Ennis v Credit Union Australia

[2017] FCCA 549

FEDERAL CIRCUIT COURT OF AUSTRALIA

ENNIS v CREDIT UNION AUSTRALIA [2017] FCCA 549

Catchwords:
CONSUMER LAW – Consumer credit – home lending – conduct as a credit provider – alleged failure to comply with National Consumer Credit Protection Act 2009 (Cth) and the National Credit Code (Sch 1 to the National Consumer Credit Protection Act) – alleged breach of responsible lending requirements.

Legislation:
National Consumer Credit Protection Act 2009 (Cth) ss.118 (1), 118(2), 118(3), 118(4), 123 (2)(a), 123(3), 128, 129, 130, 131(1) , 131(2) , 131(3) , 131(4), 133

National Credit Code  ss.185 (1), 185(2)

Applicant: ALANA-KARENE ENNIS

Respondent: CREDIT UNION AUSTRALIA

File Number: BRG 7 of 2016

Judgment of: Judge Jarrett

Hearing date: 28 July 2016

Date of Last Submission: 28 July 2016

Delivered at: Brisbane

Delivered on: 22 March 2017

REPRESENTATION

No appearance by the Applicant

Counsel for the Respondent: Mr Jones

Solicitors for the Respondent: Thomsons Lawyers

ORDERS

1. The application filed on 6 January, 2016 be dismissed;

2. The applicant pay the respondent’s costs of and incidental to the application to be taxed on the indemnity basis pursuant to the Federal Court Rules 2011.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 7 of 2016

ALANA-KARENE ENNIS

Applicant

And

CREDIT UNION AUSTRALIA

Respondent

REASONS FOR JUDGMENT

1. Before a licenced credit provider enters into a credit contract with a consumer the licenced credit provider must make an assessment that assesses whether the credit contract will be suitable for the consumer if the contract is made.  If the credit contract is assessed as unsuitable, the credit provider must not enter into the credit contract with the consumer.  A credit contract is unsuitable for a consumer if at the time it is entered into it is likely that the consumer will be unable to comply with the consumer’s obligations under the contract or could only comply with substantial hardship which will be presumed to be present where the consumer can only comply with the consumer’s financial obligations under the contract by selling his or her principal place of residence.  I have provided the statutory references for those propositions later in these reasons.

2. On or about 15 August, 2012 Ms Ennis and her husband were approved for a mortgage loan in respect of a property they purchased in Redbank Plains, Queensland which they intended to use as their home.  They had a deposit of $14,150.13 and they borrowed from the respondent $277,500.  In these proceedings Ms Ennis alleges that the respondent has breached its obligations to her under the National Consumer Credit Protection Act 2009 (Cth). She alleges that the respondent, a licenced credit provider for the purposes of that Act, ought to have assessed the mortgage loan that she and her husband obtained from the respondent as unsuitable for her and therefore, ought not to have entered into the loan with her.

3. Ms Ennis argues that the respondent made an assessment of her and her husband’s ability to service the loan and in doing so made various errors which resulted in the respondent concluding that she and her husband could service the loan when in fact they could not.  She argues that the respondent did not take into account expenses she was likely to incur by reason of her illness and did not meet its own responsible lending criteria.

4. The respondent denies that any errors were made or that it ought to have assessed the mortgage loan as unsuitable for Ms Ennis or she and her husband.  It denies that it did not meet its responsible lending criteria.

5. Ms Ennis seeks the following orders:

   1. An order for compensation to the applicant under the National Consumer Credit Protection Act (Cth) 2009, Chapter 4, Part 4.2, Division 2, 178, 1, 2(a) in the amount of $750,000 or as acceptable to the Court.

   2. An order to reduce the mortgage loan by 75 per cent of the original loan amount, in accordance with existing case precedents, and allowable under the National Consumer Credit Protection Act (Cth) 2009, Chapter 4, Part 4.2, Division 2, 179, 2(b).

   3. An order to pay pecuniary penalties under the National Consumer Credit Protection Act (Cth) 2009, Chapter 4, Part 4.2, Division 2, 181. In an amount acceptable to the Court.

   4. No order for costs or interest.

   5. Such further orders as the Court considers appropriate.

6. The respondent seeks that the application be dismissed.

7. I am not satisfied that the respondent or any of its officers made any errors when considering the ability of Ms Ennis and her husband to service the loan for which they applied from the respondent.  I am not satisfied that the respondent ought to have, or was compelled to, assess the credit contract for which Ms Ennis applied from the respondent as unsuitable for her or for her and her husband.  Consequently, for the reasons that follow the application must be dismissed.

A summary of Ms Ennis claims

1. Ms Ennis did not appear at the hearing of this application.  Nonetheless, I have had regard to the affidavits and submissions filed by her in these proceedings.

2. In its written submissions delivered for the purposes of the trial before me, the respondent’s counsel conveniently summarised Ms Ennis’ case as follows:

   3. The Applicant’s central complaint is that the loan was unsuitable and unaffordable because she calculates the “NDI” or “Net Disposable Income” as being below the respondent’s threshold of 1.25. That overall complaint is supported by numerous discrete factual points, such that there is arguably a more general case advanced that the respondent did not assess the loan application in accordance with its own lending guidelines and the regulations governing consumer credit.

   4. The specific allegations made by the Applicant may be identified as follows:

   Incorrect income figures

   (a) Inflating the income of Mr Ennis by $24.66 per fortnight;

   (b) Inflating the carers payment of Mr Ennis by $228.12 per fortnight;

   (c) Inflating the disability pension of the Applicant by $228.12 per fortnight;

   (It is submitted that the proper treatment of the Centrelink benefits is the main issue in dispute in this proceeding.)

   (d) Including a pension supplement of $45.40 per fortnight in the disability pension figure for the Applicant;

   (e) In consequence of the above, the respondent assessed the borrowers’ income as $14,362.94 higher than the true figure which ought to have been assessed;

   Incorrect asset figures

   (f) Inflating the assets by approximately $14,000 or $15,000;

   Disability

   (g) The respondent did not “adequately account” for the Applicant’s disability. This takes a number of forms:

   (i) Not taking into account that Mr Ennis might stop work if the Applicant’s care needs increased, which would mean that the borrowers’ sole source of income would be Centrelink benefits;

   (ii) Not taking into account disability expenses of the Applicant in its living expenses calculation, which appears to be $30 per week for medical expenses. (The Applicant’s affidavit does not assert that those medical expenses were disclosed to the respondent.)

   (h) Not making any adjustment for potential reductions in the carer’s payment and disability pension if employment income increased;

   (i) The disability pension of the Applicant was assessed as taxable income when it was not in fact taxable – however, the Statement of Claim notes this did not affect the overall assessment;

   Verification

   (j) Insufficient enquiries to ensure that the income and assets were correct – the Applicant does not identify what those further enquiries should have been and the allegation seems to imply that the information the Applicant and Mr Ennis gave to the respondent was false (particularly as paragraph 16 of the Statement of Claim asserts that the “payslips, bank statements, income tax records, Centrelink statements etc” “were used to obtain these figures”)

   Responsible lending

   (k) There is a general and entirely unparticularised suggestion that the respondent breached “responsible lending guidelines (under the NCCP Act)”, although it may be discerned from a Notice to Produce dated 11 July 2016 that it will be contended that:

   (i) The respondent’s Credit Assessor did not complete any necessary checklists or notes when assessing the application;

   (ii) The respondent did not assess income in accordance with policy;

   (iii) The assessment of Centrelink payments as income was improper given the length of time the borrowers had received those amounts;

   (iv) There were insufficient enquiries into the Applicants’ assets;

   (v) There was inappropriate behaviour on the basis Credit Assessors will be alleged to have earned commission from approving loans;

   (vi) The respondent withheld material information from the Lenders Mortgage Insurer.

3. Ms Ennis relies upon the National Consumer Credit Protection Act 2009 (Cth) and asserts that various provisions of that Act have been contravened by the respondent. Having regard to the material that she has filed, the provisions she relies upon are as follows:

   a)ss.118 (1) to (4);

   b)ss.123 (2)(a) and (3);

   c)ss.131 (1) to (4);

   d)ss.133 (1) to (4)

   e)ss.185 (1) and (2) of the National Credit Code.

4. Subsections 118(1) – (4) and 123(2)(a) and (3) appear in Part 3-1 of the National Consumer Credit Protection Act. However, Part 3-1 does not apply in relation to credit assistance provided by a licensee in relation to a credit contract if the licensee is or will be the credit provider under the proposed credit contract.

5. Here, the respondent was the credit provider. Part 3-1 does not apply to this particular transaction. Ms Ennis’ reliance upon the subsections that appear within it is misplaced.

6. Part 3-2 applies to licensees who are credit providers under credit contracts.  Section 128 requires a licensee to make an assessment of the suitability of the credit contract in accordance with s.129 and make the inquiries and verification described at s.130 of the Act, before offering credit to a consumer.  The assessment must assess “whether the credit contract will be unsuitable for the consumer if the contract is entered into or the credit limit is increased in that period.”

7. Section 130 proscribes the necessary enquiries as follows:

   (1) For the purposes of paragraph 128(d), the licensee must, before making the assessment:

   (a) make reasonable inquiries about the consumer’s requirements and objectives in relation to the credit contract;

   (b) make reasonable enquiries about the consumer’s financial situation; and

   (c) take reasonable steps to verify the consumer’s financial situation; and

   (d) make any inquiries prescribed by the regulations about any matter prescribed by the regulations; and

   (e) take any steps prescribed by the regulations to verify any matter prescribed by the regulations.

   […]”

8. There are no relevant requirements under the Regulations.

9. According to s.131 of the Act a proposed credit contract will be unsuitable if, at the time of the assessment it is likely that:

   (2)…

   (a) the consumer will be unable to comply with the consumer’s financial obligations under the contract, or could only comply with substantial hardship, if the contract is entered or the credit limit is increased in the period covered by the assessment; or

   (b) the contract will not meet the consumer’s requirements or objectives if the contract is entered or the credit limit is increased in the period covered by the assessment; or

   (c) the regulations prescribe circumstances in which a credit contract is unsuitable – those circumstances will apply to the contract if the contract is entered or the credit limit is increased in the period covered by the assessment.

10. Subsection 131(3) provides that for the purposes of s.131(2)(a) it is presumed that, if the consumer could only comply with the consumer’s financial obligations under the contract by selling the consumer’s principal place of residence, the consumer could only comply with those obligations with substantial hardship, unless the contrary is proved.

11. If the contract is assessed to be unsuitable s.133 of the Act demands that the loan contract not be made.

12. Ms Ennis also relies upon s.185 of the National Credit Code.  That section requires a credit provider to provide, within nominated timeframes, a copy of the credit contract, a credit-related insurance contract or a notice given under the Code.

13. The respondent points out that it is a signatory to the Mutual Banking Code of Practice.  The respondent incorporates the provisions of the Mutual Banking Code of Practice into its credit contracts.  Thus, while there is no common law duty to engage only in responsible lending practices or to only lend to a borrower an amount the borrower can afford to repay, the Mutual Banking Code of Practice gives rise to certain duties on the part of the respondent.

14. Clause 6 of the Mutual Banking Code of Practice deals with responsible lending obligations in the following terms:

    (6.1) We will always act as a responsible lender.

    (6.2) We will base our lending decisions, including decisions to extend existing credit facilities, on a careful and prudent assessment of your financial position. We will periodically review our credit assessment procedures and criteria for the products we issue.

    (6.3) We will generally only lend amounts to you that we believe, on the information available to us, you can reasonably afford to repay. However, different criteria will apply in the case of some products, such as bridging finance arrangements and reverse mortgage loans (if we offer these).

    (6.4) We expect you to provide honest and accurate information to us when applying for a loan or the extension of a credit facility. However, where it is prudent to do so, we will also undertake our own independent checks.

    (6.5) We will promote the responsible use of credit to our members and customers using a range of approaches.

15. The respondent observes that a number of things should be noted about the text of clause 6:

    (a) The standard is a “careful and prudent assessment”;

    (b) The decision whether and how much to lend is based on the information available to the lender and is conditioned by the term “generally” – it is not absolute or strict;

    (c) The requirement to make further independent checks is conditioned by “where it is prudent to do so”;

    (d) The provision of honest information by the intending borrowers is a component of the contractually agreed process.

The loan application and approval process

1. Mr and Ms Ennis met with an officer of the respondent on 15 August, 2012.  The relevant officer was Ronnie Differ.  I have evidence from Ms Differ.  Her evidence is that she remembers Mr and Ms Ennis and that she met with them in relation to their loan application which resulted in the loan which is the subject of this proceeding. 

2. Mr and Ms Ennis completed a loan application.  The signed application in evidence:

   a)states that the borrowers paid $247 rent per week. The way the form is filled out, it appears to show that both paid $247 per week;

   b)Mr Ennis’ period of employment is given as 14 years;

   c)Mr Ennis’ gross income was given as $1,066.00 per fortnight ($533.00 per week);

   d)Mr Ennis’ Centrelink payments were given as $638.00 per fortnight ($319.00 per week) not taxable;

   e)Ms Ennis’ Centrelink payments were given as $808.00 per fortnight ($404.00 per week) not taxable;

3. Mr and Ms Ennis certified that the information provided “on this form is correct and complete in every detail” and that “I/We certify that I/we can afford this loan/s without enduring any hardship.”

4. Mr and Ms Ennis were given a credit guide in compliance with the National Consumer Credit Protection Act.

5. Mr and Ms Ennis met with Ms Ronnie Differ who was the manager of the respondent’s Branch at which they made their application and carried out their loan interview.  Data collected in the loan interview is recorded in a “Needs Assessment Form”.

6. Before meeting with Ms Differ, a “Needs Analysis Form” had been partially completed by another officer of the respondent who took the initial loan enquiry from Mr and Ms Ennis.  Ms Differ completed the balance of the “Needs Analysis Form” for the purposes of the application.  She was aware that Ms Ennis suffered from multiple sclerosis.  She asked them to declare any relevant expenses that might not have otherwise been included in the application.

7. Ms Differ’s role was to gather information that the respondent’s officers would then use to consider the Ennis’ application for the loan in question.  She thought that Mr and Ms Ennis had a strong loan application.

8. I have evidence from Mr Jason Thomas, a banker employed by the respondent. Mr Thomas gave evidence about the respondent’s loan application and approval procedures. According to his evidence, the respondent uses a computer system called “RAP” or “Rapid Application Processing” to process home loan applications. The RAP system does not automatically approve home loan applications. All home loan applications through the respondent are manually assessed by an employed credit assessor. The RAP has inbuilt calculations and rules which trigger “alerts” where an application does not meet the respondent’s credit criteria or where an application contains information that requires further information. Those calculations and triggers and the underlying credit risk policy are independently managed by the respondent’s “Risk Management” division and are periodically reviewed and updated. Mr Thomas’ evidence was that the triggers which relate to serviceability are expressly programmed to comply with the National Consumer Credit Protection Act.

9. Mr Thomas explained in his evidence that all home loan applications made to the respondent are assessed by a credit assessor who considers the RAP alerts and the other application information such as property valuation, conduct of existing loan accounts and the existence of genuine savings to determine whether the loan should be approved or declined.  Mr Thomas explained that each credit assessor has a delegated authority limit, which specifies the parameters within which that credit assessor can decide whether to approve or reject a loan application.

10. For the purposes of the RAP system various data needs to be supplied.  The data includes, income and expenses.  Ms Ennis’ case is that the respondent used the wrong data for the purposes of her application.  She argues that had the correct data been used, the loan would have, or ought to have, been declined.  I will return to these issues later in these reasons.

11. The credit assessor who assessed Mr and Mrs Ennis’ application was Christine Ah Tong who is employed as a credit assessor by the respondent.  Ms Ah Tong is paid a wage by the respondent.  She does not receive any incentives from the respondent for approving loans such as that applied for by Mr and Ms Ennis.

12. Ms Ah Tong assessed the Ennis’ loan application although Ms Ah Tong does not now recall undertaking that task.  It was four years prior to the making of her affidavit relied upon by the respondent in these proceedings.

13. However, Ms Ah Tong’s evidence reveals that the decision on the Ennis’ loan application would have been made using information and documents submitted on the respondent’s “RAP” loan system because that was the only way in which decisions on loan applications could be made.  Her evidence was that the Ennis’ loan application was processed in the ordinary way that all home loan applications to the respondent were processed at the time.

14. Ms Ah Tong gave evidence of her practice when deciding on an application for a loan such as that made by Mr and Mrs Ennis.  She swears that the practice was to read the signed application, the lender’s notes, the documents supplied including payslips, pension statements and savings statements so as to fully assess the application.

15. Ms Ah Tong examined the records kept by the respondent concerning the Ennis’ loan application in the respondent’s “RAP” system.  Her evidence is that the payslips, Suncorp savings statements verifying fortnightly regular deposits, Centrelink Pension, Disability support pension and Centrelink payment documents provided by Mr and Ms Ennis “were all verified in terms of CUA procedures and verification of income was confirmed”.

1. Ms Ah Tong’s evidence is that it was apparent from looking at the “RAP” system that the fact that Ms Ennis had multiple sclerosis at the time of the application was known because some of the income relied upon to assess serviceability was her disability payment through Centrelink and Mr Ennis’ carer’s payment through Centrelink.

2. The loan for which Mr and Ms Ennis applied was approved on 28 August, 2012.  The loan was advanced on 17 September, 2012 and Mr and Ms Ennis were able to proceed with the purchase of what they intended to be their home.  However, they have defaulted on the lending arrangements and the respondent has indicated an intention to exercise its rights consequent upon that default.

3. I also have evidence from Mr Keith Foss who is the “Senior Manager Credit Risk & Decisioning” for the respondent. He is the current supervisor of Ms Ah Tong.  Mr Foss gives evidence that he has had regard to information contained in the respondent’s “RAP” loan application computer system when preparing his affidavit.  He explains the purpose of the “Needs Application Form” which Ms Differ completed.  He explains the meaning of the notes in the form and identifies the figures used in assessing the loan application. He undertook the process of correlating those figures to the documents provided by Mr and Ms Ennis.

4. Mr Foss provides net disposable income (“NDI”) calculations.  He explains that the NDI calculation is based on the total net income figure less living expenses divided by assessed repayments.  According to Mr Foss, the “minimum servicing benchmark” was 1.25.  An NDI of 1.25 or greater indicates that the loan can be serviced or is affordable for those applying for it.  An NDI less than 1.25 would result in the application being refused.

Consideration

1. The respondent submits that “responsible lending obligations” were built into each stage of the loan assessment process.  The purpose of the Needs Analysis Form which Ms Differ completed with Mr and Ms Ennis was to ensure the respondent met its responsible lending obligations.  Responsible lending “alerts” and “triggers” were built into the RAP system, as explained by Mr Thomas in his evidence.  A credit assessor with experience and training in responsible lending personally assessed the loan. There was no “auto-approval” based merely on computer assessment of information.

2. Further, the evidence shows that the same information which the respondent’s credit assessor acted upon was provided to the respondent’s Mortgage Insurer, and that a third party also approved the loan application as falling within its parameters.

3. Ms Ennis’ case focusses upon what she alleges was an erroneous calculation of her and Mr Ennis’ NDI. 

4. Ms Ennis argues that the respondent used the wrong amounts for various components that were necessary to calculate the net disposable income.  As the submissions for the respondent usefully summarise, the specific allegations made by Ms Ennis concerning incorrect income figures may be identified as follows:

   a)inflating the income of Mr Ennis by $24.66 per fortnight;

   b)inflating the carers payment of Mr Ennis by $228.12 per fortnight;

   c)inflating the disability pension of Ms Ennis by $228.12 per fortnight;

   d)including a pension supplement of $45.40 per fortnight in the disability pension figure for the Ms Ennis.

5. In consequence of using the wrong figures, she argues that the respondent assessed the Ennis’ income as $14,362.94 higher than the true figure which ought to have been assessed. 

6. In addition, she alleges that the respondent used incorrect asset values inflating the Ennis’ assets by approximately $14,000 or $15,000.

Income

1. As prepared by the respondent’s counsel, the following table identifies the figures which Ms Ennis says in her material should have been allowed, the figures which Mr Foss states were used by the respondent in assessing the loan application and the nature of the dispute between the parties:

Item	Applicant’s case as to what should have been allowed	Mortgage Application Form	Used by respondent in Assessment	Nature of dispute
Mr Ennis employment income	$533.40	$533.00	$545.73	Pay slips showed actual average income including penalties of $498.08.
Mr Ennis carer’s payment	$147.99	$319.00	$262.05	(Total Centrelink Taken from Centrelink Income Statement future regular payment amount.
Carer allowance (non- taxable)	$57.00	Included above	$57.00	Taken from Centrelink Income Statement future regular payment amount.
Mr Ennis pension supplement	Nil	Included above	Nil	Centrelink Income Statement regular future payment amount was $22.70 per week
Applicant’s disability support pension	$147.99	$404.00	$262.05 (Total Centrelink payments $426.90)	Taken from Centrelink Income Statement future regular payment amount.
Applicant’s pension supplement	Nil	Included above	$22.70	Taken from Centrelink Income Statement future regular payment amount.
Family Tax Benefit A and B	$142.17	Included above	$142.15	Taken from Centrelink Income Statement future regular payment amount.
Sub-total weekly income	$1,028.55	$1,256.00	$1,291.68
Total gross income	$53,484.60	$65,312.00	$67,167.36
Total after tax income (annual)	$51,345.22	$62,699.52	$64,587.00	Third figure taken from RAP.  First and second figures adopt a shorthand 4% reduction.
Less expenses	$30,640.00	$29,080.00	$29,080.00	Applicant’s case figure includes $30/week medical expenses $1,560 per annum)
Loan repayments	$20,761.00	$20,761.00	$20,761.00
Interim NDI calculation	0.997 (1.07 without additional medical expenses)	1.62	1.71

1. The evidence shows that the amounts used by the respondent were supported by the evidence given to it by Mr and Ms Ennis and in particular:

   a)the Needs Analysis Form recorded a statement from Mr and Ms Ennis that Mr Ennis’ employment income was $24,090 per year, which was $463.27 per week. That was consistent with the payslip figures for base pay but excluding the additional penalty payments;

   b)the Needs Analysis Form recorded a statement that Mr and Ms Ennis received $26,000 per annum between them from Centrelink. This would equate to $250.00 per week each;

   c)the Centrelink statements exhibited to Mr Foss’ affidavit show that Family Tax Benefits were being received as at 29 May, 2012. They showed the previous regular total entitlements and payments were $1,141.01 per fortnight (being $570.50 per week or $29,666.25 per annum);

   d)the discrepancy between Mr and Ms Ennis’ statement of $26,000 per annum in Centrelink payments and the documented amount of $29,666.25 may be that the Pension Supplement and the FACS Pensioner Education Supplement (totalling $2,802.80 per annum) were not included in that annualised estimate;

   e)the Centrelink documents produced to the respondent showed a continuation of the supplement payments, a continuation of the Family Tax Payments and an increase in the disability support pension; and

   f)Ms Ennis’ disability support pension was to increase by $174.57 (from $349.53 to $524.10). The document indicated she had been receiving that payment since 29 June, 2005.

2. Presuming that Ms Ennis would lose rental assistance from the date of funding the loan because she was no longer going to be renting, the total income on the face of the documents provided by Mr and Ms Ennis was:

   a)$524.10 for the Disability Support Pension;

   b)$45.50 for the pension supplement;

   c)$62.40 for the FACS pensioner education supplement;

   d)$169.66 for Family Tax Benefit A; and

   e)$114.66 for Family Tax Benefit B,

   -a total of $916.32 per fortnight.

3. I accept the respondent’s submission that the figure used by the respondent matches precisely the “future regular entitlement” payment  and correctly excludes rent assistance.

4. I also accept that Ms Ennis’ evidence does not state that she disclosed to the respondent that the amounts being received by her and Mr Ennis were in fact less than the Income Statement amounts.  Rather, the disclosure of $26,000 per annum Centrelink payments was consistent with the Income Statement “previous regular entitlements” amounts.

5. Ms Ennis complains that a loan approved in August, 2012 and funded in September, 2012 incorrectly used income referred to in the Centrelink Income Statements as “future regular entitlements and payments”, on the basis that it was future income.  There is nothing in the complaint.  It was evidence provided by her upon which she, no doubt, intended the respondent to act.

6. Even if the NDI was adjusted to take into account Ms Ennis’ assertions about the respondent’s use of incorrect income amounts Mr Foss’ evidence demonstrates that the loan remained affordable and suitable for Mr and Ms Ennis.

Assets

1. There is no evidence to suggest that the respondent inflated the value of any assets that Mr or Ms Ennis disclosed that they owned.

Expenditure and Disability

1. The evidence shows that the respondent undertook its assessment of the loan application using a “sanitised” or increased interest rate (that is, it included a safety margin or “buffer”) over that which would in fact apply from the commencement of the loan.

2. The repayments to be made by Mr and Ms Ennis were calculated as $20,761 per annum ($399.25) per week.  Mr and Ms Ennis had been paying $247.00 per week in rent.  No difficulties in paying rent were disclosed to the respondent.  The application form could reasonably be interpreted as the borrowers paying $247.00 per week rent each, rather than in total together.

3. They also demonstrated a pattern of savings of over $434.00 per week. There is no evidence that Ms Ennis or Mr Ennis sought to “talk down” their savings history or explain those payments as not in truth evidencing their saving capacity.

4. However, Ms Ennis seems to assert that the respondent should have added $30 per week ($1,560.00 per annum) to the relevant expenses on account of medical costs for her medical condition. Ms Ennis’ evidence does not disclose that any such cost was disclosed to the respondent as part of the loan application process.

5. In any event, even if that additional amount of expenditure is adjusted for, Mr Foss’ evidence is that the loan would have remained affordable and serviceable.

Rental Expense

1. Mr Foss’ analysis of the loan application includes a comment that the anticipated loan repayments were less than the aggregate of the borrowers’ regular savings and their weekly rental expense, which indicates that the proposed loan repayments were affordable.  The loan assessment itself did not factor in rental as an expense relevant to serviceability because the loan was to be an owner occupied loan.  That was an entirely appropriate approach.

Verification

1. The evidence shows that:

   a)the respondent’s credit policy set out the circumstances in which verification steps were required;

   b)those steps were followed; and

   c)the respondent’s reference to bank statements, payment slips and the Centrelink Income Statements were acts of verification.

2. I accept the respondent’s submission that no additional verification steps were required because of Mr Ennis’ longstanding membership of the respondent.  Nor was there anything arising from the documents themselves that suggested that further verification was required.

3. To the extent that Ms Ennis’ case suggests that the respondent was under a duty to effectively disbelieve she and her husband and go behind the material they provided in support of the application, I reject her case.

Irresponsible lending

1. There is simply no evidence in my view to support the assertion that the respondent has engaged in irresponsible lending or has engaged in lending practices that are inconsistent with the Mutual Banking Code of Practice.

Conclusion

1. The applicant has not made any of her grounds of complaint.  Her application must be dismissed.

2. The respondent seeks its costs on an indemnity basis pursuant to its contract with Ms Ennis.  Clause 11 of the “Terms of Loan Contract” provides:

   We may charge you enforcement expenses we reasonably incur. We may debit these to your loan account.

   An enforcement expense includes an expense for doing any of the following under this loan contract, or any mortgage:

   (a) enforcing any right we have under this loan contract, or any mortgage;

   (b) attempting to enforce any right;

   (c) performing any of your obligations under this loan contract;

   (d) protecting any right;

   (e) waiving any right;

   (f) contemplating the enforcement of any right;

   […]

3. By this proceeding, Ms Ennis sought declaratory relief and other orders against the respondent, including seeking to set aside the loan agreement and mortgage.  I accept the respondent’s submissions that in order to protect its security, the respondent was required to defend this proceeding.  This action falls squarely within clause 11(d) of the Terms of Loan Contract.  I accept that work ancillary to litigation steps is captured by clause 11(f). I also accept that taking steps in this proceeding is captured by clause 11(a) of the Terms of Loan Contract.

4. It is appropriate, in my view, to order that Ms Ennis pay the respondent’s costs on an indemnity basis so that there is certainty as to the respondent’s entitlement to charge the legal costs which it reasonably incurred in defending this proceeding.

I certify that the preceding sixty-nine (69) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 22 March, 2017.

Date: 22 March 2017