Vaughan v HSBC Bank Australia Limited [2009] FCA 1007

FEDERAL COURT OF AUSTRALIA

Vaughan v HSBC Bank Australia Limited [2009] FCA 1007

STEPHEN VAUGHAN v HSBC BANK AUSTRALIA LIMITED

NSD 498 of 2009

GRAHAM J

24 AUGUST 2009

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

general division NSD 498 of 2009

BETWEEN: STEPHEN VAUGHAN

Applicant

AND: HSBC BANK AUSTRALIA LIMITED

Respondent

JUDGE: GRAHAM J

DATE OF ORDER: 24 AUGUST 2009

WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

1. The respondent's Notice of Motion filed 7 August 2009 and the applicant's Notice of Motion filed 18 August 2009 be heard together. 2. Evidence in the one motion be evidence in the other, to the extent to which it may be relevant. 3. In respect of the applicant's Notice of Motion filed 18 August 2009: i. The motion be dismissed; and ii. The applicant pay the respondent's costs 4. In respect of the respondent's Notice of Motion filed 7 August 2009: i. Judgment be given for the respondent in relation to the whole of the proceeding instituted by the filing of the Application on 29 May 2009. ii. The applicant pay the respondent's costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

general division NSD 498 of 2009

BETWEEN: STEPHEN VAUGHAN

Applicant

AND: HSBC BANK AUSTRALIA LIMITED

Respondent

JUDGE: GRAHAM J

DATE: 24 AUGUST 2009

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 There are two Notices of Motion presently before the court. Firstly, the motion filed by the respondent HSBC Bank Australia Limited (ABN 48 006 434 162) ('the Bank') on 7 August 2009 in which the principal relief sought is that summary judgment be entered in favour of the respondent pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth) ('the Federal Court Act'). The other notice of motion presently before the Court is a Notice of Motion filed by the applicant, Stephen Ian Vaughan, on 18 August 2009 in which the primary relief sought by the applicant is summary judgment for $666,000 against the Bank pursuant to s 31A of the Federal Court Act. 2 The applicant has appeared in person and the Bank has appeared by counsel. 3 Section 31A of the Federal Court Act is in the following terms: '31A(1) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is prosecuting a proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding. (2) The Court may give judgment for one party against another in relation to the whole or any part of the if: (a) the first party is defending the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding. (3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be: (a) hopeless; or (b) bound to fail; for it to have no reasonable prospect of success. (4) This section does not limit any powers the Court has apart from this section.' 4 The applicant seeks relief against the Bank under s 31A(1) of the Federal Court Act and the Bank seeks relief against the applicant under s 31A(2) of the Act. Section 31A of the Federal Court Act was inserted into the Act by the Migration Litigation Reform Act 2005 (Cth). 5 The effect of s 31A was to soften the test for a successful application for summary judgment as stated by the High Court in Theseus Exploration NL v Foyster (1972) 126 CLR 507 ('Theseus Exploration') and also the test for a successful application for summary dismissal as stated by Barwick CJ in General Steel Industries Inc v The Commissioner for Railways (NSW) (1964) 112 CLR 125 ('General Steel Industries'). 6 The Explanatory Memorandum circulated by authority of the Attorney-General in relation to the Migration Litigation Reform Bill 2005 revealed the purpose of the new s 31A of the Federal Court Act. It relevantly provided: '21 … Section 31A provides that the Court may give summary judgment in a matter where it is satisfied that a proceeding or part of a proceeding, or a defence to a proceeding or part of a proceeding, has no reasonable prospect of success. 22. Subsection 31A(3) provides that for the purposes of giving summary judgment, a proceeding or part of a proceeding, or a defence to a proceeding or part of a proceeding, need not be hopeless or bound to fail for it to have no reasonable prospect of success. This moves away from the approach taken by the courts in construing the conditions for summary judgment by reference to the 'no reasonable cause of action' test, in Dey v Victorian Railways Commissioners … and General Steel Industries Inc v Commissioner for Railways (NSW) … [both of which were summary dismissal cases]. These cases demonstrate the great caution which the courts have exercised in regard to summary disposal, limiting this to cases which are manifestly groundless or clearly untenable. 23. Section 31A will allow the Court greater flexibility in giving summary judgment and will therefore be a useful addition to the Court's powers in dealing with unmeritorious proceedings. …' 7 In his Second Reading Speech in the House of Representatives (Hansard 10 March 2005 at p.3) the Attorney-General said, amongst other things: 'The bill also strengthens the power of the courts to deal with unmeritorious matters, by broadening the grounds on which federal courts can summarily dispose of unsustainable cases. …' A like observation was made by the Minister delivering the Second Reading Speech in the Senate (Hansard 11 May 2005 at p139). 8 The proceedings in which the Notices of Motion were filed were commenced by the applicant filing an Application on 29 May 2009. An Amended Application was filed on 10 July 2009 and a Statement of Claim was filed in support of that Application on the same date. The applicant's proceedings seemed to me to be totally misconceived. He has invoked what he has described as the 'Private Administration Process'. In essence, his case is that he put propositions to the Bank which, if accepted, may have been favourable to his interests. He submitted that because the Bank was silent in response to his requests, it was taken to have accepted the offers contained in his requests. His case is totally without merit. 9 On 14 August 2001, the applicant appears to have borrowed $500,000 from the Bank. On that day, he executed a mortgage over Lot 174 in Strata Plan 63094, being the whole of the land contained in Certificate of Title Folio Identifier 174/63094 in favour of the Bank, securing the repayment of the 'Secured Money'. The mortgage, which became registered as dealing number 7932530, incorporated the Bank's standard mortgage provisions contained in the memorandum filed at the Land Titles Office as dealing number E82762. There were minor amendments agreed between the parties to the terms of the memorandum by reference to an annexure 'A' to the mortgage as executed. The Secured Money included not only principal but also interest payable by the applicant as mortgagor to the Bank. 10 On 17 November 2006, the Bank made an offer to the applicant of finance which was accepted by the applicant on 24 November 2006. The loan agreement provided for an advance on this occasion of $491,018 with interest payable at the Bank's Variable Rate ('currently 8.02 per cent per annum') less a discount of 0.375 per cent per annum, provided that the applicant was not in default in payment of any moneys to the Bank. The term of the loan was 30 years and the first three years of the loan period were described as an 'interest only period'. 11 An Event of Default under the mortgage was a failure by the borrower to pay any moneys due and payable to the Bank when due and payable (see clause 9.1(a)). The memorandum provided for the Bank to have power to appoint a receiver of the secured property at any time after an event of default had occurred (see clause 10.1). The powers of the receiver under 12.1 included a power to enter, take possession of, have access to and make use of the secured property. The powers of the receiver further included a power to sell or agree to sell the secured property on any terms, including, without limitation, the following: '12.1(f)(i) the sale may take place whether or not the Receiver has taken possession of the Secured Property;' 12 Clause 11.1 of the memorandum provided that all of the powers which may be conferred on a receiver appointed under the mortgage should also be exercisable by the Bank at any time after an event of default had occurred. 13 The Bank claimed that the applicant defaulted under the mortgage and called for payment, under a notice under s (57)(b) of the Real Property Act 1900 (NSW), of an amount of $6,811.19, being monies owing under the mortgage of $6,461.19 and an amount of $350, being costs and expenses of preparing and serving the notice of demand. The demand recorded that as at 5 September 2008 the amount owing by the mortgagor to the Bank was $497,479.19. The evidence is that the applicant failed to comply with the Bank's demand. 14 On or about 9 October 2008 a further demand was served by the Bank on the applicant, described as a 'Final Demand' under which the whole of the amount owing under the loan was demanded, being $505,092.93 as at that date. 15 Whilst the Bank instituted proceedings for possession in the Common Law Division of the Supreme Court of New South Wales on 4 November 2008 seeking judgment for an amount of $507,793.93 together with further interest from 9 October 2008 and leave to issue a writ of possession to enforce the judgment for possession which had been sought, those proceedings were not taken to a hearing and as yet no judgment has been obtained. It appears that the Bank was able to enter into possession of the mortgaged premises, being unit 174, 365 Kent Street, Sydney, without the necessity of a writ of possession. According to the unchallenged evidence of Michael Lockey, a mortgage collection officer of the Bank, the Bank took possession of the unit on 13 March 2009 and proceeded to sell it as mortgagee in possession on 30 May 2009 for a sale price of $666,000. 16 The sale would appear to have been settled on 13 July 2009. The net proceeds of sale received by the bank were $643,202.34. As at 13 July 2009 the amount owed by the applicant to the bank was $560,395.97, being the outstanding loan amount of $530,263.09 together with legal costs, valuation fees and strata fees of $28,832.88 and other fees and charges of $1300. A net balance of $82,806.37 was paid into a bank account pending the outcome of the Bank's motion presently before the court. Mr Lockey's evidence is that, contrary to what was alleged by the applicant in his amended application and statement of claim filed 10 July 2009 and as previously alleged by him in the Supreme Court proceedings, the Bank did not engage in a 'Private Administration Process' with the applicant, 'nor did it agree at any time and in any way to discharge the Mortgage'. 17 The memorandum forming part of the Bank's mortgage included a provision relating to waiver in the following terms: '15. NO WAIVER 15.1 The Bank is not to be taken to have waived its rights in respect of any Event of Default except to the extent that those rights have been expressly waived in writing by an Authorised Officer of the Bank. 15.2 In particular and without limiting the generality of clause 15.1, the power of sale under this mortgage may be exercised notwithstanding that the Bank or the Receiver may have previously waived or refrained from exercising that power; and no demand or notice of sale made or given under this mortgage shall be waived by the acceptance of any payment on account of the Secured Money, or by any negotiations between the Bank and the Mortgagor.' 18 Under the Real Property Act 1900 (NSW), the memorandum of mortgage upon registration had the effect of a deed duly executed by the parties who signed it, including, of course, the applicant. 19 The evidence relied upon by the applicant was largely the subject of objection and rejected. At the end of the day, there was very little evidence upon which the applicant relied. A series of documents were admitted into evidence as exhibits NMA, NMB, NMC and NMD along with other documents, which were annexures B, D and E to an affidavit of the applicant sworn 29 May 2009, containing 21 paragraphs. 20 The first document, being exhibit NMA, was a document apparently sent by the applicant to an officer of the Bank described as 'Director of Recoveries' dated 30 September 2008. The document was headed: 'Notice to agent is notice to principal and notice to principal is notice to agent Time sensitive document, estoppel conditions will apply upon default. All addressed parties Joint and Severally and applicable to all Successors Nominees and/or assigns.' There followed under that heading a further marginal heading as follows: 'Notice of Conditional Acceptance and Request for Further and Better Particulars' 21 To this letter, an affidavit was attached which commenced with the heading 'FIAT JUSTITIA, RUAT COELUM'. One may assume that the translation attributed to this expression was, as recorded in the document, 'Let Right Be Done, Though The Heavens Should Fall'. 22 Another document with a similar heading, described as 'AFFIDAVIT OF CLAIMANT IN SUPPORT OF CLAIM', formed an annexure to the letter, and another document was described as a 'Supercedus Bond/Birth Certificate Duly Endorsed Accepted for Value'. 23 The next document sequentially was exhibit NMB which was a letter dated 8 October 2008 directed to the 'Loyalty & Retention Officer' of the Bank. It had attached to it a document, which apparently recorded a then current indebtedness of the applicant to the Bank of $504,597.23 and a birth certificate. The letter of 8 October 2008 included the following: 'Greetings. I, commonly called Stephen-Ian: Vaughan, hereinafter 'Principal', and holder of Loan Account number 088-036868-258, wish to settle and close this account and thank HSBC Bank for having provided me such a valuable service. Please find enclosed tender of payment for Loan Account number 088-036868-258 and adjust the account balance to zero. Principal tenders the private prepaid asset account EIN number 209 417 713T in good faith and in consideration and satisfaction against any balance outstanding on the account. If the instrument tendered by me to HSBC is insufficient consideration to off set or waive the debt please forward me in timely manner (within the timeframe of contract law) the instrument for my valuable autograph that would be sufficient to tender payment in full and complete consideration of the debt. Unless I receive said instrument in timely manner, it shall be taken the instrument tendered to you for offset of the debt is/was sufficient. Thank you for your prompt attention to this matter.' 24 The third document sequentially was exhibit NMC, being a letter dated 24 October 2008 from the applicant to the Bank's 'Loyalty & Retention Officer' enclosing what was called a: 'Notarized Acknowledgement of Initial Financing Statement, Notarized Copyright Notice Trade–Name/Trade–Mark' 25 The fourth document sequentially was annexure B to the affidavit, being a letter dated 27 October 2008 from the applicant to officers of the Bank, one being 'Manager, Collections', the other being 'C.E.O.'. The document included numerous headings, one of which has been referred to above, another was headed 'Memorandum In Law', another 'Letter of Conditional Acceptance and Request for Further and Better Particulars (Letter Rogatory)' and another, 'RE: MEDIATION REQUEST FOR SETTLEMENT AND ENCLOSURE VIA MUTUAL FACT–FINDING'. On the second page of the letter, the following appeared: 'Please provide the following particulars timely to Principal in order to show that:' and a number of paragraphs were then set out, followed by two paragraphs as follows: 'Should you fail to furnish said particulars within the next seven days of the date of this Letter of Request, it shall be deemed by all parties that no such contract or particulars exist, that your claims are irrelevant and that you are soliciting for business, you are not entitled to. Should you or nominees/employees of HSBC and HSBC fail to provide particulars via affidavit on a point for point basis against the points raised by Principal in order to verify your claim yet proceed with your attempts to recover monies from alleged debtor or Principal without their expressed permission, including but not limited to, any future solicitation via mail, it shall be deemed by all parties that you accept all liability and consent to paying STEPHEN-IAN VAUGHAN the following sums in lieu of injury : …' A series of monetary demands then followed in respect of moneys claimed by the applicant to be owing by the Bank to him. 26 The fifth document sequentially was annexure E to the same affidavit which included a document bearing the heading : 'NOTICE OF DEFAULT AND OPPORTUNITY TO CURE' The penultimate paragraph on the first page of that letter of 14 November 2008 read: 'Should you elect to remain silent, I will issue a Certificate of Dishonour/Mediation as described in the relevant Australian law's and prepare to testify, as necessary, that you have stipulated to the draft made in the presentment.' 27 Another document forming part of the same annexure was headed 'NOTICE OF FAULT AND OPPORTUNITY TO CURE'. The document bore date 4 November 2008. It was directed by the applicant to officers of the bank and included, on the second page, a statement as follows: 'You have the right to cure the mistaken silence of the dishonoured party/ies in order that the Drawer of the commercial-lien/bill be not obstructed in seeking further remedy via the acceptance for honour supra protest, which would otherwise deny the Creditor remedy, your party/ies actions thereby creating the status of involuntary servitude, permitting the disclosure of inaccurate records to agencies and data integrity boards/tribunals, then reliant on their/your records.' 28 The sixth document sequentially relied upon by the applicant was exhibit NMD dated 22 November 2008 being a: 'CERTIFICATE OF DISHONOUR as to an AWARD REACHED re: BREACH OF FIDUCIARY PUBLIC DUTY.' This was a document signed by unrelated parties and bearing, amongst others, the impression of a fingerprint against one of the signatures. It was directed to officers of the Bank, and said to come from one Clive Hartnett who gave a post office box address at Helensvale in Queensland. 29 The final document relied upon by the applicant is annexure D to the affidavit sworn 29 May 2009 of 21 paragraphs to which reference has been made. That document was directed by the applicant to officers of the Bank and included, amongst its headings: 'Letter of Request Presentation Of Confidential Commercial Information/Private Record In Regards To: Statement of Claim, Case number 15818/08' The second page of the document included: 'Show by Alexander Gordon Brodie [an officer of the bank] not signing the enclosed Affidavit for Claimants sent to him by Registered mail … on 30th October 2008 and returning it in timely manner to Principal that he is not admitting and agreeing the account number 036868-258 has been settled and closed. …' (emphasis in original) 30 It is apparent that the applicant's case against the Bank well and truly earns the description of being unmeritorious and unsustainable. The applicant has no reasonable prospect of successfully prosecuting any part of his proceeding against the Bank. In relation to his claim for summary judgment against the Bank it is totally without foundation, it proceeds on the premise that, because the Bank did not reply to his rather odd communications to it, by its silence the Bank agreed to make a gift to the applicant of $666,000. 31 The applicant's notice of motion should be dismissed with costs. In relation to the respondent's Notice of Motion, judgment should be given for the respondent against the applicant in relation to the whole of the applicant's proceeding against the respondent. Furthermore, the applicant should be ordered to pay the Bank's costs. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham.