Commonwealth Bank of Australia v Franks

[1999] NSWSC 401

NEW SOUTH WALES SUPREME COURT

CITATION:         Commonwealth Bank of Australia v Franks [1999]  NSWSC 401

CURRENT JURISDICTION:             Common Law

FILE NUMBER(S):             10411/97

HEARING DATE{S):         15 April 1999

JUDGMENT DATE:           03/05/1999
 PARTIES:

Commonwealth Bank of Australia
(Plaintiff)

Gregory Michael Franks
(Defendant)

JUDGMENT OF: Master Harrison     

LOWER COURT JURISDICTION:    Not Applicable

LOWER COURT FILE NUMBER(S):              Not Applicable

LOWER COURT JUDICIAL OFFICER:          Not Applicable

COUNSEL:
Mr G Burton
(Plaintiff)

Mr G M Franks
(Defendant in person)

SOLICITORS:
Mr J Lanser of L E Taylor
Sydney
(Plaintiff)

Mr G M Franks
(Defendant in Person)

CATCHWORDS:
Possession - whether there was an agreement to defer mortgage repayments

ACTS CITED:
Trade Practices Act - s 51A & s 52
Credit (Home Finance Contracts) Act 1984 - s 7
Real Property Act 1900 - 2 57(2(b)
Fair Trading Act s 41 & s 42

DECISION:
See para 56

JUDGMENT:

29

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

MASTER HARRISON

MONDAY, 3 MAY 1999

10411/97   -   COMMONWEALTH BANK OF AUSTRALIA 

v   GREGORY MICHAEL FRANKS

JUDGMENT     (Possession - whether there was an

agreement to defer mortgage repayments)

1          MASTER:  The plaintiff seeks possession of the defendant’s property and the defendant opposes such an order being made.  He has filed an amended defence and cross claim.  The plaintiff relied on affidavits of Anthony John Carroll sworn 26 August 1997 and 14 April 1999 and Lisa Anne Menin sworn 5 August 1998.  The defendant relied on his affidavits sworn 11 April 1997, 16 October 1997, 29 October 1997, 9 November 1997, 9 September 1998 and 14 April 1998.  Mr Carroll, Mrs Menin (formerly Links) and the defendant were cross examined.  The defendant represented himself at the hearing.  He was intelligent, well prepared and articulate but at times his evidence and submissions were confused.  I shall refer to his evidence in more detail later in this judgment.

2          The defendant by his amended defence admitted paragraph (1) to (7) of the statement of claim.  Hence, the agreed facts are that the defendant is the registered proprietor of the whole of the land in Certificate of Title Folio Identifier 5/841832 known as 5 Hollydale Place Eden in the State of New South Wales (the property).  On 9 December 1994 the defendant executed a registered mortgage in favour of the plaintiff.  The mortgage was executed in consideration of a loan of $117,287 to be advanced by the plaintiff to the defendant.  The loan was progressively advanced to the defendant from 29 December 1994 to 7 June 1995 as the plaintiff built a home on that block of land.  The defendant’s employment with the Roads and Traffic Authority was terminated on 27 June 1995.  Notwithstanding the loss of his employment the defendant continued to make full mortgage repayments until January 1996.

3          Paragraph (6) of the defence specifically pleaded that in January 1996  the defendant contacted an employee, servant or agent of the plaintiff to advise that he was in financial difficulty and would not be able to meet his January instalment pursuant to the mortgage.  Paragraph (7) pleads that in consideration of the defendant’s interest repayments pursuant to the mortgage being capitalised, the employee, servant or agent referred to in paragraph (6) agreed to defer or alternatively vary the defendant’s mortgage such that the defendant’s repayment would be deferred until the outcome of the defendant’s unfair dismissal proceedings and workers compensation proceedings whichever was the latter.

4          In paragraphs (9) and (10) of the amended defence the defendant alleged that in about April 1996 he contacted the plaintiff and spoke to Ms Lisa Links and that she similarly represented to the defendant “that the plaintiff would defer the defendant’s mortgage repayments until the outcome of the defendant’s unfair dismissal proceedings and workers  compensation proceedings whichever were the latter” or alternatively in consideration of the defendant’s payments pursuant to the mortgage being capitalised then Ms Links agreed to vary or defer the defendant’s repayment obligation as referred to above.

5          In submissions the defendant stated that an employee of the bank told him that he did not have to make mortgage repayments until his legal proceedings were finalised.  This offer was allegedly made at the bank’s instigation in January and the agreement was allegedly extended in April and June 1996.  The January representation is the first, the April is the second representation.  In the amended defence of June 1996 which would have been the third representation agreement is not pleaded.

6          The defendant alleged that these first and second representations were made in trade and commerce and constituted representations as to a matter within the meaning of s 51A of the Trade Practices Act and s 41 of the Fair Trading Act.  The defendant further alleged that the first and second representations were false in that the plaintiff has failed or refused to defer the defendant’s further mortgage repayment until the outcome of his workers compensation proceedings.  This failure constituted misleading and deceptive conduct within the meaning of s 52 of the Trade Practices Act and s 42 of the Fair Trading Act.  While the defendant does not specifically deny that he has been in default of making mortgage payments, it is accepted that this issue is in dispute.

7 The defendant has cross claimed and sought orders that the provisions of the mortgage be varied in such a manner that the cross defendant cannot seek to enforce the provisions of the mortgage until the cross claimant’s workers compensation proceedings are determined or alternatively that the cross defendant be restrained from enforcing the provisions of the mortgage until the determination of the cross claimant’s workers compensation proceedings or a declaration that the notices issued by the cross defendant to the cross claimant pursuant to s 7 of the Credit (Home Finance Contracts) Act 1984 and s 57 (2)(b) of the Real Property Act 1900 are void and of no effect.

8          The issue to be decided is whether there was an agreement between the plaintiff and defendant in January which was extended in April and June 1996 and if there was such an agreement what were the terms of that agreement.  It is necessary to consider in detail the evidence of Mrs Menin and the defendant together with notes in the bank file and the events which occurred around these times and in October 1996. 

9          Sometime prior to January 1996, the defendant had commenced two sets of legal proceedings against his former employer one seeking damages for unfair dismissal and the other seeking workers compensation payments on the basis he was suffering anxiety and stress.  The records relating to the loan advance account show that for the months of January, February, March and April 1996, a counter entry of $1,087 for repayment was deducted and then an entry was made returning that amount to the account as being due and owing.  The result is that there were no mortgage repayments made by the defendant from January to April 1996.  There have not been any further mortgage repayments made since January 1996, but the automatic deduction and reversal entries ceased to take place after April 1996 inclusive.  The defendant was charged $30 per month in respect of these reverse entries between January and April 1996 (total $120.00) on his cheque account.  The defendant’s workers compensation proceedings were finalised in August 1998 when they were struck out and he lost his unfair dismissal case in June 1997.

10        The defendant has no contemporaneous notes of his alleged conversations with bank staff in January, April or June 1996.  He swore 3 affidavits which refer to these conversations.  The first affidavit was prepared on 11 April 1997.  This affidavit was prepared without the benefit of having had access to the bank’s file.  Prior to the preparation of the affidavits dated 16 October 1997 and 9 September 1998, the defendant had obtained the bank’s file by way of subpoena and he had read its contents.

Purported January conversation

11        The defendant’s evidence is that in January 1996 he anticipated that his workers compensation case would be heard in July 1996.  There is a bank file note dated 23 January 1996 by John Beazley who is a manager at the Bega branch of the plaintiff’s bank.  It states in relation to this matter that the client has approached that office to advise that he cannot make repayments.  He has been put off work by the Road and Traffic Authority (RTA) and a legal battle has commenced to try and overrule the decision.  Income is now unemployment benefits of $375 per fortnight.  The bank requested the client’s solicitor to provide a summary of the current court proceedings  to show a better picture.  The note concluded by seeking advice as to the further action required.

12        There is a letter on the plaintiff’s file dated 12 January 1996 from the defendant’s solicitor confirming that the defendant is currently appealing a decision of the Government and Related Employees Appeal Tribunal.  It also stated that the defendant was experiencing severe financial difficulties and that it is intended to apply to the Court of Appeal seeking an expedition of the matter.  It concluded by saying “please do not hesitate to contact us further”.

13        In the defendant’s first affidavit of 11 April 1997 he makes reference to conversations with bank officers in January and June 1996.  The April conversation is not mentioned.  As previously stated the amended defence filed on 23 October 1997 makes reference to the January and April conversations.  The contents of the affidavits and amended defence are not consistent.  The original defence makes no references to conversations but does refer to an agreement being made at the plaintiff's instigation to defer payments pending the outcome of his legal proceedings.  In the defendant’s April affidavit, the only statement that could refer to the purported January conversation is contained in paragraph (5).  This paragraph does not specifically refer to the conversation occurring in January 1996 but states that when he became unable to make his repayments he advised the bank, sought and was granted expedition of his case against the employer and moved out of the home so that it could be rented in order to assist in making repayments.  The solicitor’s letter dated 12 January 1996 referred to an intended expedition application.  As at 12 January 1996 expedition had not been granted nor had the plaintiff moved out of the property and rented it out as this occurred in April 1996.  It is more likely that in paragraph (5) the defendant is referring to the purported April conversation.

14        There is no reference in the second affidavit of 16 October 1997 (including annexures) or the third affidavit of 9 September 1998 to a conversation occurring in January 1996.  There is no letter on the bank’s file other than the solicitor’s letter.  Neither party asserts that the plaintiff wrote a letter to the defendant in January 1996.  From Mr Beazley’s file note it appears that the defendant did speak to an officer of the Bega branch of the bank in January 1996 because the information recorded in the file note is more detailed than that contained in the solicitor’s letter dated 12 January 1996.  The defendant cannot recall with whom he spoke in January 1996, the date when the conversation occurred nor has he ever given his version of what each person actually said.  In evidence the defendant stated that in January 1996 he said to “them” that he was doing everything in his power to get the workers compensation and other matters settled so he could return to work (t 44).  It is not clear from the bank file note whether the defendant spoke to Mr Beazley or some one else employed by the bank whether the conversation occurred on 23 January 1996 or Mr Beazley wrote the file note on 23 January 1996 referring to an earlier conversation. The file note indicated that the plaintiff was awaiting a further letter from the defendant’s solicitor.  It indicated that a request had been made for the defendant’s solicitor to furnish a summary of current court proceedings to show a better picture. 

15        There are two possible scenarios as to what actually occurred firstly, that the solicitor’s letter dated 12 January 1996 could have been received after the conversation between the defendant and a bank officer occurred or secondly once the details of the letter dated 12 January 1996 were received by the bank, then the defendant had a conversation with an employee and that employee requested a further more detailed letter from the solicitor. The defendant points out that no further information was requested from him.  There is a reference in Ms Wong’s file note dated 14 October 1996 (which is referred to in more detail later in this judgment) where she said that there appears to be a letter sent to the defendant’s solicitor on about 15 February 1996.  A copy of this letter is not in evidence before the court.  If the latter scenario is what actually occurred it would seem unlikely that an agreement had been reached.  If an agreement had been reached there would not be any necessity for further information to be provided.  If further information was requested, it would be likely that the letter would refer to the agreement or intended agreement.

16        It is not necessary to determine in what order the telephone call and letter occurred.  I accept that as the bank’s file note records that the plaintiff advised the bank that firstly, that he could not afford to make repayments;  secondly he had been put off work by the RTA and a legal battle had commenced to override the decision and thirdly, he was on unemployment benefits of $375 per fortnight.  There is no recorded discussion of any reduced amount that the defendant could pay which one would expect to occur before an agreement to defer repayments was made.  There is no estimate of how long it would be before the court proceedings were to be finalised nor for what period the bank was prepared to defer repayment.  There is no reference to the capitalisation of interest which presumably was to be of benefit to the bank. 

17        According to the defendant, the benefit to the bank in addition to the capitalisation of interest was that by postponing repayments it may receive the arrears provided the plaintiff’s legal proceedings were successful.  According to the defendant in cross examination the benefit to the bank was that it would receive $30 for 4 months reversal entries which would take extra interest on top of what it was allowed to charge under the mortgage over the period of deferral (t 46).  The defendant did not recall if he had mentioned this in his affidavits although he conceded that they were careful and complete and left nothing important out (t 47).  At first he stated that Ms Menin made mention of this and then changed his answer to say it was part of the January conversation.

18        There is no mention that the plaintiff offered to defer repayment which one would expect if this offer was made at its instigation.  In fact, there is no mention of any agreement at all.  The evidence given by the defendant is at odds with that contained in the file note.  It is most unlikely that a bank employee would offer to defer repayments without knowing the exact duration of the deferral.  Even if I accept that the defendant told an officer of the bank that the workers compensation proceedings were probably going to be listed in July 1996 there were two sets of legal proceedings and the bank had not yet been advised as to when the appeal in the unfair dismissal proceedings was due to be heard.  Had an agreement occurred, it is unlikely that the bank employee would fail to record it.  It could also be expected that the bank would confirm such an agreement in writing.  This did not occur.  The defendant’s version of events is, on the evidence improbable.  I prefer the plaintiff’s version of events and I am not satisfied on the balance of probabilities that there was an agreement between the plaintiff and defendant in January 1996 that in consideration of the defendant’s interest repayment pursuant to the mortgage being capitalised the plaintiff agreed to defer or alternatively vary the defendant’s mortgage such that the defendant’s repayments would be deferred until the outcome of his unfair dismissal proceedings and workers compensation proceedings whichever was the latter.  I am satisfied on the balance of probabilities that there was no agreement made between the parties in January 1996.

19        As previously stated, no mortgage repayments were made between January and April.  There is no activity on the bank file during this period.  Both the plaintiff and defendant submitted that this was consistent with their version of events.  If interest was meant to be capitalised, it would be expected that the bank would have taken some steps to make these calculations and they would appear in its records.  This was not done.

Purported April conversation

20        Ms Menin is employed by the plaintiff.  In April 1996 she held the position of recoveries officer employed in the Home Loan Management section of the bank at Head Office in Sydney.  She swore an affidavit and was cross examined.  I carefully observed her being cross examined and I formed the opinion that she was a reliable and truthful witness.  However there were two inconsistencies in her evidence which I shall refer to shortly.  Neither of these inconsistencies led me to doubt her other evidence.  She has no independent recollection of speaking with the defendant at any time.  She spoke to up to 50 customers per day so it is not surprising that she has no recall of these conversations.

21        Ms Menin wrote a diary note dated 15 April 1996 which stated that she rang the home number of the defendant and left a message to call.  She wrote a note to remind her to follow up if she had not received a telephone call from the defendant on 22 April 1996.  The next file note says that on 15 April 1996 “Mr Franks rang while I was at lunch.  Rang home answering machine on.”  Ms Links gave evidence that after the defendant telephoned while she was at lunch she would have returned his call.  He did not answer the telephone so she left a message on his answering machine for the defendant to call her because that is her custom.  The next file note is dated 22 April 1996 and says “Left message to call.”  However her evidence is she did not call the defendant on 22 April 1996.  This is at odds with her affidavit evidence which states that she did call the defendant on 22 April 1996 but did not speak to him so she left a message for him to call.  On either of these versions, Ms Menin did not speak to the defendant on 22 April 1996.  She denies that she had a conversation with the defendant in April 1996 and she denies that she ever made the statements attributed to her by the defendant.  There is another note which says “D - 24/4”  By this Ms Menin said she diarised that she should speak to the defendant on 24 April 1996.

22 However, the file note made by Ms Menin dated 23 April 1996 which appears underneath the “D -24/4” entry indicates that she received an application by the defendant under the mortgage assistance scheme administered by the Home Purchase Assistance Authority from the Bega branch. She completed the form and posted it back to Bega. Ms Menin, in this entry also recommended that as the debt was continuing to increase and she considered that there was no equity in the house that the bank should issue a s 7 notice under Credit (Home Finance Contracts) Act (s 7 notice). Prior to issuing a s 7 notice the bank’s practice was for the recovery officer usually to try to contact the borrower by telephone and failing that use written communication as a last resort. No letter was written to the defendant and he was not contacted prior to the s 7 notice being first issued. However the bank has no practice as to the number of times it attempts to contact the borrower prior to the issue of a s 7 notice.

23 The next file note is in different hand writing and probably written by Paul Dryden. It stated that “Due to HLiC involvement and poor equity position the issuing a s 7 notice is supported even though the Mortgage Assistance Scheme application is still pending.” It is signed and a note underneath appears and states “We still haven’t actually spoken to the borrower ?” The last entry on that page dated 21 May 1996 stated that the issue of a s 7 notice is approved and signed by Claude Rydnen who was a bank manager.

24        The only reference the defendant made to a conversation with the bank that may have occurred in April is in his affidavit sworn 11 April 1997 at paragraph (6) where he says:

“6.      As soon as a suitable tenant was found in April 1996 I advised the Bank to assertain (sic) whether they wanted the rental sent straight to them from the managing estate agents or simply deposited into my account from which the repayments had previously been deducted.  I was astonished (and grateful) when the bank said they would defer repayments awaiting the out come of my legal action against my employer.”

25 This version implies that it was in April that the defendant was astonished and grateful when the bank offered to defer repayments. It is unlikely the defendant would have been astonished and grateful when, according to his version of events the bank had already agreed in January 1996 to the deferment of mortgage repayments until the legal proceedings were completed. It is my view, that it is more likely than not that Ms Menin did not have the conversation alleged by the defendant in April 1996 for four reasons; firstly, it would be unlikely that she would volunteer to authorise the defendant to defer making repayments, particularly as there is no period stipulated; secondly, the bank’s diary notes do not refer to workers compensation hearing being listed in July 1996; thirdly it is unlikely that she would have spoken to the defendant and not taken any file notes as to the alleged agreement bearing in mind she did take notes in relation to other action she took in this matter and fourthly, her action in authorising a s 7 notice either immediately after or days after agreeing that the defendant could defer mortgage repayments is inconsistent conduct.

26        Further it is my view that Ms Menin would have appreciated the importance of taking accurate diary notes as she spoke to up to 50 customers per day and could not be expected to remember all of those conversations.  None of her diary notes show that an agreement was reached between herself on behalf of the plaintiff and defendant that his mortgage repayments would be postponed until his court proceedings were finalised.  If she agreed to defer payments she would have acted beyond her delegated authority and deceived her superiors.  I do not think that this is the case.  I accept and prefer Ms Menin’s version of events to that of the defendant.  Ms Menin’s course of conduct in April and June 1996 is consistent with realising the bank’s security. Finally, it is my view that no conversation took place between Ms Menin and the defendant in April 1996.  This is confirmed by the file note probably written by Paul Dryden which comments that the bank had still not spoken to the defendant.

27        I am not satisfied on the balance of probabilities that there was an agreement or in April 1996 that in consideration of the defendant’s interest repayments of the defendant’s interest repayment pursuant to the mortgage being capitalised the plaintiff agreed to defer or alternatively vary the defendant’s mortgage such that the defendant’s repayments would be deferred until the outcome of his unfair dismissal proceedings and workers compensation proceedings whichever was the latter.  Nor do I accept that an agreement was made in January and the period of deferment was extended.

28 On 2 May 1996 it appears that Mr Leishman approved the issue of the s 7 notice. The s 7 of the Credit (Home Finance Contracts) Act notice is dated 9 May 1996.  The notice advised the defendant that it intended to take legal action or exercise its right under the home finance contract after a period of one month had elapsed.  It suggested that the defendant should discuss the matter with the credit provider and in particular Lisa Links (now Menin) and gave details of Ms Menin’s title and telephone number.  There is a paragraph contained in the letter which stated that if the defendant has been unemployed, sick or there was another good reason why he could not meet his commitments then the contract may be varied under the law to meet his situation.

The June conversation

29        On 7 June 1996 Justin Eamens prepared a file note.  Mr Eamens is also a recoveries officer and a co-worker of Ms Menin at head office.  It stated that the court date for the workers compensation claim in relation to anxiety and stress was 10 July 1997 but that the defendant was still on sickness benefits.  It further stated that the property had been on the market for 12 months and listed at $163,000 and that the defendant was looking to return to the work place as soon as possible (pending the court case).  It also noted that the defendant has already contacted Consumer Affairs and that they wanted to speak to the bank to work out an arrangement.  The defendant in his evidence does not make any reference to a conversation between Mr Eamens and himself. 

30 It would be consistent for the defendant being aware that the time stipulated in the s 7 notice dated 2 May 1996 was due to expire, to contact the plaintiff either concerning his failure to make repayments, or drawing the alleged agreement with the bank to its attention and seeking an explanation as to how this occurred. There is nothing in the file note of Mr Eamens to suggest that there was an agreement in place. Rather, it suggests that the defendant was seeking more time to forestall the bank from taking possession of the property. If an agreement had been struck, it would be inconsistent for the defendant to seek the assistance of Consumer Affairs to work out an arrangement with the bank.

31        Ms Menin agreed that she had a conversation with the defendant by telephone on 11 June 1996.  Her file note bears the date 11 June 1996 and stated that the defendant advised her that he was on sickness benefits for anxiety and stress in the work place so he could not afford to pay anything off the loan.  Her file note recorded that she telephoned an employee of the Mortgage Assistance Scheme and they informed her that it was still processing his application.  Ms Menin says that she does not recall the conversation with Mr Franks referred to in her diary note as 11 June 1996.  However at that time it was her invariable practice when talking to a home loan borrower who was in arrears to say words to the effect of:

“You have a mortgage to the bank and we expect payment to be maintained.  The mortgage assistance scheme requires you to contribute 27% of your gross income.  From past experience they decline applications unless you make payments.  You have to make some payment to show your commitment to your debt.  You cannot just not pay.”

32        In cross examination, Ms Menin clarified that she always treated each application on its merits.  However, where a home loan borrower who was in arrears had made an application to the Home Purchasers Assistance Authority, she always gave the above advice.

33        As previously stated, Ms Menin also says that in 1996 she had no authority to agree to an arrangement on behalf of the bank for the deferment of payment of instalments due under the home loan mortgage.  The bank’s practice required in 1996 that any request for deferment of such instalments be in writing from the borrower.  Upon receipt of any such written request the bank’s practice required that she prepared a submission to her superiors for their consideration. 

34        On 19 June 1996 the program officer of the Mortgage Assistance Scheme declined the defendant’s application and advised the bank of this.  Included in that letter was advice which was substantially in accordance with the advice Ms Menin alleges that she previously had given to the defendant.

35        In his affidavit dated 9 September 1998 defendant deposed to the June conversation in the following manner.  He allegedly said:

“‘I’m still on Sickness Benefits, but I do have good tenants in the house & the proceeds of the rent are still paid into my account at the start of each month by my real estate agents.  That will allow the bank to resume deduction when they’ve decided they’ve waited as long as they can.’”

According to the defendant Ms Menin replied “Well, we don’t usually allow deferment of repayments, but I’m sure the bank won’t be prepared to wait until July 1997 for your workers compensation case to begin”.  On the defendant’s own version of events he records that Ms Menin informed him that the bank will not await the outcome of his legal proceedings.

36        In the affidavit of 16 October 1997, annexure A paragraph (2) the defendant asserted that he did speak to Lisa Links in April 1996.  In this affidavit he says at annexure 5(c) that “When Lisa returned my call on 11.6.96 she assured me that the complete deferment of (sic) acceptable as she didn’t expect I could afford the repayments while ill.”  The defendant’s two versions are inconsistent.  He conceded that none of Ms Menin’s alleged statements were confirmed by him with the bank in writing.

37 The defendant’s version of the April 1996 conversation is not convincing. I accept that the defendant told Ms Menin that he was on sickness benefits and that he could not afford to pay anything off the loan and had applied to the Mortgage Assistance Scheme. I also accept that Ms Menin may have had a sympathetic telephone manner. If the defendant had an earlier agreement with Ms Menin on behalf of the bank, as he had alleged occurred, why didn’t he raise it with her? Why didn’t he question her as to a s 7 Credit (Home Finance Contracts) Act notice issued? 

38        It would be unlikely that Ms Menin had the conversation in June 1996 as alleged by the defendant because, firstly, there is no reference to any agreement, any of the terms or the facts that realisation should be deferred , no mention of the court proceedings or capitalisation of interest in her contemporaneous file note;  secondly, her file note records that she gave advice which was consistent with the subsequent letter received from the Mortgage Assistance Scheme and thirdly, she would have been acting outside her authority as there would have needed to be a written request and submission to her superior on file.  The defendant’s behaviour in seeking the assistance from Consumer Affairs would not have been necessary had there been an agreement in place.

39        I find on the balance of probabilities that it is more likely than not, the conversation that occurred between Ms Menin on behalf of the plaintiff and defendant is that deposed to by Ms Menin.  I am satisfied that there was no agreement made in June 1996 that in consideration of the defendant’s interest repayments being capitalised the plaintiff agreed to defer or alternatively vary the defendant’s mortgage so that they would be deferred until the outcome of his unfair dismissal proceedings and workers compensation proceedings whichever was the latter.

40 The subsequent file notes also support the plaintiff’s contention that there was no agreement between the parties. In July 1996 D Ulutus, a collections officer wrote a diary note. This officer gave a history of the loan and concluded that as the borrower was unable to meet the monthly repayments and the loan is “HLIC” insured, it is recommended that the bank proceed to realisation. A supervising officer agreed with the recommendation that the bank proceed to realisation and directed that a s 57(2)(b) notice be issued and s 7 notices to re-issue concurrently.

41        There are two relevant bank files notes and a subsequent letter from the plaintiff written during October 1996.  There is a file note by K Filer the supervisor of home loans management dated 8 October 1996.  It stated that the defendant telephoned and informed her that the tenants in the property were vacating in a fortnight and that the defendant was still on sickness benefits and not looking for work.  He was using rent to pay his own rent.  Ms Filer advised the defendant that when the tenants vacated she would arrange for the locks changed as the bank had power of sale over the property.  There is also a further note that his family was not in a position to help the defendant and that he could not afford any payments.

42 On 13 October 1996 there is a record by Ms C Wong, realisations officer. She recorded that the defendant had telephoned and he was upset at the way the bank had handled his matter. She has noted that the defendant was of the opinion that the bank should have written to him when the bank was prepared to defer the action against him. He said that had never received any letter from the bank until May 1996. Ms Wong in her diary note agreed that the bank had not sent any letters to him before the s 7 notice dated 9 May 1996. She advised him that if he wanted to he could send a letter to the bank which they would have a look at. The defendant complained that Karen Filer did not tell him that he had no other choice but to surrender the property to the bank. Ms Wong confirmed that what Ms Filer had advised was true and she recommended that action should not be deferred and that the matter be followed up on 8 November 1996. A note written at the foot of this file note agreed with Ms Wong’s recommendation and stated that unless the proposal was realistic the bank would be seeking possession at the expiry period of notice. These file notes lack any purported earlier references to any agreement or agreements by the plaintiff to defer the defendant’s mortgage repayments. While Ms Wong records that the defendant told her that the bank should have written to him when it was prepared to defer action against him, the file note does not record the defendant as saying that the bank at any stage had been prepared to defer action or had made any prior agreement or agreements with him for the deferral of his mortgage repayments.

43        After the defendant spoke to Ms Wong he wrote a letter dated 14 October 1996.  He said:

“…I phoned Karen Filer who informed me the bank was going to take possession of the property on 1.11.96 & sell it.  She said I would have to move out & hand in the keys.  I pointed out I had received the same notice .. sent before dated 9.5.96.  Upon receipt of that notice I had spoken to Lisa Links who had been most sympathetic & helpful when I explained my current health, employment & financial position.  Under the circumstances she said the bank would give me more time, that taking possession was a last resort which the bank did not like to do.  I was most relieved (& surprised) by the bank’s compaassion. (sic).  I told her the house was on the market & every effort to sell it was being made.  I had moved out & rented it out.

I was most distressed to find the bank’s attitude had changed when I spoke to Karen Filer.  I have always understood the bank’s legal right to the property.  In fact, in January when I was no longer able to meet the mortgage I had expected no mercy from the bank in exercising those rights.  I was wrong.  Although in hindsight it may have been better for all concerned if it had done so before interest began to accrue on the interest.  Unfortunately under what terms & for how long the current arrangement would apply were never set out in correspondence.  All the explanation I got from Ms Filer was that legal action had commenced on 21.8.96 & the bank would not enter into any further negotiation.  …”

44        In the balance of the letter the defendant spoke about his financial situation and the fact that he had rented out his house and that he asked the bank to reconsider its position.  This is the first time that the defendant has raised any purported agreement he had with the plaintiff and refers to a conversation with Ms Links that occurred after 9 May 1996.  The letter does not give any details as to the terms of the purported agreement and that he was given mercy by the bank in January 1996.  It is my view that as it became clear to the defendant that the sale of his property had now become imminent, he reconstructed the purported position of the bank.  Prior to writing this letter, his position was that the bank should have written to him when it was prepared to defer action.

45        Additionally, it is inconceivable that the plaintiff would enter into an agreement stipulated by the defendant as it is uncertain.  There is no benefit to the bank but rather a positive detriment.  The equity in the property and value of the property was decreasing.  It was not certain that the defendant would be successful with his claims and would obtain enough funds from them to be able to satisfy the debt owed to the plaintiff.  In the defendant’s latter version of the agreement given in evidence he stated that the bank could unilaterally terminate the agreement but did not do so.  Even taking into consideration that the defendant is a litigant who has not had the benefit of legal representation, the defendant’s version of events is confused, imprecise and inconsistent.  It is my view that the defendant’s version of events has been reconstructed, either consciously or unconsciously by the defendant so as to produce his desired result, namely that the plaintiff does not succeed in taking possession of his property, despite the fact that no mortgage repayments have been made since January 1996.

46        If as the defendant later stated the bank had a unilateral right to terminate the agreement at any time, it would have become apparent that once the plaintiff commenced legal proceedings that it had exercised its unilateral right and terminated the purported agreement.

47        I turn to the defendant’s allegations of breaches of the Trade Practices Act and the Fair Trading Act and the authorities cited by the defendant.  I have read those authorities  Section 52 of the Trade Practices Act is expressed in Henjo Investment Pty Ltd & Ors v Collins Marrickville Pty Ltd (1988) ATPR 40-850 49,150-1, in general terms and is designed to have a “broad reach”: Hornsby Building Information Centre Pty Ltd & Anor v Sydney Building Information Centre Ltd (1978) ATPR 40-067; (1978) 140 CLR 216 per Stephen J at ATPR p 17,689; CLR p 255. It is a provision to protect the consuming public from unfair trading practices, namely, from being misled or deceived: The Hornsby Building Information Centre case;  World Series Cricket Pty Ltd v Parish (1977) ATPR 40-040; (1977) 16 ALR 181 per Bowen CJ at ATPR p 17,426; ALR pp 186-187; Frank J at ATPR p 1,432; ALR p 196 and Brennan J at ATPR p 17,436; ALR p 199;  Pilkington ACI (Operations) Pty Ltd (1978) ATPR 40-093; (1978) 142 CLR 113 per Mason J at ATPR p 17,917; CLR p 128. It is not established that intent is not a necessary element in a contravention of the section: see, for example, the Hornsby Building Information Centre case per Stephen J at ATPR p 17,690;  CLR p 228.  However, there are cases where there will be deceptive conduct only where the intention of the alleged contravener is established.  Misleading or deceptive conduct generally consists of representations, whether express or by silence;  but it is erroneous to approach s 52 on the assumption that its application is confined exclusively to circumstances which constitute some form of representation (Bridge Stockbrokers Ltd & Anor v Bridges & Ors (1985) ATPR 40-502 at p 46,024; (1985) 57 ALR 401 at p 415).

48        In ascertaining whether the bank has engaged in conduct that is misleading or deceptive or was likely to mislead or deceive, it is necessary to examine the conduct, whether representational in character or not and ask the question whether the impugned conduct of its nature constitutes misleading or deceptive conduct.  This will often but not always, be the same question, as whether the conduct is likely to mislead or deceive.  This misleading or deceptive conduct caused the defendant to suffer damage.  The defendant drew my attention to a line of authority that says financial institutions have responsibility to ensure sufficient explanations have been given for a client to understand the implications of an agreement or non-payment period has on the borrower.

49 The plaintiff sent s 7 notices to him in May and August 1996. As I understood the defendant’s submissions in relation to the Trade Practices Act and Fair Trading Act because the plaintiff’s 7 notices forwarded to him in May and August 1996 stipulated that the mortgage may be varied due to sickness or unemployment there is an opportunity for the bank to negotiate a deferral of repayments and the bank by not so doing, makes the action taken by the plaintiff null and void.  However, the letter makes it clear that the plaintiff may negotiate a variation of the mortgage but the obligation is not mandatory.  The defendant’s own evidence is that he did not make an offer to pay a lesser monthly sum or any sum at all in relation to the mortgage. 

50        The defendant also submitted that in January 1996 the plaintiff led him to understand it would postpone repayments based on his financial circumstances and if it believed he had simply defaulted on his mortgage repayments in February, March and April (t 89) there was an obligation for the bank to speak up.  According to the defendant, the silence of the bank and the internal lack of follow-up to the memo dated 23 January 1996 was consistent with his understanding that the plaintiff would postpone repayments subject to the hearing of his court cases which were anticipated to be heard around July of that year.  I have examined the January conversation in detail and I cannot find any statements made on behalf of the plaintiff which led him to believe that it was willing to postpone repayments.

51        The defendant also complained that once legal proceedings were commenced he was not given an opportunity to pay anything off the debt and as a consequence the debt has accrued to its current level.  In the defendant’s last affidavit at annexure A paragraph (9)(b) he sets out between the months of May 1996 and August 1997 the total deposits and the maximum balance that he had in his bank account during that time.  In cross examination the defendant conceded that he did not have the funds to enable him to pay the repayments of $925 per month.  There is evidence that in October 1996 the defendant told Ms Filer that he could not afford to make repayments and that his family was not in a position to help.  There is no evidence as to whether or not the plaintiff would accept repayments after the legal proceedings were commenced.  I cannot see how this amounts to a breach of s 52 of the Trade Practices Act or ss 41 and 42 of the Fair Trading Act. 

52        The defendant also raised in support of his claim pursuant s 52 of the Trade Practices Act that the bank never told him that he was not entitled to have tenants in the property to pay rent.  This is incorrect.  Aside from para C1 of the mortgage, as at October 1996 the defendant advised the plaintiff that he was using the rent to pay his own rent and Ms Filer advised the defendant that when the tenants vacated she would arrange for the locks to be changed as the bank had power of sale over the property. 

53        Finally the defendant submitted that as the bank fell silent because they did not reply to his letter dated 14 October 1996 and because there was no correspondence from the bank to him prior to May 1996 that attempt to unequivocally qualify the bank’s position constituted a breach of s 52 of the Trade Practices Act. Prior to the s 7 notice Ms Menin left messages for the defendant to call but he chose not to follow that up. Further I do not think that the bank made any representations nor do I think that any of the conduct by the bank amounted to misleading or deceptive conduct pursuant to s 52 of the Trade Practices Act or ss 41 and 42 of the Fair Trading Act. The lack of written correspondence prior to the issue of the s 7 notice and the bank’s failure to notify him that it did not reconsider its position do not in my view constitute misleading and deceptive conduct.

54 In relation to the defendant cross claim, in paragraphs (1), (2) and (3) the defendant sought that the mortgage not be enforced until the determination of the workers compensation proceedings. As previously stated on 8 August 1998 the defendant’s workers compensation proceedings were finalised on terms not favourable to the plaintiff. These orders sought by the plaintiff are no longer applicable. The remaining order sought is that a declaration that the notices issued by the plaintiff/cross defendant pursuant to s 7 of the Credit (Home Finance) Contract Act 1984 and s 57(2)(b) of the Real Property Act 1900 are void and of no effect. There is no evidence to suggest these notices are void and this ground of the cross claim fails. The cross claim is dismissed. The plaintiff is entitled to possession of the property and I enter judgment accordingly.

55 In relation to the date when the writ of possession should issue there are currently tenants in the property who have not been notified that the property is the subject of these possession proceedings. The plaintiff notified the occupiers of the premises in accordance with Part 40 r 11 of the Supreme Court Rules (Ex B) but these tenants have since been replaced.  The new tenants should be forthwith advised that the bank intends to take possession in 14 days.  I grant leave to the plaintiff to issue a writ of possession, such writ not to issue before 17 May 1999.   This period should allow the current tenants to move out in an orderly manner.  In relation to the monetary sum due and owing, I accept the evidence contained in the affidavits of Anthony Carroll.  I calculate that the amount due and owing under the mortgage is $161,754.94 due as at 14 April 1999.  I do not have details of the amount of interest that accrued between 14 April 1999 to the date of this judgment so I make no provision for this.

56        The judgment and orders I make are:

(1)It is adjudged that the plaintiff is entitled to possession of the whole of the land in Certificate of Title Folio Identifier 5/841832 known as 5 Hollydale Place Eden in the State of New South Wales.

(2)The defendant is to pay the plaintiff the sum of $161,754.94.

(3)The cross claim is dismissed.

(4)Leave to issue a writ of possession, such writ not to issue before 17 May 1999.

(5)The defendant/cross claimant is to pay the plaintiff/cross defendant’s costs of the proceedings including the cross claim.

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LAST UPDATED:             03/05/1999