JUDGMENT
1 HIS HONOUR: The plaintiffs as appellants have appealed against a costs order, one of the orders made by Acting Master Berecry on 1 September 1999 upon the plaintiffs' Motion dated 9 June 1999 for leave to discontinue the remainder of the claims in the Amended Summons. The learned Acting Master's orders granted leave to discontinue on terms to the effect that the plaintiffs are not to bring new proceedings claiming the relief sought in the Amended Summons and in particular are not to claim damages, compensation or interest flowing from the lodgment of the defendant's Caveat 5067466W. The present parties with five others are parties to litigation commenced by the defendant 4884/97 in this Division relating to many subjects revolving around affairs and assets of Wincopy Pty Ltd. While those proceedings were pending the defendant verified the caveat on 19 June 1998 and lodged it soon after. The caveat claimed, against land at Hurstville which is the site of a valuable office building called "Otis House," a beneficial interest pursuant to constructive or implied trust in accordance with the terms of a joint venture between Helen Liu, the Bank of China through its nominee and the caveator, or alternatively equitable interest in favour of the caveator to the same extent in accordance with the terms of the said joint venture.
2 The plaintiffs commenced the proceedings by applying to the Court on 26 June 1998 for abridgment of time to serve the summons and on 29 June filed a summons returnable on 1 July 1998. After argument on 1 and 2 July, Hodgson CJ in Eq on 2 July gave a judgment which led to orders on 3 July dealing with the interlocutory position which was to be in effect until 20 July. (Later this was extended to 23 July). The debate before Hodgson CJ in Eq related mainly to the terms on which the plaintiffs' dealings with the property and proceeds of its sale should be controlled, in a context where the plaintiffs contended that it was urgent that Wincopy should be in a position to sell Otis House having regard to its obligations to the Bank of China.
3 On 2 July Hodgson CJ in Eq observed, after considering a number of matters, that the Court would probably not allow the caveat to stand in the way of a reasonable re-financing, even though it may make some further order or make some further provision to restrain further dealings with the property after such re-financing had taken place. Hodgson CJ in Eq made directions on the basis that the defendant wished to put on evidence to support the claim which had been made in the caveat. The orders made on 3 July impose detailed restrictions on the plaintiffs, and among many other things noted that the defendant without admission of liability had given to the plaintiffs a signed withdrawal of the caveat; it was not necessary for the Court to order withdrawal of the caveat. The costs of the proceedings before Hodgson CJ in Eq were reserved. Section 74O of the Real Property Act prevents the lodgment of further caveats in a number of cases, but these do not include the present case where the caveat was withdrawn without there being an order of the Court for its withdrawal.
4 On 23 July 1998 the interlocutory proceedings came before me; the claims of the parties for interlocutory relief were defined by Notices of Motion filed in Court that day. I concluded that it was not appropriate to impose any further interlocutory restraints on the plaintiffs' dealings with the land and made orders which ended the restrictions imposed by the orders of 3 July.
5 After 23 July 1998 there was no interlocutory application before the Court, Claims 1 and 2 in the Amended Summons of 3 July no longer required adjudication as the defendant had withdrawn the caveat, and Claims 2A and 3 which related to an injunction restraining further caveats and a claim for compensation were still pending. Neither party obtained an appointment for directions or brought the proceedings under the Court's consideration. The property was in fact sold late in 1998, and from 11-14 December 1998 an injunction obtained ex parte by the now defendant in the other proceedings restrained the plaintiffs from dealing with the proceeds of sale; however that injunction was dissolved. The plaintiffs proceeded with the sale, and were not restrained in disposition of the proceeds until February 1999 when negotiations led to consent orders and undertakings in other proceedings which again imposed restraints on the plaintiffs' dealings.
6 Although the other proceedings have occupied a great deal of the attention of the parties and of the Court, the next step in the present proceedings was an application by the plaintiffs by Notice of Motion of 9 June 1999. This was heard by the Master on 1 September 1999 and were disposed of that day for reasons given orally.
7 The appeal is by way of re-hearing under s.75A of the Supreme Court Act 1970, particularly subs.(5). The order for costs, in accordance with s.76, is a discretionary order, and on appeal the exercise of the discretion is not considered de novo, and a discretionary decision is not disturbed unless it is shown to be wrong in some relevant way, for example for failing to take into account a material consideration, for taking into account a consideration which was not material, for being evidently based on an erroneous principle or otherwise being manifestly wrong.
8 The Master in his judgment at para 15 concluded "At the end of the day, the caveat having been withdrawn, the property has been sold, there was nothing more for the plaintiff to pursue. If that were the only matter to consider then it would seem to me that the plaintiff, while discontinuing, should be entitled to its costs but there are two matters that I go back to which I think are important issues. It is now agreed to by the defendant that there should be discontinuance."
9 I understand these observations to show that the Master was of the view that although discontinuing the proceedings the plaintiffs had achieved substantial success. This was a correct view; the plaintiffs had achieved substantial success in that on 3 July they obtained withdrawal of the caveat, the plaintiffs were placed under restraints which could be seen as giving the defendant protection which substituted for the caveat, and those restraints came to an end on 23 July 1998, the plaintiffs had gone on unrestrained to dispose of the property and were no longer in need of the opportunity to claim an injunction against lodging a further caveat.
10 The issue worthy of debate on the plaintiffs' application for discontinuance was whether the plaintiffs should be allowed to keep alive the possibility that they might claim damages against the defendant in respect of the caveat. This was discussed in inconclusive correspondence dealing with possible settlement on 25 June and 1 July 1999. On 1 September, the day the Notice of Motion came on for hearing, the plaintiffs made clear their readiness to accept terms, adopted in the Master's order, which prevented them from bringing any further claim.
11 In these circumstances questions of costs were the only questions which required decision. Costs questions related to the general costs of the proceedings, costs reserved by the order of 3 July 1998, and the costs of the Notice of Motion of 9 June 1999.
12 The Master was of the view that had it not been for two matters to which he gave further consideration, the plaintiffs while discontinuing should be entitled to costs. This view was clearly right, because the plaintiffs achieved substantial success. They were placed under restraints to preserve the defendant's opportunity to produce evidence and, I would suppose, to advance the claim asserted in the caveat by a cross-claim; the defendant did not advance the claims asserted in the caveat in any way. With hindsight it has been clear since 23 July 1998 that nothing was achieved by imposing interlocutory restraints on the plaintiffs, and what happened in substance was that the plaintiffs commenced the proceedings on 26 June and got a withdrawal of caveat on 3 July 1998.
13 The first of the two matters to which the Master referred was: "… the problem of communication of the plaintiffs' attitude to the offer that was made by the defendant on 1 July. It seems to me that had there been some response to that, notwithstanding this matter was advancing down a particular track within the Court system, we may not have been here today and it is always open to the parties to communicate offers of settlement or compromise their course of litigation. They can be communicated orally or, more conventionally, in writing. That did not happen here and it was therefore not necessarily unreasonable for the defendant to maintain the stance that they did up until this morning." The stance referred to was opposition to the Notice of Motion and to leave to discontinue.
14 The reference to offers of settlement refers to correspondence in evidence. On 25 June 1999 the plaintiffs' solicitor told the defendant's solicitor "… We would not oppose leave being granted for the plaintiff's discontinuance on terms that your client be released in respect of any claims for damages, compensation and interest flowing from the lodgment of the caveat the subject of these proceedings." In a reply also of 25 June 1999 the defendant's solicitor said "While we are pleased to note the proposed release, our opposition to immediate taxation of costs remains. We note that no mention of the proposal of the above release was made during the appearance before Registrar Berecry despite your retention of senior counsel apparently to argue the matter on 25 instant." Then on 1 July the defendant's solicitor offered: "However, we are instructed to offer to consent to discontinuance, if an appropriately worded release can be given to Mr Xu together with an order for costs for these proceedings in favour of Mr Xu." The plaintiffs' solicitors did not reply; the proceedings were before the Court on 2 July for directions, on 28 July when an appointment for hearing was made and again on 1 September. During that period there was no further correspondence dealing with settlement, so far as evidence shows. On 1 September, and not earlier, the plaintiffs unequivocally adopted the position that they would accept restrictions on claims for compensation but would not accept liability for costs.
15 In my respectful opinion it was an error of principle for the Master to treat what he regarded as the unsatisfactory conduct by the plaintiffs of communications relating to the defendant's offer of settlement as relevant to the exercise of the discretion to award the general costs of the proceedings to one party or the other. The perception that the plaintiffs did not properly handle the negotiations on 1 July and thereafter does not, on a reasonable view, have any bearing on the exercise of discretion to order the general costs of the proceedings. Long before 1 July 1999 the plaintiffs had achieved substantial success as they had got rid of the caveat, obtained control of the sale of the property, and had passed the time when the defendant could intervene with another caveat. Unsatisfactory elements in their conduct of the Notice of Motion in July and August 1999 could do nothing to qualify this. Their substantial success had already been achieved.
16 Even if this matter were relevant to the discretion as to costs, it could be of very little significance, and there must have been some error of principle if this element alone or with another element induced the Master not only to withhold an order for costs in favour of the plaintiffs but to subject them to an order for costs in favour of the defendant. The conduct of the plaintiffs and their counsel made it clear on 2 July and thereafter that there were not going to accept the offer before them; they acted inconsistently with acceptance of it, and this was as good as a clear reply. Furthermore, acceptance of the offer would require them to agree to pay the general costs of the proceedings to the defendant; the plaintiffs were in no way unreasonable in not conceding this, as the general costs of the proceedings were fairly open to debate, and the offer was an entire offer; it was not open to them to accept part of it and not accept the part relating to costs.
17 I hold that in this respect the Master treated as a discretionary consideration a matter which was not appropriately so treated, and further that the Master took a wrong view of its significance.
18 The second matter is the significance of the plaintiffs' having proceeded by commencing litigation rather than first serving a lapsing notice. A lapsing notice would have placed on the defendant the need to make an application to the Court if the caveat was not to lapse 21 days after service of the notice. In this respect the Learned Master said (para.17) "The other matter of course is in fact the lapsing notice. I read extracts from the Chief Judge's judgment. I am not satisfied that at the time the matter was brought before his Honour that there was the degree of urgency prevailed that has been submitted from the bar table this morning."
19 In my opinion the proof of facts relating to the reasonableness of proceedings by litigation instead of by way of lapsing notice was so incomplete that treating the matter as relevant to the exercise of discretion must be regarded as erroneous. The Master made a correct conclusion that commencing the litigation with short notice of the return of the Summons was not justified by the Chief Judge's statement of the subject. That conclusion is further shown to be correct by later events in which the plaintiffs did not in fact dispose of the property for some months. However the whole subject has no real significance unless it is established that if a lapsing notice had been served the defendant would have allowed the caveat to lapse. The defendant did not give evidence to that effect and there is no evidence on that subject.
20 The circumstances show clearly that that would not have happened, in that on the return of the Summons an order for removal of the caveat was resisted, and successfully resisted in that the defendant obtained its removal on terms, which gave protection of another kind to his claim. Later events show that the controls imposed on the plaintiffs by the terms of the Chief Judge's order were not necessary. It was only in the course of and on obtaining the imposition of these controls that the caveat was withdrawn, and these facts clearly demonstrate that the defendant was not, in an unqualified way, prepared to withdraw his caveat on demand; so it should not be supposed that he was prepared to allow it to lapse. There is a double aspect of being a defendant in a case where the plaintiffs claim to set aside a caveat, as the caveat asserts an interest and has a similar effect to an injunction, and the Court's consideration is immediately taken to what measures the defendant should take to establish and uphold the claim made in the caveat. It was far from being the case that the proceedings were unnecessary because the defendant would have allowed the caveat to lapse. The plaintiffs were entitled to approach the Court for an order removing the caveat, a course which is offered to them by the terms of the Real Property Act. If they made the appraisal that the plaintiff was not likely to give up lightly the caveat which he had lodged a few days earlier, that appraisal was correct. My respectful conclusion is that the Master took an altogether wrong view of the significance of the absence of the lapsing notice.
21 The exercise by the Master of the discretion with respect to the general costs of the proceedings should in my opinion be set aside because of the Master's reliance on these two matters, and the discretion is now open for exercise. My view is that the plaintiffs achieved a substantial success, notwithstanding that they abandoned part of their claim in respect of compensation. That was not the major claim which they advanced, and the success which they did obtain in the form of the removal of the caveat put them in the position to control or influence whether they in fact incurred significant losses and had any need to recover compensation. The plaintiffs should recover the general costs of the proceedings. My view is the same as the view which the Master formed subject only to his address to the two matters to which I have referred.
22 The Master also said at para.19 "So far as costs go, the plaintiffs to pay the defendant's costs of the proceedings that have not already been determined and costs of this Motion." The costs which had not already been determined were the costs reserved by Hodgson CJ in Eq on 3 July 1998. The Master's decision to award those costs to the defendant appears followed from his view about recovery of the general costs of the proceedings; in my opinion it was erroneous, and the plaintiffs should recover these costs as well as the general costs of the litigation.
23 The Master awarded the costs of the Motion of 9 June 1999 to the defendant. I am of the view that the proper order is that each party should pay its, his or her own costs, having regard to the plaintiffs' not having declared their position fully or clearly until 1 September 1999.
24 Defendant's counsel contended that I should follow a decision in Denman Homes Pty Ltd & Anor v. McNamara & Ors (Needham J unreported 14 September 1983) in which (p.2) after referring to earlier decisions Justice Needham concluded "… Where a defendant seeks leave to discontinue a cross-claim or withdraw a defence it is not open to the Court to order any other party to pay that defendant's costs." The authorities referred to were 19th century authorities where discontinuing plaintiffs asked that the defendants be ordered to pay their costs. The old authorities appear to have been affected by legislative provisions and by practices about the award of costs which were different in effect to the costs power in s.76 of the Supreme Court Act 1970. Needham J did not refer to s.76 and his holdings was very limited, applying, when read literally, only to ordering any other party to pay a defendant's costs. The same old authorities were considered and were not followed in Garwolin Nominess Pty Ltd v. Statewide Building Society [1984] VR 469; Kaye J acted under the costs power in the rules of the Supreme Court of Victoria. That was a case where the plaintiffs had achieved total success; the present is a case where the plaintiffs have achieved substantial success. I take a similar view of the significance of the old authorities, and I do not regard the opinion of Needham J in Denman Homes Pty Ltd v. McNamara as dealing with discontinuance by the plaintiffs. If it was Needham J's intention to suggest that there is a limit of the kind indicated on the powers of the Court under s.76, it is my respectful view that his Honour was incorrect.
25 The defendant should pay the costs of this appeal.
26 My Orders are: