Pioneer Mortgages Ltd v Pearson
[2013] QDC 310
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- Unreported Judgment
- Pioneer Mortgages Ltd v Pearson[2013] QDC 310
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Pioneer Mortgages Ltd v Pearson[2013] QDC 310
Pioneer Mortgages Ltd v Pearson[2013] QDC 310
DISTRICT COURT OF QUEENSLAND
CITATION: | Pioneer Mortgages Limited ACN 095 875 755 -v- Pearson [2013] QDC 310 |
PARTIES: | PIONEER MORTGAGES LIMITED ACN 095 875 755 (plaintiff / respondent) v MARK ANDREW PEARSON (defendant / applicant) |
FILE NO/S: | BD 4710 of 2012 |
DIVISION: | Civil |
PROCEEDING: | Application |
ORIGINATING COURT: | Brisbane |
DELIVERED ON: | 6 December 2013 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 4 December 2013 |
JUDGE: | Rackemann DCJ |
ORDER: | Application dismissed |
CATCHWORDS: | Practice and procedure – Application to set aside default judgment – Where substituted service had not come to attention of defendant – Where delay and failure to file notice of intention to defend explained – Whether prima facie defence – Whether financier responsible for conduct of mortgage broker – Whether financier had obligation to verify information in loan application on the merits – Alleged unconscionable asset loan |
COUNSEL: | MD Alexander for the plaintiff / respondent M Campbell for the defendant / applicant |
SOLICITORS: | Gadens Lawyers for the plaintiff / respondent |
- [1]By an application filed 12 November 2013, the defendant seeks to set aside the default judgment obtained by the plaintiff on 18 October 2013. The subject application also sought other relief, but that was not pressed when the matter came on for hearing.
- [2]The subject proceedings were commenced by a claim and statement of claim filed on 3 December 2012. The relief sought in the proceedings, and for which default judgment was obtained, was for possession of certain real property (‘the property’). The plaintiff is a financier who advanced moneys to the defendant on security of a mortgage. The defendant has, at all relevant times, been in default.
- [3]The applicant / defendant claims that he was not aware of the proceedings at the time default judgment was obtained. Service of the claim and statement of claim had been effected by substituted service pursuant to an order made on 9 September 2013. That order:
- dispensed with personal service;
- required the claim (and a copy of the substituted service order) to be served by sending them to a PO Box and to an e-mail address and by informing the defendant of that by a text message;
- deemed service to have been effected four business days after service in that way.
- [4]There is no suggestion that the documents were not served in the way ordered. The consequence is that service was deemed to have been effected (whether it had come to the defendant’s knowledge or not) and there was nothing irregular about the plaintiff seeking or obtaining default judgment.
- [5]There was an attempt to impugn the plaintiff’s conduct in obtaining the substituted service order. It was said that it knew that the PO Box address was one which was ineffective. All that the defendant pointed to however, was an e-mail of 10 December 2012 from the defendant to the financial ombudsman. Nothing was put before me to substantiate any claim that there was material non-disclosure of facts known to the plaintiff at the time it obtained the substituted service order.
- [6]The defendant has not established that the judgment was irregularly entered.
- [7]The remaining issue is whether the court should, in the exercise of discretion, set aside the default judgment. The following questions are of relevance to the exercise of that discretion:
- (i)has the applicant delayed in bringing the application?
- (ii)has the applicant explained his failure to file a notice of intention of defend within time?
- (iii)is there a prima facie defence on the merits?
- [8]The defendant has explained his failure to file a notice of intention to defend within time by deposing that he did not, in fact, attend his PO Box until at or about the end of October. Further, he did not get the text (his phone was frequently out of credit and/or with his mother) and the service by e-mail had been treated by his filter as SPAM. I accept that as an adequate explanation.
- [9]The delay in bringing the subject application was not great and was explained in the defendant’s affidavit (including that he was away for some time). I would not refuse to set aside the default judgment on account of delay.
- [10]The determinative matter, in this case, is whether there is a prima facie defence on the merits. Council for the defendant formulated a draft of the defence and counterclaim which would be filed in the event that the default judgment is set aside.
- [11]The applicant / defendant does not cavil with the following:
- (i)in or about 23 November 2006 he purchased the property with finance from the National Australia Bank, which took a mortgage over the property
- (ii)in 2008 he, with the assistance of a mortgage broker, refinanced the debt with the plaintiff
- (iii)a firm of solicitors acted for him in that transaction
- (iv)the plaintiff advanced the moneys, on security of a mortgage, on or about 10 July 2008
- (v)the defendant has fallen into arrears and, indeed, has not made a payment since 1 February 2011
- [12]The draft defence and counterclaim seeks orders, inter alia, declaring both the loan agreement and the mortgage to be ‘void’. The entitlement to claim such relief is said to arise as a consequence of the plaintiff’s unconscionable conduct (within the general meaning of that expression and its meaning for the purposes of the Australian Securities and Investments Commission Act 2001), as a consequence of which the defendant entered into the refinancing arrangement and thereby assumed responsibility for a debt which he could not service.
- [13]This is, it was contented, a case of asset lending which was, in the circumstances, unconscionable. There was argument about whether such a case, if made out, would entitle the defendant to the relief sought in the draft defence and counterclaim, but there are more fundamental difficulties for the defendant.
- [14]Counsel for the defendant did not submit that, on the face of the loan application, the refinancing ought not to have been offered to the defendant. Rather, it was said that the loan application, which had been prepared by the broker, was falsified and that the plaintiff was either the broker’s principal (and hence responsible for his misdeeds) or had an obligation to independently investigate the bona fides of what appeared on the face of the loan application.
- [15]In particular, the defendant says that:
- (i)he only signed a three page document
- (ii)that document was added to by others without his consent
- (iii)the loan application was amended, without his knowledge or consent, to, amongst other things, grossly overstate his income
- [16]The first difficulty for the defendant is in establishing a prima facie case that the misdeeds of the broker can be sheeted home to the plaintiff. Ordinarily, a broker is taken to be the agent of the borrower, rather than the lender (Barker v GE Mortgage Solutions Ltd [2013] QCA 137). That position may, of course, differ according to the circumstances. Aside from mere assertion however, there is no apparent basis for contending that, in the present case, the broker was acting on behalf of the plaintiff.
- [17]There is no evidence that the broker held any actual authority to be the agent of the plaintiff generally in its dealings with the defendant nor is there evidence of any representation to the defendant to the effect that the broker was its authorised agent. I note that the defendant has deposed that he met the broker when the broker made an unsolicited approach “having been referred to me through a third party who had become aware of my intention to sell the real property”.
- [18]Counsel for the defendant pointed to the fact that the broker’s signature appears under the description ‘checking officer’ on an “identifiable record for a signatory to an account ‘100 point check’”, but that falls short of evidencing actual, apparent or ostensible authority for the broker to act as the plaintiff’s agent in the transaction generally or in the preparation of the loan application form more specifically.
- [19]The defendant has not established a prima facie case for the conduct of the broker to be sheeted home to the plaintiff.
- [20]It was also submitted that the conduct which was unconscionable in the circumstances included the failure, by the plaintiff, to make its own enquiries into the true position, rather than accept the information on the face of the loan application. I was not referred to any provision or authority which establishes that lenders are under such an obligation as a matter of course.
- [21]Counsel for the defendant referred me to Violet Home Loans Pty Ltd v Schmidt & anor [2013] VSCA 56, where a lender was held to have acted unconscionably and in breach of the general law, s 51AC of the Trade Practices Act 1974 and s 12CB of the Australian Securities and Investments Commission Act 2001. The loan contract and mortgage in that case were there set aside on condition that the borrower pay the lender the amount that had been refinanced plus interest. In that case it was found that the financier had, by its employed credit officer, participated in ‘fudging’ figures as to income. It turned a blind eye to inconsistencies on the face of the loan application and income declaration. It could have had no confidence in the assertion that the borrower was a self employed painter who was in a position to service the loan. The transaction represented asset based lending which was unconscionable having regard to a number of factors. It was in that context that the primary judge said:
“… it could have, conscious of the inconsistency between the amounts in these forms … asked for further proof of the income…”
- [22]Further, the trial judge observed:
“[Violet] knew that there were irregularities in the income declaration and the loan application… Mr Schmidt’s loan application figures had been ‘massaged’. Moreover, it was known to [Violet] that Mr Schmidt was in his mid sixties (as evidenced by the copy of his passport details) and had no ABN, notwithstanding the original application nominating income from self-employment of either $69,000 or $75,000, depending upon which document one looked at. There must have been significant doubt as to whether Mr Schmidt had any capacity to repay the loan. This is particularly so when [Violet] knew from the details in the asset builder loan statements that his repayments of that loan were not being made out of other sources (such as income from self-employment or investments) but came out of the capital remaining in that account.”
- [23]While the draft defence and counterclaim asserts that the plaintiff knew or ought to have been aware of ‘discrepancies and inconsistencies’ in the loan documentation, counsel for the defendant did not point to anything which would warrant a conclusion that the plaintiff (as distinct from the mortgage broker) had any reason to be put on notice or investigation about irregularities with the loan documentation or that the plaintiff wilfully turned a blind eye to the conduct of the mortgage broker.
- [24]The defendant has failed to show even a prima facie case of unconscionability either in the general sense or in the sense used in the Commonwealth legislation.
- [25]Although not referred to in the draft defence and counterclaim, counsel for the defendant also referred to the Consumer Credit Code under the Consumer Credit (Qld) Act 1994 and, in particular, to its provisions about unjust transactions. The applicability of that, in these circumstances, was questioned on the basis that in the document which the defendant admits to having signed, the loan was said to be wholly or predominantly for business or investment purposes. Even if that were not so however, the defendant has not established a prima facie case to reopen the transaction on the basis that it was unjust.
- [26]The draft defence and counterclaim also asserts that the plaintiff was precluded from commencing or continuing the subject proceedings by reason of the defendant’s referral of the matter to the financial ombudsman. Counsel for the defendant abandoned that in the course of oral submissions.
- [27]The defendant has failed to show a prima facie defence on the merits. The application is dismissed, with costs.