Whild v GE Mortgage Solutions Ltd (No 2)
[2012] VSC 322
•2 August 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
No. S CI 2011 01988
| SUSAN IRENE WHILD | Appellant |
| v | |
| GE MORTGAGE SOLUTIONS LTD (ACN 070 797 894) | Respondent |
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JUDGE: | CROFT J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 18 May 2012 (last written submissions received 31 May 2012) | |
DATE OF JUDGMENT: | 2 August 2012 | |
CASE MAY BE CITED AS: | Whild v GE Mortgage Solutions Ltd (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 322 | |
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COSTS – Basis of calculation of costs entitlement under mortgage loan agreement – whether Memorandum of Common Provisions entitles a successful mortgagee to recover costs on a solicitor and client basis or on a party and party basis – Supreme Court (General Civil Procedure) Rules 2005, Rules 63.30 – Shepparton Projects Pty Ltd v Cave Investments Pty Ltd (No. 2) [2011] VSC 384 – Beckwith v Pedler [2000] VSCA 86 (CA) – Gomba Holdings (UK) Ltd v Minories Finance Ltd [1993] Ch 171 (CA).
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APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr M.A. Strang Mr D. C. Turner | George Liberogiannis & Associates |
| For the Respondent | Mr S.D. Hay | Gadens Lawyers |
HIS HONOUR:
Introduction
This proceeding arose as a result of an appeal against the orders of Senior Member C. McKenzie dated 31 March 2011 in Victorian Civil and Administrative Tribunal (“VCAT” or “the Tribunal”) Proceeding No. M171/2008 (“the VCAT proceeding”).[1] The background to this proceeding and the enforcement action taken by the respondent against the appellant under two loan agreements secured by mortgages over the appellant’s property are set out in my judgment delivered on 18 May 2012 (“the Primary Judgment”),[2] and it is not necessary to repeat those matters again now. For the purposes of this judgment, I have adopted the same abbreviations as appear in the Primary Judgment.
[1]Whild v GE Mortgage Solutions Limited (ACN: 070 797 894) (Credit) [2011] VCAT 797.
[2]Whild v GE Mortgage Solutions Ltd [2012] VSC 212.
In summary, the issues between the parties arising out of the appeal were determined on bases that:[3]
(a)the default notice dated 1 April 2004 in respect of Loan A was valid and the Tribunal was in error in finding that it was not;
(b)none of the “posting notices” could constitute a valid notice under the statutory power of sale provisions of the TLA and the Tribunal was in error in finding that such a notice constituted a notice of default for the purposes of the statutory provisions; and
(c)a contractual power of sale was available to the respondent under clauses 8.20 and 8.21 of the mortgage, but that, having found that the default notice was valid for the purposes of the TLA provisions, issues in relation to the exercise of this power do not arise and the contractual power is, in this sense, otiose in the present circumstances.
[3]Whild v GE Mortgage Solutions Ltd [2012] VSC 212, [68].
I briefly heard the parties on the questions of the form of orders that should be made to give effect to my findings and costs following the delivery of the Primary Judgment. I was subsequently provided with an agreed form of orders by the parties which they believe appropriately reflect the result of the appeal (save for the issue of costs), and submissions by the parties on the question of costs. As indicated in the Primary Judgment, I had originally intended to vacate the orders made by VCAT and to make fresh orders which would more readily express and explain my reasoning and findings with respect to the substantive matters in dispute – reasoning and findings significantly different from those of VCAT, though the ultimate result remained the same. The course I proposed was, however, no more than for the sake of clarity and did not in any way affect the disposition of the appeal. Having heard counsel on delivery of the Primary Judgment I am content that matters are sufficiently clarified and the orders should be made as proposed.
I now deal with the question of costs.
Costs
It is common ground that the terms of any agreement as to costs will inform the Court’s discretion as to the basis of taxation of costs[4] and that the Court should ordinarily exercise its discretion in accordance with the agreement.[5] It is clear on the authorities that whether the terms of any agreement as to costs entitle a party to more than party and party costs is ultimately a matter of construction.[6] It is also clear that the terms of the agreement must provide in plain and unambiguous language that costs are to be paid on a special basis, otherwise costs should be awarded on a party and party basis only.[7]
[4]See, eg, Perpetual Trustees Australia Ltd v Schmidt (No 3) [2010] VSC 261, [38]-[41] (J Forrest J).
[5]Kyabram Property Investments Pty Ltd v Murray [2005] NSWCA 87 at [12]-[14] (Beazley JA, Ipp and Hodgson JJA agreeing); Reading Entertainment Australia Pty Ltd v Burstone Victoria Pty Ltd (No 2) [2005] VSC 137 at [23], [25] (Whelan J); Taree Pty Ltd v Bob Jane Corp Pty Ltd [2008] VSC 228 at [43]-[44] (Vickery J).
[6]Reading Entertainment Australia Pty Ltd v Burstone Victoria Pty Ltd (No 2) [2005] VSC 137 at [22] (Whelan J).
[7]Kyabram Property Investments Pty Ltd v Murray [2005] NSWCA 87 at [12] (Beazley JA, Ipp and Hodgson JJA agreeing); Taree Pty Ltd v Bob Jane Corporation Pty Ltd (No 2) [2008] VSC 228 at [47]-[48]. And see Shepparton Projects Pty Ltd v Cave Investments Pty Ltd (No 2) [2011] VSC 384 (Croft J).
The position that the general discretion will ordinarily be exercised to reflect a contractual right to costs is made very clear, with reference to authorities, in the decision of the English Court of Appeal in Gomba Holdings (UK) Ltd v Minories Finance Ltd.[8] In that case, Scott LJ, in delivering the judgment of the English Court of Appeal, said:[9]
[8][1993] Ch 171.
[9][1993] Ch 171, 192-4; and see Civil Procedure (“the White Book”) (2010), Vol 1, [48.3.1] (p 1378-9) where the principles stated at the conclusion of this consideration of the authorities is set out and relied upon.
“As to the interaction between a contractual right to litigation costs and the court’s discretionary power under section 51(1) of the Supreme Court Act 1981,[10] there are several judicial dicta to which reference should be made.
[10]Section 51(1) of the English Supreme Court Act 1981 then relevantly provided:
“Subject to the provisions of this or any other Act and to rules of court, the costs of and incidental to all proceedings in the civil division of the Court of Appeal and in the High Court … shall be in the discretion of the court, and the court shall have full power to determine by whom and to what extent the costs are to be paid.”
Section 24 of the Victorian Supreme Court Act 1986 is in substantially the same terms.
In Bank of Baroda v Panessar [1987] Ch 335, a mortgage case, Walton J said, at p 355:
‘it seems to me that it is not possible for a person in the position of the bank to exclude the discretion of the court, but one nevertheless starts from the position that the contractual position between the parties is that the costs will be paid on an indemnity basis. I cannot think that the words “all costs” mean anything other than that. So one starts from the position that that is the contractual position but not, as I venture to think, binding on the court.’
In ANZ Banking Group (New Zealand) Ltd v Gibson [1981] 2 NZLR 513, also a mortgage case, Holland J said, at p 531:
‘The court is given a discretion as to the costs to award. I am satisfied that the fact that the parties have by contract agreed to pay costs on a solicitor/client basis is a factor to be taken into account by me in the exercise of my discretion.’
Vinelott J in his judgment of 19 December 1991 said:
‘If the parties have agreed the basis of taxation it would, I think, be an improper exercise of the court’s discretion to direct the taxation on some other basis, unless satisfied that there had been some conduct on the part of the mortgagee disentitling him to costs or to costs on the agreed basis.’
On the other hand, in Mansfield v Robinson [1928] 2 KB 353 the parties to an arbitration had agreed beforehand that the successful party should have costs on the High Court scale. The arbitrator, not knowing of this agreement, made no order as to costs. An action was then brought to enforce the costs agreement. The county court judge held that in view of certain statutory provisions which provided that the costs of the arbitration were to be in the discretion of the arbitrator, the costs agreement was invalid. An appeal to the Divisional Court succeeded.
Salter J posed the question ‘whether it is allowable to parties to an arbitration of this kind to make their own agreement as to costs,’ and said: ‘I am unable to distinguish the position of such an arbitrator from that of a judge in this respect,’ and, at p 359, said:
‘With regard to the discretion of a judge as to costs, which is given by Order LXV, r 1, of the Rules of the Supreme Court, it is, I think, common practice for parties to make their own agreements as to the costs … and such agreements are perfectly valid and enforceable.’
Talbot J agreed. The costs agreement was held to be valid and enforceable.
In In re Shanahan (1941) 58 WN(NSW) 132, another mortgage case, Street J said, at p 134:
‘the parties are free to make any arrangements which they like dealing with the subject matter of costs; and it seems to me to make no difference whether that agreement is made before or after the court takes the matter into its consideration … It has been held that even if a court, having full discretion in the mater of the costs of any proceeding, deals in its order with such costs, a party can still enforce an antecedent agreement in relation thereto inconsistent with the court’s order: Mansfield v Robinson.’
These dicta are not entirely reconcilable. In any event, none binds this court.
There is, however, a recent decision of this court in Seavision Investment SA v Evennett [1992] 2 Lloyd’s Rep 26 in which Parker LJ expressed the opinion, concurred in by the other members of the court, that a contractual right of one party to an action to have the costs of the action paid by another party to the action could not override the discretion as to costs given to the court by Ord 62, r 3(2) and section 51(1) of the Act of 1981, but that where an order for payment of the costs was sought, the discretion should ordinarily be exercised so as to reflect the contractual right. This opinion accords with that of Vinelott J that I have cited.
In our opinion, the following principles emerge from the cases and dicta to which I have referred.
(i) An order for the payment of costs of proceedings by one party to another party is always a discretionary order: section 51 of the Act of 1981.
(ii) Where there is a contractual right to the costs, the discretion should ordinarily be exercised so as to reflect that contractual right.
(iii) The power of the court to disallow a mortgagee’s costs sought to be added to the mortgage security is a power that does not derive from section 51 but from the power of courts of equity to fix the terms on which redemption will be allowed.
(iv) A decision by a court to refuse costs, in whole or in part, to a mortgage litigant may be a decision in the exercise of the section 51 discretion or a decision in the exercise of the power to fix the terms on which redemption will be allowed or a decision as to the extent of a mortgagee’s contractual right to add his costs to the security or a combination of two or more of these things. The pleadings in the case and the submissions made to the judge may indicate which of the decisions to which we have referred has been made.
(v) A mortgagee is not, in our judgment, to be deprived of a contractual or equitable right to add costs to the security merely by reason of an order for payment of costs made without reference to the mortgagee’s contractual or equitable rights and without any adjudication as to whether or not the mortgagee should be deprived of those costs.”
The issue to be considered in this respect is whether the respondent should be awarded costs of the appeal and the costs of the application for leave to appeal on a solicitor and client basis, or whether costs should be awarded on a party and party basis only.
Relevant to this issue are clauses 6.4 and 6.6 in the Memorandum of Common Provisions (“MCP”), which regulated the mortgage agreement between the parties. The respondent contended the provisions provide a contractual basis upon which the respondent mortgagee can recover the costs and expenses incurred by it in enforcing the mortgage against the appellant mortgagor. These provisions provide as follows:
“6.4 If you do not correct the default within any period given in the notice then, at the end of that period and without further notice to you the amount owing becomes immediately due and payable (to the extent it is not already due for payment). In addition, we may do one or more of the following as well as anything else the law allows us to do as mortgagee:
(a) sue you for the amount owing;
(b) take possession of the property;
(c)do anything an owner or receiver of the property could do, including improving, selling or leasing it;
(d)appoint a receiver to do any of those things and anything else the law allows a receiver to do, including under 6.5.”
…
Enforcement expenses
6.6 When we ask, you must pay us the reasonable expenses we reasonable incur in enforcing this mortgage after you are in default (including in preserving and maintaining the property – such as by paying insurance, rates and taxes for the property). This applies to expenses we incur before or after taking action under 6.4.”
The appellant’s primary submission on the question of costs is that the VCAT proceeding ”did not relate directly to the enforcement of the mortgage”. On this basis, the appellant submitted that the ”relevant clause [6.6] in the mortgage ought to be construed in the appellant’s favour and not read to interfere with [the] Court’s general discretion as to costs.” Further, the appellant submitted that this provision should be read contra proferentum in favour of the appellant. Alternatively, the appellant submitted that if clause 6.6 of the MCP is implemented, the respondent ought to pay two thirds of the appellant’s costs on a party and party basis to be taxed in default of agreement on the basis she was successful on her points of appeal which were contested by the respondent. On this basis, the appellant submitted that she should only pay one-third of the respondent’s costs on whatever basis the Court determines.
The appellant substantially clarified her position on costs in further supplementary written submissions, the filing of which was not objected to by the respondent. The appellant submitted that clause 6.6 of the MCP reflects the common law rule that the mortgagee is entitled to costs reasonably incurred by it on a party and party basis. There was no basis under clause 6.6 which allowed for costs to be ordered on a solicitor and client basis. The appellant conceded, as a matter of principle, that costs in a general sense include costs incurred by a mortgagee in ascertaining or defending its rights in preserving the security or recovering the mortgage debt (including costs associated with a defective notice).[11] However, she submitted that in the circumstances of this proceeding, the VCAT claim was brought more than two years after the settlement of the Hoppers Crossing property and in this regard, the costs of the VCAT proceeding were “too far removed”. Further, the appellant submitted that because the Hoppers Crossing mortgage had been discharged, the contractual provision under clause 6.6 of the MCP has been lost, and there is no provision in the mortgage which preserves the respondent’s entitlement to costs after discharge.[12]
[11]See Fisher & Lightwood’s Law of Mortgage (2nd Aus ed, LexisNexis Butterworths), [40.3].
[12]Cf clause 8.18 of the MCP, which provides:
The submissions of the appellant in this respect should be rejected. The respondent, in its oral and written submissions, is correct, in my view, that the respondent’s costs should be borne by the appellant. This proceeding arose directly out of the respondent’s (ultimately successful) attempt to enforce the mortgage over the Hoppers Crossing property. The respondent was bound to appear before VCAT to defend its decision to sell the Hoppers Crossing property under the default notice and to exercise its right to sue for the balance owing under the relevant loan agreement. It was required to make submissions at VCAT that the relevant default notice dated 1 April 2004 in respect of Loan A was valid despite any overstatement. In my view, the subject matter of the respondent’s original enforcement proceeding, the appellant’s VCAT application and the appellant’s appeal to this Court were ‘one and the same’ in a real and practical sense. In this regard, it is clear from the authorities that a mortgagee is entitled to recover all costs, charges and expenses reasonably and properly incurred by him in ascertaining or defending its rights, in preserving the security or recovering the mortgage debt.[13] On this basis, and having regard to the authorities, I do not agree that the costs ‘are too far removed’, as submitted by the appellant in all of the circumstances, notwithstanding the VCAT claim was brought more than two years after the settlement of the sale of the Hoppers Crossing property. Accordingly, I find that the costs of this proceeding were reasonably incurred in enforcing the mortgage, and they can therefore be claimed against the appellant on that basis.
[13]See, eg, National Provincial Bank of England v Games (1886) 31 Ch D 582 at 592; Elders Trustee and Executor Co Ltd v Eagle Star Nominees Ltd (1986) 4 BPR 9205; Lawnic Ptd Ltd v Wilson (SC (Qld), Shepherdson J, 17 December 1997, unreported); and see Estoril Investments Pty Ltd v Westpac Banking Corporation (No 2) (SC (NSW), Young J, 31 August 1999, unreported) and Nemeth v Reachcord Pty Ltd (1998) NSW ConvR ¶55-873, and see Fisher & Lightwood’s Law of Mortgage (2nd Aus ed, LexisNexis Butterworths), [40.3]
For the reasons in the Primary Judgement, the appellant was ultimately not successful in her appeal from VCAT and the agreed form of orders submitted to the Court by the parties reflecting the orders made in the Primary Judgement affirm the VCAT order and dismiss the appellant’s appeal from VCAT. The object of the proceedings from the respondent’s perspective was enforcement of the mortgage and it has been successful in achieving this objective. In this context the appellant has not been successful. Any success the appellant achieved on particular issues, or procedurally, does not detract from the respondent’s success in achieving its objective. Neither does any such success justify departure from the general rule that costs follow the event on the basis of the respondent’s consequent failure as I am not satisfied that this resulted in any additional costs of any significance, or otherwise affected the course of the proceeding. It therefore follows that I do not accept appellant’s submission that she ought to be entitled to an award of one third of her costs.
Having regard to my findings on the question of costs, the Court is required to determine whether costs are to be awarded on the usual basis, or whether there is a basis upon which costs can be ordered on a solicitor and client basis, having regard to clauses 6.4 and 6.6 of the MCP, and the Court’s general discretion as to costs.
Despite the lack of express reference to ‘solicitor and client costs’ in the relevant clauses of the MCP, the respondent submitted that clause 6.6 of the MCP should be interpreted in a way which permits the mortgagee to recover all reasonable enforcement costs on a solicitor and client basis. In particular, the respondent relied heavily on the consistency in language between clause 6.6 of the MCP and order 63.30 of the Supreme Court (General Civil Procedure) Rules 2005 (‘the Rules’), which provides for the taxation of costs on a solicitor and client basis. Order 63.30 of the Rules provides:
“Solicitor and client basis
63.30 On a taxation on a solicitor and client basis all costs reasonably incurred and of a reasonable amount shall be allowed.”
The respondent contended that because a taxation of solicitor and client costs under Order 63.30 of the Rules allows a party to recover ‘all costs reasonably incurred’ in a proceeding, clause 6.6 should be interpreted as permitting a recovery of enforcement costs on a solicitor and client basis because the provision expressly states that a mortgagee is entitled to recover ‘the reasonable expenses [the mortgagee] reasonably incur[s] in enforcing the mortgage after [the mortgagor is] in default’. The respondent submitted the consistency in language between the provision should be read as establishing an intention by the parties to allow the respondent to recover all reasonable enforcement costs on a higher basis, namely a solicitor and client basis.
In response, the appellant submitted that the language of Order 63.30 of the Rules should not be taken to support the interpretation of clause 6.6 of the MCP as a provision for solicitor and client costs. The appellant submitted that there was no express reference to solicitor and client costs or indemnity costs in clause 6.6 of the MCP. Further, as s 45 of the Consumer Credit Code restricts enforcement expenses to ‘reasonable enforcement expenses’, the appellant submitted clause 6.6 of the MCP should be interpreted as limiting the recovery of enforcement expenses to recovery on a party and party basis only. Quite apart from the fact that this legislation is not applicable in the present circumstances, in my opinion, these provisions do not assist the appellant’s position. If anything the language used does, in my view, support the entitlement of the respondent to recover reasonable expenses as that expression would generally be understood and not as constrained by the technical concepts and constraints imposed on costs recovery by the provisions of legislation and court rules.
In my opinion, Order 63.30 supports an interpretation of clause 6.6 as a provision which permits the mortgagee to recover its reasonable enforcement costs and expenses on a solicitor and client basis. Having regard to the language of clause 6.6 of the MCP and its consistency with the language of Order 63.30 of the Rules, clause 6.6 of the MCP is, in my view, clearly intended to enable a mortgagee to recover all reasonable costs and expenses incurred in relation to the enforcement of the mortgage. This permits the recovery of costs on a higher basis than a party and party basis. The reference to costs and expenses being ‘reasonably’ incurred in clause 6.6 of the MCP does, however limit the extent of the indemnity enjoyed by the mortgagee in recovering its enforcement costs to those reasonably incurred and of a reasonable amount.
Thus, it follows that the appellant is liable to pay the respondent’s costs of the appeal (including any reserved costs), and the costs of the appellant’s originating motion and summons seeking leave to appeal filed on 28 April 2011 (including any reserved costs), on a solicitor and client basis pursuant to clauses 6.4 and 6.6 of the MCP.
Transcript costs and ‘fixed’ costs
The appellant made a range of submissions regarding the costs of the transcript and the fixing of fees for the appellant’s counsel and solicitors. On the basis of my findings in relation to the question of costs in favour of the respondent, it follows that I reject the appellant’s submissions in respect to the question of disbursement costs (including the costs of the transcript), and the fixing of costs in her favour.
Appeal Costs Act
The appellant raised an issue of a certificate under s 4 of the Appeals Costs Act 1998 in correspondence between the parties but no formal submissions or authorities were made or cited to the Court in this regard. While it appears the appellant claims the notice of contention is in the form of an appeal, the respondent submitted that the notice of contention should not be treated as a notice of appeal. In any event, the Respondent submitted that the notice of contention cannot satisfy the definition of appeal contained in sections 3 and 4 of the Appeal Costs Act 1998. In any event, as this issue was not pressed by the appellant it is not necessary to discuss it further. However it may assist in indicate that on the basis of the submissions as they now lie I incline to the position put by the respondent.
Orders
On the basis of the preceding reasons, and following the parties’ agreement of a proposed form of order following delivery of the Primary Judgment on 18 May 2012, I will make the following orders:
(1) Pursuant to s 148(7)(a) of the Victorian Civil and Administrative Tribunal Act 1998 (Vic), the Court affirms the order of the Victorian Civil and Administrative Tribunal made on 31 March 2011 in proceeding number M171/2008 on the basis of the Court’s reasons for judgment delivered on 18 May 2012.
(2) The appeal is otherwise dismissed.
(3) The appellant pay the respondent’s costs of the appeal (including any reserved costs), and the costs of the appellant’s originating motion and summons seeking leave to appeal filed on 28 April 2011 (including any reserved costs), on a solicitor and client basis.
‘This mortgage does not merge with or adversely affect, and is not adversely affected by, any of the following:
(a) another security or right or remedy to which we are entitled; or
(b)a judgment or order which we obtain against you in respect of any of the amount owing.
(We can still exercise our rights under this mortgage as well as under the judgment, order, security, right or remedy.)
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