Plaintiff v Defendant

2 This proceeding concerns a default by the defendant on a loan made to him by the plaintiff under a loan agreement entered on 8 April 2020, which was secured by a mortgage over a real property asset owned by the defendant. The mortgage, also dated 8 April 2020, incorporated the memorandum of common provisions registered with the Land Titles Office and numbered AA3217 (the 'MCP').

3 The plaintiff issued a notice of default to the defendant on or about 12 October 2022. The defendant was aware of the notice of default. The plaintiff alleges in the proceeding that the defendant ultimately failed to comply with the terms of the notice such that the plaintiff became entitled to possession of the land the subject of the mortgage. The plaintiff commenced this proceeding on 15 June 2023.

4 Ms Tara De Melo, an employee of the plaintiff, deposes that following the filing of the writ and statement of claim seeking payment of the debt and possession of the subject land, attempts were made to effect personal service of that originating process at two addresses of the defendant known to the plaintiff, being:

(a) 106A Kellet Street in Northcote (the 'Northcote Address'); and

(b) 12 Flemming Avenue in Burnside (the 'Burnside Address').

Ms De Melo deposes that personal service was not able to be effected at either the Northcote or the Burnside Addresses. At each address, an occupant informed the process server that the defendant did not reside there.

5 Ms De Melo further deposes that, on 11 October 2023 she emailed Kingsford Lawyers, which firm had acted for the defendant in respect of complaints he made about the plaintiff following the issue of the default notice. The email referred to the existence of legal proceedings, noted that service attempts were continuing and asked for an updated residential address for the defendant. None was ever provided.

6 Ultimately, the plaintiff relied on clause 10 of the MCP and r 6.14 of the Rules, purporting to serve the originating process on the defendant by sending it by pre-paid, ordinary post to the Northcote Address. The Northcote Address had been notified to the plaintiff pursuant to clause 38 of the General Terms and Conditions to the loan agreement.

7 No appearance was filed by the defendant within the time allowed under the Rules. Accordingly, judgment was entered against the defendant in default of appearance on 15 November 2023.

8 The plaintiff obtained a warrant of possession in respect of the default judgment, which was issued to the Sheriff on 28 November 2023.

9 The defendant has given evidence in this application that:

(a) he has not resided at the Northcote Address since October 2020;

(b) he did not receive the originating process until after he received a notice to vacate the property the subject of the mortgage in mid-January 2024.

Is there an Agreement for Service of an Originating Process otherwise than in the Manner Provided in r 6.02 of the Rules?

10 Pursuant to r 6.02, an originating process must be served personally on a defendant, except where otherwise provided by the Rules. The defendant applies to set aside the default judgment on the basis that it was irregularly obtained, the originating process having been purportedly served by pre-paid, ordinary post to the Northcote Address, when personal service was required.

11 Rule 6.14 provides an exception to r 6.02. It states:

Where the parties to any proceeding have, before or after the commencement of the proceeding, agreed that originating process or any other document in the proceeding may be served on a party or on a person on behalf of a party in a manner or at a place (whether within or outside Victoria) specified in the agreement, service in accordance with the agreement shall be sufficient service.

Rule 6.14 requires the existence of an agreement by which the parties to the proceeding have agreed that 'originating process or any other document in the proceeding' may be served in the manner or at the place specified in that agreement. The rule has existed in this form for some time, however, neither party directed the Court to any authorities considering its effect. The corresponding rule in the New South Wales Supreme Court[3] permits service of any document (including an originating process) in legal proceedings in accordance with any agreement, acknowledgment or undertaking by which the party to be served is bound. In that jurisdiction, this has been interpreted to permit service not only by agreement between the parties, but where an address for service has been notified unilaterally, such as in a statutory demand,[4] or in a deed of company arrangement.[5] Despite this difference, the authorities in that Court provide that care must be taken in interpreting the agreement (or undertaking or acknowledgment in that jurisdiction) to ensure that it relates to service of judicial process. That caution applies with equal force to the consideration of the Victorian rule - the agreement must relate to service of 'originating process or other documents in the proceeding', i.e., judicial process.

12 The plaintiff relies on clause 10 of the MCP as being an agreement for service of the originating process for the purposes of r 6.14. The clause states (underline added):

Clause 10. Service of notices and documents

10.1 How to give or serve a notice

The mortgagee may give you a notice or other document by:

• delivering it to you personally;

• leaving it at your home or business address last known to the mortgagee;

• leaving it at the address you have given to the mortgagee to send notices to;

• sending it by post to your home or business address last known to the mortgagee; or

• by electronic communication (for example email or SMS).

The mortgagee may also give you a notice or other document in any other way authorised by law.

10.2 When documents are served

A notice or other document is taken to be given to you:

• if the notice or other document is given personally - on the date shown on it or the date you receive it, whichever is the later;

• if the notice or other demand is sent by post- on the date shown on it or the date it would ordinarily be delivered by post, whichever is the later

• if the notice or other document is sent by electronic transmission on the date shown on it or the date when the sending machine produces a report indicating that the notice or other document was sent, whichever is the later.

Service by any of these methods will be valid and effectual even though the mortgagor does not receive the document or if the document is returned to the mortgagor through the post unclaimed.

The notice may be signed by any employee, solicitor, or agent on behalf of the mortgagee. The notice will be validly served even if it is not received by you.[6]

The word 'document' is not defined in the MCP. The words 'other demand' are used seemingly in lieu of 'other document' and presumably erroneously, in the second bullet point in clause 10.2.

13 The defendant submits that clause 10 of the MCP can only apply to a document that is given or served under the provisions of the MCP and does not extend, either expressly or by implication, to a writ and statement of claim served in a proceeding, even if to enforce the terms of the loan agreement and mortgage. Although the defendant did not cite any authorities in respect of this submission, it finds support in the case of Gaggin v Lemari ('Gaggin').[7] In Gaggin, the Court considered whether a clause (Clause 20.6.3) in a contract of sale of land which read '[a] document under or related to this contract is served if it is served on the party's solicitor, even if the party has died or any of them has died'[8] permitted service of an originating process seeking declarations that the contract of sale had terminated. The then applicable service rule in New South Wales was Part 9, Rule 9 of the New South Wales Supreme Court Rules, which has now been repealed, but which was in terms relevantly identical to r 6.14. His Honour Young J held:

I do not consider that that is sufficient to activate Part 9 rule 9 of the Supreme Court Rules which covers the case where a defendant has agreed that an originating process in proceedings may be served in a particular way, by a contract made before the action is brought... The words in the contract would need to be much expanded to cover the court process if it is desired that clause 20.6.3 cover the present situation. [9]

Other authorities cited by the defendant demonstrate the application of r 6.14 in circumstances where the agreement for service refers expressly to an originating process or other court document.[10] In such cases it is plain that the rule can be relied upon.

14 The plaintiff says there is no need to imply any additional term into the MCP to support its position. The plaintiff submits that, when interpreted in accordance with the settled principles of contractual construction, the words 'other document' in clause 10 refer to an originating process, such that this is an agreement that service be effected by ordinary pre-paid post at the home or business address of the defendant last known to the plaintiff. The plaintiff submits that the defendant's construction of the MCP is unduly narrow; divorced from its context, purpose and the entirety of its contents; and at odds with the business common sense which the MCP ought be afforded.

15 Interpreting a commercial document such as the MCP '...requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure.'[11] It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party, by words and conduct, would have led a reasonable person in the position of the other party to believe.[12] The plaintiff submits that because:

(a) the MCP forms part of a transaction entered into for the very purpose of the plaintiff legally enforcing its security over the mortgaged property in the event of default;

(b) clauses 2.2(b) and (c) of the MCP expressly contemplate the plaintiff obtaining judgment against the defendant as a result of such enforcement processes; and

(c) clauses 10.2 and 10.3 of the MCP refer to the mortgagee engaging solicitors to act on its behalf and to sign notices and other documents for the mortgagee;

the ordinary reasonable person reading the document would inevitably take an originating process or other court document to fall within the ambit of the words 'other document' in clause 10. I do not agree. Certainly, the purpose of any security instrument such as a mortgage, is to secure an interest of a lender and to enable enforcement against the security provided in the event of default. However, it is not inconsistent with that purpose to interpret the phrase 'other document' in clause 10 as not including an originating process, such that the plaintiff mortgagee must personally serve legal proceedings that it commences in aid of enforcement. The plaintiff is not deprived of any of its rights of enforcement by that interpretation, nor is it a commercially unfair, inconvenient or absurd result in the context of the agreement. Such an interpretation is also not incongruous with any other provisions of the agreement. Significantly, there appears to be only one reference in the MCP to the initiation or conduct of legal proceedings and that appears in the terms of the power of attorney given to the mortgagor in clause 4.5, by which the mortgagee is entitled to institute, conduct or defend legal proceedings in the name of the mortgagor as owner of the mortgaged land. There is no express reference anywhere in the MCP to legal proceedings being commenced or maintained by the mortgagee, not even as an enforcement step in clause 4.2. Those clauses refer only to the outcomes of legal proceedings, such as recovery of possession of the subject land. With the absence of any such reference in the entire MCP in mind, the clauses relied upon by the plaintiff, namely the reference to 'judgment' in clauses 2.2(b) and (c), and to the ability of solicitors to sign documents on behalf of the mortgagee (clauses 10.2 and 10.3), would not, in my view, lead a reasonable person to believe that the words 'other document' in clause 10 are intended to refer to an originating process.

16 The circumstances here stand in contrast to those in Bindaree Beef Pty Ltd v Chinatex (Australia) Pty Ltd & Ors ('Bindaree').[13] In that case, her Honour Justice Rees of the New South Wales Supreme Court held that a notice provision contained in a deed of company arrangement ('DOCA') contemplated the service of judicial process in the form of an originating process seeking to terminate the DOCA. The provision itself stated:

23.1 Services of Notices

A notice, demand, consent, approval or communication under this Deed (Notice) must be:

(a) in writing, in English and signed by a person duly authorised by the sender; and

(b) hand delivered or sent by prepaid post, facsimile or email to the recipient's address for Notices specified in the Details, as varied by any Notice given by the recipient to the sender.[14]

Her Honour reasoned that because, in other provisions, the DOCA contemplated the making of various applications under the Corporations Act 2001 (Cth) ('Corporations Act') in connection with the DOCA, including by reference to the subject matter of those applications and identification of the sections of the Corporations Act under which they would be brought, the relevant clause did apprehend the service of judicial process in respect of the DOCA.[15] Her Honour further held that a 'demand', as that word was used in the relevant notice clause, included, by its ordinary meaning, court documents originating legal proceedings.[16] Accordingly, service of the originating process by email under the relevant notice provision was held by her Honour to be valid service. Here the plaintiff does not have the benefit of any relevant reference to judicial processes being taken under or in connection with the MCP anywhere else in that document. Furthermore, clause 10 does not utilise the word 'demand' or any similar word which might be readily understood as referring to legal process simpliciter.

17 The plaintiff says that to read down the phrase 'other document' in clause 10 would deprive those words of any meaning, for there could be nothing else to be given or served under the MCP, other than an originating process or court document. This submission is at odds with other provisions of the MCP which contemplate the giving of 'other documents' under the MCP which are not a notice, an originating process or other court document. For example, clause 2.3(a) contemplates the mortgagee demanding from the mortgagor information and documents in relation to the use of the land, clauses 2.4 and 2.5 contemplate the mortgagee requesting access to, or information about, the land secured by the mortgage, clause 5.4 contemplates the provision of written consent from the mortgagee to any proposed building works. Such demands, requests and consents as are expressly described in the MCP would, in the mind of the ordinary reasonable person reading the MCP and understanding its context, be encompassed by the words 'other document' under clause 10. Relevantly, a failure by the mortgagor to comply with any of the demands or requests in clauses 2.3, 2.4 or 2.5 may result in an event of default under clause 4.1(a). The mortgagee would be entitled to rely on the provision of such documents in accordance with clause 10 to obviate any argument that the request or demand was never made because it did not come to the actual notice of the mortgagor who had not updated their address information.

18 In light of the above, I am satisfied that the MCP did not authorise another mode of service for the purposes of r 6.14, and the writ and statement of claim were not validly served on the defendant when sent by pre-paid, ordinary post to the Northcote Address.

19 Although it was not raised before me, it is arguable that, even if it was able to rely on the MCP to validly serve the defendant by pre-paid, ordinary post (contrary to what I have found above), given the plaintiff knew, having made failed attempts at personal service at the Northcote Address, that the defendant no longer resided there, it abused the processes of the Court in doing so.[17] That in itself may justify setting aside the default judgment. The plaintiff did not make any mention of the previous, failed attempt at personal service at the Northcote Address in its affidavit of service sworn 24 October 2023 and filed in support of its application for default judgment on 15 November 2023. However, in light of my findings, I do not need to further consider this.

Should the Default Judgment be Set Aside Given the Originating Process was not Validly Served?

20 The defendant submits that because the defendant has not been validly served, the default judgment has been irregularly obtained and ought be set aside as of right. Although the defendant does not cite any authority in support of this submission, there are plenty of them.[18]

21 The plaintiff submits that, nevertheless, the Court may disregard the irregularity in the entry of judgment if the justice of the situation warrants it. So much was established in Australia and New Zealand Banking Group Ltd v Nick Kostovski ('Kostovski').[19] In that case, the Court considered the irregularity[20] created by an error in the name of the court identified on the originating process and an error in the time for filing an appearance, stating:

...it is no longer the law (assuming that it ever was the law) that merely because the judgment was irregularly obtained, the defendant is entitled as of right to have that judgment set aside. Rule 2.01 and, arguably, the court's inherent jurisdiction, empower the court to disregard an irregularity such as that arising for consideration here if the justice of the situation warrants it.'[21]

22 The plaintiff relies upon the evidence filed in respect of the application, which it says reveals that the defendant was aware of the default notice, and that by on or about 11 October 2023, the defendant was made aware of the proceeding and the attempts of the plaintiff to serve him, and that he chose to ignore the proceeding. Submissions were made orally, and in the plaintiff's original outline of submissions filed on 20 March 2024, that the defendant also delayed in responding to the default judgment after learning of it. In all, the plaintiff submits, the Court should disregard the irregularity because the justice of the situation warrants it.

23 Although I would be reluctant to disregard an irregularity where it relates to service of the proceedings on the defendant being as it is foundational of the Court's jurisdiction in a proceeding, nevertheless, the plaintiff's arguments based on the asserted knowledge of the defendant, are not supported by the evidence, a summary of which follows.

(a) on 11 October 2023, having commenced the proceeding but having been unable to personally serve the defendant at either the Northcote or the Burnside Addresses, the plaintiff wrote to Kingsford Lawyers by email. The email states:

La Trobe Financial are seeking confirmation if Kingsford Lawyers are still acting on behalf of Mr Michael Cassar.

If so, we are seeking an update with respect to your client's loan which remains in arrears by $175,461.54 as at today's date with monthly repayments obligations not being met.

....

Please be informed due to the prolonged arrears our acting solicitors TG Legal + Technology Lawyers were instructed to progress with legal proceedings to recover the outstanding amount owing; filing Statement of Claim with the courts on 25 August 2023, with service attempts now continuing.

Can you please confirm if you have an updated residential address for your client?[22]

The email starts by inviting an update on the loan owing by the defendant. Although it then indicates that proceedings have been commenced, it does not attach a copy of the originating process and it does not identify the jurisdiction or court the claim has been issued in. The email does not ask the solicitors to seek instructions as to whether they are authorised to accept service of the proceedings.[23]

(b) Ms Hristovski deposes that she responded by email on that same day to the effect that Kingsford Lawyers did act for the defendant and they had sought instructions. In fact, her actual email, as exhibited to her affidavit, says only that her firm 'has sought our client's instructions'.[24]

(c) it is not until a subsequent email dated 30 November 2023 that Ms Hristovski positively confirms that her firm is acting for the defendant in relation to the loan with the plaintiff. By that email, the defendant sought a three month grace period to pay the arrears to allow him time to seek distribution of his entitlements from the estate of his late father.

(d) a response was sent by the plaintiff that same day, although I accept the evidence that has been adduced to the effect that the response was not received by the defendant's lawyers until January 2024, having been incorrectly diverted into a junk mail folder. The 30 November 2023 email reply states, somewhat awkwardly:

Due to the loan conduct La Trobe Financial have reserved our rights progressing (sic) with proceedings to recover the outstanding amount owing; a Warrant of Possession has been filed with the Courts. Please be informed legal proceedings will continue to remain on foot until the loan is repaid in its entirety.[25]

(e) on 22 January 2024, Kingsford Lawyers wrote to the plaintiff seeking a response to its 30 November 2023 email (being unaware that one had been sent). The email also sought a copy of the 'writ for possession and possession orders made in the Supreme Court of Victoria.'[26]

(f) the defendant deposes that he received the notice to vacate on or about 17 January 2024. He further deposes that he was not aware of the 'Writ or Judgment' until 25 January 2024, when copies were obtained by his lawyers. His affidavit says nothing about whether he became aware of the proceeding (as distinct from the originating process) but he was not cross examined on his affidavit; and

(g) the defendant filed his summons seeking orders to set aside the default judgment on 22 February 2024.

24 The plaintiff submits that by reason of the 11 October 2023 email exchange, on or about that date the defendant was made aware of the proceeding and the attempts of the plaintiff to serve him. This is despite the plaintiff not having provided, by its 11 October 2023 email, any detailed information concerning the proceeding so as to enable the proceeding itself to be searched for and identified. There is simply no evidence as to what passed between Kingsford Lawyers and the defendant, when such communications occurred and when the defendant became aware of them. Certainly the firm did not further respond until 30 November 2023, after default judgment had already been entered by the plaintiff. The plaintiff did not again contact Kingsford Lawyers prior to securing judgment in default of appearance on 15 November 2023 to see if it held instructions to accept service, and while it did not have to do so, it well knew by that time that the defendant did not reside at the Northcote Address to which it had sent the originating process.

25 Although the warrant of possession was referred to in the ill-fated 30 November email from the plaintiff, even if that email was seen by the defendant's lawyers, they may not have been any the wiser without further enquiry as to what had by then transpired. The 30 November response from the plaintiff is significant for what it did not say. It did not identify the specific legal proceedings that had been commenced, nor did it say anything about judgment in default of appearance having already been entered against the defendant.

26 Given the above, I am not satisfied that the defendant was aware of the proceeding prior to default judgment being obtained, nor before he received the notice to vacate in mid-January 2024. Further, I do not consider that the defendant unreasonably delayed in bringing his set-aside application, it being around a month after becoming aware of the default judgment.

27 I also consider that it counts against the plaintiff in terms of the 'justice of the situation' that, having attempted personal service at the Northcote and Burnside Addresses, and having been told that the defendant no longer resided at either address, it nevertheless sent the originating process to the Northcote Address in full knowledge that the originating process would not come to the attention of the defendant. Then, knowing it would not have come to his attention, the plaintiff did not mention that default judgment had been entered when it communicated with the defendant's lawyers on 30 November 2023, they having that day informed the plaintiff they had instructions to act for the defendant in relation to the loan.

28 For the reasons above, I find that the defendant was not validly served in accordance with the Rules, and that default judgement was irregularly obtained and should be set aside.

29 For obvious reasons, I do not need to consider the defendant's application for a stay on execution of the default judgment.

(a) pursuant to r 21.07, the judgment entered on 15 November 2023 against the defendant in default of appearance be set aside;

(b) the plaintiff pay the defendant's costs of the application without recourse to charging those costs against the loan advanced by the plaintiff to the defendant, or charging those costs against the security provided by the defendant under the mortgage.

[1] The defendant relies on the affidavit of Michael Cassar sworn on 16 February 2024, and the affidavit of Jasmina Hristovski sworn 28 March 2024.

[2] The plaintiff relies on the affidavits of Natasha Evans sworn 24 October 2023 and 15 November 2023, and the affidavits of Tara De Melo affirmed on 20 March 2024 and 8 April 2024.

[3] Uniform Civil Procedure Rules 2005 (NSW) r 10.6(1).

[4] See In the matter of Cummins Equipment Hire Pty Ltd [2015] NSWSC 2085.

[5] See Bindaree Beef Pty Limited v Chinatex (Australia) Pty Ltd & Ors [2018] NSWSC 1499 [44] ('Bindaree').

[6] Exhibit TDM to the affidavit of Tara De Melo affirmed 20 March 2024, 48.

[7] [2000] NSWSC 856 ('Gaggin').

[10] See Timbercorp Finance Pty Ltd (in liq) v Allan [2016] VSC 481, where the relevant agreement relied upon was one contained in an email from a solicitor which stated (cited at [24]) '...I am authorised to accept service of the above proceedings on his behalf. The pleadings can be sent to me by email.' In that case, his Honour Derham AsJ ultimately found that service was not effective in accordance with rule 6.14 because no SEPA notice was enclosed with the documents sent by email as agreed. See also ANZ Banking Group Ltd v Williamson [2019] VSC 692 at [30], which case involved an application for a stay on enforcement. It was submitted by ANZ that the defendant had been validly served with the originating process by post in accordance with a different MCP and r 6.14. At [30] the Court described the relevant clause in the MCP thus: '[it] authorised service of documents (including legal proceedings) by way of personal service, post and facsimile.'

[11] McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579, 589 [22] ('McCann') citing Lake v Simmons [1927] AC 487, 509 (Viscount Sumner).

[12] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179 [40] quoting Pacific Carriers [2004] HCA 35; (2004) 218 CLR 451, 461-2 [22].

[13] [2018] NSWSC 1499 [44] ('Bindaree').

[17] Deputy Commissioner of Taxation v Abberwood Pty Ltd (1990) 19 NSWLR 530.

[18] See eg Gamble v Killingsworth & McLean Publishing Co Pty Ltd [1970] VicRp 22; [1970] VR 161, 168; Daly v Silley [1960] VicRp 57; [1960] VR 353, 355 citing Anlaby v Praetorious [1888] UKLawRpKQB 55; (1888) 20 QBD 764.

[19] Supreme Court of Victoria, Chernov J, 2 July 1997.

[20] At ibid_,_ 5, his Honour had cause to doubt whether these irregularities were sufficient to result in the default judgment having been irregularly obtained.

[22] Exhibit TDM to the affidavit of Tara De Melo affirmed 20 March 2024, 69.

[23] At paragraph 25 of her affidavit affirmed on 20 March 2024, Ms De Melo deposes that she did not receive confirmation after her 11 October 2023 email that Kingsford Lawyers were instructed to accept service of the proceedings, however, quite plainly they were never asked to do so.

[24] Exhibit JH to the affidavit of Jasmina Hristovski sworn 28 March 2024, 2.

[25] Exhibit TDM 2 to the affidavit of Tara De Melo affirmed 8 April 2024, 1.

[26] Exhibit JH to the affidavit of Jasmina Hristovski sworn 28 March 2024, 8.