Supreme Court New South Wales Medium Neutral Citation: Permanent Custodians Ltd v Klear [2018] NSWSC 320 Hearing dates: 13 March 2018 Date of orders: 16 March 2018 Decision date: 16 March 2018 Jurisdiction: Common Law Before: Davies J Decision: (1) Judgment for the plaintiff for possession of the land comprised in certificate of title folio identifier 4/SP70758 being the land situated at and known as 4/7 Park Street, Merrylands, NSW 2160. (2) The defendants are to pay the plaintiff's costs of the notice of motion filed 12 March 2018. Catchwords: LAND LAW - mortgages – rights and liabilities of mortgagor and mortgagee – whether mortgage and incorporated memorandum entitled mortgagee to possession of land upon default of mortgagor – whether default notices were valid in respect of the loan agreement – no defence disclosed in Defence filed Legislation Cited: Civil Procedure Act 2005 (NSW) s 73 National Credit Code s 88 Real Property Act 1900 (NSW) s 60 Uniform Civil Procedure Rules 2005 (NSW) r 14.23 Cases Cited: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Jennings v Credit Corp Australia Pty Ltd (2000) 48 NSWLR 709; [2000] NSWSC 210 Westport Insurance Corporation v Gordian Runoff Limited (2011) 244 CLR 239; [2011] HCA 37 Texts Cited: Nil Category: Principal judgment Parties: Permanent Custodians Ltd (Plaintiff) Nicholas Frank Klear (First Defendant) Stephanie Petrina Klear (Second Defendant) Representation: Counsel: I Mir (Plaintiff) N Blaker (Defendants) Solicitors: Kemp Strang (Plaintiff) Michael Vassili Barristers and Solicitors (Defendants) File Number(s): 2017/340693 Publication restriction: Nil Judgment 1. On 28 August 2016 the defendants entered into a loan agreement with the Plaintiff to borrow the sum of $366,860. The loan was secured by a mortgage over land the defendants at 4/7 Park Street, Merrylands. 2. The defendants appear to have defaulted under the loan agreement on or about 27 February 2017 when the accounts kept by the loan servicer, Bluestone Mortgages, show a payment reversal for the direct debit that had been made on 27 February 2017. On 2 May 2017 notices under s 88 of the National Credit Code and s 57(2)(b) of the Real Property Act 1900 (NSW) were issued to each of the defendants. When the default was not remedied a statement of claim was filed on 10 November 2017 seeking possession of the property at Merrylands and judgment in the sum of $377,790.53. 3. A defence was filed on 19 December 2017 which pleaded that the defendants did not admit paragraphs 1, 2, 3 and 6 of the statement of claim, and that they did not admits paragraphs 4 and 5 absent further particulars. Paragraph 1 alleged the defendants owned the identified land, paragraph 2 alleged the defendants obtained a loan from the plaintiff on 28 June 2016, paragraph 4 alleged that the defendants mortgaged the property as security for the loan and paragraph 6 alleged default notices under s 88 of the National Credit Code were served. 4. There was no justification for paragraphs 1, 3 and 6 not being admitted. With regard to paragraph 2, it may be accepted that the loan agreement was dated 28 August and not 28 June, but I note in an amended defence later filed, paragraph 2 was admitted. 5. Contrary to r 14.23 Uniform Civil Procedure Rules 2005 (NSW) the defence was not verified. That meant, under the Rules, that the defendants were in default. 6. The matter first came to me for early judicial directions on 23 February 2018. The plaintiff sought to strike out the defence in reliance upon the Possession List Practice Note. However, Mr Blaker, the solicitor appearing for the defendants, said that there was an issue in dispute over the quantum claimed. He said that the matter had previously been stood over to enable settlement of the proceedings but that the defendant intended to file an amended defence after particulars had been provided. When I asked what particulars were needed, the solicitor said that he needed "the full and complete document to which they assert is the mortgage". 7. Mr Blaker also informed me that he sought leave to file a notice of motion to enforce a settlement that had been reached under s 73 of the Civil Procedure Act 2005 (NSW). I directed that any such notice of motion and affidavits in support of that motion were to be filed and served by 2 March 2018 and made returnable before me on 8 March 2018. I also directed that the plaintiff was to provide the defendants' solicitor with a copy of the mortgage and loan agreement by 27 February 2018, and that any verified amended defence was to be filed by 2 March 2018. 8. The amended defence admitted paragraphs 1, 2, 3 and 6 of the statement of claim. In answer to the paragraphs 4, 5 and 7 the defendants said that the default itself did not enliven a right to possession, that the mortgage contract did not entitle the plaintiff to possession, that the allegations did not make out a breach of essential terms, and that the mortgagor [scil. mortgagee] had fiduciary duties to the defendants which it had breached. 9. On 8 March 2018 Mr Blaker said that there was to be no motion to enforce a settlement under s 73. When I enquired of him what his defence to the claim in substance was, he said that conditions did not arise to the point where possession could be taken, and there had been no default at least at the time of the filing of the statement of claim. 10. However, he agreed that, although obliged to pay principal and interest on a monthly basis, the defendants had not done so. In answer to my enquiry about what fiduciary duties were being referred to in the amended defence, Mr Blaker said they were "holdings out" in respect to times for payment, and in respect of fees charged, but he did not want to press that defence, he said, until he had spoken further with Mr Mir, the solicitor for the plaintiff. He reaffirmed that the main issue in dispute was the quantum of the claim. 11. Mr Mir sought to strike out the whole of the amended defence. He handed me some documents including the loan agreement, the mortgage, the Memorandum of mortgage said to be incorporated into the mortgage and some loan account documents. These had all been previously provided to Mr Blaker. Mr Blaker objected to my having regard to these documents on the basis that there was no affidavit swearing to their truth and correctness. 12. In the circumstances, I directed that if the plaintiff wished to seek to strike out the defence or seek summary judgment a motion should be filed with supporting affidavits by 12 noon on 12 March 2018. The motion was to be returnable on 13 March at 9:30am before me where I indicated I would hear the motion in respect of an order for possession only and not for judgment for a sum of money. 13. The motion and affidavits were filed at 1.21pm on 12 March 2018 and were served shortly thereafter. 14. On the return date, 13 March, Mr Blaker sought an adjournment of the hearing of the notice of motion. His first basis for doing so was that he read on the Court's website at 11pm on the night of Monday, 12 March that the hearing date of 13 March was vacated. I directed my Associate to make enquiries, and Justice Link produced the following result concerning these proceedings: This matter is listed for Directions (Possession List) on 13 March 2018 9:30 AM before the Supreme Court - Civil at Supreme Court Sydney. The following hearing dates are vacated: 13 Mar 2018 09:00 AM Reason: Other (ID 41377695) 1. As the entry makes clear the matter was not vacated. The time was simply changed from the erroneous time of 9:00am to 9:30am, the time to which I had adjourned the matter when it was before me on 8 March 2018. 2. The second basis for the adjournment was that, in view of the confusion about whether the hearing date was vacated, Mr Blaker had not had time to prepare the matter or to obtain instructions from his clients. Since, however, the notice of motion and affidavit were served upon him shortly after 1:30pm on 12 March and he did not see until 11:00pm the listing entry which he thought vacated the hearing, he had ample time to prepare the matter and seek any instructions that were necessary from his clients. I endeavoured a number of times to obtain from Mr Blaker the matter or matters about which he needed to obtain instructions but he at no time identified what those matters were. It is significant in that regard that the documents annexed to the affidavit in support of the motion had all been served on Mr Blaker on or about 27 February, and had been discussed in court on 8 March. They were the documents Mr Blaker did not want me to act upon because there was no affidavit attesting to their truth and correctness. 3. The third basis for the adjournment was that he could not be sure if the mortgage and loan agreement annexed to the affidavit in support of the motion were the same mortgage and loan agreement that had been provided to him by the plaintiff's solicitors during the course of the previous week. In my opinion, there was no reason that Mr Blaker could not, in the time available to him, have checked that the documents were identical. 4. For these reasons, the application for an adjournment was refused. 5. The affidavit in support of the motion was from Chris Lazarou who was a collections manager employed by Bluestone Group Pty Ltd. Mr Lazarou said in his affidavit that the plaintiff had appointed Bluestone as servicer of the loans in respect of the loan and mortgage the subject of the proceedings. 6. Mr Lazarou went on to say: [2] By reason of the arrangements between the Plaintiff and Bluestone, I am duly authorised to make this affidavit on behalf of the Plaintiff. I am by reason of my own knowledge and my familiarity and understanding of the records of the Plaintiff cognisant of the facts in this matter. 1. Thereafter, Mr Lazarou annexed the loan agreement, the mortgage, the memorandum filed in the LPI, the default notices and the statements showing the movements on the account of the defendants in respect of the loan. 2. Mr Blaker handed up a list of objections to Mr Lazarou's affidavit. I note, in that regard, that the fact that he was able to prepare such a document before coming to Court rather undercut his assertions that he needed an adjournment because he had not been able to prepare the matter adequately. 3. Mr Blaker objected to the second sentence of paragraph 2 of the affidavit on the basis that it was conclusionary and was evidence of an opinion that assumed facts not in evidence. He asserted that no basis of expertise had been put forward. 4. The objection is without merit. Mr Lazarou was not putting himself forward as an expert witness but was identifying his position with Bluestone and giving evidence about his knowledge of the documents which he annexed to his affidavit. 5. I do not intend to deal seriatim with the objections which were to all but four of the 12 paragraphs in the affidavit. The objections were misconceived. They asserted that evidence was conclusionary when it was doing nothing more than providing a summary of the narrative from the documents which were annexed to the affidavit. Two examples will suffice. 6. Paragraph 4 of the affidavit reads: By agreement dated 28 August 2016, the First Defendant and Second Defendant entered into a loan agreement (Loan Agreement) with the Plaintiff. At pages 1 to 39 [of the Exhibit to the affidavit] is a true copy of the Loan Agreement, which includes General Terms and Conditions. Mr Blaker's objections to this paragraph were these: First sentence: conclusionary, and evidence of an opinion that assumes fact not in evidence. Second sentence: hearsay as business record not tendered, conclusionary, and evidence of an opinion that assumes fact not in evidence. 1. The second sentence of paragraph 8 of the affidavit read: At pages 61 to 68 are true copies of account statements that were sent to the Frist Defendant and Second Defendant for the period from 1 January 2017 to 30 June 2017 and 1 July 2017 to 31 December 2017 (Final Statements). Mr Blaker's objection was: Conclusionary, and evidence of an opinion that assumes fact not in evidence. 1. In my opinion, all of the objections to the evidence should be rejected. 2. Mr Blaker drew attention to what was said to be an error in the default notices issued pursuant to s 88 of the National Credit Code and s 57(2)(b) of the Real Property Act. On each of the default notices the date of the credit contract was said to be "on or about 26/09/2016". Mr Blaker said that he did not know if the default notices were referring to the same loan agreement, and that he had forwarded a notice to produce to the plaintiff's solicitors in respect of the matter. 3. In fact, Mr Blaker sent an email on 12 March 2018 asking for the production of the credit contract that was signed on or about 26/09/2016. He received an email in reply on that day confirming that the loan agreement was signed on 28 August 2016 and that the default notice incorrectly referred to the date of drawdown being 26 September 2016. 4. Since the defendants only entered into one loan agreement with the plaintiff and since the account number on the default notices of 1097435 was the account number shown on the statements issued in respect of the account, it seems perfectly clear that the default notices were in respect of the account the defendants had with the plaintiff as a result of the loan agreement entered into on 28 August 2016. Moreover, Mr Lazarou's affidavit made clear that the loan agreement was dated 28 August 2016 (the annexed loan agreement also showed it was dated 28 August 2016), and that the principal sum was advanced on 26 September 2016. 5. Mr Blaker raised two other matters in answer to the plaintiff's motion. The first concerned Mr Lazarou's position as the collections manager for Bluestone, and how that related to the plaintiff Permanent Custodians Ltd. As noted above, Mr Lazarou swore in his affidavit that the plaintiff had appointed Bluestone as servicer of the loans in respect of the loan and mortgage. 6. The loan agreement annexed to Mr Lazarou's affidavit had three parties. The lender was Permanent Custodians Ltd, the borrowers were Nicholas Frank Klear and Stephanie Petrina Klear and the manager was Bluestone Servicing Pty Ltd. The loan agreement was executed by the defendants. Further, the defendants executed an authority to pay addressed to Bluestone Mortgages. The general terms and conditions forming part of the loan agreement were headed "Bluestone Mortgages General Terms and Conditions". 7. In those circumstances, it was entirely appropriate that Mr Lazarou, as the collections manager for the Bluestone Group, swear the affidavit in support of the notice of motion. 8. The second matter was said to be a construction of the loan agreement. Mr Blaker submitted that the loan agreement did not give to the plaintiff the right to seek possession in the event of default. He drew attention to clause 17 of the loan agreement which relevantly provided: 17. What can the Lender do when you are in default? 17.1 At any time after default occurs, we can take any of the following action after giving any notice required by law. (a) Demand and require immediate payment of any money due under your loan agreement. (b) Call up the loan and require payment of the entire balance owing under your loan agreement. (c) Exercise any right, power, or privilege conferred by any law, your loan agreement, or any security. (d) Use any money of yours in any account with us to reduce the amount you owe us. 17.2 We can take action even if we do not do so promptly after the default occurs. We do not lose any rights or forgive any defaults unless we do so in writing. 17.3 We can exercise these rights with or without taking possession of any mortgaged property. If the Lender holds more than one security, we can enforce any one of the securities first or all of them at the same time. 1. Clause 16 is also relevant. It provided: 16. When will you be in default? 16.1 If any one or more of the following occur we may decide an event of default has occurred. You must ensure no event of default occurs. (a) There is default of any term or condition of your loan agreement. (b) There is default under any mortgage or other security given under your loan agreement. (c) You fail to pay any person (including the Lender and/or other lenders) any money by the due date. … 1. Mr Blaker submitted that clause 17 of the loan agreement, whilst referring to the taking of possession, did not actually authorise the plaintiff to do so. 2. When I drew Mr Blaker's attention to the terms of Memorandum AH107429 referred to in the mortgage, Mr Blaker first submitted that that Memorandum was not incorporated into the mortgage. He then submitted that he needed further time to get instructions to put on affidavits about the way in which the mortgage documents were signed. He further submitted that clause 17.3 of the loan agreement impliedly excluded s 60 of the Real Property Act. 3. The mortgage executed by the defendants states that the defendants (called the "Mortgagor"): mortgages to the mortgagee all of the mortgagor's estate and interest in the land specified above, and covenants with the mortgagee that the provisions set out in memorandum number AH107429 filed in the Department of Lands, Land and Property Information Division (LPI)/Annexure A are incorporated in this mortgage. 1. Annexure A refers to the agreement by the mortgagee to lend $366,860 to the mortgagor, and that the mortgagor acknowledges indebtedness to the mortgagee for that amount and agrees to repay it with interest at the times agreed with the mortgagee. Memorandum AH107429 relevantly contains the following provisions: debt means all money owing by you to the mortgagee now or in the future on any account. The debt includes any money due or possibly due by you to the mortgagee as a result of any arrangement including any loans made to you or guarantees given by you to the mortgagee, and includes any loss or damage suffered by the mortgagee as a result of those arrangements. It also includes interest, costs, fees, duties, taxes and any other amount you are obliged to reimburse or pay to the mortgagee at any time under the mortgage or otherwise. … mortgage means the mortgage signed by you which incorporates these mortgage common provisions and includes the terms of these mortgage common provisions. If there is an inconsistency between these mortgage common provisions and the mortgage, the provisions of the mortgage prevail. … You must pay the debt to the mortgagee on the dates agreed between you and the mortgagee. Usually, this agreement appears in a credit contract or loan offer letter or loan agreement. If there is no agreement, you must pay the debt to the mortgagee on demand. … 4.1 When there is default Default generally occurs if you fail to do something you are obliged to do, if you do something you are obliged not to do, or if something happens (even though outside your control) which is prohibited or results in default under the mortgage or a collateral security. If any one or more of the following occur the mortgagee may decide default has occurred. (a) ... (b) There is default of any term of any loan agreement or other agreement relating to the debt. … 4.2 The mortgagee's rights on default At any time after default occurs, the mortgagee can take any of the actions listed below. The mortgagee does not lose any rights or forgive any defaults unless the mortgagee does so in writing. The mortgagee can take action even if the mortgagee does not do so promptly after the default occurs. The mortgagee can exercise these rights with or without taking possession of the land. If the mortgagee holds collateral security, it can enforce any one of the securities first or all of them at the same time. The mortgagee's costs of exercising these rights will form part of the debt secured by the mortgage. (a) Demand and require immediate payment of the debt. (b) Exercise any right, power, or privilege conferred by any law, the mortgage, or any collateral security. (c) Do anything the mortgagee considers appropriate to recover the debt and deal with the land in any way the mortgagee considers fit with the land (including the contracts and other property included in the definition of land). For example, the mortgagee may: (i) eject you or any other occupants from the land and take possession of the land. If the mortgagee takes possession, the mortgagee can subsequently withdraw from possession of the land; 1. Memorandum AH107429 is clearly incorporated into the mortgage executed by the defendants. Clause 17.1(c) of the loan agreement gives the lender the right to exercise any power conferred by any security. Clause 4.2(c)(i) gives clear right to the plaintiff to seek possession of the land if there is default in payment under any loan agreement entered into by the defendants with the plaintiff. There is no defence pleaded suggesting any invalidity of the mortgage or the memorandum, nor is any unjustness of the contract or unconscionability about its execution asserted. All that is said in answer to the allegation of default is that the default itself did not enliven possession. The terms of both the loan agreement and the Memorandum are a complete answer to that allegation. 2. The defence says that the facts do not make out a breach of an essential term. There can be no doubt that default in payment due under the loan agreement, which is secured by the mortgage, is a breach of an essential term, but in any event, under clauses 16 and 17.1(c) of the loan agreement and clause 4.2 of the Memorandum, default is enough to enliven the right to possession. 3. The evidence discloses that the defendants first defaulted when a direct debit was reversed in February 2017. Between that time and the present only two payments have been made that have not immediately been reversed. In that way, the defendants have been in default under the loan agreement and mortgage since April 2017. 4. Nothing in clause 17 faintly suggests that, in a way that is difficult to understand, s 60 of the Real Property Act is somehow ousted. The mortgage is a registered mortgage with the rights given by that section. 5. The only other matter referred to in the defence is that the mortgagee owes fiduciary duties to the defendants and has breached those fiduciary duties. Those duties are not identified in the defence and no submissions were made about them. I have noted above at [10] what Mr Blaker said about them. 6. The evidence establishes that the defendants have defaulted under the loan agreement and mortgage. Those documents expressly provide for a right to possession when there is a default of the kind established. The defendants demonstrate no arguable defence to the claim made. The construction of a document is a question of law: Westport Insurance Corporation v Gordian Runoff Limited (2011) 244 CLR 239; [2011] HCA 37 at [82]; Jennings v Credit Corp Australia Pty Ltd (2000) 48 NSWLR 709; [2000] NSWSC 210 at [11]. Argument, even of an extensive kind, may be necessary to show that a claim or a defence is obviously untenable or manifestly groundless: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129-130. I am satisfied that the construction argument here is manifestly groundless. The plaintiff is entitled to possession of the land. 7. The evidence discloses that no other persons than the defendants were in occupation of the property at the time the proceedings were commenced. 8. Accordingly, I make the following orders: (1) Judgment for the plaintiff for possession of the land comprised in certificate of title folio identifier 4/SP70758 being the land situated at and known as 4/7 Park Street, Merrylands, NSW 2160. (2) The defendants are to pay the plaintiff's costs of the notice of motion filed 12 March 2018. ********** 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: 16 March 2018