Birch v Glissen [2005] NSWSC 337

The defendant applied for costs on an indemnity basis in respect of the plaintiff’s unsuccessful application for an extension of a caveat. The caveat was lodged against property that was not owned by the defendant. In response to a submission that the Court had the power to amend the description of the interest described in the caveat , Justice McDougal stated:

Mr Johnson referred to s 74L of the Real Property Act 1900, but did not otherwise indicate the source of this power.  I referred Mr Johnson to the decision of McClelland J in Depsun Pty Ltd v Tahore Holdings Pty Ltd (1990) 5 BPR 11314.  His Honour there said, in substance, that s 74L empowered the Court to amend defects in the prohibitory provisions of caveats, but not in the provisions defining the estate or interest claimed.  It is apparent from his Honour’s decision in that case that he did not consider that there was any other source of power entitling the Court to amend the description of the estate or interest claimed by a caveat. 

The notice of motion was dismissed with costs.

The application for indemnity costs was based on the principle that the application for the extension of the caveat had no real prospects of success and that the plaintiff had acted unreasonably in seeking that relief: Oshlack v Richmond River Council (1998) 193 CLR 72; Harrison v Schipp [2001] NSWCA 13; NMFM Property Pty Ltd v Citibank Ltd [No 11] (2001) 109 FCR 77; and Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397.

Justice McDougal summarized the applicable principles:

… in White ACT (in liquidation) v G B White & Ors [2004] NSWSC 303].  I said:

“The basic rule is that a successful party is entitled to its costs on a party and party basis:  see for example Pt 52A r 32.  See also the judgment of Mason P in Rosniak v Government Insurance Office (1997) 41 NSWLR 608, 616.

It is clear, of course, that there is a discretion to award costs on the indemnity basis.  That follows from, among other sources, s 76(1) of the Supreme Court Act and Pt 52A r 32.

The basis upon which the discretion to award indemnity costs should be exercised has been examined in a very great number of cases.  But, as those cases make clear, the discretion is not confined or limited except to the extent that it is required to be exercised judicially:  see for example Harrison v Schipp [2001] NSWCA 13 (Giles JA, with whom Handley and Fitzgerald JJA concurred); see also Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248, 256-257.

What is required, in any case, is that the Court examine the facts of that case in the light of such statements of principle as may be relevant.  In the ordinary way, the Court will take into account, as offering guidance, statements of principle made by those to whom the particular judicial officer should have regard.

At the most basic level, the statements of principle indicate – not unsurprisingly – that there must be some sufficient special or unusual feature to justify departure from the ordinary rule.

I take the basic principle to be as stated by Gaudron and Gummow JJ in Oshlack v Richmond River Council (1998) 193 CLR 72, 9.  Their Honours said at:

“It may be true in a general sense that costs orders are not made to punish an unsuccessful party.  However, in the particular circumstance of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs, but for costs on a  ‘solicitor and client’ basis, or on an indemnity basis. The result is more fully or adequately to compensate the successful party to the disadvantage of what would otherwise have been the position of the unsuccessful party in the absence of such delinquency on its part.”

I read what their Honours said on the basis that “some relevant delinquency” does not mean moral delinquency or some ethical shortcoming, but delinquency bearing a relevant relation to the conduct of the case:  see for example Council of the Municipality of Botany v Secretary, Department of the Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412, 415; NMFM Property Pty Limited v Citibank Limited (No 2) (2000) 109 FCR 77.”

To that citation I add, from the judgment of Woodward J in Fountain Selected Meats, that it may be appropriate to order indemnity costs where the unsuccessful party, properly advised, should have known that it had no prospect of success:

“ I believe that it is appropriate to consider awarding ‘solicitor and client’ or indemnity costs whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success.  In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some willful disregard of the known facts or the clearly established law.  Such cases are, fortunately, rare.  But when they occur, the court will need to consider how it should exercise its unfettered discretion”.

I take his Honour’s statement to be an indication of a special or unusual feature sufficient to justify departure from the ordinary rule, or an instance of delinquency bearing a relevant relation to the conduct of the proceedings. 

Justice McDougal found that there was a basis for ordering indemnity costs, since the interest claimed in the caveat was bad and was inconsistent with clearly established principle. As a result the plaintiff’s application was a hopeless cause and an order for indemnity costs was justified.

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