Pepper Finance Corporation Ltd v Jensen
[2015] QDC 241
To print this judgment please return to the case and click on the PDF icon
next to the
case name. For court use, a full PDF copy is required or preferred.
Exit Distraction Free Reading Mode
Please Note: You are about to print a copy of the onscreen
version of
this judgment. For court use, a full PDF copy of the judgment is required or preferred. Please
return to
the case for PDF printing options.
- Unreported Judgment
- Pepper Finance Corporation Ltd v Jensen[2015] QDC 241
- Add to List
Pepper Finance Corporation Ltd v Jensen[2015] QDC 241
Pepper Finance Corporation Ltd v Jensen[2015] QDC 241
DISTRICT COURT OF QUEENSLAND
CITATION: | Pepper Finance Corporation Ltd v Jensen & Anor [2015] QDC 241 |
PARTIES: | PEPPER FINANCE CORPORATION LIMITED v STEWART CHRISTIAN JENSEN (first defendant) AND KATJA REBEKKA JENSEN (second defendant) |
FILE NO/S: | 209 of 2013 |
DIVISION: | Civil |
PROCEEDING: | Application |
ORIGINATING COURT: | District Court |
DELIVERED ON: | 1 October 2015 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 28 July 2015 |
JUDGE: | Reid DCJ |
ORDER: |
|
CATCHWORDS: | Application – summary judgment – default on mortgage – whether National Credit Code applies to transaction – whether notice of default given – whether notice purportedly given pursuant to s 38 of National Credit Code – requirements of that section – recovery of legal fees – whether disputed – failure to give notice pursuant to s 38 of National Credit Code |
COUNSEL: | L. M. Copley for the plaintiff J. Prus for the defendants |
SOLICITORS: | Kemp Strang Lawyers for the plaintiff Noble Law for the defendants |
Introduction
- [1]In this matter the plaintiff seeks summary judgment of a claimed debt of $203,350.14 together with interest and expenses pursuant to the provisions of a loan agreement and mortgage. It also seeks possession of the mortgaged land.
- [2]The defendants resist that application.
- [3]In Queensland University of Technology v Project Constructions (Aust) Pty Ltd (in liq) [2003] 1 Qd R 259, Holmes J (as the CJ then was) considered the test for summary judgment, as expressed in r 293(2) of Uniform Civil Procedure Rules 1999 (Qld) (UCPR), was whether there exists a real as opposed to a fanciful prospect of success and whether there was a need for a trial. The test under r 292(2) is no different. Her Honour cautioned by reference to General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125:
“Great care must be exercised to ensure that under the guise of achieving expeditious finality a (party) is not improperly deprived of his opportunity for the trial of his case.”
Plaintiff’s Claim
- [4]The plaintiff’s claim is straightforward. It claims that by an agreement of 13 December 2012, it advanced to the defendants $189,000 to enable them to purchase a property at Manoora in north Queensland. The defendants, it is said, agreed to repay the principal sum together with interest and other charges in accordance with a loan agreement and mortgage registered over the subject property.
- [5]It was a term of the mortgage that in the event of default, and upon the giving of a notice of default which was not remedied, the total amount owing would then become payable and, additionally, the plaintiff would be entitled to possession of the property.
- [6]Soon after entering into the arrangement, the defendants ceased making their loan payments and notices of default were served on them on about 4 September 2013. Those notices were not complied with.
- [7]Much of that was not disputed and is in any case proven in material filed in the court and relied on by the plaintiff. An affidavit of Philip Mark Kaunitz filed by leave at the hearing attests to the fact that as at 23 July 2014 the outstanding liability was $302,367.44 and that the defendants remain in possession of the property.
- [8]An affidavit of Barry Talbot, filed 15 September 2014 exhibits the Home Loan application, loan agreement and general terms and conditions and the mortgage, and attests to the lending of the principal sum, service of the default notices and the defendants’ failure to remedy their default.
- [9]The matter, on its face, appears to entitle the plaintiff to the relief sought but the claim is resisted.
Defence
- [10]The defendants filed an Amended Defence on 22 July 2014. It is not easy to understand the grounds of defence and the defendants’ counsel’s oral submissions did little to assist. It appears from the Amended Defence that the defendants wish to assert the following:
- (a)That the loan agreement is unenforceable because of the failure of the plaintiff to comply with a notice, given on 4 October 2013 by the defendants and said to have been given pursuant to s 38 of the National Consumer Credit Protection Act 2009 (Cth) (para 3(b) of the Amended Defence). In fact this appears to be an assertion that the notice was given pursuant to s 38 of the National Credit Code (NCC) which is Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth).
- (b)The plaintiff’s conduct with respect to the loan agreement is alleged to have been deceptive, misleading or otherwise unconscionable in that the plaintiff misrepresented and refused to clarify to the defendants, upon request, the nature and extent of the loan arrangements (para 3(c) of the Amended Defence). Particulars of that allegation suggest that the assertion is that the defendants, after entering into the loan and purchasing the property, sought from the plaintiff details of the source and identity of lenders of funds to the plaintiff used by the plaintiff to enable them to make the loan to the defendants but that such information was not provided. This allegation appears to be very closely related to the alleged noncompliance with the asserted s 38 notice which, as will appear, also related to such issues.
- (c)That, unknown to the defendants, the plaintiff raises funds from investors and that its business model places the defendant at “considerable additional risk and cost”. Such risk is not identified in the pleadings or material before me. They allege that if that matter was known to them they would not have entered into the loan agreement but did so believing it was “an ordinary home loan”.
- (d)That the mortgage and loan agreement do not provide that the defendants undertook to pay to the plaintiff the monies secured by the mortgage (para 5 of the Amended Defence) or that in the event of the defendants’ failure to comply with the plaintiff’s notice of default, the total amount owing under the loan agreement and secured by the mortgage was then due and payable or that the plaintiff would be entitled to possession of the land (paragraph 6 of the Amended Defence). I interpose that this assertion is directly contrary to the content of the loan agreement and mortgage, and indeed, largely contrary to oral submissions of the defendants’ counsel.
- (e)That the plaintiff did not advance the principal sum to the defendants (contrary to the clear evidence of that fact and to oral submissions before me) or, alternatively, refused to advise the defendants as to the true source of funds and arrangements by which funds were made available. In particular the defendants assert that the plaintiff has failed to disclose details of its expenses, commission or other sources of funds and has failed to refer the dispute “to external dispute resolution” (paragraph 7 of the Amended Defence).
- (f)That the defendants are not in default of their loan obligations “for the reasons aforesaid” (paragraph 8 of the Amended Defence), which reasons are not at all clear to me. The paragraph then repeats and relies on paragraphs 3 and 4 of the Amended Defence. I interpose that those paragraphs do not appear to me to be relevant to the issue of default. They refer to the allegations already summarised, namely that there was no loan agreement and any agreement was unenforceable by reason of unconscionability or misleading and deceptive conduct.
- (g)That although the principal and interest set out in default notices was not paid, the defendants were not obliged to do so (paragraphs 9 and 10 of the Amended Defence).
- (h)That prohibited fees and charges have been added to the defendants’ account in breach of ss 31 and 32 of the NCC (paragraph 12 of the Amended Defence).
Defendants’ submissions
- [11]Written submissions filed on the defendants’ behalf contend that the Amended Defence to which I have referred raised triable issues as follows:
- (a)Commencing enforcement proceedings in breach of s 38 of the NCC.
- (b)The plaintiff’s conduct in relation to the alleged loan arrangement with the defendants “has been deceptive and misleading or otherwise unconscionable rendering the conduct void”.
- [12]Oral submissions of counsel for the defendants did not, as I previously indicated, enlighten me and in many respects appeared inconsistent with the Amended Defence.
Application
- [13]A preliminary issue that arose was whether the NCC applied to this transaction. Central to this issue was whether or not the loan was for business or investment purposes, or was a residential loan for construction of a house in which the defendants were to reside. As with many issues in this matter, the defendants’ affidavit material does little to clarify the matter but it does appear to me on the basis of the plaintiff’s material that the NCC does apply. The loan documents are, as I have said, exhibited to an affidavit of Barry Talbot, a collections officer for the plaintiff company.
- [14]The purpose of the loan is set out in the loan agreement exhibited to that affidavit. At page 4 thereof (page 23 of the exhibit) the purpose is set out as follows:
“You must use the loan for purchase of newly erected dwellings –house by first mortgage.”
- [15]That of course is not definitive of whether or not the house was to be occupied by the defendants, or was for a commercial purpose. Page 25 of the exhibit (also part of the loan agreement) provides as follows:
“If the borrower is a company, or if this loan is predominantly used for business purposes or investment purposes (not including investment in residential property), this loan will not be regulated by the National Credit Code despite any statement that the National Credit Code applies to this loan.”
- [16]That clause excludes the application of the NCC only in respect of loans for business purposes or investment purposes other than for investment in residential property. Consequently given that the purpose of the loan is for purchase of a newly erected dwelling, it seems to me that even if the dwelling were for business or investment rather than being the defendants’ own residence, that clause would not exclude the application of the NCC.
- [17]In the circumstances, I proceed on the basis that the NCC applies.
- [18]A careful consideration of the defendants’ counsel’s submissions and the material suggests that there are really three matters on which they seek to rely:
- (1)That the arrangement between them and the plaintiff is subject to the NCC (as I have found) and that the plaintiff is precluded by reason of s 38 thereof from bringing these proceedings, the defendants having given a written notice pursuant to that section to the plaintiff on 4 October 2013, and the plaintiff not having responded as required by that section.
- (2)That the plaintiff’s conduct with respect to the formation of the loan was deceptive, misleading or otherwise unconscionable in that it misrepresented the nature of the loan agreement and subsequently refused to advise the defendants of the nature and extent of the loan arrangement. As will appear this ground is closely related to the issues raised by the defendants concerning the notice purportedly given under s 38 of the NCC referred to in sub-paragraph (1) above.
- (3)That the plaintiff’s claim includes prohibitive or excessive fees. In oral submissions it seems these were confined to what was said to be excessive legal fees associated with enforcing the indebtedness of the defendants.
- [19]I note that whilst some other issues can perhaps be said to be raised in the Amended Defence in submissions before me counsel for the defendants, so far as I could distil from his oral submissions, confined the matter to the grounds I have outlined, and specifically disavowed suggestions made in the defence, for example, that money was not due and owing by the defendants’ to the plaintiff.
- [20]In this regard I note that during his submissions counsel for the defendants conceded:
- (1)That the loan agreement “is properly in place” (see T1-36, l 28 and 1-42, l 31).
- (2)That money had been lent by the plaintiff to the defendants (T1-42, l 32).
- (3)That there was default by the defendants (T1-36, l 29) who had in fact made only two repayments pursuant to the loan agreement (T1-43, l8/12).
- [21]Counsel submitted that “it is conceded that the money is owed … the question is how much money is owed, whether some of the fees are appropriate”. (T1-43, 12/13) The only specific fees he referred to in his submissions were certain legal fees said by the plaintiff to have been incurred by it enforcing the claim against the defendants and recoverable from them pursuant to the terms of the loan agreement.
- [22]In circumstances where as I have found the NCC applies, the defendants submit that they gave to the plaintiff a notice pursuant to s 38 thereof on 4 October 2013. A copy of that notice is part of Exhibit SCJ-2 to an affidavit of the male defendant sworn on 24 July 2015 and filed herein. It is at page 30 of that exhibited bundle. I attach a copy of the notice to this judgment.
- [23]It can readily be seen that the notice itself provides that it is a notice of dispute purportedly given pursuant to s 38 of the NCC. It also refers to correspondence from the defendants to the plaintiff of 17 September. That letter is at pages 24-28 of the exhibit. I also attach that correspondence to this judgment.
- [24]It can be seen that the notice and letter are wordy, imprecise and difficult to understand. The letter makes, in paragraph 13 and following, a number of demands.
- [25]A question which must immediately be considered is whether it is in fact a notice pursuant to s 38 of the NCC.
- [26]That section of the NCC provides as follows:
“38 Disputed accounts
- (1)If a debtor, by written notice to a credit provider, disputes a particular liability entered against the debtor under a credit contract, the credit provider must give the debtor a written notice explaining in reasonable detail how the liability arises.
- (2)A written notice need not be given if the credit provider agrees with the debtor as to the disputed amount and gives the debtor a written notice advising of the agreed liability.
- (3)If in the case of a continuing credit contract the disputed entry appears in a statement of account in which a date for payment of the amount of the account, or part of that amount, is shown, the notice of dispute must be given to the credit provider on or before that date.
- (4)In the case of any other credit contract for which a statement of account is given, the notice of dispute must be given to the credit provider within 30 days after the day the debtor receives the statement of account in which the amount, or part of that amount, is first shown.
- (5)In the case of a credit contract in respect of which a statement of account need not be and is not given for the period to which the disputed liability relates, the notice of dispute must be given to the credit provider not later than 3 months after the day the contract ends.
- (6)The credit provider must not begin enforcement proceedings on the basis of a default arising from the disputed liability until the period of 30 days, starting on the day the credit provider gives the written explanation or advice as to agreement, has expired.
Criminal penalty: 50 penalty units.
- (7)A debtor or credit provider may apply to the court to have the court determine a disputed liability and, if satisfied that a liability is genuinely disputed, the court may determine the matters in dispute and make such consequential orders as it thinks just.
- (8)If an application is made to the court under this section within 30 days after the explanation is given, the credit provider must not, without leave of the court, begin enforcement proceedings on the basis of a default arising from the disputed liability.
Criminal penalty: 50 penalty units.
- (9)Subsections (6) and (8) are offences of strict liability.
…
- (10)This section does not affect a dispute not dealt with, or not arising, under this section.
- [27]I might add this agreement was not a continuing credit contract as defined in the NCC, so subsection (4) would apply if the notice of 4 October was in fact a s 38 notice.
- [28]It can immediately be seen that the section relates to a written notice which “disputes a particular liability entered against the debtor under a credit contract”. If such a notice is given, the credit provider must give “written notice explaining in reasonable detail how the liability arises". The credit provider is, when a notice is given under s 38, precluded from beginning enforcement proceedings until at least 30 days after it provides the written explanation or advice. Subsection (7) provides that either the debtor or credit provider may apply to the court for determination of a disputed liability.
- [29]The section appears to me to provide a codified process for determination of disputes concerning “a particular liability”.
- [30]The question to be determined is whether the notice I have attached to this judgment, read with the letter of 17 September 2013 referred to in it and also attached herein, can be categorised as a notice under s 38 of the NCC. Determination of this issue depends, in my view, on whether it is a notice which “disputes a particular liability entered against the debtor under a credit contract.”
- [31]I cannot see how it does. It is directed to a much more general matter – in particular whether any other person is a “holder in due course of our debt instruments” and a request for all documents “related to the securitisation of our contract/loan agreement/bill/note/negotiable instruction and mortgage.”
Consideration
- [32]In such circumstances, an argument that s 38 of the NCC precludes the plaintiff from bringing these proceedings is without foundation. This disposes of the first issue referred to in [17] hereof.
- [33]Furthermore, there is in my view no basis for refusing the plaintiff the relief sought because of deceptive, misleading or unconscionable conduct. There is nothing to show the loan agreement is other than the defendants understood it to be – namely, an agreement to lend the defendants the loan amount of $189,000 on the terms set out in the agreement. The source of the plaintiff’s funds, to enable that transaction to be effected, is not shown by the defendants’ counsel’s submissions to be of any relevance. Moreover it is inconsistent with his oral submissions that “we accept that he (sic) owes money, but it’s how much …” (T1-48, 28/29)
- [34]The only remaining issue raised by counsel for the defendants related to the issue of legal fees incurred by the plaintiff. Relevant clauses in the General Tenancy Conditions of the loan agreement include:
“3.1 Interest charges for each day are calculated at the daily percentage rate on the amount owing for the end of that day. (The daily percentage rate is the annual percentage rate divided by 365, including in a leap year.)
3.2 Interest charges are debited on each day repayments are due.
4.1 You must repay us all amounts you borrow from us and you must pay us interest charges, our fees and charges and government charges and any enforcement expenses.
4.7 If we ask for a direct debit authority as a condition of your loan you must not cancel the direct debit authorisation or close the account referred to in the direct debit authority. You must also ensure there is enough money in the relevant account to meet repayments under the loan agreement.
6.1 You must pay us:
- (a)all fees and charges in the circumstances indicated in the loan agreement and any changed or new fee or charge notified to you;
- (b)an amount equal to any government charges and duties on receipts or withdrawals under the loan agreement, calculated in accordance with the relevant legislation. These are payable whether or not you are primarily liable for such charges and duties; and
- (c)reasonable enforcement expenses if you default. You must pay on demand and we may debit your account with our costs in connection with any exercise or non exercise of rights arising from any default, including:
- (i)legal costs and expenses on a full indemnity basis or a solicitor and own client basis, whichever is higher;
- (ii)our internal costs.
Where the loan is regulated by the National Credit Code or similar laws, these costs will not exceed our reasonable enforcement costs including internal costs).
6.2 You authorise us to debit these amounts to your loan account. We may do so on and after the day we pay them or the date they become due or payable by you or us (whichever is earlier).”
10 Meaning of words
amount owing means, at any time, the balance owing on your loan account at that time, plus all accrued interest charges, default interest charges and other amounts which you must pay under the loan agreement but which have not been debited to your loan account at that time.”
- [35]Perusal of the Amended Defence reveals that in it the defendants raised no particular issue concerning legal fees claimed by the plaintiff from the defendants. There is in paragraph 12 of the defence an allegation that “prohibited fees and charges have been added to the Defendants’ account in breach of sections 31 and 32 of the Credit Code and those amounts must be deducted…”
- [36]In submissions before me, counsel for the defendants did not suggest the legal fees were in any way “prohibited”. Rather, he submitted that the issue was whether the amount of the fees was appropriate. This submission, it seems to me, was very clearly directed to the amount of the legal fees and not to whether such fees were prohibited. In circumstances where paragraph 6.1 of the terms and conditions clearly contemplate the plaintiff recovering legal fees incurred in enforcing the defendants’ indebtedness the fact that they were not so objected to is understandable.
- [37]The result is that the defendants do not appear to raise any issue about legal fees in the pleadings. A perusal of the male defendant’s affidavit also reveals that it raises no issue concerning such fees. Written submissions prepared by the defendant’s solicitor and filed before me again raised no such matter.
- [38]Rather, it is stated in the written submissions that the account statement “has included in it amounts for litigation legal fees for example that have attracted interest”. It is submitted in those written submissions that to do so constitutes a breach of s 32(a)(1) (sic) of the NCC. Section 32 of the NCC provides so far as relevant as follows:
“32 Fees or charges in relation to third parties
When this section applies
- (1)This section applies if a fee or charge is payable by a debtor to the credit provider for an amount (the third party amount) payable or paid by the credit provider to another person, body or agency.
Third party amount ascertainable at time of debtor payment
(2) If, when the fee or charge is paid by the debtor to the credit provider, the third party amount is ascertainable, then the amount of the fee or charge must not exceed the third party amount.
Third party amount not ascertainable at time of debtor payment
(3) If:
(a) when the fee or charge is paid by the debtor to the credit provider, the third party amount is not ascertainable; and
(b) after the fee or charge is paid, the credit provider ascertains the third party amount; and
(c) the third party amount is less than the amount of the fee or charge paid;
then the credit provider must refund or credit the difference to the debtor.”
- [39]It appears from the written submission that the defendants’ proposition is that, in seeking to recover interest on those legal fees, the plaintiff seeks to recover an amount that exceeds “the actual amount payable or paid” by the plaintiff.
- [40]There is no merit in that submission, which misunderstands the nature of a claim for interest on a debt which is allowable pursuant to the terms and conditions of the loan agreement. The amount sought to be recovered as reimbursement of the sum paid or payable for legal fees is not shown to be other than the sum charged. The plaintiff also seeks to recover interest thereon. It is specifically entitled to do so by reason of the terms and conditions of the loan agreement. To do so is not a breach of s 32 of the NCC.
- [41]Despite the defendants’ counsel’s oral submission, it does not seem to me that any issue is raised in the defence or in the male defendant’s affidavit or in written submissions contesting the amount of legal fees claimed. In any case, such a dispute is one which the defendant ought to have raised by means of a notice under s 38 of the NCC since it would be a dispute about “a particular liability”. They did not do so as perusal of the notice of 4 October and letter of 17 September both attached hereto reveals.
- [42]It is to such matters, and not to matters such as the source of the plaintiff’s funding, that s 38 of the NCC is directed. If there was a dispute about legal fees, then notice under s 38 ought to have been directed to that issue.
- [43]Having regard to what I have said about the absence of complaint about the legal fees in the male defendant’s affidavit or in the defence or in written submissions, I am not satisfied that the liability of the defendants to pay them is genuinely disputed. Rather, it appears to me a contrivance directed to stall the plaintiff’s entitlement to judgment.
Conclusion
- [44]In the circumstances, I can see no basis for the defendants opposing the plaintiff’s claim for summary judgment. There is, in my view, no real prospect of the defendants succeeding in their defence to the claim, and no need for a trial.
- [45]I am satisfied that the plaintiff advanced to the defendants the sum of $189,000 by way of a loan. I am satisfied that in December 2012 the defendants as mortgagor executed in favour of the plaintiff a mortgage subsequently registered over the subject land and that pursuant to the terms of the mortgage and loan agreement, the amount claimed is now due and payable. I am also satisfied the plaintiff is entitled to an order for possession of the land. I am satisfied that on 4 September 2013 the plaintiff by written notice to the defendants gave notice of their default, and that the defendants have failed to pay the principal sum, interest or other charges owing pursuant to the terms of the agreement between the parties.
- [46]In the circumstances, I am satisfied, having regard to the contents of an affidavit of Philip Kaunitz sworn 27 July 2015 and filed by leave before me, that as at 23 July the amount owing was some $302,367.44. I will give judgment for the plaintiff against each of the defendants for that sum. This of course does not preclude the plaintiff from recovering interest and expenses calculated thereafter. I also order that the plaintiff recover possession of all of that piece or parcel of land described as lot 18 on registered plan 727895, in the county of Nares, parish of Cairns, being the whole of the land contained in title reference no. 20993175.
- [47]I will hear argument as to costs, if that is necessary, though it appears to me such sums are in any case recoverable pursuant to the terms of the agreement even without such order.