I delivered judgment in this matter on 14 September 2022 (see Kitanovski v Ibrahim [2022] NSWSC 1232). In accordance with the Amended Summons filed on 13 August 2021, the Court made an order for specific performance of a contract for the sale of land entered into between the plaintiff (Ms Kitanovski) as purchaser and the second defendant (Ms Lahood) as vendor. The Court also ordered the first defendant (Mr Ibrahim) and the third defendant (the Commissioner of Taxation) to remove their respective caveats over the property, on the condition that Ms Kitanovski pay into Court the sum of $700,000 (being the difference between the contract price and the true value of the land) as a form of alternative security.
The only matter still to be determined is who should bear the costs of the proceedings. At [55] of the primary judgment, I indicated that my preliminary view on the matter was that Ms Lahood ought to pay Ms Kitanovski's costs of the specific performance claim, but that Ms Kitanovski should pay Mr Ibrahim's and the Commissioner's costs of the proceedings insofar as they related to Ms Kitanovski's attempts to have their caveats removed pursuant to section 74MA of the Real Property Act 1900 (NSW). This preliminary view was buttressed, but not entirely formed, by the fact that counsel for Ms Kitanovski only proffered the condition ultimately imposed on the removal of the caveats during his closing submissions in reply.
The parties have since provided written submissions to the Court either in opposition to, or in support of, the Court's preliminary view as to costs. Having considered those submissions, and for the reasons I now provide, I am remain of the view that Ms Lahood should pay Ms Kitanovski's costs incurred in relation to the specific performance claim, and that Ms Kitanovski should pay Mr Ibrahim's and the Commissioner's costs incurred in relation to the section 74MA claims.
Ms Kitanovski endorsed the position that Ms Lahood ought to pay her costs of the specific performance claim. Ms Kitanovski submitted that, as between herself and the first and third defendants, Ms Lahood should also be ordered to pay Mr Ibrahim's and the Commissioner of Taxation's costs incurred in relation to the section 74MA claims. Ms Kitanovski submitted that Ms Lahood's conduct relevantly invited or encouraged Ms Kitanovski's claims, including as against Mr Ibrahim and the Commissioner, so as to bring into play the principles espoused by the High Court in cases such as Oshlack v Richmond River Council (1998) 193 CLR 72 at 97-8 per McHugh J, and Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 at [25] per Kiefel CJ, Bell, Gageler, Keane and Nettle JJ.
More specifically, Ms Kitanovski submitted that she was compelled to bring proceedings seeking removal of the caveats under section 74MA of the Real Property Act because Ms Lahood, in dereliction of her obligation as vendor to convey clear title to the land, had failed to do so herself. Ms Kitanovski also submitted that, in circumstances where a condition of payment into Court was ordered to redress prejudice to Mr Ibrahim and the Commissioner resulting from a sale at an undervalue of the property over which they claimed to have security interests, it is Ms Lahood that ought to bear responsibility for orchestrating the sale at an undervalue. This submission from Ms Kitanovski is curious given that it was she, not Ms Lahood, who insisted that the contract price for the property remain as it had been two years prior (see Kitanovski v Ibrahim (supra) at [16]). Ms Kitanovski finally submitted that, whilst her victory against Mr Ibrahim and the Commissioner was only made possible by the extremely late proffering of the condition on removal of the caveats, the Court should not disregard that she did in fact still enjoy some success in the proceedings.
Mr Ibrahim submitted that the proper exercise of the Court's discretion as to costs would be to make orders in accordance with those foreshadowed at [55] of the primary judgment. Mr Ibrahim submitted that Ms Kitanovski only succeeded in having his and the Commissioner's caveats removed after proffering an acceptable condition thereabout at the heel of the hunt. Mr Ibrahim also submitted that Ms Kitanovski unnecessarily protracted these proceedings by her previous procedural conduct, which involved initiating these proceedings only against Mr Ibrahim (notwithstanding that the Commissioner's caveat would still stand in the way of completion of the sale with Ms Lahood). I note here that I would reject Mr Ibrahim's final submission that Ms Lahood would be unlikely to satisfy any costs order against her, in light of her considerable debt to the Australian Taxation Office (standing, as at the time of hearing, at approximately $25,000,000). That may well be so, but Ms Lahood's impecuniosity would not in itself preclude the Court from making a costs order against her (see Oshlack v Richmond River Council (supra) at 89; Northern Territory v Sangare (supra) at [32]).
The Commissioner similarly submitted that Ms Kitanovski ought to pay its costs, in circumstances where Ms Kitanovski primarily agitated her case on the ground that the sale of the property was not at an undervalue, and that the impugned caveats ought be removed unconditionally. The Commissioner also bases its position on the fact that Ms Kitanovski only proffered the condition as to relief at the last possible moment in the proceedings.
I confirm my preliminary view on the matter that it is an appropriate exercise of the Court's discretion as to costs to order that Ms Kitanovski pay Mr Ibrahim's and the Commissioner's costs of the proceedings, insofar as they relate to the relief sought under section 74MA of the Real Property Act.
It is true that Ms Lahood, as vendor, had an obligation to provide a clear title to Ms Kitanovski, and that Mr Ibrahim's and the Commissioner's caveats would have impeded her ability to do so. It is also true that Ms Lahood was ready to sell the property at a price determined by the Court to be an undervalue, and that Ms Kitanovski enjoyed some success (albeit qualified in part by conditions) in the proceedings. However, I do not think that these factors justify the making of an order that Ms Lahood pay Mr Ibrahim's and the Commissioner's costs.
Ms Kitanovski chose to prosecute her claim against Mr Ibrahim and the Commissioner on the footing that the impugned contract price was not really at an undervalue, and, accordingly, that the sale of the property at that price would occasion no prejudice to either Mr Ibrahim or the Commissioner. Ultimately, this was found not to be the case. Again, and seemingly in cognisance of this difficulty, counsel for Ms Kitanovski made the forensic decision at the last moment to proffer a condition on the withdrawal of the caveats that the Court found to be acceptable. Without that condition, Ms Kitanovski's claim would not have succeeded. I therefore find it difficult to accept the proposition that Ms Kitanovski enjoyed more than a modicum of success in the proceedings.
I similarly reject Ms Kitanovski's submission that Ms Lahood's conduct compelled the institution of this litigation, and that the blame for the undervalued contract price ought to be lain at Ms Lahood's feet. Once more, it was Ms Kitanovski who insisted that the contract price remain as it had been two years earlier, when Ms Kitanovski and Ms Lahood entered into a prior contract for the sale of the land. The contract price cannot be fairly blamed on Ms Lahood. Moreover, I do not think that Ms Lahood's role in selling the land at an undervalue to Ms Kitanovski can be regarded as liable to mislead Ms Kitanovski as to prejudice, or lack thereof, to be suffered by Mr Ibrahim or the Commissioner (cf Redden v Chapman (1949) 50 SR (NSW) 24 at 25 per Roper CJ in Eq).
Likewise, it is not to the point that Ms Lahood failed to attend to the withdrawal of the caveats, so as to allow the sale to complete. It is doubtful, given Ms Lahood's sizeable debt to the Australian Taxation Office, whether this could in fact have been done, particularly in circumstances where the sale was in breach of a provision of a Deed entered into between Ms Lahood and the Commissioner that prohibited disposition of the property by Ms Lahood without the Commissioner's written consent. Where Ms Kitanovski has chosen to prosecute her claims that the caveats should be removed on the basis that no prejudice would be suffered, unsuccessfully were it not for the imposition of a condition requiring the payment of funds into Court, it seems fairest to me that Ms Kitanovski pay Mr Ibrahim's and the Commissioner's costs. I do not accept Ms Kitanovski's alternative submission that there should be no order as to the costs of those claims.
For the above reasons, the Court will order:
1. that the second defendant pay the plaintiff's costs of the specific performance claim; and
2. that the plaintiff pay the first and third defendants' costs of the claims under section 74MA of the Real Property Act.
[2]
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Decision last updated: 12 October 2022