HER HONOUR: These proceedings arise out of loan facilities entered into between the Commonwealth Bank as lender and Mr and Mrs Goater as borrowers. The facilities are secured by mortgages over two properties in Moree owned by Mr Goater.
The Bank seeks possession of the properties and judgment in a money sum. The Goaters have brought a cross-claim against the Bank and a separate cross-claim against Moree Plains Shire Council. The cross-claim against the Bank arises out of a settlement agreement entered into between the Bank and the Goaters following their lodgement of a complaint with the Financial Ombudsman Service. The cross-claim against the Council arises out of the Council's disclosure to the Bank of financial information concerning the Goaters which is said to have prompted the Bank to abandon the settlement agreement and to pursue enforcement action. The Goaters allege that the disclosure of that information entailed a breach of duties of care and confidence owed by the Council to the Goaters and also amounted to misleading or deceptive conduct resulting in loss and damage.
The proceedings are listed for hearing for 5 days commencing on 29 May 2017. By notice of motion filed 18 April 2017, the Goaters sought to have the hearing dates vacated. The application was opposed by the Council. The Bank initially neither opposed nor consented to the application on the basis that there would be no prejudice occasioned by a short delay. However, upon being informed by the Court that no fresh hearing dates would be available until the end of the year, the Bank indicated its opposition to the application.
The motion came before me as Duty Judge on 24 April 2017. During the course of argument, the Bank made an open offer to resolve the application. The motion was stood over to 26 April 2017 to give the Goaters an opportunity to respond to the offer. It was rejected. After further hearing on 26 April 2017, I dismissed the application, reserving my reasons. These are my reasons for refusing to vacate the hearing dates.
Mr and Mrs Goater put forward three reasons why the hearing should not proceed on the dates fixed. The first related to an unresolved dispute as to the quantum of certain costs payable forthwith by the Bank to the Goaters. In short, the Goaters say they need to have those costs paid by the Bank in order to fund the impending hearing. To date, the Bank has paid less than half the amount claimed. The second and third reasons relate to discovery.
The context in which the costs issue arises should be explained. The proceedings were commenced by statement of claim filed in 2012. However, the prosecution of the claim had to abide the resolution of a complaint lodged by the Goaters with the Financial Ombudsman Service. The complaint was resolved by a settlement agreement. The Bank subsequently alleged that the Goaters had breached that agreement and in March 2014 obtained default judgment. A writ of possession was issued and in May 2014 the Bank took possession of the properties.
The Goaters then brought an application to have the default judgment set aside. That application was refused by Davies J, principally on the grounds that the Court did not have power to set aside the judgment once the writ had been executed: Commonwealth Bank of Australia v Goater [2014] NSWSC 652 at [23]. That decision was set aside by the Court of Appeal: Goater v Commonwealth Bank of Australia [2014] NSWCA 382. The Court set aside the default judgment and ordered the Bank to pay the Goaters' costs in this Division and on appeal. Possession of the properties was subsequently restored to the Goaters (presumably by agreement - no order to that effect was sought or made).
In August 2015, the Goaters' solicitor, Mr Hill, wrote to the Bank's solicitor seeking to reach agreement as to the amount of costs to be paid by the Bank. The letter claimed $103,361.35, which was said to be 75% of the costs actually incurred. A copy of Mr Hill's invoice to the client, which included considerable detail, was included with the letter. The Bank did not agree to pay those costs.
In September 2015, having formed the view that the Goaters had again fallen into breach of the settlement agreement, the Bank demanded repayment of the facilities and issued notices pursuant to s 57(2)(b) of the Real Property Act 1900 (NSW).
In October 2015, the Goaters filed a notice of motion seeking an order that the costs ordered against the Bank by the Court of Appeal be payable forthwith.
In March 2016, Campbell J made the order sought by the Goaters: Commonwealth Bank of Australia v Goater [2016] NSWSC 216. His Honour said (at [22]):
Having consideration to the arguments of Counsel, I am convinced by the argument that the order sought should be granted. While I accept that the delay was in part due to the conduct of Mr and Mrs Goater, considerations of fairness balance heavily against the significance of this consideration. Despite their part in the delay, Mr and Mrs Goater are likely to suffer from the delay in the finalisation of the proceedings. I am further aware that their representation is on a 'speculative basis'. From this, I infer that they are unable to put their solicitor in funds to fight the litigation. There is significant financial inequality between the parties, with the Bank being well placed to financially support extended proceedings, which cannot be similarly said of Mr and Mrs Goater. I am satisfied that the application to set aside the default judgment is sufficiently discrete to justify an order that the costs be payable forthwith. The impecuniosity of Mr and Mrs Goater might stultify the proceedings if the order is not made.
After the publication of Campbell J's judgment, Mr Hill sent two "without prejudice" letters offering to settle those costs without proceeding to assessment (dated 1 April 2016 and 9 June 2016). No response was made by the Bank to either letter.
On 7 July 2016, Mr Hill made an application for assessment of his costs. The assessment was not completed until March 2017. The costs were assessed in the amount of $98,301.45. The Bank immediately indicated that it would be applying for a review of the assessment. Mr Hill wished to have the review process expedited, stating that his clients did not have sufficient funds to prepare for trial. However, the Bank objected to expedition of the review process, but indicated its preparedness immediately to pay the sum of $46,754.62, being the uncontested portion of the bill.
The present application was supported by an affidavit sworn by Mr Hill stating that the litigation has been funded by his firm, that over $200,000 has been incurred in costs and that he is personally financially unable to prepare for the trial until the assessed costs are paid.
On the strength of that evidence, and in light of the remarks of Campbell J set out above, I formed the view that there was a real risk that the delay in resolving the dispute as to the quantum of costs payable by the Bank was causing real prejudice to Mr and Mrs Goater in their defence of the Bank's claim and the prosecution of their cross-claims. That was the very basis on which Campbell J was persuaded to order that those costs be payable "forthwith" (an order made over a year ago). While it is difficult if not impossible to form any view as to the likely outcome of the review of the original assessment, experience tells against the likelihood that the amount awarded will be as little as the amount paid to date by the Bank (less than 50 per cent).
Presumably recognising the force of those considerations, the Bank made an open offer in the following terms:
Upon Mr Hill giving a solicitor's undertaking to refund any amount of the costs found to be excessive by the review panel, the plaintiff shall pay, within seven days, to the trust account of Mr Hill the amount of $34,890.26.
The intention of the offer was to provide for payment in the order of 80 per cent of the amount claimed (the figures are not exact).
The Goaters rejected the offer on the grounds that, leaving aside the issue as to costs, Mr Hill is of the view that the hearing cannot proceed until the discovery issues are resolved. Two discovery issues were raised.
The first relates to alleged delay on the part of the Bank in giving discovery. After an exchange of correspondence, the Goaters received a list of documents from the Bank on 29 March 2017. The list included 16 documents as to 13 of which there was a claim of client legal privilege. Mr Hill states that he is instructed by Mr and Mrs Goater to dispute the privilege claims. Pressed as to the basis on which the claims might be disputed, Mr Hill tentatively indicated that the basis for the argument will be that, where documents over which privilege is claimed "could relate to a matter that could result in a civil penalty", privilege does not attach to the communication. He noted that one of the Goaters' claims against the Bank is for unconscionability which he submitted "gives rise to a liability for a civil penalty".
The submission evidently refers to s 126D of the Evidence Act 1995 (NSW), which provides:
126D Loss of professional confidential relationship privilege: misconduct
(1) This Division does not prevent the adducing of evidence of a communication made or the contents of a document prepared in the furtherance of the commission of a fraud or an offence or the commission of an act that renders a person liable to a civil penalty.
I was not persuaded that that was an issue which should prevent the trial from proceeding at this stage. Even if the argument foreshadowed holds good, it is not a basis for vacating a hearing date.
The second discovery issue raised by the Goaters related to three categories of documents of which the Goaters seek disclosure by the Council. An application for discovery of those three categories was brought by the Goaters and was dismissed by N Adams J: see Commonwealth Bank of Australia v Goater [2017] NSWSC 418. Her Honour disallowed each of the three categories. Mr Hill stated that he has instructions to seek leave to appeal against her Honour's judgment. Without seeking to pre-empt the likely outcome of any such application, my consideration of her Honour's judgment and the likely utility of the categories of documents sought has not persuaded me that that is a sufficient reason for vacating the hearing dates.
For those reasons, I took the view that the only persuasive basis for vacating the hearing dates was the issue of the costs payable by the Bank. The Bank submitted that the Goaters' rejection of the open offer made on 24 April 2017 gives rise to an inference that the preparation of the matter for hearing is not impeded by any lack of funds. I did not accept that submission. Although I did not share Mr Hill's view as to his inability to proceed without resolution of the two discovery issues identified, I accept that his assessment of those issues informed the rejection of the open offer.
In response to my suggestion to that effect, the Bank made a fresh offer at the conclusion of the hearing on 26 April 2017 in the following terms:
Provided the hearing dates commencing 29 May 2017 are maintained, without admissions, upon the solicitor's undertaking of Mr Hill to the Court to refund any amount of the costs found to be excessive by the review panel, the Bank shall pay, within 7 days, to the trust account of Mr Hill, the amount of $34,890.26. This offer remains open for acceptance until 5:00 p.m. on 22 May 2017, being seven days before the hearing.
As already noted, with the payment of that additional amount, the Bank will have paid 80 per cent of the costs claimed.
On the strength of that further offer, I was persuaded that the risk that the defence of the Bank's claim would be stultified by the Bank's failure to meet its liability under the costs order was adequately addressed. I also had regard to further evidence adduced by the Bank as to the remaining equity in the security property; in short, the position is dire. As required by the Civil Procedure Act 2005 (NSW), I also had regard to the hearing burden of this Division and the inconvenience that flows from the vacation of a hearing date. For those reasons and on that basis, I dismissed the application.
I considered it appropriate, in the circumstances, to reserve the costs of the application to the trial judge. Although the application was dismissed, that was on the basis that the Bank, fairly and appropriately, made concessions in response to the course of the argument. In those circumstances, the costs of the present application might fairly be informed by the merits of the issues raised in the substantive proceedings. I might equally have ordered that the costs of the application be each party's costs in the cause; that did not occur to me when I determined the application.
[3]
Amendments
08 May 2017 - Insertion of plaintiff's solicitor on cover sheet
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Decision last updated: 08 May 2017