Perpetual Trustees Victoria Limited v Cipri

[2009] NSWSC 335

CITATION:	PERPETUAL TRUSTEES VICTORIA LIMITED v CIPRI & ANOR [2009] NSWSC 335
HEARING DATE(S):	30 July 2008
JUDGMENT DATE :	30 April 2009
JURISDICTION:	Common Law
JUDGMENT OF:	Hall J at 1
DECISION:	(1) The first and second defendants give the plaintiff possession of the whole of the land comprised in Certificate of Title, Folio Identifier Lot 120 in Deposited Plan 255678 and known as 48 Beachworth Avenue, Greystanes, New South Wales, 2145. (2) A writ of possession issue, such writ not to issue before a period of eight weeks from the date of these orders. (3) The second defendant to pay to the plaintiff the amount of outstanding loan monies, together with fees, charges, expenses (including enforcement expenses) and interest, which interest is to be calculated in accordance with the loan contract dated 17 June 2004 from 20 November 2006 to the date of these orders. (4) The first cross-claim is dismissed. (5) The first defendant is to pay the plaintiff’s costs in respect of its claim on the ordinary basis. (6) The second defendant is to pay the plaintiff’s costs in respect of its claim on the ordinary basis. (7) An order that the first defendant/cross-claimant (Domenico Cipri) is entitled to payment of compensation from the Torrens Assurance Fund in respect of loss arising from the operation of the Real Property Act, the conduct of the second defendant and an act of the Registrar General, as specified in s.129(1) of the Act. (8) An order that the cross-defendant to the second cross-claim (the Registrar General) pay Domenico Cipri the sum of $280,000, such payment not to carry interest if made within 28 days after the making of these final orders. (9) An order that the Registrar General pay the first defendant’s (Domenico Cipri) costs of the second cross-claim. (10) An order that the third cross-claimant (the Registrar General) is entitled to be indemnified by the second defendant/cross-defendant to the third cross-claim (Sandria Cipri) in respect of compensation to which Domenico Cipri is entitled under the Torrens Assurance Fund. (11) An order that Sandria Cipri pay the Registrar General the sum of $280,000 plus interest from date of payment of that sum by the Registrar General to Domenico Cipri in accordance with order (8). (12) An order that Sandria Cipri pay the Registrar General’s costs of the third cross-claim.
CATCHWORDS:	COSTS - claim for indemnity costs - whether failure to accept offer unreasonable - whether a true offer of compromise - doubt as to the value of an offer to pay costs and enforcement expenses in the context of the whole proceedings - refusal of costs order indemnifying first defendant in respect of his liability to pay plaintiff's costs - not damage suffered under s.129, Real Property Act.
LEGISLATION CITED:	Civil Procedure Act Contract Review Act 1980 Real Property Act 1900
CASES CITED:	ACQ v Cook (No 2) [2008] NSWCA 306 Bartlett v Comber (No 2) [2008] NSWCA 282 Bullock v London General Omnibus Company [1907] 1 KB 264 Calderbank v Calderbank [1975] 2 All ER 333 Chandra v Perpetual Trustees Victoria Limited [2008] NSWSC 178 Commonwealth of Australia v Greeton [2008] NSWCA 117 Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 Herning v GWS Machinery Pty Limited (No 2) [2005] NSWCA 375 Lackersteen v Jones (No 2) (1988) 93 FLR 442 Leichhardt Municipal Council v Green [2004] NSWCA 341 Rosniak v Government Insurance Office (1997) 41 NSWLR 608 SMEC Testing Services Pty Limited v Campbelltown City Council [2000] NSWCA 323 Stevedoring Industry Finance Committee v Gibson [2000] NSWCA 179
PARTIES:	PERPETUAL TRUSTEES VICTORIA LIMITED v DOMENICO CIPRI & ANOR
FILE NUMBER(S):	SC No 15907 of 2006
COUNSEL:	P: A Leopold SC/D F C Thomas 1D: R W Regenza Registrar-General: C A Webster
SOLICITORS:	P: Yeldham Price O'Brien Lusk 1D: Watson Stafford Registrar-General: Kelvin O'Keefe

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
POSSESSION LIST

HALL J

THURSDAY 30 APRIL 2009

No 15907 of 2006

PERPETUAL TRUSTEES VICTORIA LIMITED v DOMENICO CIPRI & ANOR

JUDGMENT
(On application for costs)

1 HIS HONOUR: Judgment was delivered in this matter on 29 October 2008: [2008] NSWSC 1128. Directions for the lodging of written submissions on the question of appropriate orders (including costs orders) were made. Such submissions on behalf of the plaintiff (“Perpetual”), the first defendant, Mr Cipri, and the Registrar General have been lodged with my associate.

2 Perpetual, by Amended Statement of Claim dated 14 March 2008, sought an order that the first and second defendants, Domenico Cipri and Sandria Delores Cipri, give possession of premises at Greystanes. Perpetual also sought monetary relief against them although subsequently Perpetual did not press the claim for monetary relief in order 2 in the Amended Statement of Claim against Mr Cipri (incorrectly numbered as order 3 in the Amended Statement of Claim). It did press the claim against Mrs Cipri in the amount $757,061.89 said to be owing as at 31 July 2008 together with interest.

3 Mr Cipri pleaded defences, firstly, that he was not a party to the loan agreement and mortgage and that his signature on those documents had been forged, secondly, that Perpetual was subject to making the mortgage liable to be set aside and, thirdly, that he was entitled to relief based upon the provisions of a personal equity in his favour: the Contract Review Act 1980. He also filed a cross-claim (the first cross-claim against Perpetual in which he, inter alia, sought a declaration that his signature on the mortgage was a forgery and was a nullity insofar as it related to him and pleaded both the personal equity asserted and the Contracts Review Act). Mrs Cipri did not enter an appearance.

4 The proceedings were determined in favour of the Perpetual. The cross-claim by Mr Cipri against Perpetual was dismissed.

5 There are three separate matters relevant to the making of costs orders:

(1) Whether Perpetual is entitled to a costs order in its favour on an indemnity basis from 8 November 2007.

(2) Mr Cipri’s claim for an order that the Registrar General pay his costs of the first cross-claim.

(3) Mr Cipri’s claim for an indemnity order against the Registrar in respect of his liability to pay Perpetual’s costs.

6 As to (2), the Registrar General does not oppose an order and in written submissions has proposed that there be an order that the Registrar General pay Mr Cipri’s costs of the second cross-claim. The Registrar General, however, opposes an order for payment of compensation in respect of costs ordered to be paid by him to Perpetual ((3) above).

(1) Perpetual’s claim for indemnity costs

(a) The basis relied upon

7 In support of the orders sought, Perpetual relied upon a letter of 7 November 2007 to the plaintiff by which it made an offer of settlement said to be in accordance with the principle in Calderbank v Calderbank [1975] 2 All ER 333. In the submissions for Perpetual, it was stated:-

“… The offer required the first defendant to pay all monies outstanding under the loan agreement but waived the plaintiff’s right both to costs of the proceedings and enforcement expenses incurred prior to the legal proceedings. The first defendant did not accept that offer. In the plaintiff’s submission, such a decision was unreasonable when regard is had to the legal principles which governed the plaintiff’s claim against the first defendant: cf Commonwealth of Australia v Greeton [2008] NSWCA 117 at [117]; Bartlett v Coomber (No 2) [2008] NSWCA 282 at [7]. Those principles were clear and unambiguous … So far as the allegations made by the second defendant were contained in the Cross Claim, no evidence or satisfactory particulars were provided in support of the assertions made … and the unavailability of the Contracts Review Act was clear law given the line of authority commencing with Permanent Trustee Company v Frazis [1999] NSWSC 319. In these circumstances, the plaintiff submits that the Court should award indemnity costs from the day following that on which the offer of settlement was made.”

8 In his submissions dated 8 December 2008, Mr R W Tregenza of counsel on behalf of Mr Cipri submitted costs against his client should not be made on any basis other than the usual party/party basis, now referred to as “the ordinary basis”: Uniform Civil Procedure Rules (UCPR), Rule 42.2. He contended that the proper test in relation to a Calderbank letter was whether the first defendant “acted unreasonably in not accepting the offer” (paragraph 3).

9 Mr Tregenza referred to dicta of Hodgson JA in Commonwealth of Australia v Greeton [2008] NSWCA 117 which dealt with the issue of a party in receipt of a Calderbank letter “acting unreasonably in refusing the offer”. The following observation of Mason P (Clarke AJA agreeing) in Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 616 was there cited by Hodgson JA:-

“Later cases have emphasised that the discretion to depart from the usual party/party basis for costs is not confined to the situation of what Gummow J described as the ‘ethically or morally delinquent party’ … Nevertheless, the court requires some evidence of unreasonable conduct, albeit that it need not rise as high as vexation. This is because party and party costs remain the norm, although it is, knowledge that they provide an inadequate indemnity.”

10 Mr Tregenza noted that the dicta of Hodgson JA in Greeton (supra) was applied in Bartlett v Comber (No 2) [2008] NSWCA 282 with whom Bryson AJA agreed.

11 The offer by the letter of 7 November 2007 was said in submissions to have been made in accordance with the principle in Calderbank (supra). The offer was not one made under the UCPR.

12 The letter of 7 November 2007 to Mr Cipri’s solicitors is in the nature of a Calderbank offer although not expressed to be such nor was it expressed as an offer that was to operate for or by reference to a defined period of time.

13 Whilst Perpetual’s offer, if accepted, required Mr Cipri to pay all monies outstanding under the loan agreement, Perpetual relies upon the concession or offer by it to waive its right to both costs of the proceedings and to enforcement expenses. That offer was not accepted. The refusal by Mr Cipri of the offer was said on behalf of Perpetual to have been “unreasonable” when regard is had to the legal principles on which Perpetual’s claim rested. Perpetual, in particular, relied upon the absence of a foundation for the defence and cross-claim based on the claimed personal equity and the Contracts Review Act.

(b) Principles concerning indemnity costs

14 There are two issues on an application for indemnity costs. The first is whether there was an offer of a genuine attempt to reach a negotiated settlement. In other words, was the offer a genuine one? The second is whether it was unreasonable for Mr Cipri to not accept the offer.

15 The fact of a more favourable result than that offered by a successful party is a substantial factor to be taken into account. In determining whether Mr Cipri’s failure to accept the offer can be said to have been “unreasonable” requires, however, a full consideration of the facts and circumstances of the case in order to establish whether there was unreasonable conduct on his part: Greeton (supra).

16 In this case, it is necessary to bring into account the timing of the offer including the fact that Mr Cipri’s claim on the Torrens Assurance Fund was not resolved until shortly before the hearing.

17 Further, it was submitted on Mr Cipri’s behalf that the offer was not a true compromise and that Perpetual offered to forego nothing of “what it sued for in the first place”. Mr Tregenza contended it was not a genuine and realistic offer to compromise the matter.

18 As at 7 November 2007, Mr Cipri’s cross-claim against the Fund was being resisted. At the time of the offer, it was still contended by Perpetual that Mr Cipri had executed the mortgage when, in fact, his signature had been forged. In those circumstances it was submitted by Mr Tregenza that:-

“… to have accepted the offer from the plaintiff without concession from the Registrar General would have left the first defendant without a house and without any assurance of success against the Torrens Assurance Fund. To have accepted the plaintiff’s offer would have put the first defendant in a difficult position – no home and no money …” (paragraph 8 of the first defendants “Submissions on Costs )

19 In determining whether the conduct in question was unreasonable, it is necessary to bring into account that Mr Cipri was a wholly innocent party and, indeed, was himself a victim of the fraud. Accordingly, he was in no way associated with the root cause for Perpetual bringing proceedings. Once proceedings commenced, he remained for a very long period in a state of uncertainty as to his rights against the Fund.

20 Mr Cipri described himself in his affidavits as a process worker by occupation. It was not suggested by any evidence that Mr Cipri has much in the way of assets or financial resources beyond the Greystanes home. The forgery and the second defendant’s failure to repay the loan with interest, directly placed his home in jeopardy. Mr Cipri, accordingly, became enmeshed in proceedings in circumstances in which it was difficult for him to accept the offer made by Perpetual, involving the potential loss of his home by sale in order to complete any settlement agreement with Perpetual, without any concession or agreement having been made, until a very late stage, in respect of his claim against the Fund. This is one circumstance to be taken into account in deciding whether Mr Cipri’s failure to accept the offer was unreasonable.

21 As I have earlier noted, Mr Tregenza also disputed the Calderbank letter contending that it did not represent a true compromise by Perpetual. In this respect he submitted (paragraph 6 of the first defendants written submissions):-

“… It offered to accept everything to which it asserted that it was entitled immediately prior to the commencement of the proceedings. The offer to waive costs is illusory as a compromise in that the plaintiff offered to forego nothing of what it sued for in the first place. The conduct of the first defendant was not unreasonable in not accepting the offer. The offer was not a genuine and realistic offer to compromise the matter.”

22 Mr Tregenza observed that, at the time of Perpetual’s offer, it was still contended by Perpetual that Mr Cipri had executed the mortgage.

23 Finally, it was contended that the claim made for costs by or on behalf of Perpetual was made with the clear intent “of foisting upon the first defendant the costs of engaging senior counsel and junior in a mortgage claim worth in the order of several hundred thousands of dollars …” (paragraph 10 of the first defendant’s written submissions). It was submitted that a relevant fact in determining whether indemnity costs should be ordered is the additional costs for which indemnity was sought. In this respect it was claimed that the engagement of senior and junior counsel where the interests sought by Perpetual was one half an interest in the suburban house was not justified. For reasons stated below, it is unnecessary to decide the matter on this last point.

24 The powers of the Court in relation to costs are to be found in s.98 of the Civil Procedure Act 2005 and Part 42 of the UCPR.

25 The general rule is that costs follow the event (UCPR, Rule 42.1) and, as earlier noted, are to be assessed on the ordinary basis: UCPR, Rule 42.2.

26 In its discretion, the Court may make an order other than costs to be assessed on an ordinary basis: UCPR, Rule 42.1 and 42.2.

27 In Greeton (supra), Beazley JA observed at [43] that the making of a Calderbank offer does not automatically result in a favourable costs order, notwithstanding that the judgment is more favourable to the party making the offer than the terms of the offer. Her Honour, in that respect, referred to dicta of Giles JA in SMEC Testing Services Pty Limited v Campbelltown City Council [2000] NSWCA 323 in which his Honour observed that:-

“… The question is whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs , and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure …” (emphasis added)

28 The onus is on the party making the Calderbank offer to satisfy the Court that it should exercise the costs discretion in its favour: Greeton (supra) at [46] per Beazley JA and Evans Shire Council v Richardson (No 2) [2006] NSWCA 61.

29 In Leichhardt Municipal Council v Green [2004] NSWCA 341, Santow JA reviewed the well-established authorities in respect of Calderbank offers and the need for there to be both a genuine offer of compromise and unreasonableness on behalf of the offeree not to accept before the costs order on an indemnity basis may be justified.

30 In Herning v GWS Machinery Pty Limited (No 2) [2005] NSWCA 375, the Court of Appeal (Handley, Beazley and Basten JJA) observed at [5]:-

“The general approach adopted in this Court is that where an offer involves ‘no element of compromise’ but merely ‘invites capitulation by the appellant’ it will not result in a variation of the usual costs order. See, eg, Townsend v Townsend (No 2) [2001] NSWCA 145 (Giles JA) at [5]. While the Second Respondent had no doubt incurred costs by 11 January 2005, it is difficult to know whether the sum would have been significant in relation to the costs of the litigation as a whole, or in relation to any possible judgment which the Appellant might obtain, if successful . Either the Appellant’s case against the Second Respondent was hopeless and should not have been pursued at all, or it was not. The ‘Calderbank letter’ does not, by itself, justify any variation from the usual order.” (emphasis added)

31 Santow J in Green (supra) stated that:-

“23. It is clear that an offer with no real element of compromise in it, which is designed merely to trigger the costs sanctions, will not be treated as a genuine offer of compromise. Thus, an offer by a plaintiff demanding the full amount claimed was held not to be an offer of compromise attracting costs penalties: Tickell v Trifleska Pty Limited (1991) 25 NSWLR 353.”

32 Similarly, in the present case the evidence does not make possible an assessment as to the amount of costs that Perpetual had incurred as at 7 November 2007 in the context of the whole proceedings so as to make a judgment as to the worth or significance of the offer. Perpetual’s claim, it is to be noted, is for indemnity costs on and from 8 November 2007.

33 In Green (supra), Santow JA stated:-

“21. In the case of Calderbank offers in an appeal context, the question of whether an offer is characterised as a genuine offer of compromise is almost the same as the question of whether costs sanctions should flow from such an offer. There is little appreciable difference between saying that an offer should not in the Court’s discretion attract costs sanctions in the circumstances and saying that an offer is not a genuine offer of compromise in the circumstances. Both depend upon a valued judgment of the offer and conduct of the parties in the circumstances of the claim. In the case of offers of compromise under the Rules, however, the question may take on a large significance as has been seen, because of the stronger prima facie entitlement entailed. Thus, it is appropriate to treat the two questions separately.”

34 Having regard to all of the circumstances, in particular, those to which I have earlier referred, I do not consider that it would be proper exercise of the discretion on costs to award Perpetual indemnity costs against Mr Cipri based on the letter of 7 November 2007. In addition to the matters to which I have referred, the offer lacked specificity in that it did not state any period for which it was intended to operate or, in particular, state whether it was to operate in respect of costs that had been incurred up to the date of the letter or costs beyond that date. Even if such lack of specificity alone would not prevent the letter from operating as a valid Calderbank offer, the only concession it offered was that concerning costs and enforcement expenses. It is not, as I have stated, possible to evaluate the relative value of those concessions (in particular the amount of costs to which the letter referred) in the context of the whole case. Accordingly, given the terms of the letter and the other matters to which I have referred, I am not satisfied that the offer represented a true offer of compromise.

35 Even if I be wrong in that respect, for reasons I have stated, I do not consider that Mr Cipri’s conduct in not accepting the offer was unreasonable.

36 Accordingly, the appropriate order is an order that the first defendant pay the plaintiff’s costs of the proceedings on the ordinary basis and I will so provide in the formal orders giving effect to this judgment.

(2) The cross-claimant’s costs against the cross-defendant on the Second Cross-Claim

37 This involves a claim by Mr Cipri for costs against the Registrar General. As stated above, the Registrar General submits to an order for costs in respect of the above cross-claim. An order, accordingly, will be made in that regard in the formal orders.

(3) The first defendant’s claim for indemnity in respect of the costs payable to the plaintiff

38 Mr Cipri’s case against Perpetual claim essentially relied upon matters pleaded in the first cross-claim. His alternative claim was one for relief against the Torrens Assurance Fund under s.129 of the Real Property Act 1900. That section, in part, provides:-

“129. Circumstances in which compensation payable
1. Any person who suffers loss or damage as a result of the operation of this Act in respect of any land, where the loss or damage arises from:-
(a) any act or omission of the Registrar-General in the execution or performance of his or her functions or duties under this Act in relation to the land, or
(b) the registration (otherwise than under s.45E) of some other person as proprietor of the land, or of any estate or interest in the land, or
(c) any error, misdescription or omission in the Register in relation to the land, or
(d) the land having been brought under the provisions of this Act, or
(e) the person having been deprived of the land, or of any estate or interest in the land, as a consequence of fraud, or
(f) an error or omission in an official search in relation to the land,
is entitled to payment of compensation from the Torrens Assurance Fund.
2. Compensation is not payable in respect of any loss or damage suffered by any person:-
(a) to the extent to which the loss or damage is a consequence of any act or omission by that person, or
…”

39 The claim for costs by Mr Cipri against the Fund is referred to in submissions on his behalf as a claim for a Bullock order against the Registrar General in respect of any liability he has for costs to Perpetual.

40 In relying upon the principle referred to in Bullock v London General Omnibus Company [1907] 1 KB 264, Mr Tregenza acknowledged in his submissions:-

“14. Although it would not be correct to describe the Torrens Assurance Fund as a wrongdoer: however it incurs the liability of the first defendant for his loss as a result of the fraudulent conduct of the second defendant.”

41 In the submissions on behalf of Mr Cipri, it was stated that it was only at or immediately prior to the hearing that the Registrar General conceded Mr Cipri’s cross-claim:-

“… The Registrar General defended the Second Cross-Claim taking full advantage of the first defendant’s pleading that the cross-claim against the Registrar General was brought in the alternative to the opposition of the plaintiff’s claim. (See Second Cross-Claim: Amended Defence to Cross-Claim, paragraph 5.)

42 It was argued on behalf of Mr Cipri that the statement of claim, as originally pleaded, asserted that he was a party to the mortgage. This assertion, it was said, made the joinder of the Registrar General in respect of a claim against the Torrens Assurance Fund a matter of importance and convenience such that the issue of forgery should be decided in the one proceeding.

43 It was also contended on behalf of Mr Cipri (first defendant’s written submissions):-

“17. In the Amended Statement of Claim (filed pursuant to leave granted on 14/2/08), the plaintiff, essentially, accepted the possibility that the signature of the first defendant was a forgery. A concession that the signature was forged was not made at that time by the Registrar General. In the Second Cross-Claim: Amended Defence to Cross-Claim, the Registrar General traversed the allegation that the signature was not the first defendant by not admitting the allegation.
18. The Registrar General, immediately prior to the hearing, ultimately conceded that the signature of the first defendant on the Mortgage was a forgery by agreeing that it would pay the first defendant’s claim (agreement as to quantum had already been reached) if his defence against the plaintiff’s claim was unsuccessful.
19. An order that the Registrar General indemnify the second [sic] defendant’s for his costs in relation to the plaintiff’s claim is consistent with the policy underlying the Torrens Assurance Fund. The policy of the Real Property Act is to provide for indefeasibility to the registered proprietor of an interest with the protection to the former proprietor who suffers detriment as a result of fraud being compensated from the … Fund.
20. It is submitted that the first defendant have the benefit of an order that the Registrar General indemnify him in respect of costs in the proceedings against the plaintiff.”

44 The claim for an order that the Registrar General should indemnify Mr Cipri in respect of his liability for costs to Perpetual needs to be considered in light of the issues raised in the amended pleadings.

45 On the basis that the parties accepted that Mr Cipri’s signature on the loan agreement and the mortgage had been forged, the issues were as summarised in a letter from the solicitor for the Registrar General to Mr Cipri’s solicitor dated 27 June 2008, namely:-

(1) Whether any debt was owed by Mr Cipri to Perpetual.

(2) Whether, upon its true construction, the mortgage secured any debt owed by Mr Cipri to Perpetual.

(3) Whether, upon its true construction, Perpetual was entitled to enforce the mortgage over the whole of the property and, in particular, Mr Cipri’s interest in the property on the basis that his signature on the loan agreement/mortgage were forged. If not, what interest(s) in the property was Perpetual entitled to enforce the Mortgage.

(4) In the event that it was determined:-

(a) the mortgage secured no debt owed by Mr Cipri to Perpetual, or
(b) the mortgage was not enforceable against the whole of the property, in particular, Mr Cipri’s interest in the property,
the Registrar General would contend that Mr Cipri suffered no loss as a consequence of the operation of the Real Property Act , and in consequence was not entitled (on the second cross-claim) to the payment of compensation from the Torrens Assurance Fund.

46 As noted above, according to the written submissions for Mr Cipri, it was at or immediately prior to the hearing that the Registrar General conceded Mr Cipri’s cross-claim.

47 The Registrar General opposes an order for payment to Mr Cipri of all costs ordered against him in favour of Perpetual whether as a costs order under UCPR, Rule 42.1 or otherwise, or as compensation for loss or damage referred to in s.129(1) of the Real Property Act from the Torrens Assurance Fund.

48 The primary submission was that there was nothing in the Registrar General’s conduct of the defence to Mr Cipri’s second cross-claim that required the making of “the positive claims” the subject of Mr Cipri’s cross-claim against Perpetual or that would support an exercise of discretion to make a “Bullock” or “Sanderson” order in respect of costs awarded in Perpetual’s favour.

49 The Registrar General in relation to his conduct in the proceedings points, firstly, to the fact that the defence of the proceedings did not require the positive claims propounded in the first cross-claim and, secondly, there was no offer made by Mr Cipri to the Registrar General consequential upon Perpetual’s offer that was refused by the Registrar General.

50 In relation to a claim for compensable loss (including in respect of costs) under s.128(1) and s.129(1) of the Real Property Act, the issue of causation of loss or damage is a central matter.

51 It was submitted for the Registrar General that Mr Cipri could not show the necessity in terms of s.129(1) as explained by Bryson AJ in Chandra v Perpetual Trustees Victoria Limited [2008] NSWSC 178 of prosecuting the first cross-claim against Perpetual:-

“At best the first defendant would be entitled to an indemnity in respect of costs against him on the statement of claim but not the positive claims propounded in the first cross-claim.” (Registrar General’s submissions, [17]).

52 The submissions for Mr Cipri do not develop an argument that the basis for the indemnity sought in respect of costs ordered against him in favour of Perpetual is to be found in the provisions of s.129. However, insofar as that may be implicit in the written submissions for Mr Cipri on costs, I will address the point below.

53 In Chandra (supra), Bryson AJ examined the question of the costs of litigation as loss or damage for compensation under s.129.

54 In that case, Perpetual took steps to enforce a forged mortgage that secure two loans from Perpetual.

55 The plaintiffs commenced proceedings against Perpetual and the Registrar General. They joined a Mr Miller, solicitor, as the third defendant. Mr Miller, who was deceived by the fraudulent party, obtained a new duplicate certificate of title. He believed he had the authority of the plaintiffs.

56 Compensation was paid under s.129 to Perpetual for the loans. The plaintiffs claimed against the Fund under s.129(1) for 25% of their legal costs that were not recoverable against Perpetual.

57 Bryson AJ held that the plaintiffs’ costs of the litigation as claimed were within the meaning of s.129(1) loss or damage which they suffered as a result of the operation of the Real Property Act arising from an act or omission of the Registrar General within s.129(1)(a). They could not have established their loss and entitlement to compensation without at the same time establishing what entitlement they had against Mr Miller. It was held that the costs of the litigation against Perpetual and Mr Miller were loss or damage as a result of the operation of the Act arising from the acts of the Registrar General.

58 Perpetual in Chandra (supra) claimed as compensation the costs it was ordered to pay the plaintiffs. However, the defence of the plaintiffs’ case was found to be “unreasonable” for reasons that need not be detailed here. In practical terms, the defence pleaded compelled the plaintiffs to join as defendants two other persons against whom they could have succeeded if they had not succeeded against Perpetual.

59 In the course of his decision, Bryson AJ made the following observations:-

(1) The issues arising under s.129(1) are different from those in the exercise of a power to award costs. They are not discretionary.

(2) Determining whether a loss is within a recoverable category under s.129(1) requires consideration of causation of loss or damage.

(3) Practical limits have to be set when deciding causation. It is necessary to recognise that, in some cases, facts or events become too remote or too little connected with an outcome to be treated as causes of the outcome. This is so under s.129(1).

60 The essential question is whether the defence and the cross-claim by Mr Cipri against Perpetual was, in Bryson AJ’s words in Chandra (supra), “causally connected with the principal subject of the litigation” including, in particular, whether the cross-claim was based upon grounds that were reasonable so as to be causally connected with the loss or damage.

61 To be causally connected, the costs payable by Mr Cipri to Perpetual must be damage that was suffered by him as a result of the operation of the Act in respect of his property arising from an act or omission of the Registrar General in the execution or performance of his functions or duties under the Act in relation to the property. I do not consider that has been established.

62 By reason of the absence of a basis for the cross-claim against Perpetual, I do not believe it can be said that any loss associated with its pursuit, namely, a costs order against Mr Cipri, can be said to have the requisite causal connection with the principal subject of the litigation.

63 Finally, I do not consider that the factors required to be established before a Bullock or Sanderson order can be made have been made out. See in this respect Lackersteen v Jones (No 2) (1988) 93 FLR 442 at 449 quoted and applied in Stevedoring Industry Finance Committee v Gibson [2000] NSWCA 179 and ACQ v Cook (No 2) [2008] NSWCA 306, [29] to [40].

64 Accordingly, I decline to make an order indemnifying the first defendant in respect of costs payable to Perpetual.

Orders

65 I make the following orders:-

(1) The first and second defendants give the plaintiff possession of the whole of the land comprised in Certificate of Title, Folio Identifier Lot 120 in Deposited Plan 255678 and known as 48 Beachworth Avenue, Greystanes, New South Wales, 2145.

(2) A writ of possession issue, such writ not to issue before a period of eight weeks from the date of these orders.

(3) The second defendant to pay to the plaintiff the amount of outstanding loan monies, together with fees, charges, expenses (including enforcement expenses) and interest, which interest is to be calculated in accordance with the loan contract dated 17 June 2004 from 20 November 2006 to the date of these orders.

(4) The first cross-claim is dismissed.

(5) The first defendant is to pay the plaintiff’s costs in respect of its claim on the ordinary basis.

(6) The second defendant is to pay the plaintiff’s costs in respect of its claim on the ordinary basis.

(7) An order that the first defendant/cross-claimant (Domenico Cipri) is entitled to payment of compensation from the Torrens Assurance Fund in respect of loss arising from the operation of the Real Property Act , the conduct of the second defendant and an act of the Registrar General, as specified in s.129(1) of the Act.

(8) An order that the cross-defendant to the second cross-claim (the Registrar General) pay Domenico Cipri the sum of $280,000, such payment not to carry interest if made within 28 days after the making of these final orders.

(9) An order that the Registrar General pay the first defendant’s (Domenico Cipri) costs of the second cross-claim.

(10) An order that the third cross-claimant (the Registrar General) is entitled to be indemnified by the second defendant/cross-defendant to the third cross-claim (Sandria Cipri) in respect of compensation to which Domenico Cipri is entitled under the Torrens Assurance Fund.

(11) An order that Sandria Cipri pay the Registrar General the sum of $280,000 plus interest from date of payment of that sum by the Registrar General to Domenico Cipri in accordance with order (8).

(12) An order that Sandria Cipri pay the Registrar General’s costs of the third cross-claim.

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