BNY Trust Company of Australia Ltd v Moore
[2012] WASC 255
•24 JULY 2012
BNY TRUST COMPANY OF AUSTRALIA LTD -v- MOORE [2012] WASC 255
Pending Appeal
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2012] WASC 255 | |
| Case No: | CIV:2223/2011 | 3 JULY 2012 | |
| Coram: | MASTER SANDERSON | 24/07/12 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Judgment granted | ||
| B | |||
| PDF Version |
| Parties: | BNY TRUST COMPANY OF AUSTRALIA LTD TERENCE PATRICK MOORE MARLENE GLORIA FORREST-MOORE |
Catchwords: | Summary judgment on mortgage Turns on own facts |
Legislation: | Nil |
Case References: | Banco Exterior Internacional SA v Thomas (1996) EWCA Civ 676 Bank of Western Australia Ltd v Luo [2010] NSWSC 733 Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447 Morlend Finance Corporation (Vic) Pty Ltd v Westendorp [1993] 2 VR 284 Perpetual Trustees Australia Ltd v Schmidt [2010] VSC 67 Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
TERENCE PATRICK MOORE
MARLENE GLORIA FORREST-MOORE
Defendants
Catchwords:
Summary judgment on mortgage - Turns on own facts
Legislation:
Nil
Result:
Judgment granted
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Mr B C Smith
Defendants : Mr T B Lyons
Solicitors:
Plaintiff : Gadens Lawyers
Defendants : Gibson Lyons
Case(s) referred to in judgment(s):
Banco Exterior Internacional SA v Thomas (1996) EWCA Civ 676
Bank of Western Australia Ltd v Luo [2010] NSWSC 733
Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447
Morlend Finance Corporation (Vic) Pty Ltd v Westendorp [1993] 2 VR 284
Perpetual Trustees Australia Ltd v Schmidt [2010] VSC 67
Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389
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1 MASTER SANDERSON: This is the plaintiff's application for summary judgment. The plaintiff's claim is for breach of a written loan agreement entered into between the defendants and the plaintiff on or about 3 July 2007. The plaintiff claims the defendants were in default under the loan agreement. A default notice was issued. That default notice was dated 26 May 2011. Having failed to rectify the default, the plaintiff issued proceedings seeking to obtain possession of the property over which the loan was secured.
2 There was no disagreement between the parties as to the applicable principles on a summary judgment application. Summary judgment is reserved for only the clearest cases. The version of the facts most favourable to the defendants must be assumed unless the evidence is inherently incredible. It is incumbent upon a plaintiff to verify the facts contained in the statement of claim and to swear that in the plaintiff's honest belief, there is no defence to the claim. Once that is done, the evidentiary burden shifts to the defendant. The defendant must then establish there is a serious question to be tried.
3 The plaintiff relies on a number of affidavits in support of its application. These are the affidavit of Craig Hilary Miles, sworn 9 December 2011, the affidavit of Tamara Elise Strack, sworn 11 May 2012, the affidavit of Amanda Palmira Kotze, sworn the same day and two affidavits of Owen David Taylor, the first sworn 18 May 2012, and the second sworn 31 May 2012. It is unnecessary to go through these affidavits in any detail. Suffice it to say the affidavits between them annex all relevant documents, they establish there was default under the loan agreement, they exhibit the relevant default notice and they show there was no compliance with that default notice. They also confirm the contents of the statement of claim and swear to a belief there is no defence to the claim. The effect of these affidavits is to enliven the jurisdiction to grant summary judgment.
4 The defendants rely on two affidavits from the first-named defendant. The first was sworn on 18 January 2012 and the second was sworn on 25 June 2012. The second-named defendant has not sworn an affidavit. In his submissions, counsel for the plaintiff maintained because the second-named defendant did not file any affidavit, she has not put on any evidence and has not defended the claim. In my view, in the circumstances of this case, it was not necessary for the second-named defendant to file a separate affidavit. The defendants are husband and wife. The evidence of the first-named defendant makes it plain at all times they acted in concert. It is difficult to see the second-named
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- defendant could add anything to the evidence of the first-named defendant. So, if on the evidence there emerges a serious question to be tried, it should apply to both defendants. Requiring the second-named defendant to file an affidavit would increase costs for no benefit.
5 There is a large measure of agreement between the parties as to the facts. The summary of the facts which follows is largely taken from the written submissions made on behalf of the defendants. The first-named defendant is 61 years of age. The second-named defendant is 67 years of age. In 1999, the defendants became the registered proprietors of a property located in Halls Head.
6 On 25 May 2006, the defendants applied to Latrobe Loans of Australia Pty Ltd for a loan of $250,000 to refinance an existing high interest loan secured over the property. The Latrobe loan was approved and the pre-existing loan was paid out. On 3 July 2006, the defendants applied to Latrobe for an increase of $10,000 to the existing loan. The increase was granted. However, the defendants subsequently had to apply to Latrobe to adjust payments due to financial hardship which resulted in Latrobe issuing a default notice.
7 Presumably because they were struggling with their financial position, the defendants rather bizarrely sought guidance from a clairvoyant who suggested they contact Ms Mary Garland-Abbot. Ms Garland-Abbot advised the defendants she was a mortgage broker and could assist them in refinancing the Latrobe loan. When the defendants first met Ms Garland-Abbot, she worked for 'Purely Finance'. On or about 21 May 2007, Ms Garland-Abbot advised the defendants she was now working for a business called 'Strictly Finance'.
8 Ms Garland-Abbot advised the defendants they should refinance their loan with another lender. Initially, an attempt was made to obtain refinancing from Pepper Home Loans, but this was unsuccessful. On or about 2 May 2007, Ms Garland-Abbot submitted a loan application to Legacy Financial Services for and on behalf of the defendants. Legacy was a mortgage manager for Mobius Financial Services Pty Ltd which acted as trust manager and master servicer for the plaintiff.
9 The defendants placed some emphasis on the circumstances leading up to the loan application to Legacy. On or about 2 April 2007, Ms Garland-Abbot called the first-named defendant to say she was faxing a form through to him to sign and fax back. Ms Garland-Abbot advised the first-named defendant he did not need to complete the details in the
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- form. He was just to sign it and send it back. The forms were faxed to the defendants on Legacy letterhead and were called 'Individual Self-Certified Declaration (Lo Doc)/Loan Affordability Declaration (No Doc)'. The second page was headed 'Declaration (continued)'. In addition to asking the defendants to sign these forms, she asked them to date the forms 2 April 2007 and fax them back to her.
10 On 2 April 2007, the first-named defendant was admitted to hospital for treatment for a gall bladder condition. He says as a consequence he ceased his antidepressant medication. The first-named defendant remained in hospital until 8 May 2007. On 2 May 2007, Ms Garland-Abbot came to the hospital. The second-named defendant was present. Ms Garland-Abbot asked both defendants to sign a Legacy Financial Services application form. This they did. The first-named defendant says although both defendants signed the application form, they did not review it, nor did they complete any financial information in it.
11 It is the defendants' position the document headed 'Legacy Financial Services Income' was then completed by Ms Garland-Abbot and submitted to Legacy, showing the first-named defendant operated a videography business under the name of 'Everlasting Memories'. The firm showed this business had a gross monthly income of $10,500. It is the defendants' position they never saw the completed form and never authorised Ms Garland-Abbot to state the business earned that amount. Further, another document headed 'Legacy Financial Service Individual Self-Certified Declaration (Lo Doc)/Loan Affordability Declaration (No Doc)' was not signed by the first-named defendant.
12 Ms Garland-Abbot subsequently advised the defendants Legacy had approved a loan of $360,000 with interest of 11.05% and loan repayments of around $4,000 per month for the first six months. Ms Garland-Abbot explained to the defendants they needed to borrow an amount of $360,000 which was approximately $45,000 in excess of what they required to repay the Latrobe loan because the additional amount would cover the first six months' repayment of the Legacy loan and some additional expenses. The defendants acknowledge they accepted the terms of the loan. They further say they accepted Ms Garland-Abbot's advice that if they could demonstrate a good credit rating for six months, they could refinance at a lower interest rate.
13 The defendants say they never advised Ms Garland-Abbot they had a gross monthly income of $10,500. Rather, they told her the income from the business was only about $1,500 per year. The first-named defendant
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- provided a copy of a bank statement for their Latrobe loan for the period 1 December 2006 to 31 May 2007 to Ms Garland-Abbot on 4 June 2007. The loan statement showed five payment arrears over a six-month period.
14 Appearing as annexure APK 3 to the affidavit of Ms Kotze there is a declaration purported to be from the defendants. The declaration, signed 3 July 2007, says the first-named defendant has a gross income of $12,500 per month. The first-named defendant denies having completed or signed the declaration. He says he was first provided with a copy of this document some weeks after he had a telephone conference in May 2010 with an employee of the plaintiff. On 20 May 2011, the first-named defendant swore a statutory declaration. He says he did not fill out that declaration and it was not his signature on the declaration.
15 Against that factual background, it is submitted on behalf of the defendants there are five serious questions to be tried. Taken from the defendants' submissions (par 39), the questions are framed in the following way:
1. Was Ms Garland-Abbot the agent of Legacy in its dealings with the defendants' loan application and the provision of finance by the plaintiff?
2. Was Legacy the agent of Mobius and/or the plaintiff in its dealings with the defendants' loan application and the provision of finance by the plaintiff?
3. Was Mobius the agent for the plaintiff in its dealings with the defendants' loan application and the provision of finance by the plaintiff?
4. Did Legacy and/or Mobius owe a duty of care to the defendants in their dealings with them and, if so, did they breach that duty?
5. Was Ms Garland-Abbot (if agent for Legacy) and/or Legacy and/or Mobius acting unconscionably in breach of the provisions of the Trade Practices Act 1974 or the general law in their dealings with the defendants?
16 As framed, the first three of these questions are linked. The crucial question is whether Ms Garland-Abbot was an agent of Legacy. It is not alleged by the defendants the plaintiff engaged in the impugned conduct with respect to the alleged falsification of information in the loan application itself, or that it was directly aware of the false information in
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- the application. They rely on an assertion as to the imputation of knowledge and/or conduct from Ms Garland-Abbot through Legacy to Mobius and then to the plaintiff.
17 A mortgage or finance broker is, prima facie, the agent of the borrower. The fact the broker has in his or her possession loan application forms bearing the name of a particular lender and the fact the broker arranges for the signing of documents and then earns a commission is not, in itself, sufficient to make the broker the agent of the lender: see Morlend Finance Corporation (Vic) Pty Ltd v Westendorp [1993] 2 VR 284, 308. The subjective belief of the defendant as to the agency is irrelevant.
18 Agency is a fiduciary relationship which exists between two persons, one of whom expressly or impliedly consents that the other should act on his behalf so as to effect his relations with third parties, and the other of whom similarly consents so to act or so acts: see Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389. The focus of the inquiry in this case has to be on the legal content of the consensual agreement between the parties to the alleged agency. It is not enough to say Legacy or Ms Garland-Abbot was in the position of collecting relevant information from prospective borrowers.
19 On behalf of the plaintiff, it was submitted all the evidence indicated Ms Garland-Abbot was agent of the defendants, not the plaintiff. Ms Garland-Abbot was approached by the defendants to procure finance for them from an unspecified lender. A prior application was made to Pepper Home Loans. Ms Garland-Abbot submitted the loan application to Legacy which was acting as an introducer of loans to the Mobius All Mortgage Trust. Ms Garland-Abbot is not alleged to have any particular affiliation or accreditation with the Mobius All Mortgage Trust or any party associated with it. The only consensual relationship capable of denoting an agency is between the defendants and Ms Garland-Abbot. In my view, the evidence simply does not support, and could not even with further investigation support, a conclusion Ms Garland-Abbot was the agent of anyone but the defendants. The only consensual relationship capable of denoting an agency is between the defendants and Ms Garland-Abbot. She was shopping around for finance on behalf of the defendants at their request.
20 The loan agreement declares the commission payable for the introduction of the loan was payable to Legacy. That is a further indication Ms Garland-Abbot's involvement was not at the instigation of
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- the plaintiff. There is no evidence at all that Legacy was aware that Ms Garland-Abbot had submitted false information on behalf of the defendants. Legacy passed the loan application to Mobius for assessment and made no representation as to the accuracy of the information. Legacy did not approve the loan.
21 As I have indicated above, the first three questions the defendants say are matters to be tried are all dependent upon there being an agency relationship between the defendants and Ms Garland-Abbot. Having concluded there is no evidentiary basis to support that proposition, all three of the matters fall away. None provides a basis for refusing summary judgment.
22 Turning, then, to the question of whether there is a duty of care as between the plaintiff and the defendants, it is clear the relationship between the plaintiff and the defendants is contractual. No general duty of care arises from such a contractual relationship: see Bank of Western Australia Ltd v Luo [2010] NSWSC 733 [71] - [72].
23 The law does not recognise any duty upon a lender to assess the capacity of a borrower to repay a loan. Nor must a lender ascertain the viability of a loan or verify the details provided in a loan application: see Perpetual Trustees Australia Ltd v Schmidt [2010] VSC 67 [173]. A lender is not a branch of a social services agency. It is entirely for the lender to determine what inquiries it should make to verify information given in support of a loan application. On receipt of an apparently regular and satisfactory loan application, there is no obligation on the lender to pursue further detailed inquiries as to the circumstances of the applicant for the loan, the proposal transaction to which it relates, or the commercial viability of the loan: see Banco Exterior Internacional SA v Thomas (1996) EWCA Civ 676 per Scott VC. This leads, then, to the question of whether or not it is relevant the lender may have breached its credit policy. This is an issue which is raised frequently and it is directly put in issue by the defendants in this case. It is a matter which requires analysis.
24 The starting-point is straightforward - a lender's credit policy is for its own purposes and benefit and does not create any duty to the borrower. There have been cases in Australia where there is an allegation of 'asset lending'. These cases mainly arise under the New South Wales Contracts Review Act. It has, on occasions, been observed the failure to follow lending guidelines may indicate the lender was not concerned by the personal circumstances of the applicant and was content to rely merely on the security provided by the mortgage. However, even in those cases, any
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- discrepancy in the internal approval process of the lender is but one factor to be attributed appropriate weight and viewed in all the circumstances for the purposes of determining whether the impugned conduct was unconscionable. In Western Australia, we do not have the equivalent of the New South Wales legislation. Any statement of principle derived from cases associated with the legislation is of dubious worth.
25 In relation to the defendants' allegations concerning the Mobius credit policy, the rules contained in the credit policy include common or generic rules and are rules that are specific to particular products. Judgmental overlay applies to the assessment of some applications, including credit-impaired products. Judgmental overlay involves assurance by Mobius credit staff that the credit risk of an application is appropriate for the risk-reward balance, having regard to the totality of matters relating to the application. Exceptions to the credit policy may be considered on a case-by-case basis.
26 The defendants' application was for a credit-impaired 'lo doc' loan. This is a shorthand way of saying the defendants were perceived as a risk and were assessed accordingly. The defendants knew they had a poor lending history. By implication at least, the defendants asked the plaintiff to approve the loan in light of that poor credit history. That is what was done.
27 So far as the age of the defendants is concerned, the credit policy indicates the existence of a discretion (or in the jargon of the document 'judgmental overlay') where the age rule was exceeded. The application disclosed the ages of the defendants and the loan was approved on the basis of a 12-year term, indicating account was taken of the age of the defendants. The declared income in the application was all attributed to the first-named defendant who would have been under 70 years at the end of the loan term. The defendants have not established a departure from the credit policy.
28 Credit history searches were undertaken. These searches appear as annexures ODT 6, 7, 12, 13 and 14 to Mr Taylor's first affidavit. Notes were made on the documents evidencing consideration was given to them. No complaint on this count can be made by the defendants.
29 The defendants complain there was not proper validation of all documents as is required by the credit policy. This requirement is subject to the exception for lo doc loans such as the loan made to the defendants
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- which are subject to self-certification. The defendants can have no complaint on this count.
30 The defendants complain they could not service the loan. The declared income apparent on the face of the application was sufficient to service the borrowing. No departure from the credit policy is evident, as the assessment of the application relied on the information supplied by the defendants as to their income.
31 The defendants complain there was no investigation of undisclosed liabilities. Paragraph 2.12 of the credit policy allows for varying degrees of investigation based on the product type. The required review of liabilities is based on the key documents required for the application. For a lo doc loan, many of the documents evidencing liabilities are not required. In this case, there is nothing to suggest there was a departure from the credit policy.
32 The defendants complain no investigation was made of the loan purpose. In par 3.1 of the credit policy, refinance stated as a permitted purpose and a portion of the loan may include a 'cash out' component. Once again, no departure from the credit policy is apparent.
33 So far as this question of the departure from a lender's credit policy is concerned, what it really amounts to is this. The borrower asks for a loan. They are not compelled to make such a request. They choose to do so. A prospective lender can either approve or reject the application. In the process of determining what course to take, the lender sets itself some benchmarks. The sole purpose of these benchmarks is to protect the lender. If the applicant does not meet the benchmarks, then the loan is too risky and can be declined. It remains a question for the lender whether or not the loan is actually declined. If the loan is made in breach of the lender's internal guidelines, it does not give rise to any rights on the part of the borrower. There is no reason why it should. The borrower gets what he or she wants. The borrower is not a victim and to attempt to portray themselves as such is simply at odds with commercial reality. This is what has been done in this case and the argument carries no merit.
34 The remaining question is whether or not there is evidence of unconscionable conduct in this transaction. The starting-point is to say that no complaint is made as to the terms of the loan agreement and the mortgage. They are in a standard form and are to that extent unremarkable.
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35 In my view, there is nothing in the circumstances of this case which would render enforcement of the plaintiff's security unconscionable. The defendants were prepared to have Ms Garland-Abbot submit whatever information was required to secure approval of the loan in order to execute their plan to avoid enforcement of the Latrobe mortgage and thus defer their financial problems for at least six months. There is no evidence at all of any pressure being exerted on the defendants by Ms Garland-Abbot, Legacy or the plaintiff. What is clear from the evidence is the defendants' desire to obtain finance and to do so in the shortest possible time. They appear never to have turned their mind to the consequences of not being in a position to service the money they were seeking to borrow.
36 It is the defendants' case that signing the loan application whilst the first-named defendant was in hospital and given their respective ages, put them at a 'constitutional disadvantage' of the type described in Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447. Because of this special disadvantage, it is said the principle of unconscionable conduct under the general law applies.
37 Further, it is said the defendants' desperate financial need and emotional dependence on Ms Garland-Abbot also put them at a 'situational disadvantage' (as that phrase is used in par 43 of the defendants' submissions). It is also alleged the actions of the plaintiff in processing the loan application when it contained irregularities was in some form or another unconscionable. Taken in the overall, so it is said, when the facts are examined, it is clear in a number of respects the plaintiff or the plaintiff's agents have acted unconscionably.
38 There are a number of answers to these complaints. First, the defendants were experienced borrowers. They had entered into a number of mortgage transactions over a relatively short period of time and had been in default before. The defendants' credit history reports (to which I have referred earlier) reveal a significant level of activity.
39 Secondly, the defendants do not allege they could not or did not understand the transaction with the plaintiff or were otherwise unable to make a judgment as to their interests by means including physical or mental incapacity, their age, poverty, lack of education or need for explanation as to the nature of the transaction. These facts set this case apart from Amadio. There is nothing in the evidence to suggest the defendants did not know full well what they were doing and what they hoped to achieve.
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40 Thirdly, the document apparently signed in hospital on 2 May 2007 is of little relevance to the transaction viewed as a whole. The second-named defendant does not give evidence his medical condition affected his capacity to appreciate the significance of the transaction at the crucial point when the defendants signed the loan agreement and mortgage on 3 July 2007.
41 Fourthly, the defendants were well aware of their desperate financial position and the inevitable consequences of it with respect to the property. They were well aware they could not service the plaintiff's loan beyond six months because they were not capable of servicing the Latrobe loan. The loan transaction was designed to delay the inevitable result of default under the Latrobe facility, apparently on the hope that the second-named defendant's common law workers' compensation claim would settle for a lump sum payment of compensation which would allow them to dramatically reduce the amount of the debt.
42 Fifthly, age of itself is not a special disadvantage. There is no evidence as to how their age at the relevant time is alleged to have affected them to the extent of a special disadvantage.
43 Finally, at the time of making the loan application, the first-named defendant was instructing a solicitor in relation to a dispute relating to the purchase of a computer. It seems the defendants elected not to obtain independent legal advice in relation to the transaction with the plaintiff. They cannot now complain of their failure to do so.
44 In relation to Ms Garland-Abbot, there is no evidence of a relationship of emotional dependence by the defendants upon her. Nor is there any evidence of how the relationship they may have had with her may have affected the defendants' position to proceed with the loan. There is no evidence of any pressure or influence of any kind being exerted by Ms Garland-Abbot or anyone else on the defendants.
45 In summary, then, I am not satisfied that there is any evidence which could amount of unconscionable conduct.
46 The plaintiff has satisfied the requirements so as to allow it to obtain summary judgment. The defendants have failed to show there is a serious question to be tried. The plaintiff is entitled to the orders they seek and the defendants must deliver up possession of the Halls Head property. The defendants should pay the costs of this application, including the reserved costs. The plaintiffs should provide a minute of orders.
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