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- Unreported Judgment
Westpac Banking Corporation v Capelli QDC 265
DISTRICT COURT OF QUEENSLAND
Westpac Banking Corporation v Capelli & Anor  QDC 265
WESTPAC BANKING CORPORATION
ACN No. 007 457 141
CAROLINE MARGARET WILLIAMS also known as CAROLINE MARGARET CAPELLI
District Court at Brisbane
17 December 2018
6 November 2018
CIVIL PROCEDURE – SUMMARY DISMISSAL, SETTLEMENT AND DISCONTINUANCE – SUMMARY DISPOSAL OF LITIGATION – DEFAULT JUDGMENT – where no notice of intention to defend filed – where default judgment was entered against the first and second defendants – where there was delay in filing the application – whether there is a prima facie defence to the claim.
Mr S J Forest for the plaintiff
Thomson Geer, solicitors for the plaintiff
- The defendants have filed two applications. Firstly, they seek to set aside a judgment entered by default on 28 June 2017 and secondly, they seek an order setting aside an enforcement warrant – possession of land issued on 17 August 2018.
- As a practical effect the outcome of the first application will determine the outcome of the second application because if the default judgment is not set aside then there are no grounds for setting aside the enforcement warrant for possession of land.
- The original proceeding was commenced by a claim and statement of claim filed on behalf of the plaintiff on 9 May 2016. In that claim the plaintiff asked for judgment in the sum of $464,919.76 plus interest and costs pursuant to two loan agreements together with an order for recovery of possession of land pursuant to a registered mortgage. The defendants lodged a complaint with the financial ombudsman service on 3 May 2016. That complaint was resolved in favour of the plaintiff on 14 December 2016. After an order was made for substituted service on 28 March 2017 the first defendant was served on 24 April 2017 and on 2 May 2017. The second defendant had already been served on 16 May 2016. There was no notice of intention to defend filed and accordingly a default judgment was entered. A copy of that judgment was sent to each of the defendants on 17 July 2017.
- The defendant has applied to have the judgment set aside on a number of bases however after hearing from the first defendant at the hearing of this application his main argument seems to be twofold. Firstly, that the property that he bought which was the security for the mortgage was overvalued by the bank and if it had been properly valued then the bank would not have been willing to lend the money to the defendants. Secondly, he is critical of the broker who obtained the loan for him.
- In written submissions, the first defendant raised issues with the service of the documents and the affidavits filed on behalf of the plaintiff. However, during the course of the hearing these arguments were effectively abandoned. There was no substance in those arguments in any event.
- Mr Capelli was self-employed within the building industry. Prior to the purchase of this property he and his wife Caroline Capelli owned two properties: a house at 5 Chesilton Street, Kedron and a unit at 12-204 Wellington Road, East Brisbane. Around February 2009 they decided to purchase the property at 79 Bellay Road, Beachmere. The property was on acreage. They were unable to obtain the loan through their usual lender and so approached a broker to conduct investigations. After some difficulties finding a lender he brokered the loan through RAMS home loans. The property was valued by an independent valuer at $520,000 with the land value set at 370,000. After some initial hesitation, they decided to purchase the Beachmere property and keep the other two properties for investment.
- On 20 May 2009, almost immediately upon taking up residence, the property flooded. The defendants and their children were forced to move out of their property for three to four days until the water dropped. It was around this time that they first began to default on the mortgage. Mr Capelli lost time from work trying to restore the property and from the stress of having the house flooded. It became necessary to sell the first investment property on 6 August 2009 to compensate for the loss of work and damage to the property.
- It was when rectifying the property that he found the house had damage from termites and water rot. This resulted in further rectification work so in December of 2009 it became necessary to sell the other investment property. The sale of those investment properties meant that there was a loss of rental income. This further led to the defendants struggling to repay the mortgage. There was a second flood on 10 January 2011 and then further flooding in 2015. Mr Capelli was made redundant in October of 2013.
- In his affidavit Mr Capelli exhibited a QCAT decision, which was delivered on 30 April 2010. That decision related to a property situated in the same area as his property. The judgement indicates that there were problems with the clearing of drains by the Council around the area of his property and that the Council had some knowledge that the area where this property was situated was prone to flooding.
- There is little doubt that this has been a disastrous move for Mr Capelli and his family. The property from very soon after purchase was the cause of significant stress and needed major repairs as a result of the flooding. This problem has continued to plague them. Mr Capelli had no warning that this was a problem with the property. As a result of the purchase of the property he finds himself in dire financial straits and his marriage has fallen apart as a result. It is a most unfortunate turn of events for the defendants and it is clear that it was not due to their negligence or foolishness. He maintains that because of the flooding problem the valuation should have been lower and the money should not have been lent to him.
- However, as Mr Capelli conceded in his own submissions, the bank was similarly ignorant of the flooding problems with the house. Council searches did not indicate that this was a flood prone area. There were no maps indicating that it was likely to flood. Neither party was aware of likely drainage issues. They were simply unaware of the problem. Further, the bank had obtained an independent valuation report so suggestions that the property may have been deliberately overvalued by the bank cannot really be maintained.
- There are three factors to be considered when setting aside a default judgment regularly entered namely:
- (a)Whether the judgment debtor has given a satisfactory explanation of its failure to appear.
- (b)Any delay in making the application.
- (c)Whether the defendant has a prima facie defence on the merits.
- There has been no explanation given by the second defendant for her failure to appear at the original application. There was no defence filed by either of the defendants and the first defendant’s claim that he was not informed of the proceedings is not satisfactorily explained considering that documents were served on the residence where he was living at the time.
- In relation to the delay of over 12 months from time of notification of default judgment to this application there is no sworn material to explain the delay. Submissions made from the bar table would suggest that Mr Capelli was simply overwhelmed by the emotional and financial turmoil that had resulted from the purchase of this property. As a result, he did not turn his mind to the need to overturn the judgement until he became aware of the existence of the enforcement warrant. Whilst the court has some sympathy for his situation, the length of the delay in filing the application is significant.
- The most significant factor to consider however is whether there is a prima facie defence to the claim on the merits. In that regard Mr Capelli relies on the Main Roads valuation notice issued on 26 September 2018 pursuant to the Land Valuation Act 2010. In that valuation, the value of the land is not reflective of the valuation supplied to the bank. However, he fairly concedes that the bank and the valuer were unaware at the time of the initial valuation of the property’s tendency to flood. In light of the information that the property has flooded on three occasions in recent times, it is hardly surprising that the property has decreased in value
- It may be that the defendant may have an arguable cause of action against someone other than the bank in this case. However, on the evidence placed before me there is no prima facie defence to the claim by the bank and therefore no reason to set aside the default judgement. It follows that there are no grounds to set aside the enforcement warrant. The applications are dismissed.
- Published Case Name:
Westpac Banking Corporation v Capelli & Anor
- Shortened Case Name:
Westpac Banking Corporation v Capelli
 QDC 265
17 Dec 2018