McDonald v QBE Lenders’ Mortgage Insurance Limited

By Summons filed on 15 October 2021, the plaintiffs in this court, Mr and Ms McDonald, seek an order under s 140 of the Civil Procedure Act 2005 (NSW) that proceedings in the Local Court brought against them by QBE Lenders’ Mortgage Insurance Ltd, number 2021/70990, be transferred to this Court. The cause of action brought against Mr and Ms McDonald in the Local Court is based upon the assignment of a debt due to the National Australia Bank (“NAB”), of which, it is averred, notice has been given to Mr and Ms McDonald, sufficient to engage the provisions of s 12 of the Conveyancing Act 1919 (NSW).

The amount of the remaining debt is a little over $45,000, but of course, interest is claimed. The original loan to the NAB was secured by way of a mortgage in respect of a property at Lowood in Queensland, which following the default of Mr and Ms McDonald on the loan agreement, was sold. The amount of the $45,000 I have referred to is the shortfall on NAB’s recovery after the sale.

Ordinarily, one would not even countenance a transfer of such proceedings from the Local Court to this Court. However, I am persuaded that the essential factual matrix of the Local Court proceedings is closely connected with the factual matrix giving rise to a cross‑claim filed by Mr and Ms McDonald in proceedings already pending in this Court. Those proceedings are Australia and New Zealand Banking Group Ltd v Mr and Ms McDonald (“ANZ proceedings”), number 2021/00180628.

Without going through the detail of the cross‑claim, which is not without appropriate complexity, there are a number of cross‑defendants, including the NAB. The factual matrix is perhaps best summarised in the written submissions of Mr Kalyk of counsel, who appears for the plaintiffs on the summons. The explanation, in short form, is that Mr and Ms McDonald were approached in late 2013 or early 2014 by finance brokers (who have now gone bust) referred to as Members Alliance, who were promoting the purchase of investment properties in a development in Lowood, Queensland. As it is put by Mr Kalyk:

Regrettably, their worst fears were realised, and the investment proved financially catastrophic for them. The ANZ proceedings relate to ANZ’s claim as mortgagee for possession of their home. Their cross‑claim joins not only ANZ, but also NAB, and certain legal advisers as cross‑defendants. Although the loan agreement between the McDonalds and NAB is not directly impugned by any claim for relief in the cross‑claim, the factual matrix is intrinsically bound up with the background to the loan, the subject of the Local Court proceedings. Indeed, in those proceedings, by way of defence anyway, the McDonalds seek to impugn the original loan agreement under the Contracts Review Act 1980 (NSW).

I am of the view that there is a real risk that if the matters proceed separately, there could be inconsistent findings on, essentially, the same material facts, and that it is in the interests of justice that the Local Court proceedings be transferred to the Supreme Court. I accept the submissions of Mr Woods of counsel, who appears for the defendant, that having regard to the comparative modesty of the amount involved in the Local Court proceedings - I interpolate, I am sure it is not modest to Mr and Ms McDonald - the defendant to the summons should not necessarily be subject to the same case management rigours as the other parties to the Supreme Court proceedings. QBE’s evidence has already been filed in the Local Court. It has been professionally drawn, and it seems to me appropriate that it should stand as the evidence in the Supreme Court.

Moreover, I would not have the expectation that if the matter proceeds to a full hearing that there should be a consolidation of the proceedings. Rather, the transferred proceedings should be listed at the same time as the ANZ proceedings, but it may be unreasonable to expect QBE to be present throughout the whole hearing, and the matter should be case managed to minimise the costs that will be generated by this transfer. Obviously, the cost of conducting litigation in the Supreme Court, especially as one of a number of parties, will greatly exceed the cost of conducting the proceedings in the Local Court, particularly as there were only two parties there.

Naturally, but for the cross‑claim in the ANZ proceedings the increased cost in this court, and the additional time that may be involved in the matters coming to fruition, would be powerful factors telling against the prospect of transfer, as I indicated in my introductory remarks.

However, for these reasons, I make the following: