Rod Cameron - Hicksons - Recent case studies in credit enforcement

This address represents a brief summary of the law relating to the issues raised and should not be relied on as a substitute for professional

advice. Specific legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any

losses incurred as a result of reliance on this address by those relying solely on this address.

Recent Case Studies in Credit

Enforcement

16 September 2016

Address by Rod Cameron

© Hicksons 201520162016

Possessions matters instituted by state

© Hicksons 20152016 Slide 32016

St George Bank v Hammer (No. 3)[2016] NSWSC 128 – Dutton J, 26 February 2016

08/01/08 Loan to borrower secured by mortgage, some of the funds used to

refinance previous loan

2013 Loan fell into arrears

27/06/14 Lender filed statement of claim for possession

Self represented borrower filed documents including four defences

which were “idiosyncratic”

17/07/15 Campbell J struck out the last defence and ordered any further defence

could be filed only with prior leave given by a judge obtained by notice

of motion

24/07/15 Lender applied for default judgment

28/07/15 Default judgment entered


St George Bank v Hammer (No. 3) (continued #1)

06/10/15 Borrower filed notice of motion seeking to set aside default judgment

Argument 1 – UCPR 16.2(2)(c) – “… a defendant is not in default if the defendant

has filed a defence after that time limited by the rules or allowed by the court, but

before default judgment is given”.

• Borrower argued that the defence originally filed was a defence ‘filed

after the time limited by the rules but before judgment was given’

despite the fact that the defence had been struck out

• Dutton J noted UCPR 16.2(1)(c) expressly allowed for default judgment

after a defence had been struck out - he did not accept that once a

borrower had filed a defence, no matter how unsatisfactory and even if

that defence was struck out, the plaintiff was prohibited from applying

for default judgment

• Dutton J rejected Argument 1



Argument 2 – UCPR 16.3(1A) “… unless the court otherwise orders an application

[for default judgment] may be dealt with in the absence of the parties”.

• Borrower argued that orders of Campbell J on 17/07/15 requiring the

borrower to obtain leave to file a defence, were “otherwise orders”

• Dutton J rejected Argument 2 noting that the orders made by Campbell

J restricted the filing of any further defence not the conduct of the

plaintiff in applying for default judgment



Argument 3 – Lack of courtesy

• Borrower argued that the lender’s failure to give the borrower notice that

the lender was going to apply for default judgment argued in favour of

setting aside the default judgment

• Dutton J accepted that courtesy in the context of litigation is important

however he rejected Argument 3 on the basis that:

• the statement of claim had been filed on 27/06/14

• the borrower’s actions had the aim of delaying the proceedings

• on 17/07/15 it must have been clear to the borrower that the plaintiff

would be moving quickly to obtain default judgment



Argument 4 – Challenge to the validity of assignment of debt from St George Bank to

Westpac when Westpac acquired the St George Bank

• Borrower argued the assignment may not have been legal

• Dutton J rejected Argument 4 - there was no evidence to suggest the assignment

was not valid

Argument 5 – unconscionability and unjustness and hardship

• Borrower argued that the loan should be varied because of unconscionability,

unjustness and hardship – therefore the default judgment should be set aside

• Dutton J rejected Argument 5 noting that:

• the borrower merely asserted the entitlement and relief

• the borrower did not provide any detail as to why he was so entitled

• an attack on the default judgment would require pleadings of some cogency

and detail

• in order to set aside default judgment if the proposed defence depends on

facts there should be some evidence of those facts

• the borrower had not adequately demonstrated that there was a basis for

allegation of unconscionability, unjustness and hardship



Argument 6 – Denial of natural justice

• Borrower argued the default judgment denied him natural justice because

it shut him out from litigating his defence

• Dutton J noted that the entry of judgment had occurred consistently with

the applicable rules there was insufficient material to show any denial of

natural justice

Argument 7 – Presence of tenants

• Borrower argued hardship would be caused to tenants on the property if

they were forced off the land

• Dutton J rejected Argument 7 noting that the occupants had been served

with a notice to occupier back on 09/07/14 and any claim by the tenants

should have been made by them

The borrower’s notice of motion was dismissed and the borrower was ordered to pay

the lender’s costs


RHG Mortgage Corporation v Saunders[2016] NSWSC 929 – Harrison AsJ, 6 July 2016

11/10/07 Borrower mortgaged the property to the lender to secure a loan

09/06/15 Lender served default notices on borrower

02/07/15 Lender filed statement of claim

02/12/15 Default judgment entered

02/02/16 Writ of possession issued and the lender subsequently obtained

possession


RHG Mortgage Corporation v Saunders (Continued #1)

19/05/16 Borrower filed notice of motion seeking to set aside default judgment

• Borrower argued:

• Lender did not comply with NCC obligation to respond to hardship

application

• therefore default judgment had been entered illegally and it should be

set aside under UCPR 36.15 (judgment entered illegally)

• in the alternative, the default judgment should be set aside under

UCPR 36.16 (discretion to set aside default judgment)



• S.89A of the NCC provides that if a borrower gives a hardship notice the

lender must not take enforcement action unless the lender has given the

borrower notice under s.72(4)(b) of the NCC of the lenders response to

the hardship notice

• Borrower argued that:

• in a conversation with an agent of the lender on or about 18/05/15,

the borrower gave notice of hardship

• the lender had not responded to that hardship notice as required

under s.72 (4)(b) of the NCC when the lender filed the statement of

claim on 02/07/15



• Harrison AsJ noted:

• The evidence as to the versions of the conversation on 18/05/15 was

similar – the borrower did not mention “hardship” in the conversation

• On at least 5 occasions before July 2015 the borrower had made hardship

enquiries of the lender and had adopted the procedure of obtaining the

lender’s hardship form, completing it and sending it to the lender

• A hardship notice can be given orally

• Whether a particular conversation amounts to a hardship notice depends

on what a reasonable person would understand the conversation to mean

taking into account the objective surrounding facts and circumstances

• In her view the conversation on or about 18/05/15 did not amount to a

hardship notice when considered in the context of the borrower’s

extensive experience of providing notice of hardship and pursuing the

process of seeking hardship variations



• Harrison AsJ:

• went on to consider whether, if a hardship notice had in fact been given in

the conversation on or about 18/05/15, what would have been the

outcome

• considered the judgments in Monas v Perpetual Trustees [2011] NSWCA

417 and Bank of Queensland v Dutta [2010] NSWSC 574

• held that if there had been a breach of s.72 of the NCC it involved at worst

an irregularity such that the default judgment had not been “entered”,

“made” or “given” illegally and accordingly UCPR 36.15 did not apply to

enable the default judgment to be set aside



• In considering the application to set aside the default judgment on

discretionary grounds under UCPR 36.16 Harrison AsJ noted:

• in order to set aside the default judgment the borrower had to show:

- a bona fide defence

- an arguable or triable issue

- an explanation for the delay

• The borrower’s defence, while bona fide, did not raise an arguable or

triable issue (the only issue pleaded being the alleged breach of the NCC

and the alleged illegality – already dismissed)

• The borrower failed to explain the delay, particularly in light of at least 5

SMS via email communications from the lender to the borrower from

02/11/15 to 30/11/15 notifying of the impending judgment application

• The borrower’s notice of motion was dismissed and the borrower was ordered

to pay the lender’s costs

• The borrower has appealed on grounds that Harrison AsJ erred in:

- not finding the 18/05/2015 conversation constituted a hardship notice

- failing to find that entry of default judgment in proceedings commenced in

contravention of the NCC was illegal


ANZ v Driffill[2016] NSWSC 1138 – Fagan J, 5 August 2016

16/09/10 Borrower mortgaged property to lender

23/04/14 Default judgment entered for possession and for the amount of

$795,148.06

09/12/14 Lender assigned the debts and transferred the mortgage and received

satisfaction of the judgment debt from the consideration for the

assignment

• Borrower filed a notice of motion seeking to set aside default judgment for

$795,148.06 and seeking leave to file a defence claiming by way of set off

damages for breaches by the lender of civil penalty provisions of the NCCPA

• Borrower alleged the lender breached NCCPA in that the lender failed to

investigate the borrower’s financial position before making the loan which was

unsuitable to the borrower

• The NCCPA s.178 allows a court to order compensation for loss and damage

resulting from contravention of the NCCPA civil penalty provisions


ANZ v Driffill (Continued #1)

• Borrower alleged he had not been served with the statement of claim such

that the default judgment was entered irregularly

• Process server’s evidence was clear

• Subsequent statements by borrower corroborated service of the statement of

claim

• Fagan J found the borrower had been personally served with the statement of

claim and untruthfully sought to contradict and explain away his previous

admissions of service



• In the loan application the borrower represented that he had net uncommitted

income of $12,267 per month – that was untrue – evidence was that he had

no income and the prior loans were being serviced from capital

• Loan had refinanced prior loans at higher interest rates

• Borrower asserted that if the lender had not approved and advanced the loan

he would have sold the property in 2010 and would then have had a surplus of

about $550,000

• Borrower conceded that:

• as at 2010 selling was no more than option

• even after the lender refinanced the previous loans the borrower could

still have sold the property



• Fagan J held:

• The loan in 2010 to refinance existing debts did not cause, in any legal

sense, the property to not be sold in 2010

• At its highest, if the lender had refused the loan application, that may

have caused the borrower to make a different judgment regarding sale of

the property but that is too remote from any breach of the NCC

• The borrower was not kept in ignorance or induced to not sell the

property by the lender’s lack of investigation – it was the borrower who

kept the lender in ignorance

The borrower’s claims were dismissed and he was ordered to pay the lender’s

costs


Today’s take away messages

• Tricky arguments based on unusual interpretations of rules are unlikely to

succeed – Hammer Arguments 1 and 2

• Where possible give notice and be courteous – Hammer Argument 3

• Breach of NCC s.72, whilst exposing lender to civil penalty, is possibly only

on “irregularity” and apparently does not render subsequent court action by

the lender illegal – Saunders

• In order to have a default judgment set aside, a borrower will need to show a

bona fide, arguable or triable issue by evidence and provide an explanation

for the delay – Saunders and Driffill

• However pre-enforcement action breaches of the NCCPA and/or the NCC

can be troublesome and costly and may be prejudicial to subsequent

enforcement proceedings and/or default judgments so it is worth investing to

avoid them



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This was a presentation by Rod Cameron of Hicksons.

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Rod Cameron - Hicksons - Recent case studies in credit enforcement

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