Jeffrey-Potts v Garel (Costs Ruling)
[2012] VSC 367
•29 August 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL & EQUITY DIVISION
No. 4614 of 2010
| BRENDA EILEEN ZOAY JEFFREY-POTTS | Plaintiff |
| v | |
| WARREN LEIGH GAREL | Defendant |
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JUDGE: | J FORREST J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 20 August 2012 | |
DATE OF RULING: | 29 August 2012 | |
CASE MAY BE CITED AS: | Jeffrey-Potts v Garel (Costs Ruling) | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 367 | |
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COSTS – Application by plaintiff for costs – Exercise of discretion as to costs – Plaintiff successful in establishing one of multiple claims – Effect of Calderbank offer – Whether plaintiff entitled to indemnity costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr E W Alstergren Mr C Twidale | Velos & Velos |
| For the Defendant | Mr C Hanson | Barretts |
HIS HONOUR:
Introduction
Given the result in this case and the mixed successes (and failures) enjoyed by the parties, I have determined that each party should bear its own costs. I have also determined that the Calderbank offer made by Ms Jeffrey-Potts cannot form the basis of a claim for indemnity costs given its lack of clarity and the short period of time it allowed for Mr Garel to accept the offer. My reasons now follow.
The trial
Ms Jeffrey-Potts’ primary allegation was that as a result of an agreement between herself and Mr Garel, twelve properties that were purchased in his name were to be held on trust for her and that she held the entire beneficial interest in the properties. I rejected this claim.
Mr Garel contended that the monetary contributions made by Ms Jeffrey-Potts to the purchase of the properties were loans made by Ms Jeffrey-Potts to him and that he was only obliged to repay the loan monies. I accepted that the first property was purchased with money provided by way of a loan but that none of the other properties were purchased with monies loaned by Ms Jeffrey-Potts.
I then concluded that the second and third properties purchased in Mr Garel’s name were purchased with funds provided entirely by Ms Jeffrey-Potts, and that accordingly, a presumption arose that they were held on resulting trust by Mr Garel for the benefit of Ms Jeffrey-Potts. Mr Garel did not adequately rebut this presumption. Accordingly, I found that Mr Garel held the entire beneficial interest on trust for Ms Jeffrey-Potts.
Ms Jeffrey-Potts also contended that the Court should impose, by reason of her contributions in terms of money, skill and labour, an equitable interest in the properties by way of a constructive trust founded on a joint enterprise. I accepted that she had such an interest, but not the entire beneficial interest in the entire property portfolio. Mr Garel had also contributed funds, skill and labour into the joint enterprise and I ultimately assessed the appropriate division at 60/40 in relation to the eight units not found to have been purchased with loan monies or to be the subject of a resulting trust.
Mr Garel’s counterclaim was dismissed.
In terms of the ultimate financial outcome, although difficult to be precise, it is probable that the end result is that Ms Jeffrey-Potts has done slightly better than Mr Garel.
Should Ms Jeffrey-Potts have an award of costs?
It is trite but nevertheless relevant to commence with the proposition that a court retains a very broad discretion in relation to costs.[1] At times it is clear that costs must follow the event. On other occasions, a decision as to whether an award of costs should be made will turn on impression and intuition in light of the conduct of the trial, particularly where there have been a raft of issues canvassed, upon which mixed success is enjoyed by the protagonists. This is all the more so where the evidence adduced at trial cannot be placed into discrete categories.
[1]Oschlack v Richmond River Council (1998) 193 CLR 72, [63].
The usual starting point is the result of the case.[2] However, one thing is clear in this case – it is impossible to apply the standard rule of costs following the event[3] given the disparate findings and partial successes enjoyed by the parties. In Chen v Chan,[4] the Court of Appeal said as follows in relation to the determination of costs where parties had enjoyed mixed success:
[2]Ibid [66].
[3]Latoudis v Casey (1990) 170 CLR 534, 543; Ritter v Godfrey [1920] 2 KB 47.
[4][2009] VSCA 233, [110].
The contentions of the parties raise a number of questions relevant to costs orders on appeal. The principles relevant to these questions can be summarised as follows:
(1) The general rule is that costs should follow the event. Absent disqualifying conduct, the successful party should recover its costs even where it has not succeeded on all heads of claim.
(2) The Rules of Court permit significant flexibility in determining questions of costs. In particular, the Court is entitled to examine the realities of the case and will attempt to do ‘substantial justice’ as between the parties on matters of costs.
(3) Where there is a multiplicity of issues and mixed success has been enjoyed by the parties, a Court may take a pragmatic approach in framing the order for costs, taking into consideration the success (or lack of success) of the parties on an issues basis. Generally, if such an order is made, it is reflected in the successful party being awarded a proportion of its costs but not the full amount.
(4) A Court may, when fixing costs in a claim where there has been mixed success, take into account complications which it considers will arise in the taxation of costs, as part of its consideration of the overall interests of justice.
(5) Where a Court determines to make an order apportioning costs, then it does so primarily as ‘a matter of impression and evaluation,’ rather than with arithmetical precision, having considered the importance of the matters upon which the parties have been successful or unsuccessful, the time occupied and the ambit of the submissions made, as well as any other relevant matter.
(6) Where a number of parties have had the same representation, there is a ‘rule of thumb’ as to the apportionment of costs, namely that, where some of those parties have been successful and others have not, each successful party is only entitled to his or her proportion of the costs incurred on behalf of all, plus the costs, if any, incurred exclusively on his or her behalf. The primary issue for determination in such a case is that of fairness as between the parties, having regard to the manner in which the trial, or appeal, has been conducted.
(7) 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.
Ms Jeffrey-Potts failed on her primary case – the existence of an express trust or alternatively, a resulting trust in her favour. Just about every witness called by her gave evidence directed to establishing that she was, in reality, the sole owner of the properties, thus fortifying her case based upon an express or resulting trust.
Not only were most of the witnesses called relevant to establishing Ms Jeffrey-Potts’ primary case but much of the time taken up in the trial was also directed toward substantiating that claim. For example, the evidence of both Ms Jeffrey-Potts and Mr Garel relating to the negotiations, purchase and financing of the various properties as well as their management went directly to establishing whether the twenty year relationship between the two combatants was consistent with the agreement Ms Jeffrey-Potts alleged. If she succeeded on this point she would have established a total beneficial interest in all the properties. Indeed, on one view Ms Jeffrey-Potts’ failure on this primary issue should result in an award of costs in favour of Mr Garel.[5]
[5]Hughes v West Australian Cricket Association [1986] ATPR 48, 134, 48, 136.
A considerable body of evidence was also led by both Ms Jeffrey-Potts and Mr Garel in relation to the purchase of the first property which I ultimately found to be held by Mr Garel in its entirety. Again on the issue of the existence of a loan, Mr Garel could contend that he was entitled to a proportion of his costs because he was successful in establishing his claim on this point.
However, in relation to the second and third properties, Ms Jeffrey-Potts established that she was entitled to the full beneficial interest as a consequence of the existence of a resulting trust. On this issue, Ms Jeffrey-Potts was successful.
Whilst it is true that much of the evidence relating to the primary claims of an express or a resulting trust had a secondary purpose in relation to the existence of a constructive trust, at best, it served a dual purpose. The contest in relation to the constructive trust was won by Ms Jeffrey-Potts. She established that it would be unconscionable to deny her an equitable interest in the nine remaining properties. Accordingly Ms Jeffrey-Potts has an entitlement to costs.
Mr Garel resisted the claim that the court should impose a constructive trust on the basis that he was the lawful owner and that Ms Jeffrey-Potts’ only role in facilitating the purchase of the properties was as a lender. He also asserted she had minimal, if any, role in managing the properties. Mr Garel failed to establish any of the aspects of his counterclaim, which was essentially based upon work (such as odd jobs and collecting rents) carried out by him at the boarding house. So on these issues, Ms Jeffrey-Potts would be entitled to costs.
It should also be noted that Ms Jeffrey-Potts was unsuccessful in her pleaded claim for a common intention constructive trust and the claim based on the alleged misuse of her money by Mr Garel. These claims proved little more than a distraction from the core dispute and they were not ventilated at length during the trial. I do not consider these claims should effect the ultimate order for costs.
Counsel for Ms Jeffrey-Potts contended that the minimum allowance for costs should be 60% of her total costs and rather it should be assessed at closer to 90% - representing her success in relation to eleven out of the twelve properties. Counsel for Mr Garel argued that costs should fall where they lie.
My original impression was that each party should bear their own costs. After hearing cogent and helpful submissions from both counsel, I am not persuaded that I should depart from this view. Ms Jeffrey-Potts’ successes have to be offset against the significant amount of evidence led and time taken in relation to claims which ultimately failed and to which Mr Garel would have been entitled to an award of costs. This is a case in which it is impossible to arithmetically apportion the costs or to go through the transcript with a fine tooth comb and a magnifying glass and dissect the case into issues upon which one or other has been successful.
Finally, I should mention one other matter. If I had been persuaded to make an order for Ms Jeffrey-Potts it would necessarily have been for a small percentage of her overall costs – it being impossible to isolate the costs out on an issue-by-issue basis. In the event that this course had been undertaken, a bill of costs for the whole proceeding would need to have been prepared and, given the history of this case, fought to a taxation of costs. The costs involved in the carrying out of this exercise would have been totally disproportionate to the amount of costs in dispute and the nature of the contest. Section 9(g) of the Civil Procedure Act 2010 permits the Court to take this consideration into account in determining whether to make such an order.
Is the Calderbank offer of Ms Jeffrey-Potts effective?
On the morning of the commencement of the trial, Ms Jeffrey-Potts served a letter purportedly in accordance with the principles established in Calderbank v Calderbank.[6] The letter was in the following terms:
We are instructed by our client that the net equity (with the exception of the properties situated at 176 Victoria Avenue, Albert Park and your client’s property situated at 25 Major Mitchell Drive, Horsham) in Australian dollars or alternatively in specie be settled on the basis of a 50/50 division of same.
We are instructed to formally put your client on notice that our client is prepared to settle and accept settlement of 50% of the value and/or proceeds or alternatively 50% of the division of the properties and that the offer will be open for you to accept within 24 hours after which time the offer will be withdrawn.
In the event that your client does not accept the offer and our client obtains an Order from the Court which is more favourable to our client than the offer set out above then our client will seek from your client payment of all costs incurred by our client in the proceeding on or after the date on which the offer was made on an indemnity basis.
In making the offer our client relies on the decisions of Calderbank v Calderbank (1976) Fam 93; Cutts v Head (1984) Ch290; MT Associates Pty Ltd v Aqua Max Pty Ltd & Anor (No 3) (2000) VSC 163 (3 May 2000) and Toomey v Scolaro’s Concrete Construction & Ors (No 4) (2002) VSC 28 (27 February 2002) and in accordance with the principles set down by the Supreme Court of Victoria Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) VSCA 298.
[6][1976] Fam 93.
The letter was served on Mr Garel’s counsel and solicitors on 14 March 2012 after a failed judicial mediation, shortly prior to the commencement of the trial. The offer expired on the following day. It was not accepted. On 15 March, a Calderbank offer was made by Mr Garel. In effect, it replicated the contents of Ms Jeffrey-Potts’ offer with the exception (of some importance) of the amount offered.
The principles to be applied in such an application are well known and set out by the Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2):[7]
[7](2005) 13 VR 435, (“Hazeldene”).
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 indemnity costs in the event of the offeree’s rejecting it.[8]
[8]Ibid [25].
Counsel for Mr Garel did not dispute that, viewed broadly, Ms Jeffrey-Potts should be regarded as having bettered her offer, however he said that it did not allow sufficient time for consideration and, equally as significantly, lacked the clarity necessary to resolve such a complex claim.
Counsel for Ms Jeffrey-Potts contended that the offer needed to be viewed in context, coming directly after the mediation and that it was sufficiently clear to enable Mr Garel to consider accepting it and, as it transpired, put a counter offer. Counsel for Ms Jeffrey-Potts argued that if there was any deficiency in the terms of the offer then it was open to Mr Garel, through his solicitor, to seek clarification.
The short point is whether it was unreasonable for Mr Garel to reject the offer. In my opinion, the arguments of Mr Garel should be accepted on this point for the following reasons.
First, the time allowed for the offer to be considered and accepted by Mr Garel was insufficient. Even allowing for the fact that there had been a mediation the day before, to make an offer just prior to the commencement of the trial and permit the other side only 24 hours to accept it is, in a complicated case involving unsophisticated litigants, wholly inappropriate. It matters not, contrary to the contention of counsel for Ms Jeffrey-Potts, that Mr Garel’s solicitor may have, or could have, understood the purport of the offer within the space of 24 hours. Mr Garel has no legal training and was employed as a maintenance man. His one foray into the commercial world involved the purchase of the properties that were the subject of the dispute. Even allowing for the fact that, in effect, a counter offer in the form of a Calderbank offer was made the next day by Mr Garel and that the trial had commenced, he was entitled to a reasonable time, which was certainly more than 24 hours, in which to consider the offer.
It is not to the point that his solicitor did not seek an extension of the time in which to consider the offer. It was up to Ms Jeffrey-Potts to put an offer which would satisfy the tests laid down by Hazeldene.
Second, the offer was unclear. It made no mention of the costs consequences that would flow from acceptance of the offer. Counsel for Ms Jeffrey-Potts argued that it was implicit that each party would bear its own costs. Simply put, that is not good enough. The offer had to state with reasonable precision and clarity what costs, if any, would be payable by Ms Jeffrey-Potts and by Mr Garel in the event of acceptance. Failure to do so made it close to impossible to consider the real effect of the offer – particularly in the time allocated. If that was not enough, the offer was sparse in detail – such as failing to explain the reference to “specie”, the manner in which the properties would be sold if a 50/50 split was adopted, and the allocation of rental moneys since the dispute erupted.
It is not necessary to consider the other arguments made by counsel for Mr Garel concerning the stage at which the offer was made and the uncertainty surrounding the evidence to be addressed. All in all, the offer failed by a long way to meet the requirements of an appropriate Calderbank offer. In the circumstances, it was not unreasonable for Mr Garel to reject the offer.
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