Supreme Court New South Wales Medium Neutral Citation: Toyota Finance Australia Ltd v Easy Dollar Pty Ltd (No 2) [2011] NSWSC 879 Hearing dates: 11 August 2011 Decision date: 11 August 2011 Jurisdiction: Equity Division - Duty List Before: Slattery J Decision: The defendant pay the plaintiff's costs on an indemnity basis. Summons otherwise dismissed. Catchwords: COSTS - claim for indemnity costs - whether defendant maintained proceedings that it should have known had no prospects of success - whether defendant has delayed in admitting liability to gain a tactical advantage. Legislation Cited: Registration of Interests in Goods Act 1986 (NSW) Cases Cited: Fountain Selected Meat (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 Harrison v Schipp [2001] NSWCA 13 Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd (1995) NSWLR 242 Hypec Electronics (in liq) Pty Ltd v Mead (2004) 61 NSWLR 169 Latoudis v Casey (1990) 170 CLR 534 Oshlack v Richmond River Council (1998) 193 CLR 72 Rouse v Shepherd (No 2) (1994) 35 NSWLR 277 Toyota Finance Australia Ltd v Easy Dollar Pty Ltd [2011] NSWSC 828 Category: Costs Parties: Plaintiff - Toyota Finance Australia Limited Defendant - Easy Dollar Pty Limited Representation: Plaintiff - D.M.Farrar, FARRAR Lawyers Defendant - No appearance File Number(s): 2011/223305 Publication restriction: No EX TEMPORE Judgment 1This matter has returned to Court today, first to deal with the consequences of my orders made on 1 August 2011, and second to deal with the plaintiff's application for indemnity costs. These reasons should be read with my first judgment in this matter: see Toyota Finance Australia Ltd v Easy Dollar Pty Ltd [2011] NSWSC 828. 2The orders made on 1 August 2011 seem to have had an effect. A search conducted on behalf of the plaintiff indicates that the Easy Dollar Pty Ltd ("Easy Dollar") claim to a second ranking interest in the subject motor vehicle has now been withdrawn. Just when it was withdrawn is a little unclear. But it was not withdrawn before the hearing on 1 August 2011. Copies of my judgment of that date and the orders made were served on the defendant and would have been received on 5 August 2011. 3By 9 August 2011 solicitors apparently acting on behalf of Easy Dollar were able to report to Mr Farrar acting on behalf of Toyota Finance Australia Limited ("Toyota Finance") that the charge was no longer in place. It does seem that in response to Toyota Finance's claim Easy Dollar has capitulated. Having obtained the relief that it wants, Toyota Finance asks that the proceedings now be dismissed, subject to issues of costs to which I now turn. 4Toyota Finance claims indemnity costs from Easy Dollar. It does so on three bases at least two of which, in my view, are made out in this case. 5The principles that apply are clear. The Court should be cautious in making orders for indemnity costs to ensure that such orders are made on a proper judicial basis; the discretion to order indemnity costs must be exercised on ground connected with the actual litigation; and, conduct in circumstances leading up to the litigation as opposed to the litigation itself is not a relevant type of connection unless it bears upon the conduct as litigant: Hypec Electronics (in liq) Pty Ltd v Mead (2004) 61 NSWLR 169 at 179, [42]; at 180 [45] - [47]. 6The exercise of a discretion to order costs on an indemnity basis does not exist for the purposes of punishing an unsuccessful party: Latoudis v Casey (1990) 170 CLR 534 at 542-3 per Mason CJ, and Oshlack v Richmond River Council (1998) 193 CLR 72 at 1 per Brennan CJ at 44 per Gummow and Gaudron JJ and 67 per McHugh J. Even unconscionable conduct, breaches of fiduciary duty, fraud and other deplorable conduct, when established in litigation will ordinarily lead to an order for costs on the usual basis; and, something more must be established for a special order as to costs: Harrison v Schipp [2001] NSWCA 13 at 136 per Giles JA with whom Handley JA and Fitzgerald JA agreed. See also Hypec Electronics at [43] - [46]. 7But here the plaintiff has established, in my view, conduct by the defendant. Easy Dollar as litigant, which warrants an order against it for indemnity costs. Although some of Easy Dollar's conduct was immediately before the litigation, it is in my view, conduct directly connected with the litigation, and is sufficient to found an order for indemnity costs. 8Toyota Finance's first point is that the defendant has maintained proceedings that it should have known had no real prospect of success: Fountain Selected Meat (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401. 9An inference that a party had no real prospect of success should be distinguished from situations where the party has belatedly accepted the unlikelihood of success: Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd (1995) NSWLR 242at 247. Here as my previous judgment shows, there is a legislative gap in the Registration of Interest in Goods Act 1986 but Easy Dollar in my view had no real prospects as my prior judgment shows: Toyota Finance Australia Ltd v Easy Dollar Pty Ltd (2011) NSWSC 828, at [35] - [38]. 10The Act set up its own statutory order of priorities in which Easy Dollar's interest was clearly subordinate. The general law provided additional support to the conclusion that Toyota Finance's interest, which was prior in time and prior by force of the statute, would be enforced by the Court as the first ranking interest. 11Nothing in the correspondence indicates: that there was any defence to Toyota Finance's claim; or that any other priority was being maintained; or that any other procedure was said to be appropriate other than the one that Toyota Finance has taken. 12The solicitors who now act for Easy Dollar, KP O'Donnell & Associates, have been writing to Mr Farrar. On 9 August 2011 they indicated that "the charge by Easy Dollar is no longer in place and that no payment is sought from Toyota Finance in relation to that previously referred to interest." 13This is a complete reversal of the position taken in the conversations referred to in my earlier judgment, which had Easy Dollar maintaining a tactical but undeserved priority over Toyota Finance's primary interest. This is not a case where Easy Dollar has even claimed that the position was uncertain. Toyota Finance has made out that Easy Dollar had no real prospect of success and on this ground, indemnity costs should be awarded. 14Toyota Finance's second point is that Easy Dollar unreasonably delayed making a proper admission of liability for the purposes of gaining a tactical advantage: Rouse v Shepherd (No 2) (1994) 35 NSWLR 277. It seems to me that this is also made out on the same grounds as the first point. Easy Dollar has now removed the claim to a registered interest in the motor vehicle and abandoned any claim to be paid out in priority to Toyota Finance. 15The conversation between Mr Farrar and the representative of Easy Dollar has many features of Easy Dollar seeking a tactical advantage through calculated delay in removing the interest in question. In my view, this point also justifies the making of an order for indemnity costs. 16Toyota Finance's third point is that Easy Dollar has not obtained a result better than the prior offer made by Toyota Finance. It is not necessary for me to consider this because indemnity costs are justified on the other two bases. 17I conclude therefore that this is an appropriate case for making an order for indemnity costs. The order of the Court will be that the defendant pay the plaintiff's costs of these proceeds on an indemnity basis. The Summons is otherwise dismissed. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 August 2011