MH&Ng Investment Pty Ltd v Eatertainment Group Pty Ltd (No 2)

[2025] VCC 87

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-22-05206

MH&NG INVESTMENT PTY LTD (ACN 657 121 447) as trustee of the MH&NG INVESTMENT UNIT TRUST	Plaintiff
v
EATERTAINMENT GROUP PTY LTD and ORS	Defendants

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JUDGE:	HIS HONOUR JUDGE MACNAMARA
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers
DATE OF JUDGMENT:	13 February 2025
CASE MAY BE CITED AS:	MH&NG Investment Pty Ltd v Eatertainment Group Pty Ltd and Ors (No 2)
MEDIUM NEUTRAL CITATION:	[2025] VCC 87

REASONS FOR JUDGMENT
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Subject:Form of judgment to enforce loan agreement and costs

Catchwords:              Loan agreement including charge clause granted by one of the guarantors – Charge clause enforceable only by judicial sale – Relief by way of judicial sale not sought in statement of claim – Plaintiff concedes separate proceeding for judicial sale must be launched – Whether directions as to such further proceeding ought to be included in the orders and judgment for this proceeding – Costs – Loan agreement providing for defendants to pay costs of “enforcement” on a full indemnity basis – No obligation to order costs on a full indemnity basis – Court retains discretion over costs – Costs order made as per the agreement.

Legislation Cited:      

Cases Cited:Chen v Kevin McNamara & Son Pty Ltd (No 2) [2012] VSCA 229

Hycenko v VHY Enterprises Pty Ltd [2020] VSC 834

Judgment:                  

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr H McAvaney	Mills Oakley
For the Defendant	Ms A Storey	Madgwicks Solicitors

HIS HONOUR:

Introduction

1On 24 October 2024 I handed down my substantive determination in this matter, [2024] VCC 1655. I directed the parties to bring in short minutes to give effect to my reasons and reserved costs.

2In the event, the parties could not agree on the terms of the orders to give effect to my determination or on the question of costs; and the final submissions, being submissions in reply from the plaintiff, were filed on 10 February this year.  According to the defendants’ submission dated 28 January 2025, the two matters upon which the parties could not agree were:

(a)   whether the issue of a judicial sale application should be included as part of the orders;

(b)   the question of costs.

Judicial sale

3The plaintiff’s claim sought to enforce the terms of a loan agreement. The loan agreement included a charge clause by one of the defendants over a property in Croydon. Its prayer for relief sought a declaration in favour of the plaintiff that it was “entitled to possession and ownership of the Croydon Property” ([2024] VCC 1655 [25]). I concluded that whilst the charge clause created an equitable charge, it did not grant to the plaintiff an entitlement to possession or ownership (Ibid, [89]-[90]). The plaintiff’s solicitors seek to deal, in the orders in this proceeding, with a judicial sale of the Croydon property. The plaintiff’s counsel, in his submissions as to these matters dated 20 December 2024, stated that whilst his client wished to proceed with a judicial sale, “it recognises that such an application will need to be brought in a new proceeding” [citing Hycenko v VHY Enterprises Pty Ltd [2020] VSC 834] [5].

4In paragraphs [6]-[7] he seeks inclusion in the present orders of directions as to service of my principal reasons in this proceeding on Westpac Banking Corporation as a registered mortgagee of the Croydon premises as to the preparation and filing of the further application seeking judicial sale, and for that matter to be dealt with by me having regard to my familiarity with the issue as a result of presiding in the trial last year.

5In their submissions dated 28 January 2025, the defendants’ solicitors agreed that it was appropriate to declare in this proceeding that the plaintiff has an equitable charge over the Croydon property.  They oppose the making of any orders as to the ranking of that charge and to the making of “timetabling orders” relative to service of my reasons on Westpac Bank and the filing of documents to commence a further and new proceeding seeking the proposed judicial sale.

6In my view, given the concession that in the circumstances a new proceeding for the judicial sale must be commenced, it is inappropriate to seek to encompass that new proceeding in the present one where the trial has been completed.  I also accept that since the ranking of the plaintiff’s equitable charge generally was not disputed or argued at trial, it would be inappropriate for the declaration now to be made to extend to this matter.  Likewise, it would seem inappropriate in this matter to make orders as to the listing of the further proceeding seeking judicial sale.  Subject to my other commitments and the overriding listing controls exercised by the Head of the Commercial Division and ultimately the Chief Judge, I am agreeable to dealing with the new proceeding when it is commenced.  It is inappropriate, however, to seek to deal with the commencement and progress of one proceeding by orders in a different one.

Costs

7The plaintiff seeks an order for the payment of its costs by the defendants on a full indemnity basis.  It supports this contention by reference to two matters: first, a provision in the loan agreement, clause 15, which obliges the borrower and hence the guarantor to pay the plaintiff’s enforcement costs on a full indemnity basis; and secondly, on the footing that it was unreasonable for the defendants to reject what the plaintiff says should be regarded as a “Calderbank offer” in the form of an email to the defendants’ solicitors dated 28 July 2023 and expressed to be “without prejudice save as to costs”.

8The parties were agreed that the effect of clause 15 of the loan agreement was to establish a consideration favouring the award of indemnity costs by the Court, without, however, compelling the Court so to do or restricting its discretion as to costs. (Chen v Kevin McNamara & Son Pty Ltd (No 2) [2012] VSCA 229 [6]-[8] per Maxwell P, Redlich JA and Robson AJA) In the present case the contractual provision is plain and unambiguous, though it is not compulsory of observance by the Court.

9At paragraph [88] I declined to order as part of the principal relief in the proceeding payment of $6,000 described as “indemnity costs”.  Counsel for the plaintiff correctly observed in his submission as to costs [14] that this constitutes a different subject matter from the present costs application.  It may be put to one side.

10The defendants’ solicitors’ contentions as to costs dated 28 January 2025 said first [9] that the relevant provision in the loan agreement was “not plain and unambiguous.  Its drafting does not extend to the costs of litigation.”  They continued:

“Alternatively, if clause 15 does apply to litigation costs, a relevant discretionary factor weighing against the making of an indemnity costs order is the significant fees and interest clauses contained in the Loan Agreement.” [9]-[10]

11In my view, the word “enforcement” as used in the relevant provision is sufficiently broad and unambiguous to extend to litigation costs.  How else, aside from litigation, can one enforce an agreement to repay money secured only by an equitable charge capable of being actioned only via a judicial sale?  The defendants’ second argument seems to amount to no more than the contention that the application for indemnity costs is “piling on the agony” where the loan agreement already calls for very high charges for interest and other matters.  One may accept that the terms of this loan agreement are not such as any borrower would enthusiastically embrace.  They are, however, the terms upon which these defendants chose to deal with the plaintiff.  Accordingly, I see no reason why the loan agreement ought not be given effect according to its terms, with the result that the plaintiff’s costs should be assessed on a full indemnity basis.

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Certificate

I certify that these 5 pages are a true copy of the reasons for judgment of Judge Macnamara, delivered on 13 February 2025. 

Dated:  13 February 2025 

Jodie Daniel

Associate to Judge Macnamara