Volkswagen Financial Services Australia Pty Ltd v Muon
[2024] FedCFamC2G 84
•7 February 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Volkswagen Financial Services Australia Pty Ltd v Muon [2024] FedCFamC2G 84
File number(s): SYG 1700 of 2023 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 7 February 2024 Catchwords: CONSUMER LAW – Application for orders under s 100 and s 101 of the National Credit Code for the delivery of a motor vehicle – whether applicant has given debtor at least 30 days’ notice from the date of the notice to remedy the default – no such notice given because the credit provided was not of the type to which the National Credit Code applied – not open to Court to consider granting relief on some alternative case that has not been sought to be raised – application dismissed Legislation: National Consumer Credit Protection Act 2009 (Cth) Schedule 1 ss 5, 7(1), 100, 101
Personal Property Securities Act 2009 (Cth) ss 12, 207
Division: Division 2 General Federal Law Number of paragraphs: 24 Date of hearing: 11 December 2023 Place: Sydney Solicitor for the Applicant Mr B Lavery, Celtic Legal The Respondent Appeared in person ORDERS
SYG 1700 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: VOLKSWAGEN FINANCIAL SERVICES AUSTRALIA PTY LIMITED (ABN 20 097 071 460)
Applicant
AND: MARTIN MUON
Respondent
ORDER MADE BY:
JUDGE MANOUSARIDIS
DATE OF ORDER:
7 FEBRUARY 2024
THE COURT ORDERS THAT:
1.Subject to order 2, the application is dismissed.
2.Order 1 does not, and is not intended to, prejudice or otherwise affect the rights and interests the applicant has in 2015 Audi A6 Vin/Chassis: WAUZZZ4G9FN094249 (Vehicle), including rights to commence fresh proceedings for any relief in relation to the Vehicle.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE MANOUSARIDIS:
INTRODUCTION
The applicant (VFSA) seeks an order pursuant to s 101 of Schedule 1 (Code) to the National Consumer Credit Protection Act 2009 (Cth) that the respondent, Mr Muon, deliver to VFSA’s agents a 2015 Audi A6 (Vehicle) and, if he fails to do so, an order pursuant to s 100 of the Code that VFSA have access to residential premises for the purpose of enabling it to repossess the Vehicle.
FACTS
On 27 December 2018 Mr Muon, on behalf of Builden Pty Ltd (BPL), signed a document headed “Chattel Mortgage Loan Schedule” (Schedule). Immediately under the heading the Schedule contains details of a “Dealer” (“1211 Autosports Sutherland Pty Ltd t/as Autosports Sutherland”), after which the following appears:
The person or persons named below (“Borrower, you or your”) offer to borrow from Audi Financial Services (“the Lender, “we”, “our” or “us”) the Amount of Credit specified below on the terms of this Schedule, the Chattel Loan and Mortgage Terms and Conditions contained in the booklet which accompanies this Schedule and any Special Conditions. As security for your obligations under this Agreement, this Agreement creates a mortgage over the Goods described below.
The Schedule then sets out details which include BPL as borrower, and the amount of credit ($38,925). In a section headed “Loan Instalments” the Schedule provides that the loan is to be repaid over a period of 60 months by the borrower making 60 monthly loan instalments, 59 of which would be $711.48, and the final payment would be $10,711.33. The Schedule further provides that the first loan instalment was payable on 27 January 2019. The Schedule then set out details of the Vehicle, and identified Mr Muon as the guarantor. The Schedule ends with the following:
By signing this Schedule:
1.the Borrower offers to borrow money on the terms set out in this Schedule, the Terms and Conditions contained in the booklet which accompanies this Schedule and any Special Conditions;
2.each person signing in his or her capacity as a director of a company or as a member of a partnership warrants he or she has the authority of the company or the partnership to sign this Agreement for and on behalf of the company or partnership;
3.each Guarantor agrees to provide the guarantee and indemnity set out in clause 14 of the Terms and Conditions.
4.This Schedule will be executed by you signing this Schedule and may be accepted by us by:
•us signing a duplicate of this Schedule (including a duplicate received by or on behalf of us by facsimile or by email) or by us countersigning this Schedule; or
•a person authorised by us using their password to access our electronic systems and cause notations to be made in those systems to the effect that we approve and enter into this Agreement.
There is in evidence a document titled “Terms and Conditions Commercial” which contains three sets of terms, one of which is titled “Chattel Loan and Mortgage Terms and Conditions” (Mortgage Terms). Clause 1.2 provides that VFSA accepts the borrower offer to borrow the “Amount of Credit” set out in the Schedule “when our authorised officer signs the Schedule or when we disburse the Amount of Credit in accordance with your directions, whichever occurs first”.
Clause 9.1 of the Mortgage Terms provides that the borrower will be in default if an “Event of Default”(as defined in cl 17.1) occurs, one of those events being the borrower not paying any amount payable under the loan agreement. If an event of default occurs, cl 9.2 provides that the borrower must pay the full amount owing under the Agreement, which may include the balance outstanding, arrears, and, among other things:
the net present value of all Loan Instalments and the final payment referred to in the Schedule payable from the date of repayment to the end of the Term, calculated by applying a discount rate equal to a percentage rate per annum below the rate implicit in the return to us under this Agreement, such percentage rate not exceeding 4% as determined by us in order to cover our administration and other costs and losses arising directly and indirectly from the default.
Paragraphs (e) and (f) of cl 9.3 provide that, in default, VFSA may also “enter any premises and take possession of the Goods” (that is, the Vehicle), and “sell or otherwise deal with the Goods”.
Clause 14.1 of the Mortgage Terms provides:
The Guarantor unconditionally and irrevocably guarantees the Borrower will pay the Lender all amounts payable under this Agreement when they are due. If the Borrower does not pay any amount under this Agreement on time and in accordance with this Agreement, then the Guarantor agrees to pay that amount to the Lender on demand from the Lender (whether or not the Lender made demand on the Borrower).
Mr Muon on behalf of BPL took possession of the Vehicle from which it may be inferred VFSA advanced the $38,925 by paying that amount to the dealer at Mr Muon’s direction. On 27 December 2018 VFSA registered a security interest against the Vehicle pursuant to the Personal Property Securities Act 2009 (Cth) (PPS Act).
There is in evidence a copy of a document titled “Default Notice” addressed to BPL. It states:
You are currently in default of your credit contract. Your account is currently 21 days overdue because we have not received the following agreed repayments:
Contract Number: . . . . .
Balance Outstanding $24,288.32
Including Fees of: $1,131.75
(“Default”)
The action necessary to remedy the default(s) is payment of the Balance Outstanding within 14 days from the date of this letter.
Failure to make the payment may result in us taking possession of the collateral. We may also disclose information about the Balance Outstanding of $24,288.32 to an external credit reporting body. The information will be included in your credit information file.
An identical default notice was also issued to Mr Muon. Mr Muon has not paid the amount demanded in the notices.
FIRST COURT DATE
Shortly before the listing of the matter on a first court date on 21 November 2023, Mr Muon, who is not legally represented, sent to the Court a letter and a number of documents. I have arranged to mark these documents in chambers as exhibit A. It would be convenient if I set out the full text of his letter:
Your Honour,
I respectfully request your understanding as I embark on the challenging journey of representing myself, a path I reluctantly tread due to the absence of alternative options. I extend my sincerest apologies in anticipation of any inadvertent deviations from the prescribed etiquette, stemming from my limited legal acumen.
In the days preceding the acquisition of the Audi A6 with registration NBW 14Q, I engaged with Kevin Parker, then the esteemed business manager of Audi Sutherland. During our encounter, Mr. Parker provided assurances regarding the soundness of my impending vehicle purchase. He conveyed that the car had undergone rigorous inspections, assuring me of its excellent condition and compliance with Audi’s stringent standards.
Approximately six months after acquiring the Audi A6, a cascade of persistent issues culminated in a pivotal event. On 11/2/2020, the vehicle encountered a fault rendering it unfit for road use. While traveling at approximately 80 km per hour, the Audi A6 with registration NBW 14Q exhibited system faults, starting with the steering. In a perilous moment, the steering wheel seized, rendering it immovable. Subsequently, four additional faults emerged, leading to a complete shutdown of the vehicle. I expressed my profound concerns about the safety of the Audi A6 in a letter to Audi Australia on 12/2/2020, emphasizing my trauma and urging them to consider replacing the vehicle. I implored them to investigate the root cause of the problem, highlighting the potentially fatal consequences had it occurred with another driver.
Regrettably, my plea received no response from Audi Australia, leaving me to navigate a distressing situation alone. I entrusted the Audi A6 to Audi Parramatta, where it languished for a month as they grappled with diagnosing the issue. Despite persistent follow-ups through phone calls to Audi Australia, located at Zetland, their responses were marked by a palpable indifference, evoking a sense that they were inclined to dismiss my concerns until they faded away. This protracted ordeal compounded the challenges in my life, as my professional activities hinge on the reliability of safe transportation. Even amidst my persistent efforts and emotional distress, I continued making payments for the Audi A6, only to encounter resistance when requesting a detailed report on the identified issue, with Audi Australia initially committing to providing one and subsequently reneging on that commitment.
I stand before you today, not out of choice but out of necessity, unwilling to succumb to the perceived coercion exerted by Audi Australia. They have furnished me with a defective vehicle, all the while pressuring me to fulfill my financial obligations, disregarding the genuine and profound challenges I have faced personally and, in my business, due to the Audi A6’s persistent issues.
Your Honour, I implore you to empathize with my predicament and either dismiss the matter or grant me an extension until early next year to secure legal representation. I trust that, upon careful examination, the inequitable treatment meted out by Audi Australia becomes apparent.
Among the other documents Mr Muon provided to the Court is a document titled “Offer to Purchase Used Vehicle” dated 27 December 2018 which sets out the terms of a contract to purchase the Vehicle. Mr Muon is identified as the purchaser; and the document records that $35,573 of the $43,808 purchase price was provided by “FINANCE – VWF 60”. Mr Muon also provided a letter dated 12 February 2020 he says he sent to the dealer. The letter sets out three incidents involving the Vehicle, the last occurring on 11 February 2020 when the steering wheel locked and the car displayed “ five system faults & defect “Steering defective”, “Tyre pressure system fault”, “Audi adaptive light system fault”, [“]Start-stop system fault Function unavailable” and “Stabilisation control (ESC) fault”. Mr Muon concluded his letter as follows:
This product is not of satisfactory quality or fit for the purpose described.
To resolve the problem I request that Audi Australia considers a replacement vehicle as I no longer feel safe driving the current vehicle I have as I believe it is one of Audi’s most defective vehicles on the road. I would suggest diagnosing the issue and requesting a recall on cars showing similar issues as the issue that happened with me could have had very serious implications.
I look forward to hearing from you by COB 12/2/2020 as this is an urgent matter. I would like this problem to be resolved between us. If we are unable to resolve the matter I will refer it to NSW Fair Trading for their intervention.
At the first directions hearing Mr Long, who appeared for VWFS submitted that Mr Muon’s complaints about the Vehicle was not relevant to VFSA’s obligations, as a secured creditor, to recover the Vehicle to enforce its rights. I adjourned proceeding for hearing on 11 December 2023 to give Mr Muon an opportunity to seek legal advice.
THE HEARING ON 11 DECEMBER 2023
At the hearing on 11 December 2023 Mr Muon appeared by a lawyer who applied for an adjournment. For reasons I gave at the hearing, I dismissed Mr Muon’s application for an adjournment, granted Mr Muon’s lawyer leave to withdraw, and proceeded to hear the application with Mr Muon representing himself.
Mr Muon did not dispute that he had borrowed money to purchase the Vehicle; and he did not dispute that he had defaulted in making the payments BPL was required to make under the loan. Mr Muon submitted that in substance the dealer and VFSA are one and the same, and that VFSA should share the responsibility for what Mr Muon claims is a defective Vehicle.
At the conclusion of the hearing I reserved judgment, but listed the matter for judgment at 9.30 am on 15 December 2023.
EVENTS AFTER HEARNIG
In the course of preparing my reasons of judgment, I formed the view that I required further submissions on a number of questions. At 11.22 am on 12 December 2023, my Associate, at my direction, sent an email (Email) to VFSA’s lawyer which set out the questions on which I required further submissions. The Email is as follows:
Dear Practitioner,
I refer to the hearing of this matter on 11 December 2023.
His Honour request[s] that the parties provide submissions on the following matters:
The applicant assumes that the loan the applicant granted to Builden Pty Ltd (Loan) is a contract that is regulated by the National Credit Code (Code) (being Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth)). The applicant also assumes that the guarantee and mortgage (Mortgage) securing the Loan are regulated by the Code. Given that Builden Pty Ltd, the borrower identified in the Loan, is a corporation, on what grounds does the applicant assume that the Loan constitutes the provision of credit to which the Code applies within the meaning of s 5(1), and that the Mortgage is a mortgage to which the Code applies within the meaning of s 7(1) of the Code?
1.The applicant in its submissions assumes that s 88(1) of the Code applies to the Mortgage. That subsection requires the creditor to issue a notice to a debtor allowing the debtor 30 days from the date of the notice to remedy the default. Each of the default notices that are annexed to the affidavit of Mr Long, however, are dated 19 September 2023 and allow the recipients of the notice only 14 days from the date of the notice to remedy the default. Assuming the Code applies to the Loan and the Mortgage, on what, if any basis does the applicant contend that the notices complied with s 88(1) of the Code? Alternatively, assuming the Code applies to the Mortgage, but the applicant contends that s 88(1) does not apply to the Mortgage, on what basis does the applicant rely for contending s 88(1) does not apply to the Mortgage.
2.On what basis does the applicant contend that the mere annexing of a copy of the notices constitute evidence that the notices were in fact served on the borrower and guarantor to the place and in the manner authorised by the terms of the Loan?
3.Assuming the Code does not apply to the Loan, does the Court have jurisdiction to grant the relief the applicant seeks?
His Honour would appreciate the applicant providing a copy of this email to Mr Muon; and also to provide submissions in response to this email by 20 December 2023. His Honour will not be in a position to give judgment in this matter until he receives the submissions on the above matters. In these circumstances, his Honour will vacate the listing which had been fixed at 9:30 am on 15 December 2023.
My Associate did not receive a response to this email.
DETERMINATION
Does s 88(1) of the Code apply?
As is noted in the Email, VFSA in its written submissions assumes that s 88(1) of the Code (being Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth)) applies to the Mortgage. Subsection 88(1) of the Code provides:
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
(d)if the credit contract is for a reverse mortgage, the credit provider has spoken to one of the following persons by telephone or in person in that period and has thus both confirmed that the debtor received the default notice and informed the person of the consequences of failure to remedy the default, or has made reasonable efforts to do so:
(i)the debtor;
(ii) a practising lawyer representing the debtor;
(iii)a person with a power of attorney relating to the debtor’s financial affairs.
If s 88(1) of the Code applies to VFSA’s provision of credit that is secured by Mortgage, VFSA will not have complied with that provision, because the default notices VFSA issued to BPL and Mr Muon allowed only 14 days to remedy the default. Subsection 88(1) does not, however, apply; and VFSA itself believed it did not apply to the Mortgage. That is apparent from the Schedule containing a “Business Use Declaration” which is apparently signed on behalf of “the Borrower”. The “Business Use Declaration” is as follows:
I/we declare that the credit to be provided to me/us by the credit provider is to be wholly or predominantly for
•Business purposes; or
•Investment purposes other than investment in residential property.
By signing this declaration you may lose your protection under the National Credit Code.
Assuming this declaration is correct (and there is no reason to doubt its correctness), the Code does not apply to VFSA’s provision of credit. That is so because the Code applies to the provision of credit that is covered by s 5 of the Code. Subsection 5(1) provides:
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.
Has service of the default notices been proven?
A copy of each of the Default Notices is annexed to an affidavit on which VFSA relied at the hearing; but that by itself is incapable of proving that the default notices had been served or otherwise given to BPL or to Mr Muon. Mr Muon, however, did not dispute that he had been served with the default notice that had been issued against him; and I would have been inclined to rely on Mr Muon’s not disputing that fact as a basis for finding that the default notice had been served.
JURISDICTION?
Section 207 of the PPS Act confers jurisdiction on this Court “with respect to a PPS matter”. The expression “with respect to a PPS matter” is broad, and would include any application for relief in relation to a “security interest” within the meaning of s 12 of the PPS Act, such as an application for an order for possession of the collateral. In its application, however, VFSA claims relief under s 100 and s 101 of the Code; and VSFA has not made out that case because VFSA has not given the 30 days’ notice provided for by s 88(1) of the Code. In the absence of VFSA applying for leave to amend its application, and my granting such leave, it is not open to me to make orders on the basis of a case VFSA has not advanced.
DISPOSITION
In those circumstances, I propose to make an order dismissing the application, but on terms that the order does not, and is not intended to, prejudice or otherwise affect the rights and interests VFSA has in the Vehicle, including rights to commence fresh proceedings for any relief in relation to the Vehicle.
I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 7 February 2024
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