Hanson Construction Materials Pty Ltd v Calbaro - [2024] WASC 338

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   HANSON CONSTRUCTION MATERIALS PTY LTD -v- CALABRO [2024] WASC 338
CORAM:   WHITBY J
HEARD:   ON THE PAPERS
DELIVERED          :   11 SEPTEMBER 2024
FILE NO/S:   CIV 1650 of 2024
BETWEEN:   HANSON CONSTRUCTION MATERIALS PTY LTD
Plaintiff
AND
GIUSEPE SANTO CALABRO
First Defendant
REGISTRAR OF TITLES
Second Defendant

Catchwords:

Costs - Application for indemnity costs - Extension of caveat pursuant to s 138C of the Transfer of Land Act 1893 (WA) - Indemnity costs pursuant to contractual terms - Indemnity costs to reflect disapproval of first defendant's conduct

Legislation:

Supreme Court Act 1935 (WA)
Transfer of Land Act 1893 (WA)

Result:

Plaintiff's application for indemnity costs granted

Category: B

Representation:

Counsel:

Plaintiff	:	P J Hannan
First Defendant	:	J R Marzec
Second Defendant	:	No appearance

Solicitors:

Plaintiff	:	Patane Lawyers
First Defendant	:	Zafra Legal
Second Defendant	:	No appearance

Case(s) referred to in decision(s):

Bank of Western Australia Ltd v Marsh [2000] WASC 208
Bank of Western Australia Ltd v Ponga (unreported) (Master Sanderson) Supreme Court of WA Library No. 980697
Boon v Burt [2020] WASC 64 (S)
Chateau Constructions (Aust) Ltd v Zepinic [2013] NSWSC 1326
Fountain Selected Meat (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397
Gamba Holdings UK Ltd v Minories Finance Ltd [1993] Ch 171
Oswal v Carson (No 4) [2011] VSC 434
Polaris Properties (WA) Pty Ltd as trustee for The Polaris Trust v Pickworth [2019] WASC 119 (S)
Rumball v Mortimore [2000] WASC 126
Yara Australia Pty Ltd v Oswal [2012] WASCA 204

WHITBY J:

Hanson Construction Materials Pty Ltd, the plaintiff, commenced this action to extend the operation of caveat No. 9891217 (Caveat) pursuant to s 138C of the Transfer of Land Act 1893 (WA) (TLA).
On 19 February 2024, the Caveat was registered by the plaintiff against Apartment 10, The Bellevue, 18 Bellevue Terrace, West Perth WA 6006 (Apartment 10). The first defendant, Giusepe Calabro, is the registered proprietor of Apartment 10.
On 20 May 2024, the Registrar of Titles, the second defendant, issued a notice to the plaintiff under s 138B of the TLA advising that unless proceedings were commenced, the Caveat would lapse. This notice was issued upon the application of the first defendant.
The Caveat would have lapsed on 13 June 2024, unless, before that time, the second defendant was served with a copy of an order of this court extending its operation.
This action was commenced by originating summons filed on 4 June 2024. On 7 June 2024, I made orders extending the operation of the Caveat until further order of the court and made programming orders for the final hearing of the action. The action was listed for final hearing on 1 August 2024.
On 8 July 2024, the solicitors for the first defendant informed the solicitors for the plaintiff that the first defendant would no longer challenge the extension of the Caveat. However, the parties could not agree on consent orders.
On 1 August 2024 at the hearing of the matter, the parties agreed that no further substantive orders were required given that I had previously made an order extending the operation of the Caveat until further order of the Court. The parties were not, however, in agreement as to the appropriate costs orders to be made. The plaintiff sought an order that the first defendant pay its costs on an indemnity basis. The first defendant sought an order that he pay the plaintiff's costs to be taxed if not agreed. I made an order that each provide short submissions in relation to costs.
The plaintiff relies upon two affidavits of Bruce Blaise Patane, one sworn on 31 May 2024 (First Patane Affidavit) and one sworn on 8 July 2024 (Second Patane Affidavit) in support of an indemnity costs order.
The plaintiff submits that there are three bases for indemnity costs - a contractual basis, a security basis and a conduct basis.
The first basis is referred to as the contractual basis. To understand this basis, it is necessary to consider the underlying facts giving rise to the Caveat.
The first defendant is a director and shareholder of GN Constructions Pty Ltd (GN).
On 12 November 2023, GN entered into an application for commercial credit with the plaintiff (Credit Application). The Credit Application sets out the terms upon which the plaintiff would supply concrete products to GN upon credit.[1]
[1] First Patane Affidavit; Attachment BBP6.
By a Guarantee and Indemnity dated 12 November 2023 (Guarantee), the first defendant guaranteed the payment of all moneys owing by GN to the plaintiff and charged, in favour of the plaintiff, all present and future real property that he owned.[2]
[2] First Patane Affidavit; Attachment BBP7.
GN currently owes the plaintiff money for concrete products. GN went into external administration on 19 February 2024.
On 19 February 2024, the plaintiff lodged the Caveat over Apartment 10 to protect its interests therein as chargee under the Guarantee.
The Credit Application contains the following clause:
14.Expenses: The Customer must pay to Hanson any costs, charges and expenses (including all stamp duty and legal fees) incurred by Hanson in connection with the entry into these Terms, the exercise or attempted exercise of any power, right or remedy under these Terms, and the failure of the Customer to comply with these Terms. In addition the Customer will be liable for all transactions involving the Customer's credit account, including fraudulent use of that account by the Customer or its employees.
The Guarantee contains the following clauses:
2.Indemnity
If the obligation of the Customer to pay the Guaranteed Moneys to Hanson is unenforceable for any reason, the Guarantor as a separate undertaking unconditionally and irrevocably indemnifies Hanson against any loss Hanson suffers as a result. Hanson need not incur any expense or make any payment before enforcing this right of indemnity.
7.Charge
As security for payment to Hanson of the Guaranteed Moneys and for its obligations generally under this Guarantee, the Guarantor charges in favour of Hanson the whole of the Guarantor's undertaking, property and assets (including, without limitation, all of the Guarantor's interests, both legal and beneficial, in freehold and leasehold land) both current and later acquired.
9.Expenses
The Guarantor must pay to Hanson all costs, charges, fees and expenses (including, without limitation, all stamp duty and legal fees) incurred by Hanson in connection with any entry into this Guarantee, the exercise or attempted exercise of any power, right or remedy under this Guarantee, and the failure of the Guarantor to comply with any obligations under this Guarantee.
12.Definitions
…
Guaranteed Moneys means all moneys which are, will be or may be at any time in the future, owing or payable to Hanson by the Customer for any reason whatsoever. It includes, without limitation, money by way of principle, interest, fees, costs, indemnities, charges, duties or expenses or payment of liquidated damages.
The plaintiff submits that these clauses of the Credit Application and the Guarantee give the plaintiff a contractual entitlement to indemnity costs and that the court should give effect to those contractual provisions.
Section 37 Supreme Court Act 1935 (WA) provides that the costs of, and incidental to, all proceedings in the Supreme Court shall be in the discretion of the court. Where the parties to an action are also parties to a contract which contains plain and unambiguous provisions allowing for costs to be paid on a certain basis, the court should ordinarily exercise its discretion in a manner consistent with the contractual provisions.[3]
[3] Boon v Burt [2020] WASC 64 (S) [4] citing Rumball v Mortimore [2000] WASC 126 [15]; Bank of Western Australia Ltd v Marsh [2000] WASC 208 [5] - [7]; Bank of Western Australia Ltd v Ponga (unreported) (Master Sanderson) Supreme Court of WA Library No. 980697; Gamba Holdings UK Ltd v Minories Finance Ltd [1993] Ch 171, 194.
The first defendant does not assert that the Credit Application and the Guarantee are unenforceable. The issue is whether the above provisions are unambiguous and plain in their meaning so as to allow the plaintiff to recover costs on an indemnity basis. The first defendant submits that the provisions do not clearly allow the plaintiff to recover indemnity costs because they do not refer to 'indemnity costs' or to 'solicitor/client costs'.
I do not agree with the first defendant. In my view, cl 9 of the Guarantee is unambiguous and plain in its meaning - the plaintiff can recover all costs, including legal fees incurred by the plaintiff in connection with the failure of the first defendant to comply with any obligations under the Guarantee. The legal fees incurred by the plaintiff clearly include, in my view, all the legal costs the plaintiff has incurred (that is on an indemnity basis), not only those costs that the plaintiff would be entitled to recover on a party/party basis.
I consider that it is appropriate to exercise my discretion to reflect the plaintiff's contractual right to indemnity costs, subject to review by the court on taxation.
Although it is not necessary to consider the second and third bases for indemnity costs given my finding in relation to the contractual basis, I make these brief observations in relation to each.
In relation to the 'security basis', the plaintiff submits that a security holder has an entitlement to add to the secured debt the costs incurred by the security holder in protecting or enforcing their security. The plaintiff relied on the case of Chateau Constructions (Aust) Ltd v Zepinic[4] in support of that proposition. The Chateau Constructions case was concerned with the extent to which a party can include court costs already determined on taxation as funds secured by the charged property.[5] The case is not, in my view, authority for the proposition that costs incurred by a security holder in the enforcement of their security warrant an indemnity costs order.
[4] Chateau Constructions (Aust) Ltd v Zepinic [2013] NSWSC 1326 (Chateau Constructions).
[5] Chateau Constructions [21].
In relation to the 'conduct basis', the plaintiff submits that the first defendant's conduct in advancing a hopeless case justifies an indemnity costs order being made against him.
The first defendant submits that, given that the first defendant did not oppose the orders sought by the plaintiff and that there was no final determination of the court in relation to the merits of the action, it would not be appropriate to order indemnity costs.
An award of indemnity costs is appropriate where the action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success.[6] Although the 'applicant' is ordinarily a reference to the plaintiff, where the plaintiff is the party who has been forced by a defendant to take legal action, the defendant will, in substance, be considered the plaintiff in the action.[7] That is the case here because the plaintiff was forced to commence this action when the first defendant caused the second defendant to issue a lapsing notice pursuant to s 138B of the TLA.
[6] Fountain Selected Meat (Sales) Pty Ltdv International Produce Merchants Ltd (1988) 81 ALR 397, 401 applied in Yara Australia Pty Ltd v Oswal [2012] WASCA 204 [33].
[7] Oswal v Carson (No 4) [2011] VSC 434 [11].
The first defendant initially contested the action and, at the hearing on 7 June 2024, sought to have the action programmed to a substantive hearing. It was only after the plaintiff had filed affidavit evidence and submissions that the first defendant informed the plaintiff that the action would not be opposed. Was the first defendant's opposition to the extension of the Caveat hopeless? In my view, yes. By cl 7 of the Guarantee, the first defendant charges in favour of the plaintiff the whole of his assets as security for the payment of amounts guaranteed. This gives rise to a caveatable interest.
The first defendant's conduct in causing the lapsing notice to be issued and ultimately consenting to the Caveat being extended, where there was no basis, in my view, upon which the first defendant could legitimately oppose the extension of the Caveat, was unsatisfactory. An order for indemnity costs is appropriate to reflect the court's disapproval of the first defendant's conduct.[8]
[8] Polaris Properties (WA) Pty Ltd as trustee for The Polaris Trust v Pickworth [2019] WASC 119 (S) [10].
Therefore, on both the contractual basis and the conduct basis, I order that the first defendant pay the plaintiff's costs of the action on an indemnity basis.
I make the following order:
(1)The first defendant pay all the costs incurred by the plaintiff, except insofar as they are of an unreasonable amount or have been unreasonably incurred so that, subject to those exceptions, the plaintiff is completely indemnified for its costs of this proceeding.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
RP
Associate to the Honourable Justice Whitby
11 SEPTEMBER 2024