ANZ Banking Group Ltd v Driffill

[2016] NSWSC 1138

Supreme Court

New South Wales

Medium Neutral Citation:	ANZ Banking Group Ltd v Driffill [2016] NSWSC 1138
Hearing dates:	04 – 05 August 2016
Date of orders:	05 August 2016
Decision date:	05 August 2016
Jurisdiction:	Common Law
Before:	Fagan J
Decision:	Common Law Division proceedings 2013/204570: 1. The judgment debtor’s notice of motion filed 4 May 2016 is dismissed. 2. The judgment debtor is to pay the plaintiff's costs of the notice of motion.  Equity Division proceedings 2015/303041: 1. The statement of claim is dismissed. 2. The plaintiff is to pay the defendant's costs of the proceedings.
Catchwords:	PRACTICE AND PROCEDURE – civil – application to set aside default judgment – possession of land – mortgage and debt interest – whether judgment entered irregularly – whether defendant was served – whether defendant has an arguable case on the merits
Legislation Cited:	National Consumer Credit Protection Act 2009 (Cth)
Category:	Procedural and other rulings
Parties:	2013/204570 Australia and New Zealand Banking Group Ltd (Plaintiff/Respondent) Ian Adrian Driffill (Defendant/Applicant)   2015/303041 Ian Adrian Driffill Australia and New Zealand Banking Group Ltd
Representation:	Counsel: Paul Glissan (Defendant/Applicant)   Solicitors: Mr J Foley (Plaintiff/Respondent)
File Number(s):	2013/204570; 2015/303041
Publication restriction:	Nil

Judgment

1. In Common Law Division proceedings 2013/204570 the plaintiff (“ANZ Bank”) claimed against the defendant (Mr Driffill) judgment for possession of land at North Tumbulgum on the Tweed River.

2. The claim was made on the ground of default under a mortgage which Mr Driffill, as registered proprietor, had granted to the Bank on 16 September 2010 to secure a loan to him of $725,000. No defence was filed. On 23 April 2014 default judgment for possession of the land was entered.

3. The Bank also claimed in its originating process judgment for the outstanding balance of the mortgage debt and interest. On 23 April 2014 default judgment was entered for $795,148.06. On 9 December 2014 the ANZ Bank assigned the debt and transferred the mortgage to a third party. The assignee sold the property for $950,000 in early 2015. The Bank received satisfaction of its judgment debt from the consideration paid to it by the third party upon the assignment.

4. There is now before the Court a notice of motion filed by Mr Driffill seeking an order that the default judgment for $795,148.06 be set aside and that he have leave to file a defence in which he would plead, by way of set-off, a claim for damages. The cause of action for the set-off is said to arise from breaches by ANZ of civil penalty provisions of the National Consumer Credit Protection Act 2009 (Cth) (“the Consumer Credit Act”).

5. In particular, Mr Driffill cites ss 128 to 131 and 133. That is, he asserts that ANZ failed to investigate his financial position before agreeing to make the loan to him in September 2010 and entered into what he alleges was an “unsuitable” loan to himself.

6. Section 178 of the Consumer Credit Act provides as follows, so far as relevant:

“(1) The court may order a person (the defendant) to compensate any person (the plaintiff) for loss or damage suffered by the plaintiff if:

(a) the defendant has contravened a civil penalty provision [of this Act] ... and

(b) the loss or damage resulted from the contravention ...”

7. A central issue in Mr Driffill’s present application to set aside judgment is whether he has an arguable and triable case that any “loss or damage resulted from” ANZ Bank having breached the credit inquiry requirements of the Consumer Credit Act, assuming that there was such a breach.

8. Mr Driffill contends that he was never served with ANZ Bank’s statement of claim for possession and for the debt. He therefore contends that the default judgment was entered against him irregularly. If that should be substantiated by the evidence that he has tendered, then he would be entitled to have the judgment set aside as of right.

9. In the alternative, he contends that even if he was served and the default judgment was regularly entered, he should be allowed to defend because he can demonstrate a triable issue and an arguable case of a defence of set-off as summarised above. He further asserts, as he must on an application to set aside a default judgment regularly entered, that he can explain and excuse his failure to file a defence in time and that the plaintiff/judgment creditor would suffer no prejudice by the belated litigation of his defence.

10. The Bank has been fully paid its judgment sum and in effect the defence, if successful, would reduce the amount of the judgment and support an order that some amount be repaid. Mr Driffill claims $550,000.

11. In Equity Division proceedings 2015/303041 Mr Driffill as plaintiff alleges against the Bank the same breaches of the Consumer Credit Act as are relied upon for the proposed defence to the Common Law proceedings. The statement of claim by which the Equity Division proceedings were inititated has been drawn by Mr Driffill himself and does not plead an intelligible cause of action.

12. By notice of motion filed in the Equity Division proceeding, ANZ Bank seeks a stay which it claims should operate unless and until the Bank’s judgment in the Common Law Division action is set aside. The stay is sought upon the logical ground that whilst the default judgment for the full amount of the mortgage debt stands, it would be inconsistent for the Court to hear, let alone uphold, Mr Driffill’s claim for damages arising out of the alleged breach of the Consumer Credit Act which is said to have resulted in the mortgage loan having been made.

13. Both motions were heard by me together on 4 August 2016. At the conclusion of the hearing counsel agreed that if the Common Law Division judgment should not be set aside then it would follow that rather than the Equity Division proceedings being stayed they should be dismissed.

Service of the Common Law Division Statement of Claim

14. Philip John Fisher swore two affidavits of service of the Common Law statement of claim on 2 August 2013 and a supplementary affidavit regarding service on 4 August 2016. The first of his affidavits of 2013 related to service of the statement of claim and of a Notice to Occupier upon the occupier of the mortgaged property. This service was carried out, according to Mr Fisher, on 27 July 2013 by placing both documents in an envelope marked “Confidential” and addressed to the occupier and by depositing this envelope in a letterbox on the property.

15. According to detailed electronic records which Mr Fisher created over the course of several attempts to effect service between 15 and 27 July 2013, there were two houses on the property. One was a brick and render house with a double lock up garage. The other was a fibro residence. According to Mr Driffill’s evidence before me, he occupied the more substantial building and the other was tenanted.

16. Mr Fisher’s electronic records of 27 July 2013, entered either that day or the next, state that on 27 July after placing the envelope addressed to the occupier in the letterbox Mr Fisher spoke to a man who drove on to the property in a Toyota HiLux motor vehicle, registered number SEC628. The driver of this vehicle identified himself to Mr Fisher as Ian Driffill. Mr Fisher served him personally with the statement of claim. This personal service upon Mr Driffill was deposed to in Mr Fisher’s second affidavit of 2 August 2013.

17. I accept Mr Fisher’s evidence. He was an independent contract process server. The evidence does not disclose that he had any incentive or motive to falsify his evidence regarding the personal service either when he made his initial electronic record, when he swore his affidavits in 2013 or when he was cross-examined.

18. Under cross-examination he appeared to me to be entirely frank. He acknowledged his complete reliance upon his contemporaneous records. He did not claim to be able to describe Mr Driffill or to identify him as he sat in the back of the Court. There is no reason to doubt that the person who identified himself to Mr Fisher as Ian Driffill was in fact Mr Driffill. There is no evidence to suggest that any other person might have pretended to be Mr Driffill at the time when Mr Fisher attended the property.

19. Mr Driffill agreed in cross-examination that the Toyota HiLux registered number SEC628 was his. He did not identify any other person as having driven it on this day.

20. Mr Driffill swore an affidavit on 4 May 2016 in which he deposed that the statement of claim for possession and for the mortgage debt was never personally served upon him. I do not accept that evidence. Four days after the date when Mr Fisher says he effected service, namely, on 31 July 2015, Mr Driffill completed an online statement regarding what he said was a dispute between himself and ANZ Bank. This was done on the website of the Financial Ombudsman Service (FOS). Under the heading “Summary of Dispute” on this document Mr Driffill typed in the following:

“On 16 December 2010 I entered into a loan agreement with ANZ Bank for $725,000, I previously had a loan from NAB, which was never in arrears. I changed banks because ANZ offered a better interest rate. I was seved (sic) with statement of claim on Saturday, 27 July 2013.”

21. This is a plain admission that service had occurred. In cross-examination Mr Driffill said that this merely referred to a conversation he had had with a former tenant of the fibro house on his land to the effect that a person representing himself to be the sheriff had attended the property looking for Mr Driffill. Mr Driffill said that he had assumed from the information conveyed to him by his former tenant that there must have existed a statement of claim and that the sheriff must have been there to serve it and that was why he made the entry I have quoted in the FOS online dispute information form.

22. I do not believe that evidence. If Mr Driffill had had such a conversation with a former tenant there would have been no logical basis for translating it into an assumption about a statement of claim as opposed to (a) some other type of legal document or (b) a mere enquiry that the sheriff might have been making.

23. At page 21 of the transcript of the evidence Mr Driffill gave before me there are recorded questions that I asked him concerning what he typed into the FOS dispute form. They included the following:

“Q. Where did you get the terminology ‘statement of claim’?

A. I did three years of law at university. I have got an idea as to what may or may not follow.

Q. Why would it be a statement of claim, not [a] summons or notice [to occupier] or something else?

A. I don't know.”

24. The words in brackets in this quotation are transcript corrections which I consider need to be made. I do not consider this attempt to explain why Mr Driffill adopted the terminology “statement of claim” at all satisfactory or convincing. I am comfortably satisfied that he derived the term “statement of claim” from looking at a document which Mr Fisher had served on him four days before making this entry in the FOS online document. Namely, the originating process of the Common Law Division proceedings.

25. The online notification of dispute records a further reference to the statement of claim. In part, Mr Driffill typed into this form these words:

“My complaints: (1) Being issued with Statement of Claim when all reasonable attempts are and have been taken to sell the property.”

26. In relation to the “outcome sought”, Mr Driffill’s first point was:

“(1) Statement of Claim to be discontinued, property remains on market until sold.”

27. Thus not only did Mr Driffill acknowledge to the Financial Ombudsman Service on 31 July 2013 that he had been served with a statement of claim four days earlier, he made this fact a central element in his complaint. That is, that enforcement proceedings were being taken through the Court at a time when he was attempting to market the property.

28. Also on 31 July 2013 Mr Driffill wrote to the Bank requesting that it provide him with its documents relating to the subject borrowing. He concluded this letter with the following paragraph:

“I assume that you will not take any legal action in relation to the above account until 28 days after the documents requested have been received. If this assumption is not correct please advise me in writing immediately.”

29. Mr Driffill’s counsel relied upon this as being some indication that, by reason of the assumption said to have been made, Mr Driffill cannot have appreciated that the statement of claim had already issued at this date.

30. I do not read the letter that way. The terminology of it is equally consistent with an assumption by Mr Driffill that the statement of claim, although issued and served, would not be progressed. The indications in the FOS document of the same date that the statement of claim had been personally served are precise.

31. Mr Driffill filed his statement of claim to commence the Equity Division proceedings on 16 October 2015. He deposed in the affidavit verifying the statement of claim that “ANZ Bank served statement of claim on 27 July 2013 on me.” This is another direct contradiction of his evidence given on the present motions that he was never served. He sought to explain the affidavit verifying the Equity Division statement of claim on the basis that it just picked up the terms in which he had recounted the development of his dispute with the ANZ Bank in his online form at the FOS.

32. I reject that explanation. I find that the verifying affidavit verifying contains a truthful admission of having been served with the Common Law Division statement of claim. It is an admission made by Mr Driffill when he was representing himself in the commencement of the Equity Division claim. At that time, before obtaining legal advice, he evidently did not appreciate that the default judgment in the Common Law Division would be an obstacle to his claim in Equity. Having subsequently been advised that the default judgment is an obstacle and therefore wishing to have the default judgment set aside, Mr Driffill has untruthfully sought to contradict and to explain away his previous admissions of having been served.

Absence of any Triable or Arguable Case

33. As the statement of claim was properly served and the default judgment regularly entered, consideration must be given to whether Mr Driffill’s propounded set-off defence is viable.

34. In September 2010 when he entered into the agreement with ANZ Bank to borrow $725,000, his property was encumbered with a first mortgage to the National Australia Bank securing a loan of $620,000 and a second mortgage to Monaco Super Fund Pty Ltd for $100,000. Mr Driffill had paid $1,300,000 to purchase the property in about October 2007. He had lived on the property since that date. If the property had held its value up to the second half of 2010, which it may not have done having regard to the global financial crisis of late 2008 and 2009, his equity at the time when he refinanced with ANZ Bank would have been about $580,000.

35. Mr Driffill told the ANZ Bank, as part of his June 2010 application for the loan, that he had a net uncommitted monthly income of $12,267 from which he could service the loan. This was untrue. His evidence before me was that he had no income at that time and that he was servicing the existing borrowings from the National Australia Bank and Monaco Super Fund out of capital which was available to him. He gave evidence that he intended to, and did in the event, service the ANZ refinancing loan from the same source. The funds advanced by ANZ Bank were applied to discharge the debts owing to the two prior mortgagees, leaving Mr Driffill in almost exactly the same position after the transaction as he had been in before it, except that the identity of the lender and encumbrancer had changed and the interest rate which his borrowing had to bear to the ANZ Bank was lower than the rates he had been paying the prior lenders.

36. Mr Driffill’s propounded set-off defence would plead in para 17 that:

“had the plaintiff not approved and advanced the home loan to him he would have sold the land in 2010 and, after discharging his mortgages to the National Australia Bank and Monaco Super Fund Pty Ltd, he would have been left with net proceeds of sale of about $550,000, whereas as a result of entering into the home loan contract with the plaintiff the defendant has eventually been left with no net proceeds of sale after judgment for possession of the land in favour of the plaintiff, its sale and discharge of the mortgage over it.”

37. Assuming he has an arguable case that ANZ Bank breached the Consumer Credit Law by failing to investigate adequately his capacity to service the new loan, Mr Driffill's case that he suffered "loss and damage" and that it "resulted from the contravention" (in the words of s 178) entirely depends upon the allegation quoted from para 17 of the proposed defence. That allegation is part of a pleading settled by counsel but it is unsupported and it would remain unsupported at trial because Mr Driffill has acknowledged that at the time of the refinance by ANZ in September 2010 he had no thought of selling the property, whatever the identity of the lender.

38. He gave these answers to questions in the course of evidence before me at T26, lines 12 – 37:

“Q. So you considered at that time that you had equity in the property - that is, at the time of the refinancing with ANZ - of about 600,000?

A. That's correct.

Q. So at the time of refinancing with the ANZ, should I take it that you had no reason to think of selling the property?

A. It would have been an option if I didn't refinance.

Q. Well, I know. But it would always be an option.

A. Yes.

Q. But you had really no reason to contemplate taking the option. I'm asking--

A. Not at that time, no.

Q. And that was because you considered you had substantial equity in the property--

A. I had substantial equity, and I felt that if in the future there was a problem I could put the property on the market and sell it.

Q. And to complete my question, is that correct? That your reasons at that time were that you had substantial equity, you were able to service the existing borrowings on the property, it had appreciated in value from when you first bought it, to your understanding, and there was no reason to think of doing anything but to continue holding the property with the same amount of debt carried on it?

A. That's correct."

39. At T34 line 1 he said, in contradiction of these answers, he would have definitely sold if ANZ Bank had not loaned the money but then at T35 line 4 he answered a question as follows:

“Q. So selling was no higher [than] an option in 2010. It was just one of the things you were considering?

A. That's correct.

Q. And you knew that option was still in place after you took out the ANZ loan?

A. That's correct.”

40. After the refinance Mr Driffill was in the same position with respect to selling the property and realising whatever equity he had in it as he had been in when the NAB and Monaco Super Fund had been his mortgagees. The change of lender did not diminish his capacity to sell.

41. His admission that he had no desire to exercise that capacity, either before or after the refinance, is borne out by subsequent events. He held on to the property through the remainder of 2010 and during 2011, taking a second mortgage loan of $250,000 from Monaco Solicitors in September 2011. This further borrowing against the property was used in part to service the ANZ Bank debt: see T36, line 30. Consistently with Mr Driffill's admissions that in September 2010 he did not wish to sell the property but was holding on to it in the expectation of appreciation in value and that selling was no more than an option, right through to late 2011 Mr Driffill was still showing determination to hold the title. It was necessary for him to borrow funds with which to service the ANZ debt in order to retain the land.

40. That determination to hold the property persisted until April 2012 when Mr Driffill realised he could no longer service the payments which were due to the ANZ Bank. He then commenced to market the property. He went into default on the ANZ loan in June 2012 and remained in default at all times thereafter.

41. Quite apart from the factual concessions of Mr Driffill which contradict the critical assertion in his draft proposed pleading as quoted from par 17, there is a difficulty of principle for Mr Driffill's case. The making of ANZ's loan to refinance existing debts cannot be shown to have caused, in a legal sense, the property not being sold in late 2010. After the advance from the ANZ Bank the question of sale or no sale remained a matter entirely for Mr Driffill to decide. The parameters affecting that decision were materially unchanged by the lending transaction.

42. Mr Driffill's counsel attempted to formulate a causation mechanism along the lines that had the Bank investigated Mr Driffill's financial position in accordance with the Consumer Credit Law and had it thereby discovered the falsehood of his representations about income, the Bank would have refused to refinance him and he would have sold his land. A sale in these circumstances could not then be said to occur because the Bank’s refusal in any way altered his financial circumstances or his capacity, relative to the decision to hold or to sell, but because the decision would have awakened in him an awareness that holding the property was unrealistic in economic terms. That is, the refusal by ANZ Bank would have been taken into account by Mr Driffill and would have caused him to make a different judgment and exercise his (admittedly unaltered) capacity to sell in a different way.

43. Resort to this mechanism of causation shows that the continued holding of the property and the alleged loss on ultimate sale which followed is, in law, too remote from the alleged breach of the sections of the Consumer Credit Law to be recognised. The propounded effect upon his judgment is not only irrational it is not recognisable as causation in law.

44. As a matter of fact, also, this propounded mechanism of causation is unsupportable. Mr Driffill already knew his own financial circumstances so far as relevant to his ability to service the loan. He outlined them in his evidence before me. The Bank's unawareness of those circumstances, because Mr Driffill misrepresented them and because the Bank failed to unearth the truth, was incapable of causing Mr Driffill to be ignorant of his financial unsustainability and therefore was incapable of causing him to hold the property against his better interests. He was not kept in ignorance or induced to hold on to the title by the Bank's lack of investigation; it was he who kept the Bank in ignorance.

45. For those reasons I do not consider that there is any triable or arguable defence sought to be raised and there is no basis for setting aside the default judgment. It is not necessary to consider other questions such as whether there would be any prejudice to the Bank, if the default judgment should be set aside, or whether Mr Driffill has shown any reasonable excuse for not having filed a defence in a timely fashion.

46. Accordingly, the orders of the court in the Common Law Division proceedings are:

1. The judgment debtor’s notice of motion filed 4 May 2016 is dismissed.

2. The judgment debtor is to pay the plaintiff's costs of the notice of motion.

49. In the Equity Division proceedings the Court’s orders are:

1. The statement of claim is dismissed.

2. The plaintiff is to pay the defendant's costs of the proceedings.

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Decision last updated: 19 April 2018