Dennis v Commonwealth Bank of Australia
[2020] FCCA 1313
•26 May 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| DENNIS v COMMONWEALTH BANK OF AUSTRALIA | [2020] FCCA 1313 |
| Catchwords: CONSUMER CREDIT – Credit Protection – general – operation of credit legislation. |
| Legislation: National Consumer Credit Protection Act 2009 (Cth), ss.125, 126(2), 128, 129, 130, 131, 133, 160D(1), 178(1) |
| Cases cited: Dennis v Minister for Finance [2017] FCCA 45 Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199 |
| Applicant: | SUSAN DENNIS |
| Respondent: | COMMONWEALTH BANK OF AUSTRALIA |
| File Number: | BRG 134 of 2018 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 3 February 2020 |
| Date of Last Submission: | 3 February 2020 |
| Delivered at: | Brisbane |
| Delivered on: | 26 May 2020 |
REPRESENTATION
| The Applicant in person |
| Counsel for the Respondent: | Mr Alexander |
| Solicitors for the Respondent: | Gadens |
ORDERS
Save for the claim for a contravention of s.160D(1) of the National Consumer Credit Protection Act 2009 (Cth) the application filed on 19 January, 2018 be dismissed pursuant to rule 13.10(1) of Federal Circuit Court Rules 2001 (Cth);
The remainder of the application is adjourned to 26 June, 2020 at 9:30am for directions.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 134 of 2018
| SUSAN DENNIS |
Applicant
And
| COMMONWEALTH BANK OF AUSTRALIA |
Respondent
REASONS FOR JUDGMENT
Does the National Consumer Credit Protection Act 2009 (Cth) and the Code of Banking Practice 2013 impose an enforceable obligation on a bank to lend a customer money in the event that the bank assesses that a particular credit contract or extension to the limit on a credit contract is suitable for its customer? The answer to this question underpins the claim made in these proceedings by the applicant, Ms Dennis, against the respondent, Commonwealth Bank of Australia.
The present application before the Court is an application by the respondent for summary dismissal of Ms Dennis’s application. In the principal proceedings Ms Dennis claims $750,000 (or otherwise the maximum compensation possible) pursuant to s.178(1) of the National Consumer Credit Protection Act 2009 (Cth) for compensation for alleged contraventions by the respondent of that Act and breaches of the Code of Banking Practice 2013. The alleged contraventions occurred on 4 November, 2015 when an employee of the respondent decided to decline temporary financial accommodation sought by Ms Dennis. She claims compensation for the loss she alleges she incurred as a consequence of that decision. She also claims that the respondent should refund to her the interest charged from 11 November, 2015 to four accounts that she holds with the respondent as well as refunding to her the repayments she has made on her then existing home loan, personal loan and credit card accounts since 11 November, 2015.
The legal basis for her claims
In her originating application Ms Dennis describes the grounds of her application as follows:
1. In November 2015 the Commonwealth Bank of Australia (CBA) breached its responsible lending obligations under the National Consumer Credit Protection Act 2009 and the Code of Banking Practice 2013 by declining a temporary loan I had the capacity to repay in full approximately four (4) months later solely on the basis that my income is stopping temporarily while I am taking leave. The CBA disregarded all the relevant information I provided about my circumstances at that time except that my income is stopping temporarily. The CBA disregarded my financial situation at that time which demonstrated my capacity to repay the temporary loan. The CBA disregarded my requirements and objectives at that time even though the CBA knew that it was vital for every aspect of my life that I remain employed and my permanent government employment was not in jeopardy. The CBA failed to recognise the significant financial hardship I was suffering at that time i.e. my companion animals and I were facing starvation, and placing all my loan repayments on hold would not have provided me with funds to purchase food and petrol to travel to purchase food etc. to enable me to continue to live at that time. When I applied for a temporary loan, the CBA knew I was planning to return to work as soon as possible. If the CBA had approved this temporary loan I would have returned to my government employment, working my standard hours, on 4 January 2016. The CBA knew that their decision in November 2015 to decline this temporary loan would force me to resign from my permanent government employment to access my superannuation and significant financial hardship for the remainder of my life.
2. In November 2015 the Commonwealth Bank of Australia deceived me about its responsible lending obligations in accordance with what was described to me at that time as the ‘Lending Code of Practice implemented by the Australian government’.
3. In addition to breaching its responsible lending obligations, the Commonwealth Bank of Australia (CBA) breached its obligations under the Code of Banking Practice 2013 and the recommendations of the Code Compliance Monitoring Committee by failing to give genuine consideration to my significant financial hardship at that time and not engaging actively and cooperatively with me to ensure an effective outcome. The CBA failed to assist me to stop my circumstances from deteriorating. The CBA failed to deal with my urgent complaint dated 5 November 2015 about the decision of the CBA on 4 November 2015 in a genuine, fair and prompt manner. The CBA did not contact me about my complaint dated 5 November 2015 until 16 November 2015 after the CBA knew I had been forced to resign from my permanent government employment to access my superannuation so that my companion animals and I could continue to live at that time.
As articulated in her application and the affidavit that accompanied it and as explained during the course of her oral submissions, Ms Dennis’s claims seem to be:
a)a claim for contravention of the responsible lending obligations cast upon financial institutions by Chapter 3 of the National Consumer Credit Protection Act;
b)a claim for contravention of the responsible lending obligations cast upon financial institutions by the Code of Banking Practice 2013;
c)a claim for the giving of deceptive or misleading information in contravention of s.160D(1) of the National Consumer Credit Protection Act; and
d)a claim for contravention of the obligations cast upon a financial institution by the Code of Banking Practice to deal with complaints.
Some background is necessary first.
Background
Ms Dennis’s application arises against a factual matrix that has already been the subject of proceedings in this Court and decided by me, albeit against a different respondent. In her affidavit filed at the commencement of the current proceedings, Ms Dennis draws heavily upon my recitation of the facts in the earlier matter and she relies upon some documents that were part of a court book that were filed for the purposes of those proceedings (which bear no. BRG 725 of 2016). I assume therefore that she accepts as accurate, that recitation. I will set out that factual matrix, as I described it in Dennis v Minister For Finance [2017] FCCA 45, so far as it is relevant to these proceedings:
8. Ms Dennis is a qualified accountant. She obtained her professional accounting qualification when she was 22 years of age. She is now over 65 years of age. She was in continuous employment since she was 18 years of age and until 2005. The circumstances in which her employment ended in 2005 appear highly contentious and are not directly relevant to these proceedings. However, losing her employment in 2005 had a deleterious effect upon her financial situation. She found it difficult to secure fresh employment. She attributes that, at least in part I think, to what she describes as age based discrimination against mature aged people seeking employment.
9. Ms Dennis secured two casual positions in 2012, one with the Logan City Council and the other with Queensland Health. Between 2005 and 2012 however, Ms Dennis had accumulated debt. She had a mortgage over the home in which she lived, a personal loan and credit card debts. Her evidence is that she had a debt of approximately $350,000 that she had to service. Her new employment was not as well remunerated as her old employment and consequently, she says, she had to manage on a very tight budget. She lived, effectively, from pay day to pay day.
10. Ms Dennis lives alone with a number of companion animals in a rural setting to the south of Brisbane. Her companion animals (two dogs and three horses) are her family. As she points out, she had and continues to have a legal obligation, as well as a moral obligation, to provide for their care.
11. On 9 October, 2015 Ms Dennis’ companion dog, an English Setter named Hobson, was diagnosed with hemangiosarcoma. Although Hobson had been unwell for other reasons for some time, he was responding well to his treatment and the care that Ms Dennis was providing for him. However, the diagnosis of hemangiosarcoma was both unexpected and serious. According to Ms Dennis and the veterinary advice that she obtained, Hobson could not be left alone and required her constant care and attention. She was the only person available to provide that care.
12. There is evidence in the Court Book that Ms Dennis was told by Hobson’s veterinarian that, due to the risk of spontaneous haemorrhaging, unnecessary movement of Hobson was not recommended. However, he was not in need of hospitalisation and was able to remain at home with Ms Dennis. His back legs were weak and he needed assistance for drinking, feeding, toileting and cleaning. Nonetheless, according to Hobson’s veterinarian’s advice, euthanasia was not considered appropriate at that time.
13. Ms Dennis needed to be on hand to properly care for Hobson. Ms Dennis was able to immediately secure extended leave, without pay, from each of her employers so that she might stay at home to nurse him. Her employers understood her predicament and the email correspondence to her from them in evidence before me was very supportive of her. She was under no pressure to return to work before she was able to safely leave Hobson on his own.
14. The duration of Hobson’s illness was entirely unknown. His condition was very serious and according to the material before me, usually resulted in an afflicted dog passing very quickly. However, with the assistance of some trial treatments, Hobson battled the odds. His illness was unexpectedly lengthy.
15. Without an income Ms Dennis soon, to use her words, “ran out of cash and credit”. She had the debt of some $350,000 that she needed to service as well as to provide for herself and her animals. But her funds were limited and quickly exhausted. She made a number of attempts to acquire funds from various sources, none of which were successful.
16. Ms Dennis had a small superannuation account with a balance of about $22,000. She determined to access that account as a source of funds from which she could continue to live and care for her animals whilst she was not working. To that end, on 5 November, 2015 she contacted the trustee of her fund but was apparently advised that the trustee would not allow her to access her superannuation early because she had not been in receipt of Centrelink benefits for the requisite period of time, or indeed at all since 2012.
17. I pause the narrative there to say that at this point Ms Dennis had dealings with the Department of Human Services in Canberra about accessing her superannuation account early. Those negotiations led nowhere.
18. Ms Dennis sought advice from her local Federal Member of Parliament. She sent an email to him on 9 November, 2015. I have set it out in full because it captures Ms Dennis’ predicament in a way that I cannot do by attempting a summary of it. She said:
Are you able to help me access my superannuation of $22,000 now so that I do not starve and my dogs and my horses do not starve? The Department of Human Resources (formerly Centrelink) will not help me. I am a certified practising accountant. I am 64 years of age. I am in this terrible financial predicament because I was bullied out of my employment in 2005 and to this day I have still been unable to find a decent paying position in the finance field. I am an excellent financial manager. I have lived on the poverty line myself for the last 10 years - have not had a social life, have not been out to dinner, been to the movies, hired a video, etc. am completely on my own without the help of a family member, a friend or a neighbour. l do not have a Next of Kin and I do not have an emergency contact person to help me. I am currently employed at base level wages earning 50% less than I earned 25 years ago. I am a responsible pet owner. I cannot work at present because it would constitute animal cruelty to leave my dog at home on his own in his current condition. I am not going to kill my dog because of age discrimination and bullying in society. I have been given extended leave from my employment so my jobs are secure, but I am receiving no income. The Commonwealth Bank of Australia has the mortgage over my property. This bank will lend me no money whatsoever to help me through this temporary period because I am not receiving an income at present I have little left on my credit card. When this is gone, I will have no credit left to pay for anything and my dogs, my horses and myself are going to starve, let alone all the essential living expenses I need to pay e.g. electricity, health insurance and my debt repayments.
In my desperation I wrote to the Gold Coast Bulletin yesterday to see if they can help me because no one will listen to me. I was told by a medical practitioner last year that I should kill my dog because he was inconveniencing my life. My dog has been a better friend to me than any human being I have met in my life. He is fighting to live. I cannot kill him, whatever the consequences, and I should not be forced to even consider this. Mature aged persons like myself are ignored in society. My dogs and my horses love me and support me. They are my family and my friends.
Understandably I feel debilitated by this financial stress and I feel physically very ill so I hope I have made some sense in this message.
Thereafter, Ms Dennis retired from her employment. Her dealings with Centrelink and the Department of Finance led her to commence proceedings against the Minister for Finance which were ultimately unsuccessful.
The reference in the above extract to the Commonwealth Bank of Australia not lending Ms Dennis any money whatsoever to help her through “this temporary period” concerns these proceedings. For present purposes, Ms Dennis’s relationship with the respondent commenced on 20 August, 2013 when Ms Dennis entered into a loan agreement with the respondent. She borrowed $285,000, secured by way of mortgage over her residence, for a term of 19 years. The loan was to be repaid by monthly instalments, interest only for the first year and thereafter principal and interest.
In June, 2014 Ms Dennis had taken a period of leave without pay from her employment. Her income stopped temporarily. Nonetheless, on 27 June, 2014 the respondent offered to Ms Dennis a personal overdraft with a limit of $2,000. Ms Dennis argues that this is a significant matter because it is now disingenuous for the respondent to argue that the cessation of her income was a matter that informed its decision not to extend to her the credit she was seeking in December, 2015.
On 4 November, 2015 Ms Dennis made an informal application for financial assistance from the respondent. She sought either a loan or an increase in the limit on her personal overdraft. The request was made to Chris Noble, a “Customer Banking Specialist” employed by the respondent at its Upper Coomera branch. According to Ms Dennis’s statements in a letter sent by her to the Financial Ombudsman Service Australia on 26 April 2017, Ms Noble was the same person who provided her with the overdraft facility in 2014 when her income had stopped temporarily. She was in communication with this person until 4 November, 2015. Her letter to Ms Noble of 4 November, 2015 was in the following terms:
Hi Chis
As previously advised I will not be receiving any further income after this week which is why I have asked for an increase in my loan amounts. It does not matter whether it is in the form of a personal loan overdraft and an increase in my personal loan. Both my employers understand my situation and have granted me as much leave as l need to care for Hobson so my employment is secure. I have provided you with one written response which relates to my permanent position with Queensland Health.
Euthanasia is not a reasonable option for my dog, Hobson. There is no one else than myself to care for him. If I allowed any person or organisation to force me to do otherwise would constitute animal cruelty and I would never be able to live with myself. It is not Hobson’s fault about the timing of his disease. As I have previously advised I do not know how long I will need to be off work to care for Hobson.
Kind Regards
Susan
Ms Noble replied later the same day in the following terms:
Hi Susan
I understand it must be a very stressful time for you at the moment, emotionally and financially.
I have discussed your situation with my manager and as your income is stopping while you are taking leave, unfortunately will not be able to put in an application for an overdraft increase at this stage. I can see the home loan is still on interest only so you are paying the minimum payment.
I understand your frustration, I think best plan would be to look at withdrawing funds from your superannuation.
I am thinking of you at this hard time, it is very difficult for you.
I can definitely look at your finances once you are receiving an income again when you are back at work and understand this will not help unfortunately in the interim.
kindest regards
Chris Noble
In her letter to the Financial Ombudsman Service Australia dated 26 April, 2017 Ms Dennis records as follows:
On 4 November 2015 Mark Brown, the CBA Upper Coomera branch manager refused to provide me with any financial assistance whatsoever in accordance with what was described to me as the Lending Code of Practice implemented by the Australian government solely on the basis that my income had stopped temporarily. I was advised that all other factors concerning my individual situation were irrelevant e.g. the security of my permanent government employment, the imminent increase in my wages income, my ability to repay the overdraft increase in full as well as reduce my overall debt in four (4) months time, etc. This CBA manager would not speak to me on the ‘phone and I was not allowed to make an appointment to see him…
On 5 November, 2015 Ms Dennis wrote a letter of complaint to the respondent about Ms Noble’s response. The complaint is lengthy and I will not set out its terms in full. The complaint was about the “attitude of the manager at the Upper Coomera branch”. Ms Dennis set out the circumstances that led to the predicament in which she found herself. She also pointed out that she had never defaulted on any repayments on any financial facilities in her life. She set out the background to her employment situation. She pointed out that although she was temporarily without income she still had employment on a permanent basis and had real property in which he had “significant equity”. She pointed out that she could access her superannuation when she turns 65 although she was unable to access it early because she will remain employed and not on Centrelink benefits. She was going to turn 65 in about four months’ time. She pointed out that when she had used her immediately available cash reserves she would be without any resources with which to purchase food and petrol or to care for her animals. She pointed out that she would then have no other option than to resign from her secure, permanent, government employment even though she could not afford to retire and did not want to. She considered the attitude of the Upper Coomera branch manager as “extremely harsh and inhumane” and she requested a response to her concerns, if possible by return the same day.
Ms Dennis says that the respondent did not reply to her letter of complaint until 16 November, 2015 by which time she had resigned from her employment with a view to accessing her superannuation. She asserts that the respondent knew that she had been forced to resign from her permanent employment so that she could access her superannuation.
The legal framework
The parties agree that the National Consumer Credit Protection Act applied to the dealings between Ms Dennis and the respondent. That Act cast upon the respondent certain statutory duties that operate irrespective of the terms of the contract or contracts between Ms Dennis and the respondent. I will return to them later in the proceedings.
The Code of Banking Practice 2013 is a voluntary industry code adopted by the banking industry. The terms of the Code of Banking Practice are incorporated into the contracts that Ms Dennis has with the respondent in respect of each of her banking products. For example, in the document described as “Consumer Mortgage Lending Products Terms and conditions” dated 18 June, 2013, which according to the respondent’s evidence forms part of the terms and conditions of Ms Dennis’s home loan, the following appears:
Code of Banking Practice
The Bank abides by the banking industry’s Code of Banking Practice, a voluntary code of conduct which set standards of good banking practice for us to follow when dealing with you. The Code applies to the banking products that we provide to you.
There is no dispute between the parties that the terms of the Code of Banking Practice form part of the contracts between Ms Dennis and the respondent in respect of the loans and other credit facilities Ms Dennis had with the respondent in November, 2015.
The relevant obligations cast upon the respondent by Chapter 3 of the National Consumer Credit Protection Act 2009 (Cth)
Chapter 3 of the National Consumer Credit Protection Act deals with responsible lending conduct. For the purposes of this discussion I have assumed that Ms Dennis is a consumer and the respondent is a licensee for the purposes of that Chapter. Chapter 3 has 13 parts. Not all of the parts are relevant for these proceedings. Parts 3-1, 3-2A, 3-2B, 3-2C, 3-2D, 3-3, 3-4, 3-5, 3-5A, 3-6 and 3-7 have no relevance to the present proceedings. They deal with specific circumstances none of which appear to arise on the circumstances of this case.
Part 3-2 – Licensees that are credit providers under credit contracts: general rules has relevance in these proceedings. Part 3-2 Division 2 requires a licensee to give to a consumer the licensee’s credit guide in accordance with s.126(2) as soon as practicable after it becomes apparent to the licensee that it is likely to enter a credit contract with a consumer. The requirements of the credit guide are specified in section 126(2).
Part 3-2 Division 3 is important in this case. It relates to the obligation to assess unsuitability. Section 128 of the Act casts upon a licensee an obligation to assess whether the credit contract under consideration will be unsuitable for the consumer if the contract is entered or the contract credit limit is increased in that period. I have set it out in a little more detail later in these reasons. Section 128 is a civil penalty provision.
Section 129 provides that for the purposes of s.128(c) the assessment to be made must specify the period of the assessment and it must assess whether the credit contract will be unsuitable for the consumer if the contract is entered or the credit limit is increased in that period. Section 130 of the Act imposes an obligation on a licensee to make reasonable inquiries about the consumer’s requirements and objectives in relation to the credit contract for the purposes of s.128(d). The licensee is obliged to make reasonable inquiries about the consumer’s financial situation, to take reasonable steps to verify the consumer’s financial information, to make any inquiries prescribed by the National Consumer Credit Protection Regulations 2010 about any matter prescribed by the Regulations and take any steps that might be prescribed by the Regulations. Section 130 is a civil penalty provision.
Section 131 provides for when a licensee must assess that the credit contract under consideration will be unsuitable for the consumer. The contract will be unsuitable for the consumer if any of the alternatives set out in s.131(2) are met.
Section 133(1) proscribes a licensee from entering into a credit contract with a consumer if the contract is unsuitable for the consumer under s.133(2). I have set out this provision in a little more detail later in these reasons. Subsection 131(1) is a civil penalty provision.
Subsection 133(2) provides that a contract is unsuitable for the consumer if, at the time it is entered or the credit limit is increased:
a)it is likely that the consumer will be unable to comply with the consumer’s financial obligations under the contract, or could only comply with substantial hardship; or
b)the contract does not meet the consumer’s requirements or objectives; or
c)if the regulations prescribe circumstances in which a credit contract is unsuitable – those circumstances apply to the contract.
The point of these obligations is summarised in s.125 – Guide to this Part. The guide provides that the Part has rules that apply to licensees that are credit providers and which are aimed at better informing consumers and preventing them from being in unsuitable credit contracts.
The Code of Banking Practice 2013
The Code of Banking Practice 2013 relevantly provided:
27. Provision of credit
Before we offer, give you or increase an existing, credit facility, we will exercise the care and skill of a diligent and prudent banker in selecting and applying our credit assessment methods and in forming our opinion about your ability to repay the credit facility.
28. If you are experiencing financial difficulties with your credit facility
28.1. This clause 28 applies to a credit facility you have with us.
28.2. With your agreement and cooperation, we will try to help you overcome your financial difficulties with any credit facility you have with us. We could, for example, work with you to develop a repayment plan.
28.3. We will deal with you or, at your request, with your authorised financial counsellor or representative where you have given us their correct contact details. If our reasonable attempts to contact or otherwise deal with your financial counsellor or other representative are unsuccessful, we will revert to dealing with you.
28.4. If, in the course of our personal dealings with you, we identify that you may be experiencing difficulties in meeting your repayments under the credit facility, we may decide to contact you and invite you to discuss your situation with us and the options available to assist you in meeting your obligations in these circumstances.
28.5. If, at any time you consider you are, or expect to be, experiencing difficulties in meeting your repayments to us, you should make contact with us as soon as possible to discuss your situation with us and the options available to assist you in meeting your obligations.
28.6. We will respond promptly (for example, within the timeframes prescribed by the National Credit Code, if it applies) to any requests for assistance from you, or your authorised representative, in relation to your financial difficulties with a credit facility you have with us. We will take into account the information available to us, including the information you provide to us, about your financial situation in determining whether or not we are able to provide assistance and the nature and extent of any assistance.
28.7. If, when you contact us in any of the circumstances described in clauses 28.5 and 28.6 or when you discuss your situation with us as a result of an invitation described in clause 28.4, we think that the hardship provisions of the National Credit Code could apply to your circumstances, we will inform you about them.
28.8. We will inform you in writing of our decision whether or not to provide you with any assistance if you are in financial difficulty with a credit facility you have with us and the reasons for our decision.
If we agree to provide you with assistance, we will confirm in writing the main details of the arrangements.
28.9. We will:
(a) not require you to apply for early release of your superannuation benefits to repay the whole or any part of your credit facility with us; and
(b) recommend that you seek independent advice on the option of applying for early release of your superannuation benefits, for example, from a financial counsellor or financial adviser. Information on having your superannuation benefit ts released early is available from the Department of Human Services ( We will make information about our processes for dealing with customers in financial difficulty with a credit facility available on our website (including relevant contact numbers). We will inform you at your request about how to find this information on our website and we will make this information available in another format if you tell us you do not have access to our website.
28.11. We will take reasonable steps to ensure that relevant staff, who are responsible for dealing with you about your financial difficulties with a credit facility you have with us, are trained in relation to the hardship provisions of this Code and the National Credit Code.
Part F of the Code contained provisions relating to resolution of disputes, monitoring and sanctions.
Consideration
Ms Dennis suggests that some of the ways in which the respondent breached its “legal lending obligations under Sections 130 and 131 of the National Consumer Credit Protection Act (and Section 27 Provision of Credit of the Code of Banking Practice 2013) as well as its contractual obligations in its four (4) Loan Agreements” with her are:
a)by ignoring her capacity to repay the temporary loan that she was seeking in full in approximately four (4) months;
b)by refusing to provide her with temporary financial assistance, which she argues forced her into substantial financial hardship “for the remainder of my life even though my permanent government employment was secure and I was in a position to return to work on a full-time basis on 4 January 2016”; and
c)by ignoring that she only required a temporary increase in funds and that she intended to remain in permanent government employment which would enable her to continue to increase her wages income, continue to manage her loan repayments, improve her standard of living and remain living on her property.
She also sets out a more fulsome explanation of the matters that she says amount to a breach of the obligations cast upon the respondent at paragraph 142 and onwards in her affidavit filed on 13 February, 2018.
Ms Dennis argues that the decision of the Upper Coomera branch manager on 4 November, 2015 took away from her the opportunity to continue in permanent employment, to increase her wages and to continue to service her borrowings and thereby remain living on her property with her companion animals. She argues that the decision forced her into retirement and was grossly negligent.
Ms Dennis’s case is that on a proper assessment of her financial circumstances and her situation, the respondent could not have come to the conclusion that the credit contract that she was seeking to enter into with the respondent was unsuitable for her for the purposes of the Act. She further argues that in order for the respondent to meet its legal lending obligations under the Act and the Code, the respondent should have approved the minimal increase in her overdraft limit so as to enable her to remain in employment.
I am prepared to accept the fundamental factual proposition that underscores Ms Dennis’s argument namely that on a proper assessment of her financial circumstances and her situation, the respondent could not have come to the conclusion that the credit contract that she was seeking to enter into with the respondent was unsuitable for her for the purposes of the Act.
Section 178(1) of the Act provides for orders for compensation. It says:
178 Compensation orders
Court may order person to pay compensation
(1) The court may order a person (the defendant) to compensate another person (the plaintiff) for loss or damage suffered by the plaintiff if:
(a) the defendant has contravened a civil penalty provision or has committed an offence against this Act (other than the National Credit Code); and
(b) the loss or damage resulted from the contravention or commission of the offence.
The order must specify the amount of compensation.
Note: An order may be made under this subsection whether or not a declaration of contravention has been made under section 166.
It will be observed that a remedy is only available pursuant to this subsection where a defendant has contravened a civil penalty provision or has committed an offence against the Act.
Whilst Part 3-2 of the Act contains a number of civil penalty provisions, none of them are engaged in this case.
Section 128 (in Part 3-2 Div 3) is a civil penalty provision. Shorn of those parts not presently relevant, that section provides that a licensee must not:
a)enter a credit contract with a consumer who will be the debtor under the contract; or
b)make an unconditional representation to a consumer that the licensee considers that the consumer is eligible to enter a credit contract with the licensee; or
c)increase the credit limit of a credit contract with a consumer who is the debtor under the contract; or
d)make an unconditional representation to a consumer that the licensee considers that the credit limit of credit contract between the consumer and the licensee will be able to be increased
unless the licensee has, within the preceding 90 days made an assessment in accordance with s.129 of the Act and made inquiries and sought verification in accordance with s.130 of the Act.
The respondent here did none of the things necessary to engage s.128. It did not:
a)enter a credit contract with Ms Dennis; or
b)make an unconditional representation to her that the respondent considered that she was eligible to enter a credit contract with the respondent; or
c)increase the credit limit of a credit contract held by Ms Dennis with the respondent; or
d)make an unconditional representation to her that the respondent considered that the credit limit of credit contract between her and the respondent will be able to be increased.
In those circumstances carrying out an assessment in accordance with s.129 was not mandated. On any view of the facts, the respondent cannot be said to have contravened s.128 of the Act.
The next civil penalty provision in Part 3-2 of the Act of relevance is s.133(1). It provides that a licensee must not enter a credit contract with a consumer who will be the debtor under the contract, or increase the credit limit of a credit contract with a consumer who is the debtor under the contract, if the contract is unsuitable for the consumer under s.133(2).
Here again, no contravention could arise on the facts because the respondent did not enter a credit contract or increase the credit limit of a credit contract with Ms Dennis. The subsection was not engaged and on the present facts, no action for a contravention of that subsection is open.
Leaving aside the question of s.160D(1) which I will address later in these reasons, absent being able to demonstrate that the respondent breached a civil penalty provision of the Act, to succeed in her present proceedings Ms Dennis must demonstrate that Chapter 3 of the Act creates some general obligation on the part of the respondent to:
a)undertake any assessment about the unsuitability of a credit contract or an increase in the credit limit of a credit contract in good faith; and
b)if the credit contract or an increase in the credit limit of a credit contract is not assessed as unsuitable for her, offer to enter into the credit contract or increase the limit of her credit contract as she requested.
Even assuming that there is an obligation on the part of the respondent to undertake any unsuitability assessment in good faith, the difficulty with Ms Dennis’s argument is that whilst the responsible lending rules set out in Chapter 3 of the Act prevent a lender such as the respondent entering into an unsuitable credit contract with a consumer such as Ms Dennis, it does not oblige a lender to enter into a suitable credit contract with a consumer. That is to say, there is nothing in the responsible lending rules set out in Chapter 3 of the Act that obliged the respondent to offer any financial accommodation or credit contract or loan, however it might be described, to Ms Dennis. It was not obliged to enter into a contractual arrangement with her even though the financial accommodation she sought might not have been assessed against the responsible lending criteria as unsuitable for her.
That is not surprising. As a matter of general law, the relationship between banker and customer is contractual and consensual. The position was summarised in Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199 as follows (my emphasis):
32 As to the principles concerning the relationship of banker and customer, the primary judge rejected the submission of Mr Paciocco and SDG that they were merely historical, saying that they were to be seen as inherent in the arrangement. In particular, the core banking law principles inherent in the arrangement included the following set out at [93] of the reasons and taken from Andrews 211 FCR 53 at [82]:
1. A savings or deposit account is in law a loan to the banker: Pearce v Creswick (1843) 2 Hare 286; Dixon v Bank of New South Wales (1896) 17 LR (NSW) Eq 355; Khan v Singh [1936] 2 All ER 545. The bank borrows the money and proceeds from the customer and undertakes to repay them on demand. The bank’s undertaking includes a promise to pay any part of the amount due against the written order of the customer addressed to the branch of the bank where the account is kept: Joachimson at [127]. Conversely, the bank will not pay any part of the amount due to the customer without such an order or some other compulsion or entitlement recognised by law;
2. The issue of a cheque by a customer, or the giving of a payment instruction or withdrawal request to its bank, which would have the effect of overdrawing a customer’s account, is construed as a request by the customer for an advance or loan from the bank, and the bank has a discretion to approve or disapprove the loan: Cuthbert v Robarts, Lubbock & Company [1909] 2 Ch 226 at 233; Barclays Bank Ltd v W J Simms Son & Cooke (Southern) Ltd [1980] 1 QB 677 at 699-700; Ryan v Bank of New South Wales [1978] VR 555 at 577; Narni Pty Ltd v National Australia Bank Ltd [1998] VSC 146 at [37] and Narni Pty Ltd v National Australia Bank Ltd [2001] VSCA 31 at [21];
3. A written order by a customer which requires the bank to pay a greater amount than the balance standing to the credit of the customer may be declined. There is no obligation on the bank to pay a cheque unless there is a sufficient balance in the account to pay the entire amount or unless overdraft arrangements have been made which are adequate to cover the amount of the cheque: Bank of New South Wales v Laing [1954] AC 135 at [154]; Office of Fair Trading v Abbey National plc [2008] EWHC 875 (Comm) at [45] and Narni [2001] VSCA 31 at [12];
4. If a customer with no express overdraft facility draws a cheque which causes his account to go into overdraft, the customer, by necessary implication, requests the bank to grant an overdraft on its usual terms as to interest and other charges: Lloyds Bank plc v Voller [2000] 2 All ER (Comm) 978 at 982.
It can be seen from those principles that even an existing customer of the bank has no basis for an expectation that the bank will extend credit to the customer without the bank’s agreement. The bank has a discretion to extend further credit to the customer. The bank is not obliged to extend the credit in the absence of a pre-existing agreement between the customer and the banker.
Nothing in the Code of Banking Practice 2013 changes that position, in my view. As can be seen from the text of clause 27 of the Code extracted above, the focus of that clause is upon the assessment of the ability of the borrower to repay the credit facility and the clause imposes an obligation on the bank to exercise the care and skill of a diligent and prudent banker in selecting and applying the credit assessment methods to do that. Nothing in clause 27 obliges a credit provider such as the respondent to make an offer for the provision of credit to a consumer that even if it assesses that the consumer is able to repay the credit facility. It does not create such an obligation.
Further, it is plain from the text of clause 28 generally, and clause 28.2 more particularly, that the object of the clause is to create an obligation on a credit provider to communicate with a consumer about financial difficulties that the consumer might be having “with any credit facility [the consumer] has with us”. However, there is nothing in clause 28 which obliges a credit provider, as part of that process, to extend further credit to the consumer. Clause 28.5 recognises that a consumer might experience difficulties “in meeting your repayments to us” and invites the consumer to contact the lender as soon as possible to discuss the situation and “the options available to assist you”. Again, there is nothing in that clause which obliges the credit provider or bank to extend further credit to a consumer who is in financial difficulty although that may be one of the options that are available.
The respondent here was under no obligation to advance further credit to Ms Dennis, even if it had done so in the same or similar circumstances in the past. The bank was not obliged to agree to lend her further funds. Nothing in the National Consumer Credit Protection Act or the Code of Banking Practice 2013 obliged the bank to advance her further funds.
Subsection 160D(1) appears in Part 3–6A of Chapter 3 of the Act. It provides that a person must not in the course of engaging in a credit activity give information or a document to another person if the giver knows or is reckless as to whether the information or document is false in a material particular or materially misleading. Subsection 160D(1) is a civil penalty provision.
Here, Ms Dennis asserts that a representative of the respondent gave her information that was false in a material particular or was materially misleading. The relevant information said to have contravened s.160D(1) has been described by Ms Dennis in the following ways:
a)in her affidavit filed on 13 February, 2018 at paragraph 128 she recounts a conversation with a person from the respondent on 16 November, 2015 in response to her complaint dated five November, 2015:
The CBA was prevented from lending me any money because of the Lending Code of Practice implemented by the Australian government. There was no need for the CBA Upper Coomera branch manager to allow me to make an appointment to talk to him about my individual situation because under the Lending Code of Practice implemented by the Australian government the CBA is prohibited from considering any customer’s individual circumstances. If my dog, Hobson had been a human child I would not have been treated differently. If a CBA customer is unable to pay his or her mortgage, even if this results from an unforeseen and extraordinary event, and even if the customer is in a position to pay the mortgage amount in four (4) months time, the CBA must still follow the Lending Code of Practice implemented by the Australian government. It is the fault of the Australian government and not the CBA that I was forced to resign from my secure government employment in order to access my superannuation.
b)in her letter to the Financial Ombudsman Service Australia dated 26 April, 2017:
…the CBA Upper Coomera branch manager refused to provide me with any financial assistance whatsoever in accordance with what was described to me as the Lending Code of Practice implemented by the Australian government solely on the basis that my income had stopped temporarily.
c)in her affidavit filed on 6 April, 2018:
… the Respondent deceived me when it said it was prohibited from considering my individual circumstances because of its legal lending obligations under the “Lending Code of Practice implemented by the Australian government.
Taken literally, the offending statement concerning the “Lending Code of Practice” was wrong because neither party suggests that there is in fact a “Lending Code of Practice” that has been implemented by the Australian government or otherwise. It might have been a reference to the Code of Banking Practice 2013 I have referred to above. Clause 28 of the Code, that I have extracted above, would permit the respondent to take into account Ms Dennis’s individual circumstances when deciding upon a request for financial assistance by her.
However, the reference in the statements, variously reported by Ms Dennis to the relevant obligations being “implemented by the Australian government” is more likely to be a reference to the obligations set out in Chapter 3 of the National Consumer Credit Protection Act. Those provisions, as I have set out above require the credit provider or licensee to take into account the consumer’s individual circumstances when assessing whether the particular credit contract or credit limit increase under consideration will be unsuitable for the consumer. The inquiries that a licensee is obliged to make by s.130(1), in part at least, are directed to the consumer’s individual circumstances.
Taking Ms Dennis’s case at its highest, if a statement in the terms she alleges or to the effect of what she alleges was made to her, was in fact made, she may arguably make out a case for a contravention of s.160D(1) of the Act. However, a finding that the respondent had contravened s.160D(1) would not lead to the making of an order for compensation as Ms Dennis seeks because the contravention occurred after she had resigned from her employment which, according to her case is the cause of the deterioration in her financial circumstances. There remains the possibility of the imposition of a pecuniary penalty for the contravention.
To succeed, the respondent bears the onus of demonstrating that Ms Dennis has no reasonable prospect of successfully prosecuting her application.
Finally, Ms Dennis asserts that the respondent has breached the terms of the Code of Banking Practice 2013 and the terms of the credit contracts that she had with the respondent because it failed to deal with her complaints in the way in which she expected the respondent to deal with them. The relevant complaint appears to be that which she made on 5 November, 2015. She did not receive an immediate response but according to her evidence received a response on 16 November, 2015. Nothing in the evidence given by Ms Dennis in support of this aspect of her claim, taken at its highest, demonstrates a breach either of the Code of Banking Practice 2013 or the contracts that Ms Dennis had with the bank in respect of each of her credit facilities.
Conclusion
The National Consumer Credit Protection Act and the Code of Banking Practice 2013 do not impose, separately or collectively, an enforceable obligation on a bank to lend a customer money in the event that the bank assesses that a particular credit contract or extension to the limit on a credit contract is suitable for its customer. That they do not impose such an obligation means, and I find, that Ms Dennis has no reasonable prospect of successfully prosecuting her proceeding based upon the respondent contravening the responsible lending criteria set out in the Act and the Code. She also has no reasonable prospect of successfully prosecuting her claim based upon the failure of the respondent to deal with her complaints in the way in which she anticipated or desired.
I have found that her claim relating to a contravention of s.160D(1) of the National Consumer Credit Protection Act is arguable, taking her case at its highest.
In those circumstances, it is appropriate that her proceedings, save for the claim for a contravention of s.160D(1), be summarily dismissed pursuant to rule 13.10(1) of Federal Circuit Court Rules 2001 (Cth).
I certify that the preceding fifty-seven (57) paragraphs are a true copy of the reasons for judgment of Judge Jarrett
Associate:
Date: 26 May, 2020
2
4
3