Smits v Cugola[2021] QSC 161

SUPREME COURT OF QUEENSLAND

Jackson J:

1. [1]
   On 10 June 2021 the court heard and decided extemporaneously six applications between the parties,^[1] that I will refer to as the “principal reasons”.  The plaintiff brought separate applications for summary judgment against the first and second defendants and against the third and (possibly) fourth defendants.  The first and second defendants brought a summary judgment application against the plaintiff and an application to remove a caveat over their home, described as Lot 14 in the principal reasons.  The third and fourth defendants brought an application for summary judgment against the plaintiff and an application to remove a caveat over their home, described as Lot 3 in the principal reasons. 
2. [2]
   In the result, the plaintiff’s applications for summary judgment were wholly unsuccessful and dismissed.  The third and fourth defendants were wholly successful in their cross application for summary judgment, so that the claim against them was dismissed and also on their application to remove the caveat over Lot 3, that was ordered to be removed.  The second defendant was wholly successful on her application for summary judgment, so that the claim against her was dismissed and the first and second defendants were wholly successful on their application to remove the caveat over Lot 14, that was ordered to be removed.  The first defendant was partially successful on his application for summary judgment, so that parts of the plaintiff’s claim against him were dismissed, leaving the remaining part of the plaintiff’s claim against the first defendant to proceed.
3. [3]
   Additionally, before the hearing of the applications involving the first and second defendants could proceed, the court heard and decided an application by the plaintiff, ostensibly made as part of the application for summary judgment against the first and second defendants, that the first and second defendants be restrained from engaging their senior counsel.  That application was also dismissed.
4. [4]
   In these circumstances the defendants apply for various orders for costs. 
5. [5]
   The third and fourth defendants apply for an order that the plaintiff pay their costs of the whole of the proceeding, including the applications against and by them.  Under s 15 of the Civil Proceedings Act 2011 (Qld) and r 681 of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”), the costs of a proceeding, including an application in the proceeding, are in the discretion of the court and are to follow the event unless the court otherwise orders. 
6. [6]
   Accordingly, unless another special order should be made, the costs of the proceeding including the applications heard and decided on 10 June 2021 as between the plaintiff and the third and fourth defendants should be paid by the plaintiff. 
7. [7]
   The plaintiff’s written submissions are not useful.  To a large extent, they consist of indirect or direct arguments to the effect that the decisions made extemporaneously on the various applications were wrongly made or attended by error or doubt and complaints that other matters were not decided.
8. [8]
   Costs would ordinarily be assessed on the standard basis under r 702 of the UCPR.  However, under r 703, the court may order costs to be assessed on the indemnity basis.  The third and fourth defendants apply for an order that the costs be assessed on the indemnity basis because the plaintiff was unreasonable in rejecting a Calderbank offer.  That offer was that the plaintiff discontinue the proceeding against the third and fourth defendants who would consent to the discontinuance and not seek payment of legal or other costs. 
9. [9]
   The third and fourth defendants’ Calderbank offer was accompanied by three stated points, being that the plaintiff had released them from any liability by a deed of release that I described in the principal reasons as the 2012 Smits de Wit Deed of Settlement, that the plaintiff’s alleged cause of action for contribution was time-barred because it arose more than six years before the proceeding was started against the third and fourth defendants and that the plaintiff’s alleged rights of subrogation to the rights and remedies of the Bank of Queensland as creditor did not arise because the debt of the principal debtor was not paid in full.  As the principal reasons show, the third and fourth defendants succeeded on each of those grounds. 
10. [10]
    In my view, the plaintiff was unreasonable in not accepting the third and fourth defendants’ Calderbank offer and it should be ordered that the costs that the plaintiff is ordered to pay to the third and fourth defendants be assessed on the indemnity basis. 
11. [11]
    The first and second defendants apply for orders for costs that are complex and, in some respects, do not reflect precisely the results on the relevant events of the applications and the proceeding that were heard and decided on 10 June 2021.  Up to 19 February 2021, they apply for an order that the plaintiff pay their costs of the plaintiff’s application for summary judgment.  After 19 February 2021, they apply for an order that the plaintiff pay 85 per cent of their costs of the plaintiff’s application for summary judgment and their applications for summary judgment and to remove the caveat over Lot 14.  In addition, they seek an order that the plaintiff pay 85 per cent of their costs of the claim.  There is also a distinction between some costs sought on the indemnity basis and some costs sought on the standard basis up to or from various dates. 
12. [12]
    One relevant submission made by the plaintiff is that, to the extent that questions were decided adversely to the plaintiff, they were not so clearly unarguable that an order for costs on the indemnity basis should be made against him. 
13. [13]
    In my view, the various results on the events of the different applications and the proceeding as between the plaintiff and the first and second defendants mean that the orders sought by the first and second defendants should not be made. 
14. [14]
    Instead, in my view, it should be ordered that the plaintiff pay the second defendant’s costs of the proceeding, including the applications heard and decided on 10 June 2021 against and by her, because she was wholly successful on each of the events of the applications and in obtaining judgment in the proceeding.  It may be acknowledged that the first and second defendants had the same lawyers appearing so that some or most of their costs will be common costs that may have to be apportioned for the purpose of giving effect to the costs orders that should be made.  But that is, in principle, the correct way to resolve that problem.
15. [15]
    As between the plaintiff and the first defendant, the plaintiff was wholly unsuccessful on his application for summary judgment and the costs of that application would follow that event.  On the first defendant’s application for summary judgment, the first defendant was partly successful, to the extent of the dismissal of most of the plaintiff’s claim against him, as reflected in the orders made on that application.  It follows, in my view, that it is appropriate that the plaintiff pay the costs of those questions and the court should declare or determine that 75 per cent of the costs of the first defendant’s application for summary judgment are attributable to the question or part of the proceeding on which the first defendant was successful. 
16. [16]
    Otherwise, the costs of the proceeding as between the plaintiff and the first defendant should be made as costs in the proceeding between those parties.
17. [17]
    The first and second defendants make detailed submissions as to why the costs ordered to be paid by the plaintiff to them should be ordered to be assessed on the indemnity basis.  They are based on the plaintiff’s unreasonable conduct because in part the proceeding was commenced in wilful disregard of known facts or clearly established law and in other parts was supported by allegations that ought never to have been made that demonstrated irresponsibility on the part of the plaintiff.  Particular reference was made to the grounds of the first and second defendants’ success in the proceeding and the applications, the distracting application to restrain their senior counsel from acting, as well as the prolix nature of the affidavit material filed by the plaintiff and the history of delay in bringing the applications to hearing. 
18. [18]
    In my view, care should be taken before an order for indemnity costs is made against an unsuccessful party purely because it did not have a real prospect of success on a claim or part of a claim.  Sometimes, as in this case, detailed examination of the material and the arguments is required to clearly establish that a party does not have a real prospect of success.  That is not the same as saying that the party has behaved unreasonably or misconducted itself for the purposes of making an order that costs be assessed on the indemnity basis.
19. [19]
    Looking at the matter broadly, in my view, the plaintiff was unreasonable in bringing the claim against the second defendant.  To the extent that the claim was brought against her on the basis that the plaintiff was subrogated to the rights and remedies of the Bank of Queensland against her, called the BOQ Stand-in Claims in the principal reasons, the plaintiff’s claim failed as not having a real prospect of success because the debt payable by the principal debtor to the Bank of Queensland had not been paid in full.  That was a clear and relatively short question of fact and law that was decided on 10 June 2021.  Nevertheless, to that extent, I do not consider the plaintiff’s claim against the first and second defendants was brought, when started, in a way that amounted to misconduct or unreasonable conduct for the purpose of an order for indemnity costs. 
20. [20]
    On the other hand, the plaintiff’s claim against the second defendant as a party to and guarantor of what is described as the plaintiff’s loan agreement in the principal reasons was, in my view, a part of the proceeding that was brought without a proper basis.  No arguable factual basis for that claim against the second defendant was identified in the plaintiff’s pleadings or affidavit material. 
21. [21]
    As against the first defendant, the plaintiff’s position on the claim to be subrogated to the Bank of Queensland’s rights and remedies is the same, but his claim for relief based on the plaintiff’s loan agreement is based on arguable grounds, to the extent it is not barred by a limitation provision. 
22. [22]
    In the result, in my view, it is not appropriate to order that the costs of the first and second defendants ordered to be paid by the plaintiff be assessed on the indemnity basis.