BMW Australia Finance Limited v Nelson - [2008] WADC 84

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: BMW AUSTRALIA FINANCE LIMITED -v- NELSON [2008] WADC 84

CORAM: KEEN DCJ

HEARD: 19 MAY 2008

DELIVERED : 16 JUNE 2008

FILE NO/S: CIV 556 of 2005

BETWEEN: BMW AUSTRALIA FINANCE LIMITED (ACN 007 101 715)
Plaintiff
AND
GRAHAME BRETT NELSON
Defendant

Catchwords:

Practice and procedure - Appeal against leave to amend statement of claim - Application by defendant for judgment under O 16 Rules of the Supreme Court - Turns on own facts

Legislation:

Hire Purchase Act 1959

Result:

Appeal and application dismissed

Representation:

Counsel:

Plaintiff: Mr R A C Cullen
Defendant: Mr K C Staffa

Solicitors:

Plaintiff: Cullen Babington Hughes
Defendant: Staffa Lawyers

Case(s) referred to in judgment(s):

Australia & New Zealand Banking Group Ltd v Cooper & Anor (1993) 9 WAR 112
Brown v Universal Guarantee Pty Ltd [1968] WAR 23
Bulong Operations Pty Ltd (Receivers and Managers Appointed) (Subject to Deed of Company Arrangement) v ComputerCorp Pty Ltd & Ors [2005] WASC 147
Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491
Custom Credit Corporation Ltd v Van Delft [1965] WAR 237
Esanda Finance Corporation Ltd v Kett (1993) 9 SR (WA) 65
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99
Gair v Smith (1964) VR 814
Glentham Pty Ltd v Luxer Holdings Pty Ltd & Anor [2002] WASC 80
Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365
Mir Bros Projects Pty Ltd v 1924 Pty Ltd [1980] 2 NSWLR 907

KEEN DCJ: This matter arises out of a hire purchase agreement entered into between the plaintiff and the defendant on 21 September 1999 in respect of a 1999 BMW 523i, registration number 90‑DE.
For the purposes of these reasons it is not necessary for me to set out the terms of the hire purchase agreement.
What is now before the Court is the defendant's appeal against a decision of the Deputy Registrar made 23 August 2007 whereby he gave the plaintiff leave to amend its statement of claim pursuant to a Chamber summons filed 15 August 2007. That summons in turn sought leave to amend in the terms of a minute of proposed second amended statement of claim again filed 15 August 2007.
Apart from that appeal the defendant also seeks judgment under O 16 of the Rules of Supreme Court.
It is convenient to deal with the two matters in the order noted above because matters relating to the summary judgment application arise by reason of the amendments to the statement of claim.

The appeal

The statement of claim as it stood pleaded certain terms of the hire purchase agreement and then, relevantly, pleaded:
"4.On 22 July 2004 the defendant owed the plaintiff the sum of $3,341.16 plus interest accruing at a daily rate for arrears in instalments pursuant to the Agreement.
5.By notice dated 22 July 2004 the plaintiff made demand upon the defendant for payment of the sum of $3,341.16 pursuant to the Agreement."
A live issue between the parties, and one that had been between them for some time, was whether or not the defendant had paid an instalment under the hire purchase agreement of $650. Ultimately the plaintiff became satisfied that that payment had been made. Accordingly, the plaintiff sought to amend its statement of claim to record that fact.
The amendments sought to amend par 4 and par 5 in the following terms:
"4.On 21 July 2004 the defendant owed to the plaintiff the sum of approximately $2,691.16 plus interest accruing at a daily rate for arrears of instalments pursuant to the Agreement.
5.By notice dated 22 July 2004 the plaintiff made demand upon the defendant for payment of the sum of $3,341.16 pursuant to the Agreement." (The "Notice of Intention to Repossess")
The plaintiff also sought to include a new paragraph:
"6.The Notice of Intention to Repossess complied with the Third Schedule of the Hire Purchase Act and was posted to the defendant's last known place of abode."
The plaintiff also sought to plead receipt of a further payment of $300 on 22 July 2004 about which there is no contention.
The plaintiff also added to the statement of claim three new paragraphs in the following terms:
"12.By notice dated 3 August 2004 the plaintiff notified the defendant that the Vehicle had been repossessed.
13.The notice of 3 August 2004 advised the defendant of the plaintiff's estimates as to the amount necessary to finalise or reinstate that agreement and the plaintiff's estimate of the plaintiff's loss.
14.The notice of 3 August 2004 complied with the Fourth Schedule of the Hire Purchase Act and was posted to the defendant's last known place of abode."
Various other consequential amendments were made to the statement of claim which are not relevant for the purposes of this appeal.
Whilst the appeal is a hearing de novo it is pertinent to note the comments of the Deputy Registrar at the time of granting leave to amend. It is also pertinent to note that this application for leave to amend came very shortly before trial and the trial was adjourned.
The learned Registrar noted that the essential variations concerned the statutory requirements which must be met under a hire purchase agreement if the owner is to recover a shortfall on repossession and sale from a hirer. He noted that the minute sought to introduce a reference to the notice pursuant to the Fourth Schedule to the Hire Purchase Act 1959 (the Act). I pause to note that this fact of service of the notice had previously been pleaded in the plaintiff's reply.
The Registrar thought that this amendment would come as no surprise to the defendant as the notice had been raised in his defence.
So far as the other amendments are concerned the Registrar noted the admission of the payment alleged by the defendant to have been made but to that time denied by the plaintiff.
The learned Registrar took the view that the amendments were largely of a technical nature and there was no prejudice to the defendant or the prejudice was not significant.
The defendant's case on the hearing of the appeal is that the amendment was late and in circumstances where the plaintiff was admitting the defendant's claim to have made this payment of $650. The defendant's position is that the learned Registrar should have required an affidavit to explain why the plaintiff could not have found this payment previously. The defendant had found it and the defendant asked the question "why not the plaintiff". The defendant said that good faith was put in issue before the Registrar and that needs to be dealt with on affidavit.
It seemed to me and I obtained little in the way of contradiction from the defendant that the amendment as to the amount did little more than to admit the defendant's position. The plaintiff was admitting that this payment, alleged to have been made by the defendant, had in fact been made. Accordingly, by amending the statement of claim the real issues joined between the parties were clearly identified. Alternatively by amending the pleading to acknowledge this payment the plaintiff was avoiding false issues being on the pleadings before the Court.
The defendant also argued that conditions, particularly as to costs, should have been imposed upon the plaintiff. Such conditions were imposed in the sense that the learned Registrar ordered that the plaintiff do pay the defendant's costs of the application including any costs thrown away.
The defendant argued that the defendant and his wife had travelled or were to travel from Bahrain for the purposes of the trial within the course of the next few days and the costs ought to have reflected those expenses and should have been payable forthwith.
I will come to the issue of costs later, but it does not seem to me that that issue is determinative of the appeal.
What is determinative in this appeal is whether or not the Registrar erred in making the order allowing the amendment that he did. Put another way, this being a rehearing, on the rehearing should I grant the application for leave to amend.
Whichever way the matter is looked at the short answer is that the amendment should be allowed. It was not an amendment that would take the defendant by surprise. The defendant was well aware of these matters, in fact they constituted part of the foundation of his defence.
Further, but more importantly, the amendments constituted an admission by the plaintiff of the defendant's position and corrected the issues on the face of the pleadings so that only the true issues would move forward to trial and there would be no false issues.
Parties should be encouraged to make admissions wherever possible and that is exactly what has occurred in this case. It seems to me that once one gets to that position then it is not necessary for there to be an affidavit explaining matters as sought by the defendant. No doubt these will all be very important matters on questions of costs at some later stage in the proceedings.
In the premises the appeal must fail.

Application for summary judgment under O 16

The defendant's case can be put quite simply: that is, that the plaintiff now acknowledging receipt of the sum of $650 the plaintiff's notices under the Third and Fourth Schedules of the Act are demonstrably wrong and fail to comply with the requirements of the Act and as a result the plaintiff's rights under the agreement fall away and with it the plaintiff's cause of action. That needs to be analysed further. However, before doing so it is quite clear that the amendment to par 4 of the statement of claim acknowledges that as at 21 July 2004 the defendant owed the plaintiff the sum of $2,691.16 plus interest. The notice under the Third Schedule pleaded in par 5 made demand for payment of the sum of $3,341.16. That is the sum originally claimed by way of arrears before the reduction for the sum of $650 paid.
The defendant also argues that the amount claimed under the Fourth Schedule notice was also demonstrably incorrect.
The defendant's claim to judgment is based upon an interpretation of the relevant provisions in the Act. Section 13 of the Act relevantly provides:
"(1)Subject to this section, an owner shall not exercise any power of taking possession of goods comprised in a hire purchase agreement arising out of any breach of the agreement relating to the payment of instalments until he has served on the hirer and every guarantor a notice, in writing, in the form of the Third Schedule and the period fixed by the notice (being not less than seven days after service of the notice) has expired.
(2)…
(3)Within 21 days after the owner has taken possession of goods that were comprised in a hire purchase agreement he shall serve on the hirer and every guarantor a notice, in writing, in the form of the Fourth Schedule.
(4)If the notice required by subsection (3) is not served, the rights of the owner under the hire purchase agreement cease and determine, but, if the hirer exercises his rights under this Act to recover the goods so taken possession of, the agreement has the same force and effect in relation to the rights and liabilities of the owner and the hirer as would have had if the notices had been duly given."
The notice prescribed in the Third Schedule is headed "Notice of Intention to Repossess". It takes the form of giving notice by identifying the agreement and advising the hirer of an intention to retake possession of the goods:
"… after expiration of . days from the service of this notice unless the arrears of instalments which now amount to $..... are paid to ……….. at ………. on or before ……….. 20…:
Total amount payable   $.....
Amount paid or provided by hirer to …/…/20...      $.....
Arrears under agreement to …/…/20...                    $....."
The Fourth Schedule is entitled "Advice to Hirers". It commences by notifying that the goods have been repossessed and that the hirer is entitled to get them back if within 21 days the hirer requests the owner in writing to redeliver the goods and within a further 14 days reinstates the agreement by paying the arrears and remedies the breaches of the agreement. The form continues:
"The owner's estimate of the amount you must pay to reinstate the agreement is –
Arrears of instalments  $.........
Costs of storage, repair or maintenance          $.........
Cost of repossession  $.........
Cost of redelivery  $.........
Total:$........."
The Fourth Schedule gives an alternative to the hirer to finalise the agreement and pay the balance due under the agreement and the costs of repossession and continues with the words:
"The owner's estimate of the amount required to finalise the agreement is –
Total amount payable under the agreement     $.......
Less deposit and instalments paid                  $.......
Balance due under agreement  $.......
Less statutory rebates  $.......
Add costs of repossession  $.......
Storage, repair or maintenance  $.......
Total$......."
Further information is provided to hirers under the Fourth Schedule notice as to deficiencies or excesses in amounts due. The form also goes on to note that action to enforce rights should be taken at once and if a hirer thinks he has any rights under the Act he should seek advice at once.
The defendant's position is that the amount demanded by the plaintiff was in excess of that which was due. Further, contrary to the pleading as sought to be made at par 4 it was not sufficient for the plaintiff to state the arrears as "approximately". The Act does not contemplate such approximation. The defendant accepted that costs of repossession and storage might be estimates, but argues that there is no room for estimating the amount otherwise due under the agreement.
The defendant's case is that not only was the Third Schedule notice wrong but also the Fourth Schedule notice which demanded the sum of $3,341 plus other amounts. The defendant relies upon s 13(4) of the Act. The notice being wrong and a fresh notice not having been served before repossession the plaintiff had failed to serve an appropriate notice under the Act and therefore its rights under the agreement ceased and determined.
The plaintiff relied upon Custom Credit Corporation Ltd v Van Delft [1965] WAR 237. In that case goods had been repossessed and appropriate notice given under the Fourth Schedule. In that case an estimate had been given of the resale value of the goods by the repossession agent. That figure was carried through into the Fourth Schedule notice. It turned out that that figure was wildly optimistic and the vehicle (the subject of the agreement) was sold for considerably less. The Court held that the statement of the estimate in the repossession notice did not preclude the plaintiff from establishing what the true value was on the date of seizure.
Counsel for the defendant argued that that sort of variable as demonstrated in Van Delft's case was acceptable but not an estimate in relation to the amount due.
In respect of the "amount due" counsel also referred to a decision of this Court, Esanda Finance Corporation Ltd v Kett (1993) 9 SR (WA) 65. In that case his Honour Judge Sadleir was dealing with a hire purchase agreement under which the owner had served a notice under the Third Schedule. Following that notice negotiations took place and a lump sum payment was made by the hirer. Repossession was not pursued. The defendant fell further into arrears and the plaintiff repossessed the vehicle without giving a further notice under the Third Schedule. His Honour noted that:
"In the end, although it may be regarded as a hiatus in the Act, I am unable to find that there is any consequence under the general law upon the plaintiff's right to recover monies due pursuant to the agreement after repossession, even though it has not given a further Third Schedule notice prior to that repossession. It seems to me that on the law as it stands, even in the absence of any such notice at all, an owner of goods is not precluded from recovering monies due under the agreement upon repossession. Of course a Fourth Schedule notice must be given, but that is not a matter that is involved in this appeal."
The defendant relied upon the use of the words "monies due" and argued that the monies due as expressed in the Third Schedule notice were not the monies that were due.
The plaintiff for its part argued that these sorts of errors or estimates in the Third and/or Fourth Schedule notices did not deprive the owner of its rights under the hire purchase agreement or Act. The Van Delft case is clearly distinguishable and is limited to the facts of that case, that is to say specifically estimates in respect of the re‑sale value of the vehicle. The comments made by his Honour Judge Sadleir in Kett's case as to the Fourth Schedule are clearly obiter.
I was not taken to any further authorities dealing with the effects of a failure to "strictly" comply with the notice requirements under the Third and Fourth Schedule. I was told by counsel that there were no such authorities.
That being the case it seems to me that this case falls to be determined upon a proper construction of the Act after full argument. It is to be noted that this is an application for summary judgment. On such an application a matter may be disposed of summarily if the Court is satisfied that the action is frivolous or vexatious or that the defendant has a good defence on the merits. The first grounds for such an application were not argued before me. The only question is whether or not the defendant has a good defence on the merits.
It has oft been stated that the power to order summary judgment should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried (Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99). It is further said that the Court should be astute not to risk stifling the development of the law by summarily disposing of actions in respect of which there is a reasonable possibility that it will be found in the development of the law still embryonic, that a cause of action does lie; Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365 at 373.
As I have noted, at the hearing of this matter neither counsel was able to point to any authorities dealing with the need for there to be strict accuracy in providing information in the notices required under the Third and Fourth Schedules to the Act. I have dealt with the two cases that were referred to at hearing. I gave counsel leave to file further submissions on this matter and I received further written submissions from the parties. Those submissions were to be directed to whether or not an analogy could be drawn between the circumstances in the present case, that is to say defects in the notices and defects arising in notices under the law relating to mortgages and leases.
The defendant's outline can be encapsulated in the argument that the Act imposes a statutory requirement in respect of default notices. It is said that a party should not be deprived of his statutory rights under the Act.
The high point of the defendant's submission appears to be that if a party fails to comply with a statutory requirement of the Act then any statutory penalties must follow as a matter of course. Authority was cited for that proposition, but with respect the two cases cited by the defendant, namely Bulong Operations Pty Ltd (Receivers and Managers Appointed) (Subject to Deed of Company Arrangement) v ComputerCorp Pty Ltd & Ors [2005] WASC 147 and Brown v Universal Guarantee Pty Ltd [1968] WAR 23 are not on point. Those cases did not deal with failures on the part of the owner to give an accurate notice under the Third and/or Fourth Schedule. They dealt with other errors or misstatements in the hire purchase agreement. The argument from the defendant is that as soon as the owner fails to comply to the letter with the provisions of the Act its fate is sealed.

I have noted the defendant's reliance upon s 13(4) of the Act.
The exact scope of that section is a matter which will fall for determination at trial.
In "Hire Purchase Law" 4^th ed Else-Mitchell and Parsons, Law Book Co Ltd the learned authors note at p 113 that the failure to comply with the provisions as to the Third Schedule Notice does not by any provision of the Act involve any civil law consequences. It was noted it may be wrongful to the extent that a hirer has an action for breach of statutory duty.
Further, in the same work at p 114 the learned authors note that a failure to serve a Fourth Schedule Notice involves the committing of an offence on the part of the owner. It is that failure to serve the notice which would trigger, there described as s 13(5), the consequence of the rights under the hire purchase agreement thereupon ceasing and determining.
It seems to me, and it is a matter for argument at trial, that had it been the intention of Parliament to deprive an owner of all of its property rights should it make an error of the kind which has occurred in the present case then that purpose would have found expression in the Act.
It may well be that the plaintiff has a statutory duty under the Act to comply with the Act as to the notices under the Third and Fourth Schedules and there may be some consequences arising out of a breach of that duty. However I am not prepared to accept, at this level of inquiry, that that consequence extends to the owner losing all of its rights.
As I noted, in this case I sought further submissions as to the way in which default notices under mortgages and leases might be applied or decisions used to assist in the determination of this issue.
I have received submissions from both sides in this regard.
On the one hand as to mortgages the defendant says that it is not sufficient to state the amount alleged by the creditor to be owing, it must contain information sufficient to ascertain the correct amount owing: Australia & New Zealand Banking Group Ltd v Cooper & Anor (1993) 9 WAR 112. That involved a notice to guarantors and does not assist in the determination of whether or not a notice is bad because it contains the wrong amount.
As to leases, the defendant argues that before there can be forfeiture for non-payment of rent the common law demand must meet a number of requirements, one of which is to state the precise amount of rent due. The defendant cites Glentham Pty Ltd v Luxer Holdings Pty Ltd& Anor [2002] WASC 80. That was a decision at first instance. A default notice had been served for various items said to be due under a lease. There was a dispute as to the accuracy of the amounts said to be owing. The matters referred to by the defendant as being required for the purposes of a default notice were matters that were referred to by the learned Master in Glentham and were extracted from WD Duncan: "Commercial Leases In Australia", 3^rd ed at 318‑319. The learned Master agreed with that statement of law. The learned Master thought it arguable that the notice of demand issued in that case was not adequate as a common law notice of demand for non-payment of rent as it did not state the precise amount of rent due, it being mixed in with variable outgoings and other charges.
The learned Master was there dealing with a common law notice of default which is distinguishable from the present case which relies upon a statutory requirement and the consequences of failure to comply to that statutory requirement as I have noted above.
The plaintiff for its part in relation to mortgages noted that a default notice under the Act was analogous to a default under a mortgage and that the purpose of a notice to a mortgagor is to inform the mortgagor of an alleged breach and of a proposal to sell and to afford the mortgagor an opportunity to rectify: Mir Bros Projects Pty Ltd v 1924 Pty Ltd [1980] 2 NSWLR 907.
Further, the plaintiff argues that an overstatement of the amount due in a default notice is not bad (Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491) and does not do away with the necessity to tender what is actually due unless there is at the same time refusal to receive less: Mir Bros Projects Pty Ltd.
Analogy was also drawn to notices of breach of a lease and the proposition was put that notice of breach of a lease is not rendered invalid by the inclusion of additional matters not justifying a notice of forfeiture or if it is insufficiently accurate; Gair v Smith (1964) VR 814.
Specifically and importantly the plaintiff argues that whilst it overstated the demand to the defendant the defendant did not pay the amount demanded or any lesser amount. It is argued that the defendant was still obliged to pay the plaintiff the correct amount of the arrears.
I am of the view that the arguments put before me on the hearing of this application and in written submissions do not foreclose a detailed argument which may lead to success on the part of the plaintiff at trial. In those circumstances it is not appropriate for summary judgment to be granted on the defendant's application.
In coming to this decision I am conscious that the pleadings as they now stand demonstrate an error in the amounts sought in both the Third and Fourth Schedule notices. Nevertheless, I am not convinced that that is an error which deprives the plaintiff of all of its rights under the hire purchase agreement. These are matters which the plaintiff should be allowed to test at trial.

Other matters

I have noted above that the defendant argues that different orders as to costs ought to have been made by the Registrar when granting leave to amend. I have also noted that the amendment was made very shortly before trial and the trial was vacated. In vacating that trial her Honour Judge Wager reserved the costs of the vacation of the trial and said that it may well be appropriate for the appeal Judge who determines the appeal and the O 16 application to determine the issue of costs. She reserved costs until after the determination had been made in respect of the appeal and the O 16 application.
The costs of the defendant's and his wife's travel to Perth were costs incurred for the purposes of the trial. With the trial being adjourned by reason of the late amendment they are or may be costs thrown away by reason of the adjournment rather than costs thrown away by reason of the amendment. The distinction between the two may seem somewhat narrow in the present circumstances but the distinction still exists.
Further, the defendant has raised a number of matters going to the plaintiff's conduct of this matter and its knowledge or purported knowledge of the payments to which I have referred. It may well be that the plaintiff will have more to say about this in relation to costs once evidence has been led at trial.
In the circumstances I am of the view that the Registrar's order as to costs on granting leave to amend is the appropriate order in the circumstances.
I am further of the view that whilst her Honour Judge Wager reserved costs until after the disposition of the present matters it is appropriate for the costs of the adjournment of the trial to be dealt with by the trial Judge.
This then just leaves the costs of the present applications, that is to say the appeal which has not succeeded and the summary judgment application which has also not succeeded. I will hear counsel as to the costs of these matters.