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11 Oonoonba Road Pty Ltd v ACP Properties (Townsville) Pty Ltd[2022] QCA 87

11 Oonoonba Road Pty Ltd v ACP Properties (Townsville) Pty Ltd[2022] QCA 87

SUPREME COURT OF QUEENSLAND

CITATION:

11 Oonoonba Road Pty Ltd & Anor v ACP Properties (Townsville) Pty Ltd & Ors [2022] QCA 87

PARTIES:

11 OONOONBA ROAD PTY LTD

ACN 615 776 148

(first appellant)

TIMOTHY EDMONDS

(second appellant)

v

ACP PROPERTIES (TOWNSVILLE) PTY LTD

ACN 631 282 203

(first respondent)

ACP PROPERTIES (QLD) PTY LTD

ACN 606 370 870

(second respondent)

STEPHEN GEORGE CAMPBELL

(third respondent)

FILE NO/S:

Appeal No 2394 of 2021
DC No 2476 of 2019

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal – Further Orders

ORIGINATING COURT:

District Court at Brisbane – [2021] QDC 10 (Barlow QC DCJ)

DELIVERED ON:

20 May 2022

DELIVERED AT:

Brisbane

HEARING DATE:

Heard on the papers

JUDGES:

Sofronoff P and Morrison JA and Flanagan J

FURTHER ORDERS:

  1. Judgment for the first appellant against the second respondent on the claim and counterclaim in the proceedings below in the sum of $400,589.25.
  2. The respondents pay the first appellant’s cost of and incidental to the appeal and the proceedings below.
  3. The first respondent pay the second appellant’s costs of and incidental to the appeal and of the proceedings below.
  4. The undertakings given by the appellants pursuant to the order made by consent by Fraser JA on 10 May 2021 be discharged.
  5. Any money paid by the appellants into court as security pursuant to the consent order dated 15 April 2021 be paid out to the appellants.

CATCHWORDS:

APPEAL AND NEW TRIAL – PROCEDURE – QUEENSLAND – POWERS OF COURT – COSTS – where the Court delivered its reasons in respect of the appeal – where the appellant succeeded on appeal – where the Court set aside the orders at first instance – where the parties made further submissions as to costs – where the appellant sought costs on an indemnity basis – where the Court found that the respondent unlawfully took the proceeds of sale – whether the unlawful taking of the proceeds of sale amounts to misconduct or inappropriate conduct by the respondent – where the appellant made an offer of compromise prior to the commencement of proceedings – whether an early offer was expressed as full and final – whether costs should be on a standard basis or an indemnity basis

District Court of Queensland Act 1967 (Qld), s 68, s 72, s 73

Property Law Act 1974 (Qld), s 88

11 Oonoonba Road Pty Ltd & Anor v ACP Properties (Townsville) Pty Ltd & Ors [2021] QCA 254, cited

Australia and New Zealand Banking Group Ltd v Evans [1992] 2 Qd R 230, followed

Bodger v Nicholls (1873) 28 LT 441; (1873) 37 JB 397, cited

Bofinger v Kingsway Group Ltd (2009) 239 CLR 269; [2009] HCA 44, followed

Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 536, cited

Ex parte Australian Co-Op Development Society Ltd (in liq) [1978] Qd R 395, cited

Huizhong Investment Group Pty Ltd v Westpac Banking Corporation Ltd [2019] NSWSC 524, cited

Marks & Sons Pty Ltd v Ridd Milking Machine Co Ltd [1923] VLR 435; [1923] ArgusLawRp 57, cited

Rockett v Moneycorp Securities Pty Ltd [2008] QSC 258, cited

Seymour v Lackey [1976] Qd R 277, cited

Tancred Brothers Pty Ltd v Burke [1986] 1 Qd R 494, cited

COUNSEL:

D A Savage QC, with L Copley, for the appellants
N H Ferrett QC for the respondents

SOLICITORS:

Mobbs & Marr Legal for the appellants
Archibald & Brown Lawyers for the respondents

  1. [1]
    SOFRONOFF P:  I agree with the reasons of Morrison JA and with the orders proposed by his Honour.
  2. [2]
    MORRISON JA:  The Court delivered its reasons in respect of the appeal on 26 November 2021.[1]  The only substantive order made at that time was that the orders made at first instance were set aside.  The parties were invited to make submissions on the final form of orders to reflect those reasons, and as to costs.  They have done so.  They are not able to agree on what the orders should be, nor costs.
  3. [3]
    The relevant findings made in the previous reasons are as follows:
    1. (a)
      Oonoonba and ACPQ purchased land for development, as tenants in common in equal shares;
    2. (b)
      ACPQ lent Oonoonba $1,647,500 for the development (the ACPQ Loan);
    3. (c)
      by way of security Oonoonba mortgaged its half interest in the land to ACPQ; the mortgage was registered;
    4. (d)
      Oonoonba was not able to repay the ACPQ Loan;
    5. (e)
      the National Australia Bank lent ACPQ and Oonoonba the sum of $1.6 million dollars (the NAB loan); it required a registered first mortgage over the land to support the loan, as well as a guarantee from (relevantly) Mr Edmonds;[2]
    6. (f)
      to permit the NAB mortgage to be registered, ACPQ released its own mortgage; ACPQ was therefore left with an executed but unregistered mortgage from Oonoonba;
    7. (g)
      ACPQ unlawfully registered its mortgage as a second mortgage;
    8. (h)
      ACPQ sold the land to ACPT in purported exercise of its power of sale as mortgagee;
    9. (i)
      the sale to ACPT was unlawful insofar as it related to the sale of Oonoonba’s half interest in the land;  that was the only part of the land the subject of the unlawfully registered second mortgage;
    10. (j)
      ACPT had meanwhile taken an assignment of the NAB’s mortgage; that was a mortgage over both half shares in the land; ACPT paid $550,077.96 to the NAB for that assignment;
    11. (k)
      the sale to ACPT settled and title to the entirety of the land was registered in ACPT’s name;
    12. (l)
      the net proceeds of sale, $2,733,297.07 were paid solely to ACPQ; and
    13. (m)
      one half of the net proceeds were paid to ACPT for its half share in the land; the other half was paid in reduction of the amount owed to ACPQ by Oonoonba under the original ACPQ Loan; nothing was paid to ACPT in reduction of the NAB loan or mortgage.
  4. [4]
    Relevant to the resolution of how the net proceeds of sale should be dealt with is s 88 of the Property Law Act 1974 (Qld), which relevantly provides:

88 Application of proceeds of sale

  1. (1)
    Subject to this section, the money arising from sale, and which is in fact received by the mortgagee, shall be held by the mortgagee in trust to be applied by the mortgagee—
  1. (a)
    firstly, in payment of all costs, charges and expenses properly incurred by the mortgagee as incident to the sale, or any attempted sale, or otherwise; and
  1. (b)
    secondly, in discharge of the mortgage money, interest and costs, and other money (if any) due under the mortgage; and
  1. (c)
    thirdly, in payment of any subsequent mortgages or encumbrances;

and the residue (if any) of the money so received shall be paid to the person entitled to receive or entitled to give receipts for the proceeds of sale of the mortgaged property”.

  1. [5]
    For the purposes of s 88 the terms “mortgage” and “encumbrance” are defined under Schedule 6 to the Property Law Act.  The term “mortgage” is defined as including “a charge on any property for securing money or money’s worth”.  The term “encumbrance” includes “a mortgage in fee or for a lesser estate or interest, and a trust for securing money, and a lien and a charge of a portion, annuity or other capital or annual sum”.
  2. [6]
    In the previous reasons this Court held that as first mortgagee of the land, ACPT should have received the sale proceeds first in discharge of the NAB loan (which had been assigned to ACPT), as it was secured by the NAB first registered mortgage, and only after that was discharged could any sale proceeds be diverted elsewhere.[3]
  3. [7]
    It was held that the general disbursement of the funds should be carried out in this way:[4]

“[134] That being the case the NAB loan (assigned to ACPT) should have been paid out of the gross proceeds of sale of the property.  Then the net proceeds should have been split 50:50 as between Oonoonba and ACPQ.  Then, of course, the ACPQ loan would have to be met.”

Sale price of the land

  1. [8]
    The parties are agreed that the starting point for the assessment consequent upon the first set of reasons is that the net proceeds of the sale by ACPQ was $2,733,279.07.[5]
  2. [9]
    The parties are also agreed that the NAB loan debt at the date of completion of the sale (31 May 2019) was $555,077.20.
  3. [10]
    The parties are also agreed that the amount available after settling the debt under the NAB loan was $2,178,201.11.
  4. [11]
    Finally, each half share at that point is agreed to be in the sum of $1,089,100.56.
  5. [12]
    It is at this point that the parties depart from a unified approach.
  6. [13]
    In the first set of reasons the Court concluded that the net proceeds should be applied to the NAB loan first The conclusion that in this case the net proceeds should be applied as against the NAB loan before any consideration of the moneys that might flow to ACPQ, has support in authority.  In Rockett v Moneycorp Securities Pty Ltd[6] a second registered mortgagee exercised the power of sale.  The court ordered that the proceeds of sale should be applied first to discharge the mortgage money, interest and costs due to the first mortgagee, and secondly to discharge the commission due to the agent engaged by the selling mortgagee with respect to the sale of the mortgage property.  The court accepted a submission that s 88(1) was a machinery provision which did not have the effect of placing the second mortgage and costs incidental to it ahead of the first mortgage which otherwise had priority.  A similar conclusion was reached in Huizhong Investment Group Pty Ltd  v  Westpac Banking Corporation Ltd.[7]
  7. [14]
    Oonoonba contends that when ACPQ released its mortgage in order to permit the NAB mortgage, the effect was to release the mortgage as a charge on the land whilst retaining the personal covenants under the mortgage.  Because of the release it was said that ACPQ’s unregistered mortgage does not come within s 88(1)(c) of the Property Law Act.  In other words, it is not a “subsequent mortgage or encumbrance”.
  8. [15]
    That submission must be rejected.
  9. [16]
    Section 88 is to be read in a manner consistent with the equitable duty of the first mortgagee to account to puisne mortgagees as a trustee for any surplus.[8]  In Bofinger the High Court adopted a passage from Kay J in Charles v Jones[9] where his Honour described the position in equity:

“I have never heard it doubted that where a mortgagee sells, and has a balance in his hands, he is a trustee of that balance for the persons beneficially interested.  He takes his mortgage as a security for his debt, but, so soon as he has paid himself what is due, he has no right to be in possession of the estate, or of the balance of the purchase-money.  He then holds them, to say the least, for the benefit of somebody else, or of a second mortgage, if there be one, or, if not, of the mortgagor What, then, is he to do?  Surely he has a duty cast upon him.  His duty is to say, ‘I have paid my debt: this property which is pledged to me, and in respect of which I now hold this surplus in my hands, is not my property.  I desire to get rid of this surplus, and hand it back to the person to whom it belongs. …’  The duty of this mortgagee was at least to set this money apart in such a way to be fruitful for the benefit of the persons beneficially entitled to it.  To that extent and in that manner he was, according to my understanding of the law, in a fiduciary relation to the persons entitled to the money …”

  1. [17]
    Where s 88(1)(c) uses the phrase “any subsequent mortgages” it is referring to the priorities between mortgages, not whether one was executed first in time.  So much was made clear in Australia and New Zealand Banking Group Ltd v Evans[10] where the court had to consider a circumstance where two mortgagees had modified the priorities that would otherwise be established by the sequence of registration.  One mortgage was first in time but registered second.  Having examined the three decisions which supported the proposition that s 88 should not be read literally,[11] de Jersey J said:

“I agree with King CJ’s description of the provision as one intended ‘to provide the machinery for giving effect to the priorities otherwise legally established’.  I would read the reference to ‘the mortgage’ in s. 88(1)(b) as meaning the mortgage first in priority.  The reference in (c) to ‘subsequent mortgages’ clearly assumes that the mortgage earlier referred to is the one with the dominant priority.  I do not consider that the priority to which the section relates is the priority prima facie established by the order of registration, but the true priority, however lawfully achieved.”

  1. [18]
    I respectfully agree with that conclusion.
  2. [19]
    For that reason the ACPQ mortgage was a “subsequent mortgage” for the purposes of s 88(1)(c).
  3. [20]
    Under s 88(1) the selling mortgagee should, so far as possible, determine the rights of subsequent mortgagees and the mortgagor, and any other person entitled to be paid from the surplus, and make payment accordingly.  As to this, in Ex parte Australian Co-Op Development Society Ltd (in liq),[12] an issue arose as to whether an undated bill of mortgage was a subsequent mortgage or encumbrance for the purposes of s 88(1)(c).  The question was whether the phrase “subsequent mortgages or encumbrances” referred to registered mortgages or encumbrances or had a wider application.  As to that, Hoare J said:

“While one can readily see the creation and enlargement of doubts by the provisions of s. 77(2) of the Property Law Act, nevertheless, I find it difficult to see why the provisions of s. 88(1)(c), at any rate as they apply to a bill of mortgage should be restricted to a registered bill of mortgage.  At the same time it would, on the face of it, be absurd if the bill of encumbrance is, by the operation of s. 77(2), to be placed, as it were, in a different category and with separate provisions applying to a bill of encumbrance.  It is not necessary for me to determine this aspect of the matter on this application but it may be that the operation of s. 77(2) is sufficiently restricted by the words, ‘unless the contrary intention appears.’  However, I say no more of the bill of encumbrance but it does seem to me that, having regard to the existing law which is so well established, I can see no good reason why s. 88(1)(c) as far as its application to a mortgage is concerned, should be restricted to a registered mortgage and I so hold.  It is, I think in the circumstances, appropriate to say something of the position of the first mortgagee who holds surplus moneys.  Apparently it is a common practice in Queensland for lending institutions to have unregistered charges of various kinds which could be categorised as unregistered mortgages and which would be regarded as equitable mortgages.  It seems to me that a first mortgagee must act reasonably and, generally speaking, it could be said that he would act reasonably if having received a claim by a second or subsequent mortgagee to any surplus moneys he ascertains as soon as reasonably possible the validity or otherwise of the claim as best he can, including inquiries of the mortgagor to the extent that the course is feasible.  Then, having satisfied himself as to the validity of the claim and the proper order of priority, he makes the payment to any subsequent unregistered mortgagees, having regard to the general law as to priorities, and then pays any surplus to the mortgagor.”

  1. [21]
    Whilst Australian Co-Op Development dealt with an unregistered subsequent mortgage, there is no reason why the principle underlying that decision should be limited to that situation.
  2. [22]
    Further, s 88 provides that the residue of the money so received “shall be paid to the person entitled to receive … the proceeds of sale”.  The section does not require that the ultimate recipient be the holder of a mortgage, whether registered or not.  It obliges the mortgagee conducting the sale, as trustee under s 88(1), to hold the residue for the person who is entitled to receive it.  Implicit in the obligations as part of that statutory trust, is an obligation to ascertain the person who is entitled to receive the proceeds of sale.
  3. [23]
    In my view, the release of ACPQ’s mortgage released it as a charge on the land but did nothing to impair ACPQ’s entitlement to enforce the personal covenants under the mortgage.  ACPQ had taken steps to enforce the mortgage prior to it purporting to exercise the statutory power of sale.  Oonoonba could have been under no misapprehension that ACPQ was seeking repayment of its debt.
  4. [24]
    Therefore, in my view, ACPQ had an entitlement under s 88(1) to have the proceeds of sale properly applied after the NAB loan was repaid, to receive that part of the residue to which it was entitled as against Oonoonba, in respect of Oonoonba’s debt to it.
  5. [25]
    Consequently, the release did not, as Oonoonba contended, extinguish the security as well as the benefit s 88 of the Property Law Act upon the distribution of the sale proceeds.[13]

Amount of the ACPQ loan

  1. [26]
    The parties were not able to agree upon the state of the loan account in the event that the NAB loan and mortgage had been properly satisfied from the proceeds of sale.  Oonoonba contended, by reference to paragraph 10 of the statement of claim,[14] that the debt at the time of sale would have been in the sum of $1,845,951.75.[15]  By contrast ACPQ contended that the correct figure was $1,923,424.20.[16]  It attached a schedule to its submissions setting out the justification for that figure.  For ease of reference the relevant part of the schedule is set out below.

ACPQ Loan

Judgment17/12/21

Date:

Rate 4.67%

Date Transaction AmountBalance

23/12/2016Advance$1,350,000.00 $1,350,000.00

10/05/2017Interest $     24,046.31 $1,374,046.31

10/05/2017Advance$   100,000.00 $1,474,046.31

30/06/2017Interest $       9,649.29 $1,483,695.60

30/06/2017Advance$   100,000.00 $1,583,695.60

10/08/2017Interest$       8,328.97 $1,592,024.57

10/08/2017Advance $    97,500.00  $1,689,524.57

12/06/2018Interest$    67,454.50  $1,756,979.07

Increased rate 9.36%

31/05/2019Interest $166,445.12 $1,923,424.20

31/05/2019Sale Proceeds$(1,089,100.56) $   834,323.64

17/12/2021Interest $224,945.95 $1,059,269.59

Total amount owing: $1,059,269.59

  1. [27]
    The change in the interest rate from 4.67 % to 9.36 % was recorded in emails between Mr Campbell and Mr Edmonds, on 5 June 2018 and 11 June 2018.[17]  That the loan was paid in tranches, some of which were amounts of $100,000, was the subject of unchallenged evidence by Mr Campbell.[18]  ACPQ’s schedule included source references for the three relevant tranches by reference to the trial bundle.  As no objection was taken by Oonoonba to those figures as being taken as correct by reference to the trial bundle, and because they reflect the evidence of Mr Campbell, I consider they can be accepted.  The calculations reflected in the schedule for the amount of interest, firstly at 4.67 % compounding on a daily basis, and then 9.36 % compounding on a daily basis, are also correct.
  2. [28]
    Therefore, assuming that the NAB loan was paid out first from the sale proceeds, at that point the ACPQ loan stood at $1,923,424.20.
  3. [29]
    On the basis that half of the sale proceeds went to Oonoonba, one must deduct the agreed figure of $1,089,100.56.  As the schedule reflects, the result is that Oonoonba owed $834,323.64 as at 31 May 2019.

Waiver by suing in the District Court

  1. [30]
    A complication to which Oonoonba refers in its supplementary submissions, is that ACPQ instituted its proceedings in the District Court which has a limited monetary jurisdiction of $750,000.00.  Oonoonba contends that there can be only one of two consequences, the first being that ACPQ abandoned any part of its claim over $750,000.  The second is that the entire claim was not within the jurisdiction of the District Court because there was no express abandonment of the excess.
  2. [31]
    In the District Court proceedings each of ACPT and ACPQ claimed sums less than $750,000.00 by way of a debt due and owing.[19]  It was alleged that the amount owing under the development agreement[20] was $556,966.21.[21]  It was then pleaded, in paragraph 12, that Oonoonba was indebted to ACPQ in the sum of $556,966.21.  The relief sought by ACPT and ACPQ, in each case, was for a sum less than $750,000 by way of “a debt due and owing”.[22]
  3. [32]
    In answer to Oonoonba’s counterclaim ACPT and ACPQ maintained that “the Defendants are liable as pleaded in the Statement of Claim”.[23]
  4. [33]
    The opening submissions on behalf of ACPT and ACPQ sought only the relief in the claim.[24]  Though this was said to be “subject to updated calculations”, nothing was said to suggest that the claim would exceed the monetary jurisdiction of the District Court.
  5. [34]
    The closing written submissions advanced on behalf of ACPT and ACPQ contended that if the re-registration of the ACPQ mortgage was illegitimate, then one half of the proceeds would have been held on trust for Oonoonba, and at the time ACPQ received the sale proceeds “Oonoonba was indebted to it for more than the worth of the half-share”.[25]  Notwithstanding that submission, nothing was said to suggest that ACPT or ACPQ were seeking relief beyond the monetary jurisdiction of the District Court, namely $750,000.00.
  6. [35]
    In the closing written submissions on behalf of Oonoonba, one scenario that was canvassed was the outcome if the NAB mortgage should have been paid out as a priority on the sale of the land.  Under that scenario the claim by ACPT was listed at the amount claimed in the statement of claim, namely $566,966.21.[26]
  7. [36]
    It is true to say that if a claim is within the monetary limit of the District Court jurisdiction, proof that the actual liability is in excess of the monetary limit does not deprive the court of jurisdiction.[27]  A finding may be made as to the amount of damages suffered which is in excess of the monetary limit.[28]  That is because the liability may be reduced as a result of, for example, contributory negligence, or other matters which bring it below the monetary limit.  If that is the case, then judgment can be given.  However, if the court determines that the amount payable is an amount in excess of the monetary limit, the correct course is to give judgment for the amount of the monetary limit.[29]
  8. [37]
    As long as the actual judgment is for an amount within the monetary limit, it does not matter if the excess consists only of interest and it is that excess which takes it above the monetary limit.[30]  That is so whether the interest component is that payable under a contract or whether it is the amount a court may award under a statute, such as the Civil Proceedings Act 2011 (Qld): s 68(3)(c) of the District Court of Queensland Act.
  9. [38]
    It is possible to have a claim exceeding the jurisdiction which is tried in the District Court by consent.[31]  It is also true that any excess over the monetary limit can be abandoned in the claim: s 73 of the Act.
  10. [39]
    There is no consent to the jurisdiction being exceeded in this case.  Nor is there any express statement of abandonment in the pleading.  However, suing for the monetary limit is, in effect, an abandonment of any excess.[32]
  11. [40]
    In Marks & Sons the court was dealing with a claim where the plaintiff sought an account as a result of transactions between both parties.  In the pleading the plaintiff stated, “the plaintiff says that the amount of the subject matter of this action does not exceed 500l”.  That was the monetary jurisdiction of the county court at the time.  As to that statement the court observed:[33]

“We think that is a clear limitation of the amount sought to be recovered, and looking at sec. 40 of the County Court Act 1915, we find that jurisdiction is given to the County Court in connection with ‘all personal actions where the amount, value or damages sought to be recovered is not more than five hundred pounds whether on balance of account or otherwise”.

  1. [41]
    In the present case the pleading on behalf of ACPT and ACPQ expressly limited the claim to a figure within the monetary jurisdiction of the District Court.  That claim was maintained in the opening submissions and, apart from referring to the fact that the debt was greater than the half share of the proceeds, nothing was said to seek a claim beyond the monetary limit of the jurisdiction of the District Court.  Nor was anything said in oral submissions which might have had that effect.
  2. [42]
    In my view, the contention that ACPQ abandoned any excess above $750,000.00 on its claim should be accepted.  That is particularly so given that its closing submissions recognised that the debt to ACPQ was greater than the half share due on the sale proceeds, yet the suit was maintained in the District Court and no attempt was made to do anything but pursue the pleaded claim.
  3. [43]
    The result is that Oonoonba’s debt to ACPQ on its loan should be taken to be $750,000.00 as at 31 May 2019.
  4. [44]
    On the basis that ACPQ must account to Oonoonba for the half share that should have been directed its way on 31 May 2019, namely $1,089,100.56, less $750,000.  The net sum is $339,100.56.
  5. [45]
    That sum should attract interest in accordance with the rate applicable under the Civil Proceedings Act Applying the rate of 6.10 % from 31 May 2019 to 20 May 2022 the interest component is $61,488.69.
  6. [46]
    The total sum owed by ACPQ to Oonoonba as at the date of these reasons is therefore $400,589.25.

Costs

  1. [47]
    The parties accept that in the case of Mr Edmonds, as his claim has succeeded, he is entitled to the cost of the appeal and of the proceedings at first instance.  Mr Edmonds’ liability arose only under the guarantee which he gave in support of the NAB loan.  That loan was assigned to ACPT, which was the entity seeking relief against him.  It is right, therefore, that ACPT pay Mr Edmonds’ costs of the appeal and of the proceedings below.
  2. [48]
    As for Oonoonba, it is plain that it has succeeded on the appeal.  It succeeded on its contention that the re-registration of the ACPQ mortgage was unlawful, as was the purported exercise of the power of sale by ACPQ.  It succeeded on its contention that, as a consequence, the NAB loan should have been paid out of the gross proceeds of sale of the property as a first priority, then the net proceeds split 50:50 as between Oonoonba and ACPQ.  That would then leave the ACPQ loan to be met.  The success of that case also defeated ACPT’s claim.
  3. [49]
    Plainly the orders made against Oonoonba at first instance must be set aside.  Given that there was never a challenge to Oonoonba’s liability to ACPQ on the loan, but merely a contest as to how the sale proceeds should have been applied, it should be recognised that Oonoonba has substantially succeeded in the appeal as against both ACPT and ACPQ.  In accordance with the findings of this Court, that should have been the result at first instance.  Therefore, subject to other questions with which I will next deal, Oonoonba should have its costs of the appeal and the proceedings at first instance against both ACPT and ACPQ.
  4. [50]
    Oonoonba raises two further matters.  The first is that it seeks costs on an indemnity basis.  Two grounds are advanced for that contention.  The first are the findings by this Court that the arrangements between ACPT and ACPQ permitted ACPQ to unlawfully take all of the proceeds of sale.  The second is said to arise from an early offer of settlement.
  5. [51]
    I am not persuaded that costs should be ordered on the indemnity basis because of the findings relating to the way in which the ACPQ mortgage was re-registered, and the way the sale and division of proceeds was conducted.  There are several reasons for that conclusion.
  6. [52]
    First, there has been no misconduct or inappropriate conduct in the course of the litigation.  Nor could it be said that the claim had such a remote prospect of success that the proceedings should not have been brought or continued.  Both of those are classic categories affecting the exercise of discretion to order costs on the indemnity basis.[34]
  7. [53]
    Secondly, the relevant unlawfulness related to the absence of agreement by which the ACPQ mortgage was re-registered.  That turned on a consideration of the dealings between Mr Campbell and Mr Edmonds.  Whilst this Court came to the conclusion that there was no agreement, that was not based on any impropriety on the part of Mr Campbell, but simply an absence of a meeting of minds on the subject.
  8. [54]
    Thirdly, the proceedings came well after the sale had settled, which had the consequence that as title had passed and there was no allegation of fraud, the sale could not be undone.  The issues were therefore concerned with whether the sale was lawful and what accounting should follow.  The arguments on ACPQ’s and ACPT’s side could not be said to be wholly unmeritorious.
  9. [55]
    Fourthly, no allegation was made that the conduct by ACPQ or ACPT was tainted by fraud or improper motive.  True it is that the arrangements preserved the NAB loan in the hands of ACPT, and thus exposed Oonoonba and Mr Edmonds to liability, but it was not said that those arrangements were fraudulent or improper.
  10. [56]
    The second basis for the contended order on the indemnity basis is that an offer of compromise was made prior to the commencement of proceedings by the appellant’s former solicitors The offer was made on 15 January 2019,[35] and was in these terms:

“The parties have been engaged in undertaking a venture for the development of the Transit Centre here in Townsville and it is clear that the relationship between them has broken down and cannot be restored.

As owners in common in the property the parties have rights to apply to the Court for the appointment of a trustee for sale.  This can be a costly and time consuming process and could be avoided by agreement to undertake a similar process.

Our client would be happy to participate in a process of this nature on the basis that their respective rights and obligations would be reserved on sale and upon discharge of the mortgage to the bank on the basis that any surplus is paid to a trust account pending determination of the parties entitlements (by agreement or otherwise).

Alternatively our client would be prepared to transfer its interest in the land to yours for a nominal consideration in terms of the attached Deed”.

  1. [57]
    In my view, it cannot be said that what was proposed in that offer was an outcome better than achieved in the proceedings.
  2. [58]
    First, whatever was contained in the Deed referred to in the last paragraph, that document was not put before this Court.  That Deed apparently dealt only with the second part of the offer, namely a transfer of the land from Oonoonba to ACPQ.
  3. [59]
    Secondly, the second offer was not expressed to be in full and final satisfaction of all disputes and did not give credit for the ACPQ loan.
  4. [60]
    Thirdly, the first part of the offer was not definitive.  It proposed participation in a process similar to the appointment of a trustee for sale, though it was not said what that process would be.  All that was said was that if that was an acceptable way forward, a deed would be prepared.  Plainly that was not an offer capable of acceptance so as to make a binding contract.
  5. [61]
    Fourthly, neither offer dealt with the liability of Mr Edmonds on his guarantee of the NAB loan.
  6. [62]
    It follows that the cost orders should be on the standard basis.

Final orders

  1. [63]
    On 26 November 2021 this Court ordered that the orders made on 4 March 2021 in the District Court be set aside.  For the reasons which I have expressed above the following orders are appropriate:
  1. Judgment for the first appellant against the second respondent on the claim and counterclaim in the proceedings below in the sum of $400,589.25.
  2. The respondents pay the first appellant’s cost of and incidental to the appeal and the proceedings below.
  3. The first respondent pay the second appellant’s costs of and incidental to the appeal and of the proceedings below.
  4. The undertakings given by the appellants pursuant to the order made by consent by Fraser JA on 10 May 2021 be discharged.
  5. Any money paid by the appellants into court as security pursuant to the consent order dated 15 April 2021 be paid out to the appellants.
  1. [64]
    FLANAGAN J:  I agree with Morrison JA.

Footnotes

[1]11 Oonoonba Road Pty Ltd & Anor v ACP Properties (Townsville) Pty Ltd & Ors [2021] QCA 254.

[2]Mr Edmonds is the principal of Oonoonba.

[3]Reasons No. 1, at [122].

[4]Reasons No. 1, at [134].

[5]That is described as the “sale price” in the appellant’s supplementary submissions, paragraph 15, but it was, in fact, the net proceeds.

[6][2008] QSC 258.

[7][2019] NSWSC 524.

[8]Bofinger v Kingsway Group Ltd (2009) 239 CLR 269; [2009] HCA 44.

[9](1887) 35 Ch D 544 at 549-550.

[10][1992] 2 Qd R 230 at 232-233.

[11]Bank of New Zealand v Development Finance Corporation of New Zealand [1998] 1 NZLR 495 at 503; Mercantile Credits Ltd v Australia and New Zealand Banking Group Ltd (1988) 48 SASR 407 at 410; and Re Murrell; Ex parte: Official Trustee in Bankruptcy (1984) 57 ALR 85 at 90 and 92.

[12][1978] Qd R 395 at 396-397.

[13]Oonoonba’s supplementary outline, paragraph 13.

[14]AB 39.

[15]Oonoonba’s supplementary outline, paragraph 16.

[16]Supplementary outline, paragraph 3.

[17]AB 382-383.

[18]AB 666-667.

[19]Amended Claim, AB 35-36.

[20]Which reflects the ACPQ loan.

[21]Amended Statement of Claim, paragraph 10, AB 39.

[22]AB 43.

[23]Reply and Answer, paragraph 35, AB 74.

[24]Outline by way of opening, paragraph 54, AB 92.

[25]Paragraphs 23 and 25, AB 96.

[26]Paragraph 39(b), AB 109-110.

[27]Bodger v Nicholls (1873) 37 JB 397; 28 LT 441.

[28]Seymour v Lackey [1976] Qd R 277.

[29]Tancred Brothers Pty Ltd v Burke [1986] 1 Qd R 494.

[30]Jones v Harvey & Kennedy Trading Co Pty Ltd [1991] QSFC 51.

[31]Section 72 District Court of Queensland Act 1967 (Qld).

[32]Marks & Sons Pty Ltd v Ridd Milking Machine Co Ltd [1923] VLR 435.

[33]Marks & Sons at 439.

[34]Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225.

[35]AB 632.

Close

Editorial Notes

  • Published Case Name:

    11 Oonoonba Road Pty Ltd & Anor v ACP Properties (Townsville) Pty Ltd & Ors

  • Shortened Case Name:

    11 Oonoonba Road Pty Ltd v ACP Properties (Townsville) Pty Ltd

  • MNC:

    [2022] QCA 87

  • Court:

    QCA

  • Judge(s):

    Sofronoff P, Morrison JA, Flanagan J

  • Date:

    20 May 2022

  • Selected for Reporting:

    Editor's Note

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2019] QDC 26505 Dec 2019-
Primary Judgment[2021] QDC 1004 Feb 2021-
Appeal Determined (QCA)[2021] QCA 25426 Nov 2021-
Appeal Determined (QCA)[2022] QCA 8720 May 2022-
Application for Special Leave (HCA)File Number: B25/202217 Jun 2022-

Appeal Status

Appeal Determined (QCA) Special Leave Sought (HCA)

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