Perpetual v Kloester
[2024] VCC 1922
•2 December 2024
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised (Not) Restricted Suitable for Publication |
BANKING AND FINANCE LIST
Case No. CI-22-04022
| PERPETUALTRUSTEE COMPANY LTD (ACN 000 001 007) | Plaintiff |
| V | |
| IAN ALBERT KLOESTER | Defendant |
---
JUDGE: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 11 November 2024 | |
DATE OF RULING: | 2 December 2024 | |
CASE MAY BE CITED AS: | Perpetual v Kloester | |
MEDIUM NEUTRAL CITATION: | [2024] VCC 1922 | |
DECISION
Catchwords: Practice and Procedure – Application to set aside judgment in default of defence – Whether a real issue to be tried – Application dismissed
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P S Noonan | Avent Dwyer Legal |
| For the Defendant | Mr I A Kloester (in person) |
HIS HONOUR:
1The defendant, Ian Kloester, owns a property at Foster Street Dandenong (“the property”). The property is mortgaged to the plaintiff, Perpetual Trustee Company Ltd (“Perpetual”). This proceeding was issued by Perpetual on 28 September 2022 seeking possession of the property. Mr Kloester, whilst seeking pro bono legal assistance, has represented himself in the proceeding.
2Perpetual entered judgment in default of defence on 23 October 2023. On 5 August 2024, Mr Kloester issued a summons seeking to set aside the default judgment and for other orders. On 14 October 2024, Judge Ryan made an order adjourning the summons. The order was conditional upon Mr Kloester filing an affidavit by 4 November 2024. Mr Kloester did not strictly comply with this order, and as a consequence, the plaintiff submitted that Judge Ryan’s default order took effect and the summons issued on 5 August 2024 had been dismissed with costs.
3On 7 November 2024, Mr Kloester filed a “Request for an interlocutory determination” seeking, amongst other matters, to pursue the application to set aside the default judgment. The other matters included:
a. allowing Mr Kloester time to seek legal representation;
b.requiring Perpetual to provide extensive information and documents in order for Mr Kloester’s advisers to determine whether the mortgage and Perpetual’s taking of possession was lawful;
c.to permit Mr Kloester to continue processes he had initiated, initially with Perpetual’s agreement, for the sale of the property.
4After considering the extensive material that had been filed, including three affidavits sworn by Mr Kloester dated 11 October and 4 and 8 November 2024 and an affidavit by Perpetual’s solicitor, David Cameron Avent sworn 14 October 2024, together with the parties’ oral submissions, I ordered that Mr Kloester’s application made on 7 November 2024 be dismissed with costs. I now give my reasons.
5The issues raised by Kloester’s application are as follows:
a.whether the judgment had been entered irregularly, as Mr Kloester had requested that all communications from Perpetual’s solicitors be by posted mail rather than email, and the correspondence by the solicitors leading up to the entry of judgment had been by email;
b.whether Perpetual’s solicitors should have given prior notice to Mr Kloester of their intention to enter judgment in default of defence;
c.whether the default judgment should be set aside, involving consideration of:
i.whether a satisfactory explanation had been given by Mr Kloester for his failure to file a defence;
ii.whether there had been unacceptable delay by Mr Kloester in making application to set aside the judgment;
iii. whether Mr Kloester had raised a bona fide issue to be tried;
iv.whether Perpetual would be prejudiced if the judgment were set aside;
v.any other appropriate matter to be considered in the exercise of the Court’s discretion.
d.if the judgment were not set aside, whether execution on the judgment should be stayed, on the basis of any of the following matters:
i.to give Mr Kloester further time to find solicitors prepared to act pro bono for him;
ii.to see whether Mortgage Stress Victoria might find an arguable basis for Mr Kloester to defend the proceeding, if the Court were prepared to require Perpetual’s solicitors to respond to the request dated 6 November 2024 for information and documents;
iii.to allow Mr Kloester to sell the property himself, and thereby to pay out the amount owing to Perpetual;
iv.generally, and in conjunction with the other matters raised, Mr Kloester’s poor financial position and his mental health condition.
Whether the judgment was irregular
6Mr Kloester was served with Perpetual’s writ following an application for substituted service. On 25 May 2023, Judicial Registrar Bennett ordered that Mr Kloester be served by posting the documents addressed to him at the property, as well as sending an SMS message to Mr Kloester’s mobile telephone number.
7The affidavit filed in support of the application by Perpetual’s solicitor stated that the property was Mr Kloester’s address on the electoral roll and that both the address of the property and Mr Kloester’s mobile telephone number had been given as methods of contact with Mr Kloester’s “application pack” dated 21 October 2019 when the mortgage was arranged.
8The affidavit also referred to correspondence between Mr Kloester and RedZed Lending Solutions Pty Ltd, a company that acted as the manager of Perpetual’s mortgages.
9Mr Kloester says that he requested both the Court and Perpetual’s solicitors that all correspondence with him in relation to the proceeding be by postal mail. Mr Kloester referred to “my difficulties managing digital communication and issues with my email systems”. He also pointed to the substituted service order as an instance where the Court itself had required documents to be sent by post.
10Mr Kloester filed an appearance on 30 June 2023. The Notice of Appearance stated his “email address for service” as it was required to do by Rule 8.06(1)(a)(iv).
11I am not satisfied that there was any genuine concern by Mr Kloester that communication by email was unsatisfactory. This was the method of communication he primarily used himself, including via his IPhone. Mr Kloester also indicated that he was proficient with computer technology. There is no proper basis for suggesting that the judgment was irregularly entered.
Whether prior notice should have been given before judgment was entered
12The Court’s Practice Note 2 of 2022 – Commercial Division Omnibus (PNCO 2-2022) provides that, “Plaintiffs should not ‘snap on’ judgment immediately after the time for the filing of a notice of appearance or a defence has passed. If a notice of appearance has been filed, the Court expects that the plaintiff will warn the defendant(s) in writing before making an application for judgment in default of defence”.
13Shortly after Mr Kloester filed his appearance, the Court advised the parties by email dated 3 July 2023 that the proceeding was listed for an administrative mention on 18 August 2023. The document was headed, “FIRST ADMINISTRATIVE MENTION NOTICE”, and in the text of the notice the following paragraph was in red type, “In proceedings commenced by writ, a defence must be filed and served within the time prescribed by the Court rules, unless the Court otherwise orders. The administrative mention process does not displace this requirement”. The return date of the Administrative Mention was later adjourned.
14Mr Kloester advised the Court by email on 28 July 2023 that he had lodged a complaint with Australian Financial Complaints Authority (AFCA). The complaint was later “closed” by AFCA.
15On 24 October 2023, judgment was entered in default of defence. This followed the filing of an affidavit by the plaintiff’s solicitors on 23 October 2023 attesting to certain matters including service by email dated 13 October 2023 of a “Form 21A (Notice of Intention to enter Judgment in default of defence), by way of service”. Mr Kloester said in his affidavit sworn 4 November 2024 that “I never saw” the Form 21A notice and had not been aware that AFCA had dealt with his complaint.
16I consider, in the circumstances, that Mr Kloester’s failure to file a defence was not affected by any irregularity in the procedures followed by the plaintiff’s solicitors. The Rules appear to have been followed by the solicitors.
Absence of a satisfactory explanation for the failure to file a defence
17I consider that it is likely Mr Kloester always intended to defend the proceeding. He may not have read the administrative mention notice sufficiently carefully or he may have considered, that in view of the AFCA complaint he had made, he was not required to take any further steps in the proceeding at that stage. This is a matter I need to take into account in determining whether the judgment should stand.
Whether the application to set aside judgment has been unacceptably delayed
18There are many reasons why Mr Kloester’s application to set aside judgment was not made before he issued a summons on 5 August 2024. This is not a factor which I need to consider further. I shall, however, refer to some of the matters later as they are themselves relevant matters for me to take account of.
Whether Mr Kloester has raised a “real” matter to be tried
19This is the principal reason why, in my view, the judgment should not be set aside. Mr Kloester has not demonstrated that there are matters which raise an arguable defence to the plaintiff’s claim.
20The Court of Appeal said in Goldberg v Morrow [2003] VSCA 127 at paragraphs 12 and 13 (per Ormiston JA with whom Batt JA agreed) that, it is a “well known … principle of practice … in the area of default judgments” that “the Court does not ordinarily enter a default judgment where it is pointless to do so because a defendant is seeking genuinely on a tenable basis to defend the proceeding. That statement is equally applicable in considering an application to set aside a default judgment.
21From the material filed and Mr Kloester’s oral submissions, it is possible to discern the following bases upon which he contends that he has a defence to the plaintiff’s claim for possession:
a.non-compliance by Perpetual with the regulatory requirements in the grant of the mortgage and/or in Perpetual’s actions following the default by Mr Kloester;
b.Perpetual had “hidden” the conditions of the loan, as the standard mortgage terms could only be inspected if he visited its head office in Melbourne. He was not prepared to do this and expected that Perpetual was required to post a copy of the relevant document to him. Mr Kloester was therefore unable to calculate whether the amount claimed as owing by Perpetual was the appropriate figure, or a higher, unauthorised, interest rate had been claimed;
c.Perpetual’s loan to Mr Kloester was made in circumstances where it was inappropriate because he clearly did not have the financial means to service the loan.
22Recently, Mr Kloester consulted Mortgage Stress Victoria (MSV) seeking pro bono legal advice. MSV wrote to the plaintiff’s solicitors on 31 October 2024 stating (in part) that, “Mr Kloester has provided our Service with instructions which indicate he may have a defence to the original court proceedings. We have not been able to review the loan documents to provide advice regarding the merit of his claim. Mr Kloester requires time to obtain documents from the plaintiff and obtain advice”.
23Mr Kloester apparently sent a letter dated 6 November 2024 to the plaintiff’s solicitors with an extensive request for documents and other information. The letter is annexure IAK 2 to the affidavit of Mr Kloester sworn 8 November 2024. The letter is in extremely broad terms. It cannot, in the circumstances, be regarded as a reasonable request or as indicative of any arguable defence that may be open to Mr Kloester.
24During his oral submissions, Mr Kloester indicated that there were other matters of defence that he had discussed with other persons and which he wished to explore further and raise at a later time. I pressed Mr Kloester to tell me the nature of the defences as this was a necessary requirement if judgment were to be set aside. The matters he raised included:
a.Mr Kloester said that when he was in financial difficulties in 2021 and was unable to make his mortgage payments, phone calls were made by Perpetual or a person connected with it to family members and/or neighbours of Mr Kloester that breached his privacy;
b.Mr Kloester also said that, although he was entitled to make application to Perpetual to capitalise the interest payments, he was persuaded by a representative of RedZed (on behalf of Perpetual) not to do so;
c.Later, Perpetual had wrongly claimed it was entitled to a direct debit from Mr Kloester’s bank account for a mortgage payment. Mr Kloester said that, as a result of the “double dipping” by Perpetual, he had an “imperfect” bank record. Mr Kloester was therefore unable to refinance the mortgage loan from Perpetual with another financial institution;
d.Mr Kloester said that the loan to him was an example of “predatory lending”, apparently because a reasonable lender would not have lent to him at all on the basis of the financial information supplied;
e.Perpetual may not have followed the law in relation to his conditions of hardship during the COVID pandemic;
f.“penalty” interest may have been wrongly claimed when Mr Kloester defaulted. He was unable to properly understand his rights under the mortgage without a copy of the terms and conditions which were not readily available to him.
25These matters are generally not addressed at all in Mr Kloester’s affidavits. There was nothing in Mr Kloester’s oral submissions of sufficient particularity which would give me any confidence that Mr Kloester might have an arguable defence. If there were such a defence, it is likely that it would have been raised in the extensive correspondence following the entry of judgment.
Other discretionary matters
26Mr Kloester has had mental health issues over many years. He also wishes to sell the property to pay out the mortgage. These matters will be discussed further below in relation to the question of whether any judgment should be stayed.
27Mr Kloester, apart from his residual equity in the property, does not have the financial resources to pay for lawyers. He has made a number of attempts to obtain pro bono assistance, without success. This is also a matter relevant to whether a stay is appropriate. Insofar as it is also relevant to the application to set aside the default judgment, I have indicated that there is not sufficient indication of a possible defence which would make it appropriate to further delay consideration of Mr Kloester’s summons to set aside judgment.
Prejudice to the parties
28Mr Kloester submitted that there would be no prejudice to Perpetual if the judgment were set aside. Mr Kloester has admitted that he did not make mortgage payments and that this resulted in a default in 2021. The writ was issued on 28 September 2022 and judgment entered on 24 October 2024. Perpetual has rights pursuant to the transaction by reason of which Mr Kloester purchased the property. In the circumstances, the exercise of those rights should entitle Perpetual to maintain its judgment against Mr Kloester.
29Accordingly, I am not satisfied that there is a proper basis upon which to set aside the default judgment.
Whether a stay of execution of the judgment is appropriate
30Mr Kloester has suffered a number of family tragedies and other personal setbacks in his life. Medical reports from his general practitioner and a psychiatrist refer to these matters and his general medical and mental health issues.
31Nevertheless, although these matters may have affected Mr Kloester’s ability to realise some of the employment projects which has impacted on his financial position, these matters do not appear to otherwise have any direct relationship with the issues in the proceeding.
32Perpetual, through RedZed, gave Mr Kloester the opportunity to sell the property in order to pay out the monies owing to Perpetual. In December 2023, Mr Kloester consulted a number of real estate agents who thought that a price of $1.6 million was achievable. The only firm offer was made on 25 July 2024 to purchase the property for $1.398 million, conditional upon a satisfactory inspection report. Those attempts came to nothing.
33Mr Kloester, by his request for an interlocutory determination dated 7 November 2024, sought an adjournment of 92 days. On 11 November 2024, when I indicated that I would dismiss that application, I hoped to deliver these reasons within a few days. By reason of the additional delay, I will grant a further stay of execution on the judgment until 16 December 2024.
Orders
34The order of Judge Ryan on 14 October 2024 was a conditional order, and it appears that the condition imposed on Mr Kloester was not complied with. Although it is likely that Judge Ryan’s order resulted in the dismissal of the summons filed 5 August 2024, I will also deal with that summons in the orders that follow, as Mr Kloester sought to justify before me that he was not in default, or that any default was not his responsibility.
35I make the following orders:
1. The defendant’s summons filed 5 August 2024 is dismissed.
2.The defendant’s application made by a request for an interlocutory determination filed 7 November 2024 is dismissed.
3.The defendant must pay the plaintiff’s costs of the summons filed 5 August 2024 and the application made by request for an interlocutory determination dated 7 November 2024, including any reserved costs, to be assessed by the Costs Court on a standard basis in default of agreement.
4.Stay execution on the judgment entered for the plaintiff against the defendant on 24 October 2023 until 4:00 pm on 16 December 2024.
0