Plaintiff v First Defendant

2 The plaintiff and the second defendant are the deceased's daughters and the first defendant is the husband of the second defendant.[1]

3 The remaining issue to determine is the costs of the proceeding, which the parties agreed were to be determined on the papers.

(a) the plaintiff seeks that the defendants personally pay her costs of the proceeding on an indemnity basis;

(b) the first defendant seeks the plaintiff's costs be paid from the estate of the deceased and no costs orders be made against him personally; and

(c) the second defendant seeks her costs from the plaintiff personally on an indemnity basis

Initiation of plaintiff's proceeding in the Practice Court

5 In February 2016, the plaintiff sought orders that the defendants deliver up the original duplicate certificate of title of the property to the plaintiff, pursuant to s 116A of the Transfer of Land Act 1958 ('the Act'). As the property had been sold and settlement of the sale was due within a few days of the application, the application was made in the Practice Court.

6 In her affidavit in support of the application, the plaintiff deposed the last registered dealing with the property was the issue of a new certificate to the first defendant in September 2009. The plaintiff alleged the defendants' possession of the title was established by a telephone conversation between her solicitors and the first defendant on 13 November 2016 and also inferred by a telephone conversation between her solicitor and the first defendant's then solicitor, Mr Stephen Canals of Altona Legal. After the telephone conversations, written requests by the plaintiff for delivery up of the title were made on 22 December 2015 and 12 February 2016.

7 On the return date of the application in the Practice Court, the first defendant appeared on his own behalf and on behalf of the second defendant. Counsel for the plaintiff informed the Court that the application no longer possessed the degree of urgency first thought as there were two caveats over the property that prevented the settlement of the sale. The first defendant informed the Court that the defendants opposed the plaintiff's application and produced a copy of a document alleged to be a later will of the deceased dated 8 June 2010. As a consequence, the proceeding was referred to the Trusts, Equity and Probate List for further hearing on 4 March 2016.

Proceeding in the Trust, Equity and Probate List

8 On 4 March 2016, the first defendant, purporting to represent himself and the second defendant, informed the Court that the certificate of title was not in his possession. Orders were made requiring the defendants to provide affidavits as to their knowledge of the whereabouts of the certificate and adjourning the proceeding for further hearing on 23 March 2016.

9 On 16 March 2016, the second defendant retained solicitors to act on her behalf due to her concerns with the first defendant's conduct on 4 March 2016. By affidavit sworn 23 March 2016, the second defendant deposed, inter alia, that:

(a) on 10 March 2016 the first defendant was involuntarily admitted to the psychiatric unit at Werribee Mercy Public Hospital;

(b) while she was aware that the first defendant obtained the certificate of title, she believed he gave it to the deceased;

(c) she has not seen the certificate of title at any stage and is not aware of its whereabouts;

(d) she recalled a conversation between Stephen Canals and the first defendant where the first defendant said 'what if I don't have it' and she personally asked the first defendant if he had the title, at which time the first defendant responded that he gave it to the deceased;

(e) the certificate of title may have been at the deceased's house, where it was thrown out when the plaintiff and her family cleared out the property after the deceased passed away; and

(f) was disappointed that the plaintiff had proceeded with the sale of property when she was on notice of the existence of a later will; and

(g) she had instructed her solicitors to commence negotiations with the plaintiff for the removal of the caveats.

10 On the return date of the directions hearing on 23 March 2016, the plaintiff informed the Court she would make an application for a new certificate of title pursuant to s 31 of the Act. Further orders were made on this day and it was noted in the orders that neither defendant knew the whereabouts of the certificate of title. The proceeding was adjourned for further hearing on 8 April 2016.

11 By affidavit sworn 5 April 2016, the plaintiff's solicitor deposed that:

(a) during a telephone conversation on 17 November 2015 the first defendant informed him that he would only hand over the title upon being provided a copy of the 1978 will; and

(b) during a telephone conversation on 11 December 2015 the first defendant's then solicitor, Stephen Canals, advised that the first defendant only wished to provide the certificate of title at settlement of the sale of the property.

12 By affidavit sworn 5 April 2016, the plaintiff deposed that:

(a) she refuted the second defendant's contention the certificate of title was thrown away when the deceased's house with cleared;

(b) on 29 September 2015 she was informed by her lawyers, who had possessed the grant of probate of the deceased, that they did not possess the certificate of title;

(c) on 20 October 2015 she was informed by the deceased's bank, National Australia Bank, that it did not possess any documents in safe custody in the deceased's name; and

(d) the plaintiff's solicitor had requested the second defendant to withdraw her caveat.

1. The Registrar of Titles is directed to:
   • (a) cancel the folio of the register for the property
   • (b) create a new folio of the register for the property;
   • (c) remove Caveat AM096727H and Caveat AM191492D from the new folio;
   • (d) record Helena Lutar as Executrix of the Estate of Lina Chojnacki as the registered proprietor of the property in the new Folio; and
   • (e) produce a Certificate of Title with the new folio and deliver it to Helena as Executrix of the Estate of Lina Chojnacki deceased. [2]

1. The plaintiff serve a copy of this order upon the Registry of Titles forthwith.

1. The Registrar of Titles have leave to make any application in this proceeding concerning the orders made within 14 days of service of the order.

1. The costs of the proceeding be adjourned to a date to be fixed on 48 hours' notice to the parties.

14 On 29 April 2017, the Registrar of Titles made an application seeking to vacate order 1 and for a formal declaration to be made by the Court that the certificate was lost. This was on the basis that the order directed at the Registrar was not appropriate in circumstances where it is open to the plaintiff to make an application under s 31 of the Act.

15 On 6 May 2016, the orders sought by the Registrar, vacating the previous order and formally declaring that the certificate was lost, were made by the Court.

16 The jurisdiction of the Court as to costs is conferred by s 24(1) of the Supreme Court Act 1986. This general discretion must be exercised in accordance with Order 63 of the Supreme Court (General Civil Procedure) Rules 2015.[3] The prima facie position in respect of costs in litigation is for standard costs to be ordered by the court, with the court having the discretion to award costs other than on the standard basis.

17 The 'usual order as to costs' is that 'costs follow the event' and a successful party in litigation is entitled to an award of costs in its favour. [4] The relevant 'event' is success in the action or on particular issues.[5] The unsuccessful party bears the liability for the costs of the unsuccessful litigation.[6] The central principle is to make an order that is fair and just between the parties in the circumstance of each case.[7]

18 Pursuant to s 36(2) of the Trustee Act 1958, a trustee may reimburse himself or herself, or pay or discharge out of the trust premises all expenses incurred in or about the execution of the trusts or powers. A trustee is entitled as of right to indemnity out of the trust for expenses properly incurred, that is, all costs except to the extent that they are of an unreasonable amount or have been unreasonably incurred. The concept of proper expenditure excludes conduct demonstrating want of prudence or diligence.[8] Expenses and liabilities that are improperly incurred, such as acting beyond power, in bad faith or exercising power 'with an absence of care and diligence that a person of ordinary prudence should exercise' are not caught by the right of indemnity and shall be borne by the trustee personally.[9]

19 The power to order costs is usually exercised after a hearing on the merits. Success in the action or on particular issues is the factor that controls the exercise of the discretion in most cases. A successful party is prima facie entitled to a costs order.

20 Where a proceeding is undetermined and has not been resolved by contest before a court in a hearing on the merits, the court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. The court has discretion to make costs orders either where a defendant has consented to a grant of final relief or if there is consensus as to the outcome of the proceedings. In certain circumstances, a costs order can be made if it can be determined that one or other party would almost certainly have succeeded in the proceeding, or if one or other party has acted unreasonably in pursuing or defending the proceeding.[10]

21 A special costs order will only be made where the proceeding exhibits a special or unusual feature or special circumstances. Each proceeding must be considered on its own facts to ascertain whether those facts support the making of a special order for costs.

22 The authorities concerning the principles to be applied when a court, in the proper exercise of its discretion, may depart from the making the usual order for costs on a standard basis are well known and conveniently set out in cases such as Colgate-Palmolive Co v Cussons Pty Ltd,[11] Ugly Tribe Co Pty Ltd v Sikola[12] and Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3).[13] The categories of circumstances that warrant a special costs order are not closed, however, the cases set out examples of circumstances where a special costs order has been made.

23 The plaintiff submits that successful litigants are generally entitled to an award of costs. In this proceeding, the plaintiff obtained the certificate of title from the Registrar of Titles after being informed by the defendants, to whom the certificate had last been traced, that they did not have it. The evidence available to the plaintiff at the time was that it was in the possession of the second defendant, if not the first defendant. At that time, there was no assurance from the defendants that the title had been lost, simply a refusal to produce it.

24 The plaintiff further submits that the first defendant, who did not assist the Court, contested the proceeding for the ulterior purpose of obtaining an adjudication in relation to the later will. In the circumstances, there was no arguable defence or information provided in relation to the certificate of title until the application was made, which was the first time the defendants informed the Court they may have lost the document.

(a) there has been no finding that the first defendant was in possession of the certificate of title and wrongfully withheld it;

(b) the plaintiff's evidence in relation to the possession of the certificate of title was equivocal, at best the evidence appears to suggest the first defendant, in the context of a dispute over a range of issues, may have indicated that he possessed the certificate, but goes no further than that;

(c) it is undisputed that the first defendant was suffering from a serious mental illness, which was likely to make his actions and statements unreliable. In these circumstances, it would not be appropriate to proceed on the basis that the first defendant had wrongfully withheld the certificate;

(d) if costs were awarded against the first defendant, there is no basis for ordering them on an indemnity basis; and

(e) any costs orders should not include the costs incurred as a result of the involvement of the Registrar of Titles as this was brought about by the adoption of the wrong procedure by the plaintiff.

26 The second defendant seeks her costs from the plaintiff personally on an indemnity basis, contending that:

(a) there was no proper basis for her to have been made a party to the proceeding as there was no evidence to suggest she had the duplicate certificate in her possession;

(b) there was no admissible evidence forthcoming from the plaintiff that suggested the second defendant possessed the certificate of title when the application was filed;

(c) the plaintiff was unsuccessful in obtaining an order against the second defendant with the Court accepting that she was unaware of the whereabouts of the certificate of title and the usual rule that costs follow the event should apply;

(d) the plaintiff caused unnecessary costs by issuing the proceeding without first using the administrative process available to her under s 104[14] of the Act; and

(e) upon the Court being satisfied on 23 March 2016 that the defendants did not possess the certificate of title, the plaintiff should have made an application under s 31 of the Act and discontinued the proceeding. This was the correct procedure to adopt as submitted by the Registrar and accepted by the Court. In the circumstances, the costs incurred after 23 March 2016 were unnecessary and should be paid by the plaintiff.

27 This proceeding followed a circuitous route as circumstances overtook the relief originally sought by the plaintiff. Ultimately, the plaintiff utilised an administrative procedure to obtain the certificate of title without the Court's assistance, save for the declaration that the title was lost. The unconventional trajectory of the proceeding is perhaps best highlighted by the costs submissions of the plaintiff and the second defendant who both seek their costs from the other according to the maxim that costs should follow the event. The Court was not required to make a determination as to the relief sought by the plaintiff or the various allegations proffered by either party. In the circumstances, it is unhelpful to assess costs through the prism of the supposed success of a party.

28 Where a proceeding is not ultimately resolved by a determination of the merits of the dispute, it is appropriate for the Court to examine the conduct of the parties to determine if it gives rise to an entitlement to costs or, conversely, the conduct is such that it warrants a cost order against a party, that is, whether the parties acted reasonably in pursing or defending the proceeding.[15]

29 These proceedings were commenced against the backdrop of an extant contract of sale and imminent settlement date. It was reasonable for the plaintiff to form the view that the first defendant possessed the title as the last registered dealing with the property was the first defendant who obtained the title. When he and his former solicitors were approached for the whereabouts of the title, they did not deny possession of it and, on one view, represented that the first defendant was in possession of it. The conversations and correspondence did not result in the production of the title or confirmation that the first defendant did not possesses it. In the circumstances, it was reasonable and prudent for the plaintiff to adopt the course she did in issuing the proceeding.

30 The defendants' submission that the proceeding was inappropriate in light of certain extra curial remedies to obtain the title, such as ss 31 or 104 of the Act, after it became clear the title was lost, fail to take into account the plaintiff's reasons for initiating the proceeding. She had no way of knowing the title had been lost or that the decision to issue the proceeding was unreasonable on the information available to her.

31 I am satisfied that the plaintiff acted reasonably in issuing and conducting the proceeding and the orders that she ultimately sought were appropriate. On this basis, she is entitled to her costs from the estate of the deceased. Instead, she seeks to recover her costs from the defendants personally on an indemnity basis.

32 The plaintiff submits the defendants did not assist the Court, contesting the proceeding initially and continuing the proceeding with the ulterior purpose of seeking adjudication in relation to the alleged later will. The Court made no adverse formal findings of fact in relation to these matters. In the circumstances where the first defendant demonstrated certain mental health issues early in the proceeding and the second defendant had limited involvement in the proceeding before 15 March 2016, the Court is cautious to make any order orders for costs personally against either defendant.

33 Accordingly, the Court will order that the costs of the plaintiff of and incidental to the proceeding including any reserved costs be paid and retained from the estate of the deceased on the trustee basis, to be taxed in default of agreement.

34 The first defendant does not seek any orders against the plaintiff. The only order he seeks is that there be no cost orders against him personally. As the plaintiff's costs are to be paid from the estate of the deceased, no further consideration of the first defendant's orders are necessary. The first defendant will bear his own costs.

35 The second defendant contends that she should never have been jointed as a party and the plaintiff's application was unnecessary on the basis that there were at various times more appropriate means to obtain a new title.

36 The first submission of the second defendant is made on the basis that there was no reasonable basis to believe she had the title in her possession at any time. Her submission fails to take into account the initial circumstances of the commencement of the proceeding and the manner in which it developed. It is uncontested that the first defendant purported to act on behalf of the second defendant until around 15 March 2016. There is no evidence that, up until that time, the second defendant made any suggestion that she did not possess the title or seek to challenge or correct the plaintiff's affidavit evidence that the title was in the possession of either defendant, or that the plaintiff should have adopted an administrative process in respect of the title. In those circumstances, it was reasonable for the plaintiff to join the second defendant in the proceeding.

37 The second submission of the second defendant is rejected. It has already been determined that the Court is satisfied that the course adopted by the plaintiff in commencing the proceeding and subsequently seeking orders directing the Registrar to issue a new title was reasonable at the time those decisions were made.

38 Further, the second defendant's costs were incurred after it became apparent that the defendants did not know of the whereabouts of the title. Upon instructing solicitors from 15 March 2016, the second defendant consented to the orders sought by the plaintiff in relation to the title. The affidavit by the second defendant from this time confirmed she did not possess the title. This information could have been provided much earlier. The affidavit also sought to promulgate issues outside the scope of the proceeding, in particular, the existence of an alleged later will.

39 The second defendant's submissions that the plaintiff pay her costs of the proceeding on an indemnity basis are rejected. It would not be reasonable for the second defendant to recover her costs from the plaintiff or the estate of the deceased. The second defendant should bear her own costs.

(a) the costs of the plaintiff of and incidental to this proceeding including any reserved costs, assessed on the trustee basis, be paid and retained from the estate of the deceased, to be taxed in default of agreement;

(b) the defendants bear their own costs of and incidental to this proceeding personally, without being indemnified from the estate of the deceased; and

[1] The first and second defendant were separated at the time this proceeding was commenced.

[2] Order 1 was proposed by the plaintiff and made with the consent of the second defendant.

[3] Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3) [2012] VSC 399 (14 September 2012) [11] (Croft J); see also Coombes v Ward (No 2) [2002] VSC 84 (27 March 2002).

[4] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 97 (McHugh J) ('Oshlack').

[5] Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622, 624-5 (McHugh J) ('Lai Qin').

[6] Oshlack [1998] HCA 11; (1998) 193 CLR 72, 97 (McHugh J).

[7] Earnshaw v Loy (No 2) [1959] VicRp 44; [1959] VR 252, 253_;_ see G E Dal Pont, Law on Costs (Lexis Nexis, 3rd ed, 2013) [6.15].

[8] Nolan v Collie [2003] VSCA 39; (2003) 7 VR 287, 303-10 (Ormiston JA); Dimos v Skaftouros [2004] VSCA 141; (2004) 9 VR 584, 617 (Dodds-Streeton AJA, referring to National Trustees Executors & Agency Company of Australasia Ltd v Barnes [1941] HCA 3; (1941) 64 CLR 268.

[9] Re O'Donogue [1998] 1 NZLR 116, 121 (Hammond J); Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) [2001] FCA 1628; (2001) 188 ALR 566, 606 (Finkelstein J); Nolan v Collie [2003] VSCA 39; (2003) 7 VR 287.

[10] Lai Qin [1997] HCA 6; (1997) 186 CLR 622, 624 (McHugh J); Seng Hpa v Walker [2017] VSC 320 (8 June 2017) [77]-[81] (McMillan J).

[11] Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225.

[12] Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 (14 June 2001).

[13] Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3) [2012] VSC 399 (14 September 2012).

[14] Section 104 of the Transfer of Land Act 1958 sets out a procedure where by the Registrar of Titles can require any person to submit any certificate of title.

[15] Lai Quin (1997) 186 CLR 662, 645-5 (McHugh J); Seng Hpa v Walker [2017] VSC 320 (8 June 2017)