In these proceedings, commenced by Summons filed on 27 April 2021, the plaintiffs sought orders under s 74MA of the Real Property Act 1900 (NSW) that the first defendant withdraw two caveats. The caveats had been lodged by the first defendant on about 7 April 2021 against the titles to two parcels of land of which he was the registered proprietor. The parcels of land were each the subject of a contract for sale entered into on 11 February 2021 following a public auction. The sales occurred pursuant to the exercise of powers of sale by the plaintiffs.
The first defendant alleged that, for various reasons, the plaintiffs did not have the power to sell the land, and that the contracts for sale were thus voidable at the suit of the registered proprietor (see Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870 at 875). Interests in the land were claimed in the caveats by the first defendant accordingly.
On 21 May 2021, following a hearing conducted by telephone, the Court ordered that the caveats be withdrawn. An ex tempore judgment was delivered. It was concluded that the first defendant had failed to satisfy the onus of showing that there was a serious question to be tried or a prima facie case as to the existence of the interests claimed. It was further concluded that even if there was a serious question or prima facie case, the balance of convenience was not in favour of a continuation of the caveats.
The question of costs as between the plaintiffs and the first defendant remains outstanding. The plaintiffs seek an order that the first defendant pay their costs of the proceedings on an indemnity basis. They also seek an order that instead of assessed costs the first defendant pay costs in a specified gross sum (see the Notice of Motion filed on 28 May 2021). These orders are opposed by the first defendant.
Directions have been made for the filing of evidence and written submissions concerning costs, with a view to the matter being dealt with on the papers. In accordance with those directions, the Court has received written submissions from the plaintiffs dated 28 May 2021 (which refer to various affidavits filed by the plaintiffs) and from the first defendant dated 4 June 2021 (which refer to two affidavits filed by the first defendant).
Business Finance Pty Ltd (Receiver and Manager Appointed) v Mudge [2021] NSWSC 733 | Case summary | Zoe
The plaintiffs recognise that there is some reluctance on the part of courts to order indemnity costs against litigants who appear for themselves, but submitted, by reference to authority including Vink v Tuckwell (No 3) (2008) 67 ACSR 547; [2008] VSC 316 at [103]-[107], that such orders may be warranted in certain circumstances, including where the self-represented litigant acts unreasonably and in such a way that costs are unnecessarily incurred.
The plaintiffs submit that the first defendant acted unreasonably by making various assertions or allegations that the plaintiffs say are baseless or irrelevant, and that the caveats themselves made claims that were devoid of merit. The plaintiffs further submitted that the first defendant made unfounded allegations of dishonesty and malicious conduct against the plaintiffs, and made threats towards the second plaintiff. The plaintiffs also submitted that the first defendant had unreasonably failed to respond to open offers made by the plaintiffs to settle the overall dispute between the parties. The first defendant essentially took issue with each of the matters raised by the plaintiffs, denying that any basis was shown to justify an award of indemnity costs.
Most of the matters relied upon by the plaintiffs in this regard occurred prior to the commencement of the proceedings, and indeed prior to the lodgement of the two caveats. To this extent the matters relied upon seem to me to be of little or no significance to the question of whether to make an order for indemnity costs of the proceedings. Insofar as the matters occurred after the lodgement of the caveats, it has not been shown that they have caused any substantial increase in the costs incurred by the plaintiffs. It seems to me that the strongest factor in favour of an award of indemnity costs is that the claims made by the first defendant in the caveats themselves were found to be lacking in substance.
However, accepting that no serious question to be tried or prima facie case was established by the first defendant, I do not think that in all the circumstances it would be appropriate to award indemnity costs against the first defendant. In this regard, I have taken into account the circumstances that the first defendant apparently had the benefit of legal advice or assistance at the time the caveats were lodged, and he thereafter defended the proceedings without the benefit of representation by a lawyer. I have also taken into account the fact that if a claim was made under s 74P of the Real Property Act for compensation against the first defendant for lodging the caveats without reasonable cause, it would be necessary to establish that the first defendant lacked an honest belief based on reasonable grounds that he had a caveatable interest (see Boensch v Pascoe (2019) 94 ALJR 112; [2019] HCA 49 at [12] and [109]-[114]). A claim for indemnity costs in s 74MA proceedings bears some similarity to a claim for compensation under s 74P, and I would not be prepared to go so far as to conclude that the first defendant did not have an honest belief based on reasonable grounds that he had a caveatable interest.
In my opinion, the appropriate order for costs as between the plaintiffs and the first defendant is that the first defendant pay the plaintiffs' costs of the proceedings on the ordinary basis. I note the submission made by the first defendant that he should not be required to pay costs "on an indemnity basis or any other basis". However, in my view there is no reason to depart from the usual position that costs follow the event (see Uniform Civil Procedure Rules 2005 (NSW) r 42.1).
I turn now to the plaintiffs' application for a gross sum costs order pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW). The power to make such an order exists at the present time because the relevant costs have not been referred for assessment.
The plaintiffs submitted that the circumstances warrant the making of such an order in the present case. It is submitted that both the plaintiffs and the first defendant would benefit from minimising further costs and delays by bringing the matter to an end; it is further submitted that there is a real risk that the first defendant may not be able to meet a costs order against him. The plaintiffs' submissions in this regard were not specifically answered by the first defendant in his submissions although I note that in his affidavit of 4 June 2021 reference is made to a right to apply for a costs assessment under s 203 of the Legal Profession Act 1987 (NSW). That provision has been repealed, and in any case it concerns an application by a client who has received a bill of costs, so would not apply here. The first defendant also states in his affidavit that the costs are of an interlocutory application, and such costs are ordinarily not payable until the end of the proceedings. The first defendant further states that he has "prepared an Appeal" and therefore a costs order against him would be prejudicial and premature. However, the application made in these proceedings for removal of the caveat is not an interlocutory application, albeit that the applicable principles are akin to those that apply to applications for interlocutory injunctions. Moreover, the proceedings have been concluded save for this application in relation to costs. There is thus no good reason to defer the application even if there is the prospect of an appeal.
In my view, the circumstances of the present case warrant the making of a gross sum costs order. I accept the plaintiffs' submissions to that effect. I consider that there is a real likelihood that the first defendant will be unable to meet a substantial costs order made against him. The first defendant informed the Court that impecuniosity was a reason why he did not take action to seek to prevent the sale process. I also think, having regard to the first defendant's affidavit, that there is a real risk that a costs assessment process involving the first defendant would be rendered unnecessarily lengthy and expensive as a result of the first defendant putting into issue all aspects of the claimed costs.
The plaintiffs adduced evidence of the costs they had incurred. The evidence is to the effect that the total anticipated costs of the plaintiffs of the proceedings are $159,251.50 (including GST). That includes an amount of $13,750 (including GST) for costs anticipated to be incurred after 28 May 2021 in relation to the present application. That amount seems to me to be excessive. I would thus proceed on the basis that the total costs are in the order of $150,000 (including GST). Otherwise, I accept that the amount of costs as calculated is accurate and reasonable in the circumstances.
The amount of $150,000 appears to include an amount of no less than about $42,000 for Counsel's fees and Court filing fees. If $40,000 was allowed for those items, and a further $81,000 (being 75% of the remaining $108,000) was allowed for the costs of the solicitors, the total would be $121,000 (including GST). That is to say, adopting a broad-brush approach, and recognising that the costs of the solicitors would likely be discounted by approximately 25% on an assessment on the ordinary basis, an amount of about $121,000 (including GST) is likely to be found due to the plaintiffs on such an assessment.
However, in order to avoid the risk of injustice to the first defendant, who would be deprived of the benefit of the assessment process if a gross sum costs order is made, it is appropriate to apply a modest further discount to take into account the contingencies present in the costs assessment process, including the possibility that a smaller amount may be found to be due on assessment (see Hamod v State of New South Wales [2011] NSWCA 375 at [814] and [820]; see also Bahamad v Wong [2020] NSWSC 991 at [11]-[12] and [62]-[68]). In all the circumstances, I consider that in the present case an amount of $110,000 (including GST) would be a fair amount to specify for a gross sum instead of assessed costs. That amount seems to me to be reasonable, and rationally based on the evidence before the Court.
For the above reasons, the Court will order:
1. that the first defendant pay the plaintiffs' costs of the proceedings; and
2. that instead of assessed costs the first defendant pay the plaintiffs' costs in the specified gross sum of $110,000 (including GST).
Finally, I should record that the submissions and affidavit of the first defendant included numerous other matters which seemed to me to be of little or no relevance to the determination of the issues on this application. All of these matters have been considered, even if they are not expressly referred to in the reasons set out above.
[2]
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: 22 June 2021
Parties
Applicant/Plaintiff:
Business Finance Pty Ltd (Receiver and Manager Appointed)