McDonald, N.E. v Esanda Finance Corporation

[1992] FCA 360

JUDGMENT No. ..3.k?.~ .... lQ;. ....

IN THE FEDERAL COURT OF AUSTRALIA )

NEW SOUTH WALES DISTRICT REGISTRY )	No. NG 747 of 1991
GENERAL DIVISION	1

BETWEEN :  NEIL EDWARD McDONALD

Applicant

AND:  ESANDA FINANCE CORPORATION

First Respondent

AND:  COMMONWEALTH BANK OF AUSTRALIA

Second Respondent

AND:  JOHN CHARLES McAULEY

Third Respondent

AND:  LITHGOW MOTORS PTY LIMITED

Fourth Respondent

CORAEI:	FOSTER J
DATE :	24 APRIL 1992
PLACE :	SYDNEY

Note:	Settlement and entry of orders is dealt with by
Order 36 of the Federal Court Rules.

BNUTE OF ORDERS

THE COURT ORDERS:

1.    that the second respondent pay the costs, on a party/party basis, of the applicant in relation to the notice of motion filed 28 January 1992;

2.    that leave be granted for the applicant to seek an order granting leave to tax the bill of costs in relation to this proceeding prior to the hearing of the principal proceedings.

IN THE FEDERAZl COURT OF AUSTRALIA )

1

NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 747 of 1991

1

GENERAL DIVISION 1

BETWEEN:  NEIL EDWARD McDONALD

Applicant

AND:  ESANDA FINANCE CORPORATION

First Respondent

AND:	COMMONWEALTH BANK OF AUSTRALIA Second Respondent
AND :	JOHN CHARtES McAULEY

Third Respondent

AND:  LITHGQW MOTORS PTY LIMITED

Fourth Respondent

C O W :	FOSTER J
DATE :	24 APRIL 1992

P m : SYDNEY

REASONS FOR J[TWIENT

(Extempore)

HIS HONOUR: The Court has before it a notice of motion dated 24 January 1992 taken out by the applicants in these proceedings against the second respondent, the Commonwealth Bank of Australia. The notice of motion seeks that the second respondent be restrained from taking any further steps in exercise or purported exercise of any power of sale arising under mortgage number 2691577 dated 30 April 1991. It appears from what has been put before me that this was a mortgage given by the applicants to the second respondent over property in which they resided. It was given as security for the performance, inter alia, of obligations undertaken by the fourth respondent, Lithgow Motors Pty Limited. It is unnecessary in this notice of motion to go into any detail in relation to those obligations or purported obligations. The motion was brought on as a matter of urgency in the vacation, seeking an order that the motion be expedited. It sought appropriate orders for the abridgment of time for service, for directions, for further and other orders and for costs.

The substantive relief sought in the notice of motion is not now sought. This is because on 11 February 1992 the solicitors for the second respondent provided an undertaking on behalf of their client to the solicitors for the applicants to the effect that the second respondent would not exercise any power of sale in respect of the land, the

notice to the applicants solicitors. It is quite clear that	subject of the mortgage without first giving 14 days written
the second respondent intends to abide by this undertaking given inter partes although it is clear the undertaking has never formally been given to the Court nor has it been sought on behalf of the applicants that it be given to the Court.

In these circumstances the applicants seek that the
notice of motion be dismissed but they seek an order for their
costs of bringing it. The basis upon which this order is
sought is that the attitude evinced by the second respondent
prior to their bringing of the notice of motion necessitated
that it be brought in order that the applicants' position in
relation to their property and their continued residence in it
be preserved pending the disposal of the substantive matters

involved in this litigation.

It is necessary, unfortunately, that I refer to the course of events leading up to the taking out of the notice of motion and also subsequent events. These matters are for the most part, referred to in the affidavits of Diana Perla, solicitor for the applicants, dated 24 January 1992 and 17 March 1992 respectively.

There are in fact two affidavits of Diana Perla dated 24 January, and it is necessary to have regard to both of them in ascertaining the factual situation in the matter. From a consideration of the affidavits and the annexed

material it appears that a formal demand was made by the	second respondent upon the applicants on 17 October 1991.
This demand was made for a sum of money allegedly owing by the applicants under securities given by the applicants. It was indicated that in the event of the sum not being paid within 28 days, the bank would take action to recover payment.
Amongst the securities referred to on that letter was the mortgage already referred to. This letter of demand

was responded to by Diana Perla on behalf of the applicants on

12 November 1991.	In that letter she indicated that the	I _
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!
I .

applicants contended that the securities relied upon,

1 .

including the subject mortgage, were not enforceable against	: :
them by the second respondent. A draft statement of claim	t ;.
proposed to be filed in the Federal Court was enclosed with
the letter. It was said in the letter that the draft set out	...
i ,
the nature of the applicants' allegations against the bank.	i /
Although a copy of that draft is not annexed to the affidavit, it appears that the allegations in the draft corresponded with the allegations made in the statement of claim which was subsequently filed, together with an application in this Court on 22 November 1991.
It can be said that the allegations made against the second respondent in aid of a claim that the mortgage should be set aside are very elaborately pleaded over a large number of paragraphs in that document, and that the paragraphs themselves are copiously eked out with particulars also set out in the body of the statement of claim. The letter of 12	November 1991 goes on to state that the solicitors have been	instructed to request whether the bank was prepared to release
the applicants from the alleged debt and discharge the
security, or alternatively to undertake not to attempt to
exercise any power of sale, pending determination of the	I
proceedings which were to be commenced before the Federal	I,
I
Court. The letter further indicated that if advice to this effect was not received from the bank within five days, the	!
I
I I.

solicitors were instructed to move the Court, ex parte if necessary, for an injunction restraining the bank from attempting to exercise its power of sale. There was also an offer made to provide further security in exchange for this undertaking. On 18 November the bank, through its solicitors, responded that it was not prepared to provide the undertaking requested, and that it intended to proceed with action to realise upon the mortgage. As I have already indicated, proceedings in this Court were commenced on 22 November. Various orders were sought in the application. It does not appear that any precise order was sought restraining the second respondent from taking proceedings to execute under the mortgage. There was, however, reference made at the conclusion of the application to a directions hearing to take place on 19 December 1991, in which the applicants' claim for an interlocutory order was to be heard, although there is no indication in the application as to what that interlocutory order was to be. In fact, on 19 December, which was either the last or second last day for directions in 1991, it appears

that the only direction given was that the matter be stood	over for further directions on 7 February. It also appears
that no claim at that stage was made before the Court in respect of any interlocutory relief relating to the mortgage.
It seems that at about this time the bank gave an indication that it proposed to take proceedings in relation to the mortgage. This provoked a letter from the applicants8 solicitor, Diana Perla, to the relevant branch of the bank. That letter referred to the proceedings having been commenced in this Court and the fact that in those proceedings orders were being sought that the securities be set aside. It referred to the directions hearing before myself on 19 December and suggested that, before the bank took any steps, it should consult its legal department, as the solicitors had instructions to move the Court for an injunction in relation to any step taken by the bank to enforce the securities,

pending the determination of the proceedings.

This letter was replied to on 8 January 1992 by a letter from the bank indicating that letters of demand would be issued, and that on the expiry of 14 days from some date which it is difficult to determine, the bank intended to issue notices under s 57(2) (b) of the Real Pro~ertv Act 1900 (NSW).

A notice under that section was, in fact, served on

17 January 1992. The service of this notice clearly resulted

on 29 January. On that date, which was in the vacation, the	have said, it was taken out as a matter of urgency for hearing in the notice of motion being taken out on 24 January. AB I
matter came on for hearing before Beaumont J. His Honour was then advised that the power of sale could not, in any event, be exercised before 15 February.

It seems that no further proceedings were taken in
respect of the notice of motion at that point of time, the
whole of the proceedings being currently listed for mention
before myself on 7 February. In the circumstances, it appears
that Beaumont J adjourned the notice of motion until the same

date.

On 7 February, the matter came before myself when further directions in relation to the proceedings were given. It does not appear that any directions were given in respect of the notice of motion, nor that the notice of motion was dealt with. The applicants were ordered to file and serve their affidavits by 11 February. Further orders were made in respect of the filing of a defence by the respondent and by affidavits on its behalf. The whole of the proceedings were stood over for further directions on 20 March.

It has been made known to me that the affidavits which were to be relied upon by the applicants in relation to the proceedings and also in further support of the notice of motion, were in fact in a fair state of preparation as at 7

February. They were, in fact, sworn, filed and served on 10

February. Those affidavits deal in considerable detail with the allegations made in the statement of claim in support of the applicants' contention that the mortgage documents should be set aside. When those affidavits were filed and served upon the second respondent, it gave the undertaking inter partes to which I have already referred.

In the circumstances which I have set out at some length, the applicants claim that they should receive an order for costs of the notice of motion. The respondents, conversely, say that no order should be made. The simple case of the applicants is that the attitude evinced in November, December and January by the second respondent necessitated the taking out of the notice of motion. The second respondent says that it was perfectly justified in adopting that attitude right up to the time when it received the sworn evidence of the applicants in their affidavits of 10 February.

It is not an easy matter to decide. The fact that the matter comes before the Court at all may well be due to the very large amount that has been claimed for costs in a letter sent on behalf of the applicants by their solicitor. The Court, of course, is not interested in these proceedings in determining whether that amount or any other amount would be the appropriate award of costs. The Court is only concerned as to whether a costs order should be made, and if so, in what form.

There can be no doubt in the matter that the attitude of the second respondent exhibited throughout the months to which I have made reference inevitably produced the result that the notice of motion needed to be taken out. The applicants were placed in a position where the bank was indicating every intention of taking proceedings to execute upon the mortgage, irrespective of the fact that proceedings had been promptly commenced in this Court seeking relief

against the mortgage. It is fair to say also, that those proceedings were commenced by a statement of claim of the elaborate nature to which I have already made reference. The bank was therefore under no misapprehension as to the allegations that were being made as to the unenforceability of the mortgage and the reasons for it.

Had the application been made ex parte in circumstances of extreme urgency, the amount of material that was provided on 29 January in support of the application for the injunction would, in my view, have been sufficient to secure an ex parte injunction returnable, of course, at short notice so that the matter could be looked into more thoroughly. Had the matter proceeded to hearing on 29 January, not on an ex parte basis, but on the basis of a final hearing as to whether the relief should or should not be granted, it is very doubtful whether the material then provided would have been sufficient. It has been put to me on behalf of the bank that it would clearly have been

insufficient.

However, I bear in mind that it provided ample evidence of the bank's attitude and of the nature of the claim sought to be made. The question would have been whether a reasonable case to be tried was shown, and whether the balance of convenience lay with the applicants. There is nothing to suggest that the balance of convenience would have lain with the second respondent. It is not really necessary to decide,

I feel, in the circumstances, whether the Court would have felt sufficiently satisfied as to the existence of the reasonable case to be tried, to have granted interlocutory relief simply on the basis of the material that was then before it. That situation simply did not arise.

The bank conceded that it could not, in any event, execute on the security at that point of time. The matter was

adjourned until 7 F e b ~ a r y and affidavits were in the course

of preparation in support of the notice of motion. It was quite obviously understood between the parties that if the notice of motion were to go ahead it would go ahead on the basis of additional material. There was no indication on the part of the respondent that it would simply agree to the order or give an undertaking if it received some further information. As far as I can see, the matter simply proceeded on the basis that the hearing was deferred, and was to take place on the evidence that existed and such further evidence as the applicants would adduce, and as might be adduced by the

respondents. For all purposes it appears to me that it was, at 7	February, when the matter came before the Court, a notice of
motion that was extant and was to be heard in the future, and which was being defended. It did not proceed, simply because before the matter was heard, the respondent gave an undertaking which was sufficient to render the notice of motion no longer necessary. Although I have not found this

matter easy to decide, I ultimately come to the conclusion that it is reasonable in all the circumstances that the applicants receive the costs on a party/party basis of the notice of motion.

As I have indicated in making that order, I express

no view whatsoever as to the appropriateness or not of the amount that has been claimed. That would be a matter for the taxing officer if the parties cannot otherwise agree. I therefore award the costs of this motion to the applicants.

It has been put to me by the applicant that I ought to make an order allowing the bill of costs relating to these proceedings to be taxed forthwith even thought the principal proceedings are not concluded. Order 62 r 3 states that:-

"An order for costs of an interlocutory proceeding shall not, unless the court otherwise orders, entitle a party to have a bill of cost taxed until the principal proceedings in which the interlocutory order was made is concluded."

The present case is not, in my view, one where I should "otherwise order". I would require material before me that would, inter alia, indicate the details of the bill of costs, and whether any prejudice would flow to the parties as a result of such an order being made. As I do not have sufficient material before me, I do not propose to make that order now. I will, however, grant leave to the applicant to seek, in relation to the principal order that I have just made, a further order granting leave to tax a bill of costs prior to the hearing of the principal proceedings, if they are so advised.

I certify that this and the preceding eleven (11) pages are a true copy of the reasons for judgment herein of the Honourable Mr Justice M. L. Foster.

Associate: ir..pW---~L

Date:	24 APRIL 1992
A P P E A R A N C E S

COUNSEL FOR THE APPLICANT:	MR G. McVAY
INSTRUCTED BY:	DIANA PE-  h ASSOCIATES
COUNSEL FOR THE RESPONDENT:	MR R.G. FORSTER

INSTRUCTED BY:	L.E. TAYLOR
DATE OF HEARING:	24 APRIL 1992
DATE OF JUDGMENT:	24 APRIL 1992