FEDERAL COURT OF AUSTRALIA

Jeffriess v Perpetual Trustee Company Limited [2020] FCA 1074

ORDERS

THE COURT ORDERS THAT:

1.    There is no order for costs on the interlocutory application filed in conjunction with the applicants’ originating application on 6 March 2020.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

REEVES J:

1    These reasons concern an application for party and party costs made by the respondents and an order that those costs be taxed immediately. It has a somewhat unusual procedural history, a summary of which is as follows.

2    On 6 March 2020, the applicants, Mr and Mrs Jeffriess, filed an originating application in this Court seeking declaratory relief under the National Credit Code (Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth)) in respect of a “reverse” mortgage they had entered into in 2005 with the first respondent, Perpetual Trustee Company Limited, as security for a loan in the amount of $220,000. The mortgage related to a property at 8 Bollard Circuit, Clear Island Waters in Queensland. The second respondent, Bluestone Equity Release Pty Ltd, manages the loan on behalf of Perpetual Trustee.

3    Their originating application included the following claims for interlocutory relief:

1.    An order pursuant to s. 23 of the [Federal Court of Australia Act 1976 (Cth)] that subject to order 2 below, [Perpetual Trustee] or [Perpetual Trustee and Bluestone Equity] forthwith do all things reasonably necessary to facilitate or give effect to the removal of a registered mortgage number 709176337 over property known as 8 Bollard Circuit Clear Island Waters in the State of Queensland Real Property Description Lot 302 on Registered Plan 868075 to facilitate the conveyance of the property by [Mr and Mrs Jeffriess] to Anish Unadkat pursuant to a contract dated 21 September 2019 between [Mr and Mrs Jeffriess] and Anish Unadkat.

2.    That the Discharge Amount in the sum of $1,569,905.84 be held by the solicitor for [Mr and Mrs Jeffriess] in the trust account of the solicitors (in an interest bearing account) for [Mr and Mrs Jeffriess], and thereby held until the resolution of these proceedings or such further order of the court.

3.    Alternatively, that the proceeds of sale of the property at 8 Bollard Circuit Clear [Island Waters] in the State of Queensland be paid into Court pursuant to the [Federal Court Rules 2011 (Cth)].

4    As is indicated in [3(1)] above, in September 2019, Mr and Mrs Jeffriess entered into a contract to sell the property. The sum referred to in [3(2)] above is the fee that the respondents proposed to charge for the early termination of the reverse mortgage. The main issue in dispute in this proceeding is the validity of that fee.

5    According to the amended statement of claim filed on 9 June 2020, the sale of the property was originally due to be settled on 29 January 2020. That date was later extended to 9 March 2020. Then, in an affidavit which he filed in support of the claim for interlocutory relief set out above, Mr Jeffriess stated that their lawyer was seeking a further extension of that settlement date from the purchaser. He also deposed that their lawyer was concurrently seeking to have Bluestone Equity agree to “quarantine” the monies allegedly due under the reverse mortgage “pending the resolution of the dispute”. Mr and Mrs Jeffriess were able to obtain successive extensions and the sale of the property settled on 27 March 2020.

6    Furthermore, in an affidavit which he filed in respect of this costs issue, Mr and Mrs Jeffriess’ lawyer, Mr Peter Mylne, described the dilemma that his clients faced at about this time in the following terms:

… that without appropriate interlocutory relief, they were continuing to incur liability under the security documents, and in order therefore to defray that continuing liability, decided with their lawyers to finalise the sale, pay out the obligations to the respondents and reserve their rights with respect to the ongoing litigation of this matter.

7    Mr and Mrs Jeffriess’ interlocutory application was given a return date of 20 March 2020. Service of the originating application and the accompanying statement of claim were effected on Bluestone Equity on 11 March 2020 and on Perpetual Trustee the following day.

8    On 12 March 2020, there was an exchange of correspondence between the lawyers for the parties in which Mr and Mrs Jeffriess’ lawyer confirmed that they intended to proceed with their interlocutory application.

9    On Tuesday, 17 March 2020, my Associate informed the parties by email that: “Due to ongoing concerns regarding the spread of the [Corona Virus Disease 2019] COVID-19, this matter has been adjourned”. This notice was given as a result of a decision made by the Chief Justice that all face-to-face hearings should be adjourned until the Court could, among other things, develop methods of dealing with cases that do not require face-to-face contact.

10    Shortly thereafter, an offer was made to the parties to hear the interlocutory application on the papers. In response, Mr and Mrs Jeffriess’ lawyer advised the Court on 25 March 2020 that:

…

Our clients have decided that, without prejudice to their substantive proceeding, they will settle with the financier to mitigate the ongoing increase of the break fees. In the circumstances, his Honour will not be required to determine the interlocutory application.

…

11    This position was confirmed in a letter that was sent to the respondents’ lawyers on 27 March 2020, in which it was said:

We refer to this matter and our recent conversation earlier today.

Your clients are invited to agree to an order that:

1.    The interlocutory application be dismissed.

2.    That costs be reserved.

If your clients are not agreeable to that proposal then there should be a costs argument. It is unlikely that a costs argument would curry much favour with his Honour in these difficult times.

If your clients are agreeable then we will draft an order in the above terms.

12    The respondents did not agree to the costs component of this proposal. Eventually, orders were made by consent on 16 April 2020, which included the following:

1    [Mr and Mrs Jeffriess’] interlocutory application be dismissed.

2    The parties file and serve any affidavits dealing with the costs of the interlocutory application, and a written outline of submissions in relation to such costs, by 4.00 pm on 15 May 2020.

3    The costs of the interlocutory application be determined on the papers.

…

13    The respondents filed an affidavit and a set of submissions on 15 May 2020. Mr and Mrs Jeffriess did likewise on 17 June 2020. Consequently, the respondents were invited to file submissions in reply which they did on 24 June 2020.

14    In their submissions, the respondents claimed that costs should follow the event of the dismissal of the interlocutory application. As for the order that those costs be taxed immediately, they submitted:

The application having been abandoned, the respondents should have their costs paid now, without having to wait until the end of a trial (if there is to be a trial). The respondents are out of pocket now. There is no reason that they should not be reimbursed for their costs now, and regardless of what happens at trial.

15    In their submissions, Mr and Mrs Jeffriess submitted that there should be no order for costs. In support of that contention, they claimed that they would have been able to make out a prima facie case for the grant of the interlocutory orders they sought. They also claimed that, because COVID-19 pandemic restrictions prevented them from obtaining a hearing date for their application and simultaneously “time was running on the obligations upon a strict interpretation of the security documents and [they] were facing a liability increasing in quantum to the respondents”, they decided to settle “with rights being reserved and the respondents being paid out”.

16    In their submissions in reply, the respondents persisted with their application. They contended that the Court was not in a position to adjudicate on the merits of Mr and Mrs Jeffriess’ interlocutory application. Nonetheless, relying upon the decision of Bond J in Fairfield Services Pty Ltd (in liquidation) v Leggett [2020] QSC 183 (Fairfield Services), they contended that Mr and Mrs Jeffriess had “effectively surrendered and decided not to proceed with their interlocutory application” and that circumstance provided a “strong reason” to award costs against them. They also pointed out that the statement in Mr and Mrs Jeffriess’ submissions that the matter “was settled with rights being reserved” did not apply to the interlocutory application.

17    It is trite to say that the Court has a broad discretion under s 43 of the Federal Court of Australia Act 1976 (Cth) to award the costs of a proceeding and that, ordinarily, costs follow the event. However, for the following reasons, I do not consider a relevant event has occurred in this matter. In the first place, I consider the judgment in Fairfield Services is distinguishable. In that matter, the plaintiffs sought leave to discontinue the whole proceeding less than three weeks before the trial because they had decided that the costs of proceeding to trial outweighed the benefits that were likely to be gained (see Fairfield Services at [2]–[3]). In those circumstances, Bond J considered that the plaintiffs’ decision amounted to a complete surrender by the plaintiffs (see Fairfield Services at [8]). Given that state of affairs and applying the decision of Burchett J in ONE.TEL Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 at [6] and a number of other cases (see Fairfield Services at [12]–[15]), his Honour decided that the plaintiffs should pay the defendants’ costs of the proceeding.

18    In this matter, Mr and Mrs Jeffriess do not wish to discontinue this proceeding. To the contrary, they are presently seeking to proceed to trial in the substantive proceeding. Furthermore, their decision to withdraw the interlocutory application did not, in my view, amount to a “complete surrender”. Instead, the history above indicates that, until the Court moved to adjourn the hearing of that application because of the COVID-19 pandemic, they were determined to proceed with it. In that circumstance, it is not appropriate, as Mr and Mrs Jeffriess seem to have proposed, to determine whether or not they would have succeeded to obtain the relief they sought (see Associated Steamships Pty Ltd v Seafarers Safety, Rehabilitation and Compensation Authority (No 2) [2020] FCA 853 at [24]–[25] and the authorities there cited). Instead, the usual order in that instance is that both parties should bear their own costs.

19    In my view, that outcome is reinforced in this matter by the extraordinary situation that prevailed in respect of Mr and Mrs Jeffriess’ interlocutory application. Specifically, the Court had adjourned their application because of the COVID-19 pandemic and they were, on the one hand, committed to settle on the unconditional sale they had entered into in September 2019 and, on the other, unable to reach any agreement with the respondents to remove the mortgage from the property and at the same time preserve their position pending the resolution of the dispute concerning that mortgage in this proceeding.

20    For these reasons, I consider both parties should bear their own costs of Mr and Mrs Jeffriess’ interlocutory application. That being so, it is unnecessary to determine the respondents’ application for an order for early taxation of the costs order they were anticipating would be granted.

21    Accordingly, the order will be:

1.    There is no order for costs on the interlocutory application filed in conjunction with the applicants’ originating application on 6 March 2020.

Associate:    

Dated:    28 July 2020