National Australia Bank Ltd v Trani
[2023] VSC 142
•29 March 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
MORTGAGE RECOVERY LIST
S ECI 2021 02832
| NATIONAL AUSTRALIA BANK LTD (ACN 004 044 937) | Plaintiff |
| v | |
| PATRIZIA TRANI and OFFICIAL TRUSTEE IN BANKRUPTCY AS TRUSTEE OF THE BANKRUPT ESTATE OF ABRAHAM DIQUINZIO | First Defendant Second Defendant |
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JUDGE: | CROFT J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 21 March 2023 |
DATE OF JUDGMENT: | 29 March 2023 |
CASE MAY BE CITED AS: | National Australia Bank Ltd v Trani & Anor |
MEDIUM NEUTRAL CITATION: | [2023] VSC 142 |
JUDGMENT APPEALED FROM: | Orders of Efthim AsJ dated 3 October 2022 |
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MORTGAGE – Proceedings for application to set aside judgment in default of appearance – Nature of appeal pursuant to r 77.06 of the Supreme Court (General Civil Procedure) Rules 2015 – No explanation for default in consequence of which the judgment was obtained – No arguable defence – Securitisation ‘of mortgage no defence’ – Kostokanellis v Allen [1974] VR 596 – Westpac Banking Corporation v Mason [2011] NSWSC 1241 – RHG Mortgage Corporation Ltd v Astolfi [2011] NSWSC 1526 – McLean v Westpac Banking Corporation [2012] WASC 152 – Summerland Credit Union Ltd v Lamberton; Summerland Credit Union Ltd v Jonathan [2014] NSWSC 547 – Hou v Westpac Banking Corporation [2015] VSCA 57 – Appeal dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff (Respondent on appeal) | Mr AA Segal | TG Legal +Technology Lawyers |
| For the First Defendant (Applicant in the appeal) | Ms Patrizia Trani in person | |
| For the Second Defendant | No appearance | |
| AMICUS CURIAE | ||
| Victorian Bar Pro Bono Scheme | Mr Alan Herskope of Counsel |
HIS HONOUR:
Appeal
The first defendant’s appeal is brought pursuant to r 77.06 of the Supreme Court (General Civil Procedure) Rules 2015. As McDonald J said in Pentridge Village Pty Ltd (in liq) & Ors v Construction, Forestry, Maritime, Mining & Energy Union & Ors:
The appeal is in the nature of a rehearing and requires the party seeking to appeal to establish error on the part of the Associate Judge before the appellate power may be exercised. Once error is established in relation to the determination of the subject of the appeal, the Judge hearing the appeal has all the powers of the Court constituted by the Associate Judge, including to give any judgment and make any order which ought to have been given or made and to make any further or other order as the case may require.[1]
[1][2022] VSC 303, [45]; and see r 77.06.9(2)(b) and r 77.06.9(2)(d).
The appeal is brought with respect to the orders of Efthim AsJ made on 3 October 2022 whereby the first defendant’s application to set aside the default judgment made on 31 May 2022 was dismissed.
In dismissing the application to set aside the default judgment, the Associate Judge, Efthim AsJ, set out reasons under the heading ‘Other Matters’ in the orders. The presently relevant parts of these reasons as set out are contained in paragraphs A to F, as follows:
A.In Kostokanellis v Allen (1974) VR 596, the Full Court of the Supreme Court outlined four factors to be taken into account when determining an application to set aside a judgment entered in default of appearance: first, whether the defendant has an arguable defence on the merits; second, the defendant’s reason for the default in consequence of which the judgment was obtained; third, whether the application to set aside the judgment was made promptly after the judgment came to the knowledge of the defendant; and fourth, whether, if the judgment were set aside, the plaintiff would be prejudiced in any respect which could not be adequately compensated by an award of costs or giving of security.
B.The Court said that the most important consideration is the defendant’s defence as evidenced by his affidavit. If he had an arguable defence on the merits then it would severely prejudice that defendant were he to be disallowed by the Court from making his argument at trial of the matter. The two considerations as to reasons for default or delay in bringing the application should be taken into account but are not determinative of whether judgment should be set aside or not.
C.The first plaintiff [clearly intended as a reference to the first defendant] provided no evidence as to her failure to file a notice of appearance in this proceeding in time. Her explanation for not filing the notice of appearance is not accepted.
D.The first defendant provided no explanation for making late her application to set aside judgment in default, over a month after judgment in default was given.
E.The first defendant’s proposed defence is a bare denial, does not respond to any of the points raised in the writ and statement of claim and has no real prospect of success. In her affidavit, which is scandalous, the first defendant does not address any issues in the plaintiff’s writ and statement of claim.
F.If the Court were to set aside the judgment in default, the plaintiff would be prejudiced as the first defendant cannot compensate the plaintiff for the debt that is the subject of the judgment in default and which continues to accrue.
As indicated, these reasons were based on the Full Court decision in Kostokanellis v Allen,[2] where four factors were outlined which require consideration in determining an application to set aside the judgment in default of appearance.
[2][1974] VR 596. See paragraph [A] under ‘Other Matters’.
At the hearing of this appeal, and also at a directions hearing on 10 March 2023, more than a week in advance of the appeal hearing, the first defendant was asked whether further submissions would be made and material provided as to any arguable defence or defences with respect to an arguable defence or defences on the merits. The position in this respect at the hearing of the appeal was that the first defendant relied upon a document titled ‘Defence’ (dated 16 August 2022) which was annexed to her affidavit of 16 August 2022[3] and further material contained in her affidavit of 16 January 2023. This further material raised, in summary, what may be described as the ‘securitisation defence’ to the effect that the plaintiff had no standing to bring the proceeding as it has assigned its mortgage by way of some securitisation arrangement. Neither the 16 August 2022 ‘Defence’ document nor its earlier version (dated 5 June 2022) was ever filed as a pleading, though it is set out in the form of a defensive pleading. In substance, however, it raised no substantive matters and, in conventional terms, would be properly be described as a bare denial. The affidavit to which this document was annexed could only be described, as did Efthim AsJ, as scandalous, and it is also clear that the material contained in and annexed to that affidavit was and remains irrelevant to the proceeding, and certainly this appeal.
[3]Noting that an earlier version of this ‘Defence’ (dated 5 June 2022) was annexed to the first defendant’s affidavit of 4 July 2022.
Of the four factors to be taken into account as articulated in Kostokanellis v Allen, attention is first directed to whether the first defendant had reason for the default in consequence of which the judgment was obtained.
Explanation for default
A notice of appearance was not filed by the first defendant in the proceeding as required by r 21.01(2) of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’). It is accepted that in accordance with the Rules and on proper material, the Prothonotary entered judgment for the plaintiff on 31 May 2022.
At the hearing before Efthim AsJ, the first defendant raised the issue of her purported inability to lodge a notice of appearance, on two occasions, on the Supreme Court RedCrest electronic document filing system. The Court has published a ‘RedCrest e-filing user guide’ in respect of electronic filing.[4] It is accepted that the issue raised by the first defendant as to her inability to file a notice of appearance does go to the question of whether she had an explanation for the default in consequence of which the judgment was obtained.
[4]As noted in the User Guide, the User Guide does not impact upon, modify or override any time limit imposed by any statutory provision [Section 1]. Relevant guidance on filing documents is set out in Section 4 [My Filings Page] and Section 6 [Approval and Rejection of Filing].
In respect of this factor, the reasons provided by Efthim AsJ[5] are that the first defendant provided no evidence as to her failure to file the notice of appearance in the proceeding in time and that her explanation for not filing the notice of appearance was not accepted. In spite of the first defendant’s own assertions with respect to this factor, there is no other material in support of these assertions, and it would appear that this is the basis for the rejection by Efthim AsJ of her explanation for not filing the notice of appearance in time, a failure which led to the entry of judgment. This is a question of fact which Efthim AsJ determined on the basis of the material then before him and on the basis of submissions at the hearing of the matter on 3 October 2022. On the material before the court at that time and also at the time of hearing the appeal, there is no basis for any finding on appeal that the Associate Judge was in error in the finding made that there is no explanation for the failure by the first defendant to file a notice of appearance on time in accordance with the Rules.
[5]See ‘Other Matters’, paragraph C.
No arguable defence
The importance of answering the question whether there is an arguable defence in the present context is addressed in Vacuum Oil Co Pty Ltd v Stockdale,[6] where Jordan CJ (with whom Davidson and Roper JJ agreed) said:[7]
[6](1942) 42 SR (NSW) 239.
[7](1942) 42 SR (NSW) 239 at 243-4.
The present is not a case in which judgment was signed by default through some procedural omission on the part of the defendant or his legal advisers. The action followed the ordinary course, except that its coming on for trial was delayed through dilatoriness on the part of the defendant. It is one in which, the action coming on for trial in its ordinary place in the list, no-one was present in Court to conduct it for the defendant, and it therefore proceeded in his absence. In such a case, where the plaintiff is no respect in default, a new trial will not be granted save in very special circumstances: Chitty’s Archbold, 10th ed, 1457; 12th ed, 1526. In every such case the Court has an inherent and unfettered, though judicial, discretion in the exercise of which it will, however, necessarily consider (a) whether any useful purpose would be served by setting aside the judgment, and (b) how it came about that the applicant found himself bound by a judgment regularly obtained: Evans v Bartlam [1937] AC 473 at 482. As a general rule, though not necessarily in every case, if some reason exists for departing from it: Collins’ Book Depot Pty Ltd v Bretherton [1938] VLR 40; Austn Digest (1934-1939) 1859, the Court requires an affidavit showing prima facie that the defendant has a good defence on the merits: Evans v Bartlam [1937] AC 473 at 480, 488-9, and also an explanation of his absence which shows that justice requires and in the circumstances it should be excused. If there has been gross negligence on the defendant’s part, the Court will be more disposed to require at least a reasonably clear case of merit to be shown to incline it to interfere: Nash v Swinburne 3 M & G 630 at 632; Weitzel v Friedenreich 14 WN 7; 1 Austn Digest 376.
It is obvious that decisions on other sets of facts are of no assistance in arriving at a decision as to how it would be proper to exercise the Court’s discretion in the present case. The question is whether, upon the material that has been placed before us, there is a real likelihood that it would be unjust to the defendant to allow the judgment to stand. If so, it should be set aside on such terms as will minimise the possibility of injustice to the plaintiff. If not, we should not interfere.
This latter paragraph in the judgment of Jordan CJ, as set out above, was referred to with approval by the Full Court in Kostokanellis v Allen.[8] In similar vein, in the same case, the Full Court made reference to the speech of Lord Wright in the House of Lords in Evans v Bartlam,[9] where His Lordship said:
The primary consideration is whether he has merits to which the Court should pay heed; if merits are shown, the Court will not prima facie desire to let a judgment pass on which there has been no proper adjudication.
It follows from the authorities, particularly those to which specific reference has been made, that unless a party in the first defendant’s position as an appellant in the present context is able to show a prima facie defence, being a defence which is arguable and not fanciful, the court will not disturb the default judgment.[10]
[8][1974] VR 596 at 605.
[9][1937] AC 473 at 489.
[10]Civil Procedure Victoria (LexisNexis, looseleaf), [I.21.c7.20] p 3345.
If legislative endorsement were required for this long-established approach of the courts, then it is, in my view, provided by sub-s 7(1) of the Civil Procedure Act 2010 (Vic), which provides that:
The overarching purpose of this Act and the rules of court in relation to civil proceedings is to facilitate the just, efficient, timely and cost‑effective resolution of the real issues in dispute.
These considerations, naturally, must be applied in a manner which provides procedural fairness to all parties. In this respect, the ‘default judgment’ mechanism in various contexts provides the means of achieving fair outcomes for all concerned in both a timely and cost-effective manner. The default judgment mechanism has been long-established procedurally. An example in Victoria is the legislative intervention to provide for such a mechanism in proceedings by way of ejectment for recovery of possession of land, which, following similar legislation with respect to the practice of the superior courts of common law at Westminster, was enacted in s 224 of the The Common Law Practice Act 1856 (Vic).[11]
[11]And see Short v Taylor (1886) 8 ALT 10.
The default judgment mechanism as it is applied in various contexts, does not preclude any party from putting its case if it chooses to do so and subject to a party having an arguable claim and an arguable defence, and not simply fanciful claims and defences. Moreover, it is an essential mechanism for the situation where a plaintiff issues proceedings to which the defendant does not respond, whether by way of appearance, defence or in other circumstances. Otherwise, if there were no means of bringing the proceedings to a close by way of judgment, it would be very easy for a defendant to advance its position by thwarting the proceeding by doing nothing.
Having regard to these matters, it is apposite to turn to the Notice of Appeal dated 14 October 2022 filed by the first defendant. The grounds relied upon in the Notice of Appeal are that there was ‘… an error in law in failing to take into consideration the [first] defendant’s inalienable rights contained in [the] Human Rights and Responsibilities Act 2006 in particular s 20 and s 24’ (‘the Charter’). It is noted that no issue was raised in the Notice of Appeal with respect to Efthim AsJ’s finding in respect of the third and fourth factors outlined in Kostokanellis v Allen.[12]
[12][1974] VR 596: and see the reasons of Efthim AsJ set out in ‘Other Matters’, paragraphs D and F.
The further ground which the first defendant also sought to rely upon on appeal has been described as the ‘securitisation defence’. This ground was not raised in the Notice of Appeal, but appeared in subsequent affidavit material filed by the first defendant, particularly her Affidavit dated 16 January 2023 in which it is stated (at paragraphs [19] and [20] of that Affidavit):
19.In part of my defence, I discovered documents which evidenced the plaintiff, National Australia Bank Limited, had assigned my mortgage, amongst other things, to the Federal Reserve of New York and therefore had no proper standing as a creditor against me. Copies attached to my affidavit as PT-A02
20.The plaintiff, failed to disclose this information to the court in their application for summary judgment and mislead [sic] the court to believe they were a rightful creditor.
The source of the documents exhibit at PT-A01 is not clear, but even if it were accepted that some kind of ‘securitisation’ arrangement had been entered into by the plaintiff with respect to the relevant mortgage, that does not, for reasons which follow, provide any defence to the present claim.
Charter issues
Section 24 of the Charter relates to the right to a ‘fair hearing’ and provides as follows:
(1)A person charged with a criminal offence or a party to a civil proceeding has the right to have the charge or proceeding decided by a competent, independent and impartial court or tribunal after a fair and public hearing.
(2)Despite subsection (1), a court or tribunal may exclude members of media organisations or other persons or the general public from all or part of a hearing if permitted to do so by a law other than this Charter. Note See Part 5 of the Open Courts Act 2013.
(3)All judgments or decisions made by a court or tribunal in a criminal or civil proceeding must be made public unless the best interests of a child otherwise requires or a law other than this Charter otherwise permits.
It is important to observe, however, that s 24 does not, of itself, provide a basis to enforce a freestanding and unitary ‘right to a fair trial’.[13] Rather, it is a feature of the due administration of justice that a person should have effective access to the courts in order to enforce some legal, equitable, or statutory right, or to defend a proceeding.[14] Moreover, the human rights provisions in the Charter are subject to ‘reasonable limits’ provided in sub-s 7(2) of the Charter as follows:
[13]See Knight v Sellman & Ors [2020] VSC 320, [193].
[14]Knight v Sellman, [197]–[202], citing Commissioner of Corrective Services v Liristis (2018) 98 NSWLR 113, [66]-[69], [71]–[79], [104]–[107], [110] (Basten JA) (citations omitted) and Proudfoot v Director of Public Prosecutions [2020] VSCA 138, [48].
(2)A human right may be subject under law only to such reasonable limits as can be demonstrably justified in a free and democratic society based on human dignity, equality and freedom, and taking into account all relevant factors including:
(a)the nature of the right; and
(b)the importance of the purpose of the limitation; and
(c)the nature and extent of the limitation; and
(d)the relationship between the limitation and its purpose; and
(e)any less restrictive means reasonably available to achieve the purpose that the limitation seeks to achieve.
The application of s 24 of the Charter was considered in Deputy Commissioner of Taxation (Cth) v Bourke[15] in the context of a refusal to grant an adjournment of a summary judgment application. In considering the question of whether a fair and public hearing was afforded, the Court made the following observations. First, the element of ‘fairness’ relates to procedural fairness, rather than substantive fairness. It does not involve an assessment of the merits of the particular decision, rather it is synonymous with the principle of ‘equality of arms’, which holds that a party must have a reasonable opportunity to put his or her case under conditions that do not place him or her at a substantial procedural disadvantage relative to the opposing party.[16] Secondly, the requirement that proceedings be ‘public’ is synonymous with the common law principle of open justice. The principle helps maintain public confidence in the administration of justice. Moreover, by exposing proceedings to public scrutiny, it helps ensure their fairness.[17]
[15][2018] VSC 380.
[16]At [73] citing Ragg v Magistrates’ Court of Victoria & Anor (2008) 18 VR 300, 310 [45]-[47] (Bell J).
[17]At [76].
In the present circumstances, the first defendant has not contended, contrary to the plaintiff’s submissions, that she did not have ample opportunity to prepare for the application before Efthim AsJ — noting that it was her application — that the hearing was conducted in open court and no party was excluded, and further, that she was given as much time as she wanted or required to make her submissions to the Court.
For these reasons, I find that there is no merit in this ground of appeal as there is no failure by Efthim AsJ to accord this defendant a fair and public hearing pursuant to s 24(1) of the Charter.
Finally, with respect to the Charter provisions, reference has been made to s 20 of the Charter, which relates to property rights and provides that, ‘A person must not be deprived of that person’s property other than in accordance with law’. There is, in my view, no merit in this ground of appeal, as the plaintiff properly obtained judgment in default and is now seeking to enforce that judgment pursuant to a warrant of possession.
Securitisation defence
As indicated previously, the first defendant now raises a further argument by way of defence that as the plaintiff has assigned or ‘securitised’ the mortgage, it is somehow prevented from enforcing its mortgage.
The authorities make it clear that even if there has been a ‘securitisation’ of a mortgage such as this, that is no bar to the original lender bringing the proceedings to enforce the loan.[18] In Westpac Banking Corporation v Mason,[19] McCallum J put the matter succinctly:[20]
The short answer to the defence is, accordingly, that whatever the position between the plaintiff and any third party so far as any equitable interest or equity is concerned, the legal interests of the parties to these proceedings are governed by the loan agreement and the registered mortgage. A debt is owed by the defendants to the plaintiff and the land stands charged with that debt.
[18]Summerland Credit Union Ltd v Lamberton [2014] NSWSC 547, [15]; Westpac Banking Corporation v Mason [2011] NSWSC 1241, [29]; RHG Mortgage Corporation v Astolfi [2011] NSWSC 1526 at [13]–[15].
[19][2011] NSWSC 1241.
[20]Ibid [29].
The veracity of similar defences has also been considered and dismissed by the courts at appellate level. Thus in Hou v Westpac Banking Corporation the Court of Appeal said:[21]
[21][2015] VSCA 57, at [62]-[66].
62Mr 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.
63The 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’.
64Similar defences have been advanced and rejected at first instance both in this State[22] and in New South Wales.[23]
65The Court of Appeal of the Supreme Court of Western Australia addressed a relevantly similar defence in McLean v Westpac Banking Corporation.[24]
66In 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.
[22]National Australia Bank Ltd v Norman [2012] VSC 14.
[23]RHG Mortgage Corporation v Astolfi [2011] NSWSC 1526; Westpac Banking Corporation v Mason [2011] NSWSC 1241.
[24][2012] WASC 152.
[25]Ibid [19]. See also ibid [30]-[31].
[26]As a decision of another 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].
Moreover, in the context of the claimed ‘securitisation’ defence, there is, in my view, no proper evidence that any ‘securitisation’ arrangement applies in some way to the relevant mortgage, much less the precise nature of any such alleged arrangement. In any event, the evidence before the Court is, particularly having regard to the affidavit of Daniel Jackaman dated 26 August 2022 and the annexures thereto, that the plaintiff is the registered proprietor of the relevant mortgage. It follows that, as such, the plaintiff has indefeasible legal title to the mortgage pursuant to the provisions of s 42 of the Transfer of Land Act 1958. Additionally, there is no evidence that there has been any assignment of any legal chose in action it may have under the provisions of the mortgage, particularly such as the personal covenant on the part of the mortgagor(s) to pay the sum secured by the mortgage, under s 134 of the Property Law Act 1958. Consequently, there is no bar to the plaintiff seeking to enforce the mortgage the subject of these proceedings in the event of default.
Conclusions and orders
For the preceding reasons, the appeal will be dismissed and, subject to any further submissions of the parties with respect to the question of costs, costs will follow the event.
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