Costs
24The parties accepted that costs should follow the event but were in dispute as to what that meant in the present context. Mr Gracie submitted that the plaintiff had been successful and should have its costs. I do not think that submission can be accepted in light of the defendant's success on the cross claim.
25Mr Zipser submitted that the defendant should have most of her costs. He relied on the decision of the Court of Appeal in Baker v Towle [2008] NSWCA 73. That case was concerned with the adjustment of interests in the property of parties to a de facto relationship pursuant to s 20 of the Property (Relationships) Act 1984. Basten JA drew a distinction between such cases and cases in which costs are apportioned on the basis of an assessment of success or failure on specific issues: at [84]. His Honour said:
However, in a case involving adjustment of interests in assets, it may be thought that justice is best done by an apportionment of costs depending upon the plaintiff's degree of success. The trial judge was not in error in adopting that approach in the present case, and the approach may properly be applied in relation to the appeal.
26Mr Zipser also relied upon decisions of the Court of Appeal in which costs have been apportioned following a successful cross claim under the Contracts Review Act. In Cook v Permanent Mortgages Pty Ltd [2007] NSWCA 219 at [22] to [24] per Giles JA; Beazley JA and Hoeben J (as his Honour then was) agreeing. Giles JA said:
22In my opinion this was not a sound exercise of the judge's discretion. As I have said, there was in the end no real dispute that the respondent was entitled to an order for possession. The real dispute was over the relief claimed by the appellants. The hearing lasted five days, and was all but exclusively devoted to that dispute. The issues were whether the Code applied to the loan transaction, whether the contract of loan was unjust and what relief should be granted. The respondent failed on all of these issues. There may have been some uncertainty in the precise relief claimed by the appellants, but in substance the appellants were successful. The respondent would be entitled to costs reflecting the commencement of the proceedings claiming possession and the relatively formal steps to prove its entitlement to possession, but otherwise the costs should, in my view, have gone to the appellants.
23The respondents submitted that nonetheless it was a matter for the judge's discretion, and it was insufficient that this Court would have exercised the discretion differently. Where I consider the judge erred is in failing to take account of the appellant's success in obtaining significant relief. It may have been by way of a relatively small reduction in principal and a greater reduction of the interest payable, but it was relief which the respondent had resisted on all of the issues of the application of the Code, injustice and the grant of relief. The judge's reasons indicate, in my respectful opinion, such misapprehension of this that I think he failed to take into account a material consideration. His exercise of discretion can thereby properly be displaced.
27The Court made a small allowance for the relatively formal steps required for the plaintiff to prove its entitlement to possession, ordering the plaintiff to pay 90% of the defendant's costs as agreed or assessed.
28In Tonto, the President said at [300]:
I have made the appellant responsible for three quarters of the costs of the proceedings and the appeal because I do not think that the costs order can be separated from the relief of the injustice contemplated by s 7(1) of the Contracts Review Act. The variation to the loan agreement leading the O'Donnells to fund 25% of the loan achieves justice in my view to both the lender and the O'Donnells. The costs order should reflect that proportion.
29I accept, as submitted by Mr Zipser, that the defendant was successful at each of the three stages involved in an application under the Contracts Review Act (explained in Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 at [106] to [109]). The defendant did not obtain all the relief she sought. The Court was asked to reduce the principal debt from $160,000 to $4,113 and that was declined. However, the plaintiff came to court seeking interest on that sum at the rate of 96 per cent per annum.
30The position is complicated by the fact that the plaintiff made a concession as to interest at the outset of the proceedings. As already noted, the interest rate provided for in the mortgage was 4 per cent per month (48 per cent per annum) with a default rate of 8 per cent per month (96 per cent per annum). The plaintiff made an open offer at the outset of the hearing to accept payment of the principal amount together with unpaid interest calculated at the rate of 2 per cent per month (24 per cent per annum) plus payment of the plaintiff's costs as agreed or assessed. The Court was subsequently informed that the offer should be regarded by the Court as a concession by Big Kahuna as to the maximum interest claimed in the proceedings.
31It may nonetheless be accepted, as submitted by Mr Zipser, that the reduction of the interest rate to 7 per cent per annum represents an apportionment of the burden of the loan in favour of the defendant. Applying the penalty rate of interest claimed by the plaintiff, the claim (including principal) was in the order of $928,000. At 2 per cent per month (according to the open offer) it was reduced to approximately $352,000 plus costs. The formal concession as to interest came after the hearing. The amount in which judgment is to be entered according to my reasons is about $218,000 (see affidavit of Mr Whitfield sworn 3 July 2012 at paragraph 4).
32Separately, Mr Zipser submitted that the manner in which I exercised my discretion under s 7 of the Contracts Review Act was "generous to the plaintiff" and that I should not "compound the generosity by adjusting the costs order to mirror that generosity". The submissions relied upon in support of that contention were the same submissions as were relied upon in support of the application to reopen the exercise of my discretion on the grounds of the principles stated in Autodesk (considered above). I do not think it would be appropriate to determine costs on the premise that the principal judgment entails error.
33In my view, however, it is appropriate to adopt the approach explained by the President in Tonto set out above. In doing so, I have had regard to the plaintiff's entitlement to a small allowance for the proof of its claim. I have also had regard to the plaintiff's open offer referred to above.
34On that basis, in my view a just result is to order the plaintiff to pay 70% of the defendant's costs up to and including the first day of the hearing and 40% of the defendant's costs from that date, such costs to be as agreed or assessed.
35I direct the plaintiff to bring in short minutes of order reflecting these reasons.