JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA CITATION : WARREN -v- LAWTON [No 3] [2016] WASC 285 (S) CORAM : LE MIERE J HEARD : 20 SEPTEMBER 2016 DELIVERED : 21 DECEMBER 2016 FILE NO/S : CIV 1372 of 2010 MATTER : Claim for an order for the dismissal of 1st and 2nd named first defendant's application under Section 138B of the Transfer of Land Act 1893 for the removal of caveat BETWEEN : MARK DONALD WARREN Plaintiff
AND
JOSEPH FRANCIS LAWTON
MOLLY ELIZABETH HALL
First Defendants
REGISTRAR OF TITLES
Second Defendant
Catchwords:
Costs - Calderbank offer - Where outcome of offer and outcome of court order unknown - Whether rejection of offer unreasonable - Turns on own facts
Costs - Whether successful party should be deprived of some of its costs due to the introduction of issues on which it was unsuccessful - Turns on own factsCosts - Special costs order - Whether matter was unusually difficult or complex - Special costs order - Turns on own facts Legislation:
Property Law Act 1969 (WA)
Transfer of Land Act 1893 (WA), s 138B Result:
Costs awarded
Category: B
Representation:
Counsel:
Plaintiff : Ms J R Cass
First-named First Defendant : No appearance
Second-named First Defendant : Mr T O Coyle
Second Defendant : No appearance
Solicitors:
Plaintiff : Jackson McDonald
First-named First Defendant : No appearance
Second-named First Defendant : McAuliffe Legal
Second Defendant : No appearance
Case(s) referred to in judgment(s):Aljade & MKIC v OCBC [2004] VSC 351Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39 (S)Electricity Generation and Retail Corporation t/as Synergy v Woodside Energy Ltd [2014] WASC 469 (S)Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115Hannell v Amaca Pty Ltd (Formerly James Hardie & Co Pty Ltd) [2006] WASC 310 (S)Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435Nikolaou v Papasavas, Phillips & Co (No 2) [1989] HCA 11; (1989) 166 CLR 394O'Rourke v P & B Corporation Pty Ltd [2008] WASC 36 (S); (2008) 36 WAR 197Warren v Lawton [No 3] [2016] WASC 285Background 1 I summarised the background to this matter in Warren v Lawton [No 3] [2016] WASC 285 as follows. The plaintiff, Mr Warren agreed to sell to the first defendants, Mr Lawton and Ms Hall, who I will sometimes refer to as the defendants, an undivided one-twentieth share of Lot 2706, a rural land holding of about 80 ha near Margaret River. They agreed that Ms Hall and Mr Lawton would have the exclusive use and occupation of an agreed area and Mr Warren would have the exclusive use and occupation of the remainder of Lot 2706. Mr Warren, Mr Lawton and Ms Hall signed an agreement (the Contract of Sale).
2 The Contract of Sale included clauses to the following effect. First, Mr Warren shall be entitled to mortgage the whole of the land (cl 6). Secondly, Ms Hall and Mr Lawton shall be entitled to the exclusive use and occupation of the land coloured green on a plan attached to the Contract of Sale and Mr Warren shall be entitled to the exclusive use and occupation of the rest of the land (cl 9). Thirdly, each party shall be entitled to erect improvements on their exclusive use area which improvements shall remain the property of the party erecting them and may be removed at any time (cl 10). Fourthly, if Mr Lawton and Ms Hall wish to sell their undivided one-twentieth share Mr Warren shall have an option to purchase it at a price equal to one-twentieth of the unimproved market value of the whole of Lot 2706 (cl 13). Fifthly, Mr Lawton and Ms Hall shall hold their undivided one-twentieth share as joint tenants and not alter the joint tenancy without the written consent of Mr Warren (cl 14). Sixthly, upon the death of the survivor of Mr Lawton and Ms Hall they shall be deemed to have given Mr Warren notice of intention to sell giving rise to his option to purchase (cl 15).
3 In 1995 Ms Hall and Mr Lawton agreed that Mr Lawton's interest in Lot 2706 be transferred to Ms Hall. Ms Hall requested that Mr Warren consent to the transfer and remove the caveat he had lodged over Ms Hall and Mr Lawton's undivided one-twentieth share claiming an interest as optionee. Mr Warren consented to the transfer upon terms in a deed of assignment drafted by his solicitors. Ms Hall did not agree and did not execute the deed of assignment. Mr Warren did not withdraw his caveat and Ms Hall has not been registered as the sole proprietor of the undivided one-twentieth share.
4 The relationship between Mr Warren and Ms Hall deteriorated. In October 2009 Ms Hall caused the second defendant, the Registrar of Titles, to issue to Mr Warren a notice under s 138B of the Transfer of Land Act 1893 (WA) to the effect that unless Mr Warren obtained from the court an order extending the operation of the caveat within 21 days the caveat will elapse. Mr Warren applied by originating summons for the operation of the caveat to be extended (the caveat proceedings). On 4 November 2009 the court ordered that the operation of the caveat be extended until further order. The caveat proceedings remain adjourned.
5 On 16 March 2010 Mr Warren commenced this action. Mr Warren initially sought an order dismissing the defendants' application under s 138B of the Transfer of Land Act for the removal of the caveat or alternatively an order that the Registrar of Titles dismiss the defendants' application for the removal of the caveat. Mr Warren also sought a declaration that he has a caveatable interest in the defendants' undivided one-twentieth share of Lot 2706. Mr Warren subsequently amended his claim to also claim a declaration that the Contract of Sale represents the whole of the agreement between himself and the defendants for the sale and purchase of the undivided one-twentieth share.
6 Ms Hall has brought a counterclaim in which she seeks a range of relief based on numerous causes of action. In his opening address counsel for Ms Hall said that Ms Hall has 10 causes of action. The first cause of action, as counsel described it, is that Mr Warren has no caveatable interest in the undivided one-twentieth share. The second is that Mr Warren breached a collateral contract, or an implied term of the Contract of Sale, that, other than as required by law, Mr Warren would do nothing on Lot 2706 that would affect the peace and tranquillity of the Lawton Hall exclusive use area by clearing bush, generating noise and dust and encouraging or permitting members of the public, guests and tenants to use the access way to the Lawton Hall exclusive use area. Thirdly, Mr Warren breached an implied term of the Contract of Sale that he would not unreasonably withhold his consent to an alteration of the joint tenancy of the undivided one-twentieth share. Fourthly, Ms Hall sought a declaration that the rights under cl 13 of the Contract of Sale, that is the right of first refusal or conditional option have expired. Ms Hall does not press that claim. Fifthly, Ms Hall claims rectification of the Contract of Sale to provide that the defendants be entitled to the exclusive use and occupation of an area which she describes as the Lawton Hall Lot in substitution for the green area on the plan attached to the Contract of Sale. Sixthly, Ms Hall says that Mr Warren unconscientiously took advantage of her special disadvantage by causing her to sign the Contract of Sale which contained terms which are unfair, unjust and unreasonable. Seventhly, Ms Hall says that Mr Warren was the purchasing agent of herself and Mr Lawton and as such or alternatively in all the circumstances Mr Warren owed her and Mr Lawton a fiduciary duty which he breached by charging them a price for the undivided one-twentieth share that was in excess of its fair market value and causing them to sign a written agreement that contained terms that were unfair, unjust and unreasonable. Eighthly, Ms Hall says that the clauses of the Contract of Sale relating to Mr Warren mortgaging the whole land, giving him a right of first refusal (or conditional option), requiring his consent to alteration of their joint tenancy and providing that he may exercise his option to purchase on the death of the survivor of Mr Lawton and Ms Hall are an unlawful restraint upon Ms Hall's rights of alienation of her interest in the undivided one-twentieth share and should be set aside. Ninthly, Ms Hall claims that by various actions of Mr Lawton or his tenant or invitees he has trespassed on Ms Hall's exclusive use and occupation area. Tenthly, Ms Hall seeks an order for sale of lot 2706 under s 126(2) of the Property Law Act 1969 (WA).
7 The trial in this matter took place on 3 - 7, 11 and 20 August as well as 23 October 2015. I handed down my reasons for decision on 7 September 2016. I found that:
a. The Contract of Sale should be rectified by providing that the Purchasers are entitled to the exclusive use and occupation of the Lawton Hall Lot. b. Clauses 6, 13, 14 and 15 of the Contract of Sale are an invalid restraint on alienation and unenforceable.
c. There is no collateral contract, or implied term, that except as required by law the Vendor would do nothing on Lot 2706 that would affect the peace and tranquillity of the Lawton Hall Lot.
d. If, contrary to my finding, cl 14 is enforceable, it is subject to the proviso that the Vendor will not unreasonably withhold his consent.
e. Mr Warren did not engage in unconscionable dealing.
f. Mr Warren did not breach any duties owing to Mr Lawton and Ms Hall as a purchasing agent or any fiduciary duties.
g. Mr Warren is liable for some acts of trespass on the Lawton Hall Lot.
h. It should be ordered pursuant to Property Law Act s 126(2) that Lot 2706 be sold and the proceeds divided between Mr Warren and Ms Hall.
i. Mr Warren does not have a caveatable interest in the Lawton Hall undivided one-twentieth share in Lot 2706 and his caveat should be removed.
j. There should be no declaration that the Contract of Sale represents the whole of the agreement between Mr Warren and Mr Lawton and Ms Hall for the sale and purchase of the undivided one-twentieth share in Lot 2706.
8 The parties could not come to an agreement on the orders to be made at the delivery of the reasons on 7 September 2016 and the motion for judgment was adjourned to 20 September 2016. On 20 September I heard argument in relation to the orders to be made, including the costs orders sought by both parties. I reserved my decision on the costs of the matter. For the reasons which follow the court will order that Mr Warren pay 75% of Ms Hall's costs and those costs should be assessed with a 75% increase to the limits on items 17 and 20(a) of the Scale. The costs orders sought
9 Mr Warren's primary submission in respect of costs was that Mr Warren should pay the Ms Hall's costs of the action (including reserved costs) from 16 March 2010 to 22 December 2010; and Ms Hall should pay Mr Warren's costs of the action (including reserved costs) from 23 December 2010. This order was sought on the ground that Ms Hall had unreasonably rejected a Calderbank offer on 23 December 2010. Mr Warren alternatively submitted that he should pay 50% of Ms Hall's costs of the action, to be taxed if not agreed.
10 Ms Hall sought orders that Mr Warren pay her costs, including all costs reserved, to be taxed if not agreed. Ms Hall also sought the removal of the limits fixed by such Legal Profession (Supreme Court) (Contentious Business) Determinations (Scale) as might apply from time to time in relation to items 17, 20 and 33 (other work) and Ms Hall be at liberty to tax costs under item 34 of the Scale (travel).
Principles in relation to Calderbank Offers
11 The offeror of a rejected Calderbank offer bears the onus of satisfying the court that indemnity costs should be awarded: Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115 [21]. The Court of Appeal in that case discussed the principles relevant to the rejection of a Calderbank offer. Buss JA (Wheeler JA agreeing) said (citations omitted in select passages):
A Calderbank offer will not justify an award of indemnity costs unless its rejection was unreasonable. All of the relevant facts and circumstances must be considered in determining whether a party's rejection of a Calderbank offer was unreasonable.
The mere fact that the recipient of a Calderbank offer is ultimately worse off than he or she would have been had the offer been accepted, does not mean that its rejection was unreasonable.
As the Court of Appeal of Victoria noted in Hazeldene's Chicken Farm, deciding whether conduct is 'reasonable' or 'unreasonable' always involves matters of judgment and impression [24]. Although it is neither possible nor desirable to enumerate exhaustively all circumstances which must be taken into account, in a particular case, in deciding whether the rejection of a Calderbank offer was unreasonable, the Court of Appeal said that, ordinarily, regard should be had to, at least, the following:
(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 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 of the offeree's rejecting it. [25]. [16]-[19]
The Calderbank Offer 12 In a letter from Mr Warren's solicitor, MJ McPhee, to Ms Hall's solicitors, McAuliffe Legal, Mr Warren offered to agree to the following (the Offer). First, both parties engage independent qualified valuers to do a valuation of the unimproved value of Ms Hall's share of the land and the depreciated value of the improvements on Ms Hall's portion of the property. Secondly, the purchase price of the land be fixed at the average of the two valuations. Thirdly, the valuers do not communicate with one another. Fourthly, settlement occur within 90 days of the average being fixed with a 10% deposit. Fifthly, the action be dismissed with no order as to costs.
13 There was no mention of the offer foreshadowing an application for indemnity costs in the event it was rejected. This is relevant but rarely decisive. The offer allowed for a response to be sent by return or as soon as possible but no timetable for a response was set. McAuliffe Legal sent a response rejecting the offer on 27 January 2011.
14 Counsel for Ms Hall argued that the absence of any considered explanation as to the weaknesses in Ms Hall's position should weigh against a conclusion that its rejection was unreasonable. There is no general rule in relation to the effect of the absence of an explanation of the basis of why the offeree should accept an offer, though the extent to which the weakness of a party's position is already exposed may bear upon the significance of any absence: Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 [26] [27]; Aljade & MKIC v OCBC [2004] VSC 351 (Redlich J) [87].
15 Counsel for Ms Hall submits that the offer lacked clarity for the following reasons. First, this offer was to undertake a process rather than an offer of money. Secondly, the valuation proposed a valuation of the unimproved value of Ms Hall's share of the land and the depreciated value of the improvements on Ms Hall's share of the property. Counsel for Ms Hall submitted that it is unclear whether that takes into account the terms of the contract, which I found were detrimental to the value and would have reduced any value in Ms Hall's share of the property to no more than $5,000: Warren v Lawton [No 3] [57]. Counsel for Mr Warren submitted that the offer provided for a valuation of the entirety of Ms Hall's share of the lot. This is distinct from the contractual provision which provided that if Mr Warren purchased Ms Hall's interest it would be solely based on the one-twentieth value of the unimproved whole of the land.
16 Further, it was submitted that there is no evidence as to what value may have been fixed by the process. Counsel for Mr Warren submitted that the value of the offer can be assessed by the values which I found applied in Warren v Lawton [No 3]. I found the market value of the whole of the land at the date of the trial was $2,085,000 and the unimproved market value of the land was $1,125,000: Warren v Lawton [No 3] [60]. The two expert witnesses in that matter fixed a value to the structural improvements on Ms Hall's property at $65,000 and $50,000 respectively. Thus the value would have been between $106,250 and $121,250. Assuming the land is sold for the market value then Ms Hall would receive $104,250 less sale costs. Counsel for Mr Warren submitted that whatever value the land had would carry over into an assessment of the land at a different date (ts 944).
17 In assessing the value counsel for Mr Warren submitted I should ignore the issues of trespass for which I found Mr Warren liable as the amount awarded in respect of those claims is less than the difference between the offer and a one-twentieth share in the market value of the Land. Further, the acts of trespass occurred after the date of the Offer.
18 The rejection of the offer was not unreasonable and therefore an indemnity costs order would not be justified in this case. The relief granted in this case was different to the resolution provided in the offer. Ms Hall sought an order for sale of lot 2706 under s 126(2) of the Property Law Act 1869 (WA). On 13 October I ordered that this occur and that the proceeds be divided between the parties according to their shares of the property. I am also not satisfied that the valuation which I accepted as the value of the property at the time of trial can be applied as the valuation at the time of the offer. The evidence before me in this matter cannot provide enough certainty as to the outcome of the process provided for in the Offer.
19 Further, it is not certain that the sale process which will take place will result in a price for the property which is greater or less than the market value as assessed at trial. It cannot be known whether Ms Hall would have been better off in a process where an amount is reached by dividing two valuations compared to the sale of the land via a real estate agent. The court is therefore not in a position to weigh the outcome of the trial against the Offer. Nor do the other circumstances of this case support a conclusion that the rejection of the Offer was unreasonable. I therefore cannot be satisfied that it was unreasonable for Ms Hall to reject the Offer, and therefore there should not be an order for costs to be paid on an indemnity basis.