Diep v Tran (Costs)

[2020] VSC 171

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

PROPERTY LIST

S ECI 2020 01572

DE DIEP	Plaintiff
v
TI KE TRAN	First Defendant
and
KIM BA AU	Second Defendant
and
THI HA NGAN DANG	Third Defendant

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JUDGE:	John Dixon J
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers
DATE OF JUDGMENT:	9 April 2020
CASE MAY BE CITED AS:	Diep v Tran & Ors (Costs)
MEDIUM NEUTRAL CITATION:	[2020] VSC 171

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PROPERTY – Caveat – Costs – Application made for summary removal of caveat – Caveat withdrawn by defendant before application was determined – Caveat used as bargaining chip – Whether indemnity costs appropriate.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	The application was determined on the papers.
For the Defendant

HIS HONOUR:

1. The plaintiff applied for the summary removal of a caveat affecting a property at Keysborough that was subject to a contract of sale, on the basis that the net proceeds of the sale would be retained on trust by the plaintiff’s solicitor in an interest bearing controlled monies account. The application was said to be urgent, as the contract of sale was scheduled to settle on 31 March 2020.

1. On 3 February 2020, the first defendant (Mr Tran) lodged a caveat on the property, asserting a caveatable interest on the basis of an agreement dated 1 May 2019 between Mr Tran of the one part, and the second and third defendants of the other part. Notwithstanding that the solicitors for the plaintiff made several requests, Mr Tran did not produce a copy of this agreement to the plaintiff. It has never been sighted.

1. On 17 and 26 March 2020, the plaintiff’s solicitor wrote to the solicitors who had lodged the caveat on Mr Tran’s behalf, seeking the withdrawal of the caveat.

1. On 27 March 2020, Mr Burton of the plaintiff’s solicitors spoke with Mr Tran by telephone, seeking an urgent response to the plaintiff’s request that the caveat be removed. Mr Burton deposed that Mr Tran stated that he would not remove the caveat until there was ‘an offer on the table’ and that he ‘plays poker and was happy to spend a couple of hundred thousand dollars to make a point’. Following that conversation, the plaintiff’s solicitors again wrote to Mr Tran seeking the withdrawal of the caveat.

1. Then, on the same day, the solicitor who had lodged the caveat communicated to the plaintiff’s solicitor that he no longer acted for Mr Tran. Later that day, Mr Burton again spoke with Mr Tran and, during that conversation, suggested that the caveat be withdrawn, the settlement proceed and the net proceeds of the sale be placed in a trust account pending resolution of the dispute. Mr Tran responded with words to the effect of ‘you said you were going to make an offer, there’s no offer of money. Why would I remove my caveat if you are not going to give me money.’

1. There being no further response from Mr Tran, the plaintiff issued this proceeding. The court’s initial response by email at 9:46am on Monday 30 March 2020, about the conduct of the application, was copied to Mr Tran. Approximately 30 minutes later, he emailed the plaintiff’s solicitor stating that the caveat would be withdrawn that day. The caveat was withdrawn that day.

1. Thereafter, the court ordered that the outstanding of question of costs be determined on the papers, and gave directions for the plaintiff and Mr Tran to file and serve written submissions and any further affidavits in support of their positon.

1. The time for compliance with that order has now passed. The plaintiff has filed submissions and a further affidavit sworn by his solicitor. The defendant has neither filed submissions, nor communicated with the court and has, accordingly, failed, without excuse, to comply with the order. I have determined the application for costs without the benefit of submissions or any evidence from Mr Tran, effectively on an ex parte basis. In doing so, I am satisfied that Mr Tran, or his new solicitor, was aware of, but declined, the opportunity to file an affidavit and make submissions.

1. The plaintiff seeks an order that Mr Tran pay his costs, to be assessed on an indemnity basis.

1. I am satisfied that the following findings are warranted. First, Mr Tran failed to provide any justification for the interest claimed by his caveat, either when asked to do so by the plaintiff’s solicitors prior to the issue of the proceeding, or to the court after becoming aware that the proceeding was on foot. Plainly, the Mr Tran elected to concede that he had no caveatable interest in the property.

1. Secondly, prior to the issue of the proceeding, the plaintiff made a sensible and reasonable proposal that the net proceeds be retained in a trust account, enabling settlement to proceed while preserving the opportunity for Mr Tran to articulate his dispute, and for the parties to resolve the disputed entitlement to those proceeds without affecting the rights of third parties.

1. Thirdly, I am satisfied that Mr Tran was maintaining the caveat until the last moment in order to extract a monetary offer from the plaintiff. The caveat was impermissibly being used as a bargaining chip, an inference clearly open from Mr Burton’s second affidavit and from the chronology of events.

1. This court has repeatedly stated that caveats are not to be used as bargaining chips. Caveats serve a particular function in the statutory Torrens system of property title registration. Their function is to notify interests claimed in land and to prevent dealings adverse to those interests being registered on the title until disputes about the existence, validity, and priority of such interests have been resolved. Lodging a caveat, without proper cause, to force another party to pay money in exchange for the withdrawal of the caveat, or to incur legal expense in commencing a Supreme Court proceeding, is an ulterior or collateral purpose, characterised by many judges of this court as a serious misuse of the relevant statutory provisions.[1]

   [1]Goldstraw v Goldstraw [2002] VSC 491, [38]–[39]; Weingarten v Fletcher [2003] VSC 448; Luther v Milner [2009] VSC 595; Love v Kempton [2010] VSC 254, [30]; Piroshenko v Grojsman & Ors (2010) VR 489, 491 [23]; Ren v Shi [2012] VSC 271, [44]–[49]; Li v Xin [2013] VSC 107; Alliance Developments Pty Ltd v Arbab [2019] VSC 832.

1. The plaintiff’s solicitors informed Mr Tran of the principle that caveats are not to be used as bargaining chips on three occasions prior to the issue of the proceeding.

1. I am satisfied that in the particular circumstances of this application, Mr Tran’s caveat was a serious misuse of the relevant statutory provisions for an improper or ulterior purpose.

1. In Ugly Tribe Company Pty Ltd v Sikola & Ors,[2] Harper J included in his frequently cited list of special circumstances in which it has been held proper to order indemnity costs, the commencement or continuation of proceedings for an ulterior motive. A number of the cases that I have footnoted above demonstrate the application of this principle where a caveator has, without proper grounds for a caveat, lodged it as a bargaining chip.

   [2][2001] VSC 189, [7].

1. I will order that the plaintiff’s costs of the application be paid by the first defendant and be assessed on an indemnity basis.