PLAINTIFF SEEKS FOR INDEMNITY COST AFTER SUCCESSFUL JUDGMENT AGAINST THE DEFENDANT ON THE GROUND THAT THE BASIS OF THE DEFENDANT’S CLAIM IS BASED ON A SHAM TRANSACTION

CIFG (Australia) Pty Ltd v Perna (Costs) [2020] VSC 735 (10 November 2020)

This case involves the plainitff asking the court that the defendant pays for indemnity costs after the court accepted the plaintiff’s submission that the defendant’s claim to an equitable charge is found to be based on a sham transaction.

Facts:

The court published reasons (Primary  Reasons) for a decision that the plaintiffs were entitled to be paid the whole of the amount, and any interest accrued thereon, out of the surplus funds from the sale of a property.

The court concluded that subject to the making of submissions as to costs by the parties, the first defendants should pay the costs of the plaintiffs incurred in connection with this proceeding.

The Court accepted the plaintiffs’ submission that there was no basis for the first defendants’ claim in priority to the Funds and found that the ground for their alleged caveatable interest (being a purported equitable charge arising under the Perna & Grace Agreement) was based upon a ‘sham’ agreement.

The plaintiffs sought an order that the first defendants pay indemnity costs on a joint and several basis because the nominated basis for the lodging of the Perna & Grace Caveat was without merit or any reasonable basis. The Perna & Grace Agreement was not a valid agreement which could give rise to the first defendants having any equitable interest in the Land, and consequently the Fund.

Issue: Is the plaintiff entitled to indemnity costs?

Law:

• The costs of and incidental to all matters in the Supreme Court are in the discretion of the Court, and the Court has full power to determine by whom and to what extent the costs are to be paid: Supreme Court Act 1986 s 24(1)
• Fountain Selected Meats (Sales) Pty Ltd v Int Produce Merchants Pty Ltd ((1988) 81 ALR 397 at 401)- “it is appropriate to consider awarding ‘solicitor and client’ or ‘indemnity’ costs, whenever it appears that an action had 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 wilful disregard of the known facts or the clearly established law.”

Analysis:

The court agrees with the submissions made by the plaintiffs that this is a proper case for the costs to be awarded on an indemnity basis in relation to this proceeding. The first defendants ought to have known that, quite apart from the validity of the Perna & Grace Agreement, their claim to an equitable charge over the Land and thus a claim to the Fund was subject to the prior equitable interest of the plaintiffs, if that was established, and that their charge was inchoate, because they had not incurred any loss or liability that could give them a claim on the Fund pursuant to their charge.

Conclusion: The plaintiff js entitled to the costs of this proceeding on an indemnity basis.

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