MTH v Croft

Consideration

1. Ms Reid, who appeared for the plaintiff, submitted that, although there had been no hearing on the merits, the orders which were made on 4 December 2020 represented a "substantial victory" for the plaintiff and a "capitulation" by Mr and Mrs Croft since Mrs Croft had agreed to re-transfer Mr Croft's interest in the Yarrowyck and Ebor properties which had been transferred to her for, in effect, nil consideration.
2. Ms Reid submitted that there are two categories of case where the court would exercise its discretion to award costs in favour of one party, notwithstanding that there had been no final judicial determination on the merits: first, where one party has acted so unreasonably that the other party ought have the costs of the action; and, secondly, where one party would be almost certain to have succeeded had the matter proceeded to a hearing on the merits and it can be inferred that, by agreeing to the ultimate result, the other party has capitulated. Ms Reid submitted that the present case fell into both of these categories. She further relied on the circumstance that Mr Croft had offered no explanation for the transfers and, indeed, filed no substantive evidence in these proceedings (there was no direction that required either Mr or Mrs Croft to file evidence).
3. Mr Davis, who appeared for Mr and Mrs Croft, submitted that there ought be no order as to costs in accordance with the principles in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624; [1997] HCA 6 (Lai Qin). Although he accepted that Lai Qin acknowledged the two categories identified by Ms Reid above, he contended that neither applied in the present case. He relied on His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand v The Macedonian Orthodox Community Church St Petka Incorporated (No 2) [2007] NSWCA 142 in which Beazley, Giles and Hodgson JJA said at [27]: "Applications for interlocutory injunctions are commonplace. If there is nothing to distinguish an application from the typical case that comes before the court, then the underlying jurisprudence relating to the exercise of the discretion may warrant the making of what is referred to in the legal vernacular as the 'usual order', whether that be costs in the cause or the plaintiff's costs in the cause. The making of such an order does not displace the exercise of the court's discretion. Rather, it is a shorthand form of giving effect to the principles that govern the court's discretion in circumstances where there are no countervailing or different circumstances to warrant the exercise of the discretion in a different manner."
4. The question whether one party ought be ordered to pay the costs of another party is discretionary: s 98 of the Civil Procedure Act 2005 (NSW) (the Act). I am required by Part 6 of the Act, to take into account the overriding purpose of the Act and the rules of court, which is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. The word "proceedings" ought not be confined to either these proceedings or to the damages proceedings because these proceedings were plainly brought for the purpose of safeguarding the assets which will be available to meet any judgment against Mr Croft obtained by the plaintiff in the damages proceedings. They could have been brought by notice of motion in the damages proceedings but were brought separately by summons, presumably because such interlocutory applications are more amenable to the procedure relating to summons and because they were made, at the first instance, ex parte. However, because they were brought by summons rather than by notice of motion, I do not consider that the result ought be affected by the choice of procedure.
5. The Court's jurisdiction to make the orders sought by the plaintiff in the summons was explained in Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264 at 276 (and approved by the High Court in Jackson v Sterling Industries Ltd (1987) 162 CLR 612; [1987] HCA 23) as follows: "The basis of jurisdiction is founded on the risk that the defendant will so deal with his assets that he will stultify and render ineffective any judgment given by the Court in the plaintiff's action, and thus impair the jurisdiction of the Court and render it impotent properly and effectively to administer justice in New South Wales."
6. The Court's power to make the orders sought is provided by Division 2 of Part 25 of the Uniform Civil Procedure Rules 2005 (NSW). A freezing order can be made if the applicant has a good arguable case on an accrued cause of action that is justiciable in the Court and in respect of which there is sufficient prospect that the judgment will be enforced by the Court: UCPR, r 25.14(1) and (2).
7. Had the proceedings been brought by notice of motion in the damages proceedings, the question would have arisen whether a costs order ought be made in favour of either party and on what basis. The circumstances of the transfers from Mr Croft to Mrs Croft in mid-2019 for nil valuable consideration had the effect of diminishing the assets of Mr Croft which would otherwise have been available to meet a judgment in favour of the plaintiff. Having regard to the risk of further dissipation (the damages proceedings having recently been commenced) it was necessary for the plaintiff to apply for an interlocutory injunction, ex parte, to protect her interest in the enforcement of any judgment in the damages proceedings: see Third Chandris Shipping Corporation v Ultramarine SA [1979] QB 645 at 653 (Mustill J). There was a risk, in light of the events which had happened, that, had the application not been made, Mr Croft would have transferred further property to Mrs Croft, which would not have been available to meet any judgment. This consequence would have rendered the damages proceedings wholly futile (leaving aside the comfort to be obtained from adverse findings against an alleged wrongdoer) and would have thwarted the processes of this Court.
8. On the material available to me, the plaintiff's prospects of success in the summons proceedings were high. Neither Mr Croft nor Mrs Croft has sought to put on any evidence in these proceedings in opposition to the plaintiff's claim for orders or for costs. In these circumstances, it is easier to draw the inference against them that the reason for the transfers was to safeguard the assets from any adverse judgment. I regard their agreement to the orders which were ultimately made by consent and without admissions on 4 December 2020 as amounting to a sensible capitulation that the orders made by Campbell J on an ex parte basis would be confirmed at a contested hearing and that there were substantial prospects that, if proceedings were commenced under s 37A of the Conveyancing Act for declarations that the transfers to Mrs Croft were void, such relief would be granted.
9. In these circumstances, the plaintiff would ordinarily be entitled to her costs of the application made by summons. However, I do not consider that these costs should be ordered to be paid now since the application could have been made ex parte by notice of motion in the damages proceedings. Had that course been taken, the usual rule would have resulted in the costs not being payable until the conclusion of the damages proceedings.
10. There is a further matter which requires consideration. The purpose of the current proceedings was to safeguard any judgment obtained by the plaintiff in her favour in the damages proceedings. If the plaintiff is successful in the damages proceedings, she should have her costs of these proceedings paid by Mr Croft. If, however, she were not successful in the damages proceedings, then I am not satisfied that she ought be entitled to her costs of the summons proceedings. In that event, I am not persuaded that she ought bear the costs of Mr Croft in the summons proceedings, since it was necessary that she bring them in order to protect the Court's processes.
11. Having regard to these matters, I consider the appropriate order to be that the costs of the summons proceedings are to be the plaintiff's costs in the cause, the cause being the damages proceedings. Thus, if the plaintiff is successful in obtaining a judgment against Mr Croft in the damages proceedings, she will be entitled to have her costs of the summons proceedings paid by Mr Croft. However, if she is unsuccessful against Mr Croft in the damages proceedings, she will have to bear her own costs of the summons.

Orders

1. For the reasons given above, I make the following order: 1. In the event that the plaintiff obtains judgment against Geoffrey Croft (the first defendant in these proceedings and the second defendant in proceedings 2020/113788) in proceedings 2020/113788, Geoffrey Croft is to pay the plaintiff's costs of these proceedings.

Amendments 06 July 2021 - reference to Mrs Croft deleted - coversheet, [27], [28], [29] 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: 06 July 2021