Interest was running at $8,000 a month. The director kept living there rent-free
A Queensland lender has secured a court order forcing a defaulting borrower to cover its full legal costs - not just the usual portion - after the borrower's attempt to delay enforcement on a Noosa Hills property collapsed.
The Supreme Court of Queensland delivered the costs ruling on November 9, 2026, following a decision on October 22 that rejected the borrower's bid to pause enforcement while it pursued an appeal. The case involves Sutton Property Pty Ltd, a second-ranked mortgagee, and AAKK Investments Pty Ltd, which owns the property at 35 Warana Street, Noosa Hills.
The loan went bad fast
Sutton Property advanced the loan on December 19, 2024. It was a short-term deal - the borrower was supposed to pay back the loan by April 10, 2025, and list the property for sale by February 15, 2025. Neither happened. The borrower defaulted.
By February 2026, the secured debt had blown past $1,800,000. The property was valued at between $1,700,000 and $1,900,000 - but that was before factoring in selling costs, accruing interest, and a third mortgage sitting behind Sutton's position. The equity cushion was gone.
Meanwhile, interest kept running at more than $8,000 a month. The borrower's director continued living in the property without paying rent, compensation, or any kind of occupation fee. The borrower had paid nothing beyond interest that was prepaid out of the original loan advance.
A deadline the borrower could not meet
On September 17, 2026, the court granted Sutton summary judgment for possession - a ruling without a full trial - finding the borrower had no real prospect of successfully defending the claim. The borrower moved for a stay the very next day.
On September 25, the court granted a conditional pause on enforcement. The conditions were strict: the borrower had to pay $320,000 into court by October 16 and file an appeal by October 15. If either condition was not met, the pause would lapse automatically.
The borrower filed its appeal on time. But it did not pay the $320,000. The pause expired. Despite that, the borrower applied for yet another stay, which the court dismissed on October 22.
Who pays the legal bill - and how much
With the stay gone, the question turned to costs. Sutton relied on clause 286 of the loan agreement, which required the borrower to pay the lender's legal costs on what is called an indemnity basis - meaning the borrower would cover the full amount of Sutton's legal fees, not just a reduced court-assessed portion. That clause sat within a broader framework: clause 218 covered losses arising from payment default and enforcement, and clause 219 carved out an exception where the loss was caused by the lender's own "deliberate misconduct or negligence."
The borrower, representing herself, pushed back on several fronts. She argued the indemnity was limited by the misconduct carve-out, pointing to disputes around the original lending arrangements and post-loan dealings. She argued the lender's costs were incurred unreasonably - which clause 286 itself excluded from the indemnity. Her fallback positions were that each side should bear its own costs, that costs be parked until the appeal was decided, or at minimum that costs be set at the standard (lower) rate.
The court was not persuaded. Applying the principle from Lee v Australia and New Zealand Banking Group Ltd [2013] QCA 284, it held that while courts retain discretion over costs, that discretion should ordinarily line up with a lender's contractual right to full cost recovery. The borrower's arguments about lender misconduct were "not proved" and had been "largely rejected" at the summary judgment stage.
An appeal is pending, but the stay is gone
The borrower's appeal against the original possession order remains on foot. But with the pause on enforcement refused and full legal costs now ordered on top of the mounting debt, the lender's enforcement path is clear for now.
For mortgage lenders and their advisors, the decision is a clean reminder: well-drafted cost recovery clauses in loan agreements will be enforced in Queensland when a borrower defaults and loses contested applications - particularly when the borrower cannot point to specific, proved misconduct by the lender.
