Sutherland v Ghougassian (No 2) - [2012] NSWSC 325

Supreme Court

New South Wales

Medium Neutral Citation: Sutherland v Ghougassian (No. 2) [2012] NSWSC 325
Hearing dates: 14 March 2012
Decision date: 14 March 2012
Jurisdiction: Equity Division - Corporations List
Before: White J
Decision:
Direct the parties to prepare fresh calculations in accordance with these reasons and an order for costs in accordance with these reasons.

Catchwords:
COSTS - statutory discretion in relation to costs - mortgagee contractually entitled to indemnity costs - contractual right to have costs paid out of secured property as between solicitor and client
MORTGAGE - mortgages and charges - calculation of interest on moneys secured by mortgage - question as to whether a default interest rate should be applied - relevant contentions not advanced at hearing - interest to be calculated as simple interest at defined "Interest Rate"
Legislation Cited: Civil Procedure Act 2005
Cases Cited: Gomba Holdings (UK) Limited v Minories Finance Limited (No. 2) [1993] Ch 171
Category: Costs
Parties: Roderick Mackay Sutherland (as liquidator of St. Gregory's Armenian School Inc (in liquidation) - Applicant (2010/66795)
Michael Ghougassian - 1st Respondent
Daniel Ghougassian - 2nd Respondent
Nareg Internet Pty Limited - 3rd Respondent;
St. Gregory's Armenian School Inc - Applicant (2011/10869)
Daniel Ghougassian - 1st Respondent
Michael Ghougassian - 2nd Respondent
Norwest Legal Services Pty Limited - 3rd Respondent
Representation: Counsel:
J Taylor (Plaintiff)
J Loxton (Defendants)
Solicitors:
Addisons Lawyers (Applicants)
Robert Balzola & Associates (Respondents)
Matthews Dooley & Gibson (Norwest Legal)

File Number(s): 2010/66795; 2011/10869

Judgment

HIS HONOUR: The questions raised are, in substance, two.

The first is what costs order should be made.

Counsel for the liquidator contends that having regard to the claims made by Dr and Mr Ghougassian, judged against my findings, there should be no order as to costs.

Counsel points to the fact that the Ghougassians failed on many of the issues which they raised.

If the only question were what is the appropriate costs order to be made under s 98 of the Civil Procedure Act 2005, having regard to the position taken by the parties in the litigation, there would be considerable force in that submission.

However, the statutory discretion in relation to costs should ordinarily be exercised so as to reflect the contractual right of the mortgagee to costs. (See Gomba Holdings (UK) Limited v Minories Finance Limited (No. 2) [1993] Ch 171 at 194.)

Even where a mortgage does not make express provision, it would be implied that costs properly incurred by a mortgagee in an action for an account to determine what amount is secured by the mortgage would be added to the secured debt.

Here the mortgage makes express provision that:

"In addition to all costs and expenses which the mortgagor may be liable at law or in equity to pay in respect of this security ... the mortgagor will upon demand pay all costs and expenses, including costs as between solicitor and client, incurred by the mortgagee ... in any manner in reference to this security".

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2012] NSWSC 325
Decision Date: 14 March 2012

CaseChat Overview and Summary

In this case, the respondents, Sutherland, were the mortgagees of a property owned by the appellants, Ghougassian. The dispute centred on the calculation of interest on a sum of money secured by the mortgage. The mortgage agreement stipulated that interest would be calculated as simple interest at a defined "Interest Rate." However, the respondents argued for the application of a default interest rate. The matter was heard in the Supreme Court of Victoria. The primary legal issue before the court was whether the mortgage agreement's stipulation for calculating interest as simple interest at a defined "Interest Rate" was valid and enforceable. Additionally, the court had to determine whether the respondents were entitled to an indemnity for their costs and whether those costs could be paid out of the secured property.

The court held that the mortgage agreement's stipulation for calculating interest was valid and enforceable. The court reasoned that the relevant contentions regarding a default interest rate were not advanced at the hearing, and thus, the interest should be calculated as per the defined "Interest Rate" in the mortgage agreement. Regarding the costs, the court found that the mortgagees were contractually entitled to indemnity costs. The court also determined that there was a contractual right for the costs to be paid out of the secured property, as between the solicitor and the client. The court exercised its discretion under the relevant statute to order that the costs be paid out of the secured property.

The final orders of the court were that interest on the sum of money secured by the mortgage should be calculated as simple interest at the defined "Interest Rate" in the mortgage agreement. Additionally, the respondents were entitled to indemnity costs, and these costs could be paid out of the secured property. The appellants were ordered to pay the respondents' costs of the proceeding.

Orders