Bendigo and Adelaide Bank v Grahame

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

S ECI 2018 02347

BENDIGO AND ADELAIDE BANK LIMITED ACN 068 049 178	Plaintiff/Defendant by Counterclaim
v
HEATHER JEAN GRAHAME	Defendant/Plaintiff by Counterclaim

---

JUDICIAL OFFICER:	Matthews JR
WHERE HELD:	Melbourne
DATE OF HEARING:	1 April 2019
DATE OF JUDGMENT:	19 July 2019
CASE MAY BE CITED AS:	Bendigo and Adelaide Bank v Grahame
MEDIUM NEUTRAL CITATION:	[2019] VSC 486 (Revised 26 July 2019)

---

PRACTICE AND PROCEDURE – Summary judgment – Plaintiff seeks summary judgment against defendant – Whether defendant has real prospect of success on her defence and counterclaim – Plaintiff’s cause of action made out – Defendant’s defence and counterclaim no real prospect of success as completely lack foundation in fact and in law – Civil Procedure Act (2010) (Vic), ss 61 and 63 – Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	C. F. Gobbo	Cornwalls
For the Defendant	In person

TABLE OF CONTENTS

Background......................................................................................................................................... 1

Applicable principles........................................................................................................................ 2

Summary judgment...................................................................................................................... 2
Summary judgment application by a plaintiff................................................................ 3
Summary judgment application by a defendant............................................................ 6

Summary dismissal and strike out............................................................................................. 7
Unrepresented defendant............................................................................................................ 8

Consideration - Establishment of the Bank’s cause of action.................................................... 8

Initial loan agreement................................................................................................................... 8
Variation to increase loan............................................................................................................ 9
Default under loan........................................................................................................................ 9
Conclusion regarding the Bank’s cause of action.................................................................. 11

Consideration – The Defence and Counterclaim....................................................................... 11

The Loan Agreement was not a loan........................................................................................ 12
The Bank did not loan money as it only provided newly-created credit................. 13
The Defendant’s material.................................................................................... 13
The Bank’s submission........................................................................................ 14
Anaylysis............................................................................................................... 14

There was no loan, it was an exchange for a promissory note................................... 17
The Defendant’s material.................................................................................... 17
The Bank’s submission........................................................................................ 17
Analysis................................................................................................................. 18

Previous Loans to the Defendant.................................................................................... 19
The Defendant’s material.................................................................................... 19
The Bank’s submission........................................................................................ 20
Analysis................................................................................................................. 20

The Loan Agreement is void and/or unenforceable............................................................. 21
The Bank agreed it was void........................................................................................... 21
The Defendant’s material.................................................................................... 21
The Bank’s submission........................................................................................ 23
Analysis................................................................................................................. 23

The Loan Agreement was an unfair standard form contract...................................... 24
The Defendant’s material.................................................................................... 24
The Bank’s submission........................................................................................ 25
Analysis................................................................................................................. 25

Misleading and Deceptive Conduct............................................................................... 27
The Defendant’s material.................................................................................... 27
The Bank’s submission........................................................................................ 28
Analysis................................................................................................................. 28

Unconscionable Conduct.................................................................................................. 28
The Defendant’s material.................................................................................... 28
The Bank’s submission........................................................................................ 30
Analysis................................................................................................................. 30

Non est factum................................................................................................................... 31
The Defendant’s material.................................................................................... 31
The Bank’s submission........................................................................................ 32
Analysis................................................................................................................. 32

The Loan Agreement/Mortgage are not enforceable against the Defendant.................... 33
The Defendant has a secured interest in the Property which takes priority............ 33
The Defendant’s material.................................................................................... 33
The Bank’s submission........................................................................................ 35
Analysis................................................................................................................. 36

Reversion on Defendant’s birth certificate..................................................................... 37
The Defendant’s material.................................................................................... 37
The Bank’s submission........................................................................................ 38
Analysis................................................................................................................. 38

Invoices sent to Bank.................................................................................................................. 39
The Defendant’s material.................................................................................... 39
The Bank’s submission........................................................................................ 40
Analysis................................................................................................................. 41

Restitution.................................................................................................................................... 41
The Defendant’s material.................................................................................... 41
The Bank’s submission........................................................................................ 42
Analysis................................................................................................................. 42

Non-economic damages for emotional distress..................................................................... 43
The Defendant’s material.................................................................................... 43
The Bank’s submission........................................................................................ 44
Analysis................................................................................................................. 44

Conclusion......................................................................................................................................... 45

JUDICIAL REGISTRAR:

Background

By summons filed 1 March 2019 (‘the Application’), the plaintiff/defendant by counterclaim (‘the Bank’) seeks summary judgment in respect of the Bank’s statement of claim filed on 21 November 2018 (‘SOC’) and in respect of the defendant/plaintiff by counterclaim’s (‘Defendant’) defence (‘Defence’) and counterclaim (‘Counterclaim’) filed 30 December 2019 pursuant to s 63 of the Civil Procedure Act 2010 (Vic) (‘CPA’) and rr 22.03 and 22.16 of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’).[1] Alternatively, the Bank seeks that the defence and counterclaim be struck out pursuant to rr 23.01 and 23.02 of the Rules.
[1]By orders made on the Court’s own motion, the summons was referred to me for hearing and determination, pursuant to r 84.04 of the Rules.

The orders sought by the Bank include possession of the land situated in Croom Street, Warburton, Victoria, more particularly described as Lots 25 and 26 of Plan of Subdivision 001383 in Certificate of Title Volume 03330 Folio 872 and Lot 1 on Title Plan 741833D in Certificate of Title Volume 05579 Folio 638 (‘the Property’) and that the Defendant pay the Bank the sum of $166,702.87, being the amount the Bank says is owing as at 16 November 2018, plus interest from that date until the date of payment. Additionally, the Bank also seeks that the defence and counterclaim be dismissed and that the Defendant pay its costs of the proceeding on an indemnity basis.

The Bank relies upon the affidavit of Kathryn Jane Peace affirmed 1 March 2019 (‘Peace Affidavit’) and the Bank’s counsel also filed written submissions (‘Bank’s Submissions’).

The Defendant relies upon her affidavit affirmed 13 February 2019 (‘Grahame Affidavit’) and also provided written submissions (‘Defendant’s Submissions’).

For the reasons set out below, the Bank’s Application is granted and summary judgment will be entered for the Bank on both its claims and on the Defendant’s Counterclaim.

Applicable principles
Summary judgment

I have previously summarised the principles applicable to summary judgment in Padella Pty Ltd v Elliott,[2] as adopted by Sloss J in Israfoods (2006) Ltd v J & D Consortium Pty Ltd.[3] For completeness I set these principles out below.
[2][2018] VSC 301, [19]-[28].
[3][2019] VSC 323, [41].

Section 61 of the CPA permits a plaintiff to make an application for summary judgment on the ground that the defendant’s defence or part of that defence has no real prospect of success. Section 62 of the CPA permits a defendant to make an application for summary judgment on the grounds that the plaintiff’s claim has no real prospects of success. Section 63 of the CPA provides (subject to s 64) that the Court may give summary judgment in a civil proceeding if it is satisfied that a claim, defence or a counterclaim or part of the claim, defence or counterclaim, as the case requires, has ‘no real prospect of success’.

Section 64 of the CPA provides that:

Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because—
(a)it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only a full hearing on the merits is appropriate.

The Court of Appeal has set out the test to be applied in this context in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd.[4] Upon the present state of authority:

(a)The test for summary judgment under s 63 of the [CPA] is whether the respondent to the application for summary judgment has a ‘real’ as opposed to a ‘fanciful’ chance of success;
(b)The test is to be applied by reference to its own language and without paraphrase or comparison with the ‘hopeless’ or ‘bound to fail test’ essayed in General Steel;
(c)It should be understood, however, that the test is to some degree a more liberal test than the ‘hopeless’ or ‘bound to fail’ test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;
(d)At the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.

[4](2013) 42 VR 27, 40 [35] (‘Lysaght’) (citations omitted).

Section 7(1) of the CPA sets out its overarching purpose, being to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute. Section 9 of the CPA requires the Court to have regard to these purposes in making any order or giving any direction in a civil proceeding.

Summary judgment application by a plaintiff

An application made pursuant to s 61 of the CPA is to be made in accordance with Part 2 of Order 22.[5]
[5]Rules, r 22.03.

Rule 22.04 of the Rules provides:

(1) An application shall be made by summons supported by an affidavit—
(a)verifying the facts on which the claim or the part of the claim to which the application relates is based; and
(b)stating that in the belief of the deponent the defence to the claim or the defence to the relevant part of the claim—
(i) has no real prospect of success; or
(ii)has no real prospect of success except as to the amount of the claim or as to the amount of the relevant part of the claim.

(2)Where a statement in a document tends to establish a fact within paragraph (1) and at the trial of the proceeding the document would be admissible by or under the Evidence (Miscellaneous Provisions) Act 1958, the Evidence Act 2008 or any other Act to verify the fact, the affidavit under paragraph (1) may set forth the statement.
(3)An affidavit under paragraph (1) may contain a statement of fact based on information and belief if the grounds are set out and, having regard to all the circumstances, the Court considers that the statement ought to be permitted.
(4)The plaintiff shall serve the summons and a copy of the affidavit or affidavits and of any exhibit referred to in the affidavit or affidavits on the defendant not less than 14 days before the day for hearing named in the summons.

Rule 22.05 of the Rules provides:

(1)The defendant may show cause against the application by affidavit or otherwise to the satisfaction of the Court.
(2)An affidavit under paragraph (1) may contain a statement of fact based on information and belief if the grounds are set out.
(3)Unless the Court otherwise orders, the defendant shall serve a copy of any affidavit and of any exhibit referred to in the affidavit or affidavits on the plaintiff not less than three days before the day for hearing named in the summons.

The requirements set out in Rules 22.04 and 22.05 were considered by the Court of Appeal in Daniel Simon Hausman and Lance Vincent Hodgkinson v Abigroup Contractors Pty Ltd.[6] Of the equivalent of what is now Rule 22.04 in relation to the affidavit in support of summary judgment, the Court of Appeal stated that what ‘must be verified are the facts necessary to establish a good cause of action’.[7] Once the plaintiff has established the elements of its cause of action, there is ‘something akin’ to a shifting of the evidential burden to the defendant.[8]
[6](2009) 29 VR 213; [2009] VSCA 288 (‘Hausman v Abigroup’).
[7]Hausman v Abigroup (n 6) [60].
[8]See footnote 13 in the reasons of the Court of Appeal in Hausman v Abigroup, where it was stated: ‘Whether there is in fact such a burden upon a plaintiff, once the prerequisites for summary judgment have been satisfied, is a difficult question. Rule [22.05] requires a defendant, who is the subject of an application, in proper form, for summary judgment, to “show cause” why such judgment should not be granted. It may be that this imposes upon a defendant an evidential burden, or something akin thereto’.

Of the equivalent of what is now Rule 22.05, the Court of the Appeal stated the following:[9]

63The defendant must satisfy the Court that, in respect of the claim to which the application for judgment relates, a question ought to be tried, or there ought for some other reason to be a trial of that claim. The Court, if so satisfied, will give the defendant leave to defend and the proceeding will continue to trial in the ordinary way. The Court will normally require an affidavit by, or on behalf of, the defendant before it will be satisfied that the defendant is entitled to leave to defend. The standard of diligence required of the defendant in preparing a case in opposition to the application, especially if under pressure of time, is perhaps not as high as that required in preparing for trial.
64.Nonetheless, the defendant is required to use reasonable diligence to put before the Court, albeit in a summary form, all the evidence relied on in the defence. In that regard, it would generally be regarded as an injustice to the plaintiff to introduce for the first time, on appeal, evidence which was readily available for the hearing of the application, but was not produced. An affidavit filed by the defendant may contain a statement of fact based on information and belief.
65.The authorities suggest that an affidavit in opposition to an application for summary judgment must provide sufficient particulars to enable the defence case to be properly understood. A bald denial that the defendant is indebted to the plaintiff will not suffice. The affidavit should, so far as practicable, deal specifically with the plaintiff’s claim and the facts set out in the supporting affidavit to establish that claim. It should state clearly and concisely what the defence is, and identify the facts relied upon in support of that defence.

[9]Hausman v Abigroup (n 6) [63]-[65] (citations omitted).

The Court of Appeal’s statement of the principles in Hausman v Abigroup, extracted in paragraph 15, above remain good law since the advent of the CPA.[10]
[10]Innovateq Australia Pty Ltd and Anor v Barnes and Ors [2016] VSC 618, [11] (Ierodiaconou AsJ), referring to Capital One Securities Pty Ltd v Soda Kids Holdings Pty Ltd [2012] VSC 163 and to Portbury Development Pty Ltd v Ottedin Investments Pty Ltd and Ors [2012] VSC 490.

The Court of Appeal also stated in Hausman v Abigroup that:[11]

A judge faced with an application for summary judgment should not be required to trawl through the defendant’s material in an effort to see where there can be constructed from that material an answer to the plaintiff’s claim. It must be for the defendant to point to some material, whether legal or factual, that provides an arguable response to that claim. That is so even if it is the plaintiff who must ultimately discharge the burden of persuading the judge that there is no issue that warrants trial, and that summary judgment should therefore be granted.

[11]Hausman v Abigroup (n 6) [55].

The Defendant refers to Rule 22.04(1)(b)(i) and says that the Peace Affidavit does not contain such a statement. While the Peace Affidavit does not state, in terms, that the deponent believes that the Defendant has no real prospects of success on her Defence and Counterclaim, Ms Peace does say that she has read the Defence and the Counterclaim,[12] and she also states that:[13]

I believe that the Defendant has no Defence to the Plaintiff’s claims in this Proceeding, nor does the Defendant have any basis on which to bring a Counterclaim against the Plaintiff.

[12]Peace Affidavit, [4].

[13]Peace Affidavit, [43].

In the context of the entirety of the Peace Affidavit, I consider this to be sufficient for the purposes of Rule 22.04(1)(b)(i) of the Rules. Even if it were not sufficient, I would dispense with the need for the Bank to file a further affidavit in that regard, as I have power to do.

Summary judgment application by a defendant

The Bank also seeks summary judgment as the defendant to the Counterclaim filed by the Defendant, pursuant to s 62 of the CPA.

An application made pursuant to s 62 of the CPA is to be made in accordance with Part 3 of Order 22.[14]
[14]Rules, r 22.16.

Rule 22.17 of the Rules provides that an application for summary judgment by a defendant will be made by summons. Rule 22.18 of the Rules provides:

(1)If the defendant intends to rely on an affidavit in support of the application, the affidavit shall be filed with the summons.
(2)Where a statement in a document tends to establish a fact upon which the defendant relies and at the trial of the proceeding the document would be admissible by or under the Evidence (Miscellaneous Provisions) Act 1958, the Evidence Act 2008 or any other Act to verify the fact, the affidavit may set forth the statement.
(3)An affidavit relied upon by the defendant may contain a statement of fact based on information and belief if the grounds are set out and, having regard to all the circumstances, the Court considers that the statement ought to be permitted.
(4)The defendant shall serve the summons and a copy of any affidavit in support and of any exhibit referred to in the affidavit on the plaintiff not less than 14 days before the day for hearing named in the summons.

Rule 22.19 of the Rules provides:

(1)The plaintiff may show cause against the application by affidavit or otherwise to the satisfaction of the Court.
(2)An affidavit under paragraph (1) may contain a statement of fact based on information and belief if the grounds are set out.
(3)Unless the Court otherwise orders, the plaintiff shall serve a copy of any affidavit and of any exhibit referred to in the affidavit on the defendant not less than three days before the day for hearing named in the summons.

Summary dismissal and strike out

Rule 23.01(1) of the Rules provides that:

(1)Where a proceeding generally or any claim in a proceeding—
(a) is scandalous, frivolous or vexatious; or
(b) is an abuse of the process of the Court—
the Court may stay the proceeding generally or in relation to any claim or give judgment in the proceeding generally or in relation to any claim.

Rule 23.01(2) of the Rules provides that:

Where the defence to any claim in a proceeding is scandalous, frivolous or vexatious, the Court may give judgment in the proceeding generally or in relation to any claim.

Rules 23.02 of the Rules provides that:

Where an indorsement of claim on a writ or originating motion or a pleading or any part of an indorsement of claim or pleading—
(a) does not disclose a cause of action or defence;
(b) is scandalous, frivolous or vexatious;
(c)may prejudice, embarrass or delay the fair trial of the proceeding; or

(d) is otherwise an abuse of the process of the Court—

the Court may order that the whole or part of the indorsement or pleading be struck out or amended.

Unrepresented defendant

Throughout the proceeding the Defendant has been self-represented. I have previously summarised the principles applicable in circumstances where one party is unrepresented by lawyers in applications such as the present,[15] and I adopt that approach here.
[15]Permanent Custodians v Sanders [2017] VSC 516, [24]-[29] (‘Sanders’).

Consideration - Establishment of the Bank’s cause of action

The Bank’s claim is established by the evidence of Ms Peace as set out in the Peace Affidavit. Ms Peace is a Team Manager of the Bank’s Legal and Recovery, Mortgage Help Centre, and has access to the books and records concerning the loan and mortgage with the Defendant.[16] I have summarised this below.
[16]Peace Affidavit, [1].

Initial loan agreement

(a) By letter of offer dated 3 November 2016 the Bank offered to loan the Defendant $145,000 (‘Initial Advance’) on the terms set out within the letter of offer, and on 8 November 2016 the Defendant accepted the offer (‘Initial Loan Agreement’).[17]
[17]Peace Affidavit, [6]; Exhibit KJP-4.

(b) Clause 9 of the Initial Loan Agreement included that the Defendant would provide security for the loan in the form of the existing mortgage over the Property.[18] This existing mortgage was dated 12 May 2015 and was registered with the Land Titles Office on 10 June 2015 in dealing number ALD946995D (‘Mortgage’),[19] and incorporated Memorandum of Common Provisions AA953 (‘MCP’).[20] A search of the titles register shows that the Defendant is the registered proprietor for the Property and show the registration of the Mortgage.[21]
[18]Peace Affidavit, [6]; Exhibit KJP-4.
[19]For completeness I note that the Mortgage records a further parcel of land, Volume 3335 Folio 996, which was not included as security for the Initial Loan Agreement; Peace Affidavit [11]; Exhibit KJP-9.
[20]Peace Affidavit [11]; Exhibit KJP-9.
[21]Peace Affidavit [10]; Exhibit KJP-8.

(c) The Defendant’s bank statement for the period 26 October 2016 to 1 January 2017 show the Bank advanced the sum of $144,650 to the Defendant on 12 December 2016, being the Initial Advance less credit fees and charges.[22]
[22]For completeness I note the Initial Loan Agreement specified that the amount paid to the Defendant less the credit fees and charges would be $144,487.40 and not $144,650, however I consider nothing turns on this; Peace Affidavit, [9]; Exhibit KJP‑6.

Variation to increase loan

(d) By a further letter of offer dated 15 November 2017 the Bank offered to increase the amount loaned to the Defendant by $20,400 (‘Loan Increase’) on the same terms set out in the Initial Loan Agreement (‘Variation Agreement’).[23] The Variation Agreement set out the some of the current and changing terms of the Initial Loan Agreement, including that $140,170.81 was outstanding on the Initial Loan Agreement as at 15 November 2017 and that the total of that amount and the additional $20,400 would be $160,570.81 as at 15 November 2017. Further, the Variation Agreement provided that the security for the increase would be the Mortgage over the Property.[24] On 17 November 2017 the Defendant accepted the Variation Agreement.[25] Together, the Initial Loan Agreement and Variation Agreement form the Loan Agreement referred to in paragraph 2 of the SOC (‘Loan Agreement’).
[23]Peace Affidavit, [14]; Exhibit KJP-5.
[24]Peace Affidavit, [14]; Exhibit KJP-5.
[25]Peace Affidavit, [7]; Exhibit KJP-5.

(e) The Defendant’s bank statement for the period 2 July 2017 to 1 January 2018 show that the Bank advanced the sum of $20,000, being the Loan Increase less credit fees and charges as stipulated in the Variation Agreement.[26]
[26]Peace Affidavit, [9]; Exhibit KJP-7.

Default under loan

(f) The Bank’s records in respect of the Defendant show that she made regular fortnightly repayments under the Loan Agreement until 8 January 2018 when the last repayment was received by the Bank, after which no further repayments were made.[27]
[27]Peace Affidavit, [16]-[17]; Exhibit KJP-10.

(g) Clause 8.1(a)(i) of the MCP provides that it is an event of default if ‘you [the Defendant] does not pay any part of the secured money under the regulated arrangement or this mortgage’. Clause 8.1(b) provides that in the event of default the Bank will notify the Defendant in writing of the event of default, and that if the event of default continues for at least 31 days after service of the notice the Bank may require the Defendant to repay all secured money (‘Acceleration Clause’), further in the event of default other than for bankruptcy, the Bank may also do anything specified in cl 8.3 of the MCP. Clause 8.3 of the MCP provides that the Bank may, amongst other things, take possession of Property.[28] Clause 10.1(c) of the MCP requires the Defendant to reimburse the Bank for ‘[t]he contemplated, actual, or attempted enforcement of, or exercise, preservation or consideration of [the Bank’s] rights, powers or remedies, under this mortgage’. Clause 10.1 further states it includes ‘legal fees (including in-house lawyers charged at their usual rates) on a full indemnity basis in relation to any of the above’.[29]

(h) As at 14 September 2018, the Defendant was in default under the Loan Agreement and Mortgage (‘Default’) pursuant to clause 8.1(a) of the MCP, and on 19 September 2018 the Bank sent a default notice to the Defendant (‘Default Notice’).[30] The Default Notice notified the Defendant the she was in arrears by $7,805 as at 14 September 2018 and that she was required to pay these arrears together with $525.02 in enforcement costs of issuing the notice by 29 October 2018, failing which the entire account balance, being $161,618.50 as at 14 September 2018, would become immediately due and payable. The Default Notice also advised the Defendant that the Bank may start proceedings to recover the balance due under the Loan Agreement and/or possession of the Property.[31] The Defendant admits service of the Default Notice.[32]

(i) Ms Peace states the Defendant did not remedy the Default under the Loan Agreement within 31 days of service of the Default Notice and as such, pursuant to cl 8.1(b) of the MCP, the entire balance became immediately due and payable. Further, Ms Peace states that as at the time of swearing her affidavit on 1 March 2019, the Bank has received no payment in satisfaction of the Default.[33] The Defendant denies the Default, as will be explained below. However, in the course of the hearing the Defendant stated that she had not remedied the Default as she did not have to, and that the failure to remedy the Default was not because she couldn’t pay, stating ‘I was able to make any repayments if they were lawfully to be made’.[34]

[28]Peace Affidavit [22]; Exhibit KJP-9.

[29]Peace Affidavit [22]; Exhibit KJP-9 (emphasis added).

[30]Peace Affidavit, [19]; Exhibit KJP-11.

[31]Peace Affidavit, [9]; Exhibit KJP-7.

[32]Defence, [9].

[33]Peace Affidavit, [22].

[34]Transcript, 28.18-19.

Conclusion regarding the Bank’s cause of action

The evidence outlined above establishes the Bank’s cause of action, such that it is entitled to enforce the Mortgage over the Property. Further or alternatively, the Bank is entitled to repayment in full of the amount outstanding pursuant to the Loan Agreement, including principal, interest and enforcement costs on an indemnity basis. The bank statements in respect of the Loan Agreement and the Mortgage establish that as at 1 January 2019, the amount of $171,402.63 (inclusive of some enforcement expenses) remains outstanding.[35]
[35]Exhibit KJP-10.

Consideration – The Defence and Counterclaim

In determining the Application, I have considered all issues raised by the Defendant whether in the Defence, the Counterclaim, her affidavit or her written or oral submissions, to consider whether her Defence or Counterclaim have any real prospects of success. I have not confined myself to what is pleaded or whether if pleaded it is expressed as part of the Counterclaim when it may apply as a Defence (or vice versa). Rather, I have sought to discern from all the material relied upon by the Defendant whether there is a defence or counterclaim that is capable of being properly pleaded and run. I have taken this approach without emphasis on proper form as the Defendant is self-represented. As the Defendant’s material is repeats itself in places I have also sought to combine and summarise the matters raised by the Defendant. Based on this approach I have discerned the following matters raised as potential defences and counterclaims for consideration:

(a) The Loan Agreement is not a loan;

(b) The Loan Agreement is void and/or unenforceable, relying on a number of matters or contentions;

(c) The Loan Agreement is not enforceable against the Defendant;

(d) The Bank owes the Defendant monies in relation to fees and fines the Defendant issued to the Bank;

(e) A claim for restitution; and

(f) A claim for non-economic damages for emotional stress.

Of these (a) to (c) are raised in both the Defence and Counterclaim, and (e) to (f) are only in the Counterclaim. These issues are considered in more detail below.

The Loan Agreement was not a loan

The Defendant says that the Loan Agreement is not a loan, on a number of bases, including that:

(a) No monies were advanced to the Defendant, as the Bank created new credit which was given to the Defendant;[36]

(b) The Loan Agreement was not a loan, but an exchange whereby the Bank exchanged the Defendant’s promissory note for the money/credit loaned;[37] and

(c) The Loan Agreement was not a loan as the Defendant had previous loan agreements with the Bank which were varied.[38]

[36]Defence, [2](b), [17](d)-(e); Counterclaim, [8](c), [8](d), [10](a)-(b), [18](a)-(c).

[37]Defence, [2](b), [7],[8](c), [14](b); Counterclaim, [8](d)-(e), [21](c), [26](c).

[38]Defence, [2](d); Counterclaim [25].

The Bank did not loan money as it only provided newly-created credit
The Defendant’s material

In her Defence, the Defendant states:[39]

The [Defendant] says the Bank did not advance monies. The Bank exchanged one form of currency for another form of currency. The contract that the [Defendant] signed is a promissory note and a money instrument capable of being exchanged for value just as any other form of money can be. The Bank received this promissory note and held is as an asset of the Bank. The Bank then created new credit and gave this credit to the [Defendant] in exchange for the promissory note.

[39]Defence, [2](b) (emphasis added).

The Defendant goes onto say in her Counterclaim:[40]

The [Defendant] entered into the contract on the understanding that the arrangement was a loan where the Bank was lending money it possessed in its own stores, such as the deposits of other customers.
The contract arrangement was not a loan. The Bank did not loan any money it already had in its possession and stores. Instead, the arrangement involved an exchange of one type of currency for another - that is, the [Defendant] gave the Bank a promissory note and the Bank gave the [Defendant] credit.

[40]Counterclaim, [8](c)-(d) (emphasis added).

Later in the Counterclaim, the Defendant says:[41]

The true origin and source of the moneys (goods) that the Bank gave the [Defendant] was credit created by way of bookkeeping entry.

[41]Counterclaim, [10](c).

Further in the Counterclaim the Defendant states:[42]

The Bank would have been aware of its own internal procedures and that, as part of a “loan agreement”, the Bank does not, in fact, loan any money. The Bank would have been aware that it creates new credit by way of bookkeeping entry and it is that money which is given to customers.

The Bank’s submission

[42]Counterclaim, [18](a) (emphasis added).

The Bank submitted that it is clear from the Defendant’s bank statement that money was in fact advanced,[43] and if the Defendant’s argument is that the provision of credit was a mere bookkeeping exercise and that no physical money was exchanged, that proposition has been thoroughly dealt with by the courts and rejected as a defence.[44]

Anaylysis

[43]Peace Affidavit, [9]-[10]; Exhibit KJP-7; Exhibit KJP-8.

[44]Transcript, 10.31-11.5; National Australia Bank v Walter [2004] VSC 36, [242]-[245] (‘NAB v Walter’); National Australia Bank Ltd v McFarlane [2002] VSC 116, [7] (‘NAB v McFarlane”); Smart v ANZ Banking Group Ltd [2002] VSCA 111, [20]-[22] (‘Smart v ANZ’).

So far as can be discerned from the above it appears the Defendant is of the view that the Bank can only loan money from the cash funds it has in its possession, such as a deposit from another customer, and that the Bank did not do this. Instead, the Defendant asserts that the Bank provided her credit which it created either by exchanging it for her promissory note (see paragraph [45] below), in a bookkeeping exercise, or by some other means. The provision of this ‘credit’ rather than money loaned from the Bank’s cash deposits/reserves is then said to mean that the Loan Agreement is unlawful, void, or never existed.[45]
[45]Defence, [6].

In her material the Defendant does not explain what she means by ‘credit’ or why the Bank cannot loan her ‘credit’, she merely asserts that the Bank loaned her ‘credit’ and not money it possessed and that the Bank cannot do this. Further the Defendant does not say that she was unable to use money loaned to her by the Bank or that she somehow did not receive the benefit of the credit advanced/money loaned.

Justice Dodds-Streeton considered this issue in NAB v Walter, observing:[46]
[46]NAB v Walter (n 44) [243]-[246].

The [Defendants] submitted that the NAB likewise merely creates book entries of loans instead of providing lawful consideration for the promise to repay. They say that the practice amounts to “credit creation” and “fractional reserve banking”, because the NAB keeps in reserve funds which amount to only a fraction of the total amount of loans and advances made. The loans and advances made by the NAB are thus simply book entries ... “. [The Second Defendant] pointed to an NAB account statement for the [the Defedants’] home loan in which the “purported loan” was not shown as a credit to the borrower, but immediately shown as a debit and submitted “So there was no credit given at any time ...”.
…
A similar argument based on “credit creation” was advanced in National Australia Bank Ltd v McFarlane.[47] In that case, the defendant mortgagor contended that unless the lender in a security transaction hands over “bullion, banknotes or coin”, the mortgage is invalid. Byrne J stated:
[47]NAB v McFarlane (n 44) [7]-[9].
“It is apparent to me that this is arrant nonsense. It has no regard to the legal obligations created by a bank loan; it ignores the reality of modern commerce where it is money, in the broad sense of the term, including choses in action, and not only gold, banknotes and coin, or indeed legal tender, which plays a most important part.”[48]
[48]NAB v McFarlane (n 44) [7].

…
In Smart v ANZ Banking Group Ltd[49] the appellant, Mr Smart, who gave evidence in the present case, contended that the loan secured by a mortgage was not a real loan but “a paper transaction. Actual money doesn’t change hands, cash money”. Batt JA at p.4 observed that:

“The argument thus seemed to be that no moneys were lent, but only credit was created by book entry, which, it was said, was unlawful because the only mode of payment was by legal tender .... Mr Smart’s argument overlooks banking and credit altogether. Indeed, it seems to take no regard even of an undoubted fact of commercial life, the use of cheques and bills of exchange. It may be that in economic terms, the respondent bank “lends” its credit by way of fractional reserve banking but it cannot be doubted that in point of juristic analysis money was lent. That is so even in the case of the housing loan; some funds advanced to Mr Smart pursuant to it were by his direction paid to the solicitors for the vendors .... Moreover, there can be no doubt that Mr Smart received value in this and the other funding transactions. A legal liability in Mr Smart sounding in money was created for good consideration. What was done was not unlawful, was real and was not devoid of legal effect. Arnold v State Bank of South Australia (1992) 38 FCR 484 at 485 and 486”.

I agree with and adopt the above observations of Byrne J and Batt JA.

[49]Smart v ANZ (n 44) [20]-[22].

In her oral submissions, the Defendant also stated that despite what is in her Counterclaim, she considered this ‘credit creation’ to not be by a bookkeeping entry, but via an exchange of her promissory note for the credit (see paragraph [45] below). How this was different to a bookkeeping entry was not explained,[50] but in any event that is not material.
[50]Transcript, 29.7-29.24.

In her written submissions, the Defendant sought to distinguish her defence from the situations discussed in NAB v Walter, Smart v ANZ and NAB v McFarlane, stating:[51]

[T]he arguments put forward by self-represented litigants in these cases were quiet unlike those put forward by [the Defendant] in the present case.
…
In the present proceeding, the [Defendant] has pleaded that it is not possible for the Bank to loan credit and that the Bank did not loan any money it already had in its possession, which, it could be said, has some similarity to one of the arguments proffered in the case of NAB v Walter. However that is where any similarity ends. For the Bank to assert that the [Defendant’s] arguments are somehow the same as those put forward in other cases is preposterous.

[51]Defendant’s Submissions, [22]-[23].

The Defendant did not explain beyond this how her defence in this regard was different to those discussed in NAB v Walter and the other cases.

In my view, despite what the Defendant says in her submissions, her defence in this regard (as best as can be discerned) is analogous to that discussed in NAB v Walter. Further, it is clear from the Defendant’s bank statement that money was in fact advanced,[52] and that the Defendant had the benefit of that money. Therefore, for the reasons set out above by her Honour in NAB v Walter, I do not consider a defence based on the Bank loaning ‘credit’ has real prospects of success. Even if it were different to NAB v Walter, I would be of the same view.
[52]Peace Affidavit, [9]-[10]; Exhibit KJP-7; Exhibit KJP-8.

The Defendant has provided no authorities for her propositions in this regard, or that they establish a valid defence, despite being asked to do so. That is hardly surprising, since I am not aware of any such authorities. The Defendant’s propositions do not amount to a defence known to the law.

There was no loan, it was an exchange for a promissory note
The Defendant’s material

In her Defence, the Defendant states:[53]
[53]Defence, [2](b), [7], [17](b)-(c) (emphasis added).

The Bank exchanged one form of currency for another form of currency. The contract that the [Defendant] signed is a promissory note and a money instrument capable of being exchanged for value just as any other form of money can be. The Bank received this promissory note and held it as an asset belonging to the Bank. The Bank then created new credit and gave this credit to the [Defendant] in exchange for the promissory note.
…
The [Defendant] says the arrangement was an exchange, not a loan. The [Defendant] says she owes no money to the Bank and is therefore not in default.
…
The Bank provided to the [Defendant] the service of exchanging one form of money for another (an administrative task requiring little time and effort) whilst the [Defendant’s] obligation was to provide vast sums of money to the Bank over many years.
…
The Bank described (and continues to describe) the arrangement as a loan when it was not a loan. It was an exchange

This assertion that there was no loan but there was instead an exchange whereby the Bank exchanged the monies paid to the Defendant for a promissory note (being the contract(s) the Defendant signed) is repeated throughout the Defence and Counterclaim.[54]

The Bank’s submission

[54]Defence, [2](b), [7], [8](c), [12], [13], [14](b), [17](b)-(c); Counterclaim, [8](d)-(e), [9](c), [20], [21](c), [26](c).

The Bank submits that the contracts signed by the Defendant are not promissory notes and that the Defendant has failed to provide any authority in support of the proposition that they are.[55]

Analysis

[55]Transcript, 9.30-10.16, 22.20-26.

According to s 89(1) of the Bills of Exchange Act 1909 (Cth) a promissory note is:

[A]n unconditional promise in writing made by one person to another, signed by the maker, engaging to pay, on demand or at a fixed or determinable future time, a sum certain in money, to or to the order of a specified person or to bearer.

As described in Australia and New Zealand Banking Group Ltd v Evans; Evans v Esanda Finance Corporation Ltd:[56]

The essence of this definition, and one which would be commonly understood outside of the statutory context, is that a promissory note is a written promise to pay a sum of money on demand or at a particular time.

[56][2016] NSWSC 1742, [47] (‘ANZ v Evans’)

In effect, a promissory note creates a unilateral obligations for the promisor to pay the promisee a sum of money on demand or at a particular time. Importantly, a promissory note is not a bilateral contract whereby promises are swapped between the parties.

It is clear from the Loan Agreement that it is a bilateral contract requiring both the Bank and Defendant to fulfil certain promises made in the agreement. At its simplest, the Loan Agreement constitutes a promise by the Bank to loan the Defendant $160,570.81 in exchange for the Defendant promising to repay that money plus interest, as well as the Defendant providing security for the loan by way of a mortgage over the Property. I would also note the Loan Agreement was signed by both the Defendant and on behalf of the Bank by one of the Bank’s branch managers. The Loan Agreement cannot be characterised as a promissory note. In any event, it is clear from its terms that the Loan Agreement was not a promissory note.

I reject the Defendant’s assertion in her Defence that the Bank exchanged ‘one form of money for another’ by exchanging the alleged promissory note for the money the Bank loaned the Defendant. A promissory note is not money, it is merely a promise to pay. A promissory note may create a legal obligation to pay, but that does not mean it is in and of itself the payment, especially in circumstances where it is not drawn on any reputable or substantial financial institution.[57] As Justice Garling of the NSW Supreme Court stated in ANZ v Evans:[58]

A promissory note may, in the hands of the holder, be of some value because it may be able to be negotiated by endorsement to a third party. However, that does not mean that the proffering of a promissory note is the equivalent of a payment in cash.

[57]See Sanders (n 15), [65]-[70].

[58]ANZ v Evans (n 56), [47].

For the reasons set out above, I do not consider a defence based on the Loan Agreement being a promissory note which was exchanged for the money loaned by the Bank has real prospects of success. I also note for completeness that it is inconsistent with the Defendant’s assertions that she was not loaned money but was merely given credit.

Previous Loans to the Defendant
The Defendant’s material

In the Grahame Affidavit the Defendant says that there have been a number of loan agreements between her and the Bank. These included one in May 2014 (loan number 0021322631/6601), one in May 2015 (loan number 0021322631/6701), one in August 2015 (loan number 0021322631/6702) and one in November 2016 (loan number 0021322631/6602).[59]
[59]Grahame Affidavit, [1]-[3].

In her Defence, the Defendant states:[60]

The [Defendant] says that account number 699466116 was only one of several which is associated with the alleged loan. The [Defendant] first entered into a contract with the Bank in 2014 and the contract was varied three times after that. The foundation portion of the “loan” number remained the same (that is, 0021322631), however the Bank allocated a new account number with each variation of the contract.
The [Defendant] says that paragraph 2 of the Bank’s statement of claim is incomplete in that it fails to disclose any other accounts held either now or previously by the Bank in which the alleged loan was conducted. In particular, the Bank does not disclose the accounts which hold or have held amounts deposited by the [Defendant] in relation to the various iterations of the contract.

The Bank’s submission

[60]Defence, [2](d)-(e) (emphasis added).

In oral submissions the Bank submitted that the fact there had been earlier loans made to the Defendant by the Bank were ‘of no consequence because what is being sued upon here is the mortgage’ and that in both the Initial Loan Agreement and the Variation Agreement there is a requirement to provide security in the form of the Mortgage over the Property.[61] Further, the Initial Loan Agreement was a new contract and not a variation of any earlier contract, and it is this, along with the subsequent Variation Agreement, which is also being sued upon.

Analysis

[61]Transcript, 14.8-14.19.

From the Defendant’s material it appears that she asserts that all loan agreements since the first loan in May 2014 have been variations to what she describes as the ‘foundational loan’, and that as such all these agreements need to be read together. To support this assertion, the Defendant seems to have put a great deal of weight on the fact that all of the various loan agreements between the Bank and the Defendant share the same first ten digits, being 0021322631. She seeks to infer that the various loan agreements are in fact part of one loan agreement. Other than this, the Defendant has not provided any evidence to support this claim.

However, from a reading of the Initial Loan Agreement it is clear that it is a new stand-alone contract, not a variation to any of previous loan agreements. In her affidavit, the Defendant acknowledges as much, stating that whenever the arrangement was amended ‘a new contract [was] entered into’.[62] Further evidence of this can be found in the Defendant’s acknowledgment that ‘the Bank allocated a new account number with each variation of the contract’ a statement which is supported by Defendant’s bank statements for this loan,[63] although I do not accept her characterisation of these as a variation of the contract.
[62]Grahame Affidavit, [2].
[63]Defence, [2](d); Peace Affidavit, [9]; Exhibit KJP‑6; Exhibit KJP-7.

The fact that the various loan agreements may have shared the same initial ten digits is irrelevant. The Bank’s SOC concerns only the November 2016 agreement loan number 0021322631/6602 (ie the Initial Loan Agreement) which was varied in 2017 by the Variation Agreement and not any previous loan agreement, and the Loan Agreement is the only agreement (along with the Mortgage) that the Bank seeks to enforce in this proceeding.

For the reasons set out above, I do not consider a defence based on there being previous contracts between the Defendant and the Bank as having real prospects of success. I also note that the Defendant does not articulate how her proposition that there was only one contract or arrangement gives rise to a defence. I do not see how it does.

The Loan Agreement is void and/or unenforceable
The Bank agreed it was void
The Defendant’s material

The Defendant relies on numerous pieces of correspondence between her and the Bank, commencing in January 2018. In summary, her letters to the Bank make various assertions as to the invalidity of the Loan Agreement and Mortgage, and say that if she is not provided with documentation by certain dates that prove the Loan Agreement and Mortgage were lawful, then they would be regarded as unlawful and the Bank will be taken to have agreed with that. The Bank’s responses confirm its position that the relevant contracts were legally binding and lawful. I set this out in more detail below.

In her Defence the Defendant states:[64]

The Bank has admitted to the [Defendant] through tacit acquiescence that the contract was not a loan.
…
The [Defendant] admits that she mortgaged the land to the Bank, however the [Defendant] denies that a genuine “loan agreement” existed. The [Defendant] says that the contract is unlawful and void, and that the Bank agreed with this claim through tacit acquiescence. The [Defendant] says that her obligations under the contract are therefore not binding.

[64]Defence, [2](c), [6] (emphasis added).

The Defendant’s position in this regard is further explained in the Grahame Affidavit. The Defendant explains that in a letter to the Bank dated 28 January 2018 (‘28 January Letter’), she stated that:[65]

If Bendigo Bank does not satisfactorily and substantially provide the information and documentation requested in the above five points,[66] the home loan agreement between myself and Bendigo Bank becomes no longer mutually binding, and will be deemed null and void. In that circumstance, I request that Bendigo Bank rescind the loan, cancel the debt, discharge the mortgage, and post to me the Certificate of Title for the [Property].

[65]Grahame Affidavit, [9]; Exhibit A.

[66]The five points referred to here were a reference to her request that the Bank provide her within 30 days a copy of the complete loan application form that was relied upon as the basis for the Loan Agreement and any credit-related insurance contract; a copy of any agreement between the Bank and any third party which may have an interest in the Loan Agreement or the Property; documentation that proves the Bank loaned her money which it already had in its possession and did not just create credit by way of a bookkeeping entry; documentation that shows the Loan Agreement was fair and that neither party had a particularly greater advantage or risk than the other party; and an explanation as to who holds the title to the Property and, if it is the Bank, why they are not responsible for the payment of council rates and insurance while it is in their possession.

The Bank replied to the 28 January Letter in a letter dated 8 February 2018 in which it stated, amongst other things, that the ‘[t]he loan contract is a legally binding document’.[67] In the Grahame Affidavit the Defendant says she took this response to mean the Bank regarded the contract as lawful and therefore legally binding.[68] The Bank also stated in that letter that it ‘has declined your request to rescind the loan, cancel the debt and discharge the mortgage.’[69] Following this letter, the Defendant sent a further letter to the Bank on 19 February 2018 (‘19 February Letter’) which stated, amongst other things:[70]

If Bendigo Bank provides to me by 27 February 2018 substantial documentary evidence that proves the home loan contract is lawful, then I shall pay any outstanding loan repayments and the contract shall be legally binding on both parties.
If Bendigo Bank does not provide to me by 27 February 2018 substantial documentary evidence that proves the home loan contract is lawful, then my assertion that it is unlawful stands as true, and it will be presumed that both parties agree that the contract is unlawful and therefore null and void. In that instance, I require Bendigo Bank to cancel all debts pertaining to the unlawful home loan contract, discharge the mortgage, and post to me the Certificate of Title for the [Property] along with documentary evidence that the debt has been cancelled and the mortgage discharged all by 6 March 2018.

[67]Grahame Affidavit, [12]; Exhibit B.

[68]Grahame Affidavit, [12].

[69]Exhibit KJP-13.

[70]Grahame Affidavit, [14]; Exhibit C (emphasis added).

In a response to the 19 February Letter, the Bank sent a letter dated 26 February 2018 in which it reiterated that ‘[t]he Bank has provided to you a copy of your Letter of Offer which is a legally binding contract and therefore, to use your words, a lawful document’.[71] Despite this, the Defendant was of the view that the Bank had not proven the Loan Agreement was ‘lawful’ and in a letter dated 13 March 2019 the Defendant sent a letter to the Bank’s CEO stating, amongst other things:[72]

6 March 2018 has come and gone and I have not received any documentation from Bendigo Bank demonstrating that the home loan is lawful, therefore it is understood that Bendigo Bank has agreed that it is unlawful.

The Bank’s submission

[71]Grahame Affidavit, [19]; Exhibit E.

[72]Grahame Affidavit, [21]; Exhibit F (emphasis added).

The Bank submitted that by the correspondence summarised above, the Defendant sought to impose unilateral new contractual terms in either the Mortgage or Loan Agreement, and that the Bank was aware of no legal basis to support such an imposition and the Defendant had failed to provide any.[73] The Bank further submitted that it had clearly set out in its responses to the Defendant’s correspondence its position that the Loan Agreement and Mortgage were legally binding and lawful, and that it could not be said that the Bank had agreed with the Defendant that they were not or that it had acquiesced to her proposition.[74]

Analysis

[73]Transcript, 16.1-17.4.

[74]Transcript, 32.21-33.25.

From the correspondence between the Defendant and the Bank it is clear that the Bank did not acquiesce, tacitly or otherwise, to the Defendant’s assertion that the Loan Agreement and/or Mortgage were unlawful, in fact the Bank clearly asserted that the Loan Agreement and/or Mortgage were legally binding and provided copies of the documents.[75]
[75]Grahame Affidavit, [12], [19]; Exhibit B; Exhibit E.

Regardless, unsurprisingly there are no terms in either the Loan Agreement or Mortgage which require the Bank to prove to the Defendant’s satisfaction that they are lawful, failing which they are null and void. These would be new terms. The manner in which the Defendant seeks to unilaterally impose these new contractual terms on the Bank without the Bank’s agreement has no legal basis. Similarly there is no statutory or common law requirement for the Bank to prove, to the Defendant’s satisfaction or otherwise, that the Loan Agreement or Mortgage are lawful, failing which they are null and void.

For the reasons set out above, I do not consider a defence based on the Bank failing to prove to the Defendant’s satisfaction that the Loan Agreement or Mortgage are lawful or that the Bank acquiesced that they are unlawful and therefore null and void has real prospects of success. Rather, I consider such a defence to be spurious.

The Loan Agreement was an unfair standard form contract
The Defendant’s material

In her Defence the Defendant states:[76]
[76]Defence, [17].

The [Defendant] says that the contract is unenforceable.
a)The contract was a standard form contract. As the creator of the standard form contract, the Bank had a responsibility to ensure the contract was fair and did not take unfair advantage of a customer (see sections 23 and 24 of the Australian Consumer Law).

b)The contract is grossly unfair. The Bank takes virtually no risk and the [Defendant] bears the huge risk of potentially losing her home. Further, the contract was such that the obligations of the Bank were minimal compared to that of the [Defendant]. The Bank provided to the [Defendant] the service of exchanging one form of money for another (an administrative task requiring little time and effort) whilst the [Defendant]’s obligation was to provide vast sums of money to the Bank over many years.

The Bank’s submission

The Bank submitted that the Defendant has merely asserted that the contract is unfair and has failed to provide any legal basis for this claim, By way of example, the Bank says there is no basis for a contention that the terms of the Loan Agreement constitute a penalty.[77]

Analysis

[77]Transcript, 17.3-18.6.

The Australian Consumer Law (‘ACL’) is contained in Schedule 2 to the Competition and Consumer Act 2010 (Cth) . Section 131A of the Competition and Consumer Act 2010 (Cth) provides that the ACL does not apply ‘to the supply, or possible supply, of services that are financial services, or of financial products’ other in relation to certain circumstances (such as gift cards).[78] Therefore ss 23 and 24 of the ACL do not apply to the Loan Agreement.
[78]Competition and Consumer Act 2010.

Despite this I have also considered whether the Defendant may have a defence under the relevantly identical unfair contract provisions of the Australian Securities and Investment Commission Act 2001 (Cth) (‘ASIC Act’) which do apply to financial products.

Section 12BF of the ASIC Act provides:[79]
[79]ASIC Act, s 12BF.

(1) A term of a consumer contract or small business contract is void if:
(a)       the term is unfair; and
(b)       the contract is a standard form contract; and
(c)       the contract is:
(i)       a financial product; or
(ii)a contract for the supply, or possible supply, of services that are financial services.

Section 12BG of the ASIC Act defines the meaning of unfair as:[80]

(1) A term of a contract referred to in subsection 12BF(1) is unfair if:
(a)it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and
(b)it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
(c)it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

[80]ASIC Act, s 12BG.

Sections 12BG(2) - (3) of the ASIC Act provide that in determining whether a contract term is unfair, the Court may have regard to the contract as whole and the extent to which the term is transparent (expressed in reasonably plain language, legible, etc).[81]
[81]See s 12BG(3) of the ASIC Act.

The Defendant has not identified any specific term(s) in the Loan Agreement which she says are unfair. Instead, she asserts the entire Loan Agreement is unfair. This assertion appears to be based on the Defendant’s misapprehension that the Bank merely exchanged a promissory note (which the Defendant says was the Loan Agreement) for the money loaned. As the Defendant puts it:[82]

The Bank provided to the [Defendant] the service of exchanging one form of money for another (an administrative task requiring little time and effort) whilst the [Defendant]’s obligation was to provide vast sums of money to the Bank over many years.

[82]Defence, [17].

The fact that the Defendant would have to ‘provide vast sums of money’ to the Bank while the Bank merely performed an ‘administrative task requiring little time and effort’ assumedly would constitute the ‘significant imbalance in the parties’ rights and obligations arising under the contract’ as required by s 12BG(1)(a) the ASIC Act. However, I have already found that defences based on the Loan Agreement being a promissory note which paid the Bank, or that the Bank exchanged it for created ‘credit’, or that the Loan Agreement was not a loan have no real prospects of success. Similarly, I consider that a defence based on the Loan Agreement being an unfair contract for those same reasons has no real prospects of success. The Defendant has not proffered any reasons which I consider would make the Loan Agreement unfair, within the meaning of the relevant legislation or otherwise.

Misleading and Deceptive Conduct
The Defendant’s material

In her Counterclaim the Defendant says the Bank has engaged in misleading and deceptive conduct by describing the arrangement under the Loan Agreement as a ‘loan’, when the Defendant says was not a ‘loan’ but an ‘exchange’, whereby the Bank exchanged the Defendant’s promissory note for ‘credit’.[83]
[83]Counterclaim, [8]-[16].

As the Defendant puts it:[84]
[84]Counterclaim, [8].

The Bank falsely represented that the contract was or is a loan.
(a)The Bank made the express representation that the contract arrangement is a “loan” in its information, website, advertising material, and in the contract documents signed by the [Defendant]. The Bank also refers to the contract as a “loan agreement” in its statement of claim to the Supreme Court.
(b)The meaning of the term “loan” is clear and unambiguous. It means to lend something temporarily and, by logical inference, a lender must first possess the thing in order to be able to lend it.
(c)The [Defendant] entered into the contract on the understanding that the arrangement was a loan where the Bank was lending money it possessed in its own stores, such as the deposits of other customers.
(d)The contract arrangement was not a loan. The Bank did not loan any money it already had in its possession and stores. Instead, the arrangement involved an exchange of one type of currency for another - that is, the [Defendant] gave the Bank a promissory note and the Bank gave the [Defendant] credit.

…
(f)The Bank engaged in misleading and deceptive conduct by describing the contract arrangement as a loan when it was not a loan. The Bank thereby contravened section 18 of the Australian Consumer Law, section 1041E(1) of the Corporations Act 2001, section 12DA(1) of the ASIC Act 2001, and section 160D of the National Consumer Credit Protection Act 2009.

The Bank’s submission

The Bank submitted that there is no obligation under the Loan Agreement to identify the source of the monies being advanced.[85] Further, it relied on its submissions discussed earlier (see paragraph [36] above) that it is clear that money was advanced to the Defendant, and that any proposition that the provision of credit was a mere bookkeeping exercise has been thoroughly dealt with and rejected by the courts.[86]

Analysis

[85]Transcript, 19.5-19.14.

[86]Peace Affidavit, [9]-[10]; Exhibit KJP-7; Exhibit KJP-8. Transcript, 10.31-11.5; NAB v Walter (n 44), [242]-[245]; NAB v McFarlane (n 44), [7]; Smart v ANZ (n 44), [20]-[22].

For the reasons discussed earlier, I do not consider the Defendant’s defence that the Bank created credit, or exchanged a promissory note for credit, or that the Loan Agreement was not a loan, as having real prospect of success. For the same reasons I do not consider that a defence or counterclaim that the Bank engaged in misleading and deceptive conduct by describing the Loan Agreement as ‘loan’ as having any real prospect of success. Plainly, the Loan Agreement was a loan and it is sophistry and fanciful to contend otherwise. That being so, the Bank’s description of it as a loan is not misleading or deceptive or likely to mislead or deceive.

Unconscionable Conduct
The Defendant’s material

In her Defence and Counterclaim the Defendant claims the Bank engaged in unconscionable conduct by reason of the same alleged conduct discussed above, namely that the Bank did not loan the Defendant ‘money’ (either its own or deposited by other customers) but loaned the Defendant ‘credit’, which it created in a bookkeeping entry by exchanging the Defendant’s promissory note (i.e.: the Loan Agreement) for the ‘credit’.[87] This conduct is said to be unconscionable on a number of bases, including:
[87]Counterclaim, [17]-[24].

(a) the Bank deliberately misled the customer to procure financial gain;[88]
[88]Counterclaim, [18].

(b) the Bank required the Defendant to provide security for the Loan Agreement when it had taken no risk;[89]
[89]Counterclaim, [19].

(c) the Bank failed to disclose to the Defendant the true nature and characteristic of the ‘loan’;[90]
[90]Counterclaim, [20].

(d) the Loan Agreement was a standard form contract which is extremely unfair and one sided, as the Bank took no risk but the Defendant could lose her home;[91]

(e) the Bank took advantage of the Defendant’s then lack of knowledge of where the Bank would get the money for the loan;[92] and

(f) the Bank charged the Defendant interest, despite not loaning its own money and taking no risk.[93]

[91]Counterclaim, [21].

[92]Counterclaim, [22].

[93]Defence, [11].

Further, the Defendant claims that the Bank’s conduct was unconscionable by attempting to ‘frighten and intimidate the [Defendant] into complying with its unlawful demand’,[94] and by retaining the money paid by the Defendant toward the loan account.[95] This latter claim is discussed below (see paragraph [125]).
[94]Counterclaim. [24].
[95]Counterclaim, [23].

The Defendant says this unconscionable conduct contravenes s 21 of the ACL, s 991A(1) of the Corporations Act 2001 (Cth) and d 12CB(1)(a) of the ASIC Act.[96]

The Bank’s submission

[96]Counterclaim, [17].

The Bank relied on its submissions discussed earlier (see paragraph [36] above) that it is clear that money was advanced to the Defendant, and that any proposition that the provision of credit was a mere bookkeeping exercise has been thoroughly dealt with and rejected by the courts.[97]
[97]Peace Affidavit, [9]-[10]; Exhibit KJP-7; Exhibit KJP-8. Transcript, 10.31-11.5; NAB v Walter (n 44), [242]-[245]; NAB v McFarlane (n 44), [7]; Smart v ANZ (n 44), [20]-[22].

Further, the Bank submitted that there was nothing to support an unconscionable conduct claim under the relevant legislation or under well-known authorities such as Commercial Bank of Australia v Amadio,[98] or Garcia v National Australia Bank Ltd,[99] as the Defendant has not pleaded that she was at any special disadvantage as described by those cases.[100]
[98](1983) 151 CLR 447.
[99](1998) 194 CLR 395.
[100]Transcript, 19.25-20.16; NAB v Walter (n 44), [338]-[372].

The Bank also submitted that the Defendant had failed to identify how the Loan Agreement was unfair,[101] and there is no basis for the Defendant’s allegation of concealment.[102] Additionally, the Bank rejected the Defendant’s assertion that it had engaged in any conduct of attempting to frighten or intimidate the Defendant into complying with its demand for payment and said that the correspondence from the Bank to the Defendant as exhibited to the Peace Affidavit spoke for itself.[103]

Analysis

[101]Transcript, 24.15-25.12.

[102]Transcript, 25.3-25.12.

[103]Transcript, 25.12-25.26.

There is nothing in the Defendant’s material to suggest that she was under any duress, special disadvantage or special disability when entering into the Loan Agreement, or that the Bank exerted undue influence on the Defendant.[104] Given this, the Defendant’s unconscionable conduct claims rest primarily on her claims that the Bank loaned her credit instead of money. How this translates into a special disadvantage, or any other condition which would give rise to the possibility of unconscionable conduct, is not set out or supported by the material. For the reasons discussed earlier, I do not consider the Defendant’s claim that the Bank created credit, or exchanged a promissory note for credit, or that the Loan Agreement was not a loan, as having any real prospect of success, and for the same reasons I do not consider any unconscionable conduct claim based on this as having any real prospects of success. Further, none of the necessary elements of an unconscionable conduct claim arise on any of the evidence (or pleadings) in this case.
[104]NAB v Walter (n 44), [338]-[372]; Sanders (n 15) [77]-[81].

In relation to the Defendant’s claims that the Bank engaged in unconscionable conduct by attempting to ‘frighten and intimidate the [Defendant] into complying with its unlawful demand’,[105] from a review of the correspondence from the Bank to the Defendant there is nothing to support the claim that the Bank sought to frighten or intimidate the Defendant. The Bank merely informed the Defendant on a number of occasions that she was in default, made demands for payment, and subsequently informed her that it will have no choice but to commence legal action against her if the Default was not remedied. I do not consider the Defendant’s claim as having any real prospect of success.[106]
[105]Counterclaim. [24].
[106]Peace Affidavit, Exhibit KJP-11; Exhibit KJP-13; Grahame Affidavit, Exhibit B; Exhibit E; Exhibit I; Exhibit L; Exhibit N.

Non est factum
The Defendant’s material

In her Defence the Defendant states:[107]

The [Defendant] says that the contract is unenforceable.
…
(e)The Bank engaged in unconscionable behaviour, taking advantage of the [Defendant]’s lack of knowledge and understanding of banking practices for its own financial benefit. In particular, the Bank had knowledge of how new money is created to fund a “loan”. The Bank could reasonably have assumed the [Defendant] did not have such knowledge.
(f)The [Defendant] pleads “non est factum” - the agreement is invalid and unenforceable because the [Defendant] was mistaken about the character of the agreement when signing it.

[107]Defence, [17(d)-(f)].

The Defendant does not further explain or particularise this in any of her material.

The Bank’s submission

The Bank submitted the Defendant has failed to set out the elements of such a defence or provide evidence to establish them.[108]

Analysis

[108]Bank’s Submissions, [19(iii)].

Non est factum (Latin for ‘it is not [my] deed’) is a defence available in very limited circumstances. The High Court in Petelin v Cullen[109] set out the limits of who this defence may apply to, stating that:[110]

The class of persons who can avail themselves of the defence is limited. It is available to those who are unable to read owing to blindness or illiteracy and who must rely on others for advice as to what they are signing; it is also available to those who through no fault of their own are unable to have any understanding of the purport of a particular document.

[109](1975) 132 CLR 355 (Petelin v Cullen).

[110]Petelin v Cullen (n 109) [12].

The Defendant in this proceeding is not blind or illiterate and from the material filed and oral submissions made is evidently fluent in English. There is also no evidence to suggest she was unable to understand the purport of the relevant agreements. Further, both the Initial Loan Agreement and Variation Agreement contained terms that the Defendant by signing acknowledged that she had read the documents.[111] The Defendant has provided no material as to how she would fall into any of the classes identified in Petelin v Cullen.
[111]Peace Affidavit, [6]; Exhibit KJP-4; Peace Affidavit, [7]; Exhibit KJP-5.

Further, the High Court also stated:[112]

To make out the defence a defendant must show that he signed the document in the belief that it was radically different from what it was in fact and that, at least as against innocent persons, his failure to read and understand it was not due to carelessness on his part. Finally, it is accepted that there is a heavy onus on a defendant who seeks to establish the defence.

[112]Petelin v Cullen (n 109) [12] (emphasis added).

From the Defendant’s material it would appear (although it is not entirely clear) that she is alleging that she was mistaken about the character of the Loan Agreement when signing, in that she thought the Bank was lending her money it already had in its possession, something the Defendant says did not happen. Instead the Defendant says the Bank created credit which it loaned to her. As discussed earlier, I do not accept a defence based on this proposition as having any real prospect of success. However, even if this was accepted, the Defendant has failed to show how this would be ‘radically different’ to being loaned money in the Bank’s possession, in circumstances where the Defendant still had the use and benefit of it.

For the reasons outlined above, I do not consider a defence of non est factum as having any real prospects of success.

The Loan Agreement/Mortgage are not enforceable against the Defendant
The Defendant has a secured interest in the Property which takes priority
The Defendant’s material

In response to paragraph 14 of the SOC, in which the Bank pleads it is entitled to possession of the Property pursuant to the terms of the Mortgage, the Defendant in her Defence says:[113]

The [Defendant], Heather Jean Grahame, has entered into a security agreement with the trading entity HEATHER JEAN GRAHAME and a copy of this security agreement was attached to a Uniform Commercial Code (UCC) financing statement which was filed on an international commercial noticeboard based in Washington, DC on 25 July 2018. The [Defendant] says that the living person, Heather Jean Grahame, therefore has the highest legal claim on all property held in the name of the trading entity HEATHER JEAN GRAHAME which includes the land listed on the mortgage.

[113]Defence, [14(c)].

There is no further reference to ‘HEATHER JEAN GRAHAME’ being a distinct legal entity from the Defendant in the Defence or Counterclaim, but the Defendant explains in her affidavit how she says this self-described security interest came about, stating:

The registered sole proprietor of the [Property] is the corporation/trading entity HEATHER JEAN GRAHAME.[114]
…
On 25 July 2018, I entered into a security agreement with the entity HEATHER JEAN GRAHAME and attached this security agreement to a UCC (Uniform Commercial Code) financing statement which was filed in the UCC office at Washington, DC. I also included as collateral on this filing the birth certificate, registration number 55486/1968, which I had accepted for value. The file number for that financing statement is 2018-206-1183-8. A copy of that UCC financing statement and the security agreement is attached (Exhibit V). The signatures on the security agreement have become extremely faint due to the numerous scans and copies made of the document, however the original document is signed by both parties.[115]
…
Having completed a security agreement between myself, Heather Jean Grahame, and the corporate entity HEATHER JEAN GRAHAME, I am therefore the secured creditor of all property held in the name of HEATHER JEAN GRAHAME. This includes, but is not limited to, any registered land and bank accounts.[116]
…
I am the secured creditor of the [Property], and, as such, my claim is superior to that of the plaintiff.[117]

[114]Grahame Affidavit, [4].

[115]Grahame Affidavit, [47].

[116]Grahame Affidavit, [49].

[117]Grahame Affidavit, [55].

Exhibit V to the Grahame Affidavit contains this purported security agreement (‘Purported Security Agreement’), which reads:[118]
[118]Grahame Affidavit, Exhibit V.

SECURITY AGREEMENT
Number: HJG001
NON-NEGOTIABLE Date: 25 July 2018
All Property of HEATHER JEAN GRAHAME (or any derivative thereof), Debtor, of [the Property] is hereby property and security of the Secured Party, Heather Jean Grahame of c/o P.O. Box 46, Warburton, Victoria [3799], Australia, and before any of the following property can be exchanged, sold, tendered or any manner disposed of must be compensated to the Secured Party for the property. This property now owned and hereafter acquired includes, but not limited to, proceeds, products, accounts and fixtures held by HEATHER JEAN GRAHAME. Any property not specifically listed, named or listed is included in the same.

The Debtor agrees to notify all employers and creditors of the same, as all Debtor’s property is of this date property of the Secured Party.
This privately held security agreement is not dischargeable in bankruptcy court as the property of the Secured Party is exempt from levy.
The Secured Party accepts all signatures.

The Purported Security Agreement also contains a signature block for the ‘Debtor’ and ‘Secured Party’, which appears unsigned in the copy filed. This may be due to it being unreadable due to the numerous copies made by the Defendant (as she says in her affidavit). The Defendant does not explain in her affidavit who signed on behalf of ‘HEATHER JEAN GRAHAME’.

Further, the Defendant says that when she signed the Mortgage, she did so in front of Mr Adam Whitworth, who she describes as the manager of the Yarra Junction branch of the Bank. She says that at the time:[119]

Mr Whitworth told me that I must write my name in all-capital letters on the contract. At the time, I asked Mr Whitworth why that was necessary and he was unable to provide me with an explanation other than to say it was a requirement of the bank. I have subsequently become aware that by providing my signature together with my name in all-capital letters, I am unknowingly agreeing to be the surety for the debts of the corporate entity HEATHER JEAN GRAHAME. The bank failed to disclose this relevant information to me when I entered into the contract.

[119]Grahame Affidavit, [6].

I note that the words ‘HEATHER JEAN GRAHAME’ are typed on the Mortgage in all capital letters and then the signature is ‘H Grahame’.[120] I also note that the same combination appears on the Initial Loan Agreement and the Variation Agreement.[121]

The Bank’s submission

[120]Exhibit KJP-9.

[121]Exhibits KJP-4 and KJP-5 respectively.

The Bank submitted that to the extent there is any legal basis for the Purported Security Agreement between the Defendant’s capitalised name and the Defendant, such an agreement is not permitted under the Mortgage,[122] as clause 12.6 of the MCP provides:

You may not assign or transfer any of your rights or obligations under this mortgage without our prior written consent.[123]

[122]Transcript, 15.6-15.30.

[123]MCP, cl 12.6.

The Bank submitted that nowhere in the Defendant’s material had she alleged, let alone proved, that she had obtained such a consent from the Bank.[124]

Analysis

[124]Transcript, 15.6-15.30.

As far as I understand the Defendant’s position, there are two distinct legal persons involved in the transaction with the Bank, being the Defendant as an individual person and a corporate entity, the latter of which is spelt in all capitals, i.e. ‘HEATHER JEAN GRAHAME’.

When the Defendant was asked about the basis for the proposition that her name when spelled in all capitals, was a corporation and/or a trading entity, the Defendant acknowledged she couldn’t provide any authorities to support the proposition, and said that it was information she had come across in her personal research.[125] She did not elaborate on what this personal research was. I am not aware of any authorities or laws which would establish this. In my opinion, there is no basis for this defence and it is nonsensical. Whether the Defendant’s name is spelled in capitals or not, it clearly refers to the same person, being the Defendant, and the notion that a person’s name when spelled all in capitals refers to some distinct corporate (or trading) entity is arrant nonsense.
[125]Transcript, 30.16-30.25.

Even if this was not the case, it is clear from the Mortgage which the Defendant signed in 2015, which incorporated the MCP, that the Defendant would have required the Bank’s prior written consent prior to effecting any such assignment or transfer, which the Defendant clearly did not have in 2018 when she executed the Purported Security Agreement. Additionally, the Defendant does not address how she says the 2018 Purported Security Agreement would take priority over the Bank’s 2015 registered Mortgage.

For the reasons set out above, I do not consider this defence to have any real prospects of success, including a defence that the property is owned by a corporate entity and that that entity gave the Defendant a security interest in the property.

Reversion on Defendant’s birth certificate
The Defendant’s material

Although not contained in her Defence or Counterclaim, in her affidavit the Defendant states that:

In the letter dated 18 November 2018, I inform the [Bank] that I have completed a UCC financing statement and an assignment of reversionary interest of the corporate entity HEATHER JEAN GRAHAME, thereby assigning all debts of the corporate entity to the Department of Treasury. [126]
…
Having completed an assignment of reversionary interest on the birth certificate bond in the name of Heather Jean GRAHAME, I am not liable for any debts in the name of the corporation/trading entity HEATHER JEAN GRAHAME, therefore I am not liable for any loan debt in the name of HEATHER JEAN GRAHAME that the [Bank] may allege.
I performed an acceptance for value on the loan account statement in the amount of $166,381.53 on 18 November 2018, and informed the [Bank] that I had done so. The [Bank] is therefore aware that it will, in due course, receive these funds from the Australian Treasury. [127]

[126]Grahame Affidavit, [40].

[127]Grahame Affidavit, [56]-[57].

The Defendant’s 18 November 2018 letter to the Bank, referred to above, states amongst other things:[128]

Please find enclosed a copy of a bank statement for loan account number 699466116 in the amount of $166,381.53 which has been accepted for value. The original of this document has been posted to the Department of Treasury, Canberra.
The outstanding debt of that loan account in the name of corporate entity HEATHER JEAN GRAHAME is thus to be offset by the credit of the trust which was created at my birth. That trust is the result of the government creating a birth certificate and using that certificate to issue bonds worth millions of dollars. Those bonds are backed by the pledge of my future labour and Income-earning capacity, an arrangement which was not disclosed to either myself of my parents.
As a living being, it is my labour upon which those bonds and credit were issued and therefore I have the authority to direct that a debt in the name of the corporate entity be offset with credit of the associated trust.

[128]Grahame Affidavit, Exhibit T.

In her written submissions, the Defendant stated:[129]

The [Defendant] has performed an assignment of reversionary interest on birth certificate, registration number 55486/1968, thereby assigning all debts in the name of HEATHER JEAN GRAHAME to the Australian Department of the Treasury.

The Bank’s submission

[129]Defendant’s Submissions, [13(iv)].

The Bank noted that this claim was made in the Grahame Affidavit and not in the Defence or Counterclaim, and submitted that such a claim was ‘utterly devoid of merit and nonsensical’.[130]

Analysis

[130]Bank’s Submissions, [19(vi)].

As far as I understand the Defendant’s position as set out above, when she was born the government issued her with a birth certificate. She does not state whether this was the Commonwealth government or a state/territory government. The government then used this birth certificate to issue bonds, supposedly worth millions of dollars, backed by her future labour and income. This also created some kind of trust relationship between the government and the Defendant, which the Defendant says the corporate entity HEATHER JEAN GRAHAME had a reversionary interest in (what has to occur before this interest in the trust reverts is unclear). The Defendant then assigned this reversionary interest, which she says was in the birth certificate, to the Department of Treasury. The Defendant then says that this means the Department of Treasury will pay the debt owed to the Bank from the credit in this trust.

When asked at the hearing whether the Defendant had any basis that was known to the law for the proposition that there was a such a reversionary interest in her birth certificate (including with the effect she described), the Defendant said she did not know whether there was any basis known to law as she was not a lawyer, and that she had come across the proposition in her own research.[131] Again, no further detail was provided.
[131]Transcript, 30.18-31.12.

In my opinion there is no basis for the Defendant’s proposition. The idea that a government issues bonds on a person’s birth certificate which then forms the basis of some kind of trust is fanciful. It is also fanciful to suggest that the Defendant can somehow pass on the liability for her debts to a government department in the way she describes. These assertions are nonsensical, unknown to the law and in my opinion have no real prospect of success as either a defence or a counterclaim.

Invoices sent to Bank
The Defendant’s material

In summary, the Defendant claims that as the Bank did not provide her with documentary material that the Loan Agreement and Mortgage were valid and did not then cancel the debt and discharge the Mortgage, then by reason of the assertions in her correspondence to the Bank she is entitled to charge the Bank a considerable amount of money (in excess of $1.2m), which the Bank is allegedly liable to pay. She also says that she is entitled to charge the Bank additional amounts. I set out these arguments in more detail below.

In her Counterclaim, the Defendant states:[132]

The [Defendant] sent a letter to the Bank, dated 19 February 2018 … In the letter, the [Defendant] informed that Bank that if, on 27 February 2018, the contract is deemed unlawful and the Bank continues to act dishonourably by not cancelling the debt and discharging the mortgage by 6 March 2018, that the [Defendant] would issue the Bank with a claim and fine of $1,298,665.90. The [Defendant] also informed the Bank that if the Bank did not pay this claim and fine by the due date, that a fee of $1000 per day would be charged for each day beyond the due date that the claim and fine remained outstanding. The [Defendant] stated that the Bank could avoid these financial penalties by either providing documentary evidence showing that the contract was lawful and fair or, alternatively, cancelling the debt and discharging the mortgage.
The [Defendant] sent a letter to Mike Hirst, CEO and Managing Director, dated 13 March 2018. The letter reiterated that the Bank would be issued with a claim and fine of $1,298,665.90 if it did not cancel all debts pertaining to the contract and discharge the mortgage, and the [Defendant] extended the due date for this performance to 23 March 2018. In the letter the [Defendant] also informed the Bank that, as the Bank had tacitly agreed the contract was unlawful, any subsequent correspondence suggesting that the [Defendant] owes money in regard to the contract will be regarded as harassment and the [Defendant] will issue the Bank with a $200 fine for each occasion it requests or demands money from the [Defendant].
The [Defendant] received no response to the letter to Mike Hirst dated 13 March 2018. So on 27 March 2018 the [Defendant] issued the Bank with invoice number 20180327 for $1,298,665.90, due date 27 May 2018. That invoice was posted to Mike Hirst by registered post
The Bank did not pay invoice 20180327 by the due date of 27 May 2018, so from 28 May 2018 to the present day the [Defendant] has issued invoices charging the Bank $1000 per day for not paying invoice 20180327 by the due date.
Between 13 March 2018 and the present day, the [Defendant] has issued the Bank with six invoices, each of $200, for harassing the [Defendant] with requests or demands for payment.

[132]Counterclaim, [1]-[6].

The Defendant further explains in her affidavit that the invoice issued on 27 March 2018, invoice number 20180327, (‘27 March Invoice’) was for a fine of $1,000,000 (‘Initial Fine’) and for a claim of $298,665.90 for reimbursement of all money the Defendant had previously paid to the Bank towards loans with the Bank, including an amount for inflation of $5993.68 (‘27 March Restitution Claim’).[133] Subsequent to the Bank not paying the 27 March Invoice on the due date of 27 May 2018 or at all, the Defendant explains that she sent the Bank further invoices on a weekly basis, charging the Bank a fee of $1,000 per day (‘Daily Fees’) for failing to pay the 27 March Invoice. Additionally, the Defendant explains she has also sent the Bank multiple invoices for $200 harassment fines (‘Harassment Fines’) for the Bank sending her correspondence suggesting that Defendant owes money under the Loan Agreement to the Bank. Based on these invoices, the Defendant states that the Bank currently owes her $1,551,865.90.[134]

The Bank’s submission

[133]Grahame Affidavit, [22], [46]; Exhibit F; Exhibit G.

[134]Grahame Affidavit, [46].

The Bank submitted that it has not entered into any contract or agreement with the Defendant subsequent to the Loan Agreement which would give rise to any obligation for the Bank to pay the Defendant any of the amounts claimed in the invoices, whether they be for fines or fees.[135]

Analysis

[135]Peace Affidavit, [39]; Transcript, 21.23-22.13.

The Defendant can only charge the Bank what she describes as fines, harassment fines or daily fees if she has a contractual right to do so.

Unsurprisingly, the Loan Agreement does not provide for the Defendant to issue such fines or fees, and as discussed above (see paragraph [68]), parties cannot unilaterally impose contracts or contractual terms on other parties. The Defendant did not create, by the terms of her correspondence to the Bank or otherwise, any contracts or contractual terms. As such, the Defendant has no basis for issuing the Initial Fine, Daily Fees or Harassment Fines and I do not consider this counterclaim as having any real prospects of success.

In relation to the 27 March Restitution Claim, I have dealt with this below (see paragraphs [125] to [132]).

Restitution
The Defendant’s material

In her Counterclaim, the Defendant claims:[136]
[136]Counterclaim, [25]-[26].

The [Defendant] first engaged in the “home loan” with the Bank in 2014 (loan number 0021322631/6601). The agreement was amended on three subsequent occasions and a new contract entered into.
…
The [Defendant] is entitled to recover all moneys that have been deposited into all “loan” accounts because:
(a)those amounts exist on the accounts payable side of the Bank’s ledger and are therefore amounts owed to the [Defendant];
(b)those moneys were procured by the Bank through the use of misleading and deceptive statements; and
(c)the Bank has provided the service of exchanging one form of money for another form of money, a service that requires little time and effort by the Bank and does not justify the Bank receiving and retaining such large sums of money.

In the orders sought section of the Defendant’s Defence and Counterclaim (‘Defendant’s Orders Sought’) the Defendant states she seeks:[137]

[R]estitution in the amount of $459,003.75, being the sum total of amounts deposited into the “loan” accounts from 2014 to the present, such restitution being in accordance with sections 237(1) and 243(d) of the Australian Consumer Law, sections 1325(1) and (5)(d) of the Corporations Act 2001, and section 12GF(1) of the ASIC Act 2001.

The Bank’s submission

[137]Defendant’s Orders Sought, [3].

The Bank submitted that there was no proper basis for a restitutionary claim in respect of a loan account where there has clearly been an advance of moneys (or credit) to the defendant.[138]

Analysis

[138]Transcript, 25.24-25.30.

The Defendant’s claim for restitution appears to be based again on the proposition that the Bank was providing a ‘service’ in which it merely exchanged the promissory note (which the Defendant says was the Loan Agreement) for a credit it loaned to the Defendant. Based on this ‘service’ requiring ‘little time and effort’ the Defendant appears to be alleging the Bank has been unjustly enriched by receiving loan repayments made by the Defendant, and as such she seeks to have them restored to her.[139]
[139]Counterclaim, [26(c)].

In her Defence and Counterclaim the Defendant seeks restitution in the amount $459,003.75, which she says is the amount she had paid towards the various loans with the Bank since 2014,[140] while in her 27 March Invoice she sought restitution in the amount of $298,665.90 (which included an amount for inflation of $5993.68).[141] From the description of the $298,665.90 in the 27 March Invoice it would appear the Defendant seeks this amount in relation to the November 2016 loan from the Bank (i.e. the Loan Agreement) and the May 2015 loan (see paragraph [54]), but not the other loans. The Defendant’s Bank statements show the Defendant has only made repayments totalling $12,483 pursuant to the Loan Agreement.[142] She made no attempt to reconcile any of these amounts.
[140]Defendant’s Orders Sought, [3].
[141]Grahame Affidavit, [22], [46]; Exhibit F; Exhibit G. For completeness I note no basis was given for how this amount for inflation was calculated.
[142]Peace Affidavit, [16]; KJP-10.

For the same reasons I have already expressed as to the validity of the Loan Agreement and the Defendant’s defences that there was no loan, I also find that any claim for restitution based on this has no real prospects of success.

Further, in circumstances where the Defendant clearly had the benefit of the money loaned,[143] repayments towards that loan cannot be said to have unjustly enriched the Bank, especially in circumstances where the repayments made of $12,483 fall far short of the principal loaned of $164,400 (being the sum of the Initial Advance of $145,000 and the Loan Increase of $20,400).[144]
[143]Peace Affidavit, [9]-[10]; Exhibit KJP-7; Exhibit KJP-8.
[144]Peace Affidavit, [6], [14]; Exhibit KJP-4; Exhibit KJP-5. $12,483 was the amount repaid by the Defendant pursuant to the Loan Agreement.

For the reasons set out above, I do not consider the counterclaim for restitution as having any real prospects of success.

Non-economic damages for emotional distress
The Defendant’s material

In her counterclaim the Defendant claims non-economic damages for emotional distress.[145] As the Defendant puts it:[146]
[145]Counterclaim, [15], [27]-[30].
[146]Counterclaim, [27]-[30].

Non-economic damages
The [Defendant] was damaged by the misleading and deceptive representations of the Bank, and by the unconscionable conduct of the Bank. Such profound deceit and lack of morality by an organisation which plays a pivotal role in society completely undermines trust between people and a sense of peace and security.
The [Defendant] was led into error by the Bank’s deceptive representations, and unknowingly the [Defendant] agreed to the creation of new money, thereby contributing to inflation and financial stress for the whole community. Had the [Defendant] been aware that new money was created to fund the “loan”, she would not have engaged in such a detrimental scheme.
The [Defendant] experienced great emotional distress as a result of believing she must pay the Bank large sums of money on a regular basis for many years and risked losing her home if she failed to make such payments.
The [Defendant] experienced emotional distress as a result of the Bank’s attempts to intimidate and frighten her after she had informed the Bank that the contract was unlawful. The Bank’s methods in this regard included repeatedly sending notices of default and threats of legal action, arranging for the [Defendant] to be watched as she collected mail from the post office, charging the [Defendant] with extra fees, and initiating proceedings against the [Defendant] in the Supreme Court.

The Bank’s submission

The Bank submitted the Defendant has failed to provide a legal basis for such a claim and the claim is not particularised.[147]

Analysis

[147]Bank’s Submissions, [19(iv)]; Transcript, 25.30-26.11.

Given that I have already found that the Defendant’s misleading and deceptive conduct claim and her claim that the Bank created credit or exchanged a promissory note for credit do not have real prospects of success, I also find that a claim for emotional distress based on these do not have real prospects of success.

In relation to the claims that the Bank attempted to ‘intimidate and frighten her’,[148] as I have said (see paragraphs [89] and [90] above), from a review of the correspondence from the Bank to Defendant, there is nothing to support these claims. In relation to the allegation that the Bank arranged ‘for the [Defendant] to be watched as she collected mail from the post office’,[149] the Defendant has provided no evidence to support this claim. As such I do not consider a claim for emotional distress based on these claims as having any real prospects of success.
[148]Counterclaim, [30].
[149]Counterclaim, [30].

Further I would note the Defendant has not provided any details of any actual damage suffered and the situations in which equity can intervene for emotional distress are very limited.[150]
[150]Giller v Procopets [2008] VSCA 236.

Conclusion

For the reasons set out above I am satisfied that the Bank has established its cause of action, such that it is entitled to enforce the Mortgage over the Property, and further or alternatively, the Bank is entitled to repayment in full of the amount outstanding pursuant to the Loan Agreement, including principal, interest and enforcement costs.

Further, I am also satisfied that the Defendant’s defences and counterclaims as best as can be ascertained from her pleadings and other material have no real prospects of success. I am also satisfied that it is in the interests of justice to summarily dispose of the proceeding.

Accordingly, the Bank’s application for summary judgment, in respect of both the statement of claim and the counterclaim, will be granted.

For the sake of completeness, I will indicate that if it had been necessary to consider the alternative relief sought by the Bank for summary strike out and dismissal under Rule 23, I would have granted it. For all the reasons set out above, I agree with the Bank’s submission that:[151]

by no proper amendment of the pleading can [the Defendant] raise a good defence or, in respect of the Counterclaim, a cause of action against [the Bank] because the Defence and Counterclaim so completely lack foundation in fact or law that no legitimate pleading amendment could save it.

[151]Bank’s Submissions, [11].

I will hear the parties as to the form of orders and as to costs.

[2019] VSC 486

19 July 2019