Stone Living Pty Ltd v 3 Property Group 9 Pty Ltd (No 2)
[2020] ACTSC 357
•18 December 2020
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Stone Living Pty Ltd v 3 Property Group 9 Pty Ltd (No 2) |
Citation: | [2020] ACTSC 357 |
Hearing Date: | 18 December 2020 |
DecisionDate: | 18 December 2020 |
Before: | McWilliam AsJ |
Decision: | See [26] |
Catchwords: | COSTS – Where parties engaged in building dispute and caveats had been lodged over land owned by the defendants – whether issuing lapsing notices in respect of caveats prior to litigation was unreasonable conduct – whether costs ought follow the event in circumstances where the substantive issue is yet to be resolved between the parties – where parties resolved the interlocutory issue following judgment – whether each party should pay their own costs |
Legislation Cited: | Land Titles Act 1925 (ACT) ss 105, 107 |
Cases Cited: | International Computer Network Pty Ltd v Lumos International Pty Ltd [2018] NSWSC 1793 |
Parties: | Stone Living Pty Ltd (Plaintiff) 3 Property Group 9 Pty Ltd (ACN 618 155 409) (First Defendant) 3 Property Group 10 Pty Ltd (ACN 618 426 190) (Second Defendant) 3 Property Group 11 Pty Ltd (ACN 618 671 560) (Third Defendant) |
Representation: | Counsel Dr A Greinke (Plaintiff) Mr D Robens (Defendants) |
| Solicitors Mills Oakley (Plaintiff) Harrington Hall (Defendants) | |
File Number: | SC 143 of 2020 |
McWilliam AsJ:
On 10 June 2020, judgment was delivered in proceedings SC 143 of 2020 which are now the subject of an application for costs made by the plaintiff: see [2020] ACTSC 149 (the primary judgment).
The judgment resolved a controversy between the parties as to whether the Court should extend three caveats that were lodged over three parcels of land owned by the defendants which were identified in the primary judgment at [2] (the Land).
It is sufficient for the purposes of the costs application to say that the plaintiff and the defendants have been engaged in a lengthy building dispute whereby the plaintiff says each of the defendants owes it money, either for work it has undertaken or in interest arising from delays in payment. The defendants issued lapsing notices in respect of the caveats in or around April 2020. They did so pursuant to s 107 of the Land Titles Act 1925 (ACT) (the Act).
This brought the parties to court on an urgent basis and following the grant of urgent interlocutory relief, I extended the operation of the caveats for a period of three months or until 10 September 2020 to give the plaintiff sufficient time to take appropriate action to commence substantive litigation in which to resolve the dispute about whether the plaintiff has any legal or equitable interest in the land.
The issue
As part of the reasons for judgment, I indicated at [50] that I would hear the parties further as to the question of costs. Separate proceedings involving the same parties have now been commenced, namely proceedings SC 268 of 2020. The issue concerning the caveats has also been resolved between the parties without the need for any further hearing. Accordingly, the only outstanding issue is the costs of the proceedings.
Submissions of the parties
The plaintiff seeks a variety of costs orders dividing the proceedings into three phases. The first phase concerns the conduct leading up to the litigation with the service of three lapsing notices. The plaintiff argues that it should receive its costs on an indemnity basis in respect of the first phase. Such an order is said to be warranted because of a lack of notice that the defendants were about to take that course, which the plaintiff says was unreasonable. The plaintiff argues that taking such action deprived the parties of attempting to negotiate an outcome, as they ultimately did, albeit after judgment had been delivered.
The plaintiff further submitted that the Act also provides for an alternative means of removing a caveat in the form of s 105 of the Act which permits a party to approach the Supreme Court directly without issuing a lapsing notice. The plaintiff says this would have enabled the parties to negotiate and prepare the matter for court in a timely manner rather than seeking urgent relief.
The second phase, as described by the plaintiff, concerns the period from the commencement of this litigation – and by this litigation, I mean the present proceedings – to the delivery of judgment on 10 June 2020. In that regard, the plaintiff seeks its costs on a party-party basis, arguing that as it was successful in having the caveats extended, costs ought to follow the event.
Thereafter the plaintiff submits that there is a third phase in respect of which there should be no order as to costs as the parties have resolved their differences by consent.
The defendants seek that the costs of the proceedings are to form part of the costs in the cause of proceedings SC 268 of 2020. In respect of the first phrase, the defendants argue that they sent numerous correspondence to the plaintiff in the months before the lapsing notices were issued. They received no response and, accordingly, there was no unreasonable conduct in pursuing a course expressly provided for by the legislation.
Mr Robens, who appeared for the defendants, drew the Court's attention to the affidavit of Jaime Charles Farrelly, sworn 8 May 2020, where Mr Farrelly deposes to sending a number of emails to the directors for the plaintiff. Those emails were sent during the period of February, March and April in 2020. In one of the emails dated 13 March 2020, Mr Farrelly wrote (at [59]):
A reasonable request to sign a builder's site deed as required by the financier which is a common thing required on sites such as this. Stone has not cooperated in returning that signed. You have written on 12 March noting that the caveat on site will not be removed without an agreement on the contract price and payments to Stone.
In the following paragraph, Mr Farrelly sets out his permission and concludes the paragraph by saying:
Your prompt response will be appreciated in the circumstances.
There was no prompt response to that correspondence. There was no response at all. Mr Farrelly followed up that correspondence in a further email dated 8 April 2020. Among the very detailed email, Mr Farrelly included the following (at [16]-[19]):
Stone has not shown a willingness to reasonably negotiate the terms of a new contract.
In my email dated 13 February 2020, I requested Stone's response and opinion of what the contract price was between the parties. We have also sought to clarify the design and plans to be applied to a new contract.
A substantive response was not received to my email dated 13 February 2020.
I sent a further email dated 27 March 2020, again asking for details of what might be the contract price and the plans to be built.
The letter continues and then concludes (at [25]):
Please make contact with our office ...
Again, there was no response to that correspondence. It was in those circumstances that on 17 April, the first of the lapsing notices was issued.
In support of the submission that costs should be costs in the cause of the separate proceedings, Mr Robens relied upon the judgment of International Computer Network Pty Ltd v Lumos International Pty Ltd [2018] NSWSC 1793 (ICN v Lumos), a decision by Ward CJ in Eq, where her Honour says at [94]-[95]:
…Counsel for ICN has drawn my attention to two decisions; a decision of mine in State of New South Wales v Gevaux [2011] NSWSC 758 and the decision of the Court of Appeal in His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand v The Macedonian Orthodox Community Church St Petka Incorporated (No 2) [2007] NSWCA 142. In the Court of Appeal case, reference was made to the manner in which Young J, as his Honour then was, had dealt with costs in relation to an application for an interlocutory application in Boscolo v TCN Channel Nine Pty Ltd (No 2) (New South Wales Supreme Court, Eq Div, 28 April 1994, unreported). There, his Honour had said (at [110]):
Although costs are always in the discretion of the Court, the usual rule that is applied in the exercise of the Court’s discretion is that if a person succeeds in getting an interlocutory injunction, costs should be costs in the cause.
The Court of Appeal noted at [21] that his Honour had not there explained the basis of the rule but went on to say that the rationale for making an order that costs be costs in the cause is that at the time of granting an interlocutory injunction the Court is not in a position to adjudicate on the ultimate outcome of the proceedings, but went on to explain that each case must depend upon its own facts. In Gevaux (at [12]) I had noted that in relation to the costs of interlocutory applications, it was commonplace for costs to be ordered to be costs in the cause, referring there to the decision of Hamilton J in Coscom Pty Ltd v Standing Enterprises Pty Ltd [2006] NSWSC 114.
Critically for the resolution of the application before me, Ward CJ in Eq at [96] said as follows:
In the present case, the matter might be tested in this way. If at the end of the day ICN is successful in obtaining a judgment to the effect that the Heads of Agreement are binding and enforceable (such that in hindsight it could be said that the caveat should not have been removed) should it therefore be in a position where it is unable to recover the costs of this present interlocutory application? When considered in that fashion, I think it is appropriate that the order to be made today is that costs be costs in the cause (not that they be the second defendant’s costs in the cause) and I will so order.
The first phase
Dealing with the first phase, there are a number of reasons why the submissions made by Dr Greinke for the plaintiff should not be accepted. First, there is nothing in the Act which provides that a person who intends to cause a lapsing notice to be issued over land that they own needs to first give notice to the person who has lodged the caveat.
Second, it is difficult to see how a party who refuses to engage on questions about the underlying dispute which is said to prevent the caveat from being removed has any basis to then argue that the owner of the land was acting unreasonably in seeking to clear the path for a refinancing to take place in respect of the Land in question, as discussed briefly in the primary judgment at [34].
The submission made by Dr Greinke in reply was that because of the history of dispute between the parties, the defendants should have known that the plaintiff was never going to simply allow the caveat to lapse so that the proper and orderly course was for the defendants to apply to the Supreme Court under s 105 of the Act. That submission misunderstands that it is for the party who seeks to maintain an interest in someone else's land to prove it. Further, as was made clear in the primary judgment (at [13]), the proceedings were treated like an application for removal of a caveat in any event.
What has occurred is essentially an interlocutory decision. It really should have formed part of the substantive proceedings which are those now brought in proceedings SC 268 of 2020. In circumstances where the plaintiff simply did not engage with the defendants on the issue before the lapsing notices issued, the documentary evidence makes it quite clear that this was not a case where a dispute about whether the caveats ought to remain was likely to be resolved in a timely manner without recourse to litigation.
I am not satisfied that the defendants acted in an unreasonable manner in respect of the first phase, but even if I were wrong about that conclusion, the reasoning that follows in respect of the second and third phases applies equally to the first phase.
The second and third phases
With regard to the remainder of the costs in the proceedings, the appropriate course is to simply adopt what was said in ICN v Lumos, as set out above at [17] of these reasons.
Dr Greinke sought to distinguish ICN v Lumos on its facts, arguing that the present proceedings were not simply an outcome based on discretionary reasoning. There was a separate argument about whether there was a serious question to be tried which the parties devoted significant resources to arguing, and which the plaintiff won.
That argument misunderstands entirely the point made very clearly by Ward CJ in Eq at [96]. If it turns out in proceedings SC 268 of 2020 that the plaintiff has no interest in the Land, then there is no foundation for the caveat. In those circumstances, the plaintiff will have maintained over the Land a caveat without proper entitlement to do so. The defendants should not have to pay the costs of the plaintiff proving that it had an arguable case, which is all that the question about whether there was a serious issue to be tried concerns.
I am satisfied that this case is on all fours with ICN v Lumos and although it is not a decision of this court, the cogent reasoning of the Chief Judge in Equity in the Supreme Court of New South Wales was in the context of very similar factual circumstances, and her Honour followed established authority, which was then approved of by the Court of Appeal. Accordingly, I consider that the same principle ought to apply to the facts of this case It follows that the order of the Court will be:
(1) The costs of the proceedings are to form part of the costs in the cause in proceedings SC 268 of 2020.
| I certify that the preceding twenty-six [26] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam. Associate: Date: |
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