If you are a borrower taking your bank to court over a loan dispute, there are many hurdles to jump. First, you have to find the money to pay lawyers to mount your action.
This is a task that often costs well into six figures - hard to find unless you are wealthy, or have some assets that the bank does not have control over that can be liquidated.
The bank, on the other hand, has a large legal budget and a whole department handling legal affairs. It also hires some of the best counsel available.
Having filed your claim you then have to get through several interlocutory skirmishes, including strike out motions, forcing amendments and clarifications to your statement of claim, challenges over the way your case is pleaded or worded, and other battles over document discovery.
Regardless of which party wins, it is likely that the matter will go to appeal.
So more money is required to fight that second round.
All this time your debt with the bank climbs alarmingly, as penalty interest applies to the debt, the cost of legal expenses are added to your account and interest is added to that figure as well, building the figure the bank claims you owe it into a telephone number.
That is the figure on which, if it wins, it obtains judgement in order to seize your assets, demand payment, or bankrupt you if you can't pay.
Few borrowers can win on this sort of grossly uneven playing field. If they win it is not plain sailing either, as Mr and Mrs Brian Timms have found.
The couple took the Commonwealth Bank to court in 1997 over a 1991 $950,000 business loan that has blown out to $6.6 million, and accrues interest at the rate of $2348.45 a day.
The bank won the first round. The Timms appealed and won the second round and costs, and the appeal court directed the matter be reheard. That rehearing occurred last year. More money had to be found for that.
The case is about a furniture business the Timms bought with the bank loan. The furniture business was a basket case from day one and collapsed not long after they bought it.
The business they bought was sold to them by another CBA client banking with another branch of the bank. The couple are seeking declarations that they were deceived and misled as to the health of the business by the bank because, they claim, it told them the business they were buying was sound when it knew it was anything but.
At the time of writing the bank had cross-claimed, and a decision on the reheard case is pending. But it is what happened after the Timms won their appeal that is interesting. The bank was ordered to pay the Timms' costs. That was in September 2002.
As is normal, the costs awarded were sent to be taxed by an expert. Every account is pored over and the expert determines whether it is a fair bill for the case and properly charged. The Timms had borrowed money to fund the appeal and also had to find money for the rehearing.
Naturally, they wanted prompt payment of the costs owed to them.
The taxed costs - which are never as high as indemnity costs - amounted to $126,011.78, substantially less, the Timms say, than what it cost to run their battle with the bank.
The Timms are still waiting for those costs to be paid by the bank. A couple of weeks ago they spent another $10,000 and went back to court to get the costs paid, and to ask for interest to be paid on their taxed costs.
They failed on both counts.
They have been disappointed by a legal technicality and now, it seems, they won't get any interest on those costs.
Justice Margaret Beazley in the appeal court said she has no power to award interest on their costs, still outstanding, because that interest on costs should have been asked for at the time the costs order was made, not later. The interest was not asked for at the time the order was made and now cannot be added to the bill.
"A claim for interest under s.95(4) is part of the claim that a party has in relation to costs. It is not a separate or independent cause of action. If no application for interest is made and determined before entry of judgement for costs, the claim for interest merges with the judgement for costs. That is what has occurred in this case," Justice Beazley noted.
However, if a bank wins a case, because of the way their loan documents are drawn up with every clause written in its favour, the bank claims interest for every day the debt builds, with that debt including all of its legal bills from the moment they are incurred and debited to the account.
In this case it is $2348.45 a day.
The lesson for borrowers is that if you win against a bank and manage to get a costs order, make sure that you also ask for interest on it at that time. Because you can't do it later when the bank takes its time paying.
