Haichkay Pty Ltd v Sacco
[2019] VSC 196
•27 March 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
MORTGAGE RECOVERY LIST
S ECI 2018 00868
| HAICHKAY PTY LTD (ACN 006 622 199) ATF THE PAUL LITTMANN SUPERANNUATION FUND | Plaintiff |
| v | |
| DEANNE LOUISE SACCO | Defendant |
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JUDICIAL OFFICER: | Matthews JR |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 14 March 2019 |
DATE OF JUDGMENT: | 27 March 2019 |
CASE MAY BE CITED AS: | Haichkay Pty Ltd v Sacco |
MEDIUM NEUTRAL CITATION: | [2019] VSC 196 |
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PRACTICE AND PROCEDURE – Summary judgment – Plaintiff seeks summary judgment against defendant – Whether defendant has real prospect of success on her defence – Civil Procedure Act (2010) (Vic), ss 61 and 63 – Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27 – National Credit Code (Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth)) does not apply – Jams 2 Pty Ltd & Ors v Stubbings (No 3) [2019] VSC 150 applied – Application granted.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr B. Barr | Consult Solicitors |
| The Defendant was represented by her husband, Mr A. Sacco |
JUDICIAL REGISTRAR:
Background
By summons filed on 12 December 2018, the plaintiff seeks summary judgment pursuant to s 63 of the Civil Procedure Act 2010 (Vic) (‘CPA’).[1] Alternatively, the plaintiff seeks that the defence dated 21 September 2018 be struck out and judgment entered for the plaintiff pursuant to Order 23 of the Rules.
[1]By orders made on the Court’s own motion, the summons was referred to me for hearing and determination, pursuant to r 84.04 of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’).
The orders sought by the plaintiff include possession of the land situated in Farrell Street, Frankston, Victoria, more particularly described in Certificate of Title Volume 08182 Folio 534 (‘the Property’). In the alternative, the plaintiff seeks orders for the repayment of $490,000, being the principal advanced to Bayslili Pty Ltd (‘Bayslili’) (a company of which the defendant and her husband are directors) pursuant to two loans, which were secured by registered mortgages over the Property. The plaintiff also seeks orders for the payment of outstanding interest and enforcement costs on the two loans.
The plaintiff relies upon the affidavits affirmed by Paul Bernard Littmann on 12 December 2018 (‘First Littmann Affidavit’) and 12 March 2019 (‘Second Littmann Affidavit’)[2] and the affidavit affirmed by Malcolm Murphy on 8 March 2019 (‘Murphy Affidavit’). The plaintiff’s counsel also provided a written outline of submissions.
[2]This affidavit was originally affirmed on 8 March 2019 but was then re-affirmed on 12 March 2019 so as to comply with the new requirements in the Oaths and Affirmations Act 2018 (Vic).
The defendant filed two affidavits on 15 February 2019. Those affidavits were not served until 25 February 2019, despite the defendant being required to serve any such affidavit on or before 4.00pm on 15 February 2019.[3] One of these affidavits was in response to the First Littmann Affidavit (‘First Sacco Affidavit’), and the other was in respect of her representation in the proceeding (‘Second Sacco Affidavit’). Further, on 12 March 2019 the defendant filed two further affidavits, one responding to the Murphy Affidavit (‘Third Sacco Affidavit’) and one responding to the Second Littmann Affidavit (‘Fourth Sacco Affidavit’). The plaintiff does not object to the defendant relying on any of those affidavits, despite the late service of the first two affidavits and there being no order providing for the second two affidavits.
[3]Orders made by the Court on 1 February 2019.
Applicable principles
Summary judgment
Section 61 of the CPA permits a plaintiff to make an application for summary judgment on the ground that the defendant’s defence or part of that defence has no real prospect of success. Section 63 of the CPA provides (subject to s 64) that the Court may give summary judgment in a civil proceeding if it is satisfied that a claim, defence or a counterclaim or part of the claim, defence or counterclaim, as the case requires, has ‘no real prospect of success’.
Section 64 of the CPA provides that:
Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because—
(a) it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only a full hearing on the merits is appropriate.
The Court of Appeal has set out the test to be applied in this context in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd.[4] Upon the present state of authority:
(a)The test for summary judgment under s 63 of the [CPA] is whether the respondent to the application for summary judgment has a ‘real’ as opposed to a ‘fanciful’ chance of success;
(b)The test is to be applied by reference to its own language and without paraphrase or comparison with the ‘hopeless’ or ‘bound to fail test’ essayed in General Steel;
(c)It should be understood, however, that the test is to some degree a more liberal test than the ‘hopeless’ or ‘bound to fail’ test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;
(d)At the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.
[4](2013) 42 VR 27, 40 [35] (‘Lysaght’) (citations omitted).
Section 7(1) of the CPA sets out its overarching purpose, being to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute. Section 9 of the CPA requires the Court to have regard to these purposes in making any order or giving any direction in a civil proceeding.
An application made pursuant to s 61 of the CPA it is to be made in accordance with Part 2 of Order 22.[5]
[5]Rules, r 22.03.
Rule 22.04 of the Rules provides:
(1) An application shall be made by summons supported by an affidavit—
(a)verifying the facts on which the claim or the part of the claim to which the application relates is based; and
(b)stating that in the belief of the deponent the defence to the claim or the defence to the relevant part of the claim—
(i) has no real prospect of success; or
(ii)has no real prospect of success except as to the amount of the claim or as to the amount of the relevant part of the claim.
(2)Where a statement in a document tends to establish a fact within paragraph (1) and at the trial of the proceeding the document would be admissible by or under the Evidence (Miscellaneous Provisions) Act 1958, the Evidence Act 2008 or any other Act to verify the fact, the affidavit under paragraph (1) may set forth the statement.
(3)An affidavit under paragraph (1) may contain a statement of fact based on information and belief if the grounds are set out and, having regard to all the circumstances, the Court considers that the statement ought to be permitted.
(4)The plaintiff shall serve the summons and a copy of the affidavit or affidavits and of any exhibit referred to in the affidavit or affidavits on the defendant not less than 14 days before the day for hearing named in the summons.
Rule 22.05 of the Rules provides:
(1)The defendant may show cause against the application by affidavit or otherwise to the satisfaction of the Court.
(2)An affidavit under paragraph (1) may contain a statement of fact based on information and belief if the grounds are set out.
(3)Unless the Court otherwise orders, the defendant shall serve a copy of any affidavit and of any exhibit referred to in the affidavit or affidavits on the plaintiff not less than three days before the day for hearing named in the summons.
The requirements set out in Rules 22.04 and 22.05 were considered by the Court of Appeal in Daniel Simon Hausman and Lance Vincent Hodgkinson v Abigroup Contractors Pty Ltd.[6] Of the equivalent of what is now Rule 22.04 in relation to the affidavit in support of summary judgment, the Court of Appeal stated that what ‘must be verified are the facts necessary to establish a good cause of action’.[7] Once the plaintiff has established the elements of its cause of action, there is ‘something akin’ to a shifting of the evidential burden to the defendant.[8]
[6](2009) 29 VR 213; [2009] VSCA 288 (‘Hausman v Abigroup’).
[7]Hausman v Abigroup (n 5) [60].
[8]See footnote 13 in the reasons of the Court of Appeal in Hausman v Abigroup, where it was stated: ‘Whether there is in fact such a burden upon a plaintiff, once the prerequisites for summary judgment have been satisfied, is a difficult question. Rule [22.05] requires a defendant, who is the subject of an application, in proper form, for summary judgment, to “show cause” why such judgment should not be granted. It may be that this imposes upon a defendant an evidential burden, or something akin thereto’.
Of the equivalent of what is now Rule 22.05, the Court of the Appeal stated the following:[9]
63The defendant must satisfy the Court that, in respect of the claim to which the application for judgment relates, a question ought to be tried, or there ought for some other reason to be a trial of that claim. The Court, if so satisfied, will give the defendant leave to defend and the proceeding will continue to trial in the ordinary way. The Court will normally require an affidavit by, or on behalf of, the defendant before it will be satisfied that the defendant is entitled to leave to defend. The standard of diligence required of the defendant in preparing a case in opposition to the application, especially if under pressure of time, is perhaps not as high as that required in preparing for trial.
64.Nonetheless, the defendant is required to use reasonable diligence to put before the Court, albeit in a summary form, all the evidence relied on in the defence. In that regard, it would generally be regarded as an injustice to the plaintiff to introduce for the first time, on appeal, evidence which was readily available for the hearing of the application, but was not produced. An affidavit filed by the defendant may contain a statement of fact based on information and belief.
65.The authorities suggest that an affidavit in opposition to an application for summary judgment must provide sufficient particulars to enable the defence case to be properly understood. A bald denial that the defendant is indebted to the plaintiff will not suffice. The affidavit should, so far as practicable, deal specifically with the plaintiff’s claim and the facts set out in the supporting affidavit to establish that claim. It should state clearly and concisely what the defence is, and identify the facts relied upon in support of that defence.
[9]Hausman v Abigroup (n 5) [63]-[65] (citations omitted).
The Court of Appeal principles in Hausman v Abigroup extracted in paragraph 13 above remain good law since the advent of the CPA.[10]
[10]Innovateq Australia Pty Ltd and Anor v Barnes and Ors [2016] VSC 618, [11] (Ierodiaconou AsJ), referring to Capital One Securities Pty Ltd v Soda Kids Holdings Pty Ltd [2012] VSC 163 and to Portbury Development Pty Ltd v Ottedin Investments Pty Ltd and Ors [2012] VSC 490.
The Court of Appeal also stated in Hausman v Abigroup that:[11]
A judge faced with an application for summary judgment should not be required to trawl through the defendant’s material in an effort to see where there can be constructed from that material an answer to the plaintiff’s claim. It must be for the defendant to point to some material, whether legal or factual, that provides an arguable response to that claim. That is so even if it is the plaintiff who must ultimately discharge the burden of persuading the judge that there is no issue that warrants trial, and that summary judgment should therefore be granted.
[11]Hausman v Abigroup, [55].
Rule 23.01(2) of the Rules provides that:
Where the defence to any claim in a proceeding is scandalous, frivolous or vexatious, the Court may give judgment in the proceeding generally or in relation to any claim.
Unrepresented defendant
Throughout this proceeding to date, the defendant has not been represented by a lawyer. Her husband, Amedeo Sacco, has been granted leave to appear at each of the directions hearings on her behalf. At the most recent directions hearing on 1 February 2019, I indicated to Mr Sacco that he should not assume that he will be given leave to appear at the hearing of the summary judgment application, particularly without evidence from the defendant as to why Mr Sacco should be entitled to appear on her behalf. The Second Sacco Affidavit purports to give Mr Sacco ‘full authority’ to represent her and ‘make all legal and non-legal decisions relating to this matter’. However, it does not provide any substantive evidence in support of Mr Sacco appearing on the defendant’s behalf.
The plaintiff neither objected nor consented to Mr Sacco appearing on behalf of the defendant, but noted the absence of such evidence. The plaintiff pointed to a number of cases which considered whether a lay person should be allowed to represent another person.[12] The substance of those cases appears to be that the Court may grant leave for a lay person to represent another person where it is in the interest of justice to do so, noting a number of reasons why it is not lightly allowed.[13]
[12]Apostolou v Commissioner of State Revenue [2008] VSC 332; Damjanovic v Maley [2002] NSWCA 230.
[13]Damjanovic v Maley [2002] NSWCA 230, [83]-[86].
In response, Mr Sacco submitted that he and his wife cannot afford a lawyer and that his wife cannot appear as she is unwell. None of this was contained in the Second Sacco Affidavit. Mr Sacco also submitted that it was better for him to appear rather than there be no appearance.
I allowed Mr Sacco to appear on behalf of the defendant. I took the view that it was preferable that Mr Sacco appear on the defendant’s behalf, as otherwise there would be no appearance at all. In circumstances where the defendant has specifically requested that he do so and authorised him to do so, justice is likely to be better served by allowing that to occur.[14] An important factor in my allowing this on this occasion is that the defendant herself has gone into evidence by providing her affidavits, such that the Court is in a better position to separate evidence from submission than it otherwise may have been when considering the submissions made by Mr Sacco. Further, I had had the opportunity on previous occasions to observe the way in which Mr Sacco conducts himself when appearing in Court, as I had permitted him to appear at directions hearings, and I am not perturbed by him not being subject to the disciplinary measures which apply to lawyers. I have urged the defendant, through Mr Sacco, on several occasions to obtain legal advice and/or representation. That she has not chosen to do so is a matter for her.
[14]Damjanovic v Maley [2002] NSWCA 230, [83]-[86].
I have previously summarised the principles applicable in circumstances where one party is unrepresented by lawyers in applications such as the present,[15] and I adopt that approach here.
[15]Permanent Custodians v Sanders [2017] VSC 516, [24]-[29].
Consideration
Establishment of the plaintiff’s cause of action
The plaintiff’s claim is proved by the evidence of Mr Littmann, as set out in the First Littmann Affidavit. Mr Littmann is the sole director of the plaintiff, which is the trustee of the Paul Littmann Superannuation Fund, which is his family superannuation fund.[16] I have summarised this below:
[16]First Littmann Affidavit, [1]-[2].
(a) On or about 14 November 2017, the plaintiff entered into a loan agreement (‘First Loan Agreement’) with Bayslili, the defendant and Mr Sacco, pursuant to which the plaintiff agreed to loan $455,000 to Bayslili, secured by a mortgage (‘First Mortgage’) given by the defendant over the Property, and with the defendant and Mr Sacco guarantors.[17] The defendant was the registered proprietor of the Property.[18] The proposed advance to Bayslili pursuant to the First Loan Agreement was subsequently reduced to $420,000;[19]
(b) On or about 31 January 2018, the plaintiff entered into a loan agreement (‘Second Loan Agreement’) with Bayslili, the plaintiff and the defendant, pursuant to which the plaintiff agreed to loan $70,000 to Bayslili, again secured by a mortgage given by the defendant over the Property (‘Second Mortgage’), and again with the defendant and Mr Sacco guarantors;[20] and
(c) On 13 February 2018, the plaintiff advanced the sum of $490,000 to the Bayslili pursuant to the First and Second Loan Agreements.[21] The First and Second Mortgages were registered on the same date.[22] Bayslili defaulted on the First and Second Loan Agreements by not paying the interest that was due and payable.[23] The plaintiff served letters of demand upon Bayslili and notices to pay upon Bayslili, the defendant and Mr Sacco.[24] However, these payment defaults were not remedied.[25]
[17]First Littmann Affidavit, [5]-[7]; Exhibit PBL-2.
[18]First Littmann Affidavit, [3]; Exhibit PBL-1.
[19]First Littmann Affidavit, [9].
[20]First Littmann Affidavit, [10]-[12]; Exhibit PBL-3.
[21]First Littmann Affidavit, [17]-[19]; Exhibits PBL-7, PBL-8 and PBL-9.
[22]First Littmann Affidavit, [13]-[14]; Exhibits PBL-1, PBL-4 and PBL-5.
[23]First Littmann Affidavit, [21].
[24]First Littmann Affidavit, [22], [25], [27]; Exhibits PBL-11, PBL-12 and PBL-13.
[25]First Littmann Affidavit, [23]-[24], [26].
This evidence outlined above establishes the plaintiff’s cause of action, such that it is entitled to enforce the mortgages over the Property. Further or alternatively, the plaintiff is entitled to repayment in full of the amount outstanding pursuant to the First and Second Loan Agreements, and the mortgages, including principal, interest and enforcement costs.
On or about 21 February 2018, a caveat was registered on the title to the property in favour of Boutique Agistments Pty Ltd.[26] It is a term of the mortgages that the defendant ‘must do everything necessary to promptly remove a caveat’ placed on the Property without the plaintiff’s consent.[27] Mr Littmann says that he had no prior knowledge of this caveat and did not consent to it being registered on the title to the Property.[28] It is an event of default under the mortgages for the defendant not to comply with an obligation under the mortgages.[29] The plaintiff says that the defendant’s failure to do everything necessary to promptly remove the caveat is an event of default, and that is a default relied upon in the statement of claim. I will say more about this later.
[26]First Littmann Affidavit, [28]; Exhibit PBL-14.
[27]Clause 5.8 of memorandum of common provisions AA2712 (‘MCP’): Exhibit PBL-6 to the First Littmann Affidavit.
[28]First Littmann Affidavit, [29].
[29]MCP, clause 8.1(a)(2).
The Defence
The defendant admits at Item 1 of her defence filed 21 September 2018 (‘Defence’) that she is a natural person capable of being sued but says that Bayslili and Mr Sacco are also defendants.[30] This is plainly wrong: they are not defendants to this proceeding. If the complaint is that they should be, then that is misconceived as the plaintiff is entitled, under the mortgage, to pursue the defendant without firstly or concurrently pursuing Bayslili or Mr Sacco.
[30]Defence, Item 1.
The defendant accepts that the title to the Property is in her name.[31] She neither admits nor denies the existence of the First and Second Loan Agreements, nor the settlement of the loans pursuant to those agreements, nor the First and Second Mortgages; rather she pleads that she does not have copies of the relevant documents and puts the plaintiff to its proof.[32] She also disputes, or queries, the amount of the First Loan Agreement. She says that the plaintiff is claiming that it is $455,000 when it was only $420,000, however, it is clear from paragraphs 3, 4 and 5 of the statement of claim that while initially the First Loan Agreement was to be for $455,000, the amount of the Advance was $420,000. This is explained further by Mr Littman in the First Littman Affidavit.[33] A revised version of the First Loan Agreement, dated 29 January 2018 which provided that the loan was for $420,000 is exhibited to the Murphy Affidavit.[34] I am satisfied that this has been adequately explained, and I do not consider any defence based on “the loan was $420,000, not $455,000” to have any real prospect of success.
[31]Defence, Item 1, paragraph B states “…title is in the name of Deanne Sacco…”.
[32]Defence, Items 3 to 12.
[33]First Littmann Affidavit, [8]-[9].
[34]Exhibit MM-1 to the Murphy Affidavit. In his submissions, counsel for the plaintiff said that it was not until the plaintiff or its lawyers received the Murphy Affidavit that they obtained a copy of this revised version.
The First and Second Loan Agreements were both executed by the defendant. On multiple occasions she has admitted the existence of the loans and her liability thereunder.[35] As to the first loan, she acknowledges that ‘disbursement figures only show that $420,000,00 [sic] were drawn down’ and refers to the ‘disbursement figure sheet which state $420,000 was drawn down’.[36] Further, the documents exhibited to Mr Littmann’s affidavit clearly evidence the settlement of the loans, as well as registration of the First and Second Mortgages.[37] Accordingly, there can be no real dispute as to the existence of the loans, settlement of the loans and registration of the mortgages, and any defence based on that has no real prospect of success.
[35]First Littmann Affidavit, [33]; Exhibits PBL-16 and PBL-17.
[36]Defence, Items 4 and 9.
[37]First Littmann Affidavit, [13]-[14], [17]-[19]; Exhibits PBL-1, PBL-4, PBL-5, PBL-7, PBL-8 and PBL-9.
As to the alleged payment defaults, the defendant’s defence appears to be that she allegedly did not receive any loan documents and that her husband is allegedly unwell.[38] However, she does not deny executing the First and Second Loan Agreements or that Bayslili defaulted on the repayment of those loans. She has previously admitted the existence of “outstanding repayments” and her liability pursuant to the First and Second Loan Agreements.[39] The plaintiff submits that Mr Sacco is not a party and his health is irrelevant to the issues in this proceeding. That may be so, but it is an explanation proffered by the defendant for the reasons for the defaults. However, that does not provide the defendant with a defence to the plaintiff’s claim that is recognised by the law, subject to the discussion below in paragraphs 33 and following.
[38]Defence, Items 19-24.
[39]First Littmann Affidavit, [33]; Exhibits PBL-16 and PBL-17.
The defendant pleads in the Defence that she has no knowledge of the caveat to Boutique Agistments Pty Ltd. She pleads that all dealings regarding the loans were done with a broker, Malcolm Murphy and the plaintiff’s then solicitor. She repeats this in the First Sacco Affidavit.
In submissions, Mr Sacco said that they had no prior knowledge of this caveat and that the first they heard of it was when they were served with the writ and statement of claim in this proceeding. There was no evidence from the defendant in this regard. The plaintiff submitted that the defendant would have received notification of the caveat at the time it was registered, but I had no evidence to suggest that this was usual. In any event, the plaintiff submitted that the defendant became aware of the caveat at least when served with the writ and statement of claim, and there was no evidence of the defendant having taken any steps after that time to have the caveat removed.
On the state of the evidence before me, I am not convinced that the presence of the caveat on title and the defendant’s failure to do everything necessary to remove it was an event of default under the mortgages at the time the writ and statement of claim were filed. However, that is of little consequence if there were other defaults upon which the plaintiff could rely at that time, which there were, being the payment defaults.
The defendant denies having received notices to pay pursuant to s 76 of the Transfer of Land Act 1958 (Vic) and all other notices. However, the notices to pay were sent to the defendant at the address for the Property, which was listed on the mortgages as her address, as well as at her Seaford address specified on the ASIC search of Bayslili.[40] Accordingly, the defendant’s denial has no real prospect of success.
[40]First Littmann Affidavit, [25]; Exhibit PBL-12.
National Credit Code
Mr Sacco submitted that the National Credit Code (as contained within Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth)) (‘NCC’) applies to the First and Second Loan Agreements and to the mortgages.
Relevant provisions of the NCC
The NCC applies to contracts which are ‘credit contracts’ within the meaning of the NCC.[41] Section 5(1) of the NCC sets out the provision of credit to which the NCC applies. Section 5(1) is set out below (emphasis added):
[41]NCC, s 4.
5(1)This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of precontractual obligations) is proposed to be entered into:
(a) the debtor is a natural person or a strata corporation; and
(b)the credit is provided or intended to be provided wholly or predominantly:
(i)for personal, domestic or household purposes; or
(ii)to purchase, renovate or improve residential property for investment purposes; or
(iii)to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes; and
(c)a charge is or may be made for providing the credit; and
(d)the credit provider provides the credit in the course of a business of providing credit carried on in this jurisdiction or as part of or incidentally to any other business of the credit provider carried on in this jurisdiction.
Section 204 of the NCC defines ‘strata corporation’ to mean:
(a)a body corporate incorporated in relation to land subdivided wholly or mainly for residential purposes under a law of this or some other jurisdiction providing for strata, cluster, precinct or other subdivision of land; or
(b)a body corporate whose issued shares confer a right to occupy land for residential purposes.
Relevantly, the application of the NCC turns on the identity of the debtor and the purpose of the provision of credit.
Mr Sacco relied on s 13(1) of the NCC, which provides as follows:
In any proceedings (whether brought under [the NCC] or not) in which a party claims that a credit contract, mortgage or guarantee is one to which [the NCC] applies, it is presumed to be such unless the contrary is established.
The plaintiff did not dispute this, but submits that the contrary has been established. This is considered further below.
Identity of the debtor
The borrower under each of the First and Second Loan Agreements is Bayslili. During the course of submissions, Mr Sacco acknowledged that Bayslili was named as the borrower under the First and Second Loan Agreements.
Plainly, Bayslili is not a “natural person”. Mr Sacco submitted that a company is a person for the purposes of the law, which is the case, but a company is not a natural person. Bayslili is not a strata corporation.
Subsequently, Mr Sacco argued that Bayslili is not the borrower because it is not the defendant in this proceeding, and that because Mrs Sacco is the defendant she is the borrower. That submission must be rejected.
Since Bayslili is the borrower, the First and Second Loan Agreements are not credit contracts to which the NCC applies.[42]
[42]See Jams 2 Pty Ltd & Ors v Stubbings (No 3) [2019] VSC 150, [226]-[246] (‘Jams v Stubbings’) for a recent discussion of the applicability of the NCC.
However, the defendant submitted that even if the NCC does not apply to Bayslili, it should apply to the defendant as mortgagor under the First and Second Mortgages, as she is a natural person. The same argument was made in respect of the defendant being a guarantor.
Section 7(1)(a) of the NCC make it clear that a mortgage only fall within the NCC if ‘it secures obligations under a credit contract’.[43] Similarly, s 8(1)(a) of the NCC provides the same in respect of guarantees. Section 4 of the NCC defines a ‘credit contract’ as ‘a contract under which credit is or may be provided, being the provision of credit to which this Code applies’.[44] Section 5 of the NCC defines which types of the ‘provisions of credit’ the NCC applies to. The upshot of this is that if the credit contract does not fall within the NCC, neither a guarantor or mortgagor will be covered by the NCC.
[43]NCC, s 7(1)(a).
[44]NCC, s 4.
For all of these reasons, and for the same reasons as expressed in Jams v Stubbings, there is no real prospect that the defendant can establish that the NCC applies to provide her with a defence.
Does the purpose of the Loans fall within the purposes identified under the NCC
Much of the defendant’s submission concerned the question of whether the loans were home loans, which I took to mean were for a ‘personal, domestic or household purpose’ and not for business purposes. It seemed to be common ground that the NCC does not apply to loans taken out for a business purpose.[45]
[45]NCC, s 5(1)(c).
While this question does not require resolution given that Bayslili is the borrower under the loan agreements, given the emphasis placed on it by the defendant I will deal with it.
In the First Sacco Affidavit, the defendant says that the First and Second Loan Agreements were not for business purposes but were to refinance the family home. She says that her broker, Malcolm Murphy, knew this.[46]
[46]First Sacco Affidavit, [3].
However, the loan agreements expressly state that the loans were ‘for business purposes: assisting with cash flow’.[47] Mr Murphy has affirmed an affidavit on 8 March 2019 filed by the plaintiff, in which he confirmed that he acted as broker for the defendant.[48] He deposes that the defendant and Mr Sacco told him in late 2017 that the loan was needed for business purposes and that the part of the loan document which recorded the purpose as stated above was written by them.[49] Mr Murphy also deposes that the loans were for a refinancing of two existing loans to Bayslili, which were also stated on the documents to be for business purposes (‘February 2017 Loans’) and were secured by mortgages over the Property.[50] As I understand the evidence, Mr Murphy was not the broker who assisted the defendant and Bayslili for the February 2017 Loans; at that time, they were assisted by another broker, Ross from One Stop Finance.[51]
[47]First Littmann Affidavit, Exhibits PBL-2, PBL-3.
[48]Murphy Affidavit, [4].
[49]Murphy Affidavit, [6]-[7].
[50]Murphy Affidavit, [8]; Exhibit MM-2 to this affidavit is a copy of these two February 2017 Loans.
[51]Third Sacco Affidavit, [3].
In addition, Mr Murphy says that the loan application to the plaintiff completed by the defendant and Mr Sacco named a solicitor, Ryan Doll of Hills Lawyers.[52] Mr Murphy arranged for the loan documents and the mortgages to be sent to him for him to give advice to the defendant and Mr Sacco.[53] The defendant’s signatures as mortgagee and guarantor, and Mr Sacco’s as guarantor, were witnessed by Mr Doll.[54]
[52]Murphy Affidavit, [9].
[53]Murphy Affidavit, [9].
[54]Murphy Affidavit, [9].
In the Third Sacco Affidavit the defendant responded to the Murphy Affidavit. She deposed that Mr Murphy told the defendant and Mr Sacco ‘to put the loan was for business purposes, we did question this but he said “it was more likely for the loan to be accepted and it really didn’t matter what we wrote there anyway” we accepted his explanation as this was he [sic] area of expertise’.[55] She also deposes that Mr Doll just witnessed the documents and did not give them any advice.[56]
[55]Third Sacco Affidavit, [2].
[56]Third Sacco Affidavit, [4].
Further, the defendant says that the First and Second Loan Agreements fall within section 5(1) of the NCC as the money loaned under those agreements was used to refinance the February 2017 Loans,[57] which in turn were used to refinance an initial home loan secured by the Property which was made to the defendant personally and not Bayslili around the time the Property was purchased in 2008 (‘2008 Loan’).[58] The defendant says that Bayslili was only incorporated on the advice of Ross from One Stop Finance when obtaining the February 2017 Loans and solely for the purpose of obtaining those loans.[59]
[57]Third Sacco Affidavit, [3]; Exhibit DSAS 4.
[58]Third Sacco Affidavit, [3]; Exhibit DSAS 1.
[59]Third Sacco Affidavit, [3].
The defendant further states that no money from any of the loans were used for the her husband’s business Globeline Automotive Services.[60] She submits that the settlement statements for the First and Second Loan Agreements show that most of the monies loaned either paid out the February 2017 or the other items requiring payment so as to enable registration of the mortgages to the plaintiff.
[60]Third Sacco Affidavit, [6].
In addition to the matters referred to in paragraph 49 above, the plaintiff relies on other aspects of the First and Second Loan Agreements and the Mortgages to support its contention that the NCC does not apply:
(a) The First and Second Loan Agreements both state that the loan is subject to it:
not being for personal domestic or household purposes or otherwise not being regulated under the [NCC]. The precise purpose for which this loan is being taken out is to be completed at the foot of this letter. You should not accept this conditional letter of offer unless this loan is wholly or predominantly for business purposes or investment (other than in residential property) purposes.
(b) In clause 9.8 of each of the First and Second Mortgages, it is a special condition that:
Notwithstanding anything hereinbefore contained [the defendant] confirms that the advance secured by this mortgage is being made to [Bayslili] and accordingly this transaction will not be subject to the provisions of the [NCC].
True it is that whether or not a statute applies is to be determined objectively in all of the circumstances, and statements made by the parties in their contractual documents are generally not regarded as determinative of such matters. However such provisions are able to form part of the factual matrix to be taken into account.
I am satisfied that there is no real prospect of the defendant establishing that the First and Second Loan Agreements were entered into for a purpose recognised under s 5(1)(c) of the NCC. The rationale for steps taken by the defendant in early 2017, purportedly on the advice of someone who was not even involved in the transaction with the plaintiff cannot be visited upon the plaintiff. While it may well be likely the case that the 2008 Loan was purely a home loan, that was many years ago and I do not see how that can affect the 2017 Loans, let alone the loans the subject of this proceeding. How the monies advanced under the First and Second Loan Agreements ended up being disbursed is not the determinative question. Even if the defendant’s evidence about Mr Murphy telling her to write that these loans were for business purposes, it must be remembered that he acted as broker for the defendant, Mr Sacco and Bayslili and not for the plaintiff. It is clear that the plaintiff used a different broker to act for it in this transaction, Connect Capital Solutions.[61]
If the NCC applies, does that give rise to a defence that has a real prospect of success?
[61]Exhibits PBL-2 and PBL-3 to the First Littmann Affidavit.
If the reliance on Mr Sacco’s ill health when dealing with the defaults is an attempt to invoke the hardship provisions of the NCC, it is by no means clear from the Defence or the defendant’s affidavits that it is or that it is proffered as a defence. In submissions, Mr Sacco stated that if the NCC applied to the plaintiff’s loans then the hardship provisions under the NCC were invoked. He referred to evidence that both he and the defendant had, on multiple occasions both before and after this proceeding was commenced, raised issues about his illness and inability to earn sufficient income to make the payments under the loans. When I asked what defence that may give rise to, Mr Sacco said that the plaintiff should have considered their letters and emails and answered them. He also referred to the defendant’s evidence that their new mortgage broker, who they have engaged to assist in refinancing so as to pay out the plaintiff, had been hindered in that activity by the plaintiff refusing to provide information and documents.
Even if the NCC applies, it is by no means clear to me that the above references to hardship give rise to a defence that has real prospects of success.
Any other defence based on the NCC (which is not identified and which I am unable to discern from the material) similarly has no real prospect of success, as I do not consider there to be a real prospect of a Court finding that the NCC applies.
Other matters raised by the defendant
Amounts which the defendant says have been paid under the loan agreements
In paragraphs 18 to 20 of the statement of claim, the plaintiff provides particulars of the amounts due by way of interest payments[62] under the First Loan Agreement as at each of 13 March 2018, 13 April 2018 and 13 May 2018, any amounts which it says were made in part payment of the amounts due, and the amounts outstanding on each of those dates.
[62]The First and Second Loan Agreements were both ‘interest only’ loans.
In the Defence, the defendant pleads that the plaintiff has failed to acknowledge payments made by the defendant on 17 January 2018 of $1,500, 25 January 2018 of $1,500 and 30 January 2018 of $222.92 before the loan had even settled. I note that these three alleged payments add up to $3,222.92 (‘Disputed Payment’).
In the First Sacco Affidavit, the defendant says that she believes she has a suitable defence as she has made payments to the plaintiff, and she sets out dates and amounts for those payments. I note that each one of those, other than the Disputed Payment, has been accounted for either in the settlement statements[63] or in the particulars to paragraphs 18 to 20 of the statement of claim.
[63]These are $2,975 for the First Loan Agreement, which was the interest payment for the first month from 13 February 2018, payable by 13 February 2018, which was deducted at settlement (see exhibit PBL-7) and $1,020.83 for the Second Loan Agreement, which was dealt with in the same way (see exhibit PBL-8).
In respect of the Disputed Payment, the defendant relies on a letter to her from Cornwall Stodart dated 11 January 2018 (‘CS Letter’).[64] It will be recalled that the initial letter documenting the First Loan Agreement was for $455,000 and it was dated 3 November 2017. That ended up not going ahead in that form as the loan was effectively split so that the first loan was for $420,000 and the second one was for $70,000, giving a total of $490,000. In the CS Letter, it is stated that the plaintiff will withdraw the loan offer (as it had not yet settled) by 17 January 2018 unless by that date there was either settlement of the loan or Cornwall Stodart received a cheque made out to the plaintiff for $3,222.92, which was said to be interest for the period 13 January 2018 to 12 February 2018. If cheques for that amount were received, then the plaintiff would hold the funds available for settlement on or before 13 February 2018. This is the amount of the Disputed Payment.
[64]Exhibit DLS6 to the First Sacco Affidavit.
The defendant submitted that having to pay this before the loan settled was unusual and that it may then make the situation irregular.
The plaintiff says that there is no evidence that the Disputed Payment was paid, that it was for a different loan and not the ones that were settled, and that this issue has no application to the loans in this proceeding.
The statement of claim particularises the First Loan Agreement to be partly in writing and partly to be implied. Insofar as it is in writing, it is comprised of the letter dated 3 November 2017 from Connect Capital Solutions to Bayslili.[65] Insofar as it is to be implied, it is implied from the course of dealings between the plaintiff and Bayslili (and other matters, which are not germane to the issue being discussed here). Paragraph 5 of the statement of claim says that the amount advanced under the First Loan Agreement was $420,000. I have referred to this above. The course of dealings includes the revised version of the 3 November 2017 letter of offer, as referred to in paragraph 26 above.
[65]This is the document at exhibit PBL-2 to the First Littmann Affidavit.
Given this, it is unclear to me how the plaintiff contends that the Disputed Payment has no application to the loans in this proceeding, those loans being the First Loan Agreement and the Second Loan Agreement. At the very least, it requires some explanation. In particular, I asked for an explanation as to whether the Disputed Payment should be treated as an interest payment in respect of the First Loan Agreement.
At the conclusion of the hearing, I indicated to the plaintiff that I believed I would be assisted by further material which showed the calculation prior to 13 July 2018 of the amounts owing under both loans and that the amounts owing should be updated to the date upon which I intended to deliver judgment, being 27 March 2019. I made orders that the plaintiff could file a further affidavit regarding those calculations and in respect of the Disputed Payment, if it wished. I also made orders that the defendant could file a further affidavit confined to those matters if she wished.
The plaintiff filed a further affidavit of Mr Littmann sworn 19 March 2019 (‘Third Littmann Affidavit’). He deposes that the plaintiff distributed the amount of $455,000 to Cornwall Stodart prior to 13 January 2018 in anticipation that it would be advanced to the defendant pursuant to the First Loan Agreement as per the letter of offer dated 3 November 2017. Mr Littmann then refers to the CS Letter and confirms that the Disputed Payment was paid. He says that the Disputed Payment was charged to hold the sum of $455,000 available for the period from 13 January 2018 to 12 February 2018, having previously made the funds available for settlement, and was calculated by reference to the interest to be charged under the loan.[66]
[66]Third Littmann Affidavit, [2].
The defendant filed a further affidavit affirmed by her on 25 March 2019 in response to the Third Littmann Affidavit (‘Fifth Sacco Affidavit’). In her affidavit, she notes that it is now proved that the Disputed Payment was made.[67] She also refers to Mr Littmann saying that the plaintiff had placed the $455,000 into Cornwall Stodart’s account prior to 13 January 2018 and the defendant says that the exact date this was paid should be stated, as this will determine the correct interest.[68]
[67]Fifth Sacco Affidavit, [1].
[68]Fifth Sacco Affidavit, [2].
I accept the explanation provided by Mr Littmann and do not consider that it has any impact upon this application. In effect, the Disputed Payment was a fee charged by the plaintiff to hold the funds available past the agreed date and for a settlement which was to occur after that agreed date.[69] It was not a payment of interest due under the loan and therefore it does not factor into the interest which was due to be paid by 13 March 2018 or to the amount now owing under the loan. There is nothing in the Fifth Sacco Affidavit which establishes otherwise. Even if it was an interest payment for the period 13 January to 12 February 2018, further payments would still have been due on 13 February 2018[70] and then on 13 March 2018, and so on. Even if the $455,000 was paid into Cornwall Stodart’s account before 13 January 2018, then that is not something that assists the defendant by way of calculating the interest as it may only serve to increase the amount of interest payable. However, since the Disputed Payment was not a payment of interest due under the loan, this does not require resolution.
[69]Condition (e) of the First Loan Agreement was that the letter of offer was subject to a condition subsequent of ‘Drawdown or settlement taking place within 28 days of the date hereof or such other period as the Lender may agree upon in writing’. See Exhibit PBL-2 to the First Littmann Affidavit.
[70]These interest payments were paid at settlement.
Mr Littmann deposes in the Third Littmann Affidavit that as at 27 March 2019, the total principal and interest owing by the defendant to the plaintiff is $563,272.25, being $490,000 in principal plus $55,037.14 in interest on the first loan of $420,000 plus $18,235.11 in interest on the second loan of $70,000.[71] Mr Littmann exhibits an updated statement of the interest owing under both loans from 13 February 2018 to 27 March 2019, prepared by the plaintiff’s accountant, Michael Diamond.[72] He explains that the interest calculations differ slightly to those set out in paragraphs 18-20 and 34-36 of the statement of claim, which had calculated interest from 13 February 2018 to 13 July 2018, because the payments made of $1,000 on 22 March 2018 and $1,000 on 9 April 2018 were offset in the statement of claim against the interest calculated for the period 13 April to 12 May 2018, whereas they ought to have been offset against interest calculated for the period 13 March to 12 April 2018, and the first interest payment on each loan was deducted at settlement.
[71]Third Littmann Affidavit, [5].
[72]Third Littmann Affidavit, [3]; Exhibit PBL-2 to the Third Littmann Affidavit.
In the Fifth Sacco Affidavit, the defendant refers to what she describes as ‘significant deficiencies’ between the interest due as at 27 March 2019 as per the Third Littmann Affidavit and the interest calculations set out in exhibit PBL-3 to the Second Littmann Affidavit. She also says that the calculations exhibited to the Third Littmann Affidavit which were said by Mr Littmann to have been prepared by Mr Diamond are not on his letterhead or signed by him.[73] Nothing turns on this. Further, the defendant says in the Fifth Sacco Affidavit that since it ‘has taken many months to determine we paid $3,222.92 to the plaintiff’, ‘who is to say that all the other figures are correct’.[74]
[73]Fifth Sacco Affidavit, [3]-[4].
[74]Fifth Sacco Affidavit, [1].
In my view, the Third Littmann Affidavit adequately explains these differences in the figures and adequately sets out the calculations of the amounts owing. Further, these adjustments work in favour of the defendant. Therefore, I see no prejudice in those adjustments being made to the amounts owing. I am satisfied that the defendant has no real prospect of success in disputing the amounts owing.
Connect Capital Solutions
There is a matter raised by the defendant in her 15 February affidavit which needs to be addressed concerning the broker used by the plaintiff to arrange and document the loans, Connect Capital Solutions. The First and Second Loan Agreements are on the letterhead of Connect Capital Solutions and give an Australian Financial Services (‘AFS’) number for Connect Capital Solutions. The defendant deposes that at the time of preparing her affidavit, Mr Sacco telephoned ASIC to enquire about Connect Capital Solutions and was told that the AFS number stated on the letterhead was not Connect Capital Solutions’ number and that it was required to have its own number. The defendant says that ASIC told her husband that it would investigate and gave him an investigation number, which she recites in her affidavit. The defendant says that she is shocked by this and that the Court should not accede to the plaintiff’s application while this is unresolved.
During the course of the hearing, Mr Sacco sought to play a voicemail message recorded on his mobile telephone, a course to which the plaintiff did not object. This message was then played in Court and it was simply a message left the day before from an ASIC employee asking Mr Sacco to call him back about the enquiry and leaving a telephone number and email address for that purpose. Mr Sacco said that he had not yet spoken with this ASIC employee after receiving the message.
It is unclear to me what point the defendant seeks to make of this. When I asked Mr Sacco this at the hearing, he said that it means that the whole loan arrangement with the plaintiff, from its inception, is ‘funny business’. This was said to be because Connect Capital Solutions was trading using someone else’s number, and why would you do that if you have your own number.
The Second Littmann Affidavit exhibits ASIC extracts in respect of Connect Capital Solutions’ AFS number.[75] This shows that at the relevant time, Guildfords Funds Management Pty Ltd (‘Guildfords’) held an AFS licence (the number of which was the AFS number stated on Connect Capital Solutions’ letterhead) and Connect Capital Solutions was an AFS representative operating under that licence. Apart from the error in Connect Capital Solutions’ letterhead, if that be an error (for example, I do not know whether Connect Capital Solutions is required to display its own AFS number or the AFS licence number it operates under, or both), then I do not regard this as something which would prevent the Court from granting the plaintiff’s application. I do not believe that it is something that requires an adjournment of the application either. It is clear from the ASIC extracts that at the relevant time Connect Capital Solutions had an AFS number and that it operated as an authorised representative under Guildfords’ AFS licence. Further, Mr Littmann deposes that he is informed by Mr Ed Gurgiel of Connect Capital Solutions that it acted as an authorised representative of Guildfords at that time, and that it now acts as an authorised representative of another AFS licensee.[76]
[75]Exhibit PBL-2 to the Second Littmann Affidavit.
[76]Second Littmann Affidavit, [4].
This is not a matter which the defendant can rely to give her a defence with a real prospect of success.
There is a further matter raised by the defendant in the Fourth Sacco Affidavit regarding Connect Capital Solutions. She says that Mr Gurgiel is a principal of both Connect Capital Solutions and Cornwall Stodart solicitors, who acted for the plaintiff at the time the First and Second Loan Agreements were entered into. She says ‘I am unsure if this allowed [sic] or a conflict of interest’.[77]
[77]Fourth Sacco Affidavit, [2].
I do not know if describing Mr Gurgiel as a ‘principal’ of both organisations is accurate, but Mr Littmann says he is from Connect Capital Solutions and the letters confirming settlement of the monies advanced under the First and Second Loan Agreements from Cornwall Stodart are signed by him as partner.[78]
[78]Exhibits PBL-7 and PBL-8 to the First Littmann Affidavit.
This matter was not addressed by either party in submissions. Nonetheless, I do not see how this issue, if it be an issue, raises a defence with any real prospect of success.
Conclusion
As set out above, the plaintiff has established all elements of its cause of action.
The defence as filed does not conform with the Rules in terms of the form for pleadings. The defendant’s affidavits do not clearly set out what her defence would be. I have endeavoured to glean what possible defences she may be relying on, whether pleaded or not, from this material and from the submissions made on her behalf. Such is my obligation given that the defendant is not represented by lawyers. However, it remains the case, as set out by the Court of Appeal in Hausman, that there is a limit to how far the Court can be expected to go.[79]
[79]Hausman v Abigroup, [55].
I have addressed all of the matters raised by the defendant, as set out above. In my view, the defendant’s defence has no real prospect of success. Nor can the defence be remedied by affording the defendant the opportunity to re-plead.
I have given careful thought to whether the defendant has adduced any evidence which could be the basis for any other defence (which has not been articulated to date, in either the Defence, the affidavits or submissions). I am satisfied that there is no evidence before me which could provide the defendant with any other defence that has any real prospect of success. There is simply no factual foundation or evidentiary basis for any other defence, including, in particular, one based on unconscionability.[80]
[80]This case is very different, from an evidentiary (let alone pleading) perspective from the one which Robson J dealt with in Jams v Stubbings. In that case, statutory and equitable unconscionability was found, despite the NCC not applying. There is no evidence in the case before me that the defendant was under a special disability or that she was taken unconscientious advantage of.
For these reasons, the plaintiff’s application for summary judgment will be granted. I will hear from the parties as to the form of orders and as to costs.
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