Youssef Taouk and Najibi Taouk v Najib Louis

Introduction 1On 20 June 2014 I published reasons for judgment in relation to the plaintiffs' claims for relief (see Youssef Taouk and Najibi Taouk v Najib Louis (No.2) [2014] NSWSC 799). I concluded that the plaintiffs' Statement of Claim should be dismissed with costs. 2On 4 July 2014, the second and third defendants (referred to as DMS and Perpetual respectively) filed a Notice of Motion seeking an order that the costs order made on 20 June 2014 be varied so as to provide for indemnity costs in their favour. The Notice of Motion was supported by an affidavit sworn by Samuel Pearlman, solicitor, on 4 July 2014. The motion was filed within the fourteen days stipulated in Uniform Civil Procedure Rules r 36.16. I informed the parties that I proposed to deal with the motion "on the papers", and gave directions for the filing and service of written submissions. In accordance with those directions, I was provided with submissions by the solicitor for DMS and Perpetual on 22 July 2014, and submissions by Counsel for the plaintiffs on 5 August 2014. The submissions have been placed on the Court file. 3A number of variations to the order are claimed in the alternative. The primary order sought by DMS and Perpetual is an order under s 98(1)(c) of the Civil Procedure Act 2005 (NSW) for the plaintiffs to pay their costs of the entire proceedings on an indemnity basis. Alternatively, DMS seeks an indemnity costs order from 23 August 2013 being the date of a Calderbank offer it made. In the further alternative, DMS and Perpetual seek an indemnity costs order from 29 March 2014, being one day after an Offer of Compromise was made by them pursuant to UCPR r 20.26 (see UCPR r 42.15A(2)). 4The claim for indemnity costs for the entirety of the proceedings is essentially put on the basis that the plaintiffs advanced a case of fraud when they must have known that such allegations were false. Reference was also made to findings made in the principal judgment to the effect that each of the plaintiffs was prepared to give untruthful evidence in support of their case. 5It was submitted for the plaintiffs that indemnity costs should not be ordered merely because the plaintiffs' evidence was not accepted, and thus the fraud case was not established on the balance of probabilities. It was also put that this was not a case where the claims were fanciful or vexatious and it was emphasised that it is not the purpose of an award of indemnity costs to punish a party. 6I accept that it is not the purpose of an award of indemnity costs to punish a party. In general terms, it may be said that the purpose is to more fully compensate a party for the consequences of some "relevant delinquency" on the part of the other party (see Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 89 per Gaudron and Gummow JJ). I further accept that the Court should exercise caution and not too readily make indemnity costs orders on the ground that a case (including a case involving allegations of fraud) has been shown, after a trial, to be devoid of merit. 7Nevertheless, I have concluded that an order for indemnity costs is appropriate in this case. 8The plaintiffs' claims fundamentally rested upon the proposition that the loan and mortgage the subject of the proceedings was procured by a fraud perpetrated by the first defendant with the assistance of others in late 2004, and that the fraud was not discovered by the plaintiffs until 2011 when they first complained about it. Yet the evidence plainly demonstrated that from late 2004, large sums of money were received into Mrs Taouk's bank account out of the proceeds of the loan, and the evidence further showed clearly that from 2005, Mrs Taouk and other members of the family made contact with DMS on numerous occasions to discuss various issues in relation to the loan. It is clear that Mrs Taouk was well aware of the existence of the loan and the total amount outstanding (which exceeded $400,000), and had involvement in both the obtaining of funds by way of redraw request and the effecting of loan repayments (see Youssef Taouk and Najibi Taouk v Najib Louis (No.2) (supra) at [64]-[68]). The plaintiffs' claims to have discovered a fraud in 2011 may properly be described as fanciful. 9In addition, I have found that the plaintiffs were willing to give untruthful evidence on numerous matters in order to assist their case, and were generally most unsatisfactory witnesses (see Youssef Taouk and Najibi Taouk v Najib Louis (No.2) (supra) at [50], [53], [54]-[57] and [58]-[62]). 10It is a significant matter to allege fraud. In this case, the plaintiffs alleged what is tantamount to a conspiracy to defraud involving several persons. The basal allegation that their signatures had been forged on various documents was not supported by any independent evidence, such as expert handwriting analysis. The case advanced essentially rested upon assertions that were thoroughly discredited. I agree with the submission that the plaintiffs must have known that they were making false allegations of fraud. 11The alleged fraud was the basic foundation of the entire proceedings. It was relied upon as a major part of the claims pleaded against DMS and Perpetual, although I note that an alternative case for relief under the Contracts Review Act was also pursued against Perpetual. 12For the above reasons, it seems to me that it is appropriate to order the plaintiffs to pay the costs of the proceedings against DMS and Perpetual on an indemnity basis. 13In case that exercise of discretion has miscarried, I should briefly state what my conclusions would have been on the alternative claims for indemnity costs. 14I would not have made an order for indemnity costs in favour of DMS from 23 August 2013 on the basis of the plaintiffs' failure to accept the Calderbank offer. The offer was in the following terms: "(a) Verdict and Judgment for the Second Defendant. (b) The First and Second Plaintiffs to pay the Second Defendant's costs on a party/party basis as agreed or assessed up to the time of the making of this offer, such costs to be either paid directly to the Second Defendant or funded in an agreed arrangement (to be considered as part of the settlement arrangements). (c) This offer shall be open for acceptance for a period of 28 days only. The above offer is made on Calderbank principles and is open for acceptance until 4:00pm on Friday 13 September 2013, at which time it shall lapse." 15In my view, the offer, viewed objectively as at the time it was made, did not involve any real element of compromise (see Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [30]-[33]; Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 344 at [8]-[9]). The letter containing the offer referred to certain evidence, and on that basis stated that the plaintiffs' claims were "clearly hopeless". However, it was not suggested that the plaintiffs, for that reason, may be facing an order for indemnity costs. In those circumstances, the offer did not really give anything away and may be viewed as a call for capitulation. 16As to the Offer of Compromise made on 28 March 2014, there was no dispute that it complied with the formal requirements of UCPR r 20.26, save that the plaintiffs submitted that the closing date for acceptance of the offer was not reasonable in the circumstances. 17The offer was made just prior to 4pm on Friday, 28 March 2014, and was stated to be open for acceptance until 5pm on Monday, 31 March 2014. The trial was due to commence on Tuesday, 1 April 2014. 18The offer was in the following terms: "1. There be a judgment in favour of the Second Defendant and the Third Defendant; and 2. The Second Defendant and the Third Defendant jointly pay the Plaintiffs $10,000 in respect of the Plaintiffs' costs; 3. This Offer of Compromise is made in accordance with rule 20.26 of the Uniform Civil Procedure Rules 2005 (NSW); 4. This offer shall be open for acceptance until 5pm on 31 March 2014." 19It was submitted that the plaintiffs effectively only had one day, being the date before the commencement of the trial, during which to consider the offer, and at about 11:20am on that day, DMS and Perpetual served affidavits by two deponents (Bernard Moussa and Pierre Moussa) who had not previously sworn affidavits in the proceedings. It was put that in those circumstances, the period for acceptance was unreasonably short. 20There is some force in that submission. Even though the recently served affidavits essentially dealt with issues that were already the subject of evidence (such as whether the plaintiffs gave instructions for the preparation of certain tax returns, and the circumstances in which the plaintiffs were introduced to the loan introducer, Sky Home Loans), they would have no doubt called for immediate attention on the part of the plaintiffs' legal advisers, and instructions from the plaintiffs themselves. Nonetheless, by 31 March 2014 the plaintiffs, with the assistance of their legal advisers, ought to have been in a position to give due consideration to the terms of the offer and respond to it by 5pm on that day. By that time, they ought to have had a clear appreciation of the strength (or weakness) of their case, and been able to give due consideration to the offer. I would not conclude that the closing date for acceptance of the offer was not reasonable in the circumstances. 21Moreover, in my view the offer contained a real element of compromise. Had it been accepted, the plaintiffs would have received $10,000 towards their costs, and would not face the prospect of being ordered to pay the costs of DMS and Perpetual. The offer should be regarded as an offer to compromise for the purposes of UCPR r 20.26. As the offer was not accepted, and DMS and Perpetual obtained judgments on the plaintiffs' claim no less favourable to them than the terms of the offer, DMS and Perpetual are entitled to orders for indemnity costs from 29 March 2014 unless the Court "orders otherwise" under UCPR r 42.15A(2). 22I would not have regarded it as in the interests of justice to have so ordered (see Manly Council v Byrne and Anor (No.2) [2004] NSWCA 227 at [10] per Campbell JA). In my view, it was not reasonable for the plaintiffs to not accept the offer, particularly in circumstances where they must have known that they were making false allegations of fraud. 23Accordingly, had I not come to the conclusion that the plaintiffs should pay all of the costs of DMS and Perpetual on an indemnity basis, I would have concluded that they should pay the costs of DMS and Perpetual from 29 March 2014 on an indemnity basis. 24The first defendant made no application for any variation of the order for costs made on 20 June 2014. Therefore, the only variation to that order will be one that provides for the plaintiffs to pay the costs of DMS and Perpetual on an indemnity basis.