Secure Funding Pty Ltd v Hamilton (No. 3)

1. [1]

   The plaintiff lending company (“Secure”) seeks judgment for possession of land, leave to issue a writ for possession immediately and judgment in a sum of money, including interest, owed to it by the defendants under a loan agreement secured on a property at Sawyers Gully.

2. [2]

   The proceedings were commenced in December 2021. There have been delays to allow the defendants time and opportunity to obtain pro bono legal assistance and to pursue various industry-based complaints with the relevant consumer credit authorities.

3. [3]

   The defendants allege in their defence that although they admit the existence of a debt to Secure, the debt was contained in a judgment entered in this Court on 12 February 2009 in previous proceedings for possession, and so their debt “merged” in that judgment.

4. [4]

   The consequence of this is alleged by the defendants to be that the debt is no longer governed by the terms of the original Loan Agreement and so the subsequent arrangements for payment of the debt made by Secure with the defendants were all invalid because they did not comply with certain provisions of the National Consumer Credit Protection Act 2009 (Cth) (“the Act”), and the National Credit Code (Cth) (“the Code”). They also assert there was no consideration for those later agreements and so the agreements are invalid on that basis as well.

5. [5]

   There was a further argument put in the alternative, that if the original Loan Agreement does apply, Secure undertook as a term of that agreement to charge a rate that is similar to other variable rate loans that it provides to customers, but the rates applied to the defendants’ loan did not correspond to those similar variable rate loans.

6. [6]

   For the reasons that follow, the defendants’ arguments fail and there will be judgment for Secure.

Factual background and the loan agreements and mortgage

1. [7]

   The following chronology emerges from the content of and annexures to two affidavits of Joe Mercieca affirmed 22 June 2022 and 14 March 2023.

2. [8]

   On 8 May 2007, the plaintiff and the defendants entered into a Consumer Loan Agreement (“the Loan Agreement”) for an advance of $100,000.00. In return, the defendants granted a mortgage over their property located at Sawyers Gully as security for their obligations under the Loan Agreement.

3. [9]

   A term of the Loan Agreement was that the defendants would make monthly payments in the sum of $712.94 over 30 years, assuming the payments will be made on time and that the annual percentage rate and fees and charges will not change. The specified interest rate was 7.7% as at the “Disclosure date” (the date the agreement was signed). Fees and charges were specified and included descriptions of default administration and dishonour fees. The default rate was identified as the specified percentage rate at that time plus a margin of 4% per annum.

4. [10]

   Included in the Standard Terms and Conditions appended to the Loan Agreement were the following terms regarding default:

5. [11]

   Next to the heading “Security” on page four of the Loan Agreement is a reference to the fact that a mortgage secures the loan on the defendants’ nominated property. The mortgage document is signed on page two by both defendants and specifically refers to the attached Memorandum and provides that the terms in the Memorandum are incorporated in the mortgage.

6. [12]

   Conditions 20, 21 and 22 of the Memorandum to the mortgage dealt with what happens if the mortgage is in default:

7. [13]

   Also, relevantly clause 33.2 of the Memorandum provides:

8. [14]

   By September 2007 there was default by the defendants. Spasmodic payments and a number of defaults followed over the next eighteen months.

9. [15]

   On 12 February 2009, the plaintiff entered default judgment against the defendants in the sum of $119,451.19 plus interest and costs with an order that the defendants give possession of the property.

10. [16]

    Mr Mercieca stated in his affidavit that Secure did not enforce the judgment because an agreement for repayment was reached.

11. [17]

    On 10 July 2009 the first defendant made a hardship application by email. On 24 July 2009 Deacons solicitors wrote to the defendants advising that Secure had approved the hardship application and that the defendants would shortly receive documentation regarding a variation to the loan. It also responded to the assertion that Secure was not entitled to charge interest on the loan balance after judgment, pointing out the contents and effect of clause 33.2 of the Memorandum.

12. [18]

    On 10 August 2009 the defendants accepted an offer made by Secure in their letter of 30 July 2009 which provided for a new term of 336 months, new minimum monthly repayment amount of $1,093.15, and “New loan” amount of $115,776.91. The letter concluded: “All other terms and conditions of your Loan Agreement remain unchanged and are in full force and effect”.

13. [19]

    It was submitted by counsel for Secure that this document has and is in effect a stand-alone agreement expressly incorporating the terms of the original Loan Agreement which was prepared and executed at the request of the customer.

14. [20]

    In January 2013 there was a request for variation made by the first defendant and correspondence from Secure agreeing to a variation dated 18 January 2013, with the next payment due on 3 February 2013.

15. [21]

    By 20 February 2013 the loan was again in default. On 20 February 2013, the defendants accepted an offer by letter providing a new term of 294 months, new minimum monthly repayment of $1,256.12 plus a $10.00 service fee, a new loan amount of $125,842.88 and concluding “all other terms and conditions of your Loan Agreement remained unchanged and in full force and effect”.

16. [22]

    On 25 September 2013, after the loan again fell into default, the defendants accepted an offer by letter which provided for a term of 286 months, a new minimum monthly repayment amount of $1,251.66 plus $10.00 service fee and a new loan amount of $129,351.03. The letter concluded:

17. [23]

    On 6 August 2021, the defendants made a complaint to the Australian Financial Complaints Authority (“AFCA”) which was unsuccessful. There was correspondence from Secure afterwards offering to assist with a new repayment arrangement or that it would assist in selling the property.

18. [24]

    On 30 August 2021, Secure requested that the defendants complete a statement of financial position to support their assertion of hardship in order to process the hardship assistance request.

19. [25]

    On 27 September 2021, Secure denied the hardship assistance request due to the failure of the defendants to provide the requested information. By this time the loan was in arrears a total of $36,553.92.

20. [26]

    On 4 October 2021, Secure issued notices of default to each defendant in compliance with clause 21 of the Memorandum and provided a 31-day period of grace.

21. [27]

    On 22 October 2021, lawyers retained by the defendants, Baker Love, wrote to Secure acknowledging the three “variations” to the original Loan Agreement and alleging that “the debt merged in the judgment”, and so the variations to the Loan Agreement was merely a refinancing of the judgment debt. The text in the letter suggests this assertion was to form the basis of a negotiation in which the defendants will agree to recommence repayments of the loan if Secure agrees to reduce the daily interest rate to a “fair and reasonable percentage rate” (unspecified).

22. [28]

    On 11 November 2021, lawyers retained for Secure responded to Baker Love’s letter, rejecting the argument, and raising amongst other things the following matters:

23. [29]

    The letter proceeded to explain the applicable interest rate under the arrangement and pointed out the Supreme Court judgment interest rate was 15.5% per annum during the relevant period. The letter also referred to the (completed) AFCA complaint of July 2021 and requested remedying of the default by 17 November 2021 or proceedings would be commenced.

24. [30]

    On 9 December 2021, Secure commenced these proceedings for possession and repayment of the loan with interest.

25. [31]

    At the time of the hearing the defendants had made no loan repayments since October 2019.

Proceedings before this Court

1. [32]

   Some latitude has been extended to the defendants by the Court. Despite being assisted by the Court on multiple occasions as to how to prepare affidavit evidence and having the benefit of a number of adjournments, provision of pro bono assistance, (see Secure Funding Pty Limited v Hamilton (No. 2) [2022] NSWSC 990), and further adjournments to allow affidavits to be prepared, the defendants have not filed any affidavit material.

2. [33]

   With the assistance of pro bono counsel, a further amended defence was filed on 7 October 2022, pleading that the debt is contained in the judgment of 12 February 2009, denying the debt is contained in the initial Loan Agreement, and stating in answer to the whole of Secure’s claim that the debt is not governed by the terms of the 8 May 2007 agreement, there was no consideration for the asserted new agreements and the plaintiff failed to comply with its obligations under the Code and the Act.

3. [34]

   On 18 November 2022, Secure filed a Reply admitting that it entered judgment against the defendants on 12 February 2009, but denying that the debt that is owed wholly merged in that judgment.

4. [35]

   In December 2022 a single page document was provided by Mr Hamilton which the Court deemed to be the defendants’ evidence and written submissions, although the document was not sworn, nor signed. It is reproduced in full as it appears in the original:

5. [36]

   A hearing date of 13 April 2023 was advised to the parties on 22 December 2022. A few weeks before that hearing date the defendants filed an urgent application before the duty judge to vacate the hearing on the basis of a formal complaint made to the AFCA, the effect of which was to impose a stay until that complaint was dealt with. On 5 April 2023 Ierace J vacated the hearing.

6. [37]

   On 21 June 2023, Registrar Jones provided a new hearing date in August 2023. That date was vacated on 19 July 2023 and the current hearing date of 22 November 2023 was given.

7. [38]

   A cynical observer may conclude that the timing of the complaints to the AFCA, shortly before the listed hearing dates, were deployed as a delaying tactic, however it was a legitimate complaint course open for the defendants to take. By the time of the hearing before me in November 2023, those avenues had apparently been exhausted.

8. [39]

   At the hearing the defendants appeared without a legal representative and Ms Masters confirmed that she agreed to Mr Hamilton speaking for both of them.

Submissions of the parties

1. [40]

   Counsel for Secure provided helpful written and oral submissions. He argued that the assertion that the source of the debt was the judgment alone is an argument that goes nowhere. The terms of the agreement made on 10 August 2009, (six months after entry of the judgment), expressly provided that the terms and conditions of the original Loan Agreement were to remain in full force and effect. That agreement had the effect of reinstating the terms of the original Loan Agreement. Its terms reflect those express matters. There is no impediment at law to such an outcome. It is simply a manifestation of the parties’ freedom to determine for themselves the terms of their bargain.

2. [41]

   Further, clause 33.2 of the mortgage Memorandum expressly provided that there will be no merger in the event that judgment is obtained against the defendants. As a result, the mortgage continues to secure the defendants’ obligations to repay the debt to Secure. When they failed to pay the amount owing in October 2021, they failed to satisfy what was required of them under the default notice. They committed defaults under clauses 20(a) and 20(b) of the Memorandum. This in turn engaged Secure’s rights under clauses 21 and 23 of the Memorandum, which include the right for Secure to give notice and sue for possession of the mortgaged land after the expiry of the period of grace.

3. [42]

   Counsel for Secure submitted that the argument by the defendants that there was no consideration given by it for the 2009 to 2013 agreements is also wrong. Secure gave up something of value by forbearing from enforcing its rights under the judgment, and gained the benefit of a higher rate of interest.

4. [43]

   The allegations by the defendants that Secure did not comply with its obligations under s 16 of the Code and ss 131 and 133 of the Act when it provided the credit the subject of the original Loan Agreement and subsequent agreements does not assist the defendants. Although there is no specific pleading in the amended defence seeking relief under the Act or the Code, it was submitted that those provisions do not assist the defendants.

5. [44]

   The provisions raised are as follows:

6. [45]

   As far as the defence asserted relates to the provision of credit under the original Loan Agreement, the defences are misconceived. Neither the Code, nor the Act was in force at the time that credit was provided in May 2007 nor when the August 2009 agreement was made.

7. [46]

   Although the provisions of the Code and the Act were in force at the time of the 2013 agreements, s 40 of the Code also applies to those agreements:

8. [47]

   The effect of s 40 of the Code is to deem the 2013 arrangements agreements that did not give rise to a “new credit contract” and so s 16 of the Code has no application as it is only engaged when a new credit contract is made.

9. [48]

   In terms of the interest rate being charged under the loan not being the rate charged by Secure for “similar variable rate loans”, this is a matter which could not have provided a legal answer to the claim. No evidence at all was served by the defendants as to the terms of other “similar variable rate loans” advanced by Secure and so this contention cannot succeed.

10. [49]

    Mr Hamilton submitted that the Western Australian case upon which he relied, Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 7) [2009] WASC 390 (“Clambake v Tipperary”), is authority for the proposition that any Loan Agreement that occurs after judgment has to specifically say within it what is meant to happen after judgment, for example what payments must be made and what the arrangements would be after judgment and if it does not specify that in the contract, then “the contract can’t keep going it’s extinguished”.

11. [50]

    Mr Hamilton explained his understanding was that the terms and conditions of the original Loan Agreement should not continue and apply to the variations, because “the original Loan Agreement was subsumed into the judgment right from the word go”.

12. [51]

    Mr Hamilton conceded that there is “no doubt I owed the money” and there is “no doubt that I entered into that last agreement”, but it is his view that even though the further agreement stated that all terms and conditions of the (original) Loan Agreement remain in full force and effect, Secure did not have a right to do that.

13. [52]

    Mr Hamilton also asserted orally that there was no further mortgage registered, although I interpolate to say that this is an irrelevant matter, was not pleaded, and there was no requirement to register a further mortgage in the circumstances.

14. [53]

    Mr Hamilton also asserted orally that he was “not provided with any information”, and he was not asked to provide a statement of his income. He said that he phoned on a number of occasions to ask for a lower interest rate and that it should have been obvious to Secure that he could not afford the loan “from the get-go”, and so they have breached their obligations for responsible lending because he was put in a worse position than he was in before.

15. [54]

    The nub of the defendants’ underlying position seems to me to be encapsulated in this oral submission:

16. [55]

    In response, counsel for Secure submitted that Clambake v Tipperary is of no assistance to the defendants because it was a new contract in August 2009 which did specifically incorporate the terms of the original Loan Agreement. As there were no additional advances made under the 2013 Loan Agreement the Code does not apply.

Consideration

1. [56]

   Unfortunately, the defendants’ arguments have no merit.

2. [57]

   From very early on in the loan period the defendants defaulted. Secure on many occasions extended patience and forbearance in the face of multiple defaults.

3. [58]

   It is clear that the combination of documents referred to in pars [8] to [13] of this judgment remained in place after entry of judgment on 12 February 2009, comprise a clear delineation of obligations and responsibilities, and that the letter, the Loan Agreement, the mortgage and the Memorandum set out with specificity the continuing relationship of the parties and their obligations under that arrangement.

4. [59]

   I reject the assertion made orally by Mr Hamilton, that he was “never requested” to provide a statement of financial hardship, an assertion made from the bar table without any evidence. Within the affidavit of Mr Mercieca is a letter dated 27 September 2021 which refers to the fact that Secure was unable to provide hardship assistance because “... we requested further information from you to support your request for hardship assistance which has not been provided”. There is no correspondence from the defendants suggesting that assertion is incorrect, nor is there any evidence before me that discloses the defendants’ financial position as it was at that time. In any event, it is a matter for Secure to decide whether a hardship application should be accommodated and if so, on what terms.

5. [60]

   The oral and written submissions made by counsel for Secure are correct.

6. [61]

   Unfortunately, the defendants stubbornly clung to a false hope and an argument that has no substance in support of the position they took to not make a single mortgage payment since October 2019. That amounts to four years of default, which in accordance with the provisions of the Loan Agreement and mortgage has certain consequences which now unfortunately must be visited on the defendants.

7. [62]

   Exhibit D comprises the list of transactions of the relevant loan account from 3 July 2007 to 18 November 2023. It sets out the various interest payments due, the payments made, the multiple defaults, the associated default interest and default fees, management fees, service fees and legal fees. My assessment of that document is that the matters contained in it reflect the consequences and repercussions of the defendants’ defaults as clearly set out in the Loan Agreement and mortgage Memorandum and the later variation agreements in 2009 and in 2013.

8. [63]

   In those circumstances, the inevitable consequence is that the relief sought in the statement of claim must be granted.

Orders

1. [64]

   I make the following orders:

   1. (1)

      Judgment for the plaintiff for possession of the whole of the land comprised in Certificate of Title Folio Identifier Lot 4771 in Deposited Plan 1006747, the postal address of which is Sawyers Gully NSW 2326 (“Land”).

   2. (2)

      Leave to issue a writ for possession over the Land immediately.

   3. (3)

      Judgment for the plaintiff against the defendants for $285,517.15.

   4. (4)

      Interest at the judgment date at the rate or rates applicable under the loan and mortgage.

   5. (5)

      The defendants pay the plaintiff’s costs.