Bevendale Pty Ltd v Pereira
[2010] VSC 531
•24 November 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. SCI 10721 of 2009
BETWEEN
| BEVENDALE PTY LTD (ACN 006 392 267) | Plaintiff |
| and | |
| MARCOS GERARDO PEREIRA & ORS | Defendants |
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JUDGE: | SIFRIS J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 10 November 2010 | |
DATE OF JUDGMENT: | 24 November 2010 | |
CASE MAY BE CITED AS: | Bevendale Pty Ltd v Pereira & Ors | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 531 | |
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COSTS – Party relying on notice to produce – compliance with notice to produce inadequate – inadequate compliance inadvertent – solicitor and client costs awarded – conduct not sufficient for an award of indemnity costs
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J L Evans | Pryles & Co. |
| For the Sixth Defendant | Mr P Fary | Thomson Lawyers |
HIS HONOUR:
On 16 December 2009, the plaintiff (“Bevendale”) commenced this proceeding by originating motion. The orders sought by Bevendale related to two properties.
The first property is known as 9 Grigorieva Court, Burnside (“the Burnside property”). The first and second defendants are or were the registered proprietors of the Burnside property. Bevendale contended that it had an equitable charge over the Burnside property arising out of a guarantee executed by the said defendants.
The second property is known as 21 Christina Crescent, Kurunjang (“the Kurunjang property”). The third and fourth defendants are or were the registered proprietors of the Kurunjang property. Bevendale contended that it had an equitable charge over the Kurunjang property arising out of a guarantee executed by the said defendants.
In the originating motion, Bevendale sought orders including:
a) declarations as to its interest;
b) orders for the sale of each of the properties; and
c) consequential orders and directions for the distribution of the proceeds of sale and related matters.
Bevendale recognised that the properties were encumbered by way of a mortgage to the sixth defendant, the National Australia Bank Limited (“the NAB”). It recognised that its equitable interest arising out of the equitable charge was subject to the NAB’s registered interest. It was however, as may be expected, unaware of the extent to which the properties were encumbered.
On 29 March 2010, the matter came on for hearing before the learned Chief Justice. The Chief Justice made the declarations sought and further orders for the sale of the properties and disposition of the proceeds, recognising the interest of Bevendale and of course, the paramount interest of the NAB. The orders are important and for convenience, the relevant orders in relation to the Burnside property are set out below:
“2. The Burnside Property be sold.
3.The plaintiff be appointed to conduct the sale of the Burnside Property.
…
5.The plaintiff may sell the Burnside Property by private treaty prior to auction, if so advised by the real estate agent engaged by the plaintiff to conduct the auction.
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8.The plaintiff be empowered, on behalf of the first and second defendants, to execute all documents necessary to effect a transfer of the Burnside Property to the purchaser of the Burnside Property pursuant to this judgment, including:
(1)contract of sale;
(2)transfer documents;
(3)all other documents associated with the transaction.
9.The proceeds of sale of the Burnside Property be paid to the solicitors for the plaintiff, Pryles & Co., and dealt with as follows:
(1)first, in payment of the costs of the sale;
(2)second, in satisfaction of the claims of the sixth defendant pursuant to its registered mortgage no. AF130935A;
(3)third, in payment of the plaintiff’s costs of this proceeding;
(4)fourth, to be paid into Court by the plaintiff pursuant to the provisions of section 69 of the Trustee Act 1958 (Vic).”
Similar orders were made in relation to the Kurunjang property.
Both properties have been sold. The Burnside property was sold by the NAB and the Kurunjang property was sold by Bevendale. The correspondence indicates some reluctance on the part of Bevendale to sell the properties, despite the orders of the Chief Justice.
As is evident from the orders made on 29 March 2010, Mr J L Evans of counsel appeared on behalf of Bevendale at the hearing before the Chief Justice, but there was no appearance on behalf of any of the defendants. The NAB attended Court (by its solicitor, Emma Ladbury) but only to answer a notice to produce dated 23 February 2010, which had been served on it (“the notice to produce”).
The notice to produce is critical to the resolution of the remaining issues in dispute between Bevendale and the NAB. In effect, it required production of all accounts and loan statements for the period 16 December 2009 to 28 March 2010 recording all of the debts outstanding to the NAB, in respect of which the mortgages over each of the respective properties constituted security. Pursuant to this notice to produce, various documents were produced to the Court (by Ms Ladbury) at the hearing of the application on 29 March 2010.
The documents produced by the NAB on 29 March 2010 evidenced an indebtedness to the NAB (secured by way of each of the relevant mortgages) as follows:
(a)In respect of the Burnside property, documents were produced disclosing amounts owing pursuant to a home loan granted by the NAB to the first and second defendants.
(b)In respect of the Kurunjang property, documents were produced disclosing amounts owing pursuant to a home loan granted by the NAB to the third and fourth defendants.
Accordingly and as a result of the response to the notice to produce, Bevendale, correctly in my view, formed the opinion that the only amount secured by the mortgage in relation to the Burnside property was the amount owing on the home loan granted to the first and second defendants. Further, Bevendale assumed, again correctly in my view, that the only amount secured by the mortgage in relation to the Kurunjang property was the amount owing on the home loan granted by the NAB to the third and fourth defendants.
More relevantly, the notice to produce did not disclose any documents evidencing the fact that the mortgages also secured amounts owing by the first and second defendants and the third and fourth defendants respectively, in relation to further financial accommodation provided by the bank to a separate company called Choco Churro Pty Ltd (“Choco Churro”).
Accordingly, in my opinion, it is clear on the evidence before me that Bevendale made submissions to the Chief Justice on 29 March 2010 in the belief that each of the Burnside property and the Kurunjang property comprised security for home loans made by the NAB to the registered proprietors of each of the said properties and no more. Only on 7 September 2010 was Bevendale told that the mortgages in respect of each property secured not only home loans advanced in relation to each of the said properties, but also four further facilities provided by the NAB to Choco Churro. Upon receipt of this information and after a heated exchange of correspondence, this application was commenced by Bevendale.
According to an affidavit sworn by Leo Wischki on 10 November 2010, Bevendale would not have sought the orders that it did on 29 March 2010 had it known that the mortgages secured further financial accommodation provided by the bank, in addition to the home loans. The reason given by Mr Wischki is that there would be no equity in the properties after satisfaction of the NAB mortgages. Consequently, it would not make sense for Bevendale to undertake to sell the properties in circumstances where it did not have a sufficient stake or in fact, no stake at all. Mr Wischki states that in such circumstances, Bevendale would not have persisted with submissions that resulted in the orders made by the Chief Justice on 29 March 2010. It would have permitted the NAB to take its own action under its registered mortgages.
According to Mr Evans, counsel for Bevendale, the legal costs incurred by Bevendale in acting, as it did, on the assumption that the properties did not secure anything other than the home loans, amount to $28,065.36. The amount is derived from affidavits sworn by Bevendale’s solicitor, Anna Krycer. Ms Krycer confirmed that the amount relates only to legal costs so incurred.
After some discussion between the Court and counsel for both parties, it was decided that the matter should be approached on the basis that the Court make a decision as to whether such costs are recoverable from the NAB.
In my view, this was a desirable course given the amount involved and the unfortunate recent interlocutory history of this matter. Rather than commence a separate proceeding based on a cause of action in estoppel (and perhaps, given the ingenuity of counsel, other causes of action) it was preferable to approach the matter by determining whether, in the circumstances, it was appropriate for the NAB to pay and for Bevendale to recover its costs incurred from 29 March 2010 to date. The parties agreed, and it is, in any event, provided in the order of the Chief Justice, that the costs of the sale would be recovered separately. Accordingly, this application is only in relation to legal costs and disbursements incurred by Bevendale after 29 March 2010 and in reliance on the extent to which the mortgages provided security, based on the information and documentation provided by the NAB in response to the notice to produce.
Mr Fary of counsel, who appeared on behalf of the NAB, conceded and in fact made an open offer to the effect that Bevendale should be entitled to its party and party costs from 29 March 2010 to date. Such a concession was, in my view, entirely appropriate. However, Bevendale is not satisfied with such offer and submits that full indemnity costs should be awarded to it for two reasons. First, it submits that the inadequate response by the NAB to the notice to produce (an important process akin to a subpoena) constitutes exceptional circumstances for the purpose of awarding indemnity costs. Secondly, Bevendale points to the conduct of the NAB after it was fully advised by Bevendale about the matter. It was submitted that the response provided by the NAB to Bevendale in a letter dated 29 September 2010, denying any wrongdoing and suggesting that it had fully complied with the notice to produce, showed a reckless disregard for the position of Bevendale. This, it is submitted, provides an additional reason why indemnity costs should be awarded.
Given the concession made by the NAB, it is appropriate that, at a minimum, Bevendale recover its costs from 29 March 2010 to date on a party and party basis. Other costs incurred by it in relation to the sale will no doubt be recovered as sale costs as provided in the orders of the Chief Justice made on 29 March 2010. In the event that there are other costs that do not fall within either category, there may well be further debate on the matter and if appropriate, the order of 29 March 2010 may be varied.
The remaining question for determination therefore, is whether Bevendale’s costs should be awarded on a scale other than party and party and whether I should fix the costs. In my view, it is not appropriate to fix the costs. The description of the work undertaken in relation to such costs is insufficient for me to make a determination as to whether they were reasonably and properly incurred and therefore, recoverable on any scale. In fact, I understood Mr Evans to concede the matter. Accordingly, I decline to fix any amount in relation to the costs. The final question is therefore on what scale Bevendale should, in the circumstances, recover its costs.
In my opinion, the costs of Bevendale should be recovered on a solicitor and client basis. This is not a matter appropriate for the recovery of costs on a full indemnity basis. However, in my opinion, the circumstances of this matter call for an order greater than party and party costs.
Solicitor and client costs will not provide Bevendale with a complete indemnity but will, to some extent, compensate it for its out of pocket expenses directly relating to the conduct of the NAB in its inadequate response to the notice to produce.
In my opinion, it is beyond argument that had the NAB properly responded to the notice to produce Bevendale would not have sought the orders that it did from the learned Chief Justice. I accept the evidence of Mr Wischki to the effect that Bevendale would not have sought orders that it be permitted to conduct the sale had it known the true facts. Whether or not the response to the notice to produce amounted to a representation for the purpose of any estoppel is not to the point and need not be determined. Rather, in my view, it constituted conduct that I am entitled to take into account in assessing whether in the circumstances costs on a higher scale should be awarded.
The inadequate production, in effect admitted by Arjun Dutta of the NAB (“inadvertently omitted”) and the incorrect and mildly provocative assertion of compliance do not assist the NAB. Further, the documents were produced to the Court not by a clerk or junior bank officer, but by Ms Ladbury herself, who has been involved in the matter as a solicitor. However, the conduct of the NAB and its solicitors was inadvertent. It was not deliberate and in my opinion, does not qualify as conduct that warrants so extreme a departure from the usual costs order. Although the categories of cases where indemnity costs may be ordered are not closed, I am cognisant of the fact that the conduct in the present case does not readily fit within the recognised categories.[1]
[1]Fountain Selected Meat (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1998] FCA 202; (1988) 81 ALR 397; Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225.
In all of the circumstances, I am of the opinion that Bevendale should recover its costs from 29 March 2010 to the date of this application, including the hearing of the application, on a solicitor and client basis. Such costs should be taxed in the absence of agreement.
I consider that the same result would follow on the initial application by Bevendale to vary the order made by the Chief Justice. The orders were made on certain assumptions. The NAB played a significant part in the creation of the assumptions and it would not be unreasonable or inappropriate to vary the orders accordingly. However, the matter has been adequately disposed of in the manner agreed to by the parties.
I am not prepared, in the exercise of my discretion, to order that Bevendale pay the costs of the NAB of the proceeding up to 29 March 2010 as sought by Mr Fary. The matter was dealt with on 29 March and the NAB did not appear other than pursuant to the notice to produce. Bevendale has at all times recognised the paramount interest of the NAB and this was taken into account in the order of 29 March 2010. Although joined as a defendant, the orders were as much for the benefit of the NAB as they were for Bevendale.
Accordingly, I will order that the sixth defendant pay the plaintiff’s legal costs in respect of the period 29 March 2010 to 10 November 2010 (both dates inclusive), such costs to be taxed as between solicitor and client.
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