Goldstein v Shyzi Pty Ltd (No 2)

[2017] NSWSC 543

Supreme Court

New South Wales

Medium Neutral Citation:	Goldstein v Shyzi Pty Ltd (No 2) [2017] NSWSC 543
Hearing dates:	On the papers
Date of orders:	04 May 2017
Decision date:	04 May 2017
Jurisdiction:	Equity
Before:	Darke J
Decision:	Orders that the first defendant pay the plaintiff’s costs of the proceedings to date on an indemnity basis
Catchwords:	COSTS – indemnity costs – plaintiff obtained orders that it has rights as secured creditor under mortgage – plaintiff unsuccessful on other issues – where mortgage provides for defendant to pay plaintiff’s costs on a full indemnity basis – whether Court should depart from general rule – whether Court should order indemnity costs in accordance with mortgage provision
Legislation Cited:	Civil Procedure Act 2005 (NSW), s 98 Uniform Civil Procedure Rules 2005 (NSW), r 42.1
Cases Cited:	Goldstein v Shyzi Pty Ltd [2017] NSWSC 398 Kyabram Property Investments Pty Ltd v Murray [2006] NSWSC 54
Category:	Costs
Parties:	Michael Goldstein (Plaintiff) Shyzi Pty Ltd (First Defendant) Australia and New Zealand Banking Group Ltd (Second Defendant)
Representation:	Counsel: Mr A Harding (Plaintiff) Mr B Lloyd (First Defendant) Mr M L Rose (Second Defendant)   Solicitors: Stevens Vuaran Lawyers (Plaintiff) Bartier Perry Solicitors (First Defendant) Dentons Australia Pty Ltd (Second Defendant)
File Number(s):	2016/349685
Publication restriction:	None

Judgment

1. Following a hearing on 5 April 2017, judgment was delivered in this matter on 12 April 2017 (see Goldstein v Shyzi Pty Ltd [2017] NSWSC 398). The Court concluded that the plaintiff had rights as a secured creditor in respect of a property owned by the First Defendant, and that it was open to the plaintiff to proceed to enforce his security against the property. However, the Court also concluded that until the plaintiff had completed enforcement against the property, he was not entitled to proceed against the first defendant personally to recover the outstanding debt.

2. The plaintiff and the first defendant remain in dispute on the question of costs. As agreed between the parties, a direction was made for the parties to provide written submissions on costs. Those submissions were provided on 27 April 2017. As no party suggested that a further oral hearing was necessary, the Court has proceeded to determine the question on the papers.

3. The plaintiff seeks an order that his costs be paid by the first defendant on an indemnity basis. The plaintiff submitted that he was successful on the principal issue between the parties, and that costs should follow the event. The plaintiff further submitted that by reason of cl 21 of the mortgage, which provides for recovery on “a full indemnity basis” of costs incurred in connection with the exercise of powers under the mortgage, the costs should be ordered to be paid on an indemnity basis.

4. The first defendant submitted that the appropriate order for costs is that it pay only half of the plaintiff’s costs. The first defendant submitted that there were two principal claims in the proceedings, being:

1. a claim in debt; and

2. a claim for possession and sale of the property.

5. The first defendant submitted that the plaintiff failed on the first claim, and only had limited success on the second. In relation to the second claim, it was pointed out that the plaintiff did not obtain orders for judicial sale, and that this was because the plaintiff failed to adduce evidence of the value of the property. The first defendant also pointed out that the plaintiff abandoned one part of its case, namely, that the first defendant was liable under the mortgage for certain costs of earlier proceedings.

6. The central issue in the proceedings was whether the plaintiff was a secured creditor of the first defendant entitled to proceed to enforce his security against the property the subject of the security. The plaintiff prevailed on that issue, and ought be regarded as the successful party for the purposes of the application of the general rule, embodied in Uniform Civil Procedure Rules 2005 (NSW) r 42.1, that costs follow the event.

7. I do not think that the factors identified by the first defendant warrant a departure from the general rule. The claim in debt, which the Court found the plaintiff was not yet entitled to pursue personally against the first defendant, was of relatively minor significance. The issue depended upon a point of construction of the Deed of Settlement. The existence and quantum of the debt was not in dispute. The issue did not significantly add to the scope of the evidence adduced, or to the hearing time. The costs issue that was abandoned by the plaintiff similarly did not significantly add to the scope of the evidence or the hearing time.

8. It is true that the plaintiff did not obtain orders for possession or sale. However, it is not correct to simply attribute that to the failure of the plaintiff to adduce evidence of the value of the first defendant’s property. The question whether orders for judicial sale should be made was agreed to be deferred in circumstances which included that the first registered mortgagee (the second defendant) had only recently commenced taking steps to exercise a power of sale over the property. The appropriate course was readily seen to be to proceed with the hearing, confined to the questions concerning the extent to which the plaintiff was entitled to enforce rights against the first defendant.

9. For the above reasons, it is my opinion that it is appropriate that the first defendant pay the plaintiff’s costs of the proceedings to date.

10. The next question is whether those costs should be ordered to be paid on an indemnity basis. In this regard, the plaintiff invokes cl 21 of the mortgage which relevantly provides:

All costs, fees and expenses including legal expenses on a full indemnity basis in connection with the…exercise of the powers of the Mortgagee on default, are payable by the Mortgagor to the Mortgagee on demand.

11. The plaintiff’s costs of these proceedings, which are in the nature of proceedings to enforce rights under the mortgage consequent upon default by the first defendant in repayment of the debt, seem to me to be costs incurred “in connection with” the exercise of the powers of the Mortgagee on default within the meaning of cl 21 of the mortgage. The parties to the mortgage have thereby agreed that such costs are payable to the plaintiff “on a full indemnity basis”.

12. The discretionary power of the Court concerning costs, referred to in s 98 of the Civil Procedure Act 2005 (NSW) is not, of course, ousted by provisions such as this. Nevertheless, the existence of a contractual provision that clearly stipulates that certain costs should be paid on a particular basis is an important factor, and the Court will ordinarily exercise its discretion in a manner consistent with the contractual provision (see, for example, Kyabram Property Investments Pty Ltd v Murray [2006] NSWSC 54 at [17]-[18]).

13. There is no doubt as to the enforceability of the mortgage. I cannot discern any reason to exercise the discretion as to costs otherwise than consistently with cl 21. Accordingly, the Court will order that the first defendant pay the plaintiff’s costs of the proceedings to date on an indemnity basis.

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