Lombardo v Bahnan (No 2)

[2014] VSC 438

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION

S CI 2014 4070

MICHAEL LOMBARDO	Plaintiff
v
SAMIR BAHNAN	First Defendant
and
THE REGISTRAR OF TITLES	Second Defendant

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JUDGE:	WARREN CJ
WHERE HELD:	Melbourne
DATE OF HEARING:	22 August 2014
DATE OF JUDGMENT:	11 September 2014
CASE MAY BE CITED AS:	Lombardo v Bahnan (No 2)
MEDIUM NEUTRAL CITATION:	[2014] VSC 438

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COSTS – Special costs orders – Where plaintiff successful in application to have caveat removed – Where no basis for asserting caveatable interest – Whether plaintiff entitled to costs of application on an indemnity basis.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr S E Marantelli	Hentys Lawyers
For the First Defendant	Mr S P Matters	Vasilaras & Co
For the Second Defendant	No appearance

HER HONOUR:

1. On 28 August 2014, I  made orders allowing the plaintiff’s application seeking the removal of a caveat and published my reasons for doing so.[1] At that time, the plaintiff foreshadowed making an application seeking that the first defendant pay his costs on an indemnity basis, however requested the opportunity to consider the Court’s reasons before deciding whether to pursue such an application.  The foreshadowed application was pursued and the parties filed written submissions on the question of costs.

   [1]Lombardo v Bahnan [2014] VSC 410.

1. For the reasons that follow, I consider it is appropriate that the first defendant should pay the plaintiff’s costs of the application on an indemnity basis.

1. The Court has a broad, unfettered discretion in the awarding of costs pursuant to s 24 of the Supreme Court Act 1986. The principles upon which a special costs order may be made are well established.[2] Also relevant to the exercise of the Court’s discretion to award costs are the provisions of the Civil Procedure Act2010, which has an overarching purpose ‘to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’ in proceedings.[3] Section 28 of that Act provides that the Court may take into account any contravention of the overarching obligations in exercising any power in relation to a civil proceeding, including the exercise of its discretion as to costs.[4]

   [2]See Colgate-Palmolive Co v Cussons Pty Ltd (1993) FCR 225 and see also the various authorities referred to in Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd [2013] VSCA 237 [538]-[551].

   [3]Civil Procedure Act 2010 s 1.

   [4]Civil Procedure Act 2010 s 28.

1. The plaintiff made two principal submissions in support of his claim that he should be awarded costs on an indemnity costs. First, he claimed that it should have been clear to the first defendant that there was no basis upon which he could properly assert a caveatable interest.  Secondly, he submitted that the timing of the lodgement of the caveat and the fact that the caveat sought to prohibit a transfer of the property to anyone save for the caveator showed that the lodgement of the caveat was not an efficient or effective step towards resolving the issues in dispute as articulated by the first defendant at the hearing of the application. The plaintiff asserted that the prohibition should properly have allowed for the transfer to both the caveator and the plaintiff to restore their previous status as tenants in common in equal shares and that it was not until more than 12 months after the transfers of land to effect the partition of the properties were registered that the caveat was lodged.

1. It was not suggested by the first defendant that costs in the ordinary way, that is on a standard basis, should not be awarded against him. 

1. The first defendant  submitted that in the course of the application the Court heard significant argument about a developing branch of jurisprudence and that it could not be said that the claim was ‘bound to fail’ without the benefit of hindsight. He further submitted that the fact that he made an offer to remove the caveat on terms to allow the contract of sale supports the submission that the caveat was not lodged as a bargaining chip.

1. Although I accept that the timing of the lodgement of the caveat is curious, it has not been established that the caveat was lodged as a bargaining chip. The plaintiff concedes there is no evidence that the first defendant knew that the plaintiff intended to sell the property and it was not shown that the first defendant was acting mala fide. However, I am satisfied that the basis for lodging the caveat was without merit and that the first defendant should have known it was bound to fail as a matter of law. I am also satisfied that the defendant should have known that lodging the caveat in the way he did would not assist in the just and efficient resolution of the real issues in dispute between the parties.[5]

   [5]Lombardo v Bahnan [2014] VSC 410 [24]-[29].

1. The first defendant knew that he bore the onus of establishing an interest or a right attached to the property in respect of which the caveat had been lodged.  The first defendant’s claim was a complicated one and, as should have been apparent, there were many hurdles of both fact and law that needed to be overcome before a were many hurdles that needed to be overcome before an arguably caveatable interest in the property could be asserted. These hurdles were not overcome.[6] The first defendant did not establish a proprietary interest in any of the plaintiff’s property.  Furthermore, the proprietary interest claimed did not lie in the Malcolm Place property, the subject of the caveat.

   [6]Ibid [32]-[35].

1. I do not consider that the fact that an offer of settlement was made assists the first defendant. Whilst I accept it was reasonable to make the offer, the offer required that the proceeds of sale be paid into a trust account and so, although it would have allowed the sale to proceed, would not have enabled the plaintiff to receive the benefit of any sale.  As my judgment demonstrates, it was reasonable for the plaintiff to reject the offer.

1. This Court has said on many occasions that the lodging of a caveat is a serious business as it can affect commercial transactions and the financial interests of others.[7] In addition to the financial cost of bringing proceedings to remove a caveat there may be a significant emotional and psychological cost involved.  A party who lodges a caveat on a basis which is bound to fail should incur the costs of the Court proceedings instituted to remove them.

   [7]Goldstraw v Goldstraw [2002] VSC 491; Love v Kempton & Anor [2010] VSC 254.

1. I will exercise my discretion to make an order that the first defendant pay the plaintiff’s costs of the proceeding on an  indemnity basis .

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