Down Town Visuals v Panorama Investments (No 4)

Case •

[2020] VSC 798

•

30 November 2020
IN THE SUPREME COURT OF VICTORIA AT MELBOURNE
COMMERCIAL COURT 		Not Restricted

The Down Town Proceeding - S CI 2017 3990

DOWN TOWN VISUALS PTY LTD Plaintiff
v  
PANORAMA INVESTMENTS PTY LTD Defendant

The Possession Proceeding - S CI 2017 3283

PANORAMA INVESTMENTS PTY LTD Plaintiff
v  
NICK MELLOS and STEPHEN ROBERT DIXON
(as Joint and Several Trustees of the Bankrupt Estate of
Dr Nicholas William Sevdalis (a Bankrupt)) & ORS

Defendants

The First Mortgagee Proceeding - S CI 2017 4334

PANORAMA INVESTMENTS PTY LTD Plaintiff
v  
NB SERVICES (AUST) PTY LTD & ORS Defendants

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JUDGE:

Digby J

WHERE HELD:

Melbourne

DATE OF HEARING:

On the papers

DATE OF JUDGMENT:

30 November 2020

CASE MAY BE CITED AS:

Down Town Visuals v Panorama Investments (No 4)

MEDIUM NEUTRAL CITATION:

[2020] VSC 798

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PRACTICE & PROCEDURE – Claims for disbursement of funds paid into Court - Cost entitlements in relation to Funds in Court – Parties claims for costs – Whether mortgage and other security give rise to priority of payment out of Court funds and in relation to costs claims - Priority disputes between secured parties – Exercise of discretion as to costs – Transfer of Land Act 1958 (Vic), s 77(3).

HIS HONOUR:

  1. These reasons concern in summary:

(a)   an application by Panorama Investments Pty Ltd (Panorama) seeking orders that:[1]

[1]Made by email dated 19 November 2019 [4:44pm] and attached Proposed Orders, and Submissions dated 24 January 2020.

(i)     the Court ‘extend and continue’ a number of costs orders made to date in Panorama’s favour in the Debt Proceeding (S CI 2015 4426) and the Possession Proceeding (S CI 2017 3283) (including in respect of the Summons dated 13 October 2017);

(ii)  the above costs be determined on a gross sum basis, based on the Adjusted Fees methodology for work done in Victoria and the Ausmaq methodology for work done in New South Wales;

(iii)             the quantification of costs be referred to the Costs Court for assessment; and

(iv)             certain ancillary, procedural orders.

(b)  an application by Down Town Visuals Pty Ltd (Down Town) seeking:[2]

[2]Down Town’s Proposed Orders attached to the Submissions dated 20 December 2019; Affidavit of Prospero Franzese, 23 December 2019 and Reply Submissions, 21 February 2020.

(i)         judgment for Down Town in the Down Town Proceeding (S CI 2017 3990) for the sum of $2,540,766.99 in respect of the sum secured by the Gulf Country Charge dated 23 November 2011;

(ii)       that the amount of $1,290,766 be paid from Common Fund No. 1 to the solicitors for Down Town, Franzese & Associates.  The amount of $1,290,766 represents the sum of $2,540,766.99 referred to in subparagraph (i) above, less the sum of $1,250,000 already paid out of Funds in Court;

(iii)      in effect the balance of funds remaining in Court in the amount of approximately $282,045[3] be held in Funds in Court pending assessment by the Costs Court on the costs of Down Town secured by the Gulf Country Charge dated 23 November 2011 and any further order of the Court or agreement between the parties;

[3]Calculated based on approximate balance of Funds in Court Account 81866 at 17 November 2020.

(iv)      to the extent that any amount of the sum of $500,000 ordered by the Court to be paid from Common Fund No. 1 on 13 November 2018 and subsequently paid to Panorama from Funds in Court includes any moneys determined by the Costs Court, or further order, not to be secured by the Panorama Mortgages, or to be non-enforcement expenses under the Panorama Mortgages, Panorama shall pay such sum into Funds in Court of the Supreme Court of Victoria;

(v)       Panorama pay the costs of Down Town on an indemnity basis in respect of:

(a)       the Possession Proceeding (S CI 2017 3283);

(b)      the Down Town Proceeding (S CI 2017 3990); and

(c)       the First Mortgagee Proceeding (S CI 2017 4334);

(vi)      The costs of this application be reserved.

  1. These reasons also concern both the abovementioned orders sought by Panorama and Down Town and priority of access to and orders sought to distribute remaining funds held in Funds in Court in an amount in excess of approximately $1,572,811 (the Funds in Court) in relation to three related proceedings in this Court:

(a)   the Down Town Proceeding (S CI 2017 3990) between Down Town and Panorama;

(b)  the First Mortgagee Proceeding (S CI 2017 4334) between Panorama and NB Services (Aust) Pty Ltd (NB Services); and

(c)   the Possession Proceeding (S CI 2017 3283) between Panorama and Nick Mellos and Stephen Robert Dixon (as joint and several trustees of the Bankrupt Estate of Dr Nicholas William Sevdalis (a Bankrupt)) and others;

(collectively, the Proceedings); and

(d)  in relation to a number of the orders sought by Panorama in the Debt Proceeding (S CI 2015 4426) between Down Town and Summit Tower Pty Ltd (Summit Tower).

Materials relied upon in support of orders sought

  1. Panorama and Down Town filed materials in relation to the above orders which each of those parties seek.[4]  Further email communications were received from Mr Podaridis in which Mr Podaridis stated that his email communications were made on behalf of NB Services, Champion Investment Group Pty Ltd (Champion Investment) and Mr Nicholas Sevdalis (Sevdalis).[5]

    [4]Subsequent to the Orders made 13 November 2018 in the Proceedings, including in relation to mediation at paragraph [2], proceedings in respect of the active parties’ costs entitlement, there was no communication from either Panorama Investment Pty Ltd or Down Town Visuals Pty Ltd until the Court, on 7 November 2019 [3:34pm], emailed Stanton & Stanton Lawyers (Ms Quarrell) and Franzese & Associates Lawyers (Mr Franzese), referring to the Orders made 13 November 2018, seeking an update as to the Proceedings and in particular whether the parties were in a position to submit orders to finalise the Proceedings or file a notice of discontinuance.  There followed the following communications from the parties:

    Panorama Investments Pty Ltd

    • Email from Stanton & Stanton Lawyers (Ms Quarrell) dated 19 November 2019 [4:44pm] to Court (and parties) attaching Proposed Orders.

    • Email from Stanton & Stanton Lawyers (Ms Quarrell) dated 4 December 2020 [12:47pm] to Court (and parties) advising the Proposed Orders were provided to the other parties in the Proceedings and advising the following responses from parties:

    1. The solicitor for the Bankruptcy Trustee for Nicholas Sevdalis indicated that they neither consent nor oppose the orders;

    2. The solicitor for the Liquidator of Native Bond Pty Ltd (In Liquidation) indicated that they neither consent nor oppose the orders;

    3. The solicitor for Down Town have alluded that they do not consent, but we have not received confirmation of this; and

    4. We have not received a response from any of the other parties. 

    • Submissions dated 24 January 2020.

    • Affidavit of Laura Quarrell sworn 24 January 2020 and exhibits.

    Down Town Visuals Pty Ltd

    • Email from Franzese & Associates, Lawyers (Mr Franzese) dated 6 December 2019 [2:04pm] to the Court (and parties) advising the parties were unable to resolve the matter. Consequently directions are sought:

    1. Any application for final orders by Down Town Visuals Pty Ltd is to be made by affidavit to be filed by 4:00pm on 20 December 2019 in respect of:

    (a)the funds held in Common Fund No. 1 in relation to the First Mortgagee Proceeding (S CI 2017 4334) and/or the Down Town Proceeding (S CI 2017 3990); and

    (b)judgment and costs against Panorama Investments Pty Ltd in the Down Town Proceeding (S CI 2017 3990).

    2. Any affidavit in opposition by Panorama Investments Pty Ltd be filed by 4:00pm on 24 January 2020.

    3. Any affidavit in reply by Down Town Visuals Pty Ltd be filed by 4:00pm on 21 February 2020.

    4. The application be heard on a date to be fixed.

    • Submissions dated 20 December 2019.

    • Reply Submission dated 21 February 2020.

    • Affidavit of Prospero Franzese sworn 23 December 2019 and Attachment ‘A’.

    • Email from Franzese & Associates, Lawyers (Mr Franzese) dated 6 July 2020 [10.21am] to the Court and Mr Podaridis (and parties) referring to the email from Mr Podaridis of the same date at 8.37am.

    [5]NB Services (Aust) Pty Ltd (In Liq), Champion Investment Group Pty Ltd and Nicholas Sevdalis (a bankrupt)

    • Email from Mr Podaridis dated 6 December 2019 [3:07pm] to the Court (and parties) advising ‘For on and behalf of Champion Investment Group Pty Ltd we also support Down Town Visuals Pty Ltd request and also liberty for any other third party to apply as well’.

    • Email from Mr Podaridis dated 6 July 2020 [8.37am] to the Court (and parties) advising the following information and submission for and on behalf of NB Services (Aust) Pty Ltd (in Liq), Champion Investment Group Pty Ltd, and Mr Nicholas Sevdalis:

    1. Any Final Orders that are made shall be stayed for a period of sixty (60) days to give the abovementioned parties leave to file any further information which has come out of the criminal investigation as your Honour was previously advised with respect to the Down Town Visuals Pty Ltd and the alleged claim and debt owing including the actions of the then Solicitor Mr John Vautin and his associate and Mr David Graer and Ors.

    2. NB Services (Aust) Pty Ltd (in Liq) as the first mortgagee still has costs that need to be reimbursed and paid from the proceeds of the sale of the property, despite the claim of the former Solicitor Ms Rothwell who resigned before your Honour. As his Honour has been made aware previously, Mr Bochrinis was only released on bail on 1st May 2020 and has been unable because of COVID-19 retain or engage new lawyers to represent him and in the circumstances should be afforded the opportunity as a party to these proceedings to state his claim;

    3. If the parties are not afforded the opportunity or liberty to apply and have the final orders stayed then there is a great risk that the funds shall disappear and dispersed and will be very difficult to recover from the parties; and

    4. Finally, there is no prejudice to the other parties with respect to a stay in the current circumstances and COVID-19 given that all parties have a right to be heard with respect to the claim on the funds and liberty to apply therein.

    Email from Mr Podaridis dated 12 November 2020 [2:33pm] to the Court (and parties) advising ‘Further to the email request from Mr Franzese and prior correspondence for the record it should be noted that there are two fraud statements being prepared with the Victorian Police and the relevant parties to this proceeding which could affect the outcome of any decision. In addition, the two parties involved because of COVID-19 restrictions have been unable to retain new lawyers as yet and will be seeking a stay of 60 days on any decision handed down.’

  1. Panorama makes no submissions which specifically support the numerous cost orders sought in paragraph (1)(a) to (g) of its Proposed Orders in the Debt Proceeding (S CI 2015 4426).[6]

    [6]Affidavit of Laura Quarrell, 24 January 2020 (Quarrell Affidavit), Exhibits ‘LAQ-9’ and ‘LAQ-10’.  The Expert Cost Reports deal with the First Mortgagee Proceeding (S CI 2017 4334), the Possession Proceeding (S CI 2017 3283) and the Down Town Proceeding (S CI 2017 3990) but not the Debt Proceeding (S CI 2015 4426).

  1. Neither in respect of the Possession Proceeding (S CI 2017 3283) does Panorama make any submission in its written Submissions dated 24 January 2020 and 1(h), (i) and (j) of its Proposed Orders.

Proceeds of sale held in Funds in Court

  1. On 31 January 2018, Panorama paid the sum of $3,708,785.95 into the Supreme Court of Victoria’s Funds in Court (Funds in Court), pursuant to paragraph [2] of the Orders of Elliott J dated 24 January 2018 in the Possession Proceeding (S CI 2017 3283).  That sum represented the surplus from the proceeds of sale of parcels of land located at 895 Yan Yean Road, Doreen, Victoria (the Yan Yean Road property).  The proper distribution of these sale proceeds, as between a number of competing claimant parties was the subject of the Down Town Proceeding (S CI 2017 3990), and earlier payments out of the Funds in Court have been made pursuant to prior orders made on 13 November 2018 in the First Mortgagee Proceeding (S CI 2017 4334).

  1. On 31 January 2018 Panorama also received the sum of $3,286,215.01[7] from the total proceeds of sale of the Yan Yean Road property.

    [7]Affidavit of Salim Nahoum, 6 April 2018, [4].

  1. The Funds in Court remain under the control of the Senior Master.

Panorama and Down Town only remaining active parties

  1. Down Town seeks orders including that there be judgment in its favour in the amount of $2,540,766.99 in respect of the sum secured by an equitable charge in its favour over the proceeds of sale of the Yan Yean Road property now held in Funds in Court.  Down Town also seeks an order that the amount of $1,290,766 be paid to its solicitors from Funds in Court in part satisfaction of the sum in respect of which it seeks judgment, taking into account that Down Town has already been paid the sum of $1,250,000 from the said Funds in Court.[8]  The present Down Town claim for $1,290,766 represents the balance Down Town contends that it is owed under its equitable charge, in priority to any costs claim of Panorama.  Down Town also seeks to have the balance of the funds, thereafter held by Funds in Court pending assessment by the Costs Court of the extent of Panorama and Down Town’s entitlement to costs, further order of the Court, or agreement between the parties.

    [8]First Mortgagee Proceeding (S CI 2017 4334), Orders made 13 November 2018, [2(c)].

  1. Further, Down Town seeks an order that Panorama, the first defendant in the Down Town Proceeding (S CI 2017 3990) and the plaintiff in the First Mortgagee Proceeding (S CI 2017 4334) and the Possession Proceeding (S CI 2017 3283), pay Down Town’s costs on an indemnity basis in respect of the Proceedings.[9]

    [9]Down Town’s Proposed Order, [5].

  1. At this stage of the proceedings, Panorama and Down Town are the only active remaining parties in the Proceedings.[10]

    [10]Refer footnote [1] above (submissions and materials filed by Panorama and Down Town); Refer footnote [2] above, informal stay application by Mr Podaridis.

Other Parties

  1. Historically, the parties to the Possession Proceeding (S CI 2017 3283) have been:

Plaintiff

Panorama Investments Pty Ltd

First Defendant

Nick Mellos and Stephen Robert Dixon (as joint and several Trustees of the Bankrupt Estate of Dr Nicholas William Sevdalis (a Bankrupt))

Second Defendant

Native Bond Pty Ltd (In Liquidation)

Third Defendant

Bendigo and Adelaide Bank Ltd (proceedings discontinued)

Fourth Defendant

NB Services (Aust) Pty Ltd

Fifth Defendant

Champion Investment Group Pty Ltd

  1. Historically, the parties to the First Mortgagee Proceeding (S CI 2017 4334) have been: 

Plaintiff

Panorama Investments Pty Ltd

First Defendant

NB Services (Aust) Pty Ltd

Second Defendant

Nick Mellos and Stephen Robert Dixon (as joint and several Trustees of the Bankrupt Estate of Dr Nicholas William Sevdalis (a Bankrupt))

Third Defendant

Native Bond Pty Ltd (In Liquidation)

  1. Historically, the parties to the Down Town Proceeding (S CI 2017 3990) have been: 

Plaintiff

Down Town Visuals Pty Ltd

Defendant

Panorama Investments Pty Ltd

  1. The parties to the Debt Proceeding (S CI 2015 4426) are:

Plaintiffs

Panorama Investments Pty Ltd

First Defendant

Summit Tower Pty Ltd

Second Defendant

Nicholas William Sevdalis (Trustees in Bankruptcy Appointed)

Third Defendant

Native Bond Pty Ltd (In Liquidation)

Fourth Defendant

N Sevdalis Pty Ltd (Controller Appointed)

Fifth Defendant

Gulf Country Investments Pty Ltd (proceedings discontinued)

Sixth Defendant

David Arthur Graer (proceedings discontinued)

  1. After certain points in time not all parties took an active part in the Proceedings.  NB Services and its former controlling director and interest holder Mr Nicholas Bochrinis absented themselves from the trial on 9 and 10 April 2018, and Champion Investment did not actively participate in the trial.  These parties did not actively participate in the Proceedings after about 9 April 2018.

Instigation of the current application

  1. Orders made 13 November 2018 in the Proceedings were forwarded to parties on 14 November 2018.  Those orders included orders for mediation in the Possession Proceeding (S CI 2017 3283), the Down Town Proceeding (S CI 2017 3990) and the First Mortgagee Proceeding (S CI 2017 4334) to occur by the end of December 2018.

  1. After about November 2018 the parties made no contact with the Court for 12 months.  On 7 November 2019 the Court communicated with the parties and requested them to submit orders to finalise the proceeding or, to file a notice of discontinuance. 

  1. By email on 6 December 2019 Mr Podaridis communicated with the Court stating:  ‘For on and behalf of Champion Investment we also support Down Town Visuals Pty Ltd request and also liberty for any other third party to apply as well’.

  1. On 12 December 2019 the Court again contacted the parties active in late 2018 (including Mr Podaridis) as follows:

Dear Parties and Practitioners,
Down Town Visuals Proposed Orders
Justice Digby has considered the correspondence received from Panorama, including its proposed orders, Down Town Visuals and Champion Investment Group and proposes to make the following orders as put forward by Down Town Visuals:

1.By 4.00pm on 20 December 2019, any application for final orders by Down Town Visuals Pty Ltd is to be filed and served by affidavit, together with Down Town Visuals Pty Ltd’s proposed orders and with any submissions, not exceeding 2  pages in respect of:

(a)the funds held in Common Fund No. 1 in relation to the First Mortgagee Proceeding S CI 2017 4334 (the First Mortgagee Proceeding) and/or S CI 2017 3990 (the Down Town Proceeding); and

(b)judgment and costs against Panorama Investments Pty Ltd in proceeding no. S CI 2017 3990.

2.By 4.00pm on 24 January 2020, Panorama Investments Pty Ltd file and serve any affidavit in opposition together with any submissions, not exceeding 2 pages.

3.By 4.00pm on 21 February 2020, Down Town Visuals Pty Ltd file and serve any affidavit in reply together with any reply submissions, not exceeding 1 page, in support of orders sought.

4.The application will be determined ‘on the papers’.

5.The parties’ costs be reserved

His Honour considers that it would be efficient, cost effective and appropriate in this matter, and at this stage, to decide the extant issues, on the papers, and will proceed to do so in the event that no objection to this course is taken by the parties within the next seven days.  Please advise by 4.00pm on Thursday 19 December 2019 if you object to this course.
I would be grateful to receive any submissions which are filed and served to be also forwarded to his Honour, via email and in electronic word format.
Panorama’s Proposed Orders

His Honour considers that it is appropriate to defer the making of the orders as proposed by Panorama in their email sent 4 December 2019 [12.47pm] until his Honour has considered the material received in the application to be made by Down Town Visuals.

  1. On 20 December 2019 the Court made the following orders:

1.By 4.00pm on 20 December 2019, any application for final orders by Down Town Visuals Pty Ltd be filed and served by affidavit, together with Down Town Visuals Pty Ltd’s proposed orders and with any submissions, not exceeding 2  pages in respect of:

(a)the funds held in Common Fund No. 1 in relation to the First Mortgagee Proceeding S CI 2017 4334 (the First Mortgagee Proceeding) and/or S CI 2017 3990 (the Down Town Proceeding); and

(b)judgment and costs against Panorama Investments Pty Ltd in S CI 2017 3990 (the Down Town Proceeding).

2.By 4.00pm on 24 January 2020, Panorama Investments Pty Ltd file and serve any affidavit in opposition together with any submissions, not exceeding 2 pages.

3.By 4.00pm on 21 February 2020, Down Town Visuals Pty Ltd file and serve any affidavit in reply together with any reply submissions, not exceeding 1 page, in support of orders sought.

4.The application will be determined ‘on the papers’.

  1. Following receipt of documents referred to in the above timetable, on 21 February 2020 the Court advised the parties (including Mr Podaridis) as follows:

On the application for final orders I confirm that pursuant to Justice Digby’s order made 20 December 2019 the following material will be considered by his Honour ‘on the papers’ -

Down Town’s Materials

1.Submissions dated 20 December 2019

2.Reply Submission dated 21 December 2020

3.Affidavit of Prospero Franzese sworn 23 December 2019

Panorama’s Materials

1.Submissions dated 24 January 2020

2.Affidavit of Laura Quarrell sworn 24 January 2020 and exhibits

Please let me know if I have omitted any material.

Background

  1. The Proceedings have a protracted history in this Court and it is only necessary to recount so much of the background and history of this matter as is necessary to comprehend these Reasons.[11]

    [11]Refer also Down Town Visuals Pty Ltd v Panorama Investments Pty Ltd [2018] VSC 427, [3]-[11].

The Sevdalis Entities

  1. Sevdalis was a medical practitioner turned property developer, who conducted property development activities through a number of related entities, including Native Bond Pty Ltd (In Liquidation) (Native Bond), Summit Tower and N Sevdalis Pty Ltd (Sevdalis Co) (collectively, the ‘Sevdalis Entities’).  

  1. Sevdalis secured finance for his business activities utilising land as security, including the Yan Yean Road property.

  1. The Sevdalis business activities within the purview of these proceedings were ultimately unsuccessful, with both Sevdalis and the Sevdalis Entities encountering financial difficulties and defaulting on numerous secured and unsecured loans.  Resultant litigation was commenced in this Court including the litigation the subject of the present application.  

  1. Sevdalis filed for bankruptcy on 23 December 2016.  Each of the Sevdalis Entities have since gone into some form of external administration or liquidation

Panorama

  1. Panorama was a secured creditor of Sevdalis and the Sevdalis Entities.  On 17 January 2013, Panorama entered into a loan agreement (the Loan Agreement) with Summit Tower under which Panorama advanced $2,424,000 secured over, inter alia, the Yan Yean Road property.  The Loan Agreement was guaranteed personally by Sevdalis, and by Native Bond pursuant to two separate Deeds of Guarantee each dated 21 January 2013.

  1. Further Sevdalis mortgaged the Yan Yean Road property to Panorama as security for the said advance by Panorama pursuant to the Loan Agreement and all moneys due thereunder, and the Sevdalis said Deeds of Guarantee.

  1. On 2 March 2017, after protracted litigation in this Court, judgment was entered on the Loan Agreement in favour of Panorama and against Sevdalis, Summit Tower and Native Bond, in the amount of $3,027,431, plus costs on an indemnity basis.

Down Town

  1. Down Town was also a secured creditor of the Sevdalis Entities by virtue of a Deed of Assignment dated 21 March 2013 between Down Town and Gulf Country Investments Pty Ltd (Gulf Country), whereby Gulf Country assigned its rights under its own loan agreement with the Sevdalis Entities to Down Town.  Pursuant to a loan agreement dated 23 November 2011 (the Gulf Country Loan Agreement) Gulf Country advanced $1,221,518.10 to the Sevdalis Entities, secured by fixed and floating charges over Native Bond’s assets.  The extent to which the assignment to Down Town included rights to interest on Gulf Country’s loan was the subject of dispute.

  1. On 8 December 2017, Elliott J made orders in the First Mortgagee Proceeding (S CI 2017 4334), applying equally to the Proceedings, directing the registered mortgagee in possession, Panorama, to effect the sale of the Yan Yean Road property in relation to which Sevdalis and the Sevdalis Entities were registered proprietors.  That sale was settled on 31 January 2018 for the sum of $7,021,770.

  1. The orders of 8 December 2017 provided that upon settlement the proceeds of sale were to be applied to amounts owing to some of the Sevdalis’ creditors, including Panorama in the amount of $3,286,215, and that Panorama pay the balance of the proceeds of sale into Funds in Court pending consent in writing of each of the parties to the Proceedings, or order of the Court.  

  1. Upon settlement on 31 January 2018 Panorama paid the sum of $3,708,785.95 (the Settlement Proceeds) into Funds in Court.

  1. Subsequent to January 2018, the balance of the Settlement Proceeds held in Funds in Court was the subject of further protracted disputation as to various parties’ entitlement to priority based on the nature and timing of their interests, in respect of those funds.  

The present applications

  1. In early 2018 an ‘Agreed List of Issues’ was settled by the parties in relation to the Proceedings, including regarding the distribution of the moneys held in Funds in Court.  The Agreed List of Issues in the form of questions were referred to in the Orders made 22 February 2018 in the First Mortgagee Proceeding (S CI 2017 4334) (the Agreed List of Issues) as set out in Order [1] below:

OTHER MATTERS:

(1)These orders are made in the First Mortgagee Proceeding and apply also to the Possession Proceeding and the Down Town Proceeding.

(2)On 31 January 2018, the plaintiff in the First Mortgagee Proceeding and the Possession Proceeding and the defendant in the Down Town Proceeding (“Panorama”) paid into the Senior Masters Fund the amount of $3,708,785.95 (“the Settlement Proceeds”), being the surplus from the settlement of the sale of the property located at 895 Yan Yean Road, Doreen Victoria on that date, pursuant to paragraph 2 of the orders made by the Honourable Justice Elliott on 24 January 2018 in the Possession Proceeding.

(3)With respect to question 5 in the questions remaining for determination at trial (“the Agreed List of Issues”), the court may, if appropriate, refer the determination of quantum to the Costs Court.

THE COURT ORDERS THAT:

1.The proceeding is fixed for trial … limited to the following Agreed List of Issues:

(1)Is the 1st defendant in the First Mortgagee Proceeding and the 4th defendant in the Possession Proceeding (“NB Services”) entitled to payment from the Settlement Proceeds, pursuant to its registered mortgage security, any of the following as referred to in the affidavit of Mr Nicholas Bochrinis (“Bochrinis”) sworn 24 November 2017 (“the Bochrinis Affidavit”):

(a)The sum of $1,250,000 referred to in paragraph 9 of the Bochrinis Affidavit.

(b)The sum of $280,000 (or any other sum) in respect of the categories of expenses referred to in paragraph 7 of the Bochrinis Affidavit.

(c)The sum of $120,000 (or any other sum) referred to in paragraph 11 of the Bochrinis Affidavit.

(d)Costs and interest and, if so, in what amount?

(2)Is the debt claimed to be owed to Panorama, in respect of which it asserts an entitlement to be paid from the Settlement Proceeds, to be calculated by reference to the amount of the judgment debt as at 2 March 2017 the subject of proceeding S CI 2015 4426 (“the Debt Proceeding”), together with statutory interest calculated on the judgment debt, or is interest to be calculated by reference to the default mortgage rate under the relevant loan agreement?

(3)Are the legal costs and expenses said to be incurred by Panorama, in respect of which it asserts an entitlement to be paid from the Settlement Proceeds:

(a)Recoverable by Panorama pursuant to its registered mortgage:

(i)Only to the extent to which they constitute reasonable enforcement expenses within the meaning of clause 39.1 of the memorandum of common provisions.

(ii)Or, is Panorama entitled to the payment of those legal costs and expenses:

A.pursuant to clauses 4(b) and 4(c) of the loan agreement between Panorama and Summit Tower dated 17 January 2013; and

B.insofar as those legal costs and expenses were incurred in, or in relation to, the Debt Proceeding, on the basis that those legal costs and expenses were the subject of a costs order made in paragraph 5 of the orders made by the Honourable Justice Digby on 2 March 2017, by which the 1st and 3rd defendants in the Debt Proceeding were ordered to pay Panorama’s costs of and incidental to that proceeding on an indemnity basis.

(b)Or payable pursuant to any other written costs agreement and, if so, which costs agreement.

(c)Or payable on any other basis and, if so, what basis?

(4)Do the legal costs and expenses said to have been incurred by Panorama, in respect of which it asserts an entitlement to be paid from the Settlement Proceeds, include the costs payable by Panorama to Mackinnon Jacobs Horton & Irving Pty Ltd in the sum of $225,000, in accordance with paragraph 1 of the orders made by Costs Registrar Conidi in proceeding S CI 2017 03051 on 18 October 2017?

(5)Having regard to the answers to question 3, what amount is recoverable?

(6)What amount, if any, is the plaintiff in the Down Town Proceeding (“Down Town Visuals”) entitled to be paid from the Settlement Proceeds?

(7)If Down Town Visuals had a valid charge, has that charge been released by reason of the withdrawals of caveats produced and dated 12 July 2016, which have been provided to its solicitor?

(8)What amount, if any, is the 5th defendant in the Possession Proceeding (“Champion Investment”) entitled to be paid from the Settlement Proceeds?

(9)What amount, if any, is the 3rd defendant in the First Mortgagee Proceeding and the 2nd defendant in the Possession Proceeding (“Native Bond”) entitled to be paid from the Settlement Proceeds?

(10)To the extent that any entitlements of Down Town Visuals, Champion Investment and Native Bond to payment from the Settlement Proceeds are established, in what order of priority, if any, do such entitlements exist?

(11)What legal costs of the parties, if any, should be paid from the Settlement Proceeds, and in what priority, if any?

  1. The above questions were the subject of a trial on 9 and 10 April 2018  and of judgment handed down on 3 August 2018, Down Town Visuals Pty Ltd v Panorama Investments Pty Ltd [2018] VSC 427 (Down Town Visuals v Panorama Investments (No 1)).

  1. In Down Town Visuals v Panorama Investments (No 1)[12] it was decided, among other things, that Questions 9 and 10 of the Agreed List of Issues concerned questions of the order of priority of any relevant claims in respect of the Funds in Court and that the interested parties would be at liberty to make further submissions as a result of that judgment.  

    [12][2018] VSC 427.

  1. Questions 5 and 11 were considered to be questions concerning legal costs which may be payable and were questions suitable for referral to the Costs Court, if necessary, subject to any further submissions by the parties.  Questions 5 and 11 were for that reason deferred.

  1. On 8 October 2018 judgment was also handed down, Down Town Visuals Pty Ltd v Panorama Investments Pty Ltd (No 2) [2018] VSC 584 (Down Town Visuals v Panorama Investments (No 2)), in respect of Question 7 in the Agreed List of Issues.

  1. On 13 November 2018 a further judgment was handed down, Down Town Visuals Pty Ltd v Panorama Investments Pty Ltd (No 3) [2018] VSC 691 (Down Town Visuals v Panorama Investments (No 3)), in relation to the issue of the extent of Panorama’s asserted interest entitlement on the legal costs and Panorama’s entitlement to recover such interest (if any) from the Funds in Court.

  1. Orders were also made in the Proceedings on 13 November 2018, declaring that Down Town held an equitable charge over the Yan Yean Road property, and otherwise referring the Proceedings to mediation to occur by 20 December 2018.

  1. Orders were made on 13 November 2018 in the First Mortgagee Proceeding (S CI 2017 4334) that the following sums be paid from Funds in Court:

(a)   to Panorama, the sum of $16,588.67, for interest;

(b)  to the receivers and managers of Native Bond, the sum of $375,000;

(c)   to Down Town, the sum of $1,250,000, in respect of its equitable charge over the Yan Yean Road property;

(d)  to Panorama, the sum of $500,000, for enforcement costs.

  1. To date in the Proceedings, Panorama has been paid $3,286,315 in respect of its entitlements and in satisfaction of its security interest.  Panorama has also been paid $16,588.67 for interest and a provisional sum of $500,000 for enforcement costs pursuant to the orders made 13 November 2018 in the First Mortgagee Proceeding (S CI 2017 4334).  

  1. Down Town seeks orders including an order for judgment in the sum of $2,540,766.99 in respect of the sum secured by its charge over the Yan Yean Road property.  Down Town has to date been paid $1,250,000 in respect of its charge and Down Town seek a further order for the balance of $1,290,766 from Funds in Court.

  1. The balance of funds remaining in Funds in Court and available for distribution at the date of the subject applications is approximately $1,572,811 (including likely tax liability).[13]

    [13]The sum of $1,572,811 is recorded as ‘approximate’ at 17 November 2020 because the Fund may be entitled to a tax refund, yet to be determined and the subject of Australian Taxation Office Assessment.

Submissions of Down Town

  1. Down Town submits that it is entitled to payment of the outstanding balance of its equitable charge over the Yan Yean Road property from the Funds in Court in priority to any other claim by Panorama because:

(a)   Panorama has received the entirety of its mortgage claim, together with the sums of $16,588.67 for interest and $500,000 for enforcement costs, whereas Down Town has only received part payment of its secured debt from Funds in Court, and has not received either the balance of its claim or its costs secured by the charge, both of which are presently payable as first priority from Funds in Court,[14] along with Down Town’s costs on an indemnity basis of the Down Town Proceeding (S CI 2017 3990) in priority to any other miscellaneous costs claim by Panorama;[15]

(b) the Funds in Court represent the surplus from the sale of land by a mortgagee, and as such are subject to the statutory priorities set out in s 77(3) of the Transfer of Land Act 1958 (Vic) (TLA) which does not alter the order of priorities otherwise established at law.[16] Pursuant to s 77(3) of the TLA, Down Town ranks immediately behind Panorama whose security has been paid out;[17] and

(c)   on the sale of a mortgaged property, the registered mortgagee, Panorama, held the surplus on trust for Down Town, as the subsequent unregistered chargee, and Down Town can follow the moneys and uphold an equitable interest in those moneys on the basis that an equitable charge over the land converts on the sale of the land to an equitable charge over the sale proceeds.[18]

[14]Down Town’s Submissions in Support of Final Orders, 20 December 2019 (Down Town Submissions), [2]; see also Order of Elliott J made 22 February 2018 and Order of Digby J made 13 November 2018 in the First Mortgagee Proceeding (S CI 2017 4334).

[15]Down Town Submissions, [2].

[16]Re S&D International (In Liq) (R & M App) [2009] VSC 225, [159].

[17]Down Town Submissions, [3].

[18]Down Town Submissions, [3]; see also Re S&D International (In Liq) (R & M App), [2009] VSC 225, [115] and [160] and Melbourne Property Group Pty Ltd v SC Australia Pty Ltd & Ors [2013] VSC 701, [57].

  1. In these proceedings the Court has found in favour of Down Town that the Gulf Country Loan Agreement between Gulf Country and the Sevdalis Entities created an equitable charge over the relevant secured properties, including the Yan Yean Road property,  in favour of Gulf Country, which equitable interest was validly assigned to Down Town.[19]  Further, the Court has also found that Down Town was entitled to be paid outstanding principal and interest at the rate provided in the Gulf Country Loan Agreement, which debt (at the time of the relevant Down Town submission) stands at $2,540,766.99, less $1,250,000 previously paid out of the Funds in Court, leaving a balance of approximately $1,290,766 now payable to Down Town.[20]

    [19]Ibid [4]; Down Town Visuals v Panorama Investments (No 1) [2018] VSC 427, [95].

    [20]Ibid [4].

  1. Down Town also submits that it is entitled to costs on an indemnity basis against Panorama in respect of the claim and costs of and incidental to Down Town Visuals v Panorama Investments (No 1),[21] where Panorama failed on every issue, including that Panorama was entitled to costs on a standard basis only.[22]  Additionally, Down Town observes that Panorama was also unsuccessful in its claim that there should be an award to it of interest on costs.[23]  

    [21][2018] VSC 427.

    [22]Down Town Submissions, [5]; Down Town Visuals v Panorama Investments (No 1) [2018] VSC 427, at [97].

    [23]Ibid [5]; Down Town Visuals v Panorama Investments (No 1) [2018] VSC 427, at [52]: In Down Town Visuals v Panorama Investments (No 3) [2018] VSC 691 Panorama sought penalty interest on its judgment for costs to be paid out of the settlement proceeds. The Court was unpersuaded (at [25]-[28]) and also ruled against Panorama’s claim for penalty interest on costs (at [29]).

  1. In its minute of Proposed Order, Down Town seeks costs on an indemnity basis against Panorama in respect of the Possession Proceeding (S CI 2017 3283), the Down Town Proceeding (S CI 2017 3990) and the First Mortgagee Proceeding (S CI 2017 4334).[24]  Down Town seeks to support its claim for an indemnity costs order on the basis of the comprehensiveness of Panorama’s failures referred to above in Down Town Visuals v Panorama Investments (No 1)[25] and Panorama’s continued claims of priority of recovery of its costs and an entitlement to priority to Funds in Court, notwithstanding that Panorama’s costs after January 2018 were not in the nature of enforcement costs.

    [24]Ibid [6]; Annexure A to Down Town Submissions, [5].

    [25][2018] VSC 427.

  1. Down Town further submits that Panorama is, in any event, only entitled to costs up until the realisation of its security upon settlement of the Yan Yean Road property[26] in about January 2018, and that Panorama’s non-enforcement costs are not claimable by Panorama from the Funds in Court and should also be subordinate, in order of priority, to Down Town’s claim in respect of its validated charge including Down Town’s enforcement costs.[27] 

    [26]Down Town Submissions, [7].

    [27]Ibid [8].

  1. Further, Down Town submits:

(a)   in these circumstances Panorama’s attempts to enforce a claim for alleged enforcement costs after the date of settlement of the Yan Yean Road property had no reasonable prospects of success, in particular at trial on issues 2, 3 and 4 of the ‘Agreed List of Issues’;

(b) Panorama’s costs and expenses were held to be assessed on a party-party basis, and not an indemnity basis as sought by it,[28] and its costs of fees payable to MacKinnon Jacobs Horton & Irving Pty Ltd were not an ‘enforcement expense’ recoverable from the Funds in Court;[29]

(c)   the costs of the defence of the Proceedings by Panorama do not give rise to a claim on Funds in Court in respect of Panorama contesting its costs entitlement where such costs are not recoverable;[30]

(d)  the Court has found that Panorama’s entitlement to contractual interest merged upon judgment such that Panorama’s entitlement to interest was limited to a statutory entitlement to interest under the Supreme Court Act 1986 (Vic) from the date of determination of its costs.[31]

[28]Whilst His Honour held that Panorama was entitled to be paid a sum from the Settlement Proceeds calculated by reference to the amount of the judgment debt, at 2 March 2017, together with interest calculated by reference to the Default Mortgage rate under the Loan Agreement, (in the amount of $16,588.67 (CB-17) (See Order of Digby J made 13 November 2018, [2(a)] in the First Mortgagee Proceeding (S CI 2017 4334)) costs were to be assessed on a party-party basis (at [52]).

[29]At [67]: ‘The third party costs sought by Panorama against the Settlement Proceeds fall outside the scope of chargeable enforcement costs. By prosecuting its former solicitors, Panorama sought a remedy personal to it to preserve its commercial position in relation to the relevant loan and the relevant mortgage.’

[30]Down Town Submissions, [7].

[31]Ibid [7].

  1. In these circumstances, Down Town also seeks orders that to the extent that any amount of the $500,000 enforcement costs already paid to Panorama from Funds in Court includes non-enforcement expenses, as determined by the Costs Court, or are otherwise not moneys secured by its registered mortgage, Panorama should be required to pay such amount back into Court.[32]

    [32]Ibid [8]; Annexure A to Down Town Submissions, [4].

Submissions of Panorama

  1. Panorama in substance submits that it has a continuing entitlement to costs in respect of the enforcement of its interests as registered mortgagee and pursuant to the Loan Agreement between it and the Sevdalis Entities and, in relation thereto, is entitled to be paid out of Funds in Court.  Panorama also submits that such costs are to be paid in priority to any further entitlements of Down Town. 

  1. In support of its position Panorama submits that:

(a)   Panorama has and will continue to incur loss by way of costs by reason of the defaults which are secured by its registered second mortgages;[33]

[33]Panorama Submissions, 24 January 2020 (Panorama Submissions), [12] and [15].

(b)  there was no agreement that Panorama’s entitlement to enforcement costs be limited to the $500,000 previously paid to it[34] and both Down Town and the Court have previously acknowledged that, absent agreement as between the parties and subject to the Court answering the ‘Agreed List of Issues’ (which would provide guidance to the Costs Court), Panorama’s further costs would need to be assessed by the Costs Court and paid in priority to the other claimants, in accordance with s 77(3) of the TLA and Panorama’s position as former registered mortgagee in possession of the Yan Yean Road property;[35]

[34]Panorama Submissions, [4]; Quarrell Affidavit, [42]-[43] and Exhibit ‘LAQ-7’.

[35]Panorama Submissions, [4].

(c) upon settlement of the sale of the Yan Yean Road property, Panorama became trustee pursuant to s 77(3) of the TLA, and the Funds in Court represent trust property for which Panorama is (or was) trustee and Down Town is a beneficiary. Panorama, as trustee, is thus entitled to the trust property in satisfaction of its continuing right of indemnity in priority to the claim of any beneficiary;

(d)  the Court has accepted Down Town’s equitable interest in the Yan Yean Road property and, subject to proof and the satisfaction of the Court, Down Town will be entitled to its enforcement costs to be paid from Funds in Court, however this entitlement is subject to Panorama’s priority;[36]

[36]Ibid [7].

(e)   insofar as Down Town submits that Panorama was only entitled to costs up to the date of realisation of its registered mortgagee interest upon settlement, no such issue was raised by Down Town in relation, or in relation to, the ‘Agreed List of Issues’ in Elliott J’s order of 22 February 2018.[37]  Nor was Panorama’s priority interest put in issue at that time;[38]

[37]Ibid [10].

[38]Quarrell Affidavit, [55].

(f)    consistent with the approach adopted by Down Town earlier in the Proceedings, as referred to in sub-paragraph (d) above, at the trial of the ‘Agreed List of Issues’, save for the costs of MacKinnon Jacobs Horton & Irving Pty Ltd which were found to be non-enforcement expenses, it was impliedly accepted by Down Town that the ‘other’ costs were covered by Panorama’s registered second mortgages as mortgage expenses.[39]

(g)  Down Town did not actively participate in the prosecution of its interests, including in the Debt Proceeding (S CI 2015 4426), despite being joined as a defendant to the Counterclaim, and only made a claim once the Yan Yean Road property was sold;[40]

(h)  Down Town correctly notes its entitlement to enforcement costs from the Funds in Court pursuant to its own charge, however fails to similarly acknowledge Panorama’s corresponding right pursuant to its mortgage or otherwise.[41]

[39]Panorama Submissions, [11]; citing Down Town Visuals v Panorama Investments (No 1) [2018] VSC 427, at [57] as highlighting the distinction: ‘Down Town submits that when incurring costs to defend title to the mortgage, the mortgagee is acting in its own interest and such costs are not chargeable. Down Town submits that Panorama’s third party claim against the solicitors was not in defence of its own mortgage, but amounted to the pursuit of a personal remedy in an attempt to preserve Panorama’s commercial position in the event that the Loan Agreement mortgage documents were ineffective. Mr Colbran QC described this exercise as ‘extraneous’ to the Loan Agreement or the securities.’ (footnotes omitted).

[40]Ibid [5] and [20(a)]; Quarrell Affidavit, [9]-[10].

[41]Ibid [16].

  1. Panorama submits that the primary enquiry of the Court ought to be whether, in placing the four issues before the Court in the ‘Agreed List of Issues’, Panorama was acting in such a manner that it ought to be disentitled to its costs in relation to the hearing and determination of those issues,[42] and that the answer to such enquiry is clearly ‘no’ in circumstances where:

    [42]Ibid [17].

(a)the settling of an Agreed List of Issues was initially proposed by Senior Counsel for Panorama on 8 December 2017,[43] as the most sensible and economical course;

(b)the Agreed List of Issues was agreed by all parties (including Down Town) and the Court as an efficient means to resolve all outstanding issues;[44]

(c)the issues that had been raised by Panorama were relatively narrow and discrete;

(d)Panorama is, or was, formally acting as a trustee with respect to the sale of the Yan Yean Road property under s 77(3) of the TLA and had previously sought judicial advice in relation to the entitlement of N.B. Services, reflected in issue 1 of the Agreed List of Issues.[45]  This was entirely appropriate.  The fact that N.B. Services, which was the former first registered mortgagee, could not substantiate its claimed $1.625 million, benefited all legitimate creditors;

(e)the remaining issues submitted by Panorama, issues 2, 3 and 4, involved discreet and generally technical issues in respect of which it was entirely appropriate for Panorama, as mortgagee and trustee, to seek judicial determination, and the fact that Panorama was unsuccessful in relation to these issues does not make its submission of them for determination unreasonable so as to disentitle it to costs;[46]

(f)the majority of the dispute in this matter was between Native Bond and Down Town.[47]

[43]Ibid [18(a)]; Quarrell Affidavit, [28].

[44]Ibid [18(b)]; Quarrell Affidavit, [34] and Exhibit ‘LAQ-5’.

[45]Ibid [18(d)]; Quarrell Affidavit, [24]–[26].

[46]Ibid [19].

[47]Ibid [18(f)]; Quarrell Affidavit, [38]–[40] and Exhibit ‘LAQ-6’.

  1. Panorama further submits that its actions in commencing and maintaining the Proceedings prevented the unlawful diversion of the Yan Yean Road property by the Bankrupt, the Sevdalis Entities, and their proxies, and was for the benefit of legitimate creditors.  It submits in these circumstances Down Town has been a substantial beneficiary of the actions of Panorama.

  1. Panorama is critical of Down Town’s conduct in the Proceedings, and says that it acted unreasonably when it:  refused to release any funds from the sale of the Yan Yean Road property on account of legal fees to Panorama at the hearing on 8 December 2017;[48] refused to attend mediation as ordered by the Court on 13 November 2018 which was sought to be convened by Panorama;[49] and did not bring a claim for costs against Panorama for approximately a year and a half following judgment in Down Town Visuals v Panorama Investments (No 1).[50]  Panorama is also critical of Down Town seeking indemnity costs against it for the Proceedings where it submits Down Town was not a party to the Possession Proceeding (S CI 2017 3283) and the First Mortgagee Proceeding (S CI 2017 4334).[51]

    [48]Ibid [20(b)]; Quarrell Affidavit, [33] and Exhibit ‘LAQ-10’.

    [49]Ibid [20(c)]; Quarrell Affidavit, [48].

    [50][2018] VSC 427; Panorama Submissions, [20(d)]; Quarrell Affidavit, [49].

    [51]Panorama Submissions, [8].

Reply Submissions of Down Town

  1. Down Town in response:

(a)   denies that it seeks to be paid for ‘all of its costs in priority to Panorama’ and submits that Panorama is seeking to extend its statutory priority to cover all of its costs by including them under the umbrella of enforcement costs by reference to a ‘continuing’ right to costs.[52]  Down Town submits that in this way Panorama conflates the issues of its alleged entitlement to costs generally with an entitlement to enforcement costs secured by its mortgage;[53]

[52]Down Town’s Reply Submissions, 21 February 2019 (Down Town Reply Submissions), [2].

[53]Down Town Reply Submissions, [2].

(b) submits that Panorama is in effect asking the Court to ignore s 77(3) of the TLA requiring any balance after the payment of the secured sums (including enforcement costs) to be payable to the mortgagor by seeking to claim non-enforcement expenses from the Funds in Court;[54]

[54]Ibid [8].

(c)   submits that its entitlement to judgment in sum of $2,540,767 was determined in Down Town Visuals v Panorama Investments (No 1)[55] in which it was held that Down Town had a valid claim to the fund, and further it was held that:

[55][2018] VSC 427.

…the Deed of Assignment provides for an absolute and unconditional assignment by Gulf Country to Down Town of all Gulf Country's beneficial and legal interest in the Loan Agreement. Accordingly. Down Town has been assigned Gulf Country's 8% interest entitlement on the loan amount that was payable by Native Bond, Sevdalis Co and Sevdalis. Down Town's entitlement to the Settlement Proceeds should be calculated accordingly;[56]

(d)  denies, as submitted by Panorama, that it has impliedly accepted that Panorama’s other costs were covered by its mortgage as mortgage expenses;[57]

(e)   submits that Panorama has received $500,000 without investigation as to the actual quantum of its legitimate enforcement costs, and has failed to demonstrate the quantum of costs secured by its mortgage.  Down Town submits that, contrary to what is asserted by Panorama, cl 4(c) of the Loan Agreement similarly confines Panorama’s entitlement to enforcement costs only.[58]  Down Town submits that the question of quantum of costs secured by both Panorama’s registered second mortgages and Down Town’s charge can only be answered by referral to the Costs Court for hearing and determination.[59]

[56]Down Town Reply Submissions, [3].

[57]Ibid [9].

[58]Ibid [13].

[59]Ibid [7].

  1. Down Town concedes it was not formally joined to the Possession Proceeding (S CI 2017 3283) and the First Mortgagee Proceeding (S CI 2017 4334) however submits that the Proceedings were consolidated and that Elliott J made orders in the Proceedings effectively treating Down Town as a party to the Proceedings to which it has not been joined.[60]  Down Town also denies that it refused to attend mediation, and submits that Panorama itself did not press for mediation.

    [60]Ibid [6].

  1. Down Town submits further that in an action to determine priorities, costs follow the mortgages.  Down Town acknowledges however that the Court retains a discretion and can order Panorama pay the costs of Down Town particularly in circumstances where Panorama had notice of Down Town’s prior equitable claim, as a result of Down Town having lodged a caveat on the title to the Yan Yean Road property prior to the registration of Panorama’s interest under its second mortgages.[61]

    [61]Ibid [15]; Down Town lodged caveats over the Yan Yean Road property on 12 April 2016 (Down Town Statement of Claim, [12], Quarrell Affidavit, Exhibit ‘LAQ-2’); Panorama advanced the Loan Agreement sum in January 2013 (Panorama Statement of Claim, [15], Quarrell Affidavit Exhibit ‘LAQ-1’) and registered its second mortgages on 24 and 29 September 2016.

Considerations

Issues to be determined concerning orders sought by the active parties

Costs sought by Panorama

  1. Panorama contends that the sole question for the Court is whether, by proposing and pursuing four issues which formed part of the parties’ Agreed List of Issues, Panorama has acted in a manner disentitling it to its costs in relation to the hearing and determination of those issues.  Panorama contends this is not the position.[62]

    [62]Panorama Submissions, [17].

  1. Panorama’s sole question referred to above is posed in a context in which Panorama submits that, as a matter of general principle, a mortgagee in a suit for redemption or foreclosure is ordinarily entitled to its general costs, unless those costs are forfeited by some improper defence or misconduct on the part of the mortgagee.  Panorama submits that those general costs encompass the mortgagee’s costs properly incurred which are incidental to a suit for foreclosure or redemption.[63]

    [63]Cotterell v Stratton (1872) 8 Ch App 295 at 302; Panorama Submissions, 24 January 2020, [13].

  1. Panorama submits that it is entitled to all of its costs as enforcement expenses of ‘the mortgage’ pursuant to the terms of the Loan Agreement dated 17 January 2013 secured by its registered second mortgages,[64] in particular cl 4(c) of the Loan Agreement.  The relevant part of cl 4(c) of the Loan Agreement provides:

    [64]Plaintiff’s Statement of Claim, [13]-[22]; Quarrell Affidavit, Exhibit ‘LAQ-1’; Affidavit of Salim Nahoum, 21 March 2015, Exhibit ‘SN-10’.

Costs on Default

The borrower shall be responsible for any and all legal costs, enforcement expenses, fees, charges and other costs including but not limited to any reasonable costs for the lender’s time where there is a default by the borrower of the terms and conditions of this letter of offer and/or any security.[65]

[65]Affidavit of Salim Nahoum, 21 March 2015, Exhibit ‘SN-8’, page 4 cl 4(c); Panorama’s Submissions, 24 January 2020, [14]; Memorandum of Common Provisions Affidavit of Salim Nahoum, 8 March 2018, Exhibit ‘SN-6’; Down Town Visuals v Panorama Investments (No 1) [2018] VSC 427, [59]-[74].

  1. Ms Quarrell also deposes that on 22 February 2018 no party submitted that Panorama’s entitlement to costs of enforcing its mortgages were limited to the costs of enforcement of Panorama’s registered second mortgages prior to settlement of the Yan Yean Road property on 31 January 2018.[66]  Quarrell also deposes that on an occasion during the course of a Court hearing on 9 April 2018, Panorama asserted that it had priority in relation to the Funds in Court and that position was not contradicted.[67]  I do not consider that background matters of this nature bear in any material way upon the issues to be decided; they add no more than context as put.

    [66]          Quarrell Affidavit, [37].

    [67]Ibid [56].

  1. Here in relation to its relevant reasonable enforcement costs Down Town accepts that Panorama is both entitled to recovery from Funds in Court and is entitled in priority to Down Town’s entitlements secured by Down Town’s equitable charge, but not in relation to costs incurred by Panorama after January 2018 because by then Panorama had effected enforcement and recovery of all sums owing to it from the settlement sum received for the sale of the Yan Yean Road property. 

  1. Down Town concedes that in relation to priority of recovery against any security ‘the costs follow the mortgages’ and that Down Town’s equitable charge ranks behind Panorama’s registered second mortgages.[68]  However, Down Town also argues that the Court retains a discretion as to costs and that here that discretion should be exercised in favour of Down Town because Panorama had notice of the equitable charge Down Town relies upon as a result of the caveat lodged on 21 April 2016 by Down Town, prior to Panorama registering its second mortgages on 24 and 29 September 2016.[69]  Ultimately, for the reasons outlined below, this potential issue concerning notice is rendered unnecessary to decide.

    [68]Down Town Submissions, [3].

    [69]Panorama Statement of Claim in the Possession Proceeding (S CI 2017 3283), [20] and [21]; Down Town Statement of Claim in the Down Town Proceeding (S CI 2017 3990, [12] and [19]; Fisher & Lightwood’s Law of Mortgage, Tyler, Young & Croft, 2nd Ed, Butterworths 2005 (40.5).

  1. However, it is to be noted that, notwithstanding Panorama’s general contentions,[70] the orders which Panorama seeks (addressed individually below) are to extend and continue its entitlement to costs in relation to a number of specific identified existing costs orders, including Panorama’s costs of the Debt Proceeding (S CI 2015 4426)[71] against Native Bond and Summit Tower, pursuant to the Order of 2 March 2017, and its costs in relation to the Counterclaim in the Debt Proceeding (S CI 2015 4426) against Summit Tower, Sevdalis and Native Bond, pursuant to the Order of 6 March 2017 in that proceeding.

    [70]Refer to paragraphs [61]-[65] of these Reasons for Judgment; Panorama’s Submission, 24 January 2020, [12], [14] and [15] and general reference in Quarrell Affidavit to overall costs incurred at [50]-[54].

    [71]Panorama Proposed Order, 1(f); Quarrell Affidavit, [6].

  1. In respect of the Possession Proceeding (S CI 2017 3283) the orders Panorama seeks (Proposed Orders 1(h), (i) and (j)) are also orders seeking to ‘extend and continue’ and certain specific identified costs orders in the Possession Proceeding against the fourth and fifth defendants, NB Services and Champion Investment, respectively.

  1. None of Panorama’s proposed costs orders are directed to the recovery of costs from Down Town and none of the costs orders Panorama seeks to extend and continue and have referred to the Costs Court, were made in or after February 2018 when Down Town became involved in applications and arguments in relation to the ‘Agreed List of Issues’ pursuant to Elliott J’s Orders made 22 February 2018 in relation to claims on the proceeds of sale of the Yan Yean Road property.

  1. Therefore, Panorama seeks:

(a)   no order in relation to any proceeding other than the Debt Proceeding (S CI 2015 4426) and the Possession Proceeding (S CI 2017 3283);

(b)  only to extend and continue those extant costs orders expressly referred to in Panorama’s Proposed Orders;

(c)   to have the costs orders referred to in (b) above referred to the Costs Court for assessment and determination, on a gross cost basis; and

(d)  no cost order against Down Town.

  1. Panorama’s written Submissions of 24 January 2020, read together with Panorama’s Proposed Orders, are essentially defensive submissions arguing that Down Town should not be entitled to the orders it seeks and that Panorama’s extant costs orders should be paid first from Funds in Court in priority to any Down Town entitlements.  Otherwise Panorama’s Submissions only refer generally and vaguely to it continuing to incur costs which are secured by its mortgages and that it is entitled to all of its costs as enforcement expenses.[72]

    [72]Panorama Submissions, [12], [14] and [15].

[147]Reasons for Judgment, [109(a)-(e)], [158(a)-(d)]; [159]-[162].

[148]Reasons for Judgment, [159]-[162].

  1. I reject Panorama’s submission that the substance of the dispute decided in these Reasons for Judgment, was whether or not Panorama ought to have its costs from the Fund in priority to Down Town and that Down Town lost and Panorama won on that issue.  More accurately, Down Town conceded from the outset of these applications that Panorama was entitled to priority pursuant to its registered second mortgage securities, in respect of reasonable enforcement costs and Down Town did not substantially contest Panorama’s entitlement to have the accrued costs orders it sought, assessed and quantified by the Costs  Court.  What Down Town contested was that Panorama was entitled to its costs and priority to the Funds in Court in respect of its costs of litigation after 31 January 2018; Down Town was successful in this regard and Panorama unsuccessful.

  1. I also reject Panorama’s submission that Down Town’s actively pursued claims (save for the issue of priority) which were not resisted by Panorama.  The correct position was that Panorama did resist Down Town’s claim for judgment in the sum of $2,540,766.99 and Down Town’s application for an order that it be paid the sum of $1,290,766.99 and Panorama also resisted Down Town’s claim for costs, including Down Town’s claim for indemnity cost recovery in the Possession Proceeding (S CI 2017 3283), the Down Town Proceeding (S CI 2017 3990) and the First Mortgagee Proceeding (S CI 2017 4334).

  1. Finally, I refuse Panorama’s inadequately justified or explained post judgment application by email seeking leave to be further heard in relation to [4] of the above orders (the order that Panorama pay Down Town’s costs on an indemnity basis, in respect of the Possession Proceeding (S CI 2017 3283), the Down Town Proceeding (S CI 2017 3990) and the First Mortgagee Proceeding (S CI 2017 4334)), which application  is resisted by Down Town.

  1. Leave to Panorama to make further submissions in relation to costs in respect of the three Proceedings referred to in the last preceding paragraph is refused because the issue of those costs, including Down Town’s specific application for its costs of the three said Proceedings on an indemnity basis, has been notified and alive in the applications since the outset[149] and has been the subject of the parties’ written submissions, including Panorama’s written submission dated 24 January 2020 at [8] and following.  I add that it is manifest that there has been both ample notice of these costs issues and more than enough time for Panorama to address them, as it purported to do in its earlier written submissions.

    [149]Down Town’s proposed final orders and supporting submissions of 20 December 2019.


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Down Town Visuals v Panorama Investments [2018] VSC 427
Down Town Visuals v Panorama Investments (No 2) [2018] VSC 584
Down Town Visuals v Panorama Investments (No 3) [2018] VSC 691