Barker v Perpetual Trustee & Anor No. Scciv-02-1833

[2003] SASC 126

BARKER v PERPETUAL TRUSTEE & ANOR

[2003] SASC 126

1. WILLIAMS J. On 6 February 2003 I ordered the discharge of an interim order for injunction which I made on 16 December 2002 and I delivered reasons for my decision ([2003] SASC 27). The respondent Perpetual Trustee thereupon sought an order for costs associated with the application for the interim order and its discharge.

2. On 14 March 2003 the plaintiff appealed to the Full Court against my order of 6 February 2003.  In its appeal notice the plaintiff has anticipated an order for costs upon a solicitor and client basis in favour of the mortgagee Perpetual Trustee.  The parties inform me that the appeal is due to be heard at the May 2003 sittings.  I have now received the submissions of the parties.

3. The plaintiff opposes the making of a costs order at this stage; by written submission dated 29 April 2003 the plaintiff’s counsel has submitted:

   “1.1That the costs should be reserved;

   1.2In the alternative that the costs be costs in the cause;

   1.3In the further alternative if an order for costs in favour of the first defendant is made that:

   (a)    the appropriate order should be that they be the first defendant’s costs in the cause;

   (b)    that the costs be restricted to the application to discharge the interim injunction namely the argument on 28^th January 2003;

   (c)    that the plaintiff have costs of and incidental of the interim injunction ordered on 13 December 2002 and the attendance on 19 December 2002;

   (d)    that costs be on a party/party basis and not on a solicitor and own client basis.”

4. In my opinion it is in the interests of the parties that I dispose of the question of costs forthwith so that the Full Court is enabled to have before it for review all aspects of the plaintiff’s application for an interlocutory injunction.  Moreover, in considering the relief which may be granted to the plaintiff it may be relevant for the court to have before it a complete statement of the plaintiff’s financial position.  It appears from the terms of the mortgage that Perpetual Trustee will be entitled to treat its costs of these proceedings as secured by the mortgage if these costs are characterised as “enforcement expenses”.  Until such time as its entitlement (if any) in this behalf is established there will be an element of uncertainty as to the amount which (sooner or later) the plaintiff has to find.

5. The plaintiff contends that the mortgagee (which is also the lender of the relevant monies) has acted unreasonably in the conduct of these proceedings; I have not observed anything which would lead me to deprive the mortgagee of costs.  The plaintiff is seeking an indulgence or relief from the consequences of his own admitted default and in these circumstances the mortgagee defendant should be entitled to its costs in any event (see Quick on Costs par 1.641 pp 1-8064).

6. It is not in dispute that the plaintiff fell badly into arrears with his modest mortgage repayments in about August 2002 following which the defendant mortgagee took steps (upon the plaintiff’s admitted default) to sell the property.  The notice of default dated 27 August 2002 advised the plaintiff of the mortgagor’s right to call up the principal and this was done by notice dated 13 December 2002 whereby demand was made for payment of $5,552.48 already due plus the balance arising under the credit contract $34,890.68 (in all $40,443.16).

7. A few days before the advertised date of auction in December 2002 the plaintiff enquired as to the outstanding arrears.  Perpetual Trustee (as mortgagee and lender) supplied this information on about 10 December 2002 (giving particulars of “total costings of $5,139.48”) but the calculation did not bring to account the acceleration in principal repayments arising upon the defendant’s default which was demanded on 13 December 2002 as abovementioned.  The lender’s right on default to call up the loan is set out on p 9 of the General Terms and Conditions of Loan.  This is immediately followed by the statement of the lender’s right to require payment of expenses reasonably incurred by the lender in enforcing or preserving its rights under the loan agreement or security.  There then follows a provision entitling the lender to debit these expenses to the loan.

8. The plaintiff seeks the indulgence of the court in seeking relief under s 55A of the Law of Property Act 1936 and an extension of time for bringing the proceedings in accordance with s 48 of the Limitations of Actions Act 1936.  In my judgment even if the plaintiff is successful in obtaining relief it can only be upon terms; I can see no reason why the defendant mortgagee should not be entitled to its reasonable costs in any event.

9. The application in which the plaintiff was unsuccessful before me was for an interlocutory injunction to interfere with the enforcement by the mortgagee of the process of sale which was on foot.  I consider that the mortgagee should have its costs in accordance with the agreement which is contained in the mortgage document.

10. Mr Barker’s mortage no 9212719 to Perpetual Trustees Australia Ltd is in evidence (Exhibit KB2 to Mr Barker’s affidavit of 12 December 2002); the mortgage is expressed to have been given upon Standard Terms and Conditions filed in the Lands Titles Office as TC 8177592.  The Standard Conditions are also in evidence (Exhibit KB3 to the abovementioned affidavit).  The Standard Conditions cl 5 identifies circumstances of default by the mortgagor and the mortgagee’s rights on default; the mortgagee is thereby empowered to take possession of the mortgaged land and to sell.  (The Loan Contract itself is Exhibit MAH2 to the affidavit of Ms Huish sworn 13 December 2002 together with the General Conditions in booklet form therein identified and set out in Exhibit MAH3 to that affidavit).

11. Monies received by the mortgagee as a result of the exercise of its rights under the mortgage will be applied (“subject to any laws”) firstly in payment of “all costs and expenses incurred by the Mortgagee in exercising its rights under the Mortgage” (see cl 5.3 of the standard conditions).  “Enforcement expenses” are dealt with in cl 7 of the standard conditions as follows:

    “7.1Enforcement expenses may become payable under the Mortgage in the event of default under clause 5.

    7.2You must pay the Mortgagee all reasonable enforcement expenses the Mortgagee reasonably incurs or expends in exercising its rights under the Mortgage.  In the case of legal fees and disbursements, these are payable on the higher of a full indemnity basis or a solicitor and own client basis.”

12. In the light of this agreement I am of opinion that the present proceedings should be regarded as so closely related to the enforcement of the rights of the mortgagee upon the mortgagor’s default as to fall within cl 7 of the standard mortgage conditions which I have recited.  The exercise of the court’s discretion in such circumstances is discussed in Citibank v Pirrotta (Full Court Judgment No S6603 - 1 April 1998).  Nevertheless the discretion still remains.  I consider that it is open to me to award costs on the basis of “solicitor and own client” notwithstanding that this may fall short of the full indemnity contemplated by cl 7.  Whilst there may be some circumstances in which costs beyond those properly payable as between solicitor and own client might be incurred I consider that an indemnity basis of awarding costs would be inappropriate in the circumstances of this matter.  The mortgagee seeks costs as between solicitor and own client and that is how the order will be expressed.  As now relevant the mortgagee will be entitled to all of its costs charges and expenses provided that it was reasonable to incur such items and provided that they are reasonable in amount.  To make good any objection upon taxation the mortgagor will be required to satisfy the taxing officer of any unreasonableness for which the plaintiff contends (see Citibank v Pirrotta cited above).  I reject the plaintiff’s argument that only party and party costs should be allowed to the mortgagee in the face of a contrary agreement.

13. Counsel for Perpetual Trustee consents to an appeal against this costs order being brought before the Full Court concurrently with the appeal which is already on foot and supports the grant of leave to appeal in accordance with s 50(2)(b) of the Supreme Court Act 1935.

14. The formal order will be:

    1Order that the plaintiff pay to the defendant Perpetual Trustee its taxed costs of and incidental to the application for an interlocutory injunction (including this order) such costs to be taxed as between solicitor and own client.

    2Order that the plaintiff have leave to appeal to the Full Court against the order contained in paragraph 1.