New South Wales Supreme Court CITATION : SIRTES v PRYER [2006] NSWSC 438 HEARING DATE(S) : 08/11/05 JUDGMENT DATE : 15 May 2006 JURISDICTION : Equity Division JUDGMENT OF : Burchett AJ at 1 DECISION : See para 12. CATCHWORDS : COSTS - circumstances justifying an order for indemnity costs LEGISLATION CITED : Civil Procedure Act 2005, s 98 Uniform Civil Procedure Rules 2005, Part 42 Harrison v Schipp [2001] NSWCA 13 Muriti v Prendergast [2006] NSWSC 286 CASES CITED : Oshlack v Richmond River Council (1998) 193 CLR 72 Rosniak v Government Insurance Office (1997) 41 NSWLR 608 Sirtes v Pryer [2005] NSWSC 1082 PARTIES : Paula SIRTES v Kim Jacqueline PRYER and Gregory Andrew SIRTES; Kim Jacqueline PRYER v Paula SIRTES FILE NUMBER(S) : SC (1394/05) Plaintiff/Cross Defendant: Mr J Simpkins SC and Mr D Meltz COUNSEL : First Defendant/Cross Claimant: Mr M B Evans. Submitting appearance only of Second Defendant. SOLICITORS : Plaintiff/Cross Defendant: Broun Abrahams Burreket First Defendant/Cross Claimant: Swaab Attorneys IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BURCHETT AJ 15 May 2006 (01394/05) Paula SIRTES v Kim Jacqueline PRYER and Gregory Andrew SIRTES; Kim Jacqueline PRYER v Paula SIRTES JUDGMENT 1 HIS HONOUR: The question for decision arises out of proceedings which were the subject of reasons for judgment delivered on 25 October 2005, pursuant to which a declaration and an order were made to provide for the setting aside of a transfer by the plaintiff to the first defendant of a one quarter share as tenant in common in a property known as 60-62 Balfour Road, Rose Bay and for the vesting of the said share in the plaintiff subject to a declaration that the plaintiff would hold it subject to an equitable charge in the sum of $775,000 in favour of the first and second defendants jointly. It remains to be determined what order should be made in respect of the costs of the proceedings and whether any order should be made on an indemnity basis. The plaintiff seeks an order for indemnity costs, contending that the first defendant, by disputing the basis for the claim, and by bringing a cross claim grounded upon an alleged entitlement to a one quarter share of the property, had acted unreasonably and maintained a legal position which was hopeless of success, with the result that the costs of the proceedings were magnified. The plaintiff also referred to settlement negotiations as indicating that she had been prepared to settle upon a footing more favourable to the first defendant than the ultimate decision of the court, and claimed she had made a firm offer to do so which had been rejected. 2 An outline of the circumstances out of which the case arose is to be found in the reasons of the court delivered on 25 October 2005: Sirtes v Pryer [2005] NSWSC 1082. It was not necessary then, and it is not necessary now, to explore every detail of the evidence that showed the transfer of the one quarter share at the property at Balfour Road was made by the plaintiff to the first defendant in circumstances which, as events turned out, required the conclusion that it was held upon constructive trust for the plaintiff. The justification for this statement is the fact that, after presenting evidence to dispute the plaintiff's case and after the plaintiff herself and her son the second defendant had been cross examined until the end of the second day of the hearing, at the beginning of the third day counsel for the first defendant announced: "I am instructed to advise the court that the first defendant does not now [emphasis added] maintain her claim to uphold the transfer but instead accepts an equitable charge or lien in the terms referred to in the pleading of the plaintiff's Amended Points of Claim". 3 That meant that the issue before the court was thereafter reduced to a question of the proper assessment of the equitable charge or lien which the plaintiff had come to the hearing conceding should be imposed over the disputed one quarter share by reason of the very substantial expenditure made by the defendants upon the property. 4 A fundamental admission such as was involved here, made during the course of the hearing, does not necessarily imply the party's case was always hopeless. The full circumstances must be considered. However, in the present case, a solicitor who obtained the execution of the relevant transfer had sworn an affidavit stating explicitly the terms of an acknowledgement by the first defendant, at the time of the execution of the document, that its basis was the use of certain property of hers for the purpose of raising finance for the house to be built upon the land to which the transfer related. Nothing of the kind happened. Apart from the complete failure of the particular transaction in question (the raising of finance upon the first defendant's property), it could not be in dispute that there had also been a failure of the wider ground of the transfer made without any express consideration by the plaintiff, namely, her understanding that the marriage between the first defendant and her son the second defendant would continue and they would live in the house to be constructed on the land. In fact, the marriage finally broke up about four weeks after the transfer. 5 In all the circumstances, it seems to me that the first defendant's resistance to the relief sought by the plaintiff was indeed hopeless. 6 Something was attempted to be made, in argument on behalf of the first defendant, of the fact that the plaintiff did not initially concede in her summons and Points of Claim that, in order that she should do equity in a situation where the totality of the arrangements between the parties required the expenditure by the defendants on the plaintiff's property to be appropriately recognised, a lien or charge should be imposed in the defendants' favour. But it was not disputed, the proceedings having been commenced on 11 February 2005 (about three months after the first defendant had expressly refused to transfer her legal interest in the property to the plaintiff, and thus not precipitately), on 23 March 2005 the plaintiff by her counsel acknowledged in court her recognition of an equitable charge in favour of the first and second defendants. That equitable charge had already been recognised in an offer of compromise made on 18 March 2005, and on 27 April 2005 the Points of Claim were amended to include reference to it. As has already been recounted, when the first defendant, on the third day of the hearing, abandoned her claim to be entitled to a one quarter interest in the property, her counsel put the point, not as something different from the plaintiff's pleaded case, but expressly in terms of the plaintiff's Amended Points of Claim. The argument later put that there was some ambiguity about the plaintiff's position is simply not consistent with the approach then taken. 7 There were a number of offers and counter offers prior to the hearing of this case, but for the purposes of these reasons it is sufficient to focus on an offer made by the plaintiff on 3 May 2005 to charge the property in favour of the defendants jointly for the payment to them of $900,000. There were conditions to this offer, but on balance it was certainly more favourable to the first defendant than the decision to which the court ultimately came. 8 It is clear that the determination of the appropriate costs order is a matter in the discretion of the court, which, as is made express by s 98(1)(c) of the Civil Procedure Act 2005, "may order that costs are to be awarded on the ordinary basis or on an indemnity basis". See also Part 42 of the Uniform Civil Procedure Rules 2005. In Muriti v Prendergast [2006] NSWSC 286, I referred to some of the authorities on this question, and particularly to Harrison v Schipp [2001] NSWCA 13 at [139] where Giles JA referred to "the need for a sufficient special or unusual feature in the case", Oshlack v Richmond River Council (1998) 193 CLR 72 at 89 where reference was made to "some relevant delinquency on the part of the unsuccessful party" and Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 616 where Mason P referred to the court requiring "some evidence of unreasonable conduct", all of these formulations being directed to the recognition of a case in which an order for indemnity costs might be made. 9 In my opinion, it was clear from 18 March 2005, and certainly from 23 March 2005, that defence of the plaintiff's claim on the basis on which it was defended up until the morning of the third day of the hearing was delinquent or unreasonable in the relevant sense. 10 Counsel for the first defendant, in his written argument, twice referred to the first defendant's desire to contend in her Family Court proceedings that the one quarter interest in the property in Balfour Road to which she claimed to be entitled should be awarded to her husband the second defendant, and that this would be in accord with the ultimate wishes of the plaintiff who intended to leave the whole of the property to him in her will. That seems to me to have no bearing on the costs order I should make in these proceedings. Plainly, in the Family Court proceedings, what the first defendant was seeking to do was to have the advantage of the one quarter interest as something in the nature of a bargaining chip she could offer in exchange for other property or advantages in the ultimate order of division of property to be made in those proceedings. The attitude taken up by her in this respect was in no way an acknowledgement of what was finally recognised to be the just claim of the plaintiff. 11 The first defendant's counsel also pointed out that an earlier recognition that the plaintiff's claim pleaded in the amended points of claim must succeed would not have avoided so much of the costs as related to the determination of the proper amount of the equitable charge to which the plaintiff was prepared to submit. It would, of course, have greatly reduced the cost of the preparation of the case upon all issues and it would have greatly reduced the time taken for the hearing, which occupied five days. But, in any case, this argument does not meet the proposition advanced by the plaintiff that the whole of the costs incurred after 3 May 2005 would have been avoided by the acceptance of the firm offer then made in terms substantially more favourable to the first defendant than the actual decision of the court. 12 I have come to the conclusion that the appropriate order is that the first defendant pay the plaintiff's costs of the proceedings, those costs to be assessed on the indemnity basis from 23 March 2005, the date when it was announced in court that the plaintiff recognised that the first and second defendants should have an equitable charge. ********** 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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