The Court published a judgment in these proceedings on 10 October 2023: Bellas v Powers [2023] NSWSC 1198 (the "principal judgment" or "J").
These reasons deal with the orders that should be made to give effect to the principal judgment, as well as the orders for costs that relate to the issues dealt with in that judgment.
In order to explain the conclusions in these reasons, it will be necessary to revisit aspects of the principal judgment. Where convenient, I will use the same terms as were used in that judgment.
The plaintiffs were respectively the Guarantor and the Borrower under a Facility Agreement. The first and second defendants were the Financier under the Facility Agreement. I will refer to them as the Powers in order to distinguish them from the other defendants. The third and fourth defendants filed a cross claim in these proceedings. I will refer to the cross claim below. Two other parties have been referred to as the fifth and sixth defendants, although sometimes they have been called interested parties. They are the plaintiffs in separate proceedings in which they have sued the present second plaintiff as a defendant (amongst others). The fifth and sixth defendants claim an interest in the funds that the present plaintiffs seek to recover in these proceedings.
In short, the issues that were listed for determination by the Court were six separate questions that are set out at J [14].
An order was made by Lindsay J for the determination of those separate questions, before any other issues that arise in the proceedings, against the background of the relief claimed by the plaintiffs in their amended summons. By prayer 1, the plaintiffs sought a declaration that a number of terms of the Facility Agreement are void and unenforceable for being a penalty. That claim was the subject of separate question 3.
Prayers 2 and 3 sought alternative relief under the Australian Consumer Law. That claim was the subject of separate question 4.
Prayers 4 to 7 sought declarations that the real property mortgages that were registered against the titles to the two properties owned by the first plaintiff did not secure any amount owing under the Facility Agreement, together with orders enforcing the first plaintiff's rights of redemption in respect of those properties. Separate questions 1 and 2 raised issues as to whether the mortgages that were registered against the titles to the two properties operated as security in respect of the second plaintiff's obligations as the Borrower under the Facility Agreement.
Separate question 5 required the determination of what amount, if anything, remains owing by the plaintiffs to the Powers that is secured against the sale proceeds of one of the properties.
The only question expressly determined by the principal judgment was separate question 3. The determination was that the relevant terms of the Facility Agreement were unenforceable and void on the ground that they constituted a penalty.
As explained at J [15], at the hearing the plaintiffs abandoned their claims in prayers 2 and 3 of the amended summons. Accordingly, it became unnecessary for the Court to determine separate question 4 concerning the plaintiffs' claim based upon the Australian Consumer Law.
The plaintiffs also abandoned their claims in prayers 4 to 7 of the amended summons. Their expressed reason for doing that was, as explained by their counsel, that the plaintiffs accepted that the Powers had a valid equitable charge over the balance of the proceeds of sale of the two properties, so there was no point in the plaintiffs seeking to establish that the mortgages that were registered in the Powers' name did not secure any amount owing under the Facility Agreement. For the reasons explained at J [21]-[28], I took the view that it was no longer necessary or appropriate for the Court to determine separate questions 1 and 2, given that those questions concerned only whether the mortgages secured the obligations of the second plaintiff under the Facility Agreement.
As I will explain below, my understanding that it was not necessary to determine separate questions 1 and 2 was probably mistaken. It arose out of the fact that the third and fourth defendants, being the cross claimants, did not take part in the hearing of the separate questions, and consequently I was not informed of the relationship between the cross claim and those separate questions. The result has been that I have discovered from reading the parties' written submissions and proposed orders that the orders must deal with wider issues than I understood I was deciding at the hearing of the separate questions. It may also be necessary to make a wider range of costs orders.
The Powers provided written submissions filed on 13 November 2023. The plaintiffs responded on 21 November 2023, and the third and fourth defendants did so on 22 November 2023. The Powers filed written submissions in reply on 24 November 2023.
It will be convenient at this stage to refer in outline to the cross claim filed by the third and fourth defendants on 5 August 2022. The plaintiffs are the first and second cross defendants. The Powers are the third and fourth cross defendants. The formulation of prayers 1 and 2 of the cross claim is confusing, as they seek declarations that the first cross defendant has charged its interest in one of the two properties, being the Leichhardt Property, to secure the payment of specified amounts under mortgages apparently granted to each of the cross claimants. The mortgages are described as being "(as defined herein)", but there are no definitions in the cross claim. That probably does not matter for present purposes. It is sufficient to note that the cross claimants claim the benefit of mortgages over the Leichhardt Property. Importantly, prayers 3 and 4 claim orders that each of the cross claimants be paid the amount claimed to be due to them in priority to the four cross defendants. Prayer 5 seeks an order against the first and second cross defendants, being the present plaintiffs, that they pay the amounts claimed to the cross claimants.
As noted above, there are separate proceedings by the fifth and sixth defendants against the present second plaintiff, being proceedings No 2021/00257925. Those proceedings have for some time been listed with the present proceedings for case management purposes. Relevantly, the principal object of the plaintiffs in the present proceedings is to establish that they are entitled to surplus funds from the sale by the Powers of the two properties the subject of the mortgages that were granted to them. The achievement of that object depended upon the plaintiffs succeeding in their claim that the terms of the Facility Agreement that provided that a higher rate of interest was payable by the second plaintiff was a penalty. If they had failed, the amount of principal and interest due to the Powers would have exhausted the proceeds of sale of the properties. As they have succeeded, the amount payable to the Powers will be less, so there will be a surplus available to meet the plaintiffs' claim. Under their cross claim, the third and fourth defendants claimed first, by prayers 3 and 4, that they were entitled to priority over the Powers' mortgage. Alternatively, they claimed by prayer 5 that the surplus after repayment of the amount owed to the Powers be paid to the third and fourth defendants. The object of the separate proceedings commenced by the fifth and sixth defendants is to establish that they are entitled to the surplus in priority to the present second plaintiff, which appears to put them in competition with the third and fourth defendants in respect of the entitlement to the surplus after the Powers have been paid the amount that is owed to them.
As I explained at J [25], the legal representatives of the third to sixth defendants who appeared at the hearing of the separate questions were given an opportunity to make submissions concerning the proper answers to those questions, but they did not do so. The legal representative for the third and fourth defendants withdrew, without explaining the substance of those defendants' position or explaining the relationship between their cross claim and the determination of the separate questions. The legal representative for the fifth and sixth defendants remained in court as an interested party but did not take part in the hearing.
Consequently, I formed the belief that it had ceased to be necessary for the Court to decide separate questions 1 and 2, which were expressed in terms of whether the mortgages granted to the Powers over the two properties operated as securities for the debt owed by the second plaintiff as Borrower under the Facility Agreement. As the plaintiffs had abandoned that claim for relief, it appeared that it was no longer necessary for the Court to determine those separate questions.
As it has happened, I did not appreciate that, in substance, separate questions 1 and 2 were also relevant to the claims of the third and fourth defendants, as cross claimants, by means of their prayers 3 and 4 that they were entitled to priority as against the Powers. There is not a precise verbal relationship between separate questions 1 and 2 and prayers 3 and 4 of the cross claim, but I now understand from the submissions made by the third and fourth defendants that they now accept that the Powers have priority over their own entitlements in respect of the proceeds of sale of the Leichhardt Property. Be all this as it may, it appears that part of the purpose of separate questions 1 and 2 being posed may have been to determine whether the Powers had an interest in the two properties that gave them priority to the claims of the third and fourth defendants.
I will return to this issue when I consider the orders proposed by the parties that appear to be based upon the subject matter of separate questions 1 and 2.
The Powers proposed the first draft of the orders that should be made by the Court. The plaintiffs responded by submitting revised proposed short minutes of order in mark-up.
The third and fourth defendants provided their own proposed short minutes of order which appeared to be a revision of the plaintiffs' version, which is therefore a mark-up of a mark-up. The third and fourth defendants provided written submissions in support of their proposed short minutes of order, notwithstanding that they did not participate in the hearing.
The fifth and sixth defendants have not provided any submissions to the Court. I infer that that is likely to be because the fifth and sixth defendants did not participate in the hearing, as they understood that the separate questions only raised issues as between the plaintiffs and the Powers. Whatever may be the truth of the position, the fifth and sixth defendants have made it clear at directions hearings over which I have presided that they do not challenge the Powers' priority in respect of the proceeds of sale of the two properties. The fifth and sixth defendants informed the Court that they could only succeed if the plaintiffs succeeded on the penalty question raised by separate question 3. This will be seen to be relevant below when I consider the costs orders proposed by the Powers.
The short minutes of order proposed by the Powers do not simply deal with the separate questions and the amended summons insofar as the plaintiffs withdrew or abandoned a number of the prayers. They also deal with the cross claim, of which the Court was unaware at the time of the hearing of the separate questions, as well as notices of motion of which I remain unaware. As the Court has not conducted any hearing in respect of the cross claim or the notices of motion, there will be limitations on the orders that the Court can make at this stage.
As the proposed orders are extensive, the most convenient way to indicate what the effect of the orders proposed by the Powers and the plaintiffs are, is to set out the revised short minutes of order as proposed by the plaintiffs. As the third and fourth defendants have proposed further revisions to the Powers' short minutes of order as revised by the plaintiffs, it will be necessary to consider the third and fourth defendants' proposals separately. The plaintiffs' revised proposed short minutes of order are:
1 Declaration that the Facility Agreement dated 31 August 2021 between the first and second defendants, as financier, the second plaintiff, as borrower, and first plaintiff, as guarantor, (Facility Agreement) is secured under the mortgage with registered dealing number AR403852 that was registered over the real property comprised within folio identifier [X/XXXXX] and known as [the Five Dock Property] and the mortgage with registered number AR403842 that was registered over the real property comprised within folio identifier [X/X/XXXX] and known as [The Leichhardt Property] (collectively, Mortgages).
2 Declaration that claims and interest of the first and second defendants pursuant to the Mortgages are first in priority to the claims and interest of each of the third to sixth defendants to the proceeds of sale of the real property comprised within folio identifier [X/XXXXX] and known as [the Five Dock Property] and the real property comprised within folio identifier [X/X/XXXX] and known as [The Leichhardt Property].
3 Declaration that the stipulation described in prayer 1 of the Amended Summons in the Facility Agreement providing for the payment of interest at the Standard Rate is unenforceable a [sic] penalty.
4 Declaration and order that, without admissions, the sum of $529,806.38 plus accrued interest from 13 November 2023 at the rate of $252.74 per day, be paid to the First and Second Defendant from the money held in the controlled money account maintained by Independent Legal pursuant to order 5 made by Justice Kunc on 27 June 2022. plus the amount of the first and second defendants' costs and expenses, is owing to the first and second defendants by the first and second plaintiffs under the Facility Agreement and which is secured by the Mortgages.
5 Order that the sum of $529,806.38 plus interest at the rate of $252.74 per day from 13 November 2023 to the date of payment, plus the amount of the first and second defendants' costs and expenses, be paid to the first and second defendants from the funds held in the controlled money account maintained by Independent Legal pursuant to Order 5 made by Justice Kunc on 27 June 2022.
6 Order that following the payment of the amounts referred to in order 4 above, the residual funds held in the controlled money account maintained by Independent Legal pursuant to Order 5 made by Justice Kunc on 27 June 2022 be paid into Court.
Amended Summons filed 6 July 2022 and costs of the separate questions
7 Order that the Amended Summons filed 6 July 2022 be otherwise dismissed listed before the Equity Registrar for further directions.
8 Order that the First and Second Defendants pay 80% of the Plaintiffs costs on a party/party basis in relation to the separate question to be paid forthwith, as agreed or assessed.
9 Reserve all other questions as to cost, to be costs in the cause.
10 Order that the first and second defendants' costs of and in relation to the proceedings be paid by the first and second plaintiff on a solicitor-client basis, except to the extent that any such costs are solely related to Separate Question 3 that was listed for hearing on 27 July 2023.
11 Order that the first and second defendants pay the plaintiffs' costs in respect of Separate Question 3, with such costs order to operate as a set-off against the amounts otherwise payable (including in respect of the costs order in Order 8 above) by the plaintiffs to the first and second defendants.
12 Order that the third to sixth defendants pay the first and second defendants' costs of the separate questions that were listed for hearing on 27 July 2023.
Cross Claim filed 5 August 2023
13 Order that the First Cross-Claim Cross Summons filed 5 August 2022 is dismissed as against the first defendant/third cross defendant and second defendant/fourth cross defendant.
14 Order that the third defendant/first cross claimant and fourth defendants/second cross claimant pay the costs of the first defendant/third cross defendant and second defendant/fourth cross claimant relating to the First Cross-Claim Cross Summons as agreed or assessed.
15 Order that the balance of the First Cross-Claim Cross Summons be stayed pending resolution of proceedings 2021/00257925.
16 List the First Cross-Claim Cross Summons for directions before the Equity Registrar on 7 December 2023 to be heard with related proceedings 2021/00257925.
Notice of Motions
17 Order that the Notice of Motion of the first and second defendants filed 12 September 2022 is dismissed with no order as to costs.
18 Order that the Notice of Motion of the fifth and sixth defendants filed 14 July 2022 as amended on 15 December 2022 is dismissed.
19 Order that the fifth and sixth defendants pay the first and second defendants' costs of the Notice of Motion filed 14 July 2022 as amended on 15 December 2022.
20 Order that the Amended Notice of Motion filed 15 August 2022 by the third and fourth defendants is dismissed as against the first and second defendants.
21 Order that the balance of the Amended Notice of Motion of the third defendant/first cross claimant and fourth defendant/second cross claimant filed 15 August 2022 is stayed pending resolution of proceedings 2021/00257925.
22 Order that the third defendant/first cross claimant and fourth defendant/second cross claimant pay the costs of the first defendant/third cross defendant and second defendant/fourth cross defendant relating to the Amended Notice of Motion filed 15 August 2022 as agreed or assessed.
I make the following observations concerning the short minutes of order proposed by the Powers, as revised by the plaintiffs, and taking into account the submissions made by the third and fourth defendants:
1. The declaration in order 1 concerns the effectiveness of the two mortgages in favour of the Powers as securities for the obligations of the plaintiffs under the Facility Agreement. As I understand it, the Powers and the plaintiffs agree to the making of that order, because it is the result of the plaintiffs abandoning prayers 4 to 7 of the amended summons. The third and fourth defendants did not contest that this order should be made.
2. Order 2 is a declaration that the interests of the Powers under their mortgages are first in priority to the claims of the third to sixth defendants to the proceeds of sale of the properties. The plaintiffs have agreed to this order being made. The third and fourth defendants also agree to this order being made. As I understand it, the agreement of the third and fourth defendants flows from their abandonment of their claim that their interests in the proceeds of sale of the Leichhardt Property take priority over the interest of the Powers. Although the fifth and sixth defendants did not take part in the hearing, as I have explained above, they have not taken the position that their interests in the proceeds of sale of the properties take priority to the interests of the Powers. On this basis, the declaration in order 2 can be made.
3. As the subject of the hearing was the determination of the separate questions, it will be appropriate to add orders that give direct answers to the questions.
4. Proposed order 3 reflects the conclusion reached in the principal judgment. The order as revised by the plaintiffs should be made.
5. Proposed order 4 concerns the amount payable by the plaintiffs to the Powers under the Facility Agreement on the basis that the Court's determination that certain terms of the Facility Agreement constitute a penalty is correct. In their submissions, the plaintiffs agreed to the amount of $529,806.38 plus interest from 13 November 2023 at the rate of $252.74 per day being paid out of the proceeds of sale to the Powers in order to stop interest running. As I understand it, the Powers object to the addition of the words "without admissions", because the intent of separate question 5 was to determine the amount payable by the plaintiffs to the Powers under the Facility Agreement. The Powers have provided a calculation in the conventional manner of the amount that they claim, and the plaintiffs have not indicated any objective disagreement with the calculation. In those circumstances, I accept the Powers' position.
6. The third and fourth defendants submitted that only $328,635.12 should be paid to the Powers for the period up to 1 July 2022. I propose to act on the agreement between the Powers and the plaintiffs as to the amount that is owed under the Facility Agreement. The Powers were entitled to issue a Financier's Certificate under clause 20.5 of the Facility Agreement that was evidence of the debt owing.
7. As to the second part of proposed order 4, which has been deleted by the plaintiffs, I understand the Powers' position to be that they are entitled to be paid their costs and expenses of their attempt to recover the money owing to them by the plaintiffs under the terms of the Facility Agreement. That is likely to be so, but it was not an issue specifically considered at the hearing, even if it is technically an issue that was raised by separate question 5. It is clear that the quantification of the costs and expenses that are claimed was not determined by the hearing, which was only concerned with the amount of principal and interest that is owed (and even then, that issue was barely addressed).
8. I will add an order that order 4 will be without prejudice to the right of the Powers to claim that additional amounts are payable under the Facility Agreement, as well as case management orders directed at ensuring that any additional amounts payable to the Powers are determined quickly and efficiently.
9. As I understand it, the effect of the plaintiffs' deletion of proposed order 5 is that it will not be necessary, given the revision that the plaintiffs propose to order 4.
10. The Powers and the plaintiffs agree as to how the balance of the proceeds of sale presently held in the controlled monies account should be dealt with by means of proposed order 6. The third and fourth defendants suggested that further negotiations take place to agree on an alternative means of holding the residual funds pending the final determination of the dispute. I will make the order agreed between the Powers and the plaintiffs.
11. By proposed order 7, the Powers seek an order that the amended summons be otherwise dismissed, while the plaintiffs submit no order for dismissal should be made, and the proceedings should simply be listed before the Registrar for further directions. As the Court should dismiss all the prayers for relief that were abandoned or withdrawn by the plaintiffs, the Court should make an order dismissing the plaintiffs' claims in prayers 2 to 7 of the amended summons. Prayers 8 and 9 seek an order that an account be taken of all monies received by the Powers on the sale of the properties owned by the second plaintiff and directions as to the manner of the taking of the account. The Powers' position apparently is that these prayers should also be dismissed because the issue was intended to be the subject of separate question 5, which concerned what amount, if anything, remains owing by the plaintiffs to the Powers under the Facility Agreement. The amount owing under the terms of the Facility Agreement is purely a matter for calculation in relation to outstanding principal and interest, and as to any consequential amounts that are payable. In theory, the amount received by a mortgagee upon the sale of a mortgaged property is a different matter than the amount of the debt that is secured by the mortgage. The issue raised by prayers 8 and 9 of the amended summons was not the subject of separate question 5. That said, as the exercise by the Powers of their rights as mortgagees of the two properties only involved the sale of two residential properties, the accounting process should be a relatively straightforward one that could be resolved as between the parties, if the Powers provided appropriate accounts to the plaintiffs. Until agreement is reached, it will be necessary to stand the balance of the amended summons over to the Registrar's list.
12. In order to understand the costs orders proposed by the Powers and the plaintiffs in relation to the issues raised by the amended summons, it is necessary to start with the terms of separate question 6. That question is in two parts; first, which parties should bear the costs of the determination of the separate questions and; second, if the answers to the separate questions conclude the involvement of the Powers in these proceedings, who should bear the Powers' costs of the proceedings and upon what basis of assessment. The determination of the separate questions will not conclude the involvement of the Powers in these proceedings, because the issue of the accounting has not been dealt with. The Court will therefore only make costs orders as between the plaintiffs and the Powers in relation to the determination of the separate questions, and the consequences of the plaintiffs' abandonment or withdrawal of prayers for relief in the amended summons.
13. The position adopted by the Powers concerning the costs of the issues raised by the amended summons is that the plaintiffs should pay those costs on a solicitor/client basis pursuant to the terms of the Facility Agreement, save for the costs solely related to separate question 3. The Powers accept that they should be ordered to pay the plaintiffs the costs in respect of separate question 3, with such costs to be a set off against the costs payable to them by the plaintiffs.
14. The plaintiffs' position is that the Powers should be ordered to pay 80% of their costs on the ordinary basis in relation to the separate question to be paid forthwith, and all other questions of costs be ordered to be costs in the cause. As I understand it, the plaintiffs suggest the 20% reduction to allow for their abandonment or withdrawal of prayers in the amended summons at the hearing.
15. Even though the hearing was only concerned with the determination of the separate questions, the effect of the plaintiffs' abandonment or withdrawal of prayers for relief is that the claims in those prayers will be dismissed. The costs of the issues raised by those prayers should follow the event and the plaintiffs be ordered to pay those costs to the Powers. So far as the Court is concerned, all of those costs would be payable on the ordinary basis. It may be that the Powers have a contractual right under the Facility Agreement to be paid their costs on the solicitor/client basis. That is an issue that was not dealt with at the hearing, and must be reserved.
16. In the absence of agreement between the plaintiffs and the Powers, there is no basis upon which the Court could determine 20% as the appropriate reduction in the costs payable by the Powers to the plaintiffs to be attributed to the issues that were withdrawn or abandoned. As the Court only dealt with the separate questions, it has no basis at all for assessing the relative forensic effort involved in the proceedings as a whole, as between the plaintiffs and the Powers.
17. By proposed order 12, the Powers seek an order that the third to sixth defendants pay their costs of the determination of the separate questions. As I understand it, all of the other defendants had the same interest in the answer to separate question 3 as the plaintiffs. In that respect, the other defendants succeeded. The other defendants had no interest in separate question 4. The fifth and sixth defendants did not in any real way contest the answer to any of the questions. Nor did the third and fourth defendants, although it has subsequently appeared in the manner that I have explained above that they have conceded that the answers to separate questions 1 and 2 should be in the affirmative. In the circumstances, I will not make order 12 proposed by the Powers, as it will complicate the issue of the payment of the costs of the hearing of the separate questions for little apparent benefit.
18. By orders 13 to 16 proposed by the Powers, the Court is invited to make orders to finally determine the cross claim filed by the third and fourth defendants as against the Powers. The effect of the orders proposed would be to dismiss the cross claim as against the Powers, with an order that the third and fourth defendants pay the Powers' costs. The balance of the cross claim would be listed before the Equity Registrar for directions.
19. By proposed orders 17 to 22, the Powers ask the Court to deal with notices of motion that have been filed by the Powers, the third and fourth defendants and the fifth and sixth defendants, by dismissing those notices of motion. Insofar as they were filed by the Powers or sought relief against them, the Powers also seek orders for costs in their favour, or that no order as to costs be made in respect of the notice of motion filed by them.
20. The plaintiffs have not taken a position concerning the cross claim or the notices of motion, I presume on the basis that they have no interest in the orders proposed by the Powers.
21. The third and fourth defendants, who are also the cross claimants, have responded to the orders proposed by the Powers in relation to the cross claim and the various notices of motion by accepting some of the orders, rejecting others, and proposing a number of new orders. The cross claim and the various notices of motion were not listed for hearing before the Court on 27 July 2023 when the Court dealt with the separate questions. I have no understanding of the procedural history of the cross claim or the notices of motion or what will be involved in the determination of the issues that are raised by them. I do not understand the extent, if any, to which the withdrawal or abandonment of the prayers for relief in the summons or the determination of separate question 3 will affect the outcome of the cross claim or the notices of motion. It is difficult to see how those matters will have any effect on those claims. The Court has not had the benefit of any explanation of these matters, or any oral submissions, and the written submissions that have been made are not sufficient to elucidate the issues.
22. In those circumstances, the Court will only be justified in making orders that affect the cross claim to the extent that it is satisfied that the third and fourth defendants accept that the orders should be made. The Court must be careful when considering the amendments to the proposed orders that have been suggested by the third and fourth defendants, because those amendments may have been suggested on the basis that, if they are not accepted by the Powers and made by the Court, then the Court should not make the orders that have apparently been agreed to by the third and fourth defendants.
23. The third and fourth defendants have agreed to orders 15 and 16 proposed by the Powers concerning the dismissal of part of their cross claim, save only that they have suggested that there should be specific references to prayers 3 and 4. I am satisfied that the Court should make the orders as revised by the third and fourth defendants. That position is consistent with those defendants having abandoned their claim to have priority over the interest of the Powers in the properties that have been sold, and those defendants having agreed that orders 1 and 2 should be made. Prayers 3 and 4 of the cross claim are the prayers that sought to establish that priority.
24. Orders 13 and 14 proposed by the Powers (being orders 15 and 16 in the plaintiffs' mark-up extracted above) would have the effect of staying the balance of the cross claim pending the resolution of the separate proceedings commenced by the fifth and sixth defendants to which reference has been made above. The third and fourth defendants have objected to the stay order, and sought to add an order that they have leave to amend their cross claim to claim new relief against the Powers. I will not make any of these orders at this stage, particularly in the absence of submissions by the fifth and sixth defendants. I will simply stand the cross claim as well as the separate proceedings commenced by the fifth and sixth defendants into the Equity Registrar's list for further directions.
25. There is substantial disagreement between the Powers and the third and fourth defendants concerning the orders that should be made in relation to the notices of motion that have been filed. The Powers are content for their notice of motion filed on 12 September 2023 to be dismissed with no order as to costs, but the third and fourth defendants seek an order that the Powers pay their costs. The Powers and the third and fourth defendants agree that an order should be made dismissing the notice of motion filed by the fifth and sixth defendants on 14 July 2022 on the basis that those defendants pay the Powers' costs. The fifth and sixth defendants have not had an opportunity to respond to these submissions. It appears, however, that the third and fourth defendants have agreed to an order that the amended notice of motion filed by them on 15 August 2022 should be dismissed as against the Powers, with an order that they pay the Powers' costs. They are the only orders that the Court can properly make at this stage.
In all of the circumstances discussed above, I consider that the only orders that should be made at this stage are:
1. Order that questions 1 and 2 ordered by the Court on 31 March 2023 to be answered separately under r 28.2 of the Uniform Civil Procedure Rules 2005 (NSW) be answered in the affirmative.
2. Declaration that the Facility Agreement dated 31 August 2021 between the first and second defendants, as financier, the second plaintiff, as borrower, and first plaintiff, as guarantor, (Facility Agreement) is secured under the mortgage with registered dealing number AR403852 that was registered over the real property comprised within folio identifier [X/XXXXX] and known as [the Five Dock property] and the mortgage with registered number AR403842 that was registered over the real property comprised within folio identifier [X/X/XXXX] and known as [the Leichhardt property] (collectively, Mortgages).
3. Declaration that claims and interest of the first and second defendants pursuant to the Mortgages are first in priority to the claims and interest of each of the third to sixth defendants to the proceeds of sale of the real property comprised within folio identifier [X/XXXXX] and known as [the Five Dock property] and the real property comprised within folio identifier [X/X/XXXX] and known as [the Leichhardt property].
4. Order that question 3 ordered by the Court on 31 March 2023 to be answered separately under r 28.2 of the Uniform Civil Procedure Rules 2005 (NSW) be answered in the affirmative.
5. Declaration that the stipulation described in prayer 1 of the Amended Summons in the Facility Agreement providing for the payment of interest at the Standard Rate is unenforceable as a penalty.
6. Order that the sum of $529,806.38 plus accrued interest from 13 November 2023, at the rate of $252.74 per day, be paid to the first and second defendant from the money held in the controlled money account maintained by Independent Legal pursuant to order 5 made by Justice Kunc on 27 June 2022.
7. Order that, following the payment of the amounts referred to in order 6 above, the residual funds held in the controlled money account maintained by Independent Legal pursuant to order 5 made by Justice Kunc on 27 June 2022 be paid into Court.
8. Order that the receipt by the first and second defendants of the money payable in accordance with order 6 be without prejudice to their right to claim additional payments under the Facility Agreement consistent with the declaration in order 5.
9. Order the first and second defendants to provide to the plaintiffs and to the other defendants within 14 days of the making of these orders a statement of all of the additional amounts to which they claim to be entitled under the Facility Agreement up to the date of the statement, together with appropriate vouchers to demonstrate their entitlement to the payments.
10. Order the plaintiffs and the defendants other than the first and second defendants to provide to the first and second defendants within a further 14 days a statement of the claims made by the first and second defendants which are accepted by them, and the claims which are not, in the latter case with an explanation of the basis of the dispute.
11. Order that there be paid out of the money paid into Court in accordance with order 7 the amount claimed by the first and second defendants in accordance with order 9 that is not disputed by the plaintiffs or any of the other defendants.
12. In respect of any dispute raised by the plaintiffs or the defendants other than the first and second defendants in accordance with order 10, direct that directions be made concerning the resolution of that dispute at the next directions hearing in these proceedings.
13. Order that the claims for relief in prayers 2 to 7 of the Amended Summons filed on 6 July 2022 be dismissed.
14. Order that the amended summons be listed before the Equity Registrar on 1 February 2024 for further directions concerning the determination of the balance of the relief sought by the plaintiffs.
15. Order the first and second defendants to pay the plaintiffs' costs of the determination of separate question 3.
16. Order the plaintiffs to pay the first and second defendants' costs of the proceedings in relation to the claims for relief in prayers 2 to 7 of the amended summons, to include their costs of the determination of separate questions 1 and 2.
17. Order that order 16 be without prejudice to the right of the first and second defendants to claim additional costs or that the costs payable to them be on a particular basis in accordance with the Facility Agreement, such additional claim for costs to be dealt with in accordance with orders 8 to 12 hereof.
18. Reserve all other questions of costs as between the plaintiffs and the first and second defendants.
19. Order that prayers 3 and 4 of the first cross claim cross summons filed 5 August 2022 be dismissed as against the first defendant/third cross defendant and second defendant/fourth cross defendant.
20. Order that the third defendant/first cross claimant and fourth defendant/second cross claimant pay the costs of the first defendant/third cross defendant and second defendant/fourth cross claimant relating to prayers 3 and 4 of the first cross claim cross summons.
21. Order that the balance of the cross claim be listed before the Equity Registrar on 1 February 2024 for further directions.
22. Order that proceedings No 2021/00257925 be listed before the Equity Registrar on 1 February 2024 for further directions.
23. Order that the amended notice of motion filed 15 August 2022 by the third and fourth defendants is dismissed as against the first and second defendants.
24. Order that the third defendant/first cross claimant and fourth defendant/second cross claimant pay the costs of the first defendant/third cross defendant and second defendant/fourth cross defendant relating to the amended notice of motion filed 15 August 2022.
Given the complexity of the issues considered in these reasons, having particular regard to the fact that the Court has been invited to make orders that were not the subject of submissions at the hearing of the separate questions, I will give the parties a brief opportunity to comment on the proposed orders, limited to improvements in the formulation of the orders and the correction of any misunderstandings under which the Court might be operating, given the circumstances in which the Court has had to consider what orders should be made. It will be necessary for the parties to provide any further submissions to my Associate by 11 December 2023.
[2]
Amendments
12 December 2023 - Correction of party at [13].
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 12 December 2023