Optionees' Submissions
53 The fifth, sixth and eleventh defendants were also separately represented. They were Onetofour, Crotti Holdings, and Old Bull Enterprises. They were persons to whom options to purchase some lots in the development were granted, or who asserted a right to exercise such options. Onetofour and Crotti Holdings sought orders that ISIS pay their costs of ISIS' notice of motion of 14 October 2004 in the payment claim proceedings and their costs in the priorities proceedings. Old Bull was not joined as a defendant until the amended summons was filed on 3 February 2005. It submitted that it ought not to be exposed to an order for costs.
54 These defendants submitted that ISIS' notice of motion of 14 October 2004 was irregular, and that ISIS had accepted this to be the case by filing the summons instituting the priorities proceedings. They submitted that ISIS had demanded an urgent hearing of the priorities proceedings on 22 and 23 November 2004, but the hearing had to be vacated because the proceedings were not ready. Therefore, they submitted, ISIS should pay the costs thrown away by the vacation of the date.
55 They also submitted that there could be no substance to ISIS' claim to priority over the interests of the option holders. The registration of a writ on title to real property does not create an interest in land. Its operation is subjugated to any legal or equitable interest in the land. They submitted that insofar as ISIS asserted that the options had lapsed, that claim was bound to have failed. Insofar as ISIS claimed rights by way of subrogation to the trustee's right of indemnity, that right was subject to the rights of the holders of the options. Those options were created by Clarence, and hence as ISIS' claim to an interest in Clarence's assets arose by way of subrogation to its right of indemnity from those assets, it was necessarily subject to the options which Clarence had previously created. The trustees' right of indemnity or exoneration was not displaced by the options. On the exercise of the options, trust assets would be replaced by cash instead of land. They submitted that the notice of motion of 14 October 2004 and the subsequent priorities proceedings were an "unmeritorious frolic" and ISIS ought to pay their costs for being precipitously joined to expensive proceedings. ISIS did not succeed against them as the options were exercised. It was because the options were exercised and the properties sold that the judgment debt was paid.
56 ISIS settled its claims with the seventh, eighth and tenth defendants. The remaining defendant in respect of whom costs were in issue was the ninth defendant, Oxley. It was also separately represented.
Oxley's Submissions
57 Oxley sought its costs of the motion of 14 October 2004 in the payment claim proceedings and its costs of the priorities proceedings. It contends that the notice of motion of 14 October 2004 was an inappropriate vehicle for the relief which ISIS claimed. It submitted that the priorities proceedings were "presumptive, unnecessary and misconceived". It submitted that ISIS failed to achieve any relief against it and that the proceedings against it were ultimately dismissed. It submitted that costs should follow the event; the event being that ISIS failed in its claim against Oxley.
58 Oxley submitted that ISIS failed to achieve anything against it including interlocutory relief of any sort. That is not an accurate reflection of the substantive outcome of ISIS' notice of motion of 15 March 2005.
59 Oxley submitted that before it could be established that Clarence had any right of indemnity over the trust assets to which ISIS was subrogated, there would have to be a final accounting. It referred to Jacobs' Law of Trusts in Australia, 6 ed, pp 638-639, where the learned authors say:
" On a judgment at law against a trustee the creditor ordinarily could not levy execution against the trust property; this is so even though the debt was founded upon a debt incurred in the course of trading by the trustee, because the execution does not extend to equitable trust assets where the whole beneficial interest is not in the judgment debtor. Where on a final account between trustee and beneficiary the balance would be in favour of the trustee, the execution would reach the trust assets.
…The subrogation is wholly derivative so that the creditor can be no better off than the trustee vis-à-vis the beneficiary, so that, for example, if the balance of account between trustee and beneficiary turns out to be not in favour of the trustee.
… A direct payment to the creditor out of the trust fund will be allowed where the fund is subject to administration by the court and where the trustee consents to such an order and other trust creditors are not thereby prejudiced. Where there is a plurality of trust creditors direct enforcement of the trustee's lien by one rather than another creditor may give him an advantage; again, direct access may be impossible without first settling the state of account between trustee and beneficiary because if the balance favours the beneficiary there will be no right of subrogation. … "
60 Oxley also contended that Clarence had an equitable set off against ISIS' judgment debt in Clarence's damages claim in the "substantive proceedings". It also submitted that ISIS was not entitled to be subrogated to Clarence's right of indemnity or exoneration from trust assets. Some of the reasons advanced in support of this latter contention were elusive, but showed the commonality of interest between Oxley and the joint venturers.
61 Oxley also contended that all creditors of Clarence were subrogated to Clarence's rights of indemnity and exoneration. Koombari, Career Path and Crotti Holdings were all creditors of Clarence prior to the giving of the Oxley charge, and prior to ISIS becoming a judgment creditor. Oxley submitted that as they were prior creditors, with a prior right of subrogation to any indemnities enjoyed by Clarence in respect of trust property, Koombari, Career Path and Crotti Holdings had prior ranking claims to those of ISIS. Oxley submitted that the creation and registration of the charge did no more than preserve the priority enjoyed by the creditors of the trust whose debts were paid out by Oxley. It did not explain why, if this were so, the charge was taken. Oxley submitted that the priority of earlier creditors showed that ISIS' claim to avoid the charge as a fraud on creditors was untenable. Hence it submitted that the claim against it was doomed to fail. It submitted that it should not have been "dragged into" the priorities proceedings. Instead, it submitted, ISIS should have abided the outcome of the substantive proceedings commenced by Clarence and ISIS should pay its costs.
62 Oxley, through its senior counsel, explained that the reason the charge was taken was that:
"It was simply a method used to arrange the financial circumstances of Clarence and the joint venture. It is no different than if, instead of going to Oxley, Clarence, bearing in mind the existence of a first registered mortgage to a financier, had gone to a second tier financier for short-term finance. All that happened is that three pre-existing creditors of the trust were paid out, and Oxley became the creditor in their place. … It was in the ordinary course of business, arranging the financial circumstances of Clarence."
63 Although I am sceptical about that submission, its accuracy has not been determined.
Applicable Principles
64 There was no dispute as to the applicable principles. They are contained in judgments of Hill J in Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201, of McHugh J in Re Minister for Immigration & Ethnic Affairs; ex parte Li Qin (1997) 186 CLR 622 at 624-625, of Burchett J in One.Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548 at 552-553, and of the Court of Appeal in Edwards Madigan Torzillo Briggs Pty Ltd v Gloria Stack & Ors [2003] NSWCA 302 at [5]. As a general rule, costs follow the event, such that prima facie the successful party is entitled to recover its costs from an unsuccessful party. As a corollary, prima facie, where a party discontinues an action, he is liable to each other party for their costs. However, the principle that costs follow the event is usually applicable following a hearing on the merits. Where a dispute has been resolved without a hearing on the merits, and there has been no capitulation, the court does not try an hypothetical action to determine who would have succeeded in order to decide how costs should be borne. In such a case, the general rule is that there should be no order as to costs. In some circumstances however, the court may be able to conclude that one of the parties has acted unreasonably in bringing or defending the proceedings. In rare cases, it may be possible for a judge to feel confident that even though both parties acted reasonably, one party was almost certain to have succeeded if the action had gone to a hearing. The reasonableness or unreasonableness of a party's institution or defence of proceedings, and the question whether one party had a near certainty of success, are matters which must be resolved, if they can be, on undisputed facts disclosed by the pleadings, the affidavits, or documents tendered, or interlocutory relief granted. Where proceedings terminate after interlocutory relief has been granted, the court may take into account the fact that interlocutory relief has been granted in exercising its discretion as to costs, but ordinarily the grant of interlocutory relief carries no implication as to the ultimate merits of the case, beyond the fact that it raises a seriously arguable issue.
65 Although there was no dispute about the principles, there was vigorous dispute as to their application.
66 I agree with the defendants' submissions that it is not possible to decide the question of costs by treating all of the defendants as if they were one. It is also too simplistic to say that all of the proceedings were concerned with ISIS' attempts to enforce its judgment debt and as ISIS was ultimately successful in obtaining payment of its judgment debt, it obtained substantial success in the various proceedings. That approach may have merit so far as its claim against the judgment debtor, Clarence, is concerned. It does not have merit in relation to the claims against the other defendants, even though the other defendants were persons who, in one way or another, stood behind Clarence.
67 So far as the joint venturers are concerned, ISIS was unsuccessful in maintaining the registration of the writ for levy of property on the title. So far as the holders of options are concerned, ISIS did not establish that the options had lapsed or that it had priority over the interests of the optionees.
68 The position regarding Oxley is different. ISIS obtained orders for the payment of the net proceeds of sale of lots in the subdivision into a controlled moneys account from which the moneys were ultimately disbursed to it, without the moneys having to be paid to Oxley. ISIS' claim that Oxley's charge was ineffectual or should be avoided pursuant to s 37A of the Conveyancing Act was not determined, but that was because it obtained the relief it sought without having to have its claims against Oxley determined.
69 Also relevant to determining questions of costs as between the plaintiff and Clarence are the proposals each party put forward as to how matters could be resolved without litigation. The reasonableness of each party's proposals, and the extent to which the final outcome reflected what had earlier been proposed, is relevant to determining how the costs should be borne.
70 I will deal first with the two notices of motion in the payment claim proceedings.
Clarence's Notice of Motion of 6 October 2004 in the Payment Claim Proceedings
71 As noted in paragraph [48], Clarence claimed that it was successful in obtaining the principal relief sought in its notice of motion of 6 October 2004. Hence, it submitted that it was entitled to its costs of that notice of motion. However, McDougall J did not make his orders on Clarence's notice of motion. His orders for the removal of the writ were made upon the cross-claim of the second to fourth defendants in the priorities proceedings. It appears that his Honour was of the view that the proper applicants for this relief were the joint venturers, whose interests were directly affected by the writ.
72 It is surprising that the joint venturers should have had separate representation from Clarence, given that the directors of Koombari were also the directors of Clarence and that Mr Nick Anastopoulos, the shareholder of Clarence, controlled Kleoni, a shareholder of Koombari.
73 ISIS' claim that Clarence failed to join the necessary parties to Clarence's notice of motion of 6 October 2004 was not decided. That question became moot following ISIS' filing of its notice of motion of 14 October 2004 joining, amongst other people, Oxley, the joint venturers, and the optionees.
74 Nor did Clarence obtain all of the relief sought in its notice of motion. In particular it sought, but was never granted, a stay of execution of the judgment.
75 Although Clarence obtained part of the relief which it sought by the orders made on the joint venturers' cross-claim, there was no determination that it, as distinct from the joint venturers, was entitled to the relief sought on its notice of motion. That question has not been decided. Nor should it be decided on an application for costs. Given the commonality of interest between the joint venturers and Clarence, justice will be served by giving the joint venturers their costs in relation to that issue without ISIS being required to pay double costs. In my view there should be no order as to costs on Clarence's notice of motion of 6 October 2004.
ISIS's Notice of Motion of 14 October 2004 in the Payment Claim Proceedings
76 The respondents to ISIS' notice of motion of 14 October 2004 raised three grounds as to why they should have their costs of that notice of motion. The first is that the relief claimed in the notice of motion should have been sought in an originating process, rather than by notice of motion in the existing proceedings. That claim is well founded. As Oxley submitted, a notice of motion is an interlocutory application brought in principal proceedings for the purpose of better enabling the litigation of the claims made in the principal proceedings. The relief sought in the notice of motion was substantially declaratory relief in relation to the priorities between ISIS, the joint venturers, the optionees, and Oxley. Those claims were not properly commenced by notice of motion in the payment claim proceedings.
77 It follows that the respondents to that notice of motion are entitled to any additional costs which they incurred over and above the costs which would have been incurred had the proceedings been initially commenced by way of originating process. It does not follow that they are entitled to all of the costs which they incurred in dealing with ISIS' notice of motion up to the filing of the summons in the priorities proceedings. A substantial amount of those costs would have been incurred even if the proceedings had been commenced by summons rather than notice of motion in the existing proceedings. Such costs would not be wasted.
78 A second ground upon which the respondents to the notice of motion claim their costs of that motion is that they contend that ISIS should not have attempted to bring the notice of motion on for urgent hearing before McDougall J on 22 and 23 November 2004. The ground advanced for having an expedited hearing was the pendency of the writ registered over the title to 50 Clarence Street and Clarence's application to remove the writ. At the hearing before McDougall J on 22 November 2004, ISIS all but conceded that the writ should be removed.
79 However, the concession made by ISIS did not detract from its claim for an expedited hearing of its notice of motion of 14 October 2004. Indeed, its claims to be subrogated to Clarence's rights to indemnity and exoneration, including its claim to be subrogated to Clarence's rights of indemnity from the joint venturers personally, and its claims that its rights derived by subrogation to Clarence's rights to be indemnified out of the trust property had priority over the claims of the optionees or Oxley, had greater urgency once it was conceded that it could not maintain the writ.
80 The respondents submitted that ISIS' pressing of its claims was premature. One of the reasons for this submission was that it was said that ISIS could not maintain a claim for relief based upon subrogation to the trustee's rights until the "true debt" between ISIS and the trustee was determined, or, until the taking of accounts. That contention raises a substantive issue of law which was not determined. It would not be appropriate to determine that issue in dealing with costs.
81 The other basis for the respondents contending that the notice of motion was premature was that they said it was brought on too quickly. It is true that McDougall J found that the application could not be heard on a final basis on 22 and 23 November 2004. One of the reasons for that was that it was not until Friday 19 November 2004 that ISIS served submissions which clearly articulated the basis upon which ISIS attacked the enforceability of the options and the deed of charge in favour of Oxley. However, his Honour expressed no criticism of ISIS in that respect. If an order for costs were to be sought arising from the vacation of the hearing dates of 22 and 23 November 2004 on the basis that ISIS should not have had the matter set down for hearing on those dates, I would expect that application to have been made before McDougall J on 22 November 2004 and determined by his Honour then. It does not appear that any application for costs was made on that ground. Rather, it appears that costs were reserved because the question of costs was thought to depend upon the determination of the issues raised by ISIS' notice of motion. All of the respondents to ISIS' notice of motion were associated with each other. They knew of the circumstances in relation to the joint venture agreement, the granting and extension of options, and the granting of a deed of charge. Prima facie, they were better positioned than was ISIS for an urgent hearing of ISIS' claims.
82 As McDougall J made no adverse finding against ISIS arising from the vacation of the dates of 22 and 23 November 2004, and as no application was made to McDougall J for costs incurred up to that date on the basis that ISIS ought not to have pressed for an urgent final hearing of its claims, and for the reasons in the preceding paragraph, I do not consider that the respondents to ISIS' notice of motion of 14 October 2004 are entitled to their costs of the notice of motion up to 22 November 2004 because the hearing fixed for that date had to be vacated.
83 The other bases upon which the respondents contend they should have their costs of the notice of motion of 14 October 2004 were the bases upon which they contended they should have the costs of the priorities proceedings.
84 For these reasons, the respondents to ISIS' notice of motion of 14 October 2004 are entitled to an order for payment of any additional costs incurred by them by reason of the claims being brought by notice of motion in the payment claims proceedings, rather than by originating process in new proceedings. Otherwise, the costs of ISIS' notice of motion of 14 October 2004 should be in accordance with the orders for costs to be made in the priorities proceedings.
Costs in the Priorities Proceedings: Second to Fourth Defendants
85 I will deal first with the costs of the second to fourth defendants, the joint venturers. Those defendants obtained the orders sought on their cross-claim for the removal of the writ. They are entitled to their costs of their cross-claim.
86 The joint venturers submit that they should also have their costs associated with their involvement in the hearing on 22 November 2004, but otherwise there should be no order as to costs between them and ISIS. Although they should have their costs of their cross-claim, upon which they were successful, it does not follow that they should have all of their costs in connection with the hearing of 22 November 2004. There has been no determination of the issues between them and ISIS. I could not determine whether it would be premature for the court to have dealt ISIS' claim to be subrogated to Clarence's rights prior to the determination of what debt was truly owing between ISIS and Clarence, unless I determined the substantive issue in those proceedings. The answer to that issue is not so obvious that I could determine that one or the other party was almost certain to have succeeded without conducting a full hearing on the issue. To do so would be inconsistent with the principles summarised in para [64]. Nor can I decide whether Clarence had lost its right of indemnity, or whether it was entitled to an indemnity from the joint venturers personally. The joint venturers appeared to acknowledge that it is not appropriate to decide these questions by their acceptance that there should be no order as to costs between them and ISIS in the priorities proceedings except in relation to the hearing of 22 November 2004.
87 For the reasons above, I do not consider that I should make an order for costs on the basis that ISIS brought on the priorities proceedings prematurely, in the sense that it sought to have them heard before the parties could reasonably have been ready. Accordingly, the only costs to which the joint venturers are entitled in relation to the hearing of 22 November 2004 are their costs of the cross-claim on which they were successful. I will order that ISIS, being the first defendant to the first cross-claim, pay the costs of the cross-claimants of the cross-claim, but that otherwise there be no order as to costs as between the plaintiff and the second to fourth defendants.
Costs in the Priorities Proceedings: Fifth, Sixth and Eleventh Defendants
88 The position of the fifth, sixth and eleventh defendants is different. For the reasons given in relation to the costs of the second to fourth defendants, I do not think I should make an order for costs thrown away by reason of the vacation of the hearing on 22 and 23 November 2004. The question remains whether I should make any order for costs in the proceedings between those defendants and the plaintiff when the issues between them were not determined.
89 ISIS did not dispute that Clarence and Onetofour entered into a put and call option agreement on or about 23 January 2003. It pleaded that that agreement related to thirty-one of the lots in the strata plan. Nor did ISIS dispute that Clarence and Old Bull entered into a put and call option agreement in respect of eight lots in the strata plan.
90 By its amended summons, ISIS admitted that the period for the exercise by Onetofour of the call option for five of the lots was extended to 28 February 2005. In respect of those lots, it did not contend that the option had lapsed.
91 In respect of the remaining twenty-seven lots over which Onetofour had an option, ISIS contended that the options had lapsed before they were exercised. By a letter dated 30 January 2004 signed on behalf of Clarence and Onetofour, Onetofour's call option was extended to 31 July 2004, except for lots 5, 6, 7 and 79, where the period was extended to 28 February 2005. Another letter of the same day between Clarence and Onetofour extended the period for the exercise of the call option for the lots, other than lots 5, 6, 7 and 79, to 31 January 2005. ISIS contended that the second letter, produced by Mr Baker in an affidavit sworn by him was, "another unsatisfactory feature of the conduct of the individuals standing behind Clarence and Oxley". The question of whether the option in respect of the other lots which expired in July 2004 was extended to 31 January 2005 cannot be decided on a costs application. However, even if the options had expired, Clarence and Onetofour had agreed to extend them.
92 ISIS pleaded that Clarence and Old Bull entered into a put and call option agreement in relation to eight lots in the strata plan on or about 16 June 2002. The period in which the call option could be exercised was a period up to seven days after Clarence notified Old Bull in writing of the registration of the strata plan.
93 ISIS pleaded that prior to 7 November 2003, Old Bull was notified in writing of the registration of the strata plan. It pleaded that by a nomination form dated 27 November 2003, Old Bull purported to notify Clarence that it nominated Crotti Holdings as purchaser under the option agreement. It alleged that the nomination was ineffective because the call option period had lapsed. It pleaded that by reason of these matters neither Old Bull nor Crotti Holdings had any interest in the lots.
94 Old Bull and Crotti Holdings submitted that ISIS was unable to provide particulars of these allegations, although ISIS referred to a facsimile dated 7 January (a mistake for 7 November) 2003 from Gibsons Lawyers to Mr Voukidis. They submitted that that document did not constitute written notice of registration of the strata plan within the meaning of the option agreement and did not record any such notice having been given.
95 The question whether notice had or had not been given in terms of the option agreement is not one which can be decided on this application. Again, there was no issue between Clarence and Crotti Holdings about Crotti Holdings' right to exercise the option.
96 ISIS pleaded that to the extent any of Onetofour, Old Bull or Crotti Holdings had an interest in the lots the subject of the option agreement, ISIS' interest as holder, by way of subrogation, of Clarence's "equitable charge" over the property had priority over Onetofour's, Old Bull's, or Crotti Holdings' interest as option holder. ISIS also pleaded that to the extent Onetofour completed a purchase of any of the lots which was subject to the option agreement, then, by virtue of the principles of tracing, Onetofour took the lots subject to ISIS' interest in them as a holder by way of subrogation of Clarence's equitable charge over the lots. That claim was not made in respect of Old Bull's or Crotti Holdings' options.
97 ISIS did not act unreasonably in instituting proceedings against the option holders. Their rights were one of the matters raised by Mr Voukidis in his affidavit of 6 October 2004 as barriers in the way of ISIS enforcing its judgment against the land. However, it is practically certain that ISIS would have failed in its claim to have priority over the rights of the optionees, assuming the options were on foot. ISIS' submissions assumed that the issue was one of competing priorities, that is, of the priority of the optionees against the rights of an equitable chargee. However, the priority issue could only arise if ISIS was in the position of an equitable chargee taking its charge from Clarence. That was not its position. Its position was wholly derivative to that of Clarence. Although it was customary to describe the right of a trustee to indemnity out of trust assets as being in the nature of a charge (Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367), the nature of that right was more fully explained by the High Court in Chief Commissioner of Stamp Duties for NSW v Buckle (1998) 192 CLR 226 at 246-247). Where a trustee is entitled to indemnity against personal liability incurred in the performance of a trust, and to have recourse to trust assets to satisfy his right of indemnity, he holds the trust property no longer solely in the interests of the beneficiaries. The High Court said (at 246-247):
"The term 'trust assets' may be used to identify those held by the trustee upon the terms of the trust, but, in respect of such assets, there exist the respective proprietary rights, in order of priority, of the trustee and the beneficiaries. The interests of the beneficiaries are not 'encumbered' by the trustee's right of exoneration or reimbursement. Rather, the trustee's right to exoneration or recoupment 'takes priority over the rights in or in reference to the assets of beneficiaries or others who stand in that situation'. A court of equity may authorise the sale of assets held by the trustee so as to satisfy the right to reimbursement or exoneration. In that sense, there is an equitable charge over the 'trust assets which may be enforced in the same way as any other equitable charge. However, the enforcement of the charge is an exercise of the prior rights conferred upon the trustee as a necessary incident of the office of trustee. It is not a security interest or right which has been created, whether consensually or by operation of law, over the interests of the beneficiaries so as to encumber them in the sense required by s 66(1) of the [Stamp Duties] Act ."
98 It necessarily follows that ISIS, being subrogated to Clarence's rights of indemnity from the trust assets, would be subject to whatever interests Clarence had created in those assets. ISIS' right by way of subrogation to enforce a sale of the assets, (assuming that that right had already arisen), rose no higher than the right which Clarence itself had to sell property to satisfy its right to be exonerated out of the trust property.
99 Accordingly, at least insofar as the option agreements were on foot, the optionees were practically certain to have succeeded on their claims. It is practically certain that Onetofour would have succeeded in relation to its exercise of the options over lots 5, 6, 7 and 79.
100 It also follows from the derivative nature of ISIS' rights that it did not have priority over the rights of the optionees in respect of other lots which Clarence had contracted to sell to the optionees. That is so whether the contract was made pursuant to the option agreements, or independently of the option agreements.
101 It may be the case that ISIS would have been entitled to an injunction to restrain Clarence from making any such contracts. I express no opinion about this. ISIS did not seek such relief. Instead, the optionees acquired the lots over which options had been given and in due course the proceeds of sale of the lots formed part of the trust estate. Whether the options were validly extended or not, contracts were entered into with the optionees for the sale of the lots.
102 In my view, the proceedings against the fifth, sixth and eleventh defendants were unnecessary. Those defendants exercised the rights which they asserted they had. The result was the receipt of cash which was used, with other moneys, to pay off Permanent Trustee and to provide the funds from which the judgment debt was paid. I agree with the submissions of counsel for the fifth, sixth and eleventh defendants that the litigation against those defendants was unnecessary. I think it practically certain that if the proceedings against those defendants had been determined, ISIS would have failed in its claims against them. I will order that ISIS pay those defendants' costs of the priorities proceedings.
Costs in the Priorities Proceedings: Ninth Defendant
103 I have already explained why I reject Oxley's submission that ISIS failed to achieve anything against it, including interlocutory relief of any sort. To the contrary, ISIS was substantially successful against Oxley in obtaining interlocutory orders which restrained Clarence from paying the proceeds of sale until $1,050,000 had been paid into a controlled moneys account of ISIS' solicitors. Nor did Oxley insist on the receipt of those moneys. It consented to the order of 29 April 2005 for the payment of the judgment debt from the moneys in the account. It is not clear whether or not this was because Oxley had already been paid, or there were otherwise sufficient assets to pay Oxley's debt, or whether it was simply a capitulation by Oxley.
104 The claims between ISIS and Oxley were not determined. There were issues in relation to the construction of the charge and its validity. They are not matters which can be determined on this application.
105 It follows that there should be no order as to costs as between ISIS and Oxley.
106 The persons standing behind Oxley were in any event represented in the proceedings. There was a community of interests between Clarence, the joint venturers, the option holders and Oxley. Even if the defendants were otherwise entitled to their costs, it would not have been just to subject ISIS to the payment of four sets of costs. However, I do not need to consider this issue further, having regard to the orders I will make.
Costs in the Priorities Proceedings: First Defendant
107 The priorities proceedings were only necessary because Clarence did not immediately pay the judgment debt. Clarence relied upon the issues raised by the other defendants. A number of issues were not determined. These included whether Clarence had a right of indemnity from the trust assets for its incurring of the judgment debt, whether Oxley had a valid charge, and, if so, what it secured. Those issues should not be determined in this judgment. One issue was determined at the suit of the joint venturers, namely, whether ISIS could execute the judgment by way of the registration of a writ for levy of property over the land, but costs will be awarded in respect of that issue on the joint venturers' cross-claim. Another issue initially raised by the affidavit filed for Clarence in support of its notice of motion of 6 October 2004, namely, the position of the option holders, would have been decided in favour of the option holders.
108 However, the final outcome of the proceedings was that ISIS eventually received payment of its judgment debt. Ultimately, Clarence was unsuccessful in its claim that it should only be required to provide security for the judgment debt. It was also unsuccessful in its claim that that security should be provided only after the secured creditors, including Oxley, had been paid out.
109 ISIS submitted that its offer of 29 October 2004 ultimately reflected the terms upon which the judgment was paid. I do not agree. ISIS' offer of 29 October 2004 did not provide for the immediate removal of the writ, but only to ISIS providing a cancellation of the writ in respect of lots as and when the sales were settled. ISIS' offer was also subject to its being satisfied that the contracts for sale to the optionees were acceptable, or that they would otherwise result in sufficient moneys which would result in the judgment debt being paid.
110 I do not think that the proposals made by either party in October or November 2004 were reflected in the final outcome.
111 Clarence made a further proposal to resolve the dispute on 3 December 2004. However, its proposal required that eighty per cent of the proceeds of sale available after paying out Permanent Trustee should be paid to Oxley and twenty per cent to a trust account and thence to ISIS, upon ISIS' giving an undertaking to provide a bank guarantee. Nor did the final outcome reflect that proposal.
112 Clarence submitted that the registration of the writ compromised its ability to sell lots in the land to meet its obligations under the judgment. That may well have been so up to 22 November 2004, but not thereafter.
113 I do not consider that ISIS is entitled to any costs of the priorities proceedings against Clarence up to 26 November 2004, when Bergin J made the orders consequential upon orders for removal of the writ. ISIS was unsuccessful in the only issue determined by McDougall J on 22 November 2004. Its proposal to resolve the issues did not accord with the final outcome. On the other hand, for the reasons I gave in relation to its notice of motion of 6 October 2004, I do not consider that Clarence is entitled to an order for costs up to 26 November 2004. McDougall J did not determine that it, as distinct from the joint venturers, was entitled to the order for removal of the writ from the title to the trust property. A resolution of Clarence's entitlement to an order for removal of the writ would need to take into account what the High Court said in Chief Commissioner of Stamp Duties (NSW) v Buckle at 246 as to the nature of the trustee's and beneficiary's proprietary interests where a trustee is entitled to be recouped or exonerated out of trust property. That was not raised before McDougall J. It is not appropriate to decide that question in this judgment. Accordingly, there should be no order as to costs as between ISIS and Clarence up to 26 November 2004.
114 However, the position after that date is different. For the reasons I have given, I consider that the interlocutory relief that ISIS obtained on 25 March 2005 and the orders made by consent on 29 April 2005 represented a substantial victory for ISIS. Given that the proceedings were only necessary because Clarence failed to pay a judgment debt, I consider that justice would not be done if no order for costs was made in ISIS' favour against Clarence after 26 November 2005, because the claims it put forward in an endeavour to obtain satisfaction of its judgment were not determined.
115 In my view, Clarence should pay part of ISIS' costs of the priorities proceedings after 26 November 2004. Such costs would not include the costs payable by ISIS to the fifth, sixth and eleventh defendants. However, they are not to be confined to the costs incurred only in relation to the claims against Clarence, as distinct from the claims against the other defendants. Clarence was interested in all of the claims against the other defendants and it would not have been possible to prepare a case in such a way that costs were incurred in the case against the other defendants, without also being incurred in the case against Clarence.
116 However, ISIS should not recover all of such costs, as these would include the costs of the issues it raised against the fifth, sixth and eleventh defendants, where I consider its claims were untenable. Rather than ask a costs assessor to assess what costs were incurred in respect of what issues, it is better to make a percentage reduction of the costs payable by Clarence. I assess the percentage having regard to the numerous affidavits filed in the priorities proceedings, and the voluminous correspondence in the priorities proceedings, which were read or tendered on the hearing as to costs. I will order that Clarence pay seventy-five per cent of ISIS' costs of the priorities proceedings incurred after 26 November 2004. That will include the costs of the hearing before me.
Costs in Winding-Up Proceeding 55028/05
117 The winding-up proceedings were not determined. It is not appropriate to seek to resolve the competing contentions of the parties as to the merits of those proceedings. There will be no order as to costs of the winding-up proceedings.
Orders
118 In proceedings 55032/03: