Jarrold v Isajul [No 2]
[2013] VSC 657
•4 December 2013
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
MAJOR TORTS LIST
No. 6646 of 2010
| CLARE MARGARET JARROLD | Plaintiff |
| V | |
| ISAJUL ENTERPRISES PTY LTD (t/as CONVEYANCING MELBOURNE (ACN 106 047 787)) | First Defendant |
| JOANNE IBRAHIM | Second Defendant |
| THE REGISTRAR OF TITLES | Third Defendant |
| | |
| TELVIN JARROLD | Fifth Defendant |
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JUDGE: | McMillan J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 18 October 2013 | |
DATE OF JUDGMENT: | 4 December 2013 | |
CASE MAY BE CITED AS: | Jarrold v Isajul [No 2] | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 657 | |
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COSTS — Whether costs should follow event — Discretion to make pass on order — Discretion to order indemnity costs
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M G R Gronow Ms G A Costello | Slater & Gordon Lawyers |
| For the 3rd Defendant | Mr B Gillies | Land Victoria Legal |
| For the 5th Defendant | Mr S Pitt | Mills Oakley Lawyers |
HER HONOUR:
Introduction
This judgment concerns the costs in this proceeding and should be read alongside my judgment handed down on 10 September 2013.[1] I ordered that the plaintiff’s claim against the third defendant be dismissed and that the third defendant’s claim against the fifth defendant be dismissed. The plaintiff, Mrs Jarrold, sought indemnity from the third defendant, the Registrar of Titles, for loss and damage suffered as a result of the actions of the Registrar.[2] The Registrar sought indemnity against the fifth defendant, Mr Jarrold, on the basis that he was the person actually responsible for the loss and damage suffered by Mrs Jarrold.[3]
[1]Jarrold v Isajul [2013] VSC 461 (10 September 2013). On 1 April 2013 the Supreme Court (Chapter I New Scale of Costs and Other Costs Amendments) Rules 2012 came into effect, which substituted standard costs for party and party costs as the usual costs order. As the trial was heard before that date, the costs rules prior to that date are applicable.
[2]Transfer of Land Act 1958, s 110.
[3]Transfer of Land Act 1958, s 109(3)(a).
Mr Jarrold seeks an order that the Registrar pay his costs of the proceeding, taxed on an indemnity basis. The Registrar seeks an order that Mrs Jarrold pay not only the Registrar’s costs but also the costs of Mr Jarrold directly. The Registrar submits that he should not have to pay the costs of Mr Jarrold, against whom he was unsuccessful.
Mrs Jarrold submits that costs should follow the event. She concedes that she must pay the costs of the Registrar on a party and party basis, but she resists any order that she pay the costs of Mr Jarrold. Mrs Jarrold submits that the costs recoverable from her by the Registrar should not include any costs that the Registrar has to pay Mr Jarrold.
All the parties agree that Mrs Jarrold should pay the costs of the Registrar. The questions that arise for consideration are:
a)Should there be any departure from the order that costs follow the event?
b)If costs should follow the event, should the Registrar’s costs payable to Mr Jarrold be recoverable from Mrs Jarrold?
c)On what basis should Mr Jarrold’s costs be taxed?
Should There Be Any Departure from the Order That Costs Follow the Event?
Mr Jarrold and Mrs Jarrold both submit that the Registrar should be ordered to pay Mr Jarrold’s costs. The Registrar submits that Mrs Jarrold should be ordered to pay Mr Jarrold’s costs direct to him. The Registrar did not submit that Mr Jarrold should bear his own costs. The Registrar relied on the following submissions:
a)Mrs Jarrold should have expected that the Registrar would seek indemnity from Mr Jarrold.
b)Mrs Jarrold declined the opportunity to join Mr Jarrold, when the first and second defendants offered it on 30 July 2012, in circumstances that were unreasonable.
c)Had the Registrar not joined Mr Jarrold, there is a real prospect that Mrs Jarrold would have succeeded in her claim, which would have been a perverse result.
d)Mrs Jarrold should have joined Mr Jarrold, because she must have known that the Registrar would join him to seek indemnity against the primary wrongdoer.
The thrust of the Registrar’s submissions is that the real fight was between Mrs Jarrold and Mr Jarrold. That being so, Mrs Jarrold cannot make a claim against the fund while refusing to join the alleged primary wrongdoer. Since her dispute is really with Mr Jarrold, she is obliged to pay his costs directly.
While the Registrar did not seek an order that its costs recoverable from Mrs Jarrold include Mr Jarrold’s costs, having rather sought an order that Mrs Jarrold pay Mr Jarrold’s costs directly, it is in my discretion to make such an order.
Mr Jarrold’s Submissions
Mr Jarrold submitted that the costs decision in Solak v Registrar of Titles [No 3][4] was analogous and should be followed. The background to the litigation in that decision is as follows.
[4][2010] VSC 235 (31 May 2010) (Davies J).
In Solak v Bank of Western Australia Ltd[5] (‘the first Solak proceeding’), Mr Solak commenced a proceeding against the Bank of Western Australia (‘BankWest’), seeking to discharge a mortgage on the grounds that it had been procured by fraud. Pagone J dismissed Mr Solak’s claim on the basis that the mortgage and loan agreement, though obtained through fraud, were effective, owing to the indefeasibility provisions of the Transfer of Land Act 1958.[6]
[5][2009] VSC 82 (17 March 2009) (Pagone J).
[6]BankWest had joined Aussie Home Loans Pty Ltd (‘Aussie’) and AHL Investments Pty Ltd (‘AHL’) as third parties. Aussie and AHL had in turn joined a company and the director of that company as fourth parties. As Pagone J dismissed Mr Solak’s claim against BankWest, it was not necessary for his Honour to adjudicate the liability of the third and fourth parties. Nonetheless Pagone J apportioned liability as follows: 70 per cent to the fourth parties and 30 per cent to BankWest.
In Solak v Registrar of Titles [No 2][7] (‘the second Solak proceeding’), Mr Solak claimed indemnity against the Registrar for loss suffered as a result of the registration of the mortgage. Mr Solak relied on Pagone J’s finding of fraud in the first proceeding to establish loss. The Registar joined a company, the director of that company, and BankWest as third parties, in order to recover any amount it might be ordered to pay to Mr Solak in the event that he was successful. The Registrar applied for summary dismissal of Mr Solak’s claim on the basis of Anshun estoppel.[8] Davies J granted that application. Her Honour held that in all the circumstances it was unreasonable for Mr Solak not to join the Registrar in the first proceeding. Mr Solak was therefore estopped from bringing his claim against the Registrar.[9]
[7][2010] VSC 146 (21 April 2010) (Davies J).
[8] Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.
[9] Solak v Registrar of Titles [No 2] [2010] VSC 146 (21 April 2010) [27] (Davies J). The decision of Davies J was reversed on appeal: Solak v Registrar of Titles (2011) 33 VR 40.
The question of costs in the second proceeding was reserved. In Solak v Registrar of Titles [No 3][10] (‘the Solak costs decision’), Davies J ordered that the Registrar pay the costs of the third parties on a party and party basis. Her Honour ordered the plaintiff to pay the costs of the Registrar of and incidental to the proceeding on a party and party basis, including the costs that the Registrar had to pay to the third parties.
[10][2010] VSC 235 (31 May 2010) (Davies J).
Her Honour concluded that it was both reasonable and to be expected that the Registrar would join the third parties.[11] Once Mr Solak commenced his proceeding against the Registrar, it was inevitable that the Registrar would join the third parties.[12] Her Honour’s finding in the second proceeding that it was unreasonable for Mr Solak not to join the Registrar, which finding raised the Anshun estoppel, also compelled the conclusion that Mr Solak should be ordered to pay the costs that the Registrar had to pay the third parties.[13]
[11]Ibid [9].
[12]Ibid.
[13]Ibid.
Mrs Jarrold’s Submissions
Mrs Jarrold submitted that there should be no abnormal order for her to pay the Registrar’s costs as against Mr Jarrold. Mrs Jarrold referred to five factors that militated against any departure from the usual costs order.
Mrs Jarrold Reasonably Elected Not to Join Mr Jarrold
Mrs Jarrold submitted that, since she elected not to assume the risk of joining Mr Jarrold as a defendant, his costs should not now be recoverable from her. The Registrar, as the party that joined Mr Jarrold, should bear the risk of doing so.[14] It was submitted that the following circumstances supported this conclusion:
[14]Counsel referred to Gladstone Park Shopping Centre Pty Ltd v Wills (1984) 6 FCR 496, 510–11.
a)Mrs Jarrold reasonably believed that Mr Jarrold was a ‘straw man’ with no accessible assets within Australia.
b)Mrs Jarrold knew Mr Jarrold had left Australia on a yacht and sailed to many different countries.
c)Mrs Jarrold did not know what country Mr Jarrold lived in.
d)The police had told Mrs Jarrold that they did not know where Mr Jarrold was.
e)Mrs Jarrold believed Mr Jarrold had forged her signature on the power of attorney.
f)Mrs Jarrold only learnt of Mr Jarrold’s address when the first and second defendants located him in April 2012. Until trial Mrs Jarrold believed that Mr Jarrold had no assets in Australia, England or Wales. While it became apparent that Mr Jarrold had a yacht and shares in his name, it remains the case that it would be difficult to enforce any judgment against Mr Jarrold. Mr Jarrold’s evidence about his shares was vague and there was no evidence that Mr Jarrold had any assets located in Victoria or other parts of Australia.
g)The Court did not allow Mrs Jarrold’s counsel to question Mr Jarrold on his asset position, ruling it to be irrelevant.
h)The first and second defendants had difficulty finding and serving Mr Jarrold with their third party proceeding. They applied to this Court and obtained from Mukhtar AsJ an extension of time for service because it took so long for them to locate Mr Jarrold.
The crux of this submission was that Mrs Jarrold should not be burdened with Mr Jarrold’s costs in circumstances where it was reasonable for Mrs Jarrold not to join him. The foregoing circumstances, it was submitted, render Mrs Jarrold’s decision reasonable.
Joinder
It was the first and second defendants that first joined Mr Jarrold pursuant to apportionment legislation. Later the Registrar also joined Mr Jarrold, seeking indemnity. Those parties joined Mr Jarrold in order to improve their own respective positions. It was open to Mrs Jarrold either to join or not to join the party against whom the first and second defendants sought apportionment. Hence, it was submitted, those parties should bear the costs of the joinder of Mr Jarrold.
Indemnity under the Act
If Mrs Jarrold had made out her claim, she would have been entitled to seek relief against the Registrar and the Registrar would have been entitled to seek indemnity from Mr Jarrold. That is the course of action envisaged by ss 110 and 111 of the Act. The Registrar advised Mrs Jarrold that that was procedure under the Act. The Registrar’s claim for indemnity would only have arisen if he had lost against Mrs Jarrold. As the Registrar was successful, no liability to pay indemnity arose.
The Personal Circumstances of Mrs Jarrold
It was submitted that it would be unreasonable for Mrs Jarrold to pay the costs of Mr Jarrold direct to him, as she is impecunious, whereas her husband is a wealthy man.
The Policy of the Indemnity Fund
An action for loss of a registered property interest can be brought against the Registrar without recourse to the actual wrongdoer. A core principle of the Torrens system is to provide compensation to those who are deprived of an interest of land by operation of the indefeasibility provisions.[15] The indemnity fund is there to protect a claimant such as Mrs Jarrold. It was submitted that the Registrar should not have resisted compensating Mrs Jarrold where the expert called by the Registrar held the opinion that she did not sign the power of attorney. The Registrar, as the manager of a beneficial fund, should not be allowed to pass on Mr Jarrold’s costs to Mrs Jarrold.
[15]Solak v Registrar of Titles (2011) 33 VR 40. This was a successful appeal against the orders for costs made by Pagone J in the first Solak proceeding in respect of the third and fourth party proceedings.
Applicable Principles
The discretion to award costs is conferred on the Supreme Court by s 24(1) of the Supreme Court Act 1986, which provides:
Unless otherwise expressly provided by this or any other Act or by the Rules, 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.
The usual rule is that costs follow the event.[16] The rule is also generally applicable to third party proceedings; the proceeding between a defendant and a third party is for these purposes a separate ‘event’.[17] The question is whether in the circumstances a departure from the usual rule is justified.[18]
[16]Gladstone Park Shopping Centre Pty Ltd v Wills (1984) 6 FCR 496.
[17]Johnson v Ribbins [1977] 1 WLR 1458, 1464. See also Kheirs Financial Services Pty Ltd v Aussie Home Loans Pty Ltd (2010) 31 VR 46.
[18]Johnson v Ribbins [1977] 1 WLR 1458, 1464.
While the starting point is that costs usually follow the event, more complex considerations arise when a third party claim has failed for the same reason that the plaintiff’s claim has failed. In those circumstances the ultimate question is whether the costs of the third party ‘ought fairly to be borne’ by the unsuccessful plaintiff.[19]
[19]Ibid.
In Kheirs Financial Services Pty Ltd v Aussie Home Loans Pty Ltd, Maxwell P, Tate JA and Habersberger AJA set out the principles applicable to the discretion to award costs where a third party claim is dismissed because the plaintiff’s claim against the defendant has failed.[20] Their Honours said:
In deciding [in a case where the third party claim has failed because the plaintiff’s claim has failed] whether any departure from the usual rule is warranted, the court will ordinarily need to consider at least the following matters:
·the reasonableness of the defendant’s decision to join the third party;
·whether the joinder of the third party was reasonably foreseeable by the plaintiff, such that the plaintiff might be viewed as having some responsibility for the costs of the third party proceeding. (An order for the plaintiff to pay the defendant’s costs may thus include the defendant’s liability to pay the third party’s costs of the third party proceeding.);
·the responsibility of plaintiff, defendant and third party, respectively, for the time taken up in the hearing of the third party proceeding.[21]
[20](2010) 31 VR 46.
[21]Solak v Registrar of Titles (2011) 33 VR 40, 55.
In Lombard Insurance Co (Australia) Ltd v Pastro,[22] King CJ considered the exercise of discretion in unsuccessful third party proceedings. He said:
There is no great difficulty where a third party claim by a defendant is unsuccessful because the defendant has failed to establish its right to recover from the third party the amount which it is required to pay to the plaintiff, or the amount which it would have been required to pay if the plaintiff’s claim had been successful. In such cases the defendant is ordinarily required to pay the costs of the third party and cannot recoup them from the plaintiff. Where, however, the third party claim fails solely because the plaintiff has failed in its claim against the defendant, the position is more complex. The principle that costs follow the event dictates that ordinarily the defendant is liable for the costs of the successful third party. It does not assist, however, in my opinion, to resolve the question whether the defendant is to be allowed to recoup those costs from the plaintiff. The third party claim has not been an issue between the plaintiff and the defendant and there has therefore been no ‘event’ in relation to it as between the plaintiff and defendant. Other guiding principles must be sought.[23]
[22](1994) 175 LSJS 448 (King CJ).
[23]Ibid (emphasis added).
His Honour determined that a guiding principle in such cases might be formulated thus:
Where the nature of the plaintiff’s claim, or allegations in support thereof, render it reasonable … to bring in the third party, and the third party claim is unsuccessful solely by reason of the failure of the plaintiff to sustain its claim or the relevant allegations, the defendant should ordinarily recover from the plaintiff the costs of the third party claim including those which the defendant is ordered to pay to the third party. The emphasis is on the word ‘ordinarily’. The discretion is unfettered and a variety of factors may properly enter into the exercise of it.[24]
[24]Ibid (emphasis added).
In Furber v Stacey, Hodgson JA emphasised that the guiding principle enunciated by King CJ was only to be a guiding principle, not the guiding principle.[25] His Honour considered that it might be stating it too highly to say that the defendant should ‘ordinarily’ be able to recover the costs of the third party.[26] His Honour considered that King CJ’s guiding principle should be qualified in the manner suggested by Finn J in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd.[27]
[25][2005] NSWCA 242 (25 July 2005) [32].
[26]Ibid.
[27](2003) 201 ALR 55.
Finn J accepted that the ultimate question was whether in the circumstances the costs of the third party ‘ought fairly to be borne’ by the unsuccessful applicant.[28] He outlined a variety of factors that have been relied upon as indicating whether this was so.
[28]Ibid 69, quoting Johnson v Ribbins [1977] 1 WLR 1458, 1464.
First, a common consideration is whether it was ‘reasonable’ or ‘appropriate’ for the defendant to bring the third party claim. His Honour warned that, although making the third party claim might have been reasonable, it might nevertheless not be reasonable to pass on the costs of the third party to the plaintiff.[29] For example, in certain circumstances it may be reasonable to join a third party, but, if the defendant did not join the third party because of the plaintiff’s claim, and the claim raised ‘private issues’, it may not be justifiable to pass on the third party’s costs.[30]
[29]GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 201 ALR 55, 69–70.
[30]See, eg, Gold Coast Bakeries (Qld) Pty Ltd v Heat & Control Pty Ltd [1992] 1 Qd R 162, 175.
Secondly, it may be relevant that the plaintiff’s claim was the catalyst for the third party claim or rendered it inevitable.[31] Causation, without regard to the nature of third party claim, is not of itself sufficient to justify a pass on order.[32]
[31]GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 201 ALR 55, 70.
[32]Ibid.
Thirdly, his Honour considered the relationship between the nature of the plaintiff’s claim and that of the third party claim to be significant. His Honour echoed King CJ’s guiding principle when he said
does the nature of an applicant’s claim, or do allegations in support of it render it reasonable for the respondent to make in turn the cross-claim that it does … or does the third party claim raise issues private to the parties to it[?][33]
Consistently with the above principles, Finn J ordered that the applicant bear the costs of the third party in respect of the ‘reflexive’ cross-claim, finding both that it was reasonable for the respondent to join the third party and that it was appropriate to pass on the costs of the third party’s successful defence to the applicant.[34] Although his Honour found that it was reasonable for the respondent to bring its cross-claim based on allegations of non-disclosure against the third party, his Honour was not satisfied that the costs of the third party in defending that cross-claim ought fairly to be borne by the defendant.[35]
[33]Ibid.
[34]Ibid 71. The ‘reflexive’ cross-claim comprised claims made against the third party that were similar to those claims made by the applicant against the respondent.
[35]Ibid.
His Honour found that the non-disclosure cross-claim raised issues peculiar to the relationship between the respondent and the third party, distinct from any claim made by the applicant against the respondent, even though the applicant’s claim provided the reason for the respondent’s making the non-disclosure claim.[36]
[36]Ibid 71–2.
Response to Mrs Jarrold’s Submissions
Given that the submissions of Mrs Jarrold were advanced to resist an order that she pay Mr Jarrold’s costs directly and an order that the Registrar be allowed to recover its costs payable to Mr Jarrold from her, it is convenient to consider each submission, in so far as it is relevant to either question, together.
Mrs Jarrold Reasonably Elected Not to Join Mr Jarrold
Mrs Jarrold relied on Gladstone Park Shopping Centre Pty Ltd v Wills[37] as authority for the proposition that a party who commences a proceeding against another bears the risk of so doing.
[37](1984) 6 FCR 496, 510–11.
In that case the applicant brought a claim against shopping centre owners for misleading conduct inducing her to enter a lease contract. The owners in turn cross-claimed against their leasing agents for indemnity, on the basis that the agents had engaged in the misleading conduct. The trial judge dismissed the applicant’s claim and the owners’ cross-claim against the leasing agents. Jenkinson J ordered that the applicant pay the costs of the owners and that the owners pay the costs of the leasing agents. Although the prospect of recovery from the impecunious applicant was slim, his Honour also made an order that the applicant pay to the shopping centre owners the amount that they had to pay the leasing agents.
On appeal the shopping centre owners submitted that, because the real fight was between the applicant and the leasing agents, the applicant should have been ordered to pay the costs of the leasing agents direct to them. This would have placed the successful agents, rather than the owners, at a shortfall. In the passage referred to by Mrs Jarrold, Beaumont J considered that the real fight was between the applicant and the shopping centre owners. As the shopping centre owners had decided to join the leasing agents to advance their own interests by seeking to secure indemnity against them, it was only just that the owners, and not the third party agents, should be made to bear the costs of that attempt. Had there been an order that the applicant pay the costs of the agents directly, however, the agents would have had to suffer from the impecuniosity of the plaintiff, rather than the owners.
Although his Honour declined to make an order that costs be paid by the applicant direct to the leasing agents, his Honour never suggested that the owners’ election to join the third party precluded them from recouping their costs from the applicant. Indeed the trial judge made that very order, and on appeal Beaumont J was of the view that the trial judge correctly applied his judicial discretion in doing so.[38] I accordingly reject any submission by Mrs Jarrold that her decision not to join Mr Jarrold as a defendant in some way precludes an order that she pay the Registrar the costs of Mr Jarrold’s successful defence against the third party claim.
[38]Ibid 508.
Mrs Jarrold put forward a variety of factors that, in her submission, militated against an order either that she pay Mr Jarrold’s costs directly or that the Registrar be allowed to recover its costs payable to Mr Jarrold from her.[39] In my opinion, none of the factors mentioned by Mrs Jarrold assists in resolving the latter inquiry. The course of action taken by Mrs Jarrold is contemplated by the statutory framework of the Act. The reasonableness or otherwise of Mrs Jarrold’s decision to join only the Registrar is not relevant to the exercise of my discretion to make an order allowing the Registrar to recoup Mr Jarrold’s costs from Mrs Jarrold, except insofar as that decision may affect the reasonableness of the Registrar’s claim against Mr Jarrold.[40]
[39]See above paragraph [13].
[40](1994) 175 LSJS 448 (King CJ).
Joinder
It is not relevant to the discretion to make a pass on order that it was the first and second defendant conveyancer parties that initially sought to join Mr Jarrold in order to seek apportionment. Mrs Jarrold cannot, by canny refusal to join certain parties, shield herself from an adverse costs order in the event that she is unsuccessful against a defendant who has reasonably incurred the costs of bringing a third party claim.
Indemnity under the Act
This was a difficult submission to follow. The submission appears to be that the Registrar was entitled to such indemnity as he could attain and, having succeeded against Mrs Jarrold, his claim for indemnity against Mr Jarrold failed, so that he should be ordered to pay Mr Jarrold’s costs. Insofar as that is the submission, I reject it. As Mrs Jarrold submits, there is no ‘event’ between her and Mr Jarrold. The prima facie rule that costs follow the event says nothing as to liability for costs between Mrs Jarrold and the Registrar.[41] It does not follow from there being separate ‘events’ as between Mrs Jarrold and the Registrar, and as between the Registrar and Mr Jarrold, that the Registrar cannot recoup its costs payable to Mr Jarrold from Mrs Jarrold.
[41]Lombard Insurance Co (Australia) Ltd v Pastro (1994) 175 LSJS 448 (King CJ).
The Policy of the Indemnity Fund
Mrs Jarrold submits that the Court should have regard to the ‘insurance principle’, which is one of the three main principles of the Torrens system. It is the principle to provide compensation for loss for errors made by the Registrar. In my judgment handed down on 10 September 2013, I concluded that no fraud had taken place in the transfer of title from the name of Mrs Jarrold. There has been no error on behalf of the Registrar and no compensable loss to Mrs Jarrold.
Mrs Jarrold submitted that the indemnity fund is there to help a claimant such as herself in this case. Had Mrs Jarrold been successful in her claim, there would have been force in this submission. As Warren CJ said in Solak v Registrar of Titles:
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.[42]
Plainly, Mrs Jarrold cannot be entitled to compensation unless she has been deprived of an interest in land by operation of the indefeasibility provisions. I have found that Mrs Jarrold’s title passed by a valid transfer of land. The policy of the Act is not to subsidise unmeritorious claims.
[42](2011) 33 VR 40, 57–8.
The third sentence quoted above is directed at a tenuous argument advanced by the Registrar, that s 38 of the Consumer Credit Code, which provides that a mortgage that does not comply with s 38 is unenforceable, will render a mortgage unenforceable even if it is registered under the Act. Since Mr Solak did not appeal Davies J’s finding in the second Solak proceeding that the Credit Code point was arguable, Warren CJ assumed, without deciding the matter, that the point was arguable. Her Honour nonetheless found that the point was:
so tenuous that this alone suggests that the registrar should not have attempted to rely on it.
However, what makes the registrar’s reliance on the Credit Code point even more unacceptable is the fact that, if successful, the Credit Code point would significantly undermine indefeasibility of registered mortgages. It would cut across the policy of the [Act]. It would increase the risk to lenders, who may pass on the cost to borrowers.[43]
Her Honour accordingly found that the Registrar had fallen short of the high standards required of a model litigant, in being over-zealous and adversarial in defending the fund.
[43]Ibid 57.
I made no similar finding of fault on behalf of the Registrar in my reasons for judgment. It was not improper for the Registrar to join Mr Jarrold. The Registrar must ensure that those who are entitled to compensation receive it, but Mrs Jarrold is not entitled to compensation. It does not follow from the fact that the purpose of the fund is to compensate for loss that the Registrar can never recover the costs of a third party in the event of a wholly unsuccessful claim against the fund.
Mrs Jarrold referred to Challenger Manager Investments v Direct Money Corporation Pty Ltd, in which Bryson J said ‘[c]ompensation is not an extraordinary remedy, and is not reserved for faults, blunders or enormities’.[44] That may be so, but compensation is reserved for those who have suffered loss. Again, Mrs Jarrold has failed to demonstrate any loss attributable to the Registrar whatsoever, due either to the fault or to an entirely innocent error on behalf of the Registrar.
[44](2003) 59 NSWLR 452, 459.
Finally, Mrs Jarrold relied on the fact that the Registrar resisted her claim against the fund in circumstances where his own expert, Mr Neil Holland, was ultimately of the opinion that Mrs Jarrold did not sign the power of attorney. Mrs Jarrold submitted that the following excerpt was apt to describe the Registrar’s resistance to providing compensation in this proceeding:
What causes delay in claiming compensation under the state guarantee of title is ‘the quite repulsive tenacity with which some jurisdictions are prepared to resist even valid claims upon the fund’. As unacceptable injustices can result from only partial use of the system of compensation, ‘[g]enerosity should be the spirit in which the fund is administered’. However, as Sackville points out, ‘gaining access to the [assurance]fund is often a protracted and worrying process’.[45]
[45]Michael Ziemer, ‘Title Insurance — The Good, the Bad and the Ugly: Does Victoria Need It?’ (2011) 20 Australian Property Law Journal 1, 27 (citations removed).
While Mr Holland was ultimately of the opinion that Mrs Jarrold did not sign the power of attorney, Mr Holland’s initial opinion was that she had signed it. The expert called by Mr Jarrold ultimately considered the handwriting evidence inconclusive. Mr Jarrold vigorously disputed Mrs Jarrold’s allegations. The matter was agitated over nine days and in my judgment I concluded that the allegations of fraud were not proved. The Registrar’s resistance to compensating Mrs Jarrold was justified and, ultimately, vindicated.
Unless it were accepted that the Registrar should yield to unproved allegations, which would be a remarkable submission, I cannot see how Mrs Jarrold can maintain that the Registrar’s conduct in defending the suit displayed ‘repulsive tenacity’. No entitlement to compensation arose pursuant to s 110 of the Act because Mrs Jarrold suffered no loss or damage. It is plainly not improper for the Registrar to insist that entitlement to compensation be proved before it be granted, and I have made no finding that the Registrar was over-zealous in defending the action.
Conclusions
Costs Follow the Event
In my opinion, although there is some force in the Registrar’s submission that it is caught between the two real parties to the dispute, there is no occasion to depart from the usual order that costs follow the event. The Registrar did not succeed in its claim for indemnity against Mr Jarrold and, given that it was successful against Mrs Jarrold, could not have succeeded, since there was no loss against Mrs Jarrold to indemnify.[46] The machinery of the Transfer of Land Act 1958 (‘the Act’) contemplates the course of action followed by Mrs Jarrold whereby she joined the Registrar as defendant. The Registrar properly sought to advance its own interests by seeking indemnity from Mr Jarrold and that claim failed.[47]
[46]Solak v Registrar of Titles [2010] VSC 235 (31 May 2010) [8] (Davies J); Transfer of Land Act 1958, s 109(3)(a).
[47]See Gladstone Park Shopping Centre Pty Ltd v Wills (1984) 6 FCR 496.
One further consideration is that a departure from the usual rule would expose Mr Jarrold to the risk of being unable to recover his costs against Mrs Jarrold, while the party that actually joined him, the Registrar, would avoid that risk. In Johnson v Ribbins, Goff LJ, in delivering the judgment of the Court of Appeal, said:
it cannot be right to deprive a third party of an order for costs to which he is otherwise entitled against the defendant, because the defendant when looking to the plaintiff for reimbursement finds a person not worth powder and shot.[48]
[48][1977] 1 WLR 1458, 1464.
In my opinion, the Registrar should be ordered to pay the costs of Mr Jarrold, against whom he was unsuccessful.
The Registrar Can Recoup Its Costs Payable to Mr Jarrold from Mrs Jarrold
I now turn to the question whether the Registrar should be entitled to recoup those costs from Mrs Jarrold. In my opinion, the costs of Mr Jarrold’s successful defence ‘ought fairly to be borne’ by Mrs Jarrold, by way of an order that the Registrar be allowed to recoup its costs payable to Mr Jarrold from her.
First, it was both reasonable and appropriate for the Registrar to join Mr Jarrold. As Mukhtar AsJ said in his Reasons for Decision:
Out of the desirability of creating conditions as best a Court can to get to the truth of the matter, it is better to enable [Mr Jarrold] … to be brought in as a party as an alleged concurrent wrongdoer. He is something more than a ‘bit player’. He is the plaintiff’s estranged husband (who she does not want to seem to sue) and the person who she alleges perpetrated brazen fraud …[49]
In the circumstances, it was entirely reasonable for the Registrar to join Mr Jarrold, whom Mrs Jarrold alleged to be the actual wrongdoer, in order to seek indemnification against him, in the event that Mrs Jarrold’s claim was successful.
[49]Jarrold v Isajul, Reasons for Decision (Unreported, Supreme Court of Victoria, Mukhtar AsJ, 8 May 2012) [2].
Secondly, I consider that the Registrar’s joining Mr Jarrold was inevitable and necessary, in the sense in which those words are used in the decided cases.[50] As Mukhtar AsJ observed:
It would be a most troublesome state of affairs if this application were refused and this trial proceeded to only then result in subsequent proceedings being brought by the applicants for damages, and the Registrar of Titles to seek indemnity against Mr Jarrold. I do not know but there could well be a real issue whether there was in truth a forgery of this Power of Attorney. … I do not know, but it may well be that Mr Jarrold will appear to the proceeding and prove that it was not a forgery.[51]
Given the desirability of avoiding a multiplicity of proceedings, and the legitimate interests of the Registrar in seeking indemnity against the ‘person actually responsible’,[52] it was inevitable that the Registrar would join Mr Jarrold. Had the Registrar not joined Mr Jarrold, it is even possible that the Registrar would have been estopped, in accordance with the principles in Anshun, from bringing a separate proceeding against Mr Jarrold.[53] For the same reasons, and as Mrs Jarrold concedes, I am also of the opinion that the joinder of Mr Jarrold was reasonably foreseeable.[54]
[50]That is to say, Mrs Jarrold’s claim rendered it necessary for the Registrar to join Mr Jarrold in order to protect its legitimate interests; and in that sense third party proceedings were inevitable. Inevitability and necessity are not meant to suggest in this context that the Registrar had no choice whether to join Mr Jarrold.
[51]Jarrold v Isajul, Reasons for Decision (Unreported, Supreme Court of Victoria, Mukhtar AsJ, 8 May 2012) [14].
[52]Transfer of Land Act 1958, s 109(3).
[53]Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.
[54]Solak v Registrar of Titles (2011) 33 VR 40, 55.
Thirdly, I consider that the nature of Mrs Jarrold’s claim rendered it reasonable for the Registrar to join Mr Jarrold. The nature of Mrs Jarrold’s allegations meant that it necessary for the Registrar to join Mr Jarrold as the alleged fraudster, and the Registrar’s claim failed for precisely the same reason that Mrs Jarrold’s did, namely, that the allegations of fraud were not proved.
While I am mindful that the Registrar administers a beneficial fund, and that the responsibility to protect that fund from unmeritorious claims is not paramount, I do not consider that the fund should in effect subsidise unmeritorious claims. Mrs Jarrold’s claim against the Registrar failed. I have found that the Registrar reasonably joined Mr Jarrold in pursuit of legitimate interests. Mrs Jarrold should pay the costs of that joinder.
On What Basis Should Mr Jarrold’s Costs Be Taxed?
Mr Jarrold’s Submissions
Mr Jarrold submits that he should be entitled to indemnity costs paid by the Registrar. Although the conduct relied upon was that of Mrs Jarrold, it was submitted that the conduct relied upon for indemnity was ‘all part of the landscape of the litigation’.[55]
[55]Fifth Defendant’s Outline of Submissions on Costs (18 October 2013) [16].
Mr Jarrold submitted that Mrs Jarrold’s further allegation that he had forged the Fishweir transfer, which was first made a short time before the trial and which she later recanted in cross-examination, was an unsubstantiated allegation of fraud. Mr Jarrold submitted that it was an allegation of fraud irrelevant to the issues between the parties.[56]
[56]Counsel referred to Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 (14 June 2001) [7]; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, 233–4.
The unsubstantiated allegation that the Fishweir transfer was forged, it was submitted, cast a dim light on the main allegation in the proceeding, that Mr Jarrold forged the power of attorney. Mrs Jarrold brought unsubstantiated, serious allegations, which demonstrated a cavalier attitude on behalf of Mrs Jarrold toward the litigation. Although Mrs Jarrold’s claim was later supported by handwriting evidence, at the date of the writ no expert evidence had yet been obtained.
Mr Jarrold submitted that the Registrar’s success was due to Mr Jarrold’s defence of Mrs Jarrold’s allegations and that therefore Mr Jarrold was entitled to indemnity. Mr Jarrold also submitted that his forewarning the Registrar that he would be seeking indemnity costs was relevant to the discretion to award indemnity costs.
Mrs Jarrold’s Submissions
Mrs Jarrold submitted that she was only liable to the Registrar for his costs, taxed on a party and party basis. While Mrs Jarrold conceded that indemnity costs may be awarded for unsubstantiated allegations of fraud, in this case Mrs Jarrold’s allegation that the power of attorney was forged was substantiated by expert handwriting evidence.
The costs order as between Mr Jarrold and the Registrar should be taxed on a party and party basis for the same reason, namely, that the allegation of fraud was not unsubstantiated.
Finally, it was submitted that it would be inappropriate to make an order for indemnity costs if a pass on order were made, because that would visit substantial costs upon Mrs Jarrold, who is impecunious.
Applicable Principles
Although the usual order is to award costs to the successful party on a party and party basis, the Court has a discretion to make a special costs order in special circumstances.[57] In Ugly Tribe Co Pty Ltd v Sikola, Harper J identified the following circumstances as warranting a special costs order:
[57]Australian Electoral Commission v Towney [No 2] (1994) 54 FCR 383.
i.The making of an allegation, known to be false, that the opposite party is guilty of fraud: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397.
ii.The making of an irrelevant allegation of fraud: Thors v Weekes (1989) 92 ALR 131.
iii.Conduct which causes loss of time to the Court and to other parties: Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, Federal Court, French J, 3 May 1991).
iv.The commencement or continuation of proceedings for an ulterior motive: Ragata Developments Pty Ltd v Westpac Banking Corp (unreported, Federal Court, Davies J, 5 March 1993).
v.Conduct which amounts to a contempt of court: EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 59.
vi.The commencement or continuation of proceedings in wilful disregard of known facts or clearly established law: J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA) Branch (No 2) (1993) 46 IR 301.
vii.The failure until after the commencement of the trial, and without explanation, to discover documents the timely discovery of which would have considerably shortened, and very possibly avoided, the trial: National Australia Bank v Petit-Breuilh (No 2) (unreported, [1990] VSC 395, 18 October 1999).[58]
His Honour noted that the categories of circumstances are not closed.[59]
[58][2001] VSC 189 (14 June 2001) [7].
[59]Ibid [8].
In NIML Ltd v MAN Financial Australia Ltd [No 2], Harper J said that litigants who make the serious allegation of fraud on an inadequate foundation should be ordered to pay costs as between solicitor and client.[60] In Wentworth v Rogers [No 5], on the other hand, the New South Wales Court of Appeal refused to order indemnity costs even though the appellant’s case was found to lack merit and some of her allegations rested on a ‘most flimsy and unconvincing basis’.[61] Kirby P, with whom Hope and Samuels JJA agreed, did not consider that the appellant brought the appeal to prolong the litigation or that she had made allegations that she believed or knew to be false.
[60][2004] VSC 510 (9 December 2004).
[61](1986) 6 NSWLR 534, 542.
Mr Jarrold relies on the basis that Mrs Jarrold made an irrelevant allegation of fraud when she alleged that Mr Jarrold had forged the Fishweir transfer. Ugly Tribe Co Pty Ltd v Sikola was not a case of an irrelevant allegation of fraud. The basis was described by Gummow J in Thors v Weekes as ‘irrelevance of the allegations to the issues between the parties’.[62] An allegation is relevant if it would be admissible in evidence to prove any allegation material to the relief that is sought.[63]
[62](1989) 92 ALR 131, 152.
[63]Forester v Read (1870) 6 LR Ch App 40; Christie v Christie (1873) 8 LR Ch App 499.
Conclusions
I have made no finding that Mrs Jarrold made allegations of fraud that she knew to be false, such as occurred in Degmam Pty Ltd (in liq) v Wright [No 2],[64] either in respect of the Fishweir transfer or the power of attorney. Although I found against Mrs Jarrold on the forgery of the power of attorney, I am not convinced that Mrs Jarrold made that allegation in circumstances where she knew it to be false or for scandalous purposes. I consider that Mrs Jarrold’s belief in the merits of her claim is rendered more reasonable by the corroborating expert handwriting evidence called by her. It is not relevant that, as Mr Jarrold submits, Mrs Jarrold did not obtain the handwriting evidence until some time after commencing the writ. It is not the case that Mrs Jarrold was unable to produce any evidentiary basis for her allegations, even if I ultimately rejected those bases. Had Mrs Jarrold persisted in her allegations of fraud without any evidentiary basis or corroborative handwriting evidence, that would be a different matter.
[64][1983] 2 NSWLR 354, 358.
The Fishweir allegation, on the other hand, is supported neither by handwriting evidence nor any other evidence besides Mrs Jarrold’s conviction, since abandoned, that she did not sign it. Even so, as I am not satisfied that Mrs Jarrold brought an allegation that she knew to be false, or that the allegation was made for scandalous purposes or to prolong the litigation, I do not consider that it provides the basis for the award of indemnity costs.
The allegation that Mr Jarrold forged the Fishweir transfer is not an irrelevant allegation of fraud. If the allegation were proved, it would have a tendency to show that Mr Jarrold had engaged in fraudulent conduct before, which finding would have been material to the issues in dispute between the parties.
Orders
Consistently with the foregoing reasons, I order that:
1.Mrs Jarrold pay the costs of the Registrar on a party and party basis, including the costs that the Registrar is ordered to pay Mr Jarrold.
2.The Registrar pay the costs of Mr Jarrold on a party and party basis.
I shall hear the parties as to the form of orders.
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