Westpac Banking Corporation v Anderson
[2015] VCC 1117
•17 August 2015
| IN THE COUNTY COURT OF VICTORIA | Revised Not Restricted Suitable for Publication |
AT MELBOURNE
COMMERCIAL DIVISION
BANKING & FINANCE LIST
Case No. CI-15-01507
| Westpac Banking Corporation | Plaintiff |
| v | |
| Lena Annika Anderson | Defendant |
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JUDGE: | His Honour Judge Cosgrave | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 14 August 2015 | |
DATE OF RULING: | 17 August 2015 | |
CASE MAY BE CITED AS: | Westpac Banking Corporation v Anderson | |
MEDIUM NEUTRAL CITATION: | [2015] VCC 1117 | |
REASONS FOR RULING
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Hay | Gadens Lawyers |
| For the Defendant | Ms M Szydzik | Arnold Bloch Leibler |
HIS HONOUR:
1 This is an application by summons filed 15 June 2015 seeking firstly judgment for possession of the property at Unit 2 16 Yarra Avenue Reservoir and secondly judgment against the defendant on the defendant’s counterclaim which seeks restitution by way of damages, interest and recovery of legal costs.
2 The plaintiff has relied on a number of affidavits which dealt with the factual background of the proceeding. In addition there were recent affidavits sworn on 13 and 14 August which sought to update certain matters such as the total amount said to be owing, namely $306,912.73 and the defendant’s failure to make any payments to the plaintiff in relation to the first loan in the period between 18 May and 18 November 2014. The plaintiff’s counsel indicated at the hearing that the plaintiff at present sought only judgment for possession.
3 The first loan was made in about January 2009 when the plaintiff’s predecessor in title, St George Bank Ltd, lent $168,000 to the defendant as a no-deposit home loan. Under the terms of the loan, the principal was the amount of $168,000. The interest rate was to accrue at the fixed owner occupier rate which at the time was 5.09% per annum fixed for 2 years commencing from settlement date. At the expiration of that 2 years, the interest rate would become the then current standard variable rate. The defendant was to make 24 monthly interest repayments each of approximately $1,100. After that period expired, the defendant was to make 252 monthly interest and principal repayments. The monthly amount was subject to change.
4 Also in January 2009 St George made a second loan to the defendant of $112,000. This loan was similar in some respects to the first but different in other respects. The interest rate was to accrue at the owner occupied negotiated variable rate which was the owner occupied standard variable rate less a margin of 0.68% per annum. The applicable rate was therefore 6.1% per annum. The defendant was to make 276 monthly and principal interest repayments. The security for the second loan was to be a first registered mortgage over the defendant’s property at Unit 2, 16 Yarra Avenue Reservoir (“the property”) and default interest was to accrue on overdue amounts at the bank’s annual rate plus an amount of 3% per annum.
5 The court’s attention was directed to various terms and conditions of the loans. They included clauses 5, 6.2, 13, 22.2, 27, 28 and 29.
6 The defendant granted a registered first mortgage over the property. The mortgage was dated 16 March 2009 and it was security for both the first and second loans. The mortgage incorporated by reference a memorandum of common provisions (“MCP”). The plaintiff drew attention to various provisions in the MCP including clauses 1.3, 2, 3.2, 18.4, 19, 20.1, 20.3, 21 and 25.
7 The loans having been made in this case, the problem arose when a lawyer for the Owners Corporation where the defendant lived at the property sent the bank a letter. The letter dated 25 February 2014 advised the bank that the Owners Corporation had obtained an order for costs in the Supreme Court against the defendant. The costs order in the sum of $10,325 was made on 24 September 2013. The lawyers for the Owners Corporation advised the bank that the Supreme Court warrant of seizure and sale was in the process of being executed against the defendant’s property in Reservoir. This was the security property for the two loans.
8 Further the Owners Corporation letter also said that the defendant, in her capacity as a lot owner, had failed to pay Owners Corporation fees, levies and charges. It was alleged that pursuant to section 28 of the Owners Corporation Act, the defendant had to pay those levies and charges. The amount said to be owing was $12,488.68. This was additional to the costs order made in the Supreme Court. The Owners Corporation said that, because the property was the subject of the bank mortgage, it was putting the bank on notice and would be pleased to know whether the bank intended to take any action. It advised that unless payment in the sum of approximately $22,000 were made within 14 days of the letter, namely 11 March 2014, the process of execution of the warrant would continue. If payments were not made, then the property would be seized by the Sherriff and sold in order to satisfy the debt allegedly owing to the Owners Corporation.
9 The defendant filed a lengthy affidavit in opposition sworn 4 August 2015. The affidavit contained a variety of matters including a series of allegations a number of which were in somewhat florid terms . Acting in reliance on the letter from the Owners Corporation’s solicitors, the bank paid the moneys demanded by the Owners Corporation and debited those moneys to the account of the defendant. It was that conduct to which the defendant took exception. The defendant disputed the plaintiff’s right to act in this way. She said that if the plaintiff had the right alleged to make payments which the defendant allegedly should make and the plaintiff made those payments in those circumstances, then the terms giving rise to that alleged entitlement were unfair or oppressive.
10 The defendant did not dispute the loans made by the plaintiff but denied the bank could simply increase the amount owing without the defendant’s knowledge or consent. As a result of the bank’s actions in this case it was said that the principal outstanding was increased from approximately $280,000 to $302,000. The defendant also contended that the increase in principal outstanding further resulted in an increase of approximately $90,000 by way of extra interest payments and fees which would be incurred in the period required to pay off the higher debt.
11 The defendant claimed that both in the loan agreement and the MCP, the bank had first to ask the defendant about the bank paying these moneys to the third party and the defendant claimed that this was not done in her case. Clause 17 of the MCP contains a reference to the bank asking for payment from the defendant. Also clause 27 of the residential loan agreement general terms and conditions starts by saying “you must pay us when we ask”, and then says “we do not need to ask you first”. This seems contradictory: on the one hand it says that the payment is preconditioned by a request and the latter part of the clause suggests there is no obligation to tell a borrower that payment has been made.
12 The question of whether or not the plaintiff must ask the defendant about the payment before making it raises an issue about the construction of the bank documents and whether the plaintiff acted consistently with its entitlements thereunder.
13 In addition, the defendant claims here that the fees were not lawfully due to the Owners Corporation. By paying all the moneys claimed by the Owners Corporation the bank has effectively prevented the defendant from clarifying her position with the Owners Corporation. The defendant denies being in “default” as required under the bank’s documentation. The defendant makes the point in her affidavit that whether or not she was in default with the Owners Corporation, she says the plaintiff had a responsibility under the terms of the agreement between the bank and her to first ask her for payment before making any payment on her account.
14 The defendant also relied upon a legal argument based on implied terms which were said to arise in the present context and to create duties binding the bank. The defendant contended that the bank breached several implied terms of the agreement. Those duties were the duty to cooperate, duty to act reasonably and duty to act in good faith. In support of these propositions, reference was made to a decision of Judge Ginnane, as he was at the time, in Commonwealth Bank of Australia v Ozden[1].
[1][2013] VCC 94
15 The defendant referred to paragraphs where His Honour reviewed the authorities and, on one view, appeared to countenance a need for the bank to act reasonably or in good faith.[2] His Honour referred in the judgment expressly to the vulnerability of the defendants, the existence of the Credit Code and the Banking Code. For my part, I do not regard this defendant as vulnerable as the Ozdens were. I note that no submissions were expressly made by the defendant in relation to the Credit Code or the Banking Code (even though I infer they would probably be applicable).
[2][2013] VCC 94 at [125] - [150]
16 Nevertheless, in an application such as this I cannot make a final determination on matters of disputed fact. I note that usually it is only once the facts have been determined can the court appropriately apply the relevant legal principles. The application of the principle will be governed by the findings of fact in a particular case.
17 I note in passing that the defendant devoted some fairly considerable time to complain about the directions hearing on 26 June 2015. At that time she sought to adjourn the hearing set down for August because she wanted more time to consider the bank’s summary judgment material. I do not think it is productive to re-agitate those issues, or comment further on them.
18 I recognise that the plaintiff here advanced a comprehensive analysis of the provisions of the loan and security documentation to justify its actions as appropriate and within power. Notwithstanding this, I consider that the defendant has raised a sufficient argument to preclude me from finding that she has no real prospect of success. The matters I refer to are:
(a) the interpretation of the bank’s documents regarding whether the bank needed to ask the defendant about the Owners Corporation payments; and
(b) the extent to which the implied terms referred to were applicable and, if they were, whether they were breached.
19 If I am wrong about this issue, in my view it is in the interests of justice that there be a hearing on the merits. Section 64 of the Civil Procedure Act contemplates this possibility. The case raises issues of more general importance as follows:
(a) are financial institutions generally and the plaintiff in particular entitled to accept at face value the allegations of third parties like the Owners Corporation;
(b) are financial institutions generally and the plaintiff in particular entitled to unilaterally increase a client’s indebtedness by paying third parties in circumstances where, on the evidence, it appears that there was no prior consultation with the client before making the payment and there was no independent verification of the third party’s entitlement to the whole amount claimed; and
(c) when, if at all, is it appropriate to imply into a finance agreement of the kind in issue here implied terms imposing a duty to cooperate, to act reasonably and to act in good faith.
20 If the trial judge finds on a detailed analysis of the facts that there was no proper basis for the defence, that can be reflected in the order for costs which would likely be made against the defendant.
21 In summary, I do not find that the defendant falls within the category of having no real prospect of success. Further, I regard it as appropriate in the interests of justice that there not be a summary disposal of the case and that there should be a hearing on the merits.
22 Finally, I note that the plaintiff sought only to obtain an order for possession of the property. It did not make any submissions to the effect that, if I were prepared to grant leave to defend, I should grant conditional leave. Had the plaintiff asked, I proposed to make it a condition of the defendant obtaining leave to defend that she pay into court the moneys owing to the bank which she claimed to have paid into an account elsewhere.