Southage v Vescovi
[2014] VSC 176
•17 April 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. S CI 2012 00450
| SOUTHAGE PTY LTD (ACN 050 240 965) | Plaintiff |
| v | |
| LISA ANGELA VESCOVI & ORS | Defendant |
No. S CI 2012 1167
| LISA ANGELA VESCOVI | Plaintiff |
| v | |
| SOUTHAGE PTY LTD (ACN 050 240 965) and REGISTRAR OF TITLES | Defendants |
---
JUDGE: | Macaulay J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 11 April 2014 | |
DATE OF JUDGMENT: | 17 April 2014 | |
CASE MAY BE CITED AS: | Southage v Vescovi & Ors; Vescovi v Southage & Anor (costs) | |
MEDIUM NEUTRAL CITATION: | [2014] VSC 176 | |
---
COSTS – Whether standard or indemnity basis – Calderbank letter refused – Analysis on an issues basis – Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; Colgate Palmolive v Cussons (1993) 46 FCR 225 considered.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff (Southage Pty Ltd) | J. Tsalanidis | Velos Lawyers |
| For the First Defendant (Vescovi) | P. Bornstein | Hendersons Legal |
| No appearance for other Defendants |
HIS HONOUR:
Proceedings
In the Southage v Vescovi, Katsimadakos & Kalivoda (‘the Southage proceeding’), Southage Pty Ltd sought judgment against Lisa Vescovi under an unregistered mortgage (‘the Williamstown mortgage’) for money it said it lent Vescovi on that security. Alternatively, it sought the money back pursuant to its rights of subrogation to an unpaid vendor’s lien, or in restitution for money paid under a mistake of fact.
In the Vescovi v Southage & Registrar of Titles (‘the Vescovi proceeding’), Vescovi sought permanent injunctions against the Registrar of Titles and against Southage preventing the registration of the mortgage and the sale of the land, together with an order for the removal of a caveat Southage had lodged over the title. Interlocutory injunctions were granted on 21 March 2012 pending the trial of the proceeding.
On 27 August 2013 the Southage proceeding and the Vescovi proceeding were heard together.
An issue in common in both proceedings was whether Vescovi’s signature to the Williamstown mortgage (and associated loan documents) had been forged.
Orders were made in the Vescovi proceeding on 27 August 2013, in Vescovi’s favour, restraining the Registrar from registering the Williamstown mortgage, restraining Southage from exercising any power of sale and ordering the removal of Southage’s caveat over the Williamstown title. The orders gave effect to Southage’s concession on the first day of trial that it had no defence to Vescovi’s proceeding once it conceded that the unregistered mortgage it held over her Williamstown land was a forgery and she had not given it.
So, other than in respect of the question of costs, which were reserved, the Vescovi proceeding was determined on 27 August 2013.
In the Southage proceeding, the claim under the mortgage and loan agreement was abandoned, as was the vendors lien claim. Only the claim in restitution proceeded. For reasons I gave on 4 April 2014, Southage failed in its claim in restitution.[1] That proceeding has also been determined except for the question of costs.
[1]Southage v Vescovi [2014] VSC 141
Cost issues
So, the remaining issues are the questions of costs for each proceeding. Those questions only arise as between Southage and Vescovi. Questions of costs between Southage and Katsimadakos (the second defendant in the Southage proceeding), or between Katsimadakos and Kalivoda (the third defendant), were resolved by consent orders made on 27 August. There are no outstanding questions of costs involving either Katsimadakos and Kalivoda.
Vescovi applies for the following orders:
Southage proceeding: that
·Southage pay all of Vescovi’s costs associated with the issue of whether the loan agreement and mortgage had been forged, on an indemnity basis;
·Southage pay all of Vescovi’s costs associated with its claim for restitution or in respect of a vendor’s lien on a standard basis until 26 November 2012 and thereafter on an indemnity basis.
Vescovi proceeding: that
·Southage pay Vescovi’s costs of the proceeding on an indemnity basis.
In respect of the Southage proceeding, Southage says it should only have to pay 50 per cent of her costs on a standard basis. That is because, it argues, although Vescovi defeated Southage’s claim for restitution, the reasons for judgment reveal that she did not succeed on all issues put in contest by her.
Southage concedes that it should pay Vescovi’s costs of the Vescovi proceeding, but argues it should only pay those costs on a standard basis.
In my view, for the reasons that follow, Southage should pay costs as follows:
·Southage proceeding: Southage pay Vescovi’s costs of the proceeding, including reserved costs, to be taxed in default of agreement -
ountil 16 March 2012 (including that day), on a standard basis,
oafter 16 March 2012, the addition of 80 percent of an indemnity basis assessment of all such costs and 20 percent of a standard basis assessment of all such costs.
·Vescovi proceeding: that Southage pay Vescovi’s costs of the proceeding, including reserved costs, to be taxed in default of agreement, until 16 March (including that day) on a standard basis and thereafter on an indemnity basis.
Chronology of events
These reasons need to be read in conjunction with my reasons for judgment (‘Reasons’) given in the Southage proceeding.[2] Further details now need to be added to the narrative contained in the Reasons.
Background to the Southage proceeding
[2][2014] VSC 141.
Katsimadakos, a solicitor, was retained by Southage to act on its behalf in respect of the loan and mortgage transaction it thought it was making with Vescovi. Katsimadakos continued to act for Southage in relation to the transaction from at least 20 January 2010, when the loan was purportedly made, until 22 February 2012. On that latter date, Velos Lawyers took over acting for Southage.
Between Vescovi learning of the caveat on the title of the Williamstown land in late August 2011, and 22 February 2012, she had certain communications with Katsimadakos about Southage’s caveat and the alleged mortgage. She says that, in those communications, she denied having signed a mortgage or having taken out a loan with Southage.
Katsimadakos also had some contact with Alfonso Grillo, the lawyer at Tresscox who was supposed to have advised Vescovi about the Williamstown mortgage, witnessed her signature, and provided an independent solicitor’s certificate to Southage. As I explain in the Reasons, Grillo did not give any such advice, witness Vescovi’s signature or sign an independent solicitor’s certificate.[3]
[3]Reasons [10].
On 20 October 2011, after Grillo had been sent by email a copy of the certificate that he allegedly signed, he emailed Katsimadakos asking whether he held the original certification documents. He also asked for copies of the ‘loan documents and documents listed that I am noted as having advised Liza in respect of’: a sign, I infer, that he was not at all convinced that he had been involved as suggested. He certainly did not acknowledge that he had given Vescovi advice, or that he had signed the certificate. The original certification document was not sent to him in response to his request. Nor were any loan documents sent to him.
Perhaps even more significantly, until Grillo gave evidence before me on 27 August 2013 neither Southage nor anyone on its behalf had any contact with Grillo after 20 October 2011 as to whether he signed the certificate or witnessed Vescovi’s signature on the mortgage.
That fact is quite extraordinary given, as will appear, that Grillo’s evidence was absolutely crucial to resolving the question whether Vescovi’s signature had been forged on the Williamstown mortgage and associated loan documents. And, from an early stage, that issue was critical to resolving whether the unregistered mortgage Southage held was valid and registrable. In turn, the validity of the mortgage was central to the two proceedings issued early in 2012.
On 30 January 2012, two years after receiving it, Southage belatedly lodged the mortgage for registration at the Land Titles Office. It was lodged for Southage by its solicitor, Katsimadakos. The same day Southage issued its proceeding against Vescovi.
Background to the Vescovi proceeding
On 20 February 2012, David Henderson, Vescovi’s solicitor, wrote to Southage setting out Vescovi’s instructions. The letter stated that Vescovi had never requested a loan from Southage, and had not signed a letter of offer, loan agreement or mortgage in favour of Southage. In the letter, Mr Henderson said he had personally spoken to Grillo who advised that he did not meet or advise Vescovi in relation to Southage. Henderson demanded, on Vescovi’s behalf, that Southage withdraw the caveat and its then application to lodge the mortgage.
On the same day, which was two days before his retainer with Southage was terminated, Katsimadakos had a meeting with Robert Kalivoda, Vescovi’s husband. Katsimadakos made a file note of that meeting. The meeting was also attended by Vescovi’s father. At that meeting, according to the file note made by Katsimadakos, Kalivoda admitted forging Vescovi’s signature on the mortgage document.
Two days later, on 22 February, Southage appointed Velos Lawyers to act in place of Katsimadakos.
On 27 February, Henderson sent Velos Lawyers a further letter. It was marked ‘without prejudice save as to costs’ and was expressed to be sent in accordance with the principles in Calderbank v Calderbank and other like authorities. In it, Henderson again reiterated that Vescovi denied signing the mortgage or loan documents, that Grillo denied giving her advice or signing a certificate and that Katsimadakos had known of the position of Vescovi and Grillo since September 2011.
On Vescovi’s behalf, Henderson offered to permit the caveat to remain on title and he proffered her undertaking as to damages. He sought Southage’s agreement to withdraw the mortgage dealing, in which case Vescovi would not bring injunction proceedings. Only two hours were given in which to accept the offer failing which he said that proceedings would be commenced to restrain the registration of the mortgage and indemnity costs would be sought.
Velos Lawyers responded by letter on 28 February. It was a detailed letter of over 3 pages. They denied Vescovi’s allegations. They said Grillo had not made reference to any irregularity concerning certification of the loan documents. Presumably that statement was a reference to the communications Katsimadakos had had with Grillo the previous October. They alleged that Vescovi’s claims were ‘recent invention’. Further reference was made to conversations Katsimadakos had had with Vescovi in September 2011, October 2011 and January 2012. They were relied on to suggest that Vescovi had raised no concerns about the loan, implying again that her position was a recent invention. They said that her denial of the mortgage was ‘disingenuous and self serving’.
No mention was made of Katsimadakos’ conversation with Kalivoda on 20 February in which Kalivoda admitted forging his wife’s signature. Vescovi’s settlement offer was expressly rejected.
On 2 March 2012, Vescovi filed her proceeding against Southage: an originating motion and a summons seeking an interlocutory and permanent injunction restraining the registration of the mortgage. That same day she swore and filed a lengthy affidavit in support of her application. Among other things, she deposed to the fact that her father attended the meeting on 20 February 2012 at Katsimadakos’ office where Kalivoda had admitted forging Vescovi’s signature on the mortgage.
She also filed an affidavit sworn by Grillo on 2 March 2012. In his affidavit, Grillo produced the copy documents sent to him by Katsimadakos the previous October. They included a copy of the certificate of independent legal advice he was alleged to have signed. Grillo swore:
I confirm I never gave any legal advice to Vescovi about the Mortgage of Land, Letter of Offer and other associated documents referred to in the Certificate of Independent Legal Advice. I further say that I did not sign page 3 of the Certificate of Independent Legal Advice.
Events after the proceedings were issued
Southage did not withdraw its claim based on the mortgage at that point. Nor did it concede that the mortgage could not be registered. Nor did it contact Grillo to verify his evidence or discuss it. It did, however, consent to an interlocutory injunction being made preserving the position until trial, and to an order that its proceeding and Vescovi’s proceeding be heard together.
In November 2012, the parties attended mediation. Following the mediation, on 26 November 2012, Henderson sent Velos Lawyers a further Calderbank letter. It was very lengthy and detailed, running for 5½ closely typed pages. Henderson set out why Southage would not be able to prove the mortgage, referring to Grillo’s evidence and Kalivoda’s admission made to Katsimadakos. He dealt with the alternative unjust enrichment claim. He argued that Vescovi was herself innocent, had no knowledge that Southage had paid for the deposit or of the loan or mortgage, and had changed her position by the time she found out by having sold the home, receiving no proceeds or any other financial benefit from the sale.
Notwithstanding those matters, Vescovi offered to compromise her position by waiving her entitlement to costs, saying that she had by then incurred solicitor client costs in the vicinity of $50,000. She offered to pay Southage $10,000 ‘to end the matter and move on from the ordeal of litigation’.
Southage was able to answer promptly. The same day Velos Lawyers wrote saying, again, Vescovi’s suggestion that she was unaware of the mortgage or the source of funds to purchase the Kew property was ‘disingenuous’. They said Southage was entitled to have Vescovi’s defence tested in the witness box. Southage rejected her offer ‘outright and [as being] not worthy of consideration’.
Claim against Katsimadakos
In May 2012 Southage joined Katsimadakos as a party to its proceeding. In its claim against Katsimadakos, Southage pleaded that it had a registrable mortgage over the Williamstown property and that Katsimadakos negligently failed to register it before Vescovi obtained an injunction restraining its registration. Had the Williamstown mortgage been registered when it was first received – indeed any time before Vescovi discovered its existence and moved to restrain its registration – Southage would have had the benefit of an indefeasible security interest in the Williamstown land under the Transfer of Land Act and may well have recovered its loan depending on what other securities had priority over it. It claimed damages from Katsimadakos for loss of opportunity to obtain an indefeasible interest in the Williamstown land by way of mortgage security.
In his defence, Katsimadakos did not admit that Vescovi had signed the loan documents or had mortgaged the Williamstown land. Further, Katsimadakos referred to Vescovi’s defence, saying that if she proved what she there alleged, then it could be inferred that her husband had forged her signature to the loan documents and the mortgage. In addition, he pleaded that Kalivoda had confessed to him on 20 February 2012 to having done so. Katsimadakos pleaded these allegations to raise a defence under Part IVAA of the Wrongs Act 1958. That is, he pleaded that if he was liable for Southage’s loss, then his liability for damages was to be reduced to the extent that Kalivoda’s wrongdoing had caused the same loss.
On the morning of trial, before any opening of the proceedings, Southage and Katsimadakos announced they had settled their dispute and that confidential terms of settlement had been entered. A copy of the terms was provided to the court in case it became relevant to quantum in the continuing claim against Vescovi.
Southage concedes forgery at trial
Counsel for Southage then opened the case against Vescovi. It was opened primarily on the basis that Lisa Vescovi had given a valid mortgage and had entered the loan agreement under the terms of which Vescovi was liable to repay the loan money and interest. The claim on the basis of unjust enrichment was opened as an alternative claim should Southage fail on its primary claim in contract and on the mortgage security.
By agreement, Grillo was called as the first witness because of the centrality of his evidence to the issue of whether the Vescovi’s signature on the loan documentation and mortgage was forged. Presumably, the logic was that if Grillo’s signature on the solicitor’s certificate was established to be a forgery or a fabrication, then that would make it probable that Vescovi’s signatures were also forged as she had always contended.
Grillo gave evidence in chief led by Vescovi’s counsel. He said no more and no less than what he said in his affidavit sworn 3 March 2012. Counsel for Southage did not cross examine him on his evidence about not signing the certificate or not having given Vescovi any advice on the loan or mortgage. The only subject of cross examination was whether Grillo had discussed with Vescovi, as an aside, her feelings about the Kew home she was purchasing: an issue Southage later pressed in relation to the ‘benefit’ she received on the claim for restitution.[4]
[4]Reasons [92].
Immediately following Grillo’s evidence Southage conceded what Vescovi had been alleging from the outset: her signatures had been forged on the loan documents and mortgage. So, Southage conceded it could not prove the mortgages had been executed by her, it must fail on its contract claim and she must succeed on her proceeding entirely. She was never tested at all on her version of events. In fact, despite what Southage said it wanted to do when answering Vescovi’s Calderbank letter of 26 November 2012, it did not take any opportunity to ‘test’ Vescovi’s defence to the mortgage claim at all. Upon Grillo saying on oath in the witness box what he had said on oath nearly 18 months earlier in an affidavit, Southage comprehensively rolled over.
Indemnity costs principles:
The Court has a wide, unfettered discretion in respect of awarding costs: s 24 Supreme Court Act. But its power and discretion to order costs must be exercised subject to, and in accordance with, O 63 of the Rules (r 63.02). Costs which are to be taxed shall be taxed on a standard basis, an indemnity basis, or such other basis as the Court may direct (r 63.28). Costs allowed on a standard basis are those costs ‘reasonably incurred and of reasonable amount’ (r 63.30). Costs allowed on an indemnity basis are all costs except insofar as they are of an unreasonable amount or have been unreasonably incurred (r 63.30.1).
It is well settled[5] that a court ought not usually make a costs order on a basis other than a party and party basis (now, effectively, the ‘standard’ basis). There should be some special or unusual feature to warrant departing from ordinary practice. The categories of case justifying such departure are not closed: they are always in the court’s discretion. But the circumstances in which the exercise of that discretion have, in other cases, been thought to justify departing from the usual order include:
·some form of misconduct that causes loss of time to the court and other parties
·the making of an allegation which ought never have been made or the undue prolongation of a case by groundless contentions
·an imprudent refusal of an offer of compromise.
[5]Colgate Palmolive v Cussons (1993) 46 FCR 225, 233.
However, the question must always be: do the particular circumstances of the case warrant the making of an order for costs, other than on the standard basis?
Other than these general considerations, it is also well settled that the unreasonable refusal of a Calderbank offer may be regarded as a special circumstance that may warrant an award of indemnity costs. In Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority, [6] the Court of Appeal expressed the relevant test as follows:
The critical question is whether the rejection of the offer was unreasonable in the circumstances. We see no justification for a more stringent test such as ‘manifestly’ or ‘plainly’ unreasonable.[7]
[6]Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435.
[7]Ibid [23] (citations omitted).
In the same case, the Court of Appeal outlined a number of matters relevant to the question of whether refusal of an offer is reasonable. It said:
The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard to at least the following matters:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed;
(f)whether the offer foreshadowed an application for an indemnity costs (sic) in the event of the offeree’s rejecting it.[8]
[8]Ibid [25] (citations omitted).
Vescovi argued that there are a number of reasons why Southage should pay indemnity costs in the Vescovi proceeding: essentially because Southage knew or ought to have known that it had no proper basis to resist the claim because it could not establish that Vescovi signed the mortgage. Those reasons were, in substance:
·Southage recognised that the evidence of Grillo was critical to the question of whether or not the purported loan documents and mortgage were forgeries;
·Southage was advised by the letter from Henderson of 20 February 2012 not only that Vescovi had never requested any loan for Southage or signed any loan agreement or mortgage documents, but that Grillo had advised that at no time had he ever met with or given legal advice to Vescovi with respect to them;
·Southage was again advised of the same matters by letter on 27 February 2012, but also that Grillo had denied his signature was on the purported certificate of independent legal advice;
·Southage did not have, and never did have, originals of any of the disputed documents;
·Southage’s solicitor, Katsimadakos, did not have possession of the originals of the disputed documents (except a purported statutory declaration);
·following Grillo’s affidavit of 2 March 2012, Southage made no inquiries of Grillo at all prior to trial;
·at trial, upon Grillo giving oral evidence in the same terms as his evidence in his 2 March 2012 affidavit, Southage immediately abandoned its primary claim and conceded that Vescovi was entitled to judgment in her claim.
Vescovi then relied upon the same factors as the basis for an award of indemnity costs in the Southage proceeding in so far as the claim was based on the mortgage and loan agreement.
As for the costs of the restitution claim issue in the Southage proceeding, Vescovi relies upon her Calderbank letter of 26 November 2012 and Southage’s refusal of her offer as the basis for claiming indemnity costs from that date onwards.
Southage answered these arguments in the following way. First, in relation to the issues based upon proof of the mortgage – both in the Vescovi proceeding and the Southage proceeding – it asserted that it was unable to concede that the mortgage and loan documents were a forgery, vis-à-vis Vescovi, because to do so would jeopardise its claim against Katsimadakos. It said that the connection between its rights and liabilities vis-à-vis Vescovi, and its claim against Katsimadakos, is demonstrated by the fact that it conceded the forgery and the consequences that flowed therefrom, as soon as it settled its claim against Katsimadakos on 27 August 2013. Finally, in relation to the restitution claim, it argued that the Calderbank offer was not a genuine attempt to settle the restitution claim and, in any event, Vescovi did not succeed on all of her arguments raised in connection with that claim.
In my view, the reasons advanced by Vescovi, in combination, supply a powerful argument why my discretion should be exercised in her favour so as to require Southage to pay indemnity costs in respect of all issues other than the claim based in restitution. It is not necessary to squeeze the circumstances into one ‘category or another. But, there is a combination of relevant circumstances which lead to that conclusion:
·Southage’s reliance, both for its own case and for its defence of Vescovi’s proceeding, in being able to prove that Vescovi had signed the mortgage and loan agreement
·the consistent denials made by Vescovi, as first communicated by her to Katsimadakos, and later communicated by Henderson on her behalf to Velos Lawyers, that she had signed any of the documents
·Southage’s failure to pursue any inquiry with the one independent witness, Grillo
·the information possessed by Southage’s solicitor, Katsimadakos, that Vescovi’s husband had confessed to forging his wife’s signature
·Southage’s imprudent rejection of Vescovi’s offer made on 27 February 2012 by its solicitor’s letter of 28 February 2012
·the sworn evidence of Grillo on 2 March 2012 that he did not advise Vescovi about the mortgage or witness her signature to it which, as later appeared, Southage was entirely persuaded by
·Southage being informed on 2 March 2012, if it did not know beforehand, that Kalivoda had confessed to Katsimadakos that he forged Vescovi’s signature.
All of these facts make it sufficiently clear, in my view, that the continuance of the defence of Vescovi’s claim, and the prosecution of Southage’s claim based upon the mortgage, after Southage received the affidavits of Vescovi and Grillo sworn 2 March 2012, constituted sufficiently unusual and special circumstances to justify costs being awarded to Vescovi on an indemnity basis. Southage either knew that its prospect of proving the mortgage was hopeless, or it closed its eyes to a number of sources of evidence that Vescovi had drawn to its attention which, had it investigated them as it ought, would have demonstrated that its position was hopeless.
Southage’s position is not improved – and is perhaps worsened - by an analysis of the arguments it raised against the imposition of indemnity costs.
Its attempt to rely upon the proposition that it was justified in not conceding the forgery while the Katsimadakos claim was on foot should be rejected. First, it was not necessary for Southage to prove the validity of the mortgage against Katsimadakos in order to succeed in its claim against him. Indeed, in most respects, its position against Katsimadakos was better if the mortgage was a forgery.
That is to say, if the mortgage was validly executed by Vescovi, Southage would succeed in its claim against her and, upon proving the mortgage, would obtain a registered security interest in the Williamstown land. Southage would then not need to recover against Katsimadakos, except perhaps to the extent that any delay in registration might have reduced the value of the security because of an increase in indebtedness secured by a prior security over that time.
However, if, as was the case, the mortgage was a forgery and an injunction against registration was going to follow, then Katsimadakos’ negligent delay (if it was negligent) in lodging would have deprived Southage of the chance of obtaining an indefeasible security for the loan when, absent registration, Southage had no security at all. That is the very claim Southage made against Katsimadakos in its pleading.
So, the argument that Southage could not concede the forgery appears to be misplaced. More likely, it did not wish to concede forgery because doing so might enable Katsimadakos to argue for a reduction in his liability based on Kalivoda’s contributory fault. And, due to his bankruptcy, Southage would not be able to recover against Kalivoda. Therefore, Southage’s refusal to concede forgery was probably to further its negotiating position with Katsimadakos at the expense of forcing Vescovi to continue to defend its hopeless mortgage claim and to continue to prosecute her own claim which enjoyed almost certain prospects of success.
In any event, as the facts show, Southage did not make its concession in favour of Vescovi as soon as it settled with Katsimadakos, as it argued it did. In fact, it opened and persisted with its claim against Vescovi, even after it settled with Katsimadakos, and only conceded the forgery after Grillo gave his evidence.
Accordingly, I reject its arguments.
That leaves only the consideration of the costs of the claim for restitution. I accept that Vescovi made an offer to compromise the proceeding in accordance with Calderbank principles by her solicitor’s letter dated 26 November 2012. Very clear reasons were given why her claim was likely to succeed, including, in substance, the reasons why ultimately I did reject the restitution claim. It was made at a time when the parties were fully appraised of relevant documents. Time was allowed for Southage to consider the offer. The terms of the offer were clearly expressed. It foreshadowed an application for indemnity costs in the event that Southage rejected it.
The only question in my mind is whether Southage’s prospects of success, assessed as at the date of the offer, were such that an offer of $10,000 with a waiver of costs was one which was unreasonable for it to refuse. Its claim at that stage was, presumably, for $219,500 with interest and costs in its favour.
In hindsight, it can be seen, of course, that Southage lost. But, as the Reasons disclose, that outcome was by no means assured. I am tempted to say that, had Southage properly analysed the law, especially regarding the significance of Vescovi not having retained any benefit from the sale of the Kew property, it perhaps ought reasonably to have accepted the offer. But, in the final analysis, I think that would be pushing the boundaries of unreasonableness too far. The law in this area is not straightforward and I do not think that the mere fact that Vescovi ultimately succeeded of itself demonstrates that Southage’s rejection of her offer at that stage was unreasonable.
Accordingly, I decline to order that Vescovi recover her costs on the restitution issue, other than on a standard basis. I am not, however, the least bit persuaded that she should recover anything less than 100 per cent of her costs on that issue. Just as the complexity of the issue favoured Southage in respect of a possible award of indemnity costs, the same consideration leads me to conclude that Vescovi should not be deprived of the whole of her costs simply because she advanced a range of arguments, some of which were accepted and some of which were not, in defence of the restitution claim.
Vescovi sought her costs to be taxed on an issues basis. Although I have analysed the costs questions by reference to issues, I think that a taxation of this case on an ‘issues’ basis could be a recipe for disaster. It is likely only to promote and protract further dispute.
In the end, I think I it is more appropriate that I fix a percentage of the costs to be awarded in the Southage proceeding on a standard basis and the percentage to be awarded on an indemnity basis. Although the decision is almost entirely devoted to the restitution issue, that is only because the other issues fell away on the first day of trial. Up until then, all issues were alive. The first half of the first day was given to resolving the mortgage claim; the second half of that day and the second day of trial were given to the restitution issue. Southage’s amended statement of claim contained 44 paragraphs against Vescovi: only 3 related to the restitution claim.
In my view an appropriate allocation of the costs devoted to the mortgage issue is 80 per cent, with 20 per cent devoted to the restitution issue. I have factored in a period of 14 days after 2 March 2012 – the date of the Grillo and Vescovi affidavits in the Vescovi proceeding – as a reasonable period in which Southage ought to have reconsidered the continuance of its defence to the Vescovi proceeding and the prosecution of the Southage proceeding insofar as it pressed a claim based upon there being an enforceable mortgage and loan agreement.
Orders
I therefore order as follows:
·Southage proceeding: Southage pay Vescovi’s costs of the proceeding, including reserved costs, to be taxed in default of agreement -
ountil 16 March 2012 (including that day), on a standard basis,
oafter 16 March 2012, the addition of 80 percent of an indemnity basis assessment of all such costs and 20 percent of a standard basis assessment of all such costs.
·Vescovi proceeding: that Southage pay Vescovi’s costs of the proceeding, including reserved costs, to be taxed in default of agreement, until 16 March (including that day) on a standard basis and thereafter on an indemnity basis.
1