CITIBANK v PIRROTTA; CITIBANK v NICHOLSON

Supreme Court of SA|1997-12-01|Before: Perry J, Debelle J

On 14 November 1997 I delivered reasons for judgment in two actions which were tried jointly. In both of them, Citibank was successful, in one as plaintiff, in the other as defendant. In both of those actions, Citibank claims against the unsuccessful parties, its costs of action.

There is a third action, being an action brought by Citibank against Mr and Mrs Pirrotta, seeking an order for possession in aid of sale of mortgaged property.[1]

It was agreed between the parties before the two actions first mentioned came to trial before me, that the outcome of the joint trial of those two actions would be determinative of the issues raised in Citibank's action against Mr and Mrs Pirrotta to the intent that no other trial of the issues in that action would be sought.

In my opinion, Citibank in the first place must have the usual order for costs which follow the event of its success in the three actions.

There is a question as to the quantification of those costs.

Mr Hoile for Citibank has put the argument that Citibank is entitled to solicitor and client costs on an indemnity or common fund basis. That is, all such costs as might have been reasonably incurred by Citibank.

In support of that argument, he has referred to the decision of Debelle J in Katsaounis v Bellehris and Anor.[2] He referred also to other authorities, including Gomba Holdings (UK) Ltd and Ors v Minories Finance Ltd and Ors.[3]

Mr Hoile drew attention to the terms of the Memorandum of Common Provisions of Citibank's memorandum of a mortgage, those provisions being incorporated in the mortgage so as to form part of it. Pursuant to clause 1.1 of the mortgage "the mortgagor agrees to pay the mortgagee the Monies Hereby Secured".

In the common provisions appears the following clause:

"(j) Monies Hereby Secured includes all, or any of the following:

(vi) the amount of any costs, charges, expenses and liabilities of any description incurred by the Mortgagee.

(A) in or about the negotiation, preparation, execution, registration or stamping of this Mortgage, any Collateral Security or any Agreement;

(B) under this Mortgage or any document executed by the Mortgagor pursuant to this Mortgage, any Collateral Security or any Agreement;

(C) in the exercise or enforcement or attempted exercise or enforcement of any power or remedy which the Mortgagee has or is entitled to for any reason against the Mortgagor or in respect of the Mortgaged Property;

including but not limited to, the amount of any costs, charges expenses and liabilities not previously mentioned in this paragraph but incurred by the Mortgagee and the amount of any administration fee charged by the Mortgagee for follow up, recovery collection or enforcement action in relation to any moneys overdue in respect of this Mortgage, any Collateral Security, any Agreement or the Mortgaged Property and also the amount of any charges and disbursements for legal advice and assistance to the Mortgagee as between solicitor and client;".

I think one may take it as clear law that the entitlement of the mortgagee to costs in proceedings of this kind, insofar as it involves the exercise of the Court's discretion, includes its contractual right to costs.

Putting it another way, the discretion as to costs should "ordinarily be exercised so as to reflect that contractual right".[4]

Indeed, Mr Hoile advanced his argument as to costs solely on the footing that the contractual right which he argued was given to his client by reason of the Memorandum of Common Provisions decided the question in favour of his argument.

Against that, Mrs Simpson, counsel for Olson & Co and Ms Ballantyne, contended that contractual provisions of that kind only hold sway, as it were, with respect to the exercise of the discretion as to costs, when they are in plain and unambiguous terms. She further contended that the provisions in question here were not in such terms. She submitted that the ordinary rule, namely, that costs of litigation are, exceptional circumstances aside, awarded on a party and party basis, should apply.

Mrs Simpson referred to a number of authorities in which similar clauses have been construed. They are illustrative of the fact that the ingenuity of draftsmen of mortgages is productive of considerable variation in drafting styles. Solicitors burdened with the task of drawing mortgages all appear to me, in the cases which were cited, to have been stretching out in the direction of giving the most ample form of indemnity to the mortgagee against its liability for costs in protecting its rights under the mortgage. But some draftsmen succeed in that task more effectively than others. In the result, I do not find myself helped by any nice comparison of the way in which such clauses have been drafted and construed in other cases. But I have no difficulty in accepting the proposition that the language of the mortgage must plainly support the proposition contended for by Mr Hoile, before it can be afforded the construction which he suggests.

Mrs Simpson has put everything which could be said from the point of view of her clients. But despite her contentions, I do not have any difficulty in construing clause (j)(vi) of the Memorandum of Common Provisions in the manner put by Citibank. In particular, it seems to me that the words "costs, charges, expenses and liabilities of any description incurred by the mortgagee", including "the amount of any charges and disbursements for legal advice and assistance to the Mortgagee as between solicitor and client" are applicable.

The costs of Citibank of and in relation to the three sets of proceedings now in question are properly to be characterised as answering the description contained in that clause. As a matter of contract between the parties, such costs should be awarded on a solicitor and client basis.

But on the other hand it seems to me that if the draftsman of the document uses the expression "solicitor and client", it would be wrong to substitute another formula. It would be wrong to substitute the words "solicitor and own client", or to add the words "reasonably incurred". If the parties have solemnly agreed upon a formulation which includes the words "solicitor and client", they must receive their costs on that formula, whatever that may mean in the context of the particular case.

It will be for the taxing master in the context of any taxation which might ensue to give effect to the words "solicitor and client", so as to apply the yardstick adopted by the parties in their contract to the taxation of costs.

The remaining question to do with costs is as to an application by counsel for Mr and Mrs Pirrotta and Mr and Mrs Nicholson for an order in the nature of what has commonly been described as a Bullock order, that is to say, an order that the costs for which they are liable vis a vis Citibank should be recoverable as part of or added to the costs which they are otherwise entitled to against Olson and Co and Ms Ballantyne, having succeeded against those parties.

In my opinion such an order should be made. It seems to me that their actions against Olson and Co and Melissa Ballantyne were inextricably bound up with the proceedings in which they were otherwise engaged vis a vis Citibank. Having had the benefit of the joint trial at which the issues common to the proceedings between all of the parties were agitated, the proper course at this stage is to make an order along the lines which I have indicated. However, that cannot extend to the action no.2260/1993, that is the action brought by Citibank against Mr and Mrs Pirrotta. Neither Olson and Co nor Ms Ballantyne were party to that action, although as I have indicated it was agreed that the outcome of the other two actions would be regarded as determinative of it. That action, that is action no.2260 of 1993, was not brought to trial before me and the question of the costs incurred by the Pirrottas which they are liable to pay Citibank in those proceedings is not one which can be transferred to parties who are not a party to that action. But a question might arise in the action for damages brought by the Pirrottas against Olson and Co and Melissa Ballantyne as to whether or not any costs which the Pirrottas might incur in action no.2260 of 1993 may be recognised in the award of any damages which might ensue vis a vis Olson and Co and Melissa Ballantyne.

[HIS HONOUR WENT ON TO PRONOUNCE ORDERS IN ACCORDANCE WITH THESE REASONS]

At a glance

Court

Decision date

Before

Source

Judgment (29 paragraphs)