Secure Funding Pty Ltd v West[2019] QDC 97

DISTRICT COURT OF QUEENSLAND

1. [1]
   Michele West is the registered owner of the land situated at 21 Tecoma Road, Palmwoods. Secure Funding Pty Ltd holds a first registered mortgage over the land. The mortgage is security for its loan of $390,000 to Ms West in September 2006. Ms West commenced repayments in March 2007 and made a number of repayments pursuant to the loan agreement. However, on numerous occasions, she was said to be in default of her obligations under the loan agreement.

2. [2]
   On 26 May 2017, I dismissed an application for summary judgment made by Secure Funding Pty Ltd. Since that time there has been a significant period of inaction. In September 2018, Secure Funding Pty Ltd gave a notice of intention to proceed under r 389 of the Uniform Civil Procedure Rules 1999.  On 20 February 2019 it filed an application in pending proceeding in which it sought:

1. (a)
   leave to amend its claim to confine the relief sought to recovery of possession of the land as a registered mortgagee,

2. (b)
   leave to bring a second application for summary judgment,

3. (c)
   summary judgment against Ms West on the amended claim, and

4. (d)
   an order that Ms West pay its costs of the application and the action. 

3. [3]
   The application was set to be heard on 1 April 2019 but apparently, at the request of the legal representatives of Secure Funding Pty Ltd, Ms West indicated that she was content for the application to be adjourned until 18 April 2019. On 1 April 2019 there was no appearance by Ms West, and his Honour Judge Moynihan QC ordered that the application be adjourned until 18 April 2019 to be listed for two hours and made no order as to costs.

4. [4]
   The application now comes on for hearing before me. An amended application was also filed on 1 April 2019. Secure Funding Pty Ltd amended the application to seek strikeout of paragraphs 14, 15, 16, 18, 20, 21 and 26 of Ms West’s Further Amended Defence filed on 6 March 2017. Ms West says that she was not present on 1 April 2019, and that she first received the amended application on the 2 April 2019. In any event, she has come along today with knowledge of it and has made submissions about it.

5. [5]
   At the start of the hearing, Secure Funding Pty Ltd made submissions with respect to its application for summary judgment and for leave to bring it. Summary judgment was sought on the basis that Secure Funding Pty Ltd is entitled to recovery of possession under clause 19.3 of the mortgage. Clause 19.1 of the mortgage says:

“If you are in default and we choose to enforce this mortgage, we must give you a notice. (You must have been in default for one day or more before we may do this).  The notice must:

1. (a)
   state that you are in default; and

2. (b)
   specify a period of grace of at least 31 days.”

6. [6]
   Clause 19.3 of the mortgage states:

“During the period of grace given under clause 19.1, you are allowed to correct any default that can be corrected.  If you do not correct that default within that period or if there is a default that cannot be corrected, then, to the extent it is not already due for payment, the amount owing becomes immediately due for payment at the end of the grace period without further notice.  In addition, we may then do one or more of the following as well as anything else the law allows us to do as mortgagee:

1. (a)
   sue you for the amount owing; and

2. (b)
   take possession of the property (We may remove personal possessions and either abandon them or store them without being liable to you.  If we store them and you do not reclaim them within a reasonable time, we may dispose of them and use the proceeds towards paying the amount owing); and

3. (c)
   do anything an owner or receiver of the property could do, including improving, selling or leasing it; and

4. (d)
   appoint a receiver to do any of those things and anything else the law allows a receiver to do.”

7. [7]
   With respect to the application in so far as it sought summary judgment, Secure Funding Pty Ltd also noted that, under clause 23.3 of the mortgage, notices may be served on Ms West by post to her residential address. Under clause 23.5 of the mortgage, notices served by post are taken to be given on the date the notice bears or the date it would have been delivered in the ordinary course of post, whichever is the later. Secure Funding relied on a default notice that was served by post, sent to Ms West at her residential address on 2 July 2018. Secure Funding Pty Ltd in that respect relied on an affidavit of Ms Young which recorded that on 2 July 2018 at approximately 12.45pm she placed the documents into an express post envelope bearing a particular tracking number and addressed it to 21 Tecoma Road Palmwoods, sealed the envelope and placed the sealed envelope into an Australia Post registered express post box.

8. [8]
   The default notice that Secure Funding Pty Ltd relies on with respect to the summary judgment application stated:

“4. To remedy this default the Mortgagee requires you to pay to it the amount of $260,946.95, being the amount owing by you as specified in paragraph 3 and the costs and expenses associated with the preparation of the notice as specified in paragraph 4 within 31 days of the date of this notice (31 Days).”

9. [9]
   The notice went on to say the following:

“5. A subsequent default of the same kind referred to in paragraph 3 that occurs during the 31 Days may be the subject of enforcement proceedings without further notice if it is not remedied within the 31 Days.

6. Unless the requirements of this notice are complied with within 31 Days, the Mortgagee proposes to begin enforcement proceedings against you and to exercise a power of sale in respect of the land mortgaged by the Mortgage.

7. If you fail to comply with the requirements of this notice within 31 days, the Mortgagee may, at its option and without further notice to you, exercise its rights under an acceleration clause in the Credit Contract and require the total of all money owed to be payable in full.

8. The amount required to pay out the Mortgage, after the operation of the acceleration clause as at 10 May 2018 was $650,946.95.   This amount is increasing daily with interest, fees, costs and any other amount we may debit to your account under the Credit Contract. 

9. Repossession and sale of the land mortgaged by the Mortgage may not extinguish your liability to the mortgagee.” 

10. [10]
    The default notice was dated 29 June 2018. During the hearing, I drew Secure Funding’s attention to the above matters and queried whether Ms West had been afforded the 31 days required under clause 19.3 of the mortgage. Secure Funding Pty Ltd then withdrew its application for summary judgment.

11. [11]
    In the course of delivering these reasons, I have noticed that the default notice also says:

“In this notice date of this notice where it appears at paragraph 5 means the later of the date this notice bears or the date when it would have been delivered in the ordinary course of the post.”

12. [12]
    That paragraph was not drawn to my attention. As I have said, by that time Secure Funding Pty Ltd had withdrawn its application for summary judgment.

13. [13]
    The application having been withdrawn, it is unnecessary for me to further deal with that part of the application. The only parts of the application that remain for me to determine are the application for leave to amend the claim to confine the relief sought to recovery of possession of the land as a registered mortgagee, the application for strike out of paragraphs 14, 15, 16, 18, 20, 21 and 26 of Ms West’s Further Amended Defence and the application for costs of the strike out application and costs of the application in so far as it seeks leave to amend the claim.

14. [14]
    In terms of the question of whether Secure Funding Pty Ltd should be given leave to amend its claim, the starting point is the relief sought in the original claim. It was:

1. $407,399.31 as at 26 December 2012 as money due and owing under a loan agreement between Secure Funding Proprietary Limited and Ms West,

2. interest as at 26 December 2012 on the sum of $407,399.31 capitalised as provided in the loan agreement,

3. recovery of possession of the land as registered mortgagee under section 78 of the Land Title Act (1994) Queensland and under the terms and conditions of registered bill of mortgage number 709932656 given by Ms West in favour of Secure Funding Proprietary Limited in respect of land described in title reference 16832013 as lot 3 on RP206842, County of Canning, Parish of Mooloolah, situated at 21 Tecoma Road, Palmwoods, Queensland, 4555.

4. Costs.

15. [15]
    The proposed amendment to the claim seeks to limit the relief to recovery of possession of the land and costs. Pursuant to r 377 of the Uniform Civil Procedure Rules 1999, leave of the Court is required to amend an originating process.  The discretion to grant leave to amend a claim is informed by r 5 of the Uniform Civil Procedure Rules 1999.  Rule 5(2) states that:

“The rules are to be applied by the Court with the objective of avoiding undue delay, expense and technicality and facilitating the purposes of the rules.”

16. [16]
    The purpose of the rules is recorded in r 5(1), namely:

“To facilitate the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense.”

17. [17]
    Ms West resists the application for leave to amend the claim on the basis that the amendment would be extremely prejudicial to her. She submits that had Secure Funding Pty Ltd given a payout figure of $260,000 instead of $407,000 in October 2013, “We would not be in this nightmare of a litigation. I had the finance to get out from underneath them.” In support of her submission, Ms West refers to paragraph 27 of the decision of Justice Applegarth in Hartnett v Hynes [2009] QSC 225 where his Honour made the following observations:

“[27] The principles discussed by the High Court in Aon inform the exercise of the discretion to grant leave to amend a claim pursuant to UCPR 377 and the discretion to allow or direct a party to amend a claim or a pleading pursuant to UCPR 375.  I have already referred to some of these principles in discussing the operation of UCPR 5 in the case of amendments made without leave pursuant to UCPR 378 and the Court’s power to disallow such amendments or make directions concerning further amendment of a claim or a pleading in order to avoid prejudice to the other party and to comply with the rules of civil procedure and their purpose.  In the context of the present application and in respect of amendments to the claim or the statement of claim for which leave is required, the following principles assume importance:

1. An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation.

2. The discretion is guided by the purpose of the rules of civil procedure, namely the just and expeditious resolution of the real issues in dispute at a minimum of expense.

3. There is a distinction between amendments which are necessary for the just and expeditious resolution of “the real issues in civil proceedings” and amendments which raise new claims and new issues.

4. The Court should not be seen to accede to applications made without adequate explanation or justification.

5. The existence of an explanation for the amendment is relevant to the Court’s discretion, and “[i]nvariably the exercise of that discretion will require an explanation to be given where there is a delay in applying for amendment”.

6. The objective of the Court is to do justice according to law, and, subject to the need to sanction a party for breach of its undertaking to the Court and to the other parties to proceed in an expeditious way, a party is not to be punished for delay in applying for amendment.

7. Parties should have a proper opportunity to plead their case, but justice does not permit them to raise any arguable case at any point in the proceedings upon payment of costs.

8. The fact that the amendment will involve the waste of some costs and some degree of delay is not a sufficient reason to refuse leave to amend.

9. Justice requires consideration of the prejudice caused to other parties, other litigants and the Court if the amendment is allowed.  This includes the strain the litigation imposes on litigants and witnesses.

10. The point the litigation has reached relative to a trial when the application to amend is made is relevant, particularly where, if allowed, the amendment will lead to a trial being adjourned, with adverse consequences on other litigants awaiting trial and the waste of public resources.

11. Even when an amendment does not lead to the adjournment of a trial or the vacation of fixed trial dates, a party that has had sufficient opportunity to plead their case may be denied leave to amend for the sake of doing justice to the other parties and to achieve the objective of the just and expeditious resolution of the real issues in dispute at a minimum of expense.

12. The applicant must satisfy the specific requirements of rules, such as UCPR 376(4) where it seeks to introduce a new cause of action after the expiry of a relevant limitation period.”

18. [18]
    Ms West placed particular emphasis on principles 9 and 10. She submits that the Court has already made orders relating to a trial plan and that Secure Funding Pty Ltd should be ready to proceed to trial with the material they have, exclusive of any documents filed after December 2018. I accept that the principles outlined in Aon Risk Services Australia Limited v Australia National University [2009] HCA 27; (2009) 239 CLR 175 and r 5 of the Uniform Civil Procedure Rules 1999 are relevant.  I am satisfied that leave should be given as the amendment only involves the confinement of the relief sought.

19. [19]
    The next question for me to determine is whether parts of Ms West’s Defence should be struck out. As I have said, Secure Funding Pty Ltd seeks to strike out paragraphs 14, 15, 16, 18, 20, 21 and 26 of the Further Amended Defence filed by Ms West on 6 March 2017. The Court’s power to strike out under r 171 of the Uniform Civil Procedure Rules 1999 is to be used sparingly and only in clear cases: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129 to 130.  However, the Court ought not shrink from striking out a pleading which is defective because it does not disclose a reasonable defence.  A defence which is so obviously untenable that it cannot possibly succeed as a matter of law is one which is appropriate to be struck out.

20. [20]
    On 26 May 2017 I heard an application for summary judgment and in the alternative, an application to strike out parts of Ms West’s Further Amended Defence. I published my judgment with respect to that hearing, which is Secure Funding Pty Ltd v West [2017] QDC 169.  In that decision, I summarised the basis on which Ms West resists or had indicated an intention to resist Secure Funding Pty Ltd’s claim.  I found that a number of the bases relied on by Ms West had no real prospect of succeeding and that there was no need for a trial of those issues.  On 17 July 2017, corresponding paragraphs of Ms West’s Further Amended Defence that sought to make out those bases for the defence were struck out by order of me.

21. [21]
    The remaining issues can be characterised as the unjust transaction and loan application form allegations, a characterisation made by me in my earlier decision as well as the default notice allegation. The application for strike out relates to the unjust transaction and loan application form allegations. At paragraph 39 of my judgment of 23 June 2017, I described those allegations as follows:

“[39] …

6. (f)
   the loan agreement was unjust within the meaning of s 70(2) of the Consumer Credit Code and the plaintiff knowingly put the defendant into a worse financial position through the unjust contract (the “unjust transaction allegation”);

7. (g)
   the plaintiff, or a party acting as agent for the plaintiff, falsified the loan application form (the “loan application form allegation”;

…”

22. [22]
    The loan application form allegation formed part of broader allegations about the loan agreement being unjust, in that Ms West contends that at the time the loan was entered into, Secure Funding Pty Ltd, or its agent, knew particular things. Section 70 of the Consumer Credit Code was replaced by s 76 of the National Credit Code.  That section provides that if on the application of a debtor, mortgagor, or guarantor, the Court is satisfied that the relevant credit contract or mortgage entered into was unjust, the Court may reopen the transaction that gave rise to the contract mortgage, guarantee, or charge.  By s 77 of the Code, if the Court reopens the transaction, it may do a number of things, including:

1. Relieve the debtor from payment of any amount in excess of such amount as the Court considers to be reasonably payable;

2. Set aside either wholly or in part a mortgage given in connection with a transaction.

23. [23]
    Secure Funding Pty Ltd submits that by the clear terms of the statute, any suggestion that a credit contract, mortgage or guarantee is unjust within the meaning of the Code is a sword, not a shield, and that the Court’s jurisdiction to reopen an unjust transaction arises only upon the debtor, mortgagor, or guarantor applying for the transaction to be reopened under the provisions of the Code.

24. [24]
    It says that Ms West has made no such application for reopening, and instead, seeks to advance unjust transaction allegations as part of her defence of the plaintiff’s claim. At a review conducted by me following the delivery of judgment in 2017, I accepted that the unjust transaction allegation and the associated loan application form allegations are not proper defences, and if Ms West wishes to pursue the unjust transaction allegation, she ought apply for leave to bring it as a counter-claim. I spent some time explaining to Ms West what that might entail. I asked Ms West if she understood what I was saying. She indicated that she did. On that basis, I adjourned the application to strike out the part of the defence relevant to those allegations, pending the filing by Ms West, by 31 July 2017, of any application she wished to bring for leave to file a counter-claim to pursue the allegations.

25. [25]
    Nearly two years have passed since that time and Ms West has not taken any steps to pursue the unjust transaction allegation, either by way of an application for leave to bring a counter-claim in this proceeding, or by way of any other reopening application. I accept the submission by Secure Funding Pty Ltd that the allegations provide no tenable defence to Secure Funding’s claim, and that it is appropriate that the paragraphs that purport to raise the defence which is untenable at law be struck out.

26. [26]
    Secure Funding Pty Ltd further submits that Ms West’s conduct in failing to pursue the unjust transaction and loan application form allegations provides a clear basis for this Court to now conclude that she does not genuinely dispute the validity of the loan agreement and mortgage on the basis of her earlier unjust transaction thesis, and the just and expeditious determination of issues properly before the Court does not require that there be a trial of that issue. That submission does not go to the question that I need to determine, in terms of whether those paragraphs ought be struck out, which I find that they should be, but it is relevant to what further directions ought be made from here.

27. [27]
    I do not accept the submission, in light of things that Ms West has said today. It is apparent that Ms West still maintains her position with respect to the transaction being unjust and misunderstood her ability to make a counter-claim due to what she says were things that she was told by QPILCH. I will make an order in terms of the draft.