Masters v CCC Financial Solutions No. 3 Pty Ltd

[2015] SADC 71

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil: Minor Civil Review)

MASTERS v CCC FINANCIAL SOLUTIONS NO. 3 PTY LTD

[2015] SADC 71

Judgment of His Honour Judge Tilmouth

30 April 2015

MAGISTRATES - APPEAL AND REVIEW - SOUTH AUSTRALIA

As a Magistrate summarily dismissed the applicant's application to set aside a default judgment and in so doing denied him the opportunity to be heard, the determination refusing the application is rescinded and the application remitted to the Magistrates court for hearing.  The jurisdiction of the court to entertain proceedings relating to recovery under a credit facility entered into in Victoria, between parties resident in Victoria, the alleged breach of which occurred in Victoria, questioned.

Magistrates Court Act 1991 (SA) s 38(7)(a), s 38(7)(d), s 38(7)(d)(iii)(A) & (B); Magistrates Court (Civil) Rules MCCR 30(2), MCCR 12(1); Supreme and District Court Civil Rules 2006 (SA) SCR 40(b), DCR 40(1)(f)(ii); NEC Information Systems Aus Pty Ltd v Lockhart (1991) 22 NSWLR 518; Lipohar v The Queen (1999) 200 CLR 485; Oppenheimer v Louis Rosenthal & Co AG [1937] 1 All ER 23; Safran v Chani [1970] 1 NSWLR 70; International Corp v Besser Manufacturing Co [1950] 1 KB 488; Earthworks & Quarries Ltd v F T Eastment & Sons Pty Ltd [1966] VR 24; AssetInsure Pty Ltd (formerly Gerling Global Reinsurance Co of Australia Pty Ltd) v New Cap Reinsurance Corp Ltd (2004) 61 NSWLR 451; Falls Creek Ski Lifts Pty Ltd v Yee (1995) 37 NSWLR 344; Spencer v Commonwealth of Australia (2010) 241 CLR 118; Stanley Kerr Holdings Pty Ltd v Gibor Textile Enterprises Ltd (1978) 2 NSWLR 372; R v Beacontree Justices [1915] 3 KB 388; National Australia Bank v Ho [2006] NSWSC 1000; National Australia Bank Ltd v McCann [2010] NSWSC 766; National Credit Code (Cth), Credit (Commonwealth Power) Act 2010 (SA) and (Vic) s 14(2)(a); Gibson v McIntosh [2015] NSWCA 112, referred to.

MASTERS v CCC FINANCIAL SOLUTIONS NO. 3 PTY LTD
[2015] SADC 71

An application for review

1. Mr Masters brings an application for the review of a decision of a Magistrate made in the exercise of the Minor Civil jurisdiction of the Adelaide Magistrates Court on 11 December 2014, in which he sought to set aside a default judgment against him in favour of the respondent, CCC Financial Solutions No. 3 (CCC).

   Underlying cause of action

2. The matter came about in this way.  By originating proceedings of 12 May 2014, CCC claimed the sum of $7,371.69 (plus a court filing fee of $131 and an additional solicitors fee of $389, totalling $7,891.69) with respect to a credit facility allegedly provided to Mr Masters.  The Statement of Claim pleads that on or about 12 March 2009 the Members Equity Bank Limited (ME Bank) agreed to provide him with financial accommodation in the form of an ME Bank Master Card credit account.  The terms of the facility are said to include minimum monthly repayments as shown on statements issued by ME Bank and that in default, the moneys advanced together with interest thereon immediately fell due, plus bank service fees, account keeping fees and Government charges.  The Statement of Claim went on to allege that on 25 January 2013, ME Bank assigned its rights under the facility, including the right to recover outstanding amounts, to CCC and that Mr Masters was posted written notice of same, on or about 27 February 2013. 

3. It is alleged that Mr Masters defaulted in making minimum monthly payments in accordance with the facility and therefore fell into breach.  As a consequence on 27 February 2014 a demand for the payment of $7,235 was made to be paid within 28 days.  As of the date of issuing the proceedings in the Magistrates Court, that sum had grown to $7,371.69, the core judgment sum claimed.

   Course of the defence case

4. As there was no response to this claim, application was made by CCC to the Registrar of that Court on 11 June 2014, to sign judgment in default of an appearance and a defence.  A string of emails between Mr Masters and the Registry followed.  He forwarded a ‘Statement of Facts’ to the Registry on 29 May 2014.  In response he was advised to ‘file an application and affidavit’, and appropriate court forms were attached to enable him to do so.  The attached ‘statement of facts’ applied for a stay of proceedings, noted he was located in remote rural Victoria, and that 21 days was insufficient time in which to respond.  It proceeded to claim ‘merciless harassment, torment and intimidation by the plaintiff’, disadvantage because he was not provided ‘basic documents such as a plain English explanation of what an assignment means’, that he was not able to secure legal assistance, of the limited capacity to deal with the matter on account of physical and psychological health, amongst other difficulties, and requesting a stay order of deferment for 42 days.

5. He complained of the inability to print forms supplied by the Court.  It appears that the hard copies of the relevant forms may have been posted to him on 2 June, the receipt of which he acknowledged in an email of 20 June 2014.  Again he complained of the need for further time to complete them, that he was not given the opportunity to apply for a stay, lodge a defence, make a third party claim or enter a counterclaim.

6. By 23 June 2014 Mr Masters was advised by the Registry that a default judgment was entered and advising him to employ forms that were attached, should he want the judgment set aside.  He replied on 27 June that he was trying to do so, again complaining that CCC refused to provide any documents, thus compounding the degree of difficulty he faced.

   The application to set aside default judgment

7. Eventually, by 26 November 2014, Mr Masters brought an application seeking leave to file a defence and counterclaim, an order that the judgment of 11 June 2014 be set aside and making a ‘request that I be heard by telephone on the date that this application is heard’.  Attached to it was a document pointing out why there had been delay in responding, and a brief description of why he was disputing the claim, which essentially repeat at length the various complaints referred to earlier, as well as a number of other largely incomprehensible matters.

8. In a note contained on the lower court file of 27 November 2014, it is recorded that Magistrate Gumpl granted the request ‘to be heard by phone’.  The application came before him on 11 December 2014.  The formal court record together with a handwritten note by his Honour’s clerk, reveals the following took place:

   FOR DEFENDANT:  Defendant by telephone NAD

   The material provided by the deft does not appear to assert that he did not receive the original claim. There is no reason given as to why he did not file and serve a defence within time and he does not appear to deny owing the money therefore his defence or proposed defence as outlined in his affidavit is defective for these reasons.  The application cannot be successful.  The application is dismissed.

   Costs in the amount of $100.00 to the plf.  Court to notify the deft of today’s result.

9. Following this ruling an agent of CCC wrote to Mr Masters as follows:

   We confirm our attendance at your application which was listed in the Adelaide Magistrates Court today.  Mr Gumpl SM heard the application.  We opposed the application on the instructions of our client.  The Magistrate advised that the Court did not telephone you as the material provided was insufficient to support the application.

   The letter went on to note the orders made (as detailed above), and confirmed instructions to seek orders in the Federal Circuit Court in its bankruptcy jurisdiction against Mr Masters.

   The application for review

10. During the hearing of the review, Mr Draper, the CEO of CCC, (who did not appear before Mr Gumpl) fairly confirmed his understanding that the Magistrate ‘decided the matter on the papers’ and considered ‘there was no need for Mr Masters to appear’.[1]  Given that an order had been made by his Honour permitting the appearance by telephone, Mr Masters held a legitimate expectation in putting his case by that means.  The summary ex-parte decision to dismiss his application clearly constituted a denial of natural justice in precluding the fair opportunity to be heard.

    [1]    T3.37-.38, T7.3-.5, 3 March 2015.

11. There were moreover, reasons of substance calling for caution.  In the first place, CCC had not produced to the Court at that stage any documentation in proof of the facility.  In the second place, there was on the face of the record an acute jurisdictional issue to determine, since the facility was entered into and exercised in the State of Victoria.  Mr Masters lived outside the jurisdiction and the registered address of ME Bank was likewise outside the jurisdiction.[2]

    [2]    Members Equity Bank Ltd (ACN 070 887 679) traded from the registered address of Level 28, 360 Elizabeth Street, Melbourne, Victoria, whereas CCC (ACN 161 191 206) trades from the registered address of Level 11E, 50 Grenfell Street, Adelaide, South Australia.

12. It is established practice for a court to inquire itself as to the existence of jurisdiction when occasion calls for it, even when the issue is not raised by the parties: NEC Information Systems Aust Pty Ltd v Lockhart.[3]  The general principle is that a court has jurisdiction to hear and determine disputes having a real and substantial connection between the subject matter of the dispute and this State: Lipohar v The Queen.[4]  There was no such obvious connection here, except that CCC was registered at an Adelaide address.

    [3] (1991) 22 NSWLR 518, 520 E-F.

    [4] (1999) 200 CLR 485, 492, 499.

13. Ordinarily this conclusion would require an order for remission directing the Magistrates Court to determine whether it had jurisdiction. However, as there is no general power of remission provided for in s 38(7)(d) of the Magistrates Court Act 1991 (SA), this Court is therefore at first sight required to review the matter on the merits and ‘substitute a judgment that the court considers appropriate’ as required by s 38(7)(d)(iii)(A) thereof. Since the order under review involves a default judgment, the power to remit is furnished by s 38(7)(iii)(B) of the Magistrates Court Act.  Nevertheless, both parties request the Court not to take that course and to determine the matter on the merits.  The merits of that option are discussed later.

14. In his application for review launched in the District Court on 15 January 2015, Mr Masters alleges numerous breaches of the Magistrates Court (Civil) Rules 2013 (SA), which in summary were the failure to action the application for a stay, the want of the provision of documents by court officials, the refusal of the Magistrate to hear him by telephone, and of an incorrect court record ‘no appearance Defendant’, amongst many other complaints.  In light of the conclusion already reached, most of these kinds of complaints are rendered redundant.

15. Mr Masters also briefly raised the issue of jurisdiction adverted to above.  He initially questioned jurisdiction being in South Australia and claimed ‘the origination of the alleged debt is in Victoria with all activity taking place in that State’.[5]  He has not taken objection to the jurisdiction in writing, as he was required to by MCCR 30(2) of the Magistrates Court Rules 1992 (SA).  Nothing is express with respect to territorial jurisdiction in those rules.  In that situation the Magistrates Court ‘… may give a direction as to the steps to be taken and may adopt (with necessary modification) the appropriate practice and procedure of the Supreme Court’: MCCR 12(1).

    [5]    T8.3, 26 March 2015.

    The question of jurisdiction

16. There are circumstances in which jurisdiction is engaged by breaches of contract occurring inside the jurisdiction as a consequence of an act committed outside the jurisdiction: Oppenheimer v Louis Rosenthal & Co AG,[6] Stanley Kerr Holdings Pty Ltd v Gibor Textile Enterprises Ltd,[7] Safran v Chani,[8] and Gibson v McIntosh.[9]  The Magistrates Court is a creature of State exercising limited statutory jurisdiction: R v Beacontree Justices,[10] Falls Creek Ski Lifts Pty Ltd v Yee.[11]  Mr Draper made it clear that CCC was not relying on any agreement between Mr Masters and ME Bank in proof of its case as ‘the original application was not available’, so that it is reliant on the statements of account for that purpose.[12]  Those statements are examined later.

    [6] [1937] 1 All ER 23.

    [7] (1978) 2 NSWLR 372

    [8] [1970] 1 NSWLR 70.

    [9] [2015] NSWCA 112, [7].

    [10] [1915] 3 KB 388, 401.

    [11] (1995) 37 NSWLR 344, 355-349.

    [12]   T6.6-.16.

17. There is no evidence here as to whether the place of payment was stipulated by the facility.  When it is not so stipulated, at common law the debtor is required to seek payment where the creditor is found: International Corporation Ltd v Besser Manufacturing Co,[13] Earthworks & Quarries Ltd v F T Eastment and Sons Pty Ltd,[14] AssetInsure Pty Ltd (formerly Gerling Global Reinsurance Co of Australia Pty Ltd) v New Cap Reinsurance Corp Ltd.[15]  There is no evidence that service was effected within the State of South Australia.

    [13] [1950] 1 KB 488.

    [14] [1966] VR 24, 26.

    [15] (2004) 61 NSWLR 451, [177]-[178].

18. As things currently stand there is no material upon which a court could be satisfied there is jurisdiction in a Court of this State to entertain the originating proceedings.  The consequences of the conclusion are considered later.

    Procedural issues

19. Mr Martin further seeks orders for the production of documents previously requested by him of the respondent.  In an annexed document he expands upon some of these, of which non-production is a key feature.  It contains a litany of generalised complaints, including unconscionable conduct, breaches of ACCC Guidelines (which are not detailed), and intimidation and bullying.

20. The matter first came before this Court on 3 March 2015 when several of these issues were canvassed.  An order was made requiring Mr Masters to file a draft Defence so that the Court could better assess the underlying merits of the application to set aside.  This was done over the tactful objection of CCC, who complained, not without some justification, that despite being ‘supplied with copious quantities of the same documents on numerous occasions ... [Mr Masters] raises a catch cry whenever he has been contacted’, and that ‘we are getting close to an abuse of process’.  Mr Masters failed to file the draft.

21. In an email to the District Court of 10 March 2013, he complained that the documents received ‘neither comply with the order nor comply with the request to ME Bank for documents’, to facilitate ‘the process for preparing a defence’.  He also noted that CCC refused to provide ‘file notes ... as these may be subject to legal professional privilege’ and complained that in light of this failure, it was not possible to ‘construct a complete defence’.

22. Mr Masters further supplied a number of materials in support of his proposed defence, with a view establishing whether as a matter of ‘practical judgment’, he has a reasonably arguable defence.  Such material is necessary so as to enliven the discretion to set aside a default judgment: Spencer v Commonwealth of Australia.[16]  These included materials extracted from an article in The Age related to debt collection, a media release from the Law Council of Australia regarding chronic underfunding for Legal Aid Commissions, which of course are irrelevant to the prospects of raising a successful defence.

    [16] (2010) 241 CLR 118, [24]-[25].

23. In order to assuage his complaints and progress the review, the Court ordered CCC to produce in a sealed packet, the documents which it claims to be subject to legal professional privilege and also to produce documents, which may be subject to confidentiality to enable the Court to consider whether they should be released to Mr Masters.

24. The Court has examined the various file notes and records so provided and confirms these relate to seeking and obtaining legal advice in respect of these very proceedings.  The claim to legal professional privilege is therefore validly made with respect to them.  Another packet containing ‘Members Equity Bank Credit Card notes’ relate to other persons to whom credit facilities were presumably provided.  As such they are totally irrelevant to these proceedings, no obligation of disclosure could possibly arise therefrom, quite apart from privacy considerations.  Another packet contains a copy of the Deed of Assignment as between ME Bank Ltd and CCC.  A copy of the Notice of Assignment dated 27 February 2013 was sent to Mr Masters again recently, by order of the Court, as were the MasterCard statements upon which CCC relies to establish its claim.

    The claim by CCC

25. As noted earlier CCC does not press its claims on an original agreement between Mr Masters and ME Bank.  Its means of proof solely rely on the tender of the statements of account.  The reason for proving the matter in this way was further explained by Mr Draper during the course of the review in this way:[17]

    … but there was statements of account.  As you can appreciate the timeline here, the actual document, the application was processed and a credit card was issued on 12 March 2009, so the original application was not available.  There is an electronic overview on the ME Bank system.  They were formerly known as Members Equity Bank.

    [17]   T6.9-.16, 3 March 2015.

26. The credit card facility was approved in March 2009 and became delinquent on 1 June 2010. Those bank statements produced to this Court, commence from 27 March 2009 and run through to 1 June 2010. As they are not in dispute, they are admissible as ‘evidence of the transactions or matters to which [they] relate’ under s 47 of the Evidence Act 1929 (SA). They are all addressed to Mr Masters of Allans Flat Victoria, the address he provides for service as a matter of record. In all instances the account number is the same.

27. Mr Masters acknowledges there was an ME Bank MasterCard issued on 12 March 2009, and closed out on 1 June 2010 with a balance of $5,639.86.  He points out that within a period of 14 days, a series of cash advances commenced and in one 10 day period, $5,000 was advanced, 80 per cent of which he points out took place in two 24 hour periods, many of which he asserted were at points of ‘great geographic distance within 24 hours of the previous transaction’.  He also acknowledges payment was erratic, for example a payment of $445 was made on 4 June 2009 through Auspost, $23.50 on 12 August 2009, $13.76 on 13 August, and $152 on 17 August 2009 by way of BPay payments.

28. Mr Masters further claims to have only been advised of the assignment to CCC on 13 January 2012, some two years after the account was closed, and that the letter of demand from CCC of 27 February 2013, only arrived 13 months thereafter.  He acknowledges receipt of a letter of 26 February 2014 claiming $7,230.35.  Mr Masters therefore questions the delay and the gaps in time in respect of these events.  He repeats his largely unspecified allegations of unconscionable conduct and intimidation.  He completes his written contentions by maintaining the case against him is ‘wholly unsupportable at law or in equity’ and the conduct in pursuing him is ‘unconscionable and vexatious’.

29. The underlying statements upon which CCC relied were again sent to Mr Masters, duplicates of which were forwarded to the Court by cover of letter dated 4 March 2015.  These materials included the letter of 13 January 2012 advising Mr Masters that CCC required payment of the account within seven days ‘in order to avoid further action’, a letter of 27 February 2013 enclosing a notice demonstrating his ownership of the account and again calling for arrangements for payments to be made within seven days.  Another letter posted to him at his address claims a debt of $6,423.67 and seeks immediate payment, as well as the letter of 26 February 2014 giving notice of intention to commence legal proceedings within 28 days.

1. Of direct relevance to the proof of the case are the series of statements adverted to above.  These demonstrate a credit limit of $6,000, and commence with an opening debit withdrawal of $1,000.00 from an ATM in High Street Wodonga.  Thereafter is a series of entries relate to interest, late payment fees, annual accounting fees and the like, together with the repayments noted earlier.

2. The most notable transactions commence with a credit entry of $445 on 4 June 2009 at Australia Post South Melbourne and a $200 ATM withdrawal from Royal Domain Victoria on 6 May 2009.  Thereafter a $1,000 withdrawal was made on 2 April 2009 from the Hume Building Society at Yackandandah, expenditure at BP Glen Rowan on 3 April 2009, at David Jones Melbourne and Bunnings Wodonga, First Choice South Melbourne all on 3 April 2009, from Country Link Sydney and Unique Stitches, South Melbourne on 4 April, another $1,000 withdrawal from the Hume Building Society at Yackandandah on 5 April, another in the same amount from an ATM at Royal Domain Victoria on 6 April, a transaction at Yackandandah on 9 April, at Office Works South Melbourne on 10 April, a $200 withdrawal from the Hume Building Society at Yackandandah on 11 April, a purchase transaction at Wodonga Victoria on 15 April, at Yackandandah on 17 April, at BP Clarendon South Melbourne on 22 April, a $1,000 withdrawal from Wodonga on 27 March 2009, and for another of a similar amount on 28 March from the Hume Building Society at Yackandandah.

3. It might be observed that Allans Flat lies some 28 kilometres South of Wodonga and that Allans Flat is not that far North of Yackandandah on the road to Wodonga, all situated around the central Northern areas of the State of Victoria.

4. There are a number of matters of note arising from these transactions.  The first is that the bulk are centred upon the very area and nearby towns in which Mr Masters resides.  Otherwise there is a consistency of transaction centred upon the South Melbourne area, except for a few transactions consistent with travelling between his place of residence and Melbourne itself.  There is one attributable to a transaction with CountryLink at Sydney, but it does not necessarily follow that this occurred in Sydney.

5. The inescapable fact of the matter is that this very credit card facility was in the name of Mr Masters, at his known address.  As a matter of current practice, the exercise by a person in the possession of a credit card facility by accessing or drawing down credit, amounts to an acceptance of the terms and conditions thereof, and binds the recipient to the performance of the obligations under the revolving credit facility.  In Banking Law in Australia, Tyree states ‘It is thought, that the first use of the card represents the cardholder’s assent to the conditions of use’.[18]

   [18]   8 Ed, 2014 LexisNexis at 366.

6. However the origins of this observation appears to reside in specific agreements with credit providers: National Australia Bank v Ho;[19] National Australia Bank Ltd v McCann.[20]  This position is now recognised by statute: s 14(2)(a) National Credit Code (Cth), Credit (Commonwealth Powers) Act 2010 (SA) and (Vic).

   [19] [2006] NSWSC 1000, [10].

   [20] [2010] NSWSC 766, [50]-[51].

7. The question of assignment of the debt once duly proven, and duly proved to have been promptly notified to him, was no business of Mr Masters and does not otherwise affect the underlying legal obligation to honour the commitment made pursuant to the credit card facility, subject to the question of jurisdiction.

8. Moreover, on 12 June 2014 a letter was sent to Mr Masters advising him of the judgment and requesting payment, to which he responded on 23 June 2014 ‘as previously advised, I will have to attend on this matter in instalments due to my limited capacity to deal with the Court’.  This arguably amounts to a partial admission of liability on his part.

9. Plainly, the difficulties of enforcement have arisen since the issue of bankruptcy proceedings and the frustrated endeavours of CCC to enforce since then.  The responses of Mr Masters over the course of time has been one of obfuscation, delay, and diversion in the sense of employing collateral means to avoid enforcement.

   Disposition

10. Based on the above matters, Mr Masters has so far failed to clearly identify any proper basis upon which he might defend the claim.  His main objection of substance appears to relate to the interest rate charged and other fees claimed, the validity of the act of assignment and possibly whether some of the alleged transactions took place at all.  As he was denied the opportunity to articulate these matters, he should be offered one last opportunity to do so.

11. In light of the above conclusions, pursuant to s 38(7)(d)(iii)(B) of the Magistrates Court Act, the judgment of the Magistrate entered on 11 December 2014 is rescinded on the grounds of procedural unfairness and the failure to explore questions of jurisdiction. The application to set aside the judgment in default is remitted to the Magistrates Court for determination, including whether it has jurisdiction. As both parties were unrepresented, it is not appropriate to make any order for costs of the review: s 38(7)(a) Magistrates Court Act.  Mr Masters is not entitled to recoup expenses incurred by him so far (if any) on account of abject delay on his part.