Commonwealth Bank of Australia v Date
[2012] VCC 624
•25 May 2012
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted |
AT MELBOURNE
COMMERCIAL LIST
BANKING AND FINANCE DIVISION
Case No. CI-11-03937
| COMMONWEALTH BANK OF AUSTRALIA | Plaintiff |
| v | |
| LEONARD ERNEST DATE | Defendant |
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JUDGE: | HIS HONOUR JUDGE ANDERSON | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 11 May 2012 | |
DATE OF JUDGMENT: | 25 May 2012 | |
CASE MAY BE CITED AS: | Commonwealth Bank of Australia v Date | |
MEDIUM NEUTRAL CITATION: | [2012] VCC 624 | |
REASONS FOR JUDGMENT
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Catchwords: Practice and Procedure – Summary Judgment application – Action by Bank following default by mortgagor – Defendant alleging non-compliance with National Credit Code – Whether “late payment” fees disclosed – Claim for fees totalling $440.00 abandoned by Bank – Whether matter should proceed to trial – County Court Civil Procedure Rules 2008, Rules 22.01 and 22.10.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr T. Warner | Gadens Lawyers |
| For the Defendant | Mr D. K. Shirrefs | Wilmoth Field Warne |
HIS HONOUR:
1 The plaintiff seeks Summary Judgment against the defendant following a default in the repayment of a mortgage loan. The defendant alleges that the plaintiff breached the provisions of the National Credit Code and that this, and other circumstances should deny the plaintiff the right to enforce the terms of the loan, at least on a summary basis.
2 The defendant relies upon the following matters:
a. The consumer credit contract executed by the parties does not refer to “late payment” fees. These fees were later charged by the Bank. It was alleged that the omission from the contract was a failure to comply with a “key requirement” which under the Code might result in the Bank being ordered to pay a penalty to the defendant which might then be set off against monies claimed by the Bank. The defendant also referred to the charging of “repayment redraw fee” which might also be in a similar position.
b. The Default Notices served by the Bank failed to comply with the requirements of the Code. The Notices did not have the required “prominent heading” and the notification of the application of the “acceleration” provisions and the consequences of “a subsequent default of the same kind” was inadequate.
c. The decision of Gordon J in Andrews v Australia and New Zealand Banking Group Limited [2011] FCA 1376 held that in certain circumstances the imposition of a late payment fee in a credit contract may constitute a penalty. This may give rise to circumstances in the present case where the Court would not permit the Bank to enforce the contract.
Disclosure of fees
3 The credit contract between the parties does not refer to “late payment” fees. Following defaults on the part of the defendant, the Bank has on 22 separate occasions charged a fee of $20.00, described in the Bank’s statements as a late payment fee. Section 17(8)(a) of the Code requires the contract document to contain “a statement of the credit fees and charges that are, or may become, payable under the contract”. By section 111 of the Code, the requirement contained in section 17(8)(a) is described as a “key requirement”. Section 112, and the sections which follow, entitle a borrower to make application in the case of such a breach for the imposition of a penalty payable to the borrower which might also be set off against monies otherwise payable to the Bank (section 115(1)).
4 Mr Warner submitted on behalf of the plaintiff that:
a.Section 66 of the Code permitted the Bank to give notice of the imposition of a “new credit fee” during the life of the credit contract.
b.The credit contract (p.5/7) gave notice to the borrower that, “We can also impose new fees and charges without your consent. We give you notice of any new fee or charge”.
c.Section 193 of the Code provides that non-compliance, by reason of a contravention of the Code, does not render the contract “illegal void or unenforceable … unless this Code contains an express provision to that effect”.
d.The plaintiff could not point in the materials filed in support of the Summary Judgment application to a later notice to the borrower of the imposition of a late payment fee.
e.In the circumstances, the plaintiff would not seek judgment in relation to the fees charged and the Court should either give judgment for the balance of the claim, under Rule 22.01, or make an appropriate declaration under Rule 22.10 and order that the plaintiff’s entitlement be “ascertained”.
f.The defendant would be entitled to pursue an application for a penalty under section 112 of the Code, even if judgment were entered.
g.The repayment redraw fee of $50.00 was in fact disclosed on page 3/7 of the credit contract as a “drawing fee – on each re-drawing under the RRF [Repayment Redraw Facility] (UTC Clause HL9.6)”. Clause HL9.6 provides that, “You must pay the drawing fee stated at Item F each time you redraw on the RRF”.
Default notice
5 The plaintiff served two Notices on the defendant, on 25 May and 19 July 2011. The defendant submitted that each Notice must comply with the provisions of section 88 of the Code. It was submitted that there was a failure to comply in the following respects:
a.The heading of the first Notice was not “prominent” as required by section 88(3).
b.The Notice did not set out the effect of the “acceleration clause” in the credit contract as required by section 93(1)(b).
c.The Notice did not satisfy section 88(3)(h) in relation to “a subsequent default of the same kind”.
6The Notice dated 25 May 2011 was in bold and a larger font and read “You are in default on your Home Loan”. Section 88(3) requires that, “A default notice must contain a prominent heading at its top stating that it is a default notice”. The Notice dated 19 July 2011 was in bold and capitals and read “NOTICE TO PAY PURSUANT TO CREDIT CONTRACT AND NOTICE TO PAY PURSUANT TO SECTION 76 OF THE TRANSFER OF LAND ACT 1958 (VIC.)”.
7The credit contract between the parties contained an “acceleration clause”. Section 92 of the Code defines an “acceleration clause” as a term providing for the Bank to become “entitled to immediate payment of all, or a part, of an amount under the contract that would not otherwise have been immediately payable [upon the] occurrence or non-occurrence of a particular event”. Section 93(1)(b) requires the Default Notice to contain an additional statement of the effect of “the operation of the acceleration clause and also of the amount required to pay out the contract (as accelerated)”.
8The Notice dated 25 May 2011 provided that the “amount you must pay” was $4,692.25. The last paragraph on the first page of the Notice reads:
“What could happen if you don’t pay?
If you do not pay 4 July 2011, we can take any of the steps without sending another notice:
· Demand you pay the total amount owed, plus other amounts owed under the contract with us that would normally be due on a later date. At the date of this notice, the full amount owed is $59,211.04. Until you pay that amount, it will continue increasing with interest, fees and charges”.
9 Section 88(3)(h) requires that a Default Notice must specify “that a subsequent default of the same kind that occurs during the period specified for remedying the original default may be the subject of enforcement proceedings without further notice if it is not remedied within the period”. The relevant paragraph of the first Notice reads, “Even after paying the amount demanded in this notice, it is important that you continue to make payments as they fall due. If another payment of the same kind is missed within 38 days of the date of this notice, we may take any or all of the steps mentioned above without sending another notice”. The Notice is dated 25 May 2011. Thirty eight days after the Notice would be 2 July 2011. The date payment was due was specified in the Notice as 4 July 2011.
10 Mr Warner submitted that:
a.Section 88 applied to the first Notice. Sub-section 3 requires that “a default notice” (emphasis added) must specify certain matters. The Code was therefore intended to require a single notice in respect of a default.
b.The second Notice served under section 76 of the Transfer of Land Act was part of the “enforcement proceedings against a mortgagor to recover payment of money due or take possession … in relation to property subject to a mortgage”. Sub-section 88(2) requires that enforcement proceedings “must not begin” unless the mortgagor is in default and has been given “a default notice, complying with this section”. The second Notice was not required to satisfy the provisions of the Code.
c.The “acceleration” requirements of section 92 had been satisfied in the first Notice.
d.The requirements of section 88(2)(h) were satisfied in the first Notice notwithstanding any slight inconsistency between the calculation of 38 days from the Notice (2 July 2011) and the date of 4 July 2011 when payment of the outstanding amount was required to be paid.
e.The requirements of the Act must be adhered to, however, the Courts have in relation to these and similar provisions consistently stated that, “One should not look at such notices strictly, that they are valid so long as they reasonably convey to the recipient the message that the section intends the borrower to receive and the borrower is not misled”. See Monas v Perpetual Trustees Victoria Ltd [2011] NSWCA 417 at para.39 per Young J A.
Andrews v ANZ Banking Group Limited
11 In this case, Gordon J held that in relation to of a credit card account a “late payment” fee when considered in the context of other fees charged to card holders might be capable of being regarded as a penalty as not being a genuine pre-estimate of loss. The decision is subject to appeal. Mr Shirrefs for the defendant submitted that the present application should not be decided before the appeal in Andrews has been determined. Mr Shirrefs submitted that in the present matter the fact that late payment fees had been charged to the defendant, and that there was no evidence that there had been disclosure to the defendant that such fees might be charged, were circumstances which may constitute unconscionable conduct. Therefore, the defendant may have available to it all the remedies provided for in section 87 of the Trade Practices Act, including the setting aside of the consumer contract.
12 Mr Warner submitted that in the circumstances considered by Gordon J, a late payment fee of $35.00 was “capable of being a penalty”. In that case the Bank accepted “that it was not a genuine pre-estimate of ANZ’s damages” (para.243). Mr Warner further submitted that there was however, no support in the decision for the defendant’s submission that late payment fees might not in the present matter be a genuine pre-estimate of loss, or even if they were not, that this might have consequences for the enforceability of the loan agreement and not simply result in the plaintiff being unable to recover in respect of those particular fees or being required to repay the fees.
Conclusions
13 Without evidence that a late payment fee might be imposed on the borrower either in the credit contract or by later notice, such fees are not recoverable. This should not, however, be the basis for denying the plaintiff’s summary judgment in respect of the balance of its claim. The bank statements exhibited in support of the Summary Judgment application disclose that the late payment fee of $20.00 was imposed on 22 occasions. It is likely that part of the amount claimed by the plaintiff as interest would have been levied on those fees.
14 The Court has power pursuant to Rule 22.10 to make a declaration of entitlement and to order that the amount of the plaintiff’s judgment be ascertained. In the precedent form of order in Williams’ Victoria Civil Procedure it is suggested that, in the Supreme Court, this would be done at a hearing conducted by an Associate Justice. In this Court, I could require the plaintiff to recalculate the interest charged omitting the late payment fees. Rather than follow that course and subject the parties to a further hearing it may be more appropriate to simply make an arbitrary deduction of $1,000.00 from the plaintiff's claim which would clearly be a sum in excess of the $440.00 and any interest incurred on that sum.
15 The Notice dated 19 July 2011 must comply with the provisions of the Code. In my view, the heading satisfies the requirement of sub-section (3) that it be “prominent” and state that it is “a default notice”. The statement in the Notice relating to the application of the acceleration provision is adequate.
16 There is a slight inconsistency between the date 4 July 2011 and the period of 38 days after the date of the Notice. Theoretically, the plaintiff might have sought to exercise certain rights if a further instalment had not been paid on 3 or 4 July 2011 and there may have been some doubt as to the ability of the Bank to exercise those rights. I note that the first instalment was due under the credit contract one month after the ‘funding date” and that the “opening balance” was made available to the borrower on 22 October 2003. I consider that this slight discrepancy is not capable of supporting an argument that the Notice dated 19 July 2011 does not comply with the requirements of section 88(3)(h).
17 The late payment fee of $20.00 may be capable of being considered a penalty although it is unlikely and no argument was addressed, for example, by reference to other fees and charges to which the borrower also became liable upon a default. However, in my view, no circumstances have been referred to which might be capable of supporting an argument that the Bank engaged in unconscionable conduct by charging the fee in circumstances where it had failed to disclose to the borrower that such fees might be imposed. In any event, section 193 provides that unless the Code contains an express provision that the effect of non-compliance is to render a contract illegal, void or unenforceable, that result does not follow. It would be “fanciful” to suggest that even if the fee were to be regarded as a penalty that the consequences to the plaintiff would be no more than the Bank being unable to recover or retain the fees charged.
18 In the circumstances, I consider that apart from the late payment fees and any interest thereon, no defence has been shown in relation to the claim that would have a real prospect of success. I do not consider that there is any other basis upon which this matter should proceed to trial. I will hear further from the parties before making final orders.
Certificate
I certify that these 8 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 25 May 2012.
Dated: 25 May 2012
Hannah Christensen
Associate to His Honour Judge Anderson
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