Di Girolamo v Rippon

Judgment 1This is the hearing to deal with the costs consequences of the resolution of these proceedings. 2The proceedings, which commenced on 11 July 2012, sought that trustees for sale be appointed pursuant s 66G of the Conveyancing Act 1919 in respect to property jointly held by the parties. 3On 31 August 2001, orders were made by consent and trustees were appointed to sell the land and the only matter not decided was the parties' costs in respect to the application and a cross-claim. 4It is useful to note some of the history behind the dispute. Apart from the parties being co-owners of the property the parties had other dealings beyond those arising from their position as co-owners of the property. They had a number of commercial relationships involving loans between them as well as the operation of the farm property. 5The monetary claims, which also arise between the parties are the subject of the cross-claim in these proceedings. This was filed after the consent orders were made for the appointment of trustees on 31 August 2011 and is also subject to a statement of claim issued by the plaintiffs against the defendants in other Supreme Court proceedings. 6In May 2012, the plaintiffs became aware for the first time that the loan facilities that the parties had with St George Bank were in arrears and a default interest was being charged. 7On 11 May 2012, the plaintiffs offered to resolve the outstanding issues between the parties, including an offer to buy the defendants' interest in the land. That was not responded to and the offer was withdrawn on 29 May 2012. In a letter dated 4 June 2012, the defendants' solicitors were advised by the plaintiffs' solicitors that they had instructions to commence proceedings for the appointment of trustees for sale and asked if they would accept service of process. The solicitors for the defendants in due course advised that they would accept service of the process. 8On 25 June 2012, two separate letters were written by the solicitors for the plaintiffs to the defendants' solicitors. One of them dealt with amounts said to be owing by the defendants to the plaintiffs and demanded payment of $885,000.00 by 29 June 2012. In the event the amount was not paid it was indicated that they had instruction to commence proceedings for recovery of the amount. The other letter also the same date referred to material containing reconciliations, which the defendants had provided and noted that this was not agreed. It went on to indicate that a person from BRI Ferrier had consented to be appointed as trustee for sale and indicated proceedings in that regard would be commenced without further notice. It also dealt with giving up personal possessions and making arrangements to give vacant possession to the trustee. The response of 29 June 2012, without referring to which letter the response was made, was in these terms: We refer to our recent correspondence between our respective parties. Our clients deny that they are indebted to your client as particularised in your letter of 25 June 2012 or at all. Our clients are in the process of preparing a reconciliation of the amounts owed between the parties which we understand is anticipated to be completed by 13 July 2012. Turning to your reference to the memorandum of understanding (MOU). We reiterate that the MOU makes plain that any amounts that the MOU contemplated to be paid between the parties was entirely conditional upon your client facilitating a sale of our clients' shares in Australian Water Holdings Pty Ltd. That pre-condition has not been satisfied at all. Should your clients elect to commence proceedings, which will be defended, our clients will rely on this correspondence for indemnity costs against your clients. 9The plaintiffs point to the last paragraph and suggests that was a reference to the proceedings for the appointment of a trustee for sale. In any event, one could probably take it to be a reference to the commencement of both proceedings and it was a statement by the defendants that both proceedings would be defended. 10The summons was filed on 11 July 2012 with a return date of 17 August 2012. On 17 August 2012, the matter was stood over to the 31 August 2012 and on that day consent orders were made for an appointment of trustees. 11The plaintiffs sought that the defendants pay its costs with an order that they be paid forthwith and not wait until the cross-claim was decided. This claim was made on two bases. First, that the plaintiffs should have consented to the land being sold before a summons was filed, given that there was no possible defence to the claim. The second basis was that the defendants acted unreasonably in respect of the litigation. It was said the indication that the proceedings would be defended supported this view. 12It is useful to note what is the proper approach of the court when determining matters such as the present. The principles normally applied in these circumstances were summarised by Mr Justice Hill in Australian Securities Commission v Aust-Home Investments Limited (1993) 44 FCR 194. At p 201 his Honour summarised the cases in the following way: "1.Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a cost order: Stratford and the SEQUEB case. 2.It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits, or, as it might be put, to determine the outcome of a hypothetical trial: Stratford. This will particularly be the case where a trial on the merits would involve complex factual matters, where credit could be an issue. 3.In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them (SEQUEB). 4.In a particular case it might be appropriate for the Court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such may have precipitated the litigation: cf Sunday Times Newspaper Co Ltd v Macintosh (1933) 33 SR (NSW) 371. 5.Where the proceedings terminate after interlocutory relief has been granted, the Court may take into account the fact that interlocutory relief has been granted: cf Re Asiatic Electric Co Pty Ltd [1973] 1 NSWLR 603 at 606, a case which, however, depended upon the specific wording of the statute under consideration." 13Recently some of these principles have been approved by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex Parte Qin (1997) 186 CLR 622. His Honour noted that the court when it does not determine a matter is deprived of the factor that usually determines whether or how it will make a costs order, namely, the result. He then went on to say at pp 624-625: "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. To do so would burden the parties with the costs of a litigated action, which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power, and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd, the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent Council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans. Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission, where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs, even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings, and the conduct of the parties continued to be reasonable until the litigation was settled, or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the costs of the proceedings. This approach has been adopted in a large number of cases." 14Recently in One.Tel Ltd v Deputy Commissioner of Taxation (2000) FCA 270 Burchett J had reason to comment on the above two cases. In par 6 he said the following: "6. In my opinion, 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. 15The plaintiff particularly relied upon Ex Parte Qin and the judgment of McHugh J referred to above. The defendants however approached it from a somewhat different line of authority which concentrated more on the particular costs orders which should be made in these types of proceedings. It was submitted that the prima facie rule on an uncontested application pursuant to s 66G of the Conveyancing Act 1919 is that the costs of both parties should come out of the proceeds of sale of the joint property. 16In Kardos v Sarbutt (No 2) [2006] NSWCA 206, the court was dealing with costs consequences of a claim pursuant to the Property (Relationships) Act 1984. Usefully they commented on the situation that applies to an application pursuant to s 66G of the Conveyancing Act 1919. 17At paragraphs 28 to 29, the court said the following: "28However, the costs of adjusting property interests consequent upon the failure of a domestic relationship are an incident of the failure of a joint relationship, usually without attributable fault. In this sense, there is an analogy with partnership disputes. In partnership proceedings, it was once the rule that no costs would be given up to the decree directing the account, a position that was not departed from except in cases of gross misconduct [Hawkins v Parsons (1862) 8 Jur (NS) 452; Parsons v Hayward (1862) 4 De GF&J 474]. The prevailing rule nowadays is that the costs of both parties of an action for dissolution are paid out of the partnership assets, unless there is some good reason to the contrary [Hamer v Giles (1879) 11 Ch D 942], except where the action is one which in substance is to try some disputed right, in which case the unsuccessful party will be ordered to pay the costs [Hamer v Giles; Warner v Smith (1863) 9 Jur (NS) 169]. The costs of taking accounts, although disputed, are usually defrayed out of the partnership assets [Butcher v Pooler (1883) 24 Ch D 273; Newton v Taylor (1827) 19 Eq 141. Similarly, in proceedings under Conveyancing Act, s 66G, for the appointment of trustees of sale of jointly held land, the costs are usually paid out of the proceeds, the rationale being that the costs of such an application are an incident of joint ownership. 29In this type of litigation, it is artificial to resolve liability for costs according to the accident of who is plaintiff and who is defendant, so as to leave a plaintiff free to litigate confident that he will receive costs however unreasonable his claim, unless the defendant betters her offer. There is no reason why the defendant should bear the risk of costs to the exclusion of the plaintiff where neither makes a realistic offer. Similar views have been expressed by Hislop J, with whom Mason P and Ipp JA agreed, in Vollmer v Hauber Davidson [2006] NSWCA 79, as follows (at [21]):- a)In the absence of agreement between the parties it was necessary for them to resort to the courts, whether pursuant to the Act, the Conveyancing Act 1919 s 66G or general equitable principles to obtain finality in respect of their property interests. b)The parties were unable to reach agreement in respect of the adjustment of their interests, neither being prepared to make a realistic settlement offer to the other. c)In these circumstances the commencement of the court proceedings was necessary from the perspective of each party, not just the respondent. d)The fact that the respondent issued a Statement of Claim and the appellant a Cross-Claim, rather than vice versa, was a chance event. Accordingly it should not be regarded as a relevant factor in determining the costs issue, a proposition which counsel accepted on the appeal. e)The effect of the Master's adjustment of the parties' interests was that the appellant's share of the property was valued at approximately $220,000, the respondent's at approximately $520,000. As is apparent from a comparison of the Master's orders and the pleadings, each party was unsuccessful in that he or she failed to obtain the adjustment that he or she sought, though each was successful in exceeding the adjustment that the other party offered. These were material considerations which were not taken into account by the Master. 30Subsequently, in Chanter v Catts (No 2) [2006] NSWCA 179, Hodgson JA, with the concurrence of Bryson JA and Hunt AJA, said that Vollmer did not tell against the award of costs to a plaintiff on the basis of "substantial success", where the plaintiff, on appeal, obtained a result which bettered the defendant's offer by $60,000. Hodgson JA said (at [6]):- In my opinion, although the proceedings achieved less than the appellant claimed, the result is substantially better than the appellant could have obtained without court proceedings and counts as substantial success. I do not think that Vollmer counts against costs being awarded on the basis of that substantial success." 18The case being considered by the court was one where the proceedings had gone through to finality and dealt with the claims of the parties. The same applied in Vollmer v Hauber Davidson [2006] NSWCA 79. 19In this case, it is notable that once proceedings started there was no articulation of any defence and in s 66G proceedings there rarely is a factual situation, which provides a defence. The mandatory effect given to the word "may" in s 66G(1) is a result of the rights inherent in co-ownership, see Hayward v Skinner [1981] 1 NSWLR 590 at 593. 20I appreciate the comments of Hislop J in Vollmer v Hauber Davidson at [21], but that was a case where there was contested proceedings fought to the finish. 21Here there was no defence and no contested proceedings. In my view, the defendant should have consented to the sale before the proceeding was commenced. The plaintiff was not ready to proceed on 17 August 2012, so the orders that I make are: (1)That the defendant pay the plaintiffs' costs of the proceedings except for the appearance on 17 August 2012; and (2)I give leave to assess the costs forthwith. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 October 2012