Supreme Court of SA|2004-03-11|Before: Doyle CJ, Anderson JJ, Duggan J, January Williams J

PERPETUAL TRUSTEES AUSTRALIA LTD & ORS v BARKER No. SCCIV-02-1833 [2004] SASC 58 (11 March 2004)

1 DOYLE CJ: I would allow the appeal for the purpose of ordering that paragraph 1 of the order of 22 August 2003 be varied to provide that the costs payable by the plaintiff to the first defendant be taxed as between solicitor and client, but would otherwise dismiss the appeal. I agree with the reasons given by Duggan J. I agree also with the reasons given by Duggan J for the order previously made, that the application by Mr Barker for an extension of time within which to cross appeal be refused, and that the purported notice of cross appeal be struck out.

2 DUGGAN J. This is an appeal against two components of a costs order.

3 The appellant, as mortgagee, took steps to enforce a power of sale over property owned by the respondent mortgagor. The respondent then applied pursuant to s 55A(3) of the Law of Property Act 1936 ("the Act") for relief against the enforcement of the appellant's right of sale. The respondent's application was unsuccessful.

4 The learned judge appealed from ordered that the respondent pay the appellant's costs of the respondent's application on a party and party basis. The costs order also required the appellant to pay the respondent's costs associated with an application by the respondent for an interlocutory injunction prior to the hearing of the application for relief.

5 The appellant argued on appeal that the judge appealed from erred in not ordering that the appellant's costs on the application be awarded on an indemnity or solicitor and own client basis. It was also argued that the court erred in directing that the appellant pay the respondent's costs on the application for the interlocutory injunction.

6 The respondent represented himself at the hearing of the application for relief and on the appeal before this court. Prior to the commencement of the appeal he purported to file a cross-appeal against the dismissal of the application for relief. The notice of appeal was filed out of time, but was treated as incorporating an application for an extension of time for the filing of the appeal. However, the extension of time was refused for reasons which are set out below.

7 The proceedings arose in the following circumstances. The respondent purchased vacant land at Craigmore and contracted with a builder to erect a house on the site. The respondent was entitled to a first homeowner's grant of $14,000 to assist with the building. Most of the balance of the purchase and building costs were borrowed from the appellant and secured by a mortgage over the property.

8 The respondent defaulted in the payment of instalments due under the mortgage in June, July and August 2002. A notice of demand was served on him on 7 August 2002. On 23 August 2002 the appellant served on the respondent a notice of default and notice of intention to exercise the mortgagee's power of sale in accordance with the terms of the mortgage.

9 In due course, the appellant took steps to exercise its power of sale and an auction was scheduled for 15 December 2002.

10 Section 55A(3) of the Act provides that a mortgagee may make an application for relief against the exercise of a mortgagee's rights within 21 days of the service of the default notice. The respondent did not make application within that time. However, an application for an extension of time for the filing of an application under the section was made on 12 December 2002. The respondent also applied for an injunction to prevent the auction from proceeding. At a hearing on 13 December the court granted an interim injunction preventing the sale of the property. The injunction was granted subject to the respondent paying the sum of $5,139 into court. The matter was adjourned for argument to 19 December. After the hearing the respondent paid the stipulated amount into court.

11 At the completion of the proceedings on 13 December the appellant served a notice on the respondent alleging that the respondent owed a further $5,552.48. It was claimed that there had been default in respect of this amount and that, in accordance with the terms of the loan contract, the total amount now owing was $40,443.16. There was a demand for immediate payment of this amount.

12 A further default in payment occurred on 2 January 2003, although part-payment of this instalment was made on 16 January. On 28 January Williams J heard argument on the application for an interlocutory injunction to restrain the sale of the property. Judgment was delivered on 6 February 2003. The learned judge refused the respondent's application for an interlocutory injunction and dissolved the interim injunction.

13 The respondent appealed to the Full Court against this decision. On 14 March 2003 an order was made extending the time within which to institute the appeal and an injunction preventing the sale of the property in contemplation of the appeal was granted.

14 The hearing before the Full Court took place on 5 May 2003 and judgment was delivered on 23 May. The appeal was allowed and the orders made by Williams J were set aside. An interlocutory injunction preventing the sale of the property until further order was granted. The respondent's application for relief pursuant to s 55A(3) was referred to a single judge for hearing.

15 At that hearing, the learned judge appealed from dismissed the respondent's application for relief. He then made orders as to costs which, in so far as they are relevant to the present appeal, are set out above.

16 The first point raised on appeal concerns the basis upon which the costs payable to the appellant are to be taxed. According to the argument, the judge at first instance erred in failing to give appropriate effect to the agreement between the parties when making the costs order. It was argued that, in the light of the terms of the agreement, the proper course was for the court to order that the appellant should have its costs on an indemnity or solicitor and own client basis.

17 In support of this argument the appellant relied on the following provisions in the loan contract:

"20.5 Enforcement expenses may become payable under your loan contract or the mortgage in the event of a breach.

20.6 You must pay all reasonable enforcement expenses Perpetual reasonably incurs or expends in exercising its rights under your loan contract or under any security resulting from any default. These amounts may be debited to your account and they are payable when they are debited."

18 Reliance was also placed on the following covenants in the mortgage:

"7.1 Enforcement expenses may become payable under the Mortgage in the event of default under clause 5.

7.2 You must pay the Mortgagee all reasonable enforcement expenses the Mortgagee reasonably incurs or expends in exercising its rights under the Mortgage. In the case of legal fees and disbursements, these are payable on the higher of a full indemnity basis or a solicitor and own client basis."

19 It is common practice for mortgages and associated agreements to include covenants and terms of this type, thus rendering it necessary for courts to consider the interaction between such agreements and the discretionary power to award costs.

20 In Gomba Holdings (UK) Ltd v Monories Finance Ltd [1993] Ch 171 at 194 the Court of Appeal, whilst recognising the discretionary nature of costs orders, held that where there is a contractual right to costs, the discretion should ordinarily be exercised so as to reflect that right.

21 This approach was followed by the Full Court in Citibank v Pirrotta & Ors (Full Court of Supreme Court of SA, 1 April 1998, unreported) with the qualification that the mortgagee should be limited to party and party costs unless the mortgage contract plainly and unambiguously provides for taxation on some other basis.

(See also In re Shanahan (1941) 58 WN (NSW) 132 at 134; In re Adelphi Hotel (Brighton) Ltd [1953] 1 WLR 955 at 961; Elders Trustee & Executor Company Ltd v EG Reeves Pty Ltd (1988) 20 FCR 164).

22 The effect of clauses bestowing such rights on mortgagees will depend upon their interpretation in each case and they will not be given effect so as to place mortgagors in a less favourable position than would otherwise be the case unless they are unambiguously expressed.

23 The judge at first instance acknowledged the principles expressed in these cases. However, he concluded that, as a matter of construction, the covenants in relation to "enforcement expenses" in the present case, in particular clause 7.2 of the mortgage, did not apply to costs incurred by a mortgagee in defending an application by a mortgagor seeking relief pursuant to s 55A(3).

24 The learned judge pointed out that the phrase "enforcement expenses" is not defined in either the loan contract or the mortgage. However, he observed that the provisions of the Consumer Credit Code (the Code) applied to both the loan contract and the mortgage. Schedule 1 of the Code defines "enforcement expenses" as including:

"expenses incurred by the mortgagee in preserving or maintaining property subject to the mortgage (including insurance, rates and taxes payable for the property) but only if the expenses are incurred after a breach occurs and are authorised by the mortgage."

25 His Honour was of the view that the phrase "enforcement expenses" in the mortgage and loan contract was intended to have the same meaning as that given to it in the Code. He then drew attention to the following provisions in the Code:

"45 (1) A mortgage is void to the extent that it secures an amount, in relation to any credit contract which it secures, that exceeds the sum of the amount of the liabilities of the debtor under the credit contract and the reasonable enforcement expenses of enforcing the mortgage.

(2) A mortgage is void to the extent that it secures an amount, in relation to any guarantee which it secures, that exceeds the limit of the guarantor's liability under the guarantee and the reasonable enforcement expenses of enforcing the mortgage.

...

99 (1) A credit provider must not recover or seek to recover enforcement expenses from a debtor, mortgagor or guarantor in excess of those reasonably incurred by the credit provider.

(2) Civil effect. Any provision of the credit contract, mortgage or guarantee that appears to confer a greater right is void. If enforcement expenses are in fact recovered in excess of this limitation, they may be recovered back.

(3) If there is a dispute between the credit provider and the debtor, mortgagor or guarantor about the amount of enforcement expenses that may be recovered by the credit provider, the Court may, on application by any of the parties to the dispute, determine the amount of that liability."

"It is plain that steps taken towards the exercise of a power of sale where there has been default in the payment of instalments fall into the category of enforcement expenses. The costs of an application for possession would likewise fall into that category. However, the application brought by the plaintiff was in exercise of a statutory right conferred upon him by s 55A of the Law of Property Act. Subsection (3) enables the Court to grant relief to a mortgagor against the enforcement of such rights by the mortgagee and to reinstate the position of the mortgagor 'in all respects as if no breach of a covenant or condition of the mortgage had occurred'.

I construe Clause 7.2 of the mortgage as entitling a mortgagee to indemnity costs or solicitor and own client costs where those costs are incurred in enforcing its rights under the mortgage. Defending an application for relief against the enforcement of those rights is not the same as enforcing those rights. Section 55A(3) contemplates an application being brought by a mortgagor where the mortgagee has taken no steps to enforce its rights other than to serve a notice required by s 55A(1). It is an application independent of any steps taken by the mortgagee to enforce its rights.

There might be a sense in which it can be said that, in defending an application under s 55A, a mortgagee is defending the exercise of its rights to enforce the terms of the mortgage. However, there is a difference between enforcement expenses incurred in exercising rights under the mortgage and defending one's right to be able to exercise those rights.

In order to rely on a contractual term such as Clause 7.2, the mortgage must "plainly and unambiguously" provide for taxation on the higher basis. In my opinion, this clause does not, in respect of an application under s 55A(3). If it did, it would probably fall foul of s 99 and s 45 of the Consumer Credit Code."

27 It followed from this reasoning that the covenants in the mortgage did not impact on the general costs discretion and costs were awarded on a party and party basis.

28 In order to answer the questions raised on appeal it is necessary to have regard not only to the relevant provisions in the agreement between the parties, but also the nature of the procedure provided for in s 55A(3) of the Act. Section 55A was enacted by the Law of Property Amendment Act 1972 following recommendations made in the Seventeenth Report of the Law Reform Committee of South Australia which dealt with various aspects of the law relating to mortgages and the rights of mortgagees.

29 Concern was expressed in the report that existing procedures for the enforcement of mortgagees' rights such as ejectment did not provide the courts with a discretion wide enough to grant relief against forfeiture in those cases in which the mortgagor could be reinstated in the mortgage upon the tender of sufficient amends to bring the mortgage payments up to date. The Committee recommended that relief of the type available to lessees in forfeiture proceedings be extended to mortgagors.

30 The method chosen in the legislation to provide this protection was to require enforcement procedures relating to rights of sale, foreclosure and possession and the right to appoint a receiver in respect of mortgaged land to be instituted by means of a written notice containing the information prescribed in s 55A(1). Upon receipt of the notice, the mortgagor is given the right to apply for relief pursuant to s 55A(3).

31 It is evident from a consideration of these provisions that the procedure for applying for relief is built into the enforcement procedures. Enforcement action of the type prescribed cannot be undertaken outside the procedure prescribed by the section. The purpose of s 55A(3) is, in the wording of the section, to "grant relief to a mortgagor against the enforcement of rights of a kind referred to in subsection (1)".

32 I respectfully disagree with the view expressed by the judge at first instance that an application by a mortgagor under the section is independent of any steps taken by the mortgagee to enforce its rights. The application is a direct response to steps taken to enforce the mortgagee's rights and it determines whether or not they are able to be exercised. The application permitted by s 55A(3) is not collateral to the enforcement procedures, but a part of procedures which regulate the enforcement of rights against the mortgagor.

33 In my view, there is no basis for confining the words in clause 7.2 of the mortgage "all reasonable enforcement expenses the Mortgagee reasonably incurs or expends in exercising its rights under the Mortgage" to expenses incurred in actions or procedures initiated by the mortgagee in contradistinction to responses by the mortgagee to actions or procedures instituted by the mortgagor to prevent the enforcement of rights by the mortgagee.

34 (cf. Elders Trustee & Executor Company Ltd v E G Reeves Pty Ltd (1988) 20 FCR 164 at 174).

35 I am also of the view that the meaning of the words used in clause 7.2 are clear and unambiguous.

36 The learned judge expressed the view that if clause 7.2 did, in its terms, encompass an application by a mortgagee under s 55A(3) it would probably "fall foul" of ss 99 and 45 of the Consumer Credit Code. The Code acknowledges the right of the mortgagor to "the reasonable enforcement expenses of enforcing the mortgage". The wording of the mortgage and loan contract reflect this restriction on the recovery of enforcement expenses.

37 If it is assumed that enforcement expenses include the expenses incurred in contesting an application under s 55A(3), then it could not be said that, as a matter of course, such expenses would be unreasonable. Such a judgment could only be made on the facts of the individual case. In the present case, there is no basis for holding that the defence of the mortgagor's application was unreasonable. The court held that the application was without merit.

38 The learned judge appealed from stated that policy considerations supported the conclusion which he reached. He said:

"To the extent that the interpretation of clause 7.2 of the mortgage is governed by the provisions of the Consumer Credit Code I consider that there are also good policy reasons consistent with the objects and purposes of the Code why "enforcement expenses" should bear this limited meaning. The Code is designed for the protection of consumers, to ensure that credit contracts that they enter and securities that they give meet acceptable community standards, and that they do not become the victims of standard terms and conditions devised by and beneficial to credit providers. The Code has its own provisions for the granting of relief to consumers in the case of hardship and unjust transactions: Part 4 Division 3. Those beneficent provisions of the Code and like provisions of s 55A of the Law of Property Act would be largely negated if, whenever a debtor applied for relief, the mortgagee's or credit provider's costs of resisting such applications could merely, as a term of the contract, be added to the amount of the debt and become secured by the mortgage, regardless of the result, and, if the terms of the contract so provide, on an indemnity basis. That would be the effect of the interpretation sought by the defendant, for even an unsuccessful defence of such proceedings would, in that case, fall within the meaning of "enforcement expenses". Such an interpretation would defeat the purposes of the Code and, in the case of s 55A of the Law of Property Act, the purposes of the section."

39 As I have attempted to point out, the Code anticipates that credit contracts may contain clauses entitling creditors to recover enforcement expenses. It simply stipulates that such expenses cannot be recovered if they are not reasonably incurred and that any provision which appears to confer a greater right is void. In this respect, the provisions relied upon by the appellant do not run counter to the policy considerations inherent in the Code.

40 His Honour concluded that the effect of a recovery clause of this nature is to negate the beneficent provisions of the Code and s 55A of the Law of Property Act in that the mortgagor would incur liability regardless of the result of the application.

41 In my view, the covenants in the agreements in the present case relating to the recovery of enforcement expenses do not have automatic effect regardless of whether the applicant in an application under s 55A is successful or not. If, as in the present case, the applicant is unsuccessful, the court's discretion as to costs remains. However, as the authorities have decided, effect will usually be given to the agreement between the parties. If the applicant is successful, the court would not be constrained by an agreement between the parties entitling the mortgagee to reasonable enforcement expenses. In any event, the court's wide powers under s 55A(3) to grant relief upon such fair and equitable terms as it may determine and to reinstate the position of the mortgagor in all respects as if no breach of a covenant or condition of the mortgage had occurred would enable it to prevent any claim to enforcement expenses under the agreement from succeeding, if such a course was appropriate.

42 For these reasons, I have reached the conclusion that the expenses incurred by the appellant in relation to the respondent's application come within clause 7.2 of the mortgage and that the agreement between the parties that they are recoverable on an indemnity or solicitor and own client basis should have been given effect when making the costs order on the application.

43 In accordance with the authorities, costs should have been awarded on a solicitor and client basis.

44 The second aspect of the appeal relates to the order that the appellant pay the respondent's costs of any hearings of and incidental to the respondent's application for an interlocutory injunction filed on 12 December 2002. This order was confined to costs incurred after 13 December 2002.

45 I have said that after service of the notices required by s 55A, an auction was scheduled for 15 December 2002. The respondent applied for an extension of time for the filing of the application for relief pursuant to s 55A(3) on 12 December 2002. At the same time, he applied for an injunction to prevent the auction from proceeding.

46 The matter was called on before Williams J on 13 December 2002. The focus of the hearing was whether an injunction should be granted. There was some discussion as to the amount owing by the respondent. Williams J granted an interim injunction restraining the appellant from proceeding with the auction until further order. The order was made conditional upon the payment into court of the sum of $5,139 by the respondent. This was the amount of arrears and legal and other costs claimed by the appellant to be outstanding as at 10 December 2002. Further consideration of this injunction was adjourned to 19 December. The amount of $5,139 was paid into court on 13 December after the court adjourned.

47 After this hearing the appellant served on the respondent another notice which claimed that the amount then unpaid was $5,542.48 and that the amount outstanding under the terms of the mortgage was $34,890.68 plus the sum of $5,542.48. The notice demanded immediate payment of the total sum of $40,443.16.

48 When the matter resumed on 19 December 2002 the judge was given an update on the amount claimed to be outstanding. Consideration of the application for an interlocutory injunction was adjourned to 28 January 2003. The judge ordered that the interim injunction be continued.

49 At the hearing on 28 January the only issue for consideration was the application for the interlocutory injunction. However, there was extensive discussion concerning the potential merits of the respondent's application pursuant to s 55A(3). Williams J reserved judgment and delivered his decision on 6 February 2003. On that date the application for an interlocutory injunction was dismissed and the interim order for injunction was discharged.

50 The respondent appealed against this decision. In his judgment in the Full Court Bleby J said:

"It was accepted before the Judge at first instance and before this Court that the appellant had a serious question to be tried on the application under s 55A of the Law of Property Act. It seems to me that that could not be based on any notion of estoppel founded on the December letter, as there is no evidence that the appellant acted to his detriment as a result. It is more likely that the concession of a serious question to be tried was based on hardship to the appellant, and in particular, the loss of the first home buyer's grant if the power of sale were exercised now with relatively little to be done to complete the house. Although the existence of a serious question was not in issue, I mention those possibilities here because it is relevant to what the Judge took into account in determining where the balance of convenience lay.

The Judge at first instance based his refusal to grant the injunction on what he considered to be the balance of convenience. One of the factors which his Honour seems to have taken into account is that, if relief from the exercise of the power of sale were granted under s 55A, the appellant would be quite unable to satisfy his then liabilities to the mortgagee and to the builder, and that in the absence of his being able to provide further security, the balance of convenience dictated that the property should now be sold.

To the extent that those considerations were taken into account by the Judge at first instance as being relevant to the balance of convenience, I consider that that constituted an error. Those factors might be relevant to the consideration of the main application, but they were not material to the question whether the exercise of the power of sale should be delayed for a relatively short time to enable the application to be determined.

...

On the hearing of an interlocutory injunction to preserve the status quo pending the determination of an application under s 55A(3), there may sometimes be a temptation to blur the line between what is considered to constitute a serious question to be tried on the principal application and what constitutes the balance of convenience in determining whether to grant the holding injunction. If hardship is the primary reason put forward in support of the principal application, there will necessarily be a weighing of the balance of convenience in determining whether a remedy should be granted, and if so, on what terms. However, that process should not be confused with the assessment of the balance of convenience in granting or not granting an interlocutory injunction while those questions are determined.

The convenience to be weighed is the convenience or inconvenience of granting the holding injunction while the principal questions are determined. As will be seen later in these reasons, although it has not transpired in this case, that should normally be for only a relatively short period. Therefore the balance of convenience at that stage relates to the effect on both parties of delaying the sale for that relatively short period of time. The mortgagor's ultimate ability to repay the loan the subject of the security will not usually be relevant to that question, but a number of other factors will. They include any irrecoverable loss that may be suffered by the mortgagor if the sale proceeds before the principal application is determined, any costs thrown away by the mortgagee in preparing the property for sale and marketing it, whether those costs are paid or recoverable, the costs and inconvenience incurred by the mortgagor in granting possession for the purposes of sale, the costs of delaying the sale and other like considerations. It should not, at that stage, involve a pre-judgment of the likely success of the principal application for which a relevant consideration may well be the mortgagor's ability to repay the total debt."

51 After considering the exercise of the discretion afresh, the Full Court decided that the balance of convenience was in favour of granting the interlocutory injunction and an order was made to that effect. The question of costs of and incidental to the application for the interlocutory injunction was reserved for consideration by the court which would deal with the substantive application pursuant to s 55A.

52 Subsequently, the learned judge appealed from heard the respondent's application for an extension of time within which to commence the application under s 55A. The extension of time was granted, but the substantive application for relief pursuant to the section was dismissed.

53 On the question of costs, his Honour was of the view that the nature and effect of the appellant's opposition to the interlocutory injunction delayed the resolution of the respondent's claim and unreasonably added to the costs of the application. However, he recognised the fact that the application had to be brought because of the respondent's tardiness and that the appellant was entitled to some of its costs as a result.

"Most of the affidavit material filed by the defendant [appellant] in opposition to the interlocutory application was relevant to and was used upon the hearing of the substantive application. The defendant should therefore have its costs of preparation of that material. However, in the view I take of the matter, the costs of any hearings relating to the first interlocutory injunction after the hearing of the application for the interim injunction on 13 December 2002 were unreasonably incurred and should be borne by the defendant."

55 Mr Karkar QC, for the appellant, submitted that this order was inconsistent with the views expressed by the Full Court and the learned judge appealed from concerning the dilatory nature of the respondent. He relied on the eventual result of the respondent's application for relief, namely, that it was found to be without merit.

56 It is important to have regard to the purpose for which the injunction was sought and what transpired at the hearing on 28 January. If it had not been granted, there would have been no practical purpose in the respondent pursuing the application for relief. The respondent was represented at the hearing on 28 January. His counsel correctly submitted to the learned judge that there was a serious question to be tried and that the court's function was to assess the balance of convenience. Counsel stressed the importance of continuing the injunction pending the final determination of the application for relief.

57 Unfortunately, however, the greater part of the hearing was taken up with argument on the merits of the respondent's pending application for relief. In his final submission to the court counsel for the appellant submitted that "in the absence of a proposal, the plaintiff has not made out what is required of him statutorily". As the members of the Full Court pointed out, the judge erred in the emphasis which he placed on the merits of the application for relief and in placing substantial reliance on what evidence was then available as to the capacity of the respondent to fulfil his obligations under the mortgage and the loan contract.

58 In making the order as to costs, the learned judge appealed from was entitled to take into account the appellant's role in basing its opposition to the injunction almost entirely on the false premise of the respondent's financial situation. As the Full Court held, there were sufficient reasons for the granting of the injunction at this stage of the proceedings and that order should have been made at first instance.

59 In my view, there was a sufficient basis for the costs which was made in relation to the injunction application and I would not interfere with the exercise of the judge's discretion in this respect.

60 I have said that, at the commencement of the hearing before this court, the respondent was refused an extension of time within which to file the notice of cross-appeal.

61 The notice of cross-appeal was filed on 24 November 2003, five months after the delivery of the judgment on the application for relief. The sole ground of appeal complains that the learned judge applied an incorrect test in determining the application made pursuant to s 55A of the Act. According to the notice, the judge employed a "means" test which was inappropriate.

62 The respondent did not provide any satisfactory reason for the extensive delay in instituting the appeal. Although unrepresented throughout the relevant period, he was by then familiar with the importance of observing time limits.

63 The purported cross-appeal has no prospect of success and, in any event, the property has now been sold. There would be no point in reinstating the mortgage and contract of loan.

64 For these reasons, I agreed with the order made by the court that, to the extent that the notice of cross-appeal is to be treated as including an application for an extension of time to appeal against the decision in the application under s 55A, an extension of time would be refused.

65 I would allow the appeal for the limited purpose of ordering that the costs payable by the respondent pursuant to paragraph 1 of the orders made by the learned judge appealed from on 22 August 2003 be taxed as between solicitor and client.

66 ANDERSON J I have read the reasons of Duggan J. I agree with the conclusion and reasons expressed by His Honour in relation the first aspect of the appeal, namely, that the costs of the appellant are recoverable on an indemnity or solicitor and own client basis.

67 In relation to the second aspect of the appeal I have reached a different conclusion from that of Duggan J. The second aspect relates to the costs of and incidental to the respondent's application for an interlocutory injunction. This injunction application was ultimately successful and the history of the hearings involved in the interlocutory injunction is set out in the reasons of Duggan J.

68 The learned judge appealed from, took the view that the actions of the appellant in opposing the interlocutory injunction firstly delayed the resolution of the respondent's claim and secondly, added to the costs.

69 His Honour said, after acknowledging that the appellant was entitled to some costs:

"Most of the affidavit material filed by the defendant [appellant] in opposition to the interlocutory application was relevant to and was used upon the hearing of the substantive application. The defendant should therefore have its costs of preparation of that material. However, in the view I take of the matter, the costs of any hearings relating to the first interlocutory injunction after the hearing of the application for the interim injunction on 13 December 2002 were unreasonably incurred and should be borne by the defendant."

70 It seems to me that Mr Barker used many tactics in his attempts to avoid the consequences of his default, which are set out by Bleby J in his judgment in the Full Court as follows:

"[35] On the material before the Judge, the reasons for default were not fully explained. The appellant gave no detail of his financial circumstances which caused the initial default. As it was, there was no explanation for the many broken promises and abusive telephone calls or the failure to entertain any sensible negotiations as to the settlement of his liability under the mortgage. There was no explanation for the continued late payment of instalments after the grant of the interim injunction. There was no explanation for the failure to draw down the loan as invoices from the builder were received. There was no information as to the appellant's ability to finance any difference between the moneys available to be drawn down on the one hand and his apparent liability for the additional costs and expenses incurred by the mortgagee and the amount due to the builder, on the other hand. There was no information as to how that liability might affect the appellant's ability to make payment of instalments due under the mortgage. There was no explanation, other than alleged ignorance of the statutory time limit, for the delay in instituting the proceedings for three and a half months in circumstances that demanded urgent action. The inference that might be drawn from the facts deposed to, without more, is that this was a last minute attempt to avoid the auction of the property which was due to occur two days after the application was filed. There has been no explanation of which I am aware for the delay in lodging the notice of appeal almost three weeks outside the time limited by the rules of Court and after the time fixed by the Judge, other than the inference that that too was only prompted by the second attempt by the mortgagee to sell the property. At no stage to date has there been any suggestion by the appellant of any terms on which the application should be granted, notwithstanding the acknowledged default in payment of instalments. In all the time that the appellant has had since the initial notice of default, there has apparently been no inquiry made as to the possible refinancing of the house and land purchase.

[36] The mortgagee, in the meantime, has continued to incur expense in its efforts to enforce its rights under the mortgage. The appellant has been made aware of the incurring of that expense. He has known or ought to have known that most of that expense is merely adding to his ultimate liability under the contract of loan and is secured by the terms of the mortgage. His inaction has largely been the cause of that additional expense."

71 Given the attitude of Mr Barker, generally as set out above, I would have thought it prudent and reasonable for the appellant to contest everything it could in the hope that it might bring to an end the seemingly endless incurring of legal costs. I therefore consider it reasonable that it should oppose the grant of the interlocutory injunction on the basis that it did.

72 His Honour believed that the appellant devoted an excessive amount of time in trying to show that there was no serious question to be tried or alternatively that it should have accepted that there was a serious question to be tried and proceeded with hearing the merits.

73 I can see good reason why anyone in the appellant's position, given the nature and background of Mr Barker's attitude in the entire matter, would want to attempt to exercise their rights to argue against a grant of the injunction. As it turns out, as Mr Karkar QC put it in argument, the appellant's opposition to the interlocutory injunction was vindicated in the end by the overall result.

74 The whole history of the proceedings was causing the mortgagee continuing and accumulating expense and in my view it was not unreasonable to attempt to minimise costs by taking the stand it did.

75 The most difficult decision is whether to interfere, having regard to the principle of not interfering with the type of wide discretion exercised by his Honour. Given the background of the matter, it is my view that it would be unreasonable on any view of the facts to penalise the appellant in the way which the current order does.

76 The ordinary rule in an application for an interlocutory injunction is that if the injunction is ultimately discharged, the costs should follow the event. The injunction was ultimately discharged and I would therefore allow the appellant its costs on the higher basis including the interlocutory injunction application but excluding the appeal in that application.

PERPETUAL TRUSTEES AUSTRALIA LTD & ORS v BARKER No. SCCIV-02-1833 [2004] SASC 58

At a glance

Court

Decision date

Before

Source

Judgment (88 paragraphs)

PERPETUAL TRUSTEES AUSTRALIA LTD & ORS v BARKER No. SCCIV-02-1833 [2004] SASC 58 (11 March 2004)

Parties

Cases Cited (1)