Lee v Australia and New Zealand Banking Group Ltd [2013] QCA 284

PARTIES: CHOL YONG LEE (appellant) v AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED ACN 005 357 522 (respondent)

FILE NO/S: Appeal No 2117 of 2013 SC No 6599 of 2010

DIVISION: Court of Appeal

PROCEEDING: General Civil Appeal – Further Orders

ORIGINATING COURT: Supreme Court at Brisbane

DELIVERED ON: 1 October 2013

DELIVERED AT: Brisbane

HEARING DATE: Heard on the papers

JUDGES: Fraser JA and Atkinson and Philip McMurdo JJ / Separate reasons for judgment of each member of the Court, each concurring as to the orders made

ORDERS: **The respondent pay to the appellant one-half of his costs of the appeal.****The order for costs made in the Trial Division be set aside.**The appellant pay to the respondent one-half of its costs of the proceeding in the Trial Division to date, to be assessed upon the indemnity basis.

CATCHWORDS: PROCEDURE – COSTS – DEPARTING FROM THE GENERAL RULE – ORDER FOR COSTS ON THE INDEMNITY BASIS – where respondent had contractual entitlement to have its costs paid on an indemnity basis – where appellant had substantial success on appeal – where respondent ultimately prevailed at trial and on appeal on the question of the enforceability of its mortgage over the appellant’s property – whether the Court should exercise its discretion as to costs in a manner other than in accordance with the respondent’s contractual entitlement / Kyabram Property Investments Pty Limited v Murray [2005] NSWCA 87, cited

COUNSEL: No appearance for the appellant, the appellant’s submissions were heard on the papers / No appearance for the respondent, the respondent’s submissions were heard on the papers

SOLICITORS: Sung Do Lawyers for the appellant / Gadens Lawyers for the respondent

1. FRASER JA: I agree with the reasons for judgment of Philip McMurdo J and the orders proposed by his Honour.

2. ATKINSON J: I agree with the reasons for judgment of Philip McMurdo J and the orders proposed by his Honour.

3. PHILIP McMURDO J: On 27 August 2013, it was ordered that the appeal be allowed, the money judgment in favour of the respondent be set aside and the case be remitted to the Trial Division, to determine the amount for which the respondent should have judgment against the appellant upon the findings made in this court. The parties were then allowed to make written submissions as to the costs in the Trial Division and on the appeal. This judgment concerns those costs.

4. The appellant submits that the respondent should pay his costs of the appeal and his costs of the trial, in each case upon the standard basis with provision that two counsel be allowed.

5. The respondent submits that it should pay no costs to the appellant and that there should be an order that the appellant pay some of its costs and upon the indemnity basis.

6. Subject to one matter, the consequence of the judgment in this court would appear to be that the appellant owes the respondent an amount, broadly speaking, between $50,000 and $100,000. This court has held that he is liable for the indebtedness of the company described in my judgment as GMG, in respect of the respondent’s provision of a rental guarantee in favour of GMG’s landlord. The amount of that guarantee in favour of the landlord was $32,776. The evidence at the trial did not enable a calculation to be made of the appellant’s liability as a guarantor only of that facility. There was evidence that the amount owing as a guarantor of that facility and GMG’s overdraft facility was, as at the trial, $176,378.75. The agreed limit of the GMG overdraft facility was $30,000. That limit was exceeded on 7 January 2009, when the respondent paid the landlord the amount of the rental guarantee, $32,776. The overdrawn balance thereby became $61,675.53. After then the liability of GMG grew by the compounding of interest to the amount which was proved at the trial. In approximate terms then, the amount of the bank guarantee, together with interest upon that sum, is likely to be about half of that amount of $176,378.75.

7. The appellant now says that when this matter is again considered in the Trial Division, it will be found that the appellant’s liability in relation to the GMG rental guarantee is “nil based upon agreed facts or those found by the Court of Appeal.”¹ That assertion is surprising. If it has substance, it is remarkable that it was not raised at the hearing of the appeal, because its acceptance in this court would have resulted in the appellant being entirely successful. The facts which are said to have been agreed or found by this court are not identified in the appellant’s submissions. At the trial, there was uncontested evidence that the rental guarantee was called upon by the landlord and that it was paid by the respondent.² There was no plea by the appellant which suggested that any of that liability of GMG was discharged from some other source.

8. The respondent prevailed on the question of the enforceability of its mortgage. That incorporated terms by which the appellant agreed to pay its legal fees, upon a full indemnity basis, relating to the enforcement or exercise of its powers as a mortgagee. The terms of the appellant’s guarantee also provided for the payment of costs and for an indemnity against any loss by the respondent as a result of any breach of a relevant facility or of the guarantee itself. Upon the basis of these provisions, the respondent says that its costs should be paid and upon the indemnity basis.

9. But the respondent is not seeking to recover its costs as a liquidated debt owing under these instruments: rather it is seeking to have the Court, in the exercise of its discretion as to costs, make an order which corresponds with what it says is its contractual entitlement. As its argument appears to accept, the existence of this contractual entitlement does not require an order for the payment of its costs and upon the indemnity basis. In such cases, it remains a discretionary judgment for the court, although the discretion should ordinarily be exercised in a way which corresponds with the mortgagee’s contractual entitlement.³ The question then is whether the discretion should be exercised other than according to the respondent’s contractual right. In my view, there are circumstances here which warrant such a departure.

10. The respondent brought its claim to trial upon the basis that the appellant was liable in respect of four facilities: two of each of the principal debtors. It was not until the commencement of the trial that the respondent abandoned its case in respect of the LNY bank guarantee. The most important and time consuming factual question was whether the respondent had been asked to “put on hold” the appellant’s instructions. Ultimately that question has been answered adversely to the respondent and that conclusion must be appropriately reflected in the orders for costs. The respondent was also unsuccessful in its argument, at trial and upon appeal, that the appellant was precluded from defending this case by his conduct of the District Court case. Against that, the bank prevailed in relation to one of the facilities and thereby in relation to its claim for possession of the mortgaged property.

11. In these circumstances, the appellant can fairly claim to have had substantial success in his appeal. In my view, that warrants some order for costs in his favour. I would order that the respondent pay one-half of his costs of the appeal.

12. As for the costs of the Trial Division, the respondent had to make its claim, and in the Supreme Court, because the appellant was denying any liability and any entitlement to an enforceable mortgage. The case was started before the most recent increase in the jurisdictional limit of the District Court, which was less than the value of the mortgaged property. The length of the trial was certainly longer for the existence of the “put on hold” issue although, without it, the case would still have taken some days. I would order the appellant to pay to the respondent one-half its costs of the proceeding in the Trial Division to date, to be assessed upon the indemnity basis having regard to the respondent’s contractual entitlement to indemnity costs.

13. These orders are, in my view, appropriate because the respondent had to bring and prosecute this case to a judgment in order to take possession of the mortgaged property, whilst the appellant had to bring the appeal to correct a money judgment which was excessive.

14. Each side suggests that there should be something from this Court which endorses the use of two counsel. One argument did involve a legal question of some complexity, which was the respondent’s unsuccessful argument about the impact of the District Court proceedings. Otherwise there is nothing about this case which would suggest the need for representation by two counsel. The amounts in issue were relatively small. I would not agree that two counsel were necessary.

15. The orders I propose are:

16. The respondent pay to the appellant one-half of his costs of the appeal.

17. The order for costs made in the Trial Division be set aside.

18. The appellant pay to the respondent one-half of its costs of the proceeding in the Trial Division to date, to be assessed upon the indemnity basis.