Lending 001 Pty Ltd v Dimarti

1. [1]

   On 7 December 2020 the defendants mortgaged their property at 43 Monterey Street, Monterey to Oak Capital Mortgage Fund Ltd (“the lender”) to secure a loan of $1,643,113.00. Interest was payable at 15% per annum reducible to 7.49% per annum if there was no default in payment.

2. [2]

   The Final Repayment Date for the sum borrowed was the same day 12 months after the Commencement Date. The “Commencement Date” was defined in the memorandum incorporated into the mortgage as (relevantly):

3. [3]

   The evidence disclosed that the Principal Amount was paid on 8 December 2020. The repayment date was, therefore, 8 December 2021.

4. [4]

   The Principal Amount, together with interest thereon, was not repaid on 8 December 2021. A Notice under s 57(2)(b) of the Real Property Act 1900 (NSW) was served on 9 December 2021. When that Notice was not complied with, a statement of claim was filed on 20 January 2022 seeking only possession of the land.

5. [5]

   On 6 April 2022 the plaintiff assigned all its rights in relation to the mortgage to a company called Lending 001 Pty Ltd. A notice pursuant to s 12 of the Conveyancing Act 1919 (NSW) was duly given to the debtors on 7 April 2022.

6. [6]

   On 29 April 2022 an amended statement of claim was filed, replacing Oak Capital Mortgage Fund Ltd with Lending 001 Pty Ltd as the plaintiff. Again, the amended statement of claim sought only possession of the land.

7. [7]

   Although the second defendant (Margherita Dimarti) was served without apparent difficulty, there were problems serving the proceedings on the first defendant (Carmelo Dimarti) who, it seems, no longer occupied the property. The plaintiff claimed to have served the first defendant on 1 June 2022 at Angie’s Italian Restaurant, 1A/31 Kosciuszko Road, Jindabyne.

8. [8]

   The first defendant appeared at the following directions hearing on 1 July 2022 but denied that he had been served with the amended statement of claim. He said that he had been told about the directions hearing by the second defendant. A further affidavit of service from the process server was provided setting out in some detail the circumstances of the process server’s identification of the first defendant and the service upon him. In any event, a defence was filed by the first defendant on 27 July 2022 and an appearance was filed by him on 2 August 2022.

9. [9]

   By notice of motion filed 12 August 2022 the plaintiff seeks summary judgment against the defendants, alternatively, that the first defendant’s defence filed 27 July 2022 and the second defendant’s amended defence filed 3 August 2022 be struck out, and judgment given for the plaintiff. As a further alternative in relation to the first defendant, the plaintiff seeks a default judgment against the first defendant on the basis that, by reason of his failure to file and serve a notice of appearance by 26 July 2022, he was in default under the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”).

10. [10]

    At all material times the first defendant appeared unrepresented, and Mr Pope, solicitor, has appeared for the second defendant.

11. [11]

    At the hearing of the notice of motion, the first defendant denied that he had been served with the notice of motion and supporting affidavit of Mohamud Ahmed affirmed 12 August 2022. However, there was an affidavit of service by an employed solicitor from Summer Lawyers, the plaintiff’s solicitors, attesting to the service by email of the first defendant. The documents were served at the email address identified by the first defendant on his defence to the amended statement of claim and also his notice of appearance. The email did not bounce back. I was satisfied in the circumstances that he had been duly served.

Summary judgment

1. [12]

   It is convenient to deal first with the second defendant, because at the directions hearing on 8 July 2022 the first defendant told me that his defence would be exactly the same as the second defendant’s defence.

2. [13]

   The second defendant filed a defence on 9 March 2022 admitting to the entry into the mortgage but denying that there was default on the basis that monthly payments “have been made and are continuing to be made with respect to the loan”. The second defendant pleaded that she received a representation to the effect that the loan could continue at the same interest rates “for at least an additional year” providing that the payments were made. She pleaded that the Consumer Credit (New South Wales) Code applied to the loan, that the plaintiff engaged in predatory practices by imposing or attempting to impose fees to which it was not entitled, claimed relief under the Contracts Review Act 1980 (NSW), and asserted that the plaintiff was in breach of the National Credit Code.

3. [14]

   At the directions hearing on 2 June 2022 the second defendant sought to file an amended defence. This was because the plaintiff had claimed, quite correctly, that the defence filed contained no particulars of matters which required particularisation. I pointed out to Mr Pope at the directions hearing that it would be necessary for him to set out the particulars he relied on for the Contracts Review Act defence and to identify the provisions of the National Credit Code that he said were applicable.

4. [15]

   A defence to the amended statement of claim was served but not filed, on 16 June 2022. The defence again pleaded the unparticularised representation concerning the extension of the loan. As particulars of the claim of predatory practices, the relief under the Contracts Review Act, and the breach of the National Credit Code the particulars were said to be these:

5. [16]

   At the directions hearing on 26 July 2022 Mr Pope, for the second defendant, sought leave to file a further amended defence which he said would include the particulars that he acknowledged ought to have been included.

6. [17]

   An amended defence was filed on 3 August 2022. In relation to the pleading concerning the representation the following particulars were included:

7. [18]

   The particulars in relation to the relief claimed under the Contracts Review Act were said to be these:

8. [19]

   The pleading in relation to the National Credit Code was repeated but no particulars in relation to the relevant sections of the Code were provided.

9. [20]

   Further compendious particulars were provided in relation to the predatory lending practices and the Contracts Review Act relief as follows:

10. [21]

    It may be observed that those particulars are identical with those which were set out in the earlier form of the defence. All of them concern events which post-date entry into the mortgage.

11. [22]

    The second defendant filed and served no evidence in answer to the plaintiff’s evidence in support of the motion. Although not strictly necessary to answer by evidence a motion for summary judgment, when the pleading was as deficient as it was, one might have expected some evidence to demonstrate an arguable defence.

12. [23]

    At the hearing of the notice of motion I sought assistance from Mr Pope to understand the identification of the maker of the representation referred to, and when and where it was made. I also sought to understand from Mr Pope what acts or omissions on the part of the lender attracted the application of the Contracts Review Act. Finally, I sought to understand from Mr Pope what provisions of the National Credit Code were relied upon. Mr Pope’s answer to all of those enquiries was that his instructions did not permit him to go beyond what was set out in the defence.

13. [24]

    On the face of the particulars provided in relation to the representation, the representation was made by the broker. A mortgage broker is ordinarily the agent of the borrower: Morlend Finance Corporation (Vic) Pty Ltd v Westendorp [1993] 2 VR 284 at 308; Fitzgerald v Watson [2011] NSWSC 736 at [25]; Australia and New Zealand Banking Group Ltd v Bragg (No. 3) [2017] NSWSC 208 at [47]-[51]; Perpetual Trustee Company Limited v Bowie [2015] NSWSC 328 at [38]. There was no evidence to the contrary: cf Michalopoulos v Perpetual Trustees Victoria Limited [2010] NSWSC 1450; but see Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389.

14. [25]

    The particulars purporting to be relevant to the relief under the Contracts Review Act do not, even by reference to s 9(2) of that Act, identify any acts or omissions on the part of the lender which could attract the application of that Act. The matters said to be particulars in relation to the Contracts Review Act all post-date the entry into the mortgage. There is no identification of how the National Credit Code is said to have been breached.

15. [26]

    The assertion that the lender supplied false and misleading information to credit providers was unparticularised, contrary to r 15.3 UCPR.

16. [27]

    The first defendant’s defence reads in its entirety:

17. [28]

    The defence suffers from the same substantive problems as the defences of the second defendant. There are assertions of predatory practices and a claim for relief under the Contracts Review Act, but no basis for these has been shown.

18. [29]

    It is not without significance that Mr Pope informed me at the hearing of the notice of motion that his firm had acted for both the first and second defendants at the time they entered into the mortgage. Even in those circumstances, Mr Pope was not able to identify any matter which would be able to be particularised whether to attract potential relief under the Contracts Review Act or otherwise. That consideration is relevant to the defences of both of the defendants.

19. [30]

    The principles to be applied to an application for summary judgment are well-known. Any defence would need to be so untenable that it cannot possibly succeed (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129), and an order should be made where it is clear there is no real question to be tried (Fancourt v Mercantile Credits Limited (1983) 154 CLR 87).

20. [31]

    In O'Brien v Bank of Western Australia Ltd [2013] NSWCA 71 Macfarlan JA (Beazley P and Ward JA agreeing) said at [3]:

21. [32]

    In Commercial Banking Co of Sydney Ltd v Pollard [1983] 1 NSWLR 74, the plaintiff sued the defendant for moneys owing under a personal loan made by the plaintiff to the defendants. The defendants filed a defence asserting that the loan was unjust in the circumstances of the time it was made pursuant to the Contracts Review Act. Particulars were provided.

22. [33]

    Justice Rogers said (at 80):

23. [34]

    Similarly, in Chalak v G & G Mikhael Pty Ltd [2022] NSWCA 116, Basten AJA (with whom Ward P and Simpson AJA agreed) said

24. [35]

    Justice Basten also considered what was required under r 13.1 UCPR and said:

25. [36]

    It seems to me that the position in the present case is distinguishable from that in Chalak. In the light of what Mr Pope said, that it is clear that no amendment to either of the defences could provide a basis to deny the plaintiff relief. During the hearing, the following exchange occurred:

26. [37]

    There is nothing identified in either of the defences to indicate how the Contracts Review Act is engaged in relation to the circumstances of the making of the contract of mortgage. No evidence has been filed by either defendant concerning those circumstances.

27. [38]

    In relation to the second defendant, Mr Pope accepted that there was no real dispute that the Principal Amount was owed because it had been advanced.

28. [39]

    The first defendant sought leave after the hearing to lodge a further written submission. Since he was appearing for himself I gave him that leave. The email he sent made it clear that the real issue, from his point of view, was not that an amount was owing to the plaintiff, but that extra fees and charges had been incurred by reason of an asserted failure on the part of the lender and/or the plaintiff to provide an account statement with a payout figure so that the defendants could refinance the loan.

29. [40]

    It is not necessary to make any findings in relation to those assertions. I note only that he accepted that a payout figure was eventually provided, and that his complaints generally were about matters which had occurred well after the mortgage was entered into. The matters about which he complained were said to have increased what was owed, not to have impugned the mortgage, nor to have cast doubt on the fact that some money was owed to the plaintiff.

30. [41]

    In Chalak, there was no dispute between the parties that the defendants owed interest at the rate of 7% on the amount borrowed. There was a dispute about whether the interest was payable at a higher rate than 7%. The primary judge gave judgment for possession, gave judgment for the plaintiff in an amount equal to the principal outstanding on the loan together with interest on that amount calculated at 7%, and then directed that there be a hearing as to the proper calculation of interest.

31. [42]

    The Court of Appeal upheld the appeal by the borrowers with Basten AJA saying:

32. [43]

    In the present case, as I have indicated above, the real contest between the parties is the amount owing to the plaintiff by reason of the alleged failure on the part of the lender and/or the plaintiff to provide a payout figure, which, in turn, led to further interest charges and fees payable. In a case where the plaintiff seeks only a judgment for possession of the land, and not judgment for any amount outstanding, I do not consider that what was said in Chalak has application to the present case. It is not inappropriate in the circumstances to give summary judgment for possession of the land whilst reserving the parties’ rights to an accounting of the precise amount owing. Although in Chalak, the judgment for possession of the land was also set aside, that was because one of the issues raised by the defence was the enforceability of the mortgage: Chalak at [44]-[46]. For the reasons I have given, there is no issue in the present case raised by the defences as to the enforceability of the mortgage.

33. [44]

    I am satisfied from the affidavit of Mohamud Ahmed affirmed 12 August 2022 that there has been default under the mortgage, in that the Principal Amount was not repaid on 8 December 2021 or at all. Such failure entitles the plaintiff to exercise its rights including the right to obtain possession of the land under cl 18.3 of the Memorandum.

34. [45]

    In those circumstances, the plaintiff is entitled to summary judgment for possession of the land.

Strike-out of defences

1. [46]

   If I am wrong in relation to summary judgment, it is necessary to consider the alternative relief sought by the plaintiff, namely, that the defences be struck out pursuant to r 14.28 of the UCPR.

2. [47]

   For the reasons I have given earlier, the amended defence is entirely deficient in its pleading and in the provision of particulars to demonstrate any substantive defence.

3. [48]

   In the circumstances where the second defendant, legally represented, has filed or served three defences which are deficient in identifying any substantive defence to the claim, where there is no evidence from the second defendant of the allegations made in the defences, and in the circumstances where the second defendant’s solicitor said that any further defence would not be able to take the matters beyond what was contained in the latest form of the defence filed 3 August 2022, it is appropriate to strike that defence out and not give leave to the second defendant to file any further defence. That would entitle the plaintiff to obtain default judgment.

4. [49]

   Only two of the paragraphs in the first defendant’s defence are capable, on their face, of amounting to a defence. The first is paragraph 4 which says, “I want to claim relief under the Contracts Review Act”. No material facts are pleaded which enable it to be seen if the Contracts Review Act is engaged. The first defendant said that his defence was to be exactly the same as that of the second defendant. The second defendant has not, and cannot, provide particulars to demonstrate how the Contracts Review Act is engaged.

5. [50]

   The second paragraph is para 9 which reads, “the Plaintiff has engaged in deceptive behaviour”. Again, no material facts are pleaded, nor are particulars provided. It is apparent, in any event, that this complaint is very likely to relate to the first defendant’s main complaint, that there was a failure by the lender and/or the plaintiff to provide an account statement.

6. [51]

   All of the other matters set out in the defence concern matters which occurred after the entry into the mortgage. They are incapable of impugning the mortgage and the plaintiff’s right to exercise rights under the mortgage, because they do not amount to an equitable set off: Meagher, Gummow and Lehane’s Equity Doctrines and Remedies (5th Edition 2014 Lexis Nexis); Commonwealth Bank of Australia v MLD Financial Services & Management Pty Ltd [2015] NSWSC 1476 at [32] to [37]

7. [52]

   This defence should be struck out. The only question is whether the first defendant should be given a further opportunity to plead a proper defence to the claim.

8. [53]

   From what the first defendant has told me at the hearing of the notice of motion, in his submission emailed subsequently, and at earlier directions hearings, the real source of his complaint, as I have said earlier, is that there was an asserted failure on the part of the lender, and thereafter the plaintiff, to provide a payout figure so that the loan could be refinanced. There seems to me to be two answers to that. First, a s 57(2)(b) notice was served. Secondly, as the defendants now accept, the present plaintiff served a document containing the payout figure after the first defendant had made a complaint to the Australian Financial Complaints Authority.

9. [54]

   In any event, any failure to provide such a payout figure is only a matter which might result in an adjustment of what is owed by the defendants to the plaintiff in any accounting between the parties. At the present time the evidence shows that the Principal Amount together with interest is due and owing to the plaintiff. I do not consider that any purpose would be served by giving a further opportunity for another defence to be filed. It would not be consistent with ss 56 and 58 of the Civil Procedure Act 2005 (NSW).

Conclusion

1. [55]

   Accordingly, I make the following orders:

   1. (1)

      1. Judgment for the plaintiff for possession of the land comprised in folio identifier 120/10707 being the land situated at and known as 43 Monterey St, Monterey NSW 2217.

   2. (2)

      2. The defendants are to pay the plaintiff’s costs.