Amit Laundry Pty Ltd v Jain

Supreme Court of NSW|2017-11-24|Before: Ward CJ

Judgment

HER HONOUR: On 3 November 2017, I published my reasons for judgment in proceedings involving a dispute as to the ownership of a property in Guildford (Property A), the sole registered proprietor of which is the defendant, Mr Rajil Jain (Amit Laundry Pty Ltd v Jain [2017] NSWSC 1495).
I concluded that Rajil holds the property on a resulting trust as to 9.08% in favour of the plaintiff (Amit Laundry Pty Ltd (Amit Laundry)) and as to one-third of the balance in favour of Rajil's brother, Amit Jain (a director and shareholder of the plaintiff company). Rajil's beneficial interest in Property A is thus two-thirds of 90.92% (60.61%). I made orders to enable the rectification of the register to reflect the ownership interests of Amit and Amit Laundry in Property A and I reserved the question of costs to be dealt with on the papers after the service of written submissions by the parties. Written submissions were duly served. For the following reasons I consider that the appropriate order is that each party pay his or its own costs of the principal proceedings but that Rajil pay Amit Laundry's costs of the interlocutory hearing in the proceedings.

Amit Laundry's submissions

There was no dispute between the parties as to the relevant principles to be applied in the exercise of the discretion to award costs and those principles do not here need to be re-stated (see for example Oshlack v Richmond River Council (1998) 193 CLR 72; [1988] HCA 11). Where there was disagreement between the parties was as to what should be regarded as the relevant "event", when considering the general rule that costs follow the event (Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 42.1).
Amit Laundry points to my conclusion (at [305]) that in practical terms it had achieved a substantial measure of success, although it had been successful in its resulting trust claim only as to a 9.08% interest in the land. The basis on which that conclusion was reached was that the outcome of the litigation was that Rajil was not in a position to force it to vacate the premises at that stage and could not sell with vacant possession (though I was by no means there suggesting that Rajil will not be able to take steps in due course to realise his interest in the property, which may well impact on Amit Laundry's ability to continue to operate its business from the laundry in the future). (One might have anticipated that there would be an attempt, as between Rajil and Amit, to reach a sensible commercial outcome to ensure that their respective interests in selling or retaining the property be recognised and addressed. However, my earlier attempt to encourage the parties to explore a commercial resolution to the matter seems to have met with no success so I say nothing further on this.)
Amit Laundry submits that in the present case there is no "discrete" or "severable" issue on which it did not succeed that would warrant departure from the usual order.
It says that its primary case was always based on a resulting trust, on which it was successful and that the alternative claims based on implied or express trust were alternative legal characterisations of the same evidence adduced to support the resulting trust claim (and to rebut Rajil's assertion of an outright gift or entitlement based on advancement). It argues that the only costs that could be said to be discretely due to those alternative characterisations of the evidence were the legal submissions; and that those alternative claims could not be said to comprise a claim which a party, properly advised, should have known had no chance of success or which was otherwise vexatious or unreasonable so as to justify any departure from the usual order on that account.
Insofar as it did not succeed in relying upon its resulting trust argument based on the distinction that the High Court drew in Calverley v Green (1984) 155 CLR 242; [1984] HCA 81 as to the Bloch v Bloch (1981) 180 CLR 390; [1981] HCA 56 type of case, again Amit Laundry argues that this depended on an alternative legal characterisation of the same evidence on which it established that it was entitled to a Calverley v Green resulting trust interest and the only discrete costs applicable to that claim were the legal submissions.
As to its lack of success on the express or implied trust alternative claims (and the Bloch v Bloch characterisation), Amit Laundry says that this affected the result only in terms of the quantum of its equitable interest in the land under the resulting trust (albeit, I might add, to a significant degree) and argues that the contest in the proceedings was fundamentally as to whether Rajil was legally able unilaterally to evict Amit Laundry from the premises and sell Property A. In the event, he was not.
Accordingly, Amit Laundry submits that the usual order should apply and it should have its costs of the proceedings.

Rajil's submissions

Rajil, on the other hand, seeks an order that Amit Laundry pay 50% of his costs of the proceedings on the ordinary basis; or alternatively, an order that each party bears his or its own costs of the proceedings.
He says that two separate but related issues fell for determination across the proceeding: first, the issue as to the beneficial ownership of Property A; and, second, the issue as to whether he was entitled to force Amit Laundry to vacate the property and sell it with vacant possession.
Rajil argues that the beneficial ownership issue was the primary factual and legal issue in dispute, the outcome of which ultimately governed the possession issue and, accordingly, the result of the beneficial ownership issue is the "event" for the purposes of s 98(1) of the Civil Procedure Act 2005 (NSW) and UCPR 42.1 (and hence the principal factor that should guide the exercise of the Court's discretion as to costs).
On that issue, Rajil says Amit Laundry substantially failed: it did not establish its principal claim to 100% beneficial ownership and it failed in its alternative claims as to an express or implied trust, establishing only a 9.08% interest in the property. Rajil points out that the finding that Amit holds a 30% interest in the property does not in any way qualify Amit Laundry's substantive failure on the beneficial ownership issue (noting that the finding as to Amit's 30% interest was contrary to Amit Laundry's principal claim and pointing to the company's separate legal personality. Rajil argues that although the finding as to Amit's 30% beneficial interest qualifies Rajil's success on this issue (i.e., its success in defeating Amit Laundry's claim to a 100% beneficial interest), it does not follow that Amit Laundry should be compensated for its costs when the reduction of Rajil's interest was not to the benefit of Amit Laundry itself.
On that basis, Rajil argues that justice would best be achieved in this case if costs were to be awarded based on the beneficial ownership interests of the parties (prima facie, Rajil to be awarded 60% of his costs and Amit Laundry 9.08% of its costs). However, to avoid the expense of the costs assessment process, Rajil contends for a reduction in the amount to which it says prima facie Rajil would be entitled so as to reflect the amount to which prima facie Amit Laundry would be entitled, hence the submission that Rajil should be awarded 50% of his costs on the ordinary basis.
Alternatively, if the beneficial ownership and possession issues are treated as separate "events", Rajil contends for an order that each party bear his or its own costs.
Rajil argues that it can be reasonably inferred that, despite the relationship between the outcome of the two issues, on a costs assessment a greater portion of the overall costs would be allocated to the beneficial ownership issue because (while the one day interlocutory hearing focused on the possession issue) almost the entirety of the evidence, the submissions and the four day principal hearing were directed to the beneficial ownership issue. As such, Rajil argues that even if Amit Laundry were to be awarded 100% of its costs of the possession issue, it can be inferred that such an amount would at best be equal to Rajil's prima facie entitlement to 50% of his costs of the beneficial ownership issue (as discussed above).
Rajil argues that it would not be in the interests of justice for further time and money to be spent on the costs assessment process given the potential difficulties in apportioning costs between the two issues, and where most likely outcome in any event is that each party would end up paying the other an approximately equivalent sum.

Determination

In James v Surf Road Nominees Pty Limited [No 2] [2005] NSWCA 29, the Court (Beazley JA, as her Honour then was, Tobias and McColl JJA) distinguished (at [34]) between cases where there are "discrete issues for determination", as where a plaintiff makes separate claims for different relief, and cases where "all issues are inseparable, or at least sufficiently linked, with respect to the overall disposition of a particular matter". In circumstances where the issue as to the beneficial ownership of the property was so intertwined with the issue as to Rajil's entitlement to possession of the property, it is not practicable in my view to treat them as separate issues.
The practical outcome of the litigation was that Amit Laundry failed in establishing its claimed 100% beneficial interest in the property; Rajil failed in asserting his claimed 100% beneficial interest in the property; and Amit Laundry succeeded (and Rajil failed on this issue) in establishing that Rajil was not entitled to demand vacant possession of the property at the time Rajil issued the notice to quit. I accept that Amit Laundry expressly argued (albeit in the further alternative) for a declaration (see [4], above) in terms which, practically speaking, may bear some similarity to the position in which it is now (as an equitable co-owner but, more relevantly, as a tenant having been in long term occupation of the ground floor of the property on a particular understanding as to the duration of its tenancy by reference to when it would be able to relocate its business). However, the basis for such a declaration (one expressly premised on Rajil holding the property as a trustee) was not the subject of detailed submission (T 294.46-295.37).
Amit himself was successful in the recognition of a roughly one-third interest he held in the property but he was not a party to the proceedings and this finding was at least inconsistent with Amit Laundry's primary contention that it owned the whole of the beneficial interest in the property (whether as a consequence of a resulting trust, or an express trust the existence of which was to be inferred from the circumstances). In these circumstances, the outcome may not inaccurately be described, using a sporting analogy, as a draw.
It is not in the interests of the just, quick and cheap resolution of the real issues in dispute between the parties for there to be costs orders made that will only leave open the likelihood of further dispute (and further costs), which would be the case if there were to be an attempt to allocate costs as between the two intertwined issues. Nor does the suggestion that the costs be attributed to reflect the percentage beneficial ownership of each of Rajil and Amit Laundry in the premises in my view adequately reflect the practical success that Amit Laundry has achieved in the proceedings. A broad brush approach is therefore more apt to achieve justice as between the parties in this particular case. That said, there is merit, in my view, in treating the costs of the interlocutory proceedings separately from the substantive proceedings (since the need for an interlocutory hearing at all was a function of the stance that Rajil took in relation to his claimed entitlement to vacant possession, which has been shown to have been incorrect and would have been problematic even had he held 100% of the beneficial ownership of the property, for the reasons outlined in my earlier judgment).
Balancing those matters and in those circumstances, I make the following orders: 1. Order that the defendant pay the plaintiff's costs on the ordinary basis of the interlocutory proceedings in this matter. 2. Other than the costs the subject of order 1, order that each party pay his or its own costs of the proceedings.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 November 2017

(Uniform Civil Procedure Rules 2005(NSW)

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