Aflalo v Krycer & Krycer

1. In her Statement of Claim, the Plaintiff alleged that the Defendants had not been in possession of the Disputed Land for a continuous period of at least 15 years without interruption. The relief sought by the Plaintiff in the Statement of Claim was described as follows:

"A. A declaration that the Defendants have not acquired a title by possession of the Disputed Land in relation to the Application under s60 of the Transfer Act (sic) and/or that the Defendants have not acquired any ownership, title or interest in the Disputed Land free from any encumbrances by reason of adverse possession. > > B. A declaration that the Defendants are not entitled to a vesting order under s62 of the Transfer Act (sic) for an order vesting the Disputed Land in the Defendants. > > C. The Registrar of Titles shall be forbidden from granting the Application lodged under dealing No AP147987X, > > D. The Registrar of Titles be directed to correct any entry in the Register Book to give effect to these orders under section 103 of the Transfer Act (sic). > > E. Costs. > > F. Any further orders as the Court considers appropriate."

1. On 10 September 2025, the Defendants filed a Defence and Counterclaim seeking the following relief:

"A. A declaration the defendants have acquired titled by way of adverse possession to the Disputed Land. > > B. Costs.

1. C. Such other order as this Honourable Tribunal (sic) deems appropriate."

1. The Plaintiff did not to file a Defence to the Defendants' Counterclaim.

1. Neither the matters pleaded in the Plaintiff's Statement of Claim nor the Defendants' Counterclaim have been adjudicated on the merits. Instead, on 15 January 2026, Her Honour Judge Burchell made the following orders based on draft consent orders submitted by the parties on 22 December 2025 (Consent Orders):

"1. The Court declares that Rebecca Krycer and David Ian Krycer have acquired title by adverse possession of the disputed land situated at 5 Sycamore Street, Caulfield South, and more particularly described in the statement of claim. > > 2. Costs are reserved. > > 3. The directions hearing listed for 5 February 2026 and the trial fixed for 10 August 2026 are vacated. > > 4. By 4.00pm on 13 February 2026, the parties must file and serve any written submissions on the question of costs (limited to 5 A4 pages). > > 5. The question of costs of the proceeding will thereafter be determined by the Court on the papers. > > 6. Reserve liberty to the parties to apply by email to the Commercial Registry (commercial.registry@countycourt.vic.gov.au) for further directions upon giving reasonable notice to all other parties."

1. The purpose of this ruling is to determine who should bear the costs of the proceeding, to what extent and on what basis. It is not a taxation. Itemised invoices are not required. For the avoidance of doubt, the s 60 Application is not part of this proceeding.
2. The costs determination is made based on the affidavit material and submissions filed by the parties.

1. The Consent Orders did not provide for the filing of affidavit material. However, on 11 February 2026, the Plaintiff sought to file a lengthy affidavit affirmed by her on that day.
2. I did not grant the Plaintiff leave to file her affidavit affirmed on 11 February 2026 but instead made orders on 19 February 2026 allowing the parties to each file and serve an affidavit not exceeding 5 A4 pages which exhibited any offers of compromise or letter in accordance with the principles enunciated in Calderbank v Calderbank[1] (Calderbank Letter).
3. On 6 March 2026, the Plaintiff and the solicitor for the Defendants each filed an affidavit in accordance with the orders of 19 February 2026.
4. The affidavit material disclosed a series of offers which are set out below. The relevance of these offers will be apparent later in these reasons.

1. On 29 September 2025, the Plaintiff sent a Calderbank Letter to solicitors for the Defendants proposing to resolve her Claim and the Defendants' Counterclaim on the basis that:

(a) the parties seek a declaration that the Defendants have not acquired title to the Disputed Land by way of adverse possession;

(b) the Defendants withdraw their Counterclaim and s60 Application;

(c) the Plaintiff would pay the Defendants market value for a portion of the Disputed Land; and

(d) the parties bear their own costs of the proceeding.

1. The Defendants did not respond to the Plaintiff's First Offer.
2. On 1 October 2025, the Plaintiff sent a Calderbank Letter to solicitors for the Defendants proposing to resolve her Claim and the Defendants' Counterclaim on the basis that:

(a) the parties seek a declaration that the Defendants have acquired title to part of the Disputed Land by way of adverse possession;

(b) the Defendants withdraw their Counterclaim and s60 Application; and

(c) the parties bear their own legal costs.

1. The Plaintiff's Second Offer was also sent to solicitors for the Defendants as an offer of compromise in accordance with Order 26 of the County Court Civil Procedure Rules 2018 (the Rules), specifically r26.02.
2. The Defendants did not respond to the Plaintiff's Second Offer.
3. On 22 October 2025, the Plaintiff sent a Calderbank Letter to solicitors for the Defendants offering to resolve the Statement of Claim and the Counterclaim on the basis that:

(a) the parties withdraw their respective Claims;

(b) the Registrar of Titles consider the s60 Application; and

(c) the parties bear their own legal costs.

1. On 31 October 2025, solicitors for the Defendants responded to the Plaintiff's Third Offer (Defendants' First Offer). The Defendants' First Offer, which was sent as a Calderbank Letter, was to resolve the litigation on the basis that the parties withdraw their respective claims and that the Plaintiff pay the Defendants' costs of $29,722.96.
2. On 2 November 2025, the Plaintiff sent a Calderbank letter to solicitors for the Defendants offering to resolve her Claim and the Counterclaim on the basis that she would agree to a declaration that the Defendants had acquired the Disputed Land by way of adverse possession, and that both parties bear their own costs (Plaintiff's Fourth Offer).
3. On 14 November 2025, solicitors for the Defendants responded to the Plaintiff's Fourth Offer (Defendants' Second Offer). The Defendants' Second Offer was to resolve the litigation on the basis that:

(a) the Plaintiff withdraw her Statement of Claim;

(b) the Defendants withdraw their Counterclaim; and

(c) the Plaintiff pay the Defendants' discounted costs of $27,722.96.

1. The Defendants' Second Offer was expressed as being made in accordance with the principles established in Calderbank.
2. On 14 November 2025 the Plaintiff sent an email to solicitors for the Defendants attaching draft consent orders which proposed that the Statement of Claim and the Counterclaim be resolved as follows on the basis of orders that:

(a) included a declaration that the Defendants had acquired all of the Disputed Land; and

(b) that costs be reserved and determined by the court upon submissions by the parties (Plaintiff's Fifth Offer).

Plaintiff's response to the Defendants' Second Offer

1. Following the Defendants' Second Offer and the Plaintiff's Fifth Offer, the Plaintiff sent a further three emails to solicitors for the Defendants on 19, 20 and 21 November 2025. In each of those emails, the Plaintiff set out the reasons why she considered that the costs sought in the Defendants' Second Offer were unreasonable.
2. In her email of 19 November 2025, the Plaintiff expressed her concerns about the quantum of costs sought by the Defendants. More specifically, the Plaintiff expressed a concern that:

(a) she had not been provided with itemised invoices;

(b) the costs sought by the Defendants may relate to work outside the proceeding;

(c) the estimate of costs to finalise the matter were high given what she considered to be limited steps required to resolve the matter;

(d) solicitors for the Defendants had failed to respond to her in a timely manner or at all; and

(e) solicitors for the Defendants had asked her to correspond with them in writing.

1. Relevantly, in her email to the Defendants' solicitors dated 19 November 2025, the Plaintiff stated:

"As set out in my correspondence of 14 November 2025, the proposed consent orders would have the effect of resolving the claim and counterclaim by: > > granting the orders that would be consistent with the orders that your clients are seeking in the Counterclaim (other than those relating to costs); > > giving effect to none of the orders that I am seeking in my statement of claim; and > > putting the matter of costs to the Court to determine upon submissions by all parties"

2. In a letter from the Plaintiff to the Defendants' solicitors sent on 20 November 2025 the Plaintiff:

(a) rejected the Defendants' Second Offer;

(b) repeated her concerns set out in her letter of 19 November 2025 about the costs sought by the Defendants;

(c) sought a response to the Plaintiff' s Fourth Offer; and

(d) conceded that the "our points of difference appear to be only in relation to costs".

1. The Plaintiff's email of 21 November 2025 to solicitors for the Defendants also stated:

"I wish to follow up your clients' position regarding my offer of 14 November 2025. I do not believe that this should be controversial given that I am agreeing to the substantive orders that your client is seeking, seeking no orders in relation my application and leaving the matter of costs to be determined by the Court. .... It appears that the only point of disagreement between the parties relates to the matter of costs." (emphasis added).

2. A minute of consent orders was attached to the Plaintiff's email of 21 November 2025. That order did not propose the filing of affidavit material in relation to costs.
3. On 25 November 2025, the Defendants' solicitors sent an email to the Plaintiff in which the Defendants rejected the Plaintiff's Fourth Offer. The Defendants proposed that the Plaintiff make an offer to pay the Defendants' reasonable costs.
4. On 26 November 2025, the Plaintiff wrote to the solicitors for the Defendants in which she reiterated many of the matters raised in her previous November emails. The Plaintiff was not prepared to make an offer to pay the Defendants' costs. The Plaintiff again stated that she proposed "to resolve the matter by consent to grant your clients the substantive order that they are seeking (other than costs)."

1. The Plaintiff filed written submission on the question of costs on 17 February 2026 (Plaintiff's Costs Submissions).
2. The Plaintiff submitted that the Defendants should pay her disbursements of $694.36. The Plaintiff's submissions also contend that the Defendants' Offers were unreasonable.

1. The Defendants filed written submission on the question of costs on 13 February 2026 (Defendants' Costs Submissions). At paragraph 7 of the Defendants' Costs Submissions, the Defendants seek their costs of the proceeding to be paid by the Plaintiff on a standard basis, to be taxed in default of agreement.
2. The Defendants seek an order that the Plaintiff pays their costs on the standard basis to be taxed in default of agreement. They do not specifically rely on the Defendants' First Offer nor the Defendants' Second Offer. Counsel's submissions referred to the decision of Derham AsJ in Soteriadis v Nillumbik Shire Council[2] in which His Honour summarised the considerations when exercising the discretion to orders costs where proceedings are sought to be discontinued.

1. Costs are in the discretion of the Court.[3]
2. The exercise of the costs discretion in the absence of adjudication on the merits was considered by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin[4]:

"In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order... > > In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties."[5]

3. In Fairfield Services Pty Ltd v Leggett[6], Bond J, as His Honour then was, identified some considerations relevant to the exercise of the costs discretion where a proceeding has ended prior to adjudication on the merits. Fairfield involved the exercise of the costs discretion where the plaintiffs sought leave to discontinue the proceeding shortly before the trial date. Justice Bond adopted the following statement by Burchett J in ONE.TEL Ltd v Deputy Commissioner of Taxation:

"It is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs."[7]

4. The distinction made by Burchett J in ONE.TEL was also accepted and applied in Zhao v Suzhou Haishun Investment Management Co[8]. Zhao involved a proceeding that had been abandoned as a result of a party's bankruptcy. In Zhao, the applicant was considered to have capitulated and was ordered to pay the respondents' costs.

1. In this case, the Consent Orders brought the litigation to an end. However, the request for this costs determination was not sought in the context of either party formally seeking to discontinue the Claim or the Counterclaim.
2. In those circumstances, r63A.15 of the Rules does not assist. In exercising the discretion as to costs it is more appropriate in this case to apply the principles adopted in Zhao, including the distinction made by Burchett J in ONE.TEL between litigation that terminates as a result of a party effectively surrendering or capitulating, and litigation that terminates because of a supervening event.
3. The Plaintiff conceded in her November 2025 emails to solicitors for the Defendants that the only issue that remained between the parties was that of costs. The affidavit material filed by the parties pursuant to the orders of 19 February 2026 does not reveal any supervening event that brought the litigation to an end. The Plaintiff, having commenced the proceeding in July 2025 made a strategic decision not to continue with the proceeding and agreed to resolve the substantive issues in December 2025.
4. The Consent Orders reflect an outcome where the Defendants have entirely succeeded on their counterclaim save for the issue of costs, and the Plaintiff has not succeeded in any aspect of her claim.

1. For the reasons set out above, I have concluded that the Plaintiff effectively surrendered and that she should pay the Defendants' costs of the proceeding on the standard basis to be taxed in default of agreement.

I certify that these 11 pages are a true copy of the reasons for ruling of Judicial Registrar Umbers delivered on 25 March 2026.

[1] [1975] All ER 333 ("Calderbank").

[2] [2015] VSC 363 at [12].

[3] s78A of the County Court Act 1958 (Vic).

[4] [1997] HCA 6; (1997) 186 CLR 622 at [6].

[5] [1997] HCA 6 (McHugh J) at [6] and [7].

[6] [2020] QSC 183 at [12] ("Fairfield").

[7] [2000] FCA 270; (2000) 101 FCR 548 at [6].

[8] [2020] VSCA 34 at [12] ("Zhao").