Lender’s minor omissions have major impact in summary judgment application

In Secure Funding v West [2017] QDC 169, the District Court of Queensland provides a helpful reminder of the importance of complying with contractual and legislative notice requirements.  As this case demonstrates, it is important for lenders to be able to demonstrate service of default notices so as to avoid minor omissions which can be costly.

Background

In 2006, Secure Funding advanced funds to Ms West which was secured by a mortgage over Ms West’s property situated in Queensland.

Ms West appointed New Capital Finance as her finance broker and authorised it to make applications to lenders on her behalf. The authorisation document included details of Howard Pacific Finance which assisted New Capital Finance with Ms West’s loan application to Secure Funding.

The loan agreement and mortgage terms required that Secure Funding must first issue a default notice providing Ms West time to remedy the default.

As Ms West failed to make contractual repayments and remedy the default notice, Secure Funding commenced proceedings seeking repayment of debt and an order for possession of the property.

Secure Funding applies for summary judgment

Secure Funding applied for summary judgment on the basis that Ms West had no “real prospect of success” in defending its claim.

Ms West opposed the summary judgment application and made numerous allegations against Secure Funding including that:

• she did not receive the default notice (Default Notice allegation)
• Howard Pacific Finance as Secure Funding’s agent, knowingly put her in a worse financial position in circumstances where she could not service the loan agreement and it was an “unjust” contract[1] (Unjust Transaction allegation).

Whilst the default notices were signed, there was no evidence before the Court demonstrating that they were in fact actually sent to Ms West.

Ms West maintained that she never directly dealt with Howard Pacific Finance and indicated an intention to call an ex-employee of Howard Pacific Finance as a witness.

Issues

In considering Secure Funding’s summary judgment application, the Court had to determine whether there was:

• a “realistic”, as opposed to “fanciful”, prospect of Ms West successfully defending all, or part of Secure Funding’s claim[2]
• a need for a trial of the claim, or part of the claim.[3]

Court findings

Default Notice allegation

The Court observed that non-compliance with the notice requirements under section 84 of the Property Law Act 1974 (Qld) and section 88 of the National Credit Code[4] did not in itself provide a defence for Ms West.  Rather, the better view was that such proceedings were not necessarily invalidated although it was open to Ms West to seek that certain penalties be imposed.[5]

Ultimately, the Court recognised that there was a dispute as to the effect of the non-compliance with legislative requirements on proceedings, but found it unnecessary to decide if Secure Funding’s proceeding was vulnerable to being set aside.  This was due to the particular facts of the case.

The Court considered the relevant clauses of the loan agreement and found that Secure Funding needed to demonstrate that the full balance of the loan (plus interest) was due and owing. To establish this, Secure Funding had to prove it had given notice of the default to Ms West, and that she had failed to correct the default.

On the evidence before the Court, Secure Funding only had a signed copy of the default notice but could not prove that it had been sent.  In circumstances where Ms West said she never received the default notice, the Court found that there was a factual issue in dispute and consequently, a need for a trial.

Unjust Transaction allegation

The Court acknowledged that, subject to the terms of the relevant contract, generally brokers have been held to be the agent of the borrowers.  However, Her Honour found that there is no clear evidence of the existence of any contract between Ms West and Howard Pacific Finance and it was unclear who Howard Pacific Finance was the agent for. This finding together with other circumstances raised by Ms West in relation to how the transaction was entered into resulted in the Court finding there was a need for a trial.[6]

Accordingly, the summary judgment application was dismissed.

Key takeaway

[2] Deputy Commission of Taxation v Salcedo [2005] 2 Qd R 232, 234-7; [2005] QCA 227.

[3] Uniform Civil Procedure Rule 1999 (Qld) rule 292(2)(b).

[4] Schedule 1 National Credit Code of the National Consumer Credit Protection Act 2009 (Cth).

[5] Judgment [58], [59].

[6] Judgment [132], [133].