Arkbay Investments Pty Ltd (in liquidation)(receivers and managers appointed) v Tripod Funds Management Pty Ltd (No 2)

[2015] NSWSC 330

Supreme Court

New South Wales

Medium Neutral Citation:	Arkbay Investments Pty Ltd (in liquidation)(receivers and managers appointed) v Tripod Funds Management Pty Ltd (No 2) [2015] NSWSC 330
Hearing dates:	Decided on the papers
Date of orders:	30 March 2015
Decision date:	30 March 2015
Jurisdiction:	Equity Division
Before:	Robb J
Decision:	I order the defendant to pay the plaintiffs' costs of the proceedings not covered by any other costs order on the indemnity basis
Catchwords:	COSTS – whether costs on plaintiff’s successful claim for compensation under Real Property Act 1900 (NSW) s 74 be paid by defendant on an indemnity basis – defendant had no arguable claim for an estate or interest in the property for the lodgement of a caveat preventing sale of property – defendant ordered in separate removal of caveat proceedings to pay plaintiff’s costs on an indemnity basis – defendant’s unreasonable rejection of a Calderbank offer
Legislation Cited:	Real Property Act 1900 (NSW) s74
Cases Cited:	Arkbay Investments Pty Ltd (in liquidation) (receivers and managers appointed) v Tripod Funds Management Pty Ltd [2014] NSWSC 1003 Oshlack v Richmond River Council (1998) 193 CLR 72
Category:	Costs
Parties:	Arkbay Investments Pty Ltd (in liquidation) (receivers and managers appointed) (first plaintiff) McEvoy Street Alexandria Pty Ltd (in liquidation) (receivers and mangers appointed) (second plaintiff) Australian and New Zealand Banking Group Ltd (third plaintiff) Tripod Funds Management Pty Ltd (defendant)
Representation:	Counsel: M R Tyson (plaintiffs) D Allen (defendant) Solicitors: Allens Solicitors (first, second and third plaintiffs) Ronayne Lawyers (defendant)
File Number(s):	2013/377318
Publication restriction:	None

Judgment

1. On 30 July 2014 I delivered judgment in these proceedings in Arkbay Investments Pty Ltd (in liquidation) (receivers and managers appointed) v Tripod Funds Management Pty Ltd [2014] NSWSC 1003.

2. The orders that I made that are presently relevant were:

Order pursuant to s 74P of the Real Property Act 1900 (NSW) that the defendant pay to the plaintiffs compensation in the amount of $40,815.53.

Order the defendant to pay the plaintiffs’ costs of the proceedings.

3. The plaintiffs have applied for an order that their costs of the proceedings be paid by the defendant on the indemnity basis.

4. The receivers and managers of the first and second plaintiffs caused them to enter into a contract on 30 July 2013 for the sale of the property that they owned in Bowden Street Alexandria for $14.8 million. Relevantly, completion of the contract was due to take place at 2 PM on 11 December 2013. Completion could not take place at that time because on 10 December 2013 the defendant lodged a caveat against the title to the property. Mr Ian Lazar, a director of the defendant, was responsible for causing the caveat to be lodged. Mr Lazar drafted the caveat.

5. On 11, 12 and 16 December 2013 the plaintiffs’ solicitors wrote letters to the defendant in which they made reasonable demands that the defendant forthwith remove the caveat to enable completion of the contract of sale to take place. The last of these letters refused to accept unreasonable conditions that the defendant had imposed on its preparedness to remove the caveat. The plaintiffs gave the defendant ample warning that they would commence proceedings immediately for the removal of the caveat. They warned the defendant that they would seek an order for compensation of the plaintiffs, and an order for payment by the defendant of the plaintiffs’ costs on the indemnity basis.

6. The defendant withdrew the caveat before the return date of the summons before White J on 18 December 2013. The solicitor who appeared for the defendant on that day readily acknowledged that the defendant did not have a caveatable interest. The need for that concession to be made is obvious from the description of the estate or interest claimed by the defendant: see previous judgment [8]. White J ordered the defendant to pay the plaintiffs’ costs on the indemnity basis.

7. The only issue that then remained in the proceedings was the plaintiffs’ claim for compensation under s 74P of the Real Property Act. On 16 May 2014 the Registrar stood the proceedings over for hearing on 13 June 2014.

8. On 29 May 2014 the plaintiffs’ solicitors served a Calderbank offer on the solicitors for the defendant. In short, the plaintiffs offered to accept in settlement of the plaintiffs’ claim for compensation and costs an amount that was 80% of the compensation claimed, and 80% of the midpoint of the estimated range of the costs that would be awarded to the plaintiffs on an indemnity basis. The offer was made open until 5 June 2014, and the defendant was required to pay the sum of $54,000 by bank cheque no later than 11 June 2014.

9. Following the hearing that took place on 13 June 2014, the plaintiffs were awarded the full amount of the compensation that they claimed. In the circumstances of this case the offer by the plaintiffs to accept a discount of 20% on the amount of their claim was more than reasonable.

10. On the hearing of the compensation claim the defendant made no attempt to establish that it had an honest belief on reasonable grounds that it had an interest in the Bowden Street property in the terms stated in the caveat. It is plain from a reading of the caveat, and the circumstances in which it was lodged by the defendant, that the defendant did not have an arguable claim for an estate or interest in the property, and the lodgement of the caveat was part of a cynical exercise to disrupt the legitimate attempt by the plaintiffs to complete the contract of sale into which they had entered. The only point raised by the defendant to resist an order for compensation was an argument that on the evidence it had not been established that the purchaser was ready willing and able to complete the contract of sale on 11 December 2013. That argument was reasonably available on the evidence, but it failed.

11. The defendant resisted an order that it pay the plaintiffs’ costs on the indemnity basis by arguing, first, that it was not conclusive that White J had ordered it to pay costs on an indemnity basis in relation to the removal of the caveat, as the compensation claim was a separate issue; and secondly, even though the offer made by the plaintiffs in the Calderbank letter was significantly more favourable to the defendant than the effect of the orders ultimately made by the Court, the letter gave the defendant less than 5 working days to accept the offer, it did not address the reasons why the plaintiffs would win, it required the defendant to accept an unsubstantiated claim for costs, and it imposed a condition that the amount be paid by bank cheque by 11 June 2014.

12. This is a clear case in which the defendant should be ordered to pay the balance of the plaintiffs’ costs of the proceedings (which have not been covered by White J’s existing order) on the indemnity basis. The conduct of the defendant from start to finish in this matter was unreasonable and delinquent: see Oshlack v Richmond River Council (1998) 193 CLR 72. The plaintiffs gave the defendant fair warning before they originally instituted the proceedings. It must have been quite obvious to the defendant that the lodgement of the caveat would inevitably cause the plaintiffs to suffer damage; whether by means of the need to pay continuing interest on any loan secured on the property, or by reason of the delay in the receipt of the purchase price. It is not appropriate in the circumstances to treat the removal of the caveat and the payment of compensation as entirely separate matters. The fact that White J ordered the defendant to pay the plaintiffs’ costs of the removal application on the indemnity basis plainly ought to have caused the defendant to appreciate that it should agree to pay compensation to the plaintiffs. Furthermore, in the circumstances of this case, the plaintiffs’ solicitors’ 29 May 2014 letter should be treated as an effective Calderbank offer. The appropriateness of the terms of that letter should not be considered in isolation of all of the other circumstances relevant to the plaintiffs’ claim in these proceedings. Given the nature of the issues, and the fact that the plaintiffs had served their evidence on the compensation issue on the defendant, the time given to the defendant in which to accept the offer, and its other conditions, were reasonable.

13. I order the defendant to pay the plaintiffs' costs of the proceedings not covered by any other costs order on the indemnity basis

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Decision last updated: 30 April 2015