Volkswagen Financial Services Australia Pty Ltd v Mandalavi
[2018] FCCA 752
•29 March 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| VOLKSWAGEN FINANCIAL SERVICES AUSTRALIA PTY LTD v MANDALAVI & ANOR | [2018] FCCA 752 |
| Catchwords: CONSUMER LAW – Mortgagee’s action to obtain possession of a mortgaged chattel – orders not to be made against third parties who have not been joined in the proceeding – quaere whether the Court can order the police to assist a mortgagee take possession of a mortgaged chattel – orders requiring a person to supply information as to the whereabouts of a mortgaged chattel are in substance mandatory injunctions and will not be ordered unless the criteria for the making of a mandatory injunction are satisfied. |
| Legislation: National Consumer Credit Protection Act 2009, sch.1 Personal Property Securities Act 2009 |
| Gurfinkel v Bentley Pty Ltd (1966) 116 CLR 98 Handevel Pty Ltd v Comptroller of Stamps (Vic) (1985) 157 CLR 177 News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 John Alexander’s Clubs Pty Ltd & Anor v White City Tennis Club Ltd (2010) 241 CLR 1 Victoria v Sutton (1998) 195 CLR 291 |
| Applicant: | VOLKSWAGEN FINANCIAL SERVICES AUSTRALIA PTY LTD (ACN 097 071 460) |
| First Respondent: | HOSSEIN MANDALAVI |
| Second Respondent: | ZIAD AJJAWI |
| File Number: | SYG 2528 of 2017 |
| Judgment of: | Judge Cameron |
| Hearing date: | 15 March 2018 |
| Date of Last Submission: | 15 March 2018 |
| Delivered at: | Sydney |
| Delivered on: | 29 March 2018 |
REPRESENTATION
| Solicitors for the Applicant: | Mr G. Pignone of Church & Grace |
| No appearance by or on behalf of the First Respondent |
| No appearance by or on behalf of the Second Respondent |
DECLARATIONS
The applicant is the owner of the legal title to the vehicle referred to in the schedule below (“Vehicle”).
| SCHEDULE | |||||
| Description of Vehicle is as follows | |||||
| Year | Make and type of vehicle | Colour | Registration no. | Engine no. | VIN no. |
| 2014 | Volkswagen Passat Sedan | Grey | CYR26V | CDA464040 | WVWZZZ3CZFE047556 |
ORDERS
Within seven days the first and second respondents deliver or surrender the Vehicle to the applicant or to an agent or representative acting on behalf of the applicant.
The applicant or its duly appointed agents or representatives be permitted to enter the first and second respondents' residential premises for the purpose of taking possession, and taking any reasonable action to facilitate the removal, of the Vehicle from such premises.
The applicant have liberty to apply.
| FEDERAL CIRCUIT COURT AT SYDNEY |
SYG 2528 of 2017
| VOLKSWAGEN FINANCIAL SERVICES AUSTRALIA PTY LTD (ACN 097 071 460) |
Applicant
And
| HOSSEIN MANDALAVI |
First Respondent
| ZIAD AJJAWI |
Second Respondent
REASONS FOR JUDGMENT
INTRODUCTION
This proceeding concerns an application brought pursuant to the National Credit Code (“Code”) which is found in sch.1 to the National Consumer Credit Protection Act 2009 (“NCCP Act”) with respect to a motor vehicle being a 2014 Volkswagen Passat Sedan VIN WVWZZZ3CZFE047556, engine no. CDA464040, registration number CYR26V (“Vehicle”). The applicant lent money to the first respondent, secured by a mortgage over the Vehicle, pursuant to a consumer loan contract (“Contract”). The loan was not repaid and the Vehicle has disappeared.
The applicant seeks orders which will assist it to locate the Vehicle and take possession of it.
LEGISLATION
The Code is contained in sch.1 of the NCCP Act. Part 1 s.4 of the Code sets out the credit contracts to which the Code applies:
4 Meaning of credit contract
For the purposes of this Code, a credit contract is a contract under which credit is or may be provided, being the provision of credit to which this Code applies.
5Provision 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; and
(c) a charge is or may be made for providing the credit; and
(d) the credit provider provides the credit in the course of a business of providing credit carried on in this jurisdiction or as part of or incidentally to any other business of the credit provider carried on in this jurisdiction.
Division 2 of pt.5 of the Code provides for the enforcement of credit contracts to which Code applies. Section 88 of the Code sets out the requirements that must be met before a credit provider can enforce a credit contract against a defaulting debtor and relevantly provides:
88Requirements to be met before credit provider can enforce credit contract or mortgage against defaulting debtor or mortgagor
Enforcement of credit contract
(1) A credit provider must not begin enforcement proceedings against a debtor in relation to a credit contract unless:
(a) the debtor is in default under the credit contract; and
(b) the credit provider has given the debtor, and any guarantor, a default notice, complying with this section, allowing the debtor a period of at least 30 days from the date of the notice to remedy the default; and
(c) the default has not been remedied within that period; and
…
Division 4 of pt.5 of the Code sets out the procedures for the enforcement of mortgages over goods. In this regard, ss.98 to 101 relevantly provide:
98 Information as to location of mortgaged goods
(1) A credit provider may, by written notice to a mortgagor under a goods mortgage, require the mortgagor to inform the credit provider, within 7 days after the day the notice is given to the mortgagor, where the mortgaged goods are and, if the mortgaged goods are not in the mortgagor’s possession, to give the credit provider all information in the mortgagor’s possession that might assist the credit provider to trace the goods.
(2) A mortgagor who contravenes a notice under this section commits an offence.
…
99 Entry to residential property to take possession of goods
(1) A credit provider, or an agent of a credit provider, must not enter any part of premises used for residential purposes for the purpose of taking possession of mortgaged goods under a goods mortgage unless:
(a) the court has authorised the entry; or
(b) the occupier of the premises has, after being informed in writing of the provisions of this section, consented in writing to the entry.
(2) The regulations may provide for procedures for the obtaining and giving of consent for the purposes of this section and may set out the circumstances in which consent is or is not taken to have been given.
…
100 Court may order entry
The court may, on the application of a credit provider that is entitled to take possession of mortgaged goods, authorise the credit provider to enter residential premises for the purpose of taking possession of mortgaged goods.
101 Order for possession
(1) The court may, on the application of a credit provider that is entitled to take possession of mortgaged goods, order a person who has possession of the goods to deliver them to the credit provider at a specified time or place or within a specified period.
…
BACKGROUND FACTS
The following facts, which I find, are drawn from the 8 August 2017 affidavit of the applicant’s solicitor, Mr Pignone.
The first respondent, Mr Mandalavi, borrowed $45,628.69 from the applicant under the terms and conditions of the Contract, which was dated 17 December 2014. The Contract created a mortgage over the Vehicle as security for performance of the first respondent’s obligations under the Contract.
The sum was advanced on 17 December 2014. Clause 5 of the Contract provided that repayments were to be made by instalments totalling $63,844.34 over 60 months. On 19 December 2014 the security interest held by the applicant over the Vehicle was registered on the Personal Property Securities Register (“PPSR”).
Annexed to Mr Pignone’s affidavit was a statement dated 16 June 2017 setting out transactions on the loan account. It recorded that the first respondent made no instalments after 17 March 2015.
On or about 8 May 2015 the applicant served on the first respondent a notice pursuant to s.88 of the Code concerning his default in payment under the Contract (“Notice”). The Notice required the first respondent to remedy his default by 12 June 2015 and advised that failure to do so would, amongst other things, entitle the applicant to commence enforcement proceedings and begin action to obtain possession of the vehicle. Mr Pignone deposed that at the date of swearing of his affidavit, the applicant had not complied with the Notice. The loan account statement showed the amount outstanding on the loan agreement to be $46,039.01.
Mr Pignone deposed that following the first respondent’s default, agents for the applicant made a number of enquiries as to the location of the Vehicle (which remained unknown at the time the applicant filed its written submissions on 8 March 2018).
Mr Pignone annexed to his affidavit the following relevant documents obtained by the applicant or its agents in the course of those enquiries:
a)the applicant’s internal contract notes;
b)notes obtained from Australian Repossession Services (“ARS”) (one of the agents employed by the applicant to locate the vehicle); and
c)a PPSR search certificate.
The notes obtained from ARS revealed the following sequence of events:
a)on 13 October 2015 a Freedom of Information (“FOI”) search was made by the ARS agent which revealed that the first respondent had transferred the registration of the Vehicle to Ziad Ajjawi, the second respondent (without the consent of the applicant);
b)on several occasions between 16 October 2015 and 28 June 2016, the ARS agent attended the second respondent’s address disclosed by the FOI search but the Vehicle was not sighted; and
c)on 18 March 2016 the ARS agent received a telephone call from a male who identified himself as the second respondent. The second respondent advised the ARS agent that he had been in possession of the Vehicle and had since sold it.
Also annexed to Mr Pignone’s affidavit of 8 August 2017 was a report produced by Scott’s Mercantile, the second agent employed by the applicant to locate the Vehicle. Information contained in the report revealed the following relevant sequence of events:
a)on 24 August 2016 a FOI search indicated that the second respondent was the registered owner of the Vehicle;
b)on 29 August 2016 the agent spoke with the second respondent. The note made by the agent records that:
…he [the second respondent] no longer had the security vehicle and sold it 2-3 months ago. He could not give details of the purchaser and sold it by parking it on the street with a sign on the window.
He purchased it in the same way in late 2015. He was unaware the vehicle was still in his name and will contact the RMS [Roads and Maritime Service (“RMS”)] today to sort out as he did not want fines/tolls etc against his name…
c)on 22 May 2017 the agent advised the second respondent that after their discussion in August 2016, the registration of the Vehicle had been renewed in his name. The second respondent denied that he still possessed the Vehicle but was unable or unwilling to provide details of the purchaser or explain how the Vehicle had been reregistered in his name;
d)on 1 June 2017 the second respondent advised the agent that he had located the Vehicle’s notice of disposal which he alleged had not been submitted to the RMS. The following day the agent received a SMS message from the second respondent which advised that the Vehicle had been sold to a third party;
e)on 9 June 2017 the agent met with the third party who indicated that she did not drive, had no knowledge of the Vehicle and had not heard of any person by the names of the first or second respondents. Proceedings brought against her by the applicant have been discontinued; and
f)on 14 June 2016 the agent spoke with the second respondent who again claimed that the Vehicle had been sold to the third party. The second respondent forwarded a copy of the transfer papers to the agent and claimed that the third party had since sold the Vehicle. The agent recorded that the transfer papers referred to a sale date of 17 May 2017 and a sale price of $5,000.
RESPONDENTS’ EVIDENCE
The first and second respondents filed no material in this proceeding. Further, they did not appear at any stage, including the hearing, although notified of the occasions on which the matter was listed.
CONSIDERATION
Proceeding to decision
Having had regard to various affidavits, including affidavits of service, I am satisfied that the first and second respondents were served with the documents initiating this proceeding and, relevantly, were advised of the hearing on 15 March 2018. It appears that they have chosen not to attend or appear. No consideration is apparent which would prevent determination of the matter in the absence of the first and second respondents pursuant to r.13.03C(1)(e) of the Court’s rules.
Discussion
Relief sought
In its application the applicant sought the following orders:
1. Pursuant to section 101 of the National Credit Code, that the First, Second and Third Respondents or any person in possession of the vehicle referred to in the Schedule below (“the Vehicle”) deliver or surrender possession to the Applicant or an agent or representative acting on behalf of the Applicant within seven days.
SCHEDULE
Description of Vehicle is as follows
Year
Make and type of vehicle
Colour
Registration no.
Engine no.
VIN no.
N/A
Volkswagen Passat Sedan
Grey
CYR26V
CDA464040
WVWZZZ3CZFE047556
2. If the Vehicle is not in the possession of the Respondents, the Respondents to divulge such information including the whereabouts of the Vehicle so as to enable the Applicant or its agents or representatives to take possession of the Vehicle within seven days.
3. The Applicant or its duly appointed agents or representatives be permitted to enter the Respondents’ residential premises or any other residential premises at which the Vehicle is located for the purpose of taking possession of and taking any reasonable action to facilitate the removal of the Vehicle from such premises.
4. Pursuant to the ·Court’s power to make ancillary orders under section 14 of the Federal Circuit Court of Australia Act 1999 (Cth):
(a)The Applicant, or its duly appointed agents or representatives, be assisted by officers of any Commonwealth, State or Territory police force, if requested, for the purpose of taking possession of, and taking any reasonable action to facilitate the removal of the Vehicle from any residential premises where it may be located;
(b)That the Applicant or its duly appointed agents or representatives, be permitted to notify the relevant State or Territory police that the Vehicle is stolen, should any person in possession of the Vehicle fail to surrender the Vehicle to the Applicant, its agents or representative upon request.
…
Contract
The Contract relevantly contained the following terms and conditions:
6. Mortgage over Goods
6.1 You give us a legal mortgage over the Goods specified in the Loan Schedule. This includes any additions or modifications made to, or replacement of, the Goods and any money received from any insurance claim over the Goods.
…
7. Obligations over mortgaged Goods
…
7.7 If we ask, you must tell us where the Goods are located and where ordinarily garaged.
…
11. Default
11.1 You will be in default if you:
(a) fail to pay us on time any money due;
…
11.3 A default notice will tell you what you need to do to fix the default, if that can be done. You must do what the notice asks within the time specified time.
…
11.6 If you do not or cannot fix the default, we are entitled to take possession of the Goods. …
Applicant’s contractual rights
As the mortgagee under a legal mortgage the applicant is the legal owner of the Vehicle, albeit that such a transfer of the legal title did not effect an outright disposal of the property but was simply a means of assuring the applicant that the first respondent would perform his obligations: Everett and McCracken’s Banking and Financial Institutions Law (8th ed) at [14.080] citing Gurfinkel v Bentley Pty Ltd (1966) 116 CLR 98 and Handevel Pty Ltd v Comptroller of Stamps (Vic) (1985) 157 CLR 177 at 192.
The annexures to Mr Pignone’s affidavit make it clear that from March 2015, which was after the applicant’s security interest was registered on the PPSR on 19 December 2014, the first respondent ceased to perform his obligation to pay contracted instalments. It is also apparent that, as required, a default notice was sent to him and that he did not remedy the default.
The consequence of those matters is that the applicant is both the holder of the legal interest in, and entitled to possession of, the Vehicle, at least as against the first respondent. However, that status is of little value if the Vehicle cannot be found, as I accept is the case.
Relief sought
Prayers 1 and 3
In the first and third prayers for relief the applicant sought non-specific orders for possession and entry onto residential premises as against anyone who might be in possession of the Vehicle or at whose home the Vehicle might be located. The Court should not make orders affecting the rights of parties who have not an opportunity to appear before it. Were it to do so, the orders would be set aside: News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 523-525; John Alexander’s Clubs Pty Ltd & Anor v White City Tennis Club Ltd (2010) 241 CLR 1 at 46-48 [131]-[137]. In a situation analogous to the one contemplated by prayer 1, namely a litigant seeking the determination of another’s rights in a proceeding to which that other is not a party, in Victoria v Sutton (1998) 195 CLR 291 at 316-318 [77]-[81], McHugh J said:
The rules of natural justice require that, before a court makes an order that may affect the rights or interests of a person, that person should be given an opportunity to contest the making of that order. Because that is so, it is the invariable practice of the courts to require such a person to be joined as a party if there is an arguable possibility that he or she may be affected by the making of the order. … In Pegang Mining Co Ltd v Choong Sam ([1969] 2 MLJ 52 at 55-56) (reference inserted) Lord Diplock, delivering the opinion of the Judicial Committee of the Privy Council, said:
In their Lordships’ view one of the principal objects of the rule is to enable the court to prevent injustice being done to a person whose rights will be affected by its judgment by proceeding to adjudicate upon the matter in dispute in the action without his being given an opportunity of being heard ... a better way of expressing the test is: will his rights against or liabilities to any party to the action in respect of the subject matter of the action be directly affected by any order which may be made in the action?
The test for determining whether a person is a necessary party has usually arisen in the context of a person seeking to join proceedings rather than a failure to join a relevant person. But the same principle must apply in both situations. Thus, in News Ltd v Australian Rugby Football League, the Full Federal Court held that an order “which directly affects a third person’s rights against or liabilities to a party should not be made unless the person is also joined as a party. If made, the order will be set aside.” … (Some references omitted)
Although the applicant’s security interest was registered on the PPSR and it is unlikely that anyone in possession of the Vehicle would be able to own it free of that security interest, that question remains to be determined. In that regard, although the operation of the Personal Property Securities Act 2009 in the context of the present case was canvassed in the applicant’s address to the Court it was not canvassed in the level of detail which would permit a conclusion that whoever possesses the Vehicle at the moment could not have any possessory rights in relation to it such that the Court could confidently declare that the applicant had an unqualified right to immediate possession of the Vehicle.
Until such a situation is demonstrated, the Court should not make an order potentially affecting the rights of a party who has not been joined in the proceeding. That ss.100 and 101 of the Code are drawn in unspecific terms, in that they speak of “premises” and “a person” without expressly requiring further particularisation by a court when making an order, does not alter this conclusion. Consequently, to the extent that prayers 1 and 3 seek such relief, they will be dismissed.
Nevertheless, in relation to prayer 1, seeking surrender of the Vehicle, I am satisfied on the evidence that the Vehicle has on occasion been in the possession of the first respondent and then the second respondent, who are parties to the proceeding. If they have it in their power or possession they should surrender it to the applicant.
In relation to prayer 3, which sought an order for entry onto residential premises to secure possession of the Vehicle, reg.87 of the National Consumer Credit Protection Regulations 2010 provides that when a person gives consent to entry to residential premises for the purposes of s.99 of the Code, such entry “may only be made between the hours of 8 am and 8 pm on any day other than a Sunday or public holiday”. It might be thought that a similar restriction would be appropriate to be applied in this case. However, as the first and second respondents did not appear at any stage of this proceeding and advanced no argument on any point, there seems no reason to limit the hours of permitted entry to their residential premises to reflect reg.87.
Prayer 2
Assuming prayer 2 were to be granted, and the resulting order served with the appropriate warning, it is possible that one or other of the remaining respondents could and would divulge the whereabouts of the Vehicle. However, mandatory injunctions, which are what prayer 2 seeks, are granted in support of particular rights, such as to repair the consequences of a wrongful act or to compel a party to do something which they had promised for valuable consideration to do. Nothing of that sort has been propounded in this case with the consequence that circumstances justifying the making of mandatory injunctions in the nature of the relief sought in prayer 2 have not been made out. In that regard, although cl.7.7 of the terms and conditions of the Contract states that “If we ask, you must tell us where the Goods are located and where ordinarily garaged”, which echoes in a civil context s.98 of the Code, no evidence was adduced to suggest that the first respondent had been asked and had failed to provide information concerning the whereabouts of the Vehicle. Until such events occur, he is not in breach of cl.7.7 of the terms and conditions of the Contract. Of course the applicant has no such contractual rights as against the second respondent.
Prayer 4
It is therefore appropriate that, apparently, the applicant has limited faith in a successful outcome by the mandatory injunction route and so has sought orders facilitating and requiring the active assistance of police for the purpose of taking actual possession of the Vehicle and removing it from wherever it may be located. Putting to one side questions concerning the appropriateness of the Court requiring (or purporting to require, noting that no relevant warrant issuing power similar to that found in s.130 of the Bankruptcy Act 1966 was propounded) the Crown, in the form of the Australian Federal Police or the police force of a State or Territory, to become involved in a private dispute over possession of a chattel, it should be recorded that no Australian police force was a party to this proceeding and, I infer, none was aware of it. For the reasons given in connection with prayers 1 and 3, the Court will not make orders purporting to be binding on any of the police forces referred to in prayer 4(a).
I also have difficulties with prayer 4(b). Before the Court would make such an order it would need to be satisfied that the Vehicle had, indeed, been “stolen”, which would probably amount to a finding that the crime of larceny had occurred. However, the action before the Court is not of that nature and, in any event, the evidence before it would not support such a finding. In particular, there is no evidence that the chattel in question was taken from the applicant’s possession, which seems an element essential to an act of stealing. Indeed, it has not been demonstrated that the Vehicle was ever in the applicant’s possession.
I am not persuaded that the relief sought in prayer 4 should be granted.
Other cases
I am aware that orders of the sort presently sought have been made in Volkswagen Financial Services Pty Ltd v Jamal (BRG388/2017); Volkswagen Financial Services Pty Ltd v Lai (BRG389/2017); Volkswagen Financial Services Pty Ltd v Pizarro (BRG390/2017); Volkswagen Financial Services Pty Ltd v Bahnam (BRG754/2017); Volkswagen Financial Services Pty Ltd v Sun Investment Group Pty Ltd (BRG755/2017); Volkswagen Financial Services Pty Ltd v Simons (BRG756/2017); Volkswagen Financial Services Australia Pty Ltd v Gammie (BRG1076/2017); Volkswagen Financial Services Australia Pty Ltd v Guler (ADG258/2017). However, reasons for judgment have not been published in any of those matters and so I am unaware of the circumstances which led to the orders being made.
CONCLUSION
Much of the relief sought by the applicant will not be granted in the terms sought. Nevertheless, as discussed with Mr Pignone at the hearing of the application, in place of that relief I will make a declaration that the applicant is the owner of the legal title to the Vehicle. Notwithstanding suggestions at the hearing of this application that I would make a declaration concerning the applicant’s right to possession of the vehicle, on further consideration, a declaration based only on contractual rights between the applicant and the first respondent would not presently appear to have any point and so will not be made.
I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of Judge Cameron
Associate:
Date: 29 March 2018
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