CBA v Ozden and Ozden (No 2)

[2013] VCC 527

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

CIVIL DIVISION

 Revised
Not Restricted
 Suitable for Publication

COMMERCIAL LIST
BANKING AND FINANCE DIVISION

Case No. CI-11-03200

COMMONWEALTH BANK OF AUSTRALIA	Plaintiff
v
OZKAN OZDEN (Also known as OSKAN OZDEN)	First Defendant
and
NURAY OZDEN	Second Defendant

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JUDGE:	HIS HONOUR JUDGE GINNANE
WHERE HELD:	Melbourne
DATE OF HEARING:	3 May 2013
DATE OF JUDGMENT:	3 May 2013 Revised
CASE MAY BE CITED AS:	CBA v Ozden and Ozden (No 2)
MEDIUM NEUTRAL CITATION:	[2013] VCC 527

REASONS FOR JUDGMENT
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LOAN AGREEMENT - extent of debt

COSTS – Calderbank offers – not unreasonable to refuse offer – contractual entitlement to costs – solicitor client costs appropriate – reduction of plaintiff’s costs in respect of particular issue – costs of counterclaim

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr B Carew	Gadens Lawyers
For the Defendants	Self represented by the second defendant

HIS HONOUR:

1       The first issue that arises from the judgement I gave in this proceeding on Wednesday, 1 May 2013, is the amount of the debt owing in respect of loan 3, the Safety Beach loan.

2       I heard evidence from Mrs Penn, a Bank officer and considered the documents containing the calculations that she made. They show that as at 1 May 2013, the debit balance for loan 3 was $761,052.07.  Some of the initial evidence that Mrs Penn gave was confusing on the issue of whether interest on enforcement costs had been deducted from that sum. However, it was clear enough by the end of her evidence that she was saying that interest in the amount of $21,967.77 had been deducted from loan 3.

3        Mrs Ozden drew my attention to the transaction history of the third loan. It was contained in a document that she received yesterday as an attachment to a Dobbs certificate, dated 1 May 2013, signed by a bank officer. It showed that as at 15 April 2013, the debit balance of the loan 3 was $971,441.50. Mrs Ozden’s analysis of the figures was that, if one deducted the enforcement expenses which totalled $241,392.93, and then deducted the interest on those enforcement costs of $21,967.77, a figure of $708,860.82 was reached. That is the amount that Mrs Ozden submits should be taken as the current debit balance of loan 3, once the enforcement costs are deducted.

4       The Court has to decide the matter on the basis of the probabilities. The Bank has to prove the higher amount on the balance of probabilities.

5       Having heard both assessments, but having heard Mrs Penn state that she, with the assistance of others, has made the calculations that has led to the figure $761,052.07 and that it does not include interest on the enforcement costs, I find on the balance of probabilities, that the debt due as at 3 May 2013 is $761,052.07.

6       The next issue is costs.

7       The first issue related to the application of Calderbank offers made by the Bank on 7 November 2012. The Bank made two offers; the first was expressed as requiring the Ozdens to pay the amount of $1,754,000, being a reduction of approximately $130,000 from $1,884,862.22, the capped sum. That $130,000 represented $100,000 damages in respect of the berth title claim and $30,000 being the estimate of the Ozden’s legal costs.

“The Capped Sum is to be paid in full by 28 February 2013 subject to your clients providing to us, by 31 January 2013, an unconditional letter of refinance for the amount of the Capped Sum, from a financial institution acceptable, in the sole and absolute discretion of the Bank, with settlement to occur within 30 days of the date of the letter of unconditional refinance.” 

8       The second offer was:

“[P]ayment of the Amount Owing less $130,000 (Reduced Sum), subject to your clients [that is the Ozdens]:

(a)    providing by 31 January 2013, an unconditional contract of sale for the Safety Beach Property, at a price to be approved by the Bank in writing, with settlement to occur within 60 days of the date of the unconditional contract of sale and the Bank to receive the net proceeds of sale at settlement; and

(b)    providing by 28 February 2013, an unconditional letter of refinance for the Reduced Sum from a financial institution acceptable, in the sole and absolute discretion of the Bank, with settlement to occur within 30 days of the date of the letter of unconditional refinance.” 

9       It was a term of both offers that if there was non-compliance, the Ozdens would agree to give vacant possession of the two properties with the right for the Bank to seek to make an application to the Court for judgment. The agreement was to be embodied in a Deed of Settlement which would contain other standard terms.

10      The offer was open for acceptance from 7 November 2012 to 4.00pm on 16 November 2012.

11      Five days later on 12 November 2012, the Ozdens’ solicitors filed a Notice of Ceasing to Act. On 16 November 2012, the last day for acceptance, Mrs Ozden replied to the Bank’s solicitor, giving reasons for refusal of the offer. Firstly, the Bank’s offers were unrealistic for them to achieve within the required time; secondly, they were claiming more than $200,000 in damages; thirdly, they could not guarantee a sale of their Safety Beach property by 31 January 2013,

“as it has been up for sale for the last 3 years and we have not had one offer. [Fourthly,] we do not want to incur more debt and costs by refinancing our loan for our primary residence 74 Osborne Street, Williamstown, nor do we want the bank to repossess our property if we fail to comply with the requirements of the offers.”

12      The Ozdens’ response went on to elaborate their case and outline a claim for damages of $1,199,100.

13      The question in respect of the Calderbank offers is, whether it has been shown that the recipient has unreasonably refused them. There is no presumption that the party rejecting a Calderbank offer should pay the offeror’s costs on an indemnity basis, if the offeree received a less favourable result.[1]

[1]Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435.

14      The question of whether the Ozdens have achieved a less favourable result than the Bank’s offers is complicated by the recent sale of the Safety Beach property. However, the Bank offered Mr and Mrs Ozden considerably more to settle the proceedings than they were awarded by the Court.

15      I have taken into account that, as the Ozdens pointed out, the capped sum contained in the offer of compromise included the VLOC line of credit which was not the subject of the proceeding.  However, that does not affect the conclusion that I have reached.

16      In accordance with the Court of Appeal decision in Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2)[2]  the rejection of a Calderbank offer is a matter to which the Court should have regard when considering whether to order indemnity costs. The Court of Appeal decision listed a number of factors, by no means exhaustive, to help determine whether the rejection was unreasonable.

[2](2005) 13 VR 435

17      I consider that it has not been established that the Ozdens’ rejection of the Bank’s offers was unreasonable. I have taken into account particularly the short time frame for acceptance of the offers. It was only a period of nine days and, as it happened, that period of nine days included the period when the Ozdens’ solicitors withdrew from acting. Even if that had not occurred, I would still have considered the nine days to be too short a period for them to accept the offer. The Ozdens had to consider whether they were going to be able to obtain refinance. I consider that a longer period, at least a fortnight was required to give the Ozdens a reasonable opportunity to consider those offers. The fact that they did make a response on the last day that the offer was open does not alter my conclusion.

18      The next issue is whether the provisions of the contractual documents including the mortgages, entitle the bank to solicitor/client costs. The relevant words are in clause 9.4 of the Bank’s Usual Terms and Conditions:

“You must pay us any expenses we reasonably incur in enforcing or protecting our rights under the contract or a security.”

and in clause 21.7 of the Memorandum of Common Provisions in the Mortgage:

“You must pay us our reasonable enforcement expense reasonably incurred or expended by us in exercising our rights in relation to your default.’”

19      Mrs Ozden has referred the Court to the judgment of the Court of Appeal in Pacific Indemnity Underwriting Agency v Maclaw No 651 Pty Ltd[3], where the Court commented upon a Deed of Compromise made in VCAT proceedings where the words were:

“… the applicant’s reasonable legal costs and expenses to be assessed by the Tribunal in default o agreement between the parties…”

[3](2005) 13 VR 483

20      The Court of Appeal decided that the expression “reasonable legal costs and expenses” means costs to be assessed and determined on a party/party basis in accordance with the ordinary practice of the Tribunal. Although the case is not an exact analogy, I consider that its reasoning applies to the terms of the security documents that are set out above. 

21      Even if I were wrong in that conclusion, I would have exercised the discretion that Vickery J identified in Taree Pty Ltd & Ors v Bob Jane Corporation Pty Ltd & Anor[4] to not apply the contractual provision. The failure to make the liability of costs on a solicitor/client basis clear in the contractual documents makes it appropriate not to award costs on that basis. I would also have taken into account the Bank’s inexplicable conduct in contributing to the length of the litigation by not releasing the berth title and pleading until the first day of trial, in its reply and defence to counterclaim matters of fact concerning the berth title which had no basis. 

[4][2008] VSC 228

22      Save for one matter, I consider that the Bank’s costs should be awarded on a party-party basis. I have considered the parties’ submissions about delays in the litigation. I do not consider that the Ozdens should have to pay any part of the Bank’s costs concerning the berth title issue. A Court has power to make specific orders in respect to particular issues. The berth title issue is such an issue. It is difficult to estimate how much that issue contributed to the costs of the litigation. Doing the best I can, I consider that the Bank’s costs should be reduced by twenty per cent and that the Ozdens should have to pay eighty per cent of the Bank’s costs on a party/party basis.

23      On reflection, I do not propose to exclude from the order for costs either of the two days for argument about costs, being 1 May and 3 May 2013. The time taken on those days was reasonable in the circumstances.

24      The other costs issue concerns the Ozdens’ counterclaim. I see no reason why the Ozdens should not receive the costs of their counterclaim taxed on the County Court Scale. It was clearly appropriate that they bring their counterclaim in this proceeding, rather than starting separate proceedings in the Magistrates’ Court. They will only be entitled to legal costs during the period that they had lawyers acting for them. After that, they will be entitled to reasonable disbursements.

25       I do not consider I should certify for the amount of counsel’s fees. The questions of quantum of costs should be left to the Costs Court.