Dimitrious Katsaounis v Peter Belehris and Coula Belehris No. SCGRG 93/785, 90/2535 Judgment No. 4884 Number of Pages 21 Mortgages

[1994] SASC 4884

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA DEBELLE J

CWDS
Mortgages - Appropriation by mortgagee out of moneys paid to mortgagor to discharge secured debt - whether mortgagee entitled to make the appropriation mortgagee entitled to appropriate - whether mortgagee's costs of enforcing mortgage are recoverable on basis other than party and party costs - mortgage provided for recovery of "costs, charges and expenses reasonably incurred or paid" - mortgagee entitled to costs on a common fund basis - other appropriations allowed. The Mecca (1897) AC 286; Detillin v Gale (1802) 7 Ves 583, 32 ER 234; Cotterel v Stratton (1872) LR 8 Ch App 295; re Griffith Jones and Co (1883) 53 LJ Ch 303; National Provincial Bank of England and Games
(1886) 31 Ch D 582; re Donaldson (1884) 27 Ch D 544 and Gomba - Holdings (UK) Ltd v Minories Finance Ltd (1993) Ch 171, applied. Re Adelphi Hotel (Brighton) Ltd (1953) 1 WLR 955; AGC (Advances) Ltd v West (1986) 5 NSWLR 301; Sandtara Pty Ltd v Australian European Finance Corporation Ltd (1990) 20 NSWLR 82 and re Queens Hotel Co (1900) 1 Ch 792, not followed. Lomax v Hide (1690) 2 Vern 185, 23 ER 721 and Ramsden v Langby (1705) 2 Vern 536, 23 ER 947, considered.

Contracts - rectification - Documents failing to record all terms of agreement - relevant principles - rectification to allow mortgagee to recover costs on a common fund basis. McKenzie v Coulson (1869) LR 8 Eq 346; Maralinqa Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336; Slee v Warke (1949) 86 CLR 271 and Joscelyne v Nissan (1970) 2 QB 86, applied. Australasian Performing Right Association Ltd v Austrarama Television Pty Ltd (1972) 2 NSWLR 467, considered.

HRNG ADELAIDE, 21-25 November 1994 #DATE 7:12:1994

Counsel for the Appellant:     Mr M Hoile

Solicitors for the Appellant:    Knox And Hargrave

Counsel for the Respondent:     Mr S Tilmouth QC with Mr D Kapetas

Solicitors for the Respondent: Zacharoyannis Luppino And Eckerman

JUDGE1 DEBELLE J These two actions, which have been heard together, concern a loan of $93,000 made by the plaintiff to the defendants. It is an unfortunate story. The defendants are husband and wife. The plaintiff and defendants were once very close friends. The plaintiff is a godfather of one of the defendants' sons. The defendant Peter Belehris once called the plaintiff his "combaro", a word in the Greek language which has no precise equivalent in English but indicates a very close degree of friendship. The loan was made as an act of friendship but, because of the defaults of the defendant and other matters, the parties are friends no longer.

2. The plaintiff gave evidence and called three witnesses, his wife, Mr Yianoulatos and Mr Georgiadis. The latter are both solicitors. While on occasions the plaintiff indulged in some unnecessary emphasis of his kindness to the defendants, he nevertheless gave his evidence clearly and I accept him as a witness of truth. Where his evidence conflicts with that of Peter Belehris, I prefer his evidence. I accept the evidence of his wife and Mr Georgiadis which, in the result, dealt with non-controversial matters. Mr Yianoulatos was a little nervous and, although he had his file with him, he did not refer to it to refresh his memory of events occurring more than seven years ago. However, I have little hesitation in accepting his evidence.

3. The defendant Peter Belehris gave evidence and called his daughter Helen. The evidence of Mr Peter Belehris in relation to the key issues in this action was unsatisfactory and unconvincing. He was not an impressive witness. He gave me the impression that he is a man who is not careful in financial matters and his want of care has led him and his wife into their present difficulties. When his evidence conflicted with that of the plaintiff, I prefer the evidence of the plaintiff. The evidence of Helen Belehris was uncontroversial.

4. Both the plaintiff and Peter Belehris gave their evidence though an interpreter. It was apparent, nevertheless, that both have a relatively good understanding of English. Each has lived in Australia for a long time, the plaintiff for some 32 years and Peter Belehris for some 38 years. On a number of occasions each responded before the question had been translated and sometimes each gave a short answer in English. Neither the plaintiff nor Peter Belehris could read English. I accept the evidence of Peter Belehris that he relied on his daughter to assist him in running his business. I accept the evidence of the plaintiff that he relied on his wife to translate to him the effect of correspondence and documents received in the course of this matter.

5. The defendants own or hold under Crown lease over some 140 acres at Renmark on which they grow grapes, oranges and lemons. On 17 July 1984 they borrowed $78,000 from Mr R.D. Silverstein, a solicitor in East Melbourne. The loan was secured by Memorandum of Mortgage No 5306127 over the land held by the defendants. For convenience I will call the mortgage "the Silverstein mortgage". The Silverstein mortgage was one of three mortgages produced for registration on 24 September 1984. The first mortgage was to the National Commercial Banking Corporation of Australia Limited, the second mortgage was the Silverstein mortgage, and the third mortgage was to the Minister of Agriculture.

6. It was a term of the Silverstein mortgage that the principal would be repaid on 24 September 1985. The defendants failed to repay the principal by the due date. They had also defaulted in payments of interest. On 9 April 1986 Mr Silverstein issued proceedings in this Court seeking possession of the defendants' land and on 19 November 1986 an order for possession was made. By some means the defendants were able to avoid a sale of their land by Mr Silverstein as mortgagee. However, by late March 1987, the defendants were in a desperate position. Although no precise dates were specified in the evidence, it is clear that by then Silverstein was requiring prompt payment of what was due to him and, failing prompt payment, would exercise his rights as mortgagee and sell the land held by the defendants. It is clear also from the evidence that the defendants were not in a position to refinance the Silverstein mortgage. They simply did not have the security to proffer. All of the land held by them was subject to the Silverstein mortgage and to other mortgages. The usual avenues of obtaining finance were closed to them. Mr Peter Belehris came to Melbourne in late March to see the plaintiff and seek his assistance. I find that when he came to Melbourne, Peter Belehris was very distressed, if not at his wits' end.

7. The plaintiff and Peter Belehris met together to seek a resolution of the defendants' difficulties and later with friends and relatives of the plaintiff. A nephew of the plaintiff, Mr Lemonitis suggested that Peter Belehris consult a Mr Yianoulatos, a solicitor. After Peter Belehris had been referred to him, Mr Yianoulatos made a number of enquiries which quickly confirmed the desperate plight of the defendants. It was clear that the Silverstein mortgage could only be refinanced if some security in addition to the land held by the defendants could be found. Enquiries by Mr Yianoulatos also confirmed that Mr Silverstein was pressing for immediate payment and was not going to grant any further indulgence. Mr Yianoulatos advised Peter Belehris that he and his wife did not have sufficient security to refinance the Silverstein mortgage. He told him it was necessary to obtain further security.

8. There was a dispute whether Peter Belehris had previously consulted Mr Yianoulatos. I find he had not. Mr Yianoulatos said he had not seen him before and I accept that evidence. There was also a dispute as to who was the client of Mr Yianoulatos. I find that Peter Belehris was his client although he later advised both and later again acted for the plaintiff in enforcing his rights.

9. On 10 April 1987, the plaintiff owned two adjoining house properties at 51 and 53 Donald Street, Brunswick. He and his wife resided in No. 51 Donald Street. He leased 53 Donald Street. Apart from rental from 53 Donald Street, the plaintiff's only source of income was an invalid pension. He had been an invalid pensioner since 1980. The defendants knew that the plaintiff was an invalid pensioner. The plaintiff agreed to assist the defendant by borrowing the sum of $93,000 on the security of his house property at 51 Donald Street, Brunswick, and then lend that sum to Peter Belehris who would use it to repay what was due on the Silverstein mortgage. Mr Yianoulatos arranged for the plaintiff to borrow the sum of $93,000 from a company called HG and R Nominees Pty Ltd. The loan was arranged through a finance broker and was secured by a mortgage over the plaintiff's house at 51 Donald Street. The mortgage was executed on 10 April 1987. The loan was for a term of two years and the principal was to be repaid on 10 April 1989. Interest was payable on the 10th days of July, October, January and April in each year. For convenience I will call the lender HG and R and will call the mortgage the HG and R mortgage. The mortgage contained the common form provisions of the Law Institute of Victoria form of mortgage. Later, when default was made in payments of principal, a firm of solicitors Herbert Geer and Rundle acted for HG and R. Plainly, HG and R was related to the firm Herbert Geer and Rundle.

10. As soon as the sum of $93,000 had been paid to the plaintiff, $89,543.52 was paid to Mr Silverstein. The balance was used by Peter Belehris to pay costs and other charges in relation to these transactions. It is clear from the evidence and I find that both the plaintiff and the defendants were relying on Mr Yianoulatos to advise them as to what arrangements should be made to give effect to their agreement. The evidence given by Mr Yianoulatos is vague as to what was to be done. He spoke a discharge of the Silverstein mortgage and in the note of his fees to Peter Belehris he refers to a discharge of the Silverstein mortgage. His evidence was that he used the word "discharge" loosely. No discharge of mortgage was executed. Later, on 20 January 1990, Mr Silverstein transferred the mortgage to the plaintiff. The transfer was not registered until 16 May 1990. It is not clear whether the transfer was intended to preserve some priority for the Silverstein mortgage. One can only assume it was.

11. However, it is clear that the parties agreed that the defendants would pay interest to the plaintiff who would use the sum to pay interest due on the HG and R mortgage and that the defendants would pay the plaintiff the principal sum on the due date in order that he could discharge the HG and R mortgage. In short, the defendants agreed to enter into a mortgage which would mirror the obligations in the HG and R mortgage. It was also agreed that the defendants could, if they wished, pay directly to HG and R what was due for interest.

12. On 10 April 1987, on the same day as the HG and R mortgage was executed by the plaintiff, Peter Belehris executed a mortgage in which he and his wife were mortgagors and the plaintiff mortgagee ("the Belehris mortgage"). The Belehris mortgage had been prepared by Mr Yianoulatos. It purported to reflect the terms of the Silverstein mortgage. It purported to be in registrable form. It purported also to state that Mrs Belehris had executed the mortgage on 10 April 1987. In fact, the mortgage was taken by Peter Belehris to Renmark for his wife to sign and she did not sign it until some months later. The defendants do not take any point concerning the later execution of the mortgage by Mrs Belehris. The Belehris mortgage was never registered and it appears that it is not in registrable form.

13. The Belehris mortgage provided that the principal sum was to be repaid on 10 April 1989, the same day as repayment of principal under the HG and R mortgage. It also provided that interest was to be paid on the 10th day of each month. Like the Silverstein mortgage, the mortgage was in the form of the common form mortgage of the Law Society of South Australia. Its provisions did not mirror the HG and R mortgage but differed from them. As will be seen the differences between the terms of the HG and R mortgage and the Belehris mortgage have caused the plaintiff to apply for rectification.

14. It is clear that Peter Belehris was then extremely grateful to the plaintiff for his generosity. Peter Belehris admitted that in his evidence and his evidence is confirmed by Mr Yianoulatos. The effect of his evidence was that Peter Belehris was very distressed when he first saw him; that Peter Belehris saw the advice he was receiving from Mr Yianoulatos as his last resort; and that he was therefore extremely grateful to the plaintiff for having provided such substantial assistance to him. Mr Yianoulatos added that the fact that the plaintiff agreed to assist in this way enabled Mr Belehris to avoid providing income statements and other documentation necessary to satisfy a lender as to the capacity of the defendants to repay the loan. Mr Yianoulatos described how he came to meet the plaintiff, how he arranged the finance and the extent of the gratitude of the defendants:
    "Mr Katsaounis was presented to me as a person who was to
    provide security and to do all things necessary to assist
    his good friend and indeed his son's godfather, to
    refinance his property and to relieve his dilemma. I
    attended to the finance people with respect to the
    unencumbered property, finance was approved, subject to all
    other searches and so forth in the usual way, and away we
    went.
    HIS HONOUR
    Q. Who was the lender.
    A. The lender was HG and R Nominees. I went through a
    finance broker, which I was familiar with, I was also
    familiar with the lender and indeed their solicitors
    Herbert Geer and Rundle, that is where we get the HG and R
    Nominees, I suspect that they are related. And it was
    clear that my instructions were to do all things necessary
    to obtain the loan, to discharge Silverstein and to do all
    things necessary to secure the arrangement as between
    Mr Belehris and Mr Katsaounis. Mr Belehris was clear in
    his instructions that he did not want his good friend to be
    out of pocket in any way whatsoever. The advices that I
    received from the other side was, from Mr Katsaounis, was
    that he hoped that he wouldn't be out of pocket as a result
    of this good gesture which he was making.
    Q. Was that said to you direct by Mr Belehris or was it
    conveyed to you in some other way, that is to say the
    statement that he didn't want his good friend out of
    pocket.
    A. Mr Belehris was adamant about that.
    Q. He said that direct to you.
    A. Direct to me. He was adamant about the fact that he
    was, Mr Katsaounis was his saviour, and there is no way in
    which he wanted him to be out of pocket in any way."

15. And then a few moments later he added, when asked what was the arrangement with respect to payments made quarterly under the terms of the mortgage to HG and R:
    "Quite simple, that Mr Katsaounis was to acquire these
    moneys from HG and R Nominees, and Mr Belehris was to
    attend to the repayment and to the ultimate discharge of
    that particular mortgage on the man's house. It was just
    dollar for dollar arrangement, that was the original
    intention, at all times, it was just a matching thing, and
    it was highly governed by friendship, highly governed by
    friendship, honourability was most important in this
    arrangement."

16. Mr Yianoulatos also gave evidence that Peter Belehris was present in his office on every occasion when he advised the plaintiff of the arrangements he had made with HG and R. In his evidence Peter Belehris admitted going with the plaintiff to a large building near the Victoria Market in Melbourne. Mr Yianoulatos had sent the plaintiff to the office of the finance broker who had arranged the loan with HG and R for the purpose of collecting the mortgage documents for signature, bringing them back to his office where they were signed, and then returning the documents to the broker. I find the building near the Victoria Markets housed the office of the finance brokers and that Peter Belehris went with the plaintiff to those offices.

17. I find that at all times the defendants knew that the plaintiff did not himself have funds to lend to the defendants and that it had been necessary for him to borrow funds in order to assist them. I find also that they knew that it was necessary for them to comply with the terms of the Belehris mortgage in order that the plaintiff in turn could comply with the terms of the HG and R mortgage. In other words, the defendants knew that it was necessary for them to pay interest on the due date under the Belehris mortgage so that the plaintiff in turn would have funds with which to pay interest on the due date under the HG and R mortgage. They knew also that they had to repay the principal on 10 April 1989 so that the plaintiff could repay the principal on the same date pursuant to the HG and R mortgage.

18. Peter Belehris gave evidence that the plaintiff knew that the defendants did not have a regular income and that their income was seasonal. He said that it had been agreed that the defendants would pay interest every six months. I find that the plaintiff knew that the defendants' income was seasonal and for that reason had suggested that the HG and R loan should be for a longer term than one year in case the defendants had a bad season. In the result the team of the HG and R mortgage was for two years. However, I do not accept that it had been agreed that the defendants would pay interest to the plaintiff every six months. First, it does not follow from the fact that the plaintiff knew the defendants' income was seasonal that he agreed to interest being paid six monthly. Secondly, that is not what is provided in the Belehris mortgage. Thirdly, it would have been foolish for the plaintiff, who had agreed to pay interest every three months on the HG and R mortgage, to agree to six monthly payments from the defendants particularly as they were to provide the funds with which he would meet his obligations under the HG and R mortgage. Anyone in the circumstances of the plaintiff would have wished to ensure that the defendants first paid him before paying what was due under the HG and R mortgage.

19. From the outset, the defendants were in default in making payments of interest under the Belehris mortgage or in paying interest direct to HG and R. At no time did they ever pay interest on the due date in the Belehris mortgage. It was on rare occasions that they paid interest in accordance with the terms of the HG and R mortgage. It was therefore necessary for the plaintiff to pay interest under the HG and R mortgage, often at the higher rate for the payment, and to seek to recover those payments from the defendants. The plaintiff was not in a position to pay the instalments of interest due under the mortgage. He had to borrow from friends to pay those instalments. He was not able to repay his friends until he received money from the defendants. Later, the defendants failed to repay the principal under the Belehris mortgage which they were required to pay on 10 April 1989 to the plaintiff. In turn the plaintiff could not repay the principal sum of $93,000 to HG and R. This resulted in the plaintiff being obliged to pay further interest under the HG and R mortgage and caused the plaintiff further loss in expenses. It is unnecessary to go into the details of all that happened in the years following the execution of the mortgages on 10 April 1987. It is sufficient to note that the defendants were continually in default and that the plaintiff had to borrow funds to meet his own obligations under the HG and R mortgage which in turn caused him to incur loss and expense. It will be necessary to refer later to the details of five other loans. On occasions the plaintiff was so far in arrears that orders for possession were obtained in respect of his house at 51 Donald Street and on one occasion HG and R changed the locks on the doors to that house.

LOANS BEFORE 10 APRIL 1987 20. The plaintiff had made other loans to the defendants before he lent them the sum of $93,000 on 10 April 1987. Out of monies paid by the defendants, the plaintiff appropriated funds to repay those unsecured loans. Although it is common ground that the plaintiff did lend them money before 10 April 1987, the defendants dispute the total amount of the loans and the right of the plaintiff to appropriate as he did.

21. The plaintiff's evidence was that he had lent money to Peter Belehris on several occasions. The evidence is not very clear as to the detail of these loans. The effect of the plaintiff's evidence was that on one occasion he had lent the sum of $2,500 to pay water rates in order to avoid having his water supply cut off; that on another occasion he had lent the sum of $7,000 of which the sum of $4,000 was used to make a payment to a Mr Peter Kotsais; and that on another occasion he had lent some $3,000 for various expenses including monies to assist in the repair of a truck owned by the defendants which had been damaged in a collision in Melbourne. The money was required for petrol, paint and other expenses in relation to the repair of the vehicle. The plaintiff said that Peter Belehris had agreed in writing that the total sum due by the defendants to the plaintiff was $12,430, a figure agreed in a note signed by Peter Belehris. I will refer shortly to that note.

22. Mr Belehris admitted two loans, totalling $9,000. The first he said was for $6,000. He said this was the same loan as the loan identified by the plaintiff as a loan of $7,000. He was insistent that only $6,000 had been lent. He also admitted another loan of $3,000. He denied the loan of $2,500 to assist in the payment of water rates.

23. In the latter part of 1987 and in early 1988 the plaintiff was pressing the defendants for payments pursuant to the mortgage and for the other loans which had been made. In May 1988 the plaintiff learned that Mr Belehris was in Sydney selling produce at the markets. The plaintiff flew to Sydney on 17 May. The defendants had made a substantial payment of $13,000 on 30 April. They agreed to make other payments. On 17 May they paid a further $8,900 and another payment of $450. A month or two later the plaintiff went to the defendants' house at Renmark where the defendant Peter Belehris signed three documents. None of the documents are dated but it is common ground that they were signed a month or two after the plaintiff had seen Peter Belehris in Sydney. The evidence of payments made to HG and R by the plaintiff and the defendants shows that $4,070 was paid by the plaintiff on 15 July 1988. That payment is not mentioned in the three documents signed by Peter Belehris. Thus, it is reasonable to infer and I find that the three documents were signed between 17 May 1988 and before 15 July 1988.

24. The first of the three documents is headed "Declaration". It reads:
    "The undersigned PETER BELEHRIS from Renmark, South
    Australia, declare that I have received from DIMITRIOS
    KATSAOUNIS of 51 Donald Street, Brunswick, the sum of
    $12,430.00 B.P. in cash. Also I owe him the sum of
    $16,562.38 which he paid on my behalf to Herbert Geer and
    Rundle."

25. It was signed by Peter Belehris in the presence of his son. This is the written acknowledgment of debt on which the plaintiff relies. The whole of the declaration is typewritten save for the figure of $12,430.00 which had been added in handwriting after the document had been typed. The initials "B.P." had also been added. Peter Belehris acknowledged in his evidence that the initials "BP" are his initials and that he had initialled the document but said that the sum of $12,430 had been filled in after he had signed and initialled the document. The plaintiff's evidence was that he and Peter Belehris had discussed how much he had lent Peter Belehris and, having agreed the amount due, the figure of $12,430 had been written on the document and then signed by Peter Belehris in the presence of his son. For reasons which later appear, I accept the evidence of the plaintiff.

26. The second document was signed by the plaintiff in the presence of the defendants' son. It reads:
    "I, DIMITRIOS KATSAOUNIS of 51 Donald Street, Brunswick,
    declare that I have received from Peter Panos (Solicitors
    Office) on behalf of Peter Belehris the following:-
    Cheque for $8,900.00 and
    Cheque for $450.00 also received from Peter Belehris in
    cash $13,000.00."

27. The third document is signed by the defendant Peter Belehris, again in the presence of his son. It reads:
    "I, PETER BELEHRIS of Renmark South Australia declare that
    I owe DIMITRIOS KATSAOUNIS of 51 Donald Street, Brunswick
    the sum of $6,642 B.P."

28. The whole of the document is typewritten save for the figure $6,642. That figure had been written in after the document had been typed. It was initialled by the defendant Peter Belehris.

29. It was the plaintiff's evidence that the three documents record the indebtedness of the defendants to him on the occasion when the documents were signed. He said that the first document records that the parties agreed that the plaintiff had lent the defendants $12,430 before the arrangement by which $93,000 was lent. It also records that on the date the document was signed the plaintiff had paid Herbert Geer and Rundle $16,562.38 because of the defendants' failure to make payments of interest on the due date pursuant to the HG and R mortgage. The two sums noted on the document total $28,992.38. The second document records the three amounts which had been repaid by the defendants to the plaintiff namely $13,000, $8,900 and $450. I find that the first payment was made on 30 April 1988 and the remaining two on or about 17 May 1988. Those three payments total $22,350. The third document, said the plaintiff, records the difference between the first two documents so that, after the payments by the defendants, they still owed him $6,642.

30. Both in cross-examination and in his address Mr Tilmouth attempted to challenge this evidence and to suggest that they support the evidence of Peter Belehris that he owed no more than $9,000. His thesis depended to a large extent on being able to deduct from the sum of $16,562, a payment of $4,217 made on 12 April 1988 by the defendants direct to HG and R. The difference is $12,345 which, said Mr Tilmouth, is the handwritten figure in the first of the three documents. The premise for the argument is false and the argument fails.

31. It is convenient to set out a schedule which shows payments made to HG and R by either the plaintiff or the defendants and the payments made to the defendants to the plaintiff. The table also shows the level of indebtedness of the defendants to the plaintiff in the period August 1987 to June 1991.
    Date        Payments by     Receipts        Balance     Payments
                Plaintiff     by Plaintiff   by
             to HG and R     from Defendants             Defendants
   to HG + R
     5.8.87     5,254.25   5,254.25 Dr
     8.1.88    11,308.13   16,562.38 Dr
     12.4.88   16,562.38 Dr     4,217.94
     30.4.88  13,000.00     3,562.38 Dr
     May 88    12,430.00(1)                 15,992.38 Dr
    17. 5.88   9,350.00     6,642.38 Dr
    15. 7.88     4,070.00   10,712.38 Dr
    17. 7.88     4,988.75   15,701.13 Dr
    10.11.88   6,291.74
     4. 1.89   4,068.74
    30. 4.89   3,000.00     12,701.13 Dr
     1. 5.89   5,346.02
    30. 3.90   11,000.00
     7. 5.90     3,000.00   15,701.13 Dr
    25. 5.90     6,970.76   22,681.89 Dr
    25. 6.90  11,122.54     11,559.35 Dr
    25. 6.90     2,300.00(2)                 13,859.35 Dr
    19. 7.90     5,522.00   19,381.41 Dr
    10.10.90     5,521.87   24,903.28 Dr
    18. 3.91  10,000.00     14,903.28 Dr
     8. 4.91  34,650.00     19,746.72 Cr
    19. 4.91    11,371.67   8,375.05 Cr
     9. 5.91  40,000.00     48,375.05 Cr
    14. 5.91    37,617.51   10,757.54 Cr
    17. 5.91    28,000.00   17,242.46 Dr
     3. 6.91  20,000.00     2,757.54 Cr
    19. 6.91  20,000.00     17,242.46 Dr Notes to the above table 1. This is an appropriation made by the plaintiff to repay the unsecured loan of $12,430. 2. This is an appropriation made by the plaintiff to pay legal costs to Messrs Youngs. 3. The above does not allow for appropriations from funds paid to Knox and Hargrave.

32. It must be noted also that at 19 June 1991, although the principal on the loan from HG and R had been substantially reduced, the principal then outstanding was $20,000. Thus the defendants effectively owed the plaintiff some $37,000 in June 1991.

33. The schedule demonstrates that as at 8 January 1988 the plaintiff had had to pay a total of $16,562.38 to HG and R because of defaults by the defendants. The defendants did not make any payment of interest due under the HG and R mortgage until 12 April 1988. That was a payment of interest due on 10 April 1988. Contrary to Mr Tilmouth's submission, the payment of $4,217.94 did not have the effect of reducing the indebtedness of the defendants to the plaintiff. Instead, it was no more than a payment of what was then due under the HG and R mortgage. Further, having regard, first, to the fact that at 8 January 1988 the plaintiff had paid $16,562.38 and, second, to the fact that the declaration refers to $16,562.38 as being due under the mortgage, the figure of $12,432 must refer to borrowings separate and apart from the mortgage. In addition, the declaration distinguishes between the two sums of $16,562.38 and $12,430. Finally, I think it most unlikely that Peter Belehris would have put his initials to a blank knowing it could be later completed. I find that the figures "$12,430" were written in the document when Peter Belehris added his initials.

34. For these reasons, I find that the declaration correctly records the amount due by the defendants to the plaintiff before 10 April 1987 and that the amount was $12,430. I find also that the other two documents record respectively what the defendants had repaid to the plaintiff and the balance outstanding after those payments, namely, $6,642. The above schedule demonstrates not only the force of that conclusion but also that Mr Tilmouth's submission that it is mere coincidence that the last document shows that a sum of $6,642 was due to the plaintiff is entirely without foundation.

COULD THE PLAINTIFF APPROPRIATE $12,430? 35. The mortgage makes express provision in Clause 18 for appropriation by the mortgagee of monies paid by the mortgagor. It states:
"That subject to the provisions of Section 52 of the
Consumer Credit Act (if applicable) the Mortgagee shall
    have the sole power of appropriating any moneys paid by the
    Mortgagor to the Mortgagee or which may be received by the
    Mortgagee on account of the Mortgagor either towards any
    moneys which are owing or payable by the Mortgagor to the
    Mortgagee or for which the Mortgagor is responsible or
    liable to the Mortgagee (either as principal debtor or
    surety or otherwise) whether secured or unsecured or in or
    towards the Moneys Hereby Secured and in such order of
    priority as the Mortgagee shall in the Mortgagee's absolute
    and sole discretion think fit and so that failing such
    appropriation or until such appropriation shall be made by
    moneys paid by the Mortgagor or received by the Mortgagee
    as aforesaid shall be applied in the following order:
    (a) in or towards any unsecured debt or liability of the
    Mortgagor to the Mortgagee
    (b) in or towards any costs damages or expenses of the
    Mortgagee hereunder
    (c) in or towards any payments made by the Mortgagee under
    or by virtue of this Security or under any power or
    authority herein contained
    (d) in or towards any interest due or payable hereunder or
    under any arrangement in that behalf, and
    (e) in or towards the principal moneys or any part thereof
    due or repayable hereunder or under any arrangement in that
    behalf
    and so that the Mortgagor's power of appropriation is
    hereby negatived."

36. Section 52 of the Consumer Credit Act has no application in this case. Although the mortgagor has a right at common law to state for what purpose a payment has been made and the creditor is bound, if he takes the money, to apply it in the manner directed by the debtor: The Mecca (1897) AC 286, that right is expressly negatived by Clause 18 and the mortgagee may himself appropriate and, failing such appropriation, the money shall be appropriated as specified in Clause 18.

37. As already mentioned, out of the sum of $13,000 paid by the defendants to the plaintiff on 30 April 1988, the plaintiff had appropriated $12,430 towards payment of the monies lent before the loan of $93,000. He relies on Clause 18. Mr Tilmouth submitted that Clause 18 operates only in respect of unsecured debts or liabilities contracted after the mortgage had been executed. To accede to that submission would be to interpret Clause 18 in a manner which is not only contrary to its plain meaning but would inhibit the common law rights of the mortgagee. Clause 18 expressly permits the mortgagee to appropriate monies received by him towards money due on unsecured loans without any limit as to the time when the debt was incurred. That right is consistent with the common law rule that, where the right of appropriation devolves upon the creditor, he may appropriate a payment in such manner as he thinks fit even to the extent of appropriating the payment to a debt which is statute barred: Stepney Corporation v Osofsky (1937) 3 All ER 289 or otherwise unenforceable: Seymour v Pickett (1905) 1 KB 715. That rule is of course subject to the rule in Clayton's Case but, in this case, there is no room for the operation of that rule. It could not have been intended that Clause 18 should circumscribe the rights of the mortgagee at common law so that the plaintiff could not apply monies received in respect of unsecured debts or liabilities incurred prior to the mortgage. For these reasons, the plaintiff was entitled to appropriate the sum of $12,430 from the monies paid to him by the defendants.

THE COSTS PAYABLE TO THE PLAINTIFF
38. A major issue was whether the defendants were liable to pay costs to the plaintiff on a party and party basis or on a solicitor and client basis. The provisions in the mortgage relating to costs and expenses are Clauses 6, 7, 9 and 18. Clause 6 is the most relevant:
    "That the Mortgagor shall pay to the Mortgagee upon demand
    all costs charges and expenses reasonably incurred or paid
    by the Mortgagee in or about the preparation execution
    stamping and registration of this security and of all
    securities (if any) collateral hereto and in or about any
    survey valuation or report concerning the said Land and in
    or about the exercise or enforcement or attempted exercise
    or enforcement of any of the powers rights or remedies of
    the Mortgagee or which the Mortgagee may in any other way
    sustain or incur in consequence of any default in payment
    of the Moneys Hereby Secured or the breach of any covenant
    condition or stipulation expressly or impliedly contained
    herein or on any account whatsoever in connection with this
    security (including the costs incurred in connection with
    any discharge hereof)."

39. It will be noticed that the mortgagee is entitled to recover all costs but they must be reasonably incurred. Clause 7 provides for the mortgagee's expenses incurred in remedying a default. It permits the mortgagee "to expend all monies which the mortgagee may deem necessary to remedy" the default. While not directly relevant, it demonstrate how the mortgage distinguishes between reasonable and necessary expenditure. Clause 9 again limits the liability of the mortgagor to reasonable costs in respect of dealings in the land secured by the mortgage:
    "That the Mortgagor shall pay all reasonable costs charges
    and expenses of the Mortgagee of or incidental to the
    production to the Registrar-General of all muniments of
    title of or incidental to any application for the
    Mortgagee's consent to any dealing with or disposal of the
    said Land including where appropriate the preparation and
    stamping of the covenant by the intended transferee
    referred to in clause 8 hereof."

40. Clause 18 has already been mentioned. It entitles the mortgagee to appropriate monies received from the mortgagor "in or towards any costs damages or expenses of the mortgagee" under the mortgage.

41. Clause 6 plainly states that the mortgagee is entitled to "all costs charges and expenses reasonably incurred" in respect of the matters specified in Clause 6. A mortgagee's entitlement to his costs might be defeated where, say, he has been guilty of misconduct: Re Wallis, ex parte Lickorish (1890) 25 QBD 176, 181. But this plaintiff has not been guilty of misconduct. The only question is what is meant by "all costs, charges and expenses reasonably incurred or paid."

42. At common law, the mortgagee has a right to recover all his costs charges and expenses so long as he acts reasonably: Detillin v Gale (1802) 7 Ves 583, 585, 32 ER 234; Dryden v Frost (1838) 3 My and Cr 670, 657; National Provincial Bank of England v Games (1886) 31 Ch D 582, 592; re Leighton's Conveyance (1937) 1 Ch 149, 152. The requirement that the mortgagee can recover only those costs which have been reasonably incurred applies even where the mortgage provides that the mortgagee is to be paid his costs on an indemnity basis: Gomba Holdings (UK) Ltd v Minories Finance Ltd (1993) Ch 171. Thus, on the taking of accounts, the mortgagor is entitled to object to items on the ground that they have been unreasonably incurred or are of an unreasonable amount. Clause 6 of this mortgage, therefore, expressly states the rights of the mortgagee at common law.

43. The next question is the basis upon which the costs payable by the mortgagor are to be quantified. It has been held that, in the absence of agreement to the contrary, the costs are to be paid as between party and party: re Adelphi Hotel (Brighton) Ltd (1953) 1 WLR 955; A.G.C. (Advances) Ltd v West (1986) 5 NSWLR 301; Sandtara Pty Ltd v Australian European Finance Corporation Ltd (1990) 20 NSWLR 82. It has also been held that it is not a sufficient indication of a contrary intention that the contractual right of the mortgagee is expressed to be to recover "all costs charges and expenses incurred or paid": In re Adelphi Hotel (Brighton) Ltd (supra); Jamieson v Gosigil Pty Ltd (1983) 2 Qd R 117. An example of a sufficient indication of contrary intention to be found in Re Shanahan (1941) 58 WN (NSW) 132. In re Adelphi Hotel (Brighton) Ltd, Vaisey J relied on the decision in The Kestrel
(1866) LR 1 Ad and E 78 and Re Queens Hotel Co (1900) 1 Ch 792. In The Kestrel, Dr Lushington was called on to review a taxation of costs payable to a mortgagee. His reasons suggest that, after argument, he had inquired as to the practice in Courts of Chancery and had been informed that mortgagee's costs are always taxed as between party and party. In Re Queens Hotel Co, Cozens-Hardy J said that there was no vestige of authority for giving solicitor and client costs. With respect, these observations were expressed too absolutely. For a long time it had been the practice to allow a mortgagee solicitor and client costs: Lomax v Hide (1690) 2 Vern 185, 23 ER 721; Ramsden v Langley (1705) 2 Vern 536, 23 ER 947; Cotterell v Stratton (1872) LR
8 Ch App 295; Re Griffith Jones and Co (1883) 53 LJ Ch 303 and National Provincial Bank of England v Games (1886) 31 Ch D 582. As I read Morgan and Davey, Costs in Chancery (1865), 169-170 a mortgagee was entitled to all his costs and the only enquiry was whether costs had been properly incurred. The editors of the sixth edition of Daniell's Chancery Practice
(1884) at pp1181-1182 do not suggest that the mortgagee is limited to party and party costs. In addition, there are cases where a solicitor who is also mortgagee has been held to be entitled to recover his proper costs, for example, Re Donaldson (1884) 27 Ch D 544, decisions which appear to be founded on the premise that a mortgagee is entitled to solicitor and client costs.

44. In this division of authority, it is not surprising that in Gomba Holdings (UK) Ltd v Minories Finance Ltd, Vinelott J expressed reservations about the correctness of the decision In re Adelphi Hotel (Brighton) Ltd, questioning whether a party and party taxation does justice to the contractual right of the mortgagee to recover all costs incurred: see Gomba Holdings Ltd v Minories Finance Ltd (supra) at 188. I respectfully share those reservations.

45. A careful reading of the reasons for judgement In re Adelphi Hotel (Brighton) Ltd indicates that Vaisey J was troubled by having to choose as between party and party costs or solicitor costs as the proper basis on which the mortgagee's costs should be awarded. He said (at 959-960):
    "I should like to add that these various basis of taxation,
    though conveniently labelled, are difficult to formulate,
    nor is it easy to discover exactly how they work in
    practice... I do not doubt the taxing masters exercise
    their discretionary powers with a due regard to the
    circumstances of each case with which they are dealing, and
    it may well be that the taxation of a mortgagee's costs
    would not be on a niggardly or markedly ungenerous scale.
    I do not know. But what are mortgagees entitled to is that
    which is covered by the words `costs charges and expenses
    properly incurred', and it is for taxing masters to say
    what these are, conformably with the principles to which I
    have endeavoured to give expression."

46. The suggestion that a taxing master should not approach the matter on "a niggardly or markedly ungenerous scale" suggests a concern that a taxation on a party and party basis might not appropriately remunerate a mortgagee.

47. It is, I think, appropriate in the context of mortgagee's costs to recognise that there is a third basis on which costs might be quantified and that is to award the mortgagee all his costs provided they have been reasonably incurred and the cost of each item is reasonable. The approach accords with an award of costs on a common fund basis: Halsbury's Laws of England (4th ed) vol 37 para 746. It is an appropriate basis to adopt, first, because the costs might be payable out of a common fund, namely, the proceeds of sale of the mortgaged property and, secondly, because the approach allows recovery of all costs except those unreasonably incurred or of an unreasonable amount. By contrast, party and party costs are allowed only for those costs which are necessary and proper: Halsbury's Laws of England, (supra), para 745. The requirement that the costs be necessary might in some cases be a more onerous requirement than that the costs be reasonable. This is another ground on which it is proper not to follow the decision in re Adelphi Hotel (Brighton) Ltd.

48. Further, if costs are awarded on a common fund basis, full effect is given to the covenant of the mortgagor to pay all costs which have been reasonably incurred. By contrast, if costs are taxed on a party and party basis, there is a real likelihood of limiting the mortgagee's right to recover his costs in a way not contemplated by the contract. All due weight must be given to the fact that the right to recover costs rests on a contract between the parties, not on an exercise of the discretion of the court. This was emphasised by Lord Selborne LC in Cotterell v Stratton (1872) LR 8 Ch App 295 at 302:
    "The right of a mortgagee in a suit for redemption or for
    closure to his general costs of suit, unless he has
    forfeited them by some improper defence or other
    misconduct, is well established, and does not rest upon the
    exercise of that discretion of the Court which, in
    litigious causes, is generally not subject to review. The
    contract between mortgagor and mortgagee, as it is
    understood in this Court, makes the mortgage a security,
    not only for the principal, interest, and such ordinary
    charges and expenses as are usually provided for by the
    instrument creating the security, but also for the costs
    properly incident to a suit for foreclosure or redemption."

49. The provisions in this mortgage entitling the mortgagee to recover his costs, when viewed as a whole, clearly indicate that it is intended that the mortgagee should not be out of pocket in consequence of his agreement to lend money to the mortgagor. A person who had signed a contract entitling him to recover all costs he had reasonably incurred would be surprised to learn that his entitlement to recover those costs had been circumscribed by being reduced to party and party costs. It is, therefore, appropriate to allow the mortgagee to recover more than party and party costs which had been reasonably incurred.

50. For these reasons, the plaintiff is entitled to all his costs provided they have been reasonably incurred. If the parties are unable to agree them, they are to be taxed on the footing that the plaintiff is entitled to all his costs, charges and expenses provided that it was reasonable to incur them and they are reasonable in amount. To make good any objection, the defendants must satisfy the taxing master of the unreasonableness contended for and any doubts will be resolved in favour of the plaintiff: Gomba Holdings Ltd v Minories Finance Ltd (supra) at 194.

RECTIFICATION
51. There is an alternative ground on which I would allow the plaintiff all his costs on a common fund basis. The plaintiff has applied for an order of rectification so that the Belehris mortgage reflects the terms of the agreements made in April 1987 between the plaintiff and defendants.

52. The plaintiff pleads that the documents failed accurately to record what had been agreed in April 1987 in two respects, first, the provisions as to interest and, second, the provisions as to recovery of costs. It is common ground that the relevant documents are the Silverstein mortgage, the HG and R mortgage and the Belehris mortgage. It is also common ground that the Belehris mortgage does not record the agreement made between the plaintiff and defendants as to the terms upon which interest was to be paid. The issue between the parties is whether the plaintiff is entitled to recover his costs in enforcing the obligations of the defendants as party and party costs or whether he is entitled to those costs on a solicitor and client basis.

53. The principles governing rectification are well established. To a large extent, they flow from the underlying principle that "courts of equity do not rectify contracts; they may and do rectify instruments": McKenzie v Coulson
(1869) LR 8 Eq 369, 375; The Olympic Pride (1980) 2 Lloyds Rep 67. The remedy is discretionary. It may be granted where the instrument sought to be rectified does not reflect the common intention of the parties: Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 350. The two principles which are relevant in this case are:
    1. If it is sought to establish the common mistake, not by
    reference to the terms of a previously concluded contract,
    but by reference to the intention of the parties, the Court
    will not order rectification unless it is positively
    established that there was an intention common to both
    parties and that intention continued up to the time of the
    execution of the instruments: Slee v Warke (1949) 86 CLR
    271 at 281; Australasian Performing Right Association Ltd v
Austrama Television Pty Ltd (1972) 2 NSWLR 467 at 473;
Johnstone v Commerce Consolidated Pty Ltd (1976) VR 463
and, on appeal, (1976) VR 724; Maralinga Pty Ltd v Major
    Enterprises Pty Ltd (supra).

2. There must be clear evidence that the instrument failed
    accurately to record the intention of the parties. The
    principle is explained by Russell LJ in Joscelyne v Nissen
(1970) 2 QB 86 at 98: "In our judgment the law is as
    expounded by Simounds J in Crane's Case with the
    qualification that some outward expression of accord is
    required. We do not wish to attempt to state in any
    difference phrases with which we entirely agree, except to
    say that it is in our view better to use only the word
    `convincing proof' without echoing an old fashioned word
    such as `irrefragable' and without importing from the
    criminal law the phrase `beyond all reasonable doubt'."

That principle has been adopted and applied in Australia:
    see Australasian Performing Right Association Limited v
    Austrama Television Pty Ltd.

3. In common with other remedies in equity, a claim for
    rectification is capable of being barred by delay on the
    part of the plaintiff. There is no plea of delay by the
    defendants in these actions nor do I think that, in all the
    circumstances, the plaintiff has been guilty of undue delay
    which should defeat his claim. It was not until he
    obtained an order for possession in January 1991 that
    questions arose as to the terms of the agreement and the
    plaintiff then sought rectification within a reasonable
    time thereafter.

54. The plaintiff and defendants agreed that the plaintiff who had generously come to the assistance of the defendants would not suffer any loss or be out of pocket in consequence of the substantial assistance he was giving them. Mr Yianoulatos described it as an arrangement of honour. It was at least that - but it was also clear, as Peter Belehris said in the course of his evidence, that the arrangements should not cost his friend a penny. As Mr Yianoulatos said in his evidence, Peter Belehris was adamant that he did not want the plaintiff to be out of pocket in any way. On the other hand, the plaintiff was not going to profit from the transaction.

55. The evidence, therefore, clearly establishes that it was the common intention of the parties that the plaintiff's generosity in assisting the defendants, by arranging a loan of $93,000 and then lending it in turn to them, should not result in the plaintiff incurring any loss or expense. It was clearly implicit in that agreement that, should the defendants default, they would pay all costs reasonably incurred by the plaintiff and that he would not be limited to party and party costs. To limit the plaintiff to party and party costs would defeat the clear intention of the parties that the plaintiff should not be out of pocket. The Belehris mortgage, which was the only document prepared by Mr Yianoulatos, did not give effect to the common intention of the parties. It is not a bar to rectification that the need for the remedy as is occasioned by an error on the part of the plaintiff's solicitors and, in general, negligence is an irrelevant consideration: Monaghan County Council v Vaughan (1948) IR 306; Weeds v Blaney (1978) 247 EG
211.

56. For these reasons, I would order rectification to permit the plaintiff to recover all his legal costs on a common fund basis.

INTEREST
57. As already mentioned, it is common ground that the rate of interest was incorrectly stated in the Belehris mortgage. It is agreed that interest was to be charged at the rate of 20 per cent per annum but reducing to 17.5 per cent per annum if interest was promptly paid. It is arguable that the rates should have exactly reflected the rates in the HG and R mortgage which provided for a lower rate of interest where interest was promptly paid and a higher rate in default. However, the defendants did not pay interest on the due date to either the plaintiff or to HG and R and so the issue as to the proper rate of interest for prompt payment does not arise. The penalty rates of interest and other costs paid by the plaintiff to HG and R or its solicitors are damages incurred by the plaintiff in consequence of the default of the defendants in paying monies to him under the Belehris mortgage. The defendants knew that the plaintiff was relying on them to make regular payments of interest and to pay the principal on the due date and, if they failed to do so, he would be unable to discharge his obligations under the HG and R mortgage.

OTHER APPROPRIATIONS
58. Out of monies received from the defendants, the plaintiff on 2 September 1990 appropriated $2,300 to Youngs, solicitors in Melbourne, for their costs. Youngs were then advising the plaintiff in relation to the mortgage and instructing Knox and Hargrave, solicitors in Adelaide, to enforce the plaintiff's rights. In my view the plaintiff was entitled to make the appropriation on the footing that the costs were costs he had reasonably incurred. There was a dispute whether the costs had in fact been incurred. I find that they were. They are part of the costs referred in a note of fees from Youngs dated 17 September 1992.

59. I find also that other costs set out in two other accounts from Messrs Youngs for legal services were in fact incurred by the plaintiff. An account dated 17 September 1992 refers to professional charges incurred in the period 11 November 1992 to date. Plainly the date 11 November 1992 is a typographical error and the memorandum of fees should have referred to fees "from 11 November 1991 to date".

60. It is common ground that in relation to an account for legal services rendered by Messrs Knox and Hargrave on 3 October 1990 the sum of $2,356.49 can be appropriated by the plaintiff out of monies paid by the defendants. It is common ground also that of the sum of $3,007.64 referred to an account for legal services from Knox and Hargrave dated 2 October 1991, the sum of $1,500 can be appropriated as costs associated with the mortgage. Other costs payable to Knox and Hargrave are costs of the action but, for the reasons already given, the plaintiff is entitled to recover them if those costs have been reasonably incurred.

THE SAVVA MORTGAGE
61. Reference to the schedule of receipts and payments shows that at March 1989 the payments by the plaintiff to HG and R exceeded his receipts from the defendants by $15,711. On 12 March 1989 the plaintiff borrowed $15,000 from a Mr Andrew Savva. That gave him some breathing space for about twelve months but by April 1990 the amounts due by the defendants again exceeded what the plaintiff had paid HG and R. I find that, in all the circumstances, it was reasonable for the plaintiff to borrow $15,000 from Mr Savva. The defaults of the defendants were substantial; they had caused the plaintiff to be out pocket; and the principal on the HG and R mortgage was to be repaid on 10 April 1989. The plaintiff is entitled to recover the interest on that sum as damages, an amount of $5,850.

THE WILLETTS MORTGAGES
62. By June 1991 a substantial portion of the HG and R mortgage had been repaid. However, the principal of $20,000 remained unpaid. In addition, the defendants owed the plaintiff some $17,000 being the difference between the payments he had made under the HG and R mortgage and the payments made by them to him. The plaintiff was not in a position to make any further payments to HG and R unless he borrowed money and so he made no repayments in the period June 1991 to November 1992. Between 18 March 1991 and 3 June 1991 the defendants had made substantial payments to the plaintiff totalling $104,650. The plaintiff was entitled to believe that it would not be long before the defendants paid the outstanding balance of $20,000 to HG and R. I find, therefore, that in all the circumstances, it was reasonable for him to wait until November 1992 before repaying the HG and R loan.

63. In the latter part of 1991 and in 1992 the defendants made no payments despite demands made by the plaintiff and his solicitors. By November 1992, HG and R was pressing very strongly for payment. It had obtained an order for possession. The evidence is not clear as to dates but, at some time, HG and R had caused the locks on the plaintiff's house at 51 Donald Street to be changed. The plaintiff decided to refinance the loan. Not only would he then be able to repay the HG and R mortgage but the fresh loan would be at a lower rate of interest. It was, in all the circumstances, a very appropriate course of action. It enabled him to obtain a reduced rate of interest and thus mitigate his loss. He therefore borrowed the sum of $29,500 from a Mr J. Willetts on the security of his house at 51 Donald Street. The loan was used to repay the sum of $28,193.39 to HG and R. The balance was applied for costs and other expenses.

64. Before entering into the loan, the plaintiff's solicitors, Messrs Knox and Hargrave, wrote on 13 November 1992 to the defendants' solicitors offering the defendants the opportunity to repay the principal soon due to HG and R. The offer was rejected. The rejection of that offer was most unfortunate. First, it resulted in the defendants themselves incurring further cost and expense to their solicitors. Secondly, it caused the plaintiff to enter into further loan agreements and thus increased the liability of the defendants to the plaintiff.

65. The plaintiff had already borrowed money from Mr Willetts before November 1992. As already mentioned, as at June 1991, the defendants owed the plaintiff some $17,000. They did not make any payments in reduction of that liability. The plaintiff found it very hard to manage. He was borrowing from friends and relatives and having to juggle the loans in order to repay one by borrowing from another. He graphically expressed his position by stating that, when he approached friends and relatives, they covered their pockets. He also needed monies to pay the legal fees in enforcing his rights under the mortgage.

66. In February 1992 the plaintiff borrowed $10,500 from Mr Willetts. He then refinanced that loan by a subsequent loan of $24,000 in November 1992, which was then refinanced by another loan for $45,000 in November 1993, and that loan in turn was refinanced by another loan for $92,000 in October 1994. All loans were secured by mortgages over the plaintiff's house at 53 Donald Street. These loans are set out in the following schedule:
    WILLETTS LOANS
    Date        Payments by     Receipt         Balance
                 Plaintiff
    19. 6.91   21,764.00 Dr
    14. 2.92     1,504.64     10,500.00(53) 12,768.00
    18.11.92     3,790.00     24,000.00(53)    3,058.00 Dr
                10,500.00
    18.11.92     1,306.61     29,500.00(51)    3,010.00 Dr
                28,193.39
    18.11.93     5,435.25     45,000.00(53) 12,555.00 Cr
                24,000.00
    18.11.92)
     to)     6,490.00   6,065.00 Cr
    18.11.94) (interest)
     5.10.94     2,428.55     92,000.00(53) 50,637.00 Cr
                45,000.00

67. The numbers in brackets refer to plaintiff's houses at either 51 or 53 Donald Street, indicating the loan for which they were security.

68. The refusal of the defendants to repay the principal sum due to the HG and R mortgage had the consequence that the plaintiff had to borrow that sum and thereby increase the total indebtedness of the defendants to him to about $45,000. His income was plainly insufficient to meet the interest burden he was facing. He had to borrow to obtain funds with which to repay the HG and R loan, to pay interest on his entire borrowings, and to pay the legal costs he was incurring in seeking to enforce his rights under the mortgage. The dire straits in which he was clearly placed is illustrated by the table of Willets loans. I accept the evidence of the plaintiff, which was not seriously challenged, that all of the loans were necessary. The plaintiff is entitled to his interest and all other costs associated with all of the Willetts loans.

69. There was some criticism from the defendants that the plaintiff or his advisers had been dilatory in advising how much was due by defendants. I do not accept that criticism. Further, there was no evidence of any willingness or ability to pay what was due. Indeed, the defendants seemed to be denying any further liability. Even if there were some force in the criticism that the plaintiff did not advise what was due, it does not sound well in the mouth of those unwilling and unable to pay.

REFERENCE OUT OF COURT
70. The parties agree that the most appropriate means of calculating what is due to the plaintiff is to appoint a chartered accountant to undertake the task and that the Court should make the appointment pursuant to R.82. They are agreed also that the task should be undertaken by Mr R Kennedy of Messrs Edwards Marshall and Co. He is willing to act. I therefore make an order appointing Mr Kennedy to report on the following question:
    On the basis of the figures supplied and on the findings of
    fact herein, were the defendants indebted to the plaintiff
    at the commencement of this action and, if so, in what
    amount?

71. After submissions from the parties, I will direct what documents and other information should be sent to Mr Kennedy and the terms of any subsidiary questions. The parties shall be jointly and severally liable to pay the fees of Mr Kennedy. Pursuant to R.82.05 the parties will be at liberty to apply to cross-examine Mr Kennedy on matters referred to in his report.

72. If Mr Kennedy requires further information, he should write to my Associate. If it is not possible for the parties to agree upon the facts on which Mr Kennedy seeks further information, I will appoint a time for the further hearing of the matter.