Saravinovska v Saravinovski

Background

1. The background against which the present proceeding was commenced can be summarised as follows.
2. The first defendant (Krste "Chris" Saravinovski) and his late wife, Radmila ("Rada"), had three sons: George, Bill and Louie. Chris and Rada purchased a number of properties over the years, including, relevantly, two commercial properties in Rockdale (the Rockdale Properties) and a property at Kogarah Bay (the Kogarah Bay Property) in which Chris now resides (with his son Louie and Louie's family).
3. George married Maria in 1986. From 1986 until December 2009, Maria and George (and in due course their children) resided with Chris, first at the then family home (another property in Rockdale) and later at the Kogarah Bay Property.
4. After Rada died in 1993, Chris became the sole registered proprietor of the Rockdale Properties and the Kogarah Bay Property.
5. In 1995, Chris incorporated a company (KR & Sons Pty Ltd), the shares in which were initially held by Chris (as to 700 shares) and by George, Bill, and Louie (as to 100 shares each). Louie and Bill subsequently transferred their shares to Chris, such that, by the time of the first proceeding in this Court, Chris held 900 shares and George held 100 shares.
6. By 2009, it appears that the family relationship between Chris on the one hand, and Maria and George on the other, had deteriorated (see the description of events in Saravinovska (No 6) at [10]-[11]). Certainly, the defendants here accept that, in 2009, there was a "falling out" within the Saravinovski family (with Chris and his sons, Bill and Louie, on one side, and George and his wife, Maria, on the other). The defendants say that the main subject matter of the dispute was George and Maria's claim of a financial interest in the home that Chris owned and occupied (namely, the Kogarah Bay Property) and other real property owned by Chris. From 2010, Louie and his family have lived with Chris at the Kogarah Bay Property.
7. In November 2011, Maria commenced proceedings against Chris bringing a claim under the Property (Relationships) Act 1984 (NSW) (the Property (Relationships) Act proceeding). In February 2012, Chris commenced his own proceedings against George to enforce a mortgage allegedly held over a property owned by him (the Mortgage Proceeding). Those proceedings were in due course heard together (the Original Proceedings).
8. During the hearing of the Original Proceedings, it was held that Chris had lost mental capacity and Louie was appointed as tutor for Chris (see Saravinovska v Saravinovski (No 4) [2015] NSWSC 64; Saravinovska v Saravinovski (No 5) [2015] NSWSC 128).
9. The hearing of the Original Proceedings occupied some 34 sitting days in 2014 and 2015. Judgment was reserved on 5 June 2015. On 8 January 2016, while judgment was still reserved, George died. Maria was appointed executrix of his estate.
10. Judgment was delivered in the Original Proceedings (Saravinovska (No 6)) on 12 July 2016. Kunc J held that Maria was entitled to an order granting her a 30% interest as tenant in common with Chris in the Kogarah Bay Property. The Mortgage Proceeding was dismissed. On 8 August 2016, orders were made in the Original Proceedings (the 8 August 2016 Orders), including an order that Chris execute and register a transfer of 30% of the Kogarah Bay Property to Maria (Order 2).
11. On 7 September 2016, following argument as to costs and further orders, orders were made in both the Mortgage Proceeding and the Property (Relationships) Act Proceeding that Chris pay 75% of Maria's and George's costs.
12. Orders were also made in the Property (Relationships) Act proceeding that Chris pay to Maria by 16 November 2016 an amount equal to 30% of the value of the Kogarah Bay Property (the Amount), failing which orders were made for the judicial sale of the Kogarah Bay Property.
13. On the undertaking of Chris, through his tutor and by his Senior Counsel, to the Court that he would not deal with or dispose of any interest in the Kogarah Bay Property up to and including the first to occur of the payment of the Amount or 16 November 2016, Order 2 made on 8 August 2016 was stayed up to and including the first to occur of the payment of the Amount or 16 November 2016 (the First Undertaking).
14. Chris, through his tutor, then brought an appeal against each of the respective decisions: on 12 October 2016, the Mortgage Appeal; and on 8 November 2016, the Property (Relationships) Act Appeal.
15. By notice of motion filed on 8 November 2016, Chris sought a stay of the orders by which Maria was to obtain a 30% interest in the Kogarah Bay Property or payment of the Amount ordered in her favour, pending the hearing of the Property (Relationships) Act Appeal. (As I will explain shortly, the following day transfers were signed in favour of Louie in respect of Chris' interest in the Rockdale Properties and the Kogarah Bay Property.)
16. Chris' stay application was heard by Basten JA on 14 November 2016, two days before payment of the Amount was due under the November 2016 orders (see Saravinovski v Saravinovska [2016] NSWCA 310). Further execution of Order 2 made on 8 August 2016 was at that time stayed, upon Chris (through his tutor and by his Senior Counsel) giving to the Court an undertaking that he would not deal with or dispose of any interest in the Kogarah Bay property (the Second Undertaking). There was no disclosure to the Court of Appeal as to the fact that a transfer had by then already been executed in favour of Louie in respect of the Kogarah Bay Property (nor as to the transfers that had been executed in relation to the Rockdale Properties, although, as the defendants point out, there was no order made affecting those Rockdale Properties).
17. The respective appeals were heard together in February 2017 and dismissed on 4 May 2017 (Saravinovski v Saravinovska [2017] NSWCA 85). Orders were made on 4 May 2017, including that: Chris pay Maria's costs of both appeals; the Property (Relationships) Act Proceeding be listed before Kunc J for directions; and the Second Undertaking given on 14 November 2016 be continued; and, upon that undertaking, the stay of further execution of Order 2 made on 8 August 2016 be continued (the Third Undertaking).
18. On 31 May 2017, Chris and Maria both filed notices of motion in relation to the orders that had been made by Kunc J on 7 September 2016 (see above at [14]). Those motions were heard by Kunc J on 16 June 2017. At that hearing, Chris relied on an affidavit sworn by his solicitor, Mr Gordon Bryant, in which Mr Bryant deposed that he had been informed by Chris and Louie that Chris owned the Kogarah Bay Property unencumbered. The written submissions served on behalf of Chris on or about 13 June 2017 in relation to those motions also stated that Chris' interest in the Kogarah Bay Property remained unencumbered. It was there submitted that Chris' undertaking not to deal with the Kogarah Bay Property could be discharged at the time he paid Maria's interest in the Kogarah Bay Property. (Again, it is relevant to note that, by this time, a transfer had already been executed in Louie's favour in respect of the Kogarah Bay Property.)
19. On 16 June 2017, Kunc J made orders by consent requiring Chris to pay to Maria, by 28 July 2017, the Amount, failing which the Kogarah Bay Property would be sold. Order 2 made on 8 August 2016 was further stayed upon an undertaking given by Chris (through his tutor and by his Senior Counsel) to the Court that he would not, without the leave of the Court, deal with (including by encumbering) or dispose of any interest in the Kogarah Bay Property up to and including the payment of the Amount or 28 July 2017 (the Fourth Undertaking).
20. The defendants point out that on 16 June 2017, when the matter came back before Kunc J for the purposes of making final orders including interest, Maria's Counsel did not raise the transfer of the Rockdale Properties with the Court; and that consent orders where made which, inter alia, required Chris to pay the judgment debt by 28 July 2017, failing which the Kogarah Bay Property would be sold by a Court appointed trustee.
21. Meanwhile, on 9 November 2016 (after delivery of the Saravinovska (No 6) judgment and entry of the costs orders in the Original Proceedings), the day after his notice of motion seeking a stay of the relevant orders pending the appeal, Chris transferred the Rockdale Properties to Louie. More relevantly, perhaps, for present purposes (although the transfer of the Rockdale Properties is not an irrelevant event, for reasons that I will explain shortly), on 9 November 2016, Chris also executed a transfer of the Kogarah Bay Property in favour of Louie.
22. For Maria, it is here noted that that transfer was executed in apparent breach of the First Undertaking given to this Court on 7 September 2016 which remained extant at the time the transfer was executed. Certainly, it is difficult to see how it could be said that execution of a transfer in respect of the Kogarah Bay Property (even though that transfer was not registered at the time) was not a dealing with Chris' interest in the Kogarah Bay Property.
23. It is noted that the defendants did not disclose the execution of the transfer of the Kogarah Bay Property to the Court, or to Maria, despite: the Second and Third Undertakings given to the Court of Appeal on 14 November 2016 and 4 May 2017, respectively; and the Fourth Undertaking given to this Court on 16 June 2017.
24. By 1 August 2017, Chris had also divested himself of the 900 shares he then held in KR & Sons Pty Ltd.
25. For Maria, it is said (and it does not appear here to be disputed) that, by reason of these transfers, Chris held no assets in his own name against which Maria could enforce the Costs Orders.
26. Maria's solicitor, Mr Michael Coffey, has deposed (in his affidavit sworn 1 December 2017 at [42]) that, on 5 June 2017, he discovered that Chris had transferred the Rockdale Properties to Louie but that he did not discover at this time that Chris had also executed the transfer of the Kogarah Bay Property. The discovery of the transfers of the Rockdale Properties led to correspondence between Mr Coffey and Mr Bryant.
27. Relevantly, by letter dated 5 June 2017, Mr Coffey referred to the transfers of the Rockdale Properties, asserted that Chris now held in his own name (so far as Mr Coffey was aware) only the Kogarah Bay Property and inquired how it was anticipated that Chris would satisfy the court orders in the absence of selling the Kogarah Bay Property. There was no response to that letter.
28. On 15 June 2017 (the day before the Fourth Undertaking was given), Mr Coffey again wrote to Mr Bryant referring to the "divestiture" of the Rockdale Properties for "no consideration" to Louie and expressing concerns "as to the reasons behind these transfers" and the consequences for Maria in enforcing the costs orders made in her favour in each of Original Proceedings and the Appeal Proceedings. Mr Coffey suggested in this letter that, in the circumstances, the Kogarah Bay Property would need to be sold. Again, there was no response to this letter. However, as noted, Chris (through his tutor, Louie) gave the Fourth Undertaking to this Court the next day.
29. On 23 June 2017, Mr Coffey wrote again to Mr Bryant: referring to the transfers of the Rockdale Properties; noting that it appeared no consideration was paid by Louie for the properties and asserting that the transfers had all the hallmarks of transactions undertaken to defeat the orders requiring Chris to pay moneys (including costs) to Maria; suggesting that the transfers ought to have been disclosed to the Court of Appeal on 14 November 2016; submitting that the transfers were liable to be set aside under s 37A of the Conveyancing Act; stating that Chris' failure to respond to Maria's letters of 5 and 15 June 2017 had heightened Maria's concerns about the transfers; and seeking an undertaking from Chris, by himself and his tutor (Louie), not to deal with or dispose of the Rockdale Properties or his shares in KR & Sons Pty Ltd. The letter foreshadowed a possible application for freezing orders over the properties.
30. On 28 June 2017, Mr Bryant responded to Mr Coffey's letter of 23 June 2017, stating, inter alia, that he was instructed to respond as follows: 1. At no stage has there been any court order which restricts Chris' freedom to deal with any of his assets other than [the Kogarah Bay Property]; 2. Chris was under no obligation whatsoever to inform your client or the court of any dealings that he may have been contemplating in respect of any property other than [the Kogarah Bay Property]. The orders made by the court between July and September 2016 only affect [the Kogarah Bay Property]. Any transactions involving other property were then and still are now completely irrelevant to the issue of any stay applications; …
31. Pausing there, as Maria points out, Mr Bryant's 28 June 2017 letter did not disclose that Chris had already executed a transfer of the Kogarah Bay Property in favour of Louie.
32. On 29 June 2017, Mr Coffey requested certain information about the transfers, including whether any consideration had been paid and, if so, the value of that consideration and how it was paid.
33. The defendants characterise Mr Coffey's 29 July 2017 letter as seeking, in essence, security for Maria's claim for legal costs of the Original Proceedings and the Appeal Proceedings.
34. On 4 July 2017, Mr Bryant responded to Mr Coffey's letter of 29 June 2017, stating inter alia that: 1. Any Court Orders that are current and relevant relate only to [the Kogarah Bay Property]; 2. Any question about Chris' assets other than [the Kogarah Bay Property] has not been raised by either party to the Court in any of the proceedings since Judgment was handed down in July 2016. Neither the Supreme Court nor the Court of Appeal made reference to Chris' other assets with a view to placing restrictions on these; 3. Our client is not obliged to disclose whether or not consideration was given for the transfers. These questions relate to personal and private matters and are of no consequence to your client; …
35. Again, this letter did not disclose that Chris had already executed a transfer of the Kogarah Bay Property to Louie.
36. On 28 July 2017, a total of $647,286 was paid to Maria representing her 30% monetary entitlement in the Kogarah Bay Property (including $59,513 by way of interest thereon). As the defendants note, by this stage, the only outstanding issue between the parties was as to the quantum of costs that the defendants would pay.
37. Mr Coffey has deposed (in his affidavit sworn 1 December 2017) that, on 1 August 2017, he discovered that Chris had divested himself of his 900 shares in KR & Sons Pty Ltd, which were then held by Louie; and that, on 31 August 2017, he discovered that Louie was the registered proprietor of the Kogarah Bay Property. On 4 September 2017, Mr Coffey obtained a copy of the executed transfer in respect of the Kogarah Bay Property.
38. On 15 September 2017, Mr Coffey wrote to Mr Bryant: referring again to the undertakings given by Chris to this Court and to the Court of Appeal; stating that it appeared that Chris had breached the First Undertaking by executing (without registering) the transfer of the Kogarah Bay Property and that the delay in registration appeared to be an attempt to hide the breach of that undertaking, and noting that the transfer was not disclosed at the time of giving the Second Undertaking. In that letter, Mr Coffey also requested an explanation of: the basis upon which the properties had been transferred for no consideration (in particular, the Kogarah Bay Property); how and why Chris was not in contempt of court; and requesting that Mr Bryant advise, within seven days, whether Louie accepted liability for the costs of the proceedings. The letter foreshadowed the commencement of further proceedings in the absence of a satisfactory response within seven days.
39. On 25 September 2017, Mr Bryant responded to Mr Coffey's letter of 15 September 2017, by: asserting that Mr Coffey continued to make reference to property that was not part of any orders of the Court; refusing to answer Mr Coffey's request for an explanation of the basis upon which the properties had been transferred to Louie for no consideration, on the basis (said by Maria to be erroneous) that this request had been answered in his letter of 4 July 2017; and asserting that: We fail to see that our clients are in contempt of Court.
40. The letter further stated that the accusation that Chris' actions constituted contempt was "completely baseless". The letter did not respond to the request for confirmation that Louie would accept liability for Maria's costs of the proceedings.
41. It was against that background that Maria commenced, on an ex parte basis, the present proceeding. At the conclusion of an ex parte hearing on 5 December 2017, Kunc J made orders including an interim injunction up to and including 8 December 2017.
42. On 21 December 2017, by consent, Ball J made orders (the 21 December 2017 Orders), including that, until further order, Louie by himself, his servant and agents be restrained from encumbering, transferring title or otherwise dealing with the Kogarah Bay Property until payment of costs to Maria as agreed or assessed in respect of the Costs Orders (in the Property (Relationships) Act Proceeding, Mortgage Proceeding, Property (Relationships) Act Appeal, and Mortgage Appeal), other than for the purposes of using the property as security for any loan or loans to make that payment to Maria simultaneously upon making that payment to Maria.
43. An order also was made that Louie deliver to Mr Bryant the certificate of title to the Kogarah Bay Property and that Mr Bryant remain in possession of the certificate of title until further order of the Court, written agreement of Maria and Louie or for the purpose of using the property as security for any loan or loans to make that payment to Maria simultaneously upon making that payment to Maria. A direction was made that Maria make an application for a costs assessment in respect of the Costs Orders pursuant to Pt 7 of the Legal Profession Uniform Application Act 2014 (NSW) by 30 January 2018 with time for service of the application to be abridged to 22 January 2018.
44. Following the 21 December 2017 Orders, a costs assessment process was carried out in relation to the costs the subject of the Costs Orders. The proceedings were stood over from time to time pending the completion of that process, which included reviews filed by Chris in relation to two of the costs determinations.
45. The costs assessment process was completed on or about 20 August 2019. On 9 April 2020, Louie, on Chris' behalf, paid the sum of $944,774.81 in respect of Maria's legal costs of the earlier proceedings.
46. Maria's costs finally having been paid in April this year, Maria's position is that there is now no utility in continuing the proceeding. As adverted to above, there is no issue between the parties as to the substantive matter not being taken further. However, there is an issue between them as to how the proceeding is to be disposed of and as to the costs of the proceeding. The parties served brief submissions on that latter issue, with a view to the matter being dealt with on the papers. Notwithstanding that that was the basis on which it was agreed that the costs issue was to be dealt with (and on which I had commenced preparation of these reasons and was ready to list the matter for judgment), Maria's legal representatives then took umbrage with parts of the submissions of the defendants and asserted that there would be a denial of procedural fairness were they not to be permitted to file reply submissions (but still contemplating that the matter would be dealt with on the papers). The defendants consented to that course, and I acceded thereto, albeit that it necessarily produced further delay (and, unbeknownst of course to the parties, it seemed to me that such reply submissions would not be necessary having regard to the preliminary view that I had reached on the submissions as they then were).

Relevant principles

1. The general principles in relation to the award of costs are well known and were not disputed by the parties. There is a broad discretion as to costs (see s 98 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act); Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11), which discretion must nevertheless be exercised judicially and having regard, inter alia, to the overriding statutory mandate in respect of the conduct of litigation in this Court (see ss 56-60 of the Civil Procedure Act).
2. As I have said elsewhere (see for example in Tuitupou v Davies [2019] NSWSC 160 at [48]), although the general rule is that costs follow the event (see r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR)) that does not necessarily assist where a matter has been resolved without a hearing as to the merits (as will be the case here when the proceeding is discontinued or dismissed). It is generally the position that, in such circumstances, the Court will not embark on a consideration as to the merits of the matter in dispute and that costs will only be awarded in favour of one party where it can be concluded that the other party has acted "so unreasonably" that the first should obtain the costs of the action (see Re the Minister for Immigration and Ethnic Affairs (Cth); Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 (Lai Qin)). In Lai Qin, McHugh J said (at 624): In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The Court cannot try a hypothetical action between the parties ... In some cases, however, the Court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action.
3. The use of the word "so" indicates a level of unreasonableness which is established by the circumstances in which the costs were incurred (see, for example, the consideration of costs issues in Renton v Kelly [2018] NSWSC 1377; see also Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 at [5], per Davies AJA, Mason P and Meagher JA agreeing; One.Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 at [5]-[6]; and Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 (Nichols v NFS Agribusiness)).
4. In Nichols v NFS Agribusiness, Payne JA, focused in that context on whether the parties had acted reasonably in commencing and defending the proceeding, observed that (at [30]): [30] If both parties to a proceeding which has been settled without a hearing on the merits have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings.
5. As to what amounts to ''unreasonable conduct", in the same case, Basten JA relevantly stated by way of example (at [6]) that, "[i]f one party commences litigation without making a pre-litigation demand, and allowing the other party a reasonable opportunity to respond, it cannot expect to recover the costs of obtaining orders which would not in any event have been opposed".
6. It is also worth noting (since both parties seek an order on this basis) the circumstances where a gross sum costs order will be appropriate (see Idoport Pty Limited v National Australia Bank Limited [2007] NSWSC 23 (Idoport), where Einstein J summarised the principles which inform the exercise of the discretion to make such an order at [9]; which was cited with approval in the Court of Appeal in Hamod v State of New South Wales [2011] NSWCA 375 at [793]-[794], per Beazley JA (as Her Excellency then was), with whom Giles and Whealy JJA agreed; and see also Bechara v Bates [2016] NSWCA 294 at [12], per the Court).
7. In Idoport, relevantly, what Einstein J said (at [9]) was: 9. For present purposes it seems convenient to commence with a recitation of the principles which inform the exercise of the discretion: i. the purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum NL v Johnson (1995) 57 FCR 119, Von Doussa J page 265: [following Purchase J in Leary v Leary [1987] 1 All ER 261 who described the purpose of the rule allowing the fixing of a gross sum as "the avoidance of expense, delay and aggravation involved in protracted litigation arising out of taxation" (All ER page 265)]; ii. the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable: Beach Petroleum at [16]; iii. the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available: Harrison v Schipp (2002) 54 NSWLR 738, per Giles JA at para [22]; [following (Wentworth v Wentworth (CA, 21 February 1996, unreported, per Clarke JA) and adopted in Sony Entertainment v Smith (2005) 215 ALR 788; [2005] FCA 228; BC200500963 at para [199]; iv. a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place: Harrison v Schipp at para [22]; v. the gross sum "can only be fixed broadly having regard to the information before the Court": Beach Petroleum at 124; [In Hadid v Lenfest Communications Inc [2000] FCA 628 at [35] it was said that the evidence enabled fixing a gross sum "only if I apply a much broader brush than would be applied on taxation, but that ... is what the rule contemplates".] vi. nevertheless the power to award a gross sum must be exercised judicially, and after giving the parties an adequate opportunity to make submissions on the matter: Leary v Leary [1987] 1 WLR 72 at 76, and Beach Petroleum NL v Johnson (No.2) (1995) 57 FCR 119 at 120"; vii. In terms of the necessity for the approach taken to be logical, fair and reasonable, Von Doussa J in Beach Petroleum NL & Anor v Johnson & Ors (No 2) (1995) 57 FCR 119, put the matter as follows, at paras [16]: "On the one hand the Court must be astute to prevent prejudice to the respondents by overestimating the costs, and on the other hand must be astute not to cause an injustice to the successful party by an arbitrary "fail safe" discount on the cost estimates submitted to the Court: Leary v Leary at 265. …"

Maria's submissions

1. As Maria has noted, r 42.19 of the UCPR applies where proceedings are discontinued by the plaintiff and provides that, unless the court orders otherwise, the plaintiff must pay such of the defendant's costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued. However, as Maria has also noted, that rule does not give rise to a presumption that the defendant is entitled to costs, and the rule does not require that the discontinuing party prove "special" circumstances (relying on the cases of Fordyce v Fordham (2006) 67 NSWLR 497; [2006] NSWCA 274 (Fordyce) at [84] per McColl JA (Beazley JA, as Her Excellency then was, agreeing) and Cetinkaya v Official Trustee in Bankruptcy [2012] FCA 611 at [21] per Bromberg J). (Pausing here, the defendants say that r 42.19 of the UCPR is inapplicable in the present case in any event - see below; to which in the subsequent reply submissions Maria points to Freelancer International Pty Ltd v O'Kane [2019] NSWSC 159 at [60] and says that the costs principles here in issue apply equally whether proceedings are discontinued or dismissed.)
2. Maria contends that it was the defendants' unreasonable conduct that invited, induced or precipitated the commencement of this proceeding. It is submitted that Maria was in effect forced to commence this proceeding (to obtain the ex parte injunction restraining Louie from further transferring or otherwise dealing with the properties and shares), noting that within the same month of commencing the proceedings the defendants consented to orders including that Louie be restrained from transferring or otherwise dealing with the Kogarah Bay Property (thus, effectively, Maria obtained the relief sought by way of preserving the property from disposal). Maria maintains that it is clear from the correspondence between the solicitors that the defendants would not have provided her with relevant undertakings or assurances unless, and until, she commenced proceedings. Thus, Maria contends for an order that the defendants pay her costs of and incidental to the proceeding.
3. As to the proposition that the defendants' conduct prior to the commencement of this proceeding was "so unreasonable" as to warrant the exercise of the costs discretion in favour of Maria, she points to the following matters.
4. First, that the correspondence referred to above makes clear that the defendants were not prepared to provide necessary undertakings or assurances in relation to the transferred property or the Costs Orders unless and until Maria commenced proceedings. It is noted that Mr Bryant's letter of 4 July 2017 expressly stated that Maria was not entitled to the requested information "in the absence of any court requirements to provide same". It is submitted that it was entirely unreasonable for the defendants to require that Maria incur the costs of commencing this proceeding before they would agree to provide any form of undertaking or assurance in relation to the Kogarah Bay Property. Further, it is said that the fact that the defendants were able to agree to the 21 December 2017 Orders soon after Maria commenced the proceeding highlights the unreasonableness of their refusal or failure to provide the undertakings and assurances sought by Maria before she commenced the proceeding.
5. Second, that, despite Maria raising legitimate concerns between June and September 2017 about the transfers of the properties, the defendants had refused to provide relevant information or to confirm whether Louie had given any consideration for the transfers. It is said that the defendants adopted an unreasonable approach to the concerns raised by Maria, including: denying the relevance of the transfers; asserting that any attempt to place restrictions on Chris' property or to approach the Court would be an "abuse of process"; alleging that proceedings foreshadowed by Maria were designed to frustrate Chris' genuine efforts to pay the Amount; asserting that the issue of consideration was "of no consequence" to Maria; and refusing to confirm whether consideration was given because Chris was "not obliged" to do so and Maria was "not entitled" to the information.
6. Third, it is said that, in executing the transfer of the Kogarah Bay Property to Louie, Chris appears to have breached the First Undertaking (and it is suggested that he may be in contempt of court). It is said that Chris subsequently took the benefit of orders made by this Court and the Court of Appeal upon the Second to Fourth Undertakings despite having already executed the transfer and despite having failed to disclose this to the Court or to Maria. It is said that the dismissal by the defendants of Maria's concerns about a possible contempt of court as "completely baseless", and the fact that they offered no explanation other than stating that "[w]e fail to see that our clients are in contempt of Court", was an entirely unsatisfactory response to the serious issues that had been raised by Maria.
7. Fourth, it is said that the defendants' failure to disclose the transfer of the Kogarah Bay Property in its correspondence between June and July 2017 was misleading and unreasonable. Maria says that Mr Bryant's subsequent explanation (that he had formed the opinion and belief, based on Mr Coffey's correspondence, that Mr Coffey was "fully aware" of the transfers, including the transfer of the Kogarah Bay Property) should not be accepted (being, it is said, entirely inconsistent with the correspondence between the parties). In particular, reference is made to Mr Coffey's letters of 5, 15 and 23 June 2017 in which it is made clear that Mr Coffey was not aware of the transfer of the Kogarah Bay Property. It is submitted that the references in Mr Bryant's letters of 28 June and 4 July 2017 to the Court orders only affecting the Kogarah Bay Property conveyed the impression that Chris had not transferred that property to Louie (or anyone else), and it is noted that the execution of the transfer of the Kogarah Bay Property was not otherwise disclosed. Further, it is said that Mr Bryant's evidence that Mr Coffey would have been aware of the transfers "within a few weeks of them having occurred" should also be rejected (noting that Mr Coffey's evidence as to when he became aware of the transfers of property and the shares is consistent with the contemporaneous correspondence).
8. Conversely, it is said that Maria's conduct in commencing this proceeding has been entirely reasonable. It is said that this was a bona fide claim by Maria, on reasonable grounds, to protect her legitimate interest in enforcing the Costs Orders. In particular, it is said that there were reasonable grounds for suspecting that the transfers of property and shares were made in an attempt by Chris and Louie to defeat enforcement of the Costs Orders, for the following reasons.
9. First, the fact that the transfers were executed shortly after the judgment in Saravinovska (No 6) and the making of the costs orders in that proceeding (and, by reason of those transfers, at the time Maria commenced this proceeding Chris held no assets in his own name against which Maria could enforce the Costs Orders).
10. Second, the unlikelihood that Louie had paid the stated consideration of $3.7 million for the properties, it being said that: each of the transfer documents indicated that only nominal duty was paid; at the time of the trial in 2015, Louie had been unemployed and receiving a social security benefit since about 2006 and, as at November 2017, the only real property assets held by Louie were the relevant properties transferred to him by Chris; and that the defendants did not dispute Mr Coffey's assertions in correspondence that the properties had been transferred for no consideration and refused to answer requests for confirmation as to whether or not Louie gave consideration. It is submitted that, in those circumstances, Mr Bryant's assertion that Mr Coffey would have been aware that stamp duty had been paid by Louie on the consideration expressed in those documents at the normal ad valorem rate should not be accepted.
11. Third, that the transfer of the Kogarah Bay Property was executed in apparent breach of the First Undertaking. It is noted again that the defendants failed to disclose the execution of that transfer to the Court or to Maria (including after 5 June 2017 when Maria raised concerns about the transfers of the Rockdale Properties and Mr Bryant responded by explaining that only the Kogarah Bay Property was subject to court orders).
12. Fourth, it is said that the approach taken by the defendants in correspondence between June and September 2017 only heightened Maria's concerns (referring to the defendants' refusal or failure: to provide Maria with relevant information about the transfers; to confirm whether Louie had paid any consideration for the transfers; to provide the undertaking requested by Maria; or to confirm whether Louie would accept liability for the Costs Orders).
13. Fifth, it is said that Louie had engaged in ex parte communications with the Court in or around October 2017 about costs orders (which Maria argues demonstrates he had a clear concern about costs as well as his attitude to non-disclosure).
14. Sixth, reference is made to findings made by Kunc J in Saravinovska (No 6) as to Louie's defence of Chris' position (which findings I do not here propose to explore, given that they relate to the earlier proceedings, save to note that the fact that such findings were made makes explicable a concern or suspicion on the part of Maria as to the events that had occurred in relation to the transfers in question).
15. Maria maintains (as above) that it is clear that the defendants were not prepared to provide the necessary undertakings or assurances and would not have given them unless and until Maria commenced proceedings against them; and that she enjoyed practical success in the present proceeding by obtaining the interim injunction and, by consent, the 21 December 2017 Orders.
16. It is noted that the correspondence between the parties placed the defendants on notice of Maria's concerns and of the likelihood that she would commence further proceedings (including to obtain urgent freezing orders or relief under s 37A of the Conveyancing Act) if satisfactory responses were not forthcoming. In these circumstances, it is submitted that any reliance by the defendants on Mr Bryant's evidence that Maria did not "telephone [him] to raise any concern about the issue of costs" between September 2017 and the commencement of the proceeding, is misplaced. For the same reason, it is said that any reliance on Mr Bryant's evidence that "there was no communication verbal or written" between 30 November 2017 and the ex parte hearing on 5 December 2017, is also misplaced. (It is further submitted that, in any event, different considerations apply in respect of ex parte proceedings.)
17. Maria maintains that the defendants were afforded ample and repeated opportunity to act in a reasonable manner to avoid the present proceeding, and that they failed to do so.
18. Insofar as it might be suggested that the commencement of the present proceeding was unnecessary because Maria ought to have known that Louie would be liable in respect of the Costs Orders by reason of his appointment as Chris' tutor in the proceedings before Kunc J, Maria says that such a submission should be rejected for the following reasons.
19. First, that where a party under a legal incapacity is a defendant in a proceeding, his or her tutor will generally not be ordered to pay the plaintiff's costs in the absence of misconduct on the part of the tutor (noting that Chris was the defendant in the Property (Relationships) Act Proceeding).
20. Second, that although there is otherwise a general rule that a tutor will be ordered to pay costs awarded against the party for whom he or she represents, there is no invariable rule that the tutor must be ordered to pay costs, there being a broad judicial discretion.
21. Third, that the Costs Orders were made against Chris, not Louie (reference being made to Yakmor v Hamdoush (No 2) (2009) 76 NSWLR 148; [2009] NSWCA 284 at [28], where Giles JA (with whom Ipp and Tobias JJA agreed) accepted that a tutor may not be personally bound by the costs assessment and enforcement process where the tutor had not been expressly referred to in the costs order).
22. Fourth, it is submitted that what was said during the hearing to appoint Louie as tutor does not overcome those matters (it being suggested that Louie's evidence during that hearing went no further than accepting that a proposition to the effect that he would be responsible for legal costs as a tutor was being put to him by Maria's Senior Counsel; not an agreement to be responsible for Chris' costs); and that, in any event, Maria may not have been able to rely on such an admission, and the defendants had subsequently failed to confirm whether or not Louie did agree to be liable to pay Chris' costs.
23. Fifth, that, even if Louie were liable for Chris' costs, it was necessary for Maria to commence this proceeding to obtain the interim injunction to restrain Louie from encumbering, transferring or otherwise dealing with the properties and shares.
24. As to the quantum of costs the subject of the present application, the evidence is that, for the period up to 14 April 2020, Maria has incurred legal costs in the amount of $58,827.39 (including GST) in the present proceeding, of which $42,762.95 was incurred up to and including 21 December 2017 (comprising $12,845.25 by her solicitors and $29,917.70 by her counsel), and that further costs have been incurred since 14 April 2020 (including on this application), the quantum of which is not the subject of evidence.
25. It is submitted by Maria (particularly in light of the history of the case and the matters referred to by Kunc J in Saravinovska (No 6)) that the discretion under s 98(4)(c) of the Civil Procedure Act should be exercised to make an order fixing the costs payable by the defendants to Maria in respect of the period up to 14 April 2020 in the amount of $48,000 (which it is noted includes a discount of over 35% in respect of all solicitor costs), and that Maria's costs since 14 April 2020 should be ordered to be paid in an amount as agreed or assessed.

Defendants' submissions

1. The defendants contend that Maria commenced the present proceeding without proper basis. They maintain that the proper course (as she now no longer wishes to prosecute the proceeding) is for the proceeding to be dismissed and for r 42.20(1) of the UCPR to operate in the ordinary way. The defendants maintain that they have not consented to the discontinuance of the present proceeding and that r 42.19 of the UCPR is inapplicable. The defendants further maintain that there has been no capitulation by the defendants in the proceeding. It is said that the proceeding should not have been maintained or otherwise continued, as there would have been little, if not no, prospects of success.
2. The defendants' primary position as to costs is to seek orders that Maria pay their legal costs of the present proceeding (pursuant to r 42.20(1) of the UCPR and s 98(1)(b) of the Civil Procedure Act). Further, they submit that this is a case in which a gross sum costs order pursuant to s 98(4)(c) of the Civil Procedure Act is appropriate. Their alternative position is that orders should be made that each party bear its own costs of the proceeding. They oppose the application by Maria for an order for costs in her favour.
3. The defendants emphasise that the correspondence between the solicitors in 2017 included reference to the Rockdale Properties (being two separate commercial properties) which had not been the subject of the orders made by Kunc J in 2016 and in respect of which it is said that Maria had not sought relief in the Original Proceedings. The defendants say that the statement of claim (filed on 5 December 2017) in the present proceeding for the first time put into issue the Rockdale Properties (referring to the relief claimed at prayers [2]-[5], [10] and the pleadings and particulars at [14]-[15]).
4. Pausing here, true it is that there was no relief sought or granted in the Original Proceedings in relation to the Rockdale Properties. However, the relevance of the transfer of those properties to Louie, and as to whether Louie had paid consideration for those Properties, clearly goes to Chris' ability to meet the adverse costs orders.
5. The defendants also emphasise that, in the correspondence between solicitors between late July and late September 2017, there was no estimate of Maria's costs provided by Mr Coffey to Mr Bryant. (Nevertheless, I note that the defendants were well aware of the protracted nature of the Original Proceedings and that costs would have been incurred in the Appeal Proceedings as well. To my mind, it beggars belief that Mr Bryant would not have been well aware that Chris faced a substantial costs liability. Moreover, it was open to Mr Bryant to have sought an estimate of the costs had he required it.)
6. The defendants say that since January 2018 the present proceeding has been stood over on numerous of occasions for the purpose of allowing the assessment of legal costs of the respective proceedings to be undertaken. (I interpose to observe that the relevance of this on the present application was not wholly clear but, as I apprehend it, this goes to the submissions made to the effect that the continuation of the proceeding has been not for a proper purpose - see below.)
7. The defendants submit that the following affidavit evidence is of relevance to the question of whether or not it was reasonable for Maria to have commenced the present proceeding at all: Louie's affidavit sworn 15 December 2017 (deposing to the reasons for the transfers); Mr Bryant's affidavit sworn 26 June 2020 (including correspondence in respect to settlement and the claim for costs); and Mr Bryant's affidavit sworn 20 July 2020 (referable to the lump sum costs application).
8. As to Louie's affidavit of 15 December 2017 (in which Louie deposed to his reasons for the transfer of the Kogarah Bay Property and the Rockdale Properties and denied that it was done for the purposes of avoiding Chris' obligations to pay legal costs), the reasons there identified by Louie for the transfer were, inter alia: that Chris wished to remain living in the Kogarah Bay Property and not sell it, but did not have sufficient savings/funds to pay Maria the judgment debt; that, due to Chris' advanced age, banks and other financial institutions would not lend money to Chris for the purpose of paying Maria the 30% value of the Kogarah Bay Property; that the transfer would enable Louie (as the new registered owner of the Kogarah Bay Property) to obtain a mortgage against the property and then pay Maria on Chris' behalf; and that the transfer would enable Louie (on Chris' behalf) to draw down on the mortgage in order to pay Maria's assessed legal costs of both the Original Proceedings and the Appeal Proceedings when payment of these costs became due sometime in the future.
9. Pausing here, the fact that Louie may have had legitimate reasons for taking steps (as Chris' tutor) to execute the transfers of the Kogarah Bay Property does not address the problem that there were undertakings that had been given to the Court in relation to the Kogarah Bay Property that on the face of things seem to have been breached; nor does it assist the defendants in circumstances where none of those reasons seem to have been communicated to Maria or her solicitor at the time. If, indeed, there was a reasonable explanation for what had occurred (which would have alleviated Maria's concerns) then it would (and, perhaps, should) have been a simple matter to have conveyed that explanation to Mr Coffey at the time. The defendants did not do so.
10. The defendants accept (by reference to Lai Qin) that the Court ought not be required to undertake an hypothetical evaluation of the merits of the dispute in order to arrive at decision to award or not to award costs, but they say that in this instance such an exercise does not arise because Maria's entitlement to costs in the sum of $944,774.81 was paid in full on 9 April 2020, rendering the present proceeding otiose and maintenance of the present proceeding "futile".
11. It is said that, besides alleging that a fraud had been committed, at its heart the present proceeding sought orders for final relief that purely related to Maria's claim for her legal costs of the Original Proceedings and the Appeal Proceedings (referring to the statement of claim filed 5 December 2017 at [26]-[29]). It is said that, even had the matter proceeded to a hearing on the merits, the only practical effect or purpose that any orders made in the present proceeding would have had would be to ensure that Chris had sufficient assets to meet his payment obligations with respect to those costs.
12. It is said that, while Maria "may have been entitled to hold concerns as to payment of the judgment debt", once payment of the sum of $647,286 was in fact made any such concern effectively evaporated (noting that Maria had the benefit and security of orders from Kunc J that the Kogarah Bay Property would be placed in the hands of trustees and sold by court order if that obligation was not met by 28 July 2017).
13. The defendants say that it was only after the $647,286 payment was made that Maria's attention turned to the issue of recovery of her (and George's estate's) costs. It is said that this can be reasonably be inferred by the fact that not once during the period 2012 to 2016 had George (or Maria on behalf of George's estate) brought any application for security for costs under r 42.21 of the UCPR in respect to the Mortgage Proceeding and George's cross claim. It is said that the relief sought in the cross claim was neither minor nor trivial, that it required time and legal costs to be allocated to its defence, and that it concerned a significant amount of money.
14. It is submitted that Maria used the present proceeding as a de facto mechanism to achieve her goal of being able to recover her legal costs, noting the requirement as to the promptness of bringing a security for costs application (the defendants citing Einstein J in ldoport at [69]-[74]). It is said that it was a "calculated and deliberate move" by Maria to commence the present proceeding "motivated for an improper purpose after she had failed to have Chris' home effectively sold from beneath him". Further, it is said that the fact that the present proceeding sought to undo the transfer by Chris to Louie in respect to the Rockdale Properties, when they had not been the subject matter of the relief in Original Proceedings, was the "furtherance of the intra family hostilities with little regard to the emotional and legal cost to the parties". Thus, it is contended that the present proceeding was commenced for an improper and impermissible purpose.
15. The defendants note that the present proceeding was commenced without notice seven months after the final decision in the Appeal Proceedings being delivered. It is said that, as at 5 December 2017, Chris and Louie had complied with all obligations that they had and that good faith had been displayed by the payment of a significant judgment debt as well as interest thereon. It is said that neither Chris nor Louie (in his role at tutor) had defaulted in the execution of their obligations pursuant to the Orders; and that it was reasonable for Maria to assume that Chris would continue to honour his legal obligations.
16. The defendants again emphasise that at no time prior to 5 December 2017 was the Court called upon to determine what rights, if any, George and/or Maria might have in respect to the Rockdale Properties. Insofar as complaint was made in the present proceeding that the transfer of the Rockdale Properties by Chris to Louie was undertaken "with the intent to defeat creditors" (referring to the statement of claim filed 5 December 2017 at [29]), it is submitted that this allegation is tantamount to an allegation that Chris and Louie had engaged in a form of fraudulent behaviour.
17. The defendants point out that Louie's affidavit sworn on 15 December 2017 addressed the allegations set out in the statement of claim filed 5 December 2017 and that, on 21 December 2017, Louie gave an undertaking to the Court also to be responsible for the payment of Maria's legal costs of the respective proceedings. It is said that, as at that time, there was no good reason for Maria to continue to keep the present proceeding on foot and that it should have been dismissed at that juncture (the defendants pointing out that the proceeding continued and that two defences were subsequently filed setting out the reasons for the transfer of both the Kogarah Bay Property and the Rockdale Properties, which pleadings were verified as true and correct).
18. It is submitted that, by reference to the verification of the pleadings, Maria would, and should, have been in a position at that stage to assess the underlying reasons for the transfer, particularly as they were ultimately undertaken for her benefit. Further, it is submitted that, as early as 15 December 2017 (when Louie's affidavit was served) or as late as at 5 April 2018 (when the two verified defences were filed and served) or even 15 April 2018 (when the "clarification letter" was sent), Maria was in a position to assess her prospects of success and the utility of continuing the present proceeding.
19. It is submitted that, on the basis of the defence pleading alone, Maria ought to have appreciated that genuine and bona fide steps were being taken by Chris and Louie to meet Chris' obligation to pay her legal costs and that the commencement of the present proceeding was misguided and improperly brought. It is submitted that a party (and the Court) is entitled to treat verified pleadings as being true and correct (referring to r 14.23(3) of the UCPR).
20. It is said that further compounding Maria's unreasonableness in commencing (as well as continuing) the present proceeding is the fact that, at the time commenced on 5 December 2017, Maria was yet to file a bill of costs in order to commence the costs assessment process (and did not do so until late January 2018) (referring to Mr Bryant's affidavit sworn 26 June 2020 at [21]).
21. It is said that the present proceeding presented an unreasonable burden on the defendants as it sought to restrict Louie's rights in respect to three properties that had a combined value of $3.7 million, and in respect to which he had paid combined New South Wales stamp duty of $170,096 (referring to the affidavit sworn by Louis on 15 December 2017 at [5]).
22. It is said that, at its highest, Maria's claim for costs could be no more than the amount estimated in a letter dated 19 January 2018 as: $815,862.77 for the Original Proceedings; $43,188.55 for interest on costs in the Original Proceedings; and $164,876.45 for the Appeal Proceedings; totalling $1,023,927.77.
23. Accordingly, it is said that the orders sought by the interim and final relief after 31 January 2018 had the practical effect of restricting the use of approximately $2.7 million worth of Louie's property over and above the amount of $1,023,927.77 which could conceivably have been needed to satisfy Maria's claim for costs. It is said that if Maria had made a claim for security for costs during the Original Proceedings in such terms, the level of quantum sought would have been rejected as being hugely excessive. This is said, of itself, to be strongly suggestive that it was Maria's desire "to disrupt or exercise inappropriate and unwarranted control over Louie's assets far in excess of her legitimate rights to recover her legal costs from Chris", and that this exemplifies that the commencement and maintenance of the present proceeding was for an improper purpose.
24. Thus, it is submitted that commencement of the present proceeding by Maria was wholly unreasonable and that, in the event that orders under r 42.20(1) of the UCPR are not made, the circumstances justify the ordinary rule in Lai Qin being departed from in this instance.
25. Further, it is submitted that a lump sum costs order is appropriate on the basis that, if costs are to be agreed or assessed, it is highly probable that Maria would oppose the costs claimed and require the preparation of a bill of costs and the parties proceeding to a contested costs assessment process. It is said that the costs assessment process would only delay resolution of these present proceeding.
26. The affidavit of Mr Bryant sworn 20 July 2020 sets out the costs incurred by Chris and Louie in the present proceeding, including for retention of counsel. Mr Bryant has estimated that solicitor/client costs up to 20 July 2020 are $62,070 inclusive of GST. It is noted that additional time and legal costs have been incurred since that time. It is submitted that, if it is found that proceedings have been commenced unreasonably by Maria, an order reflecting the actual costs incurred by Chris and Louie (on a solicitor/client basis) would reflect the principle that costs orders should be compensatory. Reference is also made to the following correspondence between the parties in relation to the resolution of the proceeding: a letter dated 11 December 2017; and two letters dated 15 December 2017. It is submitted that Maria's failure to accept these offers was unreasonable and that an order should be made that Maria pay Chris and Louie's costs on an indemnity and a lump sum basis in the amount of not less than $62,070 within 28 days.
27. Alternatively, it is said that (if there is not a lump sum order made in the amount of $62,070) Maria ought to pay 80% of this figure (the 20% discount reflecting costs on a party/party or ordinary basis).
28. Finally, as a matter of case management (and by way of clarification of Note 5 in the Consent Orders of 21 July 2020, which states that "[t]he court notes, save for the plaintiffs' claim for costs, the issues in the proceedings have resolved without a hearing on the merits"), it is submitted that an order formally dismissing the present proceeding is appropriate to bring the matter to final conclusion.
29. In reply to Maria's costs submissions, the defendants repeat their primary position that Maria ought to pay their costs of the present proceeding (and embrace the "apparent concession" that costs follow the event). The defendants reiterate that neither Chris nor Louie has ever agreed or consented to the discontinuance of the proceeding; and they reiterate their submission that the present proceeding was commenced unreasonably, unnecessarily, and without proper basis.
30. As to the proposed discontinuance of the proceeding, the defendants emphasise that Maria has not obtained the consent of Chris and Louie to discontinue, nor has she filed a motion, or otherwise sought the leave of the Court to discontinue. It is submitted that, without the filing of such a notice, the operation of r 42.19 of the UCPR is not otherwise engaged. Thus, the defendants submit that the appropriate order, in circumstances where Maria has "abandoned" the prosecution of all of the relief claimed in the present proceeding, is an order that the proceeding is dismissed and that the operation of r 42.20(1) of the UCPR be engaged with respect to costs. While it is conceded that r 42.20(1) also includes the words " ... unless the court orders otherwise", and that therefore the court is invested with a discretion, it is said that the starting point ought to be that, upon the dismissal of a plaintiff's claim for relief, costs will ordinarily flow in favour of a defendant. It is again submitted that as at 15 December 2017 (the date of Louie's affidavit) or 21 December 2017 (the date of Louie's undertaking in respect to Chris' costs in the Original Proceedings), there was no utility in Maria maintaining the present proceeding. It is said that continuance past either of these dates was futile.
31. As noted above, the defendants submit that a lump sum costs order is appropriate in the context and circumstances of this case.

Maria's reply submissions

1. As noted at [49] above, the parties initially served brief submissions with a view to the matter being dealt with on the papers and Maria did not seek any direction for the filing of reply submissions. However, notwithstanding, Maria's legal representatives subsequently sought to file reply submissions, asserting that there would be a denial of procedural fairness were they not permitted to do so. As also noted, the defendants consented to this course and I acceded thereto, albeit that this was productive of further delay and cost. Briefly, Maria's reply submissions make the following propositions.
2. First, insofar as Maria incorrectly understood that the defendants did not object to an order discontinuing the proceeding but it is now apparent that they do, Maria's position is that the proceeding should be dismissed pursuant to r 29.8 of the UCPR, subject to the determination of the present costs application. It is said that, if necessary, Maria will file and serve a notice of motion seeking such order. However, I interpose to observe that such a course would hardly be consistent with the just, quick and cheap resolution of the real issues in the proceeding - the matter is before me and should be disposed of without further unnecessary expense, and without further devotion of the parties' time and the resources of this Court.
3. Second, Maria maintains that, to the extent that the defendants argue that there has been a relevant "event" for the purposes of r 42.1 of the UCPR or that costs ought ordinarily be awarded to the defendant under r 42.20 of the UCPR, Maria points to the authorities already referred to in her primary submissions (as well as to Angius v Salier (No 3) [2020] NSWSC 764 at [115], to which reference had not earlier been made).
4. Third, insofar as the defendants submit that the proceeding was commenced without proper basis and for an "improper" or "impermissible" purpose, Maria reiterates her earlier submissions. She says that the fact that the Rockdale Properties were not the subject of court orders or relief in the Original Proceedings does not make the commencement of this proceeding unreasonable, noting that s 37A of the Conveyancing Act does not provide that a transfer of property is voidable only where the property is already the subject of court proceedings or orders. Indeed, it is submitted (and, I agree) that the fact that some of Chris' real property was divested to Louie despite undertakings to the Court not to deal with or dispose of the property is a matter supporting the reasonableness of Maria's concerns.
5. Maria says that the fact that the remainder of the transferred property was not already the subject of the proceedings giving rise to the relevant debt is otherwise of no consequence and that the defendants' submission in this regard assumes a precondition to s 37A proceedings that does not exist. Maria further says that the fact that she did not make an application for security for costs in the Original Proceedings is irrelevant. Maria says that she could not make such an application in the Property (Relationships) Act Proceeding as she was the plaintiff (citing Willey v Synan (1935) 54 CLR 175 [1935] HCA 76 and r 42.21 of the UCPR); that the defendants have identified no basis on which she ought to have made an application in the Mortgage Proceeding (noting that Chris was a resident of New South Wales and, at the time, owned substantial assets); and that the current proceeding was commenced on the basis of events that occurred after the Original Proceedings.
6. Fourth, as to the defendants' apparent contention that Maria acted unreasonably in not having the proceeding dismissed after 15 December 2017, 21 December 2017 and/or 5 April 2018, Maria says the following: that the defendants' submission as to the prospects of success invites the Court impermissibly to embark on a hypothetical trial to assess the merits (citing Nichols); that this is not one of the "unusual cases" (referred to in Lai Qin) where it should be concluded, on the face of the record, that the defendants were "almost certain to have succeeded if the matter had been fully tried" (particularly in light of the adverse credit findings made against Louie in the Original Proceedings and the fact he had not been subject to any cross-examination in the present case); that the submission that Maria acted unreasonably because she ought to have known that her prospects were low in light of the defendants' evidence and/or defence should be rejected for the same reason; that it cannot be correct, as a matter of principle, that a plaintiff acts unreasonably by continuing with proceedings in the face of a verified defence (nor, it is said, can it be correct as a matter of fact, particularly given the adverse credit findings made against Louie in the Original Proceedings); and that the giving of the undertaking on 21 December 2017 does not make the maintenance of the proceeding after that date unreasonable. It is said that the undertaking merely provided interim protection ("until further order") pending payment of the debt or resolution of the proceeding.
7. As to the last of those matters, emphasis is placed on the fact that the undertaking was given as part of the 21 December 2017 Orders, which were made by consent and reflected the parties' agreement. It is noted that those orders specifically contemplated that the proceeding was to remain on foot by providing a timetable for pleadings and evidence and it is said that in circumstances where the parties' agreement contemplated the continuation of the proceeding, the defendants cannot be heard to assert that Maria behaved unreasonably by acting consistently with those orders. Further, it is noted that, if the proceeding had been dismissed on 21 December 2017 (or 5 April 2018) and the debt was not ultimately paid by the defendants (or the No 5 Property disposed of), Maria would have been required to commence fresh proceedings. In the circumstances, it is said that the approach taken was appropriate (namely, to stand the matter over from time to time pending the completion of the costs assessment process and payment of the debt) and it is said that a similar suggestion had been made by Kunc J at the hearing on 5 December 2017 (referring to T 1.30-38).
8. Maria also disputes several other matters which she says are of significance in the defendants' submissions.
9. First, Maria says that there should not be a finding that this proceeding was commenced "without notice". Reference is made to her primary submissions in this regard. It is said that Maria placed the defendants on notice of the likelihood that she would commence this proceeding and afforded them ample and repeated opportunity to act in a reasonable manner to avoid the proceeding.
10. Second, Maria says that it is not correct that Mr Coffey was aware of the transfer of the Kogarah Bay Property as at 5 June 2017. Reference is made to her primary submissions in this regard and to the defendants' defences (the first defendant's defence at [30]; and second defendant's defence at [30]).
11. Third, Maria says that the submission that the defendants "had complied with all obligations" and that Maria ought to have assumed that Chris "would continue to honour his legal obligations" ignores the transfer of the Kogarah Bay Property despite the various undertakings given to the Court (and Maria says that the defendants' attitude is highlighted by the "extraordinary" submission that the payment of the judgment debt was a display of good faith).
12. Fourth, Maria says that the submission that the proceeding presented an "unreasonable burden" on the defendants is without substance and irrelevant. It is said that it was not unreasonable for Maria to seek relief in relation to all property alleged to have been transferred in contravention of s 37A, and that the 21 December 2017 Orders only restricted Louie's rights in relation to the Kogarah Bay Property.
13. Finally, Maria says that if, despite her submissions, there is a determination that the defendants are entitled to costs, they should not be paid on an indemnity basis: first because any offers contained in the correspondence referred to by the defendants (at [81(a)] and [81(b)] of their submissions) were superseded by the agreement reached between the parties as part of the 21 December 2017 Orders; second, because the defendants have advanced no arguments in support of the assertion that Maria's non-acceptance of these particular offers were relevantly unreasonable; third, that it was not unreasonable for Maria to reject any offer which included a term that the proceeding be dismissed; and, fourth, that the correspondence (at [81(c)] of the defendants' submissions and incorrectly dated 15 December 2017) did not include an offer made in accordance with the principles recognised in Calderbank v Calderbank [1975] 3 All ER 333.

Determination

1. As to whether the present proceeding should be dismissed (as the defendants contend) or discontinued (as Maria contends), it seems to me that this is a debate elevating form over substance (a proposition with which, as I read Maria's reply submissions, Maria would concur).
2. On either scenario, the position remains that: Maria was successful in obtaining interim ex parte relief in December 2017 and that position was continued by consent orders restraining Louie in effect from dealing with the Kogarah Bay Property until such time as the Costs Orders had been satisfied (and hence to that extent Maria has had a victory that I am prepared to accept is unlikely to have been achieved without the commencement of this proceeding); and the proceeding will have been disposed of without a hearing on the merits as to the allegations made by Maria in respect of the transfers of properties and shares. On either scenario, there is not a final "event" by reference to which one could say the general rule as to costs should apply (leaving aside the interlocutory success achieved by Maria in December 2017).
3. In those circumstances, if the proceeding were now to be dismissed, that would not carry with it any presumption as to costs in the defendants' favour; and, if leave were to be given for the proceeding to be discontinued, that would not preclude an order for costs in Maria's favour. Nor would the different means of disposing of the proceeding have any consequence in terms of an issue estoppel or the like, since there has been no hearing on the merits. Hence the argument is an arid one. In light of the position reached in the reply submissions, I will order that the proceeding be dismissed.
4. As to the competing costs orders sought by the parties, I consider that the chronology of events set out above amply demonstrates that there were reasonable grounds for Maria to be concerned that Chris' assets were being disposed of in circumstances where that might well result in an inability of Chris to satisfy the judgment debt in respect of the Amount and the Costs Orders once the quantum of costs was finally assessed. The correspondence from the defendants' solicitors (when there was finally a response to the concerns raised in relation to the disposal of the Rockdale Properties) was dismissive in the extreme. Not least, it is troubling that there was no disclosure made after 9 November 2016 of the fact that a transfer of the Kogarah Bay Property had been executed in Louie's favour notwithstanding the concerns that Maria's solicitor was raising and the fact that undertakings had been proffered to the Court and the Court of Appeal in relation to that very property. At a minimum, Mr Byrant's failure to provide a prompt notification, and reasonable explanation, of the transfers resulted in the unnecessary costs incurred by this further proceeding (see, for example, Parlby v Blair [2013] NSWSC 100 at [16]-[17], per Black J).
5. It is not to the point that the Rockdale Properties had not been the subject of the Court orders; nor is it to the point that there may have been no "obligation" on the part of the defendants to enlighten Maria as to the position in relation to the Rockdale Properties' transfers. What must have been clear to the defendants was that Maria was concerned that the defendants were (or perhaps more accurately Chris was) attempting to render themselves judgment proof. However acrimonious the litigation had been up to that point, it surely would have been a simple matter for the defendants' solicitors to proffer what they now maintain was a reasonable explanation for the steps that were being taken, in order to allay Maria's concerns. Simply to dismiss out of hand those concerns (particularly when Maria's solicitor was foreshadowing litigation if no satisfactory response was received) is not consistent with the just, quick and cheap resolution of the real issues in dispute and it makes it impossible for the defendants now seriously to suggest that there was not a proper basis for Maria to commence the present proceeding and to seek the interim relief that had been sought.
6. Any suggestion that the litigation might have been averted in some way by further communication between the solicitors seems unlikely at best. The defendants were squarely on notice of Maria's concerns and they chose not to address them.
7. As to the manner in which the concern as to a possible contempt of court was dealt with, it seems to me extraordinary that a serious allegation of that kind would have been so dismissively treated, particularly where on the face of things the defendants (Chris through his tutor) were well aware that a transfer had been executed in favour of Louie in respect of the Kogarah Bay Property and there was deafening silence as to that fact (both in the appearances before the Court and in the correspondence with Maria's solicitors).
8. The defendants concede that Maria may well have had a concern as to how the judgment debt (referred to above as the Amount) would be able to be satisfied in light of the transfers about which Maria knew but they suggest that such a concern should have evaporated when the Amount was paid in late July 2017. That too seems to me to be doubtful in light of the history of the matter and the correspondence that was passing between the solicitors at that time. Moreover, it is not irrelevant to note that the legal costs that were ultimately paid (and, I note, the costs order was not for the whole of those costs) exceeded by no small amount the Amount payable for Maria's interest in the Kogarah Bay property. In those circumstances, there remained an incentive for the defendants (or Chris) to render themselves (or himself) judgment proof and it cannot be said that there were not reasonable grounds for Maria's suspicions in light of the lack of disclosure in the correspondence as to the circumstances surrounding the respective transfers.
9. As to the complaint that the present proceeding was simply some kind of contrived or disguised security for costs application, that seems to me to ignore the very real basis for concerns on the part of Maria as to the disposition of assets that had taken place. This was not an application for security for costs - it was an application for relief based on perceived conduct in breach of s 37A of the Conveyancing Act. There was a very simple way to have headed this litigation off at the pass, so to speak -that was for the defendants to have put forward a sensible proposal as to how the adverse orders would be dealt with and to have secured agreement from Maria as to such a process. Whether Maria would have agreed to some kind of proposal of this kind is not to the point - the defendants chose not to engage with her and, instead, appear to have instructed their solicitors to write dismissively of her concerns and, if not intentionally misleading, then in a fashion that was for practical purposes misleading by omission. Thus, the fact that payment of the Amount had been made in July 2017 (no doubt incentivised by the prospect that, if not paid, the Kogarah Bay Property would be the subject of judicial sale) does not to my mind make it unreasonable for Maria to have commenced the present proceeding or to have continued its conduct while the Costs Orders remained unsatisfied.
10. I see no basis on which I could make a finding of the kind that seems to have been urged upon me (namely that the commencement of the proceeding was "motivated for an improper purpose after [Maria] had failed to have Chris' home effectively sold from beneath him").
11. Thus, I have concluded that the conduct of Maria in commencing and continuing the proceeding was reasonable and I have concluded that the conduct of the defendants as outlined above was so unreasonable as to warrant a costs order in Maria's favour in respect of the proceeding. I consider the competing claim by the defendants for their costs to be extraordinary in all the circumstances.
12. As to the application for part of those costs to be the subject of a gross sum costs order, and noting that the defendants themselves appear to be of the view that such an order would be warranted (although they seek it in their favour), I am satisfied that it is appropriate to make such an order. Not least that is because of the history of the litigation to date including the length of time taken in the costs assessment processes that have been engaged in to date. I accept the evidence as to Maria's costs up to 14 April 2020 and I consider that the discount suggested is appropriate. However, I do not consider it consistent with the making of the gross sum costs order that it be a partial order. I will direct that Maria serve an affidavit deposing to the costs incurred since 14 April 2020 and I propose to include in the gross sum costs order an amount to reflect those costs (at a similar discount).

Orders

1. For the above reasons, I make the following orders: 1. Dismiss the proceeding with effect from the making of the final costs orders in accordance with order 2 below. 2. Order the defendants to pay Maria's costs, of and incidental to the proceeding, as follows: 1. Maria's costs up to and including 14 April 2020 as fixed and to be paid as a gross sum in the amount of $48,000; 2. Maria's costs from 15 April 2020 (including the costs of this application) as fixed and to be paid as a gross sum in an amount to be fixed by me on receipt of an updating affidavit from Maria as to those costs. 1. Direct Maria to file and serve within seven days a brief affidavit deposing to the costs incurred in the proceeding from 15 April 2020 to the date of that affidavit.
2. On the making of the second part of the gross sum costs orders, the dismissal of the proceeding will be effective and the court file will be closed.

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: 11 September 2020