, but a proposal for repayments which would settle the matter was made and Mrs Treloar was again asked to set up a direct debit request, or to make payments direct by electronic funds transfer from her own account. 106 Even if the bank cheque then proffered had been accepted, Mrs Treloar would still have been in default on 1 May 2008, the amount then due being $3,000 and Mrs Treloar already being in arrears. There were further defaults subsequently. 107 On 7 August 2008, Mrs Treloar's solicitor advised the plaintiff's solicitor that she would pay the sum of $12,600 the following day by bank cheque, claiming that she had the right to make the payment in that way, given the terms of the loan contract. This payment was also refused. Mrs Treloar did not take steps to make payment of what was outstanding by other available means, although she did then provide a direct debit form for certain future payments. On Mr Stariha's evidence as at 21 November 2008, the total arrears, had the debt not been accelerated, was $22,932,87, with interest accruing daily at 9.40% and the total amount owing on the loan account being $383,530.88. 108 The defendant's arguments in relation to the refusal of bank cheques rested on the idea that there had been a waiver by the plaintiff, or an estoppel of its rights under the loan agreement; that a bank cheque was as good as legal tender and that the plaintiff had waived its contractual right to insist on payment on the basis specified in the loan contract and was bound to accept the bank cheques Mrs Treloar had offered. 109 In Stirling Properties Ltd v Yerba Pty Ltd (1987) 74 ACTR 1, Miles CJ observed at 6 that 'generally speaking, a creditor is under no obligation to accept a negotiable instrument, even a bank cheque, in payment of a debt', although parties might agree to modes of payment other than by legal tender. Reference was there made to the High Court's judgment in George v Cluning (1979) 28 ALR 57, of the effect of accepting a cheque, where it was observed at 62-3, that:

[64]

110 A similar approach was followed in Deputy Commissioner of Taxation v BK Ganter Holdings Pty Ltd (2008) FCR 385 at pp 389 - 390. For the plaintiff it was argued that its acceptance of bank cheques was a matter within its discretion. Clause 16.5 of the loan contract provided that it could waive any of its rights, but that its rights were not reduced, unless it gave the borrower written notice of such a change. It was apparent that Mrs Treloar had never received written approval for payment by bank cheque and that she had never even made a request for such approval. It followed that the plaintiff was entitled to reject a payment by bank cheque as it did and to insist on payment by the methods agreed in the loan contract. Mrs Treloar had no right to ignore the plaintiff's insistence on payment in accordance with the terms of the loan agreement. 111 I am satisfied, on the evidence, that the defendant's argument that any estoppel or waiver arose from the plaintiff's conduct may not be accepted. Payment by cheque and even bank cheque is, undoubtedly, still commonplace. Even though the law recognises no general obligation to accept payment by such means, unless there is an objection before or on receipt of a cheque, such a payment will be treated as sufficient. In this case there was such objection, no doubt because nowadays, there are other convenient and perhaps more secure methods of making payments available to parties such as these. Indeed the loan contract contemplated payment by such means and such payments were made and accepted, as the loan contract contemplated. The fact that, from time to time, the plaintiff also accepted payment by bank cheque did not bind it to accept such payments, whenever proffered. In the circumstances, the plaintiff was entitled to insist on its contractual rights in that respect. There is no evidence upon which it could be concluded that any estoppel or waiver of the plaintiff's rights arose, as between it and Mrs Treloar. 112 The plaintiff also argued, that at best, the refusal of the proffered payment could only have given rise to a reduction of the amount upon which interest was calculated. That argument was well founded, it seems to me. In Moore v Lean (1905) SR NSW 671, it was held that in order to stop interest running, there must be a tender of the amount due, complying with 'all the legal formalities which the law attaches to a tender' (at 674). If there is such a tender which is refused, some account must still be taken of the interest earned on the money by the mortgagor. No such tender was here established and even if accepted, the bank cheque payments refused would not have rectified all of the defaults under the loan. 113 In this case, while there had been an acceptance of bank cheques for a period, as the loan agreement permitted, there was no written agreement between the parties that payment would be accepted on that basis, as the loan contract required, if Mrs Treloar was to be given the right to insist on making payment by that means. To the contrary, the plaintiff insisted that it was entitled to payment in accordance with the terms of the loan agreement and that it would not accept payment by bank cheque any longer. Mrs Treloar was asked to provide a direct debit request, or to make a payment by direct deposit, but she continued to provide bank cheques from time to time, while also making payment by other means. 114 Although it was her evidence that at one stage in May 2008, she did provide such a request, albeit that it was undated, the plaintiff's evidence that it was not received, must be accepted. Mrs Treloar certainly did not complain that the request had not been acted on and she subsequently persisted in providing bank cheques, instead of making payment by other available means, as the loan contract required, or the plaintiff was prepared to accept. 115 It follows that this aspect of the defendant's case must fail. As observed by Miles CJ in Stirling Properties, Mrs Treloar's non payment cannot be converted into a payment. Her proffered payment by bank cheque was refused and she did not pay what was due by other agreed and available means, with the result that she was in default. Even if the payments had been accepted, Mrs Treloar would still have been in default. The plaintiff is accordingly entitled to an order for possession.

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Judgment (70 paragraphs)

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Cases Cited (27)

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