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Citigroup Pty Limited v Burchard QDC 23
DISTRICT COURT OF QUEENSLAND
Citigroup Pty Limited v Burchard  QDC 23
CITIGROUP PTY LIMITED (ACN 004 325 080)
JENNIFER MAY BURCHARD
District Court at Brisbane
14 February 2019 (delivered ex tempore)
14 February 2019
Porter QC DCJ
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – ENDING PROCEEDINGS EARLY – DEFAULT JUDGMENT – where the plaintiff sought recovery of possession of property following mortgage default – where default judgment was entered against the defendant – where the plaintiff was issued enforcement warrant – where the defendant now applies to set aside the default judgment and for other declarations – whether judgment should be set aside and other declarations made.
Commonwealth Bank of Australia v Jackson  V ConvR 54-447
Embrey v Smart  QCA 75
Land Title Act 1994 (Qld) s 78
Uniform Civil Procedure Rules 1999 (Qld) r 5
B A Reading for the plaintiff
Defendant, J M Burchard, appearing in person
HWL Ebsworth for the plaintiff
- On 11 January 2019 Jennifer May Burchard filed an application in this court. The application named the plaintiff, in substance, as the respondent. The application sought six orders from this court (paraphrasing):
- (1)That the plaintiff’s Citibank Mortgage Power loan product on her two accounts be reinstated with interest arrears capitalised, instead of being classified as in default;
- (2)That excessive and unnecessary legal charges be reversed from the account balances and that the plaintiff meet its own legal costs;
- (3)That any adverse credit reference reports filed by the plaintiff or any party authorised by them against her be removed;
- (4)That the enforcement warrant for eviction [sic, possession] of her and for possession of her home and land at 81 Lambros Drive, Benowa, be set aside;
- (5)That the default judgment dated 16 February 2018 for repayment of the loan principal, including capitalised interest and for possession of her home be repealed [sic, set aside]; and
- (6)That the plaintiff provide ongoing finance to her, secured against her home on a flexible loan product, which she can manage at a reasonable rate of interest for the duration of the original contract without application and other costs, and without onerous provisions.
Background to the application
- That application was filed in the following context.
- Ms Burchard is the registered proprietor of a property located at 81 Lambros Drive, Benowa, Queensland (the property). It is a residential house property. She is the registered proprietor. On 3 August 2006, the plaintiff lent Ms Burchard two sums, one of $171,000 and one of $151,400. Pursuant to the terms of the loan agreement, she agreed to make monthly repayments of those sums and pay interest on the loan monies. On 4 September 2006, she executed, as mortgagor, a mortgage over the house in the plaintiff’s favour. The mortgage secured her obligations under the loan agreement. There is no evidence as to the performance of the loan prior to about May 2016. It is evident, however, that since at least that date, Ms Burchard has had difficulties meeting the principal and interest obligations under the loan agreements. That that is so, is evident from the hardship relief given by the plaintiff to her from time to time, starting from 11 May 2016.
- In particular, Mr Clark, a collections officer with the plaintiff, swears as follows:
- (a)On 11 May 2016, the plaintiff approved hardship assistance to Mr Burchard to capitalise arrears of $1,200 with a three month payment deferral for the period 4 June to 4 August, with regular payments to resume on 4 September 2016.
- (b)Next, on 28 November 2016, some three months after regular payments were to resume, the plaintiff approved hardship assistance to capitalise arrears of some $4,219.14, with a partial payment plan for a period of four months, commencing on 4 December 2016 until March 2017, with regular payments from 4 April 2017.
- (c)Next, on 24 August 2017, some five months after regular payments were to resume under the last hardship arrangement, the plaintiff approved hardship assistance to defer one month’s payments, and assisted with payment of a building insurance premium.
- (d)Next, two months later on 26 October 2017, the plaintiff approved hardship assistance for a payment arrangement until March 2018, but subject to completion of a mortgage variation form. That form was not returned and the hardship assistance was then declined by the plaintiff.
- Not surprisingly, in the context of that account of hardship relief, on 31 July 2017, Mr Burchard was in default of her obligations under the loan agreement, because she had failed to make monthly repayments on the loans as and when they fell due. Accordingly, on 31 July 2017, the plaintiff gave written notice to Ms Burchard, pursuant to section 88 of the National Credit Code, of her default, and requiring her to remedy the default. Ms Burchard failed to comply with the demands made in the notice. Accordingly, on 16 February 2018, the plaintiff commenced this proceeding by claim and statement of claim, seeking recovery of possession of the property under section 78 Land Title Act 1994 (Qld), and repayment of the monies then owing, including interest.
- The proceedings were served on 21 February 2018. Ms Burchard, therefore, had until 21 March 2018 to file and serve her defence. It is not in dispute that she did not do so. Default judgment was entered with some alacrity five days later, on 26 March 2018. The default judgment ordered that the plaintiff recover possession of the property, and also that Ms Burchard pay the sum of $350,110.55 including interest of $2,027.44 and costs of $2,657.70.
- The plaintiff applied for an enforcement warrant to recover possession of the property. The enforcement warrant was issued on 10 October 2018; some six months or so after obtaining the default judgment. It was in that context that in about December 2018, an officer of the Court sought to obtain possession under the warrant. It was in that circumstance that Ms Burchard filed her application.
- The matter first came before Judge Jarro of this court.
- His Honour made directions for the filing of material, and adjourned the hearing to today.
- Ms Burchard appeared today for herself. She relied on two affidavits filed in the proceeding, and an outline of argument. At the start of the hearing, before formalities began, I explained to Ms Burchard the process to be followed on the application, and suggested she might consider focusing her attention on identifying a prima facie defence on the merits to the judgment for the debt and the enforcement warrant. Nonetheless, it was certainly open to her to make, and she did make, submissions in respect of other parts of her application.
- To her credit, notwithstanding the undoubted stress she has had in relation to this matter, Ms Burchard spoke clearly and calmly in support of her application. She made the following points in respect of the application to set aside the default judgment, both in respect of the judgment and possession. It is also to her credit that in the course of making these submissions, she did not seek to dispute that she had been lent the sums alleged by the plaintiff or that they had not been repaid. And in that context, she made the following points, which I will deal with as she made them.
Arguments on setting aside the default judgments
- First, Ms Burchard submitted to me that she had been restricted in her access to the plaintiff’s staff. She tendered an exhibit of an email, which tended to support that.
- Mr Reading for the plaintiff, did not really dispute that matter (which is not to say he necessarily accepted it). But accepting that she had had that difficulty, I asked her what consequence that would have. Ms Burchard said she thought the plaintiff was operating on a very narrow view and agreed that what she sought was an opportunity to persuade a person, preferably a person higher in the plaintiff’s hierarchy than the people she had been dealing with, to persuade them not to pursue their rights under the default, but to enter into some further varied agreement.
- Mr Reading submitted that, from a legal perspective, as a defence, this was irrelevant as a defence to the causes of action the subject of the default judgment. That submission, in my respectful view, is plainly correct. Whether the plaintiff was willing to discuss alternatives to proceeding on its application, and whether it was willing to make available people of a sufficiently senior level to Ms Burchard’s expectations, is a matter of customer relations for the plaintiff, it is not a matter that is a defence to a claim for possession or judgment on the claim for the unpaid advances especially where defaults have been frankly admitted.
- Second, Ms Burchard said she had not understood that she needed to defend the proceedings. And that was because she believed she was still in discussions with the plaintiff through the period where default judgment was sought. She said she was in discussions with Mr Clark until at least March 2018. She then said she did not realise that she had to defend the case, until someone came to evict her in December 2018, as I have already discussed.
- Mr Reading pointed to the fact of service of the proceedings and service of the default judgment as answering the proposition that Ms Burchard could reasonably have thought that she did not need to defend the proceedings or otherwise deal with them. That might reasonably be so, but given Ms Burchard’s response once the attempt to act on the enforcement warrant, it might be thought that nonetheless, whether it was reasonable or not, she at least hoped, if not expected that she did not have to deal with it.
- In any event, whatever the true position is, even if one were to act on the basis that there was a sufficient explanation for her failure to allow default judgment to be entered, and a sufficient explanation for her delay in applying to set it aside, it would not for other reasons, of itself, be a reason that justified setting aside a default judgment.
- As Mr Reading rightly identified, the Court of Appeal has said that the most important and compelling consideration on applying to set aside a default judgment is whether there is a prima facie defence on the merits, and that is as it should be.
- Third, in respect of the judgment for possession, Ms Burchard said that she had nowhere else to go, and she really needed to stay in her house. And as to the debt, she again, frankly admitted she did not deny the debt. Those might not be thought to be defences, but she then proceeded to submit that she had understood the default under the loans to have been addressed. I pressed her to explain on what basis she thought that arrangements had been made to address the default. I should say that she did not swear directly to specific facts that would support that proposition, and Embrey v Smart  QCA 75 at 68 to 69 cited by Ms Reading would suggest that in those circumstances, this argument would not be sufficient in any event. But again, to her credit, she appeared to give a quite frank explanation of her discussions with Mr Clark and another officer, which she accepted, involving her trying to persuade them to accept a different arrangement and waive the default, and that they consistently refused to consider that proposition, and rather prevailed upon her to refinance the loan or take some other course.
- The effect of Ms Burchard’s frank description of the discussion is such as could not lead reasonably to the conclusion that those discussions, if they, indeed, occurred as she said from the bar table, amounted to a waiver of the default. In fact, they rather indicate an insistence, and reliance, on the default.
- Fourth, Ms Burchard submitted that it was not mandatory for the plaintiff to act on the defaults. She is right about that as a matter of contract law, of course, as the relevant terms are terms for the benefit of the plaintiff. However, that does not mean that the plaintiff cannot choose to act on them if they wish.
- Fifth, Ms Burchard raised a point related to valuation and it rather underpinned, in my respectful view, the thrust of her whole complaint about the conduct of the matter by the plaintiff. She started by pointing out the plaintiff had obtained a valuation, which it would not provide to her. I could not see a legal obligation on the plaintiff to do so. I asked her what her estimate of the value was, and she told me about $700,000. She said that her inference is that the plaintiff was acting on an assumption that the valuation is much less than that, and that that mistaken belief is driving the plaintiff to seek to realise its security, so that it can avoid a loss.
- She submitted to me that one might infer that their mistaken belief about the extent of their equity, is such as to cause them to take proceedings to recover possession, and presumably, ultimately, to sell the property rather than to renegotiate the loan. She thought their decision to seek a sale might be influenced by a mistaken view of the risk.
- The difficulty with that is that even if it was so, it is not a basis upon which one could defend a proceeding by the plaintiff. Minds can differ about proper valuations. The holder of real property security does not have to take the chance on such issues once a default has occurred.
- In any event, Ms Burchard’s analysis assumed the plaintiff acted only in circumstances where it thought there was some risk it might not recover the whole of its security. If, on the other hand, one could equally infer the plaintiff thought there was no prospect of the loan being repaid in accordance with their terms, and in that case that that could be another reason for them to act in any event, regardless of what they thought the equity in the property was.
- The difficulty is, of course, that none of these matters are relevant, because they are not a basis at law to impugn the decision of the plaintiff to act in circumstances where there is a default under the mortgage. And in that regard, it is to be remembered that this is an application by the plaintiff under section 78(2)(a) Land Title Act. It has been observed that a claim for possession under section 78 is a relatively straightforward cause of action: Commonwealth Bank of Australia v Jackson  V ConvR 54-447 at 65, 225.
- A mortgagee with a registered mortgage subject to the terms of the mortgage, is entitled to possession if the mortgagor defaults under a registered mortgage. There are no terms in the mortgage that limit that right; in fact, that right is expressly included in the mortgage, which I have reviewed. There is an admitted default and the mortgage is registered. It is difficult to defend claims for possession under section 78 where those basic matters are made out, as they plainly are on the evidence in this case.
- Sixth, Ms Burchard submitted that the default judgment and the default notice might be set aside because of Citibank’s failure properly to recognise the full extent of the hardship she suffered. There is no doubt on the material before me, she suffered a great deal of hardship. Her submission might seem strange, given the extent of the hardship relief that had been given by the plaintiff, which she did not dispute. Rather, she pointed out that it was just in-and-out type relief, rather than a long-term solution. She complained that they were continual short-term hardship provisions that took up her time to keep re-negotiating.
- Be that as it may, the difficulty is that I cannot see anything in the plaintiff’s loan terms or the plaintiff’s conduct, in respect of the hardship relief, that imposed a positive obligation on the plaintiff to give any such relief at all; clause 21.26 of the loan terms is as close as it gets and it imposes no specific obligation at all.
Arguments on other paragraphs of the application
- Ms Burchard also addressed the other paragraphs of her application.
- Paragraphs 1 and 6 effectively ask the court on a summary basis to rewrite the loan agreement and to force the plaintiff to waive the default. While something like that might be theoretically possible when giving relief under the Australian Consumer Law, the difficulty is that I cannot see any arguable basis whatsoever on the evidence before me that might attract such relief, even bearing in mind the unrepresented status of Ms Burchard.
- She alleged the plaintiff had engaged in unconscionable conduct, pressure, stress and criminal damage. Those are serious allegations. There is no doubt that she suffered stress from this process, as anyone would in the difficulties she faced. But there was no evidence that went close to establishing any of those causes of action. There is nothing in those grounds, even if those causes of action could be raised. It is important to recognise that that kind of allegation might be able to be, in an appropriate case, articulated as a defence to the claim under the mortgage, if it was alleged that the mortgage should be set aside. And I am conscious of that; I have not overlooked it. But the difficulty is, there is simply no basis whatsoever, much less a prima facie case on the merits, to justify any such conclusion.
- Paragraph 2 of the application invited the Court to reverse excessive and unnecessary legal charges from account balances and make the plaintiff meet their own legal costs. The difficulty with that is this: the gravamen of Ms Burchard’s complaint was that she had disclaimed the incurring of costs on her behalf by the mortgagee, legal costs or recovery costs, costs of the valuations and so on. The difficulty is that the mortgagee was entitled to recover those costs secured by the mortgage under express terms of the mortgage, which she had executed. There is no way, as a matter of law, one can then disclaim that right. She identified a total of $7,529 of legal and collection costs included in the default judgment. She said that she calculated that amount (and I see no reason to doubt it) by analysis of her own bank statements. There was also an amount for a valuation. If I thought that there was a reasonable inference that those amounts was such as to be excessive and unnecessary in all the circumstances, it might be a matter into which one would look.
- However, nothing put before me persuades me that it falls into that category. That is particularly so, bearing in mind that the primary complaint by Ms Burchard was that she disclaimed the occurring of those costs on her behalf. And as I have said, as a matter of law that is not possible.
- I should say though, that if the costs had been very substantial in an absolute sense – and I do not suggest for a second they are not substantial to Ms Burchard – it might be a matter that would give one cause for pause. Whether it would lead to the whole default judgment being set aside though, is doubtful, even if it were so, as it might only result in a variation of the judgment, reducing it by a relatively small amount in the scheme of things.
- In any event, I am not satisfied there is a prima facie defence on the merits to that extent in the circumstances of the evidence before me.
- Paragraph 3 invited me to make orders relating to a credit reference report being varied. Ms Burchard, perhaps not surprisingly, could not direct me to a statutory source of power for me to make such an order. Even if it was made, it would not affect the default judgments. But in any event, on the material before me, I could not see the justification for such an order in circumstances where, again, to her credit, she frankly conceded there had been defaults.
- In those circumstances, conscious as I am of the impact that the plaintiff exercising its legal rights might have on Ms Burchard, I dismiss the application.
- The plaintiff seeks its costs of the application. It has been successful on its application. The costs ordinarily follow the event. I cannot see a reason that as a matter of law is properly relevant to the exercise of that discretion, why costs would not be ordered in their favour. Accordingly, I order that the defendant pay the plaintiff’s costs of the application.
- The plaintiff also reached for costs on an indemnity basis, based on the terms inter alia in the mortgage, based on well-known principles, which judges of this and other courts have applied, in which the exercise of the court’s discretion in a costs application may take into account an undertaking in this case, by covenant in a mortgage to pay costs in an amount which calls up the form of words used for indemnity costs in the rules of this court.
- Mr Reading points to clause 17.5 of the mortgage, which uses the language of:
Pay us the reasonable expenses we reasonably incur in enforcing the mortgage after you are in default.
- That certainly, as he says, calls up the form of words describing the indemnity measure in the rules. However, as Justice Jackson has recently recognised, my discretion is not bound by that. If Citibank wants costs as of right at that level, it can bring a further proceeding to obtain them. It has been a signal feature of this litigation, to the extent of my involvement in it, that Ms Burchard has done her best to comply with rule 5 of the Uniform Civil Procedure Rules 1999 (Qld). She made frank concessions and in submissions, she argued her case calmly and according to her experience, and the issues that she was involved in, reasonably and rationally.
- In those circumstances, absent the clause, there would be no basis whatsoever for an order for indemnity costs. The conduct by the litigant of the proceeding is a factor that influences whether one might give effect to such a mortgage covenant. And as I have said, given particularly her personal involvement in it, Ms Burchard has conducted the case in a fair and reasonable manner without excessive delay. In those circumstances, I am not persuaded to exercise the independent discretion I have to order costs on an indemnity basis. I will order costs be paid on the standard basis.
- Published Case Name:
Citigroup Pty Limited v Burchard
- Shortened Case Name:
Citigroup Pty Limited v Burchard
 QDC 23
14 Feb 2019