Lawnic Pty Ltd v Wilson

[1997] QSC 232

IN THE SUPREME COURT
OF QUEENSLAND

No.10627 of 1997

Brisbane

Before the Hon. Mr Justice Shepherdson

[Lawnic Pty Ltd v Wilson]

IN THE MATTER of the Corporations Law

- and -

IN THE MATTER of Lawnic Pty Ltd
ACN 059 967 994

Applicant

- and -

STANLEY WILSON of 8 Calvin Court,
Currumbin Waters in the State of Queensland

Respondent

CATCHWORDS:                  MORTGAGES - whether or not the mortgagor is liable to pay the mortgagee’s legal costs associated with the discharge of the mortgage prior to its being entitled to obtain a formal release or discharge pursuant to s.269 of the Corporations Law.    

Counsel:Mr L Bowden for the applicants.

Mr P Bickford for the respondent.

Solicitors:Carne & Herd Solicitors town agents for Broadbent & Radich for the applicants.

Short Punch & Greatorix for the respondent.

Hearing date:  11 December 1997

REASONS FOR JUDGMENT - SHEPHERDSON J

Judgment delivered 17/12/1997

This application, issued by the above named applicant Lawnic Pty Ltd as mortgagor against the abovenamed respondent Stanley Wilson as mortgagee has one issue and that is whether or not the applicant is liable to pay the respondent’s legal costs associated with the discharge of the mortgage prior to its being entitled to obtain a formal release or discharge pursuant to s.269 of the Corporations Law.

The amount of the costs claimed is $375.

Before I turn to the facts I now set out s.269 which reads:-

“269.Satisfaction of and release of property from, charges.

(1)Where, with respect to a charge registered under this Division:

(a)the debt or other liability the payment or discharge of which was secured by the charge has been paid or discharged in whole or in part; or

(b)the property charged or part of that property is released from the charge;

the person who was the holder of the charge at the time when the debt or other liability was so paid or discharged or the property or part of the property was released shall, within fourteen days after receipt of a request in writing made by the company on whose property the charge exists, give to the company a memorandum in the prescribed form acknowledging that the debt or other liability has been paid or discharged in whole or in part or that the property or that part of it is no longer subject to the charge, as the case may be.”

The applicant, which is a service company for solicitors named Broadbent & Radich, Lawyers borrowed $35,000 from the respondent who appears to have been one of their clients.  Part of the security was a registered debenture from the applicant to the respondent.  The parties also entered into a deed of loan.

In terms of the contract the loan plus interest was repayable on 23 August 1997.  The applicant sought to pay the mortgage debt one month earlier i.e. on 23 July 1997.

Correspondence ensued between the solicitors for the applicant and the solicitors acting for the respondent.  I should say now that this correspondence shows that at some stage prior to July 1997 the respondent had ceased to be a client of Broadbent & Radich.

On 18 July 1997 the respondent’s solicitors wrote to the applicant c/- Broadbent and Radich.  That letter confirmed instructions from the respondent “that providing all interest and costs are paid to the 23rd July 1997, he will waive the requirement for one month’s interest to be paid at the time of repayment of the advance if it is paid on the 23rd July 1997.”  An account for $375 was enclosed with this letter.  The letter included the following passage:-

“I will require settlement to be effected in my office on the 23rd July 1997 at which time a Form 312 will be provided to you to release the mortgage debenture in this matter.”

(Form 312 is the form prescribed and referred to in s.269)

The applicant’s solicitors claim not to have received this letter but in my view that is not material.  I say that because of a letter dated 22 July 1997 which Broadbent and Radich wrote to the respondent’s solicitors in which the right to “costs of $320 on the release” was challenged.  Before this letter was sent there had been oral conversations between the solicitors’ offices and the applicant’s solicitors obviously knew some $320 for “costs on the release” was involved.  On 22 July 1997 the respondent’s solicitors wrote again to the applicant’s solicitors and they told them the amount required to be paid on 23 July 1997 to avoid the extra month’s interest, was $16,458.33.  Before me the parties have agreed that the amount paid on 23 July was that sum less $375.

Correspondence between the parties made perfectly clear that the respondent would not provide or sign Form 312 unless the full sum of $16,458.33 was paid (see further letter dated 23 July 1997 from respondent’s solicitors to applicant’s solicitors).

The proceedings before me are as between a mortgagor and mortgagee.

Before turning to the provisions of the mortgage documents in the present case I note that “the mortgagee is entitled as of right to the costs properly incurred by him in an action for foreclosure or redemption ...” (p.659 Fisher and Lightwood’s Law of Mortgage (10th edition).

In Elders Trustees and Executor Co Ltd v. Eagle Star Nominees Limited (1986) 4 BPR 9205 McClelland J said (at p.9209):-

“Even in the absence of a contractual stipulation it is a principle of equity that a mortgagor seeking to redeem the mortgaged property otherwise then in exercise of a contractual right to do so, will only be granted relief on condition that he pays all costs, charges and expenses properly incurred by the mortgagee in relation to the mortgaged debt or the mortgaged property, including the costs of litigation properly undertaken by the mortgagee in reference to the mortgage debt or the mortgaged property (see for example National Provincial Bank of England v. Games (1886) 31 Ch D 582; re Wallis (1890) 25 QBD 176).

The principle is discussed at length in Fisher and Lightwood’s Law of Mortgage (9th edition) at 638-46.  Although this principle was developed independently of any contractual provision and thus does not directly govern the construction of such a provision, its application does provide useful guidance on what might be considered “proper” or “improper” expenditure on the part of a mortgagee for the purpose of charging the same on the mortgaged property and supports the criteria of reasonableness and good faith to which I have referred.”

In the case before me the applicant had no contractual right to redeem on the 23rd July 1997.  It was seeking an indulgence from the respondent mortgagee.  The costs in question if properly incurred are added by the mortgagee to the amount due on his security and must be paid as a condition of redeeming (re Fisher and Lightwood’s Law of Mortgage (supra) at p.661 and cases cited including re Wallis; ex parte Lickorish (1890) 25 QBD 176).

I turn now to provisions of the mortgage and the deed of loan made between the parties. By cl.1 of the registered mortgage the applicant covenanted to pay “the principal sum in accordance with the provisions, as the case may be, of this deed or of any other deed or agreement for the time being or from time to time in force between the mortgagor ... and the mortgagee ... and relating to the principal sum or any part thereof ...”  Clause 48 of the mortgage debenture is a definition clause and relevantly reads:-

“The expression “principal sum” shall mean and include:-
.......

(e)the amount of any costs, charges, expenses and liabilities of any kind or description now or hereafter incurred by the mortgagee;

(i)in or about the preparation, execution, registration and stamping of these presents or any document (whether or not under seal and whether a further assurance or otherwise) which may be executed by or on behalf of the mortgagor ... or the mortgagee or any other person in pursuance of the provisions herein contained

(ii)under or in respect of these presents or any such document

(iii)in the exercise or enforcement or attempted exercise or enforcement of any power or remedy under these presents or such document which the mortgagee has or is entitled to for any reason against the mortgagor ... or in respect of the mortgaged premises including (without limitation) the amount of any costs, charges, expenses and liabilities not otherwise mentioned in this paragraph which are incurred by the mortgagee in respect of the mortgaged premises and the amount of any costs, charges, disbursements for legal advice and assistance as to the mortgagee as between solicitor and own client.”

So far as concerns cl.48(e)(i) it seems to me that the document in Form 312 is a document which may be executed by the mortgagee “in pursuance of the provisions herein contained”.  I say that in the light of cl.41 of the mortgage deed which reads:-

“That these presents shall be a continuing security notwithstanding any settlement of account or other matter or thing whatsoever until a final discharge hereof shall have been given to the mortgagor.”

This clause 41 envisages a document of some sort amounting to “a final discharge” being “given” to the mortgagor.  In my view a Form 312 document falls within clause 41. 

For similar reasons I consider that the Form 312 document falls within cl.48(e)(ii).  Again, as an alternative and in addition to my views on sub-cll.(i) and (ii) I consider that the memorandum addressed to the respondent for the costs and outlays totalling $375 represents “the amount of any costs, charges and disbursements for legal advice and assistance to the mortgagee” and falls within sub-cl.48(e)(iii).  In my view that legal advice and assistance was reasonably and properly incurred by the respondent.

The contract between the parties evinced by the mortgage and the deed of loan does not deprive the mortgagee of the benefit of the general rule as to costs to which I have already referred.  Indeed, those documents show “plainly and unambiguously” that such costs are to be paid on a solicitor and client basis.  On this aspect I note that in Jamieson v. Gosigil Pty Ltd (1983) 2 Qd R 117, G N Williams J held that the rule that costs in a mortgage suit should be recovered by the mortgagee on a party and party basis will apply unless there is a contract between the parties “plainly and unambiguously” providing for taxation on some other basis. He also said that the taxation of the mortgagee’s costs should not be on a “niggardly or markedly ungenerous scale” (at p 123).

The law on the mortgagee’s right to costs properly incurred in relation to his mortgage debt has been established for a very long time.  There are many cases on the topic.  This is not the occasion to consider them in detail but I do wish to record the comments of the Lord Chancellor, Lord Eldon in Detillin v. Galel (1802) 7 Ves.Jun. 583 at p 584-5:-

“The owner coming to deliver the estate from that encumbrance he himself put upon it, the person having that pledge is not to be put to expense with regard to that; and so long as he acts reasonably as mortgagee to that extent he ought to be indemnified.”

This statement made almost 200 years is still relevant today and applies to the present case.

In my view, in the present case the application for which the applicant has sought an order that the respondent give it a Form 312 release of charge acknowledging that the debt owing by the applicant to the respondent has been discharged in full must be dismissed.  The orders I make are:-

1. The application is dismissed.

2. The applicant do pay the respondent’s costs of and incidental to the application to be taxed.

   Although not specifically sought from me I would add that in my view the applicant is obliged to pay the respondent’s costs which he has claimed, to be taxed on a solicitor and client basis. 

   I note that the respondent has now paid the $375 to his solicitors and this debt is no longer one which has been merely incurred - it has now been paid.  Of course the applicant may seek to have these costs taxed but I hope that some commonsense will prevail so that this matter, where a small amount of money is in dispute, is speedily resolved.