Vannella Pty Limited v TFM Epping Land Pty Limited

Consideration and determination

1. Decon submits that each party should pay their own costs of the motion having regard to their origins and the totality of the circumstances. This is in the context where, Decon says, it was necessary to file the first motion because TFM served the lapsing notice and the receivers' participation in the motion was the consequence of TFM having appointed the receivers the following day.
2. Decon submits that the receivers had no obligation to participate in the proceedings relating to the motion. It also says that, after the receivers decided to participate, they appeared to take a position that they did not oppose the motion as, after the Caveat lapsed, they did not oppose the application to lodge a new caveat on the same terms. Decon also submits as relevant that the receivers did not serve any evidence in respect of the first motion and the motion did not require the receivers to traverse any new material.
3. Decon also contends that it would ultimately have been successful in meeting the threshold of s 74K(2) of the Real Property Act 1900 (NSW) that its claim "has or may have substance" and that it would have been entitled to its costs to the extent that the receivers had opposed the motion. It submits that the dismissal of the motion has, therefore, led to the receivers avoiding costs that they would otherwise not have been able to recover.
4. The receivers submit that Decon should pay their costs of the motions as there is no reason to depart from the starting point provided by r 42.20(1) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) that Decon, as plaintiff, should pay costs as the motions have been dismissed. This is in the context where the receivers say that Decon has not achieved practical success, there has been no final determination of any application, the first motion was rendered otiose by Decon failing to lodge the extension order and the second motion was necessary only to remedy Decon's failure to lodge that extension order.
5. The principles applicable to the making of an order for costs are well established. The starting point is that an award of costs is a matter within the Court's discretion: Civil Procedure Act 2005 (NSW), s 98. While the Court's discretion is broad, it must be exercised judicially and consistently with the overriding mandate provided for in s 56 to 60 of the Civil Procedure Act 2005 (NSW).
6. Rule 42.20(1) of the UCPR provides that where the Court makes an order for the dismissal of proceedings, either generally or in relation to a particular cause of action or in relation to the whole or part of any claim, then the plaintiff must pay the defendant's costs, unless the Court otherwise orders.
7. Rule 42.7 of the UCPR relates specifically to interlocutory applications. The general position with respect to the costs of an interlocutory application is that they should follow the general costs of the proceedings.
8. In support of their contention that there must be some good reason to depart from the starting position provided by r 42.20, the receivers rely on the observations of Hallen AsJ (as His Honour then was) in McNamara v Bao San [2010] NSWSC 809 at 12 and (d), where His Honour referred to r 42.20 as creating a starting point and that, generally, there must be some proper justification, sound positive ground or good reason from departing from that ordinary position. His Honour also went onto to refer to other matters that may be regarded as relevant in determining who is to bear the burden of costs in a case where proceedings are dismissed before a final hearing. Those matters relevantly include whether proceedings are dismissed prior to any hearing on the merits, whether a plaintiff has acted reasonably in commencing the proceedings and a defendant has acted reasonably in defending them, and the distinction between a case where a plaintiff effectively surrenders and a case where some supervening event or settlement removes or modifies the subject of the dispute such that it cannot be said that one side has simply won. His Honour also noted that r 42.20(1) requires the court to make such order as it thinks just in the particular circumstances of the case: McNamara v Bao San [2010] NSWSC 809 at 12-(h),(j).
9. Where parties have acted reasonably in commencing and defending proceedings and their conduct continued to be reasonable until the litigation settled or its further prosecution became futile or the parties resolved their differences, the parties should expect that the court will not award costs as the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings: Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [30] (Payne JA, Meagher JA agreeing), [2] (Basten JA).
10. As is clear from the background, this is a case where there was no final determination following a contested hearing on the central issue raised by the first and second motions, namely, whether Decon's claim, as caveator, has or may have substance such as to entitle it to extend the operation of the Caveat or lodge a further one in similar terms. There was, therefore, no event, which determined success: Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84, at [2] (Basten JA).
11. Even though there has been no determination on the merits in relation to Decon's claim, the evidence filed in support of the first motion indicates that there was some basis for Decon's claim to lodge the Caveat: Real Property Act 1900 (NSW), s 74K(2). While Decon was on notice that TFM disputed Decon's claim to an equitable charge, in my view, it was not unreasonable for Decon to have filed the first motion in circumstances where TFM had, in May 2019, consented to the extension of other caveats lodged by Decon over the lots, TFM had taken no steps to lapse the Caveat since it was lodged in July 2019 and there is no evidence that TFM needed the Caveat to be removed at that time, such as because one or more of the lots the subject of the Caveat were being sold. In other words, there was nothing to suggest a need for the Caveat to be withdrawn on balance of convenience grounds.
12. Accordingly, I accept that Decon needed to file the first motion as a consequence of TFM serving the lapsing notice and that it acting reasonably in doing so.
13. I also consider that the receivers did not act unreasonably after the first motion was filed. They consented to the extension order and a timetable for the filing of evidence and submissions to enable the substantive issues on the motion to be determined by the Court on 28 August 2020.
14. While there has been no determination of the merits of the second motion, the position is somewhat different given it only needed to be filed due to Decon's failure to lodge the extension order. In that context, there is force to the receivers' submission that the entirety of the costs of the second motion could have been avoided and should be paid by Decon.
15. That said, I have come to the conclusion that the just and proper order in the particular circumstances of the case is to make no order as to costs in relation to both the first and second motions with the intent that Decon and the receivers are to bear their own costs of the motion. This is primarily for the reason that I consider that it is more appropriate to make one costs orders in respect of both motions as they related to the same ultimate issue as to Decon's claim to be entitled lodge a caveat on the title of the lots and that claim was not substantively determined. The dismissal of the two motions by consent does not reflect a capitulation or abandonment of Decon's substantive claims, but rather a resolution of the issues between the parties in the context of a supervening event, namely Decon's failure to lodge the extension order: Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84.
16. I also consider that providing for each party to bear their own costs represents an appropriate balance in the context where Decon's first motion was brought about by the service of the lapsing notice by TFM, no claims have been advanced by the receivers to suggest that the Caveat should not have been extended and the receivers did not oppose Decon's application to lodge a new caveat, in the terms sought by the second motion.
17. For these reasons, the Court makes the following orders: 1. The second plaintiff's notice of motion filed on 17 July 2020 be dismissed with no order as to costs. 2. The second plaintiff's notice of motion filed on 12 August 2020 be dismissed with no order as to costs.

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