Pepper Finance Corporation Ltd v Nastevski
[2021] VSC 566
•26 August 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL DIVISION
MORTGAGE RECOVERY LIST
S ECI 2020 02253
| PEPPER FINANCE CORPORATION LTD (ACN 094 317 647) | Plaintiff |
| -v- | |
| DAVID NASTEVSKI & ORS (according to the schedule attached) | Defendants |
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JUDGE: | Irving AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 24 August 2021 |
DATE OF JUDGMENT: | 26 August 2021 |
CASE MAY BE CITED AS: | Pepper Finance Corporation Ltd v Nastevski & Ors |
MEDIUM NEUTRAL CITATION: | [2021] VSC 566 |
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PRACTICE AND PROCEDURE – Judgments and orders – Summary judgment – No reasonable cause of action – Where plaintiff’s cause of action is made out – Where defendant’s defence does not have any real prospects of success – Interests of justice favour summary disposal of proceeding – Civil Procedure Act 2019 (Vic) Pt 4.4, ss 61-64 – Bendigo and Adelaide Bank Limited v Grahame [2020] VSC 86 – Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd (2013) 42 VR 27.
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APPEARANCES: | Counsel/Solicitor | Solicitors |
| For the Plaintiff | Ms S J Worsfield of counsel | Gadens Lawyers |
| For the Second Defendant | Mr A Nicol, solicitor | Aitken Partners |
HIS HONOUR:
Introduction
On 26 August 2021, I delivered oral reasons for refusing the defendant’s application for an adjournment and granting the plaintiff’s application for summary judgment. Below I record my reasons in writing.
The plaintiff commenced a proceeding by writ and statement of claim filed 20 May 2020 seeking, among other things, recovery of Lot 3 on Plan of Subdivision 726941Y being the land more particularly described in Certificate of Title Volume 11523 Folio 613 being also the land known as Unit 3, 37 Ashton Street, Reservoir, in the State of Victoria (the ‘land’) over which it holds a first registered mortgage.
The plaintiff has applied for summary judgment under s 61 and s 63 of the Civil Procedure Act 2010 (Vic) (‘CPA’) against the second defendant. The plaintiff’s application seeks three orders:
(a) possession of the land;
(b) payment by the second defendant to the plaintiff of $717,841.14 together with interest on that sum from 6 August 2021 to the date of payment at the variable interest rate as set from time to time pursuant to a loan agreement between the parties dated 1 November 2017 (‘loan agreement’); and
(c) the second defendant pay the plaintiff’s costs of the application and of the proceeding on an indemnity basis
(‘plaintiff’s summary judgment application’).
Background
The defendants, including the second defendant, owned the land as tenants in common. Pursuant to the terms and conditions of the loan agreement between the plaintiff and the defendants, the plaintiff loaned the defendant the sum of $562,500.00. The security for the loan was a first registered mortgage over the land.
The plaintiff says that as at 24 February 2020 the defendants were in default under the loan agreement and under the mortgage by failing to pay instalments due to the plaintiff. On 24 February 2020 the plaintiff issued a written notice to the defendants demanding payment of the total arrears owing under the mortgage and loan agreement. The defendants did not remedy the default by 6 April 2020. As a result, the plaintiff says, the whole balance outstanding under the loan agreement and mortgage became due and payable.
On 20 May 2020, the plaintiff commenced this proceeding seeking possession of the land.
On 25 June 2020, the second defendant filed a defence. That defence consisted of one sentence, ‘Require time to arrange payment to rectify the home loan arrears’.
At the commencement of the hearing of the plaintiff’s summary judgment application on 26 August 2021, the second defendant appeared, represented by lawyers. The second defendant’s lawyers informed the Court that they had been retained approximately two hours before the hearing and that their client sought an adjournment on the basis that he was confused about the proceeding and wished his lawyers to explore whether he had any possible defence to the proceeding. The plaintiff opposed an adjournment.
I refused the adjournment application because:
(a) there was no explanation as to why the second defendant had waited until the very last possible moment to instruct new lawyers;
(b) the second defendant was legally represented in the proceeding from 25 June 2021 to 16 August 2021;
(c) during the period of his prior legal representation, the Court had granted the second defendant leave to file an amended defence, however despite this, the second defendant had not sought to amend his defence;
(d) the second defendant had similarly not complied with Court orders to file submissions on the plaintiff’s summary judgment application notwithstanding that he was legally represented at the time the order timetabling the filing of submissions was made;
(e) the adjournment was opposed by the plaintiff;
(f) the plaintiff filed affidavit material deposing to previous communications with the second defendant’s legal representatives in relation to settlement negotiations occurring from late July 2020 to mid-October 2020; and
(g) in my view, an adjournment in these circumstances would be contrary to the Court’s obligations to determine civil proceedings in just, timely and efficient manner as set out in s 7 and required by s 8 of the CPA,
For the reasons that follow, I am satisfied the plaintiff has established its cause of action against the second defendant. I am not satisfied the second defendant’s defence has any real prospect of success. As such, I am satisfied there is no real question to be tried and that it is in the interests of justice to grant the plaintiff’s application for summary judgment.
Principles
The principles applicable to an application by a plaintiff for summary judgment were recently set out by Sloss J in Bendigo and Adelaide Bank Limited v Grahame:[1]
[1][2020] VSC 86, [23]-[34] (citations omitted).
The principles in Victoria concerning the requirements which must be satisfied by a plaintiff in order to obtain summary judgment were aptly summarised by Matthews JR in Padella Pty Ltd v Elliott, which I adopted in my decision in Israfoods (2006) Ltd v J & D Consortium Pty Ltd (Israfoods). For present purposes, I again respectfully adopt Matthews JR’s summary in Padella as elaborated upon in my reasons in Israfoods.
Section 61 of the CPA permits a plaintiff to make an application for summary judgment on the ground that the defendant’s defence or part of that defence has no real prospect of success. Section 63 of the CPA provides that, subject to s 64, the Court may give summary judgment in a civil proceeding “if satisfied” that a claim has “no real prospect of success”.
Section 64 of the CPA provides that:
Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because—
(a) it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only a full hearing on the merits is appropriate.
In Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd, the Court of Appeal set out the relevant test to be applied in determining an application for summary judgment made under ss 61 and 63, as follows:
(a)the test for summary judgment under s 63 of the [CPA] is whether the respondent to the application for summary judgment has a “real” as opposed to a “fanciful” chance of success;
(b)the test is to be applied by reference to its own language and without paraphrase or comparison with the “hopeless” or “bound to fail test” essayed in [General Steel Industries Inc v Commissioner for Railways (NSW)];
(c)it should be understood, however, that the test is to some degree a more liberal test than the “hopeless” or “bound to fail” test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;
(d)at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.
Section 7(1) of the CPA sets out its overarching purpose, which is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute. Section 8 of the CPA requires that the Court must “seek to give effect to the overarching purpose in the exercise of any of its powers” and section 9 provides that when making any order or giving any direction in a civil proceeding, the Court is to further the overarching purpose by having regard to the objects specified in subsection (1), being:
(a) the just determination of the civil proceeding;
(b)the public interest in the early settlement of disputes by agreement between parties;
(c) the efficient conduct of the business of the court;
(d) the efficient use of judicial and administrative resources;
(e)minimising any delay between the commencement of a civil proceeding and its listing for trial beyond that reasonably required for any interlocutory steps that are necessary for—
(i)the fair and just determination of the real issues in dispute; and
(ii) the preparation of the case for trial;
(f) the timely determination of the civil proceeding;
(g) dealing with a civil proceeding in a manner proportionate to—
(i)the complexity or importance of the issues in dispute; and
(ii) the amount in dispute.
Where a plaintiff in a civil proceeding seeks to bring an application under s 61 of the CPA, it must be made in accordance with Order 22 of the Rules.
Rule 22.04 of the Rules sets out the material required to be filed in support of an application for summary judgment. It provides as follows:
(1)An application shall be made by summons supported by an affidavit—
(a)verifying the facts on which the claim or the part of the claim to which the application relates is based; and
(b)stating that in the belief of the deponent the defence to the claim or the defence to the relevant part of the claim—
(i) has no real prospect of success; or
(ii)has no real prospect of success except as to the amount of the claim or as to the amount of the relevant part of the claim.
(2)Where a statement in a document tends to establish a fact within paragraph (1) and at the trial of the proceeding the document would be admissible by or under the Evidence (Miscellaneous Provisions) Act 1958, the Evidence Act 2008 or any other Act to verify the fact, the affidavit under paragraph (1) may set forth the statement.
(3)An affidavit under paragraph (1) may contain a statement of fact based on information and belief if the grounds are set out and, having regard to all the circumstances, the Court considers that the statement ought to be permitted.
(4)The plaintiff shall serve the summons and a copy of the affidavit or affidavits and of any exhibit referred to in the affidavit or affidavits on the defendant not less than 14 days before the day for hearing named in the summons.
Rule 22.05 of the Rules provides:
(1)The defendant may show cause against the application by affidavit or otherwise to the satisfaction of the Court.
(2)An affidavit under paragraph (1) may contain a statement of fact based on information and belief if the grounds are set out.
(3)Unless the Court otherwise orders, the defendant shall serve a copy of any affidavit and of any exhibit referred to in the affidavit or affidavits on the plaintiff not less than three days before the day for hearing named in the summons.
The requirements set out in rr 22.04 and 22.05 were considered by the Court of Appeal in Hausman v Abigroup Contractors Pty Ltd. In relation to an affidavit in support of an application for summary judgment, the Court of Appeal stated that what ‘must be verified are the facts necessary to establish a good cause of action’. Once the plaintiff has established the elements of its cause of action, there is ‘something akin’ to a shifting of the evidential burden to the defendant.
With regard to the equivalent of what is now r 22.05, the Court of the Appeal stated as follows:
[62]… Assuming the plaintiff’s application is properly made, there will be judgment for the plaintiff unless the defendant shows cause against the application to the satisfaction of the court. The Rule provides that the defendant can show such cause ‘by affidavit or otherwise’.
[63]The defendant must satisfy the Court that, in respect of the claim to which the application for judgment relates, a question ought to be tried, or there ought for some other reason to be a trial of that claim. The Court, if so satisfied, will give the defendant leave to defend and the proceeding will continue to trial in the ordinary way. The Court will normally require an affidavit by, or on behalf of, the defendant before it will be satisfied that the defendant is entitled to leave to defend. The standard of diligence required of the defendant in preparing a case in opposition to the application, especially if under pressure of time, is perhaps not as high as that required in preparing for trial.
[64]Nonetheless, the defendant is required to use reasonable diligence to put before the Court, albeit in a summary form, all the evidence relied on in the defence. In that regard, it would generally be regarded as an injustice to the plaintiff to introduce for the first time, on appeal, evidence which was readily available for the hearing of the application, but was not produced. An affidavit filed by the defendant may contain a statement of fact based on information and belief.
[65]The authorities suggest that an affidavit in opposition to an application for summary judgment must provide sufficient particulars to enable the defence case to be properly understood. A bald denial that the defendant is indebted to the plaintiff will not suffice. The affidavit should, so far as practicable, deal specifically with the plaintiff’s claim and the facts set out in the supporting affidavit to establish that claim. It should state clearly and concisely what the defence is, and identify the facts relied upon in support of that defence.
Those principles from Hausman v Abigroup extracted above remain good law since the advent of the CPA.
In Hausman v Abigroup, the Court of Appeal also made clear that on a summary judgment application the judge ‘should not be required to trawl through the defendant’s material in an effort to see whether there can be constructed from that material an answer to the plaintiff’s claim.’ Rather, the Court stated:
[55]…It must be for the defendant to point to some material, whether legal or factual, that provides an arguable response to that claim. That is so even if it is the plaintiff who must ultimately discharge the burden of persuading the judge that there is no issue that warrants trial, and that summary judgment should therefore be granted.
The Plaintiff’s Claim
In support of its summons seeking summary judgment, the plaintiff relies on the affidavits of Matthew Lane sworn 6 August 2021 and 25 August 2021. Mr Lane is an Enforcement Officer employed by Pepper Group Limited, a company that services loans made by the plaintiff, including the loan the subject of this proceeding. Pepper Group’s role includes collecting outstanding loans and enforcing mortgages on behalf of the plaintiff.
Mr Lane’s evidence is that:
(a) on 1 November 2017 the plaintiff entered into the loan agreement with the defendants;
(b) the purpose of the loan was to refinance an existing home loan;
(c) the loan agreement included the plaintiff’s General Terms and Conditions dated July 2015;
(d) the amount loaned was $562,500.00 at an annual interest rate of 6.93%, repayable in 360 monthly repayments;
(e) the term of the loan agreement was 30 years from the date funds were advanced;
(f) the first five years of the loan were subject to interest only repayments after which time the plaintiff would inform the defendants how much the payments would be before they became due;
(g) the loan agreement set out a default interest rate, being the interest rate applying from time to time plus 2% per annum;
(h) the plaintiff took a registered mortgage over the land as security for the loan;
(i) the terms and conditions of the loan agreement provided:
(i) the defendants must make all payments specified in the loan agreement including all interest, fees taxes and charges;
(ii) an event of default includes a failure to pay the plaintiff any money due by its due date;
(iii) if the defendants are in default the plaintiff may demand and require immediate payment of any money due under the loan agreement and call up the loan and require payment of the entire balance due; and
(iv) the plaintiff may give a certificate about any matter or amount payable under the loan agreement and the certificate will be conclusive and binding;
(j) the memorandum of common provisions applying to the plaintiff’s mortgage:
(i) defines ‘debt’ as all money owing by the defendants to the plaintiff and the ‘land’ as all land specified in the mortgage;
(ii) provides that the defendants mortgage all of the land specified in the mortgage to the plaintiffs as security for payment of the debt;
(iii) also provides that an event of default under the mortgage includes default of any term of the loan agreement;
(iv) if an event of default under the mortgage occurs the plaintiff may require immediate repayment of the debt and take possession of and sell the land;
(v) the plaintiff’s costs of exercising its rights under the mortgage conditions will form part of the defendants’ debt to the plaintiff;
(k) in reliance on the loan agreement, the plaintiff advanced the loan amount to the defendants’ designated loan account;
(l) since 18 December 2018, the defendants have failed to make the monthly repayments required under the terms of the loan agreement and mortgage;
(m) on 24 February 2020 the plaintiff issued and served a notice of default and demand (‘demand’) to the defendants pursuant to s 88 of the National Credit Code 2009 (Cth) and s 76 of the Transfer of Land Act 1958 (Vic);
(n) the demand required the defendants to pay the arrears and costs owing under the loan agreement in the sum of $53,473.67 by 6 April 2020;
(o) the defendants did not make the payment required by the demand;
(p) in accordance with clause 12.10 of the terms and conditions of the loan agreement, on 6 August 2021 Mr Lane issued a certificate of default by which he certified that:
(i) as at 24 February 2020 the second defendant was in default under the mortgage by reason of the defendants being in arrears of loan instalments totalling $52,434.50; and
(ii) the total amount of monies secured by the mortgage as at 24 February 2020 was $629,489.22 and as at the date of the certificate (6 August 2021) was $717,841.14.
Mr Lane’s affidavit sworn 6 August 2021 exhibits:
(a) the loan agreement, executed by the defendants as borrowers, including the second defendant;
(b) the document setting out the terms and conditions applying to the loan agreement;
(c) a copy of the Register Search Statement for the land, showing the second defendant is one of four registered proprietors of the land and that the land is subject to the mortgage;
(d) the mortgage registered on 20 November 2017 in dealing number AQ464435M, executed by the defendants, including the second defendant; and
(e) a copy of the memorandum of common provisions registered in the Register Book in dealing number AA2037, which is referred to in the mortgage;
(f) a copy of the demand dated 24 February 2020 issued by the plaintiff to the defendants; and
(g) a copy of the certificate of default prepared by Mr Lane dated 6 August 2021.
Mr Lane’s affidavit sworn 25 August 2021 exhibits a certificate of default prepared by Mr Lane dated 25 August 2021 by which he certifies that the total amount of monies secured by the mortgage as at the date of the certificate is $720,210.63.
Plaintiff’s Cause of Action
I am satisfied Mr Lane’s evidence establishes the essential elements of the plaintiff’s cause of action as follows:
(a) a loan agreement dated 1 November 2017 was accepted and signed by the defendants;
(b) on 16 November 2017, the plaintiff advanced the sum of $562,500.00 to the defendants pursuant to the loan agreement;
(c) the loan obtained by the defendants was operated in account number 1222092;
(d) the defendants, including the second defendant, own the land;
(e) by mortgage dated 1 November 2017 and registered over the land on 20 November 2020, the defendants mortgaged the land to the plaintiff as security for the monies advanced under the loan agreement;
(f) the defendants, including the second defendant, have defaulted under the loan agreement;
(g) the plaintiff has served a notice of default and demand on the second defendant;
(h) the default under the loan agreement has not been remedied by the second defendant by the due date as stated in the notice of default and demand; and
(i) pursuant to s 78(1) of the Transfer of Land Act 1958 (Vic) the plaintiff is entitled to possession of the land.
The plaintiff has demonstrated its entitlement to enforce the mortgage and to recover the land. Further or alternatively, it is entitled to repayment of the monies outstanding under the loan agreement and mortgage entered into by the second defendant. In accordance with the certificate prepared by Mr Lane, the amount owing to the plaintiff by the second defendant pursuant to the loan agreement and mortgage as at 25 August 2021 is $720,210.63. Costs and interest continue to accrue on that amount pursuant to the terms of the loan agreement and mortgage.
The Second Defendant’s Defence
On 25 June 2020 the second defendant, at that time representing himself, filed the defence referred to above, being the single sentence, “Require time to arrange payment to rectify the home loan arrears”. On that same day, the second defendant filed a notice of appointment of solicitor.
By order made 25 June 2021, the second defendant was granted leave to file an amended defence by 23 July 2021.
On 3 August 2021, the plaintiff obtained default judgment in default of defence against the first and fourth defendants. The terms of the judgment included an order for the recovery of the land, payment of the monies outstanding to the plaintiff of $640,028.52 and interest of $48,905.54 and costs of $6,073.50.
On 3 August 2021, the plaintiff obtained judgment in default of appearance against the third defendant. The terms of the judgment included an order for the recovery of the land, payment of the monies outstanding to the plaintiff of $640,028.52 for the outstanding claim and interest of $48,905.54 and costs of $5,288.50.
On 11 August 2021, the Court ordered the second defendant to file and serve written submissions in response to the plaintiff’s summary judgment application.
On 16 August 2021, the lawyers representing the second defendant filed a notice of ceasing to act.
The second defendant has not filed any amended defence or any written submissions in response to the plaintiff’s summary judgment application.
Plaintiff’s Response to the Second Defendant’s Defence
The plaintiff says that the second defendant’s defence has no real prospect of success. In particular, the plaintiff submits, correctly in my view, that:
(a) the plaintiff does not have an obligation to place legal proceedings on hold to allow a defendant time to arrange payment of arrears;
(b) the second defendant is liable to pay the whole of the amount required to pay out the loan and not just the arrears; and
(c) in any event, the second defendant has been afforded time to pay the outstanding arrears and has not done so.
Conclusion
For the reasons set out above, I am satisfied the plaintiff has established its cause of action against the second defendant. The plaintiff is therefore entitled to enforce its mortgage and recover possession of the land. Further or alternatively, the plaintiff is entitled to repayment in full of the amount outstanding pursuant to the loan agreement.
I am also satisfied the second defendant’s defence has no real prospect of success and that there is no other question which emerges that ought to be tried. In these circumstances, I am satisfied it is in the interests of justice to grant the plaintiff’s application for summary judgment.
Subject to any further submissions which counsel may wish to make as to form, I will order:
(a) judgment to the plaintiff for possession of the whole of the land in Lot 3 on Plan of Subdivision 726941Y being the land more particularly described in Certificate of Title Volume 11523 Folio 613 being the land known as Unit 3, 37 Ashton Street, Reservoir;
(b) judgment for the second defendant to pay to the plaintiff the sum of $720,210.63 together with interest on that amount from 26 August 2021 to the date of payment at the variable interest rate as set from time to time pursuant to the loan agreement dated 1 November 2017; and
(c) the second defendant pay the plaintiff’s costs of the summons dated 9 August 2021 and of the proceeding on an indemnity basis.
SCHEDULE OF PARTIES
| S ECI 2020 02253 | |
| BETWEEN: | |
| PEPPER FINANCE CORPORATION LTD (ACN 094 317 647) | Plaintiff |
| - v - | |
| DAVID NASTEVSKI | First Defendant |
| SASHA NASTEVSKI | Second Defendant |
| PARASKEVA NASTESKI (AS THE ADMINISTRATOR OF THE DECEASED ESTATE OF MIHAJLO NASTESKI) | Third Defendant |
| PARASKEVA NASTESKI | Fourth Defendant |
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