Australian Central Credit Union Limited v Page - [2007] SASC 144

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
AUSTRALIAN CENTRAL CREDIT UNION LIMITED v PAGE
[2007] SASC 144
Reasons of Judge Lunn a Master of the Supreme Court
30 April 2007
REAL PROPERTY
Mortgagee claiming possession of mortgaged property under Part 17 of the Real Property Act - plaintiff had served 2 previous s 55A of the Law of Property Act notices which were satisfied - plaintiff served 3rd s 55A notice which included costs of 2 previous notices - held amount claimed for costs was excessive - costs of second notice to be moderated because similar work had been done on 1st notice shortly beforehand - s 55A notices found to be prolix in reciting provisions of the mortgage and stating the effect of the acceleration clause - as 3rd notice issued for an excessive amount it was held to be invalid - oral application by plaintiff to dispense with compliance with s 55A refused - summons dismissed.

AUSTRALIAN CENTRAL CREDIT UNION LIMITED v PAGE
[2007] SASC 144

JUDGE LUNN: By a mortgage dated 27 March 2003 the defendant mortgaged his home at 76 French Crescent, Trott Park to the plaintiff to secure repayment of moneys which he had borrowed from the plaintiff. The plaintiff cannot locate the original loan agreement. The transaction was subject to the provisions of the Consumer Credit Act. The plaintiff sent statements to the defendant each month showing debits and credits to the loan sum and the balance then owing.
The plaintiff served a notice dated 11 October 2006 on the defendant pursuant to s55A of the Law of Property Act 1936 (“the Act”) (“the first s 55A notice”). It claimed arrears of fortnightly repayments of $536.00. On 17 October the defendant paid $1,000 to the plaintiff which satisfied the first s 55A Notice.
The plaintiff served a further s55A notice dated 13 November 2006, (“the second s 55A notice”) on the defendant requiring payment of $532.13 being arrears of fortnightly instalments of $160.00 and legal expenses of $372.13. (Although the second s55A notice did not say so, those legal costs were the costs incurred by the plaintiff’s solicitors in preparing and serving the first s 55A notice. The only notification which the defendant had received of being required to pay these costs was a debit of that amount on his monthly statement for October 2006. He received no particulars of how the amount was made up). On 23 November the defendant paid $350 to the plaintiff which was apparently insufficient to satisfy the second s 55A notice, but which was accepted by the plaintiff in satisfaction of the notice.
On 19 December 2006 the plaintiff served a further s55A notice dated that day, (“the third s 55A notice”) on the defendant by a process server leaving it at his home. This notice required the payment of $1,116.63 which was made up of arrears in fortnightly payments of $746.00 plus legal costs of $370.63. Part of these legal costs related to the costs charged to the plaintiff by its solicitors of $348.50 for preparing and serving the second s55A notice. Again the only notification which the defendant had received of these costs was a debit appearing for this amount on his monthly statement for November. On the plaintiff’s case the total of the legal costs claimed for the first and second notices had not been claimed in the third s55A notice because a payment of $350.00 made by the plaintiff on 12 December 2006 had been credited against these legal costs. The defendant did not pay this $1,116.63 in the 31 days stipulated by the third s 55A notice.
On 25 January 2007 the plaintiff instituted this action against the defendant under Part 17 of the Real Property Act 1886 seeking a summary order for possession of his house property. The defendant, acting in person, has defended the proceedings. He has filed an affidavit calling in question the plaintiff’s calculation of its indebtedness to him. However, it is not necessary to go into these issues.
The plaintiff’s solicitor conceded that the $1,116.63 claimed in the third s55A notice depended upon the plaintiff being lawfully entitled to recover from the defendant the costs of the first and second s55A notices totalling $720.63. As this is a summary jurisdiction I directed that the correctness of this debit for costs be dealt with as a preliminary issue because if it was not wholly justified the third s55A notice had been issued for an excessive amount. (I will deal with the consequences of that later).
By clause 20 of the plaintiff’s standard conditions of mortgage the defendant was liable to pay to the plaintiff the reasonable expenses it reasonably incurred in enforcing the mortgage after he was in default. Similar, and indistinguishable, provisions in other mortgages have been interpreted as meaning that this entitles the lender to recover legal costs reasonably incurred by it taxed as between solicitor and client: Bayford v St George Bank Ltd (No 2) (2003) 229 LSJS 59; Perpetual Trustees Australia Ltd v Barker (2004) 232 LSJS 400. The meaning of “costs as between solicitor and client” is conveniently summarised by R101.076(c) of the Supreme Court Rules 1987 as:
“costs as between solicitor and client or a like expression, means all costs reasonably incurred by the party in respect of a litigation and having regard to the proper interests of the persons who will ultimately bear the burden of such costs.”
Although the rule has no direct application, it sets out the common law meaning of the expression: see Dal Pont “Law of Costs” paras 16.16-16.20.
In relation to the first s 55A notice the plaintiff’s solicitors had billed the plaintiff for $399.36 for its work in respect of this notice, which was made up as follows:
Professional Services  $260.00
Disbursement for title search   $23.05
Process server’s fee   $80.00
GST   $36.31
Total  $399.36
However, the policy of the plaintiff was only to claim 25% of the GST charged to it by its solicitors from its borrowers, and thus the amount debited to the plaintiff’s account was only $372.13. On 21 November 2006 the plaintiff’s solicitors billed it for $374.00 for its work in relation to the second s 55A notice. It is not clear from the affidavits how this amount was made up, but from what I was told in submissions there was no disbursement of $23.05 charged in it for a title search. It would seem that the difference between the amounts charged by the plaintiff’s solicitors for the first and the second s 55A notices was attributable to the omission of this disbursement and the corresponding reduction in the GST charge. The plaintiff debited only $348.50 to the defendant’s account because of its policy of seeking to recover 25% of the GST.
The plaintiff put forward in an affidavit of its solicitor filed on 26 March 2007 its justification for its charges of $260.00 for the preparation of each of the first and second s55A notices. It was not a bill in taxable form, but it provided sufficient information for me to assess the costs properly chargeable as between solicitor and client under the First Schedule to the Supreme Court Civil Rules 2006 which was accepted as being the appropriate scale. (The plaintiff did not request that I should perform a formal taxation). The plaintiff submitted that the costs properly chargeable under the scale totalled $755.80, but its solicitor conceded in the course of argument that this was only an “ambit claim”. I have considered the major items as to what would be properly allowable for them. I have not considered some of the minor items. I now deal with some of the major items.
Drawing of the notice - $126.
A drawing fee has been claimed for a notice of two pages. Much of the first page is merely recitals of relevant provisions of the mortgage. These recitals do not impact on the proper interpretation of the substantive parts of the notice. The second page contains a substantial clause setting out the amount that would be due if the acceleration clause operated upon the expiration of the notice. The plaintiff’s solicitor claimed this was a proper provision in the notice because it was desirable that the defendant should know what the effect of the operation of the acceleration clause would be if the notice was not complied with. I do not accept this. The monthly statements given to the defendant informed him of the approximate amount of his total indebtedness. The amount stated in this clause was not a payout figure. If the defendant elected to pay out the mortgage, he would still have to obtain a precise payout figure as at the date of the tender of the amount owing. The notice is prolix. I consider that a reasonable allowance for a proper notice is a drawing fee equivalent to one page. This means a deduction of $63.00 from the $755.80.
Photocopying the mortgage - $17.00
There is no justification for a charge for what is the solicitor’s own file copy of the mortgage. This $17.00 is to be deducted from the $755.80.
Printing the s 55 Notice - $13.00
This is a copy for the solicitor’s own file which is not allowable under the Scale. This $13.00 is deducted from the $755.80.
Perusals
$140.00 is claimed for perusing 20 pages at $7.00 per page. The rate of $7.00 per page is appropriate. The charges for perusing the Title Register search and the Certificate of Title should only be 1 page in total, and not 2 pages. There is no proper basis for perusing 13 pages of the standard conditions of mortgage, most of which were unrelated to the default. It was not reasonable to peruse more than 2 pages of this document. It is only reasonable to allow perusals for 8 pages in all, totalling $56.00, which means $84.00 is to be taken off the $755.80.
Time spent by Law Clerk and Solicitor of 1 hour 18 minutes - $331.50
I was not given further details of how this amount was arrived at. It is calculated at a solicitor’s hourly rate of $263.00 per hour. Insofar as any time was properly spent by a law clerk it would only be chargeable at $127.00 per hour. I was told in the course of the hearing that the instructions were received from the plaintiff in writing and were to the effect that the solicitors were to do what was necessary to issue and serve a default notice. There were no express instructions to give advice and there was nothing in the circumstances which impliedly required the solicitors to give any advice about the instructions which they had received. There were some difficulties in that the plaintiff could not produce the original loan agreement and there was apparently some mistake in the figures supplied by the plaintiff to the solicitors about the defendant’s indebtedness. Insofar as any of the work related to these matters it is not reasonable that it should be charged against the defendant. The general work required for carrying out the instructions is allowed for in the proper drawing and perusal fees. No additional time can be claimed for such work. The solicitor contended that she had to spend some time in supervising the major part of the work which was done by a law clerk. The drawing and perusal fees are the same whether the drawing and perusal is done by a solicitor or a clerk. However, if it is done by a clerk, the necessary supervision by a solicitor is included in the rate allowed as work done by a clerk would normally be allowed at a lesser rate. I do not consider that any of this 1 hour 18 minutes is shown to be a proper and reasonable charge claimable against the defendant and $331.50 is to be deducted from the $755.80.
E-mail to the plaintiff requesting copies of relevant documents - $16.00
This apparently relates to the plaintiff’s inability to produce the original loan agreement which is not a reasonable cost against the defendant.
Letter to the plaintiff informing it that the notice had been sent to the process server - $16.00
The notice was served on the day it was sent to the process server. As s 112 of the Law of Property Act authorised a process server to serve the notice by leaving it at the mortgagor’s address it was highly likely that the service would occur within a day or two of the notice being sent to the process server. Another letter is allowed for reporting to the plaintiff that the notice was served after service had been confirmed by the process server. It was not reasonable in these circumstances for the solicitors to both report to the plaintiff when the notice was sent out for service and when confirmation of service was received. This $16.00 is deducted from the $755.80.
This results in $525.00 being deducted from the $755.80 which means that the proper and reasonable costs for the work of the solicitors in preparing and serving the first s 55A Notice was no more than $250.80.
I approach the assessment of the proper and reasonable costs of the preparation and service of the second s 55A Notice on a similar basis to that for the first notice. However, I take into account that the same solicitors had prepared an almost identical notice just over 1 month before. Accordingly, the work required would be significantly less than if they had not prepared another notice directed to the defendant so shortly beforehand. The drawing of the second s 55A Notice required no more than a quick check of the accuracy of the previous notice, the insertion of some figures about unpaid legal expenses and the alteration of the figure for the arrears of fortnightly payments. In my view, a proper and reasonable charge for drawing such a notice could not be more than half of what was properly chargeable for the original notice. Likewise much of the perusals of the title, mortgage and conditions of mortgage did not have to be repeated. The plaintiff’s solicitor contended that the position may have changed if some deed of priority had been entered into between the two notices, but, if so, it was incumbent upon the plaintiff to instruct its solicitors to that effect. In fact, there was no change in the relevant circumstances. I do not consider that the proper and reasonable perusal fees could exceed half of those properly allowed for the first s 55A Notice. This means that the amount of the proper and reasonable costs for the second s 55A Notice would have to be at least $73.00 less than those for the first s 55A Notice. I consider that the proper and reasonable costs of the solicitors for preparing and serving the second s 55A Notice could not exceed $177.00.
These conclusions mean that the total of the legal costs payable by the defendant as reasonable legal expenses assessed as between solicitor and client for the first and second s 55A Notices would not be more than $427.00 compared with the $520.00 debited to the defendant’s account.
S 112(3) and (4) of the Law of Property Act allow a s 55A Notice to be served on a mortgagor either personally, by leaving it at his last known place of abode or business in the State, or to be sent to him by registered post and it is not returned undelivered. Here the defendant has been charged a process server’s fee of $80.00 for the service of each of the first and second s 55A Notices. If they had been served by the alternative of registered post, the disbursement would have been less than $10.00 for each service rather than $80.00. I put to the plaintiff’s solicitor the question whether it was reasonable that service should have been effected by a process server at a cost of $80.00 rather than by registered post at a cost of less than $10. (For this purpose the other solicitor’s costs involved are probably about the same for both modes of service). The solicitor contended that service by registered post was slower in that it took some time for Australia Post to notify them whether the registered letter had been collected and signed for by the mortgagor, and, it if was not effectively served by that method, further delay was encountered in then serving the s 55A Notice by other permissible means. The difference in cost to the defendant between the two modes of service is significant and it is not necessarily justified by a delay in service of some days. The solicitor for the plaintiff was not forewarned of this issue. It can be left to be pursued on another occasion and with better evidence about what is the usual course of service by registered post. The conclusion which I have reached above about the overcharging of the solicitor’s costs is sufficient to dispose of the matter, but, if it is to be taken further, it may be that there is an additional overcharge involved in much of the $160.00 for the process server’s costs.
The amount of $116.63 sought in the third s 55A Notice was at least $93.00 in excess of the amount that was then due by the defendant to the plaintiff. For the reasons which I gave in Assured Funding Pty Ltd v Gentzsch [2007] SASC 101 this overstatement of the amount claimed in the notice invalidates the notice. The plaintiff’s solicitor attempted to draw some distinction between the amount claimed for arrears of fortnightly instalments and the amount claimed for compensation under Clause 20 of the standard conditions. As the Notice required the payment of a single sum of $1116.63 for compliance with it there is no basis to distinguish between the respective sources of indebtedness claimed in the notice.
In the event that I found the third s 55A Notice to be invalid the plaintiff’s solicitor made an oral application to dispense with compliance with the requirements of s 55A under s 55A(2)(a). She submitted that even if the notice had been limited to the correct amount, subsequent events have shown that the defendant would not have complied with it. However, here the mistake was that of the plaintiff and its solicitors. The defendant was given no information about how the amounts debited for the costs of the first and second s 55A Notices had been arrived at and was not in a position to challenge those amounts until that information was provided in the course of the hearing. S 55A is a section for the protection of borrowers and they are entitled to its benefit. A mortgagee needs to mount a strong case under s 55A(2)(a) for dispensation where non-compliance has been due to its own mistake: Commonwealth Bank v Saunders (1995) 181 LSJS 463 at 367-8 and upheld on appeal without reference to this point; Commonwealth Bank v Saunders (1995) 64 SASR 428. The dispensation is refused.
I have today made the following orders:
1 That the summons be dismissed.
2 That the plaintiff’s oral application for dispensation from s 55A of the Law of Property Act be refused.
3 That the costs of the action of the defendant as agreed or taxed be paid by the plaintiff