Birch v Glissen Pty Ltd

[2005] NSWSC 337

CITATION:	Birch v Glissen Pty Ltd [2005] NSWSC 337
HEARING DATE(S):	30.03.05
JUDGMENT DATE :	15 April 2005
JURISDICTION:	Equity Division
JUDGMENT OF:	McDougall J at 1
DECISION:	Order that the costs payable pursuant to order (2) made by me in these proceedings on 30 March 2005 be payable on the indemnity basis. Those costs are to include the costs of this application.

CATCHWORDS:	Practice and procedure - costs - indemnity costs - special circumstances - where extension for caveat sought but could not be supported on either existing or amended claim - whether notice of motion subsequently withdrawn - whether indemnity costs ought
LEGISLATION CITED:	Home Building Act 1989 Real Property Act 1900
CASES CITED:	Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) 5 BPR 11314 Oshlack v Richmond River Council (1998) 193 CLR 72 Harrison v Schipp [2001] NSWCA 13 NMFM Property Pty Ltd v Citibank Ltd [No 11] (2001) 109 FCR 77 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 White ACT (in liquidation) v G B White & Ors [2004] NSWSC 303
PARTIES:	P: Peter Birch D: Glissen Pty Ltd
FILE NUMBER(S):	SC 2047/05
COUNSEL:	P: Mr J Johnson D: Mr AC Iuliano
SOLICITORS:	P: Dennis & Company D: Colin Biggers & Paisley

LOWER COURT JURISDICTION:

1 HIS HONOUR: The question for decision is whether the costs payable by the plaintiff to the defendant in respect of the plaintiff’s unsuccessful notice of motion for extension of a caveat should be ordered to be paid on the indemnity basis.

2 By his summons filed on 22 March 2005, the plaintiff claimed, relevantly:

“(1) A declaration that in accordance with the terms of be [sic] made between the plaintiff and the defendant dated 21 January 2005 the plaintiff has a relevant estate or interest sufficient to sustain Caveat No: AB 252333.
(2) An order that caveat No. AB 252333 be extended”.

3 By notice of motion filed on the same day, the plaintiff sought, among other things, an interlocutory order extending the caveat.

4 I heard the claim for interlocutory relief on 30 March 2005. On that day, the plaintiff sought and was granted leave to amend prayer 1 of the summons so that it read (for convenience the deleted word is struck through and new words are in bold):

“(1) A declaration that in accordance with the terms of be agreements between the plaintiff and the defendant dated 19 and 21 January 2005 the plaintiff has a relevant estate or interest sufficient to sustain Caveat No: AB 252333.
(2) An order that caveat No. AB 252333 be extended”.

5 In Schedule 1 of the caveat, the estate or interest claimed by the plaintiff is described as “monies due pursuant to Deed dated 21/1/05”. It is said further that the interest arose by virtue of a Deed dated 21st January made between the defendant and the plaintiff.

6 It is apparent from the Deed of 21 January 2005 that the plaintiff and the defendant were parties to a building contract and that there were disputes under that contract. The plaintiff (the builder) had lodged a caveat against the title to the land at 1 Turramurra Ave, Turramurra upon which the building operations were carried out. The defendant (the proprietor) said that the caveat was lodged in breach of s7D of the Home Building Act 1989. That would appear to be correct, although I do not need to express a concluded view. In any event, by the Deed of 21 January 2005, the plaintiff agreed, among other things, to withdraw that caveat. (In fact, it appears, the caveat had been withdrawn prior to the date of the Deed.)

7 By cl 3 of the Deed, the defendant agreed to pay to the plaintiff $330,000. $280,000 of that was payable upon execution of the Deed. The balance was payable no later than “the registration of a second mortgage over the Site securing a further borrowing by the Owner from an additional financier”.

8 By cl 4, the defendant agreed that “[i]n order to secure to the builder the payment of the sum of $50,000” it would “arrange for the grant to the Builder of a mortgage over the property at 26 George Street Avalon”.

9 The property at Avalon was not the property on which the building works were carried out; it was not property owned by the defendant; and it was not against the title to that property that the present caveat, AA 252333, was lodged.

10 By cl 6 of the Deed, the plaintiff was required to do certain things before “becoming entitled to receive any payment from the Owner”. It was not submitted that the plaintiff had failed to comply with any of its obligations under cl 6.

11 There was no other clause in the Deed of 21 January 2005 that the plaintiff relied upon as giving it an interest in the Turramurra land, or otherwise as entitling it to lodge a caveat against the title to that land. Nonetheless, that is what the plaintiff did.

12 As I have noted, the plaintiff sought and was granted leave to amend his summons so as to rely additionally upon an agreement dated 19 January 2005. That agreement was a handwritten document of one page. It provided in cl 1 for payment of $330,000 by instalments of $280,000 on execution of a “Termination Deed” (which, I infer, is the Deed that was made two days later, on 21 January 2005). It provided further that the balance “will be secured by way of a Mortgage against 1 Turramurra Ave Turramurra and is to be discharged upon registration of a 2nd Mortgage”.

13 It was that agreement upon which the plaintiff relied. However, the estate or interest claimed in the caveat made no mention of that agreement. Even if that agreement survived the making of the Deed of 21 January 2005 – a point that was not fully argued and upon which, therefore, I express no concluded view – it follows that the agreement of 19 January 2005 could not support the estate or interest claimed in the caveat.

14 Mr Johnson of Counsel, who appeared for the plaintiff, submitted that the Court could amend the description of the estate or interest claimed by the caveat. Mr Johnson referred to s 74L of the Real Property Act 1900, but did not otherwise indicate the source of this power. I referred Mr Johnson to the decision of McLelland J in Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) 5 BPR 11314. His Honour there said, in substance, that s 74L empowered the Court to amend defects in the prohibitory provisions of caveats, but not in the provisions defining the estate or interest claimed. It is apparent from his Honour’s decision in that case that he did not consider that there was any other source of power entitling the Court to amend the description of the estate or interest claimed by a caveat.

15 Upon considering the decision in Depsun, Mr Johnson sought to “discontinue” the notice of motion. As I recorded in my brief reasons given on 30 March 2005, the notice of motion was dismissed with costs, and the question of the basis upon which those costs were payable was reserved, to be dealt with by me upon receipt of written submissions.

16 For the defendant, Mr Iuliano of Counsel, submitted that the claim for extension of the caveat had no real prospect of success, and that the plaintiff had acted unreasonably in seeking that relief. He relied on Oshlack v Richmond River Council (1998) 193 CLR 72; Harrison v Schipp [2001] NSWCA 13; NMFM Property Pty Ltd v Citibank Ltd [No 11] (2001) 109 FCR 77; and Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397.

17 I attempted to summarise the applicable principles in my judgment on costs in White ACT (in liquidation) v G B White & Ors [2004] NSWSC 303 at paras [5]-[11]. I said:

“The basic rule is that a successful party is entitled to its costs on a party and party basis: see for example Pt 52A r 32. See also the judgment of Mason P in Rosniak v Government Insurance Office (1997) 41 NSWLR 608, 616.

It is clear, of course, that there is a discretion to award costs on the indemnity basis. That follows from, among other sources, s 76(1) of the Supreme Court Act and Pt 52A r 32.

The basis upon which the discretion to award indemnity costs should be exercised has been examined in a very great number of cases. But, as those cases make clear, the discretion is not confined or limited except to the extent that it is required to be exercised judicially: see for example Harrison v Schipp [2001] NSWCA 13 at [139] (Giles JA, with whom Handley and Fitzgerald JJA concurred); see also Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248, 256-257.

What is required, in any case, is that the Court examine the facts of that case in the light of such statements of principle as may be relevant. In the ordinary way, the Court will take into account, as offering guidance, statements of principle made by those to whom the particular judicial officer should have regard.

At the most basic level, the statements of principle indicate - not unsurprisingly - that there must be some sufficient special or unusual feature to justify departure from the ordinary rule.

I take the basic principle to be as stated by Gaudron and Gummow JJ in Oshlack v Richmond River Council (1998) 193 CLR 72, 9. Their Honours said at [44] (I omit citations):

“It may be true in a general sense that costs orders are not made to punish an unsuccessful party. However, in the particular circumstance of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs, but for costs on a 'solicitor and client' basis, or on an indemnity basis. The result is more fully or adequately to compensate the successful party to the disadvantage of what would otherwise have been the position of the unsuccessful party in the absence of such delinquency on its part.”

I read what their Honours said on the basis that "some relevant delinquency" does not mean moral delinquency or some ethical shortcoming, but delinquency bearing a relevant relation to the conduct of the case: see for example Council of the Municipality of Botany v Secretary, Department of the Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412, 415; NMFM Property Pty Limited v Citibank Limited (No 2) (2000) 109 FCR 77.”

18 To that citation I add, from the judgment of Woodward J in Fountain Selected Meats at 401, that it may be appropriate to order indemnity costs where the unsuccessful party, properly advised, should have known that it had no prospect of success:

“ I believe that it is appropriate to consider awarding ‘solicitor and client’ or indemnity costs whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion”.

19 I take his Honour’s statement to be an indication of a special or unusual feature sufficient to justify departure from the ordinary rule, or an instance of delinquency bearing a relevant relation to the conduct of the proceedings.

20 For the plaintiff, Mr Johnson submitted that there was “no particular misconduct, ulterior motive, imprudent refusal of an offer of compromise, or undue prolongation of the case by groundless contentions”. Thus, he submitted, “there is no special or unusual feature in the present case to justify the Court from departing from the ordinary practice which it has already adopted.”

21 In my judgment, the circumstances of this case support an order that the costs already ordered to be paid be paid on the indemnity basis. On its face, the interest claimed by the caveat was bad. There is no basis upon which the deed of 21 January 2005 could support the caveat that was in fact lodged, and that was the subject of these proceedings. The plaintiff recognised as much when he sought, and was granted, leave to amend his summons so as to rely on the agreement of 19 January 2005.

22 However, the decision of McLelland J in Depsun – a decision given more than fourteen years ago, and that has been referred to consistently since in texts such as Young’s Annotated Conveyancing and Real Property Legislation New South Wales (Butterworths Annotated Acts, 2nd Edition, 2001) - shows that the alternative basis on which the plaintiff sought to support his caveat could not succeed. This is not a case where the plaintiff’s claim failed because of some very recent, or unusual and unexpected, decision. It is a case where the plaintiff’s alternative claim failed because it was inconsistent with clearly established principle. I note that Mr Johnson made no submission that the decision of McLelland J in Depsun was wrong, or that it could be distinguished, or that it had no application to the present facts.

23 It follows inevitably that the plaintiff, properly advised, must have known that his claim to an extension of the caveat could not be supported, either on the basis originally advanced or upon the basis sought to be advanced by the amendment. I agree with Woodward J in Fountain Select Meats that this is a circumstance capable of enlivening the Court’s discretion to award indemnity costs. In the present case, there being no explanation offered for the plaintiff’s decision to pursue what appears to be a hopeless cause, I think that it is appropriate to exercise that discretion in favour of the defendant.

24 I therefore order that the costs payable pursuant to order (2) made by me in these proceedings on 30 March 2005 be payable on the indemnity basis. Those costs are to include the costs of this application.

25 The exhibits tendered on the application may be handed out.