Homestart Finance v Johnson No. Scciv-03-504

HOMESTART FINANCE V JOHNSON
[2003] SASC 432

JUDGE BURLEY. These proceedings consist of an application by the plaintiff for an order for possession in respect of real property owned by the defendant but subject to a mortgage to the plaintiff. The application has been made pursuant to the provisions of Part XVII of the Real Property Act which provides a summary procedure. The matter first came before the court on 21 May 2003 when the summons was adjourned to enable the defendant to obtain legal advice. Eventually, after several adjournments, the matter came before the court on 9 July 2003 when an order for possession was made. On that occasion there was no attendance by the defendant or her solicitor before the Court, although she was represented by a solicitor who had been in communication with the plaintiff’s solicitors.
The defendant now seeks an order that the order for possession be revoked. The defendant relies upon the provisions of SCR 84.12 which is as follows:
“84.12The Court may vary or set aside a judgment or order at any time if the justice of the case so requires.”
The rule may be used in appropriate cases to set aside a summary judgment which has been irregularly obtained: Commonwealth Bank of Australia v Forshaw (1990) 55 SASR 247. That case involved a summary judgment obtained under SCR 25. There is, in my view, no reason why the summary procedure available under Part XVII of the Real Property Act should not be regarded as the equivalent of a summary application under SCR 25.
SCR 84.12 may be used in respect of both sealed and unsealed orders: Cavanagh-Lang v O’Callaghan and Ors [2000] SASC 187, an unreported decision of the Full Court per Olsson J with whom the other members of the court agreed.
After the adjournment on 21 May 2003 the defendant retained a solicitor, Mr P Smith, who practises at Mount Gambier. The defendant resides in the subject property which is situated at Millicent. It was not until 8 July 2003, the day before the possession order was made, that Mr Smith filed a notice of acting.
It is apparent from the correspondence which has been exhibited to various affidavits filed in this action that there were communications between Mr Smith and the solicitors acting for the plaintiff well prior to the hearing date of 9 July 2003.
What occurred at the hearing on 9 July 2003 is set out in the letter of 10 July 2003 sent by the plaintiff’s solicitor to the defendant’s solicitor. It is as follows:
“Dear Sir
HomeStart Finance v Nadeen Johnson
Supreme Court Action No 504 of 2003
I refer to the above matter and my attendance at the Supreme Court before His Honour Judge Kelly yesterday.
As discussed by telephone on 7 July 2003 I advised the Court of our discussions, specifically:
1There would be no appearance by or on behalf of your client at today’s hearing pursuant to our discussions;
2Your client wishes to oppose the making of an Order for Possession; and
3Your client seeks that the matter be listed for argument.
His Honour commented that no affidavit material has been filed by your client. I advised His Honour of your indication to me that you intended not to file affidavit material as your client has no further factual information to put to the court, and that the argument would be on the validity of the default notices.
I further advised the court that you have given an informal oral indication of what your client intends to argue, in addition to matters raised in your letter dated 1 July 2003, which letter was brought to His Honour’s attention on 2 July 2003. Thereupon, I left the matter in His Honour’s hands to determine what steps were required to be taken by your client in respect of filing appropriate affidavit material, a defence or an outline of argument.
His Honour again commented that your client has filed no affidavit material and has further provided no basis for the matter [sic] be adjourned to argument. Orders were made as follows:
1By way of comment: ‘I see no reason why this matter should be adjourned’;
2Order for Possession in terms of the minutes.
Attached is a copy of the Order for Possession made.
I emphasise that those matters discussed by telephone on 7 July 2003 were put to His Honour. His Honour saw fit to make the Order despite my advices regarding your client’s intention.”
I find that Ms Tovey, the solicitor who attended before the court on 9 July 2003, put to the court the matters that previously had been discussed by her with Mr Smith and that her letter of 10 July 2003 is an accurate summary of not only that which had been discussed previously between herself and Mr Smith but also an accurate summary of the information she gave to the court on 9 July 2003.
At the hearing of the application to revoke the possession order, Mr Cudmore appeared for the defendant and Mr S Williams appeared for the plaintiff. Argument was not able to be completed. At the hearing I gave directions enabling the parties to complete their respective cases by way of written submission.
At the hearing on 9 July 2003 two determinations were made by the Court: first, the application for an adjournment was refused; and, second, an order for possession was made which I treat as an order made on the merits as opposed to a default order. I accept Mr Cudmore’s submission that if an order is to be made under Part XVII of the Real Property Act, the Court needs to be satisfied on the basis of the affidavit material then before it that the plaintiff has demonstrated an entitlement to an order for possession. This, in turn, raises the question as to whether or not the defendant is able to rely upon SCR 84.12 or whether she should have appealed from the order refusing the adjournment application and the order for possession. I shall return to this aspect of the matter later in these reasons.
It is also necessary to note that it is the position of the defendant that she did not intend to file affidavit material to support the grounds of opposition which she wished to pursue before the court. In other words, her opposition to the possession order did not include material disputes of fact but rather was based on the contention that on the evidence as adduced by the plaintiff, it was clear that the plaintiff had failed to establish that it was entitled to an order for possession.
I turn to the question of whether or not the application should be refused on the basis that the appropriate course for the defendant to have taken was to appeal. Mr Williams, counsel for the plaintiff, submitted that the defendant should have appealed rather than apply pursuant to SCR 84.12 and that since the time for appeal has long expired, the only application that now could be pursued by the defendant was an application for an extension of time within which to appeal. He accepted, however, that the issues to be resolved on an application for an extension of time were essentially the same issues that arose on the defendant’s present application pursuant to SCR 84.12. I understand from the submissions advanced by him at the hearing, that he was content to have those issues dealt with by reference to the plaintiff’s present application rather than run the risk of further delay whilst an application for an extension of time was pursued. In those circumstances I think it appropriate to permit the defendant to pursue its application under SCR 84.12 rather than require the defendant to apply for an extension of time and, if it was granted, to pursue an appeal.
Having considered counsels’ respective submissions, I have come to the view that even if it is assumed that the defendant was denied natural justice by the refusal of the adjournment and the granting of a possession order on 9 July 2003, it would be futile to set aside the possession order because the defendant has failed to establish any arguable grounds of defence.
The argument starts with the decision of the High Court in Stead v SGIC (1986) 161 CLR 141. In that case, which involved an assessment of damages for personal injury, an important issue was whether or not the trial judge was to accept certain psychiatric evidence. During counsel’s final address, when that issue was adverted to, the trial judge informed counsel that he did not accept the psychiatric evidence of a particular witness and counsel, who had urged the trial judge not to accept the evidence, put no further submission in that regard. However, when judgment was later delivered, the trial judge stated that he accepted the evidence of the particular witness. It constituted a finding adverse to the plaintiff’s case. The plaintiff appealed to the Full Court, asserting that the plaintiff had been denied natural justice in the sense that the plaintiff’s counsel had not had the opportunity to put full submissions on the question of whether or not the particular psychiatric evidence should be accepted or rejected. The Full Court dismissed the appeal on the basis that it had not been shown that had the plaintiff had the opportunity to put full submissions, the result would have been any different. The High Court came to the conclusion that the Full Court had erred and allowed the appeal. The court said (at 145):
“That general principle is, however, subject to an important qualification which Bollen J plainly had in mind in identifying the practical question as being: Would further information possibly have made any difference? That qualification is that an appellate court will not order a new trial if it would inevitably result in the making of the same order as that made by the primary judge at the first trial. An order for a new trial in such a case would be a futility.
For this reason not every departure from the rules of natural justice at a trial will entitle the aggrieved party to a new trial. By way of illustration, if all that happened at a trial was that a party was denied the opportunity of making submissions on a question of law, when, in the opinion of the appellate court, the question of law must clearly be answered unfavourably to the aggrieved party, it would be futile to order a new trial.”
Mr Williams argued that the principle just referred to applied to the defendant’s application. He pointed out that the defendant has never asserted that she wishes to file affidavit material to support the grounds of defence advanced by her. Consequently, the decision on this application is confined to determining whether or not, on the facts contained in the affidavit material filed by the plaintiff, there arise arguable grounds of defence. To that extent the decision to be made is more akin to deciding questions of law and does not involve a resolution of disputes of fact. I agree with Mr Williams’ submission. In my opinion, the issues arising on this application are essentially the same as the example given by the High Court of the court being called upon to decide questions of law.
Initially only one arguable ground of defence was advanced by Mr Cudmore. However, Mr Williams, in his written submission, addressed all of the defences contended for in the draft defence which is Exhibit PDS1 to the affidavit of Mr P D Smith sworn on 15 August 2003. In his submissions in reply, Mr Cudmore dealt with those additional grounds of defence.
I now turn to the grounds of defence.
The defendant first contended that before the plaintiff could enforce the mortgage, it was necessary for a Notice of Assignment to be given pursuant to Section 15 of the Law of Property Act which refers to an “assignment .. of which express notice in writing has been given to the debtor ...”.
The mortgage which the plaintiff seeks to enforce was given by the defendant to the State Bank of South Australia. In his affidavit sworn on 17 April 2003, Mr Sopel, an officer of the plaintiff, deposed as follows:
“9By Deed dated 19 May 2002 between St George Bank Limited and the plaintiff, all of the rights, title and interest of St George Bank Limited in the Loan and the Mortgage were transferred and assigned to the plaintiff.
10On 28 May 2002 the Mortgage was transferred to the plaintiff. The transfer was registered as transfer number 9349000 on the Certificate of Title for the Land. Now shown to me and exhibited hereto and marked with the letters ‘ES4’ is a true copy of the transfer.”
In his further affidavit sworn on 19 August 2003, Mr Sopel deposed as follows:
“3In response to paragraph 2 of the proposed defence, I refer to paragraphs 8 to 10 inclusive of my earlier affidavit filed in the within matter and affirmed on 17 April 2003 and say that at or about the time of transfer of the mortgage from Bank SA to the plaintiff, the plaintiff sent to the defendant a letter advising of the transfer of the mortgage, together with a brochure describing changes to the defendant’s loan terms and conditions. Now shown to me and exhibited hereto and marked with the letters ‘ES1’ is a true copy of the generic letter and brochure which was sent by the plaintiff to all members of the Concessional HOME Scheme, including the defendant. The plaintiff does not hold a copy of the letter which was addressed specifically to the defendant.
4Since that letter and the transfer, all correspondence, statements and other documentation provided to the defendant concerning her loan and mortgage have been from the plaintiff, a point which would have been clear to the defendant.”
In light of that evidence, to the extent that notice of any assignment was required to be given to the defendant, such a requirement has been fulfilled and consequently there is no substance in the defendant’s contention that the plaintiff was unable to enforce the mortgage because of a lack of appropriate notice of assignment. It is also to be noted that in the Notice of Demand and Notice of Default, respectively Exhibits ES5 and ES6 to the affidavit of Mr Sopel sworn on 17 April 2003, reference is specifically made to the assignment of the mortgage to the plaintiff.
The defendant next contended that the Notice of Demand and Notice of Sale relied upon by the plaintiff as part of its case were not “signed by any duly authorised officer” as required by the mortgage. It is accepted that Mr Sopel signed the appropriate notices having been authorised to do so by a Power of Attorney, but it was argued that in so signing it was the plaintiff who signed rather than by a duly authorised officer. In my view this argument is specious and, accordingly, has no substance. By virtue of the Power of Attorney, Mr Sopel clearly had the authority of the plaintiff to sign the relevant notices.
The defendant also contended that both the Notice of Demand and Notice of Sale failed to provide an address to which payments might be made. Although in given circumstances a notice may be defective where it fails to provide the addressee with information relating to where payment might be made, this is not such a case. When the defendant was given notice of the assignment of the mortgage to the plaintiff a mailing address was provided together with various telephone numbers, including a specific telephone number relating to arrears. In those circumstances, I do not consider that there is any substance in the defendant’s contention that any notice provided to her is defective because it failed to provide an address for which payments were to be made.
Finally, it was the defendant’s contention that the plaintiff had failed to comply with Section 55a(1) of the Law of Property Act which is as follows:
“55a (1)    A right of sale or foreclosure in respect of mortgaged land, a right to enter into possession of mortgaged land or a right to appoint a receiver in respect of mortgaged land shall not be enforceable by the mortgagee under a mortgage to which this section applies against the mortgagor by action or otherwise unless-
(a)    the mortgagee has served upon the mortgagor a notice in writing-
(i)alleging a breach of a covenant or condition of the mortgage by the mortgagor;
(ii)if the breach is capable of remedy, requiring the mortgagor within one month after service of the notice, or such longer period as may be stipulated in the notice, to remedy the breach;
and
(iii)if the mortgagee seeks compensation for the breach, requiring the mortgagor within one month after service of the notice or such longer period as may be stipulated in the notice, to pay to the mortgagee the amount of the cost and expenses, stipulated in the notice, that the mortgagee has reasonably incurred in consequence of the breach;
and
(b)    where requirements are made of the mortgagor in the notice, he has failed to comply with those requirements.”
The first Notice of Demand served upon the defendant alleged that she was in default in that she had failed to pay Council rates amounting to $1,155.75. The notice states that the plaintiff had paid the Council rates and it demanded reimbursement. The notice provided that the reimbursement was to be provided by the defendant within seven days of the date of service. No such reimbursement was made and, consequently, a breach of the terms of the mortgage was thereby established. The next notice served upon the defendant was given pursuant to Section 55a of the Law of Property Act and Section 132 of the Real Property Act. It alleged default based on failure to pay instalments owing pursuant to the provisions of the mortgage and loan contract and failure to reimburse the plaintiff for the Council rates previously referred to. The notice demanded that payment of arrears and Council rates together with associated costs be paid within 31 days of the demand.
It was contended by Mr Cudmore that in order to establish a breach of the mortgage based on failure to pay mortgage instalments, it was necessary to serve a demand upon the defendant requiring her to do so. It is common ground that this was not done. Mr Cudmore relied upon the decision of State Bank of South Australia v Jeltes and Anor (1988) 49 SASR 307.
In my view, State Bank v Jeltes does not support Mr Cudmore’s submission. All the Notice of Demand does is, if it is not complied with, establish a breach of the mortgage for failure to pay the mortgage debt on demand: National Australia Bank Ltd v Zollo and Anor (1992) 59 SASR 76. The mortgagee must then issue a further notice under Section 55a of the Law of Property Act alleging that breach. A distinction is to be drawn between two types of mortgage: first, those which provide that the mortgage debt is repayable on demand, in which event a notice demanding compliance must be served in order to establish the breach upon which the subsequent Section 55a notice is based; and, second, an instalment mortgage, where the mortgagor is required to repay the principal and interest by way of periodic instalments. In the case of an instalment mortgage, the breach is established once it is proved that the mortgagor has failed to pay the instalments in accordance with the terms of the mortgage or any written agreement incorporated into the mortgage. There is no need for a prior Notice of Demand. In any event, the plaintiff has established a breach to the extent that the defendant, contrary to the provisions of the mortgage, has failed to reimburse the plaintiff in respect of the payment of Council rates.
For these reasons I consider that there is no substance in the defendant’s argument that the plaintiff has failed to comply with the provisions of Section 55a of the Law of Property Act.
It follows that, even if it is established that the defendant was denied natural justice when the court failed to adjourn the hearing of the possession summons and made an order for possession on 9 July 2003, it would be a futile exercise to revoke the possession order and set the matter down for further hearing because the defendant would be unable to establish any ground of defence to the plaintiff’s application for an order for possession.

For these reasons the application by the defendant, pursuant to SCR 84.12, that the order for possession be revoked, is refused.
I will hear counsel as to costs.

[2003] SASC 432

23 December 2003