Hughes and Anor and Ge Mortgage Solutions - [2005] WASAT 187

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: CONSUMER CREDIT (WA) ACT 1996

CITATION: HUGHES & ANOR and GE MORTGAGE SOLUTIONS [2005] WASAT 187

MEMBER: MR C RAYMOND (SENIOR MEMBER)

HEARD: 5 JULY 2005

DELIVERED : 28 JULY 2005

FILE NO/S: CC 2128 of 2005

BETWEEN: BEVERLEY ANN HUGHES
First Applicant
CHRISTINA VICTORIA HUGHES
Second Applicant
AND
GE MORTGAGE SOLUTIONS
Respondent

Catchwords:

Application under s 88 of Consumer Credit Code Whether a failure to negotiate a postponement of enforcement proceedings Effect of earlier dealings Jurisdiction to grant postponement

Legislation:

Consumer Credit Act 1994 (QLD)

Consumer Credit Act 1995 (VIC), s 5
Consumer Credit Act 1996 (WA), s 5
Consumer Credit Amendment Act 2003 (WA), s 6
Consumer Credit Code (WA), s 80(1)(3), s 86, s 88(1), s 88(3)
Rules of the Supreme Court 1975 (WA), O 13, r 2(1), r 10, O 62A

State Administrative Tribunal Act 2004 (WA), s 87(1)

Result:

Application dismissed

Category: B

Representation:

Counsel:

Second Applicant          :     Mr D Leask
First Applicant              :     Mr D Leask
Respondent:     S D Majteles

Solicitors:

Second Applicant          :     Leask & Co
First Applicant              :     Leask & Co
Respondent:     Phillips Fox

Case(s) referred to in decision(s):

Anseline v General Motors Acceptance Corporation (1998) ASC 155 – 020
Edwards v National Australia Bank [2001] ASC 155 – 049; [2001] VCAT 36
George v Bank of Western Australia (1998) ASC 155 ‑ 022

Case(s) also cited:

Nil

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The applicants have sought a postponement of enforcement proceedings under s 88 of the Consumer Credit Code (WA) (the Code). On the application of the respondent, the matter was referred to hearing for determination of preliminary issues as to whether the Tribunal had jurisdiction or otherwise whether the application constituted an abuse of process.
The Tribunal found that the proceedings did not constitute an abuse of process but that the Tribunal did not have jurisdiction because the pre-requisites to the exercise of power under s 88 of the Code had not been established. In particular, no negotiations had occurred within the period of the default notice issued under Div 2 of the Code. The Tribunal held that the jurisdiction under s 88 to postpone enforcement proceedings arose only if it could be shown that the debtor was unable to negotiate a postponement during that period.

Nature of proceedings

The applicants have applied for an order under s 88 of the Consumer Credit Code (WA) for an order postponing enforcement proceedings commenced by the respondent.
The respondent has sought the determination of preliminary issues as to whether the State Administrative Tribunal (SAT) has jurisdiction to deal with the application or whether the proceedings constitute an abuse of process.

The application

The grounds relied upon for the order sought, as set out in the application, in effect narrate the entry into a loan secured by mortgage with the respondent in August 2001, the circumstances which led to the applicants being in default in respect of the instalments, resulting in the incurring of late fee penalties, and an arrangement entered into between the parties in June 2004. The applicants stated they had made ordinary payments due under the loan but the respondent has refused to honour the agreement by which further late penalties and legal costs would not be imposed.
It may be observed that the grounds do nothing to being the applicants within the framework of s 86 and s 88 of the Code. The Tribunal was later informed the application had been prepared by the applicants themselves and the true nature of the application was clarified during the course of the later proceedings referred to below.

The response to the application

On 31 March 2005 the respondent filed a response which foreshadowed that a more detailed response would be filed once further information had been provided by the applicants. The further response was filed on 18 May 2005 (the response).
The response asserts that a default notice was served on the applicants on 21 January 2003, that the applicants did not comply therewith and on 17 February 2004 the respondent's entered judgment in the Supreme Court of Western Australia against the applicants. On 31 May 2004 an agreement was entered into with the applicants that all arrears would be cleared and enforcement of the judgment would be postponed if the applicants made certain payments (First Postponement Arrangement). It was alleged that the applicants did not make fortnightly payments as required under the First Postponement Arrangement and as a result a writ of possession was filed on 10 December 2004.
On 17 February 2005, the respondent asserts that a postponement arrangement was concluded with the applicants in terms of which enforcement was postponed until 18 March 2005 (Second Postponement Arrangement). It was alleged that the applicants did not fulfil their obligations under the Second Postponement Arrangement and commenced these proceedings instead.
The response asserts that SAT is not the appropriate jurisdiction, the matter having been heard and fully determined at the Supreme Court. Further, or in the alternative, it is alleged that SAT does not have jurisdiction under s 88(3) of the Consumer Credit Act [sic]. In support of that submission it was stated SAT has power to stay any step in the enforcement proceedings which the debtor has applied to postpone but the pre‑conditions for such an application had not been met because no default notice was given nor was any attempt made (unsuccessfully) to negotiate a postponement.
The response proceeds to raise the delay in the applicants making the application some 13 months after the commencement of enforcement proceedings which is stated to be an abuse of process.
Further, the respondent denies the arrangement said by the applicants to have been made in June 2004. The applicants had asserted that it was a term of the arrangement that the loan would be up stamped so that late payment penalty fees would no longer be charged. The respondent states that the applicants were informed on 11 June 2004 that an up stamping arrangement might be entered into if the applicants continued to make repayments as provided for in the First Postponement Arrangement. In what must be understood to be an alternative allegation, the respondent says that if the arrangement was made as asserted by the applicants, the applicants did not meet the obligations under the arrangement.

The Proceedings

At a directions hearing on 2 June 2005, the respondent sought to have the jurisdictional issues raised, determined as a preliminary issue to which the Tribunal acceded.
The parties thereafter filed written submission and the hearing of the preliminary issue took place on 5 July 2005.

The respondent's submissions

The respondent's submissions in writing, and as amplified orally, included in summary, the following:
1.The Supreme Court, in entering judgment on 17 February 2004, had finally disposed of the matter and determined all issues between the parties. Reliance was based on O 13 r 2(1) of the Rules of the Supreme Court 1971 (WA). As a result it was said that SAT was not the appropriate jurisdiction to hear the matter as a judgment had already been made by a court of competent jurisdiction.
2.Reliance was placed on Edwards v National Australia Bank [2001] VCAT 36. It was submitted that the Tribunal held in that case that an application for postponement of the enforcement of a judgment in the Magistrate's Court should have been brought in the Magistrate's Court and that the applicants' application for postponement should be dismissed on the same grounds.
3.It was submitted that SAT does not have jurisdiction to hear the matter pursuant to s 88 of the Consumer Credit Code. This was because of the requirement of s 88(1) that the debtor must have been unable to negotiate a postponement. Reliance was placed on George v Bank of Western Australia (1998) ASC 155 ‑ 022 and Anseline v General Motors Acceptance Corporation(1998) ASC 148 – 543 [sic].
4.Annexed to the respondent's submissions was a copy of a letter dated 17 February 2005. No objection was made to this letter being produced to the Tribunal. The respondent contended that a postponement arrangement was entered into with the applicants, in terms of which enforcement was postponed to 18 March 2005, as reflected in the letter.
5.The Code did not provide a basis upon which the applicants' current application could be brought, because the application had been commenced in circumstances where a negotiated postponement had already been agreed between the parties.
6.Finally, it was submitted that s 88 of the Code could not be used to postpone enforcement indefinitely and that it would be an abuse of SAT's jurisdiction to the application to proceed.
Mr Majteles quite properly drew to the attention of the Tribunal that the argument raised in Anseline (supra) that the rights under the credit contract or mortgage had merged in the judgment did not apply because of a non‑merger clause in the mortgage document.

The applicants' submissions

The applicants filed written submissions which in turn were supplemented by oral submissions. In summary the submissions included the following:
1.The entry of a default judgment had no bearing on the right of the applicants to make an application pursuant to s 88(1) of the Code. Reference was made to the definition of enforcement proceedings in Schedule 1 as including the taking possession of property under a mortgage or taking any other action to enforce a mortgage. It was submitted that this conveyed that enforcement proceedings could include proceedings after judgment.
2.Supreme Court O 13 r 10 provided that the Court might, on such terms as is thought just, set aside or vary any judgment entered pursuant to O 13. SAT was the appropriate jurisdiction because it is the specialist Tribunal with jurisdiction to determine matters arising under the Code and the procedures of SAT were designed to minimise delay and costs.
3.It was denied that the respondent entered into a postponement arrangement with the applicants on the basis set out in the letter of 17 February 2005 from the respondent's solicitors. It was submitted, orally, that the letter of 17 February 2005 constituted the notice referred to under s 86 of the Code, that the applicants had been unsuccessful in negotiating a postponement and therefore the jurisdiction bestowed by s 88 of the Code was enlivened.
4.No statement had been provided by the respondent, which showed that the applicants were in default under the terms of the loan agreement and mortgage, as varied by the agreement negotiated in June 2004.
5.A letter was attached to the respondent's submission from the Department of Consumer and Employment Protection also dated 17 February 2005 in which the author set out his understanding that an agreement had been reached that the credit contract would be up stamped.
6.The application to dismiss the proceedings on the basis of lack of jurisdiction contended for by the respondent was an abuse of process.
7.The applicants sought to enforce the agreement/arrangement concluded in June 2004 and "until that time" to postpone enforcement of the judgment.

Consideration

By virtue of s 5 of the Consumer Credit Act 1996 (WA), the Consumer Credit Code set out in the appendix to the Consumer Credit Act 1994 (QLD) as in force on the commencement of s 6 of the Consumer Credit Amendment Act 2003 (WA) applies, as if amended, as set out in Pt 5 of that Act, as a law of Western Australia. That Code, by virtue of sub‑section 5(4) may be cited as a Consumer Credit Code and has been referred to in these reasons for decision as the Code.
Section 86 of the Code provides, relevantly, that a debtor who has been given a default notice under Div 2 may, at any time before the end of the period specified in the notice of demand, negotiate with the credit provider a postponement of the enforcement proceedings. The notice under Div 2 to which mention is made is a reference to the notices required under s 80 of the Code.
Section 80(1) deals with the enforcement of a credit contract, and is applicable. It provides that a credit provider must not begin enforcement proceedings against a debtor in relation to a credit contract unless the debtor is in default under the credit contract and has been given a default notice "complying with this section" allowing the debtor a period of at least 30 days from the date of the notice to remedy the default and the default has not been remedied within that period.
Sub‑section 80(3) sets out the requirements for a default notice. The default notice must specify the default and the action necessary to remedy it and that a subsequent default of the same kind that occurs during the period specified in the default notice for remedying the original default may be the subject of enforcement proceedings without further notice if it is not remedied within the period.
Section 88(1) provides, relevantly, that if the debtor is unable to negotiate a postponement, the debtor may apply to the Court for a postponement.
By sub‑section 88(2) the Court may, after allowing the applicants, the credit provider and any debtor concerned a reasonably opportunity to be heard, order or refuse to order the postponement to which the application relates or may make such orders as it thinks fit.
Sub‑section 88(3) permits a stay order to be made until the application has been determined.
Section 7 of the Consumer Credit Act 1996 (WA) expressly provides that the jurisdiction that is expressed to be exercisable by "the Court" under the Code is exercisable only by SAT in the case of any jurisdiction under a number of specified sections including s 88 of the Code.
It is apparent that the submissions made by the respondent to the general effect that SAT is not to be regarded as a specialist Tribunal, as submitted by the respondent, and that any such application should be made to the Supreme Court, is not correct, at least in relation to the operation of s 88 of the Code generally.
I do not accept the applicants' submission that the letter of 17 February 2005 can be construed as a default notice under Div 2. The letter simply does not meet the requirements of s 80(3) of the Code. It does not specify any default nor any action necessary to remedy it, nor does it comply with the requirement of s 80(1) that a 30 day period be given from the date of the notice to remedy any default.
It may well be that the letter does not constitute the agreement for which the respondent contends. It reflects that the respondent agreed not to execute its judgment for a further 28 day period (namely 18 March 2005) provided the applicants make payment of the arrears of $32 981.14 by no later than 18 March 2005; that the applicants obtain finance approval with another financial institution to refinance the outstanding debt; and continue to comply strictly with the terms of the loan agreement and the mortgage. There is nothing to suggest that the applicants complied with those conditions or even agreed to such terms and conditions. Indeed the applicants had lodged their application before SAT on 16 March 2005. Because of the conclusions which I have reached below, I do not need to finally determine whether any binding agreement was reached.
I was informed by Mr Majteles that a default notice was annexed to the affidavit in support of the application for summary judgment and that the default notice was issued in January 2003. I made it clear to the parties that I would act on information provided to me in this manner, unless objection was taken to its accuracy. There was no objection raised to this information.
It is apparent therefore that the arrangement entered into in May or June 2004 was not a postponement arrangement as contemplated by s 86(1) which requires that the negotiation occur within 30 days of the default notice.
The applicants deny that the letter of 17 February 2005 constitutes an agreed postponement arrangement. Even if the respondent is correct that it does, it is not an arrangement as contemplated within s 86(1).
George v Bank of Western Australia Limited (1998) ASC 155 – 022 turned on whether or not negotiations had commenced within the said 30 day period. It was found that negotiations had not so occurred and the application was dismissed on that basis. Anseline v General Motors Acceptance Corporation (1998) ASC 155 – 020 dealing with the equivalent Victorian Consumer Credit Code was decided on the same basis. I agree with those decisions.
On 10 December 2004, the applicants filed a writ of possession.
The letter of 17 February 2005 from the respondent's solicitors, reflects that there had been various discussions between the parties solicitors. As I have already found this letter does not constitute a notice of default. Further, if it does reflect a postponement arrangement, it is not an arrangement within the meaning of s 86(1) of the Code because it does not arise from negotiations entered into between the parties during the period specified in the Div 2 notice. In that regard, the information provided to me that the default notice was annexed to the affidavit filed in support of the summary judgment application was not challenged. I take that to be a default notice that complied with the requirements of the Act and therefore specified a 30 day period to remedy the default.
The Consumer Credit Code set out in the appendix to the Consumer Credit Act 1994 (QLD) has been adopted as the law of Victoria in the same way as the Consumer Credit Code was adopted as part of the law of Western Australia: (see Consumer Credit Act 1995 (VIC), s 5.) The scheme of the Victorian Code was examined in Edwards v National Australia Bank [2001] ASC 155 – 049 in which Deputy President McKenzie, inter alia stated as follows:
"[35]I now turn to s 88 … The pre conditions for an application by a debtor under s 88 are these. The debtor must have been given a default notice under Division 2 of Part 5 …
The principal provision of Div 2 relating to default notices is s 80. Broadly, that section makes it an offence for a credit provider to begin enforcement proceedings ... to recover payments due, to take possession of, sell, appoint a receiver for, or foreclose in relation to the mortgaged property, unless the credit provider has given the debtor or the mortgagor a default notice allowing him or her a specified period, not less than 30 days, to remedy the default and the default has not been remedied within that period.
[36]…
[37]A debtor can try to negotiate postponement at any stage from the beginning of an enforcement proceeding to the demand for payment of a judgment debt. The negotiation must occur before the end of the period specified in the default notice or the demand for payment. The postponement is, among other things, of enforcement proceedings or and I quote "any action taken under those proceedings". As far as a credit contract is concerned enforcement proceedings expressly cover proceedings in a court to recover payment. In my view, the words "any action taken under those proceedings" will also cover enforcement of the judgment arising out of those proceedings. The postponement which can be the subject of an application to the Tribunal under s 88 is the same postponement mentioned in s 86. The postponement, that is, which the debtor tried unsuccessfully to negotiate with the credit provider. The power to stay enforcement proceedings under the credit contract given to the Tribunal by s 88(3) must, in my view, be a power to stay any step in the proceedings which the debtor has applied to postpone. If these steps cannot be stayed the postponement application could be rendered futile.
[38]Section 88 then permits the Tribunal to postpone enforcement proceedings from the beginning to any stage after judgment as [sic] been obtained. It applies to all proceedings falling within the definition of enforcement proceedings in the Code. It does not just relate to proceedings before any court. It follows that I reject this part of the Bank's submissions that I should give a more limited construction to the term 'enforcement proceedings' used in this section."

Neither the application nor the information provided to me during the course of submissions on behalf of the applicants reveals that negotiations occurred within the period of the default notice issued in December 2003.
In Edwards (supra) consideration was given to only part of the definition of "enforcement proceedings" (as set out in Sch 1 of the Code at par [31]), namely that part referring to proceedings to recover a payment due under the contract. The definition does continue to also include "taking possession of property under mortgage or taking any other action to enforce a mortgage".
Mr Leask submitted that consequently a further default notice was required before the respondent took action subsequent to the postponement arrangement entered into in May or June 2004. I do not accept that submission.
The proceedings commenced by the respondent were under O 62A of the Rules of the Supreme Court of Western Australia which governs mortgage actions. The judgment entered was to the effect that within 28 days of service of the judgment the defendants give the plaintiff possession of the land in question and pay to the plaintiff the judgment debt. The subsequent issue of a writ of possession on 10 December 2004 and any steps taken thereafter to enforce the writ of possession were a continuation of the proceedings first commenced consequent upon non-compliance with the default notice, which proceedings included not only proceedings to recover a payment due under the contract but also proceedings to enable the respondent to take possession of the property under the mortgage.
Section 87 of the Code provides that if a postponement is negotiated the default notice is taken, for the purposes of the Code, not to have been given. However, if any of the conditions of the postponement are not complied with the credit provider is not required to give a further default notice under the Code before proceeding with enforcement proceedings. In my view, the postponement referred to is the same postponement addressed by s 86 and s 88, that is, it must be a postponement which results from negotiations which occur within the notice period. Even if this view is wrong there is nothing in the application, nor in the information provided during submissions, which identify any relevant negotiations.
If, contrary to my findings, the letter from the respondent's solicitors of 17 February 2005 constituted a default notice, the applicants submit in par 5 and par 6 of their written submissions that the letter contained an offer (of a postponement) which was not accepted and there was accordingly no postponement agreement reached. There was no indication of any negotiations having occurred.
I do not consider that it is an abuse of process for the applicants to have commenced there proceedings because of delay as submitted. SAT is the proper and in fact the exclusive jurisdiction for considering a postponement application. If it was established that the respondent had held off enforcement for any length of time, without a postponement agreement actually being negotiated, the delay which results should not preclude an application being made.
However, SAT is able to make an order under s 88 of the Code only if the material jurisdictional facts are established. Those facts include that there must have been negotiations before the end of the specified notice period. As there is no suggestion to that effect I find that the Tribunal does not have jurisdiction to entertain the application and it must accordingly be dismissed.
Neither party raised the question of costs and I will therefore give liberty to apply within a limited period if it is intended to make an application for costs. The application should be supported by affidavit justifying the costs claimed, so that if any costs are awarded, the costs can be settled at that hearing. In that regard, it should be noted, that by virtue of s 87(1) of the State Administrative Tribunal Act 2004 (WA) the starting point in the consideration of any application for costs is that each party should bear its own costs. The Tribunal will need to be persuaded that costs should be awarded.
I accordingly order as follows:
1)The application is dismissed;
2)The parties have liberty to apply in relation to costs, provided that any such application be made by a written notice to the Tribunal and the other party supported by affidavit within six weeks of the date of this order.
I certify that this and the preceding [45] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
MR C RAYMOND, SENIOR MEMBER