These proceedings were commenced by summons filed in the Duty List on 30 November 2020.
The plaintiff's purpose was to obtain an order extending a caveat lodged by the plaintiff over land at Shoal Bay of which the defendant was the registered proprietor. The Shoal Bay property was purchased by the defendant on 21 October 2011.
The plaintiff is the father of the defendant. The plaintiff claims that the defendant holds the property on trust for him by reason of the circumstances in which the property was acquired and monetary contributions made by him to the purchase.
Orders were made by the duty judge on 3 December 2020 extending the caveat until 10 December 2020.
On 10 December 2020, the caveat was further extended until 16 December 2020. The Court was advised that the purchasers under the contract for sale that was then on foot had served a notice to complete that required settlement to take place by 23 December 2020. There was discussion at the hearing on the need for the plaintiff to join the purchasers if he intended to seek an order that would have the effect that the contract for sale was terminated. After seeking instructions, counsel for the plaintiff advised the Court that it was probable that the interlocutory dispute between the parties could be resolved.
I made various orders by consent on 16 December 2020. The effect of those orders was that the net proceeds of sale of the Shoal Bay property on settlement of the contract for sale were required to be paid to the solicitor acting on the sale and not to be released until further order of the Court or written agreement between the plaintiff and the defendant.
I made case management orders for the filing of a statement of claim and a defence, and then made the following additional orders:
6. ORDERS the plaintiffs to pay the defendant's costs of and incidental to the application to extend the caveat.
7. RESERVES the question as to whether the costs are payable on an ordinary basis or on an indemnity basis.
The parties were given directions for the delivery of short submissions as to the basis upon which the costs of the defendant should be paid by the plaintiff.
The defendant has applied for an order that the costs payable by the plaintiff, in accordance with order 6, be payable on the indemnity basis.
The defendant relies on her written submissions dated 10 December 2020 and her further written submissions made on 22 December 2020. The plaintiff relies upon written submissions dated 16 December 2020.
I am satisfied that the evidence establishes the following facts.
The caveat was lodged on 2 November 2018. The interest claimed was "by virtue of resulting trust arising by reason of direct financial and capital contributions. In addition, monetary contributions to the maintenance, conservation and improvement of the property".
On 18 June 2019, the plaintiff joined the defendant as a party to proceedings in the Federal Circuit Court of Australia commenced by the plaintiff's ex-wife against the plaintiff for an adjustment of the interests of those parties in the property of the marriage.
The plaintiff claimed that he had an interest in the Shoal Bay property that formed part of the matrimonial assets.
On 27 September 2019, the plaintiff and the defendant agreed to resolve their respective applications for interim orders and relief in the Federal Circuit Court. The agreement included that the Shoal Bay property would be sold at a public auction with a reserve price of $730,000, and the plaintiff would remove the caveat at or before the settlement of the sale. The defendant's application for an interim distribution of the net proceeds of sale was not determined and was stood over, together with other matters between the parties to the marriage, to 20 May 2020. The agreement between the plaintiff and the defendant, as reflected in the consent order, was that all the net proceeds of sale would be held in a controlled moneys account for the parties pending further order or agreement between the parties.
After a number of unsuccessful attempts to sell the property and delays caused by the COVID-19 pandemic, which necessitated consent variations to the consent orders made by the Federal Circuit Court, the Shoal Bay property was put to public auction on 24 October 2020, and a contract was made to sell the property to the successful bidders for $735,000. That price was above the reserve price agreed by the parties in the consent orders. The plaintiff attended the auction.
Final orders were made in the Federal Circuit Court proceedings by consent of the plaintiff and his ex-wife on 2 November 2020. No orders were made to deal with the outstanding question as between the plaintiff and the defendant in these proceedings dealing with the proceeds of sale of the Shoal Bay property.
On 11 November 2020, the Federal Circuit Court made orders dismissing all outstanding applications, as the matrimonial cause had been finally determined, and the Federal Circuit Court held that it no longer had jurisdiction to hear the plaintiff's claim against the defendant in respect of the Shoal Bay property.
There was nothing in the orders made by the Federal Circuit Court on 11 November 2020 that had the effect that the consent orders made by the Federal Circuit Court between the present plaintiff and defendant, as varied, were discharged.
By reason of the dismissal order made by the Federal Circuit Court, that Court would no longer be able to deal with the part of the consent orders whereby the Federal Circuit Court would decide how the net proceeds of sale of the Shoal Bay property would be disbursed.
By letter dated 12 November 2020 to the plaintiff's solicitors, the defendant's solicitors noted that the contract of sale that had been entered into in accordance with the consent orders was due to be completed on 5 December 2020. The defendant's solicitors suggested an agreed variation of the Federal Circuit Court consent orders, if the Federal Circuit Court could not be persuaded to deal with the issue. The effect of the suggested variation was that the net proceeds of sale should be paid into a controlled moneys account on behalf of the defendant, but not released or disbursed until the earlier of the written agreement between the parties, the order of the Federal Circuit Court or some other court of competent jurisdiction, or three months from the date of settlement.
The letter included the following paragraph:
The three-month period in the proposed [agreed variation] afford your client the opportunity to commence any application in respect of any claim that the net proceeds of the sale of property in a court of competent jurisdiction, and if so, an opportunity to seek orders extending the time for the net proceeds to be preserved pending the determination of any claim.
While the suggested variation that the net proceeds of sale would be retained in a controlled moneys account for at least three months from the date of settlement may not by itself have been reasonable, because of the improbability that the plaintiff could obtain an order from a court determining his entitlement to the net proceeds of sale within a period as short as three months, it is obviously implied in the paragraph from the letter set out above that it would be open for the court in which the plaintiff commenced his proceedings to make an order extending the period in which the net proceeds of sale were required to be retained in the controlled moneys account.
The defendant's solicitors requested confirmation of the plaintiff's acceptance of the offer by 1 PM on 12 November 2020, as settlement of the contract for sale was due to take place on 5 December 2020.
The letter threatened that the defendant would take action to remove the caveat without further notice to the plaintiff if the plaintiff did not comply with the consent orders made by the Federal Circuit Court and agree to provide the defendant with a notice of withdrawal of caveat before settlement of the contract for sale.
The plaintiff did not accept the defendant's offer, whether in the time allowed or at all.
On 12 November 2020, the defendant's solicitors were advised by email of the administrators of PEXA that the plaintiff's solicitors had declined the defendant's invitation to join the workspace in the role of caveator on title and to withdraw the caveat.
A lapsing notice requested by the defendant was issued by NSW Land Registry Services and served on the plaintiff's solicitors on 18 November 2020.
On 20 November 2020, the plaintiff's solicitors advised the separate solicitors retained to act on the sale of the Shoal Bay property that the caveat would not be removed. The plaintiff asserted that the consent orders made by the Federal Circuit Court were unenforceable and that the plaintiff could not be compelled to remove the caveat.
The defendant's solicitors sent a further letter of offer to the plaintiff's solicitors on 2 December 2020. That letter was apparently in response to an offer made on behalf of the plaintiff dated 1 December 2020. The defendant's solicitors set out the full history of the dealings between the parties, generally as summarised above, and offered to resolve the current dispute by the plaintiff agreeing to provide a notice of withdrawal of caveat at or before settlement of the contract for sale of the Shoal Bay property, with the net proceeds of sale being paid into a controlled moneys account on behalf of the parties and not to be released until further order of the Court or by written agreement between the parties.
The offer required the matter to proceed on pleadings on the basis that the plaintiff's costs of his application to extend the caveat would be reserved.
The offer was stated to be open for acceptance until 5 PM on 2 December 2020.
The plaintiff did not accept the offer made by the defendant, and, after the steps in the prosecution of the proceedings that are summarised above were taken, the plaintiff agreed to the Court making the consent orders that were made on 16 December 2020.
The plaintiff's opposition to an order that he pay the defendant's costs on the indemnity basis appears from his submissions to have proceeded upon the basis that the defendant relied upon her solicitors' 12 November 2020 and 2 December 2020 letters as if they were Calderbank offers.
As to the first of these letters, the plaintiff argued that it could not have been unreasonable for him to reject the offer contained in the letter because it would inevitably have the practical effect that the net proceeds of sale would be paid out to the defendant three months after the settlement of the contract for sale. Three months could not be a realistic period for the plaintiff to establish his right to the net proceeds of sale in this Court.
However, as I have noted above, it was a clear implication in the letter that the plaintiff could make an application within the three months period to this Court for an extension of the period for which the net proceeds of sale would be required to be retained in the controlled moneys account.
The plaintiff submitted that the offer made in the 2 December 2020 letter could not be an effective Calderbank offer because it did not allow a reasonable period for the plaintiff to decide whether or not to accept the offer. The offer was required to be accepted by the plaintiff by 5 PM on the same day on which the offer was made.
While ordinarily it would not be reasonable for a defendant to give a plaintiff less than one full day in order to accept an offer of settlement, that consideration is tempered to some extent in the present case by the fact that the plaintiff's summons had been made returnable in the Duty List on 3 December 2020 for the purpose of an interlocutory hearing, and settlement of the contract for sale was to take place on 5 December 2020.
Although the defendant did rely on the failure of the plaintiff to accept either of the two offers, she did not found her case solely on the basis that the offers should be treated as Calderbank offers. The failure of the plaintiff to accept the offers was one aspect of an argument based upon the totality of the plaintiff's conduct in failing to confirm that he would withdraw the caveat to enable the contract for sale to be completed, and also his conduct in commencing the proceedings for an order extending the caveat.
The defendant's claim for indemnity costs was based upon the fact that the contract for sale had been made at an auction in accordance with the consent orders binding the plaintiff made by the Federal Circuit Court. The sale price was greater than the reserve price agreed in the consent orders. The plaintiff attended the auction and did nothing before the contract for sale was made to prevent the defendant entering into the contract in accordance with the consent orders. Accordingly, the defendant became contractually bound to the purchasers to complete the contract. The consent orders obliged the plaintiff to withdraw the caveat before settlement of the contract for sale. The maintenance of the caveat on the title to the Shoal Bay property would prevent settlement and would put the defendant in breach of the contract. That would be contrary to the interests of the purchasers who were entitled to enter into the contract in the expectation that the caveat would be withdrawn before settlement. To the extent that this Court was called upon to cause the caveat to be withdrawn, that was a process in aid of the performance of the consent orders made by the Federal Circuit Court. Finally, as there was a subsisting contract for sale, it was inevitable on the facts of this case that the Court would require the caveat to be withdrawn to permit settlement of the contract for sale to take place, and to replace the parties' claims to interests in the Shoal Bay property by appropriately protected claims to interests in the net proceeds of sale.
It was in this context that the defendant argued that it was completely unreasonable for the plaintiff to have refused to withdraw the caveat and to have instituted the proceedings to preserve it, and that it was a course that was doomed to fail.
I agree entirely with the submissions made on behalf of the defendant. The misuse of the unilateral right of parties claiming interests in properties to lodge caveats against the title to the properties can be one of the most pernicious actions available to parties, when they do not act reasonably and responsibly in relation to the implementation of the right.
I am satisfied that the institution and prosecution of these proceedings by the plaintiff constituted relevant misconduct in connection with the conduct of the proceedings in the sense required by Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11. The plaintiff has commenced and maintained these proceedings when he should have known that the proceedings had no real prospects of success: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233-4.
The present is a clear case in which it is appropriate for the Court to order the plaintiff to pay the defendant's costs on the indemnity basis.
The Court's order is:
1. Order that the defendant's legal costs payable to the defendant in accordance with order 6 made by the Court on 16 December 2020, including in respect of the argument as to the proper basis for costs to be paid, be payable by the plaintiff on the indemnity basis.
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Decision last updated: 31 March 2021