Emma Tait Nominees Pty Ltd v Laprese
[2020] VSC 508
•14 August 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2018 02141
| EMMA TAIT NOMINEES PTY LTD (ACN 005 340 358) | Plaintiff |
| v | |
| MARINA LAPRESE (also known as Marina Dankovic and Marina Dawson and Marina Loprese) | First Defendant |
| and | |
| REGISTRAR OF TITLES | Second Defendant |
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JUDGE: | QUIGLEY J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 14 February 2020 |
DATE OF JUDGMENT: | 14 August 2020 |
CASE MAY BE CITED AS: | Emma Tait Nominees Pty Ltd v Laprese & Anor |
MEDIUM NEUTRAL CITATION: | [2020] VSC 508 |
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REAL PROPERTY – Torrens System – Fraudulent registered mortgage – Where fraud admitted – Loss or damage – Entitlement to indemnity – Transfer of Land Act 1958 (Vic) s 110 – Whether payment by plaintiff in consideration of the assignment of the mortgage sufficiently causally connected to be compensable or otherwise unreasonable.
PRACTICE AND PROCEDURE – Costs – Transfer of Land Act 1958 (Vic) s 110(3)(b) – Whether plaintiff wholly or partially precluded from recovering an indemnity for legal costs – Whether any costs to be awarded to be made on an indemnity or standard basis – Whether costs of summons to restrain the mortgagee’s sale of property ought to be included in award of costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Ravech | Dimos Lawyers |
| For the First Defendant | Mr T B D Gorton | Katherine Moorhouse Perks, Solicitor |
| For the Second Defendant | Mr B Gillies | Land Use Victoria Legal |
HER HONOUR:
Background
Emma Tate Nominees Pty Ltd (‘ETN’) issued proceedings against the Registrar of Titles in respect of a property at Black Rock which had been fraudulently transferred to the first defendant, Marina Laprese (‘Laprese’). ETN sought rectification of the Register and indemnification under s 110(1) of the Transfer of Land Act 1958 (Vic) (‘TL Act’) for loss and damage sustained by it by reason of Laprese’s fraudulent registration.
Laprese had mortgaged the property to AET Corporate Trust Pty Ltd (now known as Sargon) and Sargon advanced Laprese $220,000 on the security of the mortgage which was registered on the title. Later, Laprese also entered into an agreement with MMG Capital (Aust) Pty Ltd under which she granted MMG a caveatable interest in the property in the nature of a charge.
Laprese failed to make the mortgage payments to Sargon and in early 2019 Sargon proposed to sell the Black Rock property at a mortgagee’s auction. ETN issued proceedings against Laprese and the Registrar of Titles in February 2019 to recover its title to the Black Rock property. A summons was issued in that proceeding seeking to restrain the mortgagee’s sale. This summons led to a ‘door of the court’ settlement between ETN and Sargon whereby the sale was averted on the payment by ETN to Sargon in the amount of $395,000. This sum included the balance of the mortgaged funds and other costs and charges according to the terms of the mortgage documentation.
On 2 December 2019 consent orders were made declaring that the amendment to the Register was procured by fraud and that the Registrar was entitled to recover from Laprese as a debt pursuant to s 109(3) of the TL Act such amount as the Registrar of Titles pays out of the Consolidated Fund to ETN by reason of the fraudulent transfer and transactions procured or entered into by Laprese in relation to the Black Rock property.[1]
[1]Other procedural orders in respect of filing and service of the third-party notice by the second defendant and an amended statement of claim by the plaintiff were also made by consent on 2 December 2019.
The Court further ordered that the Register be amended by substituting ETN as registered proprietor in place of Laprese. Further directions adjourned to 14 February 2020 the questions of the quantum for which the Registrar was liable to indemnify ETN under s 110(1) of the TL Act and costs.[2]
[2]Order 6 of the Order made 2 December 2019.
Written submissions were filed on behalf of all of the parties and affidavits were filed on behalf of ETN[3] and Laprese.[4]
[3]John Alevras, ‘Affidavit of John Alevras’ filed in Emma Tait Nominees Pty Ltd v Laprese & Anor, S ECI 2018 02141, 4 February 2020; Anton Biskup, ‘Affidavit of Anton Biskup filed in Emma Tait Nominees Pty Ltd v Laprese & Anor, S ECI 2018 02141, 4 February 2020.
[4]Katherine Moorhouse Perks, ‘Affidavit of Katherine Moorhouse Perks’ filed in Emma Tait Nominees Pty Ltd v Laprese & Anor, S ECI 2018 02141, 11 February 2020.
ETN sought the following orders against the Registrar:
The second defendant pay to the plaintiff out of the Consolidated Fund by way of indemnity under section 110(1) of the Transfer of Land Act 1958:
(a) damages in the sum of $358,607.30; and
(b) the plaintiff’s costs of this proceeding, including the plaintiff’s costs of and incidental to its summons to AET Corporate Trust Pty Ltd filed 27 February 2019 on an indemnity basis, such costs to be taxed by the Costs Court in default of agreement.
The damages sought were made up of the following heads of claim:
(a) $330,000 paid by ETN to Sargon in consideration of the assignment of the mortgage to prevent Sargon from selling up at the Black Rock property as mortgagee in possession following the default by Laprese as mortgagor under the terms of the mortgage.[5]
[5]This sum was originally $395,000 but was reduced to $330,000 when $58,000 was returned by Sargon.
(b) $7,000 retained by Sargon from the security sum of $65,000 paid by ETN as security for any legal costs that Sargon might incur in relation to the mortgage;
(c) the sum of $48 paid on behalf of the plaintiff to lodge the instrument to transfer the mortgage from Sargon to ETN;
(d) the sum of $21,247.74 being for rental for the land that was lost to ETN having been paid instead to the mortgagee;[6]
(e) the sum of $197 paid on behalf of ETN to lodge the application to remove the caveat;
(f) the sum of $114.56 paid on behalf of ETN to lodge the application to amend the Register to restore ETN as registered proprietor of the land.
[6]The second defendant submitted that $21,247.74 formed part of the amount of $330,000 set out in paragraph (a): Registrar of Titles ‘Second Defendant’s Submissions’ filed in in Emma Tait Nominees Pty Ltd v Laprese & Anor, S ECI 2018 02141, 14 February 2020 [5]. See further discussion below at [36].
In relation to the quantum of damage, there are two items which are challenged by both defendants. Firstly, an amount of $69,045.60 (being part of the $330,000 paid by ETN to Sargon in consideration of the assignment of the mortgage) said to be the fees and charges of the mortgage. Secondly, the amount of $7,000 in legal costs retained by Sargon. Otherwise, the items set out in the balance of (a) and in (c) – (f) are either admitted or not opposed by the defendants. The second defendant also challenged the $21, 247.74 rental sum.
On costs, Laprese’s position is that there should be no order as to costs, or in the event costs are ordered in the plaintiff’s favour that they be on a standard basis only. The position expressed by the Registrar was that any award of costs ought to be on a standard basis only.
Subsequent to the hearing on 14 February 2020 the Court offered the parties an opportunity to make submissions on the relevance and effect, if any of s 110(3)(b) of the TL Act on the plaintiff’s claim for legal costs to be paid by way of indemnity under s 110. The parties submissions to the Court had not addressed the relevance or effect of this subsection and as the Court was concerned that this omission may have had a bearing on the question of the extent of the indemnity available to the plaintiff in respect of recovering legal costs, including the summons filed by the plaintiff on 27 February 2019. An opportunity was provided to the parties to make submissions in respect of the following questions:
(a) Does s 110(3)(b) of the TL Act wholly or partially preclude the plaintiff from recovering an indemnity for legal costs in proceeding S ECI 2018 02141?
(b) If yes, to what extent?[7]
[7]The Court set out the questions posed and associated directions by way of memorandum dated 26 March 2020.
Submissions were received from all parties on the s 110(3)(b) questions.
For the reasons which follow, I have determined that in the circumstances here there was no bar to the plaintiffs recovery as a consequence of s 110(3)(b) and that the quantum the second defendant pay to the plaintiff out of the Consolidated Fund by way of indemnity under s 110(1) of the TL Act is $358,607.30 together with costs on an indemnity basis, including the costs of the summons brought against AET Corporate Trust Pty Ltd filed 27 February 2019.
Right to right to recover loss or damage under s 110 of the TL Act
By s 110(1)(c) of the TL Act any person sustaining loss or damage (whether by deprivation of land or otherwise) by reason of any error, omission or misdescription in the Register or the registration of any other person as proprietor, shall be entitled to be indemnified.
Section 110 provides:
110 Entitlement to indemnity
(1)Subject to this Act any person sustaining loss or damage (whether by deprivation of land or otherwise) by reason of—
(a)the bringing of any land under this Act under Division 2 of Part II or by the creation of a provisional folio under Division 3 of Part II;
(aa) a legal practitioner's failure to disclose in a legal practitioner’s certificate a defect in title or the existence of an estate or interest in land;
(b)any amendment of the Register;
(c)any error omission or misdescription in the Register or the registration of any other person as proprietor;
(d)any payment or consideration given to any other person on the faith of any recording in the Register;
(e)the loss or destruction of any document lodged at the Office of Titles for inspection or safe custody or any error in any official search;
(f)any omission mistake or misfeasance of the Registrar or any officer in the execution of his duties;
(g)the exercise by the Registrar of any of the powers conferred on him in any case where the person sustaining loss or damage has not been a party or privy to the application or dealing in connexion with which such power was exercised—
shall be entitled to be indemnified.
(1A)Section 109(2)(c) does not apply to a person entitled to be indemnified under subsection (1)(aa) of this section.
(2)Any person claiming to be so entitled may bring an action against the Registrar as nominal defendant for recovery of damages or join the Registrar as nominal co-defendant in any action brought by such person in respect of such loss against any other person and the Registrar may join any other person as co-defendant in any such proceedings.
(3)No indemnity shall be payable under this Act—
(a)where the claimant his legal practitioner, conveyancer or agent caused or substantially contributed to the loss by fraud neglect or wilful default or derives title (otherwise than under a disposition for valuable consideration which is registered in the Register) from a person who or whose legal practitioner, conveyancer or agent has been guilty of such fraud neglect or wilful default (and the onus shall rest upon the applicant of negativing any such fraud, neglect or wilful default);
(b)on account of costs incurred in taking or defending any legal proceedings without the consent of the Registrar, except any costs which may be awarded against the Registrar in any proceedings in which the Registrar is a party;
(c)in consequence of the Registrar’s not inquiring as to whether a power of attorney was in force when anything purporting to have been done under the power and falling within its scope was done;
(d)where the Registrar, under section 22(1AC) of the Subdivision Act 1988, has treated a consent or request made on behalf of the person whose consent to the registration of the plan is required as being the consent of that person, in consequence of that consent being given or that request being made without lawful authority.
(4)Any indemnity paid in respect of the loss of any estate or interest in land shall not exceed—
(a)where the Register is not amended, the value of the estate or interest at the time when the error omission mistake or misfeasance which caused the loss was made;
(b)where the Register is amended, the value of the estate or interest immediately before the time of amendment;
(c)subject to paragraphs (a) and (b), in the case of a fraudulent mortgage where the mortgagee has complied with section 87A or 87B, the principal amount together with any interest, the rate of which must not exceed the Bank Accepted Bills rate (within the meaning of the Taxation (Interest on Overpayments) Act 1986).
(5)If in any action under this section judgment is given in favour of the Registrar or the plaintiff discontinues or is nonsuited the plaintiff shall be liable to pay the full costs of the Registrar in the action, but save as aforesaid a court may make such order as to costs as it thinks fit.
(6)Any sum by way of indemnity or costs awarded against the Registrar under this section shall be paid from moneys available for the purpose. (emphasis added)
The consolidated fund from which any sum by way of indemnity is paid is a beneficial fund, the purpose of which is to provide compensation to people deprived of an interest in land by operation of the indefeasibility provisions of the Act. The interpretation of legislation containing beneficial provisions – such as s 110 of the TL Act – calls for an approach that has regard to the fact that it is intended to remedy a perceived injustice or provide a benefit to the persons to whom they apply, and it is unlikely that its legislative purpose will be given effect if it is interpreted in a way that that overlooks that intention.[8] In resolving ambiguity, beneficial provisions are to be interpreted in a manner favourable to those who are to benefit from the legislation’.[9]
[8]Dennis C Pearce, Statutory Interpretation in Australia (LexisNexis Butterworths, 9th ed, 2019) 312 [9.1].
[9]Ibid 313 [9.2] citing R v Kearney; Ex parte Jurlama [1984] HCA 14; (1984) 158 CLR 426, 433; Zangzinchai v Milanta (1994) 53 FCR 35, 42–3.
On the purpose of the statutory scheme provided by s 110, Phillips JA in Registrar of Titles v Fairless noted:[10]
Its purpose is, I think, to compensate a person who is deprived of an estate or interest in land by reason of the operation of the system of registration of land titles which is established under the Act. Accordingly, indemnity is afforded where loss is sustained when land is brought under the Act, or if some error is made in the register and so on, as provided in subs (1).
…
As I said earlier, the scheme of s 110 appears to be to provide for indemnity where an owner is deprived of his property by reason of (inter alia) the registration of another in his place, the statute serving to confer a measure of indefeasibility upon the title of that other (whether it be immediate or not, according to the decisions in Vassos and Chasfild). Where, because of such indefeasibility, the true owner has lost his title, it is logical to suppose that he may claim indemnity out of the public purse under s 110; for, if so understood, the indemnity is no more than a cost of the system set up by the Act for title by registration (emphasis added).
[10][1997] 1 VR 404, 418, 423.
Similarly, in Solak v Registrar of Titles Warren CJ observed:[11]
The purpose of the fund is not to accumulate money but to provide compensation to persons who are deprived of an interest in land by the operation of the indefeasibility provisions. The registrar’s primary role is to ensure that persons who are entitled to compensation receive it. The responsibility to protect the fund from unmeritorious claims is not paramount. The registrar “has no legitimate private interest of the kind which often arises in civil litigation. [He] acts, and acts only, in the public interest”. (citations omitted)
[11](2011) 33 VR 40, 57 [88] (‘Solak’).
The defendants argued that the action taken by ETN in paying out the mortgagee to prevent the imminent sale of the Black Rock property occasioned costs which were either not sufficiently causally connected to be compensable, or otherwise were unreasonable in quantum. The two sums in particular were identified being the $69,045.60 of costs and fees charged by the mortgagee and the $7,000 retained by Sargon.
The parties agreed that, in principle, the plaintiff was entitled to damages commensurate with the loss sustained in consequence of the wrongful deprivation. The amount of damages to be paid would be the sum that would put the plaintiff in the same position (but not in a better position) so far as money can do as if the deprivation had not occurred is the limit of compensation.[12]
[12]Registrar-General (NSW) v Behn (1981) 148 CLR 562, 568.
To be entitled to indemnity under s 110 of the TL Act, the loss or damage must be suffered ‘by reason of’ one of the events listed in s 110(1). Whilst there is there no direct authority on the point concerning the interpretation of the words ‘by reason of’ in the context of this provision, there is much authority concerning a similarly worded provision in the New South Wales Torrens legislation – s 129(1) of the Real Property Act 1900 (NSW). That section confers a right to indemnity where the loss or damage ‘arises from’ specified events. Both provisions suggest there must be sufficient connection between the loss or damage and the event giving rise to it. In interpreting the New South Wales provision, the New South Wales Supreme Court has repeatedly applied common sense notions of causation drawn from tort law.
For example, in Chandra v Perpetual Trustees Victoria Ltd,[13] the Court said in relation to a claim for legal costs from the fund under s 129(1):[14]
[13][2008] NSWSC 178 (‘Chandra’).
[14]Ibid [17]-[20].
Causation has proved a difficult matter to elucidate, notwithstanding extensive judicial attempts to do so. Recent and valuable elucidation of some of its problems was given in Flounders v Millar [2007] NSWCA 238, 49 MVR 53 by Ipp JA. In tort law Australian authority establishes that a pragmatic approach rather than one founded in a highly defined enquiry is to be taken to causation questions: March v Stramare (1991) 171 CLR 506.
Practical limits have to be imposed when deciding causation. At some point which has to be recognized by an assessment based on common sense, facts or events become too remote, or too little connected with an outcome to be treated as causes of the outcome: even though they must have existed for the outcome to occur. In Stapley v Gypsum Mines Ltd [1953] AC 663 at 676 Lord Porter said:
Causation is always a difficult topic. One is but using a commonplace if one repeats that many causes have some place in the sequence of events which lead to a result, or follows Lord Shaw in saying that ‘causation is not a chain, but a net’: Leyland Shipping Co. Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350, 369; 34 T.L.R. The question always is how far back is one justified in going or how wide a net must one envisage.
Doctrine expounded in Stapley v Gypsum Mines Ltd can be clearly recognized in March v Stramare which is authoritative in Australia: the fact-finder is left to rely on common sense to show where influences on the outcome should be seen to have ended. The image of causation as a net and not a chain is an important illustration, but leaves much to the judgment of the fact-finder: in Stapley there are several valuable examinations of earlier judicial opinion, but the House was divided and the majority for the interpretation of the facts which prevailed was narrow.”
It is usual that many acts, events and influences can be found to have some relation to an outcome, and choices must be made and boundaries drawn so as to exclude some matters from conclusions about causation employed for the resolution of legal problems and decisions. Judgments have to be made about matters of degree, and influences have to be excluded even though it is possible to see that they are not entirely unrelated.
The causal test in s 129(1) involves considerations of these kinds, and in relation to legal costs, the best expression I can give to the limit is that the legal costs must, in the context of the relationship between a client and the client's solicitor, have been reasonably incurred in litigation relating to the operation of the Act in respect of land.
Likewise, in Kirkland v Quinross Pty Ltd,[15] the Court said:[16]
Earlier in these reasons for judgment I referred briefly to the test of causation applicable in an action for negligence. In my opinion the statutory language (“as a result of the operation” of the Act, and “where the loss or damage arises from” stated matters) enunciates substantially the same test of causality, namely the common sense test expounded by the High Court in March v Stramare. That was the view taken by Bryson J in the Challenger Managed Investments case, at [86].
More recently, his Honour has explored the issue in another s 129 case, Chandra v Perpetual Trustees Victoria Ltd [2008] NSWSC 178 (7 March 2008). There he described tort law’s “pragmatic approach rather than one founded in a highly defined enquiry” (at [17]).
…
A consequence of applying the negligence test of causation is that s 129(1) can probably be satisfied by showing that the operation of the Real Property Act materially contributed to the loss without being its dominant cause (compare Reiffel v ACN 075 839 266 Ltd (2003) 132 FCR 437; 45 ACSR 67; [2003] FCA 194 at [69] and cases there cited).
[15][2008] NSWSC 286.
[16]Ibid [70]-[71].
Whilst there is no Victorian authority that directly applies these principles to a claim for indemnity under s 110(1) of the TL Act, the Court of Appeal appears to have favourably cited Kirkland (albeit in dicta).[17]
[17]Solak (n 11) 51 [53].
The question is essentially one of reasonableness of the action taken in the circumstances. In Unity Insurance Broker Pty Ltd v Rocco Pezzano Pty Ltd[18] Hayne J said:[19]
Reasonableness informs much of the law of contract and, in particular, the assessment of damages for breach. This means, for example, that if the party wronged has acted reasonably, the wrongdoer may be liable for all the loss that the plaintiff has suffered, even if the plaintiffs contact has increased the loss. Conversely, the party wronged is not bound to take all possible steps to mitigate its loss, only those steps which are reasonable.
[18](1998) 192 CLR 603.
[19]Ibid 654 [134].
The defendants submitted that there was no evidence that the steps taken to incur the costs challenged were reasonable and the plaintiff should have joined AET to this proceeding and as part of the proceeding sought to have the Registrar remove the mortgage. It was suggested that the amounts of $69,045.60 and $7,000 were costs incurred voluntarily by ETN and that these costs were the price that ETN chose to pay to obtain an assignment of the mortgage rather than to join AET to the proceedings and seek rectification of the register by removing the mortgage.
This submission was challenged by ETN. ETN said it paid the sum of $395,000[20] to Sargon and took assignment of the mortgage in consideration pursuant to a deed entered into by those parties on 4 March 2019 at the insistence of Sargon. ETN did so to prevent Sargon from enforcing its mortgage and selling up the Black Rock Property. ETN was powerless to resist the enforcement of the mortgage as it no longer had a registered interest in the land and was a stranger to the mortgage which governed the rights between the first defendant as mortgagor and the mortgagee.
[20]$58,000 was later refunded by Sargon.
ETN argued that rather than the payment being discretionary, this action was the only reasonable action it could take to prevent the sale of the property. It was a reasonable action to take and was one which was preferable to that suggested by the defendants as it incurred less costs to the Registrar than the defendants’ suggested course of action.
ETN argued that the payment made was a reasonable one being a commercial deal presented to the plaintiff at the door of the court when it sought a stay of the sale of the Property.
I do not accept that the course suggested by the defendants in joining Sargon (then AET) to this proceeding and seeking to have the Registrar remove the mortgage was a more appropriate step to take than the actions taken by ETN. As ETN explained, this proposition proceeds on a false premise that it was within the plaintiff’s power to seek rectification of the register by removing the mortgage. I accept this was not so because the mortgagee was neither party to nor privy to the Laprese fraud. Accordingly, the indefeasibility provisions of the TL Act operated to confer an indefeasible interest on Sargon as mortgagee of the land and it would not be within ETN’s power even after it was restored as a registered proprietor as it now has been to procure the removal of the mortgage.
I am of the opinion that the action of ETN in taking the steps that it did to prevent the mortgagee sale including entering into a commercial arrangement was reasonable and sufficiently meets the test of causation required by s 110(1)(c). It is not necessary that the actions of the plaintiff must be the only action available to it. The test is properly that the actions taken by the plaintiff were reasonable in the circumstances. As noted later in these reasons:[21]
To cite Oliver Wendell Holmes Jr in another context, “Detached reflection is not required in the presence of an uplifted knife.”
[21]See judgment at [67]; Chandra (n 13) [6] (Bryson JA).
There is no direct authority on the question of causation in proceedings brought pursuant to s 110 of the TL Act other than those to which reference has already been made, and these comments are of a general nature. However, I am persuaded that as the legislation is beneficial legislation, I ought to interpret it to the claimant’s benefit.
As is discussed below, I am not persuaded that s 110(3)(b) is a bar to these amounts falling within the category of loss or damage provided for in s 110(1) of the TL Act.
The items which make up the total quantum claimed, including the amounts challenged of $69,045.60 and $7,000 for costs and charges demanded by Sargon to settle the proceedings to prevent the sale of the Black Rock Property at the imminent mortgagees auction, are appropriate in the circumstances.
I accept that there may be circumstances where the quantum of these type of commercial charges could be characterised as excessive or extortionate, but I am not convinced on the facts and explanation given by ETN before me that this is the case here.
I note that there was a question raised by the first defendant querying whether an amount for rental received and offset against moneys owed on the mortgage in a running account was properly claimed. The explanation given by ETN was that the money would have been received by ETN as rental and not offset against the mortgage payments and consequently was a head of loss claimable. I accept this is the case and I have not deducted this amount.
Costs
There are three questions which arise in respect of the costs sought by the plaintiff. The first question is what barrier, if any, is presented by s 110(3)(b) on the plaintiff’s claim for costs to be indemnified under the TL Act.
The second question is whether the costs incurred by the plaintiff in the proceeding brought pursuant to s 110 of the TL Act ought to be awarded on an indemnity or standard basis.
The third question concerns the costs of the summons issued on 27 February 2019 which was brought to restrain the sale of the ETN property by the mortgagee and if those costs should be included in any award.
Submissions requested on s 110(3)(b) of the TL Act
After reserving its decision, it became apparent to the Court there was a question of the relevance or effect of s 110(3)(b) of the TL Act which had not been addressed by the parties. By memorandum to the parties dated 26 March 2020, the Court offered the parties an opportunity to make submissions on this issue.
Section 110(3)(b) provides:
(3)No indemnity shall be payable under this Act—
…
(b)on account of costs incurred in taking or defending any legal proceedings without the consent of the Registrar, except any costs which may be awarded against the Registrar in any proceedings in which the Registrar is a party…
The memorandum indicated that this provision may preclude the plaintiff from recovering legal costs except if the proceeding was taken with the consent of the Registrar, or the costs are awarded against the Registrar.
The interpretation of this provision therefore compels resolution before the basis of any award of costs can be contemplated.
The question of the applicability of s 110(3)(b) is relevant to the summons dated 27 February 2019 and to the question of that part of the loss and damage claimed being the $7000 retained by Sargon and $69,045.60 of the amount of $330,000 which are fees and charges claimed paid in accordance with the mortgage schedule. The costs in the amount of $69,045.60[22] are identified as being “costs and charges relating the sale of property, including cost of defending injunction brought by Emma Tait Pty Ltd.” The details of what items and the amount is not further particularised. The defendants claim that a portion of this amount could be categorised as legal expenses. This raises the question of whether an amount in these circumstances falls within the terms of s 110(3)(b) and excluded by its operation.[23]
[22]John Alevras, ‘Affidavit of John Alevras’ (n 3) Exhibit JA-2.
[23]This argument was raised as an additional and alternative argument by the defendants to argue that this head of claim was unreasonable.
Does s 110(3)(b) operate in the circumstances here?
The plaintiff accepts that there is a bar on recovery by way of indemnity for costs if proceedings are taken without the consent of the Registrar unless the exception created by that section applies. The plaintiff submits such an exception is satisfied where:
(a) an award of costs against the Registrar is justified; and
(b) the Registrar is a party to the proceeding.
The plaintiff argues that the language of s 110(3)(b) evinces an intention that a claimant falling within the “exception” of that section should be indemnified for its loss.
As it has been successful in its claim, the plaintiff argues that an award of costs against the Registrar is consequently justified, in the absence of special circumstances warranting departure from the general rule that a successful party is entitled to its costs in a proceeding. This construction of s 110(3)(b) gives effect to the purpose of putting a person who suffers a loss in the same position, as far as money can do it, as if the title had never been disturbed by including costs of any necessary legal action within the loss covered by the indemnity.
The defendants’ interpretation of s 110(3)(b) asserts that there is a bar to the recovery of costs by way of indemnity on account of costs incurred in taking or defending any legal proceedings without the consent of the Registrar. As the plaintiff had not sought the consent of the Registrar prior to the filing of the proceedings, and in particular in respect of the summons dated 27 February 2019, neither of the defendants should be called upon to pay costs in respect of it.
They argued that the summons was resolved by consent between the plaintiff and the third-party has extinguished the matter before the Court and any claim pursuant to s 110 does not resuscitate or keep alive any such entitlement.
The position argued by the first defendant is that s 110(3)(b) does not bar a claimant from recovering the expenses of a legal proceeding through the ordinary award of costs whether against the Registrar or against another party. That is, the ordinary award of costs is separate from an indemnity award and the Court’s power and discretion to award costs is unaffected by s 110(3)(b).
The point of difference between the plaintiff and the first defendant’s submissions is in the emphasis placed on the structure of s 110(3)(b) and lies in the articulation of the basis upon which the Court may award costs where the Registrar has not consented to the proceeding. While the first defendant accepts that a costs order may be awarded against the Registrar, the power to do so is grounded in the courts general power to award costs in proceeding and is not ‘rolled ‘into the payment of indemnity under which s 110 of the TL Act.
Characterised in this way the first defendant submits the costs incurred in taking the proceedings, whether those costs, legal expenses, disbursements or any other related amounts, cannot now be sought by the plaintiff for inclusion in the indemnity award, the plaintiff having failed to seek or obtain the consent of the Registrar before commencing the proceeding. As such, any costs orders to which the plaintiff may be entitled can be made only pursuant to the court’s discretion to award costs, excluding costs incurred in defending injunction brought by the third-party mortgagee.
Findings on s 110(3)(b)
The Summons
The proceeding was issued against the Registrar and Laprese. The limitation on the indemnity payable under the TL Act operates only in respect of any costs which may be awarded against the Registrar in any proceedings in which the Registrar is a party.
I have already found[24] that the action by the plaintiff in bringing the summons within the proceeding was a reasonable step to take. In my view, it was not necessary for the consent of the Registrar to have been sought and obtained in respect of the summons as the Registrar was a party to the proceedings as issued. The summons was an interlocutory step taken within the proceeding overall.
[24]See [30]-[31].
The costs of the summons of 27 February 2019 incurred by the plaintiff are costs which are in the proceeding to which the Registrar is a party. Section 110(3)(b) is therefore not engaged.
$69,045.60 costs arising from the Mortgage contract
I am of the view that the $69,045.60 which is said by the plaintiff to be the fees and charges claimed and paid in accordance with the mortgage schedule are not costs incurred in taking or defending any legal proceedings as excluded by s 110(3)(b).
They are part of the loss and damage which was the price paid by the plaintiff to settle the action against the mortgagee and prevent the mortgagee sale from going ahead.
Consequently, again s 110(3)(b) is not engaged.
Indemnity or standard basis
The plaintiff seeks the costs of the proceeding on an indemnity basis in the amount of $239,088.94. These costs are particularised in the plaintiffs Further and Better Particulars of 21 November 2019.
The defendants argued that the circumstances identified here did not justify an award of costs on an indemnity basis.
The first defendant further argued that s 110 does not expressly provide that any award for costs is to be made only on an indemnity basis, and the language of the section is not such that s 24(1) of the Supreme Court Act 1986 (Vic) has been displaced, in essence creating a mandate whereby an award on an indemnity basis is compelled.
Costs are in the discretion of the Court. In the absence of any specific statutory provision the power to award costs arises from the Supreme Court Act. The usual order as to costs is that costs follow the event. In the usual course, there needs to be something more in the conduct or about the proceeding which would justify an award of the costs in the proceeding to be made on an indemnity basis.
In Ugly Tribe Pty Ltd v Sikola[25] Harper J identified a number of circumstances which warranted a special costs order. None of these factors are relevant or applicable in this case. However, His Honour also noted that the category of circumstances was not closed.[26]
[25][2001] VSC 189.
[26]Ibid 4 [8].
In my view, it is open to the Court to take into account that the claim is one which is made pursuant to beneficial legislation which seeks to indemnify the claimant. I have not been referred to any authority which supports the contrary proposition.
There are examples of cases where the claim for indemnity includes costs of litigation. I note that the first defendant argues in its submissions that there is not a head of claim made pursuant to s 110(1) for costs of the litigation. In my view, costs would be available as a head of claim pursuant to s 110. As I have noted below in respect of the 27 February 2019 summons, if the costs of the summons were not properly included in the plaintiff’s costs of the proceeding they could be included as part of the loss and damage properly causally connected to the action the plaintiff took in preventing the mortgagee sale.
Whilst in the context of similar, but not identical New South Wales legislation Chandra v Perpetual Trustees Victoria Ltd concerned a claim for legal costs by way of indemnity from the assurance fund in New South Wales. In that case, Perpetual took steps to enforce a forged mortgage that secured two loans from Perpetual. Compensation was paid under s 129 to Perpetual for the loans. The plaintiffs obtained an order for costs against Perpetual Trustees Victoria, and those costs by agreement were paid by Perpetual Trustees Victoria at 75% of the total amount – the plaintiffs proceeded to claim the remaining 25% of their costs out of the Torrens Assurance Fund as compensation in accordance with s 129(1).
Bryson AJ held that the plaintiff’s costs of the litigation as claimed were within the meaning of s 129(1) loss or damage which they suffered as a result of the operation of the Real Property Act arising from an act or omission of the Registrar General within s 129(1)(a). In refuting the Registrar General’s claim that that there should not be included in the assessed compensation the plaintiffs’ costs insofar as the plaintiffs pursued a claim against the Registrar General, Bryson AJ said:[27]
The registration on the title register for their house of a forged mortgage and the attempt to enforce it imposed on them the practical necessity of proceeding, with all available speed, to claim judicial remedies; and they were also under the practical necessity of joining Perpetual Trustees Victoria as well as the Registrar General as defendants; they could not well establish what their loss or damage was without obtaining judicial determination on Perpetual Trustees Victoria's rights under the mortgage. Nor could they establish what their loss or damage was unless they also joined Mr Miller as a defendant.
…
When the plaintiffs commenced their proceedings they were under extreme challenge for possession of their dwelling by Perpetual Trustees Victoria, a not inconsiderable opponent, and were confronted by a forged mortgage registered on the Torrens Register, a formidable threat to their peace and security. They could not be expected to act with restraint in the pursuit of remedies which appeared to be available and in particular they could not be expected to try conclusions with Perpetual Trustees Victoria before initiating a claim on the Fund to get the money with which to pay out the mortgage if they had to. To cite Oliver Wendell Holmes Jr in another context, “Detached reflection is not required in the presence of an uplifted knife.” The state of the register, with the forged mortgage on it, made it essential for the plaintiffs in the prudent protection of their own interests that they obtain judicial decision on the liability of the three persons whom they sued. The costs of that litigation are in my finding loss or damage as a result of the operation of the Act in respect of their land, which loss and damage arose from the acts of the Registrar General.
[27]Chandra (n 13) [5]-[6].
Bryson AJ also made some observations about the degree of connection required to make good a claim for indemnity for legal costs from the assurance fund in dealing with a claim made by the mortgagee in that case for its costs. His Honour said:[28]
…in relation to legal costs, the best expression I can give to the limit is that the legal costs must, in the context of the relationship between a client and the client’s solicitor, have been reasonably incurred in litigation relating to the operation of the Act in respect of land. While the costs which pass the causation test are no doubt ample, they are not uncontrolled or limitless. Aspects of legal work on the litigation which were futile and unproductive fall outside it. It must have been reasonable to perceive that the work should be done and that the charges should be made in the interest of the client and in the circumstances of the time.
[28]Ibid [20].
His Honour rejected some of the claims made by the mortgagee (as opposed to the defrauded mortgagor, which succeeded) and noted that a process of examination would be required to identify which costs met the causative test outlined above.
In my view, this proceeding for compensation for loss and damage pursuant to s 110 of the TL Act is of itself a factor in determining to award costs on a standard or indemnity basis. The proceeding was necessary in order to ensure that the fraudulent registration was rectified and the joinder of only these two defendants was appropriate.
Costs of the Summons 27 February 2019
I turn next to the question of the costs of the summons of 27 February 2019. The proceeding was issued between ETN and Marina Laprese the as first defendant and the Registrar the second defendant. However, the summons of 27 February 2019 was a summons directed at AET Corporate Trust (Sargon) which was the mortgagee in possession about to sell the Black Rock property.
It was argued by both the first and second defendants that as they did not participate in this summons the costs of it ought not to be awarded against them. It was argued that the proper course for the plaintiff was to join AET Corporate Trust (Sargon) to the proceeding and deal with the transfer back of the title to ETN in the proceeding.
I am of the view as I have stated above that the action of the plaintiff to restrain the sale of the property by the mortgagee was an appropriate one. Further, I accept that by proceeding in the manner that it did, this was the most cost and time effective way in which to achieve the transfer of the title back to its rightful owner.
The defendants argued that the order made by the court in respect of the summons which was dealt with by consent included no order as to costs and as a consequence the court should not now make an order interfering with that position.
In its further submissions[29] the plaintiff considers any order made as to costs in respect of the summons needs to be considered supplementary to, and not a variation of the order of Garde J on 4 March 2019 making no order as to costs between the plaintiff and the third-party mortgagee. The plaintiff proceeds on the basis that the order does not address the costs as between the plaintiff and the Registrar but rather between the plaintiff and Sargon (formerly AET). As such, the issue of costs remains yet to be resolved by the court and is supplemental to his Honours order.
[29]Emma Tait Nominees Pty Ltd, ‘Supplementary submissions for the plaintiff on the question of costs of its summons filed 27 February 2019’, Submission in Emma Tait Nominees Pty Ltd v Laprese & Anor, S ECI 2018 02141, 6 May 2020.
I am of the view that in the disposition of the summons with no order as to costs as between the parties to that summons does not prevent the court now in considering the costs of the plaintiff in the s 110(1) proceeding overall. The cost of the summons incurred by the plaintiff, was in my view, a necessary step and a reasonable one and it was a step taken in this proceeding to which Registrar and Laprese are the defendants.
If I am wrong in its analysis, I would consider that the plaintiff’s costs of the summons could have been properly included in the loss and damage occasioned by the plaintiff in seeking to prevent the mortgagee sale and been recoverable in addition to the $330,000 which has been claimed.
Conclusion
The quantum of loss and damage the Registrar of Titles is ordered to pay out of the Consolidated Fund to ETN by reason of the fraudulent transfer and transactions procured or entered into by Laprese in relation to the Black Rock property is $358,607.30.
The appropriate order in respect of costs is that the plaintiff’s costs of this proceeding including the plaintiff’s costs of and incidental to its summons filed 27 February 2019 be paid joint and severally by the defendants on an indemnity basis such costs to be taxed by the costs Court in default of agreement.
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