Sijabat v Cussen [2018] NSWSC 847

Supreme Court New South Wales

Medium Neutral Citation: Sijabat v Cussen [2018] NSWSC 847 Hearing dates: On the papers Date of orders: 06 June 2018 Decision date: 06 June 2018 Jurisdiction: Equity Before: Darke J Decision: Defendants ordered to pay plaintiffs' costs of proceedings on an indemnity basis. Catchwords: COSTS – proceedings for removal of caveats – caveators claim interests in the nature of charges – no evidence to support existence of charges – caveats maintained despite requests for removal – caveats withdrawn shortly after proceedings commenced – caveators' conduct unreasonable – indemnity costs ordered Legislation Cited: Civil Procedure Act 2005 (NSW), s 98 Category: Costs Parties: Louisa Meng Li Sijabat (First Plaintiff) Louisa Meng Li Sijabat (Second Plaintiff) G.E. Cussen and others, trading as Kemp Strang (First Defendant) HLB Mann Judd (NSW) Pty Ltd (Second Defendant) Representation: Counsel: Y C Lin (Plaintiffs)

Solicitors: CLH Lawyers (Plaintiffs) Kemp Strang (Defendants) File Number(s): 2018/42694 Publication restriction: None

Judgment 1. These proceedings were commenced by Summons filed on 8 February 2018. The plaintiffs are the trustees in bankruptcy of Cosimo Gasparre and Elizabeth Gasparre. Those appointments were made on 23 November 2017. The plaintiffs sought orders against the two defendants for removal of caveats the defendants had lodged against the title to a certain property in Hunters Hill owned by the bankrupts (being Lot 2 in Deposited Plan 1217333). Orders for compensation pursuant to s 74P of the Real Property Act 1900 (NSW) were also sought by the plaintiffs. 2. On 8 February 2018 the plaintiffs obtained orders for short service of the Summons, which was made returnable on 12 February 2018. Later on 8 February 2018, the defendants delivered signed withdrawal of caveat forms to the plaintiffs. There was thus no need for the plaintiffs to pursue their application for orders for removal of the caveats. 3. On 12 February 2018 the Court directed the plaintiffs to serve any evidence in relation to the s 74P claims by 19 February 2018. The proceedings were adjourned to 16 March 2018. On that occasion, the proceedings were adjourned to 6 April 2018, at which time the Court was informed that the only remaining issue was costs. Directions were made for affidavits and submissions to be filed and served. It was agreed by the parties that the question of costs could be dealt with on the papers. 4. Written submissions have been received from the plaintiffs and from the defendants. The plaintiffs rely upon the affidavit of Louisa Sijabat filed on 8 February 2018, and affidavits of Aaron Edmonds (4 May 2018) and Nancy Basal (4 May 2018). The defendants rely on the affidavit of Roger Mattar (10 May 2018). 5. The parties are diametrically opposed when it comes to the appropriate order as to costs. Each side contends that the other party should pay the costs of the proceedings on an indemnity basis. 6. Before summarising the principal arguments of the parties, something should be said about the two caveats that were the subject of the proceedings. The caveat lodged by the first defendant (AM743176) claimed an interest in the nature of a charge, by virtue of an agreement between the first defendant and the Gasparres. It was stated that there was an agreement to pay all legal fees owing "from proceeds of sale of subdivided property". The caveat was lodged on about 20 September 2017. 7. The caveat lodged by the second defendant (AM801964) claimed an interest in the nature of a charge, by virtue of an agreement between the second defendant and the Gasparres. It was stated that there was an agreement to pay all professional accounting and financial services fees owing "from proceeds of sale of subdivided property". This caveat was lodged on about 13 October 2017. 8. The plaintiffs submitted that the defendants capitulated in circumstances where the plaintiffs would have almost certainly succeeded in having the caveats removed. It was submitted that the caveats were invalid, as an interest in the proceeds of sale of a property is not an interest in the land itself, and also because the caveats affected the interests of both registered proprietors, not only Mr Gasparre. In relation to the second defendant's caveat it was also put that any agreement about payment out of proceeds of sale concerned a separate property entirely. It was submitted that the defendants, in maintaining the caveats in the face of assertions of invalidity, requests for their withdrawal, and offers to place the proceeds of sale of the property into a trust account pending determination of the defendants' claims, amounted to an abuse of process. The plaintiffs submitted that they were left with no option but to approach the Court. 9. The defendants submitted that the proceedings were commenced prematurely, without adequate notice, and in breach of an agreement made on about 31 October 2017. The agreement is said to arise from a letter sent by Mr Gasparre's solicitors to the first defendant on that day. The defendants further submitted that there was no urgency at the time the proceedings were commenced, and the plaintiffs could have proceeded by way of lapsing notices instead. 10. Both parties also place some reliance upon aspects of the correspondence that passed between them concerning the question of costs. 11. The letter sent to the first defendant by Mr Gasparre's solicitors on 21 October 2017 was written in the context of Local Court proceedings brought by the first defendant against Mr Gasparre. The letter includes the following: We write to request that you delay entering default judgment against our clients. … We are instructed that there are sufficient funds to cover settlement of your firm's claim upon completion of the sale of his property at 29 Woolwich Road, Hunter's Hill (the Property). We confirm that the Property will be sold at auction next Thursday, 9 November 2017. We will advise you of the settlement date so that you can arrange for someone to attend with a withdrawal of caveat in exchange for a settlement cheque. 1. The first defendant responded to the letter on 6 November 2017. This letter included the following: On 18 October 2017, we requested that your client provide an appraisal of the value of the property at 29 Woolwich Road, Hunter's Hill (Property) and the amounts owed to each of the Mortgagees and Caveators identified in the enclosed Title Search. To date, your client has not complied with our request. On that basis, we are not satisfied that there will be sufficient funds upon completion of the sale of the Property to settle the debt owed to us by your client. Please provide us with the information requested in our letter dated 18 October 2017, by Tuesday 7 November 2017. If your client does not comply with our request we will proceed with default judgement on Wednesday 8 November 2017. 1. No agreement seems to have been reached. If the letter from Mr Gasparre's solicitors contained an offer, it was not accepted by the first defendant. Any agreement would in any event post-date the lodgement of the caveats. 2. On 7 November 2017 Mr Gasparre's solicitors sent a further letter to the first defendant. This letter contained additional information about the likely proceeds of a sale of the property. There is no evidence of any response to the letter. It appears, however, that the property was in fact sold by the Gasparres on 9 November 2017 for $4.8 million. 3. As mentioned earlier, the plaintiffs were appointed as trustees in bankruptcy on 23 November 2017. The plaintiffs promptly sought information from the defendants concerning their caveats, including details of the agreements relied upon to support the caveats. 4. It is not clear what information was provided prior to 17 January 2018 when the plaintiffs sent letters that noted that the defendants had failed to substantiate any caveatable interests. The plaintiffs thus requested that the caveats be removed by 19 January 2018. 5. A deal of information was provided to the plaintiffs on 22 January 2018 (including copies of costs agreements and correspondence with Mr Gasparre) but none of this material seems to me to evidence the existence of any charges over the property. The plaintiffs evidently reached the same conclusion. On 25 January 2018 the plaintiffs again called for the caveats to be removed, this time by 30 January 2018. 6. On 31 January 2018 the defendants indicated that they preferred to reach agreement to settle the outstanding debts before settlement "so that withdrawals of caveats can be provided to you at settlement on receipt of the agreed settlement amounts". Later on 31 January 2018 the plaintiffs proposed that the caveats be withdrawn forthwith on the basis that the proceeds of sale of the property (after payment of sale costs and certain secured creditors) be held in a trust account pending resolution of the defendants' claims. It was noted that settlement was scheduled to take place on 7 February 2018. On 1 February 2018 the plaintiffs pressed for a response to their proposal. On 2 February 2018 the plaintiffs advanced a similar proposal, and foreshadowed that if it was not accepted they intended to file an application with this Court. 7. Not having received any response, on 6 February 2018 the plaintiffs again pressed for acceptance of their proposal. Once again, acceptance was not forthcoming. Later on 6 February 2018 the settlement of the contract was postponed to 13 February 2018. 8. As mentioned earlier, the plaintiffs commenced the proceedings on 8 February 2018. 9. The plaintiffs' proposal had not been accepted at the time of commencement. In my opinion, the proposal was a reasonable one, and the defendants had more than ample time to consider it. The commencement of the proceedings was clearly warranted in the circumstances. The defendants had not produced any cogent evidence to support the claims advanced by the caveats, yet the defendants remained unwilling to withdraw them. The maintenance of the caveats, particularly in the face of the proposal put forward by the plaintiffs, was in my view plainly unjustified. Even though the settlement had been postponed to 13 February 2018, the proceedings should not be characterised as premature. The defendants had given no indication that they would withdraw the caveats on any basis other than in return for agreed sums on settlement. Neither was it unreasonable of the plaintiffs not to proceed by way of service of lapsing notices, given that settlement was then anticipated to occur in about 1 week. (I note that as it turned out settlement did not occur until 26 February 2018.) I am also of the view that the defendants were given adequate notice of the commencement of the proceedings. This was foreshadowed on 2 February 2018, at a time when the defendants would have been well aware of the issues involved. 10. In my opinion the conduct of the defendants in relation to the caveats up to the time when they withdrew them was unreasonable. The withdrawal did not occur until after the plaintiffs had informed the defendants on 8 February 2018 that they were about to approach the Court. Having regard to the position earlier stated by the defendants, I infer that the provision of the withdrawal of caveat forms was prompted by the commencement of the proceedings. 11. On 9 February 2018 the plaintiffs sought the defendants' agreement to paying the plaintiffs' costs on an indemnity basis (as sought in prayer 7 of the Summons). The defendants did not agree to such an order. On 12 February 2018 the defendants suggested that the matter be dismissed with no order as to costs. 12. On 14 March 2018 and on 26 March 2018 the plaintiffs again sought the agreement of the defendants to an order for indemnity costs (and discontinuance of the proceedings). 13. In my opinion, having regard to the matters recited above, the appropriate order for costs in the exercise of the Court's discretion under s 98(1) of the Civil Procedure Act 2005 (NSW) is that the defendants pay the plaintiffs' costs of the proceedings on an indemnity basis. The proceedings were brought about by the existence of caveats that appear to have been lodged without reasonable cause. The caveats assert the existence of charges over the property, but the defendants have never provided evidence to suggest that such claims may have substance. Moreover, the maintenance of the caveats in the face of challenges to their validity, and the plaintiffs' proposal for sale proceeds to be placed into a trust account, was itself unreasonable. The conduct of the defendants up to the time of the withdrawal of the caveats was sufficiently unreasonable or delinquent to warrant an award of indemnity costs. Thereafter (that is, from 9 February 2018) the defendants failed to accept that such an award was justified, and so the proceedings have continued, and have included this costs application. 14. The Court will order that the defendants pay the plaintiffs' costs of the proceedings on an indemnity basis.