Whild v GE Mortgage Solutions Limited [2011] VCAT 797 | Case summary

Whild v GE Mortgage Solutions Limited [2011] VCAT 797 | Case summary | Zoe

[7]

On 23 May 2008, Ms Whild applied to VCAT for various kinds of relief against the respondent (GEMSL). She sought that relief under the Consumer Credit (Victoria) Code (the "Code") and the Fair Trading Act 1999 (the "FT Act"). Her claims concern two loan contracts and a mortgage entered into between her and GEMSL. The mortgage was registered in the Titles Office in dealing AC651596Q, and relates to two properties. One is in Strong Street, Spotswood (the "Spotswood property"). The other is in Huntingfield Drive, Hoppers Crossing (the "Hoppers Crossing property"). The mortgage secured both the loan contracts.
Briefly, her claims are these. First, the annual percentage rate of interest under the loan contract was overstated. It should have been 0.2% lower. This overstatement also meant that the default rate of interest was overstated, and the monthly loan payments were calculated incorrectly.
Second, default notices issued by GEMSL to Ms Whild in respect of the two loans were defective either because at the time of the issue no default under the loans existed or, if there was default, because that default was due to GEMSL's actions and not Ms Whild's. This claim revolves around the date on which a direct debit authority was given by Ms Whild to GEMSL, the date on which GEMSL received that authority, and the effect of that authority.
Third, Ms Whild claims that GEMSL has, without notice to her, unilaterally increased annual percentage rates of interest over the loan contracts. She also claims that the default rate of interest under the loan contracts is harsh, a penalty, or constitutes interest on interest and should not be enforced against her.
Fourth, Ms Whild claims that GEMSL wrongfully took possession of the Hoppers Crossing property and wrongfully sold it.
Fifth, Ms Whild claims that, after GEMSL had taken possession of the Hoppers Crossing property, its agent negligently drained the swimming pool on that property causing the pool to collapse. She seeks damages for this, and for what she says is the devaluation of the property because of the condition of the pool.
Sixth, Ms Whild claims that GEMSL wrongfully failed to safeguard her personal possessions on the Hoppers Crossing property during the period while GEMSL was in possession of it. She seeks compensation or damages for personal possessions which she says were lost or stolen during GEMSL's period of possession.
Seventh, Ms Whild claims that an entry made by GEMSL on her records kept with the credit reporting agency VEDA Advantage (VEDA) was incorrect and misleading. She says that the entry incorrectly alleged that she was in default under the two loans. She says that the existence of the entry made it impossible for her to get finance from other sources (finance that would have enabled her to settle her case against GEMSL), because other lenders would not lend to her in the light of that entry on her credit record.
Eighth, Ms Whild claims that GEMSL's attempt, in 2005, to take possession of the Spotswood property constituted coercion or harassment of her.
The remedies which she seeks are these. She asks that she be awarded compensation, or a civil penalty be imposed, under the Code for breach of certain key requirements of the Code. She asks that the transactions giving rise to the loan contracts and mortgage be reopened and that those contracts and that mortgage be set aside as unjust under ss 70 and 71 of the Code. She seeks relief against payment of what she says are unjust or harsh interest rates under the loan contracts. Under the FT Act, she claims damages for what she says was the wrongful taking of possession of the Hoppers Crossing property, its wrongful sale, and the loss of many of her personal possessions. She claims breach of various provisions of the FT Act, including those concerning unconscionable, misleading or deceptive conduct and those provisions permitting the Tribunal to declare void or vary unjust terms of contracts.
When the Amended Particulars of Claim were drawn, Ms Whild was represented by a lawyer. That lawyer ceased to act for her before the substantive hearing of the case. At that substantive hearing, she was unrepresented. The evidence at that hearing raised another issue which GEMSL (correct in my view) treated as part of Ms Whild's claim. That issue was this.
GEMSL incorrectly calculated the beginning of each repayment period under the loan contracts. On their proper construction, those contracts did not authorise what GEMSL did.
Earlier in this proceeding, GEMSL applied to have the whole application struck out. That application was unsuccessful. GEMSL, as it is entitled to do, raised at the substantive hearing a number of issues also raised in its strike out application. Of course, the context of the substantive hearing is quite different from that of the strike out application. On the strike out application, I had to determine whether the case could be said to be so manifestly untenable that it was misconceived or lacking in substance. The substantive hearing determines the matter according to the evidence.
Also before the substantive hearing, the Adelaide and Bendigo Bank Limited (formerly Adelaide Bank Limited) ("ABL") was struck out as a party to this proceeding. GEMSL accepts that, when doing work for GEMSL in relation to loan applications, loan contracts and the like, ABL and its officers, employees or agents, were agents for GEMSL.
The Amended Particulars of Claim allege various breaches of the Code of Banking Practice and of the Privacy Act 1988 (Cth). VCAT has no jurisdiction under that Privacy Act. Since ABL is not now a party to this proceeding, and since GEMSL is a non-bank lender and is not covered by the Code of Banking Practice, I strike out the claims relating to that Code and that Privacy Act.
At the end of the substantive hearing, and on GEMSL's application, I dismissed all claims alleging that GEMSL, by its actions, had caused psychological injury to Ms Whild. Ms Whild led no medical evidence at the substantive hearing which could support such a claim.
I first say something about the law. I then make some general comments about the evidence, and next make findings and, in doing so, consider the parties' submissions.
Except for one matter, GEMSL has not denied that it provided credit to Ms Whild in the ordinary course of a credit business or other business carried on by it. There is no dispute that, when Ms Whild entered into the relevant loan contracts, she was ordinarily resident in Victoria. Apart from this one matter, GEMSL does not dispute that it is a credit provider or that the relevant loan contracts are credit contracts within the meaning of the Code. But GEMSL says that the Code does not apply because the credit was not provided wholly or predominantly for personal, domestic or household purposes. Section 6(1) of the Code relevantly provides -

[17]

Section 176 casts more light about when the conduct or knowledge of a credit provider's agent, officer or employee is imputed to the credit provider.
The effect of s176 is relevantly this. The conduct of an agent, officer or employee of a credit provider acting within actual or ostensible authority is imputed to and taken to be the conduct of the credit provider. For the purposes of the Code, a credit provider is not taken to know or have reason to believe something because an agent, officer or employee of the credit provider does so, unless the knowledge or reason to believe that thing is acquired by that agent, officer or employee acting in that capacity and in connection with the transaction concerned.
I now say something about s6. In Slaveska v Commonwealth Bank of Australia[1] I considered the effect of the provisions about the purpose for which credit is provided, in the light of two lines of cases. The first line emphasised the purpose of the credit provider or a reasonable person in the credit provider's shoes. The second line emphasised how the debtor used or intended to use the credit provided. I said that s6 was written in the context of a contract. This meant that the purpose of the contracting parties was relevant. The transaction must be looked at in substance and in the context of its performance. The purpose of s6(2) to (5) was to provide clarification where the application of the general rules about the application of the Code in s6(1) gave an uncertain result. So, as far as concerns the purpose for which credit is provided, s6(4) and (5) provide clarification where the application of s6(1)(b) gives an uncertain result. The question which they answer is - was the credit wholly or predominantly provided for personal, domestic or household purposes? Section 6(4) makes it clear that investment by the debtor is not such a purpose. Section 6(5) looks at the intended use of the credit by the debtor.[2]
Caution must be exercised before drawing analogies between the facts of one case and another in this area. The purpose of the credit must be determined according to the particular facts of each case, including the particular transaction and the knowledge of the parties. Analogies are only of general help.

[31]

Relevantly to this case, the effect of s 100-104 of the Code is this. A party to a credit contract (in this case, a debtor) may apply to the Court for orders under Division 1 of Part 6 of the Code. The effect of s 8 of the Consumer Credit (Victoria) Act 1995 is that, in that Division, "Court" means VCAT. On a debtor's application, VCAT must declare whether or not the credit provider has breached a key requirement in relation to the relevant credit contract. If VCAT declares that a key requirement has been breached, it may (after considering factors set out in the Code) order the credit provider to pay a civil penalty. The Code sets out certain limits on the amount of civil penalty that can be ordered on a debtor's application. Subject to any different provision made in the order imposing the civil penalty, the debtor may set off the civil penalty against any amount due or which may become due by the debtor under the relevant credit contract.
Under s 107 of the Code, a debtor may apply to VCAT for an order that the credit provider pay compensation for any loss suffered by the debtor and arising out of breach of a key requirement. This remedy is not available to a debtor who has previously been awarded or been refused a civil penalty in respect of the same breach.
Section 100 sets out what are key requirements for the purposes of the civil penalty provisions. For contracts of the kind to which this case relates, they relevantly include s 15(C) and s 15(J). These are the key requirements mentioned in the Amended Particulars of Claim.
Broadly, s 15(C) requires the contract document to contain certain information about the interest under the credit contract. That information includes the annual percentage rate. If that rate is determined by reference to a reference rate, the name or description of that reference rate must be included, and any margin above or below that reference rate which is to be applied to determine the annual percentage rate under the contract. The contract document must also state where and when the reference rate is published or how a debtor may ascertain the reference rate. It must state the current annual percentage rate.
Section 15(J) applies to contracts under which a default rate may be charged if payment is in default. In the contract document for these credit contracts, there must be included a statement that a default rate may be charged if payment is in default. There must also be a statement of the default rate and how it is to be applied. Where the rate is to be determined by reference to a reference rate, the contract must include a statement of the current default rate and details of the reference rate similar to those required in respect of the annual percentage rate.
Under s114, a person affected by a breach of a provision of the Code which is not a key requirement may apply to VCAT for compensation for loss arising from that breach.

[38]

Breach of s 21(1) is an offence. Section 21(2) lists conduct which the sub-section deems to be a breach of s 21(1). The sub-section tells us that it does not limit s 21(1). The list in s 21(2) relevantly includes
- Doing or threatening to do an act that may intimidate, harass or expose to ridicule a debtor;
Ms Whild's submitted Particulars of Claim seek compensation or damages under ss 158(3) and 160 of the FT Act. Section 158(3) gives certain powers to VCAT to make orders in proceedings under s 159. Section 160 only deals with compensation in proceedings for offences before a Court. I treat the reference in the Amended Particulars of Claim to s 160 as a clear error. Given the reference to s 158(3), the reference to s 160 should clearly be a reference to s 159. In submissions, the respondent's counsel treated this issue in the same way. Sections 158(3) and 159 (among other things) give wide powers to VCAT to make orders where a person claims that he or she has suffered loss as a result of a breach of the Act and seeks an amount of damages in respect of that loss. Under s158(3), VCAT may make any order it considers fair, including orders such as that a contract is void in whole or in part, is varied in a specified way, is not to be enforced, or for the refund or payment of money or the return of property. Section 159 permits a person who has suffered loss or damage because of a breach of the Act to recover the amount of that loss or damage from a person who committed or was involved in the breach.
Part 9 relevantly gives VCAT the power to hear and determine consumer and trader disputes. Under s 107, a consumer and trader dispute is a dispute or claim arising between a purchaser or possible purchaser and supplier or possible supplier of services, in relation to a supply or possible supply or services. Section 107(2) makes it clear that a consumer trader dispute does not cease to be such a dispute even though it involves a dispute or claim in negligence or trespass. Under s 108, the tribunal may hear and determine a consumer and trader dispute and make one or more of a long and varied list of orders. They include orders for payment of money (including damages, damages in the nature of interest, or restitution), variation of contract terms, refunds, declaring the terms of a contract void, ordering rescission of a contract, declaring whether or not a debt is owing, and ordering a party to do or refrain from doing something.
Section 109 gives the Tribunal additional powers when it is determining consumer disputes. A consumer dispute is one which involves the supply of goods or services of a kind ordinarily used for personal, domestic or household purposes. The section permits the Tribunal to declare void or vary a contract term which it determines to be unjust, or otherwise to make orders to avoid injustice.
Section 3 is a definitions section. It gives very broad meanings to terms such as 'purchaser', 'supplier', 'services' and 'trade or commerce'. So, 'purchaser' is a person to whom (relevantly) services have been or are to be supplied. 'Supplier' is a person by whom services have been or are to be supplied. 'Supply' includes 'provide'. 'Services' (among other things) includes benefits, facilities, and rights or interests in real or personal property that are or are to be provided in trade or commerce.
The provisions of the FT Act as enforced before the amendments made to it and arising out of the enactment at Commonwealth of the Australian Consumer Law apply to this case.[5]

[39]

Ms Whild gave lengthy evidence about all the aspects of her dealings with GEMSL which are in issue in this case. She was cross-examined comprehensively. She also called other witnesses who gave evidence about specific aspects in issue in this case. One of these was Mr Cutugna, whom I accept as a knowledgeable and qualified expert in all matters to do with swimming pools, including construction, repair, maintenance, defects and structural failure.
GEMSL also called a number of witnesses, many of whom gave evidence about particular issues in this case. I have a substantial body of documentary evidence before me.
The hearing was lengthy. The issues were complex. Ms Whild was not represented by a lawyer, and needed explanation from the Tribunal about such matters as cross-examining and summonsing witnesses. I have no doubt that Ms Whild was psychologically able to run her case and give evidence. However, it was clear that at times she was psychologically more fragile than at others. With the cooperation of counsel for GEMSL, and taking into account evidence given at an earlier directions hearing by her then treating psychologist, I made certain adjustments to hearing procedures to make sure that they did not contribute unduly to her stress and that they were accessible to her. Some of these adjustments took into account that Ms Whild found it easier to give oral than written evidence. They also included the granting of adjournments when Ms Whild's emotional state required it. I thank the respondent's counsel for his cooperation in these measures.
I now explain my approach to the evidence. Except in one respect, I found Ms Whild to be a truthful and reliable witness. However, the main events dealt with in this case took place between late 2003 and late 2007. During that period, a number of things have happened to Ms Whild that have affected her emotional state and have, in my view, added to her confusion about dates and events. They include surgery, some periods of illness requiring psychological treatment, a serious assault of a sexual nature, a physical assault on her youngest daughter for whom she is the carer, that daughter's subsequent extended psychological illness and periodic hospitalisation, as well as the financial difficulties which are the subject of this case. Ms Whild's own evidence (which I accept) is that her recall is now not as good as it once was, and that she is sometimes confused about dates, names and places. Where I consider Ms Whild's evidence was confused or her memory unclear, I prefer the evidence of other witnesses with a better and clearer memory. For example, it is for this reason that I give more weight to the evidence of the estate agent Mr Burns than to Ms Whild's evidence concerning GEMSL's taking possession of and sale of the Hoppers Crossing property.
In one respect I did not consider Ms Whild's evidence reliable or wholly truthful. She gave various conflicting versions of her income at the time the loans with GEMSL were taken out, and at the time she applied for finance from other lenders in 2006. She has not prepared tax returns from and including the financial year 2003/2004, and documentary evidence of her income during that and later periods is scant. Her oral evidence conflicted with the figures shown in some of her documentation. I regard this part of her evidence with caution and give it far less weight than the documentary evidence. But this does not taint the whole of her evidence or make me regard her as a wholly unreliable witness.
I found the other witnesses for the parties truthful and reliable.

[42]

Ms Whild has previously been married and has children from that marriage. At the time of applying for the GEMSL loans, she was living with her youngest daughter only.
The GEMSL loans were not the first loans which Ms Whild had obtained. The property she purchased with part of the money from GEMSL was not the first property that she had owned, or bought and sold. She was not inexperienced in the sale and purchase of property, or the obtaining of finance to enable her to acquire property. In her property transactions, she had used the same solicitor (Mr Peter Haberle) for some 15 years.
In the latter part of 2003, Ms Whild began to look for a property to buy. Her home was at the time at Strong Street, Spotswood (the "Spotswood property"). She had lived in this home for some two years and had paid for it in part with money borrowed from the National Australia Bank (NAB). Her personal banker at NAB for a number of years had been Lara Wearne.
I accept the evidence of Ms Whild and Ms Wearne about what happened next. Ms Whild saw the Hoppers Crossing property and decided to buy it. She discussed the purchase and finance route with Ms Wearne. Ms Whild believed (incorrectly) that Ms Wearne had told her that there would be no difficulty in having a loan approved for the purpose. I accept Ms Wearne's evidence that this was a misunderstanding and that, although Ms Wearne would have told Ms Whild that she was a reliable customer, she did not tell her that the bank would certainly approve her loan application.
Ms Whild bought the Hoppers Crossing property for $265,000.00. Ms Whild then sought approval from NAB for a loan to fund a purchase. That approval was refused. I accept Ms Wearne's evidence that the loan was refused because Ms Whild had explained that the new property was to be rented to students, and the National Bank did not permit residential mortgages for this purpose.
Ms Whild then sought the assistance of a finance broker, James Conidaris of JSK Mortgage Services Pty Ltd.

[44]

Mr Conidaris sourced a loan for Ms Whild from GEMSL. He visited Ms Whild at her home and, from information she gave him, completed a loan application to GEMSL. She signed that application on 30 October 2003. From the evidence, it seems that Mr Conidaris was not accurate in filling in some of the information required by the application form, and that Ms Whild did not read the form carefully before signing it. Ms Whild's evidence was that she had only realised during the hearing that, in the loan application form, her given name was incorrectly spelt, her youngest daughter's age was incorrect, and her residential address was shown as 21 rather than 12 Strong Street.
The application was for a "self certified" or "lodoc" loan. No proof of income was required. The application included a certification by the applicant for the loan that statements in the application (including those about income) were true.
The applicant showed as one of Ms Whild's liabilities a loan to the National Australia Bank under which $219,071.79 was then owing (the "NAB loan"). It stated that this loan was to be refinanced. It sought a total loan of $524,000.00 or 80% of valuation. The loan term sought was 40 years. Ms Whild's solicitor was shown as Peter Haberle.
In section (c) of the application, the applicant is asked, if the applicant wishes to split the loan facility, to specify the split. The application does this. It states that account 1 is to be $312,000.00 and account 2 $212,000.00.
Under the heading "Security Details", two properties are shown. The possible options are "unoccupied" or "investment". The Hoppers Crossing property is shown as Asset 1 and the "investment" option is ticked. The Spotswood property is shown as Asset 2 and the "owner" and "investment" options are ticked.
There follows a business purpose declaration which Ms Whild has signed. Mr Conidaris said in evidence (and Ms Whild denied) that he had explained to Ms Whild, before she signed the declaration, that by signing it she might lose her protection under the Consumer Credit Code. I accept his evidence. His evidence was more confused about whether he told Ms Whild that she must sign the declaration if 50% (or more than 50%) of the loan was to be used for investment. I am not satisfied that he told her this. Before the business purpose declaration are the words "complete only if the following statement is correct". There is then the warning beginning with the "Important". The warning is in the form prescribed by r10 of the Regulations. However, the warning does not comply with the Regulations in that it appears above, and not below, the declaratory words.
The declaratory words then follow the warning. Except in one respect, the declaratory words are in the form prescribed by r10 of the Regulations. That respect is the addition of the words "in respect of the following accounts". The form then includes space allowing the debtor to indicate to which of the above accounts the business purpose declaration applies. No accounts are indicated. However, two boxes are ticked which read respectively "purchase" and "investment". The declaration is then signed by Ms Whild and dated 30 October 2003.
I find that the business purpose declaration substantially departs from the form required by s11(2) of the Code and the Regulations. As my later findings indicate, it was made some two and a half months before the credit contract was signed. While s11(2) requires the declaration to be signed before the credit contract is entered into, it concerns the purpose for which the credit is to be applied. When read together with s6(1) of the Code, this means the purpose for which the credit is to be applied (or provided), is determined at the time the contract is entered into. As my later findings indicate, I am satisfied that, between the time of the signing of the business purpose declaration and the time of the entry into the credit contract, the purpose for which the credit was to be provided or applied changed. The declaration did not therefore reflect the purpose for which the credit was provided, determined at the time of entering into the contract.
Second, the warning appears above, and not below, the declaratory words. In my view, this is critical. The regulations intend that the person who will sign the declaration must first read the declaratory words, and then the warning which makes the person aware of the potentially serious consequences of signing the declaration. If the warning appears before the declaratory words, a reader might easily skip it and look only at the declaration itself. The purpose of the warning might therefore be thwarted.
Third, the inclusion in the form of space in which to include account numbers and their purpose (that is, whether or not the declaration is to apply to them), substantially departs from the form of the declaration in r10. In the declaration in r10, the debtor declares that the credit to be provided is to be applied wholly or predominantly for business or investment purposes. The declaration does not require the debtor to nominate which accounts are, and which are not, to be applied wholly or predominantly for business or investment purposes. It relates only to credit provided wholly or predominantly for business or investment purposes. Here, the addition of the provision for account numbers and descriptive boxes is a substantial change in the prescribed form. It makes the declaration and its purpose confusing. Indeed, this confusion may be the reason why the account numbers were not filled in, but the boxes were ticked.
Fourth, the business purpose declaration is incomplete. It does not clearly indicate to which credit the declaration applies.
For all these reasons, I find that the business purpose declaration is ineffective to found the conclusive presumption in s11(2) that the Code does not apply to these loans.
In the details of her financial position included in the application, Ms Whild shows rental income as $11,400.00. I accept her evidence that this is the rental she expected to obtain by letting rooms in the Hoppers Crossing property to university students. Her evidence was that she intended to let most of the bedrooms on that property to students, perhaps reserving one bedroom for her own use. And she intended that she and the students would use kitchen and living areas in common.
Correspondence between Mr Conidaris and GEMSL about the loan application is in evidence. It is clear from that correspondence that what was sought was the refinancing of the Spotswood property to 80% of its value, and a loan secured over the Hoppers Crossing property to 80% of its value. Urgent processing of the application was necessary because, under the contract the purchase of the Hoppers Crossing property, settlement was to occur on 14 November 2003. It is also clear that the estimate of the rental income to be attained from the Hoppers Crossing property was based on an estate agent's appraisal that the property could bring $220 - $230 per week in rental.
On 12 November 2003, GEMSL conditionally approved the two loans. One was for $220,000.00 and was to assist with the refinance of the NAB loan, and the other was for $304,000.00 to assist with the purchase of the Hoppers Crossing property, cover costs and clear defaults. From the correspondence, it appears that three defaults had been noted on Ms Whild's credit record. Among other things, the loan approvals were conditional on the loan to security ratio being 80% of the value of the security.
On 26 November 2003, Mr Conidaris wrote to GEMSL advising that Ms Whild wished to proceed with the loan but that due to "some personal circumstances", she wished the file to be put on hold until 2 December 2003. I accept Ms Whild's evidence that these personal circumstances were a serious assault on her youngest daughter and that daughter's subsequent frequent hospitalisation and psychological illness.
On 8 December 2003, Mr Conidaris forwarded valuation fees for the security properties to GEMSL. GEMSL then obtained valuations for both properties from the Ellis Property Group.
The valuation for the Hoppers Crossing property was dated 19 December 2003. It describes the building on that property as having 8 bedrooms, 1 en suite and 1 bathroom, with a living area of 281 square metres and no car accommodation. It describes the building as having been built in the 1970s. It states that its marketability is good and that no essential repairs are required. It notes a medium risk of market volatility. The valuer assesses the value of the property (including improvements) at $265,000.00, and its rental value (on an unfurnished basis) at $230.00 per week.
The valuation of the Spotswood property is dated 29 December 2003. This is described as a 3 bedroom dwelling built in the 1950s. The total area of the property is 653 square metres, with a living area of 136 square metres. The value of the property (including improvements) is assessed at $370,000.00. Its rental value (on an unfurnished basis) is assessed at $320.00 per week.
On 5 January 2004, GEMSL wrote to Mr Conidaris explaining that, because the valuation of the Strong Street property was lower than that estimated by Ms Whild in the application, the loan amount would be reduced to $508,000.00. On the same date, Ms Whild wrote to GEMSL explaining her dissatisfaction with Mr Conidaris handling the transaction and her wish that she deal directly with GEMSL. GEMSL agreed to deal direct with her.
On 6 January 2004, GEMSL wrote to Mr Conidaris approving a loan totalling $508,000.00 consisting of a loan of $304,000.00 and a loan of $204,000.00. The loan term for each was 40 years. The annual percentage rate of interest was 9.05%. GEMSL agreed that the loan documentation was to be collected by Ms Whild from GEMSL's solicitor and agent in Melbourne, Wignalls Lenders Mortgage Services Pty Ltd ("Wignalls").
The two loan contracts initially sent to Ms Whild for signature showed an annual percentage rate of 9.05%, comprising the GE jump start variable reference rate (then at 7%) and a margin of 2.05%. The loan contracts which Ms Whild and GEMSL in fact entered into, and which bear an offer date and a disclosure date of 13 January 2004, show a lesser interest rate. Ms Whild had negotiated directly with GEMSL for that lesser rate.

[46]

I first deal with the loan for a total amount of $304,000.00 (loan A). For this loan, Ms Whild negotiated with GEMSL a reduction of the application fee from $890 to $320. That fee was payable to GEMSL. The rest ($303,680) was payable to Ms Whild or as she directed. Each of the 480 principal and interest repayments under the loan was $2,299.00. The loan purpose was "residential purchase".
The $204,000.00 loan (loan B) does not have an application fee. The whole sum is payable to Ms Whild. There are 480 principal and interest repayments each of $1,543.00. The loan purpose is "refinance - bank or other". Loan B contains a special condition not contained in the contract schedule for loan A. That special condition is "pursuant to 1.3 of the home loan contract terms and conditions you must before or on settlement terminate the credit contracts listed below and repay any outstanding amounts and you acknowledge that the loan is provided to you for this purpose as well as any other to which you and we have agreed". There follow details of the NAB loan. Both contracts contain additional handwriting. The evidence is unclear about who wrote this and when it was written. I disregard this evidence.
I now come to details in the contract schedules which are common to both loans. Each of the loans is called a "GE jump start loan principal and interest variable rate". Each has a variable annual percentage rate of interest which is charged "from and including the settlement date". That variable rate comprises the GE jump start variable reference rate (then stated to be 7%) plus a margin of 1.6%. I call the first of these rates "the reference rate". The contract schedule for each loan then states "therefore the current variable annual percentage rate is 8.8%".
The loan term for each loan is 40 years starting from and including the settlement date. For each loan, the security is a first registered mortgage over the Hoppers Crossing property and the Strong Street property. The loan to security ratio for each loan is stated to be 80%.
The disclosure date and the date of GEMSL's offer to lend is 13 January 2004. The offer can be accepted by Ms Whild signing and returning the relevant documentation. She signed the offer on 22 January 2004.
I have in evidence extensive correspondence between Wignalls and GEMSL and between GEMSL staff. It is clear from that correspondence that GEMSL and Ms Whild had agreed that the interest rate under both loan contracts was reduced from 9.05% to 8.8%. Ms Whild's evidence was also to this effect. I find that the reference in both loan contract schedules to a margin of 1.6% was in error. The total interest rate of 8.8% reflected correctly the agreement between the parties.
Under each contract schedule, the first repayment is due on the first day of the second repayment period. Each repayment after the first is due on the first day of each following repayment period during the remainder of the loan term. If a principal and interest repayment is due on a day which is not a banking day, the repayment is due on the preceding banking day.
Each contract schedule then sets out details of credit fees and charges. They include an early termination fee. Relevantly, if the contract is terminated within 24 months of the settlement date, that fee is equal to 3 months interest charges on the amount of credit shown in the contract schedule, at the interest rate payable at the date of termination. The credit fees and charges include a direct debit dishonour fee of $40.00 per dishonour. They include a late charge, payable on the 14th day after all or part of a repayment becomes overdue and calculated as shown in clause 10.6 of the terms and conditions. The late charge is also payable on the same day in each month following the month in which it was first imposed, while the relevant repayment remains overdue. If that day does not exist in that subsequent month, then it is payable on the next day.
The contract schedule for each loan notes that certain matters may be changed without the borrower's consent. Relevantly, these are the annual percentage rate, including the reference rate and margin; the amount, method of calculation, number or time of repayments or the period over which they are payable; and the amount, frequency or time for payment of fees or charges. The default rate margin is 4% per annum.
At the end of each contract schedule is a statement headed "Important - before you sign". This is a statement in the form of the regulations, that is required by the Code to be included in each credit contract to which the Code applies.

[47]

I have said that these apply to both loans. Under clause 1.3(L) the debtor acknowledges that the purpose of the loan as advised has not changed. Under clause 2.3, GEMSL agrees to notify the debtor in writing (which may be by newspaper advertisement) on or before the date of any change to the annual percentage rate. But if the change is a decrease, GEMSL may notify the debtor afterwards.
Clause 3 provides for the calculation of the daily percentage rate. Under clause 3.2, interest charges are debited on the last day of each repayment period, but if that day is not a banking day, they are debited on the preceding banking day.
Under clause 4.1, the debtor is obliged to pay to GEMSL all amounts that the debtor owes it, including interest charges and other amounts payable under the contract, by no later than the last day of the loan term. Clause 4.6 permits GEMSL to change the amount, and frequency of repayments. Clause 4.7 is a notice provision relating to a change in the amount or frequency of repayments, and is similar to clause 2.3. Clause 4.9 obliges the debtor to make repayments by direct debit authority from the account nominated by the debtor unless the parties agree otherwise. Clause 4.10(c) obliges the debtor to ensure that there is enough money in the nominated account to meet each debit.
Clause 5.1 obliges the debtor to pay the fees and charges in the contract schedule and includes 5.3 of the terms and conditions. They include any "expenses incurred in enforcing, attempting to enforce or taking any other action in connection with rights ... under this contract or security after a default, including (in the case of a mortgage) expenses incurred in preserving and maintaining the property". "Our" in the terms and conditions means GEMSL. Clause 5.2 authorises these amounts to be debited to the loan account on the date the lender pays them or the date on which they become due, whichever is earlier.
Among other things, clause 10.1 provides that the debtor is in default if the debtor does not pay on time all amounts due under the contract. Under clause 10.3, "we may give you a notice stating that you are in default. If you do not correct the default within the period given in the notice or required by law, then at the end of that period and without further notice to you the total amount owing becomes immediately due for payment (to the extent that it is not already due for payment). We may then sue you for the amount or enforce any security or do both".
Clause 10.4 relevantly provides that "we need not give you a default notice or wait until the end of any period given in such notice if ... (b) we have made reasonable attempts to locate you without success. In that case, the total amount owing becomes immediately due for payment without notice, and GEMSL may immediately sue the debtor for that amount or enforce any security or both".
Clause 10.6 concerns late charges. Its effect is that the charge is calculated on a monthly basis by multiplying one twelfth of the default rate margin in the contract schedule by the balance owing on the loan account at the end of the 14th day after the payment becomes due or on the same day in each of the following months that the payment remains overdue. Under clause 10.8, the debtor indemnifies GEMSL for loss, costs or liabilities incurred by reason of default.
Clause 11 permits GEMSL to use a payment under the contract to reduce amounts owing in any order it chooses. Clause 13.1 permits GEMSL to "assign a date under which credit is provided to you under this contract, that is on or after the date the transaction takes place". Clause 13.2 permits GEMSL to make subsequent adjustments to debits and credits to the loan account so as to accurately reflect the parties' obligations, and to make consequential adjustments to interest and charges.
Under clause 13.3, for the purposes of the contract, a Saturday which is a banking day ends at 1.00pm, and otherwise a day ends at 6.00pm. A reference to time is to time in Adelaide.
Clause 13.19 and 13.20 deal with communications between the parties. Communication in the form of a document by GEMSL to a debtor can be delivered personally, or given by leaving the document at any address nominated in writing by the debtor (or, if there is none) at the debtor's residential address last known to GEMSL. Communications by newspaper advertisement are deemed received on the date they are first published.
Broadly the effect of clauses 13.26 to 13.29 is this. The terms and conditions are required to be read down or varied (including by omitting material) to the extent that they would otherwise conflict with or breach consumer credit legislation, or to the extent that consumer credit legislation would make the contract void or unenforceable, where that legislation applies. Otherwise, the terms and conditions prevail over existing inconsistent law.
Clause 14 contains definitions used in the terms and conditions and the contract schedules. "Balance owing" means "at any time the difference between all amounts credited and all amounts debited to your loan account at that time". "Banking day" is a day other than a Sunday or a national holiday in Australia. "Costs" include (among other things) legal costs. The first repayment period is defined as "the period of one calendar month less one day from the settlement date, except where the settlement date occurs on the 29th, 30th or 31st of the month, in which case the first repayment period is the period from the settlement date until the 27th of the following month. Each repayment period after the first is defined as "one calendar month from the end of the previous repayment period". "Settlement date" means "the date we first lend you any of the amount of credit or, if earlier, the date when we first debit any of it to your loan account". "Total amount owing" means the balance owing under the loan account and accrued interest charges, default interest and other amounts payable under the contract but not debited to the loan account".

[48]

The mortgage between GEMSL and Ms Whild covers the Spotswood and the Hoppers Crossing properties. At the time of registration, it secured loans A and B. It was registered on 4 February 2004. It incorporates Memorandum of Common Provisions AA706 (the MCP). I mention key provisions relevant to this case.
The mortgage secures the "amount owing" under loans A and B. That term is defined by clause 9 to mean (subject to clause 8.26 which I mention later) all amounts which the debtor owes or may owe to GEMSL in the future including under an agreement covered by this mortgage. Clause 9 defines "agreement covered by this mortgage" as an agreement, contract or arrangement under which the debtor owes or incurs obligations to GEMSL or under which GEMSL has rights against the debtor, and includes any variation to such an agreement. It is clear from clause 1 that what is mortgaged is the land at Hoppers Crossing and Spotswood, and fixtures, structures or improvements on or affixed to that land.
Under clause 2.1, if the debtor does not comply with its obligations under the mortgage, GEMSL may take possession of the mortgaged property, sell it, and sue the debtor for any remaining money the debtor owes to it. Under clause 2.3, the debtor must ensure that the debtor is not in default under the mortgage and must carry out all of the debtor's obligations under any agreement covered by the mortgage, including the obligation to pay on time any of the amount owing. These obligations are stated to continue, even though property is released from the mortgage.
Under clause 3.3, the debtor "must not abandon" the property. Clause 3.2 obliges the debtor to keep the property in good condition.
Clause 5 is headed "things we may do at any time". In this context "we" means GEMSL. Under clause 5.1, GEMSL may enter the property to (among other things) inspect its condition, to find out whether the mortgagor is complying with the mortgagor's obligations under the mortgage, or to carry out "our rights under this mortgage".
Under clause 5.2, GEMSL must give the mortgagor reasonable notice before entering the property under clause 5.1 unless "there is an emergency". Under clause 5.3, GEMSL may do anything which the mortgagor should have done under the mortgage and has not done or, in GEMSL's opinion, has not done properly.
Clause 6 deals with default. Under clause 6.1, the mortgagor is in default if (among other things) the mortgagor does not pay the amount owing on time, or does something the mortgagor agrees not to do or does not do something the mortgagor agrees to do under the mortgage or any agreement covered by the mortgage. Clause 6.2 obliges the mortgagor to tell GEMSL if the mortgagor is in default or thinks the mortgagor may be in default. Under clause 6.3, if the mortgagor is in default and GEMSL decides to enforce the mortgage, GEMSL must give the mortgagor notice "stating that you are in default (you must have been in default or one day or more before we may do this)".
Clause 6.4 states "if you do not correct the default within any period given in the notice then, at the end of that period and without further notice to you, the amount owing becomes immediately due for payment (to the extent it is not already due for payment). In addition we may do one or more of the following as well as anything else the law allows us to do as mortgagee -

[51]

Clause 6.6 concerns enforcement expenses. It provides "when we ask, you must pay us the reasonable expenses we reasonably incur in enforcing this mortgage after you are in default (including in preserving and maintaining the property ...). This applies to expenses we incur before or after taking action under 6.4".
Clause 7 concerns how the mortgagee may deal with money received under the mortgage. Under clause 7.1, the money is to be "used towards paying the amount owing ... we may use any money received under this mortgage toward paying any part of the amount owing we choose". Under clause 7.2, money remaining after the amount owing is paid must be paid either to the mortgagor or any other person entitled.
Clause 8 deals with general matters. Clauses 8.3 to 8.8 deal with communications between the parties. Their effect is this. Communications must be in writing. Communications by GEMSL may be signed by its employee or agent. Communications by the mortgagor to GEMSL may be given to an employee or agent at one of its branches or to its registered office or to any other address it advises from time to time. They may be posted or sent electronically or given by any other means permitted by law. Communications for the mortgagor from GEMSL may be delivered personally, left at the mortgagor's address nominated in writing or (if there is none) at the mortgagor's residential address last known to GEMSL, or sent to any of these places by prepaid post or electronically, or by any other means permitted by law. A document given personally is taken to be given on the date it bears or the date it was received, whichever is later. A document posted is taken to be given on the date it bears or the date it would have been received in the ordinary course of mail, whichever is later. A fax or electronic transmission is taken to be given on the date it bears or the date the transmitting machine produces a report indicating that the transmission has been sent, whichever is later. Any document in a court action may be given by GEMSL to the mortgagor by delivering it to the address nominated by the mortgagor or (if there is none) to the residential address last known to the mortgagee, as well as by any other method of service.
Clause 8.11 permits GEMSL to exercise its rights in any way it considers appropriate, including by imposing conditions, but consent cannot be unreasonably refused. Clause 8.12 permits the mortgagee to enforce the mortgage before enforcing other rights or remedies. Clause 8.14 provides that the mortgagee is not liable for loss caused by its exercise or attempted exercise or failure or delay in exercising its rights and remedies. Under clause 8.16, the mortgagee's rights can be exercised by any person authorised by it or by its employee.
Clause 8.17 and 8.25 to 8.27 have a similar effect to clauses 13.26 to 13.29 of the terms and conditions in relation to the effect of consumer credit legislation (if applicable) and other inconsistent rules. In particular, clause 8.26 provides (among other things) that, if consumer credit legislation applies, the amount owing under the mortgage does not include an amount that exceeds the sum of the debtor's liability under each agreement covered by the mortgage and the mortgagee's reasonable enforcement expenses reasonably incurred in enforcing the mortgage. The mortgagee's rights to demand amounts and exercise other rights and remedies are to be read as subject to that legislation.
Under clause 8.20, the mortgagor appoints GEMSL and its directors secretary and officers her attorney. Clause 8.21 authorises each such attorney, if the mortgagee serves notice stating that the mortgagor is in default, to do anything which the mortgagor could do as owner, including selling, leasing or dealing with the property.
Clause 8.28 applies to the extent that the mortgage is not regulated by consumer credit legislation. It obliges the mortgagor, when asked by GEMSL, to pay to it "our reasonable costs ... in arranging, administering (including enforcing, attempting to enforce, taking any action in connection with our ... rights) and discharge of this mortgage". Under clause 8.29, and to the extent that the mortgage is not regulated by consumer credit legislation, the mortgagor indemnifies the mortgagee for any liability, loss or costs, including consequential or economic loss, suffered or incurred in the mortgagor is in default under the mortgage (loss arising from the payment of the amount owing before the due date or in connection with the property).

[52]

My findings on this subject are based on the documentary evidence, the evidence of Ms Whild and of her solicitor Mr Haberle, and the evidence of Mr Tobias (then operations team leader at GEMSL) and Mr Lorenzi (then credit support team leader at GEMSL).
On 22 January 2004, at her solicitor Mr Haberle's office, Ms Whild signed a certificate (which was then provided to GEMSL) to the effect that she had obtained independent legal advice concerning the security and loan documentation and had then freely and voluntarily signed that documentation. She signed that documentation on that date. On that date, she also signed a direct debit authority, authorising GEMSL to take from her NAB account the repayments under loans A and B. The authority related to the minimum monthly payment.
Originally, settlement was to occur on 22 January 2004. In fact settlement of the loans on the Hoppers Crossing property purchase occurred on 28 January 2004. The delay was caused by a dispute which arose between Ms Whild and the vendors in relation to certain items. When that dispute was resolved, settlement occurred.
The loan money was disbursed in the form of various cheques. It appears that most of those cheques were drawn by Wignalls in Victoria, and some by GEMSL's agents in ABL in South Australia. There was a need also to transfer the loan funds from GEMSL's South Australian agent ABL to Wignalls. It appears that that transfer occurred no later than 27 January 2004, and probably on 25 January 2004.
On 27 January 2004 GEMSL sent two letters to Ms Whild bearing that date. One related to loan A and the other to loan B but (apart from repayment amounts which accord with the contracts) they are in identical terms. They advised that the loans had settled on 27 January, that repayments would be debited to the loan account using the direct debit authority, the amount of the minimum monthly repayment, and that the first repayment is due on 27 February 2004.
As at 28 January 2004 (the date of actual handover of cheques), the adjusted purchase price for the Hoppers Crossing property (excluding the deposit) was $256,047.86. The amount paid to discharge the NAB loan and mortgage was $221,471.58.

[53]

I have found that Ms Whild's youngest daughter was assaulted in November 2003 and that it was because of this that (through Mr Conidaris) she asked GEMSL to place the files on hold until 2 December 2003. I have found that her youngest daughter thereafter was frequently in hospital and was psychologically ill. Ms Whild's responsibilities as her carer increased greatly. However, she did not tell GEMSL this at the time she entered into the loan contract. I find that, in fact, despite what had happened to her daughter, the purpose for which the credit under loan contracts A and B was provided (being the purpose known to both parties under the contracts) did not change from the purpose set out in the contracts with the disclosure dates of 13 January 2004.
It is true that Ms Whild attempted unsuccessfully to locate a suitable school for her daughter in the Hoppers Crossing, and lived at the Hoppers Crossing property from time to time (with her daughter). Her residential address was, however, always the Spotswood property. I accept her evidence that, at one time, she thought that she and her daughter might live in part of the Hoppers Crossing property, but is clear from her evidence that she still intended the bulk of that property to be rented out to students. The renovations to the property were primarily for that purpose.
Even her plan to live with her daughter at the Hoppers Crossing property was short-lived. Her youngest daughter was often hospitalised and in an area close to the Spotswood property. Ms Whild then tried to encourage her daughter to attend a school in the Spotswood area. I find that both she and her daughter lived mainly at the Spotswood property.
Although the loan application began as a single conglomerate application, I find that, by the time the loan contracts were entered into, the transaction had changed. The loans were no longer a single loan. They were two loans, of different amounts, and with different purposes. I do not accept GEMSL's submission that, in the terms of schedule 1 of the Code, the two contracts are a series or combination of contracts and in fact form one contract. I am satisfied that the two contracts are and were intended to be separate, and that the fact their terms contain significant variations from each other supports this. The purpose of loan A (the larger loan) was residential purchase of the Hoppers Crossing property for investment. The Code specifically provides that such a purpose is not a personal, domestic or household purpose. One of the key requirements for application of the Code does not apply to this loan. The Code does not apply to this loan, and, to the extent that the mortgage secured this loan, did not apply to that mortgage. My conclusion is not altered by the fact that the borrowing under loan A was larger than was necessary to fund the purchase of the Hoppers Crossing property. Some $256,000 of the total of $304,000 borrowed was for that purpose. That was the loan's predominant purpose.
I find that loan B (the smaller loan) was provided wholly for the purpose of the refinance of the Spotswood property. There was a shortfall of some $17,000 between loan B and the amount owing under the NAB loans. It appears that the shortfall was made up out of loan A. The whole of loan B was used to pay out the NAB loan. This was the purpose stated in the contract, and the purpose known to the parties. Since the purpose of the loan was to discharge a liability, the loan takes the character of that liability. The NAB loan was obtained to purchase the Spotswood property. That property was, since its purchase, Ms Whild's home. The NAB loan was for personal, domestic and household purposes. Loan B was for a similar purpose. The Code applies to that loan. To the extent that the mortgage secures that loan, the Code applies to that mortgage. I have already found that the business purpose declaration was ineffective to found any conclusive presumption that the Code does not apply.
My conclusion about the purposes of loans A and B is not changed by the use of the word "unregulated" in the terms and conditions applying to both loans, or by the inclusion (at the end of each of the contract schedules) of the statement required by the Code. These cannot of themselves apply or exclude the application of the Code. The purpose for which credit is provided is determinative.

[55]

The evidence given at the hearing raised a question about when each repayment period under loans A and B began and on what dates repayments were due. This is, of course, relevant to the question of payment default.
GEMSL treated loans A and B as having settled on 27 January 2004, and the first repayment as being due on 27 February 2004. Under the two contract schedules and the terms and conditions, the first repayment is due on the first day of the second repayment period. Each subsequent repayment is due on the first day of each following repayment period. If a repayment is due on a day which is not a banking day, it is due on the preceding banking day. A banking day includes Saturday until 1.00pm, but does not include Sunday or a national holiday. The first repayment period is defined as one calendar month less one day from the settlement date. If the settlement date occurs on the 29th, 30th or 31st of the month, the first repayment period is the period from the settlement date until the 27th of the following month. Each subsequent repayment period is one calendar month from the end of the previous period. The settlement date is the date on which GEMSL first lends the amount of credit or, if earlier, the date when it first debits any of that amount to the loan account.
It appears from the evidence that the cheques for settlement of this loan were drawn at least by 27 January 2004, and that the amount of loan funds were transferred to Wignalls at least by that date (and probably before), although the actual handover of cheques occurred on 28 January 2004. I find that (in these unusual circumstances) it was appropriate and in accordance with the loan contracts for GEMSL to debit the advances to the loan account on 27 January, and to treat that date as the settlement date. I would add that there has been no practical disadvantage to Ms Whild. The loan term is the same, and the first repayment is still due on a banking day. Whether that repayment was due on 27 or 28 February, it was definitely overdue by 1 March.
The definition of the repayment period is more difficult. The definition refers to a "calendar month". At first sight, one would construe this as a reference to one of the months of the year (January, February and so on). This works well if the settlement date is the 1st of the month - for example, 1 January or 1 February. But this does not work well if the settlement date is any other date in the month (except the 29th, 30th or 31st, which are specifically provided for). If a calendar month is January, February or the other months, and the settlement date is not the 1st, 29th, 30th or 31st of the month, there could never be a calendar month between one repayment and the next. If the definition means that the period runs from the settlement date to the end of the calendar month in which that date appears, then the first repayment period would vary according to when the settlement date occurred. For example, if the settlement date were the 2nd of February, the first repayment period would be 25 days (from the settlement date to the end of the calendar month less one day). On the same formula, if the settlement day were 27 February, it would be one day. If the settlement date were 28 February, it would be 0 (assuming no leap year). These results are so absurd that they could not have been intended.
The inclusion of specific repayments periods where the settlement date is 29th, 30th or 31st of a month (to give periods of 29, 28 or 27 days respectively), gives (in my view) some indication of the intended length of the first repayment period. These difficulties of interpretation lead me to the conclusion that "calendar month" in the definition does not mean January, February or any of the other months of the year. The most practical and common sense interpretation, and the one that leads to no absurdity, is I think this. Except for the first repayment period where the settlement date is 29th, 30th or 31st of the month (which is expressly provided for in the definition) a calendar month for the first repayment period is the period from the settlement date to the day in the next month which corresponds to the settlement date. So, if the settlement date is 27 January, the first repayment period will end on 26 February (that is, the corresponding date in the next calendar month less one day). The first repayment will be due on the first day of the second repayment period - that is, 27 February, and subsequent repayments will be due on the 27th day of each following month. This is, in my view, the proper construction of the loan contracts.
Following this interpretation, I find that the first repayment of the loan contracts was due on 27 February 2004, and that each subsequent repayment was due on the 27th day of each subsequent month. It follows that GEMSL did not misconstrue or breach the loan contracts when it calculated the repayment periods and repayments in this way.

[57]

My findings on the defaults and their consequences are based primarily on the documentary evidence (and in particular contemporaneous electronic logs (the GEMSL log) kept by the GEMSL team at ABL in Adelaide, and electronic logs (the MERC log) kept by MERC), and the evidence of Ms Whild, the MERC manager Ms Decker, the credit control officer Ms Tilling, Angela Carbone, manager of Wignalls and Miss Stogiannis (manager of Stogiannis Pharmacy).
On 27 February 2004, GEMSL attempted unsuccessfully to use the direct debit authority given by Ms Whild on 22 January 2004 on her NAB accounts to make repayments on loans A and B. It was unsuccessful because that account did not have funds to meet the repayment.
I accept Ms Whild's evidence that she became aware that the direct debit authority had dishonoured on 27 February 2004. She went to Wignalls to provide a new authority. She dealt with Ms Carbone at Wignalls. She was given a new direct debit authority to complete, but was unable to complete all the details of the new Westpac account from which repayments would be made. She later obtained those details. Her evidence was initially confused on the point, but eventually it was that the completed direct debit authority was faxed by Miss Stogiannis from the Stogiannis Pharmacy in the morning of Monday 1 March 2004. The authority was dated 27 February 2004. I do not accept Ms Whild's evidence that Ms Carbone told her that nothing would happen, as far as the drawing of the loan repayments were concerned, until 1 March. Ms Carbone denied that she told Ms Whild this, and I prefer her evidence. I accept Ms Carbone's evidence that documents received by Wignalls from GEMSL's borrowers were sent immediately to the GEMSL team at ABL for processing, either by being emailed or faxed. I am satisfied that Ms Carbone did this with the direct debit authority faxed to her on 1 March 2004.
The direct debit authority which Ms Whild completed and faxed only authorised the debiting of the minimum monthly payment, not the making up of any arrears. The form included an option for the payment of an additional lump sum, but Ms Whild did not tick this option. I am satisfied that GEMSL correctly treated the authority as operating prospectively from its date of receipt, and not retrospectively from the date it bore. It was effective for the March repayment, but not to make up the February arrears.
GEMSL concedes that, by an oversight, it did not use the new direct debit authority for the March and April payments, but only for the payment due on 27 May 2004 and for the subsequent payments. The evidence of Ms Tilley (from GEMSL's collections team) was that, if Ms Whild had authorised this by telephone, she could have made up the arrears by using the direct debit authority. But I find that Ms Whild never authorised this. The most that Ms Whild did was, in a letter to Ms Tilley dated 18 May 2004, to suggest that she might pay a "mutually agreed bulk" amount from the loan arrears. She did not suggest what amount might be agreed, or pay any of the arrears. For reasons that are not clear from the evidence, GEMSL did use the new direct debit authority but to make repayments on loan C from April 2004 on. It clearly knew of the existence of the new direct debit authority.
Ms Whild's Westpac bank account statements show that, on 27 February 2004, there was insufficient funds in her account to honour the payments on loans A and B but that, from 1 March onwards (when $14,550 from loan C had been deposited into that account) she had sufficient funds to make the repayments for at least March and April.
The accounts for loans A and B show that Ms Whild was charged dishonour fees for the unsuccessful attempts to access the direct debit authority in February, March and April 2004. A late charge was also debited to the account on 10 April 2004 but was reversed on 10 May 2004. After this, late charges continued to be debited to her loan accounts from month to month. Collection fees were also debited. The last cleared loan repayment was made to the loan accounts on 27 July 2004.
It would appear that, shortly after the end of 2006, a new consolidated loan statement was issued for loans A and B for the period 2 March 2004 to 30 December 2006. This account shows that the direct debit dishonour fees March and April 2004 were reversed. The collection fees charged to the accounts in April 2004 were reversed. The late charges charged to the accounts from May to August 2004 were reversed. Interest relating to those fees and charges was reversed. I accept Mr Tobias' evidence that this occurred in July and August 2006. GEMSL ceased its attempts to draw payments by direct debit in August 2005.
With no repayments after July 2004, and the debiting of fees and late charges, the outstanding loan balances rose quickly. By 27 July 2010, the monthly late charge for loan A was $2,970.78, and the balance of the account was $902,604.64.
The history of the loan B account is similar. By 11 June 2010, the monthly late charge was $909.46. By 27 July 2010, the account balance was $279,931.05. It appears that collection costs and legal fees were debited only to loan account A. It is not clear whether those costs related to loans A and B, or only to loan A. Both the balances of the loan A and loan B accounts were reduced because of payments made following the sale of the Hoppers Crossing property. I make findings about this later.

[58]

The default notices for loans A and B are in evidence. My findings on this issue are also based on GEMSL's collections log and the evidence of Ms Tilling.
On 9 March 2004, GEMSL sent to Ms Whild a letter indicating that loans A and B were in arrears. On 1 April 2004, it issued a document headed "Default Notice, Notice of Intention to Enforce Acceleration Clause and Notice under Section 76 of the Transfer of Land Act 1958 (if applicable) and Section 103 of the Property Law Act 1958 (if applicable)" (the default notice). A separate default notice was issued for loan A and for loan B.
The default notice for loan A mentions the borrower's name and details, the mortgage and the mortgaged properties, and then states that the borrower has "breached the following term - the borrower has not paid amounts due under the contract in the above securities. The amount overdue is $4,598. The default can be remedied by paying to GEMSL within 31 days of the date that this notice is taken to be given the above amount plus any further amount which falls due on this account pursuant to that contract and mortgage between this notice and the date upon which payment is made. Please note that if the borrower fails to comply with this notice the borrower's liabilities under the contract will be accelerated by the operation of the acceleration clause in the contract. This will have the effect of the amount owing under the contract (which as at the date of this notice is $315,787.10) becoming immediately due for payment. Please note that a subsequent default by the borrower of the same kind that occurs within a period of 31 days from the date that this notice is taken to be given may be the subject of enforcement proceedings without further notice if not remedied within the period. If the borrower fails to comply GEMSL intends to sue you for all monies due to it under the contract or to enforce the securities or both".
The default notice contains a note about when it is deemed to have been delivered. It is deemed to have been delivered on the date of receipt of or delivery in the ordinary course of post. The notice was sent to both the Spotswood and Hoppers Crossing addresses.
Except for amounts, the default notice for loan B is in the same terms. The amount overdue is stated to be $3,086. The accelerated amount owing as at the date of the notice is stated to be $212,018.42.
The collections log shows that Ms Whild could not be contacted by phone on 1 April 2004. The log notes that the default notice is to be hand delivered. On the evidence, this occurred or the notice was attached to her front door on 10 April 2004. Ms Whild's evidence is that she received the notice.

[64]

In its submissions, GEMSL relied on a line of cases to the effect that the overstatement of any amount claimed does not invalidate the claim. There are cases which apply this principle to an overstatement in the default notice of the amount in default.[6] Those cases indicate that what is important is to identify the debt, not so much the exact amount owing.
The default notice for loan A correctly stated that one payment of $2,299 (due on 27 February 2004) had not been made and Ms Whild had not made good that default at the time the notice was issued. She had not cancelled the direct debit authority on her NAB account. But the notice stated that two payments were in default. The second of these payments was due on 27 March 2004. By that time, Ms Whild had signed and sent to GEMSL's agent a new direct debit authority on her Bank of Melbourne account, and there was money in that account to meet the payment. She had complied with the loan contract by completing the direct debit authority and ensuring that there were sufficient funds in her Bank of Melbourne account to meet the payment. There was nothing more she had to do. The payment was not honoured because GEMSL did not access the correct direct debit authority, although it knew of that authority. The payment was missed, not through the fault of Ms Whild but of GEMSL. The same applies to the April payment, which fell due during the remedy period in the notice. It appears that, in May 2004 and again in July and August 2006, GEMSL recognised its error and reversed the charges relating to these payments. In these circumstances, GEMSL cannot say that the March payment was "in default" and that Ms Whild had breached the credit contract. That "missed payment" cannot be specified as a default for the purposes of a notice under s76 of the TLA, or a notice of default under the terms and conditions or the mortgage.
This is not an overstatement of the amount in default. It is an incorrect statement that a default exists when it does not. The line of cases concerning the overstatement of amounts does not apply.[7]
Counsel for GEMSL submitted that, even if I found that the notice incorrectly included an event as a default, the notice had correctly described the first missed payment as a default and was still valid. I do not agree. Such a conclusion would frustrate both the purpose of the relevant provisions of the terms and conditions and the mortgage, and also of s76 of the TLA. The purpose of all of these is to give the mortgagor a chance to rectify the default, and so ensure that the power of sale and possession is not exercised, and the property is retained. It is therefore crucial that the debtor must know specifically what the default is so that it can be rectified.
I now deal with the default notice for loan B. To the extent that this is a notice under the terms and conditions of the loan contract, the mortgage, and under the TLA, my finding and conclusions concerning loan A apply. The Code also applies to this loan. I find that the default notice is also invalid for the purposes of the Code.
Section 80(1) - (3) of the Code provide -

[74]

Under s80(4), a credit provider is not required to give a default notice or wait until the period specified in a default notice has elapsed before beginning enforcement proceedings if (among other things) the credit provider has made reasonable attempts to locate the debtor or mortgagor but without success.
Sections 84 and 85 of the Code concern acceleration clauses of the kind included in this contract and mortgage. Under s85, an acceleration clause only operates if the debtor is given a default notice stating that the debtor's liabilities are affected by the operation of the acceleration clause (a statement included in this default notice), but also stating the amount required to pay out the contract as accelerated. Section 85(2)(b) excludes the operation of s85(1) where the credit provider has made reasonable but unsuccessful attempts to locate the debtor or mortgagor.
Schedule 1 of the Code defines "enforcement proceedings" to mean proceedings in a Court to recover payment due under a credit contract, or taking of possession of property under a mortgage or taking any other action to enforce a mortgage.
Section 158 concerns tolerances and assumptions to be applied in the disclosure of information required by the Code. Relevantly, under s158(1), information in a notice "is taken to be correctly disclosed if it is within the tolerances allowed by the regulations". Regulation 36(4) of the Regulations provides that, for the purposes of s158(1)(a), information disclosed about any interest charges or payments is within the permissible tolerances if "it overstates the amount or amounts payable".
In my view, the default notice for loan B failed to comply with the Code in two respects. First, for the reasons I have set out for the default notice concerning loan A, it failed to specify the default correctly. It included something which was not a default. For the reasons I have given earlier, this was not merely an overstatement of an amount, but a mis-description of the default itself. Section 158(1)(a) and regulation 36(4) do not apply.
Second, it was conceded in submissions made on behalf of GEMSL during the hearing that the default notice overstated the accelerated balance, probably by incorrectly including an early termination fee. For example, the balance of the account for loan A should have been $308,479.86, but was stated in the default notice to be some $7,300 more than this. In my view, the rule of statutory interpretation that provisions of general application give way to special provisions applies so that s158(1)(a) does not apply to the default notice provisions. The purpose of the default notice is to give an exact description of the default (including its amount), so that the debtor can remedy it or pay out the loan, and so retain the mortgaged property. I adopt a similarly strict approach to that adopted by the Victorian Supreme Court in default notice cases under the Credit Act 1984, and do not agree with GEMSL that the existence of the tolerance provisions in s158 of the Code makes that approach inapplicable.[8] These are provisions to protect debtors and mortgagors, and should be interpreted (consistently with their language) in a way that does not minimise or undermine that protection.

[76]

For loan A, to which the Code does not apply, it is clear from the TLA that the invalidity of a notice purportedly given under s76 does not affect the title of the purchaser of land from a mortgagee in exercise of a power of sale (even if that power of sale was irregularly exercised). Ms Whild cannot regain the Hoppers Crossing property. Her remedy must be against GEMSL in damages for the unlawful exercise of the power of sale. VCAT has jurisdiction to determine this claim under the Fair Trading Act. The loan contract and mortgage are part of the provision of a service by GEMSL to Ms Whild. That service is the provision of secured credit, and includes what happened to the loans from their inception onwards. In my view, in this context, the TLA cannot be ignored.
However, clause 10.4 of the terms and conditions which are included in the credit contracts for loans A and B provide that GEMSL need not give a default notice, or wait until the period in such a notice has expired, if (among other things) it has made reasonable but unsuccessful efforts to locate the debtor. In such a case, it may immediately sue for the amount owing or enforce the security or both. Among other things, clause 6.3 of the mortgage provides that if the mortgagor is in default and the mortgagee decides to enforce the mortgage, the mortgagee must give the mortgagor a notice of default. Under clause 6.4, if the default is not remedied within the time stated within the notice then (among other things) the mortgagor may take possession and/or sell the mortgage land.
Under clause 2.1 of the mortgage, if the mortgagor does not comply with the mortgagor's obligations under the mortgage (which include obligations under any agreement covered by the agreement) the mortgagee may take possession of the mortgaged land or sell it. There is no mention of a prior default notice.
It may first be thought that clause 2.1 is inconsistent with clauses 6.3 and 6.4. But, in my view, clause 2.1 deals with a case where a default notice is not required (such as under clause 10.4 of the terms and conditions, where the mortgagee has made reasonable but unsuccessful efforts to locate the mortgagor), while clauses 6.3 and 6.4 deal with the case where a default notice is required. The mortgage must be read with the agreements covered by it.
In my view, s77 of the TLA is not inconsistent with this approach. When this action speaks of remedying a default within the time "fixed" in the mortgage, it permits the mortgage itself to fix the time within which a default must be remedied. Under clause 2.1 of this mortgage (read with clause 10.4 of the terms and conditions), there is no time to be given to remedy a default where reasonable but unsuccessful efforts have been made to locate the mortgagor. If it were otherwise, a mortgagor could prevent the exercise of a power of sale by simply disappearing. If I am wrong about this, my view is that the posting notices which Ms Whild has acknowledged receiving and which continued to notify her of the arrears constitute notice of default for the purposes of the TLA.
All of this applies also to loan B. The position under the Code is to the same effect. If the default notice is invalid, and s80(4) does not apply, and the mortgaged land has already been sold, an action in damages would lie for the unlawful exercise of the power of sale. GEMSL did not take possession of the Hoppers Crossing property under the TLA, but under the mortgage and loan contracts.

[78]

My findings on this issue are based on the documentary evidence, the evidence of Ms Tilling, Ms Decker, Mr Burns (an agents representative from Burns Real Estate) and Mr Loveridge (a collection agent employed by Procol).
On 20 April 2004, GEMSL wrote to Ms Whild advising her that the loans were in arrears, that the direct debits were dishonouring, and asking her to bring the accounts into order as soon as possible. On 3 May 2004, Ms Whild telephoned Ms Tilling, telling her that her daughter had just come home from hospital and that repayments for loans A and B should be coming out of the same account as the repayment for loan C. Ms Tilling asked for proof of her daughter's illness. On 7 May 2004, Ms Whild phoned Ms Tilling to say that she was faxing back details. Those details were received on that date. Ms Whild's evidence was that she understood that Ms Tilling would not be making late charges because this was "the bank's" error. I am satisfied that this was a misunderstanding. Ms Tilling did not have the authority to make this arrangement, and had referred this matter to a more senior manager. Ms Whild said that Ms Tilling had told her to "leave it to her", by which she understood that Ms Tilling was giving her some latitude in relation to the loans. I accept that Ms Tilling did not say this.
The GEMSL log shows that, on 11 May 2004, Ms Whild's account was $1,900 short to enable her to clear all the loan arrears. The log notes on 13 and 14 May 2004 that Ms Whild was negotiating with the bank.
On 19 May 2004, MERC received a letter from Ms Whild (dated 18 May 2004) suggesting the making of a mutually agreed lump sum payment, but not suggesting any amount. On 19 May 2004, Ms Tilling sent to Ms Whild a form of statement of financial position, a statement used by GEMSL in the making of debtor hardship arrangements. Ms Whild's evidence was that she did not receive this letter. She did not return such a statement or send proof of her daughter's illness to Ms Tilling. I am not satisfied that Ms Whild did not receive this letter. She received a number of "posting notices" from GEMSL sent to the same address. She may well not have opened or read it.
The GEMSL log is then littered with records of unsuccessful attempts to contact Ms Whild. Ms Whild's contact numbers were tried without success on numerous occasions. Messages were left and never returned. GEMSL submits that I should find that Ms Whild was deliberately avoiding service of documents. Ms Whild's evidence was that she never received these messages. Again, I find her evidence unconvincing. I am satisfied that, for her own reasons, she either did not open or did not read mail that was sent to her, and did not respond to telephone messages. This may well have had to do with her concentration on her daughter's health and needs rather than a deliberate choice to avoid service, but nevertheless her conduct did have the effect of avoiding service.
On 21 July 2004, GEMSL issued in the Supreme Court a writ claiming the amounts owing under loans A and B from Ms Whild, and possession of the Hoppers Crossing and Spotswood properties. Eventually, through her solicitor, Ms Whild accepted service of that writ in July 2005. After the sale of the Hoppers Crossing property, the writ was amended to delete references to that property.
From 2 July 2004, GEMSL employed various collection agents to attempt to locate Ms Whild. Procol Recoveries Pty Ltd (Procol) was one. Probe Investigations Pty Ltd (Probe) was another. Agents from these firms attended the Hoppers Crossing and Spotswood properties regularly from July to September 2004 and again from February to April 2005. Their reports are in evidence. I accept that calling cards were left by these agents, and Ms Whild did not contact them as a result. Ms Whild's evidence was that it was unreasonable to expect someone to respond to a calling card which mentioned a name and a contact number, without explaining the purpose of the card being left. I accept that this might be an appropriate response where the card is left for the first time, the fact that many cards were left at both properties indicated that the matter was urgent, and Ms Whild should have responded.
The agents who visited the Hoppers Crossing property reported in this way. The top floor of the home appeared to be furnished but no-one answered the door, the letterbox was overflowing with uncollected mail, and the house was run down and the garden overgrown. The reports mention the belief of neighbours that the house was vacant.
The agents' reports concerning the Spotswood property are less clear. The reports say that cars are in the driveway, and that neighbours say that, although no-one is living at the house, the occupier comes sometimes late at night, and from time to time to open and close curtains and to switch lights on and off.
On 3 May 2005, GEMSL instructed MERC to enter (on its behalf) into possession of the Hoppers Crossing property. In its turn, on 4 May 2005, MERC appointed Mr Burns of Burns Real Estate to undertake this task. It is clear from MERC's instructions that the property was believed to be vacant.
On 4 May 2005, Mr Burns visited the Hoppers Crossing property, found no-one there, and was told by neighbours that it had not been visited since Christmas. Indeed, Ms Whild's evidence was that she had not been to the property for a period of at least two months. Mr Burns formed the belief the property was vacant, returned with a locksmith and changed the locks and took possession of the property. On entering the property, he found the upstairs area in a disorganised state, the empty jewellery boxes on the floor, and drawers open. He found the refrigerator and freezer full of rotting food, which had clearly been there for some time. There was no electric power supply to the house. There was a large amount of furniture in the house, including ladies' clothing in the wardrobe. The swimming pool at the property was full of green water and debris. He placed notices at the property indicating that the mortgagee had taken possession, and that unauthorised entry would be trespass.
I find that, although Ms Whild used the house for storage of furniture and clothing, it was not occupied as a residence at the time when GEMSL entered and took possession of it. It had not been occupied as a residence for some months. Entry was not unlawful in this respect.

[80]

The Hoppers Crossing property contained a large quantity of goods belonging to Ms Whild. They included beds, bedroom furniture, dining and other tables, chairs and couches, kitchen appliances, desks, a computer, two televisions and some additional furniture stored in a shed on the property. I have already mentioned Mr Burns's evidence about the disorganised state of the home. I accept that it was in this state at the time he first entered it and that he was not responsible for its disorganised state. I accept Mr Burns's evidence that, when he entered the property, he saw that the glass on one of the toilet windows had been broken. I am satisfied that, at some time before Mr Burns entered the property (and probably during the months in which Ms Whild had not visited the property) there had been forced entry and goods taken. In her evidence, Ms Whild listed a number of the items which she believed had been taken (including jewellery, a computer and a plasma television). I am satisfied that the loss of these goods did not occur while GEMSL was in possession of the property and that it was not responsible for this loss.
On 5 July 2005, Ms Whild reported the alleged theft to the Werribee Police. Ms Whild had in fact visited the property on 4 May 2005, after Mr Burns had taken possession of it and left. Being unable to get in, she left also. Her evidence was that she visited the property twice thereafter, both times in the presence of Mr Burns. Mr Burns said that she visited the property once. I prefer his evidence. His recall is clearer and more reliable.
In her evidence, Ms Whild blamed Mr Burns for not allowing her to make a proper list of the missing goods, and not allowing her to remain on the property until the Werribee Police arrived. Ms Whild was accompanied by Mr Johnson of R&A Removals when she visited the Hoppers Crossing property when Mr Burns was there. Mr Johnson's evidence (which I accept) was that Mr Burns was short and in a hurry. I prefer this to Ms Whild's evidence. I do not accept that Mr Burns acted inappropriately or unreasonably. He had other appointments to attend. It was unclear when the Werribee Police would arrive, if at all. It is clear that he allowed them to visit the property some days later. However, all this must be seen in the context of ongoing attempts by GEMSL to have Ms Whild collect her goods. The first request to do this was by letter dated 24 May 2005. By letter dated 9 June 2005, GEMSL's solicitor advised Ms Whild that, if she did not remove the goods, they would be put into storage at her expense. Certainly, Ms Whild's solicitors raised health issues of her own and her youngest daughter, but I am satisfied that there was considerable delay in Ms Whild dealing with what was to happen to her goods at the Hoppers Crossing property. At first, GEMSL allowed Ms Whild until 1 July 2005 to remove her goods, and that period was extended to 8 July 2005. Eventually, on 27 July 2005, MERC arranged for Nuss Removals to remove and store Ms Whild's goods. The exception was the refrigerator and freezer, which MERC requested Ms Whild to attend to. MERC had the goods appraised for sale. Nuss Removals (Nuss) prepared an inventory of the goods it stored.
Since no response to its requests concerning a refrigerator and freezer was received, MERC arranged to have it cleaned and stored at some time between August and early November 2005.
A difficulty arose in late October 2005. I have no direct evidence about this, but I accept what is contained in the MERC log and in emails between Mr Burns and MERC. By this time, a contract to sell had been signed between MERC and Ms Kelly for the purchase of the Hoppers Crossing property. In late October 2005, Ms Kelly found that some of Ms Whild's goods were still in a shed on the property, moved some of those goods outside, and stored some of her own goods in the shed. Settlement had not occurred at this time. It appears that another agent with the firm of Burns Real Estate had permitted Ms Kelly to enter the property. On MERC's instructions and under Mr Burns's supervision, Ms Kelly removed her goods from the shed, and returned Ms Whild's goods to the shed. There is no evidence that Ms Whild's goods were damaged. Those goods were also put into storage by Nuss.
Eventually, on 11 November 2005, all the stored goods were delivered to Ms Whild at the Spotswood property. I have in evidence records of RACV Insurance Ltd, Ms Whild's insurer in respect of the Hoppers Crossing property. Those records show that, in October 2006, she made a claim for loss in respect of jewellery, and a claim for damage to the swimming pool at the property. According to the claim, this loss had occurred after GEMSL had taken possession of the property. It appears from the file that a number of appointments were made for Ms Whild to see an insurance investigator, but that those appointments were either cancelled or not kept. There also appears to have been difficulty contacting Ms Whild on her contact telephone numbers. In late February 2007, RACV closed its file. It reopened the file on 5 March 2007 after a telephone call from Ms Whild, but closed it again on 30 May 2007 after no further contact from Ms Whild had been received. I do not accept Ms Whild's evidence that this claim was not pursued because her entitlement to the goods had to be determined first. I find that it was not pursued because Ms Whild herself did not pursue the claim.
In November 2005, many boxes of goods were delivered by Nuss to the Spotswood property. Ms Whild said that they were piled high to the roof in at least two rooms. She has not opened any of these boxes to check their contents since then. Her evidence was that she was not physically strong enough to move the boxes and had no-one to help her. While I consider this claim to be somewhat exaggerated (two of Ms Whild's friends gave evidence and they may have been able to help), I find that Ms Whild cannot say which (if any) of her goods are missing. Her claim concerning loss of her personal possessions must fail for lack of evidence. There is no evidence that GEMSL or its agents MERC or Mr Burns acted negligently in respect of the removed or stored goods, or were responsible for the loss of any of them.
A wrought iron barbeque belonging to Ms Whild was not removed, stored and delivered to Ms Whild by Nuss. It remained on the Hoppers Crossing property. Ms Whild's uncontradicted evidence is that the barbeque was at the Hoppers Crossing property when she was there in early July 2005 but was not at the property when it was auctioned on 27 August 2005. There is no evidence that, when Ms Whild occupied the Hoppers Crossing property, she kept the barbeque locked in the shed or within the house. It remained on the property but outside and unsecured. The state of the evidence does not permit me to make findings about what happened to the barbeque. I am satisfied that the outside entrances to the property were properly secured by Mr Burns. There was a railway easement which abutted the back of the property, and it may be that someone removed the barbeque from the property using that means of access.
Under the mortgage, if the mortgagee takes possession of the mortgaged property, it may store or abandon goods of the mortgagor on the property. I am not satisfied that GEMSL treated the barbeque as abandoned, but rather it stored the barbeque on the property. It exercised no more and no less care in relation to the barbeque than Ms Whild had done. I am not satisfied that there was a failure to exercise reasonable care in relation to the barbeque by GEMSL in breach of the terms (including implied terms) of the mortgage. There is no evidence that GEMSL was responsible for its loss. Ms Whild's claim for loss in respect of the barbeque also fails.

[82]

My findings on this subject are based on the documentary evidence, including the electronic notes made by MERC (the MERC log), and the evidence of Ms Decker, Ms Whild and Mr Burns.
I have found that the default notices issued by GEMSL were invalid under the loan contracts, the mortgage and the TLA and (in the case of loan B) under the Code. However, after the default notices were issued and until and including the day on which it took possession of the property, I find that GEMSL made reasonable but unsuccessful efforts to contact Ms Whild. In these circumstances, GEMSL was entitled to take possession of the property, relying on clause 10.4 of the terms and conditions of the loan contracts, clause 2.1 of the mortgage and (in the case of loan B) s80(4)(b) of the Code. I am satisfied that these provisions also support the exercise of the power of sale in respect of the property. As far as the TLA is concerned, I am satisfied that the preconditions to the exercise of the power of sale had been complied with. Instructions for sale had been given at a time when Ms Whild could still not be located. The fact that she was located afterwards does not bar the exercise of the power of sale.
I am satisfied that the sale was made in good faith and with proper regard to the interests of the mortgagor. I make findings about this now.
MERC invited and received from Burns Real Estate submissions about how the property was to be marketed. It appointed Burns Real Estate as its agent (and through it, as GEMSL's agent) for the sale. It had the property valued by PVB Valuations Pty Ltd (PVB). The valuation is dated 10 May 2005 and indicates a market value range of $240,000 to $260,000.
I find that the marketing of the property undertaken by Mr Burns was appropriate and comprehensive. The property was advertised regularly in a local newspaper and a regional newspaper, and there was a feature in The Age. Brochures concerning the property were distributed. The property was advertised on the websites Doman.com and RealEstate.com. There were displays in the window of the Burns Real Estate office. The property was regularly opened for inspection. The marketing campaign lasted approximately one month. Although a number of people inspected the property, many expressed reservations. Those concerned the amount of work that had to be done to the property (estimated by those who inspected the property at between $50,000 and $100,000), the lack of car access at the rear of the property, the lack of a garage, modifications that Ms Whild had made to the kitchen and living area, and the fact that currently partially completed renovations would need to be completed.
The property was auctioned on 27 August 2005. It was passed in. Some time afterwards, an offer was made for $235,000. That was the only firm offer received. MERC sought the advice of PBB about this offer. PBB advised that, given such factors as the proximity to a railway line, the lack of formal car accommodation and the lack of floor coverings, the price offered was within the market value range. Contracts were signed on 29 September 2005, with settlement occurring on 28 October 2005. I find that there was no inappropriate contract during the marketing or sale of the property either by MERC or Mr Burns, that the selling price was not low market value and that no dishonest dealing occurred. There is no evidence of a lack of good faith on the part of GEMSL, MERC or Mr Burns, or a disregard of the mortgagor's interests. The marketing and selling of the property was competent and professional.

[84]

My findings on this subject are based on the documentary evidence (including the MERC log), the evidence of Ms Decker, and of Mr Mazella (an agent's representative employed by Trimboli Real Estate), and on the evidence of Ms Whild.
On 3 May 2005, GEMSL instructed MERC to change the locks and take possession of the Spotswood property. In turn, MERC instructed Mr Mazella to undertake this task.
Mr Mazella attended the Spotswood property on 4 May 2005. He saw two cars in the driveway. He sought further instructions from MERC and was told to proceed. He left the property, and returned with a locksmith. Looking through a front window, he could see a furnished lounge room with a heater running. He knocked on the front door and called out loudly but there was no response. Again, he sought more instructions from MERC. Those instructions were that the locksmith should open the front door and that Mr Mazella should see if the home was occupied.
As the locksmith began to pick the lock, Ms Whild came to the front door. She was in her bathrobe. I accept her evidence that she had been in the shower and, frightened by a noise at the door, had come to the front door. She first spoke to Mr Mazella through the door and then opened it. She told him that documents were with her solicitor and that the proper procedures had not been followed.
Mr Mazella sought more instructions from MERC. MERC instructed him to leave the property and he did so, immediately.
I accept Ms Whild's evidence that she was upset and frightened, that she went to the house of a friend and vomited, that she then went to a job interview which was unsuccessful, that she was too frightened to sleep at home that night and slept in her car, and that on the next day she went to a counsellor at the Salvation Army offices for support. However, it is not her evidence that she continued to be upset after that day. Nor is there any medical evidence of any emotional or psychological effect arising from these incidents.
I am satisfied that, when MERC initially gave instructions to Mr Mazella, it believed (and on reasonable grounds) that no-one was living at the Spotswood property. The property had been visited on a number of occasions and at different times by MERC's collection agents, and they had never found anyone at home. Ms Whild had not contacted them, after they had left their cards. But, once Mr Mazella had seen clear signs of the property being occupied (the furnished room with the heater running), together with the cars in the driveway, it was not appropriate to proceed as if the property were vacant and to try to pick the lock. I accept that, once it was clear to Mr Mazella that Ms Whild was living at the house, he left the property immediately.
While I would describe this conduct of MERC and Mr Mazella as unwise (in that it tended to assume too readily that the house was vacant and to give too little consideration to evidence to the contrary), it is clear that MERC believed the property to be vacant until that day. In my view, the conduct is not so serious as to be capable of being described as undue harassment in breach of s21 of the Fair Trading Act. I would add that there is no evidence of compensable loss arising from that conduct. This claim is not proven and fails.
The MERC log mentions another visit by Mr Mazella to the Spotswood property on 14 February 2008. He drove past the property and took a photograph. Ms Whild's evidence was that this upset her. The circumstances in which this occurred are so unclear from the evidence that I am unable to make further findings on this topic.

[86]

This is one of the issues which were not originally pleaded but which were clearly raised on the evidence and addressed by GEMSL in submissions.
The Hoppers Crossing property sale settled on 28 October 2005. On that date and out of the proceeds of sale (after deducting the costs of sale) GEMSL credited $99,151.46 to the account for loan A and $99,151.47 to the account for loan B. On 4 November 2005, it credited $18,753.58 to the account for loan C, fully paying out that loan. These three amounts total $217,056.51.
I am satisfied that there was nothing unconscionable in the way in which GEMSL applied the proceeds of sale. Under the mortgage and terms and conditions of the loan contracts loans A, B and C, it could apply monies received in any order it chose. As at 31 May 2006 (after the balance of loan A had been reduced by the $99,151.46) the loan balance was still $291,703.09. As at 3 February 2006 (after the balance of loan B had been reduced by $99,151.47) that loan balance was still $150,367.85. The annual percentage rate of interest for loans A and B was then 9.3%.
Even if GEMSL had applied the total proceeds of sale (less costs) to paying out either of loans A or B, the sum was not enough to pay out in full either of those loans. But there was enough to discharge loan C in full, and that was the loan which had the highest annual percentage rate of interest (then 10.5). It is clear from the illustrative calculations done by GEMSL and which are in the documentary evidence that the option of paying out loan C and reducing the balances on loans A and B was the option which was most in the interests of Ms Whild. It discharged the loan bearing the highest interest. Even though this was the smallest of the three loans, the burden of the highest interest payments was removed. Under the TLA, Ms Whild was only entitled to any surplus after the monies owing to the mortgagee had been paid. The proceeds of sale did not pay out all the mortgages, so that no surplus amount was due to Ms Whild.
The way in which GEMSL applied the proceeds of sale was lawful and in accordance with Ms Whild's best interests. It was not unconscionable.

Whild v GE Mortgage Solutions Limited

At a glance

Court

Decision date

Source

Judgment (96 paragraphs)

Whild v GE Mortgage Solutions Limited (ACN: 070 797 894) (Credit) [2011] VCAT 797 (29 April 2011)

Parties

Legislation Cited (6)