St George Bank v Hammer

Judgment

1. This is an application by way of notice of motion to have set aside a default judgment obtained by the plaintiff, St George Bank a division of Westpac Banking Corporation, against the defendant, Mr Hammer. The application has a number of bases. For the following reasons, the application must be dismissed with costs. Chronological background
2. A succinct statement of undisputed events that occurred before the matter came before me is as follows. It is derived from extensive affidavit material placed before me on the hearing of the motion.
3. On 8 January 2008, St George Bank lent the defendant a large sum of money that was secured by way of a mortgage over real property located in the Northern Rivers region of New South Wales. Some of the loaned funds were used to pay off a pre-existing loan. For a time, the defendant serviced the loan; eventually, in 2013, it fell into default.
4. On 27 June 2014, the plaintiff filed a statement of claim in this Court seeking possession of the real property pursuant to the mortgage. The pleading was in short and orthodox form.
5. After that, the defendant - who was at that stage acting for himself - filed a number of documents, and made a number of requests of the plaintiff, that can be characterised as idiosyncratic (in saying that, I make no personal criticism of him, because of the fact that the defendant was not represented by a lawyer at that stage).
6. Eventually, a motion of the plaintiff to have an amended defence that had been filed by the defendant on 8 July 2015 struck out came before Campbell J. The notice of motion had originally been filed with regard to an earlier version of the defence. By way of a judgment of 17 July 2015, his Honour made the order sought by the plaintiff: St George Bank v Hammer (No 2) [2015] NSWSC 953 at [41]. I shall not repeat unnecessarily the contents of that very comprehensive judgment.
7. As well as that, whilst not prohibiting any further forensic steps by the still - unrepresented defendant, his Honour ordered that any further defence filed on behalf of the defendant must first be subject to a grant of leave by a judge of this Court, and that any such leave was to be sought by the defendant by way of notice of motion.
8. On 24 July 2015, the statement of claim still being on foot, and there being no defence extant, the plaintiff applied for a default judgment. As at that date, no notice of motion as envisaged by Campbell J had been filed by or on behalf of the defendant in the preceding seven days. The application of the plaintiff was granted, and default judgment was entered on 28 July 2015.
9. On 6 October 2015, the defendant filed a notice of motion seeking to have the default judgment set aside. On 26 November 2015, before me, the defendant was permitted to file an amended notice of motion in court. Bases of the application of the defendant
10. The submissions of each party were placed before me by way of extensive written submissions, which were subsequently refined orally. The bases upon which it was said on behalf of the defendant that the default judgment should be set aside were ultimately seven in number. Correct construction of a rule
11. It was first said that r 16.2(2)(c) of the Uniform Civil Procedure Rules 2005 (NSW) (the Rules) should be read in a particular way that prohibits entry of a default judgment in the circumstances that pertained here.
12. It was accepted that there was no extant defence (in light of the order of Campbell J) at the time of the entry of default judgment. Nevertheless, because there had been, at an earlier stage of the proceedings, a defence filed by the defendant, it was said that it was not open to the plaintiff to gain the benefit of a default judgment. It was said that the true remedy available to the plaintiff in the circumstances was an application for summary judgment. To interpret the rule otherwise, it was said, would be to commit the error of statutory interpretation of reading into a statutory instrument words that are simply not there.
13. In order to understand this submission, and my determination of it, it is necessary to set out the entirety of r 16.2: 16.2 Definition of "in default" (1) A defendant is "in default" for the purposes of this Part: (a) if the defendant fails to file a defence within the time limited by rule 14.3(1) or within such further time as the court allows, or (b) if the defendant fails to file any affidavit verifying his or her defence in accordance with any requirement of these rules, or (c) if, the defendant having duly filed a defence, the court orders the defence to be struck out. (2) Despite subrule (1), a defendant is not in default if the defendant: (a) has made a payment towards a liquidated claim under rule 6.17, or (b) has filed an acknowledgment of claim under rule 20.34, or (c) has filed a defence after the time limited by these rules or allowed by the court, but before a default judgment is given against the defendant. [emphasis added]
14. Turning to my determination, I cannot accept the reading of the rule for which counsel for the defendant contended. One needs to read the rule as a whole, in the context of the entirety of the Rules, and in the context of the Civil Procedure Act 2005 (NSW), pursuant to which the rule was made. Doing so, I cannot accept that it is to be construed as meaning that, once a defendant has filed its form of defence, at any time, no matter how unsatisfactory it may be, and even if that defence has been struck out, nevertheless the plaintiff in that litigation is irrevocably prohibited from applying for default judgment.
15. Turning from the general to the specific, I cannot read the combined effect of r 16.2(2)(c) and r 16.2(1)(c) as meaning that, in the circumstances of this case, the plaintiff was prevented from obtaining a default judgment. I read the latter as meaning that, if there were a defence on foot, albeit filed out of time, that would prohibit the entry of default judgment. I do not read it as meaning that a defence that had been struck out would have that effect.
16. Here, as I have said, there was a statement of claim extant, but no defence extant, because of the order striking out the latter that had been made by his Honour. To my mind, understanding the rule as permitting a default judgment to be entered in those circumstances does not require reading words into the instrument. Rather, I consider that that understanding can be derived from the words already present in the rule: in particular, the combined effect of the words in r 16.2(1)(c) and r 16.2(2)(c).
17. It is noteworthy that counsel for the defendant did not take me to any authority of this Court in support of the reading for which he contended. In light of the fact that countless thousands of default judgments must have been entered since the commencement of the rule, and thousands of applications to have them set aside heard since that time, the absence of any supporting authority bolsters my opinion that the reading for which the defendant contends is not to be accepted.
18. I reject the first submission of the defendant. Correct construction of a second rule
19. It was secondly said that a default judgment was not available because r 16.3(1A) of the Rules states that "unless the court otherwise orders" an application for default judgment may be dealt with in the absence of parties and need not be served on the defendant. It was said that, here, Campbell J had ordered otherwise, in that his Honour had imposed upon the defendant the preconditions to filing a defence that I have detailed at [7]. For that reason, it was said, the procedure adopted to obtain the default judgment was not open to the plaintiff in this case. Again, it was said that the plaintiff should have applied for summary judgment, as opposed to default judgment.
20. Again, it is necessary to set out the whole of the rule in question: Rule 16.3 Procedure where defendant in default (1) If a defendant is in default, the plaintiff: (a) may apply for judgment to be given under this Part, according to the nature of his or her claim for relief, against the defendant in default, and (b) may carry on the proceedings against any other party to the proceedings. (1A) Unless the court otherwise orders, an application under this rule: (a) may be dealt with in the absence of the parties, and (b) need not be served on the defendant. (2) Unless the court orders otherwise, an application for judgment to be given under this Part must be accompanied by: (a) an affidavit of service of the statement of claim ("the affidavit of service"), and (b) an affidavit in support of the application ("the affidavit in support"). (3) An affidavit of service is unnecessary in relation to a statement of claim whose service has been effected by the Local Court under rule 10.1 (2). (4) Unless the court orders otherwise, an affidavit in support is valid for the purposes of an application only if it has been sworn within 14 days before the date on which the application is filed. [emphasis added]
21. To my mind, this submission must be rejected as well. I do not consider that the rule is speaking of orders of the kind made by his Honour; rather, I consider that it is speaking of orders prohibiting the adoption of the process detailed within r 16.3(1A)(a) and (b).
22. Here, there was an extant order of Campbell J that restricted the conduct of the defendant in the proceedings with regard to the filing of a defence, not the conduct of the plaintiff in applying for default judgment. I cannot accept that, merely because his Honour had imposed an extra procedural requirement upon the defendant - a requirement that he had not, at the time of the entry of default judgment, fulfilled - the imposition of that requirement prohibited the plaintiff from obtaining default judgment in accordance with the rule.
23. The second basis for the application to set aside must be rejected as well. Courtesy in litigation
24. The third submission made was that the solicitor for the plaintiff should have, as a matter of courtesy, informed the defendant that he proposed to obtain default judgment. That should have been done, it was said, between the date of the order of Campbell J (17 July 2015), and the date that the application was made (7 days later, on 24 July 2015). It was said that the failure to put an unrepresented defendant on notice that that determinative step was to be taken itself argued in favour of the default judgment being set aside.
25. Turning to my determination of this submission, undoubtedly courtesy has an important role to play in the conduct of litigation, whether both parties be represented, or unrepresented, or one is represented and the other is not. But here it is to be recalled that the statement of claim had been filed as long ago as 27 June 2014. As I have said, the defendant had, between that time and the hearing of the motion before Campbell J, taken a number of steps that must be characterised as idiosyncratic, and that had the objective effect of delaying the matter. After the delivery of the judgment of his Honour on 17 July 2015, it must have been clear to the defendant that the plaintiff would be moving promptly to obtain default judgment, unless the defendant very promptly complied with the procedural requirement that his Honour imposed.
26. Furthermore, it is not as if the application for default judgment was made immediately upon the defence being struck out; as I have shown, 7 days passed before that occurred.
27. Finally, to my mind the question of alleged discourtesy is merely ancillary to the real question: whether or not the proposed defence and cross-claim (filed contingently before me for the purpose only of me determining the motion) reveal a cause of action that properly calls for setting aside the default judgment.
28. I do not accept that the actions of the solicitor for the defendant, in seeking default judgment how and when he did, of themselves should lead to that default judgment being set aside.
29. The third basis for the application to set aside should be rejected. Relevance of principles about vitiation of assignment
30. The fourth submission made on behalf of the defendant was that I would be satisfied that there are real issues of fact and law revealed in the pleadings contingently filed by the defendant that should be the subject of determination by litigation.
31. The first of those issues was said to be whether, in truth, the original debt owed to St George Bank by the defendant pursuant to the original loan agreement had been validly assigned to Westpac (it can be seen that the proceedings are brought by St George Bank, but as a division of Westpac). It was said that the clear terms of the Financial Sector (Business Transfer and Group Restructure) Act 1999 (Cth) are not the end of the matter, and I was referred to Equuscorp Pty Ltd v Haxton [2012] HCA 7; 246 CLR 498 in support of the proposition that there is an issue worthy of litigation with regard to the purported assignment of the debt of the defendant, originally owed to St George, by St George to Westpac.
32. It can be seen, however, that the discussion of principle in Equuscorp Pty Ltd v Haxton is founded upon the basal principle that illegality can stand in the way of enforcement of a cause of action. So much is uncontroversial: but here, there is nothing placed before me to suggest illegality (or any other vitiating feature) that could call into question the validity of the assignment (explicitly mandated by statute) of debts owing from St George to Westpac. In short, to my mind, the decision of Equuscorp Pty Ltd v Haxton is not to the point.
33. I was taken on behalf of the plaintiff to the relevant legislation, which on a plain reading had the effect of transferring debts owed to the first bank (St George) to the second bank (Westpac) in 2010. On the material placed before me on behalf of the defendant, I do not accept that there is a real legal issue requiring determination about whether or not the formal change in the creditor of the defendant from St George to Westpac means that the defendant is not indebted at all to the latter bank.
34. The fourth basis for the application should be rejected. Unconscionability, and related principles
35. The fifth basis of the application, and the second of the issues said to call for litigation, was said to be the fact that the defendant has now pleaded that the loan contract should be varied in his favour, or indeed not enforced entirely, based upon a number of factors. They include: unconscionability and unjustness of the mortgage loan agreement (par 10 of the statement of cross-claim); unconscionable conduct (par 11 of the statement of cross-claim); hardship under the National Credit Code (par 12 of the statement of cross-claim); and a claim under the Contracts Review Act 1980 (NSW) and/or the Australian Securities and Investment Commission Act 2001 (Cth) and/or the National Consumer Credit Protection Act 2009 (Cth) and the National Credit Code (par 13 of the statement of cross-claim). The point was made that such relief against financial institutions is perfectly open to persons who have proceedings brought against them pursuant to loan agreements; indeed, courts throughout Australia apply those principles and provisions every day.
36. So much may be readily accepted. Indeed, I have varied loan agreements pursuant to such principles myself: see Ling v Pan Pac Investment Pty Limited; Ling v Wu [2015] NSWSC 850. I have also declined to do so: see HomeSec Finance Express Pty Ltd v Richardson [2012] NSWSC 1375. As can be seen from the proposed defence and proposed cross-claim, however, the defendant has merely baldly asserted that he is entitled to such relief, without providing any detail as to why.
37. For example, to the extent that par 12 of the statement of cross-claim speaks of "asset lending", nothing is pleaded as to the facts that would give rise to a finding that the plaintiff engaged in that conduct.
38. Similarly, although various portions of the Banking Code of Conduct are referred to, no evidentiary detail is provided with regard to how it is alleged the plaintiff breached that code. And in any event, analysis by the plaintiff before me demonstrated that many if not all of those references are misconceived, in that they referred to paragraphs of the Code that are, in truth, apposite.
39. Quite apart from that absence of evidence or detail in support of the pleaded assertions, it must have been clear to the defendant and his legal advisers that, in light of the history of the matter - which, as I have shown, features an alleged default as long ago as 2013; a statement of claim filed as long ago as 27 June 2014; a number of idiosyncratic litigious actions on the part of the defendant when unrepresented; a successful motion of the plaintiff to have a previous defence struck out; and, finally, an extant default judgment - any attack on that default judgment would require pleadings of some cogency and detail.
40. I consider that the principles discussed by Hodgson JA (with the agreement of M W Campbell AJA) in Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd [2005] NSWCA 331 apply here (albeit that it was delivered in the context of the defendant being in default by not attending a hearing, as opposed to not filing a defence). At [51] his Honour said: In my opinion, an applicant seeking to set aside a judgment obtained after an undefended hearing does not have to show that a different result is likely should the judgment be set aside and a new trial ordered. However, the circumstances may be such, as Jordan CJ says, as to require "a reasonably clear case of merits to be shown"; that is, that it appear reasonably clearly that there is a defence capable of producing a different result. If that defence depends on facts, then there should be some evidence of those facts; and the circumstances may be relevant to the quality of the evidence that is required to show a defence on the merits in particular cases. Among such circumstances could be the degree of the applicant's default, and hardship to the respondent.
41. In short, I accept that it is possible that the defendant may have a valid claim for relief based upon the various remedial principles that he seeks to call in aid in his proposed defence and cross-claim. But on the material placed before me, I do not consider that he has adequately demonstrated that the default judgment entered against him should not stand. Denial of procedural fairness
42. Sixthly, it was said on behalf of the defendant that to permit the default judgment to stand would deny him "natural justice". I interpreted that to mean that a citizen should not lightly be shut out of court from litigating an arguable claim or defence. Again, so much may be readily accepted. But inherent in the concept of a default judgment is the entry of it without "hearing" from the defendant (in light of the absence of an extant defence). As my analysis above demonstrates, the entry of that judgment occurred consistently with the applicable rules. And here, as I have shown, the defendant has not filed sufficient material, in support of his assertions, to show that there are indeed issues for curial determination. Tenants at the security property
43. The seventh and final submission was founded upon the presence of tenants in the property, both in the past and seemingly as at the date of the hearing before me.
44. In oral submissions it was explained that the contention is not that the Court lacks jurisdiction to hear proceedings for possession pursuant to a mortgage when tenants are present in the property in question. Rather, it was said that it was a question of "hardship", and whether the tenants should be "forced off the land".
45. Turning to my determination, it can be seen that the occupants of the premises were served with the requisite notices pursuant to the Real Property Act 1900 (NSW) as long ago as 9 July 2014. As well as that, if there is some claim to be made by the tenants seeking to forestall possession being granted to the plaintiff it should be mounted by them, not by their lessor in an effort to reopen a default judgment entered against himself.
46. The seventh and final submission should be rejected. Conclusion
47. No basis for setting aside the default judgment having been established, the notice of motion must be dismissed. Costs
48. Neither party submitted that the usual rule of costs following the event should not apply. Orders
49. I make following orders: 1. The notice of motion of the defendant of 26 November 2015 is dismissed. 2. The defendant must pay the costs of the plaintiff of the proceedings before me.