OTR 323 Pty Ltd v Geoff Boyd Properties Pty Ltd

These proceedings were commenced by Summons filed on 22 February 2022. The plaintiff sought:

The defendant had served a lapsing notice in respect of the caveat at about the beginning of February 2022.

On 22 February 2022, orders for short service of the Summons were made, and the Summons was made returnable on 24 February 2022. On that occasion, an order was made under s 74K of the Real Property Act 1900 (NSW) extending the operation of the caveat until 4 March 2022. On 3 March 2022, an order was made extending the operation of the caveat to 11 March 2022.

On 11 March 2022, the Court made various notations and orders by consent, including:

The substantial matters in issue between the parties were thus resolved less than 3 weeks after the commencement of the proceedings. Unfortunately, the parties could not agree on the question of costs. Directions were made for that matter to be the subject of written submissions, with a view to it being determined on the papers.

The Court has considered the detailed submissions provided by the plaintiff (dated 25 March 2022 and 22 April 2022 in reply) and the defendant (dated 8 April 2022), and, as appropriate, the evidence referred to in those submissions. I do not consider (and neither party has submitted) that an oral hearing on costs is required.

The plaintiff seeks an order that the defendant pay its costs of the proceedings. Its central argument is that it is the successful party, the defendant having capitulated to it on the matter in dispute, namely, whether the Call Option Period had been extended to 30 June 2022. It was submitted that, whilst the lapsing notice was the catalyst for the urgent commencement of the proceedings, the primary cause of the litigation was the defendant’s denial that there had been an extension of the Call Option Period. It was further submitted that, even though there was no hearing on the merits, this was a case where it could be clearly seen that the plaintiff achieved a substantial victory.

The defendant submitted that in circumstances where there has been no hearing on the merits in respect of either the interim or final relief claimed, it is appropriate to make no order as to costs, to the intent that each party bears its own costs. It was submitted that the case is an example of one where the central issue is resolved by agreement without a hearing on the merits, and where both parties have acted reasonably, or at least not unreasonably. However, the defendant went on to submit that caveat AR718991, in which the plaintiff claimed a charge by virtue of an agreement dated 30 June 2020 and described as a contract for the sale of land, was defective. It was submitted that this proposition is supported by the fact that on 16 February 2022 the plaintiff lodged a further caveat, in which it claimed an estate in fee simple by virtue of an agreement dated 30 June 2020 and described as a Call Option Deed. The defendant further submitted that the plaintiff failed to engage with the defendant prior to the commencement of the proceedings as to whether the defendant would consent to the lodgement of the further caveat.

I note in passing that the further caveat remained an unregistered dealing (AR891011), as NSW Land Registry Services took the view that the further caveat appeared to contravene s 74O of the Real Property Act. The further caveat became the subject of the plaintiff’s claim for leave under that section. The defendant ultimately consented to the lodgement of the further caveat, as noted by the Court on 11 March 2022.

In my opinion, the appropriate exercise of the Court’s discretion as to costs pursuant to s 98 of the Civil Procedure Act 2005 (NSW) is to make no order as to the costs of the proceedings.

Whilst it is correct to say that in December 2021 the parties were in dispute as to whether the Call Option Period had been extended, there was no pressing need to commence proceedings to determine that issue. However, once the defendant served the lapsing notice in respect of caveat AR718991, the plaintiff was required to take steps if it wished to maintain its status as a caveator on the titles to the defendant’s properties. In this regard, the plaintiff lodged the further caveat on 16 February 2022, and filed the Summons on 22 February 2022 claiming, inter alia, interim relief under s 74K, or alternatively under s 74O, of the Real Property Act. In accordance with usual practice, the Summons also claimed final relief, including a declaration to the effect that the Call Option Period had been extended to 30 June 2022.

Within a short period, all of the issues between the parties were resolved by consent, apart from costs. The outcome, in short, was that the plaintiff would be permitted to lodge the further caveat (with caveat AR718991 presumably lapsing), and a declaration was made to the effect that the Call Option Period had been extended to 30 June 2022.

The plaintiff points to the declaration and says that it is thus the successful party. It is true that the plaintiff has achieved success in this regard. However, this has not occurred as a result of a determination on the merits, but rather as a result of an agreement reached at a very early stage in the proceedings. That agreement was reached in the context of proceedings that, in an immediate sense, were required, if at all, because of the service of the lapsing notice.

In circumstances where caveat AR718991 claimed an interest in the nature of a charge, it was not unreasonable of the defendant to serve the lapsing notice, regardless of the merits of its position on the Call Option Period issue. The lodgement of the further caveat can be seen as an implicit recognition by the plaintiff that caveat AR718991 was defective. Moreover, it cannot be said that the defendant has in any way acted unreasonably in the proceedings. Further, given the alacrity with which the agreement was reached, it cannot be said that the defendant is a party who, after litigating for some time, effectively surrenders to the other (see Nadilo v Eagleton [2021] NSWCA 232 at [9]; cf Franpina Developments Pty Ltd v John Anthony Arena Pty Ltd [2022] NSWSC 57 at [28]).

The consent given by the defendant to the 11 March 2022 orders (including the declaration) does not necessarily demonstrate a capitulation on its part (see Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [2], [6] and [33]). This is not a case, in my view, where the Court can feel confident that the plaintiff would almost certainly have succeeded had the matter gone to trial (see Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 625). It is of course not appropriate for the Court to embark upon an enquiry to determine what would have been the outcome had the matter proceeded to a hearing (see Nichols v NFS Agribusiness Pty Ltd (supra) at [31]-[33]).

I will add that the Court should be wary of imposing a costs order on a defendant who promptly agrees to orders to dispose of the issues in proceedings. That is particularly so in this case where the commencement of the proceedings was in reality prompted by the not unreasonable step, taken by the defendant, of serving the lapsing notice in respect of caveat AR718991.

As stated by Payne JA (with whom Meagher JA agreed) in Nichols v NFS Agribusiness Pty Ltd (supra) at [30]:

For the above reasons, the Court will make no order as to costs, to the intent that each party bear its own costs of the proceedings.