Avery v Saree Holdings Ltd; Lava Ltd v Avery (No. 2)
[2012] NSWSC 938
•10 August 2012
Supreme Court
New South Wales
Medium Neutral Citation: Avery v Saree Holdings Ltd; Lava Ltd v Avery (No. 2) [2012] NSWSC 938 Hearing dates: 9 & 25 May 2012, 1 June 2012 Decision date: 10 August 2012 Jurisdiction: Equity Division Before: Slattery J Decision: In the Lava proceedings - order the defendant to pay the plaintiff interest on its costs of the proceedings - and order that there be paid to the plaintiff out of the assets secured by the Lava mortgage on an indemnity basis the plaintiff's costs of the proceedings.
In the Saree proceedings - the 13 July 2010 authority and directions are not effective to require Saree to put an end to the Saree proceedings - findings made as to amount of principal and interest due on the Saree mortgage, subject to remaining issues to be determined.
Catchwords: REAL PROPERTY - mortgages - making of final orders in the Lava proceedings - taking of accounts in the Saree proceedings - calculation of monies owing, if any, by way of principal and interest on Saree mortgage. Legislation Cited: Legal Profession Act 2004, s 350 Cases Cited: Avery v Saree Holdings Ltd; Lava Ltd v Avery [2012] NSWSC 463
Debney v Semerdziev (1982) 2 NSWLR 391Category: Consequential orders Parties: Plaintiff- Leanne Maree Avery
Plaintiff/Cross Defendant- Lava Ltd
Defendant- Saree Holdings Limited
Defendant/Cross Claimant- Leanne Maree AveryRepresentation: Plaintiff (Ms Avery)- B. Walker SC (21/4/11, 11/5/11), M. Dempsey SC (26/7/10, 27/7/10, 29/7/10), R. Alkadamani (15/2/10, 16/2/10, 17/2/10, 18/2/10), D. Jenkins (26/7/10, 27/7/10, 28/7/10, 29/7/10, 2/8/10, 3/8/10, 4/8/10, 5/8/10, 6/8/10, 21/4/11, 11/5/11)Defendant (Lava Ltd & Saree Holdings Ltd)- G. Parker SC (21/4/11, 11/5/11), M. Condon (15/2/10, 16/2/10, 17/2/10, 18/2/10, 26/7/10, 27/7/10, 28/7/10, 29/7/10, 2/8/10, 3/8/10, 4/8/10, 5/8/10, 6/8/10, 21/4/11, 11/5/11)
Defendant (Lava Ltd & Saree Holdings Ltd)- Mark Nicholas Johnson, Holman Webb Lawyers
Solicitors:
Plaintiff (Ms Avery)- Rob Tassell, Verekers Lawyers (from 19/11/10), Nicholas Karefylakis, Nicholas Karefylakis (from 24/9/2010 to 19/11/10), Peter Stewart Moore, Moore & Associates (from 21/4/10 to 24/9/10), Rodney Commins, Patterson Houen Commins (from 14/8/08 to 21/4/10), Simon Morris, Piper Alderman (from 12/9/07 to 14/8/08)
File Number(s): (09/288104); (07/261885) Publication restriction: No
Judgment
This is my second judgment in these related proceeding, the Lava proceedings and the Saree proceedings. The issues and findings in both proceedings are set out in the Court's 9 May 2012 principal judgment: Avery v Saree Holdings Ltd; Lava Ltd v Avery [2012] NSWSC 463. Events, matters and things are referred to in this judgment in the same way as they are in the principal judgment. This judgment should be read together with the principal judgement.
After the principal judgment he Court has made consequential orders in the Lava proceedings and has provided for the taking of an account in the Saree proceedings. This judgment deals with some supplementary findings in relation to the taking of the account in the Saree proceedings. But first it is necessary to record the finalisation of the Lava proceedings and the post judgment orders made in the Saree proceedings.
Orders after the Principal Judgement
In the Lava proceedings Ms Avery has failed in her attempt to set aside the judgment for possession entered by Price J in March 2009. On 25 May 2012 the Court made orders in the Lava proceedings consequential upon the findings and conclusions in the principal judgment. On that date the Court: (1) dismissed Ms Avery's motion seeking to set aside Price J's judgment; (2) ordered a stay of execution on Lava's writ of possession until 22 June 2012, reserving further consideration of the terms of that stay; (3) ordered Ms Avery to pay the Lava's costs of the Lava proceedings from 2 April 2009 on an indemnity basis; and (4) reserved for further consideration the questions: (a) whether Ms Avery should pay Lava's costs of the Lava proceedings on an indemnity basis, and (b) whether, interest should be calculated on those costs in accordance with clause 2.2 of the Lava mortgage.
On 25 May the Court directed further submissions on the two questions, (4)(a) and (b), reserved for further consideration. On 1 June 2012 the Court made orders in Chambers fixing the terms of the stay. The terms so fixed required Ms Avery to pay an occupation fee of $1250 per week, to allow reasonable inspection of Apartment 901 for the purposes of its preparation for sale prior to 22 June 2012, and to vacate the apartment by 5 pm on 22 June 2012.
Although granted an opportunity to advance submissions in relation to the matters, (4)(a) and (b) above, reserved for further consideration, Ms Avery did not seek further to be heard on Lava's claimed orders for indemnity costs and for interest on costs. Accordingly the court will make orders 4 and 5 in the short minutes of order proposed by Lava on 25 May 2012. These orders are included in the orders made at the end of these reasons.
In the principal judgment's consideration of the Saree proceedings the Court was not prepared to grant the declaration the plaintiff sought that there was nothing owing on the Saree loan and the associated Saree mortgage. The Court rejected Ms Avery's contention that the Saree mortgage was the result of her and Mr Sorensen colluding to create a sham second mortgage over Apartment 901 for submission in her Family Court of Australia proceedings. But the Court found that Saree mortgage was likely to secure something and that accordingly there was no basis for its removal from the register: Avery v Saree Holdings Ltd; Lava Ltd v Avery [2012] NSWSC 463, at [265]. But the Court did not determine what was owing on the Saree mortgage in the principal judgment. Saree argued that the proceeding should be dismissed as they were not properly framed as a redemption suit but the Court rejected that argument, and deferred the redemption suit until after an accounting had taken place.
The Court therefore gave directions on 25 May 2012 to ensure that the remainder of the proceedings were to be conducted as an account within a redemption suit; and, that all remaining findings would be made in that context. The directions made on 25 May were: (1) that an account be taken to determine the amount owing by Ms Avery to Saree on the Saree mortgage; (2) question of the redemption of the Saree mortgage is reserved for further consideration after the account has been taken; (3) directions were then made for calculations of the amount said to be owing to be served between the parties.
The parties made further submissions about a final accounting. This judgment deals with some of the remaining issues in the Saree proceedings relevant to determining what is due on the Saree mortgage. The plaintiff's redemption suit will be further adjourned with liberty to apply once the remaining matters are resolved.
Saree or Ms Avery ask the court to determine four matters in relation to what might be owing on the Saree mortgage and to whom it might be owing based on submissions advanced prior to the principal judgment. These four matters are: (1) the legal effect of certain directions to Saree to conclude these proceedings; (2) for whom Saree holds the benefit of the Saree mortgage; (3) whether there was an overpayment by Saree to Ms Avery of its own money, in addition to the moneys Saree intended to advance on behalf of other parties; and (4) subject to the determination of the other matters, what is the correct arithmetical calculation of the sum due under the Saree mortgage by way of principal, interest and costs. This judgment deals with issues (1) and (4). Issues (2) and (3) will be the subject of a further judgment.
But first it is necessary to examine the relevant terms of the Saree mortgage which are not fully set out in the principal judgment.
The Saree Mortgage
The Saree loan agreement is set out in the principal judgment: Avery v Saree Holdings Ltd; Lava Ltd v Avery [2012] NSWSC 463 at [244]. The Saree Mortgage is not set out in the principal judgment. Saree relies upon provisions of the Saree Mortgage and the Saree loan agreement to found what is said now to be due to it under the Saree Mortgage. For completeness the relevant provisions of the Saree Mortgage are set out in this section.
The mortgagor's principal obligation to pay under the Saree Mortgage is an obligation in clause 2.1 to pay what is defined as "Monies Owing" under clause 2.1 which provides as follows:-
"2.Payment of Principal and Interest
2.1Payments
The Mortgagor agrees to pay to the Mortgagee the Moneys Owing:
(a)if no Event of Default has occurred, then:
(i)in accordance with this Mortgage or any Relevant Agreement which imposes the obligation to pay it; or
(ii)in the absence of such a provision, on demand and in the manner notified by the Mortgagee to the Mortgagor; or
(b)after an Event of Default has occurred on demand subject to clause 19.2, (despite any delay or previous waiver of the exercise of the Mortgagee's option to make demand) in the manner notified by the Mortgagee to the Mortgagor."
The Saree Mortgage also provides for the payment of interest in clause 2.2, a provision which is subject to the operation of a "Relevant Agreement": "unless otherwise provided in a Relevant Agreement, the Mortgagor agrees to pay interest at the Higher Rate...". The calculation of interest here is governed by a "Relevant Agreement". The Saree Mortgage defines the Saree loan agreement as a "Relevant Agreement". The definition of "Relevant Agreement" in Saree Mortgage clause 1.1, includes "any document described as a Relevant Agreement in the Schedule [to the Saree Mortgage]".
The Schedule to the Saree Mortgage provides for an acknowledgement on the part of the Mortgagor of having received financial accommodation and refers to the Saree loan agreement dated 1 March 2006, in the following terms:-
"1.The Mortgagor acknowledges giving this Mortgage and incurring obligations and giving rights under this Mortgage for valuable consideration received from the Mortgagee whereby the Mortgagee, at the request of the Mortgagor (testified to and by the execution by the Mortgagor of this Mortgage) has provided or agreed to provide loans, advances or other financial accommodation to the Mortgagor or to any person at the request or on behalf of or for the accommodation of the Mortgagor whether at the discretion of the Mortgagee or otherwise.
2.The Mortgagor agrees with the Mortgagee that:
()the Mortgagor will pay to the Mortgagee the Principal Sum, or so much of it that remains unpaid, on 1 March 2006;
()each provision of this Mortgage is deemed to be a covenant and the Mortgagor agrees to comply with and observe each provision as it if was expressed to be and was a covenant between the Mortgagor and the Mortgagee;
()for the purpose of this Mortgage, the following descriptions apply:
()"Borrower" means LEANNE MAREE AVERY.
()"Principal Sum" means AU$2,700,000.00.
()"Relevant Agreement" includes Loan Agreement
between the Borrower and the Mortgagee dated 1 March 2006.
()"Relevant Jurisdiction" means New South Wales, Australia."
The Schedule also declares that "Relevant Agreement" includes the Saree Loan Agreement. Thus, the combined operation of Saree Mortgage clause 2.2 and the Schedule, clause 2 means that the calculation of interest due under the Saree Mortgage is controlled by the terms of the Saree Loan Agreement. I conclude below that Saree's advances to Ms Avery fall within a number of parts of this definition of "Moneys Owing".
The Saree Mortgage clause 1.1 definition of "Monies Owing" is comprehensive and captures monies or amounts owing to the mortgagee on any account, including under a Relevant Agreement. The definition of "monies owing" is relevantly as follows:-
"'Moneys Owing' means all moneys and amounts which at any time for whatever reason or circumstance (whether or not within the contemplation of the parties at the date of this Mortgage) fall within 1 or more of the following descriptions:
(a)moneys and amounts owing or remaining unpaid to the Mortgagee in any manner and on any account whatever by the Mortgagor;
(b)moneys and amounts which the Mortgagee, whether or not at the Mortgagor's express or implied request, or for the accommodation of the Mortgagor, has advanced or paid or become liable to advance or pay to or for or on the Mortgagor's account or in exercise of any of the Mortgagee's Powers;
...
(d)moneys and amounts which are:
(i)presently owing and payable;
(ii)owing but not presently payable;
(iii)contingently owing; or
(iv)prospectively owing,
by the Mortgagor to the Mortgagee;
(e)moneys and amounts which may:
(i)becoming owing or for which the Mortgagee may become liable by reason wholly or partly of past events or by reason of anything done or omitted by the Mortgagee or the Mortgagor; or
(ii)be reasonably foreseeable as likely to become owing on any account or in any manner whatever by reason of the relationship between banker and customer or lender and borrower or by operation of law or equity or otherwise by reason of anything done by the Mortgagee with the consent or at the express or implied request of the Mortgagor;
(f)moneys and amounts referred to in other clauses of this Mortgage or any Relevant Agreement (or both) as being owing by the Mortgagor to the Mortgagee or referred to as being added to or forming part of the Moneys Owing whether or not so expressed;
(g)interest due or accruing as provided for in this Mortgage or any Relevant Agreement or converted into principal; and
... "
The Saree Mortgage defines a comprehensive range of events of default. The clause 1.1 definition of "Event of Default" incorporates various events of default listed in Saree Mortgage, clause 18. Many of those Events of Default are of no relevance to the present proceedings. But the clause 18 Events of Default include, in sub-paragraph (a), a failure to punctually repay any of the moneys owing "in accordance with this Mortgage or any Relevant Agreement, which imposes the obligation to pay the Monies Owing". Thus default under the Saree Mortgage may be triggered by default under the Saree Loan Agreement, a "Relevant Agreement".
Saree and Ms Avery are also at issue about Saree's costs recoverable under the Saree Mortgage and as to the extent of the indemnity available to Saree out of the mortgaged property. The Mortgagor's right of reimbursement of costs and right of indemnity against the Mortgagor are provided for in clauses 21.1 and 21.2 of the Saree Mortgage as follows:-
"21.Costs, Charges, Expenses and Indemnities
21.1Pay on demand
The Mortgagor agrees to pay or reimburse the Mortgagee on demand for the following amounts all of which form part of the Moneys Owing:
(a)costs, charges, expenses and liabilities of any description incurred by the Mortgagee in relation to:
(i)the negotiation, preparation, execution, stamping, registration and completion of this Mortgage, any Relevant Agreement or any document in relation to this Mortgage or any Relevant Agreement;
(ii)any enforcement, protection or non-exercise or attempted enforcement or protection of any of the Mortgagee's Powers or in relation to the Mortgaged Land;
(iii)any enquiry by any authority involving the Mortgagor;
(iv)any independent consultant or other person appointed to evaluate any matter of concern, any agent of the Mortgagee, any Receiver or any attorney appointed under this Mortgage;
(b)Taxes, fees, fines and penalties in respect of fees, payable or determined to be payable in relation to this Mortgage or any Relevant Agreement or a payment, receipt or any other transaction of document contemplated by this Mortgage or any Relevant Agreement; and
(c)costs, charges, expenses and liabilities incurring, but not limited to, the Mortgagee's administration costs whatever and however called incurred by the Mortgagee under this Mortgage or any document executed by the Mortgagor under this Mortgage or any Relevant Agreement,
and in each case, but not limited to, legal costs and expenses on a full indemnity basis or solicitor and own client basis, whichever is the higher.
21.2Indemnity
The Mortgagor indemnifies and keeps indemnified the Mortgagee, any Receiver, any attorney appointed under this Mortgage and any employee, officer, agent or contractor of the Mortgagee, any Receiver or attorney appointed under this Mortgage, against any liability or loss arising from, and any costs, charges, expenses and liabilities in relation to:
(a)the payment, omission to make payment or delay in making payment of an amount referred to in clause 21.1;
(b)the occurrence of an Event of Default; and
(c)all actions, proceedings, costs, claims and demands in relation to the Mortgaged Land including, but not limited to, those arising from the use or occupation of or presence of any person on the Mortgaged Land,
and in each case, including but not limited to, legal costs and expenses on a full indemnity basis or solicitor and own client basis, whichever is the higher."
There was dispute between the parties as to the scope of these provisions.
The directions to Saree to conclude these Proceedings
One preliminary basis upon which Ms Avery submits that nothing is owing on the Saree Mortgage is that Saree should consent to judgment in the proceedings in Ms Avery's favour. This contention is based on Saree's acknowledgment that it is acting as a trustee of the benefit of the Saree Mortgage for Mr Donoghue or perhaps for others, Plus Trustee Limited, Sandra Donoghue or the Donoghue Family Trust.
Plus Trustee Limited, Gary Donoghue and Sandra Donoghue deny that Saree holds the beneficial interest in the loan monies on such a trust. But nevertheless on 13 July 2010 Plus Trustee authorised and directed Saree "to consent forthwith to judgment in favour of the plaintiff Leanne Avery [in the Saree proceedings]", and authorised and directed Saree "to discharge and release Leanne Avery of her obligations under the Saree Loan Agreement and the Saree Mortgage and to execute short minutes of order to give effect to those directions" (Exhibit 24).
This authority and direction was signed by Mr Lowther on behalf of Plus Trustee Limited. Each of the directions though was subject to a reservation that Plus Trustee "makes no admissions as to whether Plus Trustee is in fact a beneficiary to such a trust [as asserted by Saree]".
Ms Avery's short point is that if this direction were effective the proceedings should have been brought to an end. The short minutes of order attached to the directions would have Saree consenting to a declaration that Ms Avery does not owe Saree any money under the Saree Loan Agreement and is entitled to redeem and have discharged the Saree Mortgage and to orders that Saree pay Ms Avery's costs of the proceedings. No provision is made under the short minutes of order for Saree's costs.
In my view Ms Avery's contentions in relation to this direction fail for two principal reasons.
First, the 13 July 2010 authority and direction does not acknowledge without qualification the existence of any trust of the benefit of the Saree Mortgage. Plus Trustee Limited seeks to maintain a position that it can give a direction to Saree on the basis that Saree is its trustee but nevertheless keep open to itself the right to later contend that Saree does not hold the benefit of the Saree Mortgage on trust for Plus Trustee. In other words, if Saree were to follow the direction and then seek to reimburse itself out of trust property for its costs of complying with the direction or for its other liabilities of acting on the trust, Plus Trustee could then deny that a trust existed. Such a direction could hardly be effective. It seems to me that a fundamental assumption behind the making of a valid direction between trustee and beneficiary is that there is a mutual acknowledgment of that relationship. That does not exist here.
But there is another problem with the direction. The effect of the short minutes of order is for Saree to pay Ms Avery's costs without Saree having any right of indemnity out of the trust property. If a trust existed this direction would eliminate the trustee's right of indemnity out of trust property. Saree would be without recourse for the costs that it had already incurred and would be liable to pay Ms Avery's costs. Such a direction is not effective: see in Re Brockbank [1948] Ch D 206, Re Application of Scali [2010] NSWSC 1254 at [14] and Jacobs Law of Trusts, seventh edition 2006, Lexis Nexis, Butterworths at [1705].
In my view the 13 July 2010 authority and directions did not effect the amount owing between Ms Avery and Saree under the Saree Mortgage.
The Benefit of the Saree Mortgage and the Overpayment Issue
These remaining two issues will be the subject of a further judgment.
What is due on the Saree Mortgage?
Subject to the Court's determination of the remaining two issues it is possible to determine questions of the principal and interest owing on the Saree Mortgage. But as will be seen costs questions cannot yet be determined.
Principal Money
I accept Mr Sorenson's and Ms Burson's evidence that Saree made three separate advances to Ms Avery: A$370,000 on 2 March 2006, A$1,667,055 on 31 March 2006 and A$1,290,019.50 on 5 April 2006. Saree paid these monies either into the trust account of the solicitors for the vendors of Apartment 901, Messrs Allen Wong and Co, or into the trust account of Ms Avery's own solicitors acting for her on the purchase, Messrs Dibbs Abbott Stillman. Ms Avery applied these funds to the purchase of Apartment 901. The payments are expressed here in Australian Dollars, but the New Zealand Dollar amounts of the payments and the destination of each payment is the subject of findings in the principal judgment: cf Avery v Saree Holdings Ltd; Lava Ltd v Avery [2012] NSWSC 463 at [230].
Saree's contention in these proceedings is that (apart from an amount of an alleged and disputed over payment) these monies were all held and advanced by it as trustee for Mr Donoghue. The funds were with Saree as the consideration for the sale by Plus Trustee of shares in Plus SMS. But as between Saree and Ms Avery, Saree had the legal entitlement to the funds and Ms Avery had no legal interest in the funds before they were advanced to her.
In these circumstances the advances of principal attract the operation of both the Saree loan agreement and the Saree mortgage. In the principal judgment the Court did not accept Ms Avery's case that the Saree loan agreement and the Saree mortgage were part of a sham arrangement to mislead the Family Court of Australia: cf Avery v Saree Holdings Ltd; Lava Ltd v Avery [2012] NSWSC 463 at [251] - [261].
First, all Saree's payments to Ms Avery fall within the terms of the Saree loan agreement, and then fall within the obligations of the Saree Mortgage through its "Relevant Agreement" provisions. Although the principal "Loan" provided for under the Saree loan agreement was A$3,700,000, "to be drawn down in one amount" cl 2.2, the actual advance established is A$3,327,074.50 in several tranches. The parties, in my view, merely performed the Saree loan agreement slightly differently from its terms, but it still applies to the advances made.
Secondly, all Saree's advances to Ms Avery are also "Monies Owing" directly under the Saree mortgage, the Mortgagor's acknowledgement in the Saree Mortgage Schedule that "the Mortgagee....has provided or agreed to provide financial accommodation to the Mortgagor" to provide financial accommodation to the Mortgagor" assists in the assessment what are "Monies Owing". I conclude that Saree's advances were moneys had and received to Ms Avery's use, as they were applied to the purchase of Apartment 901. In my view Saree's advances to Ms Avery fall within the following sub-paragraphs of "Monies Owing". They are "moneys and amounts owing or remaining unpaid to the mortgagee...on any account" within subparagraph (a) of that definition. They are advances "on the mortgagor's account" or are "accommodation of the mortgagor" within sub-paragraph (b). They are monies "presently owing and payable" within sub-paragraph (d). They are monies that are owing by the mortgagor to the mortgagee and referred to in a "Relevant Agreement" within sub-paragraph (f). And they are moneys "owing" or "repayable" because of the reasoning in the next paragraph.
Ms Avery's obligation to repay arises because of her default under the Saree Loan Agreement, clause 4 repayment obligations. Default under the Saree Loan Agreement arises the following way. Under Saree Loan Agreement, clause 4.2.3 "the Loan" shall be immediately due and payable"....if any payment....of interest is more than one calendar month in arrears". But pursuant to clause 3.1.1 and 3.2 of the Saree Loan Agreement interest first accrued and was payable on 12 May 2006, the first periodic Interest Payment Date after the three advances Saree actually made in March and early April 2006. That interest was not paid. So the Loan moneys under the Saree Loan Agreement were repayable and owing on and from 12 May 2006. They were also therefore "Monies Owing" under the Saree Mortgage from the time it was created in September 2006.
Interest
Saree's interest calculations are also based on the Saree Loan Agreement provisions already identified. Saree has advanced interest calculations by HLB Mann Judd Limited that for the reasons stated here are in conformity with the Saree Loan Agreement. As indicated above relation to "Monies Owing", the trigger for the mortgagor's obligation to repay is the combined operation of clauses 4.2.3 and 3.1.1 of the Saree Loan Agreement. Clause 4.2.3 stipulates that if any payment of interest or principal is more than one calendar month in arrears then "the loan shall be immediately due and payable together with accrued interest thereon" without written demand. Interest on the loan is calculated under clause 3.1.1 and shall be paid under clause 3.2.2 on the 12 February, May, August and November of each year. The first payment of interest was due on 12 May 2006.
Under the Saree Loan Agreement, clause 3.3 the borrower must pay the default rate of interest under clause 3.3 up to the date of actual payment at the rate of 10 per cent accruing daily on the outstanding sum.
As that payment was not made on 12 May 2006, Ms Avery became liable to pay interest at the default rate of interest of 10 per cent pursuant to clause 3 of the Loan Agreement from that date. The HLB Mann Judd calculations reflect that, leading to accrued interest almost doubling the total amount due over the period of approximately 6 years since the advances. The total amount of interest calculated to be due up to 22 June 2012 is $2,843,059.84. The precise amount of interest accruing on a daily basis is not presently clear on the evidence. Subject to the remaining matters to be determined, judgment would need to be entered at a date after 22 June 2012, so a calculation of a daily rate from 22 June 2012 up to that date will need to be provided, for the entry of judgment for interest.
Saree's Costs
Saree also claims its costs of these proceedings, on the basis that they are secured by the Saree mortgage as part of "Monies Owing". Saree presents HLB Mann Judd's calculation of the costs incurred by Saree in Court action to obtain payment under its second mortgage, and presents its calculation of interest on those costs.
Ms Avery disputes the basis of Saree's claim to costs. She says: (1) that even though Saree may have a right to recover its costs on an indemnity basis under the mortgage that the quantum of those costs must either be assessed under Legal Profession Act 2004 or agreed, and (2) that Saree's costs can only be established by admissible evidence. Both of Ms Avery's arguments on this issue are persuasive.
Saree says that its costs incurred to obtain recovery, including in Court action, and paid to its solicitors, Jones Young, Holman Webb, Gibson & Associates and others total $198,867.94. Interest on this sum under the Saree mortgage calculated at 10 % is $55,943.36, making a total of $254,811.30 in costs and interest.
Saree also claims costs incurred in the joint action by Lava Limited and Saree Holdings "where it is unable to be collected by either Saree or Lava directly". The schedule of such costs paid to Jones Young, Alan Sorrell, Holman Webb and Gibson & Associates totals $419,273.56. The plaintiff seeks only 50% of these costs ($209,636.78) on account of Saree, with interest under the mortgage at 10% of $34,213.21, totalling $243,849.99.
But the HLB Mann Judd Limited report does not contain admissible evidence of what costs have been paid. It reports upon but does not prove by admissible evidence what memoranda of fees were issued to Saree on account of recovery under the Saree mortgage. Nor does it prove by admissible evidence what fees Saree paid, or were paid on its behalf at various times, and why it is said that 50 per cent of these costs is the percentage of costs said to have been incurred on account of Saree.
Ms Avery has a right to have Saree's legal costs assessed, even though they are claimed on an indemnity basis under the mortgage. Although she as mortgagor is not directly chargeable with the bill for these fees, she is liable to pay the party chargeable with such bill and therefore has a statutory entitlement to a costs assessment: Legal Profession Act 2004, s 350. A mortgagor's or prior mortgagee's right to taxation on assessment in such circumstances has been long recognised: see Debney v Semerdziev (1982) 2 NSWLR 391. Ms Avery is yet to exercise these rights and should be given an opportunity to do so.
Moreover, on the evidence before me Ms Avery has not been given copies of those bills. The right to have a bill assessed implies a right to have a bill prepared and delivered: cf Debney v Semerdziev (1982) 2 NSWLR 391. Under Legal Profession Act, s 350(6) she may also have a capacity to seek further information before exercising her rights to a cost assessment.
For these reasons I am not, on the present state of the evidence and the submissions as to the accounting between the parties, prepared to allow to Saree either these claimed costs or interest on these costs. Ms Avery must first have an opportunity to exercise her statutory rights to have these costs assessed.
Moreover, Ms Avery submits that final costs orders should not be made in the Saree proceedings until the Court has determined all remaining issues.
Conclusions and Orders
In the result the Court will make the following further orders in the Lava proceedings. It is also necessary as part of these orders to vary the orders made on 1 June 2012 to accommodate the change of Lava's solicitors from Homan Webb to Everingham Solomons. In the Lava Proceedings the Court orders and notes that:
(1).The Defendant pay to the Plaintiff interest on its costs of the proceedings (including the costs payable under the Order of the Court on 2 April 2009) calculated in accordance with clause 2.2 of Annexure A to the Mortgage granted by the Defendant to the Plaintiff being dealing under AC441383R ("Lava Mortgage").
(2).There be paid out of the assets secured by the Lava Mortgage, on an indemnity basis, and independently of whether such costs are recoverable or are in fact recovered from the Defendant under Orders 1 or 2 made by the Court on 2 April 2009, or Orders 3 made on 25 May 2012 or Order 1 above, the Plaintiff's costs of these proceedings together with interest on such costs calculated in accordance with clause 2.2 of Annexure A to the Lava Mortgage.
(3)Vary the orders made on 1 June 2012 to delete reference to Homan Webb and substitute therefore Everingham Solomons.
(4)Note the plaintiff's undertaking given on 8 June 2012 in accordance with the Court's orders made on 1 June 2012.
In the account being conducted in the Saree proceedings, the Court has made findings about the 13 July 2010 Authority and Directions (Exhibit 24) and about the calculation of the amounts of principal and interest due under the Saree Mortgage. The Court is yet to determine two other issues, the overpayment issue and questions as to the benefit of the Saree Mortgage and will do so shortly.
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Decision last updated: 16 August 2012
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