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- Unreported Judgment
Ask Funding Limited v Kenny QDC 91
DISTRICT COURT OF QUEENSLAND
Ask Funding Limited v Kenny  QDC 91
ASK FUNDING LIMITED ACN 094 503 385 (Plaintiff)
LEONE JOAN KENNY (Defendant)
District Court at Brisbane
Delivered ex tempore on 4 May 2018
4 May 2018
Porter QC DCJ
The defendant pay the plaintiff’s costs of the application and the proceedings on an indemnity basis, including reserved costs.
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – INDEMNITY COSTS – POWER TO ORDER – where judgment was by way of summary judgment – whether the court should order indemnity costs because to do so is justified in all the circumstances having regard to a clause in the loan terms – whether, in the alternative, the court should order indemnity costs on the basis that the defence in the proceedings was hopeless and an abuse of process.
Electricity Generation Corporation t/as Verve Energy v Woodside Energy Pty (2013) 251 CLR 640
Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2)  Ch 171
IBM Australia Limited v The State of Queensland  QSC 70
Lee v Australia and New Zealand Banking Group Ltd  QCA 284
Land Title Act 1994 (Qld) s 78
Uniform Civil Procedure Rules 1999 (Qld) r 703(3)
C Templeton for the plaintiff
No appearance for the defendant
Boyd Legal for the plaintiff
- Today I delivered judgment in the claim by Ask Funding Limited against Ms Leone Kenny for possession of two pieces of real property pursuant to mortgages of those properties, that is, registered mortgage of those properties held by Ask Funding in respect of which Ms Kenny is the mortgagor. I ordered possession under section 78(2)(c) of the Land Title Act 1994 (Qld) on the basis of default under both mortgages. The judgment was by way of summary judgment. The matter was first before the Court on 9 February 2018 when it was adjourned on Ms Kenny’s application, primarily for her to take the benefit of pro bono legal assistance offered to her through LawRight with Colin Biggers & Paisley Solicitors who she had entered into a cost agreement with and who had, understandably (given the issues), asked for six to eight weeks to give advice.
- The matter came back before me for argument on 13th of April 2018. Ms Kenny did not appear. As is explained in my reasons given on the summary judgment, she however, send a letter to the Court. That letter contained an amended defence, the earlier defence having been previously struck out on the application of Ask Funding. The implication of the sending of the amended defence and the documents accompanying it was that it was the amended defence Ms Kenny sought to rely on, and I gave leave for it to be filed, notwithstanding that it was in a highly irregular form. Based on that document and the evidence she had put before the Court on her adjournment application on 9 February 2018 (evidence I observed that she did not indicate she wanted read on the substantive hearing of the application, but which I considered in any event), I ordered summary judgment.
- Of the matters raised in the amended defence and her affidavits, the only issue of substantive merit was the contention that Ask Funding, through Mr Boyd, had frustrated the sale of the two lots some years ago. Although I reached the conclusion that there was no real prospect of her defending the claim based on those matters, including, inter alia, that she had released the claims in a deed and a variation to a deed in respect of which she had received legal advice or apparently had received legal advice, I concluded it could not be said that those two points were so hopeless as to comprise an abuse of process of the Court in raising them. The reason that I make that observation will become clear presently.
- Today I delivered judgment in the matter and Mr Templeton of counsel appeared for Ask Funding. Ms Kenny did not appear. She did not appear, notwithstanding that my associate informed her on Wednesday the 2nd of May that the matter was on for judgment today, and, further that Mr Boyd for Ask Funding also notified her of that matter on the 2nd of May at 11:23am. I note the email address is the one specified by her and has been the subject of communications on a number of occasions.
- I called on Mr Templeton for submissions on costs. He sought indemnity costs. He sought that order on two distinct grounds. The first was that I ought to exercise the discretion the Court has to order indemnity costs because to do so was justified in all the circumstances having regard to a clause in the loan terms. That clause is clause 10.6(1) of the fourth loan agreement as defined in my reasons. It provides:
The borrower must pay the lender all enforcement expenses in the event of a breach of this credit contract being the reasonable amount reasonably incurred or expended by the lender in the exercise of any right consequent upon any default on the part of the borrower under this credit contract.
- Mr Templeton helpfully referred me to a recent decision of his Honour Justice Martin in IBM Australia Limited v The State of Queensland  QSC 70 where his Honour summarised the general principles applicable when a court is exercising its statutory power to award costs in the context of a contractual promise by the unsuccessful party to pay costs on a certain basis. Those principles, as identified by his Honour, are these:
Clause 5.1(d) affords IBM a contractual right to enjoyment of the indemnity in that clause. If the State does not comply with that clause then IBM can sue. But a contractual right to costs does not override the discretionary power of the court with respect to costs. It was put this way by Stein JA in Abigroup Ltd v Sandtara Pty Ltd  NSWCA 45:
9. It is, of course, correct that a court is not bound to give effect to any curial contract as to costs when exercising its discretion to award costs. It does not follow, however, that the discretion takes over from the contract and the exercise of discretion against giving effect to the contract precludes enforcement of the contract as to costs. As Salter J said in Mansfield v Robinson  2 KB 353 at 359, agreements as to costs are common practice and perfectly valid and enforceable…The contractual right simply stands independently of the curial power and order.
While a contractual provision about costs does not confine a court in the exercise of its discretion, that discretion will usually be exercised consistently with such a provision.
- His Honour then referred to Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2)  Ch 171 and Lee v Australia and New Zealand  QCA 284. His Honour went on to observe that in construing these terms in a commercial document, they should be construed in a way all commercial documents are construed as identified in Electricity Generation Corporation t/as Verve Energy v Woodside Energy Pty (2013) 251 CLR 640 at 35.
- The first task, therefore, is to construe the clause. In my view, properly construed, the clause gives rise to an entitlement to costs which meet two requirements.
- (a)First, that they are reasonable amounts reasonably incurred by the lender; and
- (b)Second, that that amount of cost is incurred in the exercise of any right consequent upon any default on the part of the borrower under this credit contract.
- I will deal with the second limb first. This was an application for summary judgment for claim for possession under the mortgage. It was not a claim to enforce rights under the loan agreement; however, the clause does not require the costs to be costs incurred in enforcing the loan agreement. What it requires is that the identified quantity of costs be expended in the exercise of any right consequent upon any default on the part of the borrower under the contract. True it is that in strict legal terms the right to possession is consequent upon default under the mortgage, however the default under the mortgage is one and the same default as the default under the loan agreement because the loan agreement is a Transaction Document under the mortgage, and it is a default under a Transaction Document which, amongst other things, comprises default under the mortgage.
- In those circumstances, in my view, the costs of the possession proceedings under s. 78 LTA is consequent upon the default under the credit contract, because it is those defaults (given that we are dealing with two mortgages) which lead directly to the entitlement to possession, and, therefore, the entitlement to enforce it.
- As to the first limb, the question is what sort of order would the Court make in the exercise of its separate statutory discretion, given the language used to describe the measure of costs allowable. Mr Templeton submitted that the indemnity basis would be the correct basis, given that rule 703(3) provides:
When assessing costs on the indemnity basis, a costs assessor must allow all costs reasonably incurred and of a reasonable amount, having regard to –
- (a)the scale of fees prescribed for the court; and
- (b)any costs agreement between the party to whom the costs are payable and the party’s solicitor; and
- (c)charges ordinarily payable by a client to a solicitor for the work.
- It is to be noted that the definition of the character of the costs in that rule (that is, “reasonably incurred and of a reasonable amount”) is the same in substance as that identified in clause 10.6(b) (“the reasonable amount reasonably incurred”). Although I have a discretion in exercising the statutory power as to costs in a way identified by Justice Martin in IBM, in my opinion, it is the correct course to exercise my discretion to order indemnity costs as sought in this case. The following are the reasons I reached that view:
- (a)First, as I have observed, the indemnity measure is, in substance, the same as described in the same language as the measure authorised under the contract. However, it has an added an advantage. That measure is defined and prescribed by further provisions of the rules. It also provides a process for the articulation of the claim on that basis and its resolution if challenged under the rules;
- (b)Second, Ms Kenny was given notice of handing down of judgment, as I have identified, both by the Court and by Mr Boyd. As I have noted, Mr Boyd gave notice of the plaintiff’s intention to seek indemnity costs. Ms Kenny did not appear on the last occasion for the substantive hearing, or on this matter, and has had no contact with the Court. It could not be said that she had not been given a reasonable opportunity to be heard on the issue.
- (c)Third, Ms Kenny, in her defence, saw fit to call on the benefit of a number of the clauses in the standard terms; and
- (d)Fourth, Ms Kenny, as I have noted in my reasons, was represented by Agnes Lawyers, and she had been represented in relation to the earlier loan agreements as well. She signed the loan agreements with the benefit of legal advice being available.
- In all the circumstances, therefore, I consider it appropriate to exercise my statutory discretion consistently with the provision of the loan agreement identified by Mr Templeton. Accordingly, I order the defendant pay the plaintiff’s costs of the application and the proceedings on an indemnity basis, including reserved costs.
- I should finally observe that Mr Templeton also relied, as an alternative, on the proposition I ought to award indemnity costs on the basis of the Fountain Selected Meats principle that the defence in the proceedings was hopeless and an abuse of the Court’s process. I reject that submission. I think, as I’ve said, the argument in respect of the alleged interference with the sale of lots 58 and 211 was not so hopeless as to amount an abuse of process.
- I will make orders in terms of the amended draft, which I will initial, date and place with the papers.
 See Ask Funding Limited v Kenny  QDC 78.
- Published Case Name:
Ask Funding Limited v Kenny
- Shortened Case Name:
Ask Funding Limited v Kenny
 QDC 91
04 May 2018