Deutsch v Rodkin (No 2)
[2012] VSC 543
•12 November 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
S CI 2011 06667
BETWEEN:
| TZIPORAH DEUTSCH | Plaintiff |
| - and - | |
| PEARL RODKIN & ORS | Defendants |
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JUDGE: | HARGRAVE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 5 November 2012 | |
DATE OF JUDGMENT: | 12 November 2012 | |
CASE MAY BE CITED AS: | Deutsch v Rodkin & Ors (No 2) | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 543 | |
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COSTS – Successive caveats lodged without reasonable cause – Proceeding to remove caveats and recover compensation – Whether indemnity costs should be ordered.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr N Jones | Glesson & Co |
| For the Defendants | Mr S Anderson SC with Mr J Slattery | Holding Redlich |
On 28 September 2012, the Court delivered to principal reasons for judgment in the proceeding (the ‘principal reasons’).[1] The principal reasons disclose successive abuses of the caveat procedure by the first, second, third, fourth, sixth and eighth defendants, who are described in those reasons as ‘Robert and the caveators’. Not only was there no arguable interest sufficient to support any of the relevant caveats, but the Court found that the caveats were lodged, pursuant to an agreement between Robert and the caveators, for the dominant purpose of injuring the plaintiff and her husband (Tziporah and Erwin respectively).
[1][2012] VSC 450.
Compensatory and exemplary damages were awarded in Tziporah’s favour.
Tziporah seeks an order that Robert and the caveators pay her costs of the proceeding on an indemnity basis. That course is opposed.
The power to award indemnity costs is reserved for exceptional cases. As a general rule, it is the conduct of the unsuccessful party in conducting the litigation which is the determining factor – not the underlying conduct which gave rise to the litigation.[2] The underlying conduct may, however, be relevant to an assessment of the party’s conduct in the litigation. This is especially so where an unsuccessful party has continued a case, by prosecution or defence, in circumstances where, properly advised, there was objectively no chance of success. In such cases, the Court may presume the continuation of the case was for some ulterior purpose.[3]
[2]For example, NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77.
[3]For example, Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397.
In Ugly Tribe Company Pty Ltd v Sikola& Ors,[4] Harper J summarised some of the special circumstances which may be sufficient to give rise, either alone or in combination with other factors, to an order that the unsuccessful party pay costs on an indemnity basis:
[4][2001] VSC 189.
In seeking costs on an indemnity basis, the first defendant is asking the Court to depart from its usual course. Special circumstances must be present to justify such a departure. These include:
(i)The making of an allegation, known to be false, that the opposite party is guilty of fraud.
(ii)The making of an irrelevant allegation of fraud.
(iii)Conduct which causes loss of time to the Court and to other parties.
(iv)The commencement or continuation of proceedings for an ulterior motive.
(v)Conduct which amounts to a contempt of court.
(vi)The commencement or continuation of proceedings in wilful disregard of known facts or clearly established law.
(vii)The failure until after the commencement of the trial, and without explanation, to discover documents the timely discovery of which would have considerably shortened, and very possibly avoided, the trial. [5]
[5]Ibid, [7] (citations omitted).
Harper J also noted the obvious – that the categories of special circumstances are not closed, as each case must depend upon its own facts.[6]
[6]Ibid, [8].
In this case, the successful plaintiff relies upon a combination of special circumstances to justify the making of an order for indemnity costs in her favour:
(1) The making of an irrelevant allegation of fraud which was not pursued at trial.
(2) Prior to the commencement of the trial, Robert and the caveators contended in their pleadings and in written submissions that there was reasonable cause to lodge the caveats, on the basis of constructive trust. These contentions were abandoned at trial without any explanation.
(3) Robert and the caveators pursued an allegation at trial that the sale to Gestetner Capital was a sham. That allegation was not sustained at trial. It was contended that there was only a flimsy basis for the sham allegation. I do not accept the submission that that is a special circumstance. Although the sham allegation did not succeed, Robert and the caveators were entitled to challenge the bona fides of the sale to Gestetner Capital. After Mr Herszberg gave evidence, the allegation was, responsibly, not pursued.
(4) Following leave being granted to Robert Deutsch to withdraw his admission that he was a party to the agreement with the caveators to lodge the caveats, Robert and the caveators conducted an inconsistent case before the Court on that issue. In that respect, Robert gave implausible evidence which was rejected by the Court.
In all the circumstances, it was submitted that the Court could readily infer that, in the context of this bitter family dispute, the continued defence of the proceeding was for the ulterior purpose of causing continued injury to the plaintiff and her husband, of the kind caused by the offending caveats.
Counsel for Robert and the caveators acknowledged that indemnity costs are often ordered when the Court removes caveats which have no merit.[7] He submitted, however, that each case must depend upon its own facts and there was no general rule that, in all cases, the costs of a proceeding to remove caveats must be paid on an indemnity basis. I accept that submission. This was not a straightforward caveat removal case. The battleground at trial was not whether there was a caveatable interest to support the caveats, which was conceded on the first day of trial, but whether there was a conspiracy between Robert and the caveators for the dominant purpose of injuring Tziporah Deutsch and, if so, whether compensatory and/or exemplary damages should be awarded.
[7]For example, Weingarten v Fletcher [2003] VSC 448; Tobin & Anor v Ezekiel& Anor [2006] NSWSC 694; Business Acquisitions Australia Pty Ltd v Renshall [2006] NSWSC 1399; Smits v Tabone; Blue Coast Yeppoon Pty Ltd v Tabone [2007] QCA 337.
Counsel for Robert and the caveators submitted that the Court should approach the claim for indemnity costs by reference to three distinct periods of the litigation:
(1) the period prior to the commencement of the trial;
(2) the period from the commencement of the trial until the conclusion of final submissions; and
(3) the period after completion of the trial, during which there were a number of mentions and applications of the proceeding for the purposes described below.
The first period, prior to trial, should attract an order for indemnity costs. Until trial, although none of the applications to remove the caveats was opposed and they were removed, Robert and the caveators maintained unsustainable contentions that there were reasonable causes to lodge the caveats.
It was submitted on behalf of Robert and the caveators that the second period, during the trial, should be viewed in a different light. On the first day of the trial, Robert and the caveators abandoned the irrelevant allegation of fraud and conceded that they had no caveatable interest sufficient to constitute a reasonable cause to lodge any of the caveats. From that time, the trial proceeded on confined issues only –
(1) that Robert was not a party to the agreement to lodge the caveats;
(2) that the purpose of the caveats was not to injure Tziporah Deutsch, but to protect a perceived legitimate interest; and
(3) challenges to the amounts claimed for compensation or damages and the exemplary damages claim.
It was submitted that there was nothing unreasonable in mounting these defences at trial. Counsel contended that Robert’s evidence - that he was not a party to the agreement to lodge the caveats, and that the dominant purpose of the caveats was to protect the caveators – although rejected by the Court, took very little time in evidence.
It was submitted that the overwhelming majority of the time at trial was spent exploring the plaintiff’s evidence of causation and loss. I accept that the conduct of Robert and the caveators at trial in these respects was not exceptional, and that such conduct would not ordinarily justify an order for indemnity costs. Even if the conspiracy had been conceded, a trial on these issues would have been necessary. Although the plaintiff was successful, she did not obtain all of the damages which she sought.
There was nothing exceptional about the submissions made on behalf of Robert and the caveators concerning the claim for exemplary damages. Indeed, those submissions were of assistance to the Court in determining that issue and fixing the amount to be awarded. The amount awarded was considerably less than the order of magnitude sought by the plaintiff.
I accept the submissions made on behalf of Robert and the caveators on this issue. I will order that they pay the plaintiff’s costs from the first day of the trial, until the conclusion of final submissions, on a party and party basis.
I turn to consider the third period, between the conclusion of final submissions at trial and the delivery of reasons for judgment. In summary, based on the evidence of Mr Herszberg at trial, Robert and the caveators conceded that the sale to Gestetner Capital was bona fide and not a sham. This was an important concession, because the sale to Gestetner Capital was for $100,000 below market value. For the reasons given in the principal reasons, this had the effect of increasing the compensatory damages award by that amount. With this result in prospect, when the settlement of the sale to Gestetner Capital did not occur on 26 April 2012 in accordance with the contract of sale, and no satisfactory explanation for this was forthcoming from Tziporah, Robert and the caveators asked the Court to withhold delivery of reasons for judgment in the proceeding until the situation was clarified – either by evidence as to reasons the sale had not been completed or the completion of the sale. The Court acceded to that request. An application to re-open the evidence to deal with the issue was foreshadowed if no satisfactory explanation was forthcoming.
There followed a series of mentions and applications during which the issue was raised before the Court and costs were incurred. The information put forward on behalf of Tziporah was uncertain, inconsistent, confusing and unsatisfactory. Orders of the Court that information be supplied were ignored or not complied with in a timely fashion. None of this was the fault of Robert and the caveators. When the various problems were resolved, and the sale to Gestetner Capital was completed, they consented to the delivery of judgment on the following day – on the basis that the sale was a bona fide one.
In all the circumstances, I will order that each party pay their own costs of and incidental to the issues arising in the proceeding after conclusion of final submissions until the delivery of the principal reasons on 28 September 2012. The costs of attendance on that day to receive judgment, and thereafter, should be paid by Robert and the caveators on a party and party basis.
In summary, I make the following orders as to the costs of the proceeding –
(1) The first, second, third, fourth, sixth and eighth defendants pay the plaintiff’s costs of the proceeding, including reserved costs, prior to 26 March 2012 on an indemnity basis.
(2) The first, second, third, fourth, sixth and eighth defendants pay the plaintiff’s costs of the proceeding from (and including) 26 March 2012 to (and including) 4 April 2012, and on and from 28 September 2012, on a party and party basis.
(3) There otherwise be no order as to costs of the proceeding.
SCHEDULE OF PARTIES
| S CI 2011 06667 | |
| BETWEEN: | |
| TZIPORAH DEUTSCH | Plaintiff |
| - and - | |
| PEARL RODKIN | First Defendant |
| ALEXANDER DEUTSCH | Second Defendant |
| ISSAC DEUTSCH | Third Defendant |
| DAVID DEUTSCH | Fourth Defendant |
| REGISTRAR OF TITLES | Fifth Defendant |
| ROBERT DEUTSCH | Sixth Defendant |
| MOISHI GOLDSCHMEIDT | Seventh Defendant |
| ABRAHAM DEUTSCH | Eighth Defendant |
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