Commonwealth Bank of Australia v Christian

IN THE SUPREME COURT OF VICTORIA	Not Restricted
AT MELBOURNE PRACTICE COURT

No. 9680 of 2009

COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)	Plaintiff
v
CHRISTIAN JEREMY ZATORSKI	Defendant

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JUDGE:	HABERSBERGER J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	15 DECEMBER 2009
DATE OF JUDGMENT:	15 DECEMBER 2009
CASE MAY BE CITED AS:	COMMONWEALTH BANK OF AUSTRALIA v CHRISTIAN JEREMY ZATORSKI
MEDIUM NEUTRAL CITATION:	[2009] VSC 638

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PRACTICE AND PROCEDURE – Summary judgment – Defendant showing cause – Appropriate test – Whether appropriate steps taken by bank to call up all of the moneys due under the loan agreement before taking possession of, and selling, property securing loan – Supreme Court (General Civil Procedure) Rules 2005, Order 22.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr G. Moffatt	Gadens Lawyers
For the Defendant	Mr R. Cook	Fong & Co. Solicitors

_________________________________________________________________________________
HIS HONOUR:

This is an appeal by the plaintiff, by Notice of Appeal dated 28 September 2009, against an order of Evans AsJ giving the defendant leave to defend. The application is, therefore, one for summary judgment under Order 22 of the Supreme Court (General Civil Procedure) Rules 2005. Rule 22.06(1)(b)provides that on the hearing of an application for summary judgment the Court may give such judgment for the plaintiff against the defendant on the claim or part of the claim in question as is appropriate:
unless the defendant satisfies the Court that in respect of that claim or part a question ought to be tried or that there ought for some other reason be a trial of that claim or part.
In Perpetual Trustee Company Limited v. Jacobs,[1] Batt J, as his Honour then was, held that the test propounded by the above sub-rule was “not intended to be different from that established by, and by judicial decision under, the former Order 14, where the relevant words were, ‘a good defence to the action on the merits’, but it is intended to express more accurately the test which had been developed from the original rule”.[2]
[1] Unreported, 14 April. BC9406346.
[2] BC9406346 at 13–14.
His Honour then referred to two authorities as providing the test or criterion which a defendant opposing summary judgment must satisfy. The first was Australian Can Co Pty Ltd v Levin & Co Pty Ltd,[3] in which the Full Court after a review of the cases stated:
From all this it appears that where there is a real case to be investigated either in fact or law, leave to defend should be given … But in whatever language the discrimen is expressed to determine in what cases liberty to the plaintiff to sign judgment or liberty to the defendant to defend should be given, the length at which or the detail in which or the vigour with which counsel has argued the matter, cannot be the determining factor … Whatever the language various Courts have used, it seems to us that the substance of the criterion to be applied is that after the matter involved has been explained to the Judge there must be a real uncertainty without full argument or further investigation of the
facts as to the plaintiff’s right to judgment.[4]
[3] [1947] VLR 332.
[4] [1947] VLR 332 at 334-5 per Herring CJ and Lowe J.
The second authority referred to by Batt J was Fancourt v. Mercantile Credits Limited[5] where the High Court stated:
The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no
real question to be tried.[6]
[5] (1983) 154 CLR 87.
[6] (1983) 154 CLR 87 at 99 per Mason, Murphy, Wilson, Deane and Dawson JJ.
In this proceeding the defendant borrowed in excess of $800,000 from the plaintiff bank, the loan being secured by a mortgage over ten blocks of vacant land in the Yea area. The plaintiff's case is that contrary to a provision of the loan agreement and the Memorandum of Common Provisions, the defendant provided incorrect or misleading information in connection with the loan. The alleged incorrect or misleading information provided by the defendant was that he was employed by Finch Industries at an income of $200,000 per annum and that his stepfather had gifted him the sum of $400,000 to assist him in the purchase of the land at Yea.
The bank also relied on a further allegation that an incorrect or misleading document in the form of a letter from an employer setting out the defendant’s income was provided to the bank by the defendant. However, as that document was not provided to the bank until after the relevant events which I am about to consider, it cannot be relied on at this stage.
By a letter dated 29 May 2008, the solicitor for the bank wrote to the defendant stating in the second paragraph:
I am instructed that-
(a)         a default has occurred under the loan agreement pursuant to which you provided a mortgage over the above mentioned property,
(b)         incorrect or misleading information was given to the bank in connection with the loan contract and mortgage,
(c)          the default referred to in (b) above is not capable of being remedied, and
(d)         the bank has decided, without further notice, that all money owing under the loan contract and the mortgage are now due and payable immediately by you to the bank.
As you are in default of your legal obligations to the bank, I serve on you with this letter, notice under s.76(1) of the Transfer of Land Act 1958.
Accompanying the letter was a document, headed "Notice to mortgagor s.76(1) Transfer of Land Act 1958", addressed to the defendant requiring him to pay to the bank the amount of $898,457.97 being the amount of principal and interest accrued due and owing up to 29 May 2008.
Mr Cook of counsel, who appeared for the defendant, presented an argument which raised three principal defences. It is, of course, only necessary to consider whether any one of those defences raises an arguable defence, which would have the consequence that I would reach the conclusion that the matter should proceed to trial.
The first of the defences advanced by the defendant was that the terms of the loan agreement requiring notice to be given had not been complied with. Clause 9 of the loan agreement is headed "Default". Clause 9.1 reads:
You are in default under the contract if:
…
(e)          you give us incorrect or misleading information in connection with the contract before or after you sign the contract.
Clause 9.2 reads:
In most circumstances we give you a notice requiring you to fix the default (if the default can be fixed) within a certain time of telling you what the default is. In some circumstances we do not have to give you a notice (for example if a court excuses us from giving a notice).
Clause 9.3 reads:
If you are in default and:
(a)         you do not fix the default in the time allowed by the notice we give you under clause 9.2;
(b)         the default cannot be fixed and the time stated in the notice we give you under clause 9.2 elapses; or
(c)          we do not have to give you a notice under clause 9.2; THEN
(d)         we may decide without further notice that all money owing by you under the contract is due and payable immediately;
(e)          we may sue you for payment of the money you owe us;
(f)          we may exercise rights under the Security, including our right to sell the Security Property …
In other words, the plaintiff may serve a notice under s.76 of the Transfer of
Land Act and take possession.
As Mr Cook submitted, everything that followed depends on there being compliance with the above clauses.
Mr Moffatt of counsel, who appeared for the plaintiff, submitted that the bank had followed the appropriate procedure. He referred to the misleading information which had been provided to the bank in August 2007 at or about the time at which the loan was granted. Mr Moffatt submitted that what was required under the loan agreement or the usual terms and conditions for consumer mortgage lending, to give it its full name, was that first of all there needed to be an event of default as required by, in this instance, clause 9.1(e), and he relied on the allegations of incorrect and misleading information that I have referred to. Mr Moffatt then submitted that if the default could be fixed the bank would give a notice requiring the borrower to fix the default and that otherwise the bank did not have to give a notice. He submitted that in this proceeding, as the default could not be fixed, the bank was not required to give a notice under clause 9.2 and that as the default could not be fixed and the bank was not required to give a notice, clause 9.3(d) came into operation and the bank could decide, without further notice, that all money owing by the borrower was due and payable immediately.
It seems to me that there is great difficulty in making sense of the relationship between clauses 9.2 and 9.3. The way in which Mr Moffatt construed clause 9.2 was that he was reading it as meaning that in most circumstances where the default can be fixed the bank will give the borrower a notice and where the default cannot be fixed the bank will not give the borrower a notice.
In my opinion, that is not precisely what clause 9.2 says. The example, set out in that clause of a circumstance where the bank does not have to give a notice, was if a court excuses the bank from giving a notice. It does not say that a notice does not have to be given if the default cannot be fixed.
But even accepting Mr Moffatt’s reading of clause 9.2, when one comes to clause 9.3 there is clear difficulty because of sub-clause 9.3(b), which states:
If you are in default and:
…
(b) the default cannot be fixed and the time stated in the notice we give you under clause 9.2 elapses.
This sub-clause clearly contemplates the giving of a notice, even in circumstances where the default cannot be fixed. Therefore, it seems to me that that shows that the reading of clause 9.2 put forward by counsel for the plaintiff may not be correct.
What Mr Cook submitted was that when one reads clauses 9.2 and 9.3 together, even where the default cannot be fixed, a notice is to be given notifying the borrower what the default is and stating a time within which the next step is to take place, the next step being the calling up of the loan and making it immediately payable.
The letter of 29 May 2008, that was sent to the defendant, does not specify a time, and it does not go further in terms of telling the borrower what the default is other than saying incorrect or misleading information was given to the bank, therefore leaving the borrower arguably in a situation of some uncertainty as to what it was that was being alleged against him in this case.
However, Mr Moffatt correctly pointed out that there had been preceding enquiries with respect to the allegations of the provision of incorrect or misleading information so that the defendant would have known what was being alleged against him.
Nevertheless, in my opinion, it is arguable that the correct construction of these confusing clauses has not been followed and therefore that there was no notice given with a time period which had to elapse before the next step could be taken, namely the bank deciding to call up all of the moneys due under the loan agreement.
Again, Mr Moffatt pointed out that the default existed from the moment the incorrect information was provided and therefore that it had existed for some time. He submitted that the default did not have to occur after the giving of the notice under clause 9.3.
As I have said in referring to the authorities on the appropriate test, obviously I am not making a final conclusion about the correct construction of the loan contract. All I have to decide is whether the point is reasonably arguable.
In the circumstances, I have reached the conclusion that it is reasonably arguable that the appropriate steps were not taken and that, therefore, the plaintiff had no right to serve a s.76 notice under the Transfer of Land Act and that the defendant's assertion that it has a counterclaim against the bank for wrongfully selling or wrongfully taking possession of his ten blocks of land selling some five of them, with five still to be sold, is also arguable. Just what the quantum of that counterclaim would be is a matter for trial.
Therefore, in my opinion, the appropriate order is that the appeal should be dismissed.

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[2009] VSC 638

15 DECEMBER 2009