Western Land Developments Pty Limited v Maganic Brothers and Sister Pty Limited (No. 4)

This is the Court’s fourth judgment in these proceedings. It deals with two issues: first, a claim by the defendant/cross-claimant Maganic for a charging order over the land of the plaintiff/cross-defendant, Western, in respect of existing costs orders against Western; and secondly, a claim for interest pursuant to Civil Procedure Act 2005, s 101(4) on the costs awarded in Maganic’s favour on 31 August 2016.

This judgment should be read with the Court's three previous judgments. These are as follows: Western Land Developments Pty Limited & Anor v Maganic Brothers and Sister Pty Limited & Anor [2013] NSWSC 1574; Western Land Developments Pty Limited & Anor v Maganic Brothers and Sister Pty Limited & Anor (No. 2) [2016] NSWSC 598; and Western Land Developments Pty Limited v Maganic Brothers and Sister Pty Limited (No. 3) [2016] NSWSC 1203.

These reasons refer to events, matters and things in the same way as they are referred to in the Court's previous judgments.

The issues for determination are presented by Maganic's motion of 6 October 2016, which seeks the following orders:

Mr Sneddon of counsel continues to appear for Maganic. Mr Fernandes of counsel continues to appear for Western. The Court has again been assisted on this application by the careful submissions of counsel on both sides of this matter.

Mr Sneddon has ultimately conceded that the charging order sought on the motion cannot be obtained. There is no general charging clause in respect of the mutual liabilities of the parties in the original settlement agreement in these proceedings. Mr Sneddon did not claim the benefit of any other contractual or equitable right to a charge. He pursued order 1 of the motion on the basis of Civil Procedure Act, s 126, a statutory provision permitting the Court to declare a charge over certain kinds of property, and which is based upon the now repealed Judgment Creditors’ Remedies Act 1901 (Cth).

Mr Fernandes of counsel submitted for Western that Civil Procedure Act, s 126 is directed to the creation of security interests against a debtor in respect of "any equitable interest in property”: Civil Procedure Act, s 126(1)(c). Mr Fernandes further submits that Western's interests in its subdivided portion of the land the subject of these proceedings is a legal interest as registered proprietor and is not an equitable interest in property.

This argument is persuasive. And Mr Sneddon ultimately conceded its correctness. Young J's decision in: Quint v Robertson (1985) 3 NSWLR 398 (at 401C-402F) and White J's decision in Paul Michael Pty Ltd v Urban Traders Pty Ltd [2010] NSWSC 1246 (at [70]) (“Paul Michael”) make clear that the Judgment Creditors’ Remedies Act, s 27 and its successor Civil Procedure Act, s 126 were and are only applicable to equities of redemption or equitable interests, and not purely legal interests. White J explained the reason for this: in Paul Michael: "as the legal owner of the land [the registered proprietor of land held under the Real Property Act] does not also hold an equitable interest in the land. An equitable interest is something imposed on a legal title, not carved out of it. A legal owner does not hold the property on trust for himself or herself": Paul Michael at [70].

Accordingly, I dismiss this part of the motion.

Maganic also seeks under Civil Procedure Act, s 101(4) interest on the costs that it has paid to its lawyers in these proceedings. This particular section of the Civil Procedure Act was amended by the New South Wales Parliament during the course of these proceedings, which proceedings commenced as long ago as 2012 and which are now being concluded in 2016. The relevant changes may be shortly summarised.

At all relevant times up until November 2015 Civil Procedure Act, s 101 provided as follows:

The provision was amended in November 2015 to reflect the reasoning of the decision of the Court of Appeal in Doppstadt Australia Pty Ltd v Lovick and Son Developments Pty Ltd (No. 2) [2014] NSWCA 158 (at [403]) (“Doppstadt”), to the following effect:

The effect of the amendment is also readily explained by looking at Civil Procedure Act, s 101, in its amended form, which gives statutory force to the reasoning in Doppstadt and provides as follows:

The amended s 101 makes it clear that the presumed position is that interest will be payable on costs, and that after the amendment the practical onus now lies on the party resisting an order for interest on costs to show that it should not be awarded. The new legislation is slightly stronger than the effect given to the previous legislation by Doppstadt.

Mr Fernandes took the Court to passages in McKeith v Royal Bank of Scotland Group PLC; Royal Bank of Scotland Group PLC v James (No. 2) [2016] NSWCA 260 (“Royal Bank of Scotland”) which explain the changes effected by these amendments to s 101 and the applicable discretionary factors in play, when awards are made under the section. Royal Bank of Scotland relevantly provides as follows ([52]-[69]):

Any differences between the Court of Appeal’s reasoning in Doppstadt and the form of the post-November 2015 amended Civil Procedure Act, s 101 do not matter for present purposes. It is not in contest that the transitional provisions for the November 2015 Civil Procedure Act amendments mean that the old legislation applies in this case. The parties argued the case based on the old legislation, Doppstadt and Royal Bank of Scotland principles.

Invoking the pre-November 2015 form of Civil Procedure Act, s101 and Doppstadt and Royal Bank of Scotland, Mr Fernandes argued that there is a strong countervailing discretionary factor tending against the making of any orders in favour of Maganic for interest on costs.

Mr Fernandes argued that the Court's previous judgments, and in particular the third judgment, show that the delay in giving effect to the subdivision and in the conduct of these proceedings is partly to be placed at the doorstep of Maganic, as well as Western. By parity of reasoning with what is said in the passage from Royal Bank of Scotland cited above (at [68] – [69]), Mr Fernandes argues that the present is a case in which "The balance of advantage and disadvantage…renders it inappropriate for such an order [for interest on costs] to be made in respect of any of the parties".

I do not find this argument persuasive. The exercise of the Court’s discretion that informed the existing orders for costs against Western that the Court made on 31 August 2016, already takes full account of the delays occasioned on both sides. The existing costs order nevertheless make a substantial award of costs against Western: namely, that Western pays two-thirds of Maganic’s costs of these proceedings.

The Court has already considered the issue of delay and has reduced the quantum of the costs payable to Maganic for a number of discretionary reasons, including delay. When it comes to the awarding of interest on costs no further discount on this account is warranted.

For those reasons, in my view, an order for interest on costs should be made in Maganic’s favour.

What is the appropriate form of order? The Court raised with the parties, as a possible template for similar orders in this case, a form of Civil Procedure Act, s 101 order, which the Court had made in other proceedings. The Court made such an order in Jones v Poletti (No. 2) [2014] NSWSC 1057 (“Poletti”).

The parties reviewed the form of order made in Poletti and adopted it as appropriate to their circumstances. The Court will therefore make a form of order for interest on costs at the conclusion of these reasons based on the order made in Poletti.

In the course of the Court’s third judgment in these proceedings, the Court made directions with a view to the parties reaching agreement concerning the calculation of a final figure for judgment. The parties have now reached that agreement and have set out the terms of that agreement, in orders and notations (1) to (5) below, which are made by consent. Those orders explain the various integers of the calculation and the net result.

The parties contested the appropriate costs order, that flows from the result of this motion.

The parties have had mixed success on the motion. The issue that took considerable time in argument today has resulted in a money order in Maganic’s favour. In this sense, Maganic has been successful. On the other hand, Maganic has not been wholly successful: it failed to obtain any of the relief it sought in prayer for relief 1. But argument on prayer for relief 1 took little time. When Mr Fernandes put his ultimately successful argument about this prayer for relief, Mr Sneddon withdrew from the contest reasonably quickly, which shortened the Court time occupied on that issue.

In my view, in these circumstances the appropriate order is that the plaintiff/cross-defendant, Western, pay two-thirds of the defendants/cross-claimant's, Maganic’s, costs of the motion of 6 October 2016.

For these reasons therefore the Court orders as follows:

(a) such time as the plaintiff/ cross-defendant has paid the costs to the defendants/cross-claimant or either of them; or

(b) any further order relating to interest on costs in these proceedings.

For the purposes of subparagraph (a) above, Allowed Percentage means the formula of (Y/X multiplied by 100) percent where:

X equals the total amount of costs and disbursements on which the defendant/cross-claimants entitled to receive interest have paid or are liable to pay their legal advisers in connection with these proceedings; and

Y equals the total amount of costs and disbursements already the subject of the Court's orders in judgments 3 and 4 which are agreed or allowed on assessment to the defendant/cross-claimants, entitled to receive interest in connection with these proceedings.