BNY Trust Company of Australia Limited v Catherine Shepherd
[2013] NSWSC 51
•07 February 2013
Supreme Court
New South Wales
Medium Neutral Citation: BNY Trust Company of Australia Limited v Catherine Shepherd [2013] NSWSC 51 Hearing dates: 30/1/2013 Decision date: 07 February 2013 Jurisdiction: Common Law Before: Harrison AsJ Decision: (1) The default judgment entered on 30 August 2007 is set aside.
(2) The defendant is to file and serve a defence and cross claim within 14 days.
(3) Costs are reserved.
(4) The matter is listed before the registrar on 21 March 2013 at 9.00 am for directions.
Catchwords: PROCEDURE - civil - application to set aside default judgment for possession - whether delay and prejudice to plaintiff - whether applicant has arguable defence Legislation Cited: Civil Procedure Act 2005
Contracts Review Act 1980
Uniform Civil Procedure Rules 2005Cases Cited: Adams v Kennick Trading (International) Ltd & Ors (1986) 4 NSWLR 503
Cohen v McWilliam (1995) 38 NSWLR 476
Cuttle v Brandt (1947) 64 WN (NSW) 96
Davies v Pagett (1986) 10 FCR 226
Evans v Bartlam [1937] 2 All ER 646
Vacuum Oil Pty Ltd v Stockdale (1942) 42 SR (NSW) 239Category: Procedural and other rulings Parties: BNY Trust Company of Australia Limited (Plaintiff)
Catherine Shepherd (Defendant)Representation: Counsel:
J M White with C Conde (Plaintiff)
P Batley (Defendant)
Solicitors:
Gadens (Plaintiff)
Legal Aid NSW (Defendant)
File Number(s): 2007/260596
Judgment
HER HONOUR: By notice of motion filed 6 December 2012 the defendant seeks firstly, an order that enforcement of the judgment entered on 30 August 2007 is stayed pending hearing of the motion; secondly, that judgment entered on 30 August 2007 is set aside; and thirdly, that the defendant file her defence and any cross claim within 14 days after the date judgment is set aside.
The plaintiff is BNY Trust Company of Australia Limited. The defendant is Catherine Shepherd.
BNY Trust Company relied on the affidavit of Owen Taylor sworn 22 January 2013, the affidavit of Abi Uthayachandran affirmed 22 January 2013 and the affidavit of Lisa Marie Banner affirmed 22 January 2013. Ms Shepherd relied on her affidavit affirmed 17 December 2012 and the affidavit of Jeremie Quiohilag affirmed 17 December 2012. Ms Shepherd gave evidence and was cross examined.
Background
For the purposes of these applications, I generally accept Ms Shepherd's evidence, other than where I specifically say that I do not. Having said that, if the default judgment is set aside some of the evidence she gave in these applications will be subject to challenge. I carefully observed her giving evidence and being cross examined. Ms Shepherd is currently 68 years old. She left school when she was 14 years old. She cannot read or write and had limited understanding of legal concepts and court process.
She is the registered owner of the house described in Certificate of Title Folio Identifier X/XXXXX , known as XX XXXX XXXXX X, Bradbury (the house). She has lived at the house with her de facto husband, Bertram ("Harry") Hayes, since it was purchased from the NSW Land and Housing Corporation through auction in March 2002. Harry purchased the house for about $165 000 but registered it in her name. Harry is currently 69 years of age and is also a Centrelink age pensioner. He and Ms Shepherd have been in a de facto relationship for over 40 years.
In about early 2003 Harry took out a truck loan for about $40,000 against the house with Macarthur Credit Union Limited (Macarthur Credit Union). Harry took responsibility for making the repayments on this loan.
In about August 2004 Harry had a car accident, which made it difficult for him to work as a sole contractor driving trucks.
In early 2005 Harry's daughter, Natalie Gibson, visited them at the house.
Harry had stopped working because of the car accident. Ms Shepherd was also not working and was receiving a Centrelink allowance. Natalie suggested that Harry and Ms Shepherd borrow money against the house to lend as a source of income. She said words to the effect, "If you borrow money on your house and lend it out you can get interest on it to live off". Natalie said that she had a friend who could help them do it. While Ms Shepherd stated in her affidavit that she did not really understand what Natalie was talking about, she gave evidence that she did understand that she was to borrow money against the house (see T3.20) and have Natalie lend it out and obtain interest (see T3.30-40). She understood that she would still owe the money she borrowed to the plaintiff (see T3.45). I prefer the evidence that she gave during cross-examination.
It is my view that Ms Shepherd did understand that she and Harry were borrowing money and that they would have to repay the plaintiff. However, based on Natalie's advice, Ms Shepherd believed that she and Harry would receive enough interest through the arrangement to repay the loan and interest.
Ms Shepherd has known Natalie since she was a child and for as long as she has known Harry. Up until this year Harry and Ms Shepherd had a good relationship with her. She believed Natalie knew something about investing money.
In about May 2005 Natalie visited Harry and Ms Shepherd at the house together with a friend of hers named Neil Cato. Natalie said Neil was a finance broker. During the meeting Neil did most of the talking but Natalie also spoke. Although Ms Shepherd cannot remember what was discussed in detail she knew it was about the arrangement Natalie had suggested to them earlier in the year about borrowing money against the house. The meeting with Neil and Natalie went for less than 30 minutes.
During the meeting Ms Shepherd remembers signing forms to borrow money but not filling them in. Ms Shepherd did not ask any questions but signed the forms because Natalie had asked them to do so and because Natalie was Harry's daughter and it was Harry who had originally paid for the house. She did not get a copy of the forms she had signed. She was not asked by Neil or Natalie to provide any documents. At that time Ms Shepherd signed the forms she was 61 years old and Harry was 62 years old. Neither of them were working. The house was her only valuable asset.
Ms Shepherd was never contacted by HLP Mortgage Company (Aust) Pty Ltd ("HLP Mortgage") or Perpetual Trustee Company Ltd ("Perpetual Trustee") about her income or assets as stated in the loan application. She now understands through Legal Aid NSW that her employment, income and assets were incorrectly stated in the loan application submitted in May 2005. The loan application states that she was employed as a Transport Company Manager for Honkey Tonk Transport and had held that position for 180 months; Honkey Tonk Transport was Harry's business. She was not and never had been a Transport Company Manager for Honkey Tonk Transport or any other company; the loan application states that she had income of $55,000; she relied on Centrelink pension for income and her income was not $55,000; and that the loan application does not disclose that she was a Centrelink pensioner. None of the evidence as to her employment is true. She has no knowledge that this information was provided in a loan application. A copy of this document is in evidence.
In about July 2005, both Ms Shepherd and Harry were loaned $208,000 (the loan) by Perpetual Trustee through HLP Mortgage. About $40,000 from the loan was used to repay Harry's truck loan with Macarthur Credit Union. Natalie told them that $120,000 had been lent to Greg Sweeny, who was her partner. Ms Shepherd does not know what happened to the rest of the money. She and Harry received some money from the money that had been lent to Greg Sweeney, which they used to repay the loan.
In February 2006, the loan went into default. When money stopped coming into Harry's bank account to repay the loan Ms Shepherd spoke to Natalie about it who said, "I'll be paying it". Ms Shepherd believed her.
Ms Shepherd says that the first time she became aware that the plaintiff had taken her to court about the loan was when Legal Aid NSW advised her on 16 March 2012 that the plaintiff had obtained default judgment against her in August 2007.
Ms Shepherd says that she was never served with the plaintiff's statement of claim and therefore did not know she should have filed a defence. Her solicitor from Legal Aid has read to her two affidavits of service sworn by Stephen Goodwin on 11 May 2007. She disputes the contents of the process server's affidavit of service, which states that she was served with the statement of claim on 8 May 2007. She says that she had been asked if anyone else was living at the house she would have answered truthfully, she would not have said, "I don't have to tell you that." It is difficult to reconcile the contents of the process server's affidavit with that of Ms Shepherd as to whether or not the statement of claim was actually served. The process server was not called for cross examination.
On 30 August 2007, default judgment for possession was entered. On about 26 September 2007 Natalie made a payment of $100,000 on the loan. On 5 October 2007, a writ of possession issued.
On 27 January 2010, David Begg of David Begg & Associates wrote to the plaintiff's solicitors. The letter states "we have received instructions to act for Catherine Shepherd ... in relation to a writ of possession ...". It goes on to say:
"We are instructed that the Property is occupied by Ms Shepherd and her husband, Bertram Hayes. Our client's step-daughter, Natalie Gibson, has been in regular contact with your client and, we are instructed, has advised your client of the following:
1. Mr Hayes has been disabled and is unable to work following a trucking accident;
2 Ms Shepherd is not employed;
3. Ms Gibson, who holds down 2 jobs, has been paying the arrears on the mortgage the subject of these proceedings and will shortly be moving into the Property;
4. Ms Gibson is now in a financial position to continue paying the mortgage repayments and to clear the outstanding arrears. However, she will require some additional time to pay the legal fees that have been charged to the account.
According to Ms Gibson she has been told by your client, 'it doesn't matter what you pay - we just want you out'. This is, of course, very unhelpful in the face of Ms Gibson attempting to resolve the outstanding issues between our client and yours. ..."
In cross examination, Ms Shepherd denied instructing Mr Begg either in person or by telephone to act for her. In the light of the contents of the letter referred to above, it is more likely that Natalie provided the instructions to the solicitor. I accept Ms Shepherd's evidence on this topic
Ms Shepherd acknowledged that she received notices to vacate from the Sheriff. The Sheriff would turn up at the house and explain the notice to vacate to her. She says that she did not understand they were connected to court proceedings or the default judgment. She says that all she understood was that unless a payment was made on the loan, she and Harry would have to leave the house. Ms Shepherd gave evidence that aside from the regular household bills, when she received a letter, she would ask Harry about it or, if Harry was not at home she would take the letter to Natalie and get her to explain it. However, in her affidavit she deposed that both she and Harry would take the notice to vacate to Natalie. Either way she had to call upon Harry and/or Natalie to explain the contents of these documents to her.
Ms Shepherd says that every time the Sheriff came out to the house with a notice to vacate, she and Harry would see Natalie about it and show her the notice. Natalie would say words to the effect of "Don't worry you're not going to lose your house" or "Don't worry I'll fix it". Natalie would then make a payment on the loan by transferring money from her bank account and would show Harry and Ms Shepherd the transfer on the computer. Afterwards they would not hear from the Sheriff again.
In March 2012, she and Harry went to Legal Aid NSW for help after receiving another notice to vacate from the Sheriff. The impetus for them to seek legal advice was because Natalie would not help them with any further repayments.
In April 2012, after receiving a notice to vacate from the Office of the Sheriff NSW, Ms Shepherd and Mr Hayes vacated the property. Since vacating the property they have resided with one of Ms Shepherd's daughters in Glenthorne in the mid north coast region of New South Wales near Taree.
On 10 April 2012 Legal Aid NSW, on Ms Shepherd's behalf, lodged a claim with the Financial Industry Ombudsman. The claim was not finalised until around December 2012. On 6 December 2012, Ms Shepherd filed her notice of motion seeking to set aside the default judgment.
While Ms Shepherd and Mr Hayes vacated the property in April 2012 they now desire to move back into the property. This is because Mr Hayes has kidney cancer. According to Ms Shepherd, there are better facilities for treatment of his condition at Campbelltown, near the property, than are available in Taree.
The law
The defendant relies on two Uniform Civil Procedures Rules to set aside the default judgment entered on 30 August 2007. They are firstly, UCPR 36.15 on the basis of irregularities and secondly, UCPR 36.16 to set aside the default judgment entered on 30 August 2007. I shall firstly deal with UCPR 36.15 and then UCPR 36.16.
(i) Irregularity
The requirements to be satisfied in an affidavit in support of a notice of motion for default judgment in possession matters have changed. When default judgment was entered in July 2007, the requirements were different, as the rule has since been amended. The defendant submitted that not all of the requirements of the rule in force in July 2007 have been satisfied.
The plaintiff's counsel submitted that these so called irregularities are minor and any requirement not complied with should be dispensed with. He referred to s 63 of the Civil Procedure Act 2005, which refers to irregularities. It reads:
"63 Directions with respect to procedural irregularities
(1) This section applies to proceedings in connection with which there is, by reason of anything done or omitted to be done, a failure to comply with any requirement of this Act or of rules of court, whether in respect of time, place, manner, form or content or in any other respect.
(2) Such a failure:
(a) is to be treated as an irregularity, and
(b) subject to subsection (3), does not invalidate the proceedings, any step taken in the proceedings or any document, judgment or order in the proceedings.
(3) The court may do either or both of the following in respect of proceedings the subject of a failure referred to in subsection (1):
(a) it may, by order, set aside the proceedings, any step taken in the proceedings or any document, judgment or order in the proceedings, either wholly or in part,
(b) it may exercise its powers to allow amendments and to make orders dealing with the proceedings generally.
(4) The court may not take action of the kind referred to in subsection (3) (a) on the application of any party unless the application is made within a reasonable time and, in any case, before the party takes any fresh step in the proceedings after becoming aware of the failure."
UCPR 36.15 provides:
"36.15 General power to set aside judgment or order
(1) A judgment or order of the court in any proceedings may, on sufficient cause being shown, be set aside by order of the court if the judgment was given or entered, or the order was made, irregularly, illegally or against good faith.
(2) A judgment or order of the court in any proceedings may be set aside by order of the court if the parties to the proceedings consent."
In particular, the defendant has submitted that the affidavit in support of the motion for default judgment filed on behalf of JP Morgan Trust Australia Limited and sworn on 24 July 2007 by Andrew Donato, the Manager - Special Servicing for Mobius Financial Services Pty Limited, the Trust Manager for the plaintiff, was deficient for the following reasons. I have addressed each point in seriatim.
(a) The affidavit identifies Catherine Shepherd and Natalie Gibson as persons in occupation of the property but does not identify Mr Hayes by name. However, reference is made to "one other Occupant" who is presumably Mr Hayes. The affidavits of the process server state that he attended the property on 6 May 2007 and served Ms Gibson and attended on 8 May 2007 to serve Ms Shepherd. According to the process server, when he asked Ms Gibson whether anybody else apart from her and Catherine Shepherd lived at the property, Ms Gibson replied, "only me and one other adult live here besides Catherine". When he asked Ms Shepherd the same question on 8 May 2007, she replied, "I don't have to tell you that".
It is common ground that the occupiers of the property were Ms Shepherd and Mr Hayes.
(b) Mr Donato's affidavit gives particulars of the default but does not give the source of the deponent's knowledge, except his claim to be the Manager - Special Servicing of the plaintiff's trust manager. He claims to be authorised to make the affidavit, but does not disclose the source of his knowledge.
However, the calculations provided as the amount in default are detailed. The defendant does not allege they are incorrect.
(c) The affidavit refers to the process server's affidavits in connection with the information about occupation of the property, but does not expressly state the source of his knowledge of the information about the occupation of the property. The affidavit does not directly state when and how the originating process was served. It only refers to the process server's affidavits.
This relates back to irregularity (a). I have already stated that there is no dispute as to who the occupiers were at the relevant times.
In my view these deficiencies outlined by counsel for the defendant do not go to the substance of any matters in dispute. These irregularities are of a minor nature. In the exercise of my discretion I would not set aside the default judgment on the basis of any of these irregularities. This application fails.
(2) Setting aside default judgment
The plaintiff opposes the setting aside of the default judgment on the bases of delay and prejudice.
The power to set aside judgment is contained in UCPR 36.16. It relevantly reads:
"36.16 Further power to set aside or vary judgment or order
...
(2) The court may set aside or vary a judgment or order after it has been entered if:
(a) it is a default judgment (other than a default judgment given in open court), or
..."
The authorities on setting aside default judgment are Evans v Bartlam [1937] 2 All ER 646; Vacuum Oil Pty Ltd v Stockdale (1942) 42 SR (NSW) 239; Cuttle v Brandt (1947) 64 WN (NSW) 96; and Adams v Kennick Trading (International) Ltd & Ors (1986) 4 NSWLR 503. In Adams v Kennick Trading (International) Ltd, Hope JA (with whom Glass and Mahoney JJA agreed) held that in determining whether "sufficient cause" has been shown to set aside a default judgment, the court must look to the whole of the relevant circumstances which include inter alia the existence of a bona fide grounds of defence on the merits, an adequate explanation for the failure to defend, and any delay; and in determining whether there are bona fide grounds of defence the court must not try the issues to be determined at the trial: what is required is that the court determine that the facts sworn to as providing a defence, if established at the trial, would afford a defence and that the defence is set up bona fide.
(i) The proposed defence
The plaintiff does not contend that the defendant does not have a bona fide defence. She relies upon the Contracts Review 1980, s 9. Ms Shepherd cannot read or write and was not independently legally advised in relation to the loan. In essence, her proposed defence is that the credit contract and mortgage were unjust in the circumstances at the time they were entered into. It is my view that if Ms Shepherd is able to establish these facts at trial, these facts would afford a defence and that defence is set up bona fide.
(ii) Delay
On 30 August 2007, default judgment was obtained. The plaintiff's counsel submitted that the delay is lengthy and has not been adequately explained. I agree that the delay is lengthy. It is over five years since default judgment was entered.
Shortly after default judgment was entered in August 2007, a writ of possession issued. However, in the interim period Natalie paid $100,000 off the loan. It appears that there were no steps taken to enforce a writ of possession from October 2007 until about 30 August 2010. Ms Shepherd was first advised by the Sheriff that she had to vacate the property sometime after 6 July 2011.
From August 2010, when the plaintiff's solicitors wrote to Ms Shepherd concerning the default in payment of the loan, her response was to take it to Natalie or ask Harry about it. She expected that Natalie would make satisfactory arrangements with the plaintiff. It was only in March 2012 when Natalie told her that she would not help with any further repayments that she then sought advice from Legal Aid.
Between 10 April 2012 and December 2012, Legal Aid on Ms Shepherd's behalf, sought to resolve this dispute through the services of the Financial Industry Ombudsman. When it became clear the dispute would not be resolved, Ms Shepherd with the benefit of legal assistance moved quickly to have the default judgment set aside.
Because the plaintiff cannot read and write she was reliant on others to tell her what was going on with the plaintiff.
While the period of delay seems lengthy, there had been a period of inactivity by both parties for about three years, between October 2007 and 30 August 2010. In my view, in the circumstances outlined above, the defendant has provided a satisfactory and adequate explanation for her delay.
(iii) Prejudice
A further consideration to be taken into account when determining whether default judgment should be set aside is prejudice. In Cohen v McWilliam (1995) 38 NSWLR 476 at 481, Priestley JA, quoting from the Federal Court in Davies v Pagett (1986) 10 FCR 226, said:
"It is, however, another question whether concern about the extent of delays, either in a particular case or generally, should, in the absence of prejudice in the particular case, be taken into account in exercising a discretion to set aside a default judgment. The fundamental duty of the court is to do justice between the parties. It is, in turn, fundamental to that duty that the parties should each be allowed a proper opportunity to put their cases upon the merits of the matter. Any limitation upon that opportunity will generally be justified only by the necessity to avoid prejudice to the interests of some other party, occasioned by misconduct, in the case, of the party upon whom the limitation is sought to be imposed. The temptation to impose a limitation through motives of professional discipline or general deterrence is readily understandable; but in our opinion it is an erroneous exercise of the relevant discretion to yield to that temptation."
Overall the fundamental duty of this court is to do justice between the parties.
The original lender/mortgagee in the transaction the subject of these proceedings was Perpetual Trustee Company Limited. On or about 6 January 2006, Perpetual transferred to the plaintiff all of Perpetual Trustee Company Limited's estate and interest in the mortgage. The loan manager who issued the letter of offer, HLP Mortgagee Company (Aust) Pty Ltd (HLP Mortgagee) was placed into liquidation on 30 January 2007. Until 1 July 2008, Mobius Financial Services Pty Ltd serviced the plaintiff's loan book, including the mortgage. From 1 July 2008, Mobius ceased to provide such services to the plaintiff and Pepper Australia Pty Ltd serviced the plaintiff's loan book (including the mortgage). On 1 June 2008, Mobius was placed into liquidation.
Pepper Australia Pty Ltd now manages on behalf of the plaintiff the mortgage and the loan which are the subject of these proceedings. Pepper has sought the loan file from Perpetual Limited. On 27 March 2012 Perpetual replied that it could not locate its file. Other documents have been located by Perpetual on 11 January 2013.
The plaintiff says that it cannot identify who approved the loan. Ms Shepherd's evidence is that Ms Gibson and Mr Cato persuaded her and Mr Hayes to enter the loan agreement. Mr Cato was and still is a director of Acuitas Investment Pty Ltd. That company is still registered and he is still a director (see Ex A). It is likely his business records include documents that identify the person he was dealing with at HLP Mortgagee. It is likely that he can be located to give evidence of the loan application document in his business records. Mr Cato may also be able to shed light on where some of the funds went.
There are documents, including the Finance Broking Contract fax from Mr Cato to HLP Mortgage dated 12 May 2005, HLP's application for finance, financial details, declarations and a conditional approval document and the loan document produced by HLP in existence. Copies are attached to the affidavit of Jeremie Quiohilag dated 17 December 2012.
The records of Pepper are available but Pepper does not hold any documents in relation to the mortgage, being the documents relating to the loan application and assessment of the loan application before the offer of finance was made.
It appears that most of the critical documents are available and the chain of enquiry to locate the person who approved the loan and the approval document has not yet been exhausted.
I accept there is some presumptive prejudice caused by the delay of five years. There may be some documents that may not be found, such as the loan approval document but the chain of inquiry has not yet been exhausted. Overall, it is my view that both parties will be afforded a fair trial.
Ms Shepherd's counsel also referred to two other matters. He submitted that his Court should not make assumptions that Harry could get just as good treatment for his cancer at Taree and he does not need to move back to the property near Campbelltown for treatment. I think that this factor, if relevant, is of little weight either way.
Finally, the plaintiff's counsel submitted that this Court should not exercise its discretion in Ms Shepherd's favour because she is a beneficial trustee as the funds that were originally used to purchase the property belonged to Harry and not her. However, she is the legal owner of the property and she and Harry have been a de facto couple for 40 years. There is little evidence on this topic. For the purposes of this application, I do not accept that she is a beneficial trustee.
Conclusion
The defendant is and was in a position of vulnerability. She cannot read or write and was reliant upon others to explain the contents of any documentation. She has had minimal formal education. She has provided an adequate and satisfactory explanation for her delay in seeking to set aside the judgment. Although it is lengthy, being five years in duration, there was a three year period of inactivity by both parties. She has a bona fide defence. While there may be some documents, such as the loan approval document, that now may not be able to be located I accept the enquiries as to that document, and the identity of the approving officer, have not been exhausted. There is some presumptive prejudice caused by delay. However, I am satisfied a fair trial will be afforded to both parties. In the exercise of my discretion, in order to do justice between the parties, the default judgment should be set aside. Costs are reserved.
The Court orders that:
(1) The default judgment entered on 30 August 2007 is set aside.
(2) The defendant is to file and serve a defence and cross claim within 14 days.
(3) Costs are reserved.
(4) The matter is listed before the registrar on 21 March 2013 at 9.00 am for directions.
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Decision last updated: 07 February 2013
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