Pacific Blue Australia Pty Ltd v Somalis

[2008] NSWSC 75

CITATION:	Pacific Blue Australia Pty Ltd v Somalis [2008] NSWSC 75
HEARING DATE(S):	8 February 2008
JUDGMENT DATE :	8 February 2008
JURISDICTION:	Equity Division
JUDGMENT OF:	Palmer J
EX TEMPORE JUDGMENT DATE:	8 February 2008
DECISION:	Defendant to pay Plaintiff’s costs on indemnity basis.
CATCHWORDS:	INDEMNITY COSTS – CAVEAT – Caveat incurably bad in form – settlement of contracts imminent – caveator offers to withdraw caveat when proceedings threatened – order for removal made – whether costs reasonably incurred – whether costs should be ordered on indemnity basis.
CATEGORY:	Consequential orders
CASES CITED:	- Downie v Kenny & Kenny Pty Ltd, unrep., 16 September 1985; BC8500545 - Pacific Blue Australia Pty Ltd v Somalis [2008] NSWSC 16
PARTIES:	Pacific Blue Australia Pty Ltd (Plaintiff) John Somalis (Defendant)
FILE NUMBER(S):	SC 1192/08
COUNSEL:	D. Macfarlane (Plaintiff) T. Hall (Sol) (Defendant)
SOLICITORS:	John Edmunds Solicitor (Plaintiff) Hall Partners Pty Ltd (Defendant)

1192/08 Pacific Blue Australia Pty Ltd v Somalis

JUDGMENT – Ex tempore
8 February, 2008

1    On 22 January 2008 Campbell JA, sitting as Vacation Duty Judge, made an order for the removal of certain caveats which had been lodged by the Defendant against the Plaintiff's land: see Pacific Blue Australia Pty Ltd v Somalis [2008] NSWSC 16. His Honour reserved the question of costs. The question of costs has now come before me in the Duty Judge List in circumstances which I need not recount. It is sufficient to say that both parties have now agreed that it is appropriate that I deal with the matter and, as there is no other pressing matter in the Duty Judge's List, I will do so in order to avoid the parties incurring any further unnecessary expense. The circumstances giving rise to the question may be narrated very shortly.

2    The Defendant lodged certain caveats against the Plaintiff's land on about 11 January 2008. The caveats showed that the address for service of notices on the caveator was the address of the Defendant's present solicitor. I assume from that circumstance and from the manner of drafting of the caveat forms that the caveats were indeed prepared by the Defendant's solicitor.

3    The Plaintiff protested that the caveats disclosed no caveatable interest. There having been no undertaking to withdraw the caveats prior to 22 January 2008, the Plaintiff approached the Duty Judge for orders seeking the removal of the caveats. However, there had been correspondence between the parties' solicitors prior to that time. That correspondence, however, had produced no unequivocal undertaking on the part of the Defendant to remove the caveats.

4    On 22 January, the Defendant's solicitor sent to the Plaintiff's solicitor an e-mail at about 9.20am which gave an unequivocal assurance that the caveats would be removed that day and that the Defendant would commence the appropriate proceedings to enforce his claim. That e-mail was followed by a further e-mail at 9.58am repeating the assurance.

5    Those circumstances were drawn to the attention of his Honour when the Plaintiff approached him in the course of the Duty Judge list that day. His Honour said this in the judgment:

“In these circumstances, it is clear that the substance of the application is already known to the solicitor for the caveator. Further, the caveator's position is that the caveats will be withdrawn today.

The plaintiff has settlements of contracts for sale of the land over which the caveats have been lodged coming up in the next few days. The first of them is tomorrow.

In my view, given the history that I have related in this judgment, the plaintiff would be justified in having the absolute assurance that a court order would give it that the caveats in question will be removed. When the substance of the practical effect thereby achieved is not something with which the caveator disagrees, and the caveator’s solicitor is aware of the proceedings, in my view it is appropriate to make an order dispensing with service of the summons.”

6    His Honour then reserved the costs of the application, saying that the Defendant would have an opportunity to make such submissions as he wished about whether the bringing of the proceedings was necessary and as to any other matters which might bear upon costs.

7    Mr Macfarlane of Counsel, who appears for the Plaintiff, submits that an indemnity costs order should be made against the Defendant because the caveats on their face were incurably bad in form as not disclosing any caveatable interest and it was not until 9.20am on 22 January 2008 that the Defendant's solicitor gave any unequivocal assurance that the caveats would be removed. In those circumstances, he says, and having regard to an antecedent history of another party related to the Defendant lodging similar caveats against the Plaintiff's land, the Court should conclude that the Plaintiff was justified in bringing the proceedings, not only up to the point when the Defendant's solicitor's e-mail was received, but in proceeding further to obtain the orders of the Court which were made by his Honour late on 22 January.

8    Mr Hall, who appears for the Defendant, opposes any order as to costs saying that, certainly as from the time that he gave the assurance that the caveats would be removed at 9.20 am on 22 January, there was no reasonable justification for the Plaintiff proceeding as it did and incurring costs which it now seeks to visit upon the Defendant.

9    The lodgement of a caveat against the title to land is too often done in order to cause the registered proprietor embarrassment or delay. It is too often done as a bargaining tactic in a dispute. The lodgement of a caveat has serious consequences: it operates as a statutory injunction against dealings and can seriously interfere with a registered proprietor's financial position. A caveat should not be used merely as a bargaining tool and should never be lodged without a reasonable legal basis.

10    In the present case, it is clear from the nature of the interest described in the caveat form that the Defendant had no caveatable interest in the subject land. The interest claimed is in a sum of money, not in the land itself. It is regrettable that a caveat, manifestly bad on its face, could have been lodged by a solicitor – I am inferring, as I have said before, that the caveat was prepared by the Defendant's solicitor.

11    The judgment of Campbell JA shows that one of the Plaintiff's contracts for sale of the subject land fell due for completion on 23 January 2008. The evidence and the judgment reveal a course of dealing between the parties which gives rise to the inference that, on 11 January 2008, the Defendant and the Defendant's solicitor were very probably aware of the fact that the contracts for sale of the subject land were on foot. It is a legitimate inference that the caveats lodged on 11 January 2008 were designed deliberately to impede completion of those contracts. To engage in this practice by the employment of a caveat manifestly bad in form on its face is to be discouraged. It seems to me that his Honour had regard to matters such as this in concluding that, notwithstanding that at the very last moment the Defendant, by its solicitor, had offered an assurance to withdraw the caveats, nevertheless the Plaintiff was justified in seeking the absolute certainty of an order of the Court that the caveats be removed.

12    Respectfully, I agree with his Honour's approach and with his Honour's conclusion. It seems to me that the Plaintiff was entirely justified, not only in commencing proceedings for removal of the caveats, but also in obtaining those orders, despite the assurance received at the very last moment from the Defendant's solicitor on 22 January. If the Defendant had wished to prosecute his claim properly according to law, he would have made the offer to withdraw the caveats sooner than 22 January.

13    In those circumstances, I think that the proper costs order is that the Defendant should pay the Plaintiff's costs of the proceedings on the indemnity basis. There is certainly a precedent for such an indemnity order in circumstances akin to the present. In Downie v Kenny & Kenny Pty Ltd (unrep., 16 September 1985; BC8500545), Young J (as he then was) said:

“The plaintiff seeks costs on the common fund basis. This is an unusual order to make but it is justified on the authorities where the conduct of the defendant has been such that is quite unjustifiable on any grounds in which circumstances the court may grant to the plaintiff a greater degree of indemnity as to costs than would be available under the general form of order. In the instant case not only was the filing of the caveat by an estate agent completely without any warrant as to law but it was lodged in circumstances which can only have been deliberately intended to delay the settlement.”

I think that the present case is analogous to the case with which his Honour was dealing.

14    The order of the Court is that the Defendant will pay the Plaintiff's costs of the proceedings on the indemnity basis.

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