National Australia Bank v Sgargetta
[2014] VCC 48
•7 February 2014
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised Not Restricted Suitable for Publication |
COMMERCIAL LIST
BANKING AND FINANCE DIVISION
Case No. CI-12-02770
| NATIONAL AUSTRALIA BANK LTD (ACN 004 044 937) | Plaintiff |
| v | |
| ELLIOT DANIEL SGARGETTA | Defendant |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 26-29 August 2013 | |
DATE OF JUDGMENT: | 7 February 2014 | |
CASE MAY BE CITED AS: | National Australia Bank Ltd v Sgargetta | |
MEDIUM NEUTRAL CITATION: | [2014] VCC 48 | |
REASONS FOR JUDGMENT
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Subject:CONSUMER CREDIT, CONTRACT
Catchwords: CONSUMER CREDIT – Re-opening transactions – Unjust terms – Unconscionability – Application of the National Credit Code.
CONTRACT – Breach of contract – Entitlement to specific performance.
Legislation Cited: Competition and Consumer Act 2010 (Cth); Consumer Credit (New South Wales) Code 1996 (NSW); Consumer Credit (Victoria) Act 1995 (Vic); National Consumer Credit Protection Act 2009 (Cth); National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 (Cth); Sale of Land Act 1962 (Vic); Trade Practices Act 1974 (Cth); Transfer of Land Act 1958 (Vic).
Cases Cited:Australian Competition and Consumer Commission (ACCC) v Dukemaster Pty Ltd [2009] FCA 682; Bridgewater v Leahy (1998) 158 CLR 66; Director of Consumer Affairs Victoria v Scully and Gilfillan [2013] VSCA 292; Knowles v Victorian Mortgage Investments Limited [2011] VSC 611; Louth v Diprose (1992) 175 CLR 621; Meehan v Jones (1982) 149 CLR 571; Monas v Perpetual Trustees Victoria Ltd (2011) 80 NSWLR 739; Wolfe v Permanent Custodians Limited [2013] VSCA 331.
Judgment: Judgment for the plaintiff for an order for possession, and dismissal of the defendant’s counterclaim.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Segal | Gadens Lawyers |
| For the Defendant | In person |
HIS HONOUR:
1 In this case, the National Australia Bank Ltd (“NAB”) seeks an order for possession of the property at 92 Old Coach Road, Kalorama, in Victoria (“the property”). NAB makes the application pursuant to a mortgage (“the mortgage”) granted in its favour by the defendant (“Sgargetta”) to secure a home loan facility (“the facility”) of $300,000. The NAB relies upon default notices served on Sgargetta in April and May 2012.
2 In his defence, Sgargetta contended that:
(a)the NAB breached section 76 of the Uniform Consumer Credit Code (“the Code”) in failing to provide him with a payout figure; and
(b)the parties are bound by a Deed of Settlement (“the Deed of Settlement”) signed in February 2013.
Sgargetta contended that, as a result of these two matters, the NAB was not entitled to recover the alleged debt or to pursue its claim for possession, and also that the NAB was obliged to pay him approximately $2.7million in damages.
3 In response, the NAB denied that it breached the Code and said that Sgargetta failed to honour the terms of the Deed of Settlement. Hence, from the NAB’s perspective, there was no impediment to the bank seeking possession of the mortgaged property and recovering the amount owing under the facility. The NAB denied it had any liability in damages to Sgargetta.
Pleadings
4 In the amended defence dated 20 March 2013, which was settled by counsel and filed by Sgargetta, the defendant made a number of admissions which helped clarify and narrow the dispute. The defendant admitted:
· the incorporation of the plaintiff;
· that he was and remained the registered proprietor of the property;
· the NAB agreed to provide to the defendant, and the defendant agreed to accept, the facility of $300,000 which the NAB then advanced to him;
· the fixed interest rate for the 5 year period was 7.99 per cent after which the rate automatically became the variable interest rate, being the advertised variable rate for owner-occupied homes less a margin of 0.5 per cent per annum;
· making payments to the NAB of $505.56 per week as required under the facility between 17 December 2007 and 1 December 2008;
· the defendant would be in default under the loan agreement if the defendant did not pay on time any amount payable under the loan agreement;
· if the defendant defaulted under the loan agreement, the NAB could give the defendant notice requiring him to remedy the default;
· if the defendant were in default and did not remedy the default within the time specified in the notice given by the plaintiff, the NAB could do the following things: decide without further notice that all money owing by the defendant under the loan agreement was due and payable immediately; sue the defendant for payment of the money the defendant owed the plaintiff; and exercise its rights under the security provided for the loan including the right to sell property;
· the security for the loan included a first registered mortgage over the property. The defendant granted a mortgage dated 4 January 2007 over his estate and interest in the property to secure the repayment of the amount owing to the NAB in accordance with the loan agreement;
· there were terms of the mortgage that:
o the defendant would carry out on time all his obligations under every agreement covered by the mortgage including the loan agreement and including the obligation to pay any amount owing including interest as defined in the loan agreement;
o the defendant would be in default under the mortgage if he did not pay on time any of the amount owing;
o the defendant would pay to the plaintiff its enforcement expenses incurred or spent by the plaintiff in exercising its rights under the mortgage;
o if the defendant were in default and the NAB chose to enforce the mortgage, the plaintiff would give a notice to the defendant allowing the defendant 31 days to remedy the default;
o if the defendant did not remedy the default notified to him, without further notice the whole of the amount owing became due and payable on demand, and if the NAB demanded payment of the amount owing but it was not paid within seven days, the plaintiff could enforce the mortgage by taking possession of and selling the property;
· the NAB notified the defendant in writing dated 11 April 2012 (“the first demand”) of his alleged default and demanded payment of $96,032.34 by 18 May 2012;
· the defendant did not pay to the NAB the amount said to be due and owing under the first demand;
· receipt of the notice in writing dated 21 May 2012 (“the second demand”) under which the NAB demanded payment of $409,210.23 pursuant to the loan agreement and mortgage; and
· after the second demand, the defendant did not pay the NAB the total amount said to be due and owing under the loan agreement and mortgage.
5 In addition, Sgargetta raised various issues on the pleadings including the following:
· the entitlement of Sgargetta to have the court determine the amount payable by him to the NAB if it were found that the bank failed to meet its obligations under section 76 of the Code;
· Sgargetta’s loss and damage as a result of the settlement on the property not proceeding in December 2008 and his inability to complete the acquisition of another property;
· whether the NAB’s conduct contravened the Trade Practices Act as unconscionable or misleading and deceptive; and
· whether the NAB failed to mitigate its loss by allowing the alleged indebtedness of the defendant to increase and choosing not to send a notice of demand immediately after the alleged default arose but waiting approximately 3 years and 4 months before sending such demand.
Issues
6 The principal issues raised by the parties for determination appear to be as follows:
(a)Has the NAB prima facie proved its case entitling it to an order for possession of the property?
(b)Did the NAB breach its obligations under section 76 of the Code by failing to provide Sgargetta a payout figure within seven days of a request?
(c)If the NAB did breach section 76 of the Code (which NAB denies) or otherwise acted unconscionably, what amount should Sgargetta pay to the NAB pursuant to section 77 of the Code?
(d)If the NAB breached section 76 of the Code (which it denies) or otherwise acted unconscionably, is Sgargetta entitled to any compensation?
(e)Is Sgargetta entitled to specific performance of the Deed of Settlement dated 5 February 2013 entered into by the parties?
Chronology
7 By a facility agreement dated 10 December 2007, the NAB provided Sgargetta with a $300,000 home loan where the interest rate was fixed for a period of 5 years. The loan was secured by a mortgage over the property.
8 On 8 October 2008, Sgargetta entered into a contract of sale in respect of the property. The sale price was $385,000 and settlement was due on 1 December 2008. The purchaser of the property was Cybil Nickett Waldron, Sgargetta’s wife.
9 In mid to late October 2008, Sgargetta verbally sought a payout figure in respect of the mortgage. The defendant sought this payout figure in response to a request from Suncorp Bank, which the defendant claimed had approved finance for settlement of a second property that the defendant sought to purchase, and required information in relation to the payout figure of the defendant’s Kalorama property.
10 By letter dated 6 November 2008, Damien Colella (“Colella”) of the NAB, who was Sgargetta’s personal banker, wrote as follows:
“I can confirm that upon release of above-mentioned property NAB will be looking to receive funds to pay out home loan in name of Mr Elliot Sgargetta. Home loan account number is 75-128-9802, the bank will require approximately $299,000.”
11 By letter dated 12 November 2008, Home Conveyancing Reservoir Pty Ltd (“Home Conveyancing”), the conveyancing company acting on behalf of Sgargetta, faxed a letter to the discharge manager at the NAB confirming that settlement of the sale transaction was due on 1 December 2008. In addition, Ms Maric of Home Conveyancing wrote:
“Please provide the following details to enable us to prepare the section 27 deposit release statement:
1Amount secured by the mortgage.
2Amount required to discharge the mortgage.
3Amount of instalments and when payable.
4Does the mortgage provide for further advances? If so, please provide the details.
5Lower interest rate p.a. & default interest rate p.a.
6Date by which the amount secured by the mortgage is to be repaid.
7Is the vendor in default under the mortgage? If so, please give details.
PLEASE NOTE that section 76 of the Consumer Credit Code requires you to provide written payout within 7 days after receipt of this request.
Should you have any queries, please do not hesitate to contact our office.”
12 Accompanying the faxed letter was a standard form NAB document titled “Discharging Security over a Loan with National Australia Bank Ltd” which Sgargetta or his conveyancer had marked in the appropriate boxes. The first page of the facsimile received by the NAB evidenced an error in transmission insofar as the copy of the facsimile received by the NAB showed that three-quarters of one page contained in the facsimile had not been transmitted properly, but was substantially covered or obscured by another page.
13 By facsimile dated 14 November 2008, the NAB returned to Home Conveyancing the incomplete discharge authority document (together with the balance of the facsimile received) and asked that it be fully completed and re-submitted.
14 On 25 November 2008, Home Conveyancing faxed some materials to the NAB, including the contract of sale for the property and completed discharge authority.
15 On 28 November 2008, the NAB advised Home Conveyancing orally that the payout figure was $323,089.99. This sum included the “economic costs” payable under the home loan facility. In practical terms, the economic costs represented the cost of terminating early the fixed rate home loan agreement.
16 On 1 December 2008, the conveyancing transaction did not settle. Sgargetta cancelled the settlement and lodged a complaint with the Financial Ombudsman Service (“FOS”). Shortly after, he cancelled the direct debit authority by which he paid the interest on his home loan, with effect from 8 December 2008. Thereafter, Sgargetta made no further repayments in respect of the loan facility over the Kalorama property. Although it was not apparent from the evidence whether Sgargetta knew, it was the NAB’s practice at the time to put on hold all dealings in relation to a customer transaction where the customer lodged a complaint with the FOS. Until such time as the FOS completed its investigation of the compliant, the bank would take no action to progress the matter, including the pursuit of any alleged claims against the customer in respect of any alleged debt.
17 On about 22 March 2010, the FOS closed its file with respect to the complaint lodged by Sgargetta.
18 On 11 April 2012, the NAB sent the first demand.
19 By letter dated 21 May 2012, the NAB, through its solicitors, sent the second demand to Sgargetta. The letter referred to the default notice and the fact that his account was still in arrears. It advised that, in the circumstances, the NAB was now entitled to require him to pay the full amount owing under his credit contract and mortgage, being the principal, interest, costs, charges and expenses. As at that date, the amount claimed was $409,210.23.
20 On 7 June 2012, the NAB issued proceedings in the County Court of Victoria.
21 On 13 December 2012, the NAB issued a summons for final judgment, returnable on 1 March 2013.
22 Subsequently, there were settlement discussions between the parties and they entered the Deed of Settlement on 5 February 2013.
23 Clause 2.1 of the Deed of Settlement provided that if the defendant gave to the NAB a conditional letter of approval for finance on terms acceptable to the bank for an amount equal to or greater than $299,000 by 5.00pm on 25 January 2013, then this would resolve the dispute between the parties.
24 On 19 February 2013, Sgargetta emailed the bank seeking a copy of the Deed of Settlement signed by the NAB. Later that day, the NAB sent Sgargetta its executed version of the Deed of Settlement. The NAB reiterated its requirement that the timeframes in the Deed of Settlement be adhered to and did not agree to any time extension which was equivalent to the NAB’s delay in providing a signed copy of the Deed of Settlement.
25 On 25 February 2013, Sgargetta sent to the NAB what he described as a “conditional loan offer from Red Rock Mortgages” in order to pay out the loan facility in accordance with the agreed Deed of Settlement. Thereafter, Sgargetta sent to the NAB other documents regarding potential lenders but the NAB did not find the terms of the so-called offers acceptable.
26 Pursuant to the Deed of Settlement, by 5.00pm on 15 April 2013, Sgargetta was obliged to:
(a)pay the NAB the sum of $299,000 in cleared funds; and
(b)withdraw his defence and counter claim in the proceedings.
Sgargetta neither paid the NAB $299,000 in cleared funds nor withdrew his defence and counterclaim on or before 15 April 2013.
Has the NAB prima facie proved its case entitling it to an order for possession of the property?
27 The NAB relied upon a certificate given pursuant to Clause 45 of the memorandum of common provisions numbered AA986 registered with the Land Titles Office. The memorandum of common provisions was that referred to in the mortgage registered over the property. The certificate certified that Sgargetta owed the NAB the sum of $429,628.98 as at 26 August 2013, and that interest was accruing at a rate of $63.33 per day.
28 Sgargetta advanced no reason to doubt (and I do not have any independent reason to doubt) the accuracy of the certificate. In late 2008, Sgargetta owed the bank approximately $300,000 on the loan. Because Sgargetta has paid no interest on the loan since that time, it was not surprising that the indebtedness had increased to the amount set out in the certificate.
29 Further, in circumstances where Sgargetta:
(a)admitted the loan advance by the NAB, the mortgage over the property in favour of the NAB, the receipt of both the first demand and the second demand; and
(b)gave evidence that he ceased making payments to the NAB in December 2008 in respect of the borrowings
I am fortified in my view that the bank has prima facie proved its entitlement to recover from the defendant the debt owed to it.
30 In addition, the defendant gave evidence that the property was just “sitting there” at present. He said that he and his wife looked after it. He said further that his parents-in‑law spent time at the property when they were not travelling. The property was hired out as a short-term weekender and the rental earned was paid to the defendant’s parents-in‑law.
31 In these circumstances, I am satisfied that the requirements of sections 76 and 78 of the Transfer of Land Act 1958 (Vic) have been satisfied and that the bank has prima facie proved its entitlement to an order for possession.
Did the NAB breach its obligations under the relevant consumer credit code by failing to provide Sgargetta a payout figure within seven days?
(a) Identification of the relevant consumer credit code
32 Sgargetta has alleged that the NAB breached its obligations under what was referred to in his pleadings as the “Uniform Consumer Credit Code”. The NAB adopted the same nomenclature. For reasons which follow, it seems to me that the correct consumer credit legislation to which the pleadings ought refer, and against which the plaintiff’s claim is scrutinised in this judgment, is the National Consumer Credit Code (the “National Code”).
33 Prior to the introduction of the national regime, the consumer credit code in force in Victoria was the Consumer Credit (Victoria) Code (the “Code”). The Code was made pursuant to section 5 of the Consumer Credit (Victoria) Act 1995, which effectively adopted or incorporated the then existing provisions of the Consumer Credit (Queensland) Act 1994 into Victorian law. The National Code came into effect on 1 July 2010 pursuant to the National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 (the “Transitional Act”), and comprises Schedule 1 of the National Consumer Credit Protection Act 2009.
34 In Knowles v Victorian Mortgage Investments Limited,[1] Croft J discussed the interaction between the national and state-based consumer credit codes, and in applying the relevant statutory provisions, identified the circumstances in which a contract or other instrument otherwise subject to a state-based consumer credit code should be governed by the National Code.
[1][2011] VSC 611
35 The relevant provisions of the Transitional Act providing for the application of the National Code to arrangements made before commencement of the National Code are contained in Schedule 1, Part 2, Division 1A of the Transitional Act and provide as follows:
“2A Application of the new Credit Code
(1) The new Credit Code applies from commencement.
Note: The new Credit Code does not apply before commencement. It also does not apply in relation to contracts or other instruments that were made before commencement, unless they are carried over instruments (see item 3).”
36 Section 4(1) of the Transitional Act defines a “carried over instrument” as a contract or other instrument that:
“(a) was made before commencement; and
(b) was in force immediately before commencement; and
(c) the old Credit Code of a referring State or Territory applied to immediately before commencement.”
37 The analysis of the credit legislation expounded in Knowles was referred to without disapproval by the Victorian Court of Appeal in Wolfe v Permanent Custodians Limited.[2]
[2][2013] VSCA 331 at [18]-[20]
(b) Application of the National Code
38 Applying the principles of Knowles to the present case, it is clear that the facility agreement:
(a)was made before commencement of the National Code, the agreement being executed 10 December 2007;
(b)was in force immediately before commencement of the National Code; and
(c)was subject to the application of the Credit Code of a referring State or Territory immediately before commencement of the National Code.
On this basis, the facility agreement qualifies as a “carried over instrument” for the purposes of application of the National Code and any relevant relief which may be available to the defendant.
39 The provisions relevant to the giving of a statement containing a payout figure are found in section 83 of the National Code, as follows:
“(1) A credit provider must, at the written request of a debtor or guarantor, provide a written statement of the amount required to pay out a credit contract (other than a continuing credit contract) as at such date as the debtor or guarantor specifies. If so requested, the credit provider must also provide details of the items which make up that amount.
(2) The statement must also contain a statement to the effect that the amount required to pay out the credit contract may change according to the date on which it is paid.
(3) A credit provider must give a statement, complying with this section, within 7 days after the request is given to the credit provider.”
40 I note that section 83 is in the same terms as section 76 of the Code. To that extent, whether the Code or the National Code applies is without practical significance.
41 Sgargetta contends that the letter dated 12 November 2008 from Home Conveyancing is a written request for a payout figure. The letter refers to the amount required to discharge the mortgage, together with other information, which would enable the conveyancer to prepare a release statement pursuant to section 27 of the Sale of Land Act (Vic).
42 Section 27 of the Sale of Land Act (Vic) deals with the release of deposit monies in certain circumstances. The provision spells out when deposit monies can be released to the vendor or as the vendor directs.
43 The NAB contends that the letter is not a written request within the meaning of the credit code.
44 First, the NAB submits that the request is for the purposes of section 27 of the Sale of Land Act (Vic) and not a request contemplated by section 83 of the National Code. The former provision requires information to be given to a purchaser about any mortgage registered in respect of the property the subject of the Contract of Sale. The information, as set out in Schedule 1 of the Sale of Land Act (Vic) includes the amount to discharge the mortgage as at the date of giving the particulars. This date would not necessarily be the same as the day of settlement.
45 Second, even if it is arguable that the document constitutes a written request from Home Conveyancing for the purposes of the National Code, the accompanying document sent to the NAB, namely the NAB Discharge Form, was incomplete. Part of this document is in the following terms:
“Why do I need to complete a Discharge Authority?
A discharge authority needs to be completed and signed by all customers and mortgagors to enable NAB to release a security over a loan.
Until all information is received, the bank is unable to process the request. This may result in settlement being delayed. Incomplete forms will not be accepted and will be returned to the customer. If any fields are not applicable to your request, please mark them N/A.”
46 It is clear from the copy of the facsimile which the NAB received that the Discharge Form was materially incomplete. Without the completed form, the NAB was not willing to give the information sought to Home Conveyancing. The bank needed to be satisfied that Home Conveyancing was an authorised agent of the defendant. The page of the Discharge Authority which the NAB did not receive included the account number, the name of the customer, the name and contact details of the customer’s legal representative, and the customer’s signature authorising the bank to provide to the customer’s legal representative any information or documentation it required about the account and security in order to effect settlement.
47 The NAB sent back to Ms Maric of Home Conveyancing a copy of the obscured and incomplete facsimile it received so Ms Maric knew on 14 November that the NAB had not received a legible and complete copy of the discharge documentation on 13 November. Home Conveyancing did not send a complete copy of the documentation back to the NAB until 25 November 2008. Ms Maric was unable to explain the delay in responding to the bank’s request that Home Conveyancing resubmit the documentation.
48 The NAB gave Ms Maric a verbal payout figure on Friday 28 November 2008. After he received notification of the payout amount, Sgargetta called off the settlement scheduled for Monday 1 December 2008. Hence, it was the defendant who cancelled the settlement within the seven day period allowed for the bank to respond (assuming there was a written request within section 83 of the National Code).
49 I note that during the trial, reference was made to the letter written by Damien Colella, dated 6 November 2008, which referred to an approximate payout figure of $299,000. That figure was given in response to the defendant’s oral request for a payout figure. According to Melissa Thomas, the Operational Manager for Late Stage Mortgage Collections at the NAB, this document did not constitute a definite payout figure but was an indicative or approximate amount. It was said that there was no actual date of settlement specified at that time. This was important because the nomination of the payout figure is usually time critical. I do not need to resolve this issue because it is not strictly necessary for the determination of the case. However, I consider the NAB’s contention on this issue is very likely correct.
50 To the extent that there was a discrepancy between the approximate figure provided in the 6 November letter and the verbal payout figure provided on 28 November, it was attributable to the NAB’s failure to take into account the economic costs as referred to in Clause 16 of the General Terms of the Facility Agreement. Economic costs are said to be an amount equal to the bank’s reasonable estimate of its loss (if any) arising from an economic costs event. The loss usually arises because of changes in market interest rates between the start of the fixed rate period and the occurrence of the economic cost event. Where a loan amount has a fixed interest rate (as this loan did), an economic cost event occurs if, before the end of the fixed rate period, the borrower repays all of the amount owing on the account. The significance of economic costs becomes apparent in a situation where the bank has incurred a wholesale borrowing cost at a particular rate for a fixed period and, when the loan to the bank’s customer is terminated early, the prevailing market interest rate is lower. Accordingly, there is a gap between the interest which the bank can recover from a borrower of the funds and the cost to the bank in repaying the lender from whom it sourced the funds.
51 While the letter from Home Conveyancing dated 12 November 2008 constituted, on one view, a written request for a payout figure, I do not regard the NAB’s failure to respond in writing within seven days as a breach of section 83 of the National Code. It was clear from the evidence that the fax sent to the bank was incomplete or materially obscured. The obscured page contained the signature of Sgargetta which authorised the NAB to provide relevant information about his account and the property to Home Conveyancing. Had the NAB supplied such private information pertaining to Sgargetta to Home Conveyancing without the customer’s authority, the bank would have been potentially liable to the customer for acting in breach of its duties.
52 Further, I do not consider it would be appropriate to find the NAB contravened section 83 when Sgargetta himself cancelled the settlement, cancelled the debit authority pursuant to which he paid the interest due on the bank’s loan, and lodged a compliant with the FOS. These actions all related to the loan in respect of which the payout details were sought. As a result of the defendant’s conduct, any formal response by the NAB became academic especially when the defendant took these actions before the expiration of seven days from the NAB’s receipt of the complete written request from Ms Maric.
(c) Interaction with the NAB’s entitlement to recovery
53 Even if I considered that the NAB had contravened section 83 of the National Code, it would not have affected that part of my decision relating to the establishment of the NAB’s entitlement to recover the debt and possession of the property. I say this for several reasons.
54 First, the bank did provide a verbal payout figure on 28 November 2008 so Sgargetta, or his agent, Home Conveyancing, knew before settlement the amount required to discharge the bank’s security.
55 Second, Sgargetta referred in his amended defence to the court using its power under section 77 of the Code (which, for reasons discussed above, should more accurately refer to the equivalent provision in section 84 of the National Code) to determine the amount payable to the plaintiff by way of the then current indebtedness. Because the court in making the determination would have had regard to the provisions of the agreement between the parties (including interest provisions), it is likely that the court would have specified an amount payable which was substantially similar to the amount claimed by the NAB.
56 Third, even if the NAB had contravened section 83 of the National Code, it seems that such contravention would not have provided a basis in law to contest the bank’s entitlement to possession of the property. In Monas v Perpetual Trustees Victoria Ltd,[3] the parties entered a $330,000 loan agreement in May 2004 pursuant to which the mortgagee granted a registered mortgage in favour of the mortgagee over a property at Liverpool. In January 2009, the mortgagee issued a default notice. The defaults specified in the notice were not remedied, and the mortgagor commenced possession proceedings in April 2009. The mortgagor claimed that the default notice did not comply with section 80(3) of the Consumer Credit (New South Wales) Code 1996 (the “NSW Code”) and accordingly was invalid. While challenging that claim, the mortgagee, by way of a defensive measure, filed a motion for authorisation to begin the proceedings nunc pro tunc should its default notice be found defective.
[3](2011) 80 NSWLR 739
57 Section 80 of the NSW Code was in the following terms:
“80 Requirements to be met before credit provider can enforce credit contract or mortgage against defaulting debtor or mortgagor
(1) Enforcement of credit contract. 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—
(a)the credit provider has given the debtor, and any guarantor, 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
(b) the default has not been remedied within that period.
Maximum penalty – 50 penalty units.
(2) Enforcement of mortgage. A credit provider must not begin enforcement proceedings against a mortgagor to recover payment of money due or take possession of, sell, appoint a receiver for or foreclose in relation to property subject to a mortgage, unless the mortgagor is in default under the mortgage and—
(a)the credit provider has given the mortgagor a default notice, complying with this section, allowing the mortgagor a period of at least 30 days from the date of the notice to remedy the default; and
(b) the default has not been remedied within that period.
Maximum penalty – 50 penalty units.
(3) Default notice requirements. A 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.
(3A) Combined notices. Default notices that may be given under subsections (1) and (2) may be combined in one document if given to a person who is both a debtor and a mortgagor.
(4) When default notice not required. A credit provider is not required to give a default notice or to wait until the period specified in the default notice has elapsed before beginning enforcement proceedings, if—
(a)the credit provider believes on reasonable grounds that it was induced by fraud on the part of the debtor or mortgagor to enter into the credit contract or mortgage; or
(b)the credit provider has made reasonable attempts to locate the debtor or mortgagor but without success; or
(c)the Court authorises the credit provider to begin the enforcement proceedings; or
(d)the credit provider believes on reasonable grounds that the debtor or mortgagor has removed or disposed of mortgaged goods under a mortgage related to the credit contract or under the mortgage concerned, or intends to remove or dispose of mortgaged goods, without the credit provider’s permission or that urgent action is necessary to protect the mortgaged property.
(5) Non-remedial default. If the credit provider believes on reasonable grounds that a default is not capable of being remedied—
(a) the default notice need only specify the default; and
(b)the credit provider may begin the enforcement proceedings after the period of 30 days from the date of the notice.
(6) Other law about mortgages not affected. This section is in addition to any provision of any other law relating to the enforcement of real property or other mortgages and does not prevent the issue of notices to defaulting mortgagors under other legislation. Nothing in this section prevents a notice to a defaulting mortgagor under other legislation being issued at the same time, or in the same document, as the default notice under this section.”
58 The mortgagor argued that the notice given in that case did not comply with section 80(3) because it did not clearly tell the recipient that a default of the same kind occurring during the grace period must be remedied before the original notice expires. The mortgagor then argued that the opening words of section 80(1) to the effect that “a credit provider must not begin enforcement proceedings” showed that the legislation intended that the requirements of section 80(3) were mandatory. However, the trial judge found that while section 80 provided a penalty for commencing proceedings without serving a notice, it contained no express provision that the credit contract or mortgage was unenforceable, and hence proceedings commenced in contravention of the section were not a nullity, nor did section 80 require that they be dismissed.
59 Sections 83 and 84 of the National Code are similar to provisions in the NSW Code. This also applies to provisions such as section 124 of the National Code, which has a counterpart in the NSW Code, and this provision contributed to the ruling in the Monas case. Because Perpetual Trustees Victoria Limited was permitted to pursue the defendant in Monas notwithstanding the terms of section 80 of the New South Wales Code, it seems that the NAB should also be allowed to maintain its action against Sgargetta.
If NAB did breach section 83 of the National Code (which NAB denies), what amount should Sgargetta pay to NAB pursuant to section 84 of the National Code?
60 In case it is later found that I should have determined that the NAB breached the terms of the National Code and also claimed an incorrect amount from Sgargetta, I shall address the issue of the amount I would have found that Sgargetta was liable to have paid the NAB.
61 The NAB claimed that the prima facie amount which Sgargetta should pay pursuant to the facility was $429,628.98 as at 26 August 2013 (excluding enforcement expenses). This amount, which is set out in the certificate, appears to represent the whole amount owing for the principal and interest for the period from 1 December 2008 until 26 August 2013.
62 I am not satisfied that the NAB should necessarily recover interest for the whole of that period. In particular I am minded to require the bank to forgo interest for much of the period between March 2010, at which time the enquiries of the FOS ceased, and May 2011, at which time the bank sent the default notice dated 11 May 2011 regarding the breach of the terms of the facility. During this period the NAB took no, or no effective, measures to enforce its alleged rights against the defendant. Moreover, the bank gave no detailed explanation of its conduct during that period about why it took so long to act.
63 It appears from the lender’s certificate produced pursuant to clause 45 of the Memorandum of Common Provisions incorporated into the mortgage that interest was accruing under the mortgage at a rate of $63.33 per day at the date of the certificate. Plainly the interest rate might have varied during the course of the mortgage. However, using that daily rate as a guide in what is of necessity an exercise in approximation, I consider that 1 year’s interest at that rate would total about $23,115. If I were of the view that the NAB breached section 83 of the National Code and I was called upon to make a determination of the amount to be paid, I would order Sgargetta to pay the NAB $406,513.00.
If NAB breached section 83 of the Code (which the NAB denies), is Sgargetta entitled to any compensation?
64 I consider that Sgargetta has no entitlement to compensation as a result of any alleged contravention of section 83 of the Code. Assuming, contrary to my finding, that there was a contravention of the Code, I do not consider that such a contravention caused Sgargetta any loss for which he should be compensated. While I accept that the payout figure notified on 28 November 2008 was greater than the amount set out in Colella’s letter of 6 November 2008, Sgargetta did not prove how any alleged contravention had the consequences and financial impact for which Sgargetta has now claimed damages.
65 I note that:
(a)Sgargetta entered into the contract for the purchase of the property at Sassafras on about 8 October 2008 before he had any notification from the NAB as to the payout figure in respect of the loan facility and mortgage over the property. To that extent, he was already contractually committed to the purchase transaction in circumstances where he had not relied on information from the bank regarding the payout figure.
(b)Sgargetta chose not to settle or enforce the contract on the sale of the Kalorama property. Sgargetta sold the property for $385,000. Had he chosen, Sgargetta could have insisted upon settlement. At least if he had done this, the amount of money owing to the NAB might well have not escalated in the way it has and he would have mitigated his loss.
66 I shall deal later in greater detail with Sgargetta’s claim for damages.
67 I find that there is no substance in the defendant’s allegations that the NAB acted unconscionably regarding the issue of the payout figure. The amended defence claimed that the NAB contravened section 51AC of the Trade Practices Act (or alternatively, the newer sections 21 and 22 of the Australian Consumer Law as contained within Schedule 2 of the Competition and Consumer Act 2010) through its unconscionable conduct. In general terms, these provisions prohibit unconscionable conduct in business transactions.
68 Section 51AC is broader in its application than the common law concept of unconscionability. In Australian Competition and Consumer Commission (ACCC) v Dukemaster Pty Ltd,[4] Gordon J summarised the position regarding unconscionable conduct under s51AC as follows:
“(a) The scope of s 51AC is wider than that of s 51AA. The meaning of unconscionable for the purposes of s 51AC is not limited to the meaning of the word according to established principles of common law and equity ...
(b) The ordinary or dictionary meaning of unconscionable, which involves notions of serious misconduct or something which is clearly unfair or unreasonable, is picked up by the use of the word in s 51AC. When used in that section, the expression requires that the actions of the alleged contravenor show no regard for conscience, and be irreconcilable with what is right or reasonable. Inevitably the expression imports a pejorative moral judgment ...
(c) Normally, some moral fault or moral responsibility would be involved. This would not ordinarily be present if the critical actions are merely negligent. There would ordinarily need to be a deliberate (in the sense of intentional) act or at least a reckless act ...”
[4][2009] FCA 682
69 The Victorian Court of Appeal in Director of Consumer Affairs Victoria v Scully and Gilfillan[5] has recently collected the major authorities regarding statutory unconscionability.[6] An important aspect of the case is the principle that for conduct to be regarded as unconscionable within the Fair Trading Act (and equivalent legislation), it must have the degree of delinquency which can properly be described as “moral opprobrium”.[7]
[5][2013] VSCA 292
[6]Ibid at [26]-[36]
[7]Ibid at [24]
70 The conduct of the NAB with respect to Mr Sgargetta in this transaction has been unsatisfactory in a number of respects. First, it seems clear that when Colella provided the estimate on 6 November 2008, he made a mistake by leaving out of the assessment the fees incurred for early termination. Second, once the bank gave the correct figure shortly before settlement, there was only a short time left for Sgargetta to rearrange the payments to be made in order to finalise the transaction. Third, at that point, Colella would not take calls from the defendant, although previously he had been easily contactable.
71 However, even if the bank’s conduct described above were careless or thoughtless, in my view, it does not have the intentionally unreasonable, unfair and immoral nature required to describe it as “unconscionable” for the purposes of the Trade Practices Act or the Australian Consumer Law.
Is Sgargetta entitled to specific performance of the Deed of Settlement dated 5 February 2013 entered into by the parties?
72 I do not accept Sgargetta’s contention that he is entitled to an order for specific performance regarding the Deed of Settlement. In order to explain this finding, I need to examine the relevant facts and issues as follows:
· Was the Deed of Settlement void for uncertainty insofar as it gave the NAB the exclusive power to decide whether the terms of the Deed of Settlement were satisfied?
· Did the NAB honestly consider that the so-called offers for refinance which Sgargetta submitted to the bank in February 2013 were not acceptable?
· Did Sgargetta tender to the NAB a cheque for $299,000 by 15 April 2013 in satisfaction of the Deed of Settlement.
(a) Facts
73 Notwithstanding the contested nature of the proceedings, there were a number of significant matters not in dispute. They were as follows:
· Sgargetta was and remains the registered proprietor of the property the subject of the proceeding;
· the existence and terms of the NAB Choice Package Fixed Rate Home Loan;
· the mortgage dated 4 January 2007 over the property registered at the Land Titles Office and the terms of the mortgage;
· the advance of $300,000 by the NAB to Sgargetta pursuant to the loan agreement and the mortgage;
· Sgargetta’s receipt of the default notice dated 11 April 2012 and the demand dated 21 May 2012; and
· Sgargetta had not made any payments to the NAB pursuant to the loan agreement since 1 December 2008.
74 On 5 February 2013 the parties entered into a Deed of Settlement. Clause 2 of the terms read as follows:
“2.1NAB will agree to adjourn the hearing of its Summons, provided the following conditions are complied with, time being of the essence:
(a)by 5pm on 25 February 2013 Mr Sgargetta must provide to NAB solicitors, Gadens Lawyers, a conditional letter of approval for finance on terms acceptable to NAB and for an amount equal to or greater than $299,000;
(b)by 5pm on 15 April 2013 Mr Sgargetta must:
(i)pay NAB the sum of $299,000 in cleared funds; and
(ii)withdrew his Defence and Counter Claim in the proceedings; and
(c)Mr Sgargetta must otherwise comply with the terms and conditions of this deed.
2.2Provided the conditions in Clause 2.1 above are complied with, NAB will:
(a)accept $299,000 in full and final satisfaction of the amount claimed by Mr Sgargetta under the Home Loan Facility, the Mortgage and any claims in the Proceedings;
(b)discontinue the Proceedings on the basis that each party pay its own costs; and
(c)provide to Mr Sgargetta:
(i)an original and duly executed discharge of the Mortgage and registrable form; and
(ii)the original Certificate of Title for the Property.”
75 Sgargetta contended that he provided a conditional letter of approval for finance in accordance with the specified terms and offered the NAB a cheque for $299,000 before 15 April 2013.
76 On 25 February 2013 at 4.32pm, Sgargetta emailed a conditional loan offer from Red Rock Mortgages in order to pay out the loan facility in accordance with the Deed of Settlement. Sgargetta sent the letter in circumstances where he told the NAB that Red Rock was the only financier who had conditionally approved the finance because other financiers had been waiting to receive a copy of the Deed of Settlement signed by the NAB before replying.
77 The NAB provided a copy of the Deed of Settlement signed by or on behalf of the bank only on 19 February, which was approximately 11 days after Sgargetta signed the Deed. Despite Sgargetta’s request for an extension of time, the NAB refused and insisted that it would not grant any such extension to reflect the period of its delay in providing a signed copy of the Deed.
78 The loan document accompanying the 25 February 2013 email to the NAB was headed “Loan Proposal” and dated 11 February 2011. On its face, it was said to have been prepared for [email protected]. The document revealed that the minimum loan amount was $200,000 and the maximum loan account was $1 million. Cybil Sgargetta was the applicant and her signature appeared on the document, together with the date of 25 February 2013.
79 NAB’s position appeared to be that the document did not satisfy Clause 2.1(a) of the Deed of Settlement because:
(a) it was not a conditional letter of approval for finance, but a loan application submitted by Cybil Sgargetta to Red Rock Mortgages;
(b) the document was not signed by the purported lender;
(c) the minimum amount to be lent under the proposal was $200,000, which was less than the minimum amount required by the bank;
(d) the letter did not otherwise contain terms acceptable to the bank.
80 Sgargetta said that the loan proposal document was a loan offer. Whether or not it was a proposal by Cybil Sgargetta or an offer to her by Red Rock or an offer by Red Rock Mortgages (albeit to Cybil and not to the defendant), it was not, on its face, an offer for at least $299,000. This was the agreed sum necessary to achieve settlement. To that extent, there was no guarantee that the requisite amount was available to pay out the bank.
81 Subsequently, by email dated 26 February 2013 at 9.02am, Kevin Pringle, of Gadens Solicitors on behalf of the NAB, advised Sgargetta that the Red Rock proposal did not satisfy Clause 2.1(a) and the bank intended to go ahead with its application to strike out the defence and to obtain summary judgment against the defendant. The email also said:
“Accordingly we confirm that on Friday 1 March 2013, we will proceed with our client’s Summons to have your Defence and Counter Claim struck out and summary judgment entered in favour of our client.
If you are able to provide an acceptable letter of approval before Friday 1 March 2013, we will seek our client’s further instructions in respect of its Summons.”
82 Later the same day at 2.48pm, Sgargetta sent an email to Pringle attaching what Sgargetta called an amended loan offer from Red Rock Mortgages. Sgargetta said that notwithstanding any appearance to the contrary, the attached “Loan Proposal” was a “legitimate and formal loan offer approval to clients”. The amended offer, dated 26 February 2013, noted that the proposal was prepared for Cybil Sgargetta. The minimum loan amount again specified $200,000. So there was no offer, either within the timeframe specified in the Deed of Settlement, or at all for a loan of $299,000.
83 At 4.38pm on 26 February 2013, Pringle responded to the defendant rejecting the most recent so-called conditional letter of approval. Pringle’s email said that a letter of approval was a letter from the proposed financier setting out the details and terms on which the financier was prepared to provide funding to the borrower, together with any conditions for the loan to proceed. He said that the latest document was headed “Loan Proposal”, was first signed on the previous day by Sgargetta’s wife, and did not indicate that any funds would be made available to Sgargetta or at all. Accordingly, the bank intended to continue with its court proceedings on 1 March 2013.
84 On 27 February 2013 at 2.05pm, Sgargetta emailed Pringle what Sgargetta called a letter of offer from a private lender, ABNZ Investments Pty Ltd. This letter, addressed to Cybil Sgargetta, offered a loan of $299,000 on the terms and conditions set out. The offer was available for acceptance for a period of 30 days and was an interest only loan for 12 months. The offer was conditional upon:
(a) a satisfactory valuation being completed on the property;
(b) confirmation of insurance cover via a certificate of currency.
85 By an email at 6.49pm on 27 February 2013, Pringle advised Sgargetta that the latest letter of offer was not acceptable to the bank. The bank regarded a conditional letter of offer as acceptable when it was:
· signed by the lender;
· on letterhead;
· addressed to the borrower (which in the context meant Sgargetta);
· from a recognised and licensed lending institution.
Pringle said that none of the letters of offer thus far provided was acceptable to the bank and, hence, the application would proceed on 1 March 2013.
86 In her evidence, Melissa Thomas, the Operational Manager of Late Stage Mortgage Collections at the NAB, said that the document sent by Sgargetta (and referred to in paragraph 76 above), was not satisfactory to the bank because:
· it was not a letter of offer;
· it was not signed by the financier, indicating its agreement to lend to Sgargetta;
· the applicant was Cybil Sgargetta, not the defendant – there were no details regarding the defendant;
· it was not sufficiently certain that the NAB would be paid the sum of $299,000.
87 Ms Thomas said that the document forwarded to the bank by Sgargetta on 26 February 2013 at 2.48pm (referred to in paragraph 82 above), was not acceptable because:
· it was not addressed to Sgargetta;
· it was not a loan offer or approval;
· it was not signed by the prospective lender;
· it did not refer to a specific loan amount of at least $299,000.
88 Ms Thomas also said that the document which Sgargetta sent to the bank as the final purported offer of finance (referred to in paragraph 84 above), was not satisfactory to the NAB because:
· the applicant was Cybil Sgargetta, not the defendant, and there were no details pertaining to the defendant in the document;
· it was not addressed to the defendant;
· the lender had not signed the document.
In effect, there was insufficient certainty that the proposed lender would advance any funds for, or on behalf of, Sgargetta.
89 Sgargetta was critical of the NAB’s attitude to the alleged offers of finance. In questioning Ms Thomas, Sgargetta pointed out that there was no NAB document which precisely set out what was necessary for an offer to be considered acceptable to the bank.
90 When questioned about the alleged offer from ABNZ Investments Pty Ltd, Ms Thomas said that the company was not familiar to anyone in her department and that, after conducting searches, the NAB found that the company was not a registered lending institution. This raised concerns about the likelihood of the NAB receiving any funds.
(b) Is the Deed of Settlement void
91 Firstly, a contract is not void for uncertainty simply because one party has the exclusive power to decide whether a particular term is satisfied.
92 In Meehan v Jones,[8] the vendors, by contract dated 14 March 1979, agreed to sell to Meehan certain land at Roma in Queensland upon which an oil refinery had been built. The contract included the following special condition:
“This contract is executed by the parties subject to the following:
(a)the purchaser or his nominee entering into a satisfactory agreement or arrangement with AMPOL Petroleum Ltd for the supply of a satisfactory quantity of crude oil…
(b)the purchaser or his nominee receiving approval for finance of satisfactory terms and conditions in an amount sufficient to complete the purchase hereunder.”
[8](1982) 149 CLR 571
93 Before time expired for the fulfilment of the special condition, the vendors wrote to Meehan advising that they were rescinding the contract because it was void for uncertainty. The vendors thereupon entered into a contract with another purchaser. The purchaser Meehan sued and lost both at trial and on appeal to the Queensland Court of Appeal. However, the High Court held that neither special condition was void for uncertainty and an order for specific performance was granted.
94 In the course of his judgment, Mason J, with whom Wilson J agreed, said at 589-590:
“To say that a ‘subject to finance’ or ‘subject to finance on satisfactory terms and conditions’ clause denotes finance which is satisfactory to the purchaser is not to say that he has an absolute or unfettered right to decide what is satisfactory. To concede such a right would certainly serve the object of the clause in protecting him. But it would do so at the expense of the legitimate expectations of the vendor by enabling the purchaser to escape from the contract on a mere declaration that he could not obtain suitable finance. With some justification the vendor can claim that the agreement made by the parties is not an option but a binding contract which relieves the purchaser from performance only in the event, acting honestly, or honestly and reasonably, he is unable to obtain suitable finance.
There is in this formulation no element of uncertainty – the courts are quite capable of deciding whether the purchaser is acting honestly and reasonably. The limitation that the purchaser must act honestly, or honestly and reasonably, takes the case out of the principle that: ‘…where words which by themselves constitute a promise or accompanied by words which show that the promisor is to have a discretion or option as to whether he will carry out that which purports to be the promise, the result is that there is no contract on which the action can be brought’. …The judgment of the purchaser as to what constitutes finance on satisfactory terms is not an unfettered discretion – it must be reached honestly, or honestly and reasonably.
It has often been held that, where under a contract the delivery of a ship or of goods is expressed to be subject to the buyer's approval, the buyer may disapprove so long as he acts honestly (Repetto v. Friary Steamship Co. Ltd. (1901) 17 TLR 265; Haegerstrand v. Anne Thomas Steamship Co. Ltd. (1904) 10 Com Cas 67, at p 70; affd 10 Com Cas 71 (CA)). In the last case Vaughan Williams L.J. (1904) 10 Com Cas, at p 72 spoke of the relevant condition making "the view of the purchaser final if honestly arrived at". See also Diggle v. Ogston Motor Co. Ltd. (1915) WN 37; and especially Niarchos (London) Ltd. v. Shell Tankers Ltd. (1961) 2 Lloyd's Rep 496, at pp 507-509. In Canada Egg Products Ltd. v. Canadian Doughnut Co. Ltd. (1955) 3 DLR 1 the Supreme Court of Canada held that a provision in a contract which entitled the purchaser to return the goods if they were not "satisfactory" was not uncertain and that his rejection of the goods was authorized by the provision if he honestly rejected them.
There are cases in which it has been said that a capricious withholding of approval will not do (Dallman v. King [1837] EngR 1056; (1837) 4 Bing (NC) 105, at p 109 (132 ER 729, at p 730); Repetto (1901) 17 TLR, at p 265). Whether "capricious" is there used in the sense of "not honestly" is uncertain, though McNair J. in Niarchos (1961) 2 Lloyd's Rep, at p 508 thought that "capriciously" was used by Tindal L.C.J. in Dallman in a different sense, perhaps signifying "arbitrarily" or "without reasonable cause" - see Secured Income Real Estate (Australia) Ltd. v. St. Martins Investments Pty. Ltd. [1979] HCA 51; (1979) 144 CLR 596, at p 609. There was no suggestion in any of the cases mentioned in this and the preceding paragraph that the buyer's right to withhold approval led to invalidity of the contract on the ground of uncertainty.”
95 Consistent with Meehan’s case, I consider it clear that the Deed of Settlement is not relevantly uncertain and void because of the decision which the NAB is entitled to make regarding the satisfactoriness of the offer of refinance. The NAB is entitled to make this decision, but in doing so, it must act honestly.
(c)Did the NAB honestly believe the alleged offers of refinance were unacceptable?
96 Having considered the documentary evidence and heard Ms Thomas’ oral evidence, I accept that the NAB acted honestly in not accepting that the alleged conditional letters of offer from the financiers complied with the Deed of Settlement. In the circumstances referred to, and where the bank had an imminent hearing date set for its application, I accept that the bank honestly held concerns in February 2013 regarding the likely receipt of funds from another financier. As a result of the finding, there is no aspect of the NAB’s conduct regarding the Deed of Settlement which I would describe as unconscionable as alleged by Sgargetta.
(d)Did Sgargetta tender to the NAB a cheque for $299,000 by 15 April 2013 in satisfaction of the Deed of Settlement?
97 At trial, Sgargetta and the NAB provided conflicting evidence about whether Sgargetta tendered a cheque for $299,000 by 15 April 2013 in satisfaction of the Deed of Settlement. Sgargetta submitted that he tendered such a cheque and the NAB rejected the tender. The NAB submitted there was no formal tender of a cheque.
(i) The defendant’s evidence
98 During the hearing, Sgargetta asserted that he made attempts through his former counsel, Doug Shirrefs, to tender a cheque to the NAB. In particular, the defendant alleged that:
(a) Mr Shirrefs phoned Mr Segal on 18 March 2013, confirming the availability of a cheque in satisfaction of the Deed of Settlement;
(b) a cheque was produced in court at the hearing of the plaintiff’s application for summary judgment on 20 March 2013 before His Honour Judge Anderson; and
(c) a copy of the cheque was emailed to the NAB on 3 April 2013.
99 Sgargetta argued that when the cheque was produced in court on 20 March 2013, it was “rejected” by Mr Segal as counsel for the NAB at the hearing. According to the defendant, Mr Segal told His Honour Judge Anderson that he was instructed not to accept the cheque in court.
100 I note that at the trial, Sgargetta did not seek to call Mr Shirrefs to give evidence to support his case.
(ii) The NAB’s evidence
101 The NAB submitted that, save for the occasion in court on 20 March 2013, the references to the cheque were in the context of without prejudice communications.
102 In response to Sgargetta’s evidence regarding occasions on which the cheque was allegedly tendered, counsel for the NAB pointed out that the email sent to the NAB on 2 April 2013 contained a reference to a “Calderbank letter”, and hence could not be further scrutinised by the court by reason of its being a “without prejudice” communication.
103 Ms Thomas, for the NAB, gave evidence that there was no “tender” of a cheque, although she was not in court on 20 March when the cheque was allegedly produced. She subsequently became aware of a cheque being brought to court that day. When re-examined by Mr Segal, Ms Thomas stated that she had learned of the existence of the cheque as a result of a conversation between Mr Segal and the NAB’s in-house counsel, Peter Fieldhouse.
104 For his part, Mr Segal stated that he checked his emails from Mr Shirrefs and could not identify any email dealing with tender of a cheque.
105 In relation to the alleged production of a cheque in court on 20 March 2013, there was disagreement as to what was said and done in court on that day. Sgargetta gave evidence that a cheque was produced in court, and that Mr Segal rejected the tender of the cheque.
106 A copy of the transcript of the hearing before Judge Anderson on 20 March 2013 was received into evidence. I cannot identify in the transcript any:
(a) formal tender by or on behalf of Sgargetta of a cheque for $299,000;
(b) rejection of such tender by the NAB.
Rather, the most relevant part of the transcript states:
“MR SHIRREFS: … Your Honour might form the view that the clause 2.1A [of the Deed of Settlement] is severable, which would mean then that the production of $299,000 on or before 5 o’clock on 15 April this year would amount to performance. In that respect, curiously, we have a bank cheque today for $299,000. So that’s the position, Your Honour.
HIS HONOUR: Mr Segal, do you say that there’s not an arguable defence in this case?
MR SEGAL: Yes we do, Your Honour.”
107 When viewed in its entirety and in context, it seems to me that Sgargetta’s evidence about the alleged tender of the cheque on 20 March 2013 is inconsistent with, and not supported by, the transcript.
108 I do not doubt the sincerity of Sgargetta’s belief that he tendered a cheque to the NAB. However, it appears that Sgargetta does not appreciate the difference between:
(a) open and without prejudice communications;
(b) the legal doctrine of tender and having a cheque available to give the opposing party (should that party agree to the conditions, if any, upon which it is offered).
As a layman, Sgargetta could not be expected to be familiar with such distinctions. However, they do have legal significance and cannot be ignored. Further, I note that in the final version of Sgargetta’s defence and counterclaim prepared by Messrs Shirrefs and Cole of counsel, there is no defence of tender pleaded. Consistent with the requirements of rule 13.07 of the County Court Civil Procedure Rules 2008, such a defence must be specifically pleaded. If it had been truly available, I would have expected counsel to plead it.
109 In these circumstances, I find that there was no formal tender by Sgargetta of a cheque for $299,000 to the NAB, nor did the NAB reject any such tender.
Sgargetta’s claim for damages
110 Sgargetta has counterclaimed for approximately $2.7 million as a result of the alleged breach of the credit code and other unlawful or wrongful conduct by the NAB in its dealings with Sgargetta. Accordingly, I now address that claim.
111 Sgargetta sought to tender in support of his claim for damages, a report by Lanzon & Co, certified practicing accountants, dated 28 June 2013.
112 The NAB objected to Sgargetta’s reliance upon the report. The grounds of objection included, first, that the underlying material referred to in the report was not produced in discovery and, second, the author was not being called to give evidence. After some discussion in the hearing, it was accepted that the document could go into evidence on the basis that it was not an expert report but set out the categories of loss which Sgargetta claimed, repeated his instructions and made some calculations on the basis of those instructions.
113 The categories of loss which Sgargetta claimed were as follows:
(a) Business and property investment losses of $307,851. These were said to be the total direct losses suffered in the financial years ending 30 June 2009 to 30 June 2012 inclusive. As I understand it, these losses were profits which Sgargetta contends he would otherwise have made during the period stated. I note that the accountants expressed the view that they had not yet determined the loss suffered by Sgargetta in his mortgage broking business. The report disclosed that the annual gross earnings of the mortgage broking business declined from $23,843 in the financial year ending 30 June 2009 to $5,844 in the financial year ending 30 June 2012.
(b) Gross rental income foregone at Driffield Crescent, Sassafras between 15 January 2009 and 1 March 2010 in the sum of $27,889. This was said to refer to the personal occupation of an otherwise available rental income property which was needed to house Sgargetta and his wife after vacating the Kalorama property.
(c) Credit card and other borrowings from financiers to meet working capital requirements totalling $67,838.33. There was no proper evidence on how the NAB was responsible for loans needed to meet working capital requirements.
(d) Interest of $110,036.27 in respect of the non-refunded deposit on the failed sale of the property. It was said that L and C Waldron entered a loan agreement to advance $185,000 as a non-refunded deposit on the failed sale of the Kalorama property at an interest rate of 12.5 per cent per annum from the period from 1 December 2008 to 28 August 2013. It was not made clear to me what the sum represented or how the bank was responsible for causing such an alleged loss.
(e) Foregoing the first home owners grant and the stamp duty concession in the sum of $24,000. It appears that if the transaction had been properly completed then Sgargetta, or his wife, might have received the benefit of the first home buyers grant and the stamp duty concession ancillary to that. This was not established on the facts. Even the document produced by Lanzon & Co states, regarding this component of the claim, “[t]his quantum value has not been substantiated…”.
(f) Monies owed to a financial consultant in respect of services rendered to Sgargetta’s finance broking business in the sum of $15,600. Sgargetta did not make clear why the NAB should be responsible for the monies paid by Sgargetta to a financial consultant in relation to his financial broking business.
(g) Monies owed to San Andrea Pty Ltd in the sum of $128,212.94. This part of the claim comprises two elements:
(i) a loan of $100,000 together with interest of $18,857.11 for the period 24 February 2010 to 23 June 2011 used to help maintain Sgargetta’s business activities;
(ii) $9,355.83 being interest foregone on the setting aside of a sum of $299,000 pending the outcome of the case.
Again, Sgargetta did not advance a clear argument about why the NAB should be responsible for these alleged losses.
(h) Costs associated with the work done by Sgargetta’s father in the sum of $8,000. This appears to be a claim for the cost to Sgargetta’s father in either attending court and/or doing work connected with the litigation. I consider such costs might possibly be awarded only if Sgargetta otherwise succeeded in his claim against the bank. In the present case, based on my findings, such costs are not recoverable.
(i) Payment for the time spent by Mr Sgargetta in relation to the dispute in the sum of $42,120. At his highest, this claim might have some possible merit if Sgargetta otherwise succeeded in his claim against the NAB. By reason of my findings, these costs are not recoverable.
114 In addition, Sgargetta claimed damages for his personal wellbeing and health in the sum of $2 million. He referred to a letter dated 30 January 2013 from Dr Paul Kertes, who was said to be a cardiologist located at 210 Burgundy Street, Heidelberg, in Victoria. The letter was in the following terms:
“To whom it may concern.
Upon recent and thorough examination of Elliott Sgargetta’s heart, I hereby confirm that he has hypertrophic cardiomyopathy.
This is a potentially life threatening heart condition and any activities that could cause excessive anxiety and stress on the heart should be avoided.”
115 I note that the opinion set out in the letter purportedly signed by Dr Kertes contravened the requirements of the Evidence Act 2008 (Vic) and the court rules regarding admissibility. In any event, even at its highest, the letter does not substantiate, to my satisfaction:
· the extent, details or cause of Sgargetta’s heart condition;
· the quantification of the financial consequences which would flow, assuming the condition and the NAB’s legal responsibility for it were properly established.
116 In the absence of any satisfactory proof to the requisite standard, I do not find that Sgargetta proved the NAB was legally responsible for any heart condition which he has.
117 Each category of damage which Sgargetta claims assumes that the NAB is responsible for the loss. There are two problems which Sgargetta faces with these claims. First, I do not regard the NAB as having caused and been legally responsible for the losses claimed. Second, even if the NAB had caused and been responsible for those losses, the nature and quantum of the losses were not satisfactorily proved.
118 I have found that the NAB prima facie established that the debt owed by Sgargetta and the bank’s entitlement to possession of the property. I accept that, from Sgargetta’s perspective, the bank made an erroneous estimation in November 2008 of the payout amount by understating the figure by about $23,000. Assuming the request was a formal request under the applicable consumer credit code, it was not a breach of the code and it was not unconscionable conduct by the bank or otherwise in contravention of the Trade Practices Act or Australian Consumer Law. That being so, it seems to me that there is no proper basis upon which to find that the NAB is legally responsible for each of the categories of loss claimed.
119 Moreover, in my view, Sgargetta failed to adequately address his own conduct in relation to his present position. He did not give any evidence or make any submissions about any attempts to mitigate the loss. He did not give any evidence regarding attempts to raise the extra funds of approximately $23,000 required to pay out the NAB. Nor did he give any evidence about why he failed to insist upon settlement of the sale of the Kalorama property. The purchase price for this property was $385,000 and if the sale had been completed, Sgargetta would have been in a position to satisfy the NAB. Instead, he did not insist upon settlement and retained the property, so that when his parents-in-law were not using it, it could be rented out from time-to-time as a “week-ender”.
120 Also, Sgargetta failed to prove on the balance of probabilities the quantum of loss claimed. Such matters are not proved simply by putting before the court a so-called expert report which summarises a party’s allegations. A party is expected to give evidence to support those allegations, to produce and explain the supporting documentation and thereby justify the calculations which underlie the claims. In this way, the moving party satisfies its burden of proof, the opposing party can see precisely the case it has to meet and is in a position both to call responding evidence and to cross-examine the plaintiff’s witnesses.
121 I note also that for about three years from around 2006, Sgargetta had his own business as a mortgage broker. He employed four people in the business, three full time and one part time. He was working in this role at the time he obtained the five year fixed term loan from the NAB in December 2007. In the circumstances, I would have expected a person in the business of obtaining loans for borrowers on mortgage security;
(a) to be aware that terminating early a fixed term loan could involve a cost;
(b) to be capable of reading the bank statements and estimating the likely cost to pay out a fixed term loan.
I did not find convincing Sgargetta’s evidence that he was unaware at the time he took out the loan from the NAB that there could be a cost associated with an early repayment of such a loan.
Conclusion
122 The NAB has proved its case and is entitled to an order for possession of the property. I find that the NAB did not contravene material provisions of the consumer credit legislation. Even if the NAB had done so, it would not affect the possession claim or warrant an order for compensation or damages in favour of Sgargetta. The conduct of the NAB towards Sgargetta in connection with this matter and referred to in the judgment was not unconscionable within the Trade Practices Act and Australian Consumer Law provisions relied upon by Sgargetta. I dismiss Sgargetta’s counterclaim and find that the NAB did not cause, and was not legally responsible for, the losses claimed, and that the quantum of loss was not satisfactorily proved in any event.
123 Subject to any submissions from the parties, I propose to make the following orders:
(a)The plaintiff is entitled to possession of the land situated at and known as 92 Old Coach Road, Kalorama, Victoria, more particularly described in Certificate of Title Volume 4244 Folio 765.
(b)The defendant’s counterclaim is dismissed.
(c) The defendant pay the plaintiff’s costs of the proceeding to be taxed in default of agreement.
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