R J and C Holdings Pty Ltd v Parkside Developments Vic Pty Ltd (No 2)
[2016] VCC 420
•15 April 2016
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-14-02661
| R J & C HOLDINGS PTY LTD | First Plaintiff |
| and | |
| DCJ INVESTMENTS PTY LTD | Second Plaintiff |
| V | |
| PARKSIDE DEVELOPMENTS (VIC) PTY LTD | First Defendant |
| and | |
| THE REGISTRAR OF TITLES | |
| Second Defendant |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 8 April 2016 | |
DATE OF JUDGMENT: | 15 April 2016 | |
CASE MAY BE CITED AS: | R J & C Holdings Pty Ltd v Parkside Developments Vic Pty Ltd (No 2) | |
MEDIUM NEUTRAL CITATION: | [2016] VCC 420 | |
COSTS
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Subject: COSTS; FINAL ORDERS
Catchwords: COSTS - whether parties entitled to special order for costs on indemnity basis – whether parties acted unreasonably in rejection of pre-litigation offers – discounting costs orders for partial success of plaintiff
Legislation Cited: Transfer of Land Act 1958 (Vic); Civil Procedure Act 2010
Cases Cited:Calderbank v Calderbank [1976] FAM 93; Hazeldene’s Chicken Farm Pty Ltd v VWA (No.2) (2005) 13 VR 435; Foster v Galea (No 2) [2008] VSC 331; Berrigan Shire Council v Ballerini (No 2) [2006] VSCA 65; Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225; Ingot Capital Investment Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) (2008) 65 ACSR 324
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C Twidale | Vernon Da Gama & Associates |
| For the Defendant | Mr K Mihaly | Megan Copas |
HIS HONOUR:
1 I gave judgment in this proceeding on 11 March 2016. At that time, I made orders providing for the parties to file and serve submissions regarding the issue of costs and the final form of orders which should be made to give effect to the reasons for decision. Subsequently, the parties filed written submissions and returned to court for oral argument concerning the various disputed issues. This judgment should be read in conjunction with the earlier judgment.
Costs
2 The question of costs in this case raises two distinct issues:
(a) who should primarily benefit from an order for costs; and
(b) should there be any special order for costs?
Who should obtain a costs order?
3 Both the plaintiffs and Parkside enjoyed some success in the judgment. In substance the plaintiffs showed an entitlement to an injunction because Parkside unlawfully stored building materials and other objects on the easement. Although Parkside says it admitted this before the hearing, it did not proffer any undertaking as to its future conduct and its action came after the plaintiffs had earlier requested Parkside to remove items from the plaintiffs’ land before any proceedings were issued. In those circumstances, I am satisfied it was appropriate for the plaintiffs to issue proceedings and prove a case sufficient to obtain injunctive relief against Parkside.
4 Notwithstanding the plaintiffs’ success on that point, they failed on what I regard as the major issue in the case, namely, whether or not the easement over the plaintiffs’ land had been abandoned. Further, Parkside also established that:
(a)the plaintiffs trespassed on Parkside’s land and made a hole in its wall;
(b)the plaintiffs infringed the easement by:
(i)partially constructing a fence between points G-F;
(ii)replacing the gate at B-C with a wire fence;
(iii)locating a temporary fence along G-B at least partly on the easement.
While accepting the validity of Parkside’s claim in this respect, I note that Parkside exaggerated its claim regarding the extent to which the inability to use Wendel Street at B-C as a point of access infringed the easement. There was a notable difference in levels between, on the one hand, the easement on the plaintiffs’ land at this point and, on the other hand, the footpath in Wendel Street and then the road. As a result, there was no cross-over between the easement and Wendel Street. Nor was there council approval for any such cross-over. Hence, there was no council approved means for vehicular traffic to use this access point to the easement in any event. But I accept that due to the fence across B-C, it was not possible to walk or ride a bike along the easement and exit at Wendel Street.
5 Given that both parties enjoyed some success at trial, I could order that their respective costs be taxed on the claim and counterclaim and the two then be set off. In saying this, I do not mean to imply that any order in favour of the plaintiffs would have been for all the costs incurred on their claim. One would have to take account of their failure on the main issue. But this method of determining costs would be lengthy and expensive for all parties. Accordingly, it seems to me preferable to order that the plaintiffs pay a proportion of the defendant’s costs of the proceeding, being both the claim and counterclaim. The proportion would reflect the outcome of the litigation to the extent that Parkside had the greater degree of success, while the plaintiffs were still found entitled to seek and obtain injunctive relief.
6 Importantly in the context, it should be noted that the plaintiffs would not have received an injunctive order without coming to court. Parkside submits that this part of the case ought to have been the subject of separate Magistrates’ Court proceedings. However, in my view, given the history of the matter and the other complaints raised by parties in this litigation, it was justified to include the plea about the storage infringement in this proceeding rather than sue elsewhere. It avoided needless duplication because the background history was established in this case, the witnesses were ready at court to give evidence, and this court was seized of the matter.
7 While any assessment of costs of the kind I have outlined involves matters of impression and the weighing of various factors going to the conduct and outcome of the trial (and therefore are likely to be matters about which reasonable minds might differ), I consider it appropriate that, subject to my later comments, the plaintiffs pay 70% of Parkside’s costs of the proceeding.
Should there be a special costs order?
8 The plaintiff sought an order for costs whereby Parkside paid the plaintiffs’ costs of the proceeding, being the claim and counterclaim on a standard basis until early February 2016 and thereafter on an indemnity basis. The plaintiffs relied upon a Calderbank offer made by letter dated 9 February 2016. The offer was as follows:
“1. There be judgment entered against the first defendant for the nominal sum of $1.00, in relation to the claim for trespass only.
2. There be a judgment entered against the defendants by counterclaim for the nominal sum of $1.00 in relation to the claim for trespass only.
3. Within 30 days the plaintiffs apply to the Registrar of Titles, Land Victoria, under s73 of the Transfer of Land Act 1958 for the removal of the easement created by Instrument No 903909 dated 19 August 1919 (‘the easement’) on land situated at 13-23 Wendel Street, Brunswick in the State of Victoria more particularly described in Certificate of Title Volume No 9965 Folio 383 (‘the land’). Such application as to whether the easement has been abandoned or extinguished to be heard and disposed of by the Registrar of Titles on merits (‘the decision’) as soon as practicable.
4. The plaintiffs and the first defendant undertake to cooperate and provide all necessary documentation and information to the Registrar of Titles, so that the Registrar can make a determination as to whether the easement has been abandoned or extinguished.
5. Pending the decision of the Registrar of Titles, the undertakings and notations contained in clauses ‘a’, ‘b’ and ‘c’ of the Orders made by his Honour Judge Anderson dated 25 June 2014, by consent, continue to operate and have full force and effect thereby maintaining the status quo of the land as in existence as at date pending the decision.
6. In the event the Registrar of Titles requires judicial determination of any issues, the issues be brought back before this Court in this proceeding for determination.
7. There be no order as to costs.”
9 Before examining the details of the offer made by the plaintiffs, it is pertinent to note a number of relevant principles established by the authorities regarding offers of settlement made in accordance with the decision in Calderbank v Calderbank.[1]
[1][1975] 3 All ER 333.
10 First, the fact that a party achieves a less favourable result than that set out in the Calderbank offer does not give rise to a presumption of a special costs order.[2] The making of a Calderbank offer and its rejection by the recipient of the offer are “but two albeit important circumstances” to which the court will have regard in exercising its discretion with respect to the issue of costs.[3]
[2]Hazeldene’s Chicken Farm Pty Ltd v VWA (No.2) (2005) 13 VR 435 at [19]
[3]Berrigan Shire Council v Ballerini (No 2) [2006] VSCA 65 at [33].
11 Secondly, the competing policy objectives relevant to the exercise of the costs discretion are, on the one hand, the desirability of promoting settlement and reducing litigation costs and, on the other hand, the undesirability of discouraging potential litigants from bringing their disputes to the courts.[4]
[4]Hazeldene’s Chicken Farm Pty Ltd v VWA (No.2) (2005) 13 VR 435 at [21-22]
12 Thirdly, the critical question which the court must answer is whether the rejection of a Calderbank offer was unreasonable in all the circumstances. The Court of Appeal in Hazeldene said:
“In our view, these competing considerations can be sufficiently accommodated by applying a test of (un)reasonableness. The critical question is whether the rejection of the offer was unreasonable in the circumstances. We see no justification for a more stringent test such as “manifestly” or “plainly” unreasonable.”[5]
[5]Hazeldene’s Chicken Farm Pty Ltd v VWA (No.2) (2005) 13 VR 435 at [23]
13 Fourthly, when considering submissions that the rejection of a Calderbank offer was unreasonable in all the circumstances, a court should ordinarily have regard to matters including the following:
(a)the stage of the proceeding at which the offer was made;
(b)the time allowed for the recipient of the offer to accept or reject the same;
(c)the extent of the compromise offered;
(d)the offeree’s prospects of success as at the date of the offer;
(e)the clarity with which the terms of the offer were expressed; and
(f)whether the offer foreshadowed an application for indemnity costs in the event that the offeree rejected the offer.[6]
[6]Hazeldene’s Chicken Farm Pty Ltd v VWA (No.2) (2005) 13 VR 435 at [25]
14 Fifthly, the determination of whether or not it was unreasonable for the offeree to reject an offer is made “at the time or within a reasonably short time after the offer was made”. In dealing with this consideration, a court should not be too swayed by the certain knowledge provided by hindsight.
15 Sixthly, the offeror bears the onus to demonstrate that the offeree acted unreasonably in rejecting the offer.[7] This means that it is necessary to analyse with some care precisely what was proposed.
[7]Foster v Galea (No 2) [2008] VSC 331 at [9]
16 Seventhly, there is no general rule that a Calderbank offer must set out with specificity the basis for the offeror’s contention that the offeree should accept the proposed compromise. Whether there is a need to do so depends upon a consideration of all the circumstances existing at the time of the offer.[8]
[8]Hazeldene’s Chicken Farm Pty Ltd v VWA (No.2) (2005) 13 VR 435 at [26-27]
17 Finally, it is not necessary for a party seeking an order for indemnity costs to establish matters which might be relevant to other established grounds for such an award. The unreasonable refusal of an offer of compromise alone constitutes a proper ground for a special costs order. Additional conduct by the offeree is not a prerequisite for finding that the rejection of the Calderbank offer was unreasonable.[9]
[9]Hazeldene’s Chicken Farm Pty Ltd v VWA (No.2) (2005) 13 VR 435 at [28]
18 Parkside refused the plaintiffs’ offer. I do not consider that Parkside acted unreasonably in doing so. The offer, to the extent that it involved pursuing a process with the Registrar of Titles under the Transfer of Land Act 1958 would have involved more time and expense for the parties at a point where a trial date was imminent and it still remained a real possibility that the matter would come to court if Parkside was unhappy with the Registrar’s decision. Given the terms of the legislation and the different approach to the issue of abandonment of an easement taken by the Transfer of Land Act and the common law respectively, this eventuality was highly likely.
19 The decision on the substantive point regarding the abandonment or otherwise of the easement was decided in Parkside’s favour. Such an outcome was substantially more favourable to Parkside than the plaintiffs’ proposal. In my view, there was no proper basis to award the plaintiffs’ indemnity costs for any part of their claim.
20 Parkside seeks a special costs order, partly on the basis of an offer of compromise and partly because it contends the plaintiffs’ case was fatally flawed.
21 Under cover of letter dated 13 January 2016, Parkside made the plaintiffs an offer of compromise pursuant to Order 26 of the County Court Civil Procedure Rules by which:
(a)the proceeding including the counterclaim would be dismissed;
(b)the settlement offer was inclusive of the plaintiffs’ legal costs under Order 26.02(4).
The plaintiffs refused the offer made by Parkside.
22 Parkside contends that the plaintiffs did not achieve an outcome in the litigation better than that set out in the offer because:
(a)Parkside succeeded in proving the enforceability of the easement and claims it is entitled to a declaration in its favour to that effect, something which is significantly better than that offered;
(b)as to the remainder of the claims between the parties, the net effect is in Parkside’s favour. Although the plaintiffs have the benefit of an injunction, this was said to be solely in relation to an admitted part of their claim and the plaintiffs are subjected to a declaration as to their infringement of the easement and the payment of a nominal damages award.
23 Undoubtedly, the results of the case were mixed for the plaintiffs. Although they obtained an injunction regarding the storage issue, they failed in relation to the abandonment of the easement and the infringement of the easement.
24 However, in seeking indemnity costs, Parkside overlooked or treated as relatively unimportant the injunction which the plaintiffs obtained in relation to the unlawful storage of objects on the easement. Parkside did not agree before trial that the plaintiffs were entitled to an injunction and did not proffer an undertaking in lieu of an injunction. While Parkside contends that the storage issue “was a very minor component of the real dispute between the parties”,[10] the objective circumstances of the case suggest otherwise. Plainly, the plaintiffs were aware that the land over which the easement ran was theirs. They wished to assert substantial control over the land. They objected to Parkside storing building materials, cars and other objects on the easement. Even though Parkside made a conditional offer to stop using the easement for storage purposes[11], the failure to proffer an undertaking as to the future was, in my view, significant. Without an injunction or undertaking, the plaintiffs had no assurance about how Parkside would act in the future. For this reason, I consider it was not unreasonable for the plaintiffs to reject the January offer made by Parkside.
[10]Submissions para 22(b).
[11]Submissions para 22(b) and (e).
25 Parkside also contended that the plaintiffs commenced or continued with this case in wilful disregard of known facts or clearly established law.[12] Parkside submitted that the plaintiffs persisted with a hopeless case, thereby infringing the overarching obligation referred to in the Civil Procedure Act not to make claims that are frivolous or vexatious. Parkside argued that an order for indemnity costs was appropriate because the Court found that the plaintiffs’ evidence was not capable of sustaining the case they sought to prove. Parkside made reference to deficiencies in the evidence,[13] both on the abandonment of the easement and the over-burden of the easement.[14]
[12]Colgate-Palmolive v Cussons Pty Ltd (1993) 46 FCR 225.
[13]Defendant’s submissions para [27]
[14]Defendant’s submissions para [28]
26 While there is some merit in the Parkside submissions, it over-simplifies matters to claim costs for the whole of the proceeding. For a period of time before Parkside engaged its present solicitors, a major element of its defence to the plaintiffs’ claim was a claim to adverse possession – namely, by reason of Parkside’s adverse possession of the land the subject of the easement, Parkside was effectively entitled to the easement land and the plaintiffs had no basis for complaint. Quite correctly, Parkside later abandoned this defence and addressed the plaintiffs’ claims on a sounder basis. However, until that occurred, the parties were grappling with a significantly different scenario from that which existed at trial. When Parkside amended its defence to delete the adverse possession allegation and introduced new matters argued at trial, the court directed Parkside to pay costs thrown away by reason of the amendment.
27 As I understand Parkside’s submission, it seeks its costs of the claim and counterclaim on an indemnity basis for the whole proceeding. In the circumstances, this would be excessively generous and unwarranted. On no account should the plaintiffs be liable for the whole of Parkside’s costs of the proceedings. Given the major reformulation of the defence, it seems to me that such an order would constitute an inappropriate exercise of the broad discretion which the Court unquestionably enjoys in relation to costs.
28 On 12 June 2015 Judicial Registrar Burchell made orders permitting Parkside to amend its defence and add a counterclaim. The plaintiffs filed a reply on 6 July 2015, an amended reply on 12 August 2015 and a defence to counterclaim on 6 July 2015. Taking a broad brush approach and allowing a reasonable time for the plaintiffs to consider the new matters raised by Parkside, their response to them, and the adequacy and likely outcome of the case they were propounding against Parkside, I consider that the plaintiffs should have been aware of the serious shortcomings in their case and their assessment of the law by the end of September 2015.[15] Accordingly, in the circumstances, I consider that Parkside should recover its costs of the proceeding, being the claim and counterclaim, on an indemnity basis from 1 October 2015. Given the path which Parkside followed until its change of solicitors and change of pleading was lacking in relevant substance and would not have been successful, Parkside should bear its own costs for the period until 1 October 2015. As noted earlier in the judgment, the fact of the plaintiffs’ partial success in the litigation is reflected in the discount as to the extent of the indemnity costs which they must bear.
[15]See for example, Ingot Capital Investment Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) (2008) 65 ACSR 324 at [72].
29 As a further alternative argument, Parkside submitted that even if the offer of 13 January 2016 were read as a Calderbank letter, it produced the same outcome – that is, the plaintiffs should pay Parkside’s costs. Parkside submitted that a consideration of relevant factors showed that the plaintiffs’ rejection of the offer was not reasonable:
(a) the offer was made relatively late in the proceeding at a time when the plaintiffs were, or should have been, well aware of the evidence that would be tendered.
(b) Parkside allowed a period of 14 days to consider the offer. This was plenty of time as even 7 days would have been sufficient.
(c) although the offer did not involve a significant compromise, in light of the weakness of the plaintiffs’ case, the offer by Parkside to bear its own costs was still significant.
(d) the plaintiffs’ prospects at the date of the offer, save for the admitted trespass claim, were weak.
(e) the terms of the offer were clear.
(f) the offer foreshadowed an application for indemnity costs.
In short, Parkside contended that at the time the offer was made, it should have been apparent to the plaintiffs that their case was so weak that an offer to walk away and avoid the costs of the trial should have been accepted.
30 Given my earlier finding regarding indemnity costs, there is no need for me to address this aspect of the case in any detail. Suffice to say, I would have been sympathetic to Parkside’s submissions and granted an order for indemnity costs based on the Calderbank offer.
31 In short, I consider that the plaintiffs should pay the first defendant’s costs of the proceeding from 1 October 2015 on an indemnity basis and, save for costs orders already made, there otherwise be no order for costs.
Other orders
32 The parties submitted various forms of order designed to give effect to the reasons for decision handed down on 11 March 2016. Having reviewed their written outlines and heard their oral submissions, the court makes the following declarations and orders. The court declares that:
(a) the easement created by instrument number 903901 registered at the Land Titles Office is enforceable;
(b) since at least 1 July 2003, the plaintiffs have infringed the easement by preventing the first defendant from exercising its rights in respect of the easement.
The court orders that:
(a) subject to the consent in writing of the plaintiffs (or their successors in title as the case may be) or further order, the first defendant be permanently restrained from storing any item or object whatsoever on that part of the plaintiffs’ land which is subject to the easement created by instrument number 903901 registered at the Land Titles Office;
(b) the plaintiffs pay the first defendant $25.00;
(c) the first defendant is released from the undertaking given to the court on 25 June 2014 and recorded in the order of the court made that day;
(d) the plaintiffs pay 70% of the first defendant’s costs of the proceeding, being the claim and counterclaim, from 1 October 2015, such costs to be taxed on an indemnity basis in default of agreement;
(e) save for any costs orders already made in the proceeding, there otherwise be no order as to costs.
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