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Parties: Danielle Marie Zemann (Plaintiff)
Solos Limited (First Defendant)
Brent Leigh Morgan in his capacity as Court Appointed Liquidator of Solos Limited (Second Defendant)
Andrew James Barnden in his capacity as Court Appointed Liquidator of Solos Limited (Third Defendant)

Representation: Counsel:
H W Somerville (Plaintiff)
A Myers (Solicitor) (Defendants)
Solicitors:
HWLE Lawyers (Plaintiff)
Mills Oakley (Defendants)

File Number(s): 2026/72811

JUDGMENT

Background

1. By Summons filed on 20 February 2026, the Plaintiff, Ms Zemann sought, inter alia, an order under s 74NA of the Real Property Act 1900 (NSW) (“Real Property Act”) that a caveat over certain property be withdrawn by the First Defendant, Solos Limited (in liq) (“Solos”). That application was supported by an affidavit dated 20 February 2026 by Ms Zemann which referred to her purchase of the property, but did not address any question whether that purchase was funded by the assets of Solos; referred to subsequent developments; and referred to her attempt to refinance the property where a loan that she subsequently took out over it is now in default. The application was part heard before me on 23 February 2026, when Mr Somerville, who appeared for Ms Zemann, advanced criticisms of the description of the interest identified in the caveat. He also submitted that the balance of convenience supported removing the caveat to allow the refinancing to proceed, potentially on the basis that Solos could then lodge a further caveat.

2. The application was then stood over to 24 February 2026 to allow an opportunity for the solicitors acting for Solos to take instructions from its liquidator. When the matter resumed on 24 February 2026, the parties advised that they had reached a consent position. I then noted an aspect of that position and made orders as follows:

The Court NOTES that the First Defendant proposes to rectify the issues identified in the hearings of the Plaintiff’s summons filed in this proceeding that occurred on 23 February 2026 when lodging the further caveat that paragraph 2 of this order contemplates, without any admissions as to the issues so identified.

The Court ORDERS by consent that:

1 The First Defendant shall withdraw caveat no. AV603205 over the property being the land contained in folio identifier 32/35235 (Property) at the PEXA refinance which is scheduled for 2:00pm on 24 February 2026, or such other time and date after 2pm on 24 February 2026 which is convenient to the discharging mortgagee and the incoming mortgagee (Settlement).

2 Immediately following Settlement leave be granted for the First Defendant to lodge a further caveat over the Property pursuant to section 74O of the Real Property Act 1900 (NSW).

3 On or before 5pm on 3 March 2026 the parties are to provide written submissions to the Associate to his Honour Justice Black in relation to the question of costs of the proceedings, with such submissions being no longer than two pages, with the intention that the issue of costs be determined on the papers.

4 The Proceedings be otherwise dismissed.

3. At the parties’ request, those orders reserved the parties’ ability to make submissions as to costs, although it might have been thought that there would be limited utility in doing so where the matter had not been determined on the merits. The then parties took up that opportunity.

Applicable principles, submissions and determination

4. In Re Minister for Immigration & Ethic Affairs of the Commonwealth of Australia; Ex p**arte Lai Qin (1997) 186 CLR 622 at 624; [1997] HCA 6 (“Lai Qin”), McHugh J in turn observed that:

*“*In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.

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. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. 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.

5. Exceptions to that general principle may arise if a party capitulated or acted unreasonably. In One.Tel Ltd v Cmr of Taxation (2000) 101 FCR 548; (2000) 171 ALR 227; [2000] FCA 270, Burchett J observed that a costs order may be made where a party effectively surrenders to the other party, and that qualification was noted with approval by the Court of Appeal in Nadilo v Eagleton [2021] NSWCA 232 at [9]. In Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681 at 683–684, Basten JA observed that:

“… although it is possible to make an order for costs against one party if it can be shown that it has invited the litigation by its unreasonable behaviour, or has unreasonably pursued the litigation, such an order should only be made where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon.”

6. By submissions made on 3 March 2026, Ms Zemann submitted that Solos “capitulated” by agreeing to remove its caveat to permit the relevant refinance. I do not accept that submission, where its consent to removal of the caveat, on terms that it have leave under s 74O of the Real Property Act to lodge a further caveat immediately after settlement, was a pragmatic response to Ms Zemann’s wish to refinance. Second, Ms Zemann contended that Solos’ liquidator “neglected” to provide instructions to remove the caveat until the settlement of the refinancing had already been delayed, and submitted that the terms of the incoming finance are more favourable than those of the outgoing finance. That submission assumes a matter that has not been determined, namely that Solos, by its liquidators, should have consented to a removal of the caveat.

7. Third, Ms Zemann addressed the factual position in respect of the removal of the caveat, but not the circumstances in which she had acquired the relevant property or how the claims of Solos in respect of that property had arisen. It is neither necessary nor appropriate to determine either matter, where this application has not gone to a contested hearing. Fourth, Ms Zemann also submitted, but I cannot find without a hearing on the merits, that it was “unreasonable” for the Defendants to have withheld consent to the refinance.

8. Ms Zemann recognises the relevance of Lai Qin and contends that she was “almost certain to have succeeded if the matter had been fully tried”, and also relies on observations of Darke J in Frampin**a Developments Pty Ltd v John Anthony Arena Pty Ltd [2022] NSWSC 57. I do not accept that submission, where the questions as to the description of the interest in the caveat were not determined on the merits, and the claims available to Solos would likely extend beyond claims in knowing receipt against Ms Zemann (to which Mr Somerville had referred) to proprietary claims of the kind considered in cases such as Fistar v Riverwood Legion and Country Club Ltd (2016) 91 NSWLR 732; [2016] NSWCA 81, Sino Iron Pty Ltd v Worldwide Wagering Pty Ltd (2017) 52 VR 664; [2017] VSC 101 and Rheem Australia Pty Ltd v McInnes [2020] NSWSC 1313. Ms Zemann also submits the liquidators of Solos had been “dilatory” in their response to the matter; but I also do not accept that submission, where they were obliged to have regard not only to Ms Zemann’s wish to refinance but also to the protection of Solos’ claims for the benefit of its creditors.

9. Solos and the liquidators rely on Lai Qin in response. They submit there should be no order as to the costs of the proceedings; and they also submit, with considerable force, that the liquidators personally were not properly joined to the proceedings and that there is no basis for a costs order against them personally. I would likely have accepted that submission, had I been satisfied that an order for costs should be made in Ms Zemann’s favour and against Solos. Solos and the liquidators also address the timing of the refinancing and the application for removal of the caveat, pointing to delay on Ms Zemann’s part. They also point to her apparently incorrect claim that the settlement of the refinancing could not be delayed to allow Solos and the liquidators an opportunity to review the refinancing documents and to her suggested failure to provide relevant information relating to the refinancing to Solos or the liquidators. It is not necessary to address these submissions, given the conclusion which I have reached on other grounds.

10. Here, there has been no determination of Ms Zemann’s application on the merits; it is not possible to conclude that Ms Zemann would almost certainly have succeeded, or to characterise the outcome of the application as a capitulation, absent a determination on the merits; and I am not satisfied that the conduct of Solos or its liquidators has been so unreasonable to warrant an order for costs in Ms Zemann’s favour. For these reasons, I make no order as to the costs of the proceedings.

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