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  4. Perpetual Trustee Company Limited v Masswealth Pty Ltd (No. 2) - [2020] QDC 263

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Perpetual Trustee Company Limited v Masswealth Pty Ltd (No. 2)[2020] QDC 263

Perpetual Trustee Company Limited v Masswealth Pty Ltd (No. 2)[2020] QDC 263

DISTRICT COURT OF QUEENSLAND

CITATION:

Perpetual Trustee Company Limited v Masswealth Pty Ltd & Anor (No. 2) [2020] QDC 263

PARTIES:

PERPETUAL TRUSTEE COMPANY LIMITED ACN 000 001 007

(Plaintiff)

v

MASSWEALTH PTY LTD ACN 095 571 501 AS TRUSTEE FOR THE MASSWEALTH FAMILY TRUST

(First Defendant)

AND

ZOE TZIORAS MASSIS

(Second Defendant)

FILE NO:

3515 of 17

DIVISION:

Civil

PROCEEDING:

Application

ORIGINATING COURT:

District Court

DELIVERED ON:

9 October 2020 (ex tempore)

DELIVERED AT:

Brisbane

HEARING DATE:

9 October 2020

JUDGE:

Porter QC DCJ

ORDER:

  1. The Defendants' application filed 16 September 2020 be dismissed;
  2. The Plaintiff have judgment against the First Defendant and Second Defendant pursuant to rule 292 of the Uniform Civil Procedure Rules 1999 (Qld);
  3. The Plaintiff recover from the First Defendant possession of the property described as Lot 201 on Survey Plan 151078, Title Reference 50505718 being the land situated at Unit 201, 251 Varsity Parade, Varsity Lakes in the State of Queensland;
  4. The First Defendant and Second Defendant pay to the Plaintiff the sum of $793,239.95 calculated as at 21 September 2020; and
  5. The Plaintiff’s costs of and incidental to the action, including this application and any reserved costs, be paid by the First Defendant and Second Defendant on the standard basis.

CATCHWORDS:

PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES – SUMMARY JUDGMENT – where the Plaintiff agreed to advance $591,606.44 by way of loan to the First Defendant – where the First Defendant executed a Registered Bill of Mortgage over land in favour of the Plaintiff as security for the loan – where the First Defendant subsequently defaulted in payment pursuant to the provisions of the Loan Agreement – where the First Defendant continued to occupy the secured land and has failed to give possession of the secured land to the Plaintiff – whether summary judgment should be granted in favour of the Plaintiff mortgagee for loan debt and recovery of possession of land

BANKING AND FINANCE – BANKS – LIABILITIES OF BANKS – FRAUD, UNDUE INFLUENCE AND UNCONSCIONABLE CONDUCT MORTGAGOR – where the Defendants allege, inter alia, that the Plaintiff engaged in unconscionable conduct in entering into the loan and guarantee transaction with the Defendants and in taking the mortgage to secure the loan – where the Defendants allege they were at a special disadvantage – whether the urgent nature of the Defendants’ financial need, lack of assistance or explanation, misleading advice and inequality of bargaining power (if established) amounts to a special disadvantage – where the Defendants allege the Plaintiff was recklessly indifferent to facts which would indicated that the Defendants were unable to conserve their own interests – whether defects with the loan agreement would put the Plaintiff on notice of special disadvantage – whether the Plaintiff should have made reasonable enquiries – whether the Plaintiff knew of the special disadvantage (if any) – whether the loan agreement and mortgage should be set aside

LEGISLATION:

Land Title Act 1994 (Qld) s. 78

National Consumer Credit Protection Act 2009 (Cth) s. 76

Property Law Act 1974 (Qld) s. 57

CASES:

Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175

Bank of Western Australia Limited v Zhanming Luo [2010] NSWSC 733

Barker v GE Mortgage Solutions [2013] QCA 137

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447

Expense Reduction Analysts Group Pty Ltd & Ors v. Armstrong Strategic Management and Marketing Pty Limited & Ors (2013) 250 CLR 303

Kowalczuk v Accom Finance (2008) 77 NSWLR 205

Perpetual Trustee Company Limited v Masswealth Pty Ltd & ors [2020] QDC 253

COUNSEL:

B A Sim (sol) for the Plaintiff

Z Massis (self-represented) for the First and Second Defendant

SOLICITORS:

Gadens Lawyers for the Plaintiff

First and Second Defendant self-represented

Introduction

  1. [1]
    On the 17th of September 2020 I entered a judgment for the Plaintiff (Perpetual) and three Defendants by counterclaim on their defences to counterclaims by the Defendants against them: Perpetual Trustee Company Limited v Masswealth Pty Ltd [2020] QDC 253.  On that date I reserved the question of Perpetual’s claim for summary judgment on the loan facility and mortgage and for possession under the mortgage and the Defendant’s cross-application for summary judgment on their defence. 
  1. [2]
    After adjourning those applications at the Defendants’ request on a further occasion (apparently to obtain some legal assistance[1]), those applications are now before the Court.  In particular, this is an application by Perpetual as lender for summary judgment on its claim for money lent to the First Defendant (Masswealth) and guaranteed by the Second Defendant (Ms Massis) and for possession of property given as security for the loan under a registered mortgage pursuant to s. 78 of the Land Title Act 1994 (Qld).  Perpetual also seeks judgment on the guarantee on the loan facility given by Ms Massis. As I have said, Ms Massis and Masswealth’s summary judgment applications are also before the Court. 
  1. [3]
    The test for summary judgment is set out in the words of the relevant rules.  The matters to be established are that there is no real prospect of success on the defence or the claim respectively and there is no need for a trial.  The cases have been referred in Ms Sim’s outline for Perpetual.  I am acutely conscious of how serious it is to deprive a party of the opportunity to advance their case at trial.  However, in effect, the authorities direct that the task for the Court is to apply the words of the rules. 
  1. [4]
    The matters necessary to establish a prima facie entitlement to judgment by Perpetual against both parties are set out in their statement of claim.  With admirable frankness, all the allegations in the statement of claim are admitted in the current defence except some conclusory allegations in paragraphs 16 to 20.  That means, as the authorities identify, an evidential onus swings to the Defendants to persuade the Court that although Perpetual has made out its prima facie entitlement to summary judgment for possession and for its money claims, nonetheless the Defendants have a real prospect of defending the claim on defences that they raise.  However, I keep firmly in mind that, ultimately, it is for the Plaintiff to persuade me of the two statutory preconditions to entering summary judgment and that it is ultimately for the Plaintiff to persuade me to exercise the residual discretion to do so. 

Perpetual’s claim

  1. [5]
    Perpetual’s case, as I said, is sufficiently set out in the allegations contained in paragraphs 1 to 21 of the statement of claim, which provide:
  1. The plaintiff is a company duly incorporated according to law.
  1. The first defendant is the registered proprietor of all that piece or parcel of land described as Lot 201 on Survey Plan 151078, being the whole of the land contained in Title Reference Number 50505718 (“Land”).

LAND AND MORTGAGE

  1. By an agreement dated on or about 1 May 2008 (“Loan Agreement”):
  1. the plaintiff agreed to advance to the first defendant the sum of $524,610, by way of loan (“Principal Sum”); and
  1. the first defendant agreed to repay the Principal Sum together with interested calculated in accordance with the terms of the Loan Agreement.
  1. On or about 30 August 2007, in the State of Queensland, the first defendant, as mortgagor, executed in favour of the plaintiff, as mortgagee, Registered Bill of Mortgage Number 711009049 (“Mortgage”) over the Land.
  1. The first defendant, upon execution of the Mortgage, undertook to pay to the plaintiff the moneys secured thereby together with interest as therein provided.
  1. It was a term of the Loan Agreement and the Mortgage that in the event of default by the first defendant thereunder, that:
  1. upon the giving by the plaintiff of a notice of default; and
  1. upon the failure by the first defendant to comply with the said notice,

the total amount owing under the Loan Agreement and secured by the Mortgage would become immediately due and payable and the plaintiff would be entitled to possession of the Land.

  1. The plaintiff advanced the Principal Sum to the first defendant.

DEFAULT

  1. The first defendant defaulted in payment pursuant to the provisions of the Loan Agreement and Mortgage and remains in default as at the date hereof.
  1. By a notice in writing dated 4 July 2017 and posted to the first defendant on or about that date, the plaintiff gave the first defendant notice of default of payment of moneys being principal and interest then due and owing under the Loan Agreement and Mortgage (“Default Notice”).
  1. The first defendant failed to pay the said principal moneys and interest set out in the Default Notice.
  1. The first defendant has continued to occupy the Land and has neglected, failed or refused to give possession of the Land to the plaintiff.

THE GUARANTEE DEBT

  1. On 30 August 2007, the second defendant, in consideration of the terms and conditions set out therein, executed in favour of the plaintiff a guarantee and indemnity in writing (“Guarantee”) by which the second defendant guaranteed to the plaintiff, payment of all amounts owing to the plaintiff, at any time under the Loan Agreement.
  1. It was a further term of the Guarantee that the second defendant agreed to pay, to the plaintiff, upon request, any amounts which the first defendant did not pay to the plaintiff, when due under the Loan Agreement.
  1. By notice in writing dated 4 July 2017 and posted to the second defendant on or about that date, the plaintiff demanded payment of the moneys owing by the second defendant in pursuance of the Guarantee as at that date (being the amount then due and owing by the first defendant under the Loan Agreement).
  1. The second defendant has failed or refused to pay the sum demanded.

DEBT AND POSSESSION

  1. As at 13 September 2017, the first defendant was, and remains as at the date hereof, indebted to the plaintiff in pursuance of the Loan Agreement and Mortgage in the amount of $591,606.44 (“Loan/Mortgage Debt”) together with interest thereon, as hereinafter described.
  1. The plaintiff claims interest in pursuance of the Loan Agreement and Mortgage on the Loan/Mortgage Debt at the rate of 7.89% per annum or $127.88 per day, from 13 September 2017, to the date of payment.
  1. As at 13 September 2017, the second defendant was, and remains, as at the date hereof, indebted to the plaintiff in pursuance of the Guarantee in the sum of $591,606.44 (“Guarantee Debt”).
  1. The plaintiff claims interest on the Guarantee Debt at the rate of 7.89% per annum or $127.88 per day from 13 September 2017, until the date of payment.
  1. In the premises and/or pursuant to the provisions of s 78 of the Land Title Act 1994 the plaintiff is entitled to possession of the Land.
  1. The unimproved value of the Land does not exceed $750,000.00
  1. [6]
    As I have said, all those allegations to paragraph 15 are admitted. 

No real prospect of establishing the unconscionable conduct defence

  1. [7]
    The only material defence advanced arises from the Defendants’ allegations that the loan agreement and the mortgage were obtained in circumstances where they should be set aside for unconscionable conduct in equity.  The allegations to make good that proposition are directly articulated in paragraph 7C to 7I of the defence and relied upon by way of defence to paragraphs 16 to 21.  No other basis to contest those paragraphs of the statement of claim is advanced. 
  1. [8]
    I say the only material defence advanced because there is another defence advanced which is raised in reliance on non-compliance with the National Credit Code.  That is articulated in paragraphs 7J to 7M.  However, those provisions only apply in consumer loans and the relevant loan in this case was declared by the Defendants, and in fact was, an investment loan.  That matter was raised by me on the last occasion which led to the judgment on the counterclaims and no submission has been made to the contrary today.  That ground of defence has no real prospect of succeeding.  In fact, it has no prospect of succeeding at all. 
  1. [9]
    The live question on this application based on the current pleadings, therefore, is whether the unconscionable conduct defence has a real prospect of succeeding.  It is convenient to set out the central allegations relied upon in the defence:

The loan transaction was unconscionable

7C. The defendants were at a special disadvantage with respect to entry into the Loan Agreement, the Mortgage and the Guarantee because the following factors affected their ability to protect their own interests and placed them at a serious disadvantage vis a vis the plaintiff:

  1. the urgent nature of the defendants’ financial need;
  1. the lack of assistance or explanation provided to the second defendant where assistance or explanation was necessary;
  1. the misleading information provided to them by Mr D’Alessandro;
  1. the inequality of bargaining power.

7D. The plaintiff was recklessly indifferent to facts which would indicate that the defendants were unable to conserve their own interests, in circumstances where loan application contained the following defects:

  1. the loan application incorrectly stated that the second defendant was the applicant;
  1. the Borrower’s Certificate signed by the second defendant was inconsistent with the Legal Certification provided with the Guarantee;
  1. the Loan Application contained internally inconsistent information.

Particulars

The annual income for “applicant 1” at page 3 of the application is recorded as: Gross Salary/Wages - $82,000, Rental Income - $78,500 = Gross Profit-$180,000

The declaration of financial position records that the gross income for “applicant 1” is $180,000 and that rent received is $26,000 so that the total income = $206,000

7E. The matters out line at paragraph 7D would indicate to a reasonable lender that it should make enquiries as to the circumstances of the defendants.

7F. The plaintiff could have ascertained by reasonable enquiry at the time of entry into the Loan Agreement that the first defendant could not pay in accordance with its terms without substantial hardship.

7G. The plaintiff took advantage of the fact that the defendants were vulnerable by perfecting the transaction.

7H. In the circumstances, the Loan Agreement, the Mortgage and the Guarantee ought to be set aside.

7I. Further, and in the alternative, the defendants are entitled to be relieved from payment of such amount in excess of an amount that the Court considers to be reasonable payable.

  1. [10]
    The allegations in paragraph 7C are explained by earlier allegations articulated in paragraphs 2A to 7B.  Those earlier paragraphs narrate financial difficulties that the Defendants faced which forced them to refinance; that Mr D’Alessandro and his company acted as mortgage broker for the Defendants to obtain refinance; that he prepared the loan application which, as subsequently alleged, was in some respects erroneous; that the loan he arranged was with Homeloans, a mortgage manager, and Perpetual; that the loan was on disadvantageous conditions he did not disclose; and that as a consequence the Defendants ultimately could not sustain their obligations.
  1. [11]
    On this application it should be noted that I did not perceive Perpetual as contending that those background facts were not arguably made out on the material that was relied on by Ms Massis.  The real question was whether the allegations in paragraph 7C to 7I made out an arguable defence.  Also, in respect of that, the affidavits filed in support of the current pleading by Ms Massis, particularly the affidavit sworn 7 October 2020, did assert generally the factual matters identified in paragraph 7C and 7D. The real question in this case is whether there is a real prospect of defending the claim at trial based on those matters even if they were proven.  There are real difficulties with those matters establishing an arguable defence.
  2. [12]
    There appear to be three substantive difficulties.  The first arises from paragraph 7C. In my respectful view, the matters pleaded in paragraph 7C either alone or together, even if proved according to their terms, cannot as a matter of law amount to a special disadvantage.  That is especially true of 7C(a) and (d): an urgent need for financial assistance and an inequality of bargaining power.  As Justice Mason said in Amadio, the mere circumstance there was some difference in the bargaining power of parties is not enough.  The disabling condition must be one that seriously affects the ability of the innocent party to make a judgment as to his or her own best interests.[2]
  1. [13]
    Paragraph 7C(c) has a similar problem.  It is not a disabling condition that misleading information was provided by Mr D’Alessandro.  It is conduct, be it negligent or misleading, by Mr D’Alessandro.  I have already dismissed the counterclaim, based on the assertion that Perpetual is vicariously liable through Homeloans for Mr D’Alessandro’s conduct, even if that conduct could be proved.  It seems to me that it cannot be the case you are at a special disadvantage of the kind articulated in the authorities simply because your broker has not given you proper information about the loan that he proposes. 
  1. [14]
    7C(b) of the defence,  (the allegation of the lack of assistance or explanation provided to the Defendant where assistance or explanation was necessary) comes the closest to amounting to a special disadvantage. The real question is why the assistance or explanation was necessary.  The problem is that Ms Massis does not swear to any facts which put her in a position where she had some special disability which gave rise to that need for assistance or explanation.  Indeed, the evidence is to the contrary.  On the material, she appears quite capable in the English language and I have observed that in her appearing before me.  The evidence demonstrates some experience investing in property.  She worked in a solicitors’ firm, although not as a solicitor, but in an accounting role.  Her affairs were not those of a naïve person, as is demonstrated by the loan applications and so on. 
  1. [15]
    Thus, while 7C(b) could in theory give rise to a special disadvantage if the reason for the assistance or explanation was one that fell within that description, the evidence discloses none.  Indeed, as I have said, it tends to disclose quite the contrary.  I note in that regard at paragraphs 3, 4 and 5 of Ms Massis affidavit, (CD 63), she says:

During the period September 2002 to December 2012 I was employed as a part-time bookkeeper at the law firm Hardham Dalton & Sundberg. 

I was at the office performing my duties on or about 30 August 2007 and I asked Bruce Sundberg, an Australian legal practitioner at the law firm Hardham Dalton & Sundberg to witness my signature on loan documents.

I did not think it necessary to obtain legal advice or any time prior to this from any legal practitioner before signing the loan documents as they were with the existing mortgage broker and existing mortgagee Perpetual which had a registered mortgage on the title of the property. 

  1. [16]
    Accepting this evidence on its face, it is plain that Ms Massis was not at some special disadvantage that led to her to need special advice.  She made an informed decision in a rational way about that matter.  It seems to me that on the evidence before me none of the matters in 7C amount to a special disadvantage, that is, one that seriously affects the ability of an innocent party to make a judgment as to their own interests. 
  1. [17]
    As to paragraph 7D, I have already found in my previous judgment that there is no prospect of the Defendants making out that Mr D’Alessandro and his company were  agents of Perpetual so that is not a basis of attributing knowledge to Perpetual and, indeed, the defence does not try to do so. 
  1. [18]
    The defence in 7D does not, in any event, allege actual knowledge by Perpetual of the matters it describes, rather the allegation is that the Plaintiff was recklessly indifferent to facts which would indicate that the Defendants could not conserve their own interests in circumstances where the loan application contained the defects identified in paragraphs 7D(a) to (c).   As an allegation of material fact designed to attract a cause of action for unconscionable conduct in equity, it seems a little odd using the language of common law fraud.  However, no submission was made to me by Perpetual that this articulation of the mental element was insufficient to arguably attract the equity.  It is far from obvious that it is not.  Justice Mason observed in Amadio[3]:

As we have seen if A having actual knowledge that B occupies a situation of special disadvantage in relation to an intended transaction so that B cannot make a judgment as to what is in his own interests, takes unfair advantages of his (A’s) superior bargaining power or position by entering into that transaction, his conduct in so doing is unconscionable and if instead of having actual knowledge of that situation A is aware of the possibility that that may exist or is aware of facts that would raise that possibility in the mind of any reasonable person, the result will be the same.

  1. [19]
    The fact that actual knowledge is not alleged therefore does not seem to be fatal. 
  1. [20]
    Rather, the fatal problem with that allegation is that the three matters pleaded do not seem to me to rationally give rise to the conclusion that they would indicate to Perpetual that the Defendants were unable to conserve their own interests.
  1. [21]
    7D(a) correctly identifies that the loan application was seemingly executed by Ms Massis as the applicant, not Masswealth (Masswealth being, ultimately, the party that borrowed the money).  However, the evidence from Perpetual shows that the document in its records reversed that situation. On a summary judgment, I should assume that Ms Massis signed the document in the form she swears to and it is unclear as to when the identification of the applicant was changed on the version exhibited in Perpetual’s material.
  1. [22]
    However, it seems to go nowhere.  The loan application was sloppy in that regard, no doubt, as was the financial summary attached to it, but that is all that any person, I think, reasonably, would draw from that situation. That the application had been filled out sloppily and whether it correctly identified the company or the sole director as the applicant, are hardly matters of any great significance in a loan application of this kind. 
  1. [23]
    The second point, 7D(b), asserts the borrower’s certificate signed by Ms Massis was inconsistent with the legal certification provided with the guarantee. Now, that is literally true.  However, again, this would not communicate anything that would cause any alarm whatsoever, it seems to me, to any lender. 
  1. [24]
    The borrower’s certificate was in the name of the company.  The guarantor’s certificate was in respect of Ms Massis personally.  There are any number of reasons why the view might have been taken at the time that the company did not seek legal advice and Ms Massis personally did.  What is far more important is that Ms Massis signed borrower’s certificate knowing it would go to the ultimate lender, and she affirmed various matters which, in broad terms, stated an understanding of the transaction and ability of the company to take care of its own interests.  Further, the guarantor’s certificate is signed by a solicitor and he certified that he gave, in effect, independent advice to Ms Massis’ about the key aspects of the guarantee of transaction. 
  1. [25]
    Far from indicating that to the Plaintiff that the Defendants were unable to conserve their own interests, these two documents communicate unequivocally that they could.  Ms Massis’ submitted to me from the bar table that Mr Sundberg’s certification was false; that he provided no such advice and no such certification.  She, frankly, told me that she had not spoken to him recently about that assertion.  She indicated that she could get a statement from him to that effect, but as I said, had not spoken to him recently about it.  I think it highly, highly improbable that Mr Sundberg would give a statement in those terms, as it would arguably demonstrate unprofessional conduct, even professional misconduct.  But even if he would, that does not change the fact that Perpetual as the ultimate lender received a certificate which was, in fact, signed by an Australian legal practitioner and, in fact, communicated that he had explained the transaction to Ms Massis.
  1. [26]
    The last matter relied on as establishing the necessary state of mind in Perpetual is that the loan application contained internally inconsistent information.  It is certainly true that it did.  Treating the loan application as including the Declaration of Financial Position document, it can be seen from the attachments to Ms Massis’ affidavit filed 7 October 2020 (CD 76) that the figures for income were mistaken. 
  1. (a)
    Page 3 of that exhibit shows a lamentable inability in a mortgage broker to add up, with the figures $82,000 plus $78,500 being summed to the total of $180,000, not $160,500. 
  1. (b)
    Further, that number is in respect of “applicant one” who, on the face of this document, was Ms Massis. 
  1. (c)
    The statement of financial position then swaps around the applicants, continues the $180,000 and then adds $26,000 for current rent received notwithstanding that the earlier annual income entry had a provision of $78,500 for rent.  Now, there might be an explanation for that, but it is not obvious. 
  1. (d)
    A further amount was then added as Ms Massis’ income of $82,000 which was co-incidentally the $82,000 already allocated to the figure of $180,000 earlier in the application.  Interestingly, Ms Massis’ rent figure in the financial position document, added to the $26,000, gives the rental figure of $78,500 on page 3.
  1. [27]
    It is obvious on its face that the application appears to overstate the capacity of Masswealth and Ms Massis as guarantor together to service the loan (or at least is ambiguous).  That is, undoubtedly, sloppy at the least.  However, I do not see how one could possibly conclude that that kind of inaccuracy leads to the conclusion that indicated to the Plaintiff that the Defendants were unable to conserve their own interests at all in the sense of attracting a special disadvantage of the kind necessary to invoke the equity relied upon. 
  1. [28]
    Ms Sim submitted to me that it would not in any event, because other information was provided to support the loan. I think that other information was pretty thin. There was a valuation that showed that the LVR would be in the order of 90 per cent and there was a “loan servicing history” that extended back for six repayments for one loan and three for another.  There is certainly a good argument on the material that was put before me on this application that Perpetual or its agent for the purposes of assessing the loan, Homeloans, I suspect, was not careful in assessing the prospect of Masswealth being able to repay the advance.  That is a different thing entirely from an arguable inference that Masswealth and Ms Massis were unable to conserve their own interest or were at some kind of special disadvantage. 
  1. [29]
    I do not think the matters in paragraph 7D even if proved could give rise to the conclusion that the Plaintiff was fixed with any knowledge relevant in equity of any special disadvantage. 
  1. [30]
    That seems to almost be conceded in the pleading because it goes on in 7E and F not to allege that the matters in 7D would not have disclosed to the Plaintiff the prospect of some special disadvantage, but rather to allege that if the Plaintiff had made more inquiries, it would have found that Masswealth could not pay in accordance with the terms of the loan agreement without substantial hardship.  That allegation appears to have been inspired by s. 76(2)(l) of the National Credit Code. 
  1. [31]
    Section 76(1) provides a power to reopen unjust transactions and provides the Court may, if satisfied on the application of a debtor, mortgage or a guarantor that in the circumstances relating to the relevant credit contract, mortgage or guarantee at the time it was entered into, the contract, mortgage or guarantee or change was unjust, reopen the transaction that gave rise to that contract, mortgage or guarantee or change.  Section 76(2) identifies a non-exhaustive list of matters the Court can take into account in determining whether the circumstances relating to a particular transaction were unjust. 
  1. [32]
    Section 76(2)(l) identifies one such matter, being whether at the time of the contract, mortgage or guarantee the credit provider knew or could have ascertained by reasonable inquiry the debtor could not pay in accordance with its terms or not without substantial hardship.  The coincidence in the language cannot be a coincidence, but the use of the National Credit Code language does point to the conclusion that the underlying premise of the case in the defence is that Perpetual, if it had made proper inquiries, would have found that Masswealth (and presumably Ms Massis) could not repay the loan without substantial hardship.  That is not an unconscionable conduct case in equity.  It does not give rise to a right to set aside the agreement, the mortgage or the guarantee where the National Credit Code does not apply. 

Imprudent lending as a potential defence?

  1. [33]
    What really seems to be the problem that the defence is stretching or struggling to articulate is that it is a case of so-called ‘improvident lending’.  (I do not call it asset lending because the LVR was so high that it would not have been a particularly wise asset lending decision in any event.)  But it is certainly arguable on the material before me that there is a problem with the prudential basis on which the loan was advanced by Perpetual, whether the analysis was done by Perpetual or by somebody else.  Perpetual’s submissions in writing did not grapple with this, perhaps because it was not perceived as something that had to be dealt with.  I am conscious, however, that this is a summary judgment application, particularly one which, although Ms Massis has had some assistance from somebody, is being conducted by a litigant in person on their own account.
  1. [34]
    I considered the possibility that I ought perhaps to strike out the unconscionable conduct case, and give leave to file a defence defending solely on the basis of the so-called improvident lending.  I should say that my inference that improvident lending is the real complaint is confirmed by some of Ms Massis’ own evidence.  I note, in particular, Ms Massis’ affidavit of 7 October 2020 (CD 75) in paragraph 6 and 7, where Ms Massis alleges the Plaintiff failed to exercise due diligence to assess the loan and that the Plaintiff failed in responsible lending.
  1. [35]
    There is no doubt that this litigation is difficult for Ms Massis and she has a grievance against many people associated with this transaction, but as on previous occasions she was able nonetheless to advance reasonable arguments and not exaggerate or gild the lily because of her sense of grievance and she is to be commended for that. 
  1. [36]
    Be that as it may, I have got to apply the law and here I thought considerably about whether I should give leave the defendants to try and articulate a case on that basis.  The problem, in my respectful view, is that to do so would be pointless.  At common law, a bank does not owe a duty of care to a customer except in very narrow circumstances that certainly do not apply here – mostly where a bank has embarked on provision of advice.  I refer to Justice Einstein in the New South Wales Supreme Court, Bank of Western Australia Limited v Zhanming Luo [2010] NSWSC 733 at [71] to [73]. 
  1. [37]
    Those of us who practiced during the wash-up from the global financial crisis are aware, of course, of the capacity for the Banking Code of Practice to give rise to a contractual duty of the kind which might be able to be articulated by the Defendants in this case.  The matter was not addressed in submissions by either party.  However, the Banking Code of Practice is not referred to in any of the facility documents in this case and so far as I am aware, the suggestion that in 2007 the existence of the Banking Code somehow meant that the terms of it were implied at law or by some other process has never being established.  There is also the other question of whether Perpetual ever signed up to the Banking Code of Practice.  Ms Sim said something about that from the bar table which I did not think it was appropriate to act upon but, in any event, it is irrelevant. 
  1. [38]
    The Banking Code of Practice is not incorporated into the facilities and in the absence of it I cannot see any argument that Ms Massis has a real prospect of succeeding in arguing that Perpetual was under some legal duty to the Defendants to, in their interests, exercise reasonable care in assessing the prudential basis upon which the loan was advanced.  I emphasise that the material on that point was not complete before me and, frankly, given how long ago this happened one might doubt if it ever could be made complete. (Although I did not mention this in my oral reasons, one might also think such a claim might be statute barred.  The claim would accrue on breach which would have been in 2007 and the proceedings were not commenced until 2017).  But even accepting the possibility which appears on the documents as I have said, that it was an imprudent loan, I do not see any real prospect of defending the case on that basis in the absence of identification of a legal obligation owed to the Defendants by Perpetual not to advance the loan unless a proper prudential basis existed. 
  1. [39]
    It is worth adding that even in the context of the National Credit Code, it has been held that the mere fact that someone was not able to afford a loan has been held to be an insufficient basis to find a loan to be unjust.  I refer to Barker v GE Mortgage Solutions [2013] QCA 137 at [72] and Kowalczuk v Accom Finance (2008) 77 NSWLR 205 at [99] referred to in Barker at [28].  I should add before I leave that matter that in any event the case as currently pleaded is based on unconscionable conduct.  As I have said, I do not consider that there is any real prospect of making out that the facility documents should be set aside on the basis of unconscionable conduct.
  1. [40]
    A claim for negligent or irresponsible or imprudent lending, unlike an unconscionable conduct case, would not give rise to a right to set aside the transactions in any event.  It would give rise to a common law claim for damages on the assumption that it arose by reference to a breach of a contractual term or tortious duty or perhaps some kind of estoppel that was dealt with as a contractual term.  I note that no such claim is pleaded.  Ms Massis’ 16 September affidavit arguably attempts to particularise the loss from such a claim.  However, it is one thing to say what the losses were from a transaction.  It is quite another to plead that the imprudent lending would have caused those losses.  Causation, obviously, is not pleaded.  It is not even suggested. 
  1. [41]
    On the premise of the Defendants’ case, the Defendants were not able to meet their loans in any event.  It is far from clear to me that causation could be made out to demonstrate substantial damages. It is also not irrelevant to this point that the matter remains unpleaded despite the various opportunities that have existed for the Defendants to plead their case. 
  1. [42]
    True it is the defences, I think, largely remained the same as the counterclaim evolved, but this is a case where Perpetual have come here on numerous occasions to have the matter dealt with and as is made clear in Aon[4] and Armstrong,[5] there is not an absolute right to put your case.  Natural justice calls for a reasonable opportunity to put your case and I think in case like this, that point has been reached for the Defendants especially given the speculative and weak nature of any Defence which could be articulated in any event.

Discretion should be exercised to grant judgment

  1. [43]
    There remain two matters to deal with.  The Defendants urge me not to order summary judgment so that disclosure could be ordered.  True it is that there will be cases where even though a case on the current evidence and current pleadings appears to have no real prospect of succeeding, one should nonetheless dismiss the application because although there might not be demonstrably a need for a trial, one could not be confident of that until disclosure had been completed.  In this case, however, I am not persuaded that there is anything to be achieved on that front for these reasons:  the unconscionable conduct case, in my respectful view, is hopeless.  Further, the events and facts that relied upon really do not touch Perpetual itself or, indeed, Homeloans.  They involve dealings with Mr D’Alessandro and his company.
  1. [44]
    It seems unlikely to me there is any prospect that disclosure will improve the unconscionable conduct case. There is a difficulty, I suppose, in respect of the possibility of an imprudent lending case in that it might be possible for Perpetual or its agent, Homeloans, to produce a lending file which might tend to add to the evidence that this was not a prudent loan.  That, of course, is pointless if there is not some legal duty of Perpetual which it owed to the Defendants to investigate and only make a prudent loan and, as I have said, no basis for that has been identified and I do not believe there is one.  Disclosure in that context, even if it tended to show that it was an imprudent loan, would be futile.  Accordingly, I am not inclined to adjourn the case on that basis. 
  1. [45]
    I would add, too, that no specific documents that could assist were identified by Ms Massis.  She is not to be criticised for that, but it is to be noted that that argument was advanced it seems by the person who gave her legal assistance in preparing her submission.  Their attempt to articulate what documents should be produced in paragraph 23 of the Defendants’ submissions appeared to go only to that question, that is, the question of the prudence of Perpetual lending the money.  They did not seem to be directed at making out the unconscionability case. 
  1. [46]
    The last point to consider is a potential dispute about the amount owing.  Ms Massis took me to the loan account statements which are contained in an affidavit of a Mr Laubhan at CD 12 at pages 32 and following.  Ms Massis pointed out that at pages 43 – 44 there is a further loan which started in March 2017 with a balance of $144,309.98.  She told me from the bar table that Judge Ryrie on a previous occasion had queried that.  Ms Sim for Perpetual took me to page 40 of Mr Laubhan’s affidavit. The right-hand column 30 November 2017 shows a credit to the loan account for the initial advance of $144,000 and an equivalent debit to the other account on the same date.  She submitted to me that this revealed that the second facility involved a paying down of this facility and an allocation of that amount to another facility.  That, frankly, appears to be what happened.  I also have before me a prima facie evidence certificate under the mortgage which is evidently, plainly, from those figures premised on that amount being part of the loan. 
  1. [47]
    Ms Massis submitted to me that Perpetual had never addressed Judge Ryrie’s query.  Whatever might have happened back then, it is clear enough to me that the evidence discloses that that further facility was just part of the initial facility amount. 
  1. [48]
    There is otherwise an affidavit from Mr Graham Horn, who exhibited a certificate under the mortgage that the amount due was $793,293.95 along with interest accruing at a certain rate.  Those clauses in mortgages are by s. 57 of the Property Law Act 1974 (Qld) declared to be prima facie evidence only, however, the number does not look unusual to me given the amount in the detailed facility and I can see no good reason to reject the certificate in whole or in part. 
  1. [49]
    For those reasons I order summary judgment on Perpetual’s claim in the amount of $793,293.95 and order that Perpetual recover possession of the Varsity Lakes property, being the land described as lot 201 on survey plan 151078, being the whole of the land in title reference 50505718.
  1. [50]
    I therefore dismiss the summary judgment application on the defence. 
  1. [51]
    Having heard submissions on costs by the parties, I also order that the Defendants pay Perpetual’s costs of the proceedings on the standard basis.

Footnotes

[1] One of the affidavits of Ms Massis sworn 7 October and the outline of argument relied upon on this application do indeed appear to have been the result of some legal assistance.

[2] See Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 462 per Mason J

[3] (1983) 151 CLR 447 at 467

[4] Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175

[5] Expense Reduction Analysts Group Pty Ltd & Ors v. Armstrong Strategic Management and Marketing Pty Limited & Ors (2013) 250 CLR 303

Close

Editorial Notes

  • Published Case Name:

    Perpetual Trustee Company Limited v Masswealth Pty Ltd & Anor (No. 2)

  • Shortened Case Name:

    Perpetual Trustee Company Limited v Masswealth Pty Ltd (No. 2)

  • MNC:

    [2020] QDC 263

  • Court:

    QDC

  • Judge(s):

    Porter QC DCJ

  • Date:

    09 Oct 2020

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175
2 citations
Jump To
Cite 1 - (2009) 239 CLR 175
Cite 2 - (2009) 239 CLR 175
Bank of Western Australia Ltd v Phil Zhanming Luo [2010] NSWSC 733
2 citations
Jump To
Cite 1 - [2010] NSWSC 733
Cite 2 - [2010] NSWSC 733
Barker v GE Mortgage Solutions Limited [2013] QCA 137
2 citations
Jump To
Cite 1 - [2013] QCA 137
Cite 2 - [2013] QCA 137
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
3 citations
Jump To
Cite 1 - (1983) 151 CLR 447
Cite 2 - (1983) 151 CLR 447
Cite 3 - (1983) 151 CLR 447
Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303
2 citations
Jump To
Cite 1 - (2013) 250 CLR 303
Cite 2 - (2013) 250 CLR 303
Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205
2 citations
Jump To
Cite 1 - (2008) 77 NSWLR 205
Cite 2 - (2008) 77 NSWLR 205
Perpetual Trustee Co Ltd v Masswealth Pty Ltd [2020] QDC 253
2 citations
Jump To
Cite 1 - [2020] QDC 253
Cite 2 - [2020] QDC 253

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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