Commonwealth Bank of Australia v Muzaferovic

[2013] VCC 1274

IN THE COUNTY COURT OF VICTORIA Revised
(Not) Restricted

AT MELBOURNE

COMMERCIAL LIST

BANKING & FINANCE DIVISION

Case No. CI-13-00524

COMMONWEALTH BANK OF AUSTRALIA	Plaintiff
v.
EDO MUZAFEROVIC and GEORGINA MUZAFEROVIC	Defendants

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	4 October 2013
DATE OF JUDGMENT:	4 October 2013 (revised that day)
CASE MAY BE CITED AS:	Commonwealth Bank of Australia v. Muzaferovic
MEDIUM NEUTRAL CITATION:	[2013] VCC 1274

REASONS FOR JUDGMENT

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Catchwords:             Practice and procedure – Application to set aside default judgment and stay operation of warrant of possession – Whether any defence on the merits.        

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms N. McCabe (solicitor)	Gadens Lawyers
For the First Defendant	Mr E. Muzaferovic in person
For the Second Defendant	Ms G. Muzaferovic in person

HIS HONOUR:

1On 1 May 2013, judgment was entered in default of a defence against both defendants in the sum of $903,232.72 together with interest and costs. By summons dated 18 August 2013, the defendants seek an order that the judgment be set aside and a warrant of possession issued on 18 June 2013 be stayed.

2The plaintiff’s claim relates to advances made by the plaintiff to the defendants pursuant to agreements dated 28 October 2008 and 22 February 2010. The advances were made by the plaintiff to enable the defendants to complete the construction of a property at 59 Clifton Street, Aberfeldie. The defendants had problems with the builder, which resulted in action being taken at VCAT by the City of Monee Valley to have the building works rectified in accordance with the permits which had been granted.

3It is not clear from the material filed what happened to the application at VCAT commenced by the municipality. That proceeding related to the development on the defendants’ land as well as the development on the adjoining property which is owned by a relative of one of the defendants. The builder of the development on each property was the brother of one of the neighbours.

4At some stage, proceedings in VCAT were initiated by the builder apparently seeking an outstanding progress payment. The initiating proceeding in VCAT has not been produced to the Court. The proceeding by the builder has not been determined; the last step in the proceeding was the filing of submissions in late May 2013. The parties are apparently awaiting a decision in relation to that proceeding, which will determine whether the defendants should have made the progress payment to the builder.

5Apparently, the builder resolved his differences with the owners of the adjoining property and that development has been completed. The defendants have not been able to complete the development on their property, although they have apparently spent further sums with another builder in an attempt to rectify the works that were not completed properly and to bring the works to finality.

6So far as can be ascertained from the material and from the submissions that I have heard from the defendants, it seems that the complaints made against the plaintiff are as follows:

a.when the problems arose with the local municipality and it was alleged that building works had been carried out which were not in accordance with the appropriate permits, the defendants enquired from the bank as to what they should do. They apparently received no response. The defendants contrast that with the situation which occurred in relation to the adjoining property where the Bendigo Bank informed their neighbours that the bank would make no further payments to the builder until the works were rectified;

b.subsequently, when the dispute with the builder was before VCAT and was not resolving and the defendants were having difficulty meeting the loan repayments to the plaintiff, the plaintiff was slow to respond to a request on hardship grounds and later when it did, the reduction it allowed in the repayments was, in the defendants’ view, an inadequate response to their situation. The defendants contrast this position with a recent application they have made to another financial institution for hardship relief in respect of the mortgage over the house in which they presently reside. In that case, the financial institution has not required mortgage payments to be made for some months.

7The defendants submit that one or both of these matters give rise to an arguable defence on the merits in relation to the plaintiff’s claim. It was suggested that, in relation to the first matter, the plaintiff’s failure to respond when the municipality made it clear there was a problem with the building works, that the bank owed a duty of care to the defendants and the failure to unequivocally state that it would not make any payments to the builder constituted negligent conduct on the part of the plaintiff.

8The defendants have been unable to point to any obligation the plaintiff owes to them, pursuant to either the financial arrangements between them or on some other basis, which would oblige the plaintiff to become involved in the dispute between the defendants and their builder. Apparently, the bank was, pursuant to one of the financial arrangements, obliged to make payments to the builder at the request of the defendants after satisfying itself that the works had reached an appropriate stage for the payments to be made.

9The plaintiff has not made the disputed payment to the builder; neither have the defendants. The defendants directed the plaintiff that it should not make the progress payment. It is difficult in these circumstances to see how the plaintiff has done anything which might be regarded as breach of an obligation that it owed, either pursuant to the financial arrangements between itself and the defendants or that it may owe at law as a duty of care towards the defendants.

10It is clear that the defendants have become involved in an extremely difficult situation as a result of the problems they encountered with their builder. This has meant that they have had difficulty meeting the commitments pursuant to their obligations with the plaintiff. The response of the plaintiff to the application made on hardship grounds is not, however, a matter which would give rise to a defence to the present proceeding.

11In the circumstances, I do not see that the material establishes that the defendants have a defence to the claim which would have any prospect of success, if judgment were to be set aside. Accordingly, I can so no basis in law which would entitle the defendants to such an order.

12The second order sought by the defendants relates to the warrant of possession issued as a result of the default judgment. The bank wishes to sell the property to recover the amount of the judgment. The material that has been filed indicates that the property has been on the market for some time, although at a price which apparently does not reflect the value of the property in its present state. It is likely the property can only presently be sold, in its incomplete state, for a much lesser sum.

13The defendants have suggested that, when the decision in VCAT proceeding commenced by the builder is known, if the defendants were successful, further monies may be available to them which might assist them to complete the development on the property. Alternatively, the completion of the VCAT proceedings might enable them to re-finance the development with another institution, which apparently is not possible at the present time.

14A further stay of the warrant of possession should only be permitted in circumstances where it is likely that the position of the plaintiff will not be further prejudiced. The plaintiff is entitled to realise the property to assist in the recovery of the amounts outstanding in relation to the monies advanced to the defendants.

15In my view, any further delay to await the result of the case in VCAT, or to enable the completion of the development and its sale as a completed project, are presently too uncertain to make it appropriate to further stay the operation of the warrant of possession. I consider in the circumstances that the only course that can be taken is to grant a brief further stay. If circumstances were to alter, which made it clear that a further stay would assist an efficient realisation of the property for a significantly higher sum, then those matters would need to be put before the Court in proper form at the earliest possible time.

16The affidavit material in support of the present application is generally inadequate in a number of ways, This is not surprising because the defendants are self-represented and the task before them was a very difficult one, even if they had had the assistance of lawyers. However, the position now is that the application for the setting aside of judgment has been refused and the warrant of possession will only be stayed for a further short period of time.

17I am prepared to grant this further indulgence only because it appears that if the property were sold at the present time, the present development on the property would seem to add little value to it. Whereas, with the development completed, the value of the property would be substantially more. If the property were to be sold at present, it is likely that only a portion of the judgment debt would be recovered by the plaintiff from the realisation of the property, perhaps $400,000 out of a total debt of over $900,000. In those circumstances, the bank would no doubt need to look to other assets of the defendants from which to recover the balance.

18The orders I will make today are:

a.The application made by summons dated 18 August 2013 to set aside the judgment entered 1 May 2013 against the defendants in default of a defence, is refused.

b.The warrant of possession issued 18 June 2013 is stayed for a further period of 21 days.

c.The defendants must pay the plaintiff’s costs of the summons dated 18 August 2013, including the costs of the hearing today.

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Certificate

I certify that these 4 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 4 October 2013 and revised that day.

Dated: 4 October 2013

Catherine Kusiak    

Associate to His Honour Judge Anderson