National Australia Bank v McBride
[2011] QSC 52
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- Unreported Judgment
- National Australia Bank v McBride[2011] QSC 52
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National Australia Bank v McBride[2011] QSC 52
National Australia Bank v McBride[2011] QSC 52
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO/S: | |
Trial Division | |
PROCEEDING: | Claim |
ORIGINATING COURT: | |
DELIVERED ON: | 28 March 2011 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 8 March 2011 |
JUDGE: | McMurdo J |
ORDER: |
|
CATCHWORDS: | CONSUMER CREDIT – CREDIT PROTECTION – REGULATED CONTRACTS AND REGULATED MORTGAGES – ENFORCEMENT AND TERMINATION – OTHER MATTERS – where the plaintiff bank lent monies to the first defendant secured by a mortgage – where the second defendant guaranteed the loan – where the defendants defaulted in paying what was due under the loan – whether summary judgment for recovery of possession of the property should be granted to the plaintiff bank Consumer Credit Code, s 80, s 81, s 84 and s 85 400 George Street (Qld) Pty Ltd v BG International Ltd [2010] QCA 245, distinguished General Credits (Finance) Pty Limited v Fenton Lake Pty Ltd [1985] 2 Qd R 6, applied |
COUNSEL: | SA Angove (sol) for the plaintiff |
SOLICITORS: | Flower & Hart Lawyers for the plaintiff |
- In 2007, the plaintiff bank lent $708,000 to the first defendant, Mr McBride. The loan was guaranteed by the second defendant, Mrs McBride, and was secured by a mortgage over the house owned by both of them. The bank’s case is that Mr McBride, and in turn Mrs McBride, defaulted in paying what was due and that the bank is now entitled to recover possession of the property. It applies for summary judgment pursuant to r 292 of the Uniform Civil Procedure Rules 1999 (Qld).
- There is no issue as to the signing of the relevant documents or that the McBrides became bound according to their terms. Nor is it disputed that by January 2009, there were two monthly instalments of $5,500 which had not been paid to the bank. But the McBrides say that the dealings between the parties from then on precluded the bank from relying upon that default to exercise its remedy of the recovery of possession.
- The transaction was governed by the provisions of the then Consumer Credit Code.[1] These proceedings were commenced prior to the commencement of the National Consumer Credit Protection Act 2009 (Cth),[2] so that it is that previous Code which is relevant, although identical provisions are now found in the National Credit Code. The relevant provisions of the previous Code were ss 80, 81, 84 and 85.
- Section 80 required the bank to give a default notice prior to commencing “enforcement proceedings”, a term which was defined[3] to include proceedings such as these to “take” possession of property under a mortgage. The default notice had to specify a period within which the default could be remedied as well as stating the consequences if the default was not remedied. The notice had to be given to the debtor and any guarantor. So in the present case, a notice had to be given to each of the defendants. Section 81(1) provided that the mortgagor or guarantor might remedy the default “within the period specified in the notice” in which case the mortgage would be “reinstated”. Section 81(2) provided that the mortgagor or guarantor would not have remedied the default if, at the end of the period specified in the notice, the debtor or mortgagor was in default because of the breach specified in the notice (or because of a subsequent breach of the same type). Section 85 affected the bank’s ability to accelerate the time for repayment of the entire debt. It precluded the bank from doing so until after the expiry of a default notice (under s 80) which contained a statement as to the possible operation of the acceleration clause. Section 85(1)(c) provided that the acceleration clause was to operate only if “the default has not been remedied within the period specified in the default notice …”.
- Those provisions of the Code were recognised in the terms of the mortgage. Clauses 27.1 and 27.2 relevantly provided as follows:
“27.1Subject to 29, if you are in default for more than one day and:
(a)to the extent consumer credit legislation applies to the default, the Bank has given you a default notice allowing you a period of at least 31 days from the date of the notice to remedy the default unless otherwise provided by the relevant consumer credit legislation; and
(b)the Bank has given you (and any other person entitled) any other notice required by any provision of any law relating to the enforcement of this mortgage; and
(c)any notice required under this clause is not complied with,
then the whole of the amount owing becomes payable on demand and if the Bank demands payment of the amount owing but it is not paid, the Bank may enforce this mortgage pursuant to 27.2. If a notice is required under both 27.1(a) and 27.1(b), subject to applicable laws the Bank may give you the notices at the same time and may do so in the same document.
27.2The Bank may enforce this mortgage by doing any one or more of the following in addition to anything else the law allows the Bank to do as mortgagee:
(a)…
(b)take possession of the property;…”
The word “you” is likely to have been defined, within those conditions, as a reference to both Mr and Mrs McBride. (Unfortunately that page of the document was omitted from the copy which was exhibited to an affidavit sworn by the bank’s solicitor.)
- The guarantee signed by Mrs McBride provided as follows:
“8.1You [Mrs McBride] guarantee that the customer [Mr McBride] will pay the Bank all the amounts which the customer owes the Bank at any time under the credit contract. You agree to pay the Bank any of those amounts in respect of which the customer is at any time in default, up to the basic liability as at the time the Bank demands that you pay them to the Bank.”
The apparent effect of cl 8.1 was to require the guarantor, Mrs McBride, to pay only upon a demand by the bank.
- Mrs McBride was a mortgagor, but not a mortgagor who was in default under the mortgage for the purposes of s 80(2), until (in this case) the occurrence of an event described in standard condition 26(a) of the mortgage. It was in these terms:
“26.You are in default if:
(a)you do not pay the amount owing when due for payment;…”
Assuming that the word “you” in the standard conditions of the mortgage included Mrs McBride, she was not in default under the mortgage until there had been some failure by her to pay an amount when due for payment. That could not have occurred until the bank had made a demand under the guarantee.
- A default notice, in compliance with the Code and with standard condition 27.1 of the mortgage, was given to Mr McBride on or about 13 January 2009. It stated that he was in default to the extent of $11,000. In accordance with s 80(3) of the Code, it specified the action necessary to remedy the default, which was to pay that $11,000 within the period stated in the notice (31 days).
- The McBrides have pleaded that they did remedy that default, by a payment of $11,000 to the bank. However, as they plead, this was made on 23 February 2009, outside the period specified in the default notice. Because the default was not remedied within the period specified in the notice, it was open to the bank to accelerate the date for repayment of the entire debt, as it purported to do on May 2009 when it sent a demand to Mr McBride, demanding payment of the sum of $740,727.38. This was subject, however, to the bank’s having given a default notice also to Mrs McBride. It was also open to the bank, again subject to that qualification, to bring these enforcement proceedings.
- According to an affidavit of Mr McBride, he telephoned an officer of the bank on 23 February 2009 and was told that the bank had received the payment of $11,000 “and the next payment of $5,500 was due 17 March 2009 to continue the agreed repayment plan to return the contract within terms”. The McBrides appear to argue that by some means this precluded the bank from relying upon its default notice of 13 January 2009 and a failure to remedy that default.
- Mr McBride also deposes to conversations with another officer of the bank in late 2009 and early 2010, about the McBrides’ attempts to sell the property and to pay out the bank. According to him in May 2010 there was a willing purchaser at a price of $830,000. Mr McBride says that he was then unable to get an answer from the bank as to the amount required to pay out the mortgage and so a contract of sale could not be signed.
- Quite apart from those arguments, it is far from clear that the bank complied with the Code insofar as Mrs McBride was concerned. It does not claim to have given her a demand under cl 8.1 of the guarantee prior to giving her any notice of default under s 80 of the Code. At least arguably it had to do this because she was not in default until a demand under cl 8.1 had been made and was unsatisfied. The bank’s pleaded case does not include allegations of a demand upon her, or indeed of a default notice served upon her under the Code. In an affidavit sworn on the day of the hearing, the bank’s solicitor exhibited what was said to be a copy of “the default notice dated 13 January 2009 addressed to the second defendant”. There was no proof of its service upon her. Accordingly, but for what occurred in August 2010, there might well have been a case to be tried as to whether the bank’s enforcement proceedings, at least as against Mrs McBride, were precluded by a non-compliance with the Code. However, it is unnecessary to further consider that matter, or those arguments made by the defendants, given the events of August 2010.
- By the time these proceedings were commenced, the McBrides had made no payment since that of $11,000 in February 2009, apart from two payments of $5,500 in December 2009 and January 2010. This application for summary judgment was filed on 2 July 2010 and was returnable on 18 August 2010, on which date it was adjourned by consent in these circumstances. On 13 August 2010, the defendants had proposed to pay “the unpaid arrears and costs” from money to be given to Mr McBride by his family. He proposed that “[i]nstalments will be paid monthly as per the existing facility on the 17th day of each month”. On 16 August 2010, the bank by its solicitors made a counter proposal. This was that by 19 August 2010, the defendants would pay $115,134.24 towards this facility (and smaller amounts relating to other accounts), in which case the McBrides could return to the originally agreed monthly instalments, and if they made those payments, the present proceedings would be discontinued after three months. The bank’s proposal was set out in a draft deed, the parties being the bank and the McBrides. It provided also for the McBrides to provide to the bank, contemporaneously with their execution of the deed, a signed form consenting to judgment for the bank in these proceedings. The draft deed provided that the bank was not to file that order unless the defendants failed to perform their obligations under the deed. That included, most immediately, the obligation to pay that sum towards this facility on 19 August 2010.
- On 17 August 2010, the defendants faxed copies of the deed executed by them and of their consent to that judgment. On the faith of those facsimile copies, the bank agreed to adjourn its application for summary judgment for three months, ie until 17 November 2010.
- The defendants did not pay any of the moneys required to be paid according to that settlement. Nor did they return the original deed and consent to judgment. Instead, they lodged a complaint with the Financial Ombudsman Service. That complaint was dismissed in December 2010 and the bank subsequently re-listed this application for summary judgment.
- There is no purported defence raised by Mr and Mrs McBride which involves events which occurred after their executing the deed and signing the consent to judgment. But in Mr McBride’s affidavit, it is suggested that they did not become bound in terms of that deed. He deposes to a conversation with the bank’s solicitor at about 1.30pm on 17 August, in which she said to him that if the signed documents were not received from the McBrides by 2.00pm on that day, the bank’s offer would lapse. In a letter from the bank’s solicitors dated 16 August 2010, the same deadlines for acceptance of the bank’s offer had been imposed. He says that Mrs McBride did not fax the executed deed and consent to judgment until 2.30pm on that day. Accordingly, the McBrides suggest, the bank’s offer was no longer capable of acceptance and there was no settlement agreement made.
- Nevertheless, Mr and Mrs McBride offered to settle according to the terms of the documents, by faxing them that afternoon. The bank accepted that offer by causing the application for judgment to be adjourned to 17 November 2010. That adjournment had been offered by the bank (in the solicitors’ letter of 16 August 2010) on condition that the McBrides signed the deed. Its conduct in response to the fax was unequivocally an agreement to a settlement according to the deed.
- It is sufficiently clear then that there was a binding agreement made on 17 August in terms of the deed. There was consideration for that agreement, by the bank’s agreeing to postpone its application for summary judgment. In any case, the McBrides executed a deed and although the original instrument was not sent to the bank, there was a delivery of the deed in the sense of a clear expression of an intention to be bound by the document.[4]
- On 25 August 2010, the bank’s solicitors wrote to Mr and Mrs McBride to the effect that they were in breach of their obligations under the settlement by not paying the sums due on 19 August and that the bank was thereby acting to “terminate” the deed as provided for in cl 3.1 and cl 7.1 of the deed. They also demanded that the original of the consent to judgment be posted to them.
- There is no evidence or argument for the McBrides to the effect that having entered into this settlement agreement, they were entitled to be released from it or in some other way relieved from its consequences. The bank is entitled to enforce the settlement within these same proceedings.[5] Mr and Mrs McBride thereby agreed that the bank was entitled to judgment unless they complied with the deed. Having failed to do so, they have no answer to the bank’s case.
- In Mr McBride’s affidavit, there is an offer to consent to a judgment to be entered by the bank, but on terms that the judgment to be stayed pending the making of two monthly payments of $5,500 followed by a full repayment of the debt by 3 May 2011. The stated purpose of that proposal is to permit the McBrides to sell the property rather than it being sold by the bank. The reasonableness or otherwise of that course is not relevant. The proposal does not provide an answer in law to the bank’s case.
- Accordingly, there will be judgment for the plaintiff against the defendants for the recovery of possession of the subject property. Because that property is the residence of the defendants, this judgment will be stayed for 21 days. I will hear the parties as to costs.
Footnotes
[1] Appendix to the Consumer Credit (Queensland) Act 1994 (Qld).
[2] 1 April 2010.
[3] Within Schedule 1 of the Code.
[4] cf 400 George Street (Qld) Pty Ltd v BG International Ltd [2010] QCA 245 at [50] to [52].
[5] General Credits (Finance) Pty Limited v Fenton Lake Pty Ltd [1985] 2 Qd R 6 at 10.