KOUPATSIARIS and PEPPER HOME LOANS
[2010] WASAT 146
•7 OCTOBER 2010
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: COMMERCIAL & CIVIL
ACT: CONSUMER CREDIT (WESTERN AUSTRALIA) ACT 1996
CITATION: KOUPATSIARIS and PEPPER HOME LOANS [2010] WASAT 146
MEMBER: MR C RAYMOND (SENIOR MEMBER)
HEARD: DETERMINED ON THE DOCUMENTS
DELIVERED : 7 OCTOBER 2010
FILE NO/S: CC 243 of 2010
BETWEEN: BRENDA KOUPATSIARIS
STEVE KOUPATSIARIS
ApplicantsAND
PEPPER HOME LOANS
Respondent
Catchwords:
Consumer Credit Whether proceedings should be dismissed under s 47 of the State Administrative Tribunal Act 2004 (WA) as being misconceived or lacking in substance Consideration of claim for costs
Legislation:
Consumer Credit (Western Australia) Act 1996 (WA), s 5
Consumer Credit (Western Australia) Code, s 6, s 6(4), s 6(5), s 11(1), s 70(1)
Credit (Commonwealth Powers) (Transitional and Consequential Powers) Act 2010 (WA), s 5(2)
State Administrative Tribunal Act 2004 (WA), s 47, s 47(1), s 87(1)
Result:
Proceedings dismissed
Costs to be awarded to respondent from stated date, direction made to allow costs to be fixed and to determine whether order to be made against applicant or applicant's legal representatives
Category: B
Representation:
Counsel:
Applicants: Mr MB Duncan
Respondent: Mr B Smith
Solicitors:
Applicants: Lyons & Lyons
Respondent: Gadens Lawyers
Case(s) referred to in decision(s):
Ambrus and Churches of Christ Homes & Community Services Incorporated [2006] WASAT 141
General Steel Industries Inc v Commissioner of Railways (NSW) (1964) 112 CLR 125
McLean and Permanent Custodians Ltd [2010] WASAT 127
Park Avenue Nominees Pty Ltd v Boon [2001] NSWSC 700
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
The applicants applied under s 70(1) of the Consumer Credit (Western Australia) Code for orders to reopen a loan contract entered into between the parties, to set aside the contract and consequential relief.
The applicants' statement of issues, facts and contentions, as originally filed, disclosed that all moneys had been advanced to allow investment by the applicants in property pursuant to a joint venture arrangement. The applicants were afforded an opportunity to file a proposed amended statement of issues, facts and contentions, which they did. The respondent objected to the proposed amendment and, consequently, the matter was set down for hearing to determine whether or not the proceedings should be dismissed on the grounds that they were misconceived or without substance.
Although the proposed amendment had the effect that there was an arguable case that some $123,000 of the loan was for personal, domestic or household purposes, it remained obvious that $300,000 was used to refinance an investment carried out by the joint venture. Consequently, the Tribunal concluded that the predominant purpose for which credit was provided was for investment purposes. The result was that the Code did not apply to the transaction and the Tribunal lacked jurisdiction to grant the relief sought.
The Tribunal was critical of the applicants for maintaining the proceedings after being alerted to the jurisdictional issues, and questioned the halfhearted manner in which the applicants' legal representatives had dealt with the challenge to the proposed amended statement of issues, facts and contentions.
The Tribunal determined that, properly advised, the applicants should not have persisted with the proceedings after a directions hearing on 13 May 2010 when they became alive to the jurisdictional issues and that, consequently, it was an appropriate case in which to award costs. However, by reason of the Tribunal's criticism of the conduct of the matter, the Tribunal considered that the applicants' legal representatives should be afforded an opportunity to make submissions addressing why they should not be ordered to pay costs. Orders were made dismissing the proceedings and programming the filing of details of the costs claimed, submissions in opposition thereto and submissions by the applicants' legal representatives on why they should not be ordered to pay the costs.
The application and proposed amended applicants' statement of issues facts and contentions
The applicants apply to the Tribunal, pursuant to s 70(1) of the Consumer Credit (Western Australia) Code (Code), which was given effect to by s 5 of the Consumer Credit (Western Australia) Act 1996 (WA) (CC Act) prior to the repeal of that legislation by the Credit (Commonwealth Powers) (Transitional and Consequential Provisions) Act 2010 C(CP)(TCP) Act which came into operation on 1 July 2010 (Gazette, 30 June 2010, p.3185).
Pursuant to s 5(2) of the C(CP)(TCP) Act, proceedings brought in relation to a provision of the CC Act which, upon s 4 coming into operation, are pending before the State Administrative Tribunal, are to be dealt with under the CC Act, despite the repeal of that Act. These proceedings were commenced on 22 February 2010 and are therefore to be dealt with under the above transitional provisions.
The orders sought by the applicants are for the reopening of a loan contract entered into between the parties, relieving the applicant from payments due there under, setting the contract aside and requiring the respondent to take steps to discharge a mortgage over certain land and that the respondent pay the applicant's costs of the application.
On 8 April 2010, the applicants filed their statement of issues, facts and contentions. Relevant to this determination, the following facts were alleged:
1.In or about 2005 the applicants met Mark Booty, a mortgage broker employed by RAMS at that time. The applicants owned their own home unencumbered and an investment property at that time and wanted advice about finance.
2.Mark Booty convinced the applicants to enter into a joint venture arrangement whereby the parties bought and sold properties together.
3.To this end Mark Booty arranged for the applicants to borrow the sum of $300,000 from RAMS.
…
5.In or about May 2007 Mark Booty advised the applicants that he required funds for the parties' joint venture in the sum of $109,000 to purchase a property.
6.The applicants decided to refinance the loan over their principle [sic] place of residence, being the RAMS home loan in the sum of $300,000 and borrowing [sic] further funds in the sum of $109,000 for investment in the joint venture arrangement with Mark Booty.
7.The applicants were concerned that they could not service the relevant loan but Mark Booty advised them that he would arrange for the loan and take over all the repayments under it as part of the joint venture arrangement and that all they had to do was provide the security, being their principle [sic] place of residence.
…
10.The respondent advanced monies pursuant to a loan agreement in the sum of $423,000 to the applicants, secured by way of mortgage over their principle place of residence.
11.Upon settlement of the relevant loan funds were disbursed as follows:
•$300,000 to discharge the loan to RAMS secured by mortgage over the applicants' principle [sic] place of residence;
•$109,000 advanced to Mark Booty;
•The balance of about $13,000 to cover fees, charges and expenses in relation to the refinance.
At a directions hearing on 13 May 2010, the respondent raised its concern about whether the facts alleged by the applicants founded the Tribunal with jurisdiction to deal with the matter, in that on its face all of the moneys had been advanced for business or investment purposes. The directions hearing was adjourned to 27 May 2010 to enable the applicants' solicitors to take instructions on whether the applicants' statement of issues, facts and contentions required to be amended. The applicants were ordered to file and serve any proposed statement of issues, facts and contentions on or before 25 May 2010. The Tribunal also ordered that it would direct on 27 May 2010 whether or not the application should be referred to a special appointment to determine whether the proceedings should be dismissed under s 47 of the State Administrative Tribunal Act 2004 (WA) (SAT Act) or whether the matter should be programmed to a hearing of a preliminary issue on jurisdiction.
On 27 May 2010 the applicants filed their proposed amended statement of issues, facts and contentions (PASIFC). The following relevant amendments to the facts relied upon are proposed:
5.In or about May 2007 Mark Booty advised the applicants that he required funds
for the parties joint venturein the sum of $109,000 to enable the applicants to pay a ten percent deposit in relation to a property they had purchased using a deposit bond, wherein the bond had expired. The property was a unit the applicants had purchased off the plan two years earlier and was now nearing completion however, the deposit bond expired prior to settlement leaving the applicants in breach of the contract. The applicants intended for this property to be their principle [sic] place of residence ('the Spinnaker's apartment').6.The applicants decided to refinance the loan over their principle [sic] place of residence, being the RAMS home loan in the sum of $300,000 and to borrow
ingfurther funds in the sum of $109,000 being for payment of the 10% deposit to replace the expired deposit bond in the sum of $68,500 and the balance being for a buffer to cover their costs, outgoings, living expenses and the shortfall between their income and expenditure.investment in the joint venture arrangement with Mark Booty.7.The applicants were concerned that they could not service the relevant loan until the Spinnakers apartment was completed but Mark Booty advised them that he would arrange for the loan and take over all the repayments under it from the buffer he would be borrowing and would then adjust this as against
part ofthe joint venture profitsarrangementand that all they had to do was provide the security, being their principle [sic] place of residence.By order made on 14 June 2010, the Tribunal programmed the filing of submissions by the parties and directed that the matter be referred for determination on the documents of whether the proceedings should be dismissed as being misconceived or lacking in substance under s 47 of the State Administrative Tribunal Act 2004 (WA) (SAT Act).
The parties' submissions
The respondent submits as follows:
•The only possible inference that can be drawn from paras 1, 2 and 3 of the PASIFC, which paragraphs remain as originally framed, is that in or about 2005 the applicants borrowed the sum of $300,000 from RAMS for the purpose of real estate investment. That sum was secured against their unencumbered residence and therefore it is certain that no part of that sum was for the purpose of acquisition of that residence.
•Paragraphs 5, 6 and 7 of the PASIFC are vague and beg a number of questions. It is reasonably apparent that para 5 intends to convey the fact that the further borrowing of $109,000 was prompted by the need to fund a deposit for the purchase of real estate.
•Paragraph 6 of the PASIFC is inconsistent with para 5, in that the $109,000 further borrowing was apparently not all required for the deposit and that only $68,500 was required for that purpose and the balance was apparently necessary due to a shortfall between income and expenditure although in para 11, it is stated that the entire $109,000 was paid to the joint venture partner in the real estate investment scheme.
•The statement in para 7, that the applicants could not service the loan until the 'Spinnaker's apartment' was completed, can only mean that on the completion of that apartment the applicants expected to have a further source income to service (not discharge) the loan, presumably by either moving to the apartment and renting out their former residence, or by renting out the apartment. This is a further strong indication of investment purpose, rather than any personal, domestic or household use.
•Whatever the true facts are that lie beneath paras 5, 6 and 7 of the PASIFC, and whatever the purpose of the further borrowing of $109,000 from the respondent, after the refinancing of the undeniable investment portion of $300,000, the sum of $109,000 is not the predominant portion in any event. On any reading, only the provision of credit in the sum of $109,000 could possibly be considered to be for personal, domestic or household use.
•Consequently, on the applicants own PASIFC, the predominant purpose of the provision of credit was the refinancing of an investment loan and the Code therefore does not apply. The proceeding is frivolous, vexatious, misconceived or lacking in merit and should be struck out.
The respondent has further made submissions in support of an award of costs, but that will be addressed later, as the immediate issue for consideration is whether or not the claim itself should be struck out or dismissed.
The applicants' submissions were filed on 5 July 2010, six days after the filing of the respondent's submissions. Pursuant to the directions made by the Tribunal on 14 June 2010, the applicants' submissions were due to be filed only on 12 July 2010. The submissions do not in any way respond to the submissions made on behalf of the respondent.
The applicants' submissions, as prepared by their counsel, Mr Duncan, are so short that they are set out in their entirety.
1.These submissions raise an interesting question which, as far as my researches go, has not previously been determined. It is a nice question: what, within the meaning of the Act, is a "purpose"?
2.There is no determination of whether that question has been decided as an objective or a subjective test.
3.Simply put, the proposition is this: if I own a property and then purchase another with a view, ultimately, to occupy it or retire to it and sell my present home for whatever purposes[,] be they retirement, taxation or simply to provide for my family (given that most of us are going to die in retirement villages, hospitals or the like) is that a purposive domestic purpose?
4.Clearly, arguably, it is.
5.Accordingly, that is an arguable issue which can only be determined by the Tribunal in order for the Tribunal to determine its own jurisdiction (subject to correction on appeal). The matter must, therefore be justiciable before the Tribunal and the Tribunal must have jurisdiction to determine its own jurisdiction.
6.The current pleadings before the Tribunal do not squarely raise that issue and in order to serve the proper administration of justice, the Applicants should be given leave to amend to raise the issues properly and concisely.
Consideration
Section 6 of the Code prescribes that the Code applies to the provision of credit if, relevantly, when the credit contract is entered into, the credit is provided, or intended to be provided, wholly or predominantly for personal, domestic or household purposes. By subsection (5), the predominant purpose for which credit is provided is, relevantly, the purpose for which more than half of the credit is intended to be used.
Under s 11(1) of the Code, in any proceedings in which a party claims that a credit contract, mortgage or guarantee is one to which the Code applies, it is presumed to be such unless the contrary is established.
The issue for determination is whether the material facts asserted by the applicants are such as to displace the presumption that the Code applies. If the Code does not apply, it follows that the Tribunal does not have jurisdiction.
The effect of s 47 of the SAT Act is that the Tribunal, constituted by a legally qualified member, may order that the proceeding be dismissed or struck out and may make any appropriate orders if the Tribunal believes that a proceeding is frivolous, vexatious, misconceived or lacking in substance; is being used for an improper purpose; or is otherwise an abuse of process. The Tribunal is so constituted.
The principles to be applied by the Tribunal in the exercise of the dismissal or strike out power under s 47 are analogous to the principles applied in General Steel Industries Inc v Commissioner of Railways (NSW) (1964) 112 CLR 125; Ambrus and Churches of Christ Homes & Community Services Incorporated [2006] WASAT 141. It must therefore be demonstrated that the proceeding is so obviously untenable that it cannot possibly succeed, or is manifestly groundless, or that it discloses a case which the court is satisfied cannot succeed.
The following facts emerge from the applicants' PASIFC.
1)The applicants entered into a joint venture arrangement with a mortgage broker, Mark Booty, in or about 2005. The purpose of the joint venture was to enable the applicants and Mark Booty to buy and sell property, which can be taken to mean unimproved or improved land.
2)The applicants in about 2005, borrowed $300,000 from a credit provider, RAMS, for the purposes of the joint venture. The loan was secured by the registration of a mortgage over the applicants' home which was then unencumbered. At that stage the applicants also owned another investment property.
3)In about May 2007, Mark Booty advised the applicants that he required $109,000 to enable the applicants to pay a deposit in relation to a property they had purchased using a deposit bond in an amount of $68,500, which had expired. The property was a unit that had been purchased off the plan two years earlier and was nearing completion. The applicants' intention was for this property to be their principal place of residence ('the Spinnaker's apartment').
4)The respondent advanced a total sum of $423,000 to the applicants which, on settlement, was used to discharge the RAMS loan of $300,000, and to pay $109,000 to Mark Booty, with the balance of $13,000 being used to cover refinancing expenses. It should be assumed, in favour of the applicants, that $30,500 of the monies paid to Mark Booty was somehow made available to them to cover their costs, outgoings, living expenses and shortfall between income and expenditure prior to completion, and presumably therefore settlement, of the Spinnaker's apartment.
The proposition advanced by the applicants' counsel in para 3 of the applicants' submissions is not founded in any way on the facts alleged by the applicants. These are facts alleged after careful consideration when the applicants' legal representatives were alerted to the original ASIFC potentially establishing that the Tribunal did not have jurisdiction. It must be emphasised that in order for the Code to apply to the provision of credit, the determination of the purpose for which the credit is provided must be established when the credit contract is entered into between the parties. It is manifestly clear that none of the funds loaned by RAMS was used for the Spinnaker's apartment because a deposit bond was used. Further, as stated by the applicants, those funds were for investment purposes, not for the purchase of a property for personal purposes; namely, for use as their principal place of residence.
On the facts alleged by the applicants, the credit provided by the respondent was to refinance the loan over their principal place of residence, being the RAMS home loan in the sum of $300,000, and to borrow further funds for the deposit in respect of the Spinnaker's apartment, plus their costs, outgoings, living expenses and the shortfall between their income and expenditure.
Whereas the applicants originally alleged that the $109,000 was sought for the parties' joint venture, the proposed amendment makes it at least arguable that this portion of the loan was for personal, domestic or household purposes. While there is no clear allegation that the deposit was to be used for the acquisition of the Spinnaker's apartment for the applicants' personal, rather than investment, purposes, that lack of clarity must operate in favour of the applicants, having regard to the test to be applied to a summary dismissal of the proceeding. If necessary, this aspect of the matter could be properly addressed by further amendment.
The $300,000 loan was doing no more than replacing a previous loan which was unarguably for investment purposes. There is nothing to suggest any change in that regard. The applicants' assertion is that they decided to refinance the loan over their principal place of residence. Presumably, at settlement the balance of the purchase price of the Spinnaker's apartment would have to be made, but those funds could have come from any number of sources, including the sale of the other investment property, or the applicants' then principal place of residence over which the respondent had registered a mortgage to secure the loan. None of that could change the purpose of the loan entered into between the parties, which is the subject of these proceedings.
Counsel for the applicants submits that, as far 'as my researches go', it has not previously been determined whether the 'purpose' of a transaction is to be determined by an objective or subjective test. The Tribunal is left to assume that the applicants held some subjective intention to sell their present home, presumably for the purposes of paying the balance of the purchase price of the Spinnaker's apartment. It is not clear from para 6 of the applicants' submissions whether it is submitted that the PASIFC will provide a factual basis for the determination of the proposition advanced in para 3 thereof, or whether it is suggested that some further leave to amend should be granted. The terms of the Tribunal's order of 14 June 2010 suggest the former, but the absence of allegations in the PASIFC supporting the proposition suggest the latter. If the latter, it is deplorable that no further proposed amended statement of issues, facts and contentions has been filed, or that there has not been at least some clear statement of what it is that the applicants wish to allege. It is necessary, therefore, to consider the factual allegations, as set out in the PASIFC, to assess whether any amendment is capable of curing the criticisms raised by the respondent.
On any basis, the purpose for $300,000 of the total loan was to enable the applicants to maintain whatever investment had derived from the original RAMS loan which was a joint venture investment. It was a refinancing of that transaction. In these circumstances, the proposition raised by the applicants' counsel is of little significance. It is a proposition which might have some relevance to a transaction which was contemplated to be carried out in the future when the Spinnaker's apartment transaction settled, but it has nothing to do with the determination of the purpose of the transaction entered into between the parties, the subject of these proceedings. The proposition might at best reflect an ultimate objective but, in that event, it is the determination of the purpose of an intermediate transaction (the subject of these proceedings) which must be established.
Contrary to the submission by counsel for the applicants, there is a substantial body of law addressing the purpose of credit transactions and the test to be applied in determining that purpose: see the cases cited by his Honour, Justice Chaney, the President of the Tribunal in McLean and Permanent Custodians Ltd [2010] WASAT 127 at [132] and the discussion there following. Justice Chaney concluded that the test adopted in Park Avenue Nominees Pty Ltd v Boon [2001] NSWSC 700 is the correct test to be applied, being an objective test, that the relevant intention will be that which a reasonable person standing in the shoes of a credit provider would have understood to be the predominant purpose for which the credit was provided. While there are divergent views expressed in the authorities concerning whether the purpose is to be assessed from the perspective of the lender or the borrower, the authorities do not suggest a subjective test of what either party may have intended. The test applied has either been, as held by Chaney J, an objective determination of the credit providers understanding of the purpose to which the creditor intended to use the funds, or an approach also having regard to what the money was used for in order to take into consideration the substance of the transaction in the context of its performance. None of the authorities suggest a subjective test based on the state of mind of the borrower, although the debtor's stated intention will usually determine what a reasonable person standing in the shoes of a credit provider would understand the purpose to be.
In any event, taking into account all that the applicants assert about what they decided or intended, leads to the same conclusion. At the time of entering into this loan contract, $300,000 of the total loan of $423,000 was to be used to maintain whatever joint venture investment had derived from the original RAMS loan in that amount.
Section 6(4) of the Code expressly provides that investment by the debtor is not a personal, domestic or household purpose. Consequently, as more than half of the credit provided was intended to be used for investment purposes, that is the predominant purpose of the loan transaction. As the predominant purpose is not for personal, domestic or household purposes, the Code does not apply and the Tribunal lacks jurisdiction to grant the relief sought.
For the above reasons, the application is so obviously untenable that it cannot possibly succeed. It is a claim which is misconceived or lacking in substance within the meaning of s 47(1) of the SAT Act. Further, it is not a claim which, in my view, is capable of being recast into a form which would result in the Code applying to the transaction. In those circumstances, I consider that the appropriate remedy is to dismiss the proceeding.
Costs
The respondent has submitted that this is an appropriate case for costs to be awarded.
Ordinarily, each party should pay their own costs in proceedings before the Tribunal, that being the starting point contemplated by s 87(1) of the SAT Act. However, in this case the applicants were alerted to what appeared to be an obvious jurisdictional difficulty with their claim at the directions hearing on 13 May 2010. The applicants' legal representative sought leave to amend the claim so as to remove the risk that the Code did not apply to the transaction, the subject of these proceedings. That amendment has resulted in a startling change of position, and raises a concern about two possibilities. Either instructions were taken very poorly prior to the commencement of these proceedings, or the applicants have changed their instructions in a way likely to cause embarrassment to them had the matter proceeded to a final hearing. In any event, properly advised, it is surprising that the applicants have endeavoured to maintain the application, rather than acknowledge the jurisdictional difficulty and seek leave to withdraw the proceedings.
The attempt by the applicants to resist dismissal of the proceedings has been halfhearted to say the least. Their submissions consist of short six paragraphs occupying less than half a page and has been based on inadequate research. The submissions lack clarity. There has been no attempt to respond in any meaningful way to the respondent's submissions.
In these circumstances, it is appropriate that costs should be awarded to the respondent in respect of the proceedings subsequent to 13 May 2010. The issue of concern to the Tribunal is whether those costs should be ordered to be paid by the applicants or by the applicants' legal representatives. The applicants' legal representatives should have an opportunity to make submissions as to why costs should not be ordered against their firm. Directions will issue to enable the respondent's solicitors to provide details of the costs claimed, sufficient to enable the Tribunal to fix the costs, to enable the applicants to respond thereto and for their legal representatives to make submissions on why costs should not be ordered against Lyons & Lyons.
Order
For the above reasons, the Tribunal orders as follows:
1.The proceedings are dismissed.
2.On or before 22 October 2010 the respondent's solicitors must file and serve a detailed statement of the costs claimed by them in respect of the proceedings subsequent to the directions hearing held on 13 May 2010, showing the various services for which costs are claimed and the rates at which costs have been charged, sufficient to enable the Tribunal to fix the costs payable.
3.On or before 5 November 2010:
(a)the applicants may file and serve an outline of submissions opposing the amount of costs claimed by the respondent; and
(b)the applicants' legal representatives, Lyons & Lyons, may file and serve any written submissions upon which they wish to rely, addressing why an order that the costs be paid by that firm to the respondent should not be made.
4.Subject to further order of the Tribunal, the finalisation of all issues relating to costs shall be determined on the documents.
I certify that this and the preceding [37] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
MR C RAYMOND, SENIOR MEMBER
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
STREAM: COMMERCIAL & CIVIL
ACT: CONSUMER CREDIT (WESTERN AUSTRALIA) ACT 1996
CITATION: KOUPATSIARIS and PEPPER HOME LOANS [2010] WASAT 146 (S)
MEMBER: MR C RAYMOND (SENIOR MEMBER)
HEARD: DETERMINED ON THE DOCUMENTS
DELIVERED : 7 OCTOBER 2010
SUPPLEMENTARY
DECISION :12 NOVEMBER 2010
FILE NO/S: CC 243 of 2010
BETWEEN: BRENDA KOUPATSIARIS
STEVE KOUPATSIARIS
ApplicantsAND
PEPPER HOME LOANS
Respondent
Catchwords:
Consumer credit - Whether costs should be ordered against legal practitioner - Fixing of costs
Legislation:
Consumer Credit (Western Australia) Code, s 71
State Administrative Tribunal 2004 (WA), s 47
Result:
Costs ordered against applicants
Category: B
Representation:
Counsel:
Applicants: Mr J Lyons
Respondent: Mr B Smith
Solicitors:
Applicants: Lyons & Lyons
Respondent: Gadens Lawyers
Case(s) referred to in decision(s):
J & P Metals Pty Ltd and Shire of Dardanup [2006] WASAT 282
Koupatsiaris and Pepper Home Loans [2010] WASAT 146
McLane and Permanent Custodian's Limited [2010] WASAT 127
REASONS FOR DECISION OF THE TRIBUNAL:
Summary of Tribunal's decision
On 7 October 2010, the Tribunal dismissed proceedings commenced by the applicants under s 71 of the Consumer Credit (Western Australia) Code for orders to reopen a loan contract entered into between the parties, to set aside the contract and consequent relief. In doing so, the Tribunal concluded that the respondent's application for costs should be granted, but left for determination whether costs should be awarded against the applicants' legal representatives and the fixing of the quantum of costs.
The applicants' legal representatives were afforded an opportunity to show cause why costs should not be ordered against their firm.
The Tribunal accepted the submissions made by the applicants' legal representatives that it was inappropriate to make an award of costs against the applicants' solicitors, Lyons & Lyons, or the principal of that firm, Mr James Lyons. The submissions emphasised that all of the steps taken of which the Tribunal had been critical occurred during a period when the matter was being conducted by a different firm of solicitors. The Tribunal considered the statement of costs filed and served by the respondent which claimed an amount of $2,320 and fixed the costs to be paid by the applicants, in the sum of $1,290.
The application for costs
On 7 October 2010, the Tribunal issued an order dismissing these proceedings and its reason for that decision are published in Koupatsiaris and Pepper Home Loans [2010] WASAT 146 (substantive decision). In doing so, the Tribunal was critical of the way in which the proceedings had been conducted on behalf of the applicants subsequent to a directions hearing on 13 May 2010. At that directions hearing, the applicants had been alerted to the basis upon which the respondent's legal representatives indicated an intention to challenge the jurisdiction of the Tribunal to grant the relief sought. The Tribunal concluded for the reasons expressed in the substantive decision that costs should be awarded in favour of the respondent in respect of the proceedings subsequent to 13 May 2010 but no order awarding costs was made because the Tribunal was concerned about whether the costs should be awarded against the applicants' legal representatives, rather than against the applicants.
The Tribunal accordingly made directions on 7 October 2010 to afford the applicants' legal representatives an opportunity to show cause why costs should not be awarded against them. Directions were also made for the respondent to file a detailed statement of the costs claimed by it in respect of the proceedings subsequent to the directions hearing held on 13 May 2010, showing the various services for which costs were claimed and the rates at which costs had been charged, sufficient to enable the Tribunal to fix the costs payable. The applicants were also afforded an opportunity to make submissions opposing the quantum of the costs claimed.
On 15 October 2010, the respondent's solicitor's filed a statement of the costs claimed totalling $2,320.
On 2 November 2010, the applicants' legal representatives, Lyons & Lyons, filed a submission dated 3 November 2010 [sic], opposing an award of costs against Mr James Lyons personally. The submissions are filed on the letterhead of Lyons & Lyons which discloses that Mr Lyons is the principal of that firm.
No submissions have been made in relation to the quantum of costs, although the abovementioned submissions acknowledge receipt of 'a bill of costs' from the respondent's legal representatives.
The submissions from Lyons & Lyons and conclusion of the Tribunal
The submissions detail an understanding that this matter was held over pending the determination of what is referred to as a 'test case' concerning the matter of 'Michael Scales v ANZ & Macquarie'. This is taken to be a reference to two separate proceedings in the Tribunal being Michael David Scales and Macquarie Group Limited matter number CC 153 of 2010 and Michael David Scales and ANZ Banking Group Limited matter number CC 155 of 2010. In both of these matters, the Tribunal has reserved its decision on an application to extend the time for compliance with a springing order, which was put in place as a result of noncompliance with orders of the Tribunal. The submission proceeds further to reflect that the substantive decision and order of the Tribunal dismissing the proceedings issued notwithstanding that this matter was being stood over with all other similar matters pending 'the outcome of the McLean and Scales test cases'. The reference to the McLean case is to a number of proceedings which were determined by the President of the Tribunal, Chaney J, in the reported decision of McLean and Permanent Custodian's Limited [2010] WASAT 127 (McLean), being matters number CC 86, CC 87 of 2010, CC 88 of 2010 and CC 89 of 2010.
The above submissions are entirely misconceived, save that it was intended that the McLean and Scales matters were to be determined by the President of the Tribunal in order to establish principles capable of application to particular issues raised in a number of similar matters. But, this particular matter has been programmed quite separately from the other similar matters since the general call over and directions list conducted on 14 June 2010. On that date and in the presence of counsel for the applicants, this matter was programmed for determination on the documents of an application to dismiss the proceedings as being misconceived or lacking in substance under s 47 of the State Administrative Tribunal 2004 (WA).
Subsequent to the publication of the substantive submission, the Tribunal is aware that Mr James Lyons deposed to an affidavit on 20 October 2010 in support of the applications to extend time for compliance with the springing orders made in the Scales matters. By that affidavit, Mr Lyons explains the circumstances in which he took over the conduct of the various proceedings from the applicants' former legal representatives. It is evident that the files were transferred to Mr Lyons in a very poor state and that at least in those matters some orders of the Tribunal were missing from the files. It is to be inferred from the submissions in this matter that Mr Lyons is not in possession of the order made by the Tribunal on 14 June 2010.
The submissions do, however, draw to the Tribunal's attention that all of the steps taken on behalf of the applicants pursuant to the order made on 14 June 2010 carried out by the applicants' previous solicitors and not Mr Lyons. It would therefore obviously be inappropriate to award costs against Mr Lyons and the costs order will be made against the applicants personally.
Fixing the costs claimed
The approach to be taken by the Tribunal in fixing the costs is in accordance with the principles expressed in J & P Metals Pty Ltd and Shire of Dardanup [2006] WASAT 282. Further, guidance is to be provided by the maximum costs permitted under the Legal Practitioners' (State Administrative Tribunal) Determination 2010 (Determination). Although the Determination does not prevent costs in excess of the specified rates per hour being charged pursuant to a written costs agreement, the Determination is a useful guide to what may be regarded as the maximum allowable party and party costs which may be awarded by the Tribunal. Under the Determination, the maximum charge per hour for a junior practitioner admitted for less than five years is $253 inclusive of GST and the maximum rate for a senior practitioner admitted for five years or more is $352 per hour inclusive of GST.
In my view, having regard to the nature of this matter, I consider that the rates to be allowed for a junior practitioner should be $200 per hour inclusive of GST and for a senior practitioner, $300 per hour inclusive of GST.
In reviewing the respondent's statement of costs, I consider that all of the services enumerated and the time charged is reasonable and necessary. Applying the above rates to the time charged results in a reduction of the amount claimed of $2,320 to $1,290 and I accordingly fix costs in that latter amount.
Order
For the above reasons, the Tribunal will issue an order as follows.
1.On or before 17 December 2010, the applicants do pay the respondent's costs of the proceedings subsequent to 13 May 2010 fixed in the sum of $1,290.
I certify that this and the preceding [16] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MR C RAYMOND, SENIOR MEMBER
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