Across Australia Finance v Bassenger

Supreme Court of NSW|2008-07-24|Before: White J

CITATION : Across Australia Finance v Bassenger [2008] NSWSC 799

DECISION : See paras 83 to 86 and paras 92 and 93 of judgment.

CATCHWORDS : JUDGMENTS AND ORDERS - amending, varying or setting aside orders - consent orders - whether consent orders were irregularly obtained - no irregularity where legal practitioner had ostensible authority to bind client - whether contract embodied in compromise could be set aside - applicant in substance a surety for an onerous loan - independent legal advice - applicant understood her obligations and the nature of the loan - contract could not be set aside - whether Court should nevertheless decline to give effect to compromise in the interests of justice - no defence available to answer the plaintiff's claim - orders not set aside - LEGAL PRACTITIONERS - authority - compromise of litigation - legal practitioners have authority to compromise litigation in the ordinary case

Contracts Review Act 1980 (NSW) LEGISLATION CITED : Real Property Act 1900 (NSW) Conveyancing Act 1919 (NSW) Civil Procedure Act 2005 (NSW)

King Investment Solutions Pty Ltd v Hussain [2005] NSWSC 1076; [2006] ANZ ConvR 48 Ainsworth v Wilding [1905] 1 Ch 435 Phillips v Walsh (1990) 20 NSWLR 206 Spies v Commonwealth Bank of Australia (1991) 24 NSWLR 691 Permanent Trustee Co (Canberra) Ltd v Stocks & Holdings (Canberra) Pty Ltd (1976) 15 ACTR 45; 28 FLR 195 Logwon Pty Limited v Warringah Shire Council (1993) 33 NSWLR 13 CASES CITED : Harvey v Phillips (1956) 95 CLR 235 Equiticorp Financial Services Ltd (NSW) v Equiticorp Financial Services Ltd (NZ) (1992) 29 NSWLR 260 Equiticorp Finance Limited (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 Starceavich v Swart & Associates Pty Ltd [2006] NSWSC 960; (2006) 12 BPR 23,639 Donellan v Watson (1990) 21 NSWLR 335 Prestwich v Poley (1865) 18 CB (NS) 806; 144 ER 662 Waugh v H B Clifford & Sons Ltd [1982] Ch 374

Across Australia Finance Pty Ltd PARTIES : v Katrin Bassenger & 8 Ors

COUNSEL : Plaintiff: D Pritchard SC 1st - 4th Defendants: R I Bellamy

SOLICITORS : Plaintiff: Moloney Lawyers 1st - 4th Defendants: G A Kinsey Solicitors

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2424/07 Across Australia Finance Pty Ltd v Katrin Bassenger & 8 Ors JUDGMENT 1 HIS HONOUR: This is an application to set aside orders made by consent on 5 October 2007 and 28 March 2008. 2 On 21 February 2007, the plaintiff and the first to fourth defendants entered into a deed of loan whereby the plaintiff was to lend, and the first to fourth defendants were to borrow, $255,000 for a period of one month. That period could be extended by the borrowers to three months provided the loan was not in default. Interest was payable at a rate of seven percent per month, or at a lower rate of five percent per month if the borrowers were not in default. The loan was secured by unregistered mortgages over properties of the first defendant at Waitara, the second defendant at Kellyville and Kent Street, Sydney, and the third defendant at Schofields. 3 The first and second defendants are de facto partners; the third and fourth defendants are companies controlled by the second defendant. All of the borrowers agreed to charge their interest in any real property of any nature with the payment of moneys owing to the plaintiff. 4 The principal sum of $255,000 was not repaid on the due date. 5 On the present application the defendants contend that the moneys were never advanced. That contention is not tenable. In a defence filed for the second to fourth defendants, those defendants admitted that on or about 21 February 2007, the plaintiff advanced $255,000 to or at the direction of the first to fourth defendants, pursuant to the terms of the loan agreement and mortgages. 6 On 24 April 2007, the plaintiff commenced proceedings seeking, amongst other things, orders for possession of the mortgaged properties, leave to issue writs of possession and orders for judicial sale. The prior mortgagees were joined as defendants but have played no part in the proceedings. 7 The orders sought by the plaintiff reflect the principles discussed in King Investment Solutions Pty Ltd v Hussain [2005] NSWSC 1076; [2006] ANZ ConvR 48. 8 On 13 August 2007, the plaintiff filed a notice of motion seeking summary relief against the first defendant including orders for possession and sale of the unit owned by the first defendant at Waitara, which is subject to the unregistered mortgage to the plaintiff. The notice of motion was initially returnable on 21 September 2007. 9 After various adjournments, it came before McLaughlin AsJ on 5 October 2007. His Honour refused an application made for the first defendant for a further adjournment. The application for summary judgment was then compromised. The plaintiff, by its solicitor, and the first defendant, by her solicitor, agreed after negotiation that the orders sought in the plaintiff's notice of motion would be made, but would be stayed until 2 November 2007. The first defendant's solicitor signed consent orders accordingly. The stay was sought because the second defendant had indicated his intention to refinance the loan. McLaughlin AsJ made orders accordingly and by consent. 10 The first defendant says that she gave no instructions authorising her legal representatives to agree to those terms. Nonetheless, no affidavit had been served in opposition to the plaintiff's application. No defence was filed and, for reasons which follow below, I am satisfied that the first defendant's solicitor and counsel did not consider that she had a seriously arguable defence to the claim. 11 On 27 September 2007, counsel had advised, in substance, that the plaintiff would be likely to obtain the orders sought and the best course was to seek to have the notice of motion adjourned to allow the first to fourth defendants to obtain finance. 12 The proposed refinance involved the sale by the fourth defendant of properties owned at Yeppoon, Queensland. The fourth defendant had exchanged the contracts for the sale of that land in October 2007. The plaintiff had not been given a mortgage over those properties, but, on the basis of the charge in the deed of loan, it lodged caveats over those properties. The fourth defendant needed to have the caveats removed in order for the refinance to proceed. 13 On 20 December 2007, the plaintiff and the second, third and fourth defendants entered into a deed. The deed recited, incorrectly, that the fourth defendant had granted a mortgage over the Yeppoon properties on 21 February 2007. 14 The plaintiff agreed to discharge the mortgage on payment of $50,000. The plaintiff was paid $50,000 and the caveats were withdrawn. 15 As part of the agreement contained in the deed, the second to fourth defendants agreed to the orders sought by the plaintiff in these proceedings, but on the basis that the orders would be stayed until 28 March 2008. 16 On 14 March 2008, McLaughlin AsJ made the orders as sought in respect of the Kent Street, Sydney, and Kellyville properties owned by the second defendant. His Honour stayed those orders until 28 March 2008. No application has been made to set aside those orders. 17 On 28 March 2008, his Honour made the orders sought in respect of the Schofields property owned by the third defendant. Again, the orders were made by consent. 18 The plaintiff caused writs for possession to be issued in respect of the Waitara unit, the Kellyville property and the Schofields property. 19 On 3 May 2008, the first to fourth defendants filed a notice of motion seeking interlocutory relief to restrain the plaintiff from taking possession or exercising a power of sale in respect of those properties, or the Kent Street property, and also sought orders to set aside the orders of 5 October 2007 and 28 March 2008. 20 The application to set aside final orders which have been entered and made by consent ought to have been brought by a fresh proceeding (Ainsworth v Wilding [1905] 1 Ch 435; Phillips v Walsh (1990) 20 NSWLR 206; Spies v Commonwealth Bank of Australia (1991) 24 NSWLR 691; Permanent Trustee Co (Canberra) Ltd v Stocks & Holdings (Canberra) Pty Ltd (1976) 15 ACTR 45; 28 FLR 195). However, that point was expressly waived by the plaintiff. 21 The fact that an application to set aside a judgment is brought in an inappropriate form is a matter which is capable of waiver, given that in the present case no claim is made to set aside the orders based on an allegation of fraud and the point has been waived by the plaintiff (Logwon Pty Limited v Warringah Shire Council (1993) 33 NSWLR 13 at 30; Spies v Commonwealth Bank of Australia).

22 The basis on which counsel for the first defendant submitted that the orders of 5 October 2007 affecting the first defendant should be set aside was that she had not given instructions for the compromise of the claim against her and that she had an arguable defence under the Contracts Review Act 1980 (NSW). 23 Counsel submitted that the orders should be set aside under r 36.15 of the Uniform Civil Procedure Rules on the basis that the orders had been irregularly obtained. 24 I do not agree. There is no question that the first defendant's solicitor had at least ostensible authority to bind his clients to the terms of the orders of 5 October 2007. There was no irregularity in the making or entering of those orders. 25 Nonetheless, the Court has inherent jurisdiction to set aside orders made by consent, even after entry, on grounds on which the contract embodied in the orders could be set aside. Further, where the Court's assistance to carry the compromise into effect is required, the Court may decline that assistance if to provide it would lead to injustice, although the grounds may not be sufficient to invalidate the contract between the parties (Harvey v Phillips (1956) 95 CLR 235 at 242-243). 26 Even if the first defendant's solicitor had no express or implied actual authority to sign the orders of 5 October 2007, those orders would not be liable to be set aside on any ground on which the contract embodied in them could be set aside. The plaintiff was not aware of any limitation on the solicitor's authority, assuming he did not have implied or express actual authority to bind his clients to those terms. Moreover, for the reasons developed further below, I consider that the first defendant's solicitor, Mr Rabadi, had implied actual authority to settle on the terms he did, even though, on the evidence before me, he had no express authority to do so. 27 Nonetheless, the orders are for the specific performance of the agreement to give a mortgage by an order for judicial sale which will be subject to the continued supervision of the Court. In such a case, the Court has a discretion not to lend its assistance to carry a compromise into effect if to do so would lead to injustice, notwithstanding that the compromise between the parties could not be avoided on a ground which would avoid a contract. 28 The basis on which the third defendant sought to set aside the orders of 28 March 2008 was that those orders had been procured under economic duress. 29 However, counsel for the defendants properly conceded that the matters alleged by the second to fourth defendants to amount to economic duress did not in law amount to such. (See Equiticorp Financial Services Ltd (NSW) v Equiticorp Financial Services Ltd (NZ) (1992) 29 NSWLR 260 at 296-297 and Equiticorp Finance Limited (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 at 106-109 and 149-150.) The plaintiff's insistence on obtaining the second to fourth defendants' consent to the orders as a condition of releasing the caveats over the Yeppoon land was not unlawful, nor unconscionable. 30 The second defendant, Mr Goodarzi, said that the plaintiff had no right to lodge the caveats over the Yeppoon properties. I am unable to see why that would be so. If it were so, the third defendant could have applied to the Queensland Supreme Court for their removal. 31 It follows that the claim to set aside the orders of 28 March 2008 should be dismissed. 32 The more substantial argument concerned the orders of 5 October 2007 in respect of the first defendant. The first defendant did not receive any part of the loan advanced. Although named as a principal borrower, she was in substance a surety. 33 The advance was made to discharge debts owed by the second defendant to Across Australia Commercial Finance Pty Limited. The shareholder of that company was a Mr Brooks. It appears from the company searches that in about May 2007, he transferred his shares to Mr Emms, who is the sole shareholder of the plaintiff. 34 Mr Brooks' evidence, on which he was not cross-examined and which I accept, was that in 2005 and 2006, Across Australia Commercial Finance Pty Limited made various loans to the second defendant secured by mortgages. The loans were all for short periods and carried high rates of interest. 35 As at 16 January 2007, after payment of $125,075, that company was owed $228,000 by the second defendant. On 18 January 2007, it made a further advance of $27,000 and was owed a principal sum of $255,000 plus interest of $5,030.16. 36 The properties provided as security to Across Australia Commercial Finance Pty Limited included the Kent Street and Kellyville properties as well as two other units at Waitara owned by the second defendant. 37 In February 2007, the second defendant was seeking to refinance his debts secured over the land at Yeppoon, Queensland, and his two units in Waitara. Across Australia Commercial Finance Pty Limited required its debt to be discharged. The loan facility from the plaintiff was entered into in order to discharge that debt. 38 The second defendant retained Mr Robert Lewis, a solicitor of Colin Biggers & Paisley, to act on the refinance. Mr Lewis conveyed to Mr Moloney, the solicitor acting for the plaintiff, a proposal from the second defendant that $255,000 be borrowed by the first to fourth defendants from the plaintiff with security by way of second-ranking equitable mortgages over the first defendant's Waitara unit, the Kent Street unit, the Kellyville property and the Schofields property. 39 The loan from the plaintiff to discharge the debt owed by the second defendant to Across Australia Commercial Finance Pty Limited was needed for the entire refinance package to proceed. 40 The first defendant received independent legal advice in connection with the deed of loan and the provision of security over the Waitara unit. She received that advice from Mr Raymond Lee of Raymond Lee & Co. She told Mr Lee that she was happy to provide her Waitara unit as security for the loan advanced but wanted her liability capped at $100,000. She told Mr Lee that she understood that she would be a guarantor for $100,000 and that if the second defendant did not repay the loan, the lender could take her property. This was a substantially accurate understanding of the risks attendant on her position. 41 Mr Lee sought amendments to the loan documentation and the plaintiff agreed to limit the first defendant's liability to $100,000. That limit on her liability extends to principal, interest and enforcement costs and not to principal only. 42 On the basis of a letter written by Mr Lee addressed to the first defendant and dated 22 February 2007, I also find that Mr Lee advised the first defendant that the terms of the deed of loan were onerous. English is not the first defendant's first language and she would not have understood that particular word, but Mr Lee further explained that the interest to be paid was excessive compared to other commercial loans and that the loan was for a very short term of one month, which could be extended to no more than three months, and only then provided the borrowers were not in default. 43 The first defendant gave evidence before me that she understood the interest on the loan was seven percent. I infer she meant seven percent per annum because she said it was less than the rate of interest banks charge. I do not accept that evidence. I do not consider that she had any such understanding. Neither the first defendant nor the second defendant was a credible witness. 44 The first defendant denied receipt of the letter of 22 February 2007 from Mr Lee. The letter was addressed to 120/122 Saunders Street, Pyrmont. The second defendant lived at 122/120 Saunders Street, Pyrmont, and both addresses were given in different documents for the first and second defendants. 45 If the letter had not been delivered, I would expect there to be evidence that it had been returned to sender. However, it is unnecessary to decide whether the letter was delivered to the first defendant. The letter confirms oral advice given by Mr Lee and, notwithstanding the first defendant's denials, I find the advice recorded in that letter was given by him to the first defendant. 46 The second defendant deposed that as at 21 February 2007 he owed about $200,000 to Mr Brooks and to the plaintiff. He was speaking of a time before entry into the deed of loan. It is clear that the debt then owed was owed to Mr Brooks' company. As I have said, Mr Brooks was the shareholder of Across Australia Commercial Finance Pty Limited. The second defendant deposed that when he signed the deed of loan, he expected to receive $255,000 from which he would pay approximately $200,000 to discharge the loan from Mr Brooks or his company. He said he did not receive any part of the $255,000. 47 However, it is clear that the debt owed by the second defendant to Mr Brooks' company, Across Australia Commercial Finance Pty Limited, was discharged on 21 February 2007. 48 The second defendant has not made any other repayment to Mr Brooks' company. Mr Brooks has not demanded payment and accepts that the loan from Across Australia Commercial Finance Pty Limited was discharged. 49 On 6 March 2007, the plaintiff's solicitor served a notice purportedly under s 57(2)(b) of the Real Property Act 1900 (NSW) and s 111 of the Conveyancing Act 1919 (NSW) alleging default in the payment of interest of $17,850 which was immediately due on the drawdown of the advance. 50 The second defendant deposed that the notice was wrongly addressed; the unit and street numbers were transposed. Although the first defendant denied receipt of the notice, the second defendant did not. 51 In any event, as the plaintiff is not seeking to exercise a statutory power of sale, it is irrelevant to the plaintiff's entitlement to judgment whether the document was received or not. The borrowers did not elect to extend the term of the loan and in any event they were in default in paying interest. 52 The first defendant said that she was not concerned because she was told by the second defendant that he had not received the $255,000 which had been promised and signed for. Any such statement by the second defendant would have been misleading because the moneys had been applied directly in the discharge of the second defendant's earlier debt to Across Australia Commercial Finance Pty Limited. The fact that it was not paid to the second defendant is immaterial. 53 The first defendant was served with a statement of claim in June 2007. It does not appear that any steps were taken to defend the proceedings at that time. However, after the plaintiff filed its notice of motion for summary judgment against the first defendant, the second defendant instructed Mr Raymond Lee's office to act on her behalf in the proceedings. Those instructions were given on or about 13 September 2007. 54 Mr Danni Rabadi of that firm acted for the first defendant. Mr Rabadi swore an affidavit on the application before me - much of which I did not permit to be read because Mr Rabadi is overseas and was not available for cross-examination. However, his file notes were admitted without objection and they and other documents from the file of Raymond Lee & Co provide a reasonably clear picture of advice given to the first and second defendants and instructions received from them. 55 In one file note, Mr Rabadi records instructions from "Katrin", that is, the first defendant. It reads: " Wants plaintiff to sell property as they do not have enough to pay. " 56 The file note is undated. A file note of 21 September 2007 records a telephone conversation between Mr Rabadi and the second defendant. Mr Rabadi wrote: " Berry [Goodarzi] adamant that he may get finance - however the pl [plaintiff] will avert [sic] from proceedings if we can show some confirmation that finance is available. Advise - we need to instruct counsel - need to defend N o M immediately. "

57 On 21 September 2007, the plaintiff's notice of motion was adjourned on the first defendant's application to 28 September 2007. Mr Rabadi retained Mr Redmond of counsel. On 26 September 2007, the first defendant conferred with Mr Rabadi and Mr Redmond and the second defendant separately conferred with them. 58 From Mr Redmond's memorandum of advice of 27 September 2007 and Mr Rabadi's file notes of the conferences of 26 September 2007, it is clear that Mr Redmond and Mr Rabadi considered possible defences, including a defence under the Contracts Review Act. Mr Redmond considered that any defence under that Act would fail because the first defendant had executed a statutory declaration acknowledging that the moneys were borrowed for business purposes. It was also considered that the Consumer Credit Code did not apply. 59 The notes of the conference record the first defendant raising the point that she had never received the advance of $255,000 from the plaintiff. It is clear that consideration was then given to how the principal sum in the deed of loan had been applied. The second defendant advised his legal representatives that he owed approximately $350,000 and had paid $125,000 in January 2007 and, if anything, he owed about $220,000 at that point. The second defendant also advised that he signed the mortgage agreement knowing that he would not receive and was not expecting to receive a lump sum of $255,000. 60 Unsurprisingly, counsel advised that, on balance, he considered the Court would order a judicial sale of the Waitara property. 61 Counsel noted that his instructions were that negotiations were underway to refinance with another financial institution. He recommended that that course be pursued in the light of his opinion as to the prospects of defending the notice of motion. Counsel advised seeking a further adjournment on the basis that that would allow time for the first to fourth defendants to negotiate refinance. 62 The first defendant gave evidence that she was advised by counsel that he considered she had a defence to the claim based on unconscionable conduct and on the fact that the principal of $255,000 had not been witnessed. 63 I reject that evidence. It is inconsistent with the contemporaneous records. 64 On 28 September 2007, the matter was adjourned by the Registrar to 5 October 2007. This was on the basis that the matter would be referred to an Associate Judge on the next occasion. 65 On 28 September 2007, Raymond Lee & Co wrote to the first and second defendants. The letter was addressed to 120/122 Saunders Street, Pyrmont. Again, this was a transposition of the address and the first defendant contended that she had not received the letter, although there was no evidence that it had been returned undelivered. 66 Raymond Lee & Co noted that counsel's advice was that the plaintiff's application may well be successful. They recommended that the defendants pursue refinancing and advised that they would continue to attempt to settle the matter, but, if they could not, the plaintiff may be successful in obtaining the orders sought. 67 Mr Redmond wrote to Raymond Lee & Co on the same day suggesting that he meet again with the first and second defendants to draft affidavits in response to the notice of motion in the event that refinance could not be obtained by the next return date and to draft a defence. Mr Redmond asked to be advised of a suitable time for a conference. No such conference was arranged. No affidavit or defence was prepared. 68 In my view, this was because the defendants and their legal advisers had formed the view that no proper defence was available and that the matter was best pursued by endeavouring to obtain time to effect a refinance. 69 I should add that, even on the present application, no draft defence has been formulated by the first defendant in a form which could be filed if judgment were set aside. I am not critical of the defendant's legal representatives for that. On the materials before me, I do not consider that such a defence could properly be certified. 70 There is no doubt that the terms of the loan were onerous, but the first defendant was aware of those terms. From the lender's perspective, the loan was very high risk. 71 This is not a case in which it could be inferred from the onerous terms that the lender had taken unconscientious advantage of a borrower's vulnerability (compare Starceavich v Swart & Associates Pty Ltd [2006] NSWSC 960; (2006) 12 BPR 23,639). 72 As I have already said, I do not accept the first defendant's evidence that she believed the interest rate to be seven percent per annum, being less than that charged by banks. The first defendant was independently advised. She negotiated changes to the loan documentation to limit her liability to a sum which is inclusive of principal, interest and enforcement charges. She knew that she would be liable for the sum of $100,000 if the second defendant did not arrange for the loan to be repaid and she knew that the units would be repossessed and sold if her debt was unpaid. Her earlier instruction to Mr Rabadi was to let the plaintiff sell the property. 73 On 5 October 2007, Mr Rabadi applied unsuccessfully to the Registrar for a further adjournment. The matter was referred to McLaughlin AsJ. Mr Redmond was not available, another counsel, Mr Salama, was instructed to apply for an adjournment from his Honour. That application was also unsuccessful. The matter was then stood down. 74 In a subsequent letter to Mr Redmond, Mr Rabadi said: " I later got instructions and settled the matter on the following basis: 1. Judgment of motion for the Plaintiff; and 2. Motion stayed for 4 weeks; 3. Balance of matter adjourned until 19 October 2007 . " 75 Both the first and the second defendants denied giving such instructions. However, I do not consider that any weight can be put on their evidence about that matter. Mr Rabadi's affidavit evidence in relation to his instructions was rejected because he was not available for cross-examination. There is, thus, no evidence as to what instructions were given to Mr Rabadi. 76 There is no evidence that Mr Rabadi was given instructions to settle the proceedings on different terms. Nor is there evidence which I accept that he was given instructions to proceed with the litigation in a way which was inconsistent with the compromise reached on 5 October 2007. 77 On that date, there was no prospect of the application for summary judgment being successfully defended. As I have said, no affidavit had been prepared and no defence had been prepared to show an arguable defence to the plaintiff's claim. In my view, none could properly have been prepared. 78 A solicitor or barrister retained to conduct litigation ordinarily has implied as well as ostensible authority to bind his or her client to a compromise of the proceedings provided that he or she does not act contrary to instructions, the circumstances do not otherwise indicate that express instructions are required, the compromise does not include matters collateral to the action, and the compromise is effected in a fair and reasonable manner so that it is fairly within the limits of authority (Donellan v Watson (1990) 21 NSWLR 335 at 342; Prestwich v Poley (1865) 18 CB (NS) 806; 144 ER 662; Waugh v H B Clifford & Sons Ltd [1982] Ch 374 at 387). 79 Nothing in the first defendant's dealings with her legal representatives placed any limit on Mr Rabadi's implied authority. She had previously instructed him that the plaintiff could sell the property. No steps had been taken by her to defend the motion. A compromise was beneficial as a stay was negotiated which would otherwise have been doubtful. 80 My conclusion that Mr Rabadi had both implied and ostensible authority to settle the matters on the terms he did is not necessarily the end of the matter for the reasons I have earlier given. But here, there is no reason why the Court should decline to lend its assistance to give effect to the compromise reached. The first defendant had no realistic defence. She obtained the further time the second defendant wanted to endeavour to refinance, but the refinance obtained was insufficient to discharge the debt. 81 It follows that the application by both the first and third defendants to set aside the orders of 5 October 2007 and 28 March 2008 should be dismissed. 82 It is not clear to me why no application was made for the setting aside of the orders of 14 March 2008 given the interlocutory relief sought in the notice of motion. It may be that that was an oversight. However, if it were an oversight, it suffices to say that, for the same reasons as I have already given, no application to set aside the orders of 14 March 2008 would have succeeded. 83 For these reasons, I order that the notice of motion filed by the first to fourth defendants on 13 May 2008 be dismissed. 84 I order that the orders numbered 1, 2 and 3 made on 13 May 2008 be discharged and that orders 1 and 2 made on 21 May 2008 be discharged. 85 Any application by the plaintiff to enforce the undertaking as to damages given on 21 May 2008 should be made by notice of motion and is referred to an Associate Judge. 86 The exhibits may be returned after 28 days.

[Counsel addressed on costs.] 87 Mr Bellamy submits that the appropriate costs order is that the first to fourth defendants pay the plaintiff's costs, but on the usual party-party basis and not on the indemnity basis. 88 It seems to me that there are two grounds upon which costs should be ordered on the indemnity basis. One is that under clause 13.1(b) of the deed of loan, the plaintiff has a contractual entitlement to recover all of its "... costs, charges and expenses incurred by the mortgagee in connection with the enforcement of or the preservation of any rights under this deed and security documents ... including but not limited to the fees and expenses of its legal advisers".

89 It would be productive of further dispute if the plaintiff were limited to recovering costs on a party-party basis pursuant to a costs assessment and then was required to sue separately for the difference between costs recoverable under clause 13.1(b) and costs recovered under an order made under s 98. That would be inconsistent with s 56 of the Civil Procedure Act 2005 (NSW), and is a proper matter to be taken into account when exercising the discretion under s 98. 90 Secondly, in my view, none of defendants had realistic prospects of success on the application. Indeed, in the case of the second to fourth defendants, they insisted on maintaining a position which counsel readily, and I should add, entirely properly, accepted could not be sustained. 91 The position is not as clear in relation to the first defendant. But even in relation to her case, I consider that the application was doomed to fail. In my view, the application ought not to have been brought. 92 I order that the first to fourth defendants pay the plaintiff's costs of the notice of motion of 14 May 2008 on the indemnity basis. 93 These orders may be taken out forthwith.

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