JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA CITATION : PERPETUAL TRUSTEES VICTORIA LTD -v- BANTON [2002] WASC 6 CORAM : MASTER BREDMEYER HEARD : 31 AUGUST, 5 & 9 SEPTEMBER, 5 OCTOBER 2001 DELIVERED : 25 JANUARY 2002 FILE NO/S : CIV 1676 of 2001 BETWEEN : PERPETUAL TRUSTEES VICTORIA LTD Plaintiff
AND
LESLIE JOHN BANTON
Defendant
Catchwords:
Summary judgment - Bank mortgage
Legislation:
Trade Practices Act 1974, s 51AA, s 51AB, s 51AC, s 82
Result:
Application dismissed
(Page 2)Category: B Representation:
Counsel:
Plaintiff : Mr P K Walton
Defendant : In person
Solicitors:
Plaintiff : Jackson McDonald
Defendant : In person
Case(s) referred to in judgment(s):Bunbury Foods Pty Ltd v National Bank of Australasia Ltd (1984) 153 CLR 491Commercial Bank of Australia v Amadio (1983) 151 CLR 447L'Estrange v Graucob Ltd [1934] 2 KB 395Wilton v Farnworth (1948) 76 CLR 646Case(s) also cited:
Eng Mee Yong v Lutchuman [1980] AC 331Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87Henry v Armstrong [1881] 18 Ch D 668Yerkey v Jones (1939) 63 CLR 649 (Page 3)1 MASTER BREDMEYER: This is an application by the plaintiff for summary judgment against the defendant in a mortgage action. The plaintiff relies on an affidavit of Mr R Miernik sworn 4 July 2001, an affidavit of Mr S Lakmak sworn 4 July 2001, an affidavit of Mr M Manners sworn 25 June 2001, an affidavit of Ms J Bartlett sworn 30 August 2001, a supplementary affidavit of Ms Bartlett sworn 7 September 2001, an affidavit of Mr I Robertson sworn 28 September 2001 and an affidavit of Mrs A Davidson sworn 4 October 2001. The defendant relies on affidavits of his sworn 19 August, 29 August, 14 September and 19 September 2001. 2 The plaintiff in this summary judgment application seeks an order that the defendant give up vacant possession of his residential property at 4 Lotus Close, Coogee.
3 The plaintiff's case, as it appears in its affidavits, rather than in the more summary form in the statement of claim, is that in about August 1998 it loaned $50,000 to the defendant's company, Casjade Pty Ltd (Casjade). Mr Banton was at that time the sole director of that company and, at all times has been its only shareholder. He was also company secretary. This sum was secured by a mortgage over a property at 28 O'Connell Avenue, Matraville, New South Wales. In March 1999, this sum was increased to $90,000. This loan was recorded in a new loan agreement dated 31 March 1999 for $90,000 and secured by a guarantee and indemnity signed by Mr Banton, also dated 31 March 1999. It was also secured by a mortgage given by Mr Banton over his property at 4 Lotus Close, Coogee. That mortgage was in substitution for the New South Wales property which he sold.
4 From 1 April 1999 to 21 October 1999, interest was wrongly charged on this loan at 7.74 per cent, instead of 5.7 per cent. The overcharge caused by this mistake was $1,435.16 (affidavit of Robertson [9] and [11]).
5 A further $60,000 was loaned to Casjade in August 1999. Casjade signed a supplementary loan agreement for $150,000 and Mr Banton signed a guarantee and indemnity for that sum.
6 A further sum of $112,000, making a total of $262,000, was loaned by the plaintiff to Casjade in March 2000. The company signed a supplementary loan agreement for that increased sum on 23 March 2000. Mr Banton signed a third guarantee and indemnity for that sum. The actual document is undated, but I assume it was signed approximately
(Page 4)31 March 2000. The extra $112,000 was credited to Casjade's loan account on 24 March 2000. Under the loan agreement, Casjade was required to pay a monthly instalment of $1,887.53. The interest rate was variable so that sum could be varied.
7 According to the plaintiff, Casjade defaulted on the repayments as follows:
Particulars of Default
Due Date | Amount Due | | Amount |
| | $2,311.99 | $0.00 | $2,311.99 |
| $2,311.99 | $0.00 | $4,623.98 |
| $2,311.99 | $0.00 | $6,935.97 |
| $2,311.99 | $0.00 | $9,247.96 |
$0.00 |
8 Details of those defaults in those terms were given to the defendant in a written notice of default dated 22 February 2001, calling upon him to remedy the default within 31 days. The default was not remedied. By a written notice to the defendant dated 27 March 2001, the defendant was given 7 days' notice to quit possession of the property. He remained (and remains) in possession, although he has the property on the market for sale through a real estate agent. I am told there have been numerous home opens, but, as yet, no sale. 9 The plaintiff's affidavits prove its case in a prima facie way. I now need to examine the defences put up by the defendant. I deal with them in no special order.
10 The first defence relates to a sum of $5,000, which he says his company paid to Credit Force on 7 April 2000. In support of that, he has
(Page 5)produced a photocopy of his cheque stub - cheque number 401363 - for that sum made out to "Perpetual Trustees Vic". He has also produced his company's business cheque statement with Challenge Bank - account number 036-064 11-9785 - showing that this cheque for $5,000 was debited to his account on 7 April 2000. He says that this payment has not been shown as a credit in his company's loan account and, if it had, he would not have been in default of his monthly payment of $2,311.99 due on 15 September 2000, as alleged by the plaintiff.
11 It is true that the $5,000 cheque which he said he drew on or about 7 April 2000 is not shown as a credit in the company's loan account. The statements for the company's loan account with the plaintiff with Interstar Securities (Australia) Pty Ltd - account manager Credit Force - are exhibited to Mr Robertson's affidavit of 28 September 2001. As previously stated, the sum of $112,000 was debited to that account on 24 March 2000, taking the outstanding loan moneys as at that date to $258,023.75. The $112,000 additional loan moneys were thus available to Casjade to pay debts, etcetera. 12 The photocopy of the cheque stub and the debit in the company's cheque account for that sum on 7 April is some evidence that that sum was paid to the plaintiff on or about that date, but I am suspicious of that evidence. Mr Banton has given no reason why that sum was paid, nor any reason why it was paid in the form of a cheque. He has produced no document such as a letter of demand, or an invoice, requiring the money to be paid. He had not given evidence of a phone call from someone in Credit Force requesting him to repay the sum. Why would he want to repay voluntarily $5000 off the loan when he had at that time just borrowed an additional $112,000?
13 The company may have been required to pay a loan application fee, stamp duty and legal costs associated with this extra loan. I doubt if they would come to $5,000. The plaintiff required Casjade to pay a valuation fee of $165, an application fee of $85 and "other" - meaning other fees - of $425 (Banton's affidavit of 14 September, exhibit 4). The supplementary loan agreement is stamped $20, and the guarantee and indemnity is stamped "Duty Payable - Nil". The mortgage of 31 March 1999 bears a stamp duty endorsement for "24 March 2000 - $112,000" "Duty payable - Nil".
14 To pay $5000 on or about 7 April 2000 seems unusual and unlikely. I say that because prior to March 2000, Casjade had met all its monthly payments. It was not in arrears. Moreover, all payments were made by
(Page 6)direct debit from its cheque account to its loan account. The plaintiff insisted on that. The detailed statements of the loan account attached to Mr Robertson's affidavit show that all these payments were paid on time. The company had applied for, and been granted, a further loan of $112,000 and, as previously stated, this money was released to the company on 24 March 2000. The next monthly instalment was due on 14 or 15 April 2000 and, as I have said, the method of payment required by the plaintiff lender was by direct debit, not by cheque. So, why then, having just loaned a further $112,000 to the company, would the plaintiff require a repayment of $5,000 in early April - and in cheque form? The limit of the facility granted by the plaintiff to the company was $262,000. It is clear from the bank statements of the loan accounts that this limit was not exceeded in March or April. If it had been exceeded in early April, it would have made sense for the lender to require the defendant's company to pay some additional money to bring the outstanding loan within the permitted limit. But the limit was not exceeded.
15 Even if this sum of $5,000 had been paid, it would not have invalidated the default notice of 22 February 2001. That notice covered the defaults in four monthly payments of principal and interest totalling $9,247.96. Had this $5,000 been paid in April 2000, as asserted by the defendant, the defendant would still have been in default, but for a lesser sum. A default notice is valid, even though it overstates the amount due. 16 Weak though the defendant's evidence of this payment is, the possibility that this sum was paid and has not been credited by the plaintiff may amount to "some other reason" in terms of O 14 r 3(1) why summary judgment might be withheld. I will consider that again later.
17 The second matter raised as a defence relates to a purported draw-down of $2,000 from the loan on 29 March 2000. The loan statements, as previously stated, show a draw-down of $112,000 on 24 March 2000, that sum being the additional sum loaned to the company. The next entry on the statement is dated 29 March 2000 and shows "draw-down" of $2,000, taking the total sum then outstanding to $260,023.75. Mr Banton says that this draw-down of $2,000 is incorrect, as it was not requested by him. It was. Attachment IR7 TO Mr Robertson's affidavit of 28 September 2001, attaches a request for a redraw of funds of $2,000 "ASAP". It is signed by Mr Banton. I think Mr Banton had forgotten that he signed it. The request form is also signed by Ms M J Jamieson, who was also a director of Casjade.
(Page 7)18 In several of Mr Banton's affidavits, he has referred to Commercial Bank of Australia v Amadio (1983) 151 CLR 447 and to ss 51AB, 51AA, 51AC and 82 of the Trade Practices Act 1974. He considers that the plaintiff has been guilty of unconscionable conduct towards him. In his affidavit of 20 August 2001, he states:
"8. Neither I nor my partner, who was also a director of Casjade Pty Ltd, had legal advice about the loan contract or the mortgage deed and its implications. 9. As guarantor of the loan contract it was to my knowledge never explained to me that if the company went into liquidation that Perpetual could seize and sell the residence at 4 Lotus Close Coogee.
10. I have never been supplied with nor had explained to me fully before or after the full terms of the loan account and the deed of mortgage."
19 In his affidavit of 29 August 2001, he states at par 12, after referring to Amadio:
"12. One clear common thread was the lack of explanation or understanding of the loan contract or the mortgage deed … 13. At no time was it explained to me nor did I understand that a situation might arise which would lead to me losing the family home at 4 Lotus Close Coogee, WA."
20 I do not consider any arguable defence arises from those assertions. The starting-point is that, when a contract is signed, the party signing it is bound by the terms of it, whether he reads it or not, in the absence of fraud, misrepresentation, unconscionable conduct, non est factum etcetera. See L'Estrange v Graucob Ltd [1934] 2 KB 395. The same point was made, and the reason for it was given, by Latham CJ in Wilton v Farnworth (1948) 76 CLR 646 at 649.
"Where a man signs a document knowing that it is a legal document relating to an interest which he has in property, he is in general bound by the act of signature… He may not trouble to inform himself of the contents of the document, but that fact does not deprive the party with whom he deals of the rights which the document gives to him. In the absence of fraud or
(Page 8)some other of the special circumstances of the character mentioned, a man cannot escape the consequences of signing a document by saying, and proving, that he did not understand it. Unless he was prepared to take the chance of being bound by the terms of the document, whatever they might be, it was for him to protect himself by abstaining from signing the document until he understood it and was satisfied with it. Any weakening of these principles would make chaos of every-day business transactions."
21 In a letter dated 30 March 1999 sent by Jackson McDonald, solicitors for the plaintiff, to the director of Casjade enclosing the loan agreement and the loan agreement mortgage, guarantee and indemnity, etcetera, a certificate of independent legal advice was sent to Mr Banton and the letter stated:
"Before the documents are signed by Leslie John Banton, it is necessary for him to obtain independent legal advice. The solicitor should also complete the enclosed certificate of independent advice. Mr Banton should then sign the guarantee mortgage and ancillary documents in the presence of the solicitor providing the advice, and the solicitor should also write his or her name and occupation immediately beneath his or her signature. All copies of the guarantee and indemnity and mortgage should be signed in exactly the same way."
In response to that letter, Mr Banton, no doubt keen to get the loan and possibly to avoid further legal costs, faxed a letter to Jackson McDonald waiving his right to seek third party legal advice.
22 When the loan was increased to $150,000 in August 1999, fresh security documents were signed and again Mr Banton was told to get independent legal advice. He signed an acknowledgement that he had received independent legal advice about the guarantee and indemnity. That is found at page 12 of Ms Bartlett's affidavit of 7 September. The certificate of independent advice is found at page 14 of that affidavit and is signed by Timothy Robin Thies, of Nedlands. It is dated 27 August 1999. 23 I do not think it can be argued that Mr Banton was in a specially vulnerable position vis-à-vis the plaintiff. He was a guarantor, but had a close connection with the principal debtor Casjade in that he was a director and the 100 per cent shareholder of that company. He was not a truly independent guarantor, as were Mr and Mrs Amadio in that case. He
(Page 9)stood to benefit from the loans to Casjade. That was his company, it ran his business, Coco Resort Fashions, and, if it flourished, he would flourish. In his loan application of August 1999, he said his gross income was $70,000 a year - presumably from the fashion business. The plaintiff lender wanted security. It was only prepared to lend on 80 per cent of the security. It did not regard his expensive fit-out of several of the stores and the stock on hand as assets really available as security. It wanted land. Casjade had no land. The only land available to secure the loan was Mr Banton's own property at Coogee. From a commercial point of view, he had no alternative but to mortgage that property if he wanted the loans. That probably explains why he chose to waive his right to independent legal advice in March 1999. I do not think it is arguable that the plaintiff has been guilty of unconscionable conduct towards Mr Banton. The loan documents are in fairly standard form and the interest rates were not extraordinarily high. He chose to borrow through mortgage originators rather than going to a bank for example. That has its advantages. The mortgage originators come to the clients' home and work at weekends. But as at 25 August 1998, it added a further 1.04 per cent "originator margin" to the interest rate out of a total of 7.99 per cent. Even so, the interest rates were not exceptionally high.
24 The next defence raised by Mr Banton relates to the nature of the loan for $150,000 granted in August 1999. As at March 1999, the outstanding loan was $90,000 and that was increased in August 1999 by a further $60,000 to make a total of $150,000. I should add that, at all times, Mr Banton and his company had little or no direct dealing with the plaintiff. All dealings with the plaintiff were through its fund manager, Interstar Securities (Australia) Pty Ltd (Interstar) and its account manger Credit Force. Credit Force is a mortgage originator. Having asked for an increased loan to take the total to $150,000, Credit Force wrote to Casjade on 25 August 1999, advising that the loan had been approved. He was asked to sign an acknowledgement contained in a brochure enclosed and to initial a copy of the letter, and the attached schedule. The letter and the schedule are attached to Mr Banton's affidavit of 14 September 2001. They are not numbered. But the schedule sets out details of the loan. For example, it states that the total loan amount was $150,000; the loan maturity date was 15 October 2023; and application fees of $300 were payable. At the bottom of the mortgage loan schedule appear a number of boxes setting out the type of facility being offered. There are eight boxes under the heading "Facility 1" and two of those are marked with a cross; namely, "Variable" and "Interest only for 5 years". One of the boxes left unmarked is captioned "Principal and interest". The marking of these two (Page 10)boxes indicates that the loan was at a variable interest rate and it was an interest only loan for five years. At the foot of those boxes appears these words:
"Indicative repayment at 7.74 $1,135.90."
25 Mr Banton's argument, based on this document, is that this was an interest only loan for five years and, had he been charged interest only, the monthly repayments would have been much smaller and he would not have been in default at all, as alleged by the plaintiff when it issued its default notice in February 2001. Instead he says he was wrongly charged instalments of principal and interest. 26 That mortgage loan schedule was sent to Cascade with two covering letters and a number of covering documents. I quote from part of one of the letters.
"PROPOSED MORTGAGE LOAN FACILITY Thank you for completing your application for a CreditForce Loan. We are pleased to confirm our intention to arrange a Premium Access loan facility for you.
Please read this letter, the attached schedule and brochure carefully, as they outline the proposed terms and conditions of the loan facility.
If you agree to the proposed terms and conditions, please sign the Acknowledgement contained in the brochure, and initial the copy of this letter and attached schedule. These should then be returned in the enclosed envelope, along with your cheque, made payable to CreditForce, for any fees applicable at this time (see attached schedule)."