Supreme Court New South Wales Medium Neutral Citation: IMB Limited v Great Wall Resources Pty Limited [2013] NSWSC 1365 Hearing dates: 12 September 2013 Decision date: 12 September 2013 Jurisdiction: Common Law Before: Hall J Decision: (1) Each of the respondents, Francesco Saverio Capocchiano and Italia Capocchiano, are to indemnify the defendant in respect of the plaintiff's costs associated with the stay applications brought by them on and after 6 July 2011; (2) That the order requiring the respondents to indemnify the defendant not take effect until the plaintiff's costs associated with the three stay applications have been agreed or otherwise assessed; (3) That the respondents be provided with a copy of these orders; (4) That the respondents pay the defendant's costs of this motion on the ordinary basis; (5) Leave to any party to apply on seven days notice. Catchwords: COSTS - plaintiff mortgagee obtained judgment for possession against defendant company (in liquidation) - occupiers of property filed three successive applications seeking stay of execution of writ of possession - the occupiers were not party to the principal proceedings - stay applications granted on first two occasions - on last occasion stay granted on condition that occupiers pay certain amounts to plaintiff mortgagee and to defendant company - occupiers failed to comply with conditions - plaintiff obtained possession and exercised power of sale - plaintiff deducted costs of stay applications from settlement monies - application by defendant in liquidation to be indemnified by the occupiers against the plaintiff's costs associated with the stay applications brought by the occupiers - whether section 98 of the Civil Procedure Act 2005 provides power for the making of such an order - occupiers brought stay applications as occupiers of the property which coincided with the interests of the defendant - stay orders simply delayed proceedings - stay conditions not complied with - right of plaintiff to recover costs of stay proceedings available under r 42.25 of UCPR as well as pursuant to contractual entitlement under the mortgage - appropriate in all circumstances to make indemnity order in favour of the defendant Legislation Cited: Civil Procedure Act 2005 Legal Profession Act 2004 Uniform Civil Procedure Rules Category: Interlocutory applications Parties: IMB Limited (Plaintiff) Great Wall Resources Pty Limited (Defendant/Applicant) Francesco Saverio Capocchiano (Respondent) Italia Capocchiano (Respondent) Representation: Counsel: B Koch (Defendant/Applicant) No Appearance (Respondents) Solicitors: Lander & Rogers (Defendant/Applicant) No Appearance (Respondents) File Number(s): 2011/61223 Judgment 1HIS HONOUR: This is an application by way of Notice of Motion filed on 6 August 2013 by the defendant, Great Wall Resources Pty Ltd, a company in liquidation, seeking an order pursuant to s 98 of the Civil Procedure Act 2005 that each of Francesco Saverio Capocchiano and Italia Capocchiano are to indemnify the defendant against the plaintiff's costs in these proceedings incurred after 6 July 2011. 2An order is also sought that Mr and Mrs Capocchiano pay the defendant's costs in respect of the motion. The Notice of Motion is supported by the affidavit of Tean Kerr, solicitor, sworn on 2 August 2013. 3Mr Koch of counsel appears on behalf of the defendant. There has been no appearance by or on behalf of the respondents to the application. 4The proceedings were listed by his Honour Davies J on 19 August 2013 for today. The proceedings were originally listed for 10am this morning. By reason of my involvement in a criminal matter it was necessary for me to refix the time for the hearing of the Notice of Motion to 2pm today. At that time the respondents were called outside the court and there was no appearance. 5I had advised the parties that my tipstaff phoned the respondents and spoke to Mrs Capocchiano by phone and was told that the hearing time would be changed from 10 am to 2 pm today. That advice was given on 10 September 2013, on which date my Associate wrote to the respondents confirming the change of time. At the time of speaking to my Tipstaff I am informed by my tipstaff that Mrs Capocchiano said the respondents would not be appearing today. 6When the proceedings were last before this court, his Honour Davies J, on 19 August 2013, the respondents were represented by a solicitor, Mr Badarne, who had not then filed a Notice of Appearance and his Honour then heard from Mr Koch and Mr Badarne and then set a timetable for the matter. There have been no affidavits filed on behalf of the respondents to the present application. 7The procedural history of these proceedings is a lengthy one. Exhibit TK-1 is a convenient compilation of relevant documents and it is not necessary, on this application, to go through the whole history of the matter, other than to briefly record the following: 8On 7 December 2010, the Federal Court of Australia ordered the defendant be wound up and Mr David Young be appointed liquidator. The present application has been brought on the instructions of the liquidator. 9At all relevant times Mr Capocchiano was the sole director, secretary and shareholder of the defendant company. The plaintiff mortgagee filed its Statement of Claim on 24 February 2011 seeking on order for possession of property at Yallah, New South Wales, pursuant to its powers under a mortgage over the property dated 13 March 2009. 10There were originally two loans granted by the plaintiff to the defendant. The first was dated 25 September 2007, in the amount of $500,000 and the second on 2 March 2009 in the amount of $300,000. Those loans were secured by first mortgage over the property to which I have referred. 11From at least the time, probably well before the filing of the Statement of Claim, Mr and Mrs Capocchiano resided as the occupants on the defendant's property. 12On 16 May 2011 this court ordered that the defendant give possession of the property to the plaintiff. There were then three applications made by Mr and Mrs Capocchiano by way of Notices of Motion. The first is the Notice of Motion filed on 6 July 2011. That application was heard and determined by her Honour Schmidt J and a stay order was granted until 13 October 2011 and costs were reserved. 13A second Notice of Motion was filed on 20 February 2012. On 24 February 2012, Davies J heard the application and granted a stay. The stay order made by Davies J was to operate up to 25 May 2012. The third Notice of Motion was brought by the respondents and his Honour gave judgment on that application on 30 May 2012. 14His Honour made the stay operative until 16 July 2012, on condition that Mr and Mrs Capocchiano make certain interest payments to the plaintiff and $15,000 in costs to the defendant by 27 July 2012. The respondents failed to make the payments required by the order made by Davies J on that date. 15On 7 September 2012 the plaintiff obtained possession of the property. 16On 11 December 2012 there was a settlement of the sale of the property by the plaintiff. 17The present application, as I have indicated, was filed on the instructions of the liquidator on 6 August 2013. On 19 August 2013, when the application came before Davies J, Mr Badarne, solicitor, appeared on behalf of the respondents and orders were made, including an order that the respondents file and serve any affidavit evidence that they sought to rely upon by 2 September 2013 and the Notice of Motion was then listed for hearing today. 18It is noted that the transcript indicates that the respondents had received, by post, copies of the Notice of Motion and the affidavit of Mr Kerr, but not the exhibit, TK-1, but that on 19 August 2013 when the matter was before Davies J, a copy of that exhibit was provided to Mr Badarne on behalf of the respondents. 19In the course of the hearing I raised two issues. First, the basis for the Court's power to make the indemnity order sought in para 1 of the Notice of Motion. Second, the question of the quantum of costs to which the indemnity sought relates. 20As to the second of those two, Mr Koch has stated there have been negotiations ongoing with the plaintiff's solicitors with a view to agreeing the appropriate quantum of costs that are referable to or associated with the three stay applications to which I have referred. Those negotiations are ongoing and there is, as yet, no resolution of that question. Failing agreement, the issue would have to be resolved by an assessment process, presumably under the Legal Profession Act 2004. 21As to the form of the order sought in the Notice of Motion, I note that in its terms, it lacks specificity insofar as the indemnity sought is an order against the respondents that the plaintiff's costs of the proceedings incurred after 6 July 2011 rather than only the costs associated with the stay applications to which I referred. 22Returning to the first issue, the power or jurisdiction of the Court, Mr Koch relies upon s 98 of the Civil Procedure Act. Section 98 falls within Division 2 entitled, "Costs in proceedings". It provides for a broad power in the Court to make orders as to costs, including the persons against whom costs orders may be made and the power to order costs on an indemnity or on an ordinary basis. 23The provisions under s 98 become available when the Court comes to consider, at the conclusion of proceedings, the position of the party with an entitlement to costs, and the particular basis for a costs order in respect of any costs order. 24The present case is somewhat different insofar as the respondents are not the principal parties to the proceedings, which were limited to an action for possession between the plaintiff and the defendant company. They only became parties to the proceedings by way of notices of motion filed for the purpose of obtaining stay orders. Accordingly, there were no substantive proceedings (as distinct from interlocutory proceedings) which entitle any party to a costs order against the respondents. In the circumstances of the present case, it is fair to assume that the plaintiff's costs were paid out of the settlement proceeds of the sale of the property pursuant to a contractual right that the mortgagee held under its security documents, the first mortgage. On that basis, the order for indemnity in effect is seeking to have the respondents indemnify a contractual liability, they not being parties to the contract. 25Mr Koch has drawn my attention to r 42.25 of the Uniform Civil Procedure Rules which is a provision that deals with the costs of trustees and mortgagees and provides, amongst other things, that the person who is or has been a party to any proceedings in the capacity of mortgagee is entitled to be paid his or her costs in the proceedings insofar as they are not paid by any other person out of the mortgaged property. 26It seems to me that it is clear that the plaintiff mortgagee has been the successful party in the proceedings and was entitled to have its costs paid and those costs would include the costs of the stay applications. Whether, however, that would lead to a right of indemnity in the defendant against the respondents in terms of any contractual entitlement by the mortgagee to have its costs paid on the full basis, that is the solicitor/client basis, is far from clear. It does seem, however, in the circumstances where the plaintiff did incur the costs by reason of the applications brought by the respondents, that the respondents were, in effect, acting in the interests of the first defendant and the stay applications, as events turned out, benefited the respondents but, as Davies J observed in his most recent judgment, both stay applications as it turned out and the orders made on the applications simply delayed the proceedings, nothing otherwise being achieved in terms of payment of any moneys under the conditions of the orders made. 27Accordingly, although this is a somewhat novel case and although I do not consider s 98 by itself provides a clear right of indemnity in the applicant, it nonetheless, in the circumstances in which the respondents intervened in the way I have indicated by making the stay applications in their own name, and the undoubted right of the mortgagee to its costs (other than by its reliance on the contractual rights), I consider it is appropriate in all the circumstances to make an order indemnifying the defendant in respect of the costs associated with the stay applications. 28Accordingly, I make the following orders: (1) Each of the respondents, Francesco Saverio Capocchiano and Italia Capocchiano, are to indemnify the defendant in respect of the plaintiff's costs associated with the stay applications brought by them on and after 6 July 2011; (2) That the order requiring the respondents to indemnify the defendant not take effect until the plaintiff's costs associated with the three stay applications have been agreed or otherwise assessed; (3) That the respondents be provided with a copy of these orders; (4) That the respondents pay the defendant's costs of this motion on the ordinary basis; (5) Leave to any party to apply on seven days notice. ********** 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. Decision last updated: 24 September 2013