Rigene Pty Ltd v Rugolo (Costs Ruling No 2)
[2024] VSC 187
•19 April 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2023 05968
| RIGENE PTY. LIMITED (ACN 005 297 683) | Plaintiff |
| v | |
| FRANCESCO RUGOLO | First defendant |
| REGISTRAR OF TITLES | Second defendant |
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JUDGE: | Gray J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 17 April 2024 |
DATE OF JUDGMENT: | 19 April 2024 |
CASE MAY BE CITED AS: | Rigene Pty Ltd v Rugolo (Costs Ruling No 2) |
MEDIUM NEUTRAL CITATION: | [2024] VSC 187 |
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COSTS — Plaintiff sought order for removal of caveat lodged by defendant pursuant to s 90(3) of the Transfer of Land Act 1958 — Parties consented to orders for removal of caveat and for payment by plaintiff of amount claimed by defendant into separate account pending resolution or determination of dispute about defendant’s entitlement — Consent orders did not dispose of the question of costs — Plaintiff subsequently applied for costs of the proceeding, on an indemnity basis, against defendant — Where plaintiff’s application for costs of the proceeding was dismissed and defendant sought his costs of responding to plaintiff’s failed costs application — Defendant’s application allowed but on the standard basis not indemnity basis.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms A Gaber | Gadens |
| For the First Defendant | Dr D Stamboulakis | MA Legal |
HIS HONOUR:
I gave an initial costs ruling in this proceeding on 17 April 2024, supported by oral reasons. In that ruling, I dismissed an application for orders relating to costs of the proceeding brought by the plaintiff against the first defendant.
I now provide a second costs ruling. This ruling determines an application by the first defendant for costs, on an indemnity basis, against the plaintiff in respect of the plaintiff’s failed application the subject of my first costs ruling.
In the course of my oral reasons in support of my first costs ruling, I gave a detailed account of the facts that led to the proceeding. I will not repeat those reasons now. I will refer only to the basic procedural developments in the case.
The plaintiff sought removal pursuant to s 90(3) of the Transfer of Land Act 1958 of a caveat lodged by the first defendant over a property registered to the plaintiff which the plaintiff wished to sell. The caveat arose from a loan agreement that contained a charging clause. The first defendant alleged he was owed over $306,000 and the debt was secured by the charging clause to the property.
The second defendant had no active role in the proceeding and sent a submitting letter to the Court in the usual form.
On 20 December 2023, I made orders by consent disposing of this proceeding save as to costs.
The orders by consent provided for the removal of the caveat and required the plaintiff to pay from the proceeds of sale of the property the amount claimed by the first defendant into a separate interest-bearing account in the name of the plaintiff’s solicitors. Those funds are to be retained until there has been a resolution or determination of the dispute concerning the first defendant’s entitlement to them.
Although the parties reached consent on this substantive outcome to the proceeding, evidently they were unable to agree on the question of costs. Nor was any such agreement reached in the weeks and months that followed.
Later the plaintiff applied for orders that the first defendant pay its costs, on an indemnity basis, and for a gross sum costs order. On 17 April 2024, I heard the plaintiff’s costs application. The plaintiff submitted that the first defendant had acted unreasonably in the lead up to the litigation, and the consent orders achieved the plaintiff’s purpose in bringing the proceeding and represented a capitulation by the first defendant, and that the plaintiff would have clearly been the winner had its application for removal of the caveat been heard on the merits. The plaintiff disputed the loan agreement and the caveat and argued that the balance of convenience also clearly favoured removal of the caveat. I was not persuaded by any of these arguments, and I dismissed the plaintiff’s costs application.
After I had concluded my oral ruling dismissing the plaintiff’s costs application, the first defendant then applied for his costs incurred in responding to the plaintiff’s costs application, and he sought those costs on an indemnity basis. I heard argument from both parties on that application late on 17 April 2024, and reserved my decision, to be delivered later in writing.
In the course of hearing the first defendant’s costs application late on 17 April 2024, I received two items of additional factual material, as follows.
(a) It was an agreed fact that, prior to the communication on 15 April 2024, on 8 March 2024, the plaintiff had made a without prejudice Calderbank offer to the first defendant to compromise the plaintiff’s costs application on terms that would have only required the first defendant to pay about 55% of the plaintiff’s actual costs.
(b) I received an affidavit[1] on behalf of the first defendant that exhibited a communication on 15 April 2024 marked ‘without prejudice’, but which the plaintiff correctly acknowledged was admissible on the question of costs. The plaintiff did not respond to the communication. The communication accompanied the service of the first defendant’s submissions responding to the plaintiff’s costs application, and was relevantly as follows:
In any event, we confirm that out client will be seeking costs of and relating to the costs hearing, possibly on an indemnity basis, unless consent is reached between the parties and consent orders of no order as to costs are filed with the Court.
Please advise of your clients’ position with respect to the above.
[1]Affidavit of Bisan Musleh affirmed 17 April 2024, exhibit BM-3.
I do not place much weight on the plaintiff’s offer in March 2024 to compromise its costs application by accepting a little over one-third of its costs. It does, however, at least show that the plaintiff signalled to the first defendant that the plaintiff was not implacably set on receiving all its costs of the proceeding, or its costs on an indemnity basis. However, in the event, the plaintiff’s offer was not vindicated by my adjudication of the plaintiff’s costs application. I dismissed that application and did not allow the plaintiff any of its costs.
As to the first defendant’s communication to the plaintiff on 15 April 2025, I must give it significant weight. Although it did not give the plaintiff very long to consider and respond to the offer, it shows that the first defendant was reasonably endeavouring to promote the overarching purpose set out in s 7 of the Civil Procedure Act 2010 by offering a way in which the proceeding could be efficiently concluded with the expenditure of more costs on a hearing. And, in the event, the first defendant has been vindicated in offering that course by my dismissal of the plaintiff’s costs application. Subject to the resolution of the present application, there will be no order as to the costs of the proceeding, and that is the very outcome the first defendant sought from the plaintiff by consent on 15 April 2024.
However, I do not treat the communication of 15 April 2024 as a Calderbank offer. It was not expressly described as such, did not provide very long for consideration and response, and did not clearly put the plaintiff on notice that indemnity costs would be sought, referring to this only as a possibility. The first defendant did not claim it should be regarded as a Calderbank offer, but rather relied on it (and the plaintiff’s failure to respond) as evidence of the unreasonable conduct of the plaintiff in continuing with its costs application.
I have decided to allow the first defendant’s application, but only to the extent of ordering the plaintiff to pay him his costs on the standard basis. I have decided to disallow the first defendant’s application for costs to be assessed on an indemnity basis.
Although the first defendant did not advance an alternative application in this form, it is open to me to choose this course in the exercise of my discretion as to costs. The plaintiff will not be taken by surprise. I raised this possibility with counsel for the plaintiff during her submissions responding to the first defendant’s costs application. Her two key responses were:
(a) My dismissal of the plaintiff’s costs application should not be regarded as a successful event or outcome in favour of the first defendant attracting the principle that costs usually follow the event. Rather, it was a continuation of the proceeding and the plaintiff’s summons on originating motion, which was not fully disposed of by the consent orders.
(b) If the plaintiff is now to be visited with a costs order for bringing its (unsuccessful) costs application, the plaintiff would have been better off not agreeing to the consent orders in the first place, and simply proceeding with its caveat removal application. An adverse outcome could deter future settlements.
As to the plaintiff’s first response, I think the principle that costs should ordinarily follow the event[2] does apply here. Where there are multiple issues in a proceeding and mixed success on them, it is open to the Court to make orders as to costs on an issues basis.[3] Here, the costs application brought by the plaintiff after the making of consent orders can and should be seen as a discrete issue in the proceeding, in respect of which I am required to consider the separate exercise of my discretion as to costs under s 24(1) of the Supreme Court Act 1986, notwithstanding that there will be no order as to the costs of the proceeding more generally.
[2]Oshlack v Richmond River Council (1998) 193 CLR 72, [67] (McHugh J); Northern Territory v Sangare (2019) 265 CLR 164, [25] (Kiefel CJ, Bell, Gageler, Keane and Nettle JJ); Chen & Ors v Chan & Ors [2009] VSCA 233, [10(1)].
[3]Chen & Ors v Chan & Ors [2009] VSCA 233, [10(3)].
In the exercise of that discretion, I regard the plaintiff’s failed costs application against the first defendant as a sufficiently distinct issue in the proceeding to attract the principle that costs ordinarily follow the event.
The plaintiff’s failed costs application only began after consent orders had been entered on the substantive proceeding. This will make it readily achievable to identify and quarantine the costs incurred by the first defendant in responding to it, in the period after 20 December 2023. I am satisfied that those costs will not be de minimis. The plaintiff put on two additional affidavits and filed submissions. The plaintiff’s submissions relied on several earlier affidavits the plaintiff filed in support of its substantive application for removal of the caveat, and the submissions that were filed in support of that application, necessitating rehearsal of the material and arguments that would have been deployed had the substantive application not been disposed of by consent. The first defendant was, in effect, compelled to respond by briefing counsel, who drew submissions. The hearing and determination of the plaintiff’s costs application consumed a day’s hearing time. As I determined the costs application against the plaintiff, the costs of that application should follow the event, unless the first defendant displayed some disqualifying conduct. I am satisfied that the first defendant displayed no such conduct.
Another possible perspective is that r 63.20 is engaged. Rule 63.20 provides that, unless the Court otherwise orders, where no order is made as to the costs of an application, the costs of the application are the parties’ costs in the proceeding.
Here the application in question came after a consent disposition of the substantive relief sought in the proceeding, and was itself directed to the allocation of the parties’ costs of the proceeding. These circumstances mean that the default outcome contemplated by r 63.20 would be inappropriate. I am satisfied that I should ‘otherwise order’, by making an order that the plaintiff pay the first defendant’s costs of the plaintiff’s failed costs application.
As to the plaintiff’s second response, and as I acknowledged at the hearing, counsel may be right to say that it would have been better for the plaintiff not to have agreed to the consent orders and to have run its substantive application. However, as I also said at the hearing, the argument that subsequent costs applications might have a chilling effect on compromises can equally be applied to the costs application that the plaintiff brought, unsuccessfully, against the first defendant. Where the parties submit consent orders that do not address the question of costs, there is a clear risk of later controversy and an adverse outcome to both sides. Ultimately I am required to deal with the applications before me, and I cannot deprive the first defendant of its costs in successfully defending the costs application against it on the basis that such orders might have a chilling effect on the plaintiff’s compromising future caveat removal proceedings. It might be said with even greater force that the plaintiff’s costs application had an even greater potential to deter caveators from entering into such compromises.
I will make an order with the effect that the plaintiff must pay the first defendant’s costs of responding to the plaintiff’s application for costs, incurred after 20 December 2023.
However, I will not make that order on an indemnity basis.
The applicable principles are well established, and were set out by Harper J in Ugly Tribe Co Pty Ltd v Sikola.[4] I respectfully adopt his Honour’s summary of the principles, including the principles specifically relied upon by the first defendant that indemnity costs might be ordered where there has been:
(a) ‘[c]onduct which causes loss of time to the Court and to other parties’; and
(b) ‘the commencement or continuation of proceedings in wilful disregard of known facts or clearly established law’.
[4][2001] VSC 189 at [7]–[11].
The first defendant contended that I should impose an indemnity costs order because the plaintiff’s costs application was made and continued in wilful disregard of known facts and clearly established law. The first defendant’s counsel pointed to the fact that the first defendant’s written submissions mentioned no authority outside those referred to by the plaintiff. He submitted that the test for imposition of a costs order in circumstances where there had been no adjudication of the merits, as explained by McHugh J[5] and other judges, was a stringent one that was obviously not met in the case. He submitted that the plaintiff should have known that the application would fail. He submitted that this should have been clear from the outset, or at least during preparation for the hearing, and at the latest by the time the first defendant provided his submissions and offered to consent to an order for no costs of the proceeding on 15 April 2024.
[5]Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622, 624.
I acknowledge that the plaintiff’s costs application was somewhat speculative, but do not think it was clearly contrary to known authorities or clearly foredoomed to fail.
It appears that there is no decided case exactly on point.
Counsel for the first defendant did not take me to any case directly on all fours which would have precluded the point being run.
During submissions in support of the plaintiff’s costs application I asked counsel for the plaintiff whether she had identified any decided case supporting the proposition that consent orders of the kind entered here should be regarded as a ‘capitulation’ by a caveator, for the purposes of imposing costs on the caveator, in a case where there was no adjudication of the substantive application. With her instructor’s assistance, counsel identified Kahlon v Kaur,[6] as one such potential case, and a copy was provided over the luncheon adjournment. A second case, a decision of Croucher J in Rowe v Crisp, was also provided over the adjournment.[7]
[6][2018] SADC 108.
[7]Rowe v Crisp [2019] VSC 784.
When the hearing resumed and the Court and counsel gave attention to these cases, it could be seen that they did not apply here.
Kahlon v Kaur was indeed a case in which a party seeking removal of a caveat did receive an order for costs to be paid by the caveator, where the application for costs came after removal of the caveat by consent. However, the removal of the caveat by consent was not accompanied by anything of advantage to the caveator, such as an order that the party seeking removal of the caveat quarantine an amount claimed by the caveator. It was a case of capitulation. This distinguished Kahlon v Kaur from the present case. The consent orders in the present case represented in each party having a measure of success and were a compromise, not a capitulation.
Rowe v Crisp did not involve consent orders. It was a caveat removal application in which each party had a measure of success. As in the present case, the caveator was ordered (albeit not by consent) to remove the caveats in question, and the applicant for removal of the caveat was ordered (albeit not by consent) to quarantine (by paying into court) an amount of money from the proceeds of sale of the property. The caveator had previously offered to withdraw the caveats if a larger sum were paid into court, but the sum ordered was still a substantial one. The sum paid into court would be released if the former caveator did not commence a proceeding for resolution of the dispute over entitlement to that money by a certain time. Croucher J heard a costs application subsequently brought by the applicant for removal of the caveat. Croucher J accepted a responding argument on behalf of the (former) caveator that it was premature to determine the costs application, and the question of costs should await the resolution or determination of the proposed litigation over the entitlement to the money paid into court.
In the present case, although the first defendant included a similar argument based on prematurity of the costs application in his written submissions, at hearing he did not press that argument. He explained this by pointing out that the parties were now present before the Court and it would be better to achieve finality over the costs issue. The plaintiff did not object to this course or advance any assertion of prematurity itself. The issue on which Rowe v Crip turned therefore did not arise for determination before me.
While neither case was directly supportive of the plaintiff’s application, neither did they preclude the argument being run.
The plaintiff’s costs application raised a number of complex points that merited examination. As counsel for the plaintiff pointed out, the hearing consumed a day. I consider the application to have been arguable. It was not so obviously hopeless or foredoomed to failure that I should make a special costs order.
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