New South Wales Supreme Court CITATION : Tobin & Anor v Ezekiel & Anor [2006] NSWSC 694 HEARING DATE(S) : 06/07/06 JUDGMENT OF : Gzell J EX TEMPORE JUDGMENT DATE : 07/06/2006 DECISION : Plaintiffs ordered to pay defendants' costs on an indemnity basis upon assessment or agreement. CATCHWORDS : PROCEDURE - Costs - Plaintiffs' refusal to remove insupportable caveat - Whether costs on an indemnity basis should be ordered with payment on assessment or agreement LEGISLATION CITED : Uniform Civil Procedure Rules 2005 CASES CITED : Oshlack v Richmond River Council (1998) 193 CLR 72 Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 FILE NUMBER(S) : SC 106746/06 COUNSEL : Mr A Cheshire - Plaintiff Mr P O'Loughlin - Defendant SOLICITORS : T D Kelly & Co - Plaintiffs Segal & Associates - Defendants IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION GZELL J THURSDAY 6 JULY 2006 106746/06 EVELYN TOBIN & ANOR v MORRIS EZEKIEL & ANOR EX TEMPORE JUDGMENT 1 The deceased made a will leaving her estate to the plaintiffs on 28 September 1977. She made a further will excluding the plaintiffs and leaving the entirety of her property to the defendants on 10 December 1997. Probate was granted to the defendants on 3 February 2006. 2 The plaintiffs lodged a caveat on an asset in the estate that had been transmitted to the defendants on 14 February 2006. The caveat lodged by the plaintiffs stated the nature of their interest as follows: "Claim upon whole or part of the interest of the registered proprietors pursuant to proposed applications in the Equity Division of the Supreme Court of New South Wales for the Revocation of the Grant of Probate, being Probate No.101240/06 granted on 3 February 2006 of the will of the late Lily Ezekiel dated 10 December 1997 and pursuant to the Family Provision Act NSW 1982." 3 What followed the lodgement of that caveat was a consent order made by Windeyer J on 15 May 2006 and the lapsing of the caveat. Upon the plaintiffs by their counsel giving the usual undertaking as to damages, his Honour ordered that until further order the defendants and each of them be restrained from selling, transferring, alienating or otherwise disposing of the property otherwise than obtaining a mortgage up to $300,000. 4 On 19 May 2006, some four days after the making of that order, a further caveat was lodged by the plaintiffs stating their interest thus: "Claim upon whole or part of the interest of the registered proprietors pursuant to Order 1 of Mr Justice Windeyer in the Equity Division of the Supreme Court of NSW, Matter No 10676 of 2006, made on 15 May 2006." 5 On 1 June 2006, the solicitors for the defendants put the plaintiffs' solicitors on notice that they regarded the caveat as being insupportable in that what was claimed was not a caveatable interest. 6 In response, on 1 June 2006, the solicitors for the plaintiffs said that the further caveat had been lodged to protect the plaintiffs' right to prevent any breach of the injunction granted by Windeyer J and if the defendants' proposed mortgage did not breach the terms of that injunction they had no objection to its registration. A reference was made to the Real Property Act 1900 s 74H. 7 Correspondence ensued from the solicitors for the defendants on 29 June 2006 and 3 July 2006 putting the plaintiffs' solicitors on notice that they regarded the caveat as being insupportable and an application would need to be made to the Court unless it was removed. 8 On 28 June 2006 a notice of motion was filed seeking the removal of the caveat. It was to be returned on 17 July 2006. It was supported by an affidavit sworn by the solicitor for the defendants in which he said that he was instructed by his clients that the mortgagee refused to advance $300,000 unless the caveat was removed. That affidavit was affirmed on 28 June 2006 and served with the notice of motion on the solicitors for the plaintiffs. 9 On 4 July 2006 a further notice of motion supported by further affidavits was filed by the defendants seeking to advance the hearing of the first notice of motion to today. 10 Mr Cheshire, who appeared for the plaintiffs, submitted that there was an atmosphere of distrust between the parties. He said the application for probate had been taken without the knowledge of the plaintiffs and there were findings against the credit of one of the defendants in other proceedings that led the plaintiffs to maintain a suspicion with respect to the defendants. He said that it was not until 4 July 2006 when the further affidavits were served that direct evidence of a conversation between the defendants and the mortgagee emerged. Mr Cheshire submitted that as soon as it was apparent that there was such a problem, steps were taken to have the plaintiffs agree to the removal of the caveat. 11 It seems to me, however, that notice of the problem with respect to the mortgagee had been indicated in the earlier affidavit and the solicitor was perfectly entitled to swear in that affidavit as to his instructions from his clients. The fact that direct evidence of the refusal of the mortgagee to advance the moneys was not forthcoming until 4 July does not obviate the fact that the solicitors for the plaintiffs knew, on or about 28 June 2006, that it was being put that there was a problem with the mortgagee unless the caveat was removed. 12 Since 4 July 2006, Mr Cheshire and Mr O'Loughlin, who appeared for the defendants, have been able to resolve the substantive issue and consent orders are proposed for removal of the caveat. What is in issue is the question whether the plaintiffs should be ordered to pay indemnity costs and that those costs should be assessed forthwith. 13 So far as the indemnity costs are concerned, it seems to me that the defendants were, needlessly, put to the trouble of coming before this Court in circumstances where the claimed caveatable interest was insupportable. Mr Cheshire put no submission before me to justify the claimed caveatable interest. 14 Notwithstanding the suspicion the plaintiffs may have had about the defendants, it seems to me that they have misused the processes of the office of the Registrar-General in lodging the caveat. The plaintiffs have offered to pay costs on the ordinary basis. I reject the submission, however, that they were merely trying to protect their interest. The caveat ought not to have been lodged and its lodgement has not only caused the problem with the mortgagee but also the problem of coming to this Court to have the matter rectified. 15 To award indemnity costs is an exceptional exercise of discretion and may be made only in circumstances involving delinquency (Oshlack v Richmond River Council (1998) 193 CLR 72 at 89, Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233). In my view there is sufficient delinquency in this case to justify my making an order that the costs be paid on an indemnity basis. 16 It is the normal practice that interlocutory costs orders are not payable until the end of the proceedings (Uniform Civil Procedure Rules 2005, r 42.7(2)). 17 Mr Cheshire submitted that I should take account of the relative prejudices to both sides of this matter. He submitted that the caveat now being agreed to be lifted, the defendants will be able to mortgage the property and have $300,000 to prosecute the action. On the other hand his clients assert, either on the basis of a lack of testamentary capacity on the part of the deceased when making her second will, or by reason of an application under the Family Provision Act 1982, that they are entitled to the property. The consequence is, in Mr Cheshire's submission, that the plaintiffs would be prejudiced and the defendants non-prejudiced if, on the one hand, an order for immediate payment was made and, on the other, the ordinary rule was to apply. 18 In my view, the circumstances that have led me to conclude that it is appropriate in this case to make an order for indemnity costs also lead me to the view that the plaintiffs should be required to pay those indemnity costs forthwith upon agreement or assessment. *********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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