Qazi v Westpac Banking Corporation Limited
[2019] FCCA 3602
•12 December 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| QAZI v WESTPAC BANKING CORPORATION LIMITED & ORS | [2019] FCCA 3602 |
| Catchwords: WORDS & PHRASES – “Credit contract” – “debtor”. PRACTICE & PROCEDURE – Summary dismissal – relevant considerations. |
| Legislation: National Consumer Credit Protection Act 2019 ss.5, 116, 117, 118, 123, 128, 129, 130, 131, 132 Federal Circuit Court Rules, rr.13.03B, 13.10 |
| Cases cited: Appleyard v Westpac Banking Corporation [2017] QCA 316 Garcia v National Australia Bank Ltd (1998) 194 CLR 395 |
| Applicant: | SHAGUFTA QAZI |
| First Respondent: | WESTPAC BANKING CORPORATION LIMITED ABN 33 007 457 141 |
| Second Respondent: | SHAHZAD IDREES |
| Third Respondent: | NAVEED AKHTER |
| File Number: | SYG 1680 of 2019 |
| Judgment of: | Judge Cameron |
| Hearing date: | 14 November 2019 |
| Date of Last Submission: | 28 November 2019 |
| Delivered at: | Sydney |
| Delivered on: | 12 December 2019 |
REPRESENTATION
| Solicitors for the Applicant: | Mr C Senanayake of SBC Lawyers |
| Counsel for the Respondent: | Mr D Krochmalik |
| Solicitors for the Respondent: | HWL Ebsworth Lawyers |
ORDERS
The proceeding be dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1680 of 2019
| SHAGUFTA QAZI |
Applicant
And
| WESTPAC BANKING CORPORATION LIMITED ABN 33 007 457 141 |
First Respondent
SHAHZAH IDREES
Second Respondent
NAVEED AKHTER
Third Respondent
REASONS FOR JUDGMENT
Introduction
In this matter the applicant, Ms Qazi, seeks relief under the National Consumer Credit Protection Act 2009 (Cth) (“NCCP Act”) and restraint of the first respondent (“Westpac”) from “repossessing” her home in the Sydney suburb of Oakhurst (“Property”). The matter is before the Court for consideration of Westpac’s application in a case seeking summary dismissal of the proceeding pursuant to rr.13.10 and 13.03B of the Federal Circuit Court Rules 2001 (“Rules”). In the alternative Westpac seeks an order striking out the application.
Applicant’s proceeding
Relevantly for present purposes, Ms Qazi alleged in the second of the two application documents she filed that:
4.On 30 March 2016 the First Respondent, in the course of its business, pursuant to an agreement between the Applicant and the First Respondent ("the Residential Mortgage Agreement") refinanced the Applicant's existing Home Loan secured by a mortgage over the said Property.
5.On the same day and at the same time, the First Respondent together with the Second Respondent obtained Applicant's signature to a “Business Finance Agreement”, as a guarantor for K'S and QS Trading, without acknowledging the need for the Applicant to seek independent legal advice or financial advice, which is mandatory under the National Consumer Credit Protection Act 2009 (Cth).
6.The Applicant believed that she was signing documents in regards to refinancing her existing home loan … And the Applicant was not aware of the effect of signing the other documents. ….
Ms Qazi alleged that Westpac failed to discharge obligations under the NCCP Act in the following ways:
a.That, pursuant to section 116 of the National Consumer Credit Protection Act 2009 (Cth), the First Respondent … failed to make a proper preliminary assessment of the unsuitability of the Loan by the Applicant.
b.That, pursuant to section 117 of the National Consumer Credit Protection Act 2009 (Cth), the First Respondent failed to make reasonable inquiries about the Applicant's ability to enter into and comply with the obligations of the Loan.
c.That, pursuant to section 118 of the National Consumer Credit Protection Act 2009 (Cth), the First Respondent … failed to make proper inquiries to verify the suitability of the Applicant for the Loan, having reasonably been able to ascertain that the Applicant could only comply with the contract with substantial hardship.
d.…
e.That, pursuant to sections 128, 129, 130, 131 and 132 of the National Consumer Protection Act 2009 (Cth), the [First Respondent] failed to follow the “Obligations to assess unsuitability”.
Legislation
NCCP Act and National Credit Code
Sections 116, 117, 118, 123 and 128-132 of the NCCP Act are concerned with conduct in relation to “credit contracts” which s.5 of the NCCP Act and s.4 of the National Credit Code (“Code”) define to be contracts:
… under which credit is or may be provided, being the provision of credit to which this Code applies.
Section 3 of the NCC Code relevantly provides:
3 Meaning of credit and amount of credit
(1)For the purposes of this Code, credit is provided if under a contract:
(a)payment of a debt owed by one person (the debtor) to another (the credit provider) is deferred; or
(b)one person (the debtor) incurs a deferred debt to another (the credit provider).
…
Section 5 of the NCC Code relevantly provides in that regard:
5 Provision of credit to which this Code applies
(1)This Code applies to the provision of credit (and to the credit contract and related matters) if when the credit contract is entered into or (in the case of precontractual obligations) is proposed to be entered into:
(a)the debtor is a natural person or a strata corporation; and
(b)the credit is provided or intended to be provided wholly or predominantly:
(i) for personal, domestic or household purposes; or
(ii) to purchase, renovate or improve residential property for investment purposes; or
(iii) to refinance credit that has been provided wholly or predominantly to purchase, renovate or improve residential property for investment purposes; …
Section 5 of the NCCP Act and s.204 of the NCC Code provide that a “debtor” is”:
… a person (other than a guarantor) who is liable to pay for (or to repay) credit, and includes a prospective debtor.
In relation to mortgages, the NCC Code provides:
7 Mortgages to which this Code applies
(1) This Code applies to a mortgage if:
(a)it secures obligations under a credit contract or a related guarantee; and
(b)the mortgagor is a natural person or a strata corporation.
(2)If any such mortgage also secures other obligations, this Code applies to the mortgage to the extent only that it secures obligations under the credit contract or related guarantee.
…
Federal Circuit Court of Australia Act 1999
Section 17A of the Federal Circuit Court of Australia Act 1999 (“FCCA Act”) relevantly provides:
17A Summary judgment
…
(2)The Federal Circuit Court of Australia may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a)the first party is defending the proceeding or that part of the proceeding; and
(b)the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
(3)For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a)hopeless; or
(b)bound to fail;
for it to have no reasonable prospect of success.
…
Federal Circuit Court Rules
Rule 13.10 of the Rules provides:
13.10 Disposal by summary dismissal
The Court or a Registrar may order that a proceeding be stayed, or dismissed generally or in relation to any claim for relief in the proceeding, if the Court or the Registrar is satisfied that:
(a)the party prosecuting the proceeding or claim for relief has no reasonable prospect of successfully prosecuting the proceeding or claim; or
(b)the proceeding or claim for relief is frivolous or vexatious; or
(c)the proceeding or claim for relief is an abuse of the process of the Court.
Rule 13.03B provides:
13.03B Orders on default
(1)If an applicant is in default, the Court may order that:
(a)the proceeding be stayed or dismissed as to the whole or any part of the relief claimed by the applicant; or
(b)a step in the proceeding be taken within the time limited in the order; or
(c)if the applicant does not take a step in the time mentioned in paragraph (b) – the proceeding be stayed or dismissed, as to the while or any part of the relief claimed by the applicant.
…
(6)The Court may make an order of the kind mentioned in subrule (1), (2) or (4), or any other order, or may give any directions, and specify any consequences for non-compliance with the order, that the Court thinks just.
Background Facts
Ms Qazi filed two affidavits setting out events from her perspective, of which only the second was read. Westpac filed an affidavit sworn by Rosanna Mariana on 23 October 2019 in which were set out various factual matters. I draw both of those affidavits for the following summary of the facts relevant to the present application.
In early January 2016 Ms Qazi and her husband refinanced their home mortgage with Westpac (“Home Loan”) with the assistance of the second respondent, Mr Idrees, a mortgage broker. The loan offer was dated 17 February 2019 but the borrowers’ signatures on it were not dated. When they attended Mr Idrees’s office in February 2016 Ms Qazi was asked to sign a number of documents. She deposed:
… Since no body [sic] explained to me l was not clear of the nature of the document that I was signing, and believed these documents were related the refinance of our home loan. Most of the details in those documents were blank and I was given only the Signature pages. …
On or about 30 March 2016, Westpac entered into a business finance agreement with K’s and Q’s Trading Pty Ltd to provide a “Business Loan with Redraw” facility of $270,000. Westpac entered into a second business finance agreement with K’s and Q’s Trading to provide a further “Business Loan with Redraw” facility of $300,000. The agreements provided, among other things, that:
a)the purpose of the business loans was to assist with the purchase of a Red Rooster franchise restaurant;
b)both business loans had 10 year terms;
c)K’s and Q’s Trading was required to make monthly repayments of $2,946.00 for the first loan and $3,373.00 for the second business loan; and
d)performance of the business loan agreements was guaranteed by Ms Qazi to a maximum of $270,000 and by her husband also to a maximum of $270,000 and secured by a mortgage over the Property given by the applicant and her husband.
On or about 30 March 2016, Westpac received a guarantee and indemnity signed by Ms Qazi and a mortgage in respect of the Property, also relevantly signed by her.
K’s and Q’s Trading is in default under both business loan agreements and Westpac sent notices to Ms Qazi and her husband in their capacities as guarantors of those agreements. On 12 November 2018, Westpac issued default notices to Ms Qazi and her husband pursuant to s.57(2)(b) of the Real Property Act 1900 (NSW).
Application for summary dismissal
Respondent’s submissions
Westpac submitted that Ms Qazi’s claim under the NCC Code is destined to fail and has no reasonable prospect of success.
Westpac submitted that the provisions of the NCC Code did not apply to the business loans because:
a)they were extended to an incorporated entity, K’s & Q’s Trading, and the NCC Code can only apply when the borrower is a natural person or a strata corporation;
b)Ms Qazi was not the borrower but a guarantor of the business loan agreements and the NCC Code does not apply where a natural person guarantees a loan that is not otherwise subject to the NCC Code; and
c)the funds advanced were for a business purpose, namely to purchase a Red Rooster franchise and not for personal, domestic or household purposes, or for investment in residential property.
Westpac submitted that although Ms Qazi had given a mortgage over the Property to secure the business loans, the mortgage agreement was only security for the loans and was not itself a “credit contract” for the purposes of the NCC Code, with the consequence that there was no credit contract between it and Ms Qazi in respect of either business loan. It might be noted at this point that the circumstances in which the mortgage came to be given and its relationship with the Home Loan, other than the fact that it secured that loan too, were not clear. However, for present purposes it is not necessary to take that issue further.
Westpac also submitted that while the NCC Code might apply to the mortgage to the extent that it secured Ms Qazi’s obligations as a debtor under the Home Loan, presumably on the basis that the relevant rights under the mortgage depended on a default on the Home Loan to which the NCC Code applied (vide: Appleyard v Westpac Banking Corporation [2017] QCA 316 at [33]) it did not apply with respect to the enforcement of the mortgage to the extent that it secured obligations associated with the business loans. Consequently, submitted Westpac, it did not prevent the bank from taking steps to enforce the mortgage consequent upon a default on those two loans.
Westpac also argued that because Ms Qazi had not complied properly with the Court’s timetabling orders her application should be struck out. In light of the reasons which follow, it is not necessary to consider that issue.
Applicant’s submissions
Ms Qazi’s submissions relevantly addressed what she contended had been unfairness in the circumstances by which she came to guarantee K’s & Q’s Trading’s obligations under the commercial loan agreements. She also pointed to what she said were “unanswered” factual issues concerning the giving of the guarantee. Ms Qazi pointed out in that connection that cl.12.30 of the guarantee stated that the Code of Banking Practice applied to it and that Westpac had breached various provisions of that code, namely:
a.Clause 31.4(a) – the Applicant was not given prominent/sufficient notice by the First Respondent that:
i.they should seek independent legal and financial advice on the effect of the Guarantee;
ii.they could refuse to enter the guarantee; and
iii.there were financial risks involved.
b.Clause 31.5(a) – the First Respondent did not provide all the information outlined in clause 31.4 of the Banking Code before (or after) the Applicant signed the guarantee;
c.Clause 31.5(b) – the First Respondent did not allow the Applicant the required one day to consider the information before the Applicant signed the guarantee. The Applicant did not obtain independent legal advice, therefore clause 31.5(b) still applies;
d.Clause 31.6(a) – the signing of the guarantee was arranged by the Home Loan Mortgage Broker. 2nd respondent and Ms. Anjali Datta who was present acting on behalf of the debtor.
e.Clause 31.6(b) – the First Respondent did not ensure that the guarantee was signed in the absence of the debtor (Applicant’s husband).
It was submitted that the guarantee “should be rendered void” because there had been a breach of the Code of Banking Practice.
Referring to Garcia v National Australia BankLtd (1998) 194 CLR 395, Ms Qazi further submitted, at least implicitly, that it would be unconscionable of Westpac to enforce the guarantee given the following alleged circumstances:
26.It is evident that the Applicant did not understand the effect of the transaction as they did not understand that the guarantee was for the loan taken for the business.
27.The First Respondent, as lender, failed to understand that the Applicant was the wife of the borrower and that the Applicant would ‘repose trust and confidence in her husband in matters of business.’ The First Respondent, as lender, failed to understand that ‘the husband may not fully and accurately explain the purport and effect of the transaction to his wife.’
28.The First Respondent, as lender, also failed ‘itself to take steps to explain the transaction to the [Applicant] or find out that a stranger had explained it to her.’ This is evident by the First Respondent failing to comply with clause 31.4 and 31.5 of the Code [of Banking Practice], as well as not ensuring the Applicant sought independent legal and financial advice.
CONSIDERATION
Relevant Legislation
Section 17A of the FCCA Act was inserted into the Court’s statute by the Migration Litigation Reform Act 2005 which commenced on 1 December 2005. It was designed to have general application and to strengthen the power of the Court to deal with unmeritorious proceedings by broadening the grounds on which the Court can dispose of them summarily. The operation of that provision and the analogous provision in the Federal Court of Australia Act 1976 has been discussed in several cases, most significantly in Spencer v Commonwealth (2010) 241 CLR 118. In that case, the plurality held that no paraphrase of the expression “no reasonable prospect” can be adopted as a sufficient explanation of its operation let alone as a definition of its content, saying:
… full weight must be given to the expression as a whole. The Federal Court may exercise power under section 31A if, and only if, satisfied that there is “no reasonable prospect” of success. (per Hayne, Crennan, Kiefel and Bell JJ at 141 [60])
Their Honours were of the view that the elucidation of the term would best proceed by decided cases giving it content over time, noting that it was already apparent that authorities such as General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129-130 could not be relied on to define the scope of the term.
In a separate decision, French CJ and Gummow J identified circumstances in which a finding that a case lacked reasonable prospects of success would not reasonably be available. Their Honours said:
Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a “fanciful” prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success.
Where an application under s 31A requires consideration of apparently complex questions of fact, then the caution uttered by Lord Hope is relevant. The importance of those considerations is amplified if the case involves resolution of issues of law and fact, or mixed law and fact. (at 132 [25]-[26])
Their Honours were referring to the speech of Lord Hope in Three Rivers District Council v Bank of England (No 3) [2003] 2 AC 1 where his Lordship said, amongst other things:
In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be to take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence. (at 261 [95])
The Chief Justice and Gummow J made it clear that there can be circumstances at an interlocutory stage where, for instance because of the incomplete state of the evidence or the difficulty of the arguments, the Court is unable to be confident that a case lacks reasonable prospects of success and so, on that basis, it is not appropriate to dismiss the case at that point.
Considerations
Clauses 12.30 and 12.31 of the guarantee state:
12.30The relevant provisions of the Code of Banking Practice apply to this guarantee and indemnity.
12.31If a provision of this guarantee and indemnity contravenes a requirement of that Code or imposes an obligation or liability which is prohibited by that Code, this guarantee and indemnity is to be read as if that provision were varied to the extent necessary to comply with that Code or, if necessary, omitted.
It will be observed that the complaints ventilated in Ms Qazi’s submissions regarding the Code of Banking Practice echo her allegations of breach of the NCC Code made in her amended application. However, whatever similarity there might be in the issues which they raise, the fact remains that the amended application seeks relief under the NCC Code, not by reference to the issues and principles to which reference was made in Ms Qazi’s submissions. No application was made to amend the application for a second time and so it must be inferred from that that the present allegations are the ones which Ms Qazi wishes to press. However, they have no reasonable prospects of success.
For the reasons argued by Westpac, the NCC Code does not apply to prevent Westpac from exercising its rights under the mortgage to the extent that it is security for money lent under the business loan agreements. The NCC Code does not apply to those loans because they were extended to a corporation which was not a strata corporation and the funds were extended for a business purpose, not for any of the purposes set out in s.5(1)(b) of the NCC Code. Further, to the extent that Ms Qazi is a debtor in relation to the two business loan agreements, she is so because she was a guarantor of K’s & Q’s Trading’s performance of them. As such, she does not meet the definitional criteria of “debtor” in s.5 of the NCC Code and so she is not a “debtor” for the purpose of the NCC Code. Moreover, even if the NCC Code applies to the mortgage because it secured obligations under the Home Loan, by reason of s.7 of the NCC Code it does not apply to the obligations under the guarantees which it also secured, because they were not guarantees of a “credit contract” under the NCC Code.
Consequently, Westpac should have the relief it seeks, which is, relevantly:
The Applicant's Amended Application filed 21 September 2019 (Amended Application) be summarily dismissed …
As a final note, no affidavit of service of the second respondent has been filed and he did not appear at any stage. The order sought by Westpac which was for the dismissal of the proceeding in its entirety and Ms Qazi did not submit that the Court could not make such an order. Given those matters and in circumstances where Westpac’s arguments had much relevance to second respondent’s position, the proceedings will be dismissed in their entirety.
In deciding to dismiss the proceeding, I have had regard to the caution which is to be exercised when considering whether a matter might be dismissed on a summary basis, and to what has been said in cases such as Cavar v Green Gate Pty Ltd [2015] FCA 1179 at [28] and [29], Commonwealth Bank of Australia v ACN 000 247 601 Pty Ltd [2006] FCA 1416 at [30] and Przybylowski v Australian Human Rights Commission (No 2) [2018] FCA 473 at [6]-[7].
CONCLUSION
The proceeding will be dismissed.
I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of Judge Cameron
Associate:
Date: 12 December 2019
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