Supreme Court New South Wales Medium Neutral Citation: RHG Mortgage Corporation Ltd v Saunders [2016] NSWSC 1037 Hearing dates: 25 July 2016 Date of orders: 25 July 2016 Decision date: 25 July 2016 Jurisdiction: Common Law Before: Garling J Decision: Upon the following conditions, namely that: (a) the defendant pay to the plaintiff on or before midnight on the Tuesday of each week commencing 2 August 2016, a sum of money not less than $500 by depositing cleared funds to the credit of the loan account in the defendant's name with the plaintiff being loan account no: 704283367516A; and (b) the defendant is to take all reasonable steps to cause or enable an application for leave to appeal against the judgment and orders of Harrison AsJ made on 6 July 2016 to proceed expeditiously; I make the following orders, until further order, or the final disposition of the application for leave to appeal to the Court of Appeal from the judgment of Harrison AsJ of 6 July 2016, namely that: (1) the plaintiff by itself, its employees and agents is restrained from marketing, selling or otherwise dealing with land comprised in folio identifier 20/3/8123 and known as 9 Railway Street, Branxton NSW 2335; and (2) the default judgment entered in favour of the plaintiff against the defendant by the Court on 2 December 2015, be stayed. (3) Reserve all question of costs. Catchwords: PRACTICE AND PROCEDURE – civil – Notice of Motion seeking orders restraining the plaintiff from dealing with property and staying a default judgment for the plaintiff pending an appeal to the Court of Appeal – whether the points to be raised on appeal are reasonably arguable – whether the balance of convenience favours making the orders Legislation Cited: Civil Procedure Act 2005 National Credit Code 2009 Uniform Civil Procedure Rules 2005 Cases Cited: RHG Mortgage Corporation Limited v Saunders [2016] NSWSC 929 Texts Cited: Not Applicable Category: Procedural and other rulings Parties: RHG Mortgage Corporation Ltd (P) Gregory Saunders (D) Representation: Counsel: W A Smith (P) C Wood / J B B Pearson (D) Solicitors: Hicksons (P) Colin Biggers & Paisley (D) File Number(s): 2015/214636 Publication restriction: Not Applicable EX TEMPORE Judgment 1. On 27 July 2015, proceedings were commenced in this Court by the plaintiff, RHG Mortgage Corporation Ltd ("RHG"), seeking judgment for possession of a property at Branxton which was owned by the defendant, Mr Saunders, and over which property RHG holds a mortgage. At the time of commencement of these proceedings, the mortgage was in arrears and RHG commenced proceedings for the purpose of enforcing its rights under the mortgage. The Proceedings 1. A Statement of Claim was served on 28 July 2015. 2. On five occasions in the period between 2 November 2015 and 30 November 2015, RHG communicated a clear warning to Mr Saunders that the position with respect to the proceedings was that RHG would apply for default judgment against Mr Saunders. Neither the requirements of the Uniform Civil Procedure Rules 2005 ("UCPR") nor the various communications from RHG spurred Mr Saunders into action to either obtain legal advice about filing a defence or alternatively to file a defence. As a consequence, on 2 December 2015 RHG obtained a default judgment against Mr Saunders. 3. Mr Saunders made a number of agreements with RHG to attend to repayments in December 2015 and January 2016, although he did not comply wholly with those payment arrangements. It does appear that he made at least a reasonable attempt to comply with them. 4. On 2 February 2016, RHG applied for a writ of possession, which was granted. The writ was executed by the Sheriff on 22 March 2016. RHG took possession of the property on that day and, except for a short period, has been in possession of the property ever since. It has facilitated supervised access to the property to enable Mr Saunders to remove various items from it. 5. Prior to the execution of the writ of possession, Mr Saunders failed to take any steps at all to address the legal entitlement of RHG to possession of the property. However, it does appear that after RHG took possession, Mr Saunders took some steps to obtain advice. Ultimately, on 19 May 2016, he filed a Notice of Motion seeking an order that the default judgment be set aside, that he be granted leave to file a defence within 14 days, and providing for the payment of his costs by RHG. That Notice of Motion was heard by Harrison AsJ on 23 June 2016. For the reasons which she delivered on 8 July 2016, her Honour dismissed the Notice of Motion of Mr Saunders, and ordered that he pay RHG's costs on the ordinary basis: see RHG Mortgage Corporation Limited v Saunders [2016] NSWSC 929 ("the primary judgment'"). 6. Subsequently, Mr Saunders filed a Notice of Intention to Appeal from the primary judgment. Present Application 1. By Notice of Motion filed 22 July 2016, Mr Saunders seeks orders from this Court which his counsel described as preserving the status quo so that he can appeal to the Court of Appeal from the primary judgment. Mr Saunders seeks those orders in circumstances where he proffers the usual undertaking as to damages, and in circumstances where he invites the Court to impose terms with respect to the payment of money, and proceeding expeditiously with any appeal. RHG opposes the orders sought in the Notice of Motion. Discernment 1. In considering orders of the kind sought by Mr Saunders, there are two principal issues the Court must consider. The first is whether the grounds of the application for leave to appeal, and the appeal itself, are reasonably arguable. The second is whether, if that is so, the balance of convenience favours the granting of the orders. In approaching the making of such orders, the Court also needs to keep in mind the overriding purpose of proceedings in this Court as set out in s 56 of the Civil Procedure Act 2005. Ultimately the exercise of the Court's discretion requires a determination that the interests of justice favour the orders being made. 2. I turn to the question of the reasonable arguability of the application for leave, and the appeal. I am, of course, in considering this question, not determining the application, nor am I finally determining the merits of the arguments which are sought to be made on the appeal. I only have to consider whether the points sought to be raised are reasonably arguable. 3. There were two bases upon which Mr Saunders made application to set aside the default judgment. Each of those bases was dismissed by Harrison AsJ. The first basis was the application of r 36.15 of the UCPR. In short, having regard to the provision of the National Credit Code 2009 and in particular s 89A(2), Mr Saunders argued that RHG was not entitled to commence the proceedings against him when it did. It was submitted that it was unlawful for RHG to have commenced proceedings because the provisions of s 89A(2) make such conduct a criminal offence. 4. Mr Saunders submitted that if proceedings were commenced illegally, it followed that the fruit of those proceedings, namely the default judgment, was entered irregularly, illegally or against good faith, as that phrase is used in r 36.15 of the UCPR. Mr Saunders argued that if the Court formed such a conclusion, then ex debito justitiae, the Court would set aside the judgment. 5. Harrison AsJ dealt with this argument by first asking the question of whether the provisions of s 89A were enlivened. In order for those provisions to be enlivened, s 72 of the National Credit Code was relevant. A credit provider is subject to the provisions of the National Credit Code. RHG was one such provider. Section 72 provides that a debtor may give the credit provider, either orally or in writing, notice of the debtor's inability to meet obligations under a credit contract. Such a notice is called a Hardship Notice. There is then a regime which exists which provides that within 21 days the creditor may seek further information or, alternatively, reject the Hardship Notice. 6. Harrison AsJ determined that there had been no Hardship Notice given by the debtor, Mr Saunders, to the creditor, RHG, and as a consequence, any defence based upon illegality by reference to s 89A could not succeed. In making that determination, her Honour had before her two versions of a conversation which it was said by Mr Saunders constituted an oral Hardship Notice. Her Honour considered each of those versions and concluded, without accepting or rejecting either version, that the conversation did not amount to a hardship application because, as her Honour said in [23], there was no mention of the word "hardship" or the words "hardship application" by Mr Saunders. 7. The submission in this Court by Mr Saunders is that Harrison AsJ fell into error in making a final determination as to whether there was or was not a Hardship Notice given by Mr Saunders to RHG in the conversations on either 18 or 19 May 2015. It is submitted in this Court – and will be submitted on appeal – that her Honour mistook her task because Mr Saunders was seeking to set aside a default judgment. He did not have to demonstrate to the Court that on the balance of probabilities that there was a Hardship Notice. What he had to demonstrate to the Court was that there was evidence which, if accepted, would arguably support the defence which he wished to file. It is submitted here that her Honour went too far in her determination, mistook her jurisdiction and proceeded on a legally incorrect basis. 8. As well, the Mr Saunders submitted that Harrison AsJ fell into error in [23] when she in effect held that the legislation required the debtor to actively use the words "hardship" or "hardship application". 9. A further argument is mounted with respect to the position of whether, even if there was no illegality in commencing the proceedings, a breach of s 72 of the National Credit Code could constitute an irregularity, as that word is used in r 36.15. It was submitted that her Honour was arguably in error with respect to her conclusion on this issue. 10. The second basis upon which Mr Saunders sought to have the default judgment set aside in front of Harrison AsJ was pursuant to r 36.16 of the UCPR. The authorities indicate that to succeed in accordance with that Rule, Mr Saunders would need to have persuaded the Court that he had a reasonably arguable defence and could explain the delay relating to his failure to file the defence, which enabled the entry of default judgment. 11. Her Honour found that, for the same reasons with respect to the application under r 36.15 of the UCPR, the proposed defence did not raise an arguable or triable issue. She went on to consider the explanation for the delay, and found that Mr Saunders had not given an adequate explanation for the delay. 12. Mr Saunders, in this Court, says that any appeal against those conclusions has a reasonably arguable prospect of success because, first, there was an arguable defence on the merits; and, secondly, in such circumstances, the factual finding of inadequacy of the explanation for delay does not bind the Court of Appeal, either because the Court would need to re-exercise the discretion of Harrison AsJ if it found error with respect to the validity of the defence or, alternatively, because the finding of Harrison AsJ with respect to the inadequate explanation for the delay was such as to be closely related to, and infected by, the error with respect to the bona fide defence finding. 13. The challenge by Mr Saunders to the decision of Harrison AsJ, which I have attempted to summarise, was put in argument orally by counsel for Mr Saunders because, as yet, no Notice of Appeal has been filed, and the Court was not provided with a draft Notice of Appeal. 14. I hope I do no disservice to the careful arguments of counsel for RHG if I were to summarise them by saying that on the question of arguability of the appeal, counsel submitted that the judgment of Harrison AsJ was demonstrably without error and that her Honour had approached her task correctly and in accordance with the law. 15. Having listened carefully to the arguments in the course of a Duty List, I am not prepared to make a finding that the arguments put before this Court by counsel for Mr Saunders are hopeless or otherwise raise matters which are unarguable. Putting the matter differently, and by reference to the correct onus of proof, I am persuaded by counsel for Mr Saunders that the points he wishes to make before the Court of Appeal with respect to errors by Harrison AsJ are arguable. 16. I do not go any further to indicate that they enjoy substantial prospects of success, first, because I am not required to, and secondly, because this is not the forum in which it is fair to either party to make such an assessment, in circumstances where full submissions have not been put. 17. The question then becomes whether the balance of convenience favours the making of the orders. As I have earlier indicated, the nature of the orders is that the status quo is maintained. In other words, the property at Braxton is not sold and, in the meantime, moneys are paid to RHG. 18. The amount of default is not a large sum. It appears from the material before this Court that the present extent of the default is in the order of $8,806.02. The total balance outstanding on the loan from RHG to Mr Saunders including interest, legal and valuation fees and other expenses incurred by RHG is $292,886.44. 19. The evidence of Mr Saunders is that, prior to seeking possession, the house on the property at Braxton was where he lived with his family. He says in evidence before this Court, which is not challenged, that he and his partner have raised both their children on the property, and that the property is located close to his partner's sister's home. He also deposes to the fact that he has completed improvements on the property and has maintained it over time. 20. The Court has been provided with a Valuation Report about the property which assesses its value, if some work is done to it of a relatively minor kind, as being between $290,000 and $320,000. If that work is not done, the market value is said to be between $250,000 and $280,000. 21. It is clear from the Valuation Report that the property has a three bedroom and one bathroom dwelling upon it, which was built in the 1960s and which has been modernised in part and used as a family home. It was in fair condition at the time the valuers inspected it. 22. I accept the submission of counsel for Mr Saunders that the property has features about it which make it uniquely valuable to Mr Saunders, his partner and family, such that the balance of convenience favours the making of the orders to preserve the status quo. 23. The orders which are proposed will, I am satisfied, not prejudice RHG. If they do, such prejudice is small and insignificant to a large mortgage corporation, whereas the prejudice which would arise if the property was sold and Mr Saunders was later to succeed in obtaining the relief which he sought initially before Harrison AsJ, would be significant. Conclusion 1. Accordingly, I am satisfied that the balance of convenience favours the making of the orders. I am also satisfied for the same reasons that the interests of justice compel the making of the orders. Orders 1. Accordingly, I will make the following orders. Prior to so doing, I note that the defendant by his counsel has given to the Court the usual undertaking as to damages. I further note that the two orders which are shortly to be made are to be made upon the terms which I outlined. 2. Upon the following conditions, namely that: (a) the defendant pay to the plaintiff on or before midnight on the Tuesday of each week commencing 2 August 2016, a sum of money not less than $500 by depositing cleared funds to the credit of the loan account in the defendant's name with the plaintiff being loan account no: 704283367516A; and (b) the defendant is to take all reasonable steps to cause or enable an application for leave to appeal against the judgment and orders of Harrison AsJ made on 6 July 2016 to proceed expeditiously, I make the following orders, until further order, or the final disposition of the application for leave to appeal to the Court of Appeal from the judgment of Harrison AsJ of 6 July 2016, namely that: 1. the plaintiff by itself, its employees and agents is restrained from marketing, selling or otherwise dealing with land comprised in folio identifier 20/3/8123 and known as 9 Railway Street, Branxton NSW 2335; and 2. the default judgment entered in favour of the plaintiff against the defendant by the Court on 2 December 2015, be stayed. 3. Reserve all question of costs. ********** 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: 29 July 2016