Re IP Bradley Investments Pty Ltd (Costs)
[2024] VSC 326
•18 June 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2023 03410
IN THE MATTER of an application pursuant to section 84 of the Property Law Act 1958 (Vic) for a declaration or for the modification of a restrictive covenant
AND
IN THE MATTER of an application for a declaration that the covenant in transfer of land registered no. A737974 dated 11 April 1959 (covenant) affecting the land at 9 Kincumber Drive, Croydon being lot 1 of plan of subdivision no. LP093337 (part of the land formerly being lot 77 on plan of subdivision LP44793) and being the land in folio of the Register Volume 08956 Folio 903 is unenforceable
AND
IN THE MATTER of an application in the alternative for the modification of the restriction arising under the covenant
BETWEEN:
| IP BRADLEY INVESTMENTS PTY LTD (ACN 653 664 905) | Plaintiff |
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JUDGE: | Irving AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 23 May 2024 |
DATE OF JUDGMENT: | 18 June 2024 |
CASE MAY BE CITED AS: | Re IP Bradley Investments Pty Ltd (Costs) |
MEDIUM NEUTRAL CITATION: | [2024] VSC 326 |
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PROPERTY LAW — Section 84(2)(a) of the Property Law Act 1958 (Vic) — Costs of objectors in a s 84(2)(a) application — Where application sought declaration or alternatively modification of covenant under s 84(1)(c) — Objectors awarded costs of hearing.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr W Rimmer of counsel | Aughtersons Solicitors |
| For the objectors | Mr M Townsend of counsel |
TABLE OF CONTENTS
Introduction................................................................................................................................... 1
Procedural history......................................................................................................................... 1
The objectors’ costs claim............................................................................................................. 2
Objectors’ submissions................................................................................................................. 5
Plaintiff’s submissions.................................................................................................................. 6
Principles...................................................................................................................................... 11
Consideration.............................................................................................................................. 15
HIS HONOUR:
Introduction
This ruling concerns whether the plaintiff should be ordered to pay the costs of the objectors to its application and, if so, in what amount.
For the reasons that follow I have decided to order the plaintiff to pay the objectors costs fixed in the amount of $12,000.
Procedural history
The plaintiff’s application, made by originating motion filed 1 August 2023, sought a declaration pursuant to s 84(2) of the Property Law Act 1958 (Vic) (PLA) that the relevant restrictive covenant was unenforceable (declaration application). In the alternative the plaintiff sought an order pursuant to s 84(1)(c) of the PLA that the restrictive covenant be modified (s 84(1)(c) application).
When the plaintiff’s application first came before the Court, the plaintiff’s counsel presented evidence that there were no identifiable beneficiaries of the covenant. Counsel sought orders, which the Court made, that notice of the application be given to neighbours by a publicly displayed notice on the relevant property. As a result of the notice about fifty-four people sought to object to the plaintiff’s application and sought legal advice for that purpose.
On 7 December 2023, at the second return of the plaintiff’s application, the objectors appeared, represented by their solicitor. The objectors’ solicitor requested the proceeding be adjourned to allow the objectors time to decide whether to be joined as defendants to the proceeding, either immediately so that they could oppose the plaintiff’s declaration application, or to defer their decision to join until after the declaration application had been determined, in the event the plaintiff’s s 84(1)(c) application was pursued. On that basis the plaintiff’s application was adjourned. The plaintiff indicated its intention to press its declaration application on the next return, conceding that if any objector applied to become a defendant on that occasion, further directions for the preparation of the declaration application for hearing would need to be made.
On 7 March 2024, at the third return of the plaintiff’s application, the objectors’ counsel appeared. Counsel informed the Court that the objectors had decided not to apply to be made defendants to the plaintiff’s declaration application but reserved their right to revisit the issue of joinder if the Court refused the plaintiff’s declaration application and the plaintiff’s s 84(1)(c) application fell to be determined. On that basis the Court then heard and granted the plaintiff’s declaration application, making the declaration sought by the plaintiff. Counsel for the objectors then made an application for the objectors’ costs, and sought to rely on written submissions filed at 6:23pm the previous evening. Counsel for the plaintiff objected to the objectors’ reliance on the written submissions or alternatively sought an adjournment to provide written submissions in response from the plaintiff. The Court adjourned the hearing of the objectors’ costs application and directed the plaintiff to file written submissions.
On 23 May 2024 the Court heard the objectors’ costs application and reserved its decision.
The objectors’ costs claim
The objectors sought an order that the plaintiff pay their costs fixed in the sum of $22,748.52. That amount was made up of the following:
Solicitor’s professional costs Counsel fees Total Consideration of the plaintiff’s application and advice to objectors $4,469.85 $8,848.67 $13,318.52 Hearing on 7 March 2024 $880 $3,750 $4,630 Hearing on 23 May 2024 $1,500 $3,300 $4,800 Total $6,849.85 $15,898.67 $22,748.52
The objectors asked the Court to consider their attempts to compromise their costs claim. Accordingly the Court was provided with various letters between the solicitors for the plaintiff and the objectors. That correspondence revealed the following.
On 14 February 2024 the solicitor for the objectors wrote to the plaintiff’s solicitor advising that the objectors, having now had the opportunity to obtain considered advice from counsel, did not intend to apply to be joined as defendants to the plaintiff’s declaration application. The objectors’ solicitor advised that her clients had incurred costs of $13,318.52 (broken down between professional costs and counsel fees as above) and sought confirmation that the plaintiff would agree to a fixed costs order for that amount. The objectors’ solicitor offered to provide invoices substantiating those costs on request.
On 20 February 2024 the plaintiff’s solicitor responded saying that the plaintiff’s position, made clear in its originating motion and detailed correspondence provided to the objectors’ solicitor on 30 October 2023, was that the covenant was a nonsense and therefore there were no beneficiaries. The plaintiff’s solicitor stated that accordingly there was no basis for awarding costs to the objectors given the objectors had no proprietary interest to protect nor any interest in the covenant at all. Notwithstanding this position the plaintiff’s solicitor offered to pay $8,000 in full and final satisfaction of the objectors’ costs claim to resolve the issue.
On 28 February 2024 the plaintiffs sent a further letter to the objectors’ solicitor referring to the letter of 14 February 2024. The plaintiff’s solicitor indicated that, given the objectors’ confirmation that they did not seek to be joined to the plaintiff’s declaration application, there was no requirement for the objectors to attend the hearing on 7 March 2024 and that the plaintiff’s solicitor would notify the objectors’ solicitor of the outcome of the hearing. The plaintiff’s solicitor undertook to provide the Court with the objectors’ letter of 14 February 2024 on the issue of costs.
Also on 28 February 2024 the objectors’ solicitor responded to the plaintiff’s letter of 20 February 2024. The objectors’ solicitor reiterated that the objectors had incurred reasonable expenses in considering the plaintiff’s declaration application, that there were fifty five objectors to obtain instructions from and that the objectors had to obtain counsel’s advice given the complex nature of the plaintiff’s application. The objectors’ solicitor then offered to accept a fixed costs order in the sum of $12,000 to resolve the issue of costs. The objector’s solicitor advised that if this offer was not accepted the objectors intended to appear at the hearing on 7 March 2024 and seek an order for costs fixed in the sum of $13,318.52 plus their costs of the hearing of $3,000.
On 29 February 2024 the objectors’ solicitor sent a further letter[1] to the plaintiff’s solicitor. The objectors’ solicitor argued that it was in the interests of justice and the efficient operation of the court for objectors in a declaration application to receive their standard costs up until a reasonable time at which they were able to seek and receive specialist legal advice. The objectors’ solicitor again offered to accept $12,000 to resolve the costs issue and stated that the offer remained open until noon on 4 March 2024.
[1]This letter is dated 14 February 2024 but it refers to the plaintiff’s solicitor’s letter dated 28 February 2024 and was sent under cover of an email dated 29 February 2024.
On 29 February 2024 the plaintiff filed an affidavit affirmed by its solicitor, Mr Liam Brendan O’Brien, informing the Court that the plaintiff had been advised that the objectors did not intend to be joined to the declaration application, had reserved their rights to join the s 84(1)(c) application and sought costs. The affidavit exhibited the parties correspondence.
On 4 March 2024 the objectors’ solicitor wrote to the plaintiff’s solicitor noting that the offer had lapsed and advising that at the hearing the objectors would seek costs in the amount of $12,000 plus their costs of the hearing fixed at $3,000.
On 5 March 2024 the objectors filed an affidavit sworn by their solicitor, Ms Elizabeth Jacinta Romeril, detailing the objectors’ costs and exhibiting correspondence between the parties.
On 6 March 2024 at 6:23pm the objectors filed an eleven page written submission in support of their costs application. In that submission the objectors at one point asked the Court to fix their costs at $12,000 plus their reasonable costs of having to apply for the costs order.[2] However, the concluding section of the submission sought costs fixed in the sum of $13,318.52 plus a sum of $3,000 for the objectors’ costs of the hearing on 7 March 2024.
[2]Objectors, ‘Submissions on Costs’, Submission in IP Bradley Investments Pty Ltd (ACN 653 664 905) vs No-respondent, S ECI 2023 03410, 6 March 2024, [13].
At the hearing on 7 March 2024 the Court made the declaration sought by the plaintiff. The objectors’ counsel made the application for costs, sought to rely on their written submissions and requested to elaborate on those submissions orally. The plaintiff’s counsel objected and requested the plaintiff be allowed to file responsive written submissions and the Court consider the issue of costs on the papers. Ultimately, I directed the plaintiff to file written submissions on costs and adjourned the hearing of the objectors’ costs application to 23 May 2024.
Objectors’ submissions
The objectors’ counsel submitted that in applications under s 84 of the PLA there is a presumption that a plaintiff will cover the reasonable costs of objectors unless the objections taken are frivolous. The basis of the presumption is that an objector should not have to bear the 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.[3]
[3]Re Withers [1970] VR 319 (‘Re Withers’), 320; ROJ Property Group Pty Ltd & Anor v Eventpower Property Pty Ltd (Costs) [2023] VSC 268 [7] (‘ROJ Property v Eventpower (Costs)’).
Counsel referred the Court to the following passage in Re Jeffkins’ Indentures[4] as authority for the proposition that in an application for a declaration, the objectors should be given their costs up until a reasonable time has passed for them to consider the application:
…He [the plaintiff] is also expected to pay the costs of any defendants who enter an appearance down to the point in the proceedings at which they have had a full opportunity of considering the matter and deciding whether or not to oppose the application.
[4][1965] 1 WLR 375 (‘Re Jeffkins’’).
Counsel submitted that the Court has a discretion to award costs to a non-party, although such orders are exceptional and the discretion must be exercised with caution.[5] In exercising the discretion the Court should consider:
[5]Re Anderson (No. 2) [2017] VSC 463 [8].
(a) the relationship between the non-parties and the costs;
(b) whether the non-party costs were incurred in the proceeding; and
(c) whether it is reasonable and in the interests of justice to exercise the discretion in favour of the non-parties.[6]
[6]O’Keefe v Hayes Knight GTO Pty Ltd [2005] FCA 1559 [24].
The objectors’ counsel submitted that where objectors respond to a public notice of an application under s 84 of the PLA exceptional circumstances will exist. Counsel said this is particularly so where the objectors’ alternative would be to apply to become parties to the proceeding to avoid any jurisdictional uncertainty about the Court’s ability to award costs in their favour.
Counsel submitted that lay objectors should not be penalised by incurring costs for seeking advice in response to an application under s 84 of the PLA. The objectors submitted that, having seen the public notice of the plaintiff’s application they expeditiously sought legal advice about their rights, made multiple attempts to compromise the issue of costs with the plaintiff rather that joining the proceedings just to claim costs and opted out of the proceeding at the earliest possible time. Counsel submitted that in these exceptional circumstances it was in the interests of justice to award the objectors costs.
Plaintiff’s submissions
Counsel for the plaintiff submitted that the approach of Australian Courts is that absent frivolous objections, objectors who have an existing legal right available to them which the plaintiff in a s 84 application is seeking to adversely affect are entitled to appear before the Court to defend that right and are entitled to their costs of doing so, whatever the outcome.
Accordingly the plaintiff’s counsel submitted the principle in Re Jeffkins[7] was in fact narrower than the objectors suggested because:
[7]Re Jeffkins’ (n 4).
(a) it is inconsistent with Australian authority which limits a plaintiff’s liability for defendants’ costs in applications under s 84 of the PLA to costs incurred by the owners of land having the benefit of the covenant, as determined by the Court, who appear before the Court to object and to maintain the status quo and hold the plaintiff to the covenant that binds them;[8]
[8]ROJ Property v Eventpower (Costs) (n 3).
(b) in Re Withers,[9] the Court expressed the principle as follows:
[9]Re Withers (n 3) 320.
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 [plaintiff’s emphasis];
(c) the basis of the principle was expressed in Re Withers[10] as:
[10]Ibid.
…[P]roceedings of this nature are not ordinary proceedings where 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;
(d) in Wong v McConville,[11] Derham AsJ set out the guiding rules for costs in s 84 applications, and referred to New South Wales authority to the same effect:
The position is similar in New South Wales: see Walker v Bridgewood (No 2). In Re Rose Bay Bowling and Recreation Club Ltd, Long Innes CJ in Eq said of unsuccessful objectors to an application to vary a restrictive covenant that they had a clear legal right that was being attacked, and they were entitled to put their views before the court. In those circumstances, his Honour regarded the costs incurred by the objectors as necessarily incident to the application. Where those circumstances were present, his Honour thought 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 [citations omitted].
[11]Wong v McConville & Ors (No. 2) [2014] VSC 282 [17].
The plaintiff’s counsel relied upon Ambrose J’s restatement of the principle in Re Jeffkins’,[12] made in Eucalypt Group P/L v Robin & Anor,[13] as correctly reflecting the principle:
…In Re Jeffkins’ Indentures [1965] 1 WLR 375 Cross J expressed the view that a plaintiff applying for the extinguishment of a restrictive covenant for the benefit of a defendant was expected to pay the defendant’s costs at least up to the time when upon a proper investigation of the circumstances the defendant would come to the conclusion that he would not oppose the plaintiff’s application. Should such a defendant continue to oppose the application then from that time onwards that defendant would bear his own costs – although not the costs of the successful plaintiff.
[12]Re Jeffkins’ (n 4).
[13][2003] QSC 178 [9].
Counsel submitted that In Re Jeffkins’[14] was of no real assistance to the Court because the reported practice note of the case was too brief to disclose the relevant facts to which Cross J applied his statement on costs. Additionally, counsel said that in Australia the existence of the Torrens system cannot be overlooked, which, if the full facts of In Re Jeffkins[15] were known, might well have been an important point of distinction.
[14]Re Jeffkins’ (n 4).
[15]Ibid.
The plaintiff submitted the Court should consider the following in exercising its discretion to award costs in this case:
(a) the plaintiff’s application is fundamentally different to cases in which the standard approach has been applied, being an application for a declaration as to title;
(b) the plaintiff’s application is to be distinguished from some s 84(2)(a) cases where the plaintiff seeks a declaration that land which on the face of the covenant has the burden of a covenant for the benefit of specified land, is not in fact affected because of some rule of law or other technical reason;[16]
[16]For example Jeshing Property Management Pty Ltd & Bao v Yang & Ors [2023] VSCA 185 [2].
(c) the plaintiff’s application is also to be distinguished from some s 84(2)(b) cases where the plaintiff is seeking declaratory relief as to the proper construction of the covenant;
(d) given that the public notice on the land gave passers-by notice of the particulars of the folio of the Register for the subject land and of the covenant, any information which the plaintiff provided to the objectors’ solicitor after that was either already available to inquirers through the Torrens Register or was irrelevant as inadmissible extrinsic material;[17]
[17]Deguisa v Lynn (2020) 268 CLR 638, 644 [2], 662-3 [71], 668 [88].
(e) the plaintiff provided the objectors’ solicitor with a detailed letter dated 30 October 2023 setting out the plaintiff’s analysis of why the covenant was unenforceable as a ‘nonsense’ covenant, where the purported description of the benefitted land on the face of the covenant failed to reference any existing land;
(f) in providing that letter the plaintiff acted in accordance with its obligations under the Civil Procedure Act 2010 (Vic) (CPA);
(g) the plaintiff proposed the public notice of its application, notwithstanding it was unable to identify any land purportedly having the benefit of the covenant, in order to further the interests of justice;
(h) the purpose of the public notice was not to invite passers-by who might object to the plaintiff’s proposed development to investigate their own title at the plaintiff’s expense to determine whether they had a proper basis to oppose the application;
(i) merely inquiring of one’s own solicitor whether a proper basis exists to oppose an application is not a sufficient basis for imposing liability for the objectors’ costs of doing so on the plaintiff;
(j) the plaintiffs’ application was not at the expense of the objectors, who lost nothing as a result of the Court’s declaration; and
(k) the objectors have not put forward any basis upon which they considered they might have had the benefit of the covenant, ie. they have not put forward any discretionary considerations that differentiated them and their inquiries of their solicitor from any other passers-by who happened to see the notice and wished to oppose the application.
In the alternative the plaintiff’s counsel submitted that, if contrary to the plaintiff’s primary submission, the Court decided to award costs, those costs should be fixed in an amount not exceeding $8,000 because:
(a) the objectors’ claim of $13,318.52 represents its solicitor and own clients costs and not an award of costs on the standard basis;
(b) the plaintiff’s conduct has been reasonable and consistent with its obligations under the CPA such that there is no justification for imposing indemnity costs;
(c) the objectors costs are excessive when all that was reasonably required was taking instructions from the objectors, communicating with the plaintiff’s solicitor to obtain more information about the application, perusing the plaintiff’s letter of 30 October 2023, obtaining counsel’s opinion and attending the directions hearing on 7 December 2023;
(d) the appearance on 7 December 2023 was brief and any amount of costs awarded should be substantially less than claimed by the objectors; and
(e) the objectors sought the plaintiff’s letter of 30 October 2023 after it had already been provided and the plaintiff should not be charged the costs arising from the objectors’ solicitors’ confusion.
Finally, the plaintiff reserved its right to make further submissions in relation to the costs of the hearing on 23 May 2024.
Principles
Neither party referred me to authority on the principles to be applied to the issue of costs in cases where the plaintiff sought a declaration that the relevant covenant was a nonsense. Counsel for the objectors referred me to the cases of Re Hunt[18] and Re Ferraro[19] both of which involved ex parte applications for a declaration that land was not affected by any purported restriction in the relevant covenant. Both cases considered whether it was appropriate for the Court to proceed on ex parte before deciding that in the circumstances relevant to each case, the application could proceed ex parte. Accordingly, neither application involved notification and thus the issue of objectors’ costs did not arise. Perhaps for this reason, the parties sought to draw analogies from the principles relevant to costs in applications to modify restrictive covenants.
[18][2017] VSC 779.
[19][2021] VSC 166.
In Lahanis v Livesay & Others (Costs),[20] Derham AsJ conveniently summarised the principles relevant to costs in applications to modify restrictive covenants, involving offers of compromise:
[20](2021) 63 VR 197 [5]-[10].
Applicable law
Costs in restrictive covenant applications
In Wong v McConville, I considered at some length the applicable principles in cases of this kind. I will not repeat all I said, but note the wide discretion conferred by s 24 of the Supreme Court Act 1986 (Vic) and the earlier cases that accord with the views I there expressed, in particular in Victoria, Re Withers; Re Markin, Re Shelford Church of England Girls’ Grammar School, Re Ulman, Stanhill Pty Ltd v Jackson, Suhr v Michelmore, and in New South Wales, Walker v Bridgewood (No 2).
I said in Wong v McConville 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 does not apply in these applications because:
(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 (in the sense of equitable) right available to the defendants;
(c)the plaintiff will usually obtain an advantage, often a great advantage commercially, by the modification or removal sought;
(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 him or her;
(e)the decision of the Court to modify or discharge a restrictive covenant involves the exercise of a discretion; and
(f)accordingly, provided the defendants conduct the proceeding responsibly and do not make frivolous objections to the application, they should have their costs of the proceeding.
I repeated the substance of these matters in Jiang v Monaygon Pty Ltd, a decision to which the plaintiffs refer in the Calderbank letter.
Calderbank offers
In Wong I also set out the principles applicable to Calderbank offers as follows:
In Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2),the Victorian Court of Appeal said, in relation to Calderbank offers, that the critical question was whether the rejection of the offer was unreasonable in the circumstances. Deciding whether conduct is unreasonable involves matters of judgment and impression. The Court in Hazeldene held that, when considering whether the rejection of a Calderbank offer was unreasonable, a court should ordinarily have regard at least to the following matters:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d)the offeree’s prospects of success, assessed 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 of the offeree’s rejecting it.
In Luxmore Pty Ltd v Hydedale Pty Ltd Maxwell P and Kellam JA noted that what was said by the Court of Appeal in Hazeldene was meant to be of assistance to judges in approaching an application for costs consequent upon the service of a Calderbank letter. The Court of Appeal was not there engaging in a kind of judicial legislative process; they were simply giving a direction that these are the matters which the trial judge should ordinarily have regard to, in addition to such other matters as the judge might consider relevant. They remarked that it would be wrong to regard the decision as having prescribed a list of matters which must be taken into account in every case, such that a party failing to get a special order for costs could complain on appeal if one of the matters mentioned by the Court had not been specifically adverted to. Like every question of costs, it is in the discretion of the trial judge and is to be decided according to the circumstances of the particular case.
There are some aspects of the matters mentioned in Hazeldene relevant to this application that deserve further elucidation, as follows:
(a)there is no presumption that where such an offer is rejected, the offeree should pay indemnity costs where it receives a less favourable result;
(b)the onus always lies upon the offeror to demonstrate unreasonableness in the offeree;
(c)the policy objectives underlying the principle in Calderbank v Calderbank include:
(i)that it is in the interests of the administration of justice that litigation should be compromised as soon as possible and so save both private and public costs;
(ii)to indemnify an offeror whose offer is later found to have been reasonable against the costs thereafter incurred. This is considered reasonable because from the time of rejection of the offer the real cause of the litigation is the offeree’s rejection of the offer;
(iii)to this end, a party in receipt of an offer of compromise should have some incentive to consider the offer seriously. That incentive is the prospect of a special order as to costs;
(iv)it is nevertheless important not to discourage potential litigants from bringing their disputes to the Court;
(d)it is undesirable that Calderbank letters be burdened with technicality;
(e)where the offer is made by a plaintiff, the requirement that the non-acceptance be unreasonable takes on a particular significance. A plaintiff may be supposed to be aware of the claim which it makes, including, even in a general way, its magnitude and its prospects of success. A defendant, however, faced with an offer of compromise may not have this awareness. If it appears that this lack of awareness is not due to its own default, it is difficult to conclude that its rejection of the offer was unreasonable;
(f)a decision to accept or refuse a Calderbank offer will ordinarily be based upon the offeree’s prediction as to the likely outcome of the trial. An erroneous prediction may not be unreasonable if at the time the offeree was, for good reason, in possession of insufficient information to make a proper assessment or if the circumstances upon which it was based later changed;
(g)it does not follow necessarily from an adverse outcome for the offeree that rejection of the offer was relevantly unreasonable. Reliance on the outcome to show that rejection of the offer was unreasonable is a hindsight analysis;
(h)the offer must be one capable of acceptance, such that an offer that is subject to approval by a third party will not constitute a Calderbank offer, but rather an offer to negotiate; and
(i)the reasonableness of an offer, and the assessment of the reasonableness or unreasonableness of a rejection of an offer, will generally be assisted if the maker gives reasons why the offeror should succeed and/or the offeree should fail to do better than the offer. As Sundberg and Emmett JJ said in Dukemaster Pty Ltd v Bluehive Pty Ltd:
a Calderbank offer ... is unlikely to serve its purpose of attracting an indemnity award of costs if the rejecting applicant fails to recover more than what is offered, unless the offer is a reasonable one and contains a statement of the reasons the offeror maintains that the application will fail.
In addition to these matters, this case brings into sharp focus an aspect of the third factor identified in Hazeldene’s Chicken Farm, the extent of the compromise offered and its relationship to the question whether the rejection of the offer was unreasonable in the circumstances. The defendants’ Counsel has referred to a number of cases that address, in varying circumstances, the circumstance where an offer does not involve a genuine compromise, but is in fact either an invitation to capitulate or a derisory or nominal offer, so that it would not be unreasonable for the losing party to have rejected it. These authorities, and the many others that are referred to in them, all turn on their own facts. However, they demonstrate that where an offer is characterised as a demand to capitulate, or as derisory or nominal then it may be found to be reasonably rejected.
This aspect of the law relating to Calderbank offers is particularly relevant in ‘all or nothing’ cases where there is a single issue, such as in this case, where a single dwelling house restriction in a covenant is sought to be modified to permit two dwelling houses. In Thomopoulos v Faulks (No 2), the plaintiff claimed an easement ‘of-way’ over a laneway. There was no additional or alternative claim made for a lesser right, and, as Cavanough J noted, it would probably not have been open to the Court to have granted any different or lesser right than the right claimed in the proceeding. His Honour noted in that case that:
It seems to me that this is a case in which very little was offered by way of compromise and whilst that may have been, in a sense, inevitable, I think in the end that this factor tends in favour of the plaintiff. It may just be that in certain kinds of cases (such as the present) there is little or no room for relevant compromise and so the ordinary party-party rule may be very difficult to displace by the sending of a Calderbank letter.
[citations omitted].
Consideration
I have decided to order that the plaintiff pay the costs of the objectors in an amount that will be discussed further below. My reasons are as follows.
First, the plaintiff asked the Court to make orders for notification of its application by public notice. That notice stated the plaintiff’s application, which was put in the alternative, seeking a declaration or modification of the restrictive covenant. In providing notice of that application the plaintiff invited people who saw the notice to consider whether they may be beneficiaries of the covenant the plaintiff sought, albeit in the alternative, to modify.
I accept that in requesting the orders for notification of the application the plaintiff was motivated by fairness and the interests of justice. The plaintiff is not to be criticised for seeking orders to provide public notice of its application. An award of costs is, however, compensatory and not punitive. There is some force in the objectors’ counsel’s submission that it was open to the plaintiff to seek to have its declaration application determined on an ex parte basis and that if it had done so, the issue of the objectors’ costs may, if the Court agreed it was appropriate to proceed on that basis, have been avoided.
Second, having seen the terms of the notice which set out the alternative applications made by the plaintiff, it was reasonable for the objectors to seek legal advice about whether their interests were affected by the application. Additionally, this was not a case in which the plaintiff had filed preliminary submissions which objectors could seek to inspect on the Court file. In those circumstances it was reasonable for the objectors to seek their own legal advice.
Third, the plaintiff’s suggestion that in order to be eligible for an award of costs the objectors had to possess a legal interest capable of being affected by the plaintiff’s application, is, in my view, too inflexible in light of the particular, and perhaps unusual, facts of this case. On the terms of the notice, it was clear that the plaintiff’s primary contention was that there were no beneficiaries. In my view, particularly given the plaintiff’s alternative application for modification of the covenant, the objectors were entitled to investigate and should have their reasonable costs of that investigation up until the point it was clear they held no interests capable of being affected by the plaintiff’s application.
Fourth, I accept that not every passer-by who observed the notice would be entitled to the legal costs of investigating their own title. In this case, the costs sought are of the investigation of the plaintiff’s application. That investigation involved a large number of objectors obtaining one counsel’s advice on the accuracy of the plaintiff’s analysis of the covenant, provided under cover of the plaintiff’s solicitor’s letter of 30 October 2023.
Fifth, putting to one side for the moment the issue of costs at the hearing on 7 March 2024, the objectors have acted reasonably and sought to minimise costs by retaining a common solicitor and barrister and by notifying the plaintiff’s solicitor and the Court at the earliest opportunity that they did not intend to join the proceeding as defendants to the plaintiff’s declaration application.
Having decided to order costs, it remains to determine whether fixed costs should be awarded and, if so, in what amount. It appears to me appropriate that the Court fix costs. The amount of costs involved in this proceeding is relatively modest and the costs and delay of a taxation are not justified.
I will order that the plaintiff pay the objectors costs of consideration of the plaintiff’s application and advice to objectors fixed in the sum of $12,000. That figure represents approximately 70% of the objector’s solicitor’s professional fees plus counsel’s relevant fees. It is a figure that, taking a broad brush view, the objectors could expect to obtain on taxation.
In my view the objectors should not be awarded their costs of the hearing on 7 March 2024. The only real point of dispute between the parties on that date was the issue of costs. That issue was unable to be resolved on that date because the objectors filed submissions too late for the plaintiff to meaningfully respond, resulting in a further adjournment. I award no costs to the objectors in relation to the hearing on 7 March 2024.
The plaintiff has reserved its right to make further submissions in relation to the costs of the hearing on 23 May 2024. Subject to any further submissions, my preliminary view is that the plaintiff should be ordered to pay the objectors’ costs of the hearing of 23 May 2024 fixed in the amount of $4,350. I request the parties confer on the question of the costs of the hearing on 23 May 2024. If the parties are unable to agree on the terms of any order for the costs of that hearing within seven days of the date of this judgment, the proceeding will be listed for further oral submissions.
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