New South Wales Supreme Court CITATION : Perpetual Trustee Company v McAndrew [2008] NSWSC 790 HEARING DATE(S) : 29 July 2008 JUDGMENT DATE : 4 August 2008 JURISDICTION : Common Law JUDGMENT OF : Harrison AsJ (1) The costs order made on 14 December 2007 is payable forthwith. DECISION : (2) I decline to refer this matter to mediation. (3) Each party is to pay its/his own costs of this motion. (4) The matter is to be listed for a status conference on 26 August 2008 at 9.00am before the Registrar. CATCHWORDS : COSTS - Payable forthwith - Mediation Civil Procedure Act 2005 LEGISLATION CITED : Contracts Review Act 1980 Uniform Civil Procedure Rules CATEGORY : Procedural and other rulings Fiduciary Ltd v Morningstar Research Pty Ltd [2002]NSWSC 432 CASES CITED : Gattelleri v Meagher [1999] NSWSC 1279 North South Construction Services Pty Limited v Construction Pacific Management Pty Limited [2002] NSWSC 286 Perpetual Trustee Company Limited (First Plaintiff) PARTIES : Challenger Managed Investments Limited (Second Plaintiff) Shaun William McAndrew (Defendant) FILE NUMBER(S) : SC 10059/2007 COUNSEL : M J Cohen (Plaintiff) P Walsh (Defendant) SOLICITORS : Deacons (Plaintiffs) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION POSSESSION LIST ASSOCIATE JUSTICE HARRISON MONDAY, 4 AUGUST 2008 10059/2007 - PERPETUAL TRUSTEE COMPANY LIMTED v SHAUN WILLIAM McANDREW JUDGMENT (Costs payable forthwith; mediation) 1 HER HONOUR: On 14 December 2007, I delivered judgment. I dismissed the plaintiffs' notice of motion filed 11 September 2007 and made an order that the plaintiffs were to pay the defendant's costs as agreed or assessed. 2 By notice of motion filed 10 June 2008, the defendant seeks firstly, an order that pursuant to Part 36.16(3) and (4) of the Uniform Civil Procedure Rules and s 98(4)(c) of the Civil Procedure Act 2005 the plaintiffs pay the defendant's costs in the sum of $8,691.87 within fourteen (14) days; secondly, in the alternative, an order that pursuant to Part 36.16(3) and (4) the plaintiffs pay the defendant's costs within fourteen (14) days of the costs being agreed or assessed; and thirdly, that pursuant to s 26 of the Civil Procedure Act the proceedings be referred to mediation. The plaintiff opposes the orders sought. 3 The first plaintiff is Perpetual Trustee Co Limited. The second plaintiff is Challenger Managed Investments Limited (the plaintiffs). The defendant is Shaun William McAndrew (Mr McAndrew). Mr McAndrew relied on the affidavit of Richard Ambrose Reading sworn 5 June 2008. Whether costs should be orders to be payable forthwith 4 The plaintiff submitted that the defendant's application of payment of costs forthwith is misconceived. It submitted that this Court cannot entertain this issue as it should have been raised when the notice of motion seeking summary judgment was heard. 5 Costs are discretionary. The issue of whether or not costs should be orders to be payable forthwith has not been ventilated until now. It is my view that this Court can entertain this application. The defendant's costs have not as yet been assessed. 6 Rule 42.7 of the Uniform Civil Procedure Rules provides: "42.7 Interlocutory applications and reserved costs (1) Unless the court orders otherwise, the costs of any application or other step in any proceedings, including: (a) costs that are reserved, and (b) costs in respect of any such application or step in respect of which no order as to costs is made, are to be paid and otherwise dealt with in the same way as the general costs of the proceedings. (2) Unless the court orders otherwise, costs referred to in subrule (1) do not become payable until the conclusion of the proceedings." 7 The relevant predecessor of rule 42.7 was Pt 52A r 9 of the Supreme Court Rules. That rule was considered by Barrett J in Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432. His Honour said at [6]: "The 'unless the court otherwise orders' exception in rule 9(1) existed before rule 9(3) was added and was an acknowledged source of jurisdiction to order that costs be payable forthwith " (emphasis added) 8 His Honour then went on to consider some of the circumstances which may justify the making of an order that costs be payable forthwith. His Honour said, at [10] - [13]: "It becomes necessary now to consider the factors which have caused courts to depart from the normal rule in Part 52A rule 9(1) that costs are payable at the conclusion of the proceedings. A convenient and useful starting point is the following passage in the judgment of Priestley JA in Horrobin v Australia & New Zealand Banking Group Ltd (Court of Appeal, 6 June 1997, unreported at 9): 'None of the cases is on all fours with the present one; indeed, a reading of them emphasises the need for cases to be considered by reference to their own particular facts. Nevertheless, those relied on by counsel for H and S show there is a tendency for costs orders to be made payable forthwith and without waiting for the conclusion of further proceedings when the proceedings in respect of which the costs orders have been made are regarded as sufficiently self-contained and detached or detachable from proceedings yet to be heard, whether between the same or associated parties, as to make it seem just for an actual payment to be made in the meantime.' This identifies the first recognisable category of case, namely, where the application or aspect in respect of which the particular costs order is made before conclusion of the proceedings represents the determination of a separately identifiable matter or may be viewed as the completion of a discrete aspect. Examples of this may be found in Charlie Brown Pty Ltd v Green (New South Wales Supreme Court, McLelland CJ in Eq, 3 July 1995, unreported) and Bagley v Pinebelt Pty Ltd [2000] NSWSC 830. A second factor which may incline the court to order that costs be payable forthwith is some unreasonable conduct on the part of the party against whom costs have been ordered. That was a factor taken into account by Simpson J in Gattellari v Meagher [1999] NSWSC 1279, although, in the end, her Honour did not think that the particular conduct warranted such an order. A third factor is, as it was put by Giles J in Doran Constructions Pty Ltd v University of Newcastle (New South Wales Supreme Court, Giles J, 16 December 1994, unreported), that `there is much to come in the proceedings' and `one can see a fairly long time before the proceedings are disposed of. In Horrobin (above), the decision of Priestley JA to order that costs be payable forthwith was influenced to some extent by the fact that the controversy between the parties would run for at least a further year. In Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (Lindgren J Federal Court of Australia, 18 August 1995, unreported), Lindgren J said that it may be appropriate for greater use to be made of the analogous provision in the Federal Court Rules, 'particularly in cases such as this one where the final determination of the proceedings is so far away'. " 9 His Honour went on to make an order that the costs order previously made by him be payable forthwith. That was because, among other things, the defendant's costs had been abnormally increased by the application, which was a discrete matter and no final hearing date had been fixed and it appeared that the hearing would not take place until later that year. 10 In North South Construction Services Pty Limited v Construction Pacific Management Pty Limited [2002] NSWSC 286 Bryson J ordered at [35], [36] costs be payable immediately because that order was "quite discrete" from any matter remaining to be adjudicated. 11 In Gattelleri v Meagher [1999] NSWSC 1279 Simpson J at [9] said: "The discretion provided by r 9(1) is a wide one and appears to me to be unconfined. It is true that given the way the rule is framed, the prima facie position is that costs do not become payable until the conclusion of the proceedings. But the rule is not framed in such a way as to require any specific set of characterisation of circumstances in order to justify the making of an order. There was no material placed before me as to financial consequences for either of the parties should an order be made or not made. " 12 The defendant submitted that the plaintiff's application, raised quite separate and distinct issues. But I do not think so. The application centered upon whether the issues that were to be argued at trial were hopeless and whether the defendant should be required to pay money into Court. The plaintiff was unsuccessful. 13 No final hearing date has yet been fixed, although the plaintiff says it is ready to go to trial. The defendant says that he is not yet ready for trial. I accept that the expense of contesting the plaintiff's earlier application has prejudiced the defendant's financial capacity to continue with the litigation and that is a factor that supports the making of an order that costs be payable forthwith. 14 As I stated in my earlier judgment, by deed of mortgage dated 29 April 2004, and transfer of mortgage dated 9 August 2005, the defendant mortgaged to Perpetual Trustee, as custodian of the Challenger Howard mortgage fund, the land to secure a mortgage advance of $301,000. The mortgage was registered. The plaintiff seeks possession of the property due to default of payments being made in accordance with the provisions of that mortgage. 15 The defendant filed a defence and cross claim. The defence pleads that Mr McAndrew has been at all times since 25 November 1998, including on or about 26 June 2003, 10 December 2003 and 29 April 2004: "i. A person with significant cognitive impairment as a result of injuries suffered in a motor traffic accident on 25 November 1998, such cognitive impairment including deficits in: orientation; the ability to understand abstract concepts; memory/both immediate and remote; judgment; ability to initiate decisions and perform planned action; and appropriate behaviour to the situation. ii. A person who suffered impairment of complex integrated cerebral functions that particularly limited his daily activities to directed care under confinement at home. iii. Was prone to becoming lost when venturing unsupervised outside his home. iv. A person who suffered visual impairment. v. A person who suffered physical restriction. vi. A person whose pre-existing mood disorder, exacerbated by the motor traffic injury, rendered him more susceptible to: sustained mood disturbances centred on impulsively and variability of mood; the intoxicating effects of alcohol, marijuana or other psychoactive substances. b. Because of the state of his physical and mental capacity as set out in paragraph 3a, at all material times since 29 November 1998 the defendant was not reasonably able to protect his interest for the purposes of s 9(2)(e) of the Contracts Review Act 1980 ." 16 At para [26] of my earlier judgment I stated: "6. I am not satisfied that the plaintiffs have shown that the Contracts Review Act is inapplicable by the exclusion contained in s 6(2). It is my view that Mr McAndrew has an arguable case and his claim should be permitted to go to trial. I endorse the comments of Rogers J in Commercial Banking Co of Sydney Ltd v Pollard (1983) 1 NSWLR 74 at 80 where his Honour stated that it is generally inappropriate to determine a defence which raises the Contracts Review Act on an application for summary judgment." and at para [34] I concluded: "34. It is my view that a defendant seeking to have mortgage documents set aside on the basis of his lack of mental capacity should not be required to pay the amount due and owing under the mortgage before he is entitled to take court action. This would be contrary to the intention of the Contracts Review Act . Overton Investments v Cuzeno RVM and Bassanese v Perpetual Trustees Victoria are limited to the costs of enforcement expenses. The cross claim in these proceedings seek the whole of the mortgage and loan be set aside. The defendant says that he did not receive any of the proceeds of the loan. In these circumstances he should not be required to pay into Court a sum of over $300,000." 17 It is my view that the plaintiff's application to seek summary judgment was doomed to failure. Contract Review Act defences do not lend themselves to summary judgment. Even more so where it is alleged that the defendant suffers cognitive impairment due to injuries suffered in a motor traffic accident. It was an unnecessary and unwarranted application. This application had the effect of reducing the defendant's financial capacity to defend the claim. In my view, this is a case where I should otherwise order. I do so. The costs order made on 14 December 2007 is payable forthwith. Mediation 18 The defendant seeks that this matter be referred to mediation. The defendant referred to ss 26 and 56 of the Civil Procedure Act which read: "26 Referral by court (1) If it considers the circumstances appropriate, the court may, by order, refer any proceedings before it, or part of any such proceedings, for mediation by a mediator, and may do so either with or without the consent of the parties to the proceedings concerned. (2) The mediation is to be undertaken by a mediator agreed to by the parties or appointed by the court, who may (but need not be) a listed mediator. (3) … "56 Overriding purposes (1) The overriding purposes of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule." 19 The defendant submitted that this case raises a number of disputed factual issues. These include the capacity of the defendant to appreciate the nature and consequences of the mortgage that he signed, whether or not the loan was for business purposes, the involvement of other members of the defendant's family, whether the plaintiff complied with its own lending procedures in making the advance, whether the plaintiff was content to lend against the security of the defendant's property without regard to his capacity to repay either principal or interest and if the mortgage is found to be unjust what, if any, relief is appropriate. The defendant also submitted that the final hearing is likely to be lengthy, complex and expensive. The hearing will take at least a few days. 20 The plaintiff opposes the referral to mediation. The plaintiff submitted that this matter is not suitable to be referred to mediation because firstly, the defendant's defence and cross claim raises issues of credit; secondly, a referral will inflate its burden in costs, thirdly, the defendant has been in default of the provisions of the mortgage since October 2006; and lastly, it will further delay the hearing as it is ready to proceed to trial. 21 I accept that even where the parties say they have entrenched positions that in itself does not show that mediation would be a waste of time. Mediation can narrow the gap between the parties, at least on some disputed issues. Mediation offers the parties the opportunity to have their positions examined and commented upon by a neutral party, experienced in litigation. 22 Overall, given the conduct of the plaintiff so far and that the credit of the defendant is seriously contested, it is my view that referral to mediation would not benefit the parties even if costs were minimised by appointing a Registrar of this Court to conduct the mediation. I decline to refer the matter to mediation. 23 Costs are discretionary. One issue was determined in favour of the plaintiff, the other in favour of the defendant. In these circumstances it is my view that the appropriate orders for costs is that each party pay its/his own costs. The Court orders (1) The costs order made on 14 December 2007 is payable forthwith. (2) I decline to refer this matter to mediation. (3) Each party is to pay its/ his own costs of this motion. (4) The matter is to be listed for a status conference on 26 August 2008 at 9.00am before the Registrar. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.