Norris (a pseudonym) v Norris (a pseudonym) (s 66G Proceedings)

[2021] NSWSC 1676

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Norris (a pseudonym) v Norris (a pseudonym) (s 66G Proceedings) [2021] NSWSC 1676

Hearing dates:

On the papers

Date of orders:

20 December 2021

Decision date:

20 December 2021

Jurisdiction:

Equity

Before:

Robb J

Decision:

The orders of the Court are:

(1) Order that the parties' costs of the application by the plaintiff for relief under s 66G of the Conveyancing Act 1919 (NSW) be paid out of the net proceeds of sale of the property known in the proceedings as the [Suburb B] property.

(2) Order the first defendant to pay the plaintiff's costs of the cross claim filed by the first defendant on the ordinary basis

Catchwords:

COSTS — Party/Party — Exceptions to general rule that costs follow the event — Where plaintiff successful in attaining orders sought — Where plaintiff sought costs of proceedings from defendant on indemnity basis — Where defendant raised special rule pursuant to s 66G of Conveyancing Act 1919 (NSW) that parties costs’ be paid out of net proceeds of sale of property — Where Court made orders for parties’ costs of application on that basis

COSTS — Party/Party — General rule that costs follow the event — Proceedings discontinued or dismissed — Where defendant filed cross claim and resisted orders sought by plaintiff — Where at commencement of hearing defendant discontinued cross claim and agreed to orders substantially in terms sought by plaintiff — Where plaintiff sought costs of proceedings from defendant on indemnity basis — Where Court ordered defendant to pay plaintiff’s costs of cross claim on ordinary basis

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Conveyancing Act 1919 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Barel v Segal (No 3) [2012] NSWSC 1319

Chow v Chow (No 2) [2015] NSWSC 1248

Coast Property Realty Pty Ltd v Falconer [2016] NSWSC 214

Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225

Commonwealth of Australia v Gretton [2008] NSWCA 117

Hamod v New South Wales [2011] NSWCA 375

Kardos v Sarbutt (No 2) [2006] NSWCA 206

Leichardt Municipal Council v Green [2004] NSWCA 341

Oshlack v Richmond River Council (1998) 193 CLR 72

Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6

Stone v Stone [2014] NSWSC 1655; (2014) 17 BPR 33,443

Category:

Costs

Parties:

[Laura Norris] (plaintiff)
[Max Norris] (first defendant)
[Jess Norris] (second defendant)
[Craig Norris] (third defendant)
[James Norris] (fourth defendant)
[Rachel Norris] (fifth defendant)

Representation:

Counsel:
D O’Connor (plaintiff)
J Bennett (first defendant)

Solicitors:
Stacks Collins Thomson (plaintiff)
Uther Webster & Evans (first defendant)

File Number(s):

2019/365199

Judgment

1. In these proceedings, the plaintiff sought orders for the appointment of trustees for sale under s 66G of the Conveyancing Act 1919 (NSW) of property at [Suburb B] (the s 66G proceedings).

2. The [Suburb B] property was co-owned by the plaintiff (39%), the first defendant (14%), the second defendant (14%), the third defendant (14%), the fourth defendant (14%) and the fifth defendant (5%).

3. The first defendant and the fifth defendant are respectively the divorced father and mother of the other parties.

Orders made in s 66G proceedings

4. The s 66G proceedings were listed to be heard by me on 27 April 2021. They were to be heard with other proceedings, primarily a family law property settlement claim under s 79 of the Family Law Act 1975 (Cth) between the first defendant and the fifth defendant (the family law proceedings).

5. An order had been made that evidence in each proceeding be evidence in the others.

6. On the first day of the hearing, all parties consented to substantive orders being made substantially as sought in the plaintiff's summons. The costs of the s 66G proceedings were reserved.

7. These reasons deal with the outstanding costs orders in the s 66G proceedings.

8. Because of the circumstances in which the substantive orders were made in the s 66G proceedings, the Court has received none of the evidence that was served in the proceedings and none of the issues that were raised have been the subject of curial examination.

9. Shortly after the orders were made, the appointed trustees for sale approached the Court for judicial advice. Their purpose was to receive authorisation to sell the [Suburb B] property at an advantageous price, without being required to put the property on the market in the conventional way. The Court gave the trustees for sale the advice they sought, and a contract for the sale of the [Suburb B] property was exchanged. My understanding is that the sale price was considered by all parties to be attractive and higher than had been anticipated throughout the proceedings.

First defendant's cross claim

10. The reason why the orders sought by the plaintiff were not made earlier was that, on 28 February 2020, after the plaintiff's summons had been filed on 20 November 2019, the first defendant filed a cross claim in which he sought the following primary relief against the other parties to the s 66G proceedings:

A declaration that the Cross-Claimant is the beneficial owner of 56% of [the [Suburb B] property] held on resulting trust by the Cross-Defendants.

In the alternative, a declaration that the Cross-Claimant is the beneficial owner of 56% of [the [Suburb B] property] held on constructive trust by the Cross-Defendants.

A declaration that the legal and beneficial ownership of the remaining 44% of [the [Suburb B] property] is as follows:

Cross-Claimant – 14%

First Cross-Defendant – 13.60%

Second Cross-Defendant – 4.89%

Third Cross-Defendant – 4.89%

Fourth Cross-Defendant – 4.89%

Fifth Cross-Defendant – 1.74%

Order that, upon any transfer of ownership by the First Cross-Defendant and/or the Fifth Cross-Defendant, the net proceeds received by either of them be paid in satisfaction of any loans secured by [the [Suburb D] Mortgage] on title to the property situated and known as [the [Suburb D] Property].

…

11. The grounds upon which the first defendant sought this relief were as pleaded in the first defendant’s first cross claim statement of cross claim, in substance as follows. As at 13 May 2004, the first defendant had title to a property in [Suburb A]. On that date, the [Suburb A] property was transferred to the first defendant as to 20% and to a company that was the trustee of the [Noriss Trust] (the Trust). In short, the first defendant alleged that he executed the transfer under threat by the fifth defendant’s father, that he did not read the documents that he executed, and he did not have independent legal, financial or other advice. The first defendant did not receive any consideration for the transfer. The first defendant pleaded that his will was overborne and he executed the transfer under duress or undue influence. Consequently, the first defendant claimed that the trustee held the 80% interest in the [Suburb A] property on a resulting or constructive trust for the first defendant.

12. The [Suburb A] property was sold on 11 June 2013. The first defendant claimed that, in signing the transfer, his will was overborne, and he executed the transfer under duress or undue influence.

13. The [Suburb B] property was purchased on or about 21 August 2013 with the proceeds of sale of the [Suburb A] property, a payment by the plaintiff and a loan secured by registered mortgage over the [Suburb D] property. The [Suburb D] property was registered in the sole name of the fifth defendant.

14. On settlement, the [Suburb B] property was registered in the names of the parties to the s 66G proceedings in the proportions set out above at [2].

15. The first defendant therefore claimed that he had a 70% beneficial interest in the [Suburb B] property, being the 56% referred to in prayer 2 plus the 14% referred to in prayer 3(a). This claim was somewhat remote from the circumstances in which the parties to the s 66G proceedings acquired their common interests in the [Suburb B] property.

16. I infer that the first defendant also sought an order that the mortgage over the [Suburb D] property owned by the fifth defendant be discharged out of any sale proceeds of the [Suburb B] Property, because that would improve the fifth defendant’s financial position, which is an outcome that may have been advantageous to the first defendant in his family law proceedings against the fifth defendant.

17. In the result, the first defendant elected not to prosecute his cross claim shortly before the commencement of the hearing.

18. The Court does not know why the first defendant made the decision not to prosecute his cross claim. The Court has been told that the decision had something to do with the first defendant's attitude to the prosecution of the family law proceedings. However, the reasons that motivated the first defendant are not readily apparent.

Costs orders sought by the plaintiff

19. The plaintiff now seeks orders for the costs of the s 66G proceedings as follows:

1. The first defendant be ordered to pay the plaintiff's costs of the s 66G proceedings.

2. The costs be paid on the indemnity basis.

3. The Court makes a gross sum costs order under s 98(4) of the Civil Procedure Act 2005 (NSW).

4. The amount of the costs be ordered to be paid in the amount of professional fees $123,099.35, disbursements of $7,112 and counsel's fees of $57,048.75.

Costs orders sought by the first defendant

20. The first defendant's response is that the appropriate costs orders should be:

1. Costs of all parties to the s 66G proceedings should be paid out of the net sale proceeds of the [Suburb B] property.

2. Alternatively, the plaintiff should be ordered to pay the first defendant's costs.

3. If the Court makes a costs order against the first defendant, those costs should be determined by assessment in the ordinary way and not by gross sum costs order.

4. Any costs payable by the first defendant should be assessed on the ordinary basis and not on the indemnity basis.

Costs orders in proceedings under s 66G of the Conveyancing Act

21. Under s 98 of the Civil Procedure Act, the Court has a discretion as to the costs order that should be made in the proceedings, being a discretion that must be exercised judicially: Oshlack v Richmond River Council (1998) 193 CLR 72. Gaudron and Gummow JJ said of the equivalent provision to s 98 (footnotes omitted):

The terms of s 69(2) contain no positive indication of the considerations upon which the court is to determine by whom and to what extent costs are to be paid. The power conferred by the section is to be exercised judicially, that is to say not arbitrarily, capriciously or so as to frustrate the legislative intent. However, subject to such considerations, the discretion conferred is, to adapt the words of Dixon J, unconfined except in so far as “the subject matter and the scope and purpose” of the legislation may enable an appellate court to pronounce the reasons given by the primary judge to be “definitely extraneous to any objects the legislature could have had in view”.

22. Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.1 provides that, unless the Court orders otherwise, the costs of proceedings should follow the event. That means that, as the plaintiff's claim has succeeded, unless there is good reason to the contrary, the Court must at least make an order that the first defendant pay the plaintiff's costs on the ordinary basis. In Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121], Hodgson JA said, with the agreement of Mason P:

[121] In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant’s responsibility because the plaintiff was caused to incur costs by the defendant’s failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled: cf Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. Departures from the general rule that costs follow the event are broadly based on a similar approach.

23. However, the first defendant relies upon a special rule that is commonly applied to the costs of proceedings under s 66G of the Conveyancing Act to the effect that, even where the claim is unsuccessfully defended, the costs of obtaining an order for the appointment of trustees for sale of property held jointly or in common is a cost of the joint or common enterprise, so that the costs of the proceedings should be paid out of the net proceeds of sale of the property.

24. In Kardos v Sarbutt (No 2) [2006] NSWCA 206, Brereton J said (with the agreement of Basten JA and Hunt AJA): “Similarly, in proceedings under Conveyancing Act, s 66G, for the appointment of trustees of sale of jointly held land, the costs are usually paid out of the proceeds, the rationale being that the costs of such an application are an incident of joint ownership.” This statement of principle was followed by Pembroke J in Barel v Segal (No 3) [2012] NSWSC 1319. His Honour said at [9]: “The usual starting point for applications under s 66G of the Conveyancing Act 1919 is that the costs of both parties of having trustees for sale appointed are paid out of the proceeds of sale.” See also Chow v Chow (No 2) [2015] NSWSC 1348 at [8].

25. As Darke J explained in Stone v Stone [2014] NSWSC 1655; (2014) 17 BPR 33,443, the principle may extend to a reasonable but unsuccessful opposition to the appointment of trustees for sale. His Honour said:

[51] The plaintiff has succeeded, and prima facie costs should follow the event (see UCPR r 42.1). The plaintiff does not seek an order that her costs be paid by the defendant. Instead, she seeks an order that her costs be paid out of the proceeds of the sale of the Land. Orders of that nature are commonly made in matters under s 66G of the Conveyancing Act. However, the plaintiff submitted that no such order should be made in respect of the defendant’s costs, having regard to the fact that the defendant could have consented to the making of the orders under s 66G. In response, the defendant submitted that in proceedings under s 66G the usual costs order is that the costs of the parties be paid out of the proceeds of sale, “the rationale being that the costs of such an application are an incident of joint ownership“ (see, for example, Kardos v Sarbutt (No 2); [2006] NSWCA 206 at [28]).

[52] I accept that the costs of proceedings for orders under s 66G may commonly be regarded as an incident of joint ownership. In the present case, while the defendant’s opposition to the sale was ultimately not successful, he properly advanced a substantial argument in support of an estoppel which may have afforded a good reason to decline to appoint trustees for sale. In all the circumstances I think that it would be appropriate for the defendant’s costs to also be paid out of the proceeds of sale.

26. As can be seen from these authorities, the underlying rationale of the special rule is that the costs of entering into the joint or common enterprise of ownership of the relevant property will include the costs of setting up the enterprise, and if that is so, the costs of dissolution should also be treated as a cost of the enterprise. As the parties to the enterprise may have good arguable grounds for resisting its dissolution at a particular time, it may be appropriate to treat the costs of even an unsuccessful resistance as being costs of the enterprise. That is because, when parties enter into a joint or common enterprise, they may create legitimate expectations or rights for its continuation over time. As s 66G of the Conveyancing Act contemplates that one co-owner of property may make an application for the appointment of trustees for sale at any time, and without being required to satisfy specified grounds, it will always be possible that the other co-owners will have some legitimate claim for the refusal of the order so that the joint or common enterprise will continue.

27. In the present case, the first defendant's cross claim sought to establish that the co-owners of the [Suburb B] property held the property on trust for him as to 70%. That claim did not in any real way arise out of the common enterprise, or the circumstances in which it was established by the parties. It arose out of prior events, being the transfer of the [Suburb A] property into the Trust.

28. The claim on the basis of which the first defendant resisted the s 66G proceedings was therefore in reality a separate claim commenced by the first defendant against the other co-owners to establish that the beneficial ownership of the [Suburb B] property was different, in the first defendant's favour, from that which flowed from their proportionate interests as stated on the title.

29. The claim that would require the discharge of the mortgage over the [Suburb D] property owned by the fifth defendant is even more remote from the circumstances in which the parties acquired their co-ownership of the [Suburb B] property.

30. Consequently, I do not accept that the special costs order that is usually made in claims under s 66G of the Conveyancing Act should be applied to the whole of the costs of the s 66G proceedings.

31. In so far as the plaintiff has incurred some costs, probably in a relatively minor amount, in commencing the s 66G proceedings and in ultimately obtaining the orders made, the special rule will be applicable, and the costs of all parties strictly related to the application under s 66G of the Conveyancing Act should be paid out of the net proceeds of sale of the [Suburb B] property.

32. However, the plaintiff's costs strictly related to the defence of the first defendant's cross claim should be ordered to be paid by the first defendant.

33. There is another reason why that is the appropriate order in this case. If the first defendant had a good arguable claim that the joint owners of the [Suburb B] property held the title wholly on trust for the first defendant, then he could have made a claim that he was the sole beneficial owner of that property. In that case, there may have been some good reason why the first defendant would want to resist the making of the orders sought by the plaintiff and to retain the [Suburb B] property indefinitely. However, the first defendant in fact only claimed to be entitled to 70% of the beneficial title to the property. Even if the first defendant had been a 70% co-owner of the [Suburb B] property at law, that would not have been a ground for him to have resisted the making of orders for sale of the property under s 66G of the Conveyancing Act.

34. Even if the cross claim made by the first defendant was a good one, it did not give him a proper basis for resisting the sale of the [Suburb B] property. The proper course for the first defendant to have taken was to permit the property to be sold, and to seek an interlocutory order that the proceeds of sale be retained as a fund to enable the first defendant to enjoy the fruits of the cross claim if he succeeded. So far as I am aware, the first defendant's claim was only that he had a greater beneficial share of the title to the [Suburb B] property than his proportionate joint ownership established. The first defendant did not claim any separate reason for being able to resist the sale of the [Suburb B] property.

35. As a separate matter, the first defendant relied upon the decision of McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624; [1997] HCA 6, as expounded by White J (as His Honour then was) in Coast Property Realty Pty Ltd v Falconer [2016] NSWSC 214 at [13] as follows:

[13]  The parties acknowledge that the authorities, on the operation of r 42.19, indicate that circumstances in which it may be appropriate for a court to make a contrary order include where the plaintiff has achieved practical success in the proceedings or where the defendant’s unreasonable conduct has caused unnecessary costs. The defendant also submits that a contrary order may be made if a judge could feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried (Re Minister for Immigration & Ethnic Affairs; Ex Parte Lai Qin(1997) 186 CLR 622 at 624). In that case, McHugh J said that, although in an appropriate case, a court may make an order for costs, even where there has been no hearing on the merits, the court cannot try a hypothetical action between the parties so as to burden the parties with the costs of a litigation action, which by their settlement they have avoided. And that if it appears that both parties have acted reasonably in commencing a proceedings and continued to act reasonably until settlement or until the further prosecution of the proceedings became futile, then the appropriate exercise of the costs discretion will usually mean that the court makes no order as to costs (at 624-625)).

36. The present case is not one in which the prosecution of the first defendant's cross claim was rendered pointless because the first defendant secured the outcome that he sought from some extra-curial process. The case is one in which the first defendant abandoned his cross claim on the first day of the hearing. While it is true that the Court has not been required to investigate the merits of the cross claim, and it may well be that the first defendant had a good arguable claim, in no way can it be said that the orders made in the s 66G proceedings constituted a settlement between the parties. It is not necessary to label the first defendant's conduct as a capitulation as suggested by the plaintiff. It is sufficient to describe the events as involving an abandonment by the first defendant of his cross claim and the cessation of his resistance to the plaintiff's claim. The event therefore is that the plaintiff succeeded in the s 66G proceedings, and an order should be made against the first defendant that he pay the plaintiff's costs of defending his cross claim.

37. On 26 February 2021, the first defendant's solicitor made a Calderbank offer to the plaintiff in a letter to her solicitor, in which the first defendant offered to accept the orders sought by the plaintiff in the s 66G proceedings, but on terms that there would be no order as to costs, with the effect that each party would have to pay their own costs of the proceedings. The letter also stipulated that the payment from the net proceeds of sale to the first and fifth the defendants would be subject to any order made in the family law proceedings.

38. The first defendant's solicitor made an open offer to the plaintiff in similar terms by letter dated 12 March 2021.

39. The plaintiff rejected those offers by their solicitor's 24 March 2021 letter to the first defendant's solicitor. The letter noted that the first defendant's submissions that had been received by the plaintiff stated for the first time that the first defendant would seek to discontinue his cross claim. Based on that statement, counsel for the plaintiff had been instructed to cease preparing his outline of submissions and for the hearing generally.

40. On 9 April 2021, the plaintiff's solicitor, by email, made an apparently open offer involving proposed consent orders disposing of the s 66G proceedings. The offer included that an order be made that the first defendant pay the plaintiff's costs in the fixed amount of $155,000, and that those costs be paid out of the first defendant's share of the proceeds of sale of the [Suburb B] property.

41. By letter from the first defendant's solicitor dated 21 April 2021, the first defendant made an offer to the plaintiff by his solicitor that orders be made in the s 66G proceedings substantially in the form of the orders ultimately made. The offer included that the first defendant pay the plaintiff's costs as agreed or assessed.

42. This appears to be the first time that the first defendant made an offer that orders be made in the s 66G proceedings substantially in the terms of the orders that were ultimately made. Had significant further costs been incurred by the plaintiff after the date of this letter, its terms would have been a good reason for terminating the first defendant's liability for the plaintiff's costs of the cross claim at this day. However, the offer was only made six days before the commencement of the hearing, and it is probable that any further costs incurred by the plaintiff related to the making of orders under s 66G of the Conveyancing Act. Those additional costs will be payable out of the net proceeds of sale of the [Suburb B] property.

43. The consequence of these considerations is that the Court should simply make an order against the first defendant that he pay the plaintiff's costs of the cross claim.

44. I cannot see any reason at all why the plaintiff should be ordered to pay any of the first defendant's costs of the s 66G proceedings.

Basis upon which the plaintiff's costs should be paid

45. The first defendant should be ordered to pay the plaintiff's costs on the ordinary basis and not the indemnity basis as claimed by the plaintiff.

46. It has not been established that the first defendant did not have a good arguable case under his cross claim, or that he prosecuted it unreasonably, or that he was otherwise delinquent. On its face, the cross claim alleged matters that were reasonably capable of sustaining the relief claimed. Indemnity costs are only awarded where there are exceptional circumstances: Leichardt Municipal Council v Green [2004] NSWCA 341. The plaintiff has not established any of the matters set out in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 232-233, where Sheppard J said:

It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred:

…

2. The ordinary rule is that, where the court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on the party and party basis. In this court the provisions of O 62, rr 12 and 19, and the Second Schedule to the rules will apply to the taxation. In many cases the result will be that the amount recovered by the successful party under the Order will fall short of (in many cases well short of) a complete indemnity.

3.  This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation (perhaps in the form of an amendment to rules of court) or a decision of an intermediate Court of Appeal or of the High Court would be required to alter it. No doubt any consideration of whether there should be any change in the practice would require the resolution of the competing considerations mentioned by Devlin LJ in Berry v British Transport Commission and Handley JA in Cachia v Hanes on the one hand and by Rogers J in Qantas on the other. The relevant passages from the respective judgments have been earlier referred to.

4.  In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes (39 Ch D at 141) said the court had a general and discretionary power to award costs as between solicitor and client ′′as and when the justice of the case might so require”. Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston ([1982] 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo: ′′the categories in which the discretion may be exercised are not closed”. Davies J expressed (at 6) similar views in Ragata.

5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp (supra)); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata ); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.

6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.

47. The fact that the first defendant decided not to prosecute his cross claim at the hearing is not sufficient to establish that it had no reasonable prospects of success, or that the cross claim amounted to an abuse of process or other relevant misconduct.

48. Furthermore, if in the ordinary case where a claimant elects not to pursue a claim at a hearing, the Court treated that conduct as being sufficient in itself to order that the claimant pay the other party's costs on the indemnity basis, that would have the undesirable consequence of encouraging claimants who came to doubt their prospects of success to nonetheless continue to prosecute their claim to final judgment. The claimant may ultimately be better off contesting the hearing and losing, because the increased costs calculated on the ordinary basis may be less than the costs up to the point of hearing on the indemnity basis. The Court should recognise that there are many reasons why a conscientious claimant may come to appreciate, at any stage of proceedings, that the most sensible course is to abandon the claim, even if a satisfactory settlement cannot be achieved. The vicissitudes of litigation may mean that the abandonment of the claim is in the best interests of the parties and the administration of justice. Unless the factors that justify an order that costs be paid on the indemnity basis are present, a conscientious claimant who abandons their claim should be ordered to pay the other party's costs, but should not be punished by an order that the costs be paid on the indemnity basis.

Assessment of cost order

49. I am satisfied that the costs that the first defendant will be ordered to pay to the plaintiff should be assessed in the ordinary way.

50. The plaintiff has not established that any of the factors listed by the Court in Hamod v New South Wales [2011] NSWCA 375 at [816]-[818] have been satisfied in this case. There, Beazley JA (as Her Excellency then was) said:

[816] The terms of s 98(4), together with the more general considerations reflected in the Civil Procedure Act, ss 56(1), 57(1)(d) and 60, suggest the factors that merit particular consideration include: the relative responsibility of the parties for the costs incurred (for example, Harrison v Schipp); the degree of any disproportion between the issue litigated and the costs claimed; the complexity of proceedings in relation to their cost; and the capacity of the unsuccessful party to satisfy any costs liability: Ritchie’s Uniform Civil Procedure NSW at [s 98.45].

[817] The exercise of the power conferred by s 98(4) is particularly appropriate where the costs have been incurred in lengthy or complex cases and it is desirable to avoid the expense, delay and aggravation likely to be involved in contested costs assessment. This may arise either from the likely length and complexity of the assessment process: Beach Petroleum NL v Johnson (No 2) at 120; Charlick Trading Pty Ltd v Australian National Railways Commission; Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006; or from the likelihood that the additional costs of formal assessment would disadvantage the successful party because of the likely inability of the unsuccessful party to discharge the costs liability in any event: Harrison v Schipp; Sony Entertainment (Aust) Ltd v Smith (2005) 215 ALR 788 at [90], [194]–[195]; Hadid v Lenfest Communications Inc [2000] FCA 628.

[818] The power may also be exercised where a party’s conduct has unnecessarily contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceedings: Leary v Leary [1987] 1 WLR 72 ; [1987] 1 All ER 261; Sony Entertainment (Aust) Ltd v Smith; Microsoft v Jiang (2003) 58 IPR 445; [2003] FCA 101; Ritchie’s Uniform Civil Procedure NSW at [s 98.60]).

51. Apart from the fact that I consider the assessment of costs in the s 66G proceedings to be a conventional one in which the ordinary approach should be adopted, I accept that there is some risk, as submitted by the first defendant, that the plaintiff's costs of defending the cross claim may have been increased because of the plaintiff's practical interest in the other proceedings that were fixed to be heard at the same time as the s 66G proceedings.

Orders

52. The orders of the Court are:

1. Order that the parties' costs of the application by the plaintiff for relief under s 66G of the Conveyancing Act 1919 (NSW) be paid out of the net proceeds of sale of the property known in the proceedings as the [Suburb B] property.

2. Order the first defendant to pay the plaintiff's costs of the cross claim filed by the first defendant on the ordinary basis.

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Amendments

31 October 2022 - published with pseudonyms

Decision last updated: 31 October 2022