Category: Costs – Indemnity

17. An application for costs by registered proprietors against a caveator, and a consequential application for costs by all against the caveator’s solicitor, and his application for costs against them

 

Sekhon & Anor v Chandyoke and Ors [2018] VSC 327 (19 June 2018) T Forrest J.

The plaintiffs were a married couple.  The first defendant was the wife’s mother who caveated over a property owned by the couple.  The first defendant’s solicitor was separately represented on an application that he personally bear costs.  The judge had previously ordered removal of the caveat.  The first defendant had been advised by previous counsel that she had no caveatable interest and by her solicitor that there were issues with the caveat, including that there was significant doubt about the caveatable interest and her right to impugned funds.  The defendant conceded that there was no proper basis on which she could have defended the application for removal of the caveat but blamed her solicitor.

His Honour held –

1.      The defendant was made aware on numerous occasions, by both counsel and her solicitor, that she probably had no caveatable interest over the property, but refused to instruct her solicitor to remove the caveat.  Her conduct in the litigation was obstructive and sharp – she demonstrated contemptuous disregard for the litigation.  She persisted with a near hopeless case for the collateral purpose of recovering funds she believed to have been stolen from her but which she knew or ought to have known were unrelated to the property.  There were special or unusual circumstances sufficient to warrant an order that she pay the plaintiff’s costs of the litigation on an indemnity basis. [39]-[40], [42]

2.      To justify an order that the solicitor bear the costs it was unnecessary to establish dishonesty, obliquy or similar – misconduct, default or serious or gross negligence sufficed.  Although the solicitor was at times dilatory he acted for a very difficult client, who directly or indirectly obstructed the fair hearing of the caveat withdrawal application.  The solicitor on several occasions advised the client in effect that it was very likely she would lose and warning of the consequences.  It was also doubtful that the defendant would have taken advice no matter how forceful.  The principles applying to the application, whether under r 63.23 of the Supreme Court Rules or s 29 of the Civil Procedure Act showed that a non-party costs order was prima facie unjust, required caution and should only be made in a clear case.  This was not such a case. [41]

 

Sekhon & Anor v Chandyoke and Ors [2018] VSC 435 (7 August 2018) T Forrest J

 

This case was related to the previous application by the plaintiffs and the first defendant that the first defendant’s solicitor pay costs, which failed in the case referred to above.  The solicitor sought indemnity costs based on two offers before the costs hearing: 

(a) An offer to the plaintiffs on 23 March 2018 open for five days that the solicitor pay the plaintiffs’ costs of the proceeding fixed in the sum of $7500 within two business days;

(b) An offer to the plaintiffs and the defendant on 14 May 2018 open for five days that the application for costs against the solicitor be dismissed and the plaintiffs and defendant pay his costs of the application fixed in the sum of $6000 with a stay of 30 days.

His Honour held –

1.      The general rule that costs followed the event applied and so the plaintiffs and the first defendant were liable to pay the solicitor’s costs on a standard basis.  These costs would be awarded against the plaintiffs alone from 28 March, being from when it was reasonable for the solicitor to commence preparations for his defence, to 5 April, and against the plaintiffs as to half and the first defendant as to half from 6 April, being the date the first defendant filed a notice of waiver and intention to participate in the costs proceedings.   Notwithstanding that the solicitor was dilatory at times this did not justify application of any exceptions to the normal costs rule.  His Honour noted – “Solicitors cannot pick and choose their clients and ought not be judged too harshly when the sins of their clients are sought to be visited upon them”. [9]-[11], [16]-[18]

2.     Indemnity costs would not be awarded because rejection of the:

(a)   first offer was not unreasonable because it preceded any affidavit from the solicitor explaining his conduct; [13]

(b)   second offer was not unreasonable because, being an offer to undertake joint liability, neither party could accept the offer alone: they were an unlikely coalition and it would be unfair to penalise one for the unreasonableness of the other. [14]

 

6. Three County Court Cases

Today’s blog looks at three County Court cases from 2017, one on whether a contractual right to caveat created a charge/caveatable interest, one on whether a contract of sale existed so giving rise to an equitable and thus caveatable interest, the third on costs.

  • A mere contractual right to caveat, insufficient in this case: Tannous and Anor v Abdo [2017] VCC 304 (31 March 2017) Judge Macnamara.

The plaintiffs alleged that they agreed with Mr Abdo to purchase an interest in a bakery and paid money towards this, which went into the purchase of land by Mrs Abdo. At one point in the litigation to recover the sum paid towards the bakery the parties entered a document which included an undertaking by the Abdos not to sell this land and to permit the plaintiffs to lodge a caveat over it. They caveated claiming “an equitable interest as chargee”. His Honour held that whether, absent an express charging clause, an equitable interest in the nature of a charge was created by a contractual entitlement to lodge a caveat depended on the interpretation of the particular contractual provision: there was no principle establishing what implication must be drawn in all cases from authority to lodge a caveat in connection with an obligation to pay money. No charge was created here: for the plaintiff to succeed here there must be implied not just a charge but also a guarantee by Mrs Abdo of Mr Abdo’s alleged debt. The contractual language did not support creation of a charge. The agreement created at best a negative covenant not the deal with the property, creating no caveatable interest. 

  • No contract, no caveatable interest: Matthews v Knight & Anor [2017] VCC 1537 (27 October 2017) Judge Anderson.

 The facts of this case could be used in a University Exam Paper on whether or not a contract existed. The facts broadly were: delivery by an agent of three contracts (one for each of three properties) to a prospective purchaser; receipt by the agent of $1,000 partial deposit for each contract; the creation of three further contracts, partially reusing the former contracts, signed by the parties, requiring payment of a full 10% deposit by 15 September 2017, if necessary enforceable by reason of part performance; the solicitors acted as though there were enforceable contracts; the purchaser caveated; the balance of deposit was not paid; the vendor’s solicitors rejected a proposal to vary the contract and issued a rescission notice which was not complied with; the erstwhile purchaser engaged in an “opportunistic ploy” to suggest that contracts were still on foot; a further caveat.

The caveats were removed under TLA s. 90(3). The purchaser failed to satisfy the onus of demonstrating a serious issue to be tried that a contract and so an equitable interest in the land existed. There was no contract following the second contracts because: the second contracts were not intended as offers but if they had they were revoked or had lapsed; the purchaser’s purported acceptance of an alleged offer constituted by the delivery of the second contracts (ie the “opportunistic ploy”) did not accept the terms offered but proposed variation which variation the vendor never accepted.

  • Indemnity costs: Hooi & Anor v Lim & Anor [2017] VCC 949 (13 July 2017) Judge Cosgrave.

The first defendant caveated over land of which the plaintiffs were registered proprietors.  He alleged a constructive trust.  He subsequently stated that the basis of the caveat was wrongful diversion of monies and work from a partnership, but also acknowledged that he had no evidence that these monies (or what monies) had been used to purchase the land.  The plaintiffs requested removal of the caveat, asserted that the caveator had no caveatable interest, and foreshadowed indemnity costs.  Subsequently they applied for removal under the TLA s. 90(3).  The first defendant removed the caveat on day before hearing.    

Judge Cosgrave reiterated the legal principles for caveatable removal in conventional terms (roughly as set out in Blog 1) and noted that there was never any serious question to be tried that the defendant had the interest in land claimed.  As to costs his Honour held:

1. Awarding costs involved a discretionary exercise of the court’s powers. The relevant factors to consider in this context included: :

·   whether the caveat was maintained in circumstances where the defendant, properly advised, should have known there was no chance of success;

·    whether the caveat was being used as a bargaining chip;

·    whether the party lodging the caveat was a lawyer.

2.  Indemnity costs would be awarded for several reasons:

·  The first defendant had lodged the caveat without any proper basis, and knew or should have known this;

·  Unjustified allegations of fraud, in this case that land had been purchased with allegedly misappropriated funds, attracted liability for indemnity costs.  One solicitor should not make such an allegation against another without proper basis, exacerbated here because the defendant believed that the plaintiffs had to consent to the lodgment yet had lodged unilaterally.  This increased the likelihood that lodgment was for a collateral or improper purpose; 

·   The first defendant had ignored warnings to remove the caveat; 

·    The interest claimed in the caveat was exaggerated.  

 

2. When does a caveat lapse and can the effect of lapse be avoided?

Tawafi v Weil [2017] VSC 643 (21 August 2017) Digby J.

Section 90(1)(e) of the Transfer of Land Act 1958 provides that, subject to certain exceptions, a caveat lapses as to land affected by a transfer upon the expiration of thirty days after notice by the Registrar that a transfer has been lodged for registration.  If within this period the caveator appears before a court and gives an undertaking or security the court may direct the Registrar to delay registration for a further period, or may make such other order as is just (s. 90(2)).  If the Registrar is of opinion that the doing of any act is necessary or desirable, then, if the act is not done within such time as the Registrar allows, the Registrar may refuse to proceed with any registration (s. 105(a)).

The timeline was –

11 April 2017         Plaintiff enters contract to purchase certain land. 

30 May                  Defendant caveats on the grounds of “part performed oral agreement” et cetera with the registered proprietor. 

26 June                  Settlement of the purchase without the caveat being removed. 

28 June (about)   Lodgment of the instrument of transfer (Transfer) for registration. 

29 June                 Registrar notifies caveator that pursuant to s. 90(1) the caveat would lapse on 31 July unless the caveator obtained an order pursuant to s. 90(2).  No order was obtained. 

2 August               Caveator commences a proceeding against registered proprietor inter alia claiming declarations of a proprietary interest in the land and for other relief in substance supporting the existence of the caveat and preventing registration of the Transfer.  An

agreement with the registered proprietor proprietor in early 2016 is alleged whereby the caveator agreed to lend $86,000 on security of this land, followed by that loan.  The second defendant was the conveyancer acting for both sides and the third defendant was the purchaser.  

3 August               The Registrar accordingly issues a Notice of Action prohibiting registration of further dealings until withdrawal of that notice or further order. 

16 August             Purchaser files Originating Motion seeking order for registration and Summons for dismissal of the caveator’s proceeding. 

Digby J ordered the Registrar to register the Transfer and remove the Notice of Action.  His Honour reasoned –

  1. The counting of days under s. 90(1) commenced from 30 June, being the day after the notice, thirty days elapsed on Sunday 30 July, and so the expiry date was 31 July. Accordingly the caveator was out of time.  It was irrelevant that s. 105(1) might have achieved a similar result in suspending the progress of registration. [24]-[25]
  2. The judicial approach to caveat removal applications was analogous to that in applications for injunction, ie the burden of proving the caveatable proprietary interest and maintaining the caveat was upon the caveator who must also establish on the balance of convenience that the caveat should be maintained until the trial of the contested proprietary interest. However, because the caveat had lapsed this case was not the usual caveat removal contest. [17]-[19]
  3. In any event the caveator had not raised a sufficient prima facie case of or arguable triable issue concerning the asserted proprietary interest. Further, the balance of convenience heavily favoured the purchaser because: the asserted triable issue was palpably weak; and the purchaser would be prejudiced by deferral of registration, particularly having entered a building contract to improve the property which could not be financed until the financier could register a mortgage. [28], [35]-[38]
  4. Indemnity costs were awarded against the caveator, particularly because of her very weak case, the purchaser having previously asked the caveator in writing to identify an arguable caveatable interest, without proper response, and given appropriate warning to the caveator. [43] – [59]