Sharkey v Nissi (No 3) [2016] NSWSC 1648

Supreme Court New South Wales

Medium Neutral Citation: Sharkey v Nissi (No 3) [2016] NSWSC 1648 Hearing dates: On the papers Date of orders: 22 November 2016 Decision date: 22 November 2016 Jurisdiction: Equity Before: Robb J Decision: Order the cross claimant to pay the second cross defendant's costs of the cross claim on the ordinary basis. Catchwords: COSTS – costs of cross claim– second cross defendant sought indemnity costs – whether the cross claim had no chance of success – cross claim formulated on a mistaken basis – however, the second cross defendant appreciated this mistake – HELD cross claimant to pay the second cross defendant's cost on the ordinary basis Cases Cited: Birch v Glissen Pty Ltd [2005] NSWSC 337 Danthanarayana v Commonwealth of Australia [2016] FCAFC 114 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 Sharkey v Nissi [2015] NSWSC 1266 Sharkey v Nissi (No 2) [2016] NSWSC 1147 Category: Costs Parties: Christopher James Sharkey (plaintiff/first cross defendant) Donya Mayahi-Nissi (defendant/cross claimant) Sharkey Family Trust Pty Ltd (ACN 122 270 286) (second cross defendant) Representation: Counsel: A Fernon (plaintiff) D L Cook (defendant)

Solicitors: Swaabs (plaintiff) Eakin McCaffery Cox (defendant) File Number(s): 2013/383023 Publication restriction: None

Judgment 1. I delivered my principal reasons for judgment in these proceedings on 2 September 2015: Sharkey v Nissi [2015] NSWSC 1266. 2. By order 4, I dismissed the cross claim made by Ms Nissi against the trustee of Mr Sharkey's family trust, Sharkey Family Trust Pty Ltd, who I called the "Trustee". 3. On 16 June 2016, Ms Nissi filed a notice of motion seeking leave to amend her cross claim against the Trustee to assert a different legal basis for her claim against the Trustee than was pleaded in the original cross claim. 4. On 8 November 2016, I delivered reasons for judgment in which I dismissed Ms Nissi's application to amend her cross claim against the Trustee: Sharkey v Nissi (No 2) [2016] NSWSC 1147. I ordered Ms Nissi to pay the Trustee's costs of the notice of motion. 5. By order 6 made on 2 September 2015, I directed the parties to confer about the orders for costs that should be made. It is sufficient to note that the only costs order that now remains outstanding is the order that should be made in respect of the dismissal of Ms Nissi's cross claim against the Trustee. 6. Ms Nissi now accepts that, in conformity with the usual approach where a party fails in a claim made against another party, Ms Nissi should be ordered to pay the costs of her cross claim against the Trustee. She submits that the costs order should be on the ordinary basis. 7. I gave the parties leave to deliver written submissions on the terms of the costs order that should be made. 8. Ms Nissi did not avail herself of this leave, as she decided that she should accept that the court will order her to pay the Trustee's costs of her cross claim against it on the ordinary basis. The Trustee delivered a submission dated 10 November 2016 in which it submitted that the court should order Ms Nissi to pay its costs of the cross claim on the indemnity basis. Ms Nissi replied by a written submission dated 11 November 2016, in which she submitted that the costs should only be payable on the ordinary basis. 9. I will place the parties' written submissions on file, so that there will be a record of the basis of their submissions. 10. The essence of the Trustee's position is that Ms Nissi should be ordered to pay its costs on the indemnity basis because the cross claim was hopeless and doomed to fail: see Danthanarayana v Commonwealth of Australia [2016] FCAFC 114; Birch v Glissen Pty Ltd [2005] NSWSC 337 per McDougall J. The Trustee also says that indemnity costs should be awarded because the cross claim against it "has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success": Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, 401 per Woodward J. 11. I do not accept the Trustee's submission, and do not think that this is an appropriate case to order Ms Nissi to pay the Trustee's costs of the cross claim against it on the indemnity basis. 12. I have discussed the reasons for the failure of Ms Nissi's cross claim against the Trustee more fully in my second judgment, than I will in this judgment. 13. In essence, Ms Nissi's legal advisers made a simple conceptual mistake. Instead of seeking an order that the Trustee, as the principal debtor, indemnify Ms Nissi, as a third party mortgagor, in respect of the money that she had to pay to discharge the mortgage over her property, Ms Nissi sought an order for subrogation over the creditor's mortgage granted by the Trustee to the creditor. Ms Nissi therefore proceeded upon the basis of a simple and obvious mistake of fact, in that she granted the mortgage to the creditors of the Trustee, and not the Trustee. 14. I am satisfied that the Trustee's legal advisers appreciated from the outset that Ms Nissi's cross claim against the Trustee had been formulated on a mistaken basis: see [15] of my second judgment. On the other hand, Ms Nissi and her legal advisers continued to operate under the misapprehension until after the delivery of judgment, when Ms Nissi filed her notice of motion on 16 June 2016. 15. The cross claim by Ms Nissi against the Trustee hardly figured at all at the hearing of the proceedings. I do not know whether the same is true in relation to the preparation of the cross claim for hearing. It is sufficient for me to note that, from the perspective of the court, Ms Nissi's cross claim against the Trustee proceeded as if the Trustee always understood and was confident that the cross claim would not succeed. 16. This was not a case where the cross claim was doomed on its merits but was nonetheless proceeded with by Ms Nissi in circumstances where she ought to have been advised by her legal advisers that it would necessarily fail, and where the continuation of the claim has imposed some oppression or unnecessary costs on the Trustee. 17. On the contrary, the claim in the form that Ms Nissi ought to have pleaded against the Trustee was genuinely arguable. In reality, in this case, the Trustee has benefited from the misconception under which Ms Nissi proceeded, and it has done so in a way that has minimised the costs that it otherwise would have incurred. 18. I dismissed Ms Nissi's application for leave to amend her cross claim for a number of reasons, as set out in my second judgment. In making the following observation, I do not in any way alter or depart from those reasons. 19. As I explained in my second judgment at [38] to [50], a substantial, if not decisive, impediment in the way of Ms Nissi being given the leave she sought was that, even if her cross claim had been pleaded correctly from the outset, there were findings in my first judgment that were essential to her case succeeding against Mr Sharkey that I regarded had the consequence that her true cross claim against the Trustee should also fail. To the extent that that reasoning is correct, it would mean that Ms Nissi in fact had a genuine claim against the Trustee (which was not the claim that she pleaded), but even the genuine claim would have failed, because otherwise there would have been inconsistent reasoning in the judgment concerning the fate of Ms Nissi's claim against Mr Sharkey on the one hand, and her claim against the Trustee on the other. 20. In these circumstances I order the cross claimant to pay the second cross defendant's costs of the cross claim on the ordinary basis.