Supreme Court New South Wales Medium Neutral Citation: Somerville Legal Pty Limited and v Franz Boensch; Franz Boensch v Somerville Legal Pty Limited [2019] NSWSC 267 Hearing dates: 13 March 2019 Date of orders: 13 March 2019 Decision date: 13 March 2019 Jurisdiction: Equity Before: Henry J Decision: (1) The plaintiff's claim, as set out in the amended statement of claim dated 30 October 2017, be discontinued on the application of the plaintiff under UCPR r 12.1. (2) The Deed of Agreement and Mortgage dated 21 September 2015 between the defendant/cross-claimant and the plaintiff/cross-defendant (Deed) be set aside. (3) Direct the plaintiff/cross-defendant to withdraw caveat number AK72913T in respect of Folio 7366-5. (4) The plaintiff/cross-defendant to pay the defendant/cross-claimant's costs of the proceedings, including the costs of the hearing on 13 March 2019, except where the defendant/cross-claimant has otherwise been ordered to pay the plaintiff/cross-defendant's costs pursuant to prior orders of this Court in these proceedings. (5) Otherwise, dismiss the cross-claim dated 9 May 2017. (6) Note the undertaking given by the plaintiff/cross-defendant to the Court not to take any steps to enforce or otherwise rely on the Deed. Catchwords: COSTS — Party/Party — General rule that costs follow the event — Proceedings discontinued or dismissed COSTS — Indemnity basis— Bases of quantification — No circumstances to justify special order for costs Legislation Cited: Civil Procedure Act 2005 (NSW) s 98 Contracts Review Act 1980 (NSW) Real Property Act 1900 (NSW) s 74P Uniform Civil Procedure Rules 2005 (NSW) rr 12.1, 42.1, 42.2, 42.5, 42.19 Cases Cited: Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359 Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12 Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Freelancer International Pty Ltd v Matthew O'Kane [2019] NSWSC 159 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) (2008) 65 ACSR 324 Joseph Lahoud & Anor v Victor Lahoud & Ors [2006] NSWSC 126 Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 Oshlack v Richmond River Council (1998) 193 CLR 72 Category: Costs Parties: Somerville Legal Pty Limited (Plaintiff/Cross-Defendant) Franz Boensch (Defendant/Cross-Claimant) Representation: Counsel: J Emmett (Plaintiff/Cross-Defendant) Solicitors: Somerville Legal Pty Limited (Plaintiff/Cross-Defendant) J Bingham (Defendant/Cross-Claimant) File Number(s): 2017/63611 Judgment – EX Tempore (Revised) 1. The plaintiff and the defendant in these proceedings were once solicitor and client. The plaintiff had represented the defendant in other proceedings in this Court and issues arose in relation to the payment of the plaintiff's fees and costs. 2. The plaintiff commenced these proceedings by way of summons filed on 28 February 2017, seeking interim orders that the operation of the caveat, number AK72913T (Caveat) lodged by the plaintiff in respect of property at Folio 7366-5, known as 255 Victoria Road Rydalmere (Rydalmere property), of which the defendant was the registered proprietor, be extended until further order of the Court. Orders were made by Darke J on 9 March 2017 extending the Caveat until further order. 3. The proceedings then continued by way of pleadings with a statement of claim being filed by the plaintiff on 31 March 2017. The defendant filed a defence and a cross-claim in May 2017. An amended statement of claim was filed by the plaintiff on 30 October 2017 and amended defences were filed on 26 March 2018 and then, pursuant to leave granted by me on 25 February 2019, on 1 March 2019. 4. In the amended statement of claim, the plaintiff seeks declaratory relief concerning the entitlement to enforce a mortgage over the Rydalmere property which is said to secure the amount of debt outstanding to the plaintiff under a Deed of Agreement and Mortgage entered into by the parties on 21 September 2015 (Deed). 5. The defendant denies the validity of the Deed, that monies are owing under the Deed and that the plaintiff has a caveatable interest pursuant to the Deed. This is said to be for reasons including that the Deed was unjust within the meaning of the Contracts Review Act 1980 (NSW), because the Deed had allegedly been procured by the plaintiff through misleading or deceptive and/or unconscionable conduct and/or duress, and because the Rydalmere property was held by the defendant as trustee for the Boensch family trust. It is also said that the proceedings are an abuse of process in circumstances where the plaintiff had registered a certificate of cost determination against the defendant as a judgment of the Local Court on 18 January 2017 and had served a bankruptcy notice on 8 February 2019 seeking payment of that debt. 6. By its cross-claim, the defendant/cross-claimant seeks various declarations and orders, including that the Deed be set aside, that no monies are due and payable to the plaintiff/cross-defendant, that the plaintiff/cross-defendant has no caveatable interest and an order directing the plaintiff/cross-defendant to withdraw the caveat. 7. Prior to the hearing, the plaintiff/cross-defendant had informed the defendant/cross-claimant and the Court that it was no longer pursuing the declaratory relief in the amended statement of claim and would consent to the Caveat lapsing. It also offered a permanent undertaking to the Court to not enforce or otherwise rely on the Deed. 8. At the hearing, the plaintiff/cross-defendant, through its counsel, confirmed that it would be discontinuing its claim and, in respect of the cross-claim, would consent to prayers 4 and 9 of the relief claimed, which provided for the Deed to be set aside and the Caveat to be withdrawn. The Court was also informed that, in view of this, the defendant/cross-claimant no longer pressed prayers 1, 2, 5, 6, 7, 10 and 11 of the relief set out in the cross-claim. 9. At the outset of the hearing, the solicitor representing the defendant/cross-claimant sought to press prayers 3 and 8 of the relief claimed in the cross-claim, being a declaration that the Deed was unjust and ought to be set aside and a declaration that the cross-defendant had no caveatable or other interest in the Rydalmere property. 10. Having regard to the concessions made by the plaintiff/cross-defendant and the lack of utility of the declarations sought in prayers 3 and 8, the solicitor for the defendant/cross-claimant later confirmed at the hearing that he did not press them. 11. Accordingly, the substantive claims in the proceedings have been resolved without a hearing on the merits and the only outstanding issue to be determined, and on which the parties could not agree, is the issue of costs. This issue was argued before me and is the subject of these reasons. 12. The usual order as to costs under the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) is that they follow the event: r 42.1. Where proceedings are discontinued by a plaintiff, as in this case, the usual order is that the plaintiff pays the defendant's costs: r 42.19. The usual order of the Court is that costs be assessed on an ordinary basis: r 42.2. 13. It was accepted by the parties that the Court has, however, a discretion to depart from the usual order: Civil Procedure Act 2005 (NSW) s 98. This includes the power to award costs on an indemnity basis: r 42.5 of the UCPR. 14. There are no fixed rules as to when the discretion to award indemnity costs may be exercised but the cases suggest that it requires a special or unusual feature, such as some relevant delinquency in relation to the conduct of the case: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; Oshlack v Richmond River Council (1998) 193 CLR 72; Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) (2008) 65 ACSR 324. 15. The most common occasions on which indemnity costs are ordered are where an offer of compromise, including by way of a Calderbank letter, has been made. Other cases include where proceedings are commenced or continued where they have no chance of success (Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12); where the proceedings amount to an abuse of process (Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359); or where there has been some unreasonable or delinquent conduct on the part of the parties. 16. The plaintiff/cross-defendant submits that the Court should make no order as to costs in this case. This is said to be on the basis that the effect of the ultimate outcome is that the defendant/cross-claimant will succeed in some respects (as a result of the plaintiff/cross-defendant not pressing its claim and agreeing to two orders in the cross-claim) and the plaintiff/cross-defendant succeeding in other respects (being the relief given up by the defendant/cross-claimant in the cross-claim). 17. The plaintiff/cross-defendant accepts that it has effectively surrendered its claim and capitulated to the defensive aspects of the cross-claim, being the claims in respect of the Deed and the caveatable interest in the Rydalmere property. However, it submits that the abandonment of its claim and consent to the limited orders in the cross-claim was done so in circumstances where its case was not hopeless and on a no admissions basis. 18. The defendant/cross-claimant submits that the appropriate order in this case is for the plaintiff/cross-defendant to pay its costs on an indemnity basis. This is because, it was said, the proceedings are an abuse of process as they involved suing on a debt which had already been determined by way of the Local Court judgment. The defendant/cross-claimant also relied on other matters raised in its defence and cross-claim, including the argument there was no caveatable interest and the Contracts Review Act claim. 19. Having heard and considered the submissions of the parties, I am not persuaded that there is anything which provides a just basis to depart from the usual order which would require the plaintiff/cross-defendant to pay the defendant/cross-claimant's costs of the proceedings on an ordinary basis. The reasons for this are as follows. 20. The abandonment of a claim by a plaintiff is not sufficient, in itself, to warrant an order for indemnity costs: see Joseph Lahoud & Anor v Victor Lahoud & Ors [2006] NSWSC 126 at [38]. This is particularly so in this case where the abandonment by the plaintiff/cross-defendant was on a no admissions basis and was made very soon after the defendant/cross-claimant served an amended defence, being on 1 March 2019, and the evidence on which it seeks to rely, being the affidavit of Christopher John Bevan sworn 27 February 2019 and the affidavit of Franz Boensch sworn 1 March 2019. This is not a situation where the plaintiff/cross-defendant has abandoned its claim at the very last minute and on the morning of the hearing well after it had been appraised of all the defences and evidence on which the defendant/cross-claimant sought to rely. 21. I accept that a hopeless case being commenced and continued may justify the award of indemnity costs. However, based on the limited material put before the Court at the hearing on costs, this is not a case which can, in my view, be characterised as hopeless, including as it related to the validity of the Deed and the Contracts Review Act defence. While it is accepted that the defendant/cross-claimant did not obtain independent legal advice prior to executing the Deed, the evidence put forward to the Court indicates that the defendant had an opportunity to consider and get independent legal advice on the Deed. A draft of the Deed had been provided to the defendant/cross-claimant approximately three weeks before it was executed, the defendant/cross-claimant was asked on numerous occasions to consider the Deed and provide comments, and he had an opportunity to, and did in fact, negotiate the terms of the Deed. 22. I am also not satisfied that the commencement and maintenance of these proceedings are an abuse of process as alleged by the defendant/cross-claimant. This case was commenced in respect of the caveat and has, at least since 30 October 2017, been about whether the plaintiff/cross-defendant holds and is entitled to enforce a mortgage. I accept that the terms of the statement of claim filed 31 March 2017 sought to obtain judgment in the amount of $99,336.61, which includes the amount of the judgment in the Local Court proceedings. However, as submitted by counsel for the plaintiff/cross-defendant, this claim was made to support the claim of the caveatable interest and the mortgage. 23. In any event, that pleading was overtaken by the amended statement of claim on 30 October 2017, which does not seek judgment or damages in any sum by the plaintiff. 24. Further, I am not satisfied that it is an abuse of process to maintain proceedings seeking a declaration as to the enforceability of security in respect of a debt which is the subject of a judgment from the Local Court or in respect of which a bankruptcy notice has been issued by the plaintiff/cross-defendant. I accept the submissions of the plaintiff/cross-defendant's counsel that the time for election as a secured creditor arises, not on the issue of the bankruptcy notice, but upon the sequestration order when the creditor is then entitled to prove their debt in the bankruptcy. 25. Finally, in relation to the claim for indemnity costs, there was no evidence of any offers of compromise or Calderbank letters which would justify some special order other than the usual order in this matter. 26. I am, therefore, not satisfied that there are any special circumstances in this case which justify an indemnity costs order being made in favour of the defendant/cross-claimant. 27. As to the plaintiff/cross-defendant's claim that there should be no order as to costs, I accept that the defendant/cross-claimant has given up on eight prayers for relief claimed in its cross-claim. However, four of those were given up as they followed from the plaintiff/cross-defendant agreeing to an order that the Deed be set aside and an order directing it to withdraw the Caveat. The balance given up relate to the amount of the monies due and payable, an order that the cross-defendant pay to the cross-claimant compensation pursuant to s 74P of the Real Property Act 1900 (NSW) and damages from the cross-defendant. These matters do not appear to have been the subject of extensive evidence and include the amounts the subject of the Local Court judgment. 28. This is not a case in which the plaintiff/cross-defendant finds itself in the position where the proceedings have no further utility because of some intervening event that arose subsequent to the commencement of the case. Nor is it a case which has been settled without a hearing on the merits where a party has not capitulated or surrendered: see Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84; Freelancer International Pty Ltd v Matthew O'Kane [2019] NSWSC 159. 29. As counsel properly conceded, there has been a surrender and a capitulation by the plaintiff/cross-defendant and it has chosen to discontinue its claim. It has also consented to the key orders relating to the Deed and the Caveat as sought in the cross-claim. 30. In reality, this case has not been about proving a debt but has been about the validity of the security for that debt, being the Deed which was said to support the caveat. It was this case that has been given up by the plaintiff/cross-defendant and on which the defendant/cross-claimant has had success. 31. It was open to the Court to consider an apportionment of the costs on the basis that some of the relief in the cross-claim is no longer being pressed and the plaintiff/cross-defendant has had success on those issues. However, in the absence of submissions and evidence in support, it is not appropriate to seek to apportion the costs in this case in some arbitrary way. 32. For these reasons, I make the following orders: 1. The plaintiff's claim, as set out in the amended statement of claim dated 30 October 2017, be discontinued on the application of the plaintiff under UCPR r 12.1. 2. The Deed of Agreement and Mortgage dated 21 September 2015 between the defendant/cross-claimant and the plaintiff/cross-defendant (Deed) be set aside. 3. Direct the plaintiff/cross-defendant to withdraw caveat number AK72913T in respect of Folio 7366-5. 4. The plaintiff/cross-defendant to pay the defendant/cross-claimant's costs of the proceedings, including the costs of the hearing on 13 March 2019, except where the defendant/cross-claimant has otherwise been ordered to pay the plaintiff/cross-defendant's costs pursuant to prior orders of this Court in these proceedings. 5. Otherwise, dismiss the cross-claim dated 9 May 2017. 6. Note the undertaking given by the plaintiff/cross-defendant to the Court not to take any steps to enforce or otherwise rely on the Deed. ********** Amendments 14 March 2019 - Typographical error. 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: 14 March 2019