Braye v Tarnawskyj

Costs

1. On 28 February 2019 (five days before the commencement of the hearing), the plaintiff's solicitors sent by email two offers of compromise to the respective solicitors acting for the first and second defendants. Both letters were expressed to be made in the accordance with UCPR r 20.26. Both letters were also expressed to be open for acceptance until noon on 4 March 2019. Subject to the arguments referred to below, there was no suggestion by the second defendant that these offers did not comply with the terms of UCPR 20.26.
2. In the first offer, the plaintiff offered to compromise the whole of the proceedings in exchange for a declaration that an easement existed over the claimed land in favour of the plaintiff's land. The rights attending the easement included rights to drain water and sewage, for services access, and a right of access including the right to park vehicles at all times and for all purposes.
3. In the second offer, the plaintiff offered to compromise the whole of the proceedings in exchange for a declaration that the plaintiff was entitled to become registered proprietor of part of the claimed land as depicted on an annexed Plan of Delimitation. In essence, the plan showed that the declaration would not extend to the concrete pathway as well as (at least) the portion of land over which the pergola encroaches.
4. Neither offer was accepted by the first or second defendant. Counsel for the plaintiff contends that the failure of the defendants to accept either offer, and the fact that it subsequently obtained a judgment no less favourable to it, means that the plaintiff is entitled to an order for costs to be assessed on the indemnity basis from 1 March 2019.
5. Counsel for the second defendant opposes the making of the order on a number of grounds. Those grounds might be conveniently categorised into the "no genuine compromise" grounds, and the "reasonable refusal" grounds.
6. As for the "no genuine compromise" grounds, counsel noted that insofar as the easement offer was concerned, it did not represent any true compromise because the plaintiff always sought that relief in the proceedings, albeit in the alternative. Insofar as the other offer was concerned, counsel contended that there was no genuine compromise because it simply put to the defendant the entirety of the plaintiff's claim for adverse possession (except for the narrow portion of land excluded).
7. As for the "reasonable refusal" grounds, counsel for the second defendant advanced three main reasons why it was not unreasonable to fail to accept the offers. First, counsel took issue with the fact that the offers were made on the same day and were inconsistent with each other; only one offer was capable of being accepted and not the other. Secondly, counsel contended that the second defendant was not aware of the decision in Thorpe v Frank [2019] EWCA Civ 150 which was delivered only fourteen days prior to both offers being made. It was suggested that prior to that decision the weight of the authorities was in the second defendant's favour and that had the plaintiff drawn that case to the second defendant's attention prior to or at the time of the offers, then it may not have been reasonable for the second defendant to have rejected the offer. Thirdly, counsel contended that the period in which the offers were open for acceptance was inadequate. In support of this submission, counsel referred to Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [149] and Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 at [20]. It was further put that in this respect the offers failed to comply with UCPR r 20.26(5)(b).
8. Before addressing these contentions, it is necessary to address one threshold point. Counsel for the second defendant contended that there was no presumptive entitlement to indemnity costs by reason of the failure to accept either offer of compromise. However, provided an offer is made in accordance with the rules, a plaintiff who obtains a more favourable outcome has a prima facie entitlement to costs assessed on an indemnity basis unless the defendant can demonstrate that some different cost order is warranted (see UCPR r 42.14; Gray v Hobson (No 2) [2018] NSWCA 131 at [4]).
9. Turning to the "no genuine compromise" grounds, it is my opinion that both offers constituted genuine compromises by the plaintiff. In the case of the first offer, it is true that an easement over the claimed land was sought by the plaintiff, but this was always in the alternative to the primary claim in adverse possession. Acceptance of the first offer would have meant that the plaintiff abandoned its primary case, and the second defendant would have been able to become the registered proprietor of the claimed land pursuant to its contract for sale with the first defendant, subject to the plaintiff's rights under the easement. Even allowing that such rights would be extensive, there is in my view a more than minimal element of compromise.
10. As for the second offer, it excluded from the proposed declaration not only the concrete pathway but also an area of land behind it. The plaintiff's claim sought the entirety of the claimed land. Whilst the excluded land amounts to only a small area, that area would offer not insignificant benefits to either defendant.
11. For these reasons, I am satisfied that both offers represented genuine compromises by the plaintiff.
12. I turn now to the "reasonable refusal" grounds. The proximity of the hearing when an offer is made will often be a relevant factor to take into account in determining whether the refusal to accept the offer was reasonable in the circumstances: Elite Protective Personnel Pty Ltd v Salmon (supra) at [149]. This will turn on the individual circumstances of the case. Where there are complex issues in dispute a short period in which to accept the offer may be unreasonable (see, for example, Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) (supra) at [23]). In some cases, the making of an offer close to the hearing may in fact be a benefit because the advanced state of preparation of the matter will mean that the parties are likely to have a good appreciation of the relative strengths and weaknesses of their cases (see Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) (supra) at [20]; Gray v Hobson (No 2) (supra) at [7]).
13. Counsel for the second defendant noted that no reason was advanced as to why the plaintiff waited so long to make the offers. It was submitted that this late timing caused difficulty for second defendant because he is a member of the Royal Australian Air Force stationed in Western Australia and it was thus difficult for him to obtain legal advice on short notice. However, I do not think the second defendant's occupation and station in Western Australia is significant. The second defendant did not adduce any evidence showing that he suffered the difficulty suggested. No request for further time to consider the offers was made.
14. In addition, the legal questions in these proceedings were confined in nature and not especially complex. The case involved applying well established principles to a factual background which was, to a large extent, undisputed between the parties. Both parties had served their written submissions prior to the plaintiff making the offers of compromise. The defendants can be taken to have known the legal position and arguments of the plaintiff by that time. In these circumstances, it could not be said that the time in which the offers were open represented "a short period for the consideration of a global assessment of a reasonably complex dispute" (see Kooee Communications Pty Ltd (supra) at [23]). Rather, the case is closer to a situation where the parties, being in an advanced state of preparation, were in a good position to assess the strengths and weaknesses of their respective cases (see County Securities Pty Ltd v Challenger Group Holdings Pty Ltd (No 2) [2008] NSWCA 273 at [35]). For these reasons, I am satisfied that the closing date for acceptance of each offer was reasonable in the circumstances within UCPR r 20.26(5)(b).
15. As noted above, the second defendant advanced two other reasons why it was reasonable to not accept the offers. The first was that there were two offers of compromise made on the same date which were inconsistent with each other. This contention must be rejected. The rules expressly provide that multiple offers of compromise may be made in relation to the same claim: UCPR r 20.26(10). Thus, the mere fact that there may be multiple offers made during the same time period (or, as in this case, on the same day) which involve different or somewhat inconsistent offers to compromise proceedings will not of itself mean that failure to accept such offers will be reasonable in the circumstances. It was open to the defendants to accept one or other offer, or neither of them. It was obvious that both could not be accepted. The position was not confusing. As it turned out, neither offer was accepted. It seems to me that in these circumstances it is entirely reasonable for the plaintiff to rely on one or both offers in an application such as this for indemnity costs.
16. The second reason advanced by the second defendant was that it was unaware of the decision of the English Court of Appeal in Thorpe v Frank (supra). It was submitted that before this decision the state of the law was more favourable to the second defendant. It was put that had the plaintiff brought that decision to its attention at the time of the offers, it may not have been reasonable to refuse to the offers.
17. In my view, this submission overstates the importance of the decision in Thorpe v Frank insofar as it relates to the present case. That decision involved an adverse possessor making a claim to disputed land as a result of his continued efforts in paving that land over a number of years. The decision applied well known principles of law with respect to adverse possession in a somewhat novel situation. The factual circumstances in Thorpe v Frank were quite different from the circumstances of the present case. It has not been shown that it was reasonable in the circumstances not to accept either of the offers made by the plaintiff.
18. In my opinion, the second defendant has not made out any cogent reason to depart from the ordinary position as stated in UCPR r 42.14. It follows that indemnity costs should be awarded in favour of the plaintiff as against the second defendant from 1 March 2019.
19. I do not think that the first defendant should be in any different position. The first defendant took a passive role throughout the proceedings but did not, at any stage, file a submitting appearance. In these circumstances, it is appropriate to also order that the first defendant pay the plaintiff's costs on an indemnity basis from 1 March 2019.

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