Guneser v Dolas (No 2)
[2019] VCC 895
•26 June 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-17-02754
| GENCO GUNESER | Plaintiff |
| v | |
| GULTEKIN DOLAS | Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 5, 7, 8 November 2018, 12, 13, 14 February, 4, 5 March, 2 April 2019 | |
DATE OF JUDGMENT: | 26 June 2019 | |
CASE MAY BE CITED AS: | Guneser v Dolas (No 2) | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 895 | |
REASONS FOR JUDGMENT
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Subject: Contract; Joint venture agreement
Catchwords: Joint venture agreement; termination; whether plaintiff precluded from relying on termination clause; quantum of plaintiff’s entitlement based on valuation by court appointed expert; terms on which plaintiff’s mortgage should be discharged; basis of assessment of costs.
Legislation Cited: Civil Procedure Act 2010; Penalty Interest Rates Act 1983; Transfer of Land Act 1958; County Court Act 1958
Cases Cited:Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; Cachia v Hanes (1994) 179 CLR 403.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | In person | |
| For the Defendant | Mr P Cadman | Atlas Legal |
HIS HONOUR:
Background
1 On 2 April 2019, I published a reserved judgment in this matter ([2019] VCC 370). I set out the background facts and the circumstances which led these parties into a Joint Venture Agreement which ultimately broke down. I determined that, in the circumstances, the plaintiff, Mr Guneser, was entitled to relief under clause 27 of the Joint Venture Agreement, which I set out at paragraph 23 of the judgment.
2 The matter was listed for further argument and the matter came before the court again on 1 May 2019.
3 The question before the court then was what orders should be made to give effect to the court’s judgment of 2 April.
4 Clause 27 of the Joint Venture Agreement provided a mechanism for the determination of the parties’ entitlements and obligations to one another. That mechanism had not been carried into effect. At the hearing on 1 May, it was clear that the parties could not, and would not, agree upon a valuer and neither side wished to approach the President of the Real Estate Institute of Victoria (“REIV”) to have him nominate a valuer for the purposes of the clause. Mr Guneser sought to have the court appoint a special referee to determine this question.
5 Mr Cadman, counsel for the defendant, advocated the appointment of a valuer as a court-appointed expert pursuant to s65M of the Civil Procedure Act 2010 to which Mr Guneser, via his solicitor, Mr Helman, eventually agreed.
6 The effect of the hearing before the court on 1 May, in my opinion, was that, as a matter of contract, the parties modified the operation of clause 27 so that the valuation for which it provided was to be made by the court-appointed expert who was Ms Arlene Southworth of Opteon Property Group Pty Ltd, which provides valuation services to the local municipality, Moreland City Council in whose municipal district the joint venture land is situated. Her valuation made, as at 20 June 2017, was provided on 23 May 2019 valuing the property, as at 20 June 2017, in the sum of $1,100,000.
7 Following the provision of Ms Southworth’s valuation, it was contemplated that there should be a further hearing before the court. Mr Guneser, by then representing himself, however, contended that the matter should be disposed of with the parties making written submissions with no further appearance before the court required. This proved agreeable to the defendant.
8 The parties have now made their written submissions and I now provide the court’s final determination incorporating by reference the background and facts found in the principal judgment and in light of the further submissions.
Basic relief
9 There is no dispute that Mr Guneser is entitled to be repaid $55,000 plus statutory interest under the Penalty Interest Rates Act 1983 from the date of issue of this proceeding until the entry of judgment calculated at $345,551.37.
10 Further, the application of the clause 27 formula operates as follows:
· Value of property as at 20 January 2017 termination of joint venture - $1.1 million.
· Original agreed value -$635,000 = $465,000 ÷ 2 = $232,500.
11 In addition, there should be statutory interest under the Penalty Interest Rates Act upon that sum from the date of issue of the proceeding until the entry of judgment.
12 There are, however, other items of relief which remain in dispute.
13 Mr Guneser contends that the property at 75 Station Road, Glenroy should be sold to realise his entitlements, and that I should give directions for the conduct of an auction or the engagement of an estate agent. The plaintiff wishes to be authorised to engage a legal practitioner to draw the terms of a sale contract and that a reserve price of $1 million be nominated.
14 Mr Guneser also seeks a direction for the nominated legal practitioner to pay the proceeds of sale up to the limit of Mr Guneser’s entitlement into a bank account in his name held by the Commonwealth Bank of Australia.
15 None of this relief was included in the original prayer for relief in Mr Guneser’s Statement of Claim. Without exploring how a power of sale could properly be exercised by the court at Mr Guneser’s suit, the fact that none has been pleaded and that this was not gone into at trial is sufficient to render it inappropriate to accede to these contentions by Mr Guneser.
16 The solicitors for Mr Dolas sought an order “the plaintiff provide a completed discharge of mortgage in respect of mortgage number AL464492C on the Certificate of Title numbered Volume 2618 Folio 466 [viz the joint venture land] within 30 days of this order”.
17 The text of that mortgage appears, as I understand it, at Court Book 327. The instrument itself is a single page document with the detailed terms and conditions appearing in a Memorandum of Common Provisions AA689 lodged by the Law Institute of Victoria with the Registrar of Titles pursuant to s91A of the Transfer of Land Act 1958.
18 The text of that Memorandum of Common Provisions was handed up in the course of the hearing by Mr Helman on behalf of Mr Guneser.
19 The difficulty with the mortgage is that it appears to lack a schedule, which seems to be contemplated as being part of the mortgage instrument. Crucial details are identifiable only by reference to the schedule. The evidence establishes that Mr Guneser obtained this mortgage to secure Mr Dolas’ obligations to him. This is provided for in clause 25 of the Joint Venture Agreement quoted at [22] of the principal judgment. In any event, the definition of the expression “the monies hereby secured” in clause 31 of the memorandum, extends to all monies owing by Mr Dolas to Mr Guneser on any account whatsoever. An order for discharge of the mortgage as sought by Mr Dolas would be a piece of equitable specific relief. The maxim “he who seeks equity must do equity” would therefore apply (Meagher Gummow and Lehane’s Equity Doctrines and Remedies (4th ed. 2002) [3.110] et seq.
20 In those circumstances, it would be inappropriate to create an unconditional obligation on the plaintiff to discharge the mortgage which he holds without his having been paid the amounts owing to him and ordered to be paid upon his Statement of Claim.
21 These amounts will include the face value of the judgment in his favour. On and from the entry of judgment for these amounts, they will bear interest at the rate from time to time prescribed under the Penalty Interest Rates Act (see County Court Act 1958, s73(4)).
22 Mr Guneser contends that aside from the monies owing under clause 27 of the Joint Venture Agreement and interest thereon, his mortgage secures the costs of the proceeding. By virtue of clause 11 of the Memorandum of Common Provisions, the mortgage requires Mr Dolas to pay Mr Guneser, and therefore secures:
“All costs … and other monies –
…
(c) of and incidental to –
…
(ii)any proceedings in any court or tribunal in which the mortgagee is involved to protect any such right, power, authority or remedy [under the mortgage].”
23 This logic would require that Mr Guneser should not be obliged to discharge his mortgage until he is paid the costs of this proceeding.
24 Mr Guneser incorporated, by reference, a submission as to costs which he handed up on 24 April 2019, which were said to have been prepared “in consulting with barrister Daniel Epstein”. These costs, which included some $37,681.87, incurred in extending the planning permit for the subject property at 75 Station Road, totalled some $307,176.91.
25 The amount outlaid for costs at VCAT cannot, on any basis, be regarded as costs of this proceeding nor, in my view, can they be regarded as costs relative to the mortgage or in defending or prosecuting any right under the mortgage. They should be excluded.
Costs
26 Mr Guneser, as plaintiff, sought detailed costs orders in his favour. The solicitors for Mr Dolas, however, contended that there should be no order as to costs, and that each party should bear his own costs.
27 After the joint venture relationship had become contentious, but before this proceeding was commenced, solicitors Danaher Legal, acting for Mr Guneser, wrote a letter dated 2 May 2017 to Mr Dolas’ solicitor, Mr Sherriff, headed “Without Prejudice, Save as to Costs”.
28 This letter referred to earlier correspondence and contended that Mr Guneser had complied with all his obligations under the Joint Venture Agreement as varied and had “even exceeded initial expectations”. The letter conceded, however, that the relationship between the parties had “now deteriorated as a result of [Mr Dolas’] failure to comply with the Agreements”. The letter said that if Mr Dolas were seeking to terminate the agreements, Mr Guneser was agreeable to this, and he would accept payment of $320,000 within 14 days, together with an indemnity.
29 On the basis of this letter, Mr Guneser contended that any costs awarded in his favour should be “on an indemnity basis”. He referred to Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435. Mr Dolas’ solicitor was critical as to the completeness of this proposed offer of settlement. He said the offer does not explain whether it is inclusive or exclusive of costs and did not explain the consequences of termination. Nor did it deal with the issue of the $55,000.
30 Given that no proceeding had yet been issued, there would have been no costs, at least of the litigious type, claimable between the parties. Therefore, the omission from the letter of 2 May 2017 sent as a Calderbank letter is not material.
31 The typical operation of a Calderbank letter, so as to create an entitlement on the part of the sender to indemnity costs, is where the recipient of the Calderbank offer rejects it and proceeds to trial obtaining a less favourable result than the offer which the recipient rejected. Here, the letter is directed solely to the issue of the joint venture and does not seem to touch on the personal loan issue at all. On the joint venture, Mr Guneser as plaintiff has obtained an order for $232,500, which is substantially less than the $320,000 which he offered to settle for in May 2017. The outcome at trial was more favourable to Mr Dolas than the offer he rejected. Accordingly, there is no occasion for this Calderbank letter to give Mr Guneser an entitlement to indemnity costs.
32 In my view, Mr Guneser must be viewed as the victor in this proceeding. Mr Dolas contended that he was not liable to pay any amounts to Mr Guneser except, perhaps, the personal loan. In fact, the personal loan has not been repaid. In accordance with the principle that costs follow the event, Mr Guneser should have his costs to be assessed upon the standard basis. Mr Guneser’s costs will extend to his outlays, including any payments for the Opteon valuation and the amounts which he has paid to legal practitioners, only. He is not entitled to any costs for his own attendance in court or for documents which he himself has prepared. (Cachia v Hanes (1994) 179 CLR 403)
33 Mr Guneser contended that, aside from the Calderbank letter, he should be entitled to an award of costs on a full indemnity basis because of the delay and “recalcitrance” of the defendant. He referred to provisions in the Civil Procedure Act. Many of those criticisms were well-made. Some were substantial, others were more trivial. Amongst the more substantial was the observation that he, Mr Guneser, has been required to fund the entirety of the costs of the valuation by the court-appointed expert. Against that must be weighed the following. Mr Cadman, on behalf of Mr Dolas, set out a litany of criticisms of the manner in which Mr Guneser conducted the proceeding. They are as follows:
“(a) Representing that transcription services had been arranged, and seeking payment from Dolas for transcript services, in circumstances where transcription services had not been arranged for either party;
(b) Repeatedly interjecting and arguing with the Court, his own legal representatives, and Dolas’ legal representatives;
(c) Making serious allegations of corruption and deception against his own legal representatives and Dolas’ legal representatives;”
(d) Dismissing his barrister during the trial, dismissing his solicitor during the trial, seeking that obtaining leave that his dismissed solicitor be allowed to act as a Mackenzie friend reappointed as his solicitor on the record, then apparently seeking costs for payments made to his Mackenzie friend;
(e) Obtaining and seeking leave to rely on submissions drawn by various members of counsel, without notice to Dolas, and having represented to the Court and Dolas’ legal representatives that he could not afford representation – including in the context of applying for leave to be represented by a Mackenzie friend.
34 These criticisms in paragraphs (b)–(e) appear, on my observation, to be well-based. The criticism in paragraph (a) appears also to be correct, though some of what is asserted is beyond my personal knowledge since I am not privy to what transpired between counsel (Mr Guneser being represented by Mr Felkel at this stage). The conduct of both parties as described has lengthened the proceeding and rendered it more difficult to determine.
35 In the end, however, I find that Mr Guneser is as much sinning as sinned against. That is, there is at least as much to fault in the manner in which he conducted the proceeding as there is to fault as to Mr Dolas’ conduct of the proceeding. I conclude that, in light of these factors, there is no occasion to make an award of indemnity costs in favour of Mr Guneser to add.
36 The final consideration which might entitle Mr Guneser to costs on a full indemnity basis is the costs covenant in the mortgage. The legal costs referred to are, according to clause 11 of the Memorandum of Common Provisions, to extend, in the case of legal costs, to costs “as between a solicitor and his own client”. This phrase, in my view, equates with the concept of costs on a full indemnity basis. According to E.L.G. Tyler, P.W. Young and C.E. Croft Fisher and Lightwood’s Law of Mortgage (3rd Aust ed) paragraph 40.23 867:
“Where party and party costs have been recovered in such litigation the mortgagee is entitled to add to the debt the sum required to make up costs on the indemnity basis where there is a contractual provision for such: see Gomba Holdings UK Limited v Minories Finance Limited (No 2) [1993] Ch 171; [1992] 4 All ER 588 (CA) …”
37 Whether or not costs on a full indemnity basis would have been awarded to Mr Guneser in this proceeding, had the discharge of mortgage not formed part of its subject matter by virtue of the counterclaim, I need not pause to consider. Since costs on a full indemnity basis are secured by the mortgage, no discharge should be available to Mr Dolas unless he pays them insofar as they relate to the counterclaim. Mr Guneser’s claim refers to the mortgage but does not otherwise rely upon it. He sought no relief under the mortgage nor alleged any breaches of its terms; therefore the costs covenant in the mortgage has no application to Mr Guneser’s claim.
38 It follows from what I have said that it will be necessary for these costs to be assessed by the Costs Court. It would be overwhelmingly in the interests of justice for me to fix the amount of costs so that there would be no further delay and impediment to the parties proceeding to “wrap up” their troubled relationship.
39 If the costs sought by Mr Guneser were relatively straightforward and uncontentious, I would have taken this course. But they are not. They raise issues in the taxation or assessment of costs which are not within the expertise of the judge sitting in the court’s general jurisdiction, but lie within the expertise of the Costs Court, such as the recoverability of fees charged by counsel for advice in circumstances where counsel neither appears before the court nor draws or settles any document which is filed in court. Unless the parties can agree upon a figure for costs (and they have been unable to agree on anything until now, not even the issue of transcript), there seems no escape from a visit to the Costs Court.
40 It will be a matter for the Costs Court to determine whether outlays, such as the fees paid to Mr Stark of counsel for assistance in preparation of submissions which did not lead to an appearance by this gentleman at trial, are properly allowable, unless the parties agree on the quantum of costs outside the confines of a hearing in the Costs Court. Further, since the costs on the counterclaim are to be assessed on a full indemnity basis and the costs of the claim are to be assessed on the standard basis it will be necessary to distinguish between them. The list of costs sought by Mr Guneser’s April memorandum is not elaborated upon. Further information would be necessary to ascertain whether they should be allowed at all and if so on what basis, standard or full indemnity.
41 In accordance with a request by the solicitors for Mr Dolas, the judgment will include an order that, failing provision of a discharge of mortgage by Mr Guneser upon proof that the amounts owing under the mortgage have been paid to him, as explained in these reasons, the registrar of the court will be authorised to execute the discharge in his name and on his behalf.
42 Mr Guneser should, in accordance with normal conveyancing practice, be entitled to discharge costs for the discharge of the mortgage where he himself executes it. I would fix that fee in the sum of $100.
Disposition
43 In any other circumstances, I would invite the parties to agree upon the terms of a minute to give effect to my determination. As it is, however, the parties have shown themselves unable to agree upon even the most basic matters. That being the case, I will, concurrently with these reasons, publish a judgment which will be entered as these reasons are published.
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