Koay Eng Hooi v Jim Lim
[2017] VCC 949
•13 July 2017
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-17-02902
| KOAY ENG HOOI & ANOR |
| Plaintiffs |
| v |
| JIM LIM & ANOR |
| Defendants |
---
JUDGE: | His Honour Judge Cosgrave | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 6 July 2017 | |
DATE OF RULING: | 13 July 2017 | |
CASE MAY BE CITED AS: | Koay Eng Hooi & Anor v Jim Lim & Anor | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 949 | |
REASONS FOR RULING
---
Subject:REAL PROPERTY – COSTS
Catchwords: Removal of caveat – prima facie case – balance of convenience – whether defendant was justified in maintaining caveat – plaintiff seeks order for indemnity costs for removal of caveat
Legislation Cited: Transfer of Land Act 1958 (Vic)
Cases Cited:Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57; Olandezos v Bhatha [2017] VSC 234; Piroshenko v Grojsman [2010] VSC 240; Sylina v Solanki [2014] VSC 2; Thorne v Doug Wade Consultants Pty Ltd [1985] VR 433
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J D McKay | Mills Oakley |
| For the Defendants | Mr B D Devanny | L & T Associates |
HIS HONOUR:
Summary
1 This application concerns a dispute between the parties with respect to the removal of a caveat. Because the first defendant withdrew the caveat the day before the scheduled hearing, the only issue concerns the question of costs. In order to understand my decision in this matter, it is necessary to set out the relevant background facts.
Background
2 The plaintiffs are the registered proprietors of the land in Certificate of Title Volume 11860 Folio 339 being the land known as Unit 705, 5 Elgar Court Doncaster in the State of Victoria (“the Elgar Court property”).
3 The first plaintiff together with a fellow partner, David Gurupatham, is involved in a partnership dispute with the first defendant in proceeding CI-17-00073 in this court (“the Partnership Action”). In the Partnership Action, the plaintiffs seek orders for the dissolution or termination of the partnership and the taking of accounts. The first defendant has counterclaimed for damages and other relief.
4 On 9 June 2017 the first defendant lodged a caveat over the Elgar Court property claiming an interest pursuant to a constructive trust. The caveat was lodged without notice to the plaintiffs.
5 On 20 June 2017 the plaintiffs’ solicitors wrote to the first defendant requesting that the caveat be removed by 5pm on 21 June 2017. The letter advised that if the caveat were not removed, the plaintiffs’ solicitors reserved the right to apply to the court for removal. The letter also stated that the first defendant had no caveatable interest in the property.
6 On 21 June 2017 the first defendant responded to the plaintiffs’ solicitor advising that it was “well-nigh impossible” to respond within the time sought. He said that if the plaintiffs wanted him to seriously consider the matters raised, then the plaintiffs should provide affidavits.
7 Subsequently on 21 June 2017 at 10:56am, the plaintiffs’ solicitors responded by advising the defendant that they were obtaining instructions to prepare and serve affidavit material. The email asserted that there was no basis for the defendant to claim a caveatable interest in the property pursuant to a constructive trust and, in the plaintiffs’ view, there was no reason why the caveat could not be removed as a matter of priority. The email warned that if the defendant refused to remove the caveat, the plaintiffs would seek indemnity costs on their removal application.
8 At about 6:29pm on the same day, the plaintiffs’ solicitors sent a further email to the defendant in which they commented that, in their recent telephone call, they were unable to address the issue of the caveat withdrawal because the defendant indicated he had to attend a meeting and had terminated the phone call.
9 On 22 June 2017 at about 9:15am the defendant emailed the plaintiffs’ solicitors saying that it was not clear why the caveat had to be removed urgently.
10 On 27 June 2017 the plaintiffs filed their originating motion and summons in this proceeding.
11 By email dated 3 July 2017 the first defendant sent the plaintiffs’ solicitors a copy of a withdrawal of caveat, albeit one which was not in registrable form. In the covering email, the first defendant said that the basis for the caveat was a constructive trust in that the first plaintiff diverted resources arising in Australia which would otherwise be assets of the partnership. He said that, at the time of lodging the caveat, he reasonably believed that work and income had been diverted wrongfully from the partnership and applied for the benefit of the first plaintiff. The first defendant also acknowledged that there was no evidence as to the source of funds used to purchase the Elgar Court property.
12 On the eve of the hearing, the first defendant withdrew the caveat.
Legal Principles
13 The legal principles regarding applications for the removal of caveats pursuant to section 90(3) of the Transfer of Land Act 1958 (Vic) have recently been set out by Derham AsJ in Olandezos v Bhatha [2017] VSC 234 at [15]-[18]. The applicable principles were considered by Warren CJ in Piroshenko v Grojsman,[1] and were recently summarised by Elliott J in Sylina v Solanki as follows:[2]
[1][2010] VSC 240.
[2][2014] VSC 2 at [23]
“The principles to be applied on an application to remove a caveat are well settled. There are numerous cases enunciating the approach the court must take. Relevantly, the authorities (Percy & Michele Pty Ltd v Gangemi [2010] VSC 530 [38]–[48] (Macaulay J); Piroshenko [13]–[20] (Warren CJ); Schmidt v 28 Myola Street(2006) 14 VR 447, 457 [32] (Warren CJ); Goldstraw [30] (Dodds-Streeton J) establish as follows:
(1) The Court’s power under s 90(3) of the Act is discretionary.
(2) A caveator bears the onus of establishing that there is a serious question to be tried that it does have the “estate or interest in land” as claimed
(3) If the caveator establishes a serious question to be tried in relation to the estate or interest claimed, the caveator must further establish that the balance of convenience favours the maintenance of the caveat until trial.
(4) There is a relationship between the strength of the case in establishing a serious question to be tried and the extent to which the caveator must establish the balance of convenience favours the caveator; the stronger the case in establishing a serious question, the more readily the balance of convenience might be satisfied. It is sufficient that the caveator show a sufficient likelihood of success that, in the circumstances, justifies the practical effect which the caveat will have on the ability of the registered proprietor to deal with the property in question in accordance with its normal proprietary rights.”
14 While Elliott J spoke in terms of “a serious question to be tried”, I note that Warren CJ in Piroshenko concluded that the “prima facie case” was the appropriate test, thereby applying the decision of the High Court in Australian Broadcasting Corporation v O’Neill.[3] In my view, the prima facie case test is to be preferred. This does not mean that a caveator must show it is more probable than not that the plaintiff will succeed at trial. But the caveator must show that it has a prima facie case with sufficient likelihood of success to justify the maintenance of the caveat and the preservation of the status quo pending trial.
[3](2006) 227 CLR 57.
15 An application to remove a caveat involves two steps. First, the caveator must establish that there is a prima facie probability on the evidence that the caveator will be found to have the asserted legal or equitable right in the disputed land. Second, the caveator must also establish that the balance of convenience favours the maintenance of the caveat until trial.
16 In this case, the defendant plainly arrived at the realisation that he did not have a caveatable interest, and hence, he belatedly withdrew the caveat. On the evidence, this was a sensible conclusion to reach because there was no evidence adduced to justify the caveat. That being so, there was no serious question to be tried that the defendant had the estate or interest which he claimed by way of constructive trust. Inevitably, having failed at the first step, the defendant failed to overcome the second hurdle.
17 The defendant’s attitude in the litigation has been unnecessarily aggressive. Apart from lodging the caveat without any proper basis, I note that the defendant applied for default judgment on his counterclaim even after he received the detailed letter from the plaintiffs’ new solicitors on 20 June 2017 in which they explained how Ng’s health issues and consequent failure to discharge professional responsibility had caused significant difficulties for the plaintiffs. In my view, given the terms of the Civil Procedure Act, it would be inappropriate for any party to act as the defendant has done in those circumstances. It is especially unsatisfactory that a practising litigation lawyer, who should know better, would act as the defendant did.
18 Awarding costs in civil litigation always involves a discretionary exercise of the court’s powers. The case law indicates that relevant factors to consider in the context of caveat removal include:
· whether the caveat was maintained in circumstances where the defendant, properly advised, should have known there was no chance of success;
· whether the improperly lodged caveat was being used as a bargaining chip;
· whether the party wrongfully lodging the caveat was a solicitor or not;
See Pearl Lingerie Australia Pty Ltd v TGY Pty Ltd [2012] VSC 451 and Love v Kempton [2010] VSC 254
19 The plaintiffs seek the costs of the caveat removal on an indemnity basis. The defendant denies that such an order is warranted or, as I understood his submission, that the plaintiff should recover costs. The defendant contends that the plaintiffs should have proceeded under section 89A of the Transfer of Land Act. In my view, there is nothing improper in making the application under section 90(3) of the Transfer of Land Act. Indeed, my experience as a practitioner and as a judge is that this is the means most commonly employed to seek removal of a caveat.
20 I find that the plaintiffs are entitled to costs taxed on an indemnity basis in relation to the removal of caveat application. I reach this conclusion for several reasons.
21 First, the defendant lodged the caveat over the property without any proper basis. At the time, he knew or should have known that this was the case.
22 Secondly, the defendant’s rationale for lodging a caveat appeared to be that the property was purchased with funds which were misappropriated from the partnership. This was tantamount to an allegation of dishonesty against the first plaintiff, a solicitor. It is well recognised that parties making unjustified allegations of fraudulent behaviour are liable to pay the other party’s costs on an indemnity basis.[4] For one solicitor to make such an allegation against another solicitor without any proper basis is a serious matter. It is perhaps even worse in this case because it appears from some of the defendant’s correspondence dated 21 February 2017 that he believed the plaintiffs had to consent to the lodging of the caveat. Assuming this to be correct, the defendant subsequently acted unilaterally in lodging the caveat. In so doing, the defendant knew or should have known that he was acting without the plaintiffs’ consent and without any proper basis. This makes it more likely that the defendant was lodging the caveat for a collateral or improper purpose.
[4]Thorne v Doug Wade Consultants Pty Ltd [1985] VR 433.
23 Thirdly, the plaintiffs’ solicitors warned the defendant that unless he removed the caveat, they would make application to the court and seek indemnity costs. Notwithstanding the written warnings in June 2017, the defendant refused to withdraw the caveat until about 3 July 2017 after the plaintiffs had filed and served the application.
24 Finally, the defendant’s claim was exaggerated. It should have been apparent from the documents at the Land Titles Office that a registered mortgagee had provided funds for the purchase of the Elgar Court property. Further, the second plaintiff was a joint proprietor of the Elgar Court property with his wife so he was probably not entitled to all the equity in the property in any event.
25 In all the circumstances a special costs order is justified.
0
8
0