Bendigo and Adelaide Bank Limited v Zipevski (No 2) [2018] NSWDC 101

District Court New South Wales

Medium Neutral Citation: Bendigo and Adelaide Bank Limited v Zipevski (No 2) [2018] NSWDC 101 Hearing dates: 29 March 2018 Date of orders: 29 March 2018 Decision date: 29 March 2018 Jurisdiction: Civil Before: Dicker SC DCJ Decision: 1. Judgment for the first plaintiff against the defendant in the amount of $616,600.40 inclusive of pre-judgment interest to 29 March 2018. 2. Vary order 4 of the orders made on 20 March 2018 to an order that the defendant pays the plaintiffs' costs of the proceedings on an indemnity basis. Catchwords: Costs – whether plaintiff financiers entitled to an order for indemnity costs where agreements stipulated that lender is entitled to indemnity costs in relation to enforcement of its rights against the borrower – whether any discretionary reason to depart from the agreement of the parties. Legislation Cited: Civil Procedure Act 2005 (NSW), s 98 Cases Cited: Westpac Banking Corporation v Diagne [2014] NSWSC 822 Category: Costs Parties: Bendigo and Adelaide Bank Limited (First Plaintiff) ABL Nominees Pty Ltd (Second Plaintiff) Michael Zipevski (Defendant) Representation: Counsel: B Koch (Plaintiffs) No appearance (Defendant)

Solicitors: Turks Legal (Plaintiff) File Number(s): 2016/00134777

Judgment 1. HIS HONOUR: In this matter an application has been made by the plaintiffs for: 1. Final orders in relation to the judgment amount; and 2. Orders that the defendant pay the plaintiffs' costs of the proceedings on an indemnity basis. 1. The background to this application is that on 20 March 2018 I handed down reasons for decision in proceedings commenced by the plaintiffs against the defendant for moneys owed pursuant to certain agreements entered into between the second plaintiff and the defendant which were subsequently assigned by the second plaintiff to the first plaintiff, Bendigo and Adelaide Bank Limited. On 20 March 2018 I made an additional order as follows: "In the event that agreement cannot be reached or obtained as referred to in Order 3, the matter is listed for argument on 29 March 2018 at 10am." 2. Today Mr Koch of counsel appears on behalf of the plaintiffs. At the commencement of the hearing, Mr Koch handed up an email, which I will put on the Court file, which indicates that Mr Zipevski was unable to attend Court this morning at 10am "due to work commitments". Mr Zipevski, in his email, refers to various offers of settlement which he made to the plaintiffs. Mr Zipevski was also called outside court at 10.10am and there was no appearance by him. 3. In support of the application made today the plaintiffs have read two affidavits: 1. The affidavit of Stephen Flamer-Smith sworn 26 March 2018; and 2. The affidavit of service of David Stuart McCrostie affirmed 28 March 2018. 1. Having reviewed the affidavit of Stephen Flamer-Smith sworn 26 March 2018 and the loan repayment schedules and statement attached to that affidavit, I am satisfied that the amounts sought by the first plaintiff as referred to are the proper amounts. In doing so, I have checked that the interest rates referred to in paragraphs 6 and 10 of the affidavit of Mr Flamer-Smith are the appropriate default interest rates in the two agreements in question. 2. Accordingly, I am satisfied in the light of that evidence and in the light of the extensive material which was before me at the final hearing, that the order as sought in proposed paragraph 1 of the short minutes of order is justified. 3. The second order sought by the plaintiffs is to the following effect: "Vary Order 4 of the orders made on 20 March 2018 to an order that the defendant pays the plaintiffs' costs of the proceedings on an indemnity basis." 4. As I have indicated, there were two loan agreements relevant to the proceedings. In relation to the first agreement, which is at page 142 of volume 1 of the exhibit to Mr Flamer-Smith's 11 May 2017 affidavit ("the exhibit") and is dated 1 July 2007, there is in Clause 7 of that loan agreement a clause relating to the costs and expenses of the borrower and the lender. 5. Relevantly, Clause 7 provides as follows: "7. COSTS AND EXPENSES 7.1 Borrower's Costs The Borrower must pay to the Lender: (a) a loan establishment fee (including any applicable GST) as set out in item 10 of the Schedule, which includes: (1) an application fee; and (2) a fee to cover the Lender's legal costs and expenses; and (b) any penalties (including any applicable GST) that may arise due to the delay in execution and return of the documents by the Borrower to the Lender; (c) all costs and expenses incurred by the Lender in relation to the enforcement, protection or waiver of any rights under this Document including any bank dishonour fees, legal costs and expenses and any professional or consultant's fees, on a full indemnity basis and (d) all costs, expenses and fees connected with early repayment as set out in clause 4.4. 7.2 Lender's Costs The Lender must pay the cost of stamping this Document, and if applicable the guarantee that relates to this Document." 1. It is noted that under Clause 7.1(c) the borrower, being Mr Zipevski, must pay to the lender, being the second plaintiff (whose interests were later assigned to the first plaintiff) all costs and expenses incurred by the lender in relation to the enforcement of any rights under the document, including legal costs and expenses and any professional or consultant's fees "on a full indemnity basis". 2. A similar clause exists in relation to the second agreement which was entered into by the second plaintiff and the defendant dated 27 April 2009, which is at Volume 2, page 627 of the exhibit: see Clause 7.1(c). 3. It is these two clauses which are relied upon by the first plaintiff in the application in favour of the order sought. 4. My attention has been drawn by counsel for the plaintiffs to a decision of Ball J in the New South Wales Supreme Court in Westpac Banking Corporation v Diagne [2014] NSWSC 822. 5. That case considered proceedings between a bank and persons who were said to have borrowed or guaranteed various sums. After deciding the matter in favour of the plaintiff bank, Ball J went on to consider an application for indemnity costs. The bank relied upon a clause which was in substance similar to the clauses which are relied upon by the plaintiffs in the present application. 6. Ball J stated the following at paragraphs 82-83: "[82] The court is given a discretion under s 98(1) of the Civil Procedure Act 2005 (NSW) to award costs on an indemnity basis. Where a contract provides for payment of costs on that basis, the court ordinarily exercises its costs discretion to give effect to that contractual right: see Rail Corporation NSW v Leduva Pty Ltd [2005] NSWSC 138 at [26]–[34] per Nicholas J; Kyabram Property Investments Pty Ltd v Murray [2006] NSWSC 54 at [17]–[18] per Campbell J; Boreland v Docker [2007] NSWSC 53 at [114]–[117] per White J; National Australia Bank Ltd v Chen-Conway [2008] NSWSC 485. The court, however, is not bound to do so and any costs order remains at the court's discretion: Abigroup Ltd v Sandtara Pty Ltd [2002] NSWCA 45 at [9] per Stein JA (with whom Giles JA and Young CJ in Eq agreed); Kyabram Property Investments Pty Ltd v Murray [2005] NSWCA 87 at [14] per Beazley JA (with whom Hodgson and Ipp JJA agreed). [83] In this case, the costs incurred by the Bank, including the costs incurred in defending the claims made in the Commercial List Cross Claim Statement, were costs suffered by the Bank as a consequence of Mr and Mrs Diagne's defaults. There is no reason not to give effect to the relevant contractual indemnities. As I have said, no contractual indemnity was included in the Portfolio Loan Facility. However, few of the costs in the case related to the enforcement of that facility alone. Accordingly, in my opinion, it is appropriate to order that Mr and Mrs Diagne pay the Bank's costs on an indemnity basis." 1. In summary, the principles stated by his Honour are as follows: 1. The Court has a discretion under s 98(1) of the Civil Procedure Act 2005 (NSW) to award costs to a successful party on an indemnity basis; 2. Where a contract between parties provides for payment of costs on an indemnity basis, the Court will ordinarily exercise its discretion as to costs to give effect to that contractual right; 3. The Court is not obliged to do so and any costs order remains at the discretion of the Court. 1. As I indicated above, Mr Zipevski has not appeared today to argue the issue of indemnity costs. Attached to the affidavit of service of Mr McCrostie is a letter from a solicitor at Turks Legal, the solicitors for the plaintiffs, to Mr Zipevski indicating that if the proposed short minutes were not agreed to by the defendant that the plaintiffs' solicitors were instructed to seek an order that the defendant pay the plaintiffs' costs on an indemnity basis pursuant to Clause 7(1)(c) of the respective agreements. Accordingly, I am satisfied that the defendant had notice of the present application. 2. As the reasons for decision handed down on 20 March 2018 make clear, in my view there was no substance in the various defences put forward by the defendant. 3. Having reviewed the material before me and the more recent correspondence to and from the defendant, there is no apparent reason which would influence the discretion which I have as to costs and which would point to the fact that the costs discretion which I have should be exercised in a way which is different to that referred to by Ball J in the Diagne case, above, at [82]. 4. Accordingly, taking all the matters into account and the authorities which Ball J refers to, in my view I should make an order for indemnity costs in favour of the plaintiffs in the present case. I make orders in accordance with the short minutes of order that were handed up by counsel for the plaintiffs.