Kolevski v Timber Creek Holdings Pty Ltd (No 2)

Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) rr 36,16(1), 36.16(3A) and 42.25(1)

Cases Cited: Australian Competition & Consumer Commission v The Shell Company of Australia Ltd (1997) 72 FCR 386; [1997] FCA 73
Kolevski v Timber Creek Holdings Pty Ltd [2025] NSWSC 487
Phillips v Walsh (1990) 20 NSWLR 206

Texts Cited: Nil

Category: Procedural rulings

Parties: Nikolce Kolevski (First Plaintiff/First Cross-Defendant)
Lena Kolevski (Second Plaintiff/Second Cross-Defendant)
Cameron Kolevski (Third Plaintiff)
Timber Creek Holdings Pty Ltd (Defendant/Cross-Claimant)

Representation: Counsel:
M Maconachie (Plaintiffs/Cross-Defendants)
A McInerney SC/D Southwood (Defendant/Cross-Claimant)
Solicitors:
Kells (Plaintiffs/Cross-Defendants)
Stanton & Stanton (Defendant/Cross-Claimant)

File Number(s): 2022/25474

Publication restriction: Nil

JUDGMENT

1. I delivered judgment in this matter on 16 May 2025: Kolevski v Timber Creek Holdings Pty Ltd [2025] NSWSC 487 (the Judgment (J)). I made orders for the possession and sale of the Shell Cove property and the Port Kembla property, although the orders in relation to the Port Kembla property were stayed for the reasons explained at J[259]-[260]. The orders made on 16 May gave effect to my principal conclusions that (a) Nick and Lena had entered into a loan and security agreement with Timber Creek under which Timber Creek held both properties as equitable mortgagee, (b) Nick and Lena were in default under that agreement and (c) Nick and Lena had not tendered payment to discharge the equitable mortgages.

2. These same conclusions meant that it was appropriate to order that the amended statement of claim be dismissed. That pleading had relevantly sought orders for the properties to be transferred to Cameron or to some other person at Nick and Lena’s direction in return for payment of an amount of money. The factual basis for relief of that kind was not made out. I did not accept that the agreement between the parties was as described in the plaintiffs’ evidence, nor did I accept that the plaintiffs had ever been ready, willing and able to complete such a transfer as they alleged.

3. I also directed the parties to make submissions as to costs, which they have now done. Additionally, Timber Creek has made an application for some additional orders to give effect to the relief granted on 16 May.

Timber Creek’s notice of motion

4. On 20 May 2025, Timber Creek filed a notice of motion for additional orders as follows:

“1. Pursuant to rules 36.16(1)-(3A) Uniform Civil Procedure Rules 2005 (UCPR) the Defendant/Cross-claimant applies to vary the orders made on 16 May 2025 at J[265] Kolevski v Timber Creek Holdings Pty Ltd [2025] NSWSC 487 as follows:

a. The following to be inserted after paragraph J [265(5)]

(5A) A declaration [that]the oral agreement made in about July 2015 between Nikolce Kolevski and Lena Kolevski and Timber Creek Holdings Pty Ltd was in the nature of a loan and mortgage, which:

(a) involved an assignment of the Shell Cove and Port Kembla Properties as security for repayment of funds outlaid by Timber Creek Holdings Pty Ltd to acquire, hold and sell the Properties;

(b) included a term that Nikolce Kolevski and Lena Kolevski would rent the Properties, and pay $3,600 per month, and that they would pay all outgoings and land tax; and

(c) included a term that Timber Creek Holdings Pty Ltd was entitled to earn a return of 6.5% per annum on all funds advanced, including initial costs and transfer duty, reduced to 5% per annum from 21 June 2018.

(5B) A declaration that Timber Creek Holdings Pty Lid, as mortgagee, of Shell Cove and Port Kembla Properties, has the right as an incident of the mortgage to recover from the sale of the Shell Cove and Port Kembla Properties all costs and disbursements reasonably and properly incurred in protecting and enforcing the loan and mortgage, including all legal costs and disbursements incurred in the Supreme Court Proceedings 2022/00025474 (in defence of the Statement of Claim, and in respect of the Cross-Claim), on a party /party basis.

b. Vary paragraph J[265(7)] to read as follows:

(7) The proceeds to be applied in the following way:

(a) To the defendant/cross-claimant, up to an amount representing the total amount outlaid by Timber Creek to acquire, hold and sell the properties including any taxes and duties, plus a return of 6.5% per annum (as modified to 5% per annum as of June 2018) in relation to such outgoings, less any payments actually made by or on behalf of the first and second plaintiffs up to the date of sale; and

(b) to the defendant/cross-claimant representing the total amount outlaid in respect of all costs and disbursements reasonably and properly incurred in protecting and enforcing the loan and mortgage, including all legal costs and disbursements incurred in Supreme Court Proceedings 2022/00025474 (in defence of the Statement of Claim and in respect of the Cross-Claim), on a party/party basis; and

(c) The balance to the first and second plaintiffs/cross-defendants.

2. Costs.

3. Such further or other orders as the Court considers appropriate.”

5. The application was brought within the time specified by the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 36.16(3A).

6. The plaintiffs do not dispute that the Court has power to make the supplemental orders sought. Their submission was limited to the contention that the Court should not, in the exercise of its discretion, make such orders. That contention was based largely on the proposition that relief of the kind now sought had not been sought to begin with and was in fact contrary to the defendant’s primary case.

7. I am satisfied that the Court has power to make the orders sought because they are in aid of the enforcement and ‘working out’ of the orders made on 16 May: Australian Competition & Consumer Commission v The Shell Company of Australia Ltd (1997) 72 FCR 386; [1997] FCA 73 at 395 (Drummond J); Phillips v Walsh (1990) 20 NSWLR 206 at 209-210 (McLelland J).

8. I am also satisfied that it is appropriate in the exercise of my discretion to make the orders sought. The orders made on 16 May mean that Timber Creek is now empowered to deal with the properties in its capacity as equitable mortgagee. This will entail dealings with third parties. It is appropriate for it to do so with the benefit of a declaration to that effect, namely a declaration that makes clear the capacity in which it is dealing. The proposed orders address that matter.

9. The fact that these declarations are inconsistent with Timber Creek’s primary case is nothing to the point. They are entirely consistent with its alternative case, which I accepted. Timber Creek should not now be denied appropriate supplemental relief only because that relief aids its success on an alternative case.

Costs

10. The plaintiffs submit that they have had a measure of success and that the parties should pay their own costs of the proceedings. They point out that Timber Creek succeeded on the basis that it is an equitable mortgagee, which was the proposition at the heart of the plaintiffs’ case and which, as part of its principal case, Timber Creek resisted.

11. I accept that the plaintiffs have had that measure of success in the proceedings. However, their success was not as ‘considerable’ as they submit. It was not such as to warrant a departure from the ordinary rule that costs should follow the event. Nor was their success a sufficient reason to depart from the rule that Timber Creek’s costs be paid out of the mortgaged property: UCPR r 42.25(1). As already mentioned, the conclusion that Timber Creek was a mortgagee reflected an alternative case presented by Timber Creek and was based on my acceptance of Timber Creek’s evidence. As I made clear, my conclusions as to what was said in the critical discussions between Nick and Ken were overwhelmingly based on the defendant’s evidence, not the plaintiffs’. Although there were some very limited respects in which I found the plaintiffs’ evidence to be consistent with the inherent logic of events, I generally rejected the plaintiffs’ evidence for reasons of it being unreliable. I also rejected Cameron’s evidence as to having been – and continuing to be – ready, willing and able to discharge the equitable mortgages.

12. I was therefore not willing to grant any of the relief in the amended statement of claim: J[264]. I do not consider that the conclusions I reached on the real issues in dispute reflect a considerable degree of success by the plaintiffs.

Orders

13. The Orders of the Court will be as follows:

14. The orders made on 16 May 2025 in these proceedings be varied pursuant to the Uniform Civil Procedure Rules 2005 (NSW) (‘UCPR’) rr 36.16(1) and (3A) by the insertion of orders 5A and 5B:

“(5A) Declare that the oral agreement made in about July 2015 between Nikolce Kolevski, Lena Kolevski and Timber Creek Holdings Pty Ltd was in the nature of a loan and mortgage, which:

i. involved an assignment of the Shell Cove and Port Kembla Properties as security for repayment of funds outlaid by Timber Creek Holdings Pty Ltd to acquire, hold and sell the Properties;

ii. included a term that Nikolce Kolevski and Lena Kolevski would rent the Properties, and pay $3,600 per month, and that they would pay all outgoings and land tax; and

iii. included a term that Timber Creek Holdings Pty Ltd was entitled to earn a return of 6.5% per annum on all funds advanced, including initial costs and transfer duty, reduced to 5% per annum from 21 June 2018.

(5B) Declare that Timber Creek Holdings Pty Ltd, as mortgagee of the Shell Cove and Port Kembla Properties, has the right as an incident of the mortgage to recover from the sale of the Shell Cove and Port Kembla Properties all costs and disbursements reasonably and properly incurred in protecting and enforcing the loan and mortgage, including all legal costs and disbursements incurred in the Supreme Court Proceedings 2022/00025474 (in defence of the Statement of Claim, and in respect of the Cross-Claim), on a party/party basis.”

2. Order 7 made on 16 May 2025 in these proceedings be varied pursuant to UCPR rr 36.16(1) and (3A) to read as follows:

“(7) The proceeds of sale to be applied in the following way:

i. To the defendant/cross-claimant, up to an amount representing the total amount outlaid by Timber Creek to acquire, hold and sell the properties including any taxes and duties, plus a return of 6.5% per annum (as modified to 5% per annum as of June 2018) in relation to such outgoings, less any payments actually made by or on behalf of the first and second plaintiffs up to the date of sale; and

ii. To the defendant/cross-claimant representing the total amount outlaid in respect of all costs and disbursements reasonably and properly incurred in protecting and enforcing the loan and mortgage, including all legal costs and disbursements incurred in Supreme Court Proceedings 2022/00025474 (in defence of the Statement of Claim and in respect of the Cross-Claim), on a party/party basis; and

iii. The balance to the first and second plaintiffs/cross-defendants.”

3. An order for the plaintiffs to pay Timber Creek’s costs of the proceedings.
4. An order for the plaintiffs to pay Timber Creek’s costs of the Notice of Motion filed 20 May 2025.
5. An order under UCPR r 42.25(1) for Timber Creek’s costs of the proceedings to be paid out of the mortgaged property, being the ‘Shell Cove Property’ and the ‘Port Kembla Property’ as defined in the orders made on 16 May 2025 in these proceedings.

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