Rojtarowski v Payet

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

EXPEDITED LIST

Case No. CI-21-04975

Nadia-Lee Rojtarowski	Plaintiff
v
Allison Payet	First defendant
Mark Rojtarowski	Second defendant

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JUDICIAL REGISTRAR:	Judicial Registrar Bennett
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers; written submissions dated 23 February, 4 March, 25 March, 4 April and 5 April 2022
DATE OF RULING:	18 May 2022
CASE MAY BE CITED AS:	Rojtarowski v Payet & Anor
MEDIUM NEUTRAL CITATION:	[2022] VCC 649

RULING
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Subject:Costs
Catchwords: Costs of proceeding – proceeding not adjudicated on the merits – plaintiff and second defendant sought orders that first defendant pay their costs – first defendant contended that parties should bear their own costs – whether conduct of parties was reasonable prior to and after commencement of the proceeding – whether first defendant capitulated and plaintiff was the “clear winner”
Legislation Cited: County Court Act 1958 (Vic) s78A; County Court Civil Procedure Rules 2018 r63A.10; Property Law Act 1958 (Vic) s53
Cases Cited:Re Howden; Howden v Rackstraw [2020] VSC 315, Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; 13 VR 435, NMFM Property Pty Ltd v Citibank Ltd (No 11) [2001] FCA 480; (2001) 187 ALR 654, Macedon Ranges Shire Council v Thompson [2009] VSCA 209, ACN 115 918 959 Pty Ltd v Hoeys Lawyers Pty Ltd [2021] VSC 184, Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427; (2006) 236 ALR 665, Board of Examiners v XY [2006] VSCA 190.

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	J D McKay	Best Hooper
For the First Defendant	-	RM Commercial & Family Lawyers
For the Second Defendant	-	Pentana Stanton Lawyers

THE JUDICIAL REGISTRAR:

Background

These reasons deal with the question of the costs of this proceeding. On 10 February 2022, I made orders with the parties’ consent (February Orders) in relation to a dispute between the parties concerning the land at Venus Bay referred to in paragraph 1 of the February Orders (the Land). Amongst other things, the February Orders contained a declaration that the first and second defendants hold the Land pursuant to a constructive trust for the benefit of themselves as to one equal part or share, and for the benefit of the plaintiff as to the remaining equal part or share, as tenants in common.
At the time of the February Orders, the parties remained in dispute as to who should bear the costs of the proceeding. Accordingly, the February Orders contained a timetable for the filing of affidavits and written submissions in relation to that question, which the parties were content for me to determine on the papers.
Pursuant to the February Orders, the parties filed the following material, which I have had regard to in reaching my decision in relation to the question of costs:
(a)On behalf of the plaintiff: Affidavit of Robert Sutherland McKay dated 22 February 2022 (7 pages plus 182 pages of exhibits), affidavit of Nadia-Lee Rojtarowski dated 5 April 2022 (6 pages plus 46 pages of exhibits), primary written submissions dated 23 February 2022 (8 pages), reply written submissions dated 5 April 2022 (5 pages).
(b)On behalf of the first defendant: Affidavit of Alison Payet dated 25 March 2022 (17 pages plus 47 pages of exhibits), written submissions dated 25 March 2022 (16 pages).
(c)On behalf of the second defendant: Affidavit of Mark Bohdan Rojtarowski dated 4 March 2022 (11 pages plus 52 pages of exhibits), affidavit of Mark Bohdan Rojtarowski dated 4 April 2022 (4 pages plus 2 pages of exhibits), primary written submissions dated 4 March 2022 (18 pages), reply written submissions dated 4 April 2022 (14 pages plus 3 page memorandum of costs and disbursements).

The parties’ submissions

The plaintiff contended in her primary submissions that the first defendant should pay the plaintiff’s costs of the proceeding on the indemnity basis, alternatively on the standard basis. In her reply submissions, the plaintiff modified her position and claimed costs in the fixed sum of $25,000 representing recovery on the standard basis, or alternatively costs on the standard basis to be taxed in default of agreement. In claiming the fixed sum, the plaintiff relied upon Henwood v Nansor Australia Pty Ltd (costs ruling).[1]
[1] [2013] VSC 655 at [13]-[16] per Macaulay J.
In support of her position, the plaintiff contended that, having regard to the making of the February Orders, the first defendant had capitulated and the plaintiff had in substance been successful. The plaintiff relied upon authorities to the effect that where there has been no hearing on the merits and one party effectively surrenders such that there is a “clear winner”, costs should be awarded to the successful party.[2] The plaintiff submitted that this was sufficient to justify an award of costs on the standard basis. In her reply submissions, the plaintiff observed that the first defendant had not submitted that these authorities were inapplicable in the present case.
[2] See eg Re Howden; Howden v Rackstraw [2020] VSC 315 at [45]-[46] per McMillan J.
The plaintiff further submitted that the first defendant’s defence of the proceeding had not been reasonable, for reasons principally including:
(a)The plaintiff's solicitors had sent a letter dated 13 October 2021 (October Letter) to the first defendant’s solicitors, which explained in considerable detail the basis for the plaintiff’s claimed interest in the Land and provided copies of documentary evidence upon which the plaintiff proposed to rely if proceedings were instituted. The October Letter gave the first defendant’s solicitors until 27 October 2021 to acknowledge the plaintiff’s claimed 50 per cent interest in the Land, foreshadowed legal proceedings, and foreshadowed a claim for indemnity costs if the acknowledgement was not given.
(b)The plaintiff’s solicitors had warned in correspondence on a number of occasions that proceedings would be commenced and indemnity costs sought.
(c)The first defendant failed to provide any substantive response to the plaintiff’s pre-proceeding correspondence and, in particular, did not provide any explanation of why the first defendant contended that the plaintiff’s claim was ill-founded.
(d)The first defendant foreshadowed, but never pursued, an application for this proceeding to be stayed or transferred to the Federal Circuit and Family Court.
(e)The plaintiff provided no new evidence between the October Letter and the making of the February Orders, meaning that there was no good reason for the first defendant to have delayed her capitulation. Rather, the first defendant had all the information she needed before the proceeding was issued, and her refusal to capitulate at an earlier stage led to the commencement of the proceeding and the attendant costs.
(f)The first defendant’s position in the negotiations leading to the February Orders involved an impermissible seeking of orders “on a commercial basis”.
The second defendant contended that the first defendant should pay the second defendant’s costs on the indemnity basis, alternatively on the standard basis. I understood his primary submissions to be:
(a)The second defendant and the plaintiff had maintained throughout the proceeding a position consistent with the February Orders, and the February Orders involved a capitulation by the first defendant. The second defendant relied in particular upon his solicitors’ letter of 16 November 2021 to the solicitors for the plaintiff and the first defendant (16 November Letter), which was sent in response to a letter dated 5 November 2021 from the plaintiff’s solicitors to the second defendant’s solicitors (5 November Letter). By the 5 November Letter, the plaintiff’s solicitors sent the second defendant’s solicitors a copy of the October Letter. Amongst other things, the 5 November Letter foreshadowed the commencement of legal proceedings and sought written confirmation of whether the second defendant agreed with the factual outline contained in the October Letter and whether the second defendant acknowledged that the plaintiff had a 50 per cent beneficial interest in the Land. The 16 November Letter responded by stating that the second defendant agreed with the factual matters set out in the October Letter and that he agreed that the defendants held 50 per cent of their interest in the Land on trust for the plaintiff. The 16 November Letter also stated that, in order to minimise the second defendant’s costs, his solicitors were prepared to execute a formal notice admitting the plaintiff’s claim as to her 50 per cent interest in the Land. The letter concluded by stating that if the first defendant unreasonably disputed the plaintiff’s claim in respect of the Land, the second defendant’s solicitors were instructed to seek an order for indemnity costs.
(b)The 16 November Letter was an open offer, capable of acceptance at any time until the making of the February Orders, to capitulate and entirely admit the claim. The second defendant also emphasised the reference in that letter to indemnity costs. He submitted that, although the letter did not constitute a Calderbank offer given the particular circumstances of this case, it was imbued with the critical elements of a Calderbank offer. The second defendant submitted that the first defendant did not achieve a better outcome than the terms of the 16 November offer; rather, the outcome as reflected in the February Orders was the same. Further, he submitted, it should have been clear to the first defendant that this was the inevitable outcome, at least from the time that she received the October Letter which provided her with all the relevant information to assess the plaintiff’s claim. In light of that information, and the second defendant’s position as conveyed in the 16 November Letter, the first defendant should have conceded the claim prior to this proceeding being issued. The second defendant also submitted that, having regard to the 16 November Letter, there was satisfaction of the criteria for assessing whether a failure to accept a Calderbank offer warrants an order for indemnity costs, as set out by the Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2).[3]
(c)The principles relating to the making of a Sanderson order, which involves an unsuccessful defendant paying the costs of a successful defendant, were appropriate considerations in the present case. The second defendant submitted that, as one of the legal owners of the Land, he was a necessary party to this proceeding and that it was reasonable and necessary for the plaintiff to join him as a defendant. Further, having regard to the consistency of his position as set out in the 16 November Letter and the February Orders, he was to be treated as analogous to a successful defendant.
(d)Where an open offer has been made, it is necessary for the Court to consider the reasonableness of the offeree’s non-acceptance thereof. The second defendant relied upon the October Letter as having set out with particularity, and with supporting evidence, the basis upon which the first defendant must fail. Relying upon the decision of Lindgren J in NMFM Property Pty Ltd v Citibank Ltd (No 11),[4] he contended that this pointed in favour of indemnity costs being awarded. He submitted that there was nothing in the period between 13 October 2021 and 10 February 2022 which could be said to have changed the relative strengths of the parties’ cases. He further submitted, citing Macedon Ranges Shire Council v Thompson,[5] that the first defendant pressed on in circumstances where a proper assessment of her case should have shown it to be hopeless, and that she ultimately recognised the hopelessness of her case by consenting to the February Orders.
[3] [2005] VSCA 298; (2005) 13 VR 435 at 442 [25] per Warren CJ, Maxwell P and Harper AJA.
[4] [2001] FCA 480; (2001) 187 ALR 654 at 674 [87].
[5] [2009] VSCA 209 at [15] per Redlich JA and Beach AJA.
The first defendant sought orders that each party should bear their own costs, although she submitted that it would have been reasonable for the plaintiff and second defendant to pay her costs. Her submissions in relation to costs, which were in parts difficult to follow, appeared to be based primarily upon the following contentions:
(a)The plaintiff had made no claim over the land until July 2021 and, prior to that time, the first defendant had no reason to believe that the plaintiff had a 50 per cent interest in the Land. From July 2021, the plaintiff’s solicitors sent correspondence threatening legal proceedings, without providing any substantiating documents until the October Letter.
(b)The plaintiff did not allow a reasonable time after the October Letter for discussions and negotiations.
(c)The first defendant only accepted the plaintiff’s claim on a “commercial basis” so as to avoid further legal costs.
(d)After the plaintiff asserted her claim over the Land, the first defendants’ solicitors from time to time communicated to the plaintiff’s solicitors that the plaintiff should resolve the issue with the second defendant and that the first defendant did not have to be part of that dispute.
(e)The appropriate forum for the determination of the dispute regarding the Land was the family law proceeding which was already on foot between the first and second defendants in the Federal Circuit and Family Court (Family Law Proceeding), and the plaintiff should therefore not have commenced the present proceeding.
(f)There was no written document signed by either defendant which provided that the plaintiff was to have a 50 per cent interest in the Land.
(g)The plaintiff and second defendant “have acted in a way to generate excessive legal costs for the First Defendant”.
(h)The actions of the plaintiff and the second defendant “are an abuse of process”. The apparent basis for this contention is that the plaintiff instituted this proceeding in the County Court “to avoid the consideration of the overall conduct of the Second Defendant by excluding it from all other matters which are part of the Family Law proceedings”.
(i)The first defendant provided the plaintiff with a settlement offer on 16 December, which the plaintiff rejected by making a counteroffer on 17 December. This rejection was unreasonable “as the First Defendant offered all that the Plaintiff sought under the writ filed by the Plaintiff” and the plaintiff “has not done better” under the February Orders than the offer of 16 December.
Specifically in relation to the second defendant, the first defendant further submitted:
(a)It was unreasonable for the second defendant to refuse to consent to the joinder of the plaintiff to the Family Law Proceeding, because this resulted in the first defendant being involved in “duplicate proceedings” in two jurisdictions.
(b)The second defendant did not respond to the plaintiff’s claim until the 16 November Letter. This response came 3 weeks after the 27 October 2021 deadline in the October Letter and there is no explanation why the second defendant did not provide this response earlier.
(c)It was unreasonable for the second defendant not to respond to correspondence from the plaintiff’s solicitors until 16 November 2021, which was one week before a Family Dispute Resolution conference scheduled for 23 November 2021 in the Family Law Proceeding.
(d)It was “completely unreasonable” that the second defendant did not respond to the first defendant’s 16 December 2021 offer, nor the plaintiff’s 17 December counter-offer, nor correspondence from the first defendant to the second defendant on 4 January 2022.
I also record for completeness that some aspects of the first defendant’s written submissions and affidavit material appeared to traverse issues in the Family Law Proceeding which are of peripheral or no relevance to the present question concerning the costs of this proceeding in the County Court.

Discussion and decision – plaintiff’s costs

Costs are in the discretion of the Court under section 78A of the County Court Act 1958 (Vic). The Court’s discretion is unfettered but must be exercised judicially.[6]
[6] See eg ACN 115 918 959 Pty Ltd v Hoeys Lawyers Pty Ltd [2021] VSC 184 at [6] per Blue AJ.
I accept the submissions of the plaintiff which I have summarised in paragraphs 5 and 6 above. Although the matters in paragraph 6 appear largely to have been relied upon by the plaintiff in support of her now-abandoned application for indemnity costs, I consider those matters also to be relevant to the question of whether a costs order should be made on the standard basis. The authorities indicate that the reasonableness of the parties’ conduct prior to and during the proceeding is potentially relevant in circumstances such as the present.[7]
[7] Re Howden; Howden v Rackstraw [2020] VSC 315 at [41]-[46] per McMillan J.
The communications from the plaintiff’s solicitors prior to her instituting this proceeding were in my view reasonable and constituted an attempt to avoid the unnecessary incurring of costs associated with the commencement of proceedings. I also accept the plaintiff’s submission that some of the communications in response from the first defendant’s solicitors were unduly dismissive.
There is nothing in the first defendant’s submissions which persuades me that I should reject the plaintiff’s contention that the plaintiff was in effect the “clear winner” and that the first defendant should pay her costs, based on the authorities such as Re Howden. In the paragraphs below, I set out my conclusions in relation to the contentions of the first defendant which I summarised in the various sub-paragraphs of paragraph 8 above.

As to sub-paragraph (a) of paragraph 8: I do not accept that the first defendant had no reason prior to July 2021 to believe that the plaintiff had a 50 per cent interest in the Land. The first defendant’s own lawyers in the Family Law Proceeding had acknowledged as early as 5 February 2020 that they had been instructed that the plaintiff had been consistently paying half of the mortgage repayments for the Land. Those instructions presumably came from the first defendant. Further, the second defendant’s lawyers in the Family Law Proceeding had emailed the first defendant’s lawyers on 7 February 2020 stating, in respect of the ownership of the Land: “Joint husband & wife 50% (other 50% owned by husband’s sister)”. In any event, even if I were to accept the first defendant’s submission that she had no reason for such a belief prior to July 2021, she clearly had reason for such a belief from the time that she received the October Letter, which was still well before the plaintiff commenced this proceeding.
Further, I do not accept that the plaintiff is open to criticism for not providing the first defendant with the underlying documents substantiating her claim until October 2021. It would clearly have required considerable time and expense to prepare the October Letter and the documents provided with it. It was reasonable for the plaintiff initially to seek to ascertain the first defendant’s position in relation to her claim, before incurring that expense. For example, if the first defendant had accepted the plaintiff’s claim, or aspects of the facts underlying it, such expense would have been rendered unnecessary in whole or in part. On more than one occasion in mid 2021, the plaintiff asked detailed questions of the first defendant’s solicitors, seeking to ascertain the first defendant’s position in relation to aspects of the plaintiff’s claim. Those questions, however, went unanswered. After giving the first defendant those opportunities to explain her position, and having received no substantive response, it was understandable that the plaintiff then took the view that the first defendant did not accept the plaintiff’s position and that it would be necessary for the plaintiff to seek to substantiate her position and its evidentiary basis in detail, which she did in the October Letter.

As to sub-paragraph (b) of paragraph 8: The October Letter requested a response within 14 days. The first defendant’s solicitor informed the plaintiff’s solicitors in response to the October Letter that she would seek instructions and revert to them. The plaintiff’s solicitor, however, did not do so within that 14 day period. Nor did she seek additional time to respond to the October Letter. In those circumstances, I do not consider the first defendant to be justified in complaining that she was not afforded a reasonable time to respond.
As to sub-paragraph (c) of paragraph 8: Whatever was the first defendant’s motivation for agreeing to this proceeding being determined by the February Orders, the fundamental position remains that she and the other parties sought orders by consent which were in substance consistent with the claim made by the plaintiff. Parties regularly compromise proceedings for commercial reasons. The first defendant’s motivation for agreeing to the February Orders, whatever it may have been, does not detract from the fact that, in the parlance of the authorities such as Re Howden, the plaintiff was the “clear winner”.
As to sub-paragraph (d) of paragraph 8: In suggesting that she did not need to be part of the dispute regarding the Land, the first defendant appears to have failed to appreciate that, as one of the registered proprietors of the Land, and a party to the arrangement in respect of the Land alleged by the plaintiff, she was a necessary party to that dispute. The dispute could not be resolved without her involvement. The first defendant’s position in this regard appears to have been based upon her belief, deposed to in paragraph 24 of her affidavit, that there was an arrangement between the plaintiff and second defendant only in relation to the second defendant’s interest in the Land. That belief is not consistent with the claim actually made by the plaintiff, as articulated in the October Letter and in the statement of claim in this proceeding, or with the February Orders.
The first defendant’s reliance upon that position in her submissions also sits uneasily with her submission that the dispute regarding the Land should have been dealt with in the Family Law Proceeding (see sub-paragraph (e) of paragraph 8 above). If the dispute regarding the Land should have been resolved by the plaintiff and second defendant without the involvement of the first defendant, it is difficult to see how the first defendant can also contend that the Family Law Proceeding – which involved both defendants – was a more appropriate forum for the resolution of that dispute than the County Court proceeding.
As to sub-paragraph (e) of paragraph 8: A theme which permeated the first defendant’s submissions, and also much of her solicitor’s 2021 correspondence, was that the Land dispute should have been dealt with in the Family Law Proceeding rather than the plaintiff instituting the present proceeding. In circumstances where the plaintiff was not otherwise involved in the Family Law Proceeding, which involved both parenting and financial issues between the two defendants and had been on foot for approximately two years, I consider there to be real doubt as to whether it would have been appropriate to require the plaintiff to become involved in that proceeding solely in order to advance her claim in respect of the Land. In any event, the first defendant never made any application in this regard and instead, ultimately agreed to the February Orders being made in the present proceeding.
Moreover, whatever the forum in which the Land dispute was to be agitated, that dispute could have been narrowed or potentially resolved, and costs consequently avoided, if the first defendant had responded substantively to the October Letter or to the questions asked by the plaintiff’s solicitors in their 2021 correspondence. I also do not consider there to be any basis for concluding that the determination of the Land dispute in the Family Law Proceeding would have involved the parties in any less expense than that which was incurred in the present proceeding in the County Court.Regardless of the forum, costs would have been incurred by the parties in dealing with that dispute in a court proceeding.
As to sub-paragraph (f) of paragraph 8: The absence of a written document is not uncommon in cases such as the present, where the existence of the alleged trust is determined on the basis of other evidence. Indeed, as the plaintiff’s reply submissions note, s 53 of the Property Law Act 1958 (Vic) expressly excludes resulting, implied or constructive trusts from the writing requirements otherwise prescribed by that section. The absence of a written document does not in my view provide a basis for denying the plaintiff a costs order.
As to sub-paragraph (g) of paragraph 8: The first defendant’s contention regarding generation of excessive legal costs appears to be based upon her position that the plaintiff should have agreed to have the dispute about the Land dealt with in the Family Law Proceeding rather than commencing the present proceeding, and that doing so would have reduced the costs incurred. For the reasons given in paragraphs 21 and 22 above, I do not accept that position. Further, having regard to their correspondence preceding the commencement of the present proceeding, it seems to me that the plaintiff and second defendant were attempting to resolve the Land dispute reasonably and with a view to minimising legal costs, rather than generating excessive costs.
The first defendant also appears to rely upon her limited financial means, citing Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd.[8] However, Kiefel J was there discussing the relevance of impecuniosity to the specific question of whether a gross sum costs order should be made instead of costs being taxed. Her Honour was not dealing with the more general question of whether a party should be ordered to pay the costs of another party. As to that latter question, it is well-settled that a party’s financial means are not a relevant consideration other than in “exceptional circumstances”, which I do not consider to be present in this case.[9]
[8] [2006] FCA 1427; (2006) 236 ALR 665 at 694-695 [122] per Kiefel J.
[9] See eg Board of Examiners v XY [2006] VSCA 190 at [31]-[37] per Chernov JA (Nettle and Neave JJA agreeing) and [40]-[43] per Nettle JA.
As to sub-paragraph (h) of paragraph 8: I do not accept the allegation of abuse of process, which I note sits somewhat incongruously with the first defendant’s consent to the February Orders. The issue raised for determination by the plaintiff’s claim was whether or not a constructive or resulting trust arose in her favour in respect of the Land, having regard to the parties’ alleged arrangement prior to its acquisition and having regard to the plaintiff’s alleged payment of half of the costs and expenses relating to the Land. I do not accept that the “overall conduct of the Second Defendant” vis-à-vis his former domestic and parenting relationship with the first defendant, which is the subject of the Family Law Proceeding, was of such relevance to the Land dispute that it was an abuse of process for the plaintiff to have instituted the present proceeding in this Court. On the contrary, it appears likely that much of the subject matter of the Family Law Proceeding would have been irrelevant to the Land dispute.
As to sub-paragraph (i) of paragraph 8: The first defendant’s submissions refer to a 16 December 2021 settlement offer from the first defendant and a 17 December 2021 counter-offer from the plaintiff. However, it appears from the affidavit material that the offer in question is contained in an email dated 17 December 2021 (1.53pm) and that the counter-offer is contained in an email dated 18 December 2021 (11.58am). Nothing turns on this apparent error. The plaintiff submits that there were two “unusual features” of the 17 December 2021 counter-offer. The first is that it was left open for only 3 hours on the Friday prior to the Christmas vacation. I do not consider this to be an accurate characterisation of the 17 December 2021 email. Whilst the email stated that the author would be on leave from the close of business on 17 December 2021, it did not state that the offer was only open until that time. Further, the email went on to state that if proposed minutes of order were not provided prior to the author’s departure, “I will only action emails on an intermittent basis until we return on 10 January 2022”. This in my view belies any characterisation of the offer as lapsing as at the close of business on 17 December 2021.
The second “unusual feature” referred to by the plaintiff was that the counter-offer required the proposed order to contain a notation that the plaintiff’s 50 per cent share in the Property was agreed to by the first defendant on a “commercial basis”. (Such a notation also remained a feature of subsequent proposed orders proffered by the first defendant.) I accept the plaintiff’s submission that, as I indicated at the hearing on 10 February 2022, an order in those terms could not have been made. It follows, as the second defendant submits, that the counter-offer made by the first defendant on 17 December 2021 could not have been accepted. Accordingly, I do not consider the existence of that offer to militate against the costs order sought by the plaintiff.
For the reasons set out above, I consider it appropriate to order that the first defendant pay the plaintiff’s costs on the standard basis. Whilst the plaintiff has proposed that those costs be fixed in the sum of $25,000, I consider it preferable to make orders reflecting the plaintiff’s alternative position, namely, that costs be ordered on the standard basis, leaving those costs to be taxed in default of agreement as provided for by rule 63A.10 of the County Court Civil Procedure Rules 2018. I consider the Costs Court to be in a better position than this Court to determine the extent to which the costs claimed by the plaintiff should be allowed, particularly given that a not insubstantial proportion of the costs claimed by the plaintiff appear to relate to the period prior to the commencement of this proceeding.

Discussion and decision – second defendant’s costs

Subject to paragraph 33 below, I consider it appropriate to make an order that the first defendant pay the second defendant’s costs on an indemnity basis. Having regard to his interest in the Land as a registered proprietor and as a party to the alleged arrangement regarding the Land, the second defendant was a necessary party to this proceeding. Prior to the commencement of the proceeding, and in response to a request by the plaintiff that he do so, the second defendant made clear his position in the 16 November Letter, including in relation to the question of indemnity costs. That position was not expressed as being limited as to time, nor did it change prior to the making of the February Orders. Moreover, the second defendant’s position was consistent with the February Orders, which in turn reflected the relief which the plaintiff sought in this proceeding. The February Orders amounted in effect to a capitulation by the first defendant in circumstances where, prior to the plaintiff’s commencement of this proceeding, the first defendant had received a detailed explanation of the plaintiff’s claim and copies of the underlying documents upon which the plaintiff relied.
In relation to the first defendant’s contentions summarised in paragraph 9 above:
(a)As to sub-paragraph (a) of paragraph 9: I have already addressed above, in paragraphs 21 and 22, the first defendant’s reliance upon the Family Law Proceeding. Further, I do not consider it correct to describe the position as involving “duplicate proceedings”. Although there were two proceedings on foot, one in each Court, those proceedings were not duplicates of one another. Rather, they dealt with different issues.
(b)As to sub-paragraph (b) of paragraph 9: The first defendant’s submissions do not identify the relevance, for costs purposes, of the alleged delay by the second defendant in responding to the October Letter. Moreover, the first defendant’s submissions proceed upon an assumption that the October Letter was sent to the second defendant on 13 October 2021. Rather, as the second defendant observes in his reply submissions, the October Letter was not sent to the second defendant until 5 November 2021, under cover of the 5 November Letter. In light of the detailed nature of the October Letter and enclosed documents, it was not unreasonable for the second defendant to take until 16 November 2021 to respond to the 5 November Letter and enclosed October Letter. In any event, the acknowledgement was provided by the second defendant prior to the commencement of this proceeding on 22 November 2021, and at a time when the first defendant had already had over a month to consider the October Letter. After receiving that acknowledgement on 16 November 2021, there was still time for the first defendant to communicate acceptance of the plaintiff’s claim, or to ask the plaintiff for further time to consider the acknowledgment, before the present proceeding was issued. The first defendant did neither of those things.
(c)As to sub-paragraph (c) of paragraph 9: For the reasons which I have given in paragraph 31(b) above, I do not accept the first defendant’s submission that the timing of the second defendant’s response was unreasonable.
(d)As to sub-paragraph (d) of paragraph 9: Again, I note that the relevant dates of the offer and counter-offer appear to be 17 and 18 December respectively. I do not consider the lack of response from the second defendant’s solicitors to have been “completely unreasonable”, having regard to the time of year and the fact that the offices of the second defendant’s solicitors were closed until 17 January 2022. In any event, the position as between the plaintiff and first defendant had still not been resolved at this time.
It is necessary to say something in relation to the volume of the material provided by the parties in relation to costs. This proceeding was in its infancy at the time that the February Orders were made, the pleadings having not proceeded beyond the writ and statement of claim and there having been only one relatively brief hearing, on 10 February 2022. Despite this, the parties have collectively provided the Court with over 60 pages of written submissions and almost 400 pages of affidavits and exhibits, all devoted solely to the question of costs. I am concerned, therefore, that in dealing with the question of who should bear the costs of this proceeding, the parties have thereby incurred a disproportionate level of further costs.
Attached to the second defendant’s reply submissions is a table setting out the second defendant’s costs and disbursements. The table reveals that approximately 62 per cent of the total costs incurred by the second defendant in this proceeding were themselves incurred in addressing the question of which party should bear the costs of this proceeding. I accept that the first defendant’s submissions and affidavit contained some material which was of peripheral or no relevance, thereby increasing the costs of the second defendant who had to consider that material. Nonetheless, it does seem to me that the costs incurred by the second defendant in relation to the question of costs are relatively high, particularly given that much of the material relevant to that question coincided with material relied upon by the plaintiff. Accordingly, I do not consider it appropriate that the first defendant should pay the second defendant’s costs on the indemnity basis insofar as those costs relate to the question of which party should bear the costs of this proceeding; rather, those costs, all of which appear to have been incurred by the second defendant between 23 February and 3 April 2022, should be paid only on the standard basis.

Conclusion

Accordingly, for the reasons set out above, I propose to make the following orders:
(a)The first defendant is to pay the plaintiff’s costs of the proceeding on the standard basis.
(b)The first defendant is to pay, on the standard basis, the costs incurred by the second defendant in addressing the question of which party should bear the costs of the proceeding.
(c)The first defendant is otherwise to pay the second defendant’s costs of the proceeding on the indemnity basis.

[2022] VCC 649

18 May 2022