Rules of the Supreme Court, O 60A r 4(1), O 62A r 2

AGC (Advances) Ltd v West (1986) 5 NSWLR 301

ANZ Banking Group (NZ) Ltd v Gibson [1986] 1 NZLR 556

Cottrell v Stratton (1872) LR Ch App 295

Dryden v Frost (1838) 3 My & Cr 670

Elders Trustee & Executor Co Ltd v E G Reeves Pty Ltd (1988) 84 ALR 734

Elders Trustees & Executor Co Ltd v Eagle Star Nominees Ltd (1986) 4 BPR 9205

Ex parte Prackert [1987] 2 Qd R 560

In re a solicitor; ex parte the estate of Howell (1939) 56 WN (NSW) 133

Katsaounis v Belehris (1994) 179 LSJS 143

Maher v Network Finance Ltd (1986) 4 NSWLR 694

Micarone v Perpetual Trustees Australia Ltd (No 2), unreported; FCt SCt of SA; 10 December 1999

Perry v Rolfe [1948] VicLawRp 51; [1948] VLR 297

Prince v Howarth [1905] 2 KB 768

Re Adelphi Hotel (Brighton) Ltd [1953] 1 WLR 955

Re Shanahan (1941) 58 WN (NSW) 132

Sandtara Pty Ltd v Australian European Finance Corporation Pty Ltd (1990) 20 NSWLR 82

Shercliffe v Engadine Acceptance Corporation Pty Ltd (No 2) (1982) 3 BPR 9,207

Union Finance Association Ltd v Howarth (1903) 4 SR (NSW) 31

1 MASTER SANDERSON: This is an appeal from a Registrar and is brought pursuant to O 60A r 4(1). It raises again the question of the basis upon which costs are to be awarded when a mortgagee makes an application for possession, pursuant to O 62A.

2 The facts can be simply stated. The plaintiff is the holder of a registered mortgage over certain property held by the defendant. The defendant defaulted under the mortgage and the plaintiff issued proceedings seeking vacant possession of the property. The defendant did not enter an appearance. The plaintiff sought an order for possession under O 62A r 2. The plaintiff also sought an order for what is commonly known as indemnity costs. When the matter came on for hearing before the learned Registrar, an order for possession was made. The Registrar refused, however, to make an award of indemnity costs. Rather, he awarded costs on a party/party basis. The plaintiff now seeks to have the Registrar's order set aside and seeks an award of costs on an indemnity basis.

3 The mortgage on which the Bank sues is to be found as Annexure "NR4" to the affidavit of Natalie Rose Raper, sworn 12 May 2000. The relevant clauses of the mortgage are in the following terms:

"21.3 You indemnify the Bank against, and you must therefore pay the Bank for, liability, loss or costs (including consequential or economic loss) the Bank suffers or incurs:

(a) if you default under this mortgage (in which case you will also be liable for any loss arising because the Bank requires payment of the amount owing earlier than its due date); or

(b) in connection with the property or the Bank's monitoring of works.

(a) the costs and expenses of its internal lawyers (on a full indemnity basis) and external legal costs such as barristers' fees, lawyers' fees and expenses (on a full indemnity basis), receivers' fees and charges, valuers' fees and charges, real estate agents' fees and commissions, licensed debt recovery agents' fees and commissions, process servers' fees, enquiry agents' fees and other Bank agents' fees; and

4 There is no doubt, then, that the parties agreed that if it was necessary for the Bank to take steps to recover the property, the costs incurred by the Bank were to be paid by the defendant on a full indemnity basis. Of course, such an agreement cannot bind the court. But it is apposite to note that, as between the plaintiff and the defendant, there was an agreement that any costs payable by the defendant to the plaintiff should be paid on a full indemnity basis. It is also correct to note, as the learned Registrar pointed out, that irrespective of what order for costs is made by the court the plaintiff can recover expenses actually incurred on a full indemnity basis from the defendant pursuant to the contractual terms claimed in the mortgage. It may be the case then that a refusal to award indemnity costs on an application brought under O 62A will be of no practical effect.

5 However, that still leaves open the question of what is the appropriate order when a plaintiff such as the present plaintiff seeks an order for indemnity costs. I considered this very question in Bank of Western Australia Ltd v Ponga & Anor, unreported; SCt of WA; Library No 980697; 2 December 1998. In the circumstances, it is worth repeating the conclusion I reached in that decision:

"1. An order for the payment of costs of proceedings by one party to another party is always a discretionary order: see s 37 of the Supreme Court Act.

2. Where there is a contractual right to the costs, the discretion should ordinarily be exercised to reflect that contractual right.

3. Any contractual provision which allows a mortgagee to claim for all costs associated with enforcing a mortgage are recoverable subject always to review by the court on taxation."

6 These principles are, I think, consistent with what was said by the English Court of Appeal in Gomba Holdings UK Ltd v Minories Finance Ltd (No 2) [1992] 4 All ER 588 and with the decision in Citibank Savings Ltd v Nicholson, unreported; FCt SCt of SA; 1 April 1998. They are also consistent with what was said by Malcolm CJ in Wenpac Pty Ltd v Allied Westralian Finance Ltd, unreported; SCt of WA; Library No 940051; 1 February 1994 at 6 - 12. Furthermore, the decision in Ponga's case has been considered and approved by Owen J in Rumball v Mortimore [2000] WASC 126 and by Wheeler J in an earlier decision in the same case.

7 It must always be the case that an award of costs is discretionary. To that extent, any earlier decision on the subject, while persuasive, is not binding. It may well be the case that circumstances exist which would render an order for indemnity costs, even where there was an agreement between the plaintiff and the defendant, such as here, inappropriate. The court in Gomba Holdings recognised that such discretion exists and I also recognised that in the Ponga decision. But no circumstances exist in this case which would in any way compromise the plaintiff's claim for indemnity costs. They have complied with the terms of the mortgage and, as was recognised by the learned Registrar in relation to default notices, they may have gone further than was strictly necessary. In the circumstances, to deprive them of an order for indemnity costs was, in my view, both unfair and unreasonable. Accordingly, I am satisfied that the appeal ought be allowed. The orders that I will make are as follows:

1. The costs of the action, including all reserved costs and the costs of the application for leave, be the plaintiff's to be taxed if not agreed, on a full indemnity basis (namely all costs incurred by the plaintiff, except insofar as they are of an unreasonable amount or have been unreasonably incurred, so that, subject to the above exceptions, the plaintiff be completely indemnified for its costs).

2. The costs of the appeal be the appellant's (Plaintiff's) to be taxed, if not agreed, on a full indemnity basis (namely, all costs incurred by the plaintiff, except insofar as they are of an unreasonable amount or have been unreasonably incurred, so that, subject to the above exceptions, the plaintiff be completely indemnified for its costs).