David GILBEY & Anor v Lakeline Properties (NSW) Pty Ltd & Anor [2002] NSWSC 1167

New South Wales Supreme Court

CITATION : David GILBEY & Anor v Lakeline Properties (NSW) Pty Ltd & Anor [2002] NSWSC 1167 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 4201/2000 HEARING DATE(S) : 02/12/2002 JUDGMENT DATE : 9 December 2002

David Gilbey - First Plaintiff PARTIES : Roswitha Gilbey - Second Plaintiff Lakeline Properties (NSW) Pty Ltd - First Defendant Permanent Trustee Australia Limited - Second Defendant JUDGMENT OF : Acting Master Berecry at 1

COUNSEL : Mr D. Murr, SC /M. Fraser - Plaintiffs Mr D. R. Pritchard - First Defendant SOLICITORS : Douglas Humphreys - Plaintiffs Henry Davis York - First Defendant CATCHWORDS : COSTS - settlement - costs dispute - caveatable interest - reasonableness of parties actions - settlement negotiations - costs in relation to amendment. LEGISLATION CITED : s 14 of Residential Parks Act 1988 Australian Securities Commission v Aust-Home Investments Limited (1993) 44 FCR 194 CASES CITED : Minister for Immigration & Ethnic Affairs; ex parte Qin 71 ALJR 533 Hill v Copeland (1999) NSWSC 632, unreported BC9903587 DECISION : 1. The proceedings be dismissed; 2. The first defendant pay the plaintiffs' one-quarter of the plaintiffs' costs of the proceedings including reserved costs but excluding any other existing order as to costs.

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

ACTING MASTER BERECRY

MONDAY, 9 DECEMBER, 2002

4201/00 DAVID GILBEY & ANOR v LAKELINE PROPERTIES (NSW) PTY LIMITED (Receiver & Manager appointed) JUDGMENT 1 MASTER: On 12 October 2000 the plaintiffs commenced proceedings by summons seeking an extension of a caveat they had lodged in respect of land of which the first defendant was the registered proprietor. The caveat described the nature and interests in the land as "Equitable interests in the improvements on the land (being moveable dwelling)." The nature of the instrument was a Residential Tenancy Agreement dated 30 October 1992 between the plaintiffs and the first defendant. The land in question is described in Folio Identifier 80/285386 and is known as Lot 80 Lakeline Drive, Lakeline Village Estate, Kanahooka. On 21 September 2000 the plaintiffs received a lapsing notice issued on behalf of the first defendant. The proceedings were returnable before Justice Hamilton who extended the caveat. 2 The defendant's then solicitor wrote to the plaintiffs' solicitor suggesting that the caveat be withdrawn and a fresh caveat be substituted. The interest or estate claimed in the proposed form of caveat by the first defendant varied to the interest or estate described in the plaintiffs' caveat. It has become an issue as to whether or not the interest asserted in the plaintiffs' caveat is in fact a caveatable interest. It has been submitted on behalf of the plaintiffs that one matter to be determined had the matter proceeded to a hearing was whether or not the relocatable home ("the home") was a fixture or a chattel. It would appear in relation to that matter that there was at least an arguable case that the plaintiff did have a caveatable interest. Attempts were made to settle the proceedings over the next three to four months; during that period of time orders were made by consent, extending the caveat. 3 On 12 February 2002 Steven Parbery and Maxwell Prentice were appointed by the St. George Bank as receivers and managers of the first defendant. From the outset of Mr Parbery's involvement in these proceedings he made concerted efforts to settle. 4 The plaintiff and his wife purchased the home on Lot 80 for $49,000.00 in March, 1992. The plaintiffs moved into the home approximately one month later. On 30 October 1992 the Gilbeys entered into a Tenancy Agreement with Lakeline Caravan Park for a period of two years, thereafter on a week to week tenancy. The heading to clause 11 states "moveable dwelling not owned by the landlord." However, the clause itself is silent on ownership of any moveable dwelling located on a particular site. The home was located at the park and there were approximately thirty-three mobile homes at the park. In 1996 the first defendant purchased the Caravan Park. On 13 July 1998 the first defendant entered into a mortgage with the second defendant. The first defendant included as security in the mortgage the plaintiffs' the home. 5 The ownership of the home became an issue between the parties as a result of a meeting in 1998 between one of the directors of the company and the occupiers of the caravan site. Certain comments were made by the director. Subsequently, proceedings were commenced by the company to evict the plaintiffs from the site. This resulted in the plaintiffs successfully defending those proceedings. Subsequently, the plaintiffs sought legal advice and as a result of that advice the caveat was lodged on the title. 6 After the appointment of the receiver efforts were made by the receiver to sort out the problems that had arisen between the mortgagee, the occupiers and the company. It is clear from the material filed in these proceedings that at all times the receiver acted reasonably in an attempt to resolve the differences between the various parties. 7 The proceedings were specially fixed before Master Macready on 19 April 2001. However, the matter did not proceed before the Master on that occasion. It would appear that the Master was persuaded by the first defendant that the relief sought by the plaintiffs was merely interlocutory and that the proceedings were therefore incomplete. Leave was granted to amend the summons and on 4 May 2001 an amended summons was filed seeking declaratory relief in relation to the 1992 Tenancy Agreement, ownership of the mobile home as well as the initial relief in respect to the caveat. Negotiations continued between the parties with the mortgagee requesting documentary evidence of ownership of the mobile home. The receiver was also working towards having new leases prepared for the occupants of the site. It would appear at this stage that matters were progressing satisfactorily towards a settlement. It was suggested by the first defendant, however, that the mortgagee should be joined as a party to these proceedings. This request appears to have been ignored by the plaintiffs. Therefore, the first defendant took steps to join the Permanent Trustee Australia Limited as the second defendant. That company consented to being joined as a party and on 13 February 2002 a further amended summons was filed naming Permanent Trustee Australia Limited as the second defendant. The prayers for relief were identical to those sought in the original amended summons. Throughout 2001 the plaintiffs were kept informed of matters involving the receiver and the mortgagee. 8 On 15 January 2002 the plaintiffs provided evidence to the receivers of their ownership of the home. Once the receiver had this information he was then able to relay that to the mortgagee who had previously indicated that on evidence of ownership it would not impede any settlement between the plaintiffs and the first defendant. However, on 18 January 2002 the plaintiffs instructed their solicitors to set the matter down for hearing. Having regard to the complexity involved and to the fact that the plaintiffs' interests were protected by a Court order, there does not seem to be any justification for setting the matter down for hearing whilst negotiations were continuing. Settlement negotiations continued between the parties. In late April 2002 the plaintiffs filed further affidavits. Subsequently, agreement was reached between the parties. The plaintiffs entered into a new lease for a term of five years and all matters were resolved save as to the question of costs. 9 In Australian Securities Commission v Aust-Home Investments Limited (1993) 44 FCR 194 Hill J summarised the cases dealing with discontinuance and withdrawal in the following way:- "1. Where neither party desires to proceed with litigation the court should be ready to facilitate the conclusion of the proceedings by making an order for costs. 2. It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a court determining how the costs of the proceedings should be borne to endeavour to determine for itself a case on the merits or, as it might be put, to determine the outcome of a hypothetical trial: this will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue. 3. In determining the question of costs it would be appropriate, however, for the court to determine whether the applicant acted reasonably in commencing proceedings and whether the respondent acted reasonably in defending them. 4. In a particular case it might be appropriate for the court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated a litigation: cf Sunday Times Newspaper Co Limited v McIntosh (1933) 33 SR (NSW) 371. 5. Where the proceedings terminate after interlocutory relief has been granted, the court may take into account the fact that interlocutory relief has been granted: cf Asiatic Electric Co Pty Limited (1973) 1 NSWLR 603 at 606, a case which, however, depended upon the specific working of the statute of consideration." 10 In Re: Minister for Immigration & Ethnic Affairs; ex parte Qin 71 ALJR 533 McHugh J made the following comments:- "In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action…… …..in some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain costs of the action….. Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried….." 11 In Hill v Copeland (1999) NSWSC 632, unreported BC9903587, Master Macready reviewed a number of cases and made the following comment:- "….it is inappropriate for the court to determine a case on the merits or to determine the outcome of a hypothetical trial. However, the court can take the preliminary step of determining whether the plaintiff acted reasonably in commencing the proceedings." 12 The starting point therefore, is the conduct of the plaintiffs prior to the commencement of the proceedings. The plaintiffs' evidence is that a director of the former owner, Mr Maples had informed the residents at a meeting in the community hall held in 1998 that he owned everything that they could see. Subsequently, the plaintiffs conducted searches at the Land Titles Office and discovered the mortgage over the caravan site. As a result of further investigations and inspection of the Memorandum of Mortgage, the plaintiffs discovered that the mortgaged property was defined as "all improvements and fixtures erected or placed on the land at any time." This caused some concern to the plaintiffs as they had purchased the on-site home. Further conflict arose between the plaintiffs and the first defendant and in August 1999 the first defendant commenced proceedings to eject the plaintiffs from the Caravan Park. These proceedings were successfully defended by the plaintiffs. This took place in 1999. In August 2000 the plaintiffs instructed their solicitors to lodge a caveat. Although this step took place some twelve months after proceedings were commenced by the first defendant to eject the plaintiffs from the property, it seems to me that having regard to the background it was not unreasonable for the plaintiffs to lodge the caveat. There would have been some degree of apprehension and uncertainty in their minds about the intention of the first defendant and there was a real issue concerning the right of the first defendant to include as security the improvements and fixtures on the land. 13 On 20 September 2000 the first defendant's then solicitors served a lapsing notice on the plaintiffs. As a result of that action the plaintiffs commenced proceedings on 12 October 2000. It would appear that the first defendant, at all times, recognised that the plaintiffs had a caveatable interest. However, the first defendant's solicitor took the view that the caveat was defective in that it was seeking to lodge a caveat on the title but only claimed an interest in the moveable dwelling. In my view, on an application for costs it is not appropriate to consider the merits of the arguments of the parties as to whether or there had been a proper expression of a caveatable interest. On the one hand it could be argued that the home was not affixed to the land and was therefore not a fixture but merely a chattel which the plaintiffs, subject to any damages, would be able to remove from the property at any time. The other view would be is that the mobile home was a fixture to the land and therefore became part and parcel of the land and thus the way in which the caveatable interest was expressed was in fact valid. In my view the plaintiffs had an arguable case that the caveat was valid. Therefore, the plaintiffs acted reasonably in commencing proceedings. 14 However, the matter is complicated by a number of factors. Firstly, a receiver/manager was appointed to the company on 12 February 2001. At all times thereafter the receiver/manager attempted to negotiate, not only with the plaintiffs in these proceedings but with the other occupiers of the Caravan Park in respect of creating new leases and of determining precisely what was the nature of the interest of each of the occupiers. 15 Notwithstanding the negotiations the plaintiffs proceeded with the application. The Court on a number of occasions has granted a limited extension of the caveat. The matter came on for hearing before Master Macready on 19 April 2001. The Master heard a preliminary argument and adjourned the proceedings giving the plaintiffs leave to amend the summons. I am informed, although there is no record on the Court file that the Master took the view that the caveat could not be extended until further order of the Court because the only relief sought in the summons was or an interlocutory nature. Leave therefore was given to the plaintiffs to file an amended summons seeking final relief. 16 It would appear that it was not until the argument before the Master that the plaintiffs turned their minds to the substantive relief that it sought, namely whether or not they had a lease, whether or not they possessed ownership of the home, whether they had the right to enter the land and remove the home at the termination of the agreement and whether or not they had a caveatable interest in the land pursuant to the Residential Site Agreement. 17 The first defendant took the view that because the mortgagees were involved and because of the wording of the Deed of Mortgage that the mortgagee should be joined as a party. The plaintiffs resisted joining the mortgagee as a party to the proceedings. Ultimately that step was taken by the first defendant. On 13 February 2002 a further amended summons was filed joining the second defendant as a defendant in the proceedings. Shortly thereafter the proceedings settled. During the previous twelve months much of the activity between the parties concerned an attempt to resolve ownership of the mobile home and the preparation and terms of a new lease for the occupants of the Caravan Park. 18 There does not appear to ever have been any serious dispute so far as the first defendant was concerned concerning the ownership of the mobile home. However, the receiver was not prepared to move unless the mortgagee was joined as a party to the proceedings. Once that took place and once a receipt was produced showing that the plaintiffs had purchased the home the consent of the mortgagee was forthcoming. Shortly thereafter the final work on the lease was completed and these proceedings were terminated. 19 Not long after the proceedings were commenced the then solicitors for the first defendant offered to settle the proceedings with the plaintiffs. However, the plaintiffs declined the offer. It would appear that the stumbling block was the plaintiffs' costs. There has never been, since that time a serious issue between the parties. It was always apparent that the receiver wished to settle the proceedings without proceeding to a trial. The amendments to the summons were brought about, not by the plaintiffs but by advice given by the first defendant to the plaintiffs. The usual provision is that where the Court allows an amendment that is an indulgence given to the party seeking the amendment and generally that party is not entitled to those costs. The final form of relief sought by the plaintiffs is very different from that sought in the summons of 12 October 2000. Although costs orders have been made throughout the course of these proceedings the question of costs generally still needs to be determined. 20 In my view, the plaintiffs did not act unreasonably in commencing these proceedings. However, did the first defendant act unreasonably? It is clear that initially the company, the first defendant and subsequently the receiver/manager of the first defendant at all times sought to negotiate a settlement in these proceedings. Secondly, the plaintiffs were required to make two substantial amendments to their claim causing unnecessary costs to be incurred as a result of those amendments and lastly, there seems to be a substratum to these proceedings concerning negotiations between other occupiers of the caravan site owned by the first defendant and the receiver/manager. 21 In my view the receiver/manager has at all times acted reasonably. Having regard to those matters it seems to me that it would be inappropriate to make an order for costs for the whole of the proceedings in favour of the plaintiffs. In my view, however, the plaintiffs are entitled to a proportion of the costs incurred. It is arguable that the interest expressed in the caveat may have been determined as a valid caveatable interest. The receiver/manager was placed in an awkward position in that he was unaware of what the true nature of the ownership of the mobile home was and he had to commence separate proceedings to get the books and records of the company from the directors. Up until when it became apparent to the receiver/manager that the home was owned by the plaintiffs there was the possibility that if negotiations had broken down the receiver/manager would have defended the proceedings on the basis that the caveat did not disclose a good caveatable interest. However, in my view the plaintiffs should only be entitled to recover one-quarter of their costs of these proceedings. 22 Therefore, the orders that I make are:-