Glenis v Ikosedikas (No 2)

[2018] VSC 324

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION
PRACTICE COURT

S CI 2018 01788

JERRY GLENIS	First Plaintiff
FAYE GLENIS	Second Plaintiff
v
PETER IKOSEDIKAS	First Defendant
TORUA PTY LTD	Second Defendant
THE REGISTRAR OF TITLES	Third Defendant

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JUDGE:	T FORREST J
WHERE HELD:	Melbourne
DATE OF HEARING:	22 May 2018
DATE OF JUDGMENT:	15 June 2018
CASE MAY BE CITED AS:	Glenis & Anor v Ikosedikas & Ors (No 2)
MEDIUM NEUTRAL CITATION:	[2018] VSC 324

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COSTS – Property law – Application for removal of caveat – Caveat removed – Serious question to be tried but balance of convenience in favour of plaintiffs – Application for costs by plaintiffs – Application for costs by defendants – Whether costs should follow event – No order as to costs – Supreme Court Act 1986 s 24.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D Laidlaw	Stenta Legal
For the Defendant	Mr D Clough	GPZ Legal

HIS HONOUR:

1. On 30 May 2018, upon the application of the plaintiffs, I ordered that a caveat lodged on behalf of the first and second defendants (‘the defendants’) be removed from the register book.[1]  The plaintiffs are the registered joint proprietors of the relevant property.

   [1]Glenis & Anor v Ikosedikas & Ors [2018] VSC 278.

1. In short, I found that there was a serious question to be tried as to whether the caveat was lodged as a part of a loan agreement between the first plaintiff and the first and/or second defendants.  If the loan agreement was authentic (which was accepted for the purposes of this application) then it seemed clear that the first plaintiff intended to grant the defendants a charge over the property as security for loan funds already advanced.[2]

   [2]For further elucidation on this issue, see ibid [12], [13].

1. I was persuaded however that, notwithstanding this finding, the balance of convenience favoured the plaintiffs.  Essentially, I found that because of the way plaintiffs had structured their affairs, the caveat was ineffective as an instrument capable of protecting any interest the defendants may have.  To leave it in place would be a futile exercise, frustrating the plaintiffs’ capacity to deal with their property and offering no effective security to the defendants for the loan funds advanced.

1. In these circumstances, the plaintiffs apply for costs.  They argue that it ought follow the usual rule that costs follow the event; it mattered not that there was a serious question to be tried, the fact is that the balance of convenience favoured them, clearly so, and the result was pre-ordained.  The defendants resisted the plaintiffs’ application and submitted that I ought exercise my discretion to order that the successful plaintiffs pay their costs because, inter alia:

(a)   they (the plaintiffs) structured their affairs to render worthless the defendants’ security in the caveat and thus could not claim to have ‘clean hands’;

(b)   there was no evidence that the plaintiffs were under any duress to repay the mortgage or sell the property;

(c) the plaintiffs could have taken a cheaper course under s 89A of the Transfer of Land Act 1958;

(d)  the plaintiffs failed to inform the defendants there would be no surplus funds from the sale until 9 May 2018;

(e)   the plaintiffs did not engage with the defendants to agree to withdrawal of the caveat in exchange for an agreement that any surplus funds left after the mortgage was paid out be held in trust.

Analysis

1. I have concluded that I should make no order as to costs.  Whilst I have found in favour of the plaintiffs, in my view their behaviour can reasonably be characterised as sharp.  It is undoubted that the first plaintiff, at least, owes the defendants a large amount of money, the debt commencing before 2011 and compounding to this day.  The defendants were entitled to lodge a caveat over the property and did so belatedly.  On the relatively limited material before me, I am satisfied that the plaintiffs took advantage of the defendants’ dilatory response and restructured their affairs so that the relevant property was mortgaged to its full value and another property (not the subject of the caveat) is now owned virtually outright.  This property is in the name of the second plaintiff only.  She was not a participant to the initial loan agreement.  Thus, through some complex financial stratagems, the first plaintiff has placed any equity he may have had in the caveated property beyond the reach of the defendants.

1. The court has a broad, unfettered discretion in awarding costs.[3]  Though unfettered, this discretion must be exercised judicially, and in civil matters costs taxed at a standard basis ordinarily follow the event.[4]  Notwithstanding this, in my view it would be unjust to require the defendants to pay the plaintiffs’ costs of this proceeding.  As I have explained, I consider the plaintiffs have engaged in sharp practice.  The futility of preserving the caveat was the reason I determined that it be removed, and that futility is the direct result of the plaintiffs’ manoeuvres.  In my view, it would be unconscionable to award costs to the plaintiffs in these circumstances.

   [3]Supreme Court Act 1986 s 24.

   [4]Oshlack v Richmond River Council (1998) 193 CLR 72, 106 [88] (McHugh J), 122 [134], 126 [143] (Kirby J).

1. The primary submission on costs of the defendants is that, despite losing the cause, I ought order that the plaintiffs pay their costs.  I know of no authority to the effect that in a caveat removal application, if a party demonstrates a serious question to be tried but loses on the balance of convenience question, then somehow he or she is entitled to costs.  Had the defendants lodged their caveat in a timely way (as opposed to eight years after the loan agreement) these proceedings may well have been avoided.  I can see no basis to justify a costs order against the successful plaintiffs.

1. Accordingly, I shall make no order as to costs in this matter.