Court’s discretion in relation to costs not abrogated by contractual promise to pay indemnity costs

Update, 23 January 2009: See also Reading Entertainment Australia Pty Ltd v Burstone Victoria Pty Ltd (No 2) [2005] VSC 137, Reading Entertainment Australia Pty Ltd v Whitehorse Property Group Pty Ltd [2007] VSCA 309Irani v St. George Bank Limited [2005] VSC 456; Abigroup Ltd v Sandtara Pty Ltd [2002] NSWCA 45.

Original post: National Australia Bank Ltd v Chen-Conway [2008] NSWSC 485 reiterates and approves the following propositions to be found in Micarone v Perpetual Trustees Australia Ltd & Ors (No 2) [1999] SASC 533 per Olsson, Debelle and Wicks JJ (at [32]):

‘The general rule is that, in the absence of an agreement to the contrary, a mortgagee is entitled to costs on a party and party basis: The Kestrel (1866) LR1A&E 78; In re Queen’s Hotel (Cardiff) Ltd; In re, Veronon Tin Plate Company Ltd [1900] 1 Ch 792; Re Adelphi Hotel (Brighton) Ltd District Bank Ltd v Adelphi Hotel (Brighton) Ltd [1953] 1 WLR 955; Re Shanahan; Re A Solicitor’s Bill of Costs (1941) 58 WN (NSW) 132; Jamieson v Gosigil Pty Ltd [1983] 2 Qd R 117; AGC (Advances) Ltd v West; AGC (Advances) Ltd v Cranston (1984) 5 NSWLR 301; Katsaounis v Belehris (1994) 179 LSJS 143 at 155 – 156. The expression of a contrary intention must be “plainly and unambiguously expressed” to use the words of Vaisey J in Re Adelphi Hotel Co Ltd (above) at 961. Generally speaking, a contractual obligation to pay all costs is not construed to require payment of costs improperly or unreasonably incurred, such an obligation being open to objection on public policy grounds: Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2) [1993] Ch 171 at 187 – 188. That difficulty does not exist in this case since the obligation to pay solicitor and own client costs is subject to conditions as to reasonableness: Citibank Savings Ltd v Pirrotta [1998] ANZ ConvR 442; Elders Trustee and Executor Co Ltd v Eagle Star Nominees Ltd (1986) 4 BPR 9205. To make good any objection upon taxation, the mortgagors should be required to satisfy the taxing officer of the unreasonableness of the item, doubts being resolved in favour of the mortgagee: Katsaounis v Belehris (above) at 157 approved in Citibank Savings Ltd v Pirrotta.’

But it also says:

The court will usually give effect to an express contractual obligation but, nevertheless, retains a discretion to award costs on some other basis: ANZ Banking Group (New Zealand) Ltd v Gibson [1981] 2 NZLR 513 at 524 – 525.’

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