Collie v Merlaw Nominees Pty Ltd

Supreme Court of Victoria|1999-03-26|Before: Byrne J

ORDERS - quantum of equitable compensation - interest on judgment - costs - solicitor client costs.

On 22 December 1998 following a 13 day trial I published my reasoned judgment in this proceeding. In this, I made findings as to the factual and legal matters before me and left to the parties the task of calculating and, if possible, agreeing the sum, if any, to be paid by the firstnamed defendant ("Merlaw") to the plaintiff. Unhappily, the efforts of the parties have proved unsuccessful and they have returned to present argument upon the matters in dispute together with issues between them as to interest and costs.

I annex to this judgment a schedule which I have based on the helpful document prepared by counsel for Merlaw. In this schedule I set out the position of each of the parties on the various items and my decision upon them. These are the reasons for their decisions insofar as they concern disputed items.

Merlaw would deduct the sum of $5,207.10 as the costs of establishing this mortgage in December 1984. The agreements which underlie the proceeding were made in February 1985. The relevant calculation which I entrusted to the parties was to assess the amount of the unsatisfied obligations of Terramont under special condition 2 of the contract of sale. These were, relevantly, to indemnify Merlaw in relation to claims by the mortgagee under the Ogge Nominees mortgage and later under the ANZ Bank mortgage. The payment to Ogge Nominees some months before the entry into of the contract of sale gave rise to no such obligation in Merlaw which Terramont assumed.

The Ogge Nominees mortgage was discharged on its expiration in December 1987. Merlaw was in default in the payment of the last instalment and was obliged to pay to Ogge Nominees $9,867.48 in addition to the principal sum of $250,000. This it did by borrowing $265,000 from the ANZ Bank on a short term facility secured by a mortgage over the Jolimont property . This facility was in 1989 converted into a bank overdraft of $300,000 similarly secured which was discharged in 1990 when the Jolimont property was sold by the bank. The sum for final interest paid to Ogge Nominees in December was therefore included in the $300,000 which has already been deducted under Item 3. I will not allow Item 6.

The ANZ Bank loan facility was called upon by the issue of a series of bills from December 1987 until July 1989 when the bank refused to roll them over. Thereafter the debt was added to the Merlaw overdraft which was secured by the mortgage over the Jolimont property. I have found that the obligation of Terramont was to assume Merlaw's obligations to the bank under that mortgage, insofar as they related to this facility of $265,000 and later $300,000.

Merlaw says that in the period December 1987 to 15 February 1989 it paid a total of $52,412.62 to the bank. Under the terms of the contract between them, Terramont was to pay this sum to Merlaw. Counsel for Merlaw told me that no part of that sum was paid to Merlaw or to the bank by Terramont. It will be recalled that Terramont was to be conducted as a revenue neutral entity and that it had no source of income other than the amounts advanced to it by the Collie interests and the Nolan interests and rental and other payments received from them. Where such advances or payments were paid direct to Merlaw or to the bank at the direction express or implied of Terramont they would, to that extent, satisfy Terramont's obligation to which I have referred. These payments, if any, should therefore be deducted from the $52,412.62 and the surplus, if any, constitutes Item 7(i)(a). I shall refer the task of ascertaining the amount of these payments to a Master.

Item 7(ii) concerns the liabilities which Merlaw incurred under the ANZ Bank mortgage after February 1989 insofar as they are referable to the amounts incurred by Merlaw as debts to the Bank under the $300,000 facility which became part of its overdraft debt to the Bank. These, too, were to be paid by the Terramont. The plaintiff's calculation is $75,512; that of Merlaw $82,792.56. I shall refer to a Master the task of determining what is the correct amount.

The plaintiff, in addition, says that the amount incurred by Merlaw to the Bank should be reduced by $30,000 which the Bank allowed as a rebate on interest in late 1990. It is not clear on the evidence before me whether all or part or none of this rebate relates to that part of the Merlaw debt which is referable to the loan for which Terramont assumed responsibility under special condition 2. I shall refer this question also to a Master.

These items of $3,721.85 and $12,237 respectively relate to sums said to have been expended by Merlaw to repair and maintain the Jolimont property. Under the contract of sale Terramont did not assume liability for these. I will not allow these items.

Between 11 April 1989 and 15 May 1990 Merlaw paid Council and MMBW rates on the Jolimont property and land tax, totalling in all $8,367.28. These are sums for which it would be entitled to look to Terramont. Since they were payable by it under the terms of its mortgage to the bank. This item will be allowed.

According to the Merlaw bank statements, the Bank debited the account with two sums, $3,947.10 on 25 June 1990 and $4,693.37 on 20 July 1990. These were presumably for the Bank's legal costs relating to the enforcement of its mortgage security. Merlaw was liable for these under the mortgage and, in turn, Terramont must pay them. I would, however, expect that these amounts will be included in the calculation made or to be made under Item 7(ii). I will not allow them a second time.

Two sums, $48,300 and $5,000 were paid by Merlaw to Terramont on 3 December 1987 and 22 December 1989 respectively. These payments were made to reduce Terramont's overdraft and may have been unconnected with the relationship of vendor and purchaser which existed between them. The fact that Terramont played an altogether different role as the vehicle for the acquisition of equipment which Mr Collie and Mr Nolan shared, creates complications which I have sought to avoid in my judgment. I have in paragraph [103] of my judgment referred to this complication and have allowed the amount of the overdraft as it stood at the date of the Bank's sale as a deduction from the net proceeds of sale. I acknowledge that this sum includes dealings between the Collie interests and the Nolan interests with which I am not concerned. Nevertheless, it seemed to me proper to deduct this sum for the reasons there set out. For the same reasons I am of opinion that Terramont must allow to Merlaw the sum whose payment reduced that overdraft. I will allow item 12.

I will not allow this item. There was no agreement between Merlaw and Terramont that the latter would pay interest on sums which it ought to but did not pay under the contract of sale. I will not infer such a term in the contract of sale.

The contract of sale between Merlaw and Terramont included certain antique light fittings. I was told that before the mortgagee sale they were removed. I do not know by whom. I do not know their value. There is no reason to add any sum under this head to the compensation payable to Terramont for breaches it has established. I disallow this item.

Between April 1989 and 6 October 1989 or alternatively 18 July 1990 Mr Collie or Collian Services did not occupy the ground floor office at the Jolimont property. Let it be assumed that Mr Nolan excluded them. 6 October 1989 is the date on which Mr Nolan and Merlaw are said to have told the Bank that Terramont had no interest in the property. It is therefore said to be the date on which they "appropriated the property for their own use in order to satisfy the ANZ demands". 18 July 1990 is the date of the mortgagee sale of the property. This dispute between the Collie interests and Terramont or possibly with the Nolan interests is of no relevance to this proceeding. If Mr Collie or Collian Services has a complaint let them bring it elsewhere. This item is not allowed.

The plaintiff claims the sum of $35,748 for interest from 6 October 1989 to July 1990. What is sought here is a credit for the interest and fees paid by Merlaw to the Bank for which Terramont is otherwise liable as mentioned in Item 7(ii). This is sought on the basis that, since Merlaw and Mr Nolan disavowed the interest of Terramont in the property on 6 October 1989, they should not be permitted to approbate that interest by recovering the payments which went with it. There is no substance to this contention. Merlaw and Mr Nolan were wrong in disavowing the Terramont contract. It is not consistent with this conclusion that I too should ignore that contract. Item 16 is not allowed.

I will in due course order that the firstnamed defendant pay damages by way of interest on the amount found to be due. In a case such as this interest under s.60 of the Supreme Court Act 1986 runs from the date of the commencement of this proceeding and this is appropriate in this case.

It was put that I should decline to order interest on the basis that the plaintiff has unduly delayed the proceeding in its interlocutory stages and frequently amended its statement of claim. Delay there may have been. Its consequence has been that Merlaw has enjoyed the use of money which it ought to have paid to the plaintiff: Marsh v Ruby [1975] VicRp 20; [1975] VR 191 at 193, per Gowans J. I will not deprive the plaintiff of its entitlement to interest under the statute.

On the assumption that there will be in due course a sum owing to the plaintiff following the Master's enquiry, I will order that the firstnamed defendant pay the plaintiff's costs in the usual way. If the amount is less than $100,000 I will, nevertheless, order costs on the Supreme Court scale. This case has raised difficult and complex questions of fact and law and has concerned the obligations of trustees towards their beneficiaries. The disincentive created by R.63.24 should not be applied in this case unless, perchance, the amount recovered is very small.

It was said, too, that I should penalise the plaintiff for the manner in which he has conducted the proceeding. This included frequent amendments to the statement of claim and his failure to prepare Court Books as ordered. As to the first, the costs thrown away by the amendments will be borne in the usual way by the plaintiff. As to the latter, the evidence before me shows that any non-compliance is not to be laid wholly at the feet of the plaintiff. This is not a case moreover where I should apportion costs on the basis of separate issues as counsel for Merlaw contended. I should add, that delays at trial were not solely of the plaintiff's making, as I observed in paragraph [2] of my judgment.

At an early stage of the trial it was apparent that the plaintiff's claim against Mrs Nolan faced very great difficulties. These were discussed when the pleading against her was under consideration. I warned counsel for the plaintiff of the risk they ran and they nonetheless persisted with the case against her. The evidence did not improve the plaintiff's prospects. Nor did the submissions of law addressed against her. The risked event has come to pass. The plaintiff will therefore pay solicitor/client costs. It may be some consolation for him to know that, since she was not separately represented and since the evidence concerning her was short, the costs which will be attributable solely to her involvement are not likely to be substantial. These are, of course, matters for the Taxing Master.

I will therefore refer to a Master for enquiry and report to the court the following questions:

1. What payments were made between 24 December 1987 and 15 February 1989 to Merlaw or the ANZ Bank by Terramont or by any person on its behalf or at its direction, express or implied, in or towards discharge of the obligations of Merlaw to the bank under the mortgage of the Jolimont land?

2. What liabilities were incurred between 18 July 1989 and 21 July 1990 by Merlaw to the bank for interest, bank charges or otherwise under the mortgage of the Jolimont land insofar as the same are referable to the facility of $300,000 or to the overdraft into which this facility was converted?

3. Was any and what part of the $30,000 rebate allowed by the Bank to Merlaw in late 1990 a rebate of interest or bank charges referred to in question 2?

I will hear counsel further as to the precise terms of the referred questions. The orders referred to in this judgment as to interest and costs will stand over pending the making of final orders in this proceeding.

The costs of this application will be costs in the cause.

Terramont Overdraft - Additional payment by Merlaw

At a glance

Court

Decision date

Before

Source

Judgment (30 paragraphs)

Parties

Legislation Cited (1)