Supreme Court New South Wales Medium Neutral Citation: Perpetual Trustees Victoria Limited V Bianka Monas [2011] NSWSC 57 Hearing dates: Friday 4 February 2011 Decision date: 21 February 2011 Before: HOEBEN J Decision: An order that the defendant give the plaintiff possession of the land. An order that the issue of a writ of possession in favour of the plaintiff in respect of the land be stayed pending further order of the Court. The costs of these proceedings are reserved. Catchwords: CLAIM FOR POSSESSION OF LAND - defence based on Consumer Credit Code - whether default notice complied with provisions of section 80 of Code - effect of failure of notice to comply with section 80 - whether statement of claim should be dismissed - power of Court to authorise beginning of proceedings nunc pro tunc. Legislation Cited: Bankruptcy Act 1966 Consumer Credit (New South Wales) Code Corporations Act 2001 Credit (Homes Finance Contracts) Act 1984 National Consumer Credit Protection (Transition and Consequential Provisions) Act 2009 (Comm) National Credit Code (Comm) Real Property Act 1900 Workers Compensation Act 1987 (NSW). Cases Cited: Australian Finance Direct v Director of Consumer Affairs Victoria [2007] HCA 57, (2007) 234 CLR 96 at [19] Bank of Queensland Ltd v Dutta [2010] NSWSC 574 (Davies J) Benjamin v Ashikian [2007] NSWSC 735 (Smart AJ) Berowra Holdings Pty Ltd v Gordon [2006] HCA 32, (2006) 225 CLR 364 CKM (Mortgages) Limited v Burtenshaw [2010] NSWSC 1044 at [32] Emanuele v Australian Securities Commission (1997) 188 CLR 114 at [157] Flood v Police Department Employees' Credit Union (1999) ASC 155-028 Category: Principal judgment Parties: Perpetual Trustees Victoria Limited - Plaintiff Bianka Monas - Defendant Representation: Counsel: Mr S Docker - Plaintiff Ms R Francois - Defendant Solicitors: Kemp Strang - Plaintiff Legal Aid, NSW - Defendant File Number(s): 2009/11756 Judgment 1HIS HONOUR: Nature of proceedings The plaintiff, Perpetual Trustees Victoria Limited (PTVL), seeks possession of the land described in Certificate of Title Folio Identifier 1/194873 being 27 Charles Street, Liverpool NSW (the land) from the defendant, Ms Monas, who is the registered proprietor of the land and has mortgaged it to PTVL pursuant to registered mortgage AA705462 (the mortgage). 2PTVL's case is that it is entitled to possession of the land because Ms Monas breached the mortgage by failing to pay on time instalments required by the loan agreement, dated 12 May 2004 (the loan agreement), and failed to correct her default within the time specified in a default notice dated 29 January 2009 (the default notice). 3All of the matters raised by PTVL in its statement of claim are admitted except for the effect of the default notice. Accordingly, there remain to be decided the following issues: (a) Were these proceedings commenced in breach of s80 of the Consumer Credit (New South Wales) Code (the Code) . (b) If so, what is the consequence for PTVL's claim for possession, i.e. should the proceedings be dismissed due to PTVL's failure to comply with s80 of the Code. (c) Should the Court authorise the commencement of the proceedings in accordance with s80(4)(c) of the Code, as sought in the plaintiff's notice of motion filed 7 September 2010. (d) If any of these questions are decided adversely for Ms Monas, should PTVL be granted possession of the land. Factual Background 4Unless otherwise specified, I find the facts to be as follows. 5On 31 May 2004 PTVL advanced a total of $330,000 to Ms Monas pursuant to the loan agreement. The monies were advanced in two facilities, being $278,000 on a variable rate premium interest only account for 5 years, and $52,000 on a line of credit. Thereafter, Ms Monas made payments as required by the loan agreement. 6Default occurred when Ms Monas failed to pay the November and December 2008 repayments on each facility. On 29 January 2009 the solicitor for PTVL signed a default notice which was sent that same day by ordinary post to the address of the land. The default notice was able to be served in that manner because of clause 10.2 of the mortgage and s172(2) of the Code. 7The default notice was taken to have been delivered on the date it would have been delivered in the ordinary course of post, which is the fourth business day after posting, being 4 February 2009 (clause 10.5 of the mortgage, s173(1)(b) of the Code and s160 Evidence Act 1995). 8The form of the default notice is important. It read as follows: "Ms Bianka Monas 27 Charles Street LIVERPOOL NSW 2170 This is a Default Notice issued by Perpetual Trustees Victoria Limited ( Lender ) pursuant to section 57(2)(b) of the Real Property Act (NSW) 1900, by its solicitor, Kemp Strang, so authorised by the Lender to do so. If the Uniform Consumer Credit Code applies to your credit contracts and/or mortgage, this Default Notice is also a default notice within the meaning of section 80 of the Uniform Consumer Credit Code. Credit Contract status as at 27 JANUARY 2009 Credit Contract(s) Mortgage(s) Property Arrears Total Amount Outstanding MN330566001181012551 AA705462 27 Charles Street $4534.90 $284,332.04 increasing at a rate LIVERPOOL NSW of 8.41% pa MN330566001181019401 AA705462 27 Charles Street $ 892.85 $53,035.47 increasing at a rate LIVERPOOL NSW of 8.61% pa 1. As set out in the above table: 1.1 Pursuant to the Credit Contract(s), the Lender provided financial accommodation to you. To secure the amounts owing to the lender under the Credit Contract(s), you gave the Mortgage(s) over the Property in favour of the Lender. 1.2 Default(s) occurred under the Credit Contract(s) and the Mortgage(s) as the Arrears were not paid when due ( Default(s) ). 2. To remedy the Default(s), you are required to pay the Arrears due under the Credit Contract(s) to the Lender within 31 days of receipt of this notice* ( Grace Period) . 3. If you do not remedy all the Default(s) within the Grace Period, or if a default of the same type as specified in this notice occurs during the Grace Period, then, in respect of the Credit Contract(s) for which Arrears remain unpaid: 3.1 The Total Amount Outstanding plus Lender's costs and charges will automatically be due and payable and the Lender may commence proceedings for the Total Amount Outstanding; and 3.2 In respect of the Property securing that Credit Contract, the Lender proposes to: commence proceedings for or otherwise take possession of the Property exercise power of sale in respect to the Property 3.3 The Lender may take such other action under the Credit Contract(s) and the Mortgage(s) as it sees fit. 4. The Lender also requires you to pay the sum of $411.13 within the Grace Period being the costs of issuing this notice ( Enforcement Expenses) . How to Pay You can pay the Arrears and the Enforcement Expenses by sending payment to the Lender at level 10, 101 Collins Street, Melbourne, VIC 3000 to the attention of Ray Grech, who can be contacted on 03 8616 1295, alternatively payment can be made by Bpay, Biller Code 31336, customer ref no. 1994938 (for account no. MN330566001181012551) and customer ref no 1994946 (for account no. MN330566001181019401). DATED: 29 January 2009" 9Ms Monas failed to remedy the defaults identified in the default notice on or before 7 March 2009, being 31 days after 4 February 2009. Subject to the s80 question, it is PTVL's case that on 8 March 2009 it became entitled to possession of the land under the mortgage and to commence proceedings for possession under s60(c) of the Real Property Act 1900. On 1 April 2009 PTVL commenced these proceedings by statement of claim. 10Payments under the loan agreement remained in arrears until approximately 10 November 2009 when they were brought up to date by Ms Monas. Thereafter, until the date of the hearing, her payments under the loan agreement have from time to time been in arrears. However, as at the date of the hearing the payments required to be made by Ms Monas under the loan agreement were up to date and there were no arrears. Such was expressly stated at the hearing by counsel for PTVL. 11Ms Monas filed defences on 14 May 2009, 19 October 2009 and 22 March 2010. The issue concerning the default notice and its asserted failure to comply with s80 of the Code was first pleaded in a further amended defence filed on 4 June 2010. All of the other matters previously raised in her defences, including unjust contract claims, explanations as to why she was not in default and claims for relief on the grounds of hardship have either been abandoned or determined against her. 12PTVL relied upon affidavit material to establish it case. No evidence was adduced by Ms Monas. Submissions The Default Notice 13Ms Monas submits that the default notice does not comply with s80 of the Code. In order to understand the submission, it is necessary to set out s80: "80(1) Enforcement of credit contract. A credit provider must not begin enforcement proceedings against a debtor in relation to a credit contract unless the debtor is in default under the credit contract and - (a) the credit provider has given the debtor, and any guarantor, a default notice, complying with this section, allowing the debtor a period of at least 30 days from the date of the notice to remedy the default; and (b) the default has not been remedied within that period. Maximum penalty-50 penalty units. (2) Enforcement of mortgage. A credit provider must not begin enforcement proceedings against a mortgagor to recover payment of money due or take possession of, sell, appoint a receiver for or foreclose in relation to property subject to a mortgage, unless the mortgagor is in default under the mortgage and - (a) the credit provider has given the mortgagor a default notice, complying with this section, allowing the mortgagor a period of at least 30 days from the date of the notice to remedy the default; and (b) the default has not been remedied within that period. Maximum penalty-50 penalty units. (3) Default notice requirements. A default notice must specify the default and the action necessary to remedy it and that a subsequent default of the same kind that occurs during the period specified in the default notice for remedying the original default may be the subject of enforcement proceedings without further notice if it is not remedied within the period. (3A) Combined notices . Default notices that may be given under subsections (1) and (2) may be combined in one document if given to a person who is both a debtor and a mortgagor. (4) When default notice not required. A credit provider is not required to give a default notice or to wait until the period specified in the default notice has elapsed, before beginning enforcement proceedings, if - (a) the credit provider believes on reasonable grounds that it was induced by fraud on the part of the debtor or mortgagor to enter into the credit contract or mortgage; or (b) the credit provider has made reasonable attempts to locate the debtor or mortgagor but without success; or (c) the Court authorises the credit provider to begin the enforcement proceedings; or (d) the credit provider believes on reasonable grounds that the debtor or mortgagor has removed or disposed of mortgaged goods under a mortgage related to the credit contract or under the mortgage concerned, or intends to remove or dispose of mortgaged goods, without the credit provider's permission or that urgent action is necessary to protect the mortgaged property. (5) Non-remedial default. If the credit provider believes on reasonable grounds that a default is not capable of being remedied - (a) the default notice need only specify the default; and (b) the credit provider may begin the enforcement proceedings after the period of 30 days from the date of the notice. (6) Other law about mortgages not affected. This section is in addition to any provision of any other law relating to the enforcement of real property or other mortgages and does not prevent the issue of notices to defaulting mortgagors under other legislation. Nothing in this section prevents a notice to a defaulting mortgagor under other legislation being issued at the same time, or in the same document, as the default notice under this section. Note: By virtue of section 161(2), a notice may contain information required to be given under other legislation or be included in a notice given under other legislation." 14Ms Monas submits that the default notice served by PTVL on the defendant failed to comply with the requirements of s80(3) of the Code in that it omitted to inform the defendant that: (a) if a default of the same kind occurred within the period of the notice and that default was not remedied within the period of the notice; (b) proceedings could be commenced without further notice. 15Ms Monas submits that the consequence of PTVL's failure to give her a notice complying with s80(3), means that the commencement of these proceedings was barred by the operation of s80(2) of the Code. She submits that new proceedings cannot be brought against her until such a notice is served. In this case it is not possible for PTVL to serve a new notice since the defaults upon which it relied in the original notice have now been remedied. She submits that since there are no present defaults, there is no basis for any further proceedings to be brought against her by PTVL. 16Ms Monas submits that this result follows from Graham v Aluma Lite Pty Ltd (1996) 39 NSWLR 58, Permanent Mortgages Pty Ltd v Cook [2006] NSWSC 1104 (Patten AJ), Benjamin v Ashikian [2007] NSWSC 735 (Smart AJ). Ms Monas submits that to the extent that Bank of Queensland Ltd v Dutta [2010] NSWSC 574 (Davies J) decided the contrary, it was wrongly decided. 17In relation to the form of the default notice, Ms Monas submits that the requirements of s80(3) were clear and were mandatory. She submits that under the Code a notice was to provide three pieces of information: (i) The default. (ii) The action necessary to remedy the default. (iii) A subsequent default of the same kind which occurred during the period specified in the default notice for remedying the original default could be the subject of enforcement proceedings without further notice if it was not remedied within the period. Ms Monas submits that it is in relation to this third requirement that the default notice was defective in that it did not mention that if the further default was not remedied within the period of notice, proceedings might be commenced in relation to that default without further notice. Ms Monas submits that because the requirements of s80(3) were mandatory, a failure to comply with them activated s80(2) of the Code. 18Ms Monas submits that the word "must" gave s80(3) its mandatory quality. In that regard she relies upon s14 of Part 3 of Schedule 2 of the Code which provided: "14(2) In this Code, the word must, or a similar word or expression, used in relation to a power indicates that the power is required to be exercised." 19Ms Monas relies upon s8 of Part 2 of Schedule 2 of the Code which refers to the use of extrinsic material in certain circumstances to interpret the Code. In that regard she calls in aid the Objectives of the Bill set out in its Explanatory Notes as follows: "The legislation is based on the principle of truth-in-lending which will allow borrowers to make informed choices when purchasing credit. The Bill applies rules which regulate the credit provider's conduct throughout the life of a loan, but without restricting product flexibility and consumer choice. The policy of the legislation is to rely generally on competitive forces to provide price restraint but to provide significant redress mechanisms for borrowers in the event that credit providers fail to comply with the legislation." 20Ms Monas also relies upon the following extract from the Second Reading Speech: "They are aware of the major drawbacks of the existing law, and they are also aware of the important role that consumer credit laws play not only in enhancing and channelling product development but also in ensuring basic consumer protection, which is fundamental to this exercise. The Bill attempts to achieve the dual goal of ensuring that strong consumer protection remains a cornerstone of the exercise, but at the same time recognises that competition and product innovation must be enhanced and encouraged by the development of non-prescriptive flexible laws." 21Ms Monas submits that the words referred to in s80(3) of the Code, but which were omitted from the default notice served by PTVL, play an important part in such a notice. The words "without further notice" provide emphasis for a consumer to the effect that there will be no further notices. The words "and that default is not remedied within the period of the notice" make it clear to the consumer that in respect of a further default, there remains a period during which that default can also be remedied if the consumer wishes to avoid the consequences of the default notice. Ms Monas submits that in the context of consumer protection legislation of this kind, all of the requirements of the default notice specified in s80(3) have to be included and a failure to do so meant that the required notice had not been given to the mortgagor as required by s80(2). 22In the course of submissions, counsel for Ms Monas adopted the proposition that s80(3) of the Code required strict compliance with its terms. Accordingly, even if a typographical error occurred such as the omission of the word "further" from the phrase "without further notice", this would be sufficient for a failure of the notice to comply with s80(3). 23I do not agree. I am of the opinion that the approach to the construction of s80(3) of the Code suggested by Ms Monas is unnecessarily rigid and illegitimately requires additional words of expansion being read into the provision. I am of the opinion that in order to comply with the requirements of s80, a default notice needs to provide the information set out in s80(3) but does not have to use the exact words of the section. It may have been prudent to use the exact words of the section, but a failure to do so is not determinative of whether a default notice complies with its requirements. 24Apart from the wording of s80, there is support elsewhere in the Code for such an approach. Section 161 of the Code provided that regulations might prescribe the form of any notices required or authorised to be given under the Code and might require such notices to contain specified information. No such regulations were made in respect of s80. Section 11 of Part 2 of Schedule 2 of the Code referred to "compliance with forms". It provided: "11(1) If a form is prescribed or approved by or for the purpose of this Code, strict compliance with the form is not necessary and substantial compliance is sufficient." 25The very fact that no form has been prescribed in respect of a s80 notice, suggests that a substantive rather than a restrictive approach should be adopted to its contents. Where the legislature has not seen fit to draft a form of words for use in a s80(3) notice, the Court should not perform that function unless the section clearly requires it. 26In order to determine whether the default notice complied with s80 of the Code, the purpose of s80 needs to be considered as well as whether the default notice satisfies that purpose. When construing another provision of the Code, the High Court in Australian Finance Direct v Director of Consumer Affairs Victoria [2007] HCA 57, (2007) 234 CLR 96 at [19] looked at the purpose of the particular provision under consideration rather than the general purpose of the Code. In that regard the purpose of s80 has been described in Flood v Police Department Employees' Credit Union (1999) ASC 155-028 (Commercial Tribunal of NSW) as "to give debtors a last opportunity prior to commencement of proceedings to get their account in order" and in Benjamin v Ashikian at [88] as "to give the debtor or mortgagor an extra period of at least 30 days within which to remedy the default". I am of the opinion that such descriptions accurately summarise the purpose of s80. 27An overly strict and technical construction of s80 does not advance its purpose. Otherwise the smallest mistake by a credit provider in a default notice could cause a multiplicity of litigation, increased costs and extensive delay. Such a result would benefit neither debtors nor mortgagors. In particular delaying enforcement for a debtor who cannot pay instalments, will often reduce the debtor's equity in the security property by the accumulation of interest and extra costs. 28I have concluded that the default notice in these proceedings substantially complied with the requirements of subs 80(3) of the Code. The relevant part of the notice is as follows: "3. If you do not remedy all the Default(s) within the Grace Period, or if a default of the same type as specified in this notice occurs during the Grace Period, then, in respect of the Credit Contract(s) for which Arrears remain unpaid: 3.1 The Total Amount Outstanding plus Lender's costs and charges will automatically be due and payable and the Lender may commence proceedings for the Total Amount Outstanding; and ..." Put in simple terms, what is there being said is: "Put your account in order by the end of the Grace period or we are going to take action against you. This extends not only to defaults as defined and identified in the notice but also any default of the same kind which remains outstanding at the end of the period." 29The failure to use the words "without further notice" does not affect the clear message of the notice. Those words (as was conceded in argument) provided emphasis. They do not add to the meaning of the notice. Nowhere in the notice was there any suggestion that further time would be allowed or that further notice would be given. On the contrary, the fact that the default notice was issued by the solicitors for PTVL reinforced that enforcement action was imminent following the expiration of the Grace Period. 30There was nothing misleading in the default notice. On the contrary, the message was clear. The notice gave Ms Monas a last opportunity to get her account in order before action was taken against her. There was no room for construing the notice so that Ms Monas could expect further notice before proceedings commenced if she defaulted again in the same way in the period described by the notice. This is particularly so since s80 of the Code was expressly referred to in the notice. 31The contrast between the words "the Arrears" and "Arrears" as they appeared in paragraphs numbered 2 and 3 of the notice was important. The words "the Arrears" in paragraph 2 referred to the specified arrears identified in the Credit Contract Status Schedule, whereas the word "Arrears" in paragraph 3 picked up all arrears including a default of the same type as specified in the notice which occurred during the Grace Period. Such a reading of the notice which gives a logical and natural meaning to the words used, conveyed the information required by s80(3) of the Code with appropriate clarity and precision and fulfilled its statutory purpose. Clearly a default during the Grace Period would be arrears unpaid at the end of the period which was what paragraph 3 related to. What was being said to the borrower was - make sure you have no arrears that are unpaid at the end of the Grace Period. 32An overly strict interpretation of s80 could produce somewhat strange results if the default relied upon was not a monetary default but was a breach of the covenant to keep improvements in good repair. If it were sought to serve a default notice in those circumstances and the lender did not specify exactly what needed to be done to fix the improvements, some very nice but ultimately unprofitable questions could arise about whether enough information had been given so that the notice complied with subs 80(3) of the Code. 33It follows from the above analysis that the defence of Ms Monas to the effect that PTVL failed to serve a default notice, which complied with subs80(2) of the Code has not been made out. That finding is sufficient to conclude the matter. In case I am wrong in that finding, and in deference to the detailed submissions which have been put by the parties, I propose to deal with the submissions relating to the effect of s80 on the claim of PTVL if the default notice had not complied with subs 80(2). Effect of non-service of a notice under section 80(2) of the Code 34Ms Monas submits that if the default notice did not comply with s80(2) of the Code, the Court must dismiss the proceedings. She submits that this follows from the clear words of s80(2). In that regard she relies upon the observations of Smart AJ in Benjamin v Ashikian where his Honour said: "88 One of the major difficulties which the plaintiffs face is that both s 80(1) and s 80(2) provide that a credit provider must not begin enforcement proceedings unless the debtor or mortgagor is in default, and the credit provider has given the debtor or mortgagor a 30 day default notice and the default has not been remedied. One of the purposes of the default notice is to give the debtor or mortgagor an extra period of at least 30 days within which to remedy the default. This may involve the debtor or mortgagor re-oganising his or her financial affairs. The prohibition on commencing proceedings is absolute in its terms. ..." 35In addition, Ms Monas submits that this Court is required to follow Graham v Aluma Lite Pty Ltd as Patten AJ held in Permanent Mortgage Pty Ltd v Cook. In Cook, Patten AJ said: "69 Although there are obvious differences between the Code and the Credit (Home Finance Contracts) Act , there is such a degree of similarity that, in my opinion, I should regard myself as bound by, and obliged to follow, the reasoning of the Court of Appeal in Graham v Aluma Lite . The consequence of so holding is that the earlier proceedings are susceptible to an order that they be summarily dismissed as sought by the Defendants." 36In order to appreciate that submission, it is necessary to examine more closely what the Court of Appeal said in Graham v Aluma Lite. The statutory provision there under consideration was s7 of the Credit (Home Finance Contracts) Act 1984 (the 1984 Act). It relevantly provided: "7(1) A credit provider under a home finance contract shall not institute proceedings, or exercise a right, under the contract, or a mortgage or guarantee that relates to the contract (being proceedings that may be instituted, or a right that may be exercised, as a consequence of a default under the contract) until after the expiration of one month after service in accordance with subsection (2) of a notice in the prescribed form that specifies the proceedings or right. ... (3) Where a credit provider fails to comply with subsection (1), a Court or the Tribunal may, on the application of the debtor, order the credit provider to compensate the debtor for any loss suffered by the debtor as a result of that failure. (4) Where there is a mortgage relating to a home finance contract and the provisions of any other Act require the mortgagee to give notice to the mortgagor before instituting proceedings, or exercising a right, under the contract or mortgage: (a) Nothing in this Act derogates from the requirement to give the notice under the other Act, and (b) A notice required by this Act to be given before the proceedings are instituted, or the right exercise, does not fail to comply with this Act by reason only that it includes matter required to be specified in a notice required by the other Act to be given before the proceedings are instituted or the right exercised." 37In Graham no notice was sent by the credit provider. The leading judgments were given by Clarke JA and Cole JA. Priestley JA, the third member of the Court, said: "For the reasons given by Clarke JA and Cole JA, the default judgment entered against the appellant should in my opinion be set aside." Accordingly, Priestley JA expressed no preference for the reasoning of either Clarke JA or Cole JA. 38The approach of Clarke JA is conveniently set out at P65E-66C of the judgment as follows: "A conclusion that a credit provider could maintain proceedings despite a failure to comply with s 7 is, as it seems to me, inimical to the scheme of the Act. It means, or could mean, that a credit provider could press on to judgment, or a sale of a property under a power of sale in a mortgage, and in that way deprive a debtor, who has no defence to the action, of the practical benefit of the s 5 procedures. I accept that in certain circumstances subs (9) may afford a measure of protection to a debtor who had sought to take advantage of the s 5 procedures after receiving a writ, or upon becoming aware that a power of sale was being exercised, but whether that subsection was to be of any practical assistance to the debtor would depend upon whether the matter had been referred to the tribunal before, for instance, a power of sale had been exercised or a judgment for possession entered. Those considerations provide a strong basis for reaching a different conclusion to his Honour. There are additional considerations, including one, which I regard as very strong indeed, which reinforce me in my view that his Honour was incorrect. The first of these is that s 7 expressly prohibits the taking of proceedings or the exercising of rights in the absence of the service of a notice upon payment of a penalty. A breach of the section is, prima facie, an unlawful act. It is true that s 22 provides a defence in which the onus lies on the credit provider to prove that it did not know that, had no reason to believe that and had made reasonable inquiries as to whether, the contract to which the proceedings related was a home finance contract. But this does not detract from the proposition that, prima facie, the proceedings were unlawfully instituted. Nor does that defence, which is only available in proceedings against the credit provider, detract from the proposition that in terms the requirement laid down in s 7 operates as a condition precedent to the exercising of a right or the instituting of proceedings." 39Cole JA was less certain of the consequences of a failure to comply with s7. His Honour characterised the question for consideration as "the effect to be given to the doing of an act permitted by the general law but prohibited by s 7, namely, the institution of proceedings" (p 69D). His Honour was troubled by the fact that in relation to s7, the legislature had prescribed explicitly two consequences of the doing of a prohibited act, namely the imposition of a penalty and liability in damages. It had not expressly specified any other consequences of a failure to comply with s7. 40Cole JA expressed his reservation as follows: "These legislative consequences of proscribed acts being to the mind of the legislature mitigate against a court, by construction of the statute, holding proceedings otherwise validly commenced but contrary to the statutory provisions of s 7 of the Credit (Home Finance Contracts) Act or s 107(2) and s 108 of the Credit Act , and perhaps s 5(9), s 6(8) of the Credit (Home Finance Contracts) Act and s 139(9) of the Credit Act , ineffective in the sense that if non-compliance with those sections be established either such proceedings may be stayed by a court, or alternatively that established breach of those sections constitutes a good defence to the action on the mortgage or contract. This view of the sections is grounded on the omission by the legislature to simply state that established breach of s 7 or s 107 concerning notice constitutes a defence, or renders the action liable to be stayed or struck out. It is supported by the view that as the legislature has specified, in terms, that acts contrary to the prohibition contained in s 7 and s 107 will attract both penalties and damages, but not that actions commenced or rights enforced contrary to the prohibitions are rendered ineffective, such a consequence is not to be inferred or held as a matter of construction." (p75E) 41Ultimately his Honour declined to follow that approach. The basis for so doing was that the 1984 Act was one of a package of Acts regulating the rights and liabilities of lenders. By reference to similar provisions in those Acts, which he regarded as cognate Acts, Cole JA "not without considerable hesitation" concluded that "proceedings commenced contrary to s7 are ineffective in the sense that, at the least, it is a satisfactory defence to a claim for possession contained in a writ that the provisions have not been complied with." (p77A) 42In making those submissions Ms Monas was conscious of the fact that a recent decision of Davies J in Bank of Queensland Ltd v Dutta was to contrary effect. Ms Monas submitted that on this issue, Dutta was wrongly decided. In that regard Schmidt J in CKM (Mortgages) Limited v Burtenshaw [2010] NSWSC 1044 at [32] noted that she found the reasoning of Davies J in Dutta to be compelling. That remark by her Honour was, of course, obiter. 43Ms Monas challenges the following aspects of the reasoning in Dutta. She submits that the differences between s7 of the 1984 Act and the Code to which Davies J referred are largely illusory. Accordingly, she submits the reasoning in Graham v Aluma Lite is equally applicable to the Code and should be followed. 44She specifically challenges the approach of Davies J to the meaning of s80(4)(c) of the Code. That subsection provides: "80(4) The credit provider is not required to give a default notice or to wait until the period specified in the default notice has elapsed, before beginning enforcement proceedings, if - ... (c) The Court authorises the credit provider to begin the enforcement proceedings; ..." Davies J found that pursuant to that subsection, the Court had power to make an order nunc pro tunc in respect of the commencement of proceedings even if s80(2) had not been complied with. 45Ms Monas submits that the wording of the subsection does not allow such an interpretation. In particular she refers to the use of the phrase "begin the enforcement proceedings" in subs (c) which she submits envisages an approach to the Court before proceedings have been commenced, rather than an approach to the Court after proceedings have been commenced seeking to have those proceedings ratified. 46Ms Monas relies upon In the matter of Re: Prescott, a Practitioner and the Legal Practitioners Act 1981 (2009) 265 LSJS 465; [2009] SASC 312. On the basis of that decision, Ms Monas submits that s80(4)(c) could not have application nunc pro tunc because of the criminal and damages penalties provided for under the Code. Ms Monas submits that the granting of leave nunc pro tunc would involve the forgiving of illegal conduct and would potentially deprive a mortgagor of his or her right to compensation. Ms Monas submits that such consequences are a powerful indicator that this is an incorrect construction of the subsection. 47Ms Monas criticises his Honour's reliance upon s170 of the Code as distinguishing the Code from s7 of the 1984 Act. Section 170 relevantly provided: "170(1) A credit contract, mortgage or guarantee or any other contract is not illegal, void or unenforceable because of a contravention of this Code unless this Code contains an express provision to that effect. (2) Except as provided by this section, this Code does not derogate from rights and remedies that exist apart from this Code." 48Ms Monas submits that s170 is irrelevant to the question. She submits that the consequence of a breach of s80(2) is not to render the mortgage or contract unenforceable - rather a breach of s80(2) simply requires the unlawfully commenced proceeding to be dismissed and the credit provider to commence a fresh proceeding to enforce the contract or mortgage once there has been compliance with s80. 49In summary, Ms Monas submits that given the overall purpose of the Code, any interpretation of it that permits the Court to allow a credit provider to avoid the consequences of its unlawful conduct and which in effect retrospectively makes lawful conduct which was unlawful at the time it occurred, should be avoided. She submits that such an interpretation which allows the altering of the substantive rights of the borrower cannot be correct particularly in the absence of clear statutory language which permits the Court to do so. If those propositions are accepted she submits that the decision in Graham requires that these proceedings be dismissed. 50I do not accept the submissions of Ms Monas. In my opinion, Dutta was correctly decided and s80 of the Code does not require that proceedings commenced in breach of s80(2) be dismissed. 51As a start point the Code does not form part of a set of cognate Acts which enable provisions in one Act to be interpreted by reference to provisions in another. That being so, if one applied the reasoning of Cole JA in Graham to s80 of the Code, he would have reached the same result as did Davies J in Dutta . 52Moreover there must now be some doubt as to the correctness of the approach by Clarke JA when he characterised compliance with the requirements of s7 of the 1984 Act as a condition precedent to the institution of proceedings. The approach of the plurality in Berowra Holdings Pty Ltd v Gordon [2006] HCA 32, (2006) 225 CLR 364 to a similar question was different. 53The High Court was there considering s151C of the Workers Compensation Act 1987 (NSW). That section stipulated a six month delay before the commencement of court proceedings against an employer for damages. The wording of s151C was: "151C(1) A person to whom compensation is payable under this Act is not entitled to commence court proceedings for damages in respect of the injury concerned against the employer liable to pay that compensation until six months have elapsed since notice of the injury was given to the employer ..." 54In relation to that section their Honours said: "33 Section 1 5 1C should not be read as if the entitlement of a plaintiff to commence court proceedings after the passage of six months from the giving to the employer of notice of the injury was a pre-condition to the jurisdiction conferred upon the court to determine claims for work injury damages. The considerations adverted to earlier in these reasons all point against the employer's construction of s 15 1 C. 34 The better view is that the provision does not inevitably result in the invalidity of proceedings commenced in contravention of it, either for want of the court's jurisdiction or because the court has no jurisdiction except to accede to a defendant's application (whenever brought) to set aside the proceedings and to do so without regard to the procedural history and the relevant Rules of Court. 35 The construction advanced by counsel for the worker should be accepted. Section 151C does not extinguish rights or create new rights. Rather, it postpones the remedy for the common law right to initiate proceedings in a court of competent jurisdiction. The "right" which s 151C does confer is conferred upon the defendant employer and must be raised in accordance with the procedural rules appurtenant to the particular court. 36 Proceedings commenced by a worker in contravention of s 151C engage the jurisdiction and procedural rules of the court in question. Such proceedings are vulnerable to an application by the defendant to strike out the initiating process or to move for summary dismissal, but they are not a "nullity". Once a plaintiff has commenced proceedings, s 151C must be understood in connection with the procedural structure for the conduct of litigation in that court, not in isolation from it. This is not to subjugate the statute to the Rules, but to recognise that the subject-matter with which the statute deals is "rights" in the context of actual or apprehended litigation, and to understand the function of the Rules of Court and procedural law in facilitating adjudication of disputed claims." 55There are other reasons why the decision in Graham should not be applied to s80 of the Code. As Davies J appreciated in Dutta , there are significant differences between the Code and the 1984 Act. 56Section 7 of the 1984 Act not only provided time within which a mortgagor could reorganise his or her affairs or pay the demand, it provided for the exercise of other rights. Cole JA referred to some of these at p73F of Graham where he said: "As the minister made clear, the purpose of the notice contemplated by s 7(1) is to give a debtor an opportunity to remedy default or to exercise rights conferred by the Act. Those rights include the opportunity pursuant to s 5 to seek to re-negotiate periodic commitments by extension of the term of the loan and reduction of periodical payments, by postponement of payments or by extension of the term of the contract of loan and postponement of payments. Pursuant to s 5 if any of those arrangements cannot be achieved by agreement with the mortgagor, the Commissioner for Consumer Affairs may, after application by the debtor, seek to intervene to re-negotiate the terms of the home finance contract (subs (3)), or if that be not possible, the matter may be referred to the Commercial Tribunal of New South Wales which might make an order varying the contract within the terms provided by s 5(4). Notably, s 5(9) provides that if agreement cannot be reached pursuant to s 5(3), "the credit provider shall not institute proceedings, or exercise a right, under the contract, or a mortgage or contract of guarantee that relates to the contract, before the Tribunal has made or refused an order under subsection (4)"." 57While there are hardship provisions and the like in the Code, the trigger for their operation is quite different and there is no interrelation with s80 as there was between similar provisions and s7 of the 1984 Act. In essence, s80 is concerned only with enforcement proceedings whereas s7 of the 1984 Act was also concerned with exercising rights under the contract, mortgage or guarantee and also other rights such as those Cole JA referred to. 58Two other differences were specifically referred to by Davies J in Dutta [152]. His Honour pointed out that there was no equivalent in s7 of the 1984 Act of s80(4). Section 7 of the 1984 Act made no mention of circumstances where proceedings could be commenced without a default notice. 59Another difference identified by Davies J was that there was no equivalent of s170 of the Code in the 1984 Act. It is not quite clear how his Honour used that difference in Dutta . It seems to me, however, that its presence in the Code and absence from the 1984 Act has two consequences. The first is that it is a clear statement in terms that breaches of the Code have their stated consequences and that further consequences are not to be implied in respect of the rights of the parties under the relevant credit contract or mortgage. The second is that there is no practical difference between not being able to begin enforcement action in relation to a mortgage and making the mortgage unenforceable. 60Other points of distinction between the Code and the 1984 Act are that s80 of the Code does not confer jurisdiction for the bringing of the proceedings. It is essentially a procedural provision. The same cannot be said of s7 of the 1984 Act for the reasons already identified. 61Finally, included in the circumstances where a default notice is not required under s80(4) is a provision for authorisation by the Court in s80(4)(c). Leaving aside for the moment the question of whether that power can be exercised nunc pro tunc, there is no provision in the 1984 Act for any authorisation by a Court of the commencement of proceedings. 62It follows that I agree with the conclusion of Davies J in Dutta where his Honour said: "153 In my opinion, the differences between the Code and the 1984 Act have the result that the decision in Graham does not dictate the outcome of a failure to serve a notice under s 80 of the Code." 63As a result the application of s80 has to be determined not by reference to the 1984 Act, or by the decision in Graham , but by reference to its own terms. 64When one focuses on s80 and the part it plays in the Code, the approach of Cole JA in Graham remains valid. Section 80 in terms provides for a criminal sanction in the case of breach. Section 114 of the Code allows the Court to order the credit provider to make restitution or pay compensation to any person affected by a contravention of the Code in cases where no civil consequence is specifically provided for. These legislative consequences strongly tend against an interpretation which would impose further consequences for breach which have not been expressly provided for. This is particularly so if it is accepted (as it must be following Berowra Holdings Pty Limited v Gordon ) that s80 does not create rights as between the credit provider and a mortgagor, and does not confer jurisdiction to bring proceedings. 65In Dutta Davies J concluded that as a matter of construction s80 imposed a procedural condition upon the exercise of the jurisdiction to commence proceedings. As a result he found that, in accordance with Berowra Holdings Pty Limited v Gordon, non-compliance with s80 did not require the proceedings to be dismissed on every occasion. His Honour set out his reasoning at [142] - [147]. 66An important part of his Honour's reasoning was directed to situations where there might be a genuine dispute about whether a loan had been provided wholly or predominantly for personal, domestic or household purposes and that issue had been determined against the credit provider in such a way that the Code was held to apply. Another situation adverted to by his Honour was that contemplated by s80(4) where a credit provider believed certain things on reasonable grounds but after a full hearing it might ultimately be held that there were no reasonable grounds for such a belief or that reasonable attempts had not been made to locate a borrower. His Honour observed that in circumstances where no defences under the Code were raised by the borrower, it could not have been the intention of the legislature that the credit provider was obliged to serve a s80 notice and then commence new proceedings which in many cases would traverse the same material already dealt with. 67As Davies J appreciated this is an important consideration in modern litigation. It cannot be assumed that such issues would be decided as a separate question. What his Honour clearly had in mind was contested proceedings for possession, which included as one of the issues whether the Code applied to the credit transaction, or whether in accordance with s80(4) the credit provider was entitled to commence proceedings without a default notice. On the interpretation of s80 submitted by Ms Monas if one of those issues were decided against the credit provider in the judgment, a s80 notice would have to issue and the entire proceedings heard again. 68As his Honour pointed out [143], [154] an interpretation which produces such consequences could not have been in the mind of the legislature. This is particularly so in view of the current emphasis on efficiency and cost saving in litigation. 69In addition to those matters, Davies J took into account s170 of the Code (the effect of which has already been discussed) and that the authorization power given to the Court by s80(4)(c) could be exercised nunc pro tunc [145] - [146]. 70The question of whether the s80(4)(c) authorization power could be exercised nunc pro tunc is an important one. If that is a correct interpretation, it is a strong, if not decisive, argument in favour of interpreting s80 as a procedural provision. No doubt this accounts for why his Honour's interpretation was so vigorously attacked by Ms Monas. 71As a start point, I do not see anything in the wording of s80(4)(c) which supports one interpretation more than the other. The chapeau to s80(4) would have supported the interpretation of Ms Monas had the word "If" been placed before the words "before beginning enforcement proceedings". This was not done which, at the very least, is consistent with a wider interpretation. 72Similarly, the use of the word "begin" in s80(4)(c) is not decisive. Its use encompasses the concept not only of continuing extant proceedings but the commencement of proceedings. 73As a further aid to interpretation, it is difficult to see what work s80(4)(c) would have to do, if it could not have application nunc pro tunc. The matters raised in (a), (b) and (d) of the section are comprehensive in covering situations likely to be encountered by a credit provider which would justify the commencement of proceedings without a default notice. 74The fact that the authorization of a credit provider to bring proceedings nunc pro tunc might cut across the penal provisions of s80 and the compensation provision in s114 is not decisive. Those are matters which would be relevant to the exercise of the discretion by the Court to grant such authorisation nunc pro tunc but of themselves do not suggest that the alternative interpretation is correct. Insofar as compensation is concerned, this could be dealt with by way of a court imposed condition if the court felt that there was an entitlement to compensation which might be lost. 75The reasoning in Prescott is not inconsistent with s80(4)(c) having a nunc pro tunc application. That case concerned s33 of the South Australian Legal Practitioners Act. That section required a legal practitioner to have accounts and records audited and a copy of the auditor's report provided to the Supreme Court "on or before 31 October in that year or such later date as the Supreme Court may allow". The question before Bleby J was whether the Court had power to extend time after a late audit report had been submitted or in the alternative, whether the Court had power to make such an order nunc pro tunc. 76Considerations which led to the Court refusing to make an order nunc pro tunc were outlined by his Honour at [20]: "In either case there would have been a period from 31 October to the date of the order when an offence had been committed under s33(1). There would also have been a period from 31 October to the date of submitting the report during which the practitioner's practising certificate will be taken to have been suspended. This would result, if the practitioner continues to practise, in possible offences being committed against s21(1), 22 and/or 23 of the Act. There may also, depending on the terms of the scheme, be a lack of professional indemnity insurance in respect of the practitioner under a scheme of insurance adopted under s52. It may also precipitate a charge of unprofessional conduct as happened in this case, brought under s82 of the Act. The rights of third parties may also be affected by the practitioner's inability to enforce recovery of fees for work done or billed during the period, as well as possible exposure of the practitioner to an action for misleading and deceptive conduct under the Trade Practices Act 1974 Commonwealth or the Fair Trading Act 1987 (SA). The consequences of the deemed suspension of the practising certificate may, therefore, be quite extensive." 77In analysing the circumstances when a nunc pro tunc order could be made, his Honour said: "36 ... It will also be used where the Court is intervening to correct a slip, error or procedural defect in a process that is proscribed by statute, but only where the statute, by its own language, clearly authorizes it. In that case the power will be circumscribed by the construction of the statutory provisions in their context, and having regard to the purpose which the relevant provision is intended to serve." 78That statement of his Honour needs to be read against the background of observations by the majority of the High Court in Emanuele v Australian Securities Commission (1997) 188 CLR 114 at [157] where Kirby J said: "The requirement of the Court's leave is there for the superintendence of the proceedings by the Court. At least in the case of a superior court of record such as the Federal Court, it is available, retrospectively to sanction the Court's own proceedings. The missing ingredient was a step by the Court itself which, if justice required it, could, exceptionally be ordered retrospectively by a nunc pro tunc order. The power to so order was not excluded by the express provisions of the law." 79The basis for the decision of Bleby J illustrates the significant difference between the matters under consideration by him and the provisions of s80 of the Code: "54 To make an order nunc pro tunc in these proceedings would not be to cure a procedural defect. It would not be acting in the course of the Court's acknowledged jurisdiction. The practitioner invoked jurisdiction for the purpose of making an order nunc pro tunc having the effect of affecting his obligations and responsibility and his client's rights. It was not a procedural order being sought but a substantive one. He was asking the Court to cure a fundamental irregularity." 80A further point of distinction between Prescott and the matter under consideration here is that the legislation in Prescott was concerned with an extension of time, not with the commencement of proceedings. The Courts have tended towards a nunc pro tunc authorisation being available with respect to provisions concerning the commencement of proceedings, e.g. s471B of the Corporations Act 2001 and s58(3)(b) of the Bankruptcy Act 1966. 81There is another consideration which supports s80(4)(c) having a nunc pro tunc application. There is ample scope in s80 for mistakes to be made by a credit provider in commencing enforcement proceedings. This supports the subsection's role as a mechanism by which the Court can regulate the impact of s80 on enforcement proceedings. Examples include mistakenly thinking that the Code does not apply (e.g. by reason of being misinformed about the purpose of the loan or because of an undetected error in a declaration under s11(2)), mistakenly thinking a valid s80 notice has been served, mistakenly thinking a default is not capable of being remedied, mistakenly thinking it had a reasonable belief as to the matters in s80(4)(a) or (d) or mistakenly thinking its attempts to locate the debtor or mortgagor were reasonable. 82I have concluded that the conclusions of Davies J in Dutta are correct and that proceedings commenced in breach of s80(2) of the Code involve at worst an irregularity. It follows from that conclusion that I decline to follow the decisions in Benjamin v Ashikian and Permanent Mortgages v Cook. I also agree with Davies J that the authorization by the Court provided for by s80(4)(c) can be exercised nunc pro tunc. 83The next question is whether on the facts of this case, if I am wrong in my conclusion as to whether or not there was a breach of s80(2) of the Code, the Court should exercise its discretion in favour of PTVL and allow the proceedings to continue despite the procedural irregularity. 84I have concluded that the discretion should be exercised in favour of PTVL. I have reached that conclusion for the following reasons. PTVL did not ignore the provisions of s80(2) of the Code but made a genuine attempt to comply with them. There is no evidence that Ms Monas was disadvantaged in any way by the form of the default notice. On the contrary, this point was not taken promptly but was first pleaded on 4 June 2010 (in the fourth defence filed on behalf of Ms Monas). 85Ms Monas has no defence to PTVL's claim other than s80 of the Code, all other matters raised by her have been either abandoned or decided against her. There is no basis for any claim for compensation by Ms Monas. The fact that her loan is no longer in arrears does not alter that conclusion as to the exercise of my discretion. The current state of her loan is a matter which the Court can take into account when making final orders. 86If I am wrong in my approach to the proper construction of s80, I would authorise PTVL nunc pro tunc to bring the present proceedings for those same reasons. 87Since these proceedings were commenced, the National Credit Code (Comm) has come into effect. Clause 2 of Part 2 of Schedule 1 of the National Consumer Credit Protection (Transition and Consequential Provisions) Act 2009 (Comm) sets out as its object that the status quo be maintained in the transition from the State Code to the National Credit Code. Under s4(2) of the National Consumer Credit Protection (Transition and Consequential Provisions) Act these proceedings are taken to be proceedings under the National Credit Code. As such were it necessary to do so in order to make the orders sought by PTVL, it would be necessary to apply s88(5)(c) of the National Credit Code. Were that step necessary I see no difficulty in applying those transitional provisions in such a way. In view of my finding as to compliance with s80(2) of the Code, however, it is not necessary to examine the National Credit Code and the transitional provisions any further. 88In the course of argument the parties reserved their position as to costs pending the findings of the Court. Accordingly, I do not propose to make any orders as to costs so as to allow the parties to make further submissions on the issue when they have had a chance to consider these reasons. Orders 89The orders which I make are as follows: (i) An order that the defendant give the plaintiff possession of the land. (ii) An order that the issue of a writ of possession in favour of the plaintiff in respect of the land be stayed pending further order of the Court. (iii) The costs of these proceedings are reserved. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 February 2011