Cody v O'Neill
[2019] VSC 94
•26 February 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S CI 2017 02259
| BELINDA VERA CODY | Plaintiff |
| v | |
| RONALD EDWARD O’NEILL | First Defendant |
| KATHLEEN MARY O’NEILL | Second Defendant |
| REGISTRAR OF TITLES | Third Defendant |
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JUDICIAL REGISTRAR: | Matthews JR |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 20 November 2018 |
DATE OF RULING: | 26 February 2019 |
CASE MAY BE CITED AS: | Cody v O’Neill |
MEDIUM NEUTRAL CITATION: | [2019] VSC 94 |
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COSTS – Plaintiff partially successful – Costs follow event – Standard basis – Supreme Court (General Civil Procedure) Rules 2015, r 63.31 – Plaintiff abandoned other claims – Effective discontinuance of part of proceeding – Starting point discontinuing party pays costs – Not displaced – Standard basis – Supreme Court (General Civil Procedure) Rules 2005, rr 25.05 and 63.15 – ASTA v Amasya [2016] VSCA 186; Lai Qin (1997) 186 CLR 622; Soteriadis v Nillumbik Shire Council [2015] VSC 363 – Indemnity costs – Calderbank offers – Not unreasonable to reject offers – Chen & Ors v Chan & Ors [2009] VSCA 233; Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; Gunns Ltd & Ors v Marr & Ors (No 4) [2007] VSC 91
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr W Stark | Alpass & Associates |
| For the First and Second Defendants | Mr A Burnett | Petersen Westbrook Cameron Solicitors |
JUDICIAL REGISTRAR:
Introduction
This proceeding concerns the ownership of a strip of land which is fenced into the plaintiff’s property at 44 Simpson Street, Kyneton (‘Plaintiff’s Land’) but which appears on the certificate of title of the property at 12 Powlett Street, Kyneton (‘Defendants’ Land’). I shall refer to the disputed land as the Subject Land. A garage was built many years ago on the Plaintiff’s Land and part of the garage was built over the Subject Land. The plaintiff claims ownership of the Subject Land through adverse possession (‘Adverse Possession Claim’). She also makes claims in nuisance and trespass by reason of the first and second defendants’ alleged conduct in respect of entering upon the Plaintiff’s Land and the Subject Land and carrying out excavation works near the garage and erecting a wall inside the garage. The plaintiff seeks injunctive relief to restrain the defendants from this conduct (‘Injunction Claim’) and she also claims loss and damage arising from that conduct (‘Damages Claim’).
The third defendant, as is common in such matters, informed the Court[1] that he did not intend to appear in the proceeding and he played no role in the proceeding. Where I refer to ‘the defendants’ in these reasons, I am referring to the first and second defendants.
[1]By letter dated 11 July 2017.
By their defence filed 29 August 2017, the defendants reject all of the plaintiff’s claims.
On 17 May 2018, her Honour Justice Emerton made a declaration by consent, in the form set out in paragraph C of the prayer for relief in the statement of claim, which established that the plaintiff owned the Subject Land through adverse possession (‘Declaration’). Orders were subsequently made by consent on 6 July 2018 by her Honour that the third defendant amend the certificates of title in accordance with the Declaration (‘Adverse Possession Orders’). Effectively, the Declaration and the Adverse Possession Orders meant that the Adverse Possession Claim had been dealt with.
On 3 October 2018, the plaintiff’s new solicitor informed the Court that she no longer wished to pursue the balance of her claims in the proceeding, being the Injunction Claim and the Damages Claim. The Court was informed that the issue of the costs of the proceeding was the only issue remaining to be dealt with. On 5 October 2018, I made orders by consent, setting out a timetable for the provision of affidavits and submissions in respect of the costs of the proceeding.
Both parties seek different outcomes in relation to costs. The plaintiff seeks orders that the defendants pay her costs of the proceeding on an indemnity basis, alternatively on a standard basis. The defendants seek orders that for the period up to and including 14 December 2017, there be no order as to costs of the proceeding, and for the period after that date, the plaintiff pay the defendants’ costs on an indemnity basis.
The plaintiff relies on the following material in support of her application:
(a) An affidavit of Stephen Wilcox, the plaintiff’s then solicitor, sworn 17 May 2018;
(b) Her affidavit sworn 22 May 2018; and
(c) The documents annexed to her submissions dated 1 November 2018.
The defendants rely on the following material in support of their application:
(a) The affidavit of Gregory Michael Westbrook sworn 5 March 2018. Mr Westbrook is a solicitor with Petersen Westbrook Cameron Solicitors, the solicitors for the defendants in this proceeding; and
(b) The affidavit of the first defendant sworn 22 May 2018.
The Court would have been better assisted had the parties prepared affidavits which went directly and succinctly to the matters in issue on these applications, as there were a number of events referred to which post-dated the affidavits relied upon and of which the Court either did not have evidence or documents.
For the reasons which follow, I will make orders that the defendants are to pay the plaintiff’s costs of the proceeding up to and including 14 December 2017 on a standard basis, and that the plaintiff is to pay the defendants’ costs of the proceeding after 14 December 2017 on a standard basis. While this will include any reserved costs, it does not displace any costs orders previously made in respect of the proceeding or part thereof.
Background
It is necessary to further set out some of the background to the dispute between the parties and this proceeding in order to consider where the liability for costs should lie.
On 20 November 2007, the plaintiff became the registered proprietor of the Plaintiff’s Land. At that time, the garage had already been constructed: the plaintiff deposes that at the time she became the owner, the garage was on the property.
On 19 November 2015, the defendants became the registered proprietors of the Defendants’ Land.
The plaintiff alleges that the defendants interfered with the garage and its foundations from around November 2015 to mid-2016.
On 15 December 2016, the plaintiff lodged a caveat on the title to the Defendants’ Land, claiming ownership of the Subject Land by adverse possession.
This proceeding was commenced on 13 June 2017 and the defendants filed their defence on 29 August 2017.
On 12 October 2017, the parties attended a mediation, pursuant to orders made by the Court by consent on 5 October 2017. They reached an agreement as to their dispute and executed terms of settlement (‘Settlement Terms’). The Settlement Terms contained, inter alia, the following terms:[2]
[2]Annexed to the Plaintiff’s submissions.
1. The Defendants will agree not to contest any claim for adverse possession of the [Subject Land] on the following terms:
a. the Plaintiff provides written evidence of the continuing occupation of the [Subject Land] to the Defendants within 14 days; and
b. the Defendants will assess that evidence and advise of their position within 14 days of receipt.
2. If the Defendants believe that insufficient evidence of continuing occupation of the [Subject Land] has been produced then the proceeding shall be listed for directions.
3. If the Defendants believe that sufficient evidence of continuing occupation of the [Subject Land] has been produced then
a. the parties shall arrange for consent orders to be filed with the Court providing for the following:
i.the Court makes the declaration sought in paragraph C of the prayer for relief;[3]
[3]Paragraph C of the prayer for relief seeks a declaration that the Subject Land, which appears on the certificate of title to the Defendants’ Land, has been absolutely possessed as against the Defendants.
ii.the proceeding to be otherwise dismissed; and
iii.the Defendants pay the Plaintiff’s costs of the proceeding, to be taxed in default of agreement;
b. the parties agree to mutually abandon any rights, entitlements or liabilities concerning the [Subject Land];
c. the Defendants will desist from entering the Plaintiff’s property without an invitation; and
d. the Plaintiff will desist from entering the Defendant’s property without an invitation: and
e. the Defendants will remove the wall constructed by the Defendants inside the garage and repair the holes in the external garage walls with similar materials to the existing wall;
f. the Defendants will reinstate the temporary supports to the western garage wall that was installed by the plaintiff, provided that Shane Muir, engineer [balance of sub-clause is illegible on the copy of the Settlement Terms produced to the Court]
While there was no evidence of this before the Court, it was common ground between the parties that the plaintiff supplied documentation to the defendants pursuant to clause 1 of the Settlement Terms soon after 12 October 2017 and that this documentation was not accepted by the defendants as sufficient evidence of continuing occupation of the Subject Land. While there was no copy of it produced to the Court, it was common ground that this documentation included a statutory declaration signed by Angelo Phillip Russo. Mr Russo was the registered proprietor of the Plaintiff’s Land between 9 April 1986 and 7 August 2002.
A further directions hearing was held before me on 17 November 2017 where I made orders by consent that the parties attend a further mediation, which was to be concluded by 23 February 2018. There is no evidence before me to indicate whether that mediation occurred.
On 8 December 2017, the plaintiff’s then solicitor, Stephen Wilcox, sent an email to Mr Westbrook which attached a deed of assignment of possessory rights dated December 2017 (‘Assignment Deed’).[4] In that email, Mr Wilcox stated that he believed that the Assignment Deed together with the statutory declarations previously provided were ‘clear evidence’ that the plaintiff had acquired the Subject Land by adverse possession. In that same email, Mr Wilcox stated that the plaintiff was prepared to ‘continue with the settlement reached at the mediation, on the basis that consent orders are filed with the court within the next 7 days’, and that this offer was a Calderbank offer such that if not accepted and the plaintiff was ultimately successful in the proceeding, the plaintiff would seek her costs of the proceeding on an indemnity basis (‘Plaintiff’s Calderbank Offer’).
[4]Annexed to the Plaintiff’s submissions.
The Assignment Deed is between Mr Russo as transferor and the plaintiff as transferee.
The recitals to the Assignment Deed state, inter alia, that:
(a) Mr Russo was, during the period in which he was the registered proprietor of the Plaintiff’s Land, in continuous, exclusive and uninterrupted possession of the Subject Land;
(b) Mr Russo sold the Plaintiff’s Land to Georgal Nominees Pty Ltd and it became the registered proprietor of the land;
(c) The Subject Land was fenced in with the Plaintiff’s Land and had been so fenced since at least 1986;
(d) Although the Subject Land was fenced in with the Plaintiff’s Land, Mr Russo retained the possessory rights to the Subject Land;
(e) The plaintiff has been the registered proprietor of the Plaintiff’s Land since 20 November 2007 and has been in possession of the Subject Land since then; and
(f) Mr Russo agreed to transfer his possessory rights to the Subject Land to the plaintiff.
The operative part of the Assignment Deed states as follows:
[Mr Russo] hereby conveys and assigns to [the plaintiff] all his right title and interest (if any) in the Subject Land to hold same unto [the plaintiff] her executors, administrators, transferors and assigns forever, absolutely.
On 14 December 2017, Mr Westbrook responded by letter to Mr Wilcox’s 8 December email (’14 December letter’). Relevantly, that letter stated:[5]
Our clients were surprised by the contents of the [Assignment Deed], in particular that your client has acknowledged that Mr Russo retained possessory rights in the [Subject Land]. However, our clients accept that Mr Russo has now transferred his rights to your client, and consent to the Court making the declaration sought in paragraph C of the prayer for relief.
In so far as the Plaintiffs claim relates to alleged damage to the wall, trespass and damages, our clients believe that the Plaintiff has not and will not be able to establish her case, particularly noting that the [Assignment Deed] implicitly acknowledges that Mr Russo retained rights to the [Subject Land]. Our clients remain willing to desist from entering the Plaintiff’s property without invitation and invites [sic] the Plaintiff to abandon her claims sought in Paragraphs A, B, and E.
On the basis of the above, our clients are willing to pay 50% of the Plaintiff’s costs of the proceeding to date (to be taxed in default of agreement).
[5]Annexed to the Plaintiff’s submissions.
In effect, by this letter the defendants conceded the plaintiff’s Adverse Possession Claim, partially addressed the Injunction Claim insofar as they would not enter upon the Plaintiff’s Land without invitation, and rejected the balance of the Injunction Claim and all of the Damages Claim. The 14 December letter expressed this as a Calderbank offer, stating that if it was not accepted then the defendants would seek indemnity costs from the date of the letter (‘Defendants’ Calderbank Offer’).
On 17 May 2018, Mr Wilcox filed a summons on behalf of the plaintiff seeking injunctive relief. As well as seeking declarations and orders to give effect to the defendants’ concession in respect of the Adverse Possession Claim, the plaintiff also sought injunctions preventing the defendants from interfering with the garage and claiming that they have rights to interfere with the garage. As mentioned above, on that date Emerton J made the Declaration by consent, and she also dismissed the remainder of the plaintiff’s summons. After receiving written submissions from both parties as to the costs of the summons, her Honour made no order as to costs.
The Adverse Possession Orders were made by her Honour on 6 July 2018.
As well as the proceeding in this Court, from around mid-2016 there has been dispute between the parties, involving the Macedon Rangers Shire Council and building inspections regarding the garage. It is not necessary to set out the detail of that here, but suffice to say that the defendants pursued an appeal to the Victorian Building Appeals Board against a decision of the Council to order that work on the garage be stopped (‘BAB Proceeding’).
Applicable principles
The starting point regarding costs
The starting point in respect of costs is the Court’s general power as to costs. Unless otherwise expressly provided by any Act or by the Rules, 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.[6]
[6]Supreme Court Act 1986 (Vic), s 24(1) (‘Supreme Court Act’).
Under r 63.31 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’), the usual order as to costs is an award of costs to the successful party on a standard basis.[7] Therefore, any party seeking a departure from this course needs to demonstrate a basis for the Court exercising its discretion to make a special costs order.
[7]See also Oshlack v Richmond River Council (1998) 193 CLR 72, 97.
Applicable principles where there has been no hearing on the merits
It was unclear to me whether the plaintiff was seeking to discontinue the proceeding. Beyond saying that she no longer wished to proceed with the balance of the proceeding, being the Injunction Claim and the Damages Claim, after obtaining the Adverse Possession Orders, there was no precision about the manner in which the plaintiff proposed to dispose of the proceeding.
I raised this with counsel at the hearing, and the plaintiff’s counsel indicated that the plaintiff was discontinuing the proceeding. The defendants’ counsel said that as there had not been a notice of discontinuance filed, he relied on the line of authorities as per Lai Qin (set out below).
The defendants pointed to ASTA v Amaysa.[8] In that case, Whelan and Ferguson JJA (as her Honour then was) stated, in respect of costs where there had not been a hearing on the merits:[9]
[8][2016] VSCA 186 (‘ASTA Developments’).
[9]ASTA Developments, [24]-[26].
A problem in dealing with arguments about costs in a case such as this is that there has been no hearing on the merits. As McHugh J pointed out in Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (‘Lai Qin’):[10]
[10](1997) 186 CLR 622, 624 (citations omitted).
In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.
In Australian Securities Commission v Aust-Home Investments Ltd,[11] Hill J summarised the following principles concerning the exercise of a court’s discretion to order costs where the parties to a proceeding no longer wish to continue:[12]
[11](1993) 44 FCR 194.
[12]Ibid 201 (citations omitted).
(1)Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a cost order.
(2) It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial. …
(3)In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them.
(4)In a particular case it might be appropriate for the Court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation.
(5)Where the proceedings terminate after interlocutory relief has been granted, the Court may take into account the fact that interlocutory relief has been granted.
In Lai Qin, McHugh J endorsed this approach:[13]
In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. … In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. …
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. …
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.
[13]Lai Qin (1997) 186 CLR 622, 624–5 (citations omitted).
In ASTA Developments, the proceeding had come to an end (apart from the question of costs) after the Court of Appeal exercised its summary power to dismiss the applications; they were not discontinued by the applicant. As a result, r 64.29(4) of the Rules had no operation[14] and the Court of Appeal had its usual discretion to make such order as to costs as it thought fit, pursuant to r 64.38(1).[15]
[14]Rule 64.29(4) of the Rules provides that ‘[u]nless the Court of Appeal … otherwise orders or the parties otherwise agree, an applicant or appellant who … has filed a notice of discontinuance of the whole of an application or appeal shall pay the costs of each party to the application or appeal’.
[15]ASTA Developments, [19], [23].
However, that is not analogous with what has occurred here. It seems to me that the plaintiff has elected not to pursue her Injunction Claim and Damages Claim, such that she is effectively discontinuing the proceeding against the defendants, having achieved her Adverse Possession Claim. It therefore seems to me that this engages rr 25.05 and 63.15 of the Rules.
Rule 25.05 of the Rules provides as follows:
Where a proceeding, counterclaim or claim by third party notice is discontinued, or where part of a proceeding, counterclaim or third party notice is withdrawn, liability for costs shall be determined in accordance with Rule 63.15.
Rule 63.15 of the Rules then provides:
Unless the Court otherwise orders, a party who discontinues or withdraws part of a proceeding, counterclaim or claim by third party notice shall pay the costs of the party to whom the discontinuance or withdrawal relates to the time of the discontinuance or withdrawal.
In Soteriadis v Nillumbik Shire Council, Associate Justice Derham helpfully summarised aspects of the relevant law as follows (footnotes omitted):[16]
[16][2015] VSC 363, [12] (‘Soteriadis v Nillumbik’).
By these rules [rules 25.05 and 63.15] the wide discretion of the Court as to costs is modified. The modification is that the onus is on the party seeking to discontinue the proceeding (in this case the applicant) to satisfy the Court that the costs should not be paid by her. The principles and factors that the authorities outline on these, and other similar rules in other jurisdictions, have been collected and summarised by Hallen AsJ (as he then was) in Johnson v Clancy. My summary of them is as follows:
(a) The rule does not give rise to a presumption that costs will be ordered against the discontinuing party;
(b) However, the rule does create a starting position for the plaintiff or discontinuing party to pay the defendant’s costs, subject to a contrary order;
(c) The contrary order itself involves a discretionary decision to be exercised judicially. If there is to be a departure from the starting position, it should be done in a particularised, and principled way. The court is required to make such order as it thinks just in the particular circumstances of the case;
(d) The burden is on the party who seeks to persuade the court that a contrary order should be made. If facts are to be relied upon to found the court making a different order, the plaintiff will bear the onus of proving the relevant facts;
(e) All the relevant circumstances, and not just the fact of discontinuance, should be considered. This may include a consideration of the whole of the proceedings. Generally the discretion will be exercised on the basis of the objective circumstances established on the evidence and not involve the subjective considerations of one party;
(f) A relevant consideration is whether the plaintiff acted reasonably in commencing the proceedings and whether the defendant acted reasonably in defending them. It might also be appropriate for the court to consider the conduct of the defendant prior to the commencement of the proceedings where such conduct may have precipitated the litigation;
(g) Generally there must be some proper justification, sound positive ground, or a good reason, for departing from the starting position. The reasons for the discontinuance can bear heavily on the exercise of the discretion as to costs, so for example, it may be appropriate to make a contrary order:
(i) Where the proceedings have been rendered unnecessary by circumstances beyond the plaintiff’s control;
(ii) Where the plaintiff achieved practical success in the proceedings;
(iii) Where costs have been significantly increased by the unreasonable conduct of the defendant;
(h) Where the proceedings are discontinued prior to any hearing on the merits, usually it will be impracticable to assess the eventual prospects of success in the action and the court cannot try a hypothetical action between the parties to determine the question of costs;
(i) There is a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event, or settlement, so removes, or modifies, the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the court’s discretion otherwise than by an award of costs to the successful party. It is the latter type of case that usually creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs; and
(j) Where the proceedings are discontinued after interlocutory relief has been granted, the court may take into account the fact that that interlocutory relief has been granted.
Associate Justice Derham also referred to the passage from Lai Quin as referred to above. In Course v Hannan & Ors, Connock J adopted this summary of the relevant law regarding costs in the context of the proceedings being discontinued.[17]
[17][2018] VSC 401, [23]–[26] (‘Course v Hannan’). See also Just Group Limited v van Dyk and Ors [2016] VSC 66; AS v Minister for Immigration and Border Protection & Ors (Costs Ruling) [2017] VSC 300, [14]–[26].
Thus by r 63.15 of the Rules, amongst other things, the wide discretion of the Court as to costs is modified in the context of a discontinuance of the proceeding. As noted by Derham As J in Soteriadis v Nillumbik, the burden is on the party who seeks to persuade the court that a contrary order should be made,[18] that is, that the plaintiff should not be ordered to pay the defendants’ costs.
[18]Soteriadis v Nillumbik [2015] VSC 363, [12(d)].
While the considerations in respect of costs where there has been no hearing on the merits are the same, irrespective of whether the proceeding is being discontinued by the plaintiff or it is coming to an end via some other summary means, it seems to me that the only real difference between ASTA Developments and Soteriadis v Nillumbik is the starting position: if the proceeding is being discontinued, then the starting point is that the plaintiff pays the defendants’ costs, subject to a contrary order, and without creating a presumption that costs will be ordered against the plaintiff. In other words, the principles applicable to whether there should be some ‘contrary order’ are the same.
Ordering costs to be paid on an indemnity basis
In Chen & Ors v Chan & Ors, the Court of Appeal summarised the Court’s approach to costs, stating that in respect of whether costs are ordered on a standard (at that time, referred to as party/party) or indemnity basis:[19]
Usually, an order for costs will be made on a party/party basis. But an order for costs on a solicitor/client or indemnity basis may be made where special or unusual circumstances have been demonstrated, for example, by establishing misconduct in the proceeding, that the proceeding was brought for an ulterior purpose, or that it was patently unreasonable to institute, or maintain, the proceeding. Special circumstances may also include the making of an allegation of fraud which is not proved.
[19][2009] VSCA 233, [10] (citations omitted). See also Wilson v Waigani Pty Ltd & Ors (No 2) [2018] VSC 569, [6]-[7] and the cases cited therein.
The principles associated with an exercise of the Court’s discretion in respect of costs to order that costs be paid on an indemnity basis by reason of the failure to accept an offer to compromise the proceeding are well established.
In Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2), the Court of Appeal stated that the correct approach is to treat the unreasonable rejection of a Calderbank offer as a matter to which the Court should have regard when considering whether to order indemnity costs.[20] The Court of Appeal then went on to state the following:[21]
The critical question is whether the rejection of the offer was unreasonable in the circumstances.
…
Of course, deciding whether conduct is “reasonable” or “unreasonable” will always involve matters of judgment and impression. These are questions about which different judges might properly arrive at different conclusions. As Gleeson, C.J. said recently, “unreasonableness is a protean concept”. But a test of reasonableness is, we think, entirely appropriate to the exercise of a discretion such as this.
[20][2005] VSCA 298, [20] (‘Hazeldene’).
[21][2005] VSCA 298, [23]–[24] (citations omitted).
The Court of Appeal stated the following in Hazeldene, in respect of factors relevant to assessing unreasonableness (‘Hazeldene Factors’):[22]
[22][2005] VSCA 298, [25] (citations omitted).
The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed;
(f)whether the offer foreshadowed an application for an [sic] indemnity costs in the event of the offeree’s rejecting it.
In Gunns Ltd & Ors v Marr & Ors (No 4), Bongiorno J stated:[23]
Although the rejection of a Calderbank offer does not lead automatically to an order for indemnity costs, where the offer is not bettered by the result achieved, and where that rejection is unreasonable, that will be the usual result.
[23][2007] VSC 91, [49].
Consideration
The plaintiff’s submissions
The plaintiff seeks orders that the defendants pay her costs of the proceeding on an indemnity basis, alternatively on a standard basis. In summary, the plaintiff’s rationale for this is that ordinarily costs follow the event, and here the event was the making of the declaration and orders regarding the Adverse Possession Claim, which orders were made in her favour.
The plaintiff says that her costs should be paid on an indemnity basis for three reasons:
(a) The defendants had been warned several times prior to the commencement of the proceeding that the plaintiff would establish her Adverse Possession Claim and would seek indemnity costs if forced to issue proceedings to do so.[24] The plaintiff submits that it should always have been clear to the defendants that they had no rights over the garage;
(b) The defendants had unreasonably rejected the Plaintiff’s Calderbank Offer; and
(c) The defendants had an ulterior purpose in forcing the proceeding to continue after they had conceded the Adverse Possession Claim, so as to extract some leverage in relation to the BAB Proceeding, which purpose amounted to an abuse of process. The plaintiff submits that the defendants’ actions are akin to continuing with a proceeding which is entirely without merit and which are pursued for an ulterior purpose, despite their concession on the Adverse Possession Claim in their solicitor’s 14 December letter. Further, the plaintiff says that the first defendant’s submissions in the BAB Proceeding make it clear that the defendants are attempting to gain control of the garage in that proceeding, while at the same time acknowledging in this proceeding that the plaintiff owns the garage. This is said to have forced the plaintiff to continue this proceeding, despite the concession.
[24]By letters from or on behalf of the plaintiff dated 24 August 2016, 30 August 2016 and 1 December 2016; see also the defendants’ letter in response dated 26 August 2016.
The defendants’ submissions
The defendants seek orders that for the period up to and including 14 December 2017, there be no order as to costs of the proceeding, and for the period after that date, the plaintiff pay the defendants’ costs on an indemnity basis. The defendants say that their costs after 14 December 2017 should be paid on an indemnity basis as the plaintiff had unreasonably rejected the Defendants’ Calderbank Offer.
The defendants reject the plaintiff’s characterisation of the issues in the BAB Proceeding and say that in that proceeding, the defendants seek relief in respect of what they say is an unsafe garage, as they say works should be carried out to ensure it complies with building regulations or it should be demolished.
Analysis
Costs of the proceeding prior to 14 December 2017
In my view, the defendants should pay the plaintiff’s costs of the proceeding prior to 14 December 2017. The plaintiff had made numerous attempts to resolve the issues to do with the garage and its ownership prior to commencing the proceeding, and it ought to have been obvious to the defendants that she was highly likely to establish her claim. The plaintiff acted reasonably in commencing the proceeding. However, since the proceeding involved more than the Adverse Possession Claim, it cannot be said that the defendants acted unreasonably in defending the proceeding.
The plaintiff having been forced to issue the proceeding so as to vindicate her Adverse Possession Claim, it was not until some months later that the defendants conceded that claim. The defendants did so after being provided with some statutory declarations in October 2017 and the Assignment Deed in December 2017, which they then accepted as sufficient for the plaintiff to establish her Adverse Possession Claim. I think it is tolerably clear that this additional material merely gave the defendants an added reason to concede what ought to have been apparent from the beginning. The evidence discloses that the garage had been built many years ago, thereby fencing the Subject Land within the Plaintiff’s Property, and this was likely to be at least the requisite period of 15 years prior to the plaintiff making her claim. It could be said that the defendants’ acceptance of the additional material may not amount to a ‘surrender’ by the defendants to the plaintiff as referred to in Soteriadis v Nillumbik,[25] however I do not consider that material to be a ‘supervening event’ and in my view the defendants’ concession goes sufficiently close to a surrender of their defence to the Adverse Possession Claim that the plaintiff has been successful on that claim and costs should follow the event. The event is the defendants’ concession of the Adverse Possession Claim.
Should the plaintiff’s costs of the proceeding prior to 14 December 2017 be paid on an indemnity basis or a standard basis?
[25]See paragraph 38(g)(i) above.
Ordinarily, I would consider it appropriate that the defendants pay the plaintiff’s costs of the proceeding prior to 14 December 2017 on an indemnity basis on account of the warnings given to them prior to the proceeding being issued and the fact that they have effectively surrendered to the plaintiff’s Adverse Possession Claim. However, there are two factors which militate against this.
First, by the time the defendants conceded the Adverse Possession Claim, they had more information available to them than they did at the time of the correspondence relied upon by the plaintiff. It was open to the plaintiff to have obtained the additional material, being the statutory declarations and the Assignment Deed, prior to commencing the proceeding. That material ultimately convinced the defendants to concede the Adverse Possession Claim, and the timing of its provision justifies, in my view, costs being awarded on a standard rather than indemnity basis. While it is often the case that a defendant is not presented with the ‘evidence’ supporting a plaintiff’s claim at the time of asserting it and that this does not necessarily negate indemnity costs being available, in circumstances where neither the plaintiff nor the defendants knew as a matter of fact when the garage had been built and neither of them had held their respective properties for more than 15 years, awaiting that evidence is not so unreasonable a step as to justify indemnity costs. I should point out that I do not consider this to be inconsistent with the reasoning set out in paragraphs 51 and 52 above.
Second, the proceeding also concerned, from the outset, the Injunction Claim and the Damages Claim. In the circumstances of this case, there is no basis for an order that the defendants pay the plaintiff’s costs of these claims. No concessions were made regarding those claims and no outcome has been achieved by the plaintiff in respect of them. She has now elected not to pursue those claims in this proceeding. Given the way in which the proceeding was conducted, at least prior to 14 December 2017, I expect it would be very difficult to separate the plaintiff’s costs in respect of the Adverse Possession Claim from her costs in respect of the other claims. Therefore, I consider the fairest and most efficient course to be an order for the plaintiff’s costs on a standard basis, rather than an indemnity basis.
I do not accept the plaintiff’s submission that her costs should be paid on an indemnity basis as a result of the defendants failing to accept the Plaintiff’s Calderbank Offer. Having provided a copy of the Assignment Deed and asserted that it, along with the previously provided statutory declarations were clear evidence establishing the Adverse Possession Claim, the Plaintiff’s Calderbank Offer was to ‘continue with the settlement reached at the mediation, on the basis that consent orders as proposed in the [Settlement Terms] are filed with the court within the next 7 days’. That settlement involved more than consent orders in respect of the Adverse Possession Claim: the consent orders set out in the Settlement Deed were also for the dismissal of the proceeding and for the defendants to pay the plaintiff’s costs of the proceeding. Further, there were terms of the Settlement Terms as to the defendants not entering the Plaintiff’s Land and the defendants repairing the garage. In other words, the Settlement Terms also involved a compromise of the Injunction Claim and the Damages Claim, on terms partially favourable to the plaintiff.
At the hearing, there was some confusion on the part of the plaintiff’s counsel as to whether the Plaintiff’s Calderbank Offer involved just the defendants conceding the Adverse Possession Claim and the balance of the consent orders in paragraph 3(a) of the Settlement Terms being made, or whether the remainder of the terms in paragraph 3 of the Settlement Terms would still be carried out. Eventually, the plaintiff’s counsel adopted the view that it was the former, and said that if there was any lack of clarity in the offer so far as the defendants were concerned, they could have sought clarification.
In my view, the better view is that the Plaintiff’s Calderbank Offer did involve the defendants carrying out the remainder of the terms in paragraph 3 of the Settlement Terms. If that is so, then the defendants achieved a better result than they would have achieved by accepting the offer, and so the Plaintiff’s Calderbank Offer is hardly a basis for ordering that the defendants pay her costs on an indemnity basis. Even if the interpretation of the plaintiff’s counsel is to be preferred, that does not justify an order for the defendants to pay the plaintiff’s costs of the proceeding prior to the making of the Plaintiff’s Calderbank Offer on an indemnity basis.
I do not accept the plaintiff’s submission that her costs of the proceeding should be paid on an indemnity basis on account of the BAB Proceeding and the defendants allegedly having an ulterior purpose in ‘forcing’ this proceeding to continue. It was not explained to me how it could be said that the defendants had forced the plaintiff to continue with this proceeding. While it might be said that the defendants’ conduct in respect of the BAB Proceeding was inconsistent with their concession of the Adverse Possession Claim, such that it was necessary to obtain the Declaration and the Adverse Possession Orders, I simply do not have enough evidence (as opposed to unsupported submissions from the Bar table) to form any view about that. In any event, it was clear from Mr Westbrook’s 14 December letter that the defendants consented to the Court making the Declaration in support of the Adverse Possession Claim. There was no evidence before me as to why the parties did not take any steps from then until May 2018 to obtain the Declaration and the Adverse Possession Orders, although it was submitted that the parties just turned their minds after 14 December to the other issues in dispute.
Costs of the proceeding after 14 December 2017
As set out above, the ‘event’ upon which the plaintiff was successful was the defendants’ concession of her Adverse Possession Claim. In my view, the making of the Declaration and the Adverse Possession Orders merely gave effect to that. The continuation of the proceeding after 14 December 2017 was twofold: obtaining the Declaration and the Adverse Possession Orders, which ought to have been able to be achieved quickly and simply by the provision of consent orders to the Court; and the further litigation of the Injunction Claim and the Damages Claim. I note that in respect of obtaining the Declaration and the Adverse Possession Orders, Emerton J already made orders that there be no order as to costs of that, since that relief was included within the plaintiff’s summons filed 17 May 2018. It is sufficiently clear that this costs order was confined to the summons: I do not accept the defendants’ submission that her Honour’s costs order otherwise dealt with the costs of the proceeding.
As mentioned above, I do not see how it can be said that the defendants forced the plaintiff to continue with this proceeding after 14 December 2017, irrespective of the purported reason. Having obtained the concession in respect of the Adverse Possession Claim it was then a simple matter to have orders made by consent to give effect to that, such that after 14 December 2017 the continuation of the proceeding was really so that the plaintiff could continue with her Injunction Claim and Damages Claim. She subsequently chose to abandon those claims in this proceeding. Having elected to do so, and whether it strictly fits within a ‘discontinuance’ or not, the plaintiff has effectively discontinued those claims and in my view the appropriate exercise of the Court’s discretion in respect of the costs after 14 December 2017 is that the plaintiff should pay the defendants’ costs.
The question then is whether those costs should be paid on a standard or indemnity basis. The defendants seek indemnity costs, on the grounds that the plaintiff unreasonably rejected the Defendants’ Calderbank Offer. The defendants submit that the Court can gauge the plaintiff’s unreasonableness by reference to her recent abandonment of the balance of her claims, which she could have done many months ago. They say that the plaintiff could have accepted the offer and received the benefit of half of her costs. The defendants also say that the plaintiff is in a worse position than had she accepted the offer in December 2017.
I do not accept this last proposition. True it is that it is only the question of costs where the outcome now achieved from the proceeding differs from the terms of the Defendants’ Calderbank Offer. However, in light of my above ruling, I do not consider the plaintiff to be in a worse position now than she would have been if she had accepted the offer in December 2017.
The Defendants’ Calderbank Offer was to pay half the plaintiff’s costs as at 14 December 2017. I do not need the benefit of a quantification of the parties’ costs so as to determine whether the plaintiff is better or worse off now than that offer. Since December 2017, there has not been a great deal of activity in this proceeding. There was the plaintiff’s 17 May 2018 summons, which from a review of the Court file appears to be the only substantive activity, and those costs were determined by Emerton J when her Honour made no order as to the costs of the summons. Apart from that and this costs application, there was an unsuccessful application to transfer the proceeding to the County Court, along with one directions hearing and two sets of consent orders which I made on the papers. I consider that the costs after 14 December 2017 which remain for determination are likely to be much lower than the costs of the proceeding to that date, such that obtaining half her costs as at 14 December 2017 would not place the plaintiff in a worse position now than if she had accepted the offer.
Given the terms of the Defendants’ Calderbank Offer, this is not a case where the offer was rejected and the offeree subsequently went on to achieve a worse outcome than the one offered. That is when consideration of whether the rejection of the offer was unreasonable come into play: we have not reached that point here, as it cannot be said that the ultimate outcome in this case was worse for the plaintiff than the terms of the offer. It is therefore not necessary to consider the Hazeldene Factors. The offer was not bettered by the result achieved, as set out in Gunns Ltd & Ors v Marr & Ors (No 4).[26]
[26]See paragraph 46 above.
It follows that the plaintiff should pay the defendants’ costs of the proceeding after 14 December 2017 on a standard basis. I do not include the costs of this costs hearing in that finding: in my view, those are separate and require separate consideration, which I will address below.
For completeness, I note that at the directions hearing held on 31 August 2018 the defendants’ counsel appeared but there was no appearance by or on behalf of the plaintiff. I made an order that the defendants’ costs of that day were to be their costs in the cause. In light of subsequent events and this ruling, the plaintiff should pay those costs.
Conclusion
For the reasons set out above, the Court will make orders that:
(a) The defendants pay the plaintiff’s costs of the proceeding up to and including 14 December 2017, including reserved costs to that date, on a standard basis; and
(b) The plaintiff pay the defendants’ costs of the proceeding after 14 December 2017, including reserved costs after that date and the defendants’ costs of and incidental to the directions hearing on 31 August 2018, but excluding the costs of the costs hearing, on a standard basis.
I observe here that these costs orders do not displace or affect any costs orders already made in the proceeding, in particular, the orders made by Emerton J on the plaintiff’s 17 May 2017 summons.
My preliminary view in relation to the costs of this costs hearing is that there should be no order as to costs. Both parties have achieved partial success and in those circumstances I consider this to be the most appropriate outcome. The parties are requested to confer and, if they have a different view to that expressed, then short written submissions (of no more than 3 pages each) should be submitted to my Chambers and I will make a ruling on costs on the papers.
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