Hou v Westpac Banking Corporation
[2015] VSCA 57
•8 April 2015
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2015 0007
| QIN QIN HOU AND SAVVAS KANAKARIDIS |
| v |
| WESTPAC BANKING CORPORATION |
S APCI 2015 0008
| QIN QIN HOU |
| v |
| WESTPAC BANKING CORPORATION |
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JUDGES: | WHELAN and BEACH JJA | ||
WHERE HELD: | MELBOURNE | ||
DATE OF HEARING: | 1 April 2015 | ||
| DATE OF JUDGMENT: | 8 April 2015 | ||
MEDIUM NEUTRAL CITATION: | [2015] VSCA 57 | ||
JUDGMENT APPEALED FROM: | [2014] VSC 606 (Warren CJ) | ||
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MORTGAGE RECOVERY – Applications for leave to appeal – Summary judgment pursuant to ss 61 and 63 of Civil Procedure Act 2010 granted by Associate Justice – Appeal to Trial Division – Nature of appeal pursuant to r 77.06.9 of Supreme Court (General Civil Procedure) Rules 2005 – Leave to appeal refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant Hou | Mr S Kanakaridis in person | |
| For the Applicant Kanakaridis | In person | |
| For the Respondent | Mr S Hay | Gadens Lawyers |
WHELAN JA
BEACH JA:
Two proceedings were issued by Westpac Banking Corporation (‘Westpac’), one against Qin Qin Hou (who we will refer to as ‘Ms Hou’), and one against her and her partner, Savvas Kanakaridis, in December 2010. For reasons which we will explain, summary judgment applications issued in September 2011 in those two proceedings were not heard and determined until April 2014. Judgment was given in favour of Westpac on each of those summary judgment applications. Ms Hou and Mr Kanakaridis appealed to the Trial Division of this Court under r 77.06 of the Supreme Court (General Civil Procedure) Rules 2005 (the ‘Rules’). That appeal was heard on 19 August 2014 by the Chief Justice. In a judgment delivered on 5 December 2014 those appeals were dismissed.[1]
[1]Hou v Westpac Banking Corporation [2014] VSC 606 (‘Reasons’).
There are three applications now before the Court in each proceeding. Ms Hou and Mr Kanakaridis seek:
·extensions of time in which to file applications for leave to appeal from the orders made 5 December 2014;
·a stay of the orders that have been made against them; and
·leave to appeal from the orders made by the Chief Justice on 5 December 2014.
The application for extension of time
Affidavits have been sworn by Ms Hou and Mr Kanakaridis deposing to the fact that they attempted to file documents seeking leave to appeal within time but, because of errors in the documents which the Registry required to be corrected, they had to be re-cast and re-submitted. As a consequence, the applications for leave to appeal were filed approximately 10 days late.
Ms Hou and Mr Kanakaridis are representing themselves. As we indicated during the course of the hearing, we consider that they should have an extension of time in which to apply for leave to appeal and we will make orders accordingly in each proceeding.
Applications for a stay
In the course of the hearing before us counsel for Westpac indicated that steps to enforce the judgments which had been obtained had not been taken and would not be taken if the applications for leave to appeal could be heard and determined promptly. In the circumstances, as we are now delivering judgment on the applications for leave to appeal, it is unnecessary to deal with the applications for a stay.
Applications for leave to appeal
As a result of the introduction of a new appeal regime in November 2014 all civil appeals require leave.[2] The Court of Appeal may grant leave only if it is satisfied that the appeal has a real prospect of success.[3] Appeals which have a ‘real’ prospect of success are those where the prospects are not ‘fanciful’.[4]
[2]Supreme Court Act 1986, s 14A.
[3]Supreme Court Act1986, s 14C.
[4]Kennedy v Shire of Campaspe [2014] VSCA 47.
In each of these matters the President has determined under s 11(1A) of the Supreme Court Act 1986 that two judges of appeal constitute and may exercise all the jurisdiction powers of the Court of Appeal in relation to these appeals. The parties were advised that the Court intended to hear and determine the appeals instanter should leave be granted.
The relevant pleadings
The writ was issued in each proceeding on 15 December 2010. The allegations made were of loans secured by mortgages. Possession of the secured properties and recovery of the debts were sought. In each proceeding a defence was filed by solicitors acting on behalf of Ms Hou alone in the proceeding against her and on behalf of Ms Hou and Mr Kanakaridis in the proceeding against the two of them. Those defences made admissions, including admissions of Westpac’s incorporation, the identity of the registered proprietors of the mortgaged land, the two relevant mortgages each executed in September 2003, and the terms of those mortgages as then pleaded. Otherwise, the defences did not admit allegations made as to the money advanced, default, and default notices. It was said that the defendants were not in a position to either admit or deny those allegations because of a lack of particularisation in the statement of claim and an inability on their part to locate relevant records after conducting reasonable searches.
On 8 June 2011 the defences were amended pursuant to r 36.04. In each amended defence the loan agreements, previously not admitted, were admitted. The previous non-admission of the advances was altered in each case so as to admit advances of $420,000 in the case of the proceeding against Ms Hou and Mr Kanakaridis, and $384,000 in the case of the proceeding against Ms Hou alone. Otherwise, the previous non-admissions were maintained although in different terms. No positive defence of any character was pleaded.
Applications for summary judgment
By summonses issued in each proceeding on 6 September 2011, Westpac sought:
·leave to amend the statement of claim;
·summary judgment for possession and for the amount allegedly outstanding on the respective debts pursuant to ss 61 and 63 of the Civil Procedure Act 2010; and
·costs on an indemnity basis.
The claim for costs was based upon an alleged contractual entitlement to indemnity.
The principal affidavit of support in each application was sworn by a collections’ officer employed by Westpac, one John Pastro. There were also affidavits of service of default notices.
The application to amend the statement of claim was brought in each case so as to bring the allegations in the statement of claim into conformity with the factual matters deposed to by Mr Pastro.
Adjournments between 2011 and 2014
Westpac’s applications were adjourned by consent on 12 occasions, the last of which was on 10 December 2013. The majority (if not all) of those adjournments occurred as a consequence of complaints filed by Ms Hou and Mr Kanakaridis with the Financial Ombudsman Service (‘FOS’). In an affidavit sworn in each proceeding on 21 February 2014 a secured recoveries case manager of Westpac, Alexia Schar, deposed that the cases had been stayed as a result of a dispute before the FOS but that the file of the FOS had been closed on 22 January 2014 and that as a result Westpac ‘is now entitled to proceed with legal action’. Those affidavits produced certificates of indebtedness of the kind dealt with in Dobbs v National Bank of Australasia Ltd.[5]
[5](1935) 53 CLR 643 (‘Dobbs’).
Affidavits of service were sworn in each proceeding on 25 February 2014 deposing to the fact that the material in support of the applications issued in September 2011 had been served together with a covering letter advising Ms Hou and Mr Kanakaridis’ then solicitors that the FOS complaint file had been closed and that the summary judgment hearing was listed for 2 April 2014.
Further affidavits of service and affidavits with up to date certificates of indebtedness were filed in each proceeding prior to the hearing on 2 April 2014.
Hearing 2 April 2014
Westpac’s applications came on before Lansdowne AsJ on 2 April 2014. Counsel appeared on behalf of Ms Hou and Mr Kanakaridis. His instructions were limited to making an application for an adjournment. He had no affidavit material. He handed to the Associate Justice, over objection from counsel for Westpac, a doctor’s certificate in relation to Ms Hou. The adjournment was sought on the grounds that Ms Hou was too psychologically unwell to attend court and that Mr Kanakaridis was involved in business dealings which would come to fruition in approximately four months and which would enable him to pay all outstanding debts.
The Associate Justice refused the application for the adjournment for the following reasons:
·the defendants had been on notice of the hearing of the applications since early February, and would reasonably have anticipated the applications at the end of January when the FOS dispute was determined;
·the defences which had been filed did not advance any positive defence and there was no material at all which had been filed indicating that there was a defence they wished to advance; and
·the explanations in relation to Ms Hou’s health and Mr Kanakaridis’ business dealings were not sufficient to warrant an adjournment. The Associate Justice did have regard to the medical certificate, notwithstanding that there was no sworn evidence before her, but observed that the certificate did not give a real explanation as to when the psychological problems had begun and that it was apparent that Ms Hou had been seeing the psychologist for some time. In the absence of any positive defence on her part the Associate Justice considered that there was no perceived utility in an adjournment because of her psychological condition. The Associate Justice considered that Mr Kanakaridis’ unspecified business dealings did not amount to a sufficient justification for an adjournment.
Upon refusal of the adjournment application, counsel for Ms Hou and Mr Kanakaridis withdrew.
After an adjournment to deal with other matters, the Associate Justice returned to the applications. There is a full transcript of the hearing. The Associate Justice went through the material in considerable detail. In each proceeding she made orders that day refusing the application for adjournment, granting leave to amend the statement of claim, making orders for possession of the two secured properties, and making orders for recovery of the loan amounts in accordance with the certificates which had been exhibited.
Ms Hou and Mr Kanakaridis filed notices of appeal against the orders made. The notices were filed by them personally. They no longer had solicitors acting for them.
Upon notification of the appeals the Associate Justice published reasons in each proceeding.[6] The reasons in the two proceedings need to be read together, although they reveal that the Associate Justice gave separate consideration to the two proceedings. The Associate Justice applied the test in relation to summary judgment under the Civil Procedure Act set out by this Court in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd.[7] She addressed all of the issues of proof required to be established. Amongst other things, notwithstanding the fact that no allegation had been made that the Uniform Consumer Credit Code (‘UCCC’) applied or had not been complied with if it did apply, she required counsel for Westpac in each proceeding to satisfy her that the requirements of the UCCC had been complied with upon the assumption (which was not established) that they were applicable.
[6]Westpac Banking Corporation v Hou [2014] VSC 329; Westpac Banking Corporation v Hou & Anor [2014] VSC 330.
[7][2013] VSCA 158.
Material filed after the hearing on 2 April 2014
Under r 77.06.9(3) of the Rules a judge of the Court hearing an appeal from an Associate Justice has power to receive further evidence. Without seeking the exercise of that power by application prior to the appeal, Ms Hou and Mr Kanakaridis filed identical affidavits in each proceeding sworn 15 July 2014. Those affidavits exhibited copies of the loan agreements respectively signed by Ms Hou and by Ms Hou and Mr Kanakaridis. The copy loan agreements so exhibited are the same as those which had been exhibited to Westpac’s affidavits in the summary judgment applications. Each of Ms Hou and Mr Kanakaridis’ affidavits also produced copies of a conditions booklet which was said to have accompanied the signed loan agreements. In each affidavit the deponent ‘vehemently’ denied receiving the booklet. Neither affidavit raised any issue about execution of the loan agreements.
Each of Ms Hou and Mr Kanakaridis’ affidavits also produced copies of the mortgages signed by Ms Hou and Mr Kanakaridis. They are the same mortgages as had been produced in the material in support of the summary judgment applications. Neither affidavit suggested that they had not been signed by Ms Hou and Mr Kanakaridis as they purported to be.
Each affidavit produced various searches from the Australian Securities and Investment Commission (‘ASIC’). The content of the affidavits revealed that these searches were said to reveal that the ‘Bank of Melbourne’ as an entity was not in existence at the relevant time and that any such purported entity and Westpac were not appropriately licensed at the relevant time.
By affidavits sworn 31 July 2014 an officer of Westpac produced up to date certificates of indebtedness and also produced documents whereby Ms Hou and Mr Kanakaridis had endorsed letters from Westpac setting out payout figures for the loans with stamps reading ‘BILL OF EXCHANGE’ and ‘NOT NEGOTIABLE’, and with a signed recitation asserting that a payment of the sum of $1 would constitute full and final settlement of the loan account. Receipts from a branch of Westpac for the sum of $1 were attached. The officer of Westpac deposed that the documents had been received from Ms Hou and Mr Kanakaridis, that they had ‘no legal basis’, and that they had not been accepted.
By identical affidavits sworn in each proceeding on 1 August 2014 Mr Kanakaridis repeated material previously deposed to in the affidavits of 15 July 2014, referred to requests which had been made for payout figures, asserted that the letters received in response constituted ‘Inchoate or Incomplete’ bills of exchange and then deposed:
The Appellants therefore negotiated the bills and completed them as per their own tenor and then paid on the same day, being the 25th day of July 2014, the Sum Certain Amount, at the Acland Street St Kilda Branch of the Respondent and collected receipts of payment of the Sum Certain Amount from Acland Street St Kilda Branch of the Respondent.
Those affidavits also deposed to a request which had been made to Gadens Lawyers, the solicitors for Westpac, to provide him with ‘whatever authority or power of attorney they have to be acting for and on behalf of the respondent’.
In addition to again exhibiting the documents which had earlier been exhibited, including the loan agreements and the mortgages, these affidavits also produced copies of what were said to be ‘bills of exchange’, which were also said to contain ‘the terms of settlement and receipts of payment and settlement of all debts as claimed by the respondent and against the appellants’.
In relation to the mortgages, exhibited by the applicants now for the second time, the affidavits each read:
Now produced and shown to me and marked as exhibit ‘SK-4’ are copies of the mortgage documents that the respondents registered against the security properties of the Appellants together with the Memorandum of Common Provisions (the Memorandum) and which ‘Memorandum’ the appellants deny ever having seen same or having any knowledge of at the times that the purported mortgaged documents were executed.
On 31 August 2014 a manager of secured recoveries, collections, of Westpac swore an affidavit confirming that Gadens were authorised to act on behalf of the bank.
The hearing of the appeals in the Trial Division was held on 19 August 2014.
On 28 August 2014, without leave, Mr Kanakaridis filed a supplementary affidavit in each proceeding asserting, amongst other things, that their previous solicitors had prepared the defence and amended defence negligently, asserting that ‘in all their statements and affidavits to the court in these matters the defendants flatly denied having signed any agreements whatsoever’, asserting that the National Consumer Credit Protection Act2009 and the National Credit Code and ‘older Codes’ applied to the loans, making a variety of assertions in relation to Westpac’s corporate identity, suggesting Ms Hou ‘would have been in a condition of Special Disadvantage in 2003 if she was duped into signing any mortgage’ due to her ‘very limited grasp of the English language’, making assertions as to the ‘likelihood’ that Ms Hou and he would have signed the loan documents, suggesting the mortgage documents may have been fraudulently altered, asserting misleading representations, asserting that Westpac could not recover the loans because they probably had been securitised and assigned, asserting systematic fraud and deception by Westpac, and repeating the assertion that whatever amount had been due had been paid in cash in the circumstances to which they had previously deposed.
Notices of appeal to the Trial Division
By a notice of appeal filed 23 April 2014 in each proceeding Ms Hou and Mr Kanakaridis had sought to have the Associate Justice’s orders set aside on the basis of 10 specified ‘questions of law’. The notice set these 10 questions of law out and then repeated them under the heading ‘grounds of appeal’. The substance of most of them was that Westpac had in some manner breached its obligations because of a failure to have a proper regard to Ms Hou and Mr Kanakaridis’ personal circumstances. Those questions also raised an issue as to whether the correct jurisdiction was the Victorian Civil and Administrative Tribunal (‘VCAT’), and asserted that there had been no ‘proper contract’.
By amended notices of appeal filed 21 July 2014 nine different ‘questions of law’ and three ‘grounds of appeal’ were set out. These amended notices raised some new issues never referred to before.
Five of the questions of law in the amended notices asserted that the relevant agreements were with a non-existent and unlicensed entity ‘purporting to be “Bank of Melbourne”’. Four of the questions asserted in one form or another that the mortgages and/or the memorandum of common provisions were invalid or unenforceable. Insofar as the basis for this invalidity can be determined, it seems to be related to the existence of a power of attorney provision in the memorandum of common provisions, the suggestion being that that provision rendered the arrangements invalid by virtue of ‘the instruments Act 1958, the Transfer of Land Act 1958 and the Instruments (power of attorney) act 1980’.
There were then three grounds of appeal, being that the refusal of the adjournment constituted the denial of natural justice, that no legal contract had ever existed with either Westpac or the entity purporting to be ‘Bank of Melbourne’, and that none of the evidence or submissions of the respondent could prove any lawful claim.
Judgment in the Trial Division
After the appeals were heard on 19 August 2014, judgment was delayed because at the end of oral argument Mr Kanakaridis was given the opportunity to have legal assistance from the Victorian Bar pro bono scheme. As indicated, the judgment was delivered on 5 December 2014.
Whilst the Chief Justice reviewed and addressed all of the various matters raised by Ms Hou and Mr Kanakaridis in the amended notice of appeal and in the affidavits filed, it is clear from her reasons that the appellants failed on two threshold issues.
First, all of the matters sought to be raised had not been raised before the Associate Justice. The Chief Justice held that it would be quite wrong for the appellants to be permitted to raise those matters, absent an adequate explanation, as if the appeals were the first hearings.[8] The Chief Justice did not consider that an adequate explanation had been given.
[8]Reasons [54].
Secondly, whilst formulated as questions of law, the matters the appellants wished to raise were questions of fact or based upon assertions of fact, premised upon material in the affidavits which they had filed, without leave, both before and after the hearing of the appeals.[9] Her Honour was not prepared to permit reliance upon those affidavits in circumstances where no adequate explanation had been given for why the material had not been put before the Associate Justice, where they raised matters which were entirely new, and where they included unsubstantiated allegations of fraud.
[9]Ibid [39]–[45], [51], [54] and [60].
Those conclusions were, in themselves, sufficient to dispose of the appeals. The appeals could not possibly succeed if the appellants were not permitted to raise new issues and were not permitted to rely upon their affidavits. We see no error in her Honour’s treatment of those two threshold issues. Indeed, it seems to us that she was correct.
Notwithstanding her Honour’s conclusion on those issues, her Honour did review the matters raised and the material deposed to by the appellants.
The appellants characterised the matters they wished to raise as being questions of law and her Honour adopted and repeated that characterisation.[10] Appeals from an Associate Justice are appeals by way of rehearing. They are not confined to errors of law.[11] Her Honour did on a number of occasions point to the fact that the questions of law either revealed no error of law or that they did not, on analysis, raise any question of law. But her Honour also dealt with the substance of the relevant matters. It is clear that she rejected them all as a matter of substance, notwithstanding her characterisation of the appeals as being confined to errors of law.
[10]Ibid [37].
[11]See Oswal v Carson [2013] VSC 355 [11] (Ferguson J, as her Honour then was). See further, r 77.06.9 of the Rules.
The hearing of the applications
Mr Kanakaridis and Ms Hou were represented by counsel from the Victorian Bar’s pro bono scheme on the first occasion when these applications were listed. The applications were adjourned on that occasion at the applicants’ request so that counsel could consider some additional material given to him by Mr Kanakaridis. Between that hearing and the next the pro bono counsel’s involvement was terminated by the applicants. After an unsuccessful application for another adjournment, which is the subject of a separate ruling, Mr Kanakaridis made submissions on behalf of both himself and Ms Hou. Ms Hou was present in Court and confirmed that Mr Kanakaridis could speak on her behalf.
Proposed grounds of appeal
The proposed grounds of appeal are in each case identical. They are as follows:
1The claims by the respondent are fraudulent with the intention to deceive. The appellants did not enter into any credit contracts with either the Respondent or with the fake entity, ‘Bank of Melbourne’ in September 2003 and neither was the entity ‘Bank of Melbourne’ able to do so because it remained de registered as of 3 May 1998 and also it has never had a banking licence or a credit licence since that time. The appellants did not ever see or sign any credit contract or any of the extraneous documents such as the ‘Terms and Agreements’ booklet or the ‘Memorandum of Common Provisions’ (MOCP) that were used as evidence by the Respondent in support of the Respondent’s claims against the appellants.
2The proceedings as commenced by the respondent were invalid from the beginning pursuant to s3 of the SUPREME COURT ACT 1985 (Act) and the rule 1.17 of the Supreme Court (General Civil Procedure) Rules 2005 (Rules), and s6 ‘Terms Relating to Legal Practitioners’ under the Legal Profession Act 2004, and s41(2) and s42(1) of the Civil Procedures Act 2010. Also the correct Jurisdiction for commencing a proceeding under the ‘Code’ at the relevant time was the Victorian Civil and Administrative Tribunal VCAT. Not the Supreme Court.
3The Associate Justice Lansdowne did not have the Authority pursuant to order 111(b) of the Supreme Court Act 1986 and Rules 77.02 (l)(a)(b)(2) and 22.06(d) and 77.03 and 77.04 of (the Rules)
4Any alleged consideration as claimed by the respondent, was and continues to be, an unconstitutional fabrication of numerical data as a result of fraudulent accounting practices within the respondent’s own and internal systems, and in which systems, the appellants have no control over or access to.
5The quantum as awarded against the appellants is unlawful pursuant to the Property Law Act 1958 s(87).
6Her Honour was in a position of bias pursuant to the Supreme Court Act 1986 s113(25)(26)(a) (b)(c) and her honour demonstrated judicial bias against the appellants and actively interfered with the evidence and the submissions of the appellants in her reasons to pervert the course of justice by covering up the evidence against the respondent.
7Her Honour Warren CJ discriminated against the appellants and Her Honour interfered with the evidence and submissions of the appellants by either, avoiding or misrepresenting the evidence throughout Her Honour’s Reasons, and then ordering the removal of the evidence from the court file in her orders of 5 December 2014, Thereby removing the evidence for any future reference.
8The Commonwealth of Australia Constitution Act in paragraph 51 (xxxi) ensures that no one is deprived of their property by the government unless it is on ‘Just Terms.’ Also the Banking Act of 1959 in paragraph 62 E expands and further endorses this notion that a person is not to be deprived of their property unless it is on ‘Just Terms.’
9a Rules 35 and 36 allow for the withdrawal and amendment of pleadings if they were made in error and if there is new evidence available, .
b‘Rule 77.06.9 permits the receipt of further evidence on an appeal on the question of fact.’
cBank of Melbourne did not exist after 3 May 1998 and so did any connection with the Respondent. Also Bank of Melbourne was not licensed as Bank or a credit provider after 3 May 1998 and would therefore by precluded as per s925E of the Corporations act from pursuing or enforcing the alleged debt.
Analysis of proposed grounds and submissions made
Our conclusion that the Chief Justice was correct in her conclusions that the applicants could not raise new issues on appeal and ought not be permitted to rely upon the affidavits sworn after the hearing before the Associate Justice means that the applications for leave to appeal must fail. However, because there was a misconception as to the nature of the appeal before the Chief Justice we have reviewed and considered those affidavits and the submissions made to determine whether any defence which has a real prospect of success has been propounded.
Some of the matters raised in the submissions and the affidavits do not fall within the proposed grounds. Those matters include a purported reliance upon s 26 of the Money Lenders Act 1958,[12] the suggestion that Ms Hou was under a relevant special disadvantage because of her poor English, an assertion that Westpac itself was not at the relevant time in 2003 the holder of the licenses or authorities necessary for it to lend money and take security, the claim that the debts have been paid by virtue of the endorsements on Westpac’s letters and the $1 payments to which we have referred, and the assertion that the probability of securitisation means Westpac cannot take recovery action.
[12]Notwithstanding the repeal of the Money Lenders Act 1958 by s 168 of the Credit Act 1984.
In the hearing before us, Mr Kanakaridis was asked to articulate his principal complaints. He said that the applicants had never had a trial and that they ought to have a trial to raise defences which they had. He said the defences he wished to emphasise were that Westpac had been unlicensed at the relevant time, that he and Ms Hou had signed documents but had not signed contracts, that he and Ms Hou had never signed the mortgages, that ‘Bank of Melbourne’ is a ‘fake’ entity, that Ms Hou has a defence of the kind dealt with in Commercial Bank of Australia Ltd v Amadio[13] because of her limited English, and that Westpac cannot recover the debts because they have been securitised and assigned.
[13](1983) 151 CLR 447 (‘Amadio’).
We will address these principal concerns first, notwithstanding that some of them do not fall under any proposed ground of appeal.
The assertion that Westpac was not relevantly licensed in 2003 is based upon printouts of two ASIC databases. These printouts were exhibited to the applicant’s affidavits and were handed up to this Court by Mr Kanakaridis during the hearing.
One printout is of Australian Financial Services Licensees. It shows that Westpac currently holds an Australian Financial Services Licence (‘AFSL’) and that that licence commenced on 9 February 2004. An AFSL is held under s 913B of the Corporations Act 2001. An AFSL is required to be held by any person who ‘carries on a financial services business’.[14] The Corporations Act defines a ‘financial services business’ as being the business of providing ‘financial services’.[15] ‘Financial services’ are in turn defined by provisions in Div 4 of Pt 7.1 which relevantly provide that a person provides a ‘financial service’ where they ‘deal in a financial product’ or ‘make a market for a financial product’.[16] A ‘financial product’ is defined by provisions in Div 3 of Pt 7.1. Section 763A(1) provides that a ‘financial product’ is a facility through which a person makes a financial investment, manages a financial risk, or makes non-cash payments. Section 765A(1)(h)(i) provides that ‘a credit facility within the meaning of the regulations (other than a margin lending facility)’ is not a financial product. Regulation 7.1.06(1) of the Corporations Regulations 2001 sets out a list of transactions which are a ‘credit facility’ for the purposes of s 765A(1)(h)(i) including the provision of credit in the terms specified there,[17] and ‘a mortgage … that secures obligations under a credit contract.’[18] The printout from the ASIC database in relation to Westpac’s AFSL licence has no relevance to this proceeding.
[14]Corporations Act, s 911A(1).
[15]Corporations Act, s 761A.
[16]Corporations Act, s 766A(1)(b) and (c).
[17]Corporations Regulations, r 7.1.06(1)(a).
[18]Corporations Regulations, 7.1.06(1)(f)(i).
The second ASIC printout is a printout of credit licensees. It shows that Westpac currently holds a credit licence and that that licence commenced on 1 March 2011. ASIC maintains this register pursuant to s 213(1) of the National Consumer Credit Protection Act 2009 (the ‘NCCPA’). Pursuant to Part 3 of Schedule 2 of the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 persons engaged in credit activities were required to be registered by 30 June 2011. Prior to the national scheme, which was introduced by the NCCPA, persons carrying on the business of credit providers were required to be registered under State legislation. In Victoria the registry was kept by the Registrar of the Business Licensing Authority.[19] The ASIC printout says nothing about Westpac’s position in 2003.
[19]Consumer Credit (Victoria) Act 1995, s 19.
The position adopted by Westpac before us was one in which it objected to reliance on affidavits sworn and filed after the hearing before the Associate Justice on 2 April 2014. Counsel maintained Westpac was licensed, but otherwise Westpac did not seek to answer the many allegations made in the affidavit material which had been filed by the applicants, save to the limited extent to which it had done so by confirming that Gadens had been engaged by the bank, setting out the circumstances of the purported ‘bill of exchange’ payments, and producing up to date certificates of indebtedness.
For present purposes it suffices to say that the ASIC printouts produced by Mr Kanakaridis say nothing relevant about the issue of whether Westpac was licensed in 2003. They cannot form the basis of any viable defence.
When questioned about the assertion that he and Ms Hou had not signed ‘any contracts’, and in particular the loan agreements, Mr Kanakaridis said that those documents were not loan agreements, they were ‘pre-contractual disclosure’ documents. The documents are headed ‘LOAN OFFER — EQUITY ACCESS LOAN — PLAN 2’[20] and above Ms Hou and Mr Kanakaridis’ signatures the following appears:
[20]Bolding in the original.
ACCEPTANCE OF LOAN OFFER
I accept the Lender’s offer for your loan and agree to the terms and conditions set out in your Loan Offer.[21]
Mr Kanakaridis’ submission as to the character of the documents cannot be accepted.
[21]Bolding in the original.
The mortgage documents, apparently signed by Ms Hou and Mr Kanakaridis, were witnessed by one Lino Di Petta. In his affidavits of 28 August 2014 Mr Kanakaridis described him as a person who the applicants ‘understood to be a manager for “Bank of Melbourne”’. Mr Kanakaridis asserted from the bar table that the mortgage documents had not been signed by he and Ms Hou. This assertion has never been sworn to and is inconsistent with the admissions made in both the applicants’ defences and their amended defences. In our view it is also inconsistent with their affidavits sworn 15 July 2014 and 1 August 2014, the relevant contents of which we have referred to earlier. Even in the affidavits sworn 28 August 2014 there is no statement that the signatures are not theirs. We have earlier quoted the relevant passages. The postulated defence based upon non-execution is untenable.
In relation to the assertion that the Bank of Melbourne is a ‘fake entity’, which is referable to proposed grounds 1 and 9(c) it seems to us that the submissions made are misconceived. It is clear from the documentation, including that produced by Ms Hou and Mr Kanakaridis themselves, that Westpac was the contracting party. The Bank of Melbourne is described as ‘a division of Westpac’. The loan agreements have a Bank of Melbourne logo but the Westpac logo is immediately next to it. Next to the logos is the statement ‘a division of Westpac Banking Corporation’ with Westpac’s ABN. The first line of each of the loans offer documents reads:
Bank of Melbourne a division of Westpac Banking Corporation (the Lender) …
The mortgages name the mortgagee as Westpac.
In a our view the applicants would have no real prospect of success on this proposed defence.
The assertion that Ms Hou has or may have a defence under the principles dealt with in Amadio because of her limited English is no more than that, an assertion. There is no evidence of circumstances on the basis of which it could be concluded that there was relevant special disadvantage such that the principles in Amadio would apply.
The submissions made concerning securitisation were based upon information obtained from Westpac’s website. The submissions were based on the misconception that the mere fact of securitisation must necessarily lead to the conclusion that the bank is precluded from taking recovery action. This is simply not the case.
Mr Kanakaridis on behalf of himself and Ms Hou foreshadowed reliance upon a complaint related to ‘securitisation’ in written submissions filed in the Trial Division on 15 August 2014. In his affidavits sworn 28 August 2014 he deposed to the factual basis of this complaint. In substance, the factual basis of the complaint is the fact that Westpac on its website ‘proudly boasts’ that it has been securitising mortgages since 1996. Mr Kanakaridis deposes:
In their offerings to the wholesale investors for such securitised offerings, Westpac has effectively sold, transferred or assigned any of their alleged equitable interest in the loan and mortgage (securities) to the wholesale buyers of these securities.
The basis upon which it is asserted that these loans have been securitised is the extent of Westpac’s securitisation activities, the assertion being that these loans are ‘highly unlikely’ to be exceptions ‘to the rule’. It is asserted that recovery proceedings by Westpac in relation to securitised loans are ‘fraudulent’.
Similar defences have been advanced and rejected at first instance both in this State[22] and in New South Wales.[23]
[22]National Australia Bank Ltd v Norman [2012] VSC 14.
[23]RHG Mortgage Corporation Ltd v Astolfi [2011] NSWSC 1526; Westpac Banking Corporation v Mason [2011] NSWSC 1241.
The Court of Appeal of the Supreme Court of Western Australia addressed a relevantly similar defence in McLean v Westpac Banking Corporation.[24]
[24][2012] WASC 152 (‘McLean’).
In McLean, a defence asserting that Westpac could not take recovery action due to securitisation, and that its securitisation activities constituted misleading and deceptive conduct, had been pleaded. There had been a trial at which evidence had been led as to securitisation. In that case, the borrower, Mrs McLean, failed to establish that the loan had been securitised but the trial judge found the argument would have failed in any event as a matter of law. Mrs McLean appealed. The Court of Appeal relevantly held:
The appeals suffer from the fundamental flaw that the appellant’s so-called defence of securitisation was in law no defence at all. So far as it was given any specific meaning, the ‘securitisation’ alleged involved an equitable assignment of the respondent’s interest in the loan agreements and the mortgages to a third party. That, contrary to the appellant’s case, did not have the effect that the respondent was no longer able to enforce its securities.[25]
The decision in McLean is, in our view, correct.[26] This postulated defence is also untenable.
[25]Ibid [19]. See also Ibid [30]–[31].
[26]As a decision of another intermediate appellate court, in any event we could only depart from it if convinced it was ‘plainly wrong’: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, 151–2 [135].
Addressing the written submissions made on the applicants’ behalf, some of them need only be stated to be rejected as untenable.
The contention that the debts have been paid by the unilateral conversion of letters setting out a payout figure into ‘bills of exchange’ is entirely misconceived.It is hard to believe Mr Kanakaridis could have honestly believed such a transparent device could possibly have any legal effect.
In support of ground 1 it is submitted that because Westpac did not challenge the affidavit evidence filed by Ms Hou and Mr Kanakaridis they are taken to have admitted everything asserted in those affidavits. In circumstances where the applicants did not have leave to rely upon the affidavits, and where the judge hearing the appeals in the Trial Division refused to allow them to rely on the affidavits, this submission is manifestly untenable.
The submissions made in support of ground 4 raise the argument as to what is sometimes called ‘fractional reserve’ banking which has been repeatedly rejected in this Court[27] and in the Trial Division.[28]
[27]Smart v Australia & New Zealand Banking Group Ltd [2002] VSCA 111 [20]–[22]; Finlayson v Indigenous Business Australia [2014] VSCA 95 [30].
[28]National Australia Bank Ltd v McFarlane [2002] VSC 116 [7]–[9]; National Australia Bank v Walter [2004] VSC 36 [229]–[253]; Permanent Custodians Ltd v Virgin Investments Pty Ltd [2009] VSC 429 [33]–[50].
The submission that the Chief Justice was biased because of her role in relation to the common funds, as provided for in s 113 of the Supreme Court Act 1986 which is the basis of ground 6, also falls into this category. As does the submission in support of grounds 6 and 7, that her Honour has ‘interfered’ with evidence by refusing leave to rely upon the affidavits. The submissions in support of ground 8 based upon the Commonwealth Constitution and the Banking Act 1959 are also manifestly untenable.[29]
[29]The submissions made with respect to the Banking Act 1959 are untenable whether one has regard to s 62 and any of its paragraphs or (as we think the appellants meant) s 69E of that Act.
The submission made in support of ground 2 that the proceeding ought to have been brought in VCAT lacks an evidentiary foundation.
The remaining written submissions made in support of the various grounds are, it seems to us, all misconceived. They do not reveal any defence with a real prospect of success.
The submission made in support of ground 1 that the applicants never saw the memorandum of common provisions is misconceived. The memorandum is incorporated by reference in each of the admitted mortgages.
The submissions made in support of ground 2 that Gadens improperly instituted the proceeding seems to be based upon the contention that the originating processes were invalid because they were signed by ‘Gadens Lawyers’. This argument, or a relevantly similar version of it, was rejected by this Court in Permanent Custodians Ltd v Palmer.[30]
[30][2009] VSCA 80 [13].
The submission that the proceeding was improperly instituted because there was a failure to file the overarching obligation and proper basis certificates also lacks merit as the writs in this proceeding were issued before the Civil Procedure Act came into effect. The certification requirements do not apply.
The submissions made that the Associate Justice had no jurisdiction, referable to ground 3 , are also misconceived. Reliance is placed on r 22.06(1)(d) of the Rules. These applications were not made under Order 22 of the Rules. They were made under ss 61 and 63 of the Civil Procedure Act. Associate Justices are expressly given the power to hear and determine applications under the Civil Procedure Act by r 77.01(2)(a)(iiia) of the Rules. Rule 77.02 does not apply because the orders were not made at a trial. In any event, even if the Associate Justice had acted under r 22.06, it is plain that the giving of judgment in response to the respondent’s applications would have come within r 22.06(1)(b) rather than r 22.06(1)(d).[31]
[31]As to which, see rr 77.01 and 77.02 of the Rules.
In relation to ground 5, s 87 of the Property Law Act 1958 concerns foreclosure and has no relevance to these proceedings.
Grounds 9(a) and 9(b) are based on the misconception that the trial judge was unaware that she had power to permit withdrawal of admissions, amendment of pleadings, and the admission of further evidence. She was clearly aware of her powers in that regard. She determined not to exercise them, for the reasons which she gave and in relation to which we can see no error.
The additional material which led to the adjournment of the hearing of these applications was provided to the Court. It is a document in the form of a draft Originating Motion. We will not attempt to describe it. It is a document which could not be issued. We have reviewed its contents. It does not relevantly advance the applicants’ position on these applications.
Conclusion and disposition
As there does seem to have been a misconception before the trial judge, both on the part of the applicants and the trial judge, that the appeal was confined to questions of law, we have reviewed all of the materials sought to be relied upon by the applicants. There is no basis for a conclusion that the applicants have a defence with a real prospect of success. In the circumstances leave to appeal on each application must be refused. If we had been minded to grant leave to appeal then, for the reasons we have given, we would have dismissed each appeal.
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