By a Notice of Motion filed on 4 September 2017, the plaintiffs seek an order pursuant to s 98 of the Civil Procedure Act 2005 (NSW) that the respondents, who are not parties to the proceedings, pay the plaintiffs' costs of the proceedings, save for the period 2 March 2016 to 8 April 2016.
It was agreed that the application could be determined on the papers. The plaintiffs rely upon the affidavits of the first plaintiff sworn on 10 May 2017 and 8 February 2018, and the respondents rely upon the affidavit of the first respondent sworn on 4 December 2017. Written submissions have been received from the plaintiffs and the respondents.
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Factual Background
In 2012 and 2013 the defendant, Taha Salem, was the recipient of legal services provided by the plaintiffs pursuant to a costs agreement dated 18 May 2012. The plaintiffs claim that the fees for those services have never been paid.
The plaintiffs lodged caveat AJ804171 ("the original caveat") over a property in Prestons ("the property") in September 2015. The defendant owns a half share in the property as a tenant in common with his daughter and son in law, the respondents to the motion. The original caveat identified each of the defendant and the respondents as the registered proprietor of the property. The interest claimed in the original caveat was described in the following terms:
Equitable charge granted by Taha Salem pursuant to (a) the instruments set out below and (b) part performance of the said instruments by Taha Salem.
The instruments set out below included the costs agreement dated 18 May 2012.
On 3 February 2016 a lapsing notice in respect of the original caveat was served on the plaintiffs. The evidence establishes that the lapsing notice was procured by the respondents.
At about that time, the first plaintiff telephoned Yolla Abboud, the conveyancer who prepared the lapsing notice. It is alleged by the plaintiffs, that in the course of that conversation, Ms Abboud represented to the first plaintiff that the person called Taha Salem registered on the title to the property was not the person who had obtained legal services from the plaintiffs. The first plaintiff gave evidence that, as a result of this conversation, he assumed that he had made a mistake. The plaintiffs say that, in reliance upon this assumption, they did not take any action for a time to extend the original caveat. However, as a result of some further enquiries, the plaintiffs came to the view on 15 February 2015 that they were in fact pursuing the correct person.
On 19 February 2016 the plaintiffs commenced the proceedings. On 23 February 2016 the Court extended the operation of the original caveat until 1 March 2016 pursuant to s 74K of the Real Property Act 1900 (NSW).
On 1 March 2016 leave was granted pursuant to s 74O of the Real Property Act for the plaintiffs to lodge a new caveat. Caveat AK256190 ("the new caveat") was lodged that day. The new caveat initially identified both the defendant and the respondents as the registered proprietor of the property. The new caveat was later amended so that it identified only the defendant as the registered proprietor. The interest claimed in the new caveat was described in the following terms:
Equitable charge on interest of Taha Salem only granted by Taha Salem pursuant to instruments set out below & part performance of the said instruments by Taha Salem.
Again, the instruments set out below included the costs agreement dated 18 May 2012.
On 29 April 2016 orders were made to the effect that, pursuant to the costs agreement dated 18 May 2012, the defendant had charged his interest in the property in favour of the plaintiffs. On 8 July 2016 the defendant was ordered to pay the plaintiffs' costs of the proceedings in respect of the period 2 March 2016 to 8 April 2016 inclusive. The plaintiffs now seek to recover their remaining costs from the respondents.
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Determination
Section 98(1)(b) of the Civil Procedure Act confers a broad discretion on the Court to determine by whom, to whom, and to what extent costs are to be paid. This discretion includes the power to award costs against a non-party to the proceedings (see Yu v Cao [2015] NSWCA 276 at [136]). As noted by McColl JA in that case at [137]-[138], the s 98 discretion to award costs is not subject to any express limitations but should be exercised in respect of non-parties only sparingly and with considerable caution. Her Honour observed at [140] that the non-party's connection to the proceedings is central to the inquiry whether a non-party costs order should be made, and there must be a causal connection between the actions of the non-party and the occasion for ordering costs.
The plaintiffs submitted that the commencement of the proceedings was necessitated by the respondents' serving of the lapsing notice, a step which the plaintiffs say was unjustified in circumstances where the respondents knew the defendant was a registered proprietor of the property and the original caveat was drafted so as to encumber only the defendants' share of the property. The plaintiffs also point to the representation they say was made by Ms Abboud as an example of unreasonable conduct on the part of the respondents that contributed to the commencement of the proceedings.
The respondents submitted that the original caveat affected the respondents' interest in the property without any legal basis for doing so, with the result that the respondents were entitled to cause a lapsing notice to be issued.
Plainly, the defendant only granted the plaintiffs an interest over his half share of the property. However, it was not made clear in the original caveat that the interest claimed by the plaintiffs affected only the defendant's half share. The lack of clarity arose from the inclusion of the respondents in the identification of the registered proprietor, coupled with the fact that the description of the interest claimed contained no statement that the interest was confined to the defendant's interest in property.
In these circumstances, the respondents contend that the original caveat claimed an interest over their share of the property. The respondents rely on the decision of Slattery J in Allen Taylor & Co Pty Ltd v Harrison [2010] NSWSC 1021. In that case, the plaintiff's caveat was held to have only affected the defendant's interest in the property that he owned jointly with his wife, because only he was named in the caveat as the registered proprietor and the interest claimed was described as being against the interest of the registered proprietor (see at [28]). At [34], Slattery J referred to the situation where a co-owner grants an interest over his or her interest in land. His Honour then stated that "where a caveat on its face interferes with the right of the other co-owner to deal with the land and where it has not been demonstrated that the other co-owner consents to the continuation of the caveat, the caveat cannot stand: Andrews v Wilcox [2008] NSWSC 280 at [28]". However, as the caveat had been carefully drawn so as to avoid that problem, Slattery J held that it was not defective.
Allen Taylor & Co Pty Ltd v Harrison (supra) was referred to in Awadallah v Hymix Australia Pty Ltd [2015] NSWSC 117. In that case, Mr Awadallah had charged his interest in a property in favour of the defendant, who then lodged a caveat over the property. McDougall J held (at [44]-[45]) that, because Mr Awadallah alone was specified in the caveat as the registered proprietor, and the interest claimed when read as a whole clearly referred to an interest following from the claimed equitable mortgage over Mr Awadallah's interest in the property, the caveat was confined to the interest of Mr Awadallah.
As McDougall J made plain in that case, it is necessary to examine the precise wording of the caveat in question to determine whether it interferes with the rights of the relevant co-owners (in this case, the respondents) to deal with their property.
The present case can be distinguished from Allen Taylor & Co Pty Ltd v Harrison (supra) and Awadallah v Hymix Australia Pty Ltd (supra) because both the defendant and the respondents were identified in the original caveat as the registered proprietor. Further, even though the interest claimed in that caveat was described as an interest granted by the defendant, the description did not in its terms specify that only the defendant's property was the subject of the interest claimed in the caveat. Taken together, these facts indicate that the original caveat was expressed so as to interfere with the respondents' interest in the property. It follows that the original caveat was defective. It purported to affect the respondents' interest in the property over which the plaintiffs had no claim.
In those circumstances, it was appropriate for the respondents to serve a lapsing notice in respect of the original caveat. It should not be overlooked that on 1 March 2016 the plaintiff obtained leave to lodge a new caveat that was evidently intended to make it clear that the claimed interest was over only the defendant's share of the property. Whilst it is true that the proceedings were necessitated by the respondents' service of the lapsing notice, that step was an entirely reasonable act on their part.
Further, I do not think that the representation said to have been made by Ms Abboud provides a basis for any costs order against the respondents. Even if Ms Abboud did make that representation, it did not cause the plaintiffs to commence the proceedings. At most, it prompted the plaintiffs to undertake some further enquiries before deciding to commence the proceedings.
For the above reasons, the plaintiffs' application for costs against the respondents will be dismissed.
The respondents submitted that the plaintiffs should pay the respondents' costs of the motion on an indemnity basis. The reason advanced was that the plaintiffs' sought a costs order in circumstances where the plaintiffs had brought the need to commence proceedings upon themselves by lodging a defective caveat that affected the respondents' interest in the property.
I agree that an order for indemnity costs is warranted. The need to commence proceedings was a consequence of the way the plaintiffs had drafted the original caveat. This was plainly not a case where it would be appropriate for the Court to make a costs order against the non-party respondents. In the circumstances, it was unreasonable for the plaintiffs to bring the application.
Accordingly, the Court will dismiss the Notice of Motion filed by the plaintiffs on 4 September 2017, and order that the plaintiffs pay the respondents' costs of the Notice of Motion on an indemnity basis.
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Decision last updated: 24 April 2018