We recently reported on the outcome of ANZ v Londish [2014] NSWSC 432 (click here to read) in which the NSW Supreme Court upheld a loan and mortgage despite an assertion from the borrower that she derived no benefit from the loan.

In the proceedings, ANZ brought an alternative claim against the borrower seeking to step into the shoes of a former mortgagee, Challenger. The basis of this claim was that ANZ had paid out the borrower’s indebtedness to Challenger when it entered into the loan transaction with the borrower.

The borrower contended that the Challenger loan and mortgage were also unenforceable.  ANZ joined Challenger to the proceedings. ANZ made an alternative claim seeking restitution from Challenger on the basis that ANZ refinanced the Challenger mortgage in the mistaken belief that the mortgage was valid and enforceable.

The relief sought against Challenger was only necessary if ANZ was unsuccessful against the borrower.

ANZ was successful against the borrower.  The question of whether ANZ could step into the shoes of Challenger and the question of restitution against Challenger did not have to be decided.

The Court initially ordered the borrower to pay Challenger’s legal costs, notwithstanding that Challenger had been joined to the proceedings by ANZ.

Costs Argument

Challenger sought to have the cost order reversed and sought an order that ANZ pay Challenger’s legal costs. 

Challenger argued:

  1. ANZ was the only party seeking relief against Challenger and was therefore the appropriate party to pay Challenger’s costs.
  2. ANZ was unsuccessful against Challenger in the proceedings.
  3. The borrower is insolvent and if the Court ordered the borrower to pay Challenger’s costs this would have the effect of unfairly visiting the borrower’s insolvency on Challenger.

The Decision

The Court confirmed its original order that the borrower must pay Challenger’s legal costs. 

In reaching its decision the Court found:

  1. The obvious party to bear Challenger’s costs was the borrower since she raised the complaint regarding the Challenger loan that resulted in Challenger’s joinder to the proceedings.
  2. Once the borrower put the Challenger loan into issue ANZ properly joined Challenger in order to determine all the issues in dispute in one set of proceedings. 
  3. The principal issues in the proceedings largely concerned the circumstances surrounding the Challenger loan and the borrower was unsuccessful in challenging the validity of the Challenger loan.
  4. It was not correct to say that ANZ lost against Challenger in the proceedings.
  5. Even if the borrower is insolvent, ANZ ought not to be ordered to pay Challenger’s costs.  This would place ANZ in the position of an “insurer” for the borrower’s insolvency.
  6. If the borrower is insolvent and this results in Challenger having to bear its own costs of the proceedings, this is not something which ANZ should be liable for.

Take Out

The decision supports lenders joining prior lenders and other parties to proceedings to have all issues determined at once.

If the lender is successful in its claim against the borrower then it should follow that the unsuccessful borrower has to bear the costs of the other defendants.

Ultimately the question of costs remains discretionary and each case will turn on its own particular facts.  The decision is a useful guide in considering the question of costs in cases involving multiple parties. Click here to read the judgement.