Westpac Banking Corporation v Mason

Judgment 1These are proceedings for possession and judgment in a money sum commenced by statement of claim filed on 11 April 2011. Before the Court are two applications relating to that claim. The first in time of filing is the plaintiff's application filed on 16 September 2011 seeking summary judgment. The second is the defendants' application for particulars and documents sought by them in correspondence. 2Mr Foley, who appeared for the defendants, noted at the outset of the hearing last Tuesday that the supply of particulars and documents as sought in the defendants' motion does not arise if the application for summary judgment is granted. He did not oppose my determining the plaintiff's application first and it is convenient to adopt that approach. 3The plaintiff's claim arises out of a loan contract between the plaintiff as lender and the two defendants as borrowers entered into in April 2009. The loan was secured by a mortgage over a property at Angourie in the State of New South Wales of which the defendants are the registered proprietors. 4The plaintiff alleges that from June 2011, the defendants fell into default on the payment of interest due on the principal sum advanced and that, following their failure to remedy the default in response to a notice pursuant to section 57(2)(b) of the Real Property Act 1900, the whole amount secured by the mortgage is immediately due and payable in accordance with the default provisions of the loan agreement and mortgage. 5Separately, the statement of claim sought repayment of a credit card debt allegedly payable by the first defendant and secured by the mortgage but that claim was abandoned for the purposes of the present application. 6A defence was filed on 6 June 2011 at a time when the defendants were not represented. The proceedings subsequently came before Davies J in his Honour's capacity as Possession List Judge for early case management. By then, Mr Foley was on the record as the solicitor for the defendants. 7A review of the transcript reveals that Mr Foley frankly acknowledged to Davies J that the defence that had been filed needed to be amended. His Honour made directions accordingly. I should note, however, that it is clear his Honour did not grant leave to amend the defence in the terms of the amended defence subsequently filed but indicated rather that the question of leave to replead should be reserved until after the plaintiff had seen the filed document (see transcript of 15 August 2011 at 5.29.) 8Confusingly, the amended defence propounded in the application before me is stamped as having been filed on 29 August 2011, although it is signed and dated 8 September 2011 by Mr Foley. That confusion is compounded by the fact that the same version of the amended defence appears to have been handed up in court on 9 September 2011 (see T4.46 of that date) and it is not explained how it came to be date stamped 29 August 2011. In any event, it was common ground at the hearing before me that the document by reference to which the plaintiff's summary judgment application was to be considered was that document. It was not suggested that any further amendment was sought. 9While the application brought forward by the plaintiff included a prayer for an order striking out that version of the defence, I understood Davies J to have indicated that it would be necessary for the defendants to seek leave to replead in terms of that document if it was not consented to by the plaintiff (see T5.33 of 9 September 2011.) In any event, it is convenient to dispose of the matter as brought forward in the motion filed by the plaintiff. 10By the amended defence, the defendants admit entering into the loan agreement and mortgage and admit that they have defaulted on payments under the mortgage agreement. The only substantive defence pleaded is that the plaintiff has no locus standi, and cannot enforce the terms of the loan agreement and mortgage or keep the benefits of enforcement, by reason of the alleged "securitisation" of the loan agreement and mortgage. The only particulars of that contention (under paragraph 5 of the amended defence) are: a. Westpac has sold, assigned or otherwise disposed to a third party or third parties for consideration its equitable interests in the loan agreements and mortgage including all substantive rights under the loan agreements and mortgage. Westpac has done this by a process known as securitisation, particulars whereof are as follows: Particulars of Securitisation Name of Instrument Westpac Banking Corporation - 464152673991 CUSIP No. 316464105 (Major) Class N/A Symbol FDVLX Currently being traded through Fidelity Value Inception Date: 12/01/1978 Name of Instrument Westpac Banking Corporation - 464152673991 CUSIP No. 316390780 (Major) Class N/A Symbol FSAGX Currently being traded through Fidelity Select Gold Inception Date: 12/16/1985 Name of Instrument Westpac Banking Corporation - 5163 2320 0258 1701 CUSIP No. 316390301 (Major) Class N/A Symbol FXPHX Currently being traded through Fidelity Select Health Care Inception Date: 07/14/1981 11A separate matter pleaded is an alleged failure to comply with rule 14.15 of the Uniform Civil Procedure Rules 2005 . I will return to that issue. 12As to the substantive defence sought to be raised, to which I will refer as the securitisation defence, the following consequences of the contention that the loan was securitised are alleged. 13First, it is said that the plaintiff cannot enforce the terms of the loan agreement because it has already received a financial benefit for its "equitable interests" in the loan agreement and mortgage; that it has suffered no loss; that any loss suffered by the defendants' default has been suffered not by the plaintiff but by some unidentified third party; and that enforcement against the defendants accordingly amounts to "double dipping". 14Secondly, it is alleged that the amount claimed by the plaintiff amounts in the circumstances to a penalty. 15Thirdly, the conduct of claiming that amount in circumstances where the loan has allegedly being securitised is alleged to amount to misleading and deceptive conduct or unconscionable conduct within the meaning of the Competition and Consumer Act 2011 (Cth). 16Finally, it is alleged that, the claim having been securitised with other securities held by the third parties, it is necessary for the plaintiff to join those entities as parties to the proceedings. 17The factual premise for all of those allegations is the contention that the loan has been securitised. However, the pleading does not make transparent the precise import of that term or the basis on which the alleged legal consequences are said to flow. The term was explained in argument by Mr Foley by reference to a document published by the Australian Prudential Regulation Authority, The Australian Securitisation Market, Working Paper 6, October 2000 . Mr Foley relied upon a description of the so-called securitisation process set out at page 5 of that document, which states: Central to the securitisation process is the creation of an SPV, which may be established under either trust or corporations law. The originating institution (eg an ADI) sells assets to the SPV, transferring ownership of the relevant pool of loans, receivables etc and any associated collateral rights. The SPV pays for the assets by issuing securities backed by the asset pool. Cash flow from the underlying assets is used to meet the SPV's debt servicing obligations, any other on-going costs such as trustee, management and custodian fees, and to repay principal as the issued securities either mature or are retired. In this way, the SPV serves as the mechanism by which risk is transferred from the originating institution to investors. The investors must absorb any bad debts that emanate from the asset pool as well as any other events that may reduce the adequacy of the underlying cash flows to service the issued securities (unless other parties within the securitisation structure cover such losses). The SPV thus operates as a barrier; it acts to separate investors from the credit risk of the originating institution and that institution from any subsequent deterioration in the performance of the transferred assets. 18It may be noted that the description in the APRA paper refers to the transfer of the rights in question in terms that do not readily translate to the notions of legal and equitable interests critical to any defence of the present claim. 19As revealed by the passage of the amended defence set out above, the way in which the defence is pleaded by the defendants is that there has been a sale, assignment or other disposal by the plaintiff only of its "equitable interests in the loan agreements and mortgage". I will return to that issue. 20It may be doubted whether there was a proper basis for pleading the factual premise of the defence that the loan has been securitised. Mr Foley stated in argument in response to questions from me that his clients had obtained that information by undertaking some form of search on the Internet for what have been referred to in the pleading as "CUSIP" numbers in reference to the defendants' loan. 21Mr Foley frankly acknowledged, however, that he had never seen any instrument which allegedly effected the sale, assignment or other disposal pleaded in the amended defence. It is clear that the pleading signed by him was prepared wholly in reliance on the instructions he received from the defendants on the strength of the Internet searches to which I have referred. 22I should note that Mr Foley complained in that context of the plaintiff's refusal to provide the particulars and documents the subject of the defendants' separate application. However, as noted by Davies J at one of the earlier directions hearings in the proceedings, the defendants are not entitled in order to plead this defence to embark upon a fishing expedition by the process of the directions made by his Honour. The defendants have, as directed by his Honour, filed an amended defence and the question is whether that pleading raises any arguable defence to the plaintiff's claim. 23The plaintiff read an affidavit at the hearing in which it was deposed by the relevant company officer, and on the strength of his search of the business records of the plaintiff, that the loan has not been securitised. Whilst neither the amended defence nor that affidavit descended to an explanation of the terms "securitisation" or the cognate term "securitised", the argument before me proceeded on the common understanding that each document adopted those terms in the same sense. 24Mr Foley submitted that while the plaintiff contends the loan has not been securitised, the defendants contend on the strength of their Internet searches that it has and that accordingly there is a triable issue of fact and the matter must go to trial. 25In the circumstances I have outlined, however, I am not persuaded that there was any proper factual basis for pleading the defendants' contention which forms the factual premise of the legal arguments sought to be propounded. As I have already noted, Mr Foley has never tested or investigated that transactions allegedly underlying that premise but has focused on the legal or alleged legal consequences of it on the assumption that it is capable of being proved at trial. 26In my view, the absence of any proper basis for pleading that contention is sufficient reason in itself to strike out the amended defence. In case that is wrong, I turn to consider the alleged legal consequences of securitisation of the loan. 27The starting point is that the mortgage is registered. In accordance with the provisions of sections 41 and 42 of the Real Property Act 1900, the event of registration of the mortgage confers indefeasible title on the plaintiff charging the land with the amount due under the loan agreement. That proposition is so far beyond doubt as to require no authority to be cited in support of it. 28As to the debt, as expressly acknowledged and indeed pleaded by the defendants, there has been no notice given by the plaintiff of any assignment under section 12 of the Conveyancing Act 1919 . It follows that the debt can be enforced, and can only be enforced, at the suit of the plaintiff. 29The short answer to the defence is, accordingly, that whatever the position between the plaintiff and any third party so far as any equitable interest or equity is concerned, the legal interests of the parties to these proceedings are governed by the loan agreement and the registered mortgage. A debt is owed by the defendants to the plaintiff and the land stands charged with that debt. 30Default being admitted by the defendants in repayment of the sum secured by the mortgage, it follows inexorably that the plaintiff is entitled to an order for possession, there being no other defence raised to that entitlement. 31As to the claim for judgment in a money sum, it is not contended and could not be contended that the right to enforce the loan has been assigned. I am satisfied that, even if there were a triable issue as to whether Westpac's "equitable interests in the loan agreement have been securitised", there would be no triable issue disclosed by the amended defence. 32As already noted, a separate point pleaded ostensibly by way of defence is the contention that the plaintiff has failed to comply with rule 14.15 of the Uniform Civil Procedure Rules . That is not a defence proper but is merely a pleading point and accordingly it is perhaps not necessary even to address it. 33For abundance of caution, I note that the proposition raised was that whereas the rules require particular matters to be pleaded, the statement of claim does not aver those matters. In particular, reliance was placed upon subclauses (d) and (f) of 14.15(2). Mr Hynes, who appeared for the plaintiff, demonstrated by reference to the matters pleaded in the statement of claim that the defendants' allegation was simply unfounded. 34Mr Foley took a separate point in argument in respect of the application for summary judgment as to whether there was evidence given by "some responsible person" of the belief of that person that the defendants have no defence, as required by rule 13.1 of the Rules. He submitted that the deponent of the affidavit relied upon by the plaintiff did not meet that description. 35The affidavit relied upon by the plaintiff was sworn by Mr John Pastro, who described himself as an assistant manager of the plaintiff. I am satisfied that he is a responsible person within the meaning of the rules. Separately, since the loan and default are admitted and the only defence raised is a legal issue to which I have given independent consideration, I am satisfied that the requirement of rule 13.1 could properly have been dispensed with in the circumstances. 36As I have already noted, no other substantive defence has been raised. The defendants admit that the loan agreement was entered into, that funds were advanced and that they are in default. In the circumstances, I am satisfied that the absence of a defence is clearly demonstrated and that there is no triable issue in the proceedings. It follows that the plaintiff is entitled to summary judgment as sought in the notice of motion. 37[Ms Parker sought costs on the indemnity basis]. 38The plaintiff, having been successful on its motion, seeks its costs on an indemnity basis. The basis for that claim is its entitlement to costs on that basis under the loan agreement. The plaintiff accordingly relies upon the principle that this Court should, in the absence of good reason for doing otherwise, give effect to an agreement providing such an indemnity when making an order for the costs of proceedings to enforce such an agreement: see Macquarie International Health Clinic Pty Ltd v Sydney South-West Area Health Service (No 3) [2010] NSWSC 1139 per Nicholas J, in particular at [22] and [39]. 39I am satisfied that it is appropriate to make an order in those terms. Accordingly, I make orders 1 to 4 in the form of order provided by the plaintiff, which I will sign and place with the papers. Orders: 1.That the defendants give the plaintiff possession of all the land comprised in certificate of title folio identifier 2/SP48707 being the land situated at and known as 2/8 Bay St Angourie NSW 2464 (Property). 2.That the plaintiff have leave to issue a writ of possession in respect of the property. 3.Judgment for the plaintiff against each of the defendants for the sum of $911,882.54. 4.That the defendants pay the plaintiff's costs on an indemnity basis.