Bendigo and Adelaide Bank Limited v Grahame (No 2)
[2020] VSC 223
•30 April 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S ECI 2018 02347
| BENDIGO AND ADELAIDE BANK LIMITED (ACN 068 049 178) | Plaintiff |
| v | |
| HEATHER JEAN GRAHAME | Defendant |
(BY ORIGINAL PROCEEDING)
| HEATHER JEAN GRAHAME | Plaintiff by Counterclaim |
| v | |
| BENDIGO AND ADELAIDE BANK LIMITED (ACN 068 049 178) | Defendant by Counterclaim |
(BY COUNTERCLAIM)
---
JUDGE: | Sloss J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers, following the delivery of reasons on 2 March 2020 and the filing of written submissions by the plaintiff on 3 April 2020 |
DATE OF RULING: | 30 April 2020 |
CASE MAY BE CITED AS: | Bendigo and Adelaide Bank Limited v Grahame (No 2) (Costs Ruling) |
MEDIUM NEUTRAL CITATION: | [2020] VSC 223 |
---
MORTGAGES — Mortgagor defaulted on loan — Action for recovery of possession by mortgagee against mortgagor — Application by successful mortgagee for costs on an indemnity basis pursuant to contractual provision — Whether mortgagee entitled to an award of costs on an indemnity basis — Exercise of discretion as to basis on which costs to be awarded — Mortgagee’s costs awarded on the indemnity basis.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff/Defendant by Counterclaim | Ms C F Gobbo | Cornwalls |
| For the Defendant/Plaintiff by Counterclaim | In person |
TABLE OF CONTENTS
Background......................................................................................................................................... 1
Costs – applicable principles........................................................................................................... 3
Plaintiff’s submissions..................................................................................................................... 8
Contractual provisions................................................................................................................. 8
Common law position................................................................................................................ 10
Disposition........................................................................................................................................ 11
HER HONOUR:
Background
On 2 March 2020 the Court delivered its reasons on the appeal in this proceeding (reasons)[1], which was conducted as a hearing de novo pursuant to r 84.05 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules). Relevantly, the Court held that it would dismiss the defendant’s appeal and grant the plaintiff’s application for summary judgment, in respect of both its statement of claim and on the defendant’s amended counterclaim.
[1][2020] VSC 86.
Following delivery of the reasons, counsel for the plaintiff indicated that her client, being the successful party, would be seeking costs for all aspects of the proceeding on an indemnity basis.[2] At that time, counsel also referred the Court to two decisions ‘that were relied on below for that application’,[3] namely Taree Pty Ltd v Bob Jane Corporation Pty Ltd[4] and United Petroleum Australia Pty Ltd v Herbert Smith Freehills (No 2),[5] and copies of those decisions were provided to the Court and the defendant. The Court then requested that counsel for the plaintiff prepare and circulate a draft of the form of judgment to be entered, including in relation to the issue of costs, with a view to re-listing the matter for the making of orders at some convenient point.
[2]Transcript, 2 March 2020, page 8, line 10 (Ms C Gobbo).
[3]Transcript, 2 March 2020, page 8, lines 12-13 (Ms C Gobbo).
[4][2008] VSC 228.
[5][2018] VSC 501.
On 11 March 2020, the solicitors for the plaintiff forwarded to the Court and to the defendant, by email, a minute of the proposed form of order sought, noting that the proposed form of order had been provided to the defendant for comment but no response had been received. Later that day, the defendant sent an email to the Court and the plaintiff’s solicitor attaching a letter. However, that letter did not address the form of order proposed by the plaintiff’s solicitor.
In the ensuing week or so, the COVID‑19 pandemic took hold, and on Sunday, 22 March 2020, the Premier of the State of Victoria issued a statement foreshadowing that Victoria would proceed over the next 48 hours to implement a shutdown of all non‑essential activity across the State to combat the spread of coronavirus. Since then, restrictions remain in place which affect the ability for the parties to be physically present in Court, or otherwise for solicitors and witnesses to be physically proximate to each other.
Against that background, by email to the parties sent on 25 March 2020, the Court circulated a revised version of the plaintiff’s draft form of judgment and set a timetable for the plaintiff to file and serve:
(a) a short outline articulating the basis on which indemnity costs are claimed; and
(b) an affidavit dealing with the calculation of interest and specifying the amount of interest payable on the sum outstanding as at 16 November 2018 (the date to which the amount claimed in the writ was calculated) and its manner of calculation for the period from 16 November 2018 until the date of judgment, at the rate(s) applicable under the loan agreement dated 8 November 2016 between the plaintiff as lender and the defendant as borrower (as varied on 17 November 2017) (loan agreement).
In that email, provision was also made for the defendant to provide any response to the material to be filed by the plaintiff either in relation to the calculation of interest or the award of indemnity costs.
On 3 April 2020, the plaintiff filed its outline of submissions (plaintiff’s submissions). On 7 April 2020, the plaintiff provided an unsworn affidavit of Ms Stephanie Kate Davies, an employee solicitor of the plaintiff’s solicitors, which addressed, amongst other matters, calculation of interest under the loan agreement. The affidavit was provided in an unsworn form due to the difficulties with witnessing an affidavit under the ‘social distancing’ protocols that have been variously adopted in response to the COVID‑19 pandemic.
In the period since the reasons were delivered, the defendant has sent further email correspondence to the Court and to the plaintiff’s solicitor, but she has not responded substantively to the plaintiff’s submissions as to costs or the interest calculation.
Costs – applicable principles
Section 24(1) of the Supreme Court Act1986 (Vic)[6] and s 49(3)(k)[7] and Part 4.5 of the Civil Procedure Act2010 (Vic) dealing with the Court’s powers as to costs, and rule 63.02 of the Rules,[8] provide that the Court has a broad discretion in determining questions of costs. Further, s 65C(1) of the Civil Procedure Act also now permits the Court to make ‘any order as to costs it considers appropriate to further the overarching purpose.’
[6]Section 24(1) provides:
(1)Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.
[7]Section s 49(3)(k) provides:
(3)Without limiting subsection (1) [court may give any direction or make any order it considers appropriate to further the overarching purpose], a court may give any direction or make any order it considers appropriate with respect to—
…
(k)costs, including the proportions in which the parties are to bear any costs;
[8]Rule 63.02 relevantly provides as follows:
The power and discretion of the Court as to costs under section 24 of the Act shall be exercised subject to and in accordance with this Order.
Generally, where a party is successful, costs will follow the event and a successful party will usually obtain all of the costs of the action even though it may have failed in establishing some of the alternative heads of claim. In Oshlack v Richmond River Council[9], McHugh J conveniently summarised the general position concerning the ‘usual order as to costs’, and the objectives the Court seeks to meet in exercising its discretion as to costs, as follows:[10]
The expression the ‘usual order as to costs’ embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party.[11] If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.
[9](1998) 193 CLR 72.
[10]Ibid, at 97 [67] (footnotes in original).
[11]Latoudis [v Casey] (1990) 170 CLR 534 at 543, per Mason CJ; at 562-563, per Toohey J); at 566-567, per McHugh J; Cachia v Hanes (1994) 179 CLR 403 at 410, per Mason CJ, Brennan, Deane, Dawson and McHugh JJ.
While the ‘usual order as to costs’ entails, as a general rule, that a successful party is entitled to be awarded its costs on a ‘party and party’ basis, the Court may, in the exercise of its discretion, award costs to a successful party on an indemnity or other basis. In this regard, the courts have long recognised that the general rule may yield where an alternative basis is shown, such as where the parties have expressly agreed to the contrary.
In Micarone v Perpetual Trustees Australia Ltd (No 2),[12] the defendant (Perpetual), relying on clause 2.7 of its mortgage,[13] claimed that it was entitled to recover its costs on the basis of solicitor and own client costs. The plaintiffs, on the other hand, submitted that they should not be ordered to pay any more than party and party costs. The Full Court (Olsson, Debelle and Wicks JJ) held that Perpetual was entitled to recover its costs of the actions and of the appeals on a solicitor and own client basis, stating:[14]
[32]The general rule is that, in the absence of an agreement to the contrary, a mortgagee is entitled to costs on a party and party basis: The Kestrel (1866) LR 1 A& E 78; Re Queen's Hotel Co Cardiff Ltd [1900] 1 Ch 792; Re Adelphi Hotel (Brighton) Ltd [1953] 1 WLR 955; Re A Solicitor's Bill of Costs (1941) 58 WN (NSW) 132; Jamieson v Gosigil Pty Ltd [1983] 2 Qd R 117; AGC (Advances) Ltd v West (1986) 5 NSWLR 301; Katsaounis v Belehris (1994) 179 LSJS 143 at 155-156. The expression of a contrary intention must be "plainly and unambiguously expressed" to use the words of Vaisey J in Re Adelphi Hotel Co Ltd (supra) at 961. Generally speaking, a contractual obligation to pay all costs is not construed to require payment of costs improperly or unreasonably incurred, such an obligation being open to objection on public policy grounds: Gomba Holdings (UK) Ltd v Minories Finance Ltd [1993] Ch 171 at 187-188. That difficulty does not exist in this case since the obligation to pay solicitor and own client costs is subject to conditions as to reasonableness: Citibank Savings Ltd v Pirrotta (unreported, Full Court of the Supreme Court of South Australia, 1 April 1998, Judgment no. S6603); Elders Trustee and Executor Co Ltd v Eagle Star Nominees Ltd (1986) 4 BPR 9205. To make good any objection upon taxation, the mortgagors should be required to satisfy the taxing officer of the unreasonableness of the item, doubts being resolved in favour of the mortgagee: Katsaounis v Belehris (supra) at 157 approved in Citibank Savings Ltd v Pirrotta. The court will usually give effect to an express contractual obligation but, nevertheless, retains a discretion to award costs on some other basis: ANZ Banking Group (NZ) Ltd v Gibson [1981] 2 NZLR 513 at 524–525.
[33]The costs incurred by Perpetual in these actions fall within the terms of c2.7(d) since they are costs incurred in proceedings to protect its rights under the separate mortgages. The plaintiffs entered into a contractual obligation as mortgagors to pay Perpetual's costs on the solicitor and own client basis. There is nothing which requires the court to exercise its discretion to allow costs on any other basis. For these reasons, Perpetual is entitled to recover its costs of the actions and of these appeals on a solicitor and own client basis.
[12][1999] SASC 533 (Perpetual).
[13]Ibid, at [31]: Relevantly, cl 2.7 provided (emphasis in bold added):
‘The Mortgagor will pay to the Mortgagee on demand all costs (including legal costs as between solicitor and own client) expenses and other amounts incurred or paid by the Mortgagee or any Receiver or attorney appointed under this Mortgage:
...
(d)of and incidental to:
(i)the exercise or purported or attempted exercise of any of the rights powers authorities or remedies contained or implied in this Mortgage conferred on the Mortgagee or any Receiver or for the preservation of or in any manner in reference to this Mortgage and/or any Collateral Security; or
(ii)any proceedings in any court or tribunal in which the Mortgagee or any Receiver is involved to protect any such right power authority or remedy including any application for leave to intervene; or
(e)as a consequence or arising out of any default by the Mortgagor and/or the Debtor under this Mortgage and/or any Collateral Security or incurred in or incidental to the making good by or on behalf of the Mortgagee (in its absolute discretion) of any default by the Mortgagor in the observance or performance of any covenant.
All such costs and expenses shall form part of the Moneys Hereby Secured.’
[14][1999] SASC 533, at [32].
A similar view was expressed by the New South Wales Court of Appeal in Kyabram Property Investments Pty Ltd v Murray.[15]There, Beazley JA (with whom Hodgson and Ipp JJA agreed) reiterated the principle, stating:[16]
[12]It is well established that a mortgagee may rely upon its contractual entitlement to costs so as to claim an order other than on a party/party basis. In Re Adelphi Hotel (Brighton) Limited [1953] 2 All ER 498, Vaisey J at 502 observed that the prima facie rule was that costs were awarded on a party/party basis unless some alternative basis was shown “either on some well-recognised principle, or under some contract plainly and unambiguously expressed”. The New Zealand Court of Appeal applied the rule to the payment of a mortgagee’s legal costs in a recovery action: ANZ Banking Group (NZ) Limited v. Gibson (Court of Appeal) [1986] 1 NZLR 556 at 566, 569.
[13]The application of the principle is well recognised in Australia: see Inglis and Anor. v. Commonwealth Trading Bank of Australia (1973) 47 ALJR 234 at 235. In AGC (Advances) Limited v. West (1984) 5 NSWLR 301, Hodgson J stated (at 304-305) that at general law a mortgagee was entitled to party/party costs only but that the general law was subject to the precise terms of any provision of the mortgage. Cole J accepted this to be correct in Sandtara Pty. Limited & Others v. Australian European Finance Corporation Ltd. & Others (1990) 20 NSWLR 82, at 97.
[15][2005] NSWCA 87 (Kyabram Property Investments).
[16]Ibid, at [12]-[13] (emphasis in original).
In Kyabram Property Investments, the mortgage agreement expressly stated that the mortgagee should be liable to pay costs on a solicitor/own client basis. However, the Court held that even where the parties have so agreed, the order for costs nevertheless continues to be at the discretion of the court.[17] And when deciding the appeal, the Court exercised its discretion to deny an award of indemnity costs on the basis that the mortgagor in its claim, repeated through three versions of the statement of claim, had only sought an order for ‘costs’ in terms which would conventionally be interpreted as costs on a party/party basis.[18]
[17]Ibid, at [14].
[18]Ibid, at [15], [17].
That the award of costs is always a matter in the discretion of the court was reinforced by the Court of Appeal in Chen and Xu v Kevin McNamara & Son Pty Ltd.[19] In considering the related issues of whether the first respondent was entitled to recover indemnity costs pursuant to a contractual indemnity provision, and when contractual provisions may inform curial discretion, Redlich JA (Maxwell P and Robson AJA agreeing) stated:[20]
[19][2012] VSCA 229 (Chen and Xu).
[20]Ibid, at [8], [10] (footnotes in original).
[8]An agreement to pay costs will be construed as an agreement to pay costs on a party and party basis, unless it is plain from its terms that costs are to be paid on a ‘special basis.’[21] Where the terms plainly and unambiguously provide for costs to be assessed on some special basis, the court will take such a provision into account[22] but it is not bound to give effect to any extra-curial contract as to costs.[23] An agreement to pay costs on a ‘special’ basis is only a factor informing the exercise of the court’s discretion, but not requiring the exercise of that discretion in a particular way.[24] Generally however, where the parties have unmistakeably agreed to the making of a special costs order, such a term will be given effect[25] to unless there is some other discretionary consideration that militates against the making of such an order.[26]
…
[10]The costs orders made in favour of a successful mortgagee have generally reflected the terms of any special bargain contained in the mortgage contract.[27] …
[21]Kheirs Financial Services Pty Ltd v Aussie Home Loans Pty Ltd [2010] VSCA 355.
[22]Citibank Savings Ltd v Nicholson & Ors [1998] ANZ Conv R 442, 444; Rumball v Mortimore [2000] WASC 126, [14]; Commonwealth Bank of Australia v Aspenview Productions Pty Ltd [2001] VSC 499 (McDonald J); Kyabram Property Investments Pty Ltd v Murray ([2005] NSWCA 87 (Beazley JA with whom Hodgson and Ipp JJA agreed).
[23]For a discussion of relevant authority see Taree Pty Ltd v Bob Jane Corporation Pty Ltd [2008] VSC 228 (Vickery J).
[24]Russo v Buck (No 2) [2007] SASC 157.
[25]Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2) [1993] Ch 171.
[26]Re Adelphi Hotel (Brighton) Ltd [1953] 2 All ER 498; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 3) [2010] NSWSC 1139.
[27]Citibank Savings Ltd v Nicholson & Ors [1998] ANZ Conv R 442, 444 (Williams J with whom Cox and Mullighan JJ agreed); Rumball v Mortimore [2000] WASC 126, [15].
Ultimately, the Court of Appeal refused to displace the general rule that costs should be awarded on a party and party basis, because the Court found ‘no conduct, well recognised principle or plain and unequivocal contractual term had been identified’[28] that would justify that course.
[28][2012] VSCA 229, at [20] (per Redlich JA, Maxwell P and Robson AJA agreeing).
It will be noted that in Chen and Xu, the Court of Appeal referred, with approval, to Vickery J’s discussion of the relevant authorities in Taree Pty Ltd v Bob Jane Corporation Pty Ltd.[29] In Taree, the defendants sought a special costs order against the plaintiffs on the basis of the terms of the contracts existing between the parties, being relevantly a deed of guarantee and indemnity and a suite of franchise agreements. However, for reasons similar to those expressed in Kyabram Property Investments, Vickery J declined to award costs against the plaintiffs on any basis other than on a party and party basis.
[29][2008] VSC 228 (Taree).
Relevantly, his Honour found that the obligation to pay the costs of enforcing the agreements on the basis of a special costs order was not expressed in ‘plain or unambiguous language’.[30] In essence, this was because there were ‘internal contradictions in the franchise agreements as to the basis upon which the plaintiffs would be liable to [the defendant] for the costs it incurred in enforcing those agreements’.[31] But, his Honour continued, to say that even if he were wrong about that, he would, in the exercise of his discretion, dismiss the claim for a special costs order on other grounds. The first additional ground he cited was that ‘if the first defendant had intended to claim costs on other than a party and party costs basis in these proceedings, it should have done so in its pleadings.’[32] He observed that ‘[n]owhere is it claimed that any of the plaintiffs are liable to pay costs other than on a party and party basis, let alone on the indemnity basis now claimed’[33], adding that the absence of pleadings in the present case ‘was more than of mere theoretical significance because of the internal inconsistencies within the contractual documentation as to the basis upon which the plaintiffs could be liable for costs in the exercise of the discretion under the Rules.’[34] Further, his Honour was of the view that the third to fifth plaintiffs were ‘entitled to be put on notice of the full claim made against them in the counterclaim’ and unless specifically pleaded, the claim for costs on an indemnity basis ‘not only might have, but in all likelihood would have, taken the third to fifth plaintiffs by surprise.’[35]
[30]Ibid, at [48].
[31]Ibid.
[32]Ibid, at [50].
[33]Ibid, at [52].
[34]Ibid, at [53].
[35]Ibid, at [56].
Plaintiff’s submissions
In the present case, the plaintiff seeks its costs of the proceeding, including its costs of the summons filed on 1 March 2019 and of the appeal, on an indemnity basis. In so doing, it relies primarily upon contractual provisions pertaining to the loan agreement with the defendant, as contained in the Memorandum of Common Provisions (MCP) (that was incorporated into the mortgage securing the advances under the loan agreement).[36] In the alternative, the plaintiff relies upon ‘the accepted common law position in relation to indemnity costs.’[37]
[36]The MCP is exhibit KJP‑9 to the Affidavit of Ms Kathryn Jane Peace sworn on 1 March 2019 (Peace Affidavit), Appeal Book, Tab 5, pages 177-204.
[37]Plaintiff’s submissions, [2].
Contractual provisions
In support of its primary claim, the plaintiff relies on clauses 10.1(c) and 10.2 of the MCP as justifying an award of costs on an indemnity basis.[38] It is convenient to set out these clauses in full:[39]
[38]Plaintiff’s submissions, [3]-[4].
[39]Exhibit KJP‑9 (emphasis in bold added), Appeal Book, Tab 5, page 177 at 195-196.
10.1 Expenses
You must reimburse us for our expenses in relation to the following.
(a)Preparing, executing and completing this mortgage and any priority agreement.
(b)The contemplated, actual or attempted preservation or maintenance of any property.
(c)The contemplated, actual or attempted enforcement of, or exercise, preservation or consideration of our rights, powers or remedies under, this mortgage, the property or any priority agreement.
(d)Any enquiry by a governmental agency or any legal proceedings relating to you, the property, this mortgage or any priority agreement.
(e)Any consent, approval, waiver, variation, release or discharge relating to this mortgage or any priority agreement.
(f)all stamp, transaction and similar duties and charges (including fines and penalties) payable in connection with this mortgage or the property.
This includes expenses incurred in any review or environmental audit, conducting property valuations or in retaining consultants to evaluate matters of material concern to us, and administrative costs including overheads and the salaries and wages of our employees and agents (whose time and costs are to be charged at reasonable rates).
It also includes legal fees (including in-house lawyers charged at their usual rates) on a full indemnity basis in relation to any of the above.
If any account is in a currency other than Australian dollars, all fees .and charges and other amounts referred to in this clause payable or incurred in Australian dollars wl1ich we determine are to be debited to that account will be converted to that other currency at the rate we determine before being debited.
10.2 Indemnity
You must indemnify us against any loss, cost, charge, liability and expense which:
(a) we or any of our representatives; or
(b) any receiver or attorney,
incurs as a result of any:
(c) event of default; or
(d)interest in, or control or power (including any exercise, attempted exercise or failure to exercise such power) relating to the property which we or they have, including in relation to the storing or disposing of anything on the property under clause 8.3.
This includes legal fees on a full indemnity basis and administrative costs including overheads and the salaries and wages of our employees and agents.
This obligation continues despite the release of this mortgage and the repayment of the secured money.
The plaintiff submits that these clauses of the MCP demonstrate that ‘the parties agreed on clear contractual terms which entitle [the plaintiff] to recover from the defendant, its legal fees on an indemnity basis.’[40] In essence, the plaintiff, relying on the well-established principle in cases such as Kyabram Property Investments[41] and Taree,[42] contends that clauses 10.1(c) and 10.2 of the MCP evince a ‘plain and unambiguous’ intention on the part of the parties that the costs of any litigation are to be paid by the mortgagor (here, the defendant) on other than the standard basis, namely the indemnity basis.[43]
[40]Plaintiff’s submissions, [15].
[41][2005] NSWCA 87.
[42][[2008] VSC 228.
[43]Plaintiff’s submissions, [11].
The form of costs order the plaintiff proposed in the minute it circulated on 11 March 2020 was framed in the following terms:
The defendant pay the plaintiffs’ costs (including reserved costs) of the proceeding, including the appeal, on an indemnity basis, such costs to be taxed in lieu of agreement.
Common law position
The plaintiff acknowledges that the issue of whether to award costs to a party on other than the usual basis, here the indemnity basis, is a matter within the discretion of the Court.
Counsel for the plaintiff submits that the principles relating to awarding indemnity costs are generally well-settled, and she points to the following as being ‘established circumstances’ that may warrant such an award, relevantly:[44]
(a)where a party should have known it had no real prospect of succeeding in its claims.[45] Such circumstances give rise to a presumption that the relevant proceeding was “commenced or continued … because of some wilful disregard of the known facts or the clearly established law”; [46] and
(b)cases which involve “the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions”.[47]
[44]Plaintiff’s submissions, [18] (footnotes in original).
[45]Murdaca v Maisano [2004] VSCA 123, [40] (Nettle JA), citing Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd [1988] FCA 202; (1998) 81 ALR 397, 401.3 (Woodward J). Cf Bodycorp Repairers Pty Ltd v Australian Associated Motor Insurers Ltd (No 3) [2018] VSCA 192, [13] (Whelan, Niall and Hargrave JJA); Wentworth v Rogers (No 5) (1986) 6 NSWLR 534, 542E (Kirby P, with whom Hope and Samuels JJA agreed).
[46]Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd [2013] VSCA 237, [545]-[546] (Warren CJ, Osborn JA and Macaulay AJA); Murdaca v Maisano [2004] VSCA 123, [40]; Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225, 233.8 (Sheppard J).
[47]Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225, 233.8.
The plaintiff relies on the findings made by the Court in the reasons, particularly those at paragraphs [62], [63], [70], [85], [86], [96], [101], [103], [112] to [115], [120], [121], [123], [134], [138], [155], [156], [161] and [167], as demonstrating that ‘accepted common law principles are engaged’ that would render it appropriate for the Court to exercise its discretion to award indemnity costs.
Disposition
In my view, having regard to the applicable principles set out above, clauses 10.1(c) and 10.2 of the MCP, in providing for reimbursement of expenses in relation to enforcement or exercise of the plaintiff’s rights, powers or remedies under the mortgage, including for the recovery of ‘legal fees on a full indemnity basis’ do evince a ‘plain and unambiguous’ intention on the part of the parties that the costs of any litigation are to be paid by the mortgagor on other than the standard basis. However, as the decisions in Kyabram Property Investments and Chen and Xu make clear, even where the parties have so agreed, the award of costs (and on what basis) nevertheless continues to be at the discretion of the court. Accordingly, I turn now to consider matters which may bear on the exercise of the discretion.
In the present case it is relevant to note that in the prayer for relief embodied in its statement of claim, the plaintiff claims against the defendant:[48]
[48]See statement of claim, Appeal Book, Tab 1, at page 5 (emphasis in bold added).
APossession of the Land …;
B$166,702.87;
CInterest thereon at the variable rate applicable pursuant to the Loan Agreement from the date of filing to the date of payment or judgment;
DAlternatively to C, interest pursuant to statute; and
ECosts.
That is to say, the claim for indemnity costs is not specifically pleaded nor is there any statement of the facts relied upon to support such a claim.
Here, the issue of whether the absence of an express pleading or articulation of the claim for indemnity costs is likely to take the defendant by surprise, falls to be assessed against the background of the history of the proceeding to date.
Relevantly, the appeal, which is by way of hearing de novo under r 84.05, was brought by the defendant against the background of the Order made by the Judicial Registrar on 19 July 2019. The Order included, in paragraph 4, an order for costs on an indemnity basis, framed as follows:[49]
4.The defendant pay the plaintiff’s costs (including costs reserved and including the application for summary judgment) of and incidental to the claim and counterclaim in the proceeding on an indemnity basis, such costs to be taxed in lieu of agreement.
[49]See exhibit BJQ-4 to the affidavit of Bianca Quan sworn on 14 November 2019, Appeal Book, Tab 23 at pages 728-730.
The notice of appeal filed by the defendant did not specifically take issue with the order for indemnity costs.
In advance of the hearing of the appeal, the plaintiff filed an outline of submissions stating the reasons it contended neither the amended defence nor the amended counterclaim had any real prospect of success, and submitted that ‘[i]n the premises, the appeal ought to be dismissed with indemnity costs.’[50] Accordingly, at all relevant times when pursuing her appeal, the defendant was on notice that the plaintiff would seek indemnity costs in the event it was successful. In those circumstances, unlike the position in Kyabram Property Investments or Taree, it is difficult to see how the defendant could fairly be regarded as having been taken by surprise by the plaintiff claiming costs on the indemnity basis.
[50]Plaintiff’s outline of submissions (on the appeal) filed on 25 November 2019, Appeal Book, Tab 25, pages 770.
In considering matters informing the exercise of the discretion, it is also relevant to note that during the course of the appeal, the defendant pursued two applications for a stay of the Judicial Registrar’s Order, each of which was unsuccessful. The defendant also sought and obtained leave to amend her defence and counterclaim. As a result, the plaintiff has incurred the costs of and incidental to appearing at several interlocutory hearings, and in circumstances where the Court ultimately found that the defendant’s amended defence and amended counterclaim do not have any real prospects of success. Save for the second application for a stay (where the Court ordered on 18 November 2019 that the defendant pay the plaintiff’s costs of and incidental to the hearing of the defendant’s application, to be taxed on the standard basis in default of agreement) the costs of each of those applications have been reserved.
In my view, in the present case, in exercising the discretion conferred on the Court, it is appropriate for the Court to give effect to the contractual obligation that the parties agreed upon in the MCP, and award the plaintiff its costs on the indemnity basis. I note that the plaintiff‘s proposed form of order provides for taxation of those costs in default of agreement being reached. In my view, that is the appropriate course.
Having found that the plaintiff is entitled to recover its costs on the indemnity basis pursuant to the contractual provisions in the MCP, it is unnecessary for me to consider the plaintiff’s alternative submission advanced under the ‘common law position’, that the defendant’s conduct in this proceeding makes it appropriate for costs to be ordered on the indemnity basis.[51]
[51]Plaintiff’s submissions, [16]-[19].
If it had been necessary to consider the ‘common law position’ as a separate matter, I would have found that in the circumstances identified by the plaintiff,[52] and given the reasons outlined above concerning the exercise of the Court’s discretion, it is appropriate to order that the defendant pay the plaintiff’s costs on the indemnity basis, and that such costs be taxed in default of agreement.
[52]Plaintiff’s submission, [19].
I will hear from the parties as to the appropriate form of judgment to be entered on the appeal.
5
0