Devine v Bernstone
[2020] VSC 507
•17 August 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2019 05474
| Between: | |
| JENNIFER JANE LOUISE DEVINE | Plaintiff |
| -and- | |
| TERRY BERNSTONE | First Defendant |
| -and- | |
| REGISTRAR OF TITLES | Second Defendant |
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JUDGE: | Croucher J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 4 December 2019 (plus costs submissions filed subsequently) | |
DATES OF ORDERS: | 4 December 2019 (caveat removal); 17 August 2020 (costs) | |
DATE OF JUDGMENT: | 17 August 2020 | |
CASE MAY BE CITED AS: | Devine v Bernstone | |
MEDIUM NEUTRAL CITATION: | [2020] VSC 507 | |
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REAL PROPERTY — Caveat — First defendant lodged caveat on plaintiff’s title to land — Application by plaintiff to remove caveat — No proper basis for caveat — Consent to removal of caveat at hearing — Application granted — Transfer of Land Act 1958 (Vic), s 90(3).
COSTS — Whether costs to follow event — Whether costs ordered on standard or indemnity basis — Caveat lodged in wilful disregard of legal advice that no caveatable interest — Caveat lodged for ulterior motive (as a bargaining chip in a commercial dispute) — Indemnity costs ordered.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms C Symons | Melbourne Legal Chambers |
| For the First Defendant | In person | |
| For the Second Defendant | No appearance |
HIS HONOUR:
Overview
On 4 December 2019, when sitting in the Practice Court, I heard an application by Jennifer Devine, pursuant to s 90(3) of the Transfer of Land Act 1958 (Vic) (“the TLA”), for the removal of a caveat lodged by Terry Bernstone over Ms Devine’s property at 4 Tara Court, Torquay. After I explained that he did not appear to have any proper basis for lodging the caveat, Mr Bernstone (who represented himself) withdrew his opposition to the application. He also indicated that he would not lodge any more caveats over the property (this was his second). As a result, I granted Ms Devine’s application to remove the caveat and made orders accordingly.
Ms Symons, who appeared for Ms Devine, then made an application for an order directing Mr Bernstone to pay her client’s costs, and on an indemnity basis (as had been flagged in correspondence between the parties preceding the hearing). Mr Bernstone opposed the application. I reserved my decision on costs pending receipt of written submissions, which have since been received (along with an affidavit from Ms Devine). I did so rather hoping that the parties might reach an agreement on costs in the interim. Unfortunately, that has not occurred. And so it is that I am required to rule on the matter.
In the submissions, Ms Devine has maintained her stance that Mr Bernstone should be ordered to pay her costs on an indemnity basis. Incongruously, Mr Bernstone has now reverted to the position that the lodging of the caveat was justified. While he has not applied to set aside the order for the removal of the caveat, he appears to rely on his asserted justification for lodging the caveat (or perhaps his belief therein) as a basis for an order that his costs be paid (despite being unrepresented) or, alternatively, that the parties bear their own costs.
In the result, I have determined that Mr Bernstone should be ordered to pay Ms Devine’s costs on an indemnity basis, which costs are to be taxed by the Costs Court in default of agreement. My reasons follow.
Background
Ms Devine and Mr Bernstone had been — and as far as I am aware, continue to be — involved in a dispute before the County Court of Victoria relating to monies Mr Bernstone alleges he is owed pursuant to two loan agreements and a share sale agreement made with Soltoro Pty Ltd, a company of which Ms Devine is or was a director. On Mr Bernstone’s account, he is owed around $400,000.
Ms Devine has experienced a number of health issues since 2016. As a result, her ability to work has been affected and this situation has resulted in the accrual of a number of debts.
In an effort to clear her secured debts, Ms Devine came to an agreement with Richard Najdecki (her former husband) regarding the sale of the property in Torquay. Ms Devine and Mr Najdecki subsequently entered into a contract of sale for his purchase of the property, with settlement scheduled for 2:30 p.m. on 28 November 2019.
While Mr Bernstone asserted that the house was sold well under market value in an effort fraudulently to avoid her creditors, he did not say so in an affidavit and there is no other evidence before me supporting this allegation.
On 18 November 2019, Mr Bernstone attempted to lodge a caveat over the property. Under the ‘Grounds of claim’, Mr Bernstone appeared to rely on an agreement with the registered proprietor on 18 November 2019. There were some difficulties with the lodgement and registration of the caveat, so that this process was not finalised until 28 November 2019. As a result, the scheduled settlement had to be cancelled.
This caveat was in fact the second caveat lodged by Mr Bernstone over the property. On 18 January 2018, Mr Bernstone had lodged a caveat to protect his alleged interest under the agreements the subject of the County Court proceedings. On 17 January 2019, Northcote Lawyers and Associates (“NLA”) (representing Mr Bernstone) withdrew that caveat.
Between 28 and 29 November 2019, Ms Devine’s solicitors (Melbourne Legal Chambers (“MLC”)) and NLA exchanged correspondence regarding the caveat. It appears from the relevant correspondence that NLA had not had any involvement in the lodging of the caveat. NLA confirmed that Mr Bernstone had previously been advised that he had no caveatable interest in the property arising from the agreements the subject of the ongoing County Court proceedings.
Between 29 November and 2 December 2019, MLC, on the advice of NLA, exchanged correspondence directly with Mr Bernstone regarding the caveat and sought details regarding the alleged agreement of 18 November 2019. Mr Bernstone provided no explanation regarding that alleged agreement.
In an email dated 2 December 2019, in response to Ms Devine’s request to remove the caveat, Mr Bernstone stated:
Provide me immediately with a Bank Cheque for the sum of $240,000.00 and I will grant your request to have the Caveat that I lodged on 28 November 2019 removed.
On 3 December 2019, Ms Devine commenced proceedings to remove the caveat, pursuant to s 90(3) of the TLA. That provision entitles any person who is adversely affected by a caveat to bring proceedings in this Court against the caveator for the removal of the caveat.
In a letter dated 4 December 2019, the Court was advised that the Registrar of Titles would not be appearing in the matter.
As indicated earlier, I heard the application in the Practice Court on 4 December 2019. At that hearing, Mr Bernstone (who was self-represented) did not press the existence of an agreement dated 18 November 2019. He said that the date had been included on the caveat in error (being the date of the initial attempt at lodgement). Instead, he relied on an alleged conversation with Ms Devine around the time of the loans, as well as citing paragraph 5.4 of the loan agreement, as justification for lodging the caveat. However, having had the nature of a caveatable interest further explained to him (by me) in the course of the hearing, Mr Bernstone ultimately accepted that the caveat was without a proper basis. He also indicated that he would not lodge any further caveats on the property. Accordingly, I granted Ms Devine’s application and ordered that the caveat be removed.
The parties were then invited to make submissions on costs. At that point, Ms Symons made it clear, as had been flagged in earlier correspondence with Mr Bernstone, that indemnity costs were being sought. The question of costs was then reserved pending the Court’s receipt of written submissions from both parties. Those submissions (together with an affidavit by Ms Devine) have since been received by this Court, and are summarised below.
Ms Devine’s submissions
Ms Symons submits that, having been successful in the substantive application for the removal of the caveat, Ms Devine is entitled to have her costs paid by Mr Bernstone. This is so given the usual rule that costs follow the event.
While acknowledging that costs are usually ordered on the standard basis, it is Ms Symons’s submission that there exists some special or unusual feature of this proceeding that warrants the Court departing from the standard position and ordering indemnity costs instead. In particular, Ms Symons submitted that the caveat was lodged by Mr Bernstone (a) in wilful disregard of known facts or clearly established law and (b) for an ulterior motive, which made this case sufficiently special as to justify an order for indemnity costs.
Wilful disregard of known facts or clearly established law
Turning to her first point, Ms Symons submits that Mr Bernstone lodged the caveat with an awareness that he had no caveatable interest in the property arising from the agreements the subject of the County Court proceedings.
Ms Symons points to the fact that this was the second caveat Mr Bernstone had lodged over the property. In her submission, once his own lawyers withdrew the first caveat on 17 January 2019, Mr Bernstone would have been aware, at least from that point onwards, that he had no caveatable interest in the property arising from the agreements the subject of the County Court proceedings. Further, NLA’s correspondence with MLC reveals that NLA advised Mr Bernstone of precisely that fact.
In those circumstances, given that the subsequent caveat was then lodged by Mr Bernstone, not (as it turns out) on the basis of any agreement reached on 18 November 2019, but again purportedly in relation to the agreements the subject of the County Court proceedings, Ms Symons submits that it is plain that Mr Bernstone knew that the caveat was lodged on an unsupported basis.
In addition, despite the fact that Ms Devine’s solicitors communicated that position to Mr Bernstone after the caveat had been lodged, he declined to withdraw the caveat and instead persisted in defending it.
Caveat lodged for an ulterior motive
Ms Symons also submits that, given Mr Bernstone’s knowledge that he had no caveatable interest in the land arising from the agreements the subject of the County Court proceedings, the lodging of the caveat over the property was done with an ulterior motive or improper purpose, and not to protect any arguable interest in the property. That ulterior motive, in her submission, was to exert pressure on Ms Devine to pay the money allegedly owed to Mr Bernstone under the agreements the subject of the County Court proceedings. Ms Symons points to Mr Bernstone’s email of 2 December 2019 (extracted above), in which he requested Ms Devine to provide a bank cheque for $240,000 in return for his removal of the caveat. In Ms Symons’s submission, there is no justification for Mr Bernstone’s use of the caveat system in such a way.
Mr Bernstone’s submissions
Despite his concession during the course of the hearing on 4 December 2019, Mr Bernstone, in his subsequent submissions (via email) to the Court, now (or again) submits that the caveat was lodged on valid grounds, namely based on alleged discussions with Ms Devine in July/August of 2016, and was therefore lawful. Despite these assertions, he has not sought to have the order I made on 4 December 2019 set aside. Nor did he go on affidavit with these claims, despite the fact that Ms Devine filed an affidavit in which she denied any such conversations. Instead, relying on the assertions contained in his email to the Court, Mr Bernstone submits that he should be awarded his costs in this matter (despite being self-represented) or, alternatively, that I should make an order that each party pay his or her own costs. Mr Bernstone provided no further reasons in support of those submissions.
Principles
Section 24 of the Supreme Court Act 1986 (Vic) provides that:
the costs of and incidental to all matters in the Court … is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.
Despite the breadth of the discretion, it must be exercised judicially — that is, not by reference to irrelevant or extraneous considerations, but upon the facts of the relevant litigation.[1]
[1]See, for example, Latoudis v Casey (1990) 170 CLR 534 at 537; Oshlack v Richmond River Council (1998) 193 CLR 72 at 86[34].
The usual basis upon which costs are ordered is the standard basis. However, the Court may make an order for costs on an indemnity basis if satisfied that the conduct of the party warrants such an order. Special circumstances must be demonstrated “which lift the case out of the ordinary”.[2] Such circumstances include the commencement or continuation of proceedings in wilful disregard of known facts or clearly established law, as well as the commencement or continuation of such proceedings for an ulterior motive.[3]
Analysis
[2]Spencer v Dowling [1997] 2 VR 127 at 147 (per Winneke P).
[3]Love v Kempton [2010] VSC 254 at [19] (per J Forrest J).
As I have said, costs usually follow the event. On the material before me, I am not persuaded that there should be any departure from that general rule. I can see no basis on which Ms Devine should be ordered to pay Mr Bernstone’s costs. Since Mr Bernstone was not represented by a lawyer, there could be no legal costs anyway. Certainly, he has not pointed to any such costs. Nor would an order that each party bear his or her own costs be appropriate, given Ms Devine’s success. Instead, I am satisfied that Ms Devine is entitled to have her costs paid by Mr Bernstone.
I am also satisfied, for the following reasons, that Ms Devine should have her costs on an indemnity basis.
First, the nominated justification for the caveat did not exist. It was conceded by Mr Bernstone that there was no agreement dated 18 November 2019. While I accept that that date was included on the caveat in error (being the date of the initial attempt at lodgement), the fact remains that the caveat was lodged and proceedings were launched and run until the last minute on the basis of an agreement that never existed. It was at least extremely careless of Mr Bernstone to have done so.
Second, the alternative justifications for the caveat raised by Mr Bernstone — namely, an alleged conversation with Ms Devine and paragraph 5.4 of the loan agreement — were without merit. His concession (at the hearing) that the application to remove the caveat should succeed only confirmed that fact.
Third, while he did not submit that I should do any such thing, Mr Bernstone’s reversion to reliance on the alleged conversation to justify the caveat has come too late to have any effect on the order directing its removal. However, even if the conversation could be established, I expect that the most that could be said about it on a costs argument is that it might tend to rebut the suggestion that he lodged the caveat without any belief in its legitimacy.
But, as it happens, Mr Bernstone did not lead any evidence that could reasonably establish his assertion. He did not swear or affirm an affidavit in which he attested to the alleged conversation with Ms Devine. Nor had he made any reference to the alleged conversation originally until the very last minute. Ms Devine, by way of contrast, filed with the Court and served on Mr Bernstone an affidavit sworn on 6 December 2019 in which she denies that the alleged conversation occurred and states that at no stage did she consent to Mr Bernstone being entitled to lodge a caveat over the property. While he made various assertions in his email response, Mr Bernstone has not sought to file any responding affidavit. Nor has he sought to cross-examine Ms Devine on her affidavit. In those circumstances, I am inclined to accept the account of Ms Devine.
Fourth, I am unable to avoid the conclusion that Mr Bernstone lodged the caveat in wilful disregard of the repeated advice (including from his own solicitors in the County Court proceedings) that he had no caveatable interest in the property. It was high handed of him to forge ahead in the face of that advice.
Fifth, while Mr Bernstone, perhaps understandably, is frustrated with his ongoing financial dispute with Ms Devine (which, on his account, involves hundreds of thousands of dollars), I accept Ms Symons’s submission that I should be satisfied that he lodged the caveat for an ulterior motive. That ulterior motive was to exert pressure on Ms Devine to repay monies she allegedly owed by employing the caveat to prevent or delay the settlement and sale of the property to her former husband. A caveat is not a bargaining chip. Exasperated though he may have been, it was wrong for Mr Bernstone to lodge the caveat in order to pressure Ms Devine into paying him money that he believed he was owed. In this area of the law, as is often true in other aspects of life, two wrongs do not make a right.
Sixth, as a result of Mr Bernstone’s conduct in refusing to withdraw the caveat and in insisting on defending it until the hearing, Ms Devine had no other recourse than to bring the matter before this Court, and to incur the legal costs associated with such an endeavour.
Finally, Ms Devine’s solicitors warned Mr Bernstone that an application for indemnity costs would be made if the matter proceeded. It seems that that warning went unheeded. He ran the risk of such an application, and now that risk has materialised.
In my view, the foregoing matters, in combination, do “lift the case out of the ordinary” and warrant an order that Mr Bernstone pay Ms Devine’s costs of the proceeding on an indemnity basis.
And I so order.
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