Woo v Metis Law Pty Ltd

[2021] NSWSC 1328

Supreme Court

New South Wales

Medium Neutral Citation:

Woo v Metis Law Pty Ltd [2021] NSWSC 1328

Hearing dates:

On the papers

Date of orders:

18 October 2021

Decision date:

18 October 2021

Jurisdiction:

Equity

Before:

Darke J

Decision:

Defendant ordered to pay plaintiff’s costs of proceedings.

Catchwords:

COSTS – plaintiff sought removal of defendant’s caveats recorded against property of which the plaintiff was registered proprietor of a 1/100 share – property was the subject of a contract for sale to third parties – defendant rejected plaintiff’s offer to place 1% of net sale proceeds in trust account pending agreement or Court order – defendant maintained that the plaintiff had a beneficial interest greater than the 1/100 share recorded in the register – defendant ultimately failed to press this point and parties settled proceedings without a determination on the merits – consent orders provided for plaintiff to pay defendant 1% of the net proceeds of sale – held it was almost inevitable that the caveats would be ordered to be removed to allow sale of property to complete – held that the settlement agreed to by the defendant can be regarded as a capitulation on its part – order that the defendant pay the plaintiff’s costs of the proceedings.

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98

Real Property Act 1900 (NSW), s 74MA

Cases Cited:

Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84

Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622

Category:

Costs

Parties:

Eric Woo (Plaintiff)
Metis Law Pty Ltd (Defendant)

Representation:

Counsel:
J T Johnson (Plaintiff)
I King (Defendant)

Solicitors:
JB Solicitors (Plaintiff)
Metis Law Pty Ltd (Defendant)

File Number(s):

2021/251004

Publication restriction:

None

Judgment

1. This judgment is concerned with the costs of these proceedings which were commenced by Summons filed on 2 September 2021.

2. By his Summons, the plaintiff, Eric Woo, sought orders for the removal of three caveats that had been lodged by the defendant against the title to a property in Newman Street, Mortdale (Lot 10 in Strata Plan 65483). The plaintiff is the registered proprietor of a 1/100 share in the property. Hong Woo is the registered proprietor of a 99/100 share in the property.

3. The three caveats (AR322640, AR376996 and AR376997) were lodged by the defendant in August 2021. Each of the caveats claims an interest in the nature of a charge by virtue of an agreement. Each caveat is based upon a separate agreement (dated 3 June 2019, 14 August 2019 and 9 September 2018 respectively) in the nature of terms of engagement of the defendant as the provider of legal services. Each caveat specifies that the registered proprietor affected by the caveat is the plaintiff. The defendant claims that the plaintiff is liable to it for a sum of about $700,000. That is disputed by the plaintiff.

4. By the time the caveats had been lodged, the plaintiff and Hong Woo had entered into a contract to sell the property for a price of $1,070,000. The contract was due to be completed by 31 August 2021.

5. On 30 August 2021, in the course of correspondence between the parties about the caveats prior to the commencement of the proceedings, solicitors acting for the plaintiff sent a letter to the defendant that included the following:

It is apparent that the parties remain in significant dispute as to your claimed caveatable interest in this property.

With the scheduled settlement of this property of 31 August 2021 looming, we seek to ensure that the purchasers of this property are not prejudiced. Therefore, in the spirit of mitigating loss, we propose that:

That you withdraw the caveat over the property; and

1% of the net proceeds of sale be held in our trust account pending agreement between the parties or Court Order.

The sale price of the property was $1,070,000. The indicative mortgage payout figure is $697,682.92 plus a discharge fee of $320. The estimated net proceeds of sale are therefore $371,997.08. 1% of the proceeds is therefore $3,719.97.

Upon finalisation of the settlement adjustments the exact amount will be confirmed and if you are agreeable to this course, we will provide you with the exact settlement figures prior to signing off on settlement.

This offer is made without any admissions that your client has any entitlement to the net proceeds of sale being withheld.

We suggest that this course sufficiently protects your claim against the property and that it would be unreasonable for you to not permit the sale to proceed in accordance with the contract of sale entered into with a bona fide purchaser.

We request your response to this correspondence by 5:00pm today, 30 August 2021, failing which we may be instructed to commence urgent proceedings in the Supreme Court of New South Wales.

The plaintiff’s solicitors later confirmed that the above offer was an open offer.

6. On 31 August 2021 the defendant sent a letter in response that included the following:

In your letter of 30 August, you have made an offer that sees our secured interest replaced with an unsecured interest. Furthermore, the quantum of that interest is far less than the value secured by the caveat. We consider that the offer is not a fair or genuine offer. In the circumstances, the offer is not accepted.

7. The Summons was listed for directions on 13 September 2021. On that day the defendant was directed to file and serve any affidavits by 16 September 2021, and the matter was adjourned to 20 September 2021. The defendant had served a Notice to Produce upon the plaintiff, and later a subpoena was served upon Australia and New Zealand Banking Group Limited. It is evident, including from the affidavit of My-Linh Dang of 17 September 2021, that the defendant maintained that the plaintiff may have a beneficial interest in the Mortdale property greater than the 1/100 share recorded in the register. On 20 September 2021 the defendant foreshadowed bringing a Cross-Summons, which would include Hong Woo as a party. Presumably it was envisaged that a claim would be made that his interest in the property was to some extent held on trust for the plaintiff.

8. However, prior to the next listing on 24 September 2021, the Court was informed that the matter had settled save as to costs. Orders were made by consent on 29 September 2021. The orders provided for the defendant to remove the caveats and for the plaintiff to pay the defendant 1% of the net proceeds of the sale of the property upon settlement. The agreement to make the payment was noted to be on a without admissions basis.

9. The plaintiff seeks costs of the proceedings on the ordinary basis. The plaintiff submitted that the ultimate resolution of the proceedings constituted a capitulation on the part of the defendant which ought to have occurred prior to or quickly following the commencement of the proceedings. It was pointed out that prior to commencement the plaintiff had offered to have 1% of the net proceeds of sale set aside pending resolution of the dispute, but this was not accepted by the defendant which continued to assert that the plaintiff had a greater interest in the property.

10. The defendant submitted that there should be no order as to costs in circumstances where consent orders were made without a determination on the merits (see Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 at 624-5; Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [2] and [30]). It was submitted that the consent orders represented a substantial compromise from the plaintiff’s position before the proceedings commenced.

11. The issue raised by the proceedings was whether orders should be made (under s 74MA of the Real Property Act 1900 (NSW)) requiring the defendant to withdraw the three caveats. It is true that there was no determination of that issue on the merits. However, in circumstances where the caveats were expressed to affect only the plaintiff’s interest in the property and the plaintiff said he was willing to have 1% of the net proceeds of sale held in an account pending agreement or Court order, unless it could be shown that the plaintiff’s interest may be greater than the 1/100 interest recorded on the register it was almost inevitable that the caveats would be ordered to be removed so as to allow the sale of the property to complete (see Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (supra) at 625).

12. Moreover, although the defendant maintained for a while that the plaintiff’s interest was indeed greater than that recorded on the register, the defendant ultimately failed to press the point and instead agreed to a settlement that involved it receiving (on a without admissions basis) a sum equivalent to 1% of the net proceeds of sale. Whilst that settlement is somewhat better from the defendant’s point of view than the offer made by the plaintiff prior to the commencement of the proceedings, it falls well short of a settlement that would reflect the defendant’s stated position that 1% of the net proceeds was “far less than the value secured by the caveat”. It should also be noted that the defendant claimed that the plaintiff was liable to it for a sum in excess of $700,000. In these circumstances the settlement agreed to by the defendant can properly be regarded as a capitulation on its part.

13. Finally, it is my view that the costs of the proceedings would likely have been avoided, in whole or in at least large part, had the defendant not maintained that the plaintiff held an interest greater than that recorded on the register. It is likely that an agreement would have been reached along the lines of that which ultimately emerged.

14. In my opinion, taking into account all of the circumstances and in particular the matters referred to above, the appropriate exercise of the Court’s discretion as to costs under s 98 of the Civil Procedure Act 2005 (NSW) is to order that the defendant pay the plaintiff’s costs of the proceedings.

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Decision last updated: 18 October 2021