Colakoglu v Ozcelik
[2020] VSC 139
•25 March 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2020 01419
| MERYEM COLAKOGLU | Plaintiff |
| v | |
| MUHAMMET OZCELIK | First Defendant |
| THE REGISTRAR OF TITLES | Second Defendant |
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JUDGE: | John Dixon J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 25 March 2020 |
CASE MAY BE CITED AS: | Colakoglu v Ozcelik |
MEDIUM NEUTRAL CITATION: | [2020] VSC 139 |
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PROPERTY – Caveat – Summary removal – No point of principle involved.
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| ON THE PAPERS | Counsel | Solicitors |
| For the Plaintiff | Mr M Hoyne | Lennon Lawyers |
| For the First Defendant | Mr SRC Cromb | Parker Lawyers & Consultants |
HIS HONOUR:
The plaintiff and the defendant married in October 2009 and purchased a unit in Cranbourne (‘the unit’). For reasons that have not been explained on the material before me, title to the unit was placed in the plaintiff’s name. The first defendant contends that he contributed to the deposit and the mortgage payments. The marriage has broken down and proceedings were recently commenced in the Federal Circuit Court of Australia in relation to financial and parenting matters.
It is evident that the beneficial interest of the parties in the unit may be subject to adjustment under the Family Law Act 1975 (Cth). In addition, there are circumstances deposed to upon which the defendant asserts that the plaintiff holds title to the unit on an implied, resulting or constructive trust for his benefit.
On 22 January 2020, with the first defendant’s consent, the plaintiff listed the property for sale. The first defendant’s solicitor informed the plaintiff’s solicitor:
In relation to the matrimonial home, our client consents to the sale of the property and has no interest in the proceeds of the sale. Since our client has foregone his interest in the property, we do not find it necessary for him to pay the mortgage repayments as he gets no benefit from the house.
On 13 February 2020, the plaintiff contracted to sell the unit, with settlement scheduled for 19 March 2020. On 20 February 2020, the plaintiff first informed the first defendant of this sale and on the plaintiff’s request he returned his keys and remote controllers to the estate agent.
On 3 March 2020, the defendant’s solicitors lodged a caveat over the unit, having formed the view that the defendant had a caveatable interest in the unit pursuant to a resulting and/or constructive trust. How, or why, the first defendant and his solicitor reached this conclusion in the context of the first defendant’s earlier statements and conduct is not explained. However, it may be that there were some negotiations following the institution of proceedings in the Federal Circuit Court. For present purposes, it matters not.
Be that as it may, on 13 March 2020, the plaintiff sought the first defendant’s consent to withdrawing the caveat, on the basis that the sale proceeds (inclusive of the deposit) would be held by her solicitors in a solicitor’s controlled money account, for the benefit of both parties, pending resolution of the family law issues.
I pause this narrative to make two observations. The plaintiff submitted that there is no serious question to be tried. All that has occurred is that the unit is to be converted into a fund of money, to be held in trust pending resolution of the family law dispute. The beneficial interest of either party is unaffected whether it is not sought to preserve the property itself. Whether the first defendant disclaimed any interest in a trust as the plaintiff submitted, or whether he ever had such interest as the first defendant now contends, is a matter for trial. What is significant is that the first defendant did not resile from his consent to the sale of the property and neither party submits that the sale should not proceed, or that there is any proper basis to interfere with the contractually acquired rights of the purchaser.
The plaintiff’s solicitors deposed to a different understanding of this negotiation, one that is more consistent with the defendant’s earlier conduct in disclaiming any beneficial interest in the property. Again, the factual dispute cannot influence the disposition of the application.
Although this dispute ought sensibly to have resolved at this point, the focus became the payment of solicitor’s costs. The first defendant proposed that the sum of $10,000 be paid immediately to him for legal costs in exchange for the withdrawal of caveat. Legal costs could readily have been sorted out at a later point and ought not have derailed a settlement with the purchaser.
The first defendant contended that agreement was reached that each party would receive $10,000 from the proceeds of sale towards legal costs, and that the balance remaining (including the deposit) would be held in a trust account. When confirming this arrangement, the plaintiff’s solicitors stated:
We confirm our client’s instructions that she will consent to each party receiving $10,000 for litigation funding at settlement of the property on the basis that she retain the balance of sale proceeds.
The first defendant made much of the suggestion that the deal was altered by the suggestion that the plaintiff retain the balance of sale proceeds. He emphasised that on 16 March 2020, the plaintiff was asserting that the agreement was that she was entitled to the balance of sale proceeds, on the basis that $10,000 was paid to the first defendant for his costs, but his solicitor did not seek clarification of this language, which may have been unfortunate and not meaning that the plaintiff was claiming the beneficial interest in the balance. Alternatively it may have been a counter offer in the negotiations. Either way the first defendant did not follow through either seeking clarification or further negotiating.
For present purposes, I prefer the first of those interpretations of the dealings, because plaintiff next confirmed on 19 March 2020, the day for settlement, that in order for settlement to proceed that day, each party would be paid $10,000 for legal costs and the balance of the sale proceeds would be held in trust until further agreement. There remained no reason why the settlement of the sale should be obstructed by the caveat. However, the first defendant did not remove the caveat. The plaintiff contends that the first defendant stated that he would ‘lose his leverage’ if the caveat was removed, another contested assertion. The first defendant contended that there was insufficient time for his solicitor to obtain his instructions, but I do not accept that settlement could not have been completed as planned for that reason. I note that by this time, allegations of improper and unprofessional conduct were flying between the solicitors, but it is neither necessary nor appropriate that I set out this evidence or make any findings in relation to it.
The first defendant contended that he had reasonable cause to lodge the caveat and only maintained it because the first defendant’s interests were not sufficiently protected by the initial proposals made by the plaintiff. When those proposals were clarified, the first defendant claimed he did not have sufficient time to consider the subsequent proposal. I am satisfied that before the time for settlement of the contract arrived, there was no dispute between the parties that the contract ought to settle and the balance of proceeds ought to be paid into trust. The provision of a withdrawal of caveat was being inappropriately used as a bargaining chip to extract funds to cover the first defendant’s costs.
A lack of sensible resolution has seen an application to this court in respect of a very modest sum, and, on any view, the interests of the parties and their children have not been well served.
Settlement could not proceed on 19 March 2020 for want of a withdrawal of caveat and was rescheduled to 24 March 2020. This application was commenced on 20 March 2020. Because of the COVID-19 pandemic, the application has been determined on the papers and the first defendant was required to file his submissions by 4:00pm on 23 March 2020. During the course of 23 March 2020, the first defendant withdrew the caveat and, although the court has not received specific confirmation of the fact, the contract of sale appears to have now settled.
The balance of convenience plainly favoured removal of the caveat. Neither party’s rights are prejudiced because the balance of the proceeds of sale is being held in trust pending resolution of their dispute. Plainly there are issues in dispute.
As the caveat was withdrawn and the contract settled, two issues remain on this application. The first is that the plaintiff seeks an order pursuant to s 118 of the Transfer of Land Act1958 (Vic) for compensation for damages sustained by the plaintiff by reason of the failure to withdraw the caveat. It is unnecessary to deal with this application in the Practice Court. It is not urgent. In any event, there is no evidence before the court on which that application might be determined. That aspect of the proceeding will be referred to Keith JR for case management in the Property List.
The second issue is the question of the costs of this application. Three issues are raised on this question. First, who should pay the costs; secondly, on what basis should costs be taxed; and thirdly, should the first defendant’s solicitors also be liable to pay the plaintiff’s costs.
For reasons that follow, I will order that the first defendant pay the plaintiff’s costs of the application to be assessed on a standard basis and that the plaintiff’s application for a costs order against the first defendant’s solicitors be dismissed.
The first defendant submitted that had the caveat not already been removed, an order for its removal would not have been warranted because there was a serious question to be tried and the balance of convenience would have favoured the maintenance of the caveat. I have rejected these contentions. Had the caveat not been withdrawn, I would have ordered that it be removed.
It is clear that the first defendant, by his own act in withdrawing the caveat, accepted that it ought to be removed and only after the issue of this proceeding has he done so. The court was not told of any further negotiation that caused the withdrawal of the caveat.
The evidence as to whether the first defendant had reasonable cause to lodge the caveat is in an uncertain state, because the first defendant did not engage with the plaintiff’s allegation that the first defendant disclaimed any interest in the unit when consenting to its sale. As to the negotiations immediately prior to the withdrawal of the caveat, I am satisfied that the caveat continued to be maintained inappropriately as a bargaining chip, causing the plaintiff to issue this proceeding. If the first defendant was concerned that the proceeds of sale were not to be held on trust pending resolution of the family law dispute, the proper approach, in the interests of both parties contesting entitlement to a very modest sum, would have been to pick up the telephone and clarify the issue. That did not occur.
Costs will follow the event and I will order that the first defendant pay the plaintiff’s costs of and incidental to the application made by paragraphs 1-3 of the summons on originating motion dated 20 March 2020.
Such costs are to be assessed on a standard basis.
The plaintiff sought a costs order against the first defendant’s solicitors personally on this application, which appears to reflect the fact that towards the end of the negotiation much more heat than light was generated in this dispute. Allegations were exchanged. I considered the circumstances in which the court might be moved to make a costs order against a legal practitioner some years ago in Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No.5).[1] It is not necessary to set out what I said on that occasion, but mindful of the principles that I then identified as applicable, in all the circumstances, it is plainly inappropriate to contemplate an order of that sort and it is refused.
[1](2014) 48 VR 1.
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