Supreme Court New South Wales Medium Neutral Citation: St George Bank - A Division of Westpac Banking Corporation v Zhang (No 3) [2013] NSWSC 1721 Hearing dates: On the papers Decision date: 21 November 2013 Jurisdiction: Common Law Before: Adamson J Decision: (1)Subject to (2), the first defendant is to pay the plaintiff's costs of the proceedings. (2)Subject to (3), make no order as to costs in respect of the hearing on 27 September 2013. (3)The plaintiff is to pay the second defendant's costs thrown away by the amendment made by the filing of the amended statement of claim on 6 September 2013, but otherwise the second defendant is to pay her own costs of the proceedings, including the costs in respect of the hearing on 27 September 2013. (4)Make no order as to costs as between the plaintiff and the third defendant. Catchwords: PRACTICE AND PROCEDURE -costs -effect of mortgage obligations with respect to enforcement costs. Legislation Cited: Real Property Act 1900, s 138 Cases Cited: Gomba Holdings (UK) Limited v Minories Finance Limited (No. 2) [1993] Ch 171 St George Bank- A Division of Westpac Banking Corporation v Zhang [2013] NSWSC 1418 St George Bank- A Division of Westpac Banking Corporation v Zhang (No 2) [2013] NSWSC 1455 Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 Vertzayias v King [2011] NSWCA 215 Category: Costs Parties: St George Bank - A Division of Westpac Banking Corporation (Plaintiff) Wei Zhang (First Defendant) Guang Qing (Lydia) Zhang (Second Defendant) Qining Feng (Third Defendant) Registrar-General of New South Wales (Fourth Defendant) Representation: Counsel: L Gor (Plaintiff) No Appearance (First Defendant) MW Sneddon (Second Defendant) No Appearance (Third Defendant) No Appearance (Fourth Defendant) Solicitors: Kemp Strang (Plaintiff) No Appearance (First Defendant) CCSG Legal (Second Defendant) No Appearance (Third Defendant) Solicitor for the Registrar-General, Land and Property Information (Fourth Defendant) File Number(s): 2010/108317 Publication restriction: Nil Judgment Introduction 1On 3 October 2013 I delivered the principal judgment in the matter and proposed a costs order, subject to hearing from the plaintiff and the second defendant: St George Bank- A Division of Westpac Banking Corporation v Zhang (No 2) [2013] NSWSC 1455. The first and third defendants took no active part in the proceedings. The order I proposed, subject to hearing from the parties, was that each party pay its own costs of the proceedings. 2The plaintiff seeks an order that the first and third defendants pay the plaintiff's costs of the proceedings and that the second defendant pay her own costs of the proceedings. 3The second defendant seeks an order that the plaintiff pay her costs of the proceedings. The parties' submissions 4The plaintiff submitted that the first and third defendants ought pay the plaintiff's costs of these proceedings since they are liable for these costs by reason of clause 21 of the standard form mortgage (filed memorandum no. 2502459). 5The plaintiff submitted that, at the hearing of 27 September 2013, the second defendant ran a positive case seeking orders that the size of her block be increased at the expense of the first defendant. It also contended that the second defendant had disputed the plaintiff's right to exercise its power of sale over the first defendant's land up until the hearing on 27 September 2013. The plaintiff relied on the second defendant's conduct in the further two respects: (5)She alleged that she and the third defendants had repaid their loans in full and that their mortgages had been discharged; and (6)She asserted the existence of an agreement to develop the land which was contrary to the position she had taken in the application before Hall J: St George Bank- A Division of Westpac Banking Corporation v Zhang [2013] NSWSC 1418. 6The second defendant submitted that the only success the plaintiff has had in the proceedings has been against the first defendant. She contended that she was required to defend the plaintiff's amended claim under s 138 of the Real Property Act 1900 since, had the relief sought by the plaintiff been granted, her land would have been land-locked and an order for possession would have affected her land. She argued that the plaintiff ought pay her costs of the proceedings. Reasons 7One of the bases for the plaintiff's claim for costs against the first and third defendants is its contractual right in clause 21 of its standard form mortgage which is incorporated by reference into each of the mortgages granted to it by each of the first, second and third defendants. Clause 21 provides: When we ask, you must pay us the reasonable expenses we reasonably incur in enforcing this mortgage after you are in default (including in preserving and maintaining the property- such as by paying insurance, rates and taxes for the property). This applies to expenses we incur before or after taking action under clause 20. 8Clause 20 provides for various means of enforcement, including taking possession, selling the property and appointing a receiver. 9In some cases, costs orders made in proceedings accurately reflect the legal obligations mortgagors owe to mortgagees. In other cases, the costs orders do not reflect the full amount which mortgagees are contractually entitled to add to their security: Gomba Holdings (UK) Limited v Minories Finance Limited (No. 2) [1993] Ch 171 at 194. Except where specified, a general costs order in favour of a mortgagee does not disentitle a mortgagee from including its actual enforcement costs in the sum secured by the mortgage. 10The objection to making a costs order in favour of the plaintiff that requires the first defendant to pay the costs of the proceedings is that it is by no means clear that the costs of the application for an order under s 138 of the Real Property Act would be covered by clause 20. The other orders obtained by the plaintiff following the hearing on 27 September 2013 were relatively inconsequential compared with its claim under s 138, in respect of which it was unsuccessful. 11The second defendant successfully defended the plaintiff's principal claim for relief in the proceedings on 27 September 2013. She would ordinarily be entitled to her costs against the plaintiff. However, her conduct (referred to by the plaintiff in the summary of the submissions set out above) had the effect that the plaintiff was obliged to bring the proceedings to obtain the relief against her. The second defendant's stance at the hearing on 27 September 2013 was considerably more defensible than it had been in the lead-up to that hearing. However, the second defendant took points at the hearing, including relating to the nature of the agreement to develop the land, which took time and on which she was unsuccessful. 12In my view, it is appropriate to order that the first defendant pay the plaintiff's costs of the proceedings subject to an order that, as between the first defendant and the plaintiff, there be no order as to the costs of the hearing on 27 September 2013. The reason for excluding that date is so as not to determine whether those costs fall within clause 20 of the mortgage: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [91] per Gaudron and Gummow JJ; see also Vertzayias v King [2011] NSWCA 215 at [111]- [117] per Giles JA, Macfarlan and Whealy JJA agreeing. 13As to the costs as between the plaintiff and the second defendant, I propose to make allowance for the second defendant's entitlement to recover any costs thrown away by the plaintiff's amendment to the pleading. Orders 14I make the following orders: (1)Subject to (2), the first defendant is to pay the plaintiff's costs of the proceedings. (2)Subject to (3), make no order as to costs in respect of the hearing on 27 September 2013. (3)The plaintiff is to pay the second defendant's costs thrown away by the amendment made by the filing of the amended statement of claim on 6 September 2013, but otherwise the second defendant is to pay her own costs of the proceedings, including the costs in respect of the hearing on 27 September 2013. (4)Make no order as to costs as between the plaintiff and the third defendant. ********** 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: 22 November 2013