Rowe v Crisp
[2019] VSC 784
•29 November 2019 (ex tempore on substantive application); 28 September 2020 (settled reasons plus costs)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2019 05277
| Between: | |
| COURTNEY ANNE ROWE | Plaintiff |
| -and- | |
| GLENN ANTHONY CRISP | First Defendant |
| -and- | |
| REGISTRAR OF TITLES | Second Defendant |
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JUDGE: | Croucher J | |
WHERE HELD: | Melbourne | |
DATES OF HEARING: | 27 & 29 November 2019 (plus costs submissions filed on 3 & 4 December 2019) | |
DATES OF ORDERS: | 29 November 2019 (on substantive application) & 28 September 2020 (on costs) | |
DATES OF JUDGMENT: | 29 November 2019 (ex tempore on substantive application); 28 September 2020 (settled reasons plus costs) | |
CASE MAY BE CITED AS: | Rowe v Crisp | |
| MEDIUM NEUTRAL CITATION: | [2019] VSC 784 | |
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REAL PROPERTY — Caveats — Liquidator personally, then by company, lodged caveats on plaintiff’s residence — Application by plaintiff to remove caveats — Liquidator consented to removal of caveats, provided payment into Court of nett proceeds of sale of residence — Application granted but with condition as to payment into Court of part nett proceeds of sale, if any, up to $250,000 — Transfer of Land Act 1958 (Vic), s 90(3).
COSTS — Whether plaintiff to receive costs and, if so, whether on indemnity or standard basis — Whether costs to be reserved pending resolution of pending litigation to be commenced against plaintiff — Costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr CJ Twidale | NOH Legal |
| For the First Defendant | Mr LP Wirth | Rothwell Lawyers |
| For the Second Defendant | No appearance |
HIS HONOUR:
Overview
In the Practice Court, on Wednesday 27 November 2019, I heard an application by the plaintiff Courtney Rowe, pursuant to s 90(3) of the Transfer of Land Act 1958 (Vic) (“the TLA”), to remove a caveat on her residential property in Patterson Lakes (“the property”). In fact, in the course of the hearing, because a second caveat was lodged at the last minute, it became an application to remove two caveats.
The first caveat was placed on the register by the first defendant Glenn Crisp in his own name. Mr Crisp is a liquidator appointed to deal with a company called Onsite Recruitment Group Pty Ltd (formerly “Fusion Workforce Pty Ltd”) (“the company”). The company, of which Ms Rowe is (or was) a director, is in liquidation. Mr Crisp had been involved in the liquidation since 2016. The second caveat was placed on the register in the name of the company on the morning of the hearing.
After considering the affidavit evidence and hearing submissions from counsel, I reserved my decision for two days, until Friday 29 November 2019. On that day, I made the following orders (among others):
(a) that the Registrar of Titles remove the two caveats;
(b) that Ms Rowe pay into Court the proceeds of the sale of the property, if any, after payment of the reasonable costs of the sale and the discharge of any mortgage registered on the title of the property, up to a maximum of $250,000; and
(c) that the Senior Master may release to Ms Rowe the funds paid into Court in accordance with the previous paragraph, and interest accrued, if by 20 January 2020 no proceeding has been commenced against Ms Rowe claiming entitlement to the funds.
I gave ex tempore reasons for making those orders.
On the same day, after hearing submissions on the precise form of those orders, I also heard submissions on costs. Since the issues concerning costs appeared more complex than usual, I ordered the filing of written submissions on the topic.[1]
[1]Unfortunately, after my return from the Christmas break, through an administrative oversight, I came to believe, mistakenly, that I had determined, and made orders with respect to, the question of costs in this matter. It was only in recent times that I discovered the error, which is the reason for such a long delay in dealing with as simple a matter as costs. I apologise to the parties and their legal representatives for any inconvenience.
In the unusual combination of circumstances that obtain in this case, I have determined to reserve costs. In short, I accept the submission that only after the pending primary litigation against Ms Rowe is concluded will the Court be in an appropriate position to determine the costs question on the present application.
The balance of this judgment will be in two parts. First, I shall reproduce the substance of my ex tempore reasons delivered on 29 November 2019 for the orders made that day. (I shall leave those reasons in the present tense, as delivered at the time.) In the second part, I shall outline counsel’s submissions on costs and my more detailed reasons for reserving those costs.
Reasons for orders made at hearing
By the time of the hearing (on Wednesday 27 November 2019), there were five encumbrances on the property, namely:
(a) a first registered mortgage in favour of Pepper Finance Corporation Ltd;
(b) a second registered mortgage in favour of Prospa Advance Pty Ltd;
(c) the caveat lodged on 21 February 2019 in the name of Mr Crisp personally (“the first caveat”);
(d) a caveat lodged on 21 May 2019 by Ms Rowe’s solicitors NOH Legal Pty Ltd; and
(e) a caveat lodged on 27 November 2019 (the day of the hearing) at the instance of Mr Crisp but in the name of the company (“the second caveat”).
Ms Rowe has sold her home in Patterson Lakes for $1.2 million. A deposit (of ten percent) has been paid and settlement is due on Monday 2 December 2019. Thus, time is of the essence.
In her affidavit, Ms Rowe says that both registered mortgages will be discharged at settlement, and that her solicitors’ caveat will be withdrawn on or before settlement.
Both parties accept that the law as stated by Warren CJ in Piroshenko v Grojsman[2] is applicable in the present case. Briefly, the two-stage approach set out by her Honour requires the caveator to establish that there is a serious question to be tried that the caveator has the estate or interest claimed in the land in question, and, having done so, to establish that the balance of convenience favours the maintenance of the caveat on the Register of Titles until trial.
[2]Piroshenko v Grojsman (2010) 27 VR 489 at 492[12]-495[23] (per Warren CJ).
Mr Crisp does not wish to stand in the way of the settlement. He therefore does not object to removal of both caveats, but subject to a certain condition. The condition is that the nett proceeds of sale of the property be paid into, and held by, this Court until his proposed claim (on behalf of the company) against Ms Rowe is determined. This suggestion arises from a concern that, were the proceeds of sale disbursed to Ms Rowe on settlement without a condition of this type, the funds may be dissipated and then may be unable to be traced despite any successful action against Ms Rowe.
Mr Twidale, who appears for Ms Rowe, submits that there is no caveatable interest, or at least none that could be established by Mr Crisp.
As to the first caveat, he submits that it was plainly lodged by Mr Crisp personally, rather than in the name of the company. Clearly, that was a mistake, as the liquidator does not have any proprietary interest in the property. Mr Twidale submits that Mr Crisp admits as much by his behaviour in lodging the second caveat at the eleventh hour.
Mr Wirth, who appeared for Mr Crisp, did not seriously contest this point, although he did not formally give it away either.
In my view, there is no argument but that the first caveat must be removed, for there is simply no issue to try at all when Mr Crisp, as liquidator, cannot have any interest of the type asserted.
As to the second caveat, of course, it does not suffer from that same defect, for it is lodged in the name of the company. Mr Wirth’s submission is that there is a caveatable interest. He submits that the evidence does establish that there is a serious question to be tried that the company has a proprietary interest by way of a constructive trust over the property in question. He further submits that the balance of convenience favours removal of the caveat but also preservation of that interest in monetary form until trial.
Mr Twidale accepts that, if there is sufficient evidence of a serious question to be tried that the company has a proprietary interest in the property, then it is appropriate to preserve some, but only a very small amount, of the proceeds of sale until trial, because the evidence would establish only a few thousand dollars’ worth, if it got to that point at all.
Mr Wirth submits that the evidence at present shows a sufficient likelihood of the following things:
(a) First, Ms Rowe was a director of the company.
(b) Secondly, as a director of the company, Ms Rowe breached her fiduciary duties, at least by having a conflict of interest, in doing two things:
(i) First, progressively, between 1 July 2014 and 27 February 2015, she caused the company to advance funds to herself personally in the total amount of $126,421.76, which she used to improve her home at Patterson Lakes. It is submitted that this is evidenced by the balance sheet dated as of June 2015 (and generated on 14 February 2019), which labels the sum of $126,421.76 as “CR – Building Repairs”; and by bank statements for the company and invoices with descriptions such as “CR Building Repairs” and “Work at CR home”.
(ii) Secondly, it is alleged that, via a loan she arranged between the Courtney Rowe Family Trust (which, as the name suggests, is Ms Rowe’s trust) and the company, from 24 November 2014 to 26 October 2015, Ms Rowe drew funds totalling $103,016.54, which she applied personally to pay off her mortgage on her own home at Patterson Lakes. It is submitted that this is evidenced by descriptions labelling these “CR Mortgage”.
(c) Thirdly, it is argued that the evidence is capable of showing that those funds can thereby be traced into identifiable property, namely the home at Patterson Lakes.
(d) Fourthly, it is submitted that equity will conclude that, in such circumstances, a constructive trust is impressed on the property in favour of the company to the extent the funds were used to improve the property and service the mortgage.
In support of this argument, in the course of his submissions, Mr Wirth (helpfully) handed up an extract from Meagher, Gummow and Lehane’s Equity Doctrines and Remedies, which includes the following summary of principle:[3]
A profit or benefit by a fiduciary in circumstances where there was an actual or possible conflict of interest and duty, where the fiduciary took advantage of the fiduciary position, or where the fiduciary took advantage of an opportunity or knowledge derived from the fiduciary position, may be held by the fiduciary on constructive trust.[4] Where the profit can be traced into identifiable property in the hands of the defaulting fiduciary, proprietary remedies may and generally will be appropriate. So in Boardman v Phipps,[5] the fiduciaries were held to be constructive trustees of the shares they had acquired. And in Lac Minerals Ltd v International Corona Resources Ltd,[6] they were held to be constructive trustees of the land they had acquired in breach of duty. It seems clear, however, that proprietary remedies are to an extent discretionary, or only to be granted if ‘appropriate’, though it is not yet clear precisely on what criteria the discretion will be exercised or the appropriateness identified.[7] … The New South Wales Court of Appeal in United States Surgical Corporation v Hospital Products International Pty Ltd[8] held that a court will be more ready to impose a constructive trust where a fiduciary is fraudulent than where the fiduciary is honestly mistaken.
[3]Meagher, Gummow and Lehane, Equity Doctrines and Remedies (LexisNexis Butterworths Australia, 5th edn, 2015), p 189 (citations in the original).
[4]Furs Ltd v Tomkies (1936) 54 CLR 583 at 592; Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd (1958) 100 CLR 342 at 350; Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 107-110; 55 ALR 417 at 462-464; Chan v Zacharia (1984) 154 CLR 178 at 198-199; 53 ALR 417 at 432-433.
[5][1967] 2 AC 46; [1966] 3 All ER 721.
[6][1989] 2 SCR 574; (1989) 61 DLR (4th) 14.
[7]Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; 287 ALR 22 at [183].
[8][1983] 2 NSWLR 157 at 237.
As I understood him, Mr Twidale did not dispute Mr Wirth’s submissions concerning the principles that might give rise to a constructive trust based on the alleged behaviour of Ms Rowe. His principal point was that there was simply not the evidence sufficient to make out the factual substratum for a serious question to be tried that the company has a proprietary interest by way of a constructive trust over the property in question.
For example, Mr Twidale highlighted the generality of Mr Crisp’s language found in his letter of 2 April 2019, which was expressed as, “I believe you caused the Company to provide these funds to assist with building repairs of a property owned by you.” It was submitted that the monies could not clearly be traced into the impugned property and, rather, could equally have been applied to any of a number of properties identified and referred to in the material before the Court.
Mr Twidale also pointed to the loan agreement, the arguable uncertainty as to where the funds went, and to Mr Crisp’s early letter to the effect that Ms Rowe does not owe any money to the company according to the company’s records.
Thus, it seems to me that the question to be tried on an action against Ms Rowe is not one which disputes the principle that a fiduciary acting in breach of her obligations may act in a way so as to impress property paid for or contributed to by way of a constructive trust, but rather is (a) whether a breach of her duties as director of the company can be established and (b), if so, whether that gives rise to a proprietary interest in the form of a constructive trust which is traceable into identifiable property in the hands of Ms Rowe such that she, as a fiduciary, holds that identified property (or a proportionate interest therein) on trust for the company as a principal.
While it is a close-run thing, and is arguably quite a thin case at more than one level, nevertheless, on my assessment of the material before the Court on this application, I accept that there is a serious question to be tried in respect of both the funds said to have gone into home improvements or repairs and the funds said to have gone towards the loan repayments, and in the broad amounts alleged.
In circumstances where Mr Crisp does not resist either the removal of the caveat or the sale proceeding to settlement, the principles espoused in Piroshenko — particularly, the second consideration within the ‘serious question to be tried’ limb as well as the ‘balance of convenience’ limb — necessarily require adaptation here. In this instance, those aspects of the two-stage test bear limited application.
The course proposed by Mr Crisp — namely, that a portion of the proceeds of sale to be paid into Court — does not detrimentally affect or impinge upon Ms Rowe’s ability to exercise her usual proprietary rights in selling the property. To the contrary, it expressly permits settlement to be effected and registration of the bona fide purchaser’s interest in the property. Simultaneously, it preserves any proprietary interest which the company may have — being a serious question to be tried and an interest which, if established, is to be declared by a court of competent jurisdiction — which may otherwise be extinguished were the funds to be dissipated or otherwise become untraceable.
The final question, then, as I see it, is how much should be left aside, in effect, to preserve the company’s interest in the property, if indeed it has such an interest. In my view, there can be no precise answer or science to this question, especially when none was suggested to me. Mr Wirth submitted simply that it should be the whole of the nett proceeds (after the mortgages and selling expenses are paid out). Mr Twidale submitted that it is impossible to justify more than a few thousand dollars, although that argument must be seen to have failed given what I have found with respect to the serious question to be tried regarding both the repair and the mortgage repayments in the amounts alleged.
On those simple figures ($126,421.76 and $103,016.54), the total amount held back should be in the order of $240,000.
In the end, in all the circumstances, I think that $250,000 is an appropriate figure to hold back. That amount strikes an appropriate balance, in my view. On the one hand, it allows not only for the nearly $240,000 allegedly advanced but also for the possibility of some modest growth in the value of the property by virtue of the company’s alleged (unwitting) contribution to its improvement. On the other hand, I do not think it is reasonable that Ms Rowe, as the owner of the property, should be denied access to any more than that amount (of the nett proceeds of sale).
Costs
Submissions of Ms Rowe (plaintiff)
I turn now to the question of costs, commencing with Mr Twidale’s submissions on behalf of Ms Rowe.
Mr Twidale explained that Ms Rowe seeks her costs of, and incidental to, the proceeding, to be assessed on an indemnity basis. Alternatively, Ms Rowe seeks her costs, to be assessed on an indemnity basis up to 8:30 a.m. on Wednesday 27 November 2019 (which, it will be remembered, was the day of the substantive hearing), and thereafter to be assessed on the standard basis. Mr Twidale submits that such orders are warranted for the following reasons.
First, the resistance by the liquidator Mr Crisp to the unconditional removal of the first caveat supports the exercise of the Court’s discretion in Ms Rowe’s favour. More specifically, Mr Twidale submits that Mr Crisp’s resistance to the first caveat’s unconditional removal was conduct which caused a loss of time to the Court and to other parties. Further, or in the alternative, he submits that Mr Crisp’s conduct amounted to the commencement or continuation of proceedings in wilful disregard of known facts or clearly established law.
The first caveat was lodged in the name of Mr Crisp on 21 February 2019. The caveat was an absolute restriction on Ms Rowe’s ability to deal with the land in accordance with her usual proprietary rights (including any right to sell the land).
The first caveat’s lodgement has been labelled by this Court as a “mistake”. At the hearing, Mr Wirth, on behalf of Mr Crisp, did not actively resist this characterisation.
Despite being invited by Ms Rowe’s solicitors, on numerous occasions, to withdraw the first caveat, Mr Crisp refused to do so. On 14 October 2019, Mr Crisp made it abundantly clear that “[w]e advise that we will not be removing the [first] caveat and we will vigorously oppose any action bought to remove it”.[9]
[9]Mr Twidale’s emphasis.
At all material times, Mr Crisp was represented by solicitors who could have (and should have) advised him that the first caveat should be removed, as there was no basis to maintain it.
There being no consent to remove the caveat, on 21 November 2019, this proceeding was commenced by Ms Rowe. On 25 November 2019, Mr Crisp’s solicitors said that the liquidator continued to “maintain its position regarding the [first caveat]” and that “the basis for which [has] been detailed ad nauseam in previous correspondence”. The solicitors went on to say that Mr Crisp would now consent to the first caveat’s removal, subject to certain conditions.
At the hearing of the proceeding, Mr Wirth stated that Mr Crisp consented to the withdrawal of the first caveat, but on the condition that all of the proceeds of sale be paid into Court.
In other words, submits Mr Twidale, Mr Crisp never unconditionally offered to remove the first caveat.
As Mr Twidale pointed out, the Court found that there was no basis for the liquidator to have lodged the first caveat. The Court ordered that the first caveat be removed, pursuant to s 90(3) of the TLA.
In Mr Twidale’s submission, the liquidator’s resistance to the first caveat’s removal caused a loss of time to the Court and Ms Rowe, and/or was in wilful disregard of known facts or clearly established law, which together support an order for indemnity costs in Ms Rowe’s favour.
In Mr Twidale’s further submission, for reasons that have not been explained by Mr Crisp, on 14 October 2019, his solicitors asserted that there was “a clear trace of moneys from the company’s bank account to your client’s purchase of the property” (“the statement”). In the bundle of documents attached to an email of 17 October 2019, submitted Mr Twidale, there appears to be no evidence to support the statement, despite the assertion that the documents “set out the basis of the claim against the property”. Nor did the solicitors correct the statement. Instead, as indicated earlier, on 25 November 2019, they said that Mr Crisp continued to “maintain [his] position regarding the [first caveat]” and that “the basis for which [has] been detailed ad nauseam in previous correspondence”.
At the hearing on 27 November 2019, Mr Wirth, on behalf of Mr Crisp, conceded that there was no such evidence of company funds being used to purchase the property.
In Mr Twidale’s submission, Mr Crisp has not attempted to explain why he maintained the statement between 16 October 2019 and 27 November 2019. This conduct, it is further submitted, has caused a loss of time to the Court and Ms Rowe, which, again, supports an order for indemnity costs in Ms Rowe’s favour.
Likewise, pointed out Mr Twidale, there has been no explanation given by Mr Crisp as to why he wrote a letter to Ms Rowe on 8 August 2016 stating that “[a]t the date of this letter, the Liquidator does not have a claim against Courtney Rowe”.
Further, on 26 November 2019, an offer was put to the solicitors for Mr Crisp that the first caveat be removed and that Mr Crisp pay the costs of Ms Rowe, to be assessed on the standard basis. Rather than accept the offer, Mr Crisp continued to resist the removal of the caveat in circumstances where he was on notice of the affidavit material to be relied upon by Ms Rowe and also had a copy of her counsel’s written submissions dated 25 November 2019. Mr Twidale submits that it was unreasonable for Mr Crisp to reject the offer. That offer also made it expressly clear that Ms Rowe would rely upon the rejection of the offer on the question of costs. In those circumstances, it is submitted that the rejection of the offer supports an order for indemnity costs.
The lodging of the second caveat, on the morning of 27 November 2019, is, in Mr Twidale’s submission, evidence that the first caveat had no proper basis.
Notice of the second caveat was given to Ms Rowe at approximately 8:30 a.m. the same morning. A sworn version of Mr Crisp’s affidavit in support was first provided to Ms Rowe’s lawyers at around 10:20 a.m. The service of this affidavit, so late in the proceeding, could only result in the matter having to be stood down to enable Ms Rowe’s lawyers to consider the new material. It was not argued by Mr Crisp, nor could such an argument reasonably be made out, that his affidavit could have been given to Ms Rowe only at that late stage.
In Mr Twidale’s submission, had Mr Crisp’s affidavit been provided earlier, it is more likely the proceeding would have concluded in the two hours that had been allocated to the matter, and/or at least before 1:00 p.m. on 27 November 2019. Accordingly, the late service of the affidavit caused loss of time to the Court and Ms Rowe, which, again, supports an order for indemnity costs in her favour.
In order to avoid the need to adjourn the proceeding to another day, and thereby increase costs for all parties concerned, Ms Rowe elected to amend her originating process and summons and then sought to move on her amended application.
In Mr Twidale’s submission, Mr Crisp’s success in defending the second caveat can be attributed largely to the material contained in his affidavit. That affidavit set out the legal and equitable basis for the company’s proprietary rights in the property. Prior to the filing of that affidavit, Mr Crisp had not succinctly set out the legal basis to support the company’s proprietary interest in the land. Instead, up to 27 November 2019, Mr Crisp had maintained that the company’s funds had been used to purchase the land.
For the foregoing reasons, submitted Mr Twidale, Mr Crisp cannot reasonably contend that he “succeeded” in the proceeding and that he should be entitled to his costs. Moreover, Mr Crisp has not achieved the desired outcome with respect to the orders he sought at the hearing — which was that both caveats be removed on condition that all of the proceeds of the sale of the property be paid into Court. Instead, the Court ordered that the first caveat be removed unconditionally, and that the second caveat be removed on the basis that $250,000 be paid into Court from the nett proceeds of sale.
(As to the point made in the last sentence, while the orders made on 27 November 2019 do not draw any distinction between the first and second caveats and the condition concerning the payment into Court, Mr Twidale’s submission — namely, that the Court ordered that the first caveat be removed unconditionally, and that the second caveat be removed on the basis that $250,000 be paid into Court from the nett proceeds of sale — does in fact reflect my reasons for making those orders.)
Submissions of Mr Crisp (first defendant)
Mr Wirth, on behalf of Mr Crisp, submitted that, for reasons that follow, the appropriate order is that costs be reserved pending the resolution of the foreshadowed litigation to be commenced against Ms Rowe.
Mr Crisp, as the liquidator, lodged the caveats because he had identified a prima facie case of a breach of Ms Rowe’s obligations to the company. In his letter to Ms Rowe on 2 April 2019, Mr Crisp explained his view in some detail.
Mr Wirth submitted that the distinction between the first and second caveats is immaterial. They claimed the same interest. The second caveat did not give rise to any argument by Ms Rowe beyond those set out in her written submissions, except for the issue of the identity of the proper caveator. Indeed, it appears that the second caveat brought the issue to her attention. Similarly, Ms Rowe did not require further evidence to deal with the second caveat. The hearing proceeded on the same material that Mr Crisp had relied on in correspondence.
Ultimately, the Court made orders preserving the proceeds of the sale of the property on the basis of the interest for which Mr Crisp contended and which he had explained in his letter of 2 April 2019.
At the substantive hearing, it was submitted on behalf of Mr Crisp that the first caveat was not defective because he could be taken to be the company’s agent. The Court rejected that submission. But, in Mr Wirth’s submission, neither the substance of the issues in dispute nor the outcome of the proceeding turned on that issue. Moreover, the issue did not consume any meaningful time in argument.
In Mr Wirth’s submission, even in the absence of the second caveat, because Mr Crisp’s position was that his (first) caveat ought to have been removed in any event, it would have remained open to the Court to exercise its discretion under s 90(3) of the TLA for payment of the proceeds of the sale of the property into Court given that it was satisfied that there was a sufficiently arguable case justifying their preservation on an interlocutory basis. The exercise of the discretion in that manner does not depend on the caveat (as opposed to the interest it identifies) being maintainable. Mr Wirth submitted that it is open to the Court, when faced with a defective caveat and an arguable claim, to make orders in its equitable jurisdiction,[10] and that that alternative remedy was also open to the Court here. Accordingly, the lodgement of the second caveat has no bearing on the question of costs.
[10]Mr Wirth cited TL Rentals Pty Ltd v Youth on Call Pty Ltd & Ors [2018] VSC 105 at [35] (per Derham AsJ).
Ms Rowe’s solicitors first wrote to Mr Crisp’s solicitors about the first caveat on 23 August 2019. They wrote again on 7 October 2019. Mr Crisp’s solicitors responded on 14 October 2019. (Mr Wirth conceded that the reference to a connection with Ms Rowe’s purchase of the property was unfortunate, but on a fair examination of the material, he submitted, it must have been the case that the author had in mind repayments of the loan account secured by mortgage registered on the title to the property — i.e. repayments of Ms Rowe’s home loan, which was presumably acquired to purchase the property.)
It was notable, submitted Mr Wirth, that at no stage in the correspondence prior to the commencement of the proceeding was there a suggestion that Ms Rowe was desirous of selling, or had sold, the property. In fact, Ms Rowe had sold the property on 18 August 2019, almost a week before her solicitors’ first correspondence on 23 August 2019. The sale was not advertised. The process was secretive, in his submission.
Ms Rowe filed her originating motion and summons on 20 November 2019.[11] The proceeding was listed for hearing urgently, on 27 November 2019, on the basis that settlement was due on 2 December 2019. This was the first notice that Mr Crisp had of the sale of the property. On 25 November 2019, Mr Crisp’s solicitors wrote to Ms Rowe’s solicitors stating, inter alia:
[11]In fact, the Court’s order of 27 November 2019 records, in the “Other Matters” section, that the originating motion was file on 21 November 2019.
Our client does not object to the sale of the property or settlement occurring as scheduled. Our client will be willing to remove [his] Caveat, subject to the following:
1.By 4 p.m. today, our office be provided with the following information:
a.Amount owing under the Pepper Mortgage and Prospa Mortgage;
b.Settlement Statement showing direction of funds at settlement;
c.Ms Rowe’s anticipated residue from settlement after the usual disbursements and discharge of mortgages; and
d.In the event that there is a surplus, the details of the intended use of the surplus.
We put you on notice that should there be any cash available to your client, we will be seeking an order that funds received by Ms Rowe be held in trust pending the determination of our client’s claim against Ms Rowe.
As at the time of filing Mr Wirth’s submissions on costs (which was 4 December 2019), settlement still had not taken place.
Shortly after Ms Rowe’s application came on, the Court stood the hearing down to enable the parties to have discussions about resolution of the proceeding in light of the second caveat, late service of Mr Crisp’s affidavit and his position that the caveats ought to be removed in any event. In Mr Wirth’s submission, Mr Crisp’s affidavit did not contain any material that was new to Ms Rowe. He submitted further that Ms Rowe was not so prejudiced by its late service as to require an adjournment, and she did not seek one. Accordingly, in Mr Wirth’s submission, the late service of the affidavit has no bearing on the question of costs.
Mr Wirth submitted that Mr Crisp was wholly successful, in that the caveats were removed and the proceeds of sale were ordered to be paid into court, consistently with his proposal made on 25 November 2019 (which he made before lodging the second caveat).
Despite Mr Crisp’s request for disclosure of the amount of equity, and the various references during argument to the absence of that evidence, at the time of the filing of Mr Wirth’s submissions on costs, Ms Rowe still had not disclosed the equity position. Mr Wirth said that, if there were little or no equity, Mr Crisp, as the liquidator, would have withdrawn the caveats and the proceeding would have been avoided altogether.[12]
[12]In his written submission on costs, Mr Wirth said “would not have withdrawn the caveats …”, but I took the inclusion of the negative to be a typographical error.
In Mr Wirth’s submission, the secrecy of the sale and the equity position, and the timing of Ms Rowe’s application, suggest that there might be substantial equity that she is endeavouring to keep out of the liquidator’s reach. On the other hand, he submitted, the unexplained delay in settlement following the making of directions for submissions on costs suggests that Ms Rowe does not want to be exposed for wasting the Court’s and parties’ time with uncommercial litigation, which might result in Mr Crisp seeking an order for payment of his costs.
Mr Wirth conceded that, ordinarily, costs follow the event. He submitted, however, that the nature of a caveat (and the order for payment into Court) is that of an interlocutory injunction. In those circumstances, submitted Mr Wirth, and in light of the unknown equity level, the appropriate order is to reserve costs.
Mr Wirth suggested that, if litigation over entitlement to the payment into Court ensues, the parties can reagitate the issue of costs in this proceeding once that litigation has concluded. Alternatively, in his submission, if there is an absence of equity and this proceeding was always going to be uncommercial, Mr Crisp, as liquidator, would be well entitled to agitate a claim for his costs to be paid.
Mr Wirth’s alternative submission was that, if the Court is not minded to reserve costs, in the interests of finalisation of this proceeding, it would be appropriate to make no order as to costs.
Discussion
As I indicated in the overview of these reasons, I am persuaded that the preferable course is to reserve costs.
While Mr Twidale is correct to argue that the first caveat had to be removed unconditionally, the fact of the matter is that the second caveat did have a proper basis. Further, while Ms Rowe “succeeded” in having both caveats removed, the second was ordered to be removed only on the basis of the Court-imposed condition of a payment into Court of $250,000 of the nett proceeds of sale, if any. Further, Ms Rowe had resisted the findings, which I made, that there was a sufficiently arguable basis for the second caveat and that, if there were any such arguable basis, the relevant amount to be held back was only a few thousand dollars, which is a long way short of $250,000.
Equally, while Mr Crisp, at the hearing, indicated his consent to the removal of both caveats on the condition that all of the proceeds of sale be paid into Court, that concession was made knowing that the sale price was $1.2 million (albeit that there were other encumbrances on the title, the extent of which he did not know) and in circumstances where I found that $250,000 was a sufficient amount to hold back.
Thus, I think it is fair to say that each party has had a measure of success and a measure of failure on this application.
Ordinarily, that may be sufficient reason to attempt to reflect the degrees of success and failure, and other considerations, in an order for costs. Alternatively, if those matters netted out more or less to zero, it may be a good enough reason to order that no costs be awarded.
But, for at least two broad sets of reasons, such an assessment is, I think, difficult, if not impossible, to achieve at present.
First, while I found a sufficient basis to uphold the second caveat and to an estimated value of about $250,000, it may well be that, on a more careful analysis after a full hearing, a court will conclude that there is no cause of action, or that there is a cause of action but the quantum of liability is much less than I have estimated, is about that amount or is much the greater. In my view, any one of those conclusions could be relevant to the issue of costs on this application.
Secondly, I am somewhat troubled about the alleged secrecy surrounding the sale of the property, the unexplained failure to complete the sale (as at 4 December 2019), the uncertainty of Ms Rowe’s equity position, her failure to apprise Mr Crisp of that position and the behaviour in which Ms Rowe may have engaged (albeit that the latter finding is made only in accordance with the test required for establishing a caveatable interest). Again, it seems to me that these issues, about which I am presently uncertain, could have a greater or lesser relevance to the appropriate determination of the costs question at hand.
All of these and other issues that might be relevant to the costs question are far more likely to be known once Mr Crisp’s proposed litigation against Ms Rowe is concluded. Even if that does not prove to be so, I think it would be premature and unwise to determine the costs of this application before at least allowing for the opportunity to learn more of those issues as a result of that proposed litigation.
Further, it may well be that, in order to avoid incurring further costs, the conclusion of that proposed litigation will include a settlement between the parties on the costs at issue on the application before me.
In those circumstances, I think that the preferable course is to order that the costs of Ms Rowe’s application in this Court to remove the caveats be reserved. The parties shall also each have liberty to apply.
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