Jiang v Monaygon Pty Ltd (Costs)
[2017] VSC 655
•27 October 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S CI 2016 02814
IN THE MATTER of an Application pursuant to s 84 of the Property Law Act 1958 for the modification of a restrictive covenant
| PEI YAO JIANG | Plaintiff |
| v | |
| MONAYGON PTY LTD (ACN 005 621 161) | Defendant |
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JUDGE: | DERHAM AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the basis of written submissions after judgment delivered 3 October 2017. Submissions filed 17 and 23 October 2017. |
DATE OF RULING: | 27 October 2017 |
CASE MAY BE CITED AS: | Jiang v Monaygon Pty Ltd (Costs) |
MEDIUM NEUTRAL CITATION: | [2017] VSC 655 |
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COSTS – Application for modification of restrictive covenant – Application granted –Whether the plaintiff should pay a defendant’s costs even when successful – Whether defendant made frivolous objections to the application – Property Law Act 1958, s 84 – Re Withers [1970] VR 319; Re Ulman (1985) VConVR 54–178; Stanhill Pty Ltd v Jackson [2005] VSC 355; Walker v Bridgewood (No 2) [2006] NSWSC 284 and Mamfredas Investment Group Pty Ltd v PropertyIT and Consulting Pty Limited & Ors [2013] NSWSC 929.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr W Rimmer | Aughtersons Lawyers Pty Ltd |
| For the Defendant | Mr T Alexander with Mr H Kirimof | Dandanis & Associates |
HIS HONOUR:
This ruling concerns the costs of the plaintiff’s application to modify a restrictive covenant. I delivered judgment (Jiang v Monaygon Pty Ltd [2017] VSC 591) on 3 October 2017, granting the application, on the basis that the plaintiff had established that the proposed discharge or modification would not substantially injure the persons entitled to the benefit of the covenant.
As is the case with most applications now made for the modification of a covenant, the ultimate issue was whether the plaintiff had established that the proposed discharge or modification would not substantially injure the persons entitled to the benefit of the covenant so as to enliven the jurisdiction arising under s 84(1)(c) of the Property Law Act 1958 (Vic) (‘PLA’). In this case, however, the central issue was the scope of the covenant, whether the protection of mobile communication towers on the roof of the defendant’s land was within that scope and whether there were grounds to refuse the application in the exercise of the residuary discretion.
The plaintiff applies for an order that the defendant pay her costs on a standard basis from the date on which the defendant entered an appearance on the grounds that, properly advised, the defendant ought never have defended the proceeding.
The defendant submits there is no warrant in this case for the defendant to pay the plaintiff’s costs. The plaintiff should pay the defendant’s costs of the application, or, alternatively, each party should bear their own costs.
Costs in restrictive covenant matters
In Wong v McConville & Ors (No. 2)[1] I considered the principles and authorities relevant to costs in applications of this kind. It is not necessary to repeat what was said there, save to refer to the proposition that, although costs are a matter of discretion and each case stands on its particular facts, the general rule that costs follow the event ordinarily do not apply in these applications because:[2]
[1][2014] VSC 282 [9]-[19] (‘Wong’).
[2]Wong [9]-[19].
(a) under the legislation the plaintiff must apply to the Court to modify or remove the restrictive covenant. Even where the owners of the land with the benefit of the covenant agree to the modification, for the registered title to be free of the restriction the owner of the burdened land must come to Court and the Court must be satisfied that the conditions for the exercise of the jurisdiction conferred by s 84 of the PLA are satisfied;
(b) the plaintiff seeks to change an existing burden over the servient tenement (the plaintiff’s land) which benefits the dominant tenement (the defendants’ lands). It therefore seeks to remove or modify an existing legal right available to the defendants;
(c) the plaintiff will usually obtain an advantage, often a great advantage commercially, by the modification or removal sought;[3]
(d) although the owner of the burdened land has a statutory right to apply for the modification or removal of the covenant, he or she must give notice to those having the benefit (as determined by the Court) and those having the benefit (whether given notice or not) are entitled to object and to maintain the status quo and hold the plaintiff to the covenant which binds them;[4] and
(e) the decision of the Court to modify or discharge a restrictive covenant involves the exercise of a discretion.[5]
[3]For example see the observations of Anderson J in Re Withers [1970] VR 319 (Re Withers), 319–320;
[4]Re Withers, 320.
[5]See Stanhill Pty Ltd v Jackson, [2005] VSC 355 [4] (‘Stanhill’).
Provided the objector conducts the proceeding responsibly and does not make frivolous objections, it should have its costs of the proceeding (‘the standard approach’). ‘Frivolous’ in this context means ‘of little or no weight, worth or importance; not worthy of serious notice: a frivolous objection.’[6] It is usually used in combination with ‘vexatious’ to describe a wide variety of circumstances in which a claim or defence is found to be groundless, or lacking a legal basis or merit,[7] and takes its colour from its context.[8] The use of the word in the present context means, in my view, that the objections taken to the application to modify the covenants in question lacked a legal or factual basis or merit.
[6]Macquarie Dictionary, 6th Ed, meaning 1.
[7]Vo v Nguyen and ors [2013] VSC 304, [35]; Hoh & ors v Frosthollow Pty Ltd & ors, [2014] VSC 77, [12].
[8]See for example Muto v Faul [1980] VR 26, 30 where the inherent power to dismiss a proceeding on the grounds that it is frivolous, vexatious or an abuse of process extends to dismissing proceedings that are not reasonably prosecuted.
The standard approach was taken in Re Withers, and is consistent with a wide range of cases decided in Victoria, New South Wales and the United Kingdom.[9] Needless to say, costs are a matter of discretion and each case stands on its particular facts, so there are various departures from the standard approach, as referred to below.
[9]Re Markin, [1966] VR 494; Re Shelford Church of England Girls’ Grammar School, (Unreported, 6 June 1967, Lush J); Re Ulman, (1985) VConVR 54-178; Stanhill, [3]; Walker v Bridgewood (No 2) [2006] NSWSC 284, [9]–[12]; Re Rose Bay Bowling and Recreation Club Ltd (1935) 52 WN (NSW) 77; Mamfredas Investment Group Pty Ltd v PropertyIT and Consulting Pty Limited & Ors, [2013] NSWSC 929; Dean v Freeborn, [2017] UKUT 0203.
Submissions
The plaintiff relies on the Court’s determination that the interest the defendant was acting to protect in the proceeding was one that fell outside the protection of the covenants the subject of the plaintiff’s application. The defendant was not defending a proprietary right protected under, or a privilege conferred by, the restrictive covenants. It would be different if the defendant were acting to protect a benefit that fell within the ambit of the protection of the covenant in question. The defendant’s costs were not reasonably or necessarily incurred by reason of the plaintiff’s application, but were rather incurred by the defendant in this case acting to protect its commercial interests. The plaintiff submitted that the ordinary rule that costs follow the event should not be displaced in this instance.
The plaintiff also relied, by analogy, on the principles that have been developed in relation to the circumstances where indemnity costs are awarded.[10] In particular, the ground where indemnity costs are awarded where, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case. As I pointed out above, this is the proper meaning of a ‘frivolous’ objection to an application to modify a restrictive covenant.
[10]By reference to Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FFCR 225, 233-235; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, 400–1; and J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers - Western Australian Branch (Fed C of A, 19 Feb 1993, unreported), 5 (French J).
Counsel for Monaygon provided written submissions which contained a review of the decided cases, and concluded that no case could be identified in which a defendant has ever been required to pay all the plaintiff’s costs ‘on a standard basis from the date on which the defendant entered an appearance as defendant to the proceeding’ as sought by the plaintiff in this case.[11] The defendant submitted that, in accordance with the preponderance of authority set out in its written submissions, that it was entitled to put its views before the Court in a proper manner and nothing in this case justifies a departure from the standard approach to disentitle it from an order for costs necessarily or reasonably incurred.
[11]Defendant’s Submissions on Costs, 22 October 2017, [25].
The defendant referred to the decision in Mamfredas Investment Group Pty Ltd v PropertyIT and Consulting Pty Limited & Ors,[12] where Slattery J observed:[13]
Ordinarily the applicant should pay all costs reasonably or necessarily incurred by reason of the application, including the proper costs of the objectors: Re Rose Bay Bowling & Recreation Club Ltd (1935) 52 WN (NSW) 77 at 79 (“Rose Bay”); Brown v STA of NSW [2000] NSWSC 802 (“Brown”) at [9]; Marian Walker v Brian Bridgewood and Ors (No 2) [2006] NSWSC 284 at [5] (“Walker”).
But when are costs reasonably or necessarily incurred by reason of a s 89 Conveyancing Act application? It has previously been suggested, by reference to the rather quaintly described “old two guinea rule”, on which Rose Bay relied by analogy (at 78), that such costs are the costs of obtaining a solicitor's advice whether or not to consent to the proposed extinguishment /modification of a covenant/easement: Castagna v Great Wall Resources Pty Ltd [2005] NSWSC 942 (“Castagna”) at [57]; Krecichwost at 501.
But it seems that in appropriate circumstances the costs payable by the applicant are not limited only to the costs of the initial advice. Rose Bay itself was a case in which a successful applicant was required to pay the objectors costs of putting their views before the Court (at 79). Costs orders against the successful applicant were also made in Re Withers [1970] VR 319 at 320 (“Withers”) and in Stanhill Pty Ltd v Jackson [2005] VSC 355 (“Stanhill”) at [6].
But the applicant will not be required to pay the objectors' costs of putting their views before the Court in all circumstances. The Court retains a discretion to adjust the cost orders to the circumstances of the proceedings: Withers at 319.
In exercising its discretion the Court may make no order as to costs: Brown at [18] and Walker at [13]. It may require the objectors to pay the applicant’s costs, for example, if: the objectors’ conduct in defending their rights was “frivolous” (Withers at 319) or “irresponsible” (Stanhill at [6]); the applicant's case was “overwhelming” (Brown at [16] - [21])); or, the objectors run fully adversary proceedings and failed (Rose Bay at 78-79).
[12][2013] NSWSC 929 (‘Mamfredas’).
[13]Ibid [86]-[90].
Counsel for the defendant submitted from these observations that there were three circumstances which may allow the court to depart from the standard approach:
(a) the defendant has acted frivolously/irresponsibly;
(b) the plaintiff has an overwhelming case;
(c) the proceedings were conducted on a fully adversarial basis.
The defendant then analysed each ground. In relation to the first ground (acting frivolously), it submitted that it did not act frivolously because it conducted the litigation reasonably and in a proper manner. The defendant referred to the submission of the plaintiff that ‘[t]he plaintiff does not say that the defendant acted frivolously, in the sense referred to in the passage in Re Withers cited above.’[14] The passage from the judgment in Re Withers referred to is:[15]
Though costs are a matter of discretion and each case stands on its particular facts, such cases as these indicate that, unless the objections taken are frivolous, an unsuccessful objector in a proper case should not have to bear the bitter burden of his own costs when all he has been doing is seeking to maintain the continuance of a privilege which by law is his.
[14]Plaintiff’s Submissions on costs 17 October 2017, [15].
[15]Re Withers, 320.
With respect, this reveals a misunderstanding of the meaning of ‘frivolous’ as I have explained it. The plaintiff’s submission then recognises that meaning by submitting that:[16]
[The plaintiff] does submit, however, that - properly advised - the defendant ought to have realised from the start that there was no merit in the contention that the restrictions in this case protected the use of the defendant’s land for mobile telephone services on the roof of the defendant’s building, or the defendant’s commercial interests in leases to mobile telephone service providers for such purposes.
[16]Plaintiff’s Submissions on costs 17 October 2017, [15].
The plaintiff also submitted that the defendant’s opposition to the modifications sought, which are revisited again in the plaintiff’s submission on costs, were misconceived and unmeritorious.[17]
[17]Plaintiff’s submissions on costs, [18].
In relation to the second ground (overwhelming case), the defendant submitted, in effect, that at worst the parties should bear their own costs of the proceeding rather than there be an award of costs against the defendant. Reference was made to the decision of Hamilton J in the Supreme Court of NSW in Brown v State Transit Authority of New South Wales,[18] where, after protracted proceedings, the defendant ultimately voluntarily tendered to the plaintiff an instrument extinguishing an easement which had become redundant after the sale of the land concerned by the defendant. It was at that point that opposition to the plaintiff’s case was futile. The defendant particularly relied on this passage:[19]
In these circumstances I do not think that it can be said, before the point of time that I have mentioned, that the plaintiff's case was overwhelming or the defendant's conduct in seeking to uphold a proprietary right, albeit one that was seriously threatened, was unreasonable. I bear in mind also in exercising my discretion as to costs, the expropriatory nature of the proceedings, and the fact that in all cases it is reasonable for the defendant to have at least the costs of taking advice and considering its position when threatened with proceedings such as the present. My conclusion, taking into consideration all these matters, is that basically the appropriate exercise of discretion as to costs in this matter is that there should be no order as to costs of the proceedings.
[18][2000] NSWSC 802 (‘Brown’).
[19]Ibid [18].
Hamilton J went on, however, to criticise the defendant for not acting more circumspectly when he realised that the easements were not required and his opposition futile, opining that the defendant could have written to the plaintiff agreeing to the removal of the easement to avoid incurring further costs.[20] This lead his Honour to conclude that the defendant ought be ordered to pay the plaintiff’s costs of the proceedings from an appropriate date.[21]
[20]Ibid [19].
[21]Ibid [21].
In relation to the third ground (fully adversarial basis), reference was made to a decision, In re Edwards[22] in which the matter had been brought before the court by the Registrar-General who took the view that the applicant was not legally entitled to a declaration under s 89(3) of the New South Wales Conveyancing Act 1919-1930 that the subject land had, by virtue of a certain deed of release, been effectively discharged from the restrictions imposed by a particular covenant. The summons was opposed by a corporation which was interested and which supported the view taken by the Registrar-General and whose opposition failed. In that case Long Innes CJ in Eq took the view that as soon as the cudgels were taken up by the objector the matter fell into the realm of adverse litigation and that costs should follow the event.
[22]Unreported, Supreme Court of NSW, Long Innes CJ in Eq, 17 April 1935, referred to in Re Rose Bay Bowling and Recreation Club Ltd (1935) 52 WN (NSW) 77, 78-79.
In Re Rose Bay Bowling and Recreation Club Ltd,[23] Long Innes CJ distinguished the circumstances in Inre Edwards by noting that the defendants in Re Rose Bay had a legal right under the covenant which was clear and admitted. He said the defendants were entitled to put their views before the court and that the costs incurred by them ‘were a necessarily incident to such an application’. In his Honour’s view, it was only right and proper that the applicant should pay all the costs reasonably or necessarily incurred by reason of the application, including the proper costs of the objectors.[24]
[23](1935) 52 WN (NSW) 77.
[24]See also Walker v Bridgewood (No 2) [2006] NSWSC 285, [5] (Gzell J).
The defendant submitted that its case could not be described as fully adversarial given the narrow basis on which it conducted its case and that, in any event, the plaintiff has not identified the specific costs which she has unnecessarily or unreasonably incurred by virtue of the defendant’s conduct of its case.
The defendant also relied on the fact that it properly advanced an argument upon which it could succeed if the court found that the residual discretion was broader than the s 84 considerations (a point on which there was no authority) and that it was entitled, as a matter of law, to ask the Court to consider whether the injury which it will indubitably suffer as a result of the modification is in fact relevant to the exercise of the residual discretion. The plaintiff’s submission claiming costs focuses solely on the considerations relevant to its persuasive task and omits reference to the defendant’s entitlement to seek to protect its proprietary entitlement, so long as it does so reasonably and properly.
Consideration
In my view, there was nothing in the restrictions in the covenants burdening the subject land that expressly or impliedly protected uses of the defendant’s land for telecommunications towers and which required there to be no three storey building on either or both of the subject lots.
The decided cases considered in the judgment concerning the test in s 84(1)(c) of the PLA confirm that the test requires a comparison of the benefits intended to be, and actually, conferred by the subject covenants with the hypothetical, but realistic, benefits that will remain after their modification.
The protection afforded by a single dwelling covenant is limited to protecting the residential amenity of the benefitted lands. The defendant did not, after researches, find any authority holding that the benefit of a single dwelling covenant or a non-excavation covenant extended to preventing three storey residential buildings, nor where such a building might, not must, interfere with telecommunications towers on a neighbouring commercial building. In short, the defendant did not engage with the established legal test, but attempted to convert it to the protection of a current commercial use of its land by misapplying the reasoning in Prowse v Johnstone.[25]
[25][2012] VSC 4 (‘Prowse’).
The defendant’s reliance on the residual discretion was also inconsistent with the same known law and facts referred to above. Those facts and law ought to have led the defendant to realise that the defendant had no relevant interest that was protected by any of the restrictions in the two covenants in issue in the proceeding. In those circumstances, there was nothing that the defendant could point to that could justify the Court refusing the plaintiff’s application.
At the expense of repeating what I said in the judgment, I consider the benefits intended to be conferred and actually conferred by the covenants do not include the benefit of unimpeded telecommunications signals from 453 Warrigal nor the protection of leases entered into by the proprietor of that land for the erection of telecommunication antennas. Neither covenant has anything to do with protecting such things. Thus the proprietary right to enter into leases of the roof space of 453 Warrigal, to receive the rentals and to provide a ‘public service’, are not, in my view, considerations I should take into account in the exercise of the residual discretion.
The defendant’s solicitor and counsel (senior and junior) performed their respective tasks reasonably and properly, in the sense that they behaved respectfully, they generally abided the orders of the Court and they presented their client’s case in the best possible way that they could. At the start of his submissions, Senior Counsel for the defendant even acknowledged that the decided cases made it difficult to bring its ‘substantial injury’ within the ambit of s 84, so that they did realise the hurdle the defendant faced. That forthright acknowledgment was clearly warranted. But regrettably it did not stop the defendant advancing a case that had no real factual or legal merit and thus no real prospect of success.
In these circumstances, the lack of substance to the opposition to the modification sought by the plaintiff means that the appropriate order is that the defendant pay the plaintiff’s costs from an appropriate point, allowing sufficient time for the defendant to obtain proper and considered legal advice.
It is therefore necessary to consider the point from which it is appropriate to order the defendant to pay the plaintiff’s costs.
The application was notified to the benefitted land holders pursuant to an order of the Court made on 26 August 2016. The notice was served by 9 September 2016. The defendant gave notice of intention to appear and oppose the application on 6 December 2016. By orders made that day, the defendant was joined to the proceeding and directions were made for the filing of material and the holding of a mediation by 28 April 2017.
The mediation was held on 19 April 2017. On 27 April 2017 the parties requested a brief adjournment following the holding of the mediation, which was granted by order made that day. On 20 June 2017 the Court was informed that following the mediation the plaintiff and defendant had signed conditional terms of settlement and subsequently the condition or conditions failed. On that day the trial of the proceeding was fixed to commence on 21 September 2017 with orders and directions for that purpose.
This sequence suggests that the last and best opportunity for the defendant to receive and accept proper and considered legal advice as to the factual and legal merit of the application, its prospects of success, and the prospects of the defence in fact run succeeding, was at the time of the mediation. Accordingly that is the appropriate point to which the plaintiff should pay the defendant’s costs, on a standard basis, and the date after which the defendant should be ordered to pay the plaintiff’s costs of the proceeding, again on a standard basis.
The result is that it will be ordered that the plaintiff shall pay the defendant’s costs up to and including the mediation of the proceeding on 19 April 2017 and the defendant shall pay the plaintiff’s costs of the proceeding after the mediation on 19 April 2017, both on a standard basis to be taxed in default of agreement.
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