RHG Mortgage Corporation Limited v DLC Properties Pty Limited
[2009] NSWSC 990
•22 September 2009
CITATION: RHG Mortgage Corporation Limited v DLC Properties Pty Limited [2009] NSWSC 990 HEARING DATE(S): 1 September 2009
JUDGMENT DATE :
22 September 2009JURISDICTION: Common Law JUDGMENT OF: McCallum J DECISION: (1) The defendant give to the plaintiff possession of the land comprised in certificate of title folio identifier 16/15891 being the land situated at and known as 17 White Street, East Gosford and the land comprised in certificate of title folio identifier 15/15891 being the land situated at and known as 19 White Street, East Gosford in the state of New South Wales.
(2) The cross-claim be dismissed.
(3) The defendant pay the plaintiff’s costs of the proceedings including the costs of the cross-claim.CATCHWORDS: MORTGAGES – whether certain representations made by mortgagee – whether loan agreement breached by mortgagee by failing to give repayment holiday – whether loan agreement breached by failing to keep interest rate lower than competitors – whether mortgagee entitled to order for possession LEGISLATION CITED: Australian Securities and Investments Commission Act 2001 (Cth) CATEGORY: Principal judgment PARTIES: RHG Mortgage Corporation Limited (Plaintiff)
DLC Properties Pty Limited (Defendant)FILE NUMBER(S): SC 16800/08 COUNSEL: Ms V Whittaker (Plaintiff)
Ms L Craig (In Person) (Defendant)SOLICITORS: Kemp Strang (Plaintiff)
Stephen Teece Solicitor (Defendant)
IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
McCALLUM J
22 SEPTEMBER 2009
JUDGMENT16800/08 RHG MORTGAGE CORPORATION LIMITED v DLC PROPERTIES PTY LIMITED
1 HER HONOUR: In November 2006, DLC Properties Pty Limited borrowed $772,000 from RHG Mortgage Corporation Limited (then known as Rams Mortgage Corporation Limited). The loan was secured by a first registered mortgage over two adjacent properties in Gosford. In May 2008, DLC fell into default of its obligations under the loan agreement by failing to pay a monthly instalment when it fell due. A default notice was then served giving a period of grace of 31 days to pay arrears due and that was not complied with. RHG now seeks an order for possession of each property.
2 DLC does not deny that it is in default within the terms of the mortgage, nor that it has failed to remedy the default within the time allowed under the default notice served on it by RHG. In those circumstances, the mortgage provides that RHG is entitled to take possession of the secured properties (clause 19.3(b)).
3 DLC contends, however, that RHG is not entitled to rely on the default notice by reason of certain representations made to DLC and, further, by reason of alleged breaches of the loan agreement by RHG. DLC contends that RHG has, in the circumstances, engaged in conduct in trade or commerce in relation to financial services that was misleading, deceptive or likely to mislead or deceive within the meaning of s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth). Alternatively, it is contended that the conduct complained of was unconscionable within the meaning of ss 12CA, 12CB and 12CC of that Act.
The “repayment holiday” representation
4 DLC contends that RHG represented to it that the loan included an option called “Lifestyle Option” under which RHG would consider a request for a repayment holiday. In support of that contention, DLC tendered a page printed out from the Rams Home Loans website with the heading “Lifestyle Option” and a sub-heading “available on most Rams home loans”. The print out states:
- “Rams Lifestyle Option allows you to defer repayments on your loan for up to six months - twice during the life of the loan. This option is designed to help Ram’s customers whose income is temporarily affected by situations such as parental leave, accident or retrenchment. Conditions and fees apply so check further details with a Ram’s representative if you are interested in this option”.
5 The “Rams Lifestyle Option” applied to DLC’s loan. The relevant provision in the loan agreement was clause 9.8 of the general terms, which provided:
- “Subject to clause 9.12, if you are unable reasonably because of injury, illness, retrenchment, maternity leave or parental leave to meet your repayment obligations under this loan agreement, then you may ask us for a repayment holiday. We have at all times absolute discretion to decide whether or not to agree to your request. We will not agree to your request if it is based on maternity leave or parental leave and it is made within 12 months after the settlement date.”
6 The page printed out from the website was dated after the date on which the loan was entered into. RHG did not concede that a representation in the same terms was made before the date of the loan. In any event, it may be noted that the information on the website specifically disclosed that “conditions” applied to the Lifestyle Option. Accordingly, I am not satisfied that there was any representation or promise made by RHG beyond those contained in clause 9.8 set out above.
7 After DLC received the default notice on about 24 September 2008, DLC wrote to RHG by letter dated 6 October 2008 explaining that DLC was owed a large amount of money by a client (in the order of $450,000) and expected settlement of that account by the end of October or early November 2008. The letter continued “We herewith request a moratorium on this account for eight weeks until the matter relating to our income is resolved.”
8 DLC contends that the letter amounted to a request for a repayment holiday under clause 9.8 and that, in breach of that provision, RHG “refused to consider” DLC’s request (paragraph 1(e) of the defence). I note, however, that DLC’s request was not framed, in terms, by reference to clause 9.8. Further, it did not cite injury, illness, retrenchment, maternity leave or parental leave as the reason for which DLC was unable reasonably to meet its repayment obligations under the loan agreement.
9 Further, there is no evidence to support the contention that RHG refused to consider DLC’s request. A response to the request was sent by RHG’s solicitor on its behalf dated 6 October 2008, which stated “We are instructed to advise that our client is not willing to grant a moratorium of eight weeks”. There is no basis for inferring that RHG did anything less than to consider the request in good faith in accordance with the terms of the loan agreement. I am not satisfied that there has been any breach of clause 9.8 on the part of RHG.
Raymond the talking ram
10 The next alleged misrepresentation relied upon by DLC is that television advertisements published by RHG at the time DLC applied for the loan depicted a talking ram called Raymond that “undertook to keep interest rates lower than the Big Banks”.
11 DLC did not tender any copy of the advertisements at the hearing. DLC was not legally represented at the hearing, and its director, Ms Craig, had proceeded on the premise that it would be sufficient to describe the advertisements in her affidavit sworn 15 June 2009.
12 In order to ensure that DLC had a fair opportunity to present its case, I granted leave to DLC at the conclusion of the hearing to tender any copy of the television advertisement referred to in Ms Craig’s affidavit, provided that it was established by a further affidavit that the advertisement was shown before 20 November 2006 (when the loan agreement was entered into) and had been relied on by DLC.
13 DLC filed a further affidavit sworn by Ms Craig on 7 September 2009. Ms Craig had been unable to obtain a copy of any advertisement published before the date on which the loan agreement was entered into, but provided a copy of a later television advertisement which Ms Craig asserts “reaffirmed the Ram’s past promises on interest rates that was represented to me at the time of my loan”.
14 In the DVD provided by Ms Craig (marked “exhibit 1” after the conclusion of the hearing), Raymond the talking ram says:
- “Rams has always been known for its low rates. So we’ve kept our standard variable interest rates lower than any of the Big Banks.”
15 In supplementary submissions filed with leave on 14 September 2009, RHG indicated that it does not accept that the advertisement on the DVD was published before 20 November 2006. In any event, even if such a statement was made by Raymond on behalf of RHG in television advertisements published before that date, I accept as submitted by RHG that there is nothing in that statement which conveys a representation that Rams’ interest rates will remain lower than the “Big Banks” in the future.
16 Accordingly, I am not satisfied that the representation as to future interest rates relied upon by DLC was made by RHG.
The “preferential interest rate” representation
17 Separately, DLC contended that, at the time of entering into the loan agreement, it relied on a representation “that the loan would enjoy a preferential interest rate for the life of the loan”.
18 The evidence relied upon in support of that contention was another print out from the Rams website which post-dated the date on which DLC entered into the loan agreement. In any event, there is no substance in this claim. The website states:
- “If you’re self-employed and borrowing over $500,000, a Rams Low Doc Five Hundred Plus Home Loan could be perfect for you. You’ll receive a preferential rate for the life of your loan and enjoy money management facilities such as ATM, EFTPOS and cheque book access”.
19 The proposition contended for by DLC appeared to be that, by representing that customers would receive “a preferential rate”, Rams was representing that customers would receive a rate preferable to that offered by any of the so-called big banks. Leaving aside the absence of evidence as to the making of that representation before the loan was entered into, I do not accept that the representation conveys the meaning that DLC says it does.
20 In my view, the meaning conveyed by those words is that a customer that falls into the class of being self-employed and a borrower of more than $500,000 will receive a preferential (perhaps “lower”) interest rate compared with the rate charged to some other classes of Rams borrowers. There is no evidence that that did not occur.
21 The evidence relied on by DLC also addressed certain representations allegedly made by RHG when it sold the Rams brand to Westpac and changed its name from Rams Mortgage Corporation Limited to RHG Mortgage Corporation Limited. There would be many difficulties facing DLC in mounting a claim on the strength of the representations identified. For present purposes, it is sufficient to note that the representations are not alleged to have been made before the loan agreement was entered into. I am not satisfied that there is any sustainable claim on the strength of those contentions.
22 Finally, I note that the cross-claim alleges that RHG breached the terms of the loan agreement:
(b) by not upholding the terms in paragraphs in 22 and 23 of the Rams Home Loan Agreement General Terms dated March 2005.
(a) by refusing DLC’s request for a repayment holiday; and
23 As to the first alleged breach, it is clear that clause 9.8 did not impose any obligation on RHG to accede to a request for a repayment holiday. This claim is unsustainable. As to the terms in paragraphs 22 and 23 of the General Terms, the clauses identified apply, in terms, only to loans to individuals and accordingly did not apply to the loan to DLC.
Unconscionable conduct
24 In respect of the contention that RHG engaged in unconscionable conduct, DLC relied on the fact that the loan was subject to early repayment fees of 2% if the loan was paid out within the first two years of the loan and 1.5% if the loan was paid out after two years and before three years. Ms Craig’s evidence was that she understood the early termination fee was “off-set by the discounted interest rate for the life of the loan”. She further stated that, when entering into the loan, her outlook was “long-term” and accordingly that the early repayment fees did not concern her.
25 DLC contended that, having locked it into a loan with high early repayment fees, it was unconscionable for RHG to increase its interest rates at the times and by the increments that it did.
26 I do not think those matters establish unconscionable conduct on the part of RHG. DLC voluntarily entered into a loan that had a variable interest rate. The rate was 7.73% at the outset of the loan. The highest point it reached was 10.55% from 16 July 2008. From 23 February 2009 it was back down to 7.7%.
27 There was no evidence as to any special disadvantage suffered by DLC in the negotiation of the loan agreement. The security properties are apparently investment properties owned by that company. Further, as already indicated, I do not construe anything said by Raymond the talking ram as amounting to a promise or representation that the interest rate would be kept below that of the “big banks” for the term of the loan. I am not satisfied that RHG engaged in any unconscionable conduct within the meaning of the ASIC Act.
28 I am satisfied that RHG is entitled to an order for possession of each security property. I make the following orders:
(1) That the defendant give the plaintiff possession of the land comprised in certificate of title folio identifier 16/15891 being the land situated at and known as 17 White Street, East Gosford and the land comprised in certificate of title folio identifier 15/15891 being the land situated at and known as 19 White Street, East Gosford in the state of New South Wales.
(3) That the defendant pay the plaintiff’s costs of the proceedings including the costs of the cross-claim.(2) That the cross-claim be dismissed.
0
0
1