Merrifield Corporation Pty Ltd v FAL Mickleham Pty Ltd (Costs)
[2025] VSC 535
•1 September 2025
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2022 00791
| MERRIFIELD CORPORATION PTY LTD (ACN 111 110 813) & ORS (according to the attached Schedule) | Plaintiffs/Defendants by counterclaim |
| v | |
| FAL MICKLEHAM PTY LTD (ACN 643 550 010) | Defendant/Plaintiff by counterclaim |
---
JUDGE: | Harris J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 25 July 2025 |
DATE OF JUDGMENT: | 1 September 2025 |
CASE MAY BE CITED AS: | Merrifield Corporation Pty Ltd & Ors v FAL Mickleham Pty Ltd (Costs) |
MEDIUM NEUTRAL CITATION: | [2025] VSC 535 |
---
COSTS – Application for declarations and injunctions for breach of restrictive covenant on lot in business park – Counterclaim for modification of restrictive covenant – Principles on costs in applications for restrictive covenants – Exercise of costs discretion in proceeding involving multiple issues – What constitutes success for the purposes of usual rule that costs follow the event – Supreme Court Act 1986, s 24 – Re Withers [1970] VR 319.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr D Triaca | Colin Biggers & Paisley |
| For the Defendant | Ms X Teo | King & Wood Mallesons |
TABLE OF CONTENTS
Background......................................................................................................................................... 1
The parties’ positions as to costs..................................................................................................... 2
Costs principles.................................................................................................................................. 4
Submissions as to principles on costs in restrictive covenant matters.................................. 5
Conclusions on the effect of authority on costs in modification applications............ 9
To what extent did the parties succeed in their respective cases?.......................................... 10
Merrifield’s primary claim......................................................................................................... 10
Assessing success in the applications for modification......................................................... 12
Application of the principles specific to s 84 modification applications................... 16
Costs of the submissions and hearings on the issue of jurisdiction to determine the issue involving s 45 of the Competition and Consumer Act............................................................................ 17
Conclusion as to appropriate costs orders................................................................................... 18
HER HONOUR:
Background
This proceeding involved a Restrictive Covenant on land in a major business park in Mickleham, Victoria. The plaintiffs (Merrifield) commenced proceedings against the defendant (FAL) for breach of the Restrictive Covenant. The defendant, by its counterclaim, sought modification of the Covenant pursuant to s 84(1) of the Property Law Act 1958 (Vic) and pleaded various modifications in the alternative.
On 3 July 2025, I delivered judgment in this matter.[1] My conclusions were summarised at [17] of the judgment, as follows:
[1]Merrifield Corporation Pty Ltd v FAL Mickleham Pty Ltd (No 2) [2025] VSC 390, (Reasons).
(a)The Restrictive Covenant is enforceable as against FAL. The Restrictive Covenant touches and concerns the land by restricting uses, configurations or development of Lot 301 that are incompatible with a business park and thereby providing an amenity benefit to the adjacent benefitted land, Lot P. It does not touch and concern the land by reason of any protection against competition in the sale and leasing of land.
(b)The Restrictive Covenant is not void or unenforceable by reason of s 45 of the Competition and Consumer Act 2010 (Cth).
(c)The Restrictive Covenant is subject to an implied term that the consent of the proprietor of Lot P to the creation or two or more tenancies is not to be unreasonably withheld.
(d)FAL breached the Restrictive Covenant by failing to seek consent prior to entering into a second lease.
(e)The conditions for modifying the Restrictive Covenant in the manner proposed in the Fifth Proposed Modification under s 84(1)(c) are satisfied.
(f)It is appropriate to exercise the discretion of the Court to modify the Restrictive Covenant in the manner proposed in the Fifth Proposed Modification.
On 25 July 2025, I heard the parties on the appropriate orders to be made to give effect to the judgment, and on costs.
At that hearing, I determined the appropriate orders and declarations to be made for the disposition of the matter, with the exception of determining costs. The declarations formally made[2] were as follows:
(1)The restrictive covenant in Memorandum of Common Provisions (MCP) AA6062 registered 16 March 2020 and incorporated into Instrument of Transfer AT115636A registered 30 March 2020, and recorded as an encumbrance on the land described in certificate of title volume 12191 folio 001 of the Land Register maintained by the Registrar of Titles, be modified by adding in paragraph (i) the words “(other than one occupancy for the Warehouse and one occupancy for the Freezer located on the site as set out in the attached plan)” after the words “two or more separate occupancies”.
(2)The plan attached to this order be attached to MCP AA6062 in respect of the land described in certificate of title volume 12191 folio 001.
(3)By entering into the Freezer Lease on 13 September 2021 with Laverton Cold Storage Pty Ltd, without the consent of Merrifield Corporation Pty Ltd, FAL Mickleham Pty Ltd breached the restrictive covenant.
[2]Orders of Justice Harris made on 29 July 2025, after the parties had agreed an appropriate plan to be annexed to the orders and to the title on the Land Register.
I ordered that:
Pursuant to section 103 of the Transfer of Land Act 1958 (Vic), the Registrar of Titles record, in respect of certificate of title volume 12191 folio 001 of the Register, that MCP AA6062 is modified as declared…
Given the complexity of the matter, and the fact that the authorities relating to modification or removal of restrictive covenants recognise particular considerations arising with respect to costs in such cases, the parties made detailed submissions on costs, and I reserved my decision.
The parties’ positions as to costs
Merrifield and FAL each submitted that they had enjoyed a significant measure of success in the proceeding, and that orders should be made for the other party to pay its costs.[3] For this reason, one of the primary questions arising is to what extent the party succeeded on their claims and on the individual issues that were before the Court. The second question relates to whether any different principle applies to the determination of costs in proceedings involving an application to modify or remove a restrictive covenant.
[3]Plaintiffs’ Submissions on Costs dated 17 July 2025, [3]; Submissions of the defendant/plaintiff by counterclaim on orders following judgment dated 23 July 2025 (FAL’s Submissions on Costs), [14].
Merrifield contended that FAL should pay its costs of the proceeding on a standard basis, including reserved costs and the costs associated with FAL’s counterclaim. Merrifield contended that it succeeded in its claims, and subject to FAL’s limited success on its counterclaim, ‘succeeded on all material issues in the proceeding’.[4] It submitted, relying on Chen & Ors v Chan & Ors,[5] that a successful party should recover its costs even where it has not succeeded on all heads of claim, unless there is some disqualifying conduct.[6]
[4]Plaintiffs’ Submissions on Costs, [2].
[5][2009] VSCA 233, [10].
[6]Plaintiffs’ Submissions on Costs, [6].
Merrifield submitted that these ordinary principles did not apply to the application for modification of the Restrictive Covenant pursuant to s 84 of the Property Law Act, as argued by FAL in its counterclaim, because it is recognised in relevant authorities that such an application seeks some form of benefit, and a party who objects to the modification and seeks to preserve the status quo, should not have to bear the burden of costs.[7]
[7]Plaintiffs’ Submissions on Costs, [8]-[12]; Transcript 25/07/2025, T33.06-T34.06.
FAL submitted that it should be awarded its costs, on a standard basis, of the proceedings, inclusive of the counterclaim, for the following reasons:[8]
[8]FAL’s Submissions on Costs, [31]-[41].
(a) FAL was wholly successful on its primary case for modification and all the expert evidence tendered by FAL was relevant to the modification application;
(b) the plaintiffs failed to narrow the issues in dispute at trial, whilst FAL narrowed the issues in dispute at trial by not pressing for the First Proposed Modification;
(c) whilst FAL breached the Covenant, no harm was caused to the plaintiffs by that breach;
(d) the plaintiffs failed to co-operate throughout the litigation by their refusal to discover documents the restrictive covenants that applied to other sites in the Merrifield Business Park;
(e) the Court made extensive evidentiary findings which were adverse to the plaintiffs and rejected many of their contentions;
(f) had the plaintiffs consented to the two occupancies on Lot 301, the litigation would not have been necessary; and
(g) FAL had achieved, through litigation, an outcome superior to the grant of consent by Merrifield to the two occupancies on Lot 301, where the modification to the Restrictive Covenant will be recorded on title and exist for perpetuity.
Costs principles
Section 24(1) of the Supreme Court Act 1986 (Vic) provides that costs of and incidental to all matters in the Court are to be 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.
The Court’s discretion on costs is broad, but is to be applied judicially to well established principles and not by reference to ‘irrelevant or extraneous considerations’.[9]
[9]Latoudis v Casey (1990) 170 CLR 534, 557-559 (Dawson J with Brennan J agreeing at 544); Oshlack v Richmond River Council (1998) 193 CLR 72, 96 [65] (McHugh J).
The general purpose of costs is to indemnify a successful party against the costs of litigation that should not, in justice, have been visited on that party, and a successful party should generally receive costs unless good reason is shown to the contrary.[10] The outcome of a dispute has been noted to be ‘by far the most important factor… [in] guiding the exercise of the costs discretion’.[11] Customarily, a successful party is entitled to costs, even if the successful party failed to prove all of its claims.[12]
[10]Milne v Attorney-General for the State of Tasmania (1956) 95 CLR 460, 477; Latoudis, 542 (Mason CJ); Northern Territory v Sangare (2019) 265 CLR 164, 173 [25] (Kiefel CJ, Bell, Gageler, Keane and Nettle JJ).
[11]Oshlack, 96 [66] (McHugh J).
[12]Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141, [228] (Tate ACJ, Kyrou and Ferguson JJA) citing Semco Developments Pty Ltd v Graham [2005] VSCA 268, [24] (Eames JA with Chernov and Ashley JJA agreeing) and McFadzean v Construction, Forestry, Mining and Energy Union (2007) 20 VR 250, 289 [152] (Warren CJ, Nettle and Redlich JJA).
The Court of Appeal addressed the relevance in exercising the costs discretion of an assessment of the measure of success achieved by the parties in Boz One Pty Ltd v McLellan (No 2):[13]
Although s 24(1) of the Supreme Court Act 1986 confers on this Court a wide discretion in deciding questions of costs, that discretion must be exercised judicially and in accordance with established principles. A well-established principle is that costs usually follow the event, that is, that the unsuccessful party is usually ordered to pay the successful party’s costs. However, there can be departures from that principle where the justice of a particular case requires this. Where there are multiple parties, some of whom are successful and some of whom are unsuccessful, the court is required to fashion a costs order that fairly reflects the measure of success achieved by each party and all the other circumstances that bear upon the justice of the case.
[13][2015] VSCA 145, [41] (Whelan, Santamaria and Kyrou JJA).
In the present case, Merrifield sought damages for the breach of the Restrictive Covenant and established a breach, but did not ultimately call evidence on compensable loss and instead sought nominal damages. Contemporary authority is to the effect that the award of nominal damages is not regarded as materially determinative in the substantive question of which party succeeded in the litigation.[14] In other words, the award of nominal damages is not regarded in current authority as ‘a peg on which to hang costs’.[15]
[14]Oshlack, 98 [70] (McHugh J).
[15]Actrol Parts Pty Ltd v Coppi (No 3) (2015) 49 VR 573, 597-600 [90]-[97] (Bell J); KSG Investments Pty Ltd v Open Markets Group Ltd (No 2) [2021] VSC 359, [9] (Nichols J).
Submissions as to principles on costs in restrictive covenant matters
Merrifield relied, in respect of the costs of the modification application, on the authority of Re Withers.[16] In that case the applicant had made an application for a modification of a restrictive covenant which prevented any subdivision of land for residential purposes. The applicant had partly succeeded, and the objectors to the modification were unsuccessful. However, the objections made by the objectors were not found to be frivolous. It was ultimately determined that unless objections to the removal or modification of a restrictive covenant are frivolous in nature, an unsuccessful objector may, in the discretion of the Court, be entitled to their costs.
[16] [1970] VR 319 (Anderson J).
Justice Anderson held:
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.[17]
[17][1970] VR 319, 320 (Anderson J).
Anderson J also described the rationale of that principle:
… proceedings of this nature are not ordinary proceedings where [the] spoils go to the victor. The successful applicant has sought and obtained a very substantial concession or benefit, when all the objectors have done has been to seek to preserve the status quo and to hold the applicant to the covenant which bound him.
In Stanhill Pty Ltd v Jackson, Justice Morris cited the above principle in Re Withers and observed:
The principle set out in Re Withers is consistent with other decisions of the Court, such as that by Gillard J in Re Markin, Lush J in Re Shelford Church of England Girls’ Grammar School and McGarvie J in Re Ulman. In my opinion, it is a sound principle.
The plaintiff submitted that it is rare for a successful plaintiff to be deprived of a costs order in his or her favour. However that general principle is not applicable where a plaintiff seeks some indulgence from the court or (as is the present case) seeks to change an existing right. This is especially so where the remedy sought by the plaintiff is discretionary. I agree with the plaintiff’s submission that section 84 of the Property Law Act should not be seen as a section in which an applicant obtains an indulgence or concession. There is a right to make such an application and any such application must be considered on its merits. However it remains true that the court has a discretion as to whether or not to grant a remedy. It is this element, rather than some notion of a concession or indulgence, which underpins the principle articulated in Re Withers.[18]
[18]Stanhill Pty Ltd v Jackson [2005] VSC 355, [3]-[4] (Morris J).
Justice Morris accepted the submission that costs will always remain in the discretion of the court, and that there is no universal rule to be applied in cases of this type. Re Withers provides guidance rather than establishing an applicable rule. He also noted that if the plaintiff in that case had been wholly successful and had obtained a modification to the covenant to permit the maximum amount of dwellings sought, he would have been inclined to make no order as to costs.[19] His Honour also observed that ‘[i]f a defendant, resisting an application to modify a covenant, acts irresponsibly, then it would not be entitled to costs in relation to that irresponsible conduct; indeed, it might be in a position where it would have to pay the plaintiff’s costs’.[20]
[19]Stanhill, [5]-[7].
[20]Stanhill, [6].
Merrifield also relied on Wong v McConville & Ors (No. 2).[21] In that case, Derham AsJ set out the principles for costs orders under s 84 applications, stating that ‘[i]t has been held, in effect, that the nature of the proceedings for the modification or removal of a restrictive covenant constitutes “special circumstances” and that a plaintiff should pay a defendant’s costs even when successful.’[22] His Honour noted that the general rule that costs follow the event is ordinarily not applicable in these applications because:
[21][2014] VSC 282.
[22][2014] VSC 282, [12]; referring to Re Withers [1970] VR 319; Stanhill; Suhr v Michelmore [2013] VSC 284.
(a) the party seeking the modification must apply to the Court for modification or discharge of the covenant, even where the parties agree;
(b) the applicant generally obtains a commercial benefit from the modification; and
(c) the decision of the Court to modify or discharge a restrictive covenant involves the exercise of discretion,[23] which will involve having regard to the specific circumstances of the proceedings.[24]
[23][2014] VSC 282, [13].
[24][2014] VSC 282, [18].
However, in a subsequent case, Jiang v Monaygon Pty Ltd, Derham AsJ, having affirmed his view that the general rule that costs follow the event ordinarily does not apply in applications for modification of a restrictive covenant,[25] awarded costs to a successful plaintiff in an application for modification of a covenant from the point at which the defendant had the opportunity to obtain and consider legal advice.[26] His Honour considered Victorian and New South Wales authority to the effect that an applicant for modification would not be required to pay the objector’s costs, not only if the objector’s conduct was ‘frivolous’ or ‘irresponsible’ as identified in Re Withers and Stanhill, but also where:
(a) the applicant’s case is ‘overwhelming’,[27] or
(b) the objectors run ‘fully adversary’ proceedings and fail.[28]
[25]Jiang v Monaygon Pty Ltd (Costs) [2017] VSC 655, [5]-[6].
[26]Jiang, [27]-[32].
[27]Jiang, [11] citing Mamfredas Investment Group Pty Ltd v PropertyIT and Consulting Pty Ltd [2013] NSWSC 929 at [90] citing Brown v State Transit Authority of NSW [2000] NSWSC 802, [16]-[21].
[28]Jiang, [11] citing Mamfredas at [90] citing Re Rose Bay Bowling & Recreation Club Ltd (1935) 52 WN (NSW) 77, 78-79. See also In re Edwards unreported, Supreme Court of NSW, Long Innes J in Eq, 17 April 1935 (cited by Derham As J in Jiang at [18]-[19] and referred to in Re Rose Bay at 78-79).
FAL contended that there was no special principle on costs which was applicable to applications for modification of restrictive covenants. It acknowledged the cases relied on by Merrifield, but referred to authority of the New South Wales Court of Appeal in Durian (Holdings) Pty Ltd v Cavacourt Pty Ltd.[29]
[29]Durian (Holdings)(2000) 10 BPR 18,099.
That case related to an application for extinguishment of an easement pursuant to s 89(1) of the Conveyancing Act 1919 (NSW).[30] At first instance the trial judge declined to order that the easement should be extinguished and made declarations to the effect that the easement still existed.[31] On appeal, the Court of Appeal allowed the appeal, on the basis that the applicant had discharged the onus of establishing that the easement was obsolete. The Court of Appeal discharged the injunction and ordered pursuant to s 89(1) that the easement be extinguished. The Court of Appeal made costs orders that the cross-defendant (which had sought the declarations and resisted extinguishment) pay the costs of the cross-claimant both below and on appeal.[32]
[30]Section 89(1) provides:
(1)Where land is subject to an easement or a profit à prendre or to a restriction or an obligation arising under covenant or otherwise as to the user thereof, the Court may from time to time, on the application of any person interested in the land, by order modify or wholly or partially extinguish the easement, profit à prendre, restriction or obligation upon being satisfied –
…
[31]Cavacourt Pty Ltd v Durian (Holdings) Pty Ltd (1998) 9 BPR 16,833 (Young J).
[32]Durian (Holdings), 18,104, [29] (Meagher JA with whom Mason P agreed at [14] and Stein JA at [33]).
Conclusions on the effect of authority on costs in modification applications
The authorities demonstrate that the starting point in exercising the Court’s discretion on costs in an application for a variation to a restrictive covenant is to recognise that unlike ordinary proceedings, such an application involves challenging an existing legal right. An application for a variation or discharge of a restrictive covenant seeks the positive exercise of the Court’s discretion and will entail, if successful, receiving a benefit which the applicant did not previously have. A proprietor of benefitted land is entitled to seek to maintain the continuance of an entitlement that is recognised at law.
Equally, it is relevant that for many years, the law has recognised the potential for restrictive covenants to be varied or discharged in the circumstances identified in s 84 of the Property Law Act. It is part of the legal framework applicable to the acquisition and ownership of real property in the State. The proprietor of benefitted land, whether the party which imposed the restrictive covenant or subsequent proprietor, is, having regard to the circumstances in s 84(1) which an application may be made, in some position to make an assessment of whether an application will be successful. That is particularly so when there has been an opportunity to consider legal advice. In some circumstances, it might reasonably be anticipated by a proprietor of benefitted land that relevant circumstances in s 84(1) would be established by an applicant for modification. Such a party is entitled to have the matter determined by the Court with a full hearing on all of the issues. However, depending on the basis of the objections to the amendments, it may not always be reasonable for the objector to receive costs of such a fully contested adversarial hearing.[33]
[33] Jiang, [18]-[19]; Mamfredas, [90].
In the context of restrictive covenants on property used for commercial purposes, it is appropriate to approach the question of costs on the basis that an objector should consider, in response to any application for a variation, the nature of the variation sought and the relevant circumstances of the case carefully, before contesting an application in a full adversarial hearing in this Court. It will always be necessary for an applicant to apply to this Court for the order under s 84(1) and they should generally expect to bear some costs of that application. A defendant must have the opportunity to consider their legal position on an application and it would generally be appropriate that the applicant at least bear the costs relating to that assessment. However, if a defendant actively opposes the variation to a restrictive covenant on grounds which ultimately lack merit, they should not expect to recover the entirety of the costs of that opposition.
To what extent did the parties succeed in their respective cases?
Merrifield’s primary claim
Merrifield’s claim involved establishing that the Restrictive Covenant touched and concerned the land, and was enforceable against FAL, and that FAL had breached the terms of the Covenant. FAL’s defence introduced the issues of whether the Restrictive Covenant was qualified by an implied term that the consent to further occupancies required by the Covenant was not to be unreasonably withheld, and if so, whether Merrifield’s refusal of consent was unreasonable; and whether the Restrictive Covenant, if it had the purpose and effect contended by Merrifield, was void by reason of s 45 of the Competition and Consumer Act 2010 (Cth).[34]
[34]I put to one side in the following consideration of the extent to which Merrifield should be regarded as succeeding in its claims the issue of jurisdiction affecting the s 45 defence, which gave rise to discrete costs that should be paid by FAL for reasons separately addressed below.
Merrifield succeeded in establishing that the Restrictive Covenant touched and concerned the land and was enforceable. FAL was successful in establishing an implied term that the consent could not unreasonably be withheld, but was unsuccessful in establishing that Merrifield had in fact unreasonably withheld consent. Merrifield was, therefore, successful in establishing that FAL had breached the Restrictive Covenant when it entered into the lease with Laverton Cold Storage Pty Ltd without obtaining consent from Merrifield.
It is also necessary in assessing each party’s success in the primary claim to consider not just the final outcome of Merrifield’s claim, but how the substance of the claim was put in the proceeding. The issue which was most contentious, and gave rise to the most evidence and submissions in Merrifield’s case, was whether the Restrictive Covenant touched and concerned the land. Merrifield approached this question on the basis that the Restrictive Covenant touched and concerned Lot P for two reasons, primarily that it had the purpose and effect of protecting the owners of Lot P from competition in sales and leasing, and thereby protecting Lot P’s ‘development options’.[35] The amenity related benefit in ensuring that Lot 301 complied with the planning scheme which was accepted as established by the evidence was put only as the secondary purpose or benefit of the Restrictive Covenant.
[35]Reasons, [110]-[112].
Merrifield’s primary contention that the Restrictive Covenant touched and concerned the land by reason of its intention and effect of restricting competition from Lot P was made in part by reference to the language of the clause, and in part in reliance on the expert evidence of valuer Nicholas Moore and the subjective intentions of the Board of MAB, which was involved as development manager for the Merrifield Business Park.[36] I rejected the argument based on the terms of the Restrictive Covenant,[37] and also rejected reliance on the evidence of Mr Moore and of the intentions of MAB on this issue, as I found that evidence was inadmissible for this purpose, having regard to the appellate authorities on construction of Restrictive Covenants.[38]
[36]Reasons, [118].
[37]Reasons, [126]-[127].
[38]Reasons, [75]-[79].
Merrifield’s primary position on why the Restrictive Covenant touched and concerned the land was, therefore, largely misconceived. Although it succeeded in establishing that the Restrictive Covenant had amenity related benefits, this was largely on the basis of considerations arising from the terms of the Covenant, the subdivision of the land evident on the documents on the Register, and the physical features of the Merrifield Business Park, which involved very limited evidence and received limited focus in submissions.[39]
[39]Reasons, [135]-[136].
Merrifield’s contention that the Restrictive Covenant had the effect of protecting Lot P from competition from Lot 301 in sales and leasing was also the starting point of FAL’s unsuccessful defence based on s 45 of the Competition and Consumer Act. That defence was pleaded to arise only if the Restrictive Covenant had the purpose alleged by Merrifield.[40] FAL relies on this as a matter in favour of its submission that Merrifield should pay the costs of the entire proceeding.[41]
[40]Reply to Defence to Counterclaim, [2]; Amended Rejoinder, [2].
[41]FAL’s Submissions on Costs, [35]-[36].
FAL’s defence based on s 45 was, in my view, entirely misconceived based on the terms of the Competition and Consumer Act, and there was limited authority or statutory context to support the argument that s 45 would apply to competition in a market in land. FAL plainly did not succeed on this issue. That remains the case even if it was responding to a contention of Merrifield which also failed.
Overall, Merrifield was the successful party in the outcomes of the primary claim, save for FAL’s success on the relatively straightforward legal issue of whether the Restrictive Covenant was subject to an implied term. That was an issue which ultimately did not lead to any successful outcome on FAL’s part given that the facts were clearly not in favour of a finding that Merrifield’s refusal of consent was unreasonable. However, I consider it is also a factor directly relevant to the discretion on costs that a large proportion of the evidence and submissions relevant to Merrifield’s claim were not well founded, for the reasons expressed above.
Assessing success in the applications for modification
The particular principles relating to costs of an application for modification are primarily relevant to the situation where the applicant for modification has been successful. The ordinary principle that costs follow the event would apply if an applicant for modification was unsuccessful.
Here, FAL was successful in obtaining one of the alternative proposed modifications which it sought, the Fifth Proposed Modification. It was, in the language used by FAL at trial, an ‘extremely modest modification’[42], being the most limited of the proposed modifications. FAL was unsuccessful in obtaining any of the other three more significant proposed modifications. I accept Merrifield’s submission that FAL was only partially successful in its counterclaim.[43]
[42]Transcript 17/09/24, T58.06.
[43]Plaintiffs’ Submissions on Costs, [18].
Again, however, it is appropriate to consider the substance of the parties’ positions in reaching the outcome that the Fifth Proposed Modification was appropriate, but the remaining alternative proposals should be rejected.
As to the merit of Merrifield’s objections to the application for variation, I concluded that the basis on which Merrifield contested the variations to the Restrictive Covenant did not, for the most part, find support in the evidence. The primary basis on which Merrifield opposed the variation of the Restrictive Covenant was that it was said to protect the benefitted land from competition in sales and leasing of Lot 301. This primary benefit was pleaded in its defence to the amended Counterclaim[44] and was emphasised in its submissions.[45] It was also the effect of Merrifield’s expert evidence, which I largely rejected.[46] However the evidence of lay witnesses called by Merrifield, in particular that of Michael Martin, the General Manager Commercial and Industrial at MAB, did not support any anti-competition benefit or objective, and did not provide any real support for the position that the most limited variation sought by FAL would cause Merrifield substantial injury.[47]
[44]Reply to Amended Defence and Defence to Further Amended Counterclaim dated 27 November 2023, [21(b)].
[45]Reasons, [128], [337], [346]; Plaintiffs’ Outline of Closing Submissions dated 25 September 2024, [14], [91].
[46]The evidence of Nicholas Moore, which was to the effect of why a developer would ‘place a covenant of the type of the existing Covenant over lots in a business part development such as Merrifield’. Reasons, [308]. I found the evidence responding to this question inadmissible for most purposes or of very little weight for the reasons identified at Reasons, [316]-[318], [322].
[47]Reasons, [380], [420]-[421], [428]-[429].
Mr Martin’s evidence was to the effect that the intention of the restrictive covenants introduced by MAB (a general observation as he did not have direct experience of the transaction in which the Restrictive Covenant was placed on Lot 301)[48] was to ‘protect and deliver on the urban design frameworks that are established in all the planning documentation’.[49] I accepted that the Restrictive Covenant had that amenity related purpose and effect, rather than the anti-competitive purpose and effect contended for by Merrifield in its pleadings and submissions.[50] Mr Martin’s evidence also generally supported the conclusion that a variation of the Restrictive Covenant to permit two occupancies in the existing buildings would not cause a substantial injury to the proprietor of Lot P.[51]
[48]Reasons, [422].
[49]Reasons, [420].
[50]Reasons, [134]-[138].
[51]Reasons, [380], [425]-[426].
Merrifield’s submission that the variation of the Restrictive Covenant would cause substantial injury because of a precedential effect was also not supported by the evidence. Many other properties in the Merrifield Business Park, including large lots of comparable size to Lot 301, did not have restrictive covenants limiting the number of occupancies, so no precedential effect was possible in those cases.[52] That factual position was established by evidence called by FAL, in circumstances where the evidence of Mr Martin had wrongly asserted that occupancy restrictions applied to all lots across the Merrifield Business Park.[53]
[52]Reasons, [410]-[414].
[53]Reasons, [425]-[426].
It is also relevant that the evidence of Mr Martin that variation to permit more than one occupancy of Lot 301 would have adverse effects on traffic volumes in the road network around the Merrifield Business Park. This was not supported by any expert analysis or other evidence called by Merrifield, and was convincingly refuted by Charmaine Dunstan, a traffic engineer who was called by FAL.[54]
[54]Reasons, [370]-[379].
It is true, as Merrifield submits, that the more significant variations sought by FAL were not granted. However, these variations were rejected primarily on a basis that was not emphasised in Merrifield’s submissions or evidence. I was not satisfied that FAL had established that more than two occupancies, not limited to existing buildings, or three occupancies in existing buildings, would not substantially injure Merrifield as proprietor of Lot P. However, my conclusions as to potential adverse impacts on amenity of the more substantial modifications were based not on evidence filed by Merrifield, but based on FAL’s evidence which addressed issues of amenity in a reasonable and informative way.[55]
[55]Reasons, [383]-[396]. Merrifield had no burden of proof with respect to the modification application, but it remains the case that it was open to call evidence in response to FAL’s evidence. The issue of amenity was also relevant to the enforceability as against FAL of the Restrictive Covenant, in particular whether it touched and concerned the land, and this was an issue on which Merrifield bore the burden of proof.
Overall, I consider that FAL had a strong measure of success. The outcome of the more significant modifications not having been achieved is not appropriately characterised as a success on Merrifield’s part, given that its position on the amendment application was largely based on its misconceived contentions and ineffective evidence directed to the purported anti-competitive purpose and effect of the occupancy restriction in the Covenant.
In considering that success, it is an important qualification to take into account that FAL only sought the Fifth Proposed Modification, on which it succeeded, late in the proceedings.
Originally, FAL sought three quite substantial variations to the Restrictive Covenant. It abandoned the most significant variation (to remove altogether any restriction on multiple occupancies) at trial. It also only sought leave to amend its Counterclaim to seek the Fifth Proposed Modification on the first day of the hearing.[56] FAL sought Merrifield’s consent to that variation, and provided the proposed amended pleading to Merrifield which included that modification on 26 August 2024. On 28 August 2024, Merrifield requested further information from FAL, which it provided on 29 August 2024. On 6 September 2024, Merrifield advised that it neither consented to nor opposed the pleading amendments. On that same day, FAL advised Merrifield that it sought further amendments to the pleadings (the inclusion of the Fourth Proposed Modification).[57] Merrifield thus had only a limited opportunity to consider the relevant modification before the trial, and after most of the work for the trial had been completed.
[56]17 September 2024; see Reasons, [18]-[20].
[57]Affidavit of Peter Yeldham affirmed 11 September 2024, [7]-[18].
Application of the principles specific to s 84 modification applications
Proceeding from the position that FAL was, in substance, successful in its application for modification, it remains necessary to apply the particular principles applicable to costs on an application for modification of a restrictive covenant.[58]
[58]See paragraphs [25]-[27] above.
First, the application was strongly resisted by Merrifield. The proceeding, including the application for modification, is appropriately characterised as a fully contested adversarial hearing, a factor which has been recognised as tending towards the successful applicant for modification not having to bear the costs of the unsuccessful objector.[59]
[59]Jiang, [18]-[19]; Mamfredas, [90].
Secondly, it is relevant that, as noted above, the modification which FAL was successful in achieving was only proposed by FAL shortly before trial, with the amendment to the pleading to incorporate that proposed modification only made on the first day of trial. Although Merrifield’s objections were unsuccessful and to a significant extent put on a misconceived basis, they were originally formulated in response to proposed modifications of much more significant impact. This is a factor tending against FAL receiving costs of its counterclaim, at least up until that amendment.
Thirdly, I take into account that rather than FAL taking the positive steps of seeking consent for a second occupancy, or making an application to this Court to seek the modification of the Restrictive Covenant, it simply entered into a lease creating a second occupancy in breach of the Covenant. FAL then left its application for modification to be put as a counterclaim after Merrifield issued proceedings seeking to enforce the Covenant, as it was entitled to do. Merrifield acted appropriately in issuing these proceedings and in resisting the modification up to a certain point, and it would not be appropriate to require it to bear its own costs of the institution of the proceedings.
Fourthly, it would always have been necessary for FAL to make an application to the Court to obtain orders effecting the amendment to the Restrictive Covenant, and FAL would have had to incur some costs of an application.
Fifthly, although it was necessary for FAL to make an application to seek orders to vary the status quo with respect to the Restrictive Covenant, it was open to Merrifield not to contest the proposed modification once it was sought. That is the case at least after the evidence was filed and the Fifth Proposed Modification, which was consistent with that evidence, proposed. Merrifield’s objections to the modification, focusing as they did on the purported anti-competitive benefit that the Restrictive Covenant was contended to have, had no real factual basis on the evidence before the Court, and little ultimate merit.
There are, therefore, factors favouring both Merrifield’s position and FAL’s position which I must take into account in the final assessment of the costs disposition which is just and fair.
Costs of the submissions and hearings on the issue of jurisdiction to determine the issue involving s 45 of the Competition and Consumer Act
After the hearing had concluded, I raised with the parties whether it was open to this Court to determine the defence based on s 45 of the Competition and Consumer Act. Neither party had addressed this in submissions or in the pleadings. As set out in my Ruling on this issue, submissions were made on several occasions before FAL took the necessary step of informing the Attorneys General that it would seek to have this Court determine the issue on the basis that there were special reasons to do so.[60]
[60]Merrifield Corporation Pty Ltd v FAL Mickleham Pty Ltd (No 1) [2025] VSC 253, [20]-[32].
As this was a matter raised by FAL in its defence, it had the primary responsibility of ensuring that the matter was appropriately raised. Although, as indicated in my Ruling,[61] Merrifield’s submissions were also of limited assistance to the Court, it was ultimately FAL’s obligation to take steps to enable this Court to determine the matter. It is appropriate that FAL pay Merrifield’s costs associated with this jurisdictional issue.
[61]Merrifield v FAL (No 1), [23]-[24], [29].
Conclusion as to appropriate costs orders
This is a matter in which there are complexities in the exercise of the costs discretion. Merrifield was largely successful in the outcomes of its primary claim, but put a significant aspect of its evidentiary and legal case on a basis that was rejected by the Court. FAL raised a s 45 defence which was legally unsustainable. FAL was successful in its counterclaim in obtaining the most modest of its proposed modifications, but unsuccessful in seeking any of the more significant variations. However, Merrifield’s opposition was based on objections which had little support in the evidence it tendered. A major issue on which Merrifield was unsuccessful in substance – that the occupancy restriction of the Covenant had a purpose and effect of limiting sales and leasing competition – was put both in support of its primary claim (as to whether the Restrictive Covenant touched and concerned the land) on which it was more successful, and in response to the modification application, on which FAL was more successful.
I take into account the observations of the Court of Appeal in Thurin v Krongold Constructions (Aust) Pty Ltd (No 2) that:
In exercising its discretion, the Court is entitled to look to the realities of the litigation and it will attempt to do ‘substantial justice’ between the parties. Accordingly, while the general position is that costs should follow the event, such an order may not be appropriate in every case. In particular, where there is a multiplicity of issues, and mixed success has been enjoyed by the parties, the 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.[62]
[62][2022] VSCA 252, [12] (McLeish, Niall and Walker JJA).
It is not possible in my view to divide up the costs of individual issues in a complex case of this nature where the parties have been successful or unsuccessful on a range of different issues.[63] FAL identified in its submissions ten issues on which the Court did not accept Merrifield’s evidence or submission.[64] Merrifield took a broader approach in characterising success, but implicitly accepted that it had not succeeded on all issues.[65] There is no clear or sensible way to allocate costs on an issues basis. It is necessary, in my view, to approach the costs apportionment more as a matter of impression and evaluation[66] based on my various observations above, rather than seeking to allocate proportions by reference to issues.
[63]See for example KSG Investments Pty Ltd v Open Markets GroupLimited (No 2) [2021] VSC 359, [8(d)].
[64]FAL’s Submissions on Costs, [39]. I do not consider it accurate to say as FAL did at [39(h)] that I completely rejected Merrifield’s contention that the Occupancy Restriction increased the value of Lot P in the findings at [397]-[403] given the earlier conclusion that it conferred an amenity related benefit on Lot P which, although not the subject of expert valuation evidence, did provide a benefit attached to Lot P. I also do not give any weight to the reliance on my rejection of Merrifield’s reliance on parties’ subjective intentions in construing the Restrictive Covenant (FAL’s Submissions on Costs, [39(a)]), as FAL did not object to certain evidence, or accepted in submissions that a range of evidence was admissible to construe the Restrictive Covenant which I ultimately found was inadmissible, see Reasons, [75], [312].
[65]Plaintiffs’ Submissions on Costs, [14], [17], (referring to success on all ‘material’ matters’ and noting that it was ‘largely successful’).
[66]Chen & Ors v Chan & Ors [2009] VSCA 233 [10(5)]; Major Engineering Pty Ltd v Helios Electroheat Pty Ltd (No 2) [2006] VSCA 114, [5].
It is appropriate to make costs orders which broadly take into account the degree to which each party has been successful, but also give weight to the other relevant matters referred to above.[67] In seeking to achieve a fair and just outcome, I consider it relevant to take into account:
[67]See, for example, Sandpiper Developments Pty Ltd v Main Beach Developments Qld Pty Ltd (No 2) [2024] VSC 581, [26]-[28].
(a) FAL’s conduct in breaching the Restrictive Covenant;
(b) the matters on which each party ultimately had a successful outcome;
(c) the extent to which each party raised substantive legal and factual matters for determination, which were misconceived and ultimately rejected;
(d) the issues which were overlapping between the claim and counterclaim; and
(e) the specific factors relevant to the modification application referred to at [48]–[52] above.
Doing the best that I can to reflect a fair and just outcome and the competing considerations, I will order that FAL pay Merrifield’s costs of the proceeding up until the trial, and that each party bear their own costs of the hearing from 17 to 26 September 2024, and the costs hearing on 25 July 2025.
I consider that it is appropriate for FAL to bear the greater proportion of costs and my weighing of the various matters reflects this view.[68] FAL acted unreasonably in breaching the Occupancy Restriction in the Covenant rather than proactively seeking a modification of the Restrictive Covenant. It is also significant that the successful modification was not proposed until very late in the proceeding shortly before trial; that FAL’s conduct necessitated Merrifield bringing its claim, and that FAL would have had to bring a proceeding in this Court to obtain the benefit of the modification of the Restrictive Covenant.
[68]Some of Merrifield’s evidence and submissions that will be the subject of costs to be paid by FAL were put in support of a misconceived contention, in particular the expert evidence of Mr Moore. However, I do not think it is appropriate to seek to isolate costs of that work in the costs orders. I have taken that consideration into account in determining that Merrifield will bear its own costs of the hearing, notwithstanding that it had some success.
I will make the following orders:
(a) FAL pay Merrifield’s costs of and incidental to the issue relating to this Court’s jurisdiction to determine the defence relying on s 45 of the Competition and Consumer Act, including all written submissions and the hearing of 2 April 2025;
(b) FAL pay Merrifield’s costs of the claim and the counterclaim, up until the trial; and
(c) Each party bear their own costs of the hearings from 17 to 26 September 2024, and of the costs hearing on 25 July 2025.
SCHEDULE OF PARTIES
| BETWEEN: | |
| MERRIFIELD CORPORATION PTY LTD | First Plaintiff/First Defendant by counterclaim |
| MERRIFIELD BUSINESS PARK HOLD 1 PTY LTD | Second Plaintiff/ Second Defendant by counterclaim |
| MERRIFIELD BUSINESS PARK HOLD 2 PTY LTD | Third Plaintiff/ Third Defendant by counterclaim |
| MERRIFIELD BUSINESS PARK HOLD 3 PTY LTD | Fourth Plaintiff/ Fourth Defendant by counterclaim |
| MERRIFIELD BUSINESS PARK HOLD 4 PTY LTD | Fifth Plaintiff/ Fifth Defendant by counterclaim |
| MERRIFIELD BUSINESS PARK HOLD 5 PTY LTD | Sixth Plaintiff/ Sixth Defendant by counterclaim |
| AND | |
| FAL MICKLEHAM PTY LTD (ACN 643 550 010) | Defendant/ Plaintiff by counterclaim |
0
17
0