Saba v Plumb & Anor

Supreme Court of NSW|2017-07-18|Before: Black J

Solicitors: Fraser Clancy (Plaintiff/Second Cross-Defendant) Lexes Lawyers (Second Defendant/Cross-Claimant) File Number(s): 2016/110233

Judgment

On 19 May 2017, I delivered judgment ([2017] NSWSC 622) ("Judgment") in proceedings brought by Mr Anthony Saba seeking an order under s 37A of the Conveyancing Act 1919 (NSW) that a transfer of a one-quarter share in property at East Ryde by the First Defendant, Mr Noel Plumb, to the Second Defendant, Ms Jeanette Minifie, was voidable and consequential relief. I held that Mr Saba's claim should be dismissed and that Ms Minifie's Cross-Claim, which sought to establish a constructive or resulting trust over that property and consequential orders, should be dismissed in consequence. I observed that, in the ordinary course, Mr Saba would be ordered to pay Mr Plumb's and Ms Minifie's costs of and incidental to the proceedings, including the costs of the Cross-Claim, directed the parties to bring in agreed orders to give effect to the Judgment and indicated that I would allocate a date to hear any questions as to costs if the parties were unable to agree that question.
By consent, further orders were made on 2 June 2017, providing for Mr Saba to pay the costs of the proceedings, including the costs of Ms Minifie's Cross-Claim, and for the parties to make submissions as to whether Mr Saba should be ordered to pay costs on an indemnity basis and for the determination of that question on the papers.

The applicable principles

I will first refer to the principles by reference to which an application for indemnity costs, arising from matters relating to the conduct of the proceedings, is to be determined and then to the submissions made by the parties as to their application in this case.
Section 98 of the Civil Procedure Act 2005 (NSW) confers a discretionary power to determine costs on the Court and requires that that discretion be exercised judicially, and s 98(1)(c) permits the Court to order costs on an ordinary or an indemnity basis. Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) in turn provides that: "Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs."
As the solicitor for Mr Saba, Mr Clancy, points out, r 42.2 of the Uniform Civil Procedure Rules provides that, unless the Court orders otherwise or the rules otherwise provide, costs payable are to be assessed on an ordinary basis. Rule 42.5 deals with an order for costs on an indemnity basis. Mr Clancy submits that costs are awarded on an ordinary basis unless there are exceptional circumstances and refers to Leichhardt Municipal Council v Green [2004] NSWCA 341 in support of that proposition. Mr Alexander, Counsel for Ms Minifie, acknowledges that an order for indemnity costs is not made to punish an unsuccessful plaintiff for persisting with a case that fails, but to compensate a successful defendant fully for costs incurred, when the Court takes the view that it was unreasonable for the plaintiff to have subjected that party to the expenditure of costs: Hamod v State of New South Wales [2002] FCAFC 97; (2002) 188 ALR 659 at [20].
The jurisdiction to order costs is compensatory and not punitive and whether an indemnity costs order should be made depends, at least in part, on whether there was a relevant delinquency on the part of the unsuccessful party: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 89; Allplastics Engineering Pty Ltd v Dornoch Ltd [2006] NSWCA 33; Westpac Banking Corporation v Ollis [2007] NSWSC 1008 at [6]. In Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) [2008] NSWSC 199; (2008) 65 ACSR 324, McDougall J observed (at [24]) that there must usually be some special or unusual feature to justify departure from the ordinary rule as to costs and that delinquency is not necessary for an order for indemnity costs, but is relevant to whether it should be made. The relevant principles were also considered by the Court of Appeal in Cabport Pty Ltd v Marinchek (No 2) [2013] NSWCA 131 at [6] where the Court observed that an order for indemnity costs may be made where conduct in proceedings is plainly unreasonable or involves an element of delinquency. I also recently summarised the principles applicable to an order for indemnity costs in Re Australasian Barrister Chambers Pty Ltd (in liq) [2017] NSWSC 695 and I have drawn on that decision for the summary which appears above.

Ms Minifie's claim for indemnity costs

Ms Minifie made written submissions in respect of her application for indemnity costs, supported by an affidavit of her solicitor, Mr Attapallil, dated 16 June 2017. That affidavit set out the procedural history of the proceedings and referred to correspondence between the parties, including correspondence in which Mr Saba's solicitors had confirmed that he was not alleging fraud as against Mr Plumb and Ms Minifie. Mr Attapallil's evidence is also that Mr Saba's legal representatives did not indicate that fraud was to be alleged against Ms Minifie, or the nature of the allegation that was to be put, prior to the trial. Mr Attapallil also refers to the issue of subpoenas and notices to produce by Mr Saba, which were the subject of disputes between the parties which I had determined, largely prior to the commencement of the substantive hearing. I have also had regard to Ms Minifie's submissions in reply, but do not consider it necessary to summarise them in any detail.

Whether an allegation of "fraud" was identified by Mr Saba

Mr Alexander submits that, first, Mr Saba made serious and unnecessary allegations of fraud that were not sustained, despite advising that fraud would not be alleged against Ms Minifie, and such allegations significantly extended the trial and should not have been pressed after the evidence was served. Mr Alexander submits, correctly, that Mr Saba put his case, inter alia, on the basis that the claimed breakdown of Mr Plumb's and Ms Minifie's relationship was a sham and their affidavit evidence to that effect was deliberately false (Judgment [53]) and submits that that amounted to a serious and unsuccessful allegation of fraud. Mr Alexander also submits that Mr Saba did not give notice of such a claim by way of pleading. Mr Clancy responds by referring to several aspects of the conduct of the proceedings in the Real Property List that were not the subject of evidence in this application and which I should not and need not address. It does not seem to me that the absence of a pleading of that allegation can support a claim for indemnity costs against Mr Saba, where the directions made for the conduct of the proceedings in the Real Property List did not provide for pleadings, provided Mr Plumb and Ms Minifie were given fair notice of the claim they had to meet.
Mr Clancy submits, and I accept, that it was apparent at least that an allegation of an intent to defraud creditors, in the sense contemplated by s 37A of the Conveyancing Act, was made, and that the affidavit evidence filed in Mr Saba's case at an early stage of the proceedings made clear that he contested the claim that Mr Plumb's and Ms Minifie's relationship had broken down. Mr Clancy also refers to correspondence between the solicitors, and between Mr Plumb and Mr Clancy, which indicated that Mr Saba challenged the genuineness of the breakdown of the relationship between Mr Plumb and Ms Minifie and also indicated that Ms Minifie's solicitor recognised that Mr Saba contended that the settlement associated with the alleged breakdown of that relationship was a "sham". Mr Clancy also points out that the nature of Mr Saba's case, in that respect, was apparent from his opening outline of submissions and that the case was conducted on the basis that those matters were squarely in issue. Mr Clancy also points out, fairly, that a large part of Mr Plumb's and Ms Minifie's affidavit evidence, including evidence of third party witnesses, was plainly directed to meeting that case. It also seems to me that there is also some force in Mr Clancy's submission that the good faith or otherwise of Ms Minifie's conduct was, in any event, in issue by reason of her reliance on s 37A(3) of the Conveyancing Act. Mr Alexander submits, in reply, that it is no answer to Ms Minifie's complaint that the nature of the allegations made by Mr Saba was evident from submissions and affidavits. With respect, it seems to me that that is a significant matter, where Mr Plumb and Ms Minifie had notice of the case they had to meet, whether or not Mr Saba's representatives used the term "fraud" to describe the challenge to their claim that their relationship had broken down.
It seems to me that it must have been and was evident to Mr Plumb and Ms Minifie from the affidavit evidence led by Mr Saba that he contested the genuineness of the alleged breakdown of the relationship between Mr Plumb and Ms Minifie. The evidence that was led in Mr Saba's case that Mr Plumb and Ms Minifie undertook some activities that were said to be usual for a "married couple" could only have been directed to such a challenge and the evidence led by Mr Plumb and Ms Minifie to establish the breakdown of that relationship could only have been responsive to that challenge. I do not consider that either Mr Plumb or Ms Minifie could have been or were caught by surprise as to that contest. The fact that Mr Saba and his legal representatives did not attach the epithet "fraud" to that challenge is not a matter that supports an order for indemnity costs where the Defendants were on notice of the substance of the allegation that would be made. I do not find that there was no proper basis for the case put by Mr Saba, although that proposition that overlaps with other submissions put by Mr Alexander that I address below.

Whether Mr Saba had a proper basis for contesting the breakdown of the relationship between Mr Plumb and Ms Minifie

Mr Alexander also submits that Mr Saba chose to pursue the case that the claimed breakdown of Mr Plumb's and Ms Minifie's relationship was a sham despite third party affidavits and documents that corroborated the breakdown of the relationship. Mr Clancy responds, and I accept, that Mr Saba's case under s 37A of the Conveyancing Act was necessarily circumstantial. Mr Clancy also submits that there was evidence that supported Mr Saba's claim and that the living arrangements adopted by Mr Plumb and Ms Minifie were "unusual", a submission that I addressed in the Judgment. It seems to me that, in a claim under s 37A of the Conveyancing Act in respect of a transfer of property, associated with an alleged breakdown of a marital or de facto relationship, the veracity of documents prepared by the parties to the relationship and evidence led by their friends and relatives may well not be apparent until it has been tested at a hearing. Although Mr Saba was ultimately unsuccessful in establishing his claim that the breakdown of the relationship was a sham, I do not consider that this matter, alone or with other matters, warrants an order for indemnity costs against him.
Mr Alexander also submits that Mr Saba need not have put that matter in issue in order to succeed in a claim under s 37A of the Conveyancing Act. While that proposition is correct, success on that issue would have brought about Mr Saba's success in the proceedings, although that success could also have been achieved on other bases. Although the contest as to this matter undoubtedly extended the length of the hearing, I do not consider that the pursuit of it, alone or with other matters, warrants an order for indemnity costs against Mr Saba.

Width of subpoenas and notices to produce

Second, Mr Alexander refers to the width of subpoenas and notices to produce issued by Mr Saba. Mr Clancy fairly responds that each party had a degree of success in respect of the application to set aside subpoenas and notices to produce in December 2016 and that subpoenas and notices to produce were permitted in narrower form than they had been issued. It seems to me that issues in respect of the subpoenas and notices to produce partly reflected the fact that Mr Saba and Mr Plumb originally both took a wide view of the extent to which the earlier disputes between them could be agitated or reagitated in these proceedings. Those issues were further complicated by Mr Plumb's resistance to the production of documents, some of which were relevant to the matters in issue in the proceedings, on grounds of relevance or confidentiality. It seems to me that both Mr Saba and Mr Plumb contributed to the extent of dispute as to subpoenas and notices to produce. This matter does not seem to me to support, alone or with other matters, an order for costs on an indemnity basis against Mr Saba. Although several issues arose in respect of subpoenas and notices to produce in the course of the hearing, I also do not consider that those matters were such, alone or with other matters, as to warrant an order for indemnity costs.

The width of Mr Saba's evidence and the conduct of cross-examination

Third, Mr Alexander refers to the width of Mr Saba's evidence and the conduct of his Counsel's cross-examination and to the fact that Mr Saba sought to tender evidence tending toward relitigation of earlier proceedings between Mr Saba and Mr Plumb, in particular in respect of applications for an apprehended violence order brought by the Police against Mr Plumb, in respect of an incident involving Mr Saba, and by Mr Plumb against Mr Saba. Mr Clancy fairly responds that the same issues as to relevance arose in respect of both Mr Plumb's and Mr Saba's evidence, so far as each of them sought to canvass the substantive merits of their earlier disputes. I observed in my judgment that "significant parts" of Mr Saba's evidence were plainly inadmissible and were rejected (Judgment [43]); however, the position in respect of aspects of Mr Plumb's evidence was similar, other than that some of Mr Plumb's affidavit evidence was not pressed after corresponding parts of Mr Saba's affidavit evidence were rejected. Mr Alexander also refers to the service of further affidavits of Mr Saba, Mr Maxwell and Mrs Saba dated 14 February 2017 in the course of the hearing. It does not seem to me that those affidavits caused any substantial prejudice to Mr Plumb or Ms Minifie, or any significant increase of costs, and they were permitted to be read on that basis. Mr Alexander responds, in reply, that the inadmissible evidence contained in Mr Saba's affidavit, which was rejected at trial, nonetheless had to be read by Ms Minifie's legal representative prior to the hearing, wasting time and money. That, however, is a matter that will be addressed by an order for costs on the ordinary basis.
It seems to me that the scope of the evidence led in Mr Saba's case partly reflected the common view of Mr Saba and Mr Plumb as to the width of the issues in the proceedings, as to which I took a narrower view in rulings as to admissibility of evidence early in the hearing and in the Judgment. It also seems to me that approach partly reflected the fact that Mr Saba sought to draw inferences from circumstances, as will often and properly be the case in a claim under s 37A of the Conveyancing Act. It does not seem to me that matter alone, or with other matters, supports an order for indemnity costs against Mr Saba.
Mr Alexander also refers to the breadth of the cross-examination pursued by Mr Saba's Counsel and to concerns that I had expressed during the hearing as to the time that was being devoted to the pursuit of possibly collateral issues. It does seem to me that those matters increased the length of the hearing. The extent of the cross-examination undertaken by Mr Saba's Counsel seems to me also to have reflected the fact that Mr Saba was seeking to establish that inferences ought to be drawn from the relevant circumstances, where those inferences could not be established without detailed and fact-intensive cross-examination if (contrary to the view that I formed) Mr Saba's claim was well founded. I have pointed above to the fact that both Mr Saba and Mr Plumb had originally taken a wide view of the scope of the matters in issue, and some allowance must be made, and was made in the conduct of the hearing, for the fact that a case under s 37A of the Conveyancing Act may well depend on inferences drawn from a range of circumstances. It seems to me that, on balance and taken as a whole, the cross-examination of Mr Plumb, Ms Minifie and other witnesses, although lengthy, was within the scope of a proper professional judgment on the part of Mr Saba's Counsel.
Mr Alexander also refers to cross-examination of Ms Minifie based on an affidavit of Mr Saba's solicitors which had not yet been served, to which I referred in Judgment [8]. It seems to me that there was a degree of unreasonable conduct in this respect, and the approach adopted by Mr Saba, at best, created confusion, and at worst involved a risk of unfairness to Ms Minifie. However, I again do not consider that this matter, alone or with other matters, is sufficient to support an order for indemnity costs, given the nature and range of other matters in issue in the proceedings.
Mr Alexander also points to the fact that an issue relating to Mr Plumb's and Ms Minifie's understanding of the treatment of Mr Plumb's superannuation assets, which ultimately proved to be significant, was not adequately addressed in Mr Plumb's cross-examination and was not put to Ms Minifie. That matter had an impact on the outcome of the proceedings, as my judgment indicates (Judgment [78]-[84]). However, it does not seem to me that it is analogous to the failure to examine or call a number of material witnesses to which McDougall J referred in White Constructions (ACT) Pty Ltd (in liq) v White [2004] NSWSC 303 as supporting an order for indemnity costs. I do not consider that the matters relating to the cross-examination undertaken on Mr Saba's behalf, taken as a whole and alone or with other matters, support an order for indemnity costs against Mr Saba.
Mr Alexander also refers to Mr Saba's tender of material relating to earlier disputes between the parties, but this matter overlaps with and does not seem to me to add anything to the matters that I have addressed above. Mr Alexander also refers to Mr Saba's tender of documents produced by Ryde City Council on subpoena which it seems to me were ultimately of little probative value. It seems to me that that matter ultimately involved little impact on the conduct of the hearing and I do not consider that it supports an order for indemnity costs.
In summary, a number of aspects of the conduct of the proceedings contributed to their length and likely increased the costs that all parties incurred in the proceedings. I have referred above to the criticisms that are made by Ms Minifie of Mr Saba's conduct of the proceedings, but similar criticisms could also be made of the view initially taken by Mr Plumb as to the width of issues in the proceedings, and the matters on which Ms Minifie relies do not seem to me to warrant an order for indemnity costs. I will therefore maintain the costs order that I made in her favour on 2 June 2017 without further amendment.

Mr Plumb's position

Mr Plumb was self-represented for large parts of the proceedings, although he was represented by Mr Glissan of Counsel at the hearing, and is also self-represented in respect of the application for indemnity costs. Mr Plumb did not file submissions in respect of that application for indemnity costs but appears to pursue such an application on the grounds set out in his affidavit dated 16 June 2017. Mr Plumb's affidavit refers to several ex tempore judgments and orders which I made in the course of the proceedings, and to Counsel's fees, disbursements, deferred filing fees and expenses incurred by Mr Plumb in the course of the proceedings. In submissions in reply, Mr Plumb adopted Ms Minifie's submissions in chief and in reply, in circumstances that he is self-represented in respect of the application for indemnity costs. I have addressed the issues raised by Ms Minifie in submissions in chief and in reply above. The fact that Mr Plumb has incurred disbursements in respect of the conduct of the proceedings, the recoverability of which can be addressed in an assessment in the ordinary way, does not otherwise support an application for costs on an indemnity basis, as distinct from the order for costs on an ordinary basis which I have already made in his favour. I do not consider that an order for costs on an indemnity basis should be made in favour of Mr Plumb, in place of the existing order for costs on an ordinary basis, for the same reasons it was not made in favour of Ms Minifie.
In submissions in reply, Mr Plumb went beyond the leave that had been granted for submissions as to costs by seeking a gross sum costs order, an application which may also have been implicit in his initial affidavit. Mr Plumb submitted, in reply, that a gross sum costs order should be made in his favour on the basis that that was necessary to avoid a costs assessment in which he will "be opposed by a hostile Plaintiff with apparently unlimited legal resources". I recognise that Mr Plumb is self-represented in respect of this application and the Court will ordinarily extend some procedural latitude to a self-represented party, consistent with affording procedural fairness to the other parties. I will proceed on the basis that Mr Plumb's application for a gross sum costs order was implicit in his first affidavit evidence, although only squarely raised in reply. Assuming, without deciding, that Mr Plumb should be permitted to raise that application, I will address it on its merits.
Section 98(4) of the Civil Procedure Act relevantly provides that the Court may make an order to the effect that a party to whom costs are to be paid is entitled to a specified gross sum instead of assessed costs. That power is commonly exercised where costs have been incurred in a lengthy or complex case although it is not in its terms limited to such a case: Simone Starr-Diamond v Talus Diamond (No 4) [2013] NSWSC 811 at [8]. The power to make a gross sum costs order should only be exercised where the Court considers it can do so fairly between the parties, including achieving an appropriate sum on the materials available to it, and the Court typically applies a discount in assessing costs on a gross sum basis: Ritchie's Uniform Civil Procedure NSW [s 98.65]; Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23. In Hamod v State of New South Wales [2011] NSWCA 375 at [816]-[817], Beazley JA (with whom Giles and Whealy JJA agreed) summarised factors relevant to the making of a gross sum costs order as follows: "The terms of s 98(4), together with the more general considerations reflected in the Civil Procedure Act, ss 56(1), 57(1)(d) and 60, suggest the factors that merit particular consideration include: the relative responsibility of the parties for the costs incurred (for example, Harrison v Schipp [[2002] NSWCA 213; (2002) 54 NSWLR 738]); the degree of any disproportion between the issue litigated and the costs claimed; the complexity of proceedings in relation to their cost; and the capacity of the unsuccessful party to satisfy any costs liability: Ritchie's Uniform Civil Procedure NSW at [s 98.45]. The exercise of the power conferred by s 98(4) is particularly appropriate where the costs have been incurred in lengthy or complex cases and it is desirable to avoid the expense, delay and aggravation likely to be involved in contested costs assessment. This may arise either from the likely length and complexity of the assessment process: Beach Petroleum NL v Johnson (No 2) at 120; Charlick Trading Pty Ltd v Australian National Railways Commission; Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006; or from the likelihood that the additional costs of formal assessment would disadvantage the successful party because of the likely inability of the unsuccessful party to discharge the costs liability in any event: Harrison v Schipp; Sony Entertainment (Aust) Ltd v Smith (2005) 215 ALR 788 at [90], [194]-[195]; Hadid v Lenfest Communications Inc [2000] FCA 628."
I do not consider that I should make a gross sum costs order in Mr Plumb's favour in this matter. First, there seems to me to be substantial force in Mr Clancy's response that the Court is not in a position fairly to address Mr Plumb's claim for his Counsel's, Mr Glissan's, costs of representing him in this application, where that may partly depend in part on the terms of the Bar Association's pro bono scheme, under which Mr Glissan was engaged. That matter was not fully explored in the evidence in this application, although Mr Plumb led some evidence in reply as to that matter and as to the terms of Mr Glissan's retainer.
Second, I could not determine a gross sum costs order on the papers, where the parties had agreed to that course only in respect of the question whether costs should be ordered on an indemnity basis and Mr Plumb had not then foreshadowed such an application. Third, I also could not fairly determine the amount of such an order where Mr Plumb has been unsuccessful in this application for indemnity costs and will be ordered below to pay Mr Saba's costs of this application, which would need to be taken into account in determining the amount recoverable by Mr Plumb in respect of the proceedings as a whole. There is no evidence before the Court as to Mr Saba's recoverable costs of this application, so as to allow the amount of a gross sum costs order to be determined. Fourth, it seems to me that there is a significant risk that the parties would incur further legal costs, for little useful purpose, in a further oral hearing as to a gross sum costs application brought only by Mr Plumb, where Mr Saba has a substantial existing claim for costs against Mr Plumb arising out of earlier proceedings in the Local Court and District Court, and Mr Plumb and Ms Minifie have claims for costs against Mr Saba arising out of these proceedings. There remains an opportunity for the parties to avoid incurring those further legal costs by seeking to resolve the question of costs between them by agreement.
I also note, for completeness, that Mr Plumb's contention that a gross sum costs order should be made in his favour so that he can repay persons from whom he has borrowed monies to pay the costs of these proceedings is substantially undermined by the fact that Mr Saba's entitlement to the costs of the Local Court and District Court proceedings as against Mr Plumb, which is a judgment debt arising from the assessment of those costs, would likely exceed the amount of costs recoverable by Mr Plumb against Mr Saba in respect of these proceedings. It is not apparent why, as Mr Plumb appears to assume, his claim against Mr Saba in respect of the costs of these proceedings should be prioritised to Mr Saba's claim against him for the costs of the Local Court and District Court proceedings, or why Mr Plumb's creditors in respect of loans made to fund the costs of these proceedings have any better claim to payment than Mr Saba in respect of the judgment debt in his favour.

Outcome and costs of this application

The order which I previously made for Mr Saba to pay the costs of the proceedings, including the costs of Ms Minifie's Cross-Claim, should not be amended and no order for indemnity costs should be made. Ms Minifie and Mr Plumb have been unsuccessful in their application for indemnity costs and should pay the costs of and incidental to that application, as agreed or as assessed.

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: 24 July 2017

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