Westpac Banking Corporation v McLean
[2012] WASC 182
•31 MAY 2012
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: WESTPAC BANKING CORPORATION -v- McLEAN [2012] WASC 182
CORAM: KENNETH MARTIN J
HEARD: 29-30 MARCH 2012
DELIVERED : 30 MARCH 2012
PUBLISHED : 31 MAY 2012
FILE NO/S: CIV 2439 of 2009
CIV 2443 of 2009
BETWEEN: WESTPAC BANKING CORPORATION
Plaintiff
AND
SHONA DIMITY McLEAN
Defendant
Catchwords:
Banker and customer - Registered mortgages - Default on loan - Demand for possession - Facts admitted - Allegation of loans being 'securitised' - No defence
Legislation:
Credit Act 1984 (WA)
Property Law Act 1969 (WA)
Rules of the Supreme Court 1971 (WA)
Transfer of Land Act 1893 (WA)
Trade Practices Act 1974 (Cth)
Result:
Judgment for plaintiff
Category: B
Representation:
Counsel:
Plaintiff: Mr B C Smith
Defendant: In person
Solicitors:
Plaintiff: Gadens Lawyers
Defendant: In person
Case(s) referred to in judgment(s):
National Australia Bank v Norman [2012] VSC 14
Westpac Banking Corporation v Mason [2011] NSWSC 1241
KENNETH MARTIN J:
(This judgment was delivered extemporaneously on 30 March 2012 and has been edited from the transcript.)
I am dealing with two actions, CIV 2439 of 2009 and CIV 2443 of 2009. Both matters involve the same parties, namely Westpac Banking Corporation (the Bank) as plaintiff and Ms Shona McLean as defendant. On the face of it the two actions present routine security enforcement and debt recovery actions brought by a bank against its borrower customer. In each instance the Bank seeks possession, as a secured creditor by registered first mortgage, of residential properties owned by Ms McLean. The Bank's mortgages are registered in accordance with the Transfer of Land Act 1893 (WA).
The Bank filed summary judgment applications in each action. Affidavits filed on behalf of the defendant, by an amended defence, sought to raise the one defence issue of alleged 'securitisation' of the Bank's loans and mortgages. I ordered that the actions be determined substantively at a trial, rather than under O 14 of the Rules of the Supreme Court 1971 (WA) (RSC). They have come on for an urgent trial on that basis. The two actions were heard together. They have been dealt with on common affidavit evidence from each party in each action.
The plaintiff adduced evidence at the trial by affidavits sworn by Mr Peter Scalzi of 13 November 2009, which respectively are exhibits 1 and 2. Uncontroversially, they contain the loan documentation, mortgage security documents and extracts from the bank statements for the loan accounts of Ms McLean. Through its evidence, the Bank showed the initial advances of funds to Ms McLean, her subsequent default in repayment and the accrual of interest over time on both loans.
Four further affidavits from Mr John Pastro, a bank officer, were relied upon by the Bank. Mr Pastro in two affidavits, sworn 28 October 2011 in each action (exhibits 3 and 4), seeks to respond on behalf of the Bank to the securitisation defence raised by Ms McLean. Mr Pastro's affidavits were submitted on the basis of his attaching from the Bank's business records a one page copy of a screen printout showing electronic account information that Mr Pastro printed out on 26 October 2011. Paragraph 3 of each affidavit of Mr Pastro says:
The fact the Account has not been securitised is indicated by the notation 'N' in the second line next to the words 'SECURITISED IND'.
The screen printouts attached to Mr Pastro's affidavits, in each case, show the letter 'N' next to a notation, 'securitised IND' meaning, it was explained, 'not securitised'. These screens were tendered on behalf of the Bank to refute the contention that any of Ms McLean's loans from the Bank had been securitised.
Mr Pastro swore two more recent affidavits (exhibits 5 and 6) as to the present size of each delinquent loan due to the Bank by Ms McLean. In CIV 2439 of 2009, Mr Pastro's affidavit of 28 March 2012 shows that as at that date for account 037146980514 the total amount outstanding was $1,024,841.13. Interest accrues on that loan at the rate of $187.79 per day.
On the loan which is the subject of CIV 2443 of 2009, Mr Pastro's evidence is that, as at 28 March 2012 for account 037146664482, the amount outstanding from Ms McLean is $1,203,610.37. Interest accrues on that loan at the rate of $227.08 per day.
Mr Pastro's evidence as to the indebtedness of Ms McLean is uncontradicted. I accept it.
There is the one residual defence issue, however, as to the alleged securitisation of each loan. Notwithstanding the Bank's business records produced by Mr Pastro showing the Bank's loans to Ms McLean as not securitised, Ms McLean's position is that both her loans and mortgages have been securitised. The main non‑documentary evidence adduced at the trial of the matter was from Ms McLean's overseas witness, Mr Arthur Bonner. His evidence was led by Ms McLean to establish that, in fact, her loans had been securitised. This was her only defence in both actions.
Before I deal with the merits of this issue, I must say something about the state of the pleadings in each action. The pleadings in each action largely mirror each other in structure, with the actions heard together and dealt with by common evidence adduced on affidavit.
I will use the plaintiff's statement of claim in CIV 2439 of 2009 as the template. The statement of claim in the other action, CIV 2443 of 2009, is essentially the same in overall structure, but the loan amount is different, as is the mortgage security and the debt claimed.
The pleadings
In CIV 2439 of 2009, the 12 paragraph statement of claim was filed concerning Ms McLean's proprietorship of two residential properties in Perth at 65B Langley Crescent, Innaloo and 93A Brighton Road, Scarborough. It is said that by a loan contract in writing of 7 August 2007, Ms McLean agreed to repay $765,000 to the Bank, in accordance with terms of that agreement. The loan was secured by the registered first mortgages given to the Bank by Ms McLean over her properties.
There were standard terms and conditions in each first registered mortgage. Those mortgages received registration numbers at Landgate, once lodged. The mortgages were registered at Landgate pursuant to the Transfer of Land Act in due course, as referred to in par 7. A loan advance of $765,000 in funds is referred to as having been made to Ms McLean on or about 11 October 2007 (par 6). For each mortgage, standard 'fine print' terms and conditions found in a memorandum of provisions were applicable.
It is then contended in the statement of claim that Ms McLean did not make payments as required under the terms of her loan agreement (par 10). Subsequently, the Bank sought to exercise its powers as mortgagee in the wake of Ms McLean's default.
Paragraph 12 of the statement of claim asserts that the Bank sought repayment of the full loan indebtedness and told Ms McLean that it would exercise its powers if repayment was not made.
Each of the 12 paragraphs of the statement of claim are admitted by Ms McLean's amended defence, filed on 18 October 2011. That was at a time when Ms McLean was represented on the record by a legal practitioner. I refer to that defence pleading and the admissions found at pars 1 ‑ 12 therein. In any event, the making of the loan agreement; securing of the loan by registered first mortgages in favour of the Bank; the advance of funds; Ms McLean's default in repayment; the Bank's demand and Ms McLean's failure to satisfy that demand are all matters independently proven. This is by reason of the uncontentious documents and information in Mr Scalzi's two affidavits (exhibits 1 and 2).
In my assessment, the admissions found in her pleaded defences at the time Ms McLean was represented by a legal practitioner were all correctly made. Ms McLean has subsequently represented herself in these proceedings without the assistance of counsel. Had I thought some unwarranted admission had been wrongly made by her defences by a previous legal representative, I would have been concerned. However, I have investigated the position and I am wholly satisfied that the pleaded defence admissions were correctly made.
A one‑issue defence concerning alleged securitisation arises out of par 13 in each amended defence pleaded on Ms McLean's behalf in both actions. Defence par 13 reads in each action:
[Ms McLean] puts [Westpac] to strict proof that it is entitled to the relief claimed by reason of the following:
(a)Westpac engages in securitisation activities, whereby equitably assigns or otherwise disposes for consideration its rights in loans and the mortgages to various third parties.
Pausing there I observe that, of itself, the fact that a bank securitises assets is not an uncommon phenomenon nor a matter that is particularly unusual.
Paragraph 13 of the defence continues by reference to Ms McLean's loan agreements and mortgages:
(b)If the Loan Agreement and Mortgages have been securitised, Westpac cannot enforce their terms and keep the benefit of such enforcement because -
Again I pause at that point, observing that the defence proceeds cautiously by use of the word 'if'. In other words, it is not affirmatively pleaded that Ms McLean's loan agreement and mortgages with the Bank have actually been securitised. The premise of this defence is only a hypothesis that they may have been.
The same hypothetical premise is used later in par 13(b):
vi.Further or alternatively, if the Loan Agreement and Mortgages have been securitised, any failure by Westpac to disclose to the Defendant that it would assign to a third party its equitable interest in the Loan Agreements and Mortgages at any point prior, further or alternatively subsequent, to the Defendant entering into the Loan Agreements or the Mortgages, in addition to any or all the matters pleaded at sub‑paragraphs i., ii., iii., and iv., constitutes misleading or deceptive conduct in breach of section 52 of the TPA, further or alternatively unconscionable conduct in breach of section 51AC of the TPA.
The identical plea as to possible securitisation is found in the amended defence, filed on behalf of Ms McLean in the second action, CIV 2443 of 2009.
The second action is in respect of another loan of $862,500, made under a contract in writing of 14 June 2007, secured by a first registered mortgage K340445. Funds in the amount of $862,500 were advanced on 12 September 2007 pursuant to the terms of that loan agreement. Again these facts raised by the Bank are not controversial.
Securitisation
As to the concept of securitisation I would adopt the meaning I take from the text Australian Finance Law (6th ed, 2008) [8.05]:
Securitisation is the issue of debt securities by a bankruptcy remote special purpose vehicle, SPV, the proceeds of which are used to acquire or lend against the security of, a discreet pool of assets, any type of asset which has financial value and a stable or predictable cash flow (such as loans, receivables, leases, commercial real estate or a whole business) can be securitised.
Chapter 8 gives an overview of securitisation transactions in an Australian context. The text is now in its 6th edition. A review of the 5th edition, published in 2003, indicates that the explanation of securitisation was in like terms. Thus some suggestions made on Ms McLean's behalf through Mr Bonner's evidence that securitisation is a concept with peculiar, unusual features, overturning existing assumptions about bank debts and the basal borrower's obligation to repay a loan, lacks, in my view, a proper foundation in principle.
Procedural history of the actions
I will track the progression of both these actions. Each has been case managed together in the CMC List since 11 February 2010. As indicated, the plaintiff's writ of summons in CIV 2439 of 2009, carrying an indorsed statement of claim, issued on 11 August 2009. There followed an appearance in person filed by Ms McLean on 27 August 2009. She then filed an in‑person defence on 10 September 2009. There followed a chamber summons by the Bank seeking to strike out her defence, or seeking plaintiff's summary judgment, pursuant to RSC O 14.
Mr Scalzi swore the affidavits in support of the Bank's summary judgment applications on 13 November 2009. I made orders on 10 September 2010 striking out the in‑person defences. I adjourned each summary judgment application to allow Ms McLean time to fix manifest deficiencies in her pleaded defences.
Subsequently an amended defence, although not called such, was filed on 1 February 2010 in each action. On 8 February 2010, Ms McLean swore affidavits resisting summary judgment in each action. She raised a number of matters. One disclosed her pending proceedings in the State Administrative Tribunal (SAT) that commenced on 19 January 2010 as CC 85 of 2010. In these proceedings Ms McLean sought relief based on her contention that various provisions of the Credit Act 1984 (WA), which fall within the exclusive jurisdiction of the SAT, inhibited the enforceability by the Bank of the lending and mortgage transactions in both actions.
I entered both actions in the CMC List. However, from 11 February 2010, each was essentially stayed whilst the SAT dealt with those Credit Act issues. That 'second front' occasioned a delay in each case of about 18 months.
Finally, a directions hearing was able to be convened once the SAT had resolved against Ms McLean all issues, on 15 September 2010. Essentially all issues before the SAT were resolved in the Bank's favour. Each action could now be reactivated.
Shortly before a directions hearing of 15 September 2011, a legal practitioner appeared on the record for Ms McLean for the first time in both actions. The Bank was now seeking to press its deferred summary judgment applications in both matters.
I adjourned a 15 September 2011 directions hearing to 13 October 2011 to allow some more time for Ms McLean's new legal representative to better familiarise himself with the action in order to take a position for Ms McLean upon the revived summary judgment applications.
On 10 October 2011, Westpac filed a minute of orders in both matters seeking orders for possession. On 13 October 2011, the matter was adjourned for a week by reason of some personal difficulties encountered by Ms McLean's solicitor.
On 18 October 2011, an affidavit was filed by Ms McLean's solicitor annexing materials about the concept of securitisation. That dove‑tailed with the filing of the amended defences on behalf of Ms McLean in each matter on 18 October 2011. The amended defences admit all material facts pleaded by the Bank and only raise the securitisation issue in defence. I then listed the action for trial fixed for 9 December 2011.
On 6 December 2011, an application was made by Ms McLean for an adjournment of the trial. This was explained as being required to allow her more time because her solicitor now needed to remove himself from the record by reason of a conflict of interest. That had occurred on 5 December 2011, leaving Ms McLean without any legal representation only four days before trial.
I acceded to an application to delay the trial to allow Ms McLean further time to procure replacement legal representation. Unfortunately that never occurred.
On 21 December 2011, I relisted the trial for 29 March 2012. I also made some orders for a receipt of evidence by affidavit, and for a receipt of Ms McLean's foreshadowed expert evidence to occur by a video link. The expert evidence was to be directed at the one live defence issue, namely the alleged securitisation of Ms McLean's loans and first registered mortgages by the Bank and asserted consequences.
Mr Arthur Bonner is a realtor from California. He holds himself out as having knowledge in respect of matters relating to mortgage finance, the secondary mortgage market and matters of that kind. An affidavit from Mr Bonner was relied upon by Ms McLean and Mr Bonner was cross‑examined over a video link at the trial.
Mr Bonner uses what he refers to as a Bloomberg Professional Service. He is a subscribed and licensed Bloomberg researcher. He has undergone recommended training and voluntarily engaged in continuing education through Bloomberg, both online and at Bloomberg's Los Angeles facility, to stay abreast of Bloomberg Professional Services' latest developments.
Mr Bonner is a licensed mortgage securitisation analyst. He holds the knowledge and trained ability to perform effective searches using a Bloomberg terminal. Mr Bonner is involved in analysing mortgage trust deed loans, mortgage‑backed securities, associated mortgage pools, pooling and service arrangements and subsequent loan‑related documents.
Defendant's exhibit A is a copy of Mr Bonner's affidavit. Mr Bonner told me that it had been notarised on 23 March 2012 and the original will be sent to the defendant by post. The original notarisation of Mr Bonner's report prepared by him for Ms McLean, defendant's exhibit B, was to be filed at court by Ms McLean, once it reached her by post. Ms McLean has undertaken that when Mr Bonner's affidavit reaches her in Australia, the original will be filed at court.
Mr Bonner's evidence was given first over a video link, but subsequently by a conference telephone link, after the video link was lost.
The substantive evidence from Mr Bonner is contained in his report (exhibit B) headed 'Mortgage and Investment Pool Securitisation Analysis'.
I am prepared to accept that Mr Bonner is a competent user of the Bloomberg service. The Bloomberg service collates information about securitised loans from various places. The information is assembled by Bloomberg so that it can be accessed by someone like Mr Bonner who pays a fee and is trained in the use of the Bloomberg database.
Materials which Mr Bonner has assembled within exhibit B (dated 8 March 2012) have been assembled from the Bloomberg database. The real issue is, what reliable conclusions can Mr Bonner draw by accessing the Bloomberg database as regards the alleged securitisation of Ms McLean's loans.
The first matter to observe in Mr Bonner's 23 page report arises at page 2 where three loan numbers (said to be Ms McLean's bank loans) are referred to under the heading 'Original Mortgage Lender'. That term is used in reference to the Bank.
The first loan number mentioned is 0371466644‑82. However, that loan is wholly irrelevant to these proceedings.
The second mentioned loan in Mr Bonner's report, number 1371475305‑82, appears to be the subject matter of the second action, namely CIV 2443 of 2009. Mr Bonner's report is to be assessed by reference to whether there is anything his Bloomberg database inquiries have unearthed to indicate that this loan is the subject matter of 'securitisation'.
The last of the three loans of Ms McLean that Mr Bonner mentions, 0371469805‑14, looks to be the loan the subject of the first action, CIV 2439 of 2009. However, it became apparent during Mr Bonner's cross‑examination that Mr Bonner had not been able to make any inquiries in respect of that loan using the Bloomberg service or materials (ts 111 ‑ 112). Mr Bonner had never been provided with materials about that loan by Ms McLean (ts 140).
So, as clarified through the course of cross‑examination, there is no evidence from Ms McLean or in Mr Bonner's report that the third‑mentioned loan (relevant to the loan in the first action, CIV 2439 of 2009) has been securitised.
The only relevant evidence in that first action is from Mr Pastro, who says by reference to the business records of the Bank that this loan has not been securitised. That must be my finding of fact in CIV 2439 of 2009, there being no other evidence before me to contradict that conclusion.
That means that the information provided by Mr Bonner's report could only be potentially relevant to the loan in the second action. That is, the loan for $862,500 advanced on 12 September 2007, pursuant to the loan agreement of 14 June 2007. That loan is secured by the Bank's first mortgage registered at Landgate on 14 June 2007.
As regards the loan the subject of CIV 2443 of 2009, what does Mr Bonner's report contain in terms of providing any evidence to suggest this loan has ever been securitised?
I note by reference to page 3 of Mr Bonner's report some errors that he acknowledged as being made (ts 118). The first is under his heading 'Master Servicer/Servicer/Sub‑Servicer', where he refers to Westpac. This was clarified as a typographical error. Westpac should not be there. The intended reference was to EDS Business Process Administration Pty Ltd. A similar typographical error is found underneath the table at par 1 in the third line of page 3. Again, Westpac should be deleted. The intended reference to the Master/Sub‑Servicer to be EDS BPA Pty Ltd.
Mr Bonner says (par 2):
[L]oan numbers 0371466644‑82 and 1371475305‑82 could not specifically be identified by him within the WST 2007‑1G Westpac Securitisation Trust, 'mortgage backed floating rate notes' because that trust is privately held, i.e. it is a private placement, but as you will notice through the analysis, all evidence shows that WST 2007‑1G Westpac securitisation trust to be the mortgage backed, floating rate notes trust that Ms McLean's loan have [sic] been securitized in.
(Subsequently, the Prospectus for the Westpac securitised loan 2007‑1G was placed in evidence by the Bank, as exhibit 7.)
Mr Bonner obtained a copy of that Prospectus through research in a database kept by the United States Securities Exchange Commission (SEC). His report (exhibit B) refers to and copies some pages out of this Prospectus. At page 4 he says, 'The below has been taken directly from the 424B5 Prospectus'.
Westpac's Prospectus sought to raise funds to the extent of $2.6 billion. There follows a reference to the Issuer, Depositor and Trust Manager, the Sponsor and Servicer and some other information.
Mr Bonner has identified a named Sub‑Servicer in the summary page of the Prospectus as being the entity EDS (Business Process Administration) Pty Ltd, ABN 095806125. There is no controversy about this information, which is taken from the Prospectus. However, Mr Bonner's securitisation analysis and conclusions rely heavily upon a supposed linkage between that entity and what else it does. Mr Bonner makes reference to the same entity being seen on Ms McLean's registered mortgage at Landgate in CIV 2443 of 2009, from the registered mortgage document.
This emerges at pages 9 ‑ 10 of Mr Bonner's report. Working through it, on page 7, a structural diagram is taken from the Bank's Prospectus at par S9 (or by reference to exhibit 7, at page 17, in the contents of the Prospectus). Page 8 of Mr Bonner's report replicates page 18 of the Prospectus (from exhibit 7) (also numbered as page S‑10).
That summary (page 18) specifies three dates in respect of the Bank's Prospectus, a cut‑off date, a pricing date and a closing date. The cut‑off date was 10 April 2007, the pricing date was on or about 24 May 2007 and the closing date identified as on or about 31 May 2007. All those dates are significant. It will be remembered that the Bank's loan of $862,500 to Ms McLean (in September 2007) was an advance well and truly after the cut‑off date, the pricing date and the closing date.
There appears, therefore, to be a temporal hiatus between the closing Prospectus dates for this raising of funds by Westpac and the argued contention of Mr Bonner that a loan made to Ms McLean in September 2007 was the subject of securitisation by the Bank under this Prospectus. Pages 9 ‑ 10 in Mr Bonner's report are photocopies of the front and back pages of Westpac's registered mortgage, lodged in accordance with the provisions of the Transfer of Land Act. They show Westpac as mortgagee over a property at 12 Ewen Street, Scarborough securing its loan for $862,500.
Mr Bonner, by lines and arrows he has put on pages 9 ‑ 10, notes on page 9 a reference to Westpac Banking Corporation. Second, he notes on page 10 that registered mortgage K340445M that carries the lodgement stamp at Landgate of 12 September 2007 was lodged by the entity EDS BPA Pty Ltd (EDS) as lodging and preparing party for Westpac.
In Mr Bonner's report, the fact that EDS was the lodging and preparing party of Ms McLean's registered mortgage at Landgate and is named within the Prospectus plays a significant role in his expressed conclusion as to securitisation. Mr Bonner opines that Ms McLean's loan was part of the assets forming what was offered by Westpac's WST‑2007‑1G Prospectus. That logic is suspect, however. EDS as an entity may perform more than one task.
Mr Bonner's report at page 12, again either by reference to the Prospectus, or screen printouts he obtained from the Bloomberg database, points out that there were certain classes of asset within this trust. The classes are identified by a number called a 'CUSIP' number.
The acronym CUSIP stands for the Committee on Uniform Securities Identification Procedures. Mr Bonner explains at par 4 (on page 12) that the CUSIP 'nine character alphanumeric code identifies any North American security for the purposes of facilitating clearing and settlement of trades'. A CUSIP number does not specify a particular home owner's or mortgagor's loan or mortgage, as had been suggested by earlier information provided by Mr Bonner. Mr Bonner clarified this in his cross‑examination (ts 133).
A CUSIP number is applicable to a class of assets, not to an individual loan (see page 12 of the screen printout).
Mr Bonner explains in his report, at page 13, that with a private placement (as is the Westpac Prospectus and Securitisation Trust WST 2007‑1G), local loan level data is not provided. This gap in information is significant as to what Mr Bonner cannot access in the Bloomberg database.
A Bloomberg screen (at page 13 of Mr Bonner's report), under the heading Loan Level Details, shows:
Loan level data is not available for current security. Please load an appropriate non‑agency mortgage security and run again.
Private placements are held for personal investment by qualified institutional buyers, not resale in the open securities public resale market. Such placements have a limited registration requirement.
This was clarified in more recent screen searches that Mr Bonner provided. Defendant's exhibit C shows screen searches accessed by Mr Bonner from the Bloomberg database on 27 and 28 March 2012. The screens say explicitly that it is not possible to obtain loan level details for WST 07‑1G. They are not within the database of information held by Bloomberg.
Another Bloomberg screen printout of 28 March 2012 (exhibit C) reads:
Regarding your inquiry on loan level data for WST 07‑1G, I've confirmed that most of the issuers in Australia will not allow the local level data to be shown. It is generally hard enough for them to even allow us to show what we do on CLP\CLP. We are, however, still working with many to allow it, however, it probably will not be something that we will get approval for any time soon. Apologies for any inconvenience and thanks for your patience while we researched this with you.
Under cross‑examination Mr Bonner accepted that without local level loan data applicable to a particular securitisation trust, he cannot say whether or not a particular home owner's loan is an asset within the classes of asset referred to (ts 116 ‑ 118). This is so even in relation to the one loan of Ms McLean which he has researched. That is a glaring problem with his work as regards Ms McLean's loan.
Essentially then, Mr Bonner's evidence is that until he can evaluate the local level data, he is not in a position to say one way or the other whether Ms McLean's loan, the subject of the second action (CIV 2443 of 2009), formed part of the assets that were part of the international lending transaction back in 2007. Therefore, his evidence does not assist Ms McLean's defence, which must, as a result, fail.
The plaintiff raised a number of objections against Mr Bonner's evidence in terms of his expertise, the relevance of his evidence and against some of the opinions which were expressed. In the end, this hardly matters.
I accept Mr Bonner as competent in terms of performing searches in the Bloomberg database. He presented to me to be trained and proficient in terms of extracting information from that database. But this information, of course, is not Mr Bonner's own personal knowledge. It is knowledge he accesses from somewhere else, i.e. the Bloomberg database. But even the state of Mr Bonner's acquired knowledge is such that he does not know one way or another whether any of Ms McLean's loans from Westpac form part of the assets within a securitisation Prospectus transaction or not until he can examine local loan level data.
So, in the end, Mr Bonner's knowledge does not advance Ms McLean's quest to show a securitisation of any of her loans, measured as against Westpac's firm denial of that assertion.
Mr Bonner's report at page 17, particularly from par 9 onwards, began to express views upon legal questions. Such opinion evidence is not admissible. Mr Bonner is not a lawyer. This was clarified and accepted by him during questioning (ts 134 ‑ 135). He said (correctly) that he does not purport to express legal opinions either on United States law or Australian law.
Mr Bonner said (par 8, page 17):
It is evident that the Loan siting in WST 2007‑1G Westpac Securitisation Trust, the equitable portion of title has been transferred from the bank to the investors in the WST 2007‑1G Westpac Securitisation Trust to allow such investors, 'CERTIFICATE HOLDERS', an unqualified right over that being securitized.
So I do not read par 8 as suggesting that Mr Bonner contends that any loan of Ms McLean forms the subject matter of the 2007‑1G Westpac Securitisation Trust. It is now clear that Mr Bonner accepts that he does not know, one way or the other, without accessing the local loan level data.
From par 9 onwards at page 17, there are opinions expressed by Mr Bonner about no entity being a creditor if they do not hold/own the asset in question, opinions about equitable portions of title, and what a bank can and cannot do once a mortgage loan has been securitised. Again, these are inadmissible opinions on legal questions outside Mr Bonner's expertise.
Page 18 of Mr Bonner's report refers to legal 'ponzi' schemes banks use and says that such schemes are 'why we are in the mess we are in now'. He talks about government bail‑out in America. Such matters might possibly be relevant in the United States. They certainly are not relevant here. Essentially, opinions and criticisms Mr Bonner renders across pages 18 ‑ 21 cannot be accepted as providing any admissible evidence.
On page 21 at par 17, Mr Bonner says:
It appears that Westpac Banking Corporation originated mortgaged loans then sold and transferred them directly into securitisation and trust series.
Again, that sentence was clarified by cross‑examination (ts 140). Reference to mortgage loans is not to be read as any intended reference by Mr Bonner to loans that Ms McLean took out with Westpac. Mr Bonner did not intend his wide phrase 'mortgage loans' to mean that. He simply does not know one way or another.
With respect to Mr Bonner, I conclude that the sources of his knowledge was either what is provided to him by Ms McLean, what he obtained from the SEC records, or from searches on the Bloomberg database. None of that, on proper analysis, provides a sufficient basis to conclude that the loan, the subject of the second action, CIV 2443 of 2009, in the amount when advanced of $862,500 has ever been securitised.
As a pure question of fact, then, I find that there is no evidence to suggest or support a finding that either loan the subject of these actions has been securitised.
That conclusion ends this defence as matter of fact. I will render some further observations on the hypothesis as to what it might mean had I reached a finding as to the securisation of any of Ms McLean's loans from Westpac.
Securitisation?
Securitisation is not a precise term. Broadly speaking, it carries the meaning I mentioned, which suggests it relates to financing transactions. However, to suggest that by a financing transaction, whereby a bank or some financial institution raises money as against its loan book would in some (wholly unexplained) way generate the release of a debtor from the obligation to repay their loan is, as a matter of law, misconceived.
Two judgments recently delivered in Australia at first instance, in the context of summary judgment applications, address a so‑called 'defence' of securitisation. In Westpac Banking Corporation v Mason [2011] NSWSC 1241 McCallum J assessed a securitisation defence. She said [10]:
The only substantive defence pleaded is that the plaintiff has no locus standi, and cannot enforce the terms of the loan agreement and mortgage or keep the benefits of enforcement, by reason of the alleged 'securitisation' of the loan agreement and mortgage.
McCallum J noted between [12] ‑ [16] assertions about equitable interests, penalty, violation of the Trade Practices Act 1974 (Cth) by reference to misleading and deceptive conduct or unconscionable conduct or the obligation to join third parties, in terms of the enforcement of a debt, if securitisation had taken place.
Her Honour then observed (by reference to similar defence averments as are seen in the amended defences filed on Ms McLean's behalf here) [20]:
It may be doubted whether there was a proper basis for pleading the factual premise of the defence that the loan has been securitised.
McCallum J said further [28]:
It follows that the debt can be enforced, and can only be enforced at the suit of the plaintiff [that is, the legal owner of the debt].
And at [29] ‑ [30]:
The short answer to the defence is, accordingly, that whatever the position between the plaintiff and any third party so far as any equitable interest or equity is concerned, the legal interests of the parties to these proceedings are governed by the loan agreement and the registered mortgage. A debt is owed by the defendants to the plaintiff and the land stands charged with that debt.
Default being admitted by the defendants in repayment of the sum secured by the mortgage, it follows inexorably that the plaintiff is entitled to an order for possession, there being no other defence raised to that entitlement.
Judd J in National Australia Bank v Norman [2012] VSC 14, on a summary judgment application, rejected a 'securitisation' defence.
At [29] and [30] the submissions by the defendant debtors (Mr and Mrs Norman) about securitisation being a defence and various matters are seen; see also [31] and following in his Honour's reasons.
The issue was resolved by Judd J at [38] ‑ [39]:
A generous interpolation of the defendants' attack on the bank for wrongfully dealing with the loan accounts, mortgage and title had three basic components. First, a general complaint that there was unauthorised dealing with their property; second, that insofar as the bank may have dealt with their loan accounts, mortgage and title, the defendants did not benefit from the proceeds; third, that as a consequence of the securitisation the bank has no title to seek repayment or possession of the property under the mortgage.
A threshold difficulty with this part of the defendants' case is that there was no evidence of any on‑sale of the loans or securitisation by the bank. The alleged improper dealing was mere assertion.
I note the close analogy to the facts in the present case.
His Honour concluded [39] ‑ [40]:
But in any event, Mr Norman did not suggest that upon payment of the outstanding amounts, the defendants would be unable to obtain a discharge of the mortgage and recover their title. Had the bank in some way dealt with its interest in the loans, through a process of securitisation, it was not suggested that the defendants' interest in the property was in any way diminished.
The defendants' advocacy on this topic might more accurately reflect the concerns of those who purchased derivatives based on unsound loans. The defendants were not exposed to the risks they would have this court explore when investigating the alleged impropriety of the securitisation process. Ultimately, the defendants' contentions concerning securitisation were baseless and irrelevant to their position to mortgagor, debtor and registered proprietor.
I reach a similar conclusion to McCallum J and Judd J for the present case regarding Ms McLean's securitisation defence as a matter of principle.
Even if it had been established that one or other of the loans that the Bank now seeks to enforce by way of obtaining possession of the mortgage security properties had been securitised, the result would be the same.
Substantial loans have been made by the Bank to Ms McLean. They were not repaid. Ms McLean's properties secure those loans. To suggest that she, as debtor, can be excused from rendering proper repayment of her loans in circumstances where she has not received any notice (under the Property Law Act 1969 (WA)) of an assignee of her debt, is not capable of acceptance as a proposition of law.
Here, Ms McLean's securitisation argument fails both in fact and as a proposition of law.
Conclusion
In all the circumstances there should be judgment for the Bank as is sought in both actions.
The Bank has advised it does not presently seek a monetary judgment although, on the evidence adduced it would be entitled to move for judgment in the amounts identified in Mr Pastro's affidavits.
Presently, the Bank seeks only orders for possession of the properties in the two actions.
I will make orders today for possession of those properties in the Bank's favour in both actions.
As regards the Bank's position concerning any residual debt, the plaintiff can have liberty to apply.
5
2
5