Donnelly v Kempsey Local Aboriginal Land Council

Legal principles

1. Under s 98(1) of the Civil Procedure Act 2005 (NSW) (CPA) and Pt 42 Div 1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), the Court has a broad discretion to determine by whom, to whom, to what extent and on what basis costs should be awarded.
2. The Court's discretion, while unfettered, must be exercised judicially and consistently with the overriding mandate provided for in ss 56-60 of the CPA: CPA, s 56(2). It should also have regard to the principle that the award of costs is compensatory in nature, not punitive: Latoudis v Casey (1990) 170 CLR 534; at 543 (Mason CJ), 566-7 (McHugh J); [1990] HCA 59; Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 (Oshlack) at [44] (Gaudron and Gummow JJ).
3. The usual rule is that costs follow the event unless it appears that some other order should be made as to part or all of the costs: UCPR, r 42.1.
4. 'The event' to which the rule refers is the result of the proceedings, so that the party who succeeds on the claim before the court is awarded costs, unless the court, pursuant to the discretion conferred by r 42.1, makes 'some other order': Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [8] (Cellarit).
5. As White JA said in Oikos Constructions Pty Ltd t/as Lars Fischer Construction v Ostin & Anor (No 2) [2021] NSWCA 98 (Oikos) at [11] (Basten and Macfarlan JJA concurring): "Rule 42.1 has been construed on the basis that 'the event' which costs should prima facie follow can be identified as a judgment for the plaintiff or the defendant on the claim (Baker v Towle [2008] NSWCA 73 at [11]; Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [8])."
6. His Honour went on to observe that 'the event' may be characterised as the overall result in the proceeding or the result of a particular issue or group of issues that is "clearly dominant or separable" if that "produces a result that is fairer than giving the successful party all of his or her costs: Oikos at [14]-[16].
7. A court should ordinarily award the costs of the proceedings to a successful party without attempting to differentiate between the issues on which the party succeeded and any issues on which the party failed unless the issues on which the party did not succeed occupied the bulk of the time of the proceedings: Waters v PC Henderson (Australia) Pty Ltd (1994) 254 ALR 328 at 330 - 331; [1994] NSWCA 338 cited in Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [17] - [18].
8. Underlying both the general rule that costs follow the event, and qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs: Cellarit at [9].
9. In Turkmani v Visvalingam (No 2) [2009] NSWCA 279 at [13], Hodgson JA (Beazley and McColl JJA agreeing) referred to the principle of fairness underlying the making of a costs order by reference to his earlier comments in Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121] as follows: "In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant's responsibility because the plaintiff was caused to incur costs by the defendant's failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled: cf Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. Departures from the general rule that costs follow the event are broadly based on a similar approach."
10. A successful party ought not be deprived of their costs or made to pay the costs of the other side unless there is good reason for that presumption to be displaced, such as because they are they are guilty of some sort of misconduct relating to or leading up to the circumstances in the litigation: Oshlack at [44], [69] and [134].
11. In Oshlack, McHugh J summarised (at [69]) what may be regarded as conduct disentitling a successful party from receiving a costs order as follows: "'Misconduct' in this context means misconduct relating to the litigation: King & Co v Gillard & Co [1905] 2 Ch 7; Donald Campbell & Co Ltd v Pollak [1927] AC 732 at 812, or the circumstances leading up to the litigation: Bostock v Ramsey Urban District Council [1900] 2 QB 616. Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation: Jones v McKie [1964] 1 WLR 960; [1964] 2 All ER 842; Bostock [1900] 2 QB 616 at 622, 625, 627; unnecessarily protracts the proceedings: Forbes v Samuel [1913] 3 KB 706; succeeds on a point not argued before a lower court: Armstrong v Boulton [1990] VR 215 at 223; prosecutes the matter solely for the purpose of increasing the costs recoverable: Hobbs v Marlowe [1978] AC 16; or obtains relief which the unsuccessful party had already offered in settlement of the dispute: Jenkins v Hope [1896] 1 Ch 278."
12. This list is not exhaustive. As observed by McColl JA in Cellarit, disentitling conduct does not necessarily need to amount to misconduct but may simply be any conduct "calculated to occasion unnecessary expense": at [53].

Consideration and determination

1. Ms Donnelly submits that there is no reason to depart from the usual approach of costs following the event in this case. She argues that KLALC should be ordered to pay the costs of her claims in the ASOC and she should be ordered to pay the costs of KLALC's cross-claim as those orders reflect the success that both parties had with their claims and is consistent with the principle referred to at [15] above.
2. Ms Donnelly also submits that she has not engaged in any conduct in the litigation that would disentitle her to costs, referring to attempts she has made to negotiate in good faith with KLALC and compromise her claim, albeit that those attempts have been unsuccessful.
3. KLALC submits that Ms Donnelly's contention that she should pay KLALC's costs of the cross-claim and that KLALC should pay her costs of the ASOC offends the principle against attempting to differentiate between issues on which parties succeeded or failed, particularly as both parties' claims arose from exactly the same factual background. I do not accept that submission. In my view, there are two relevant 'events' for the purposes of assessing costs in this case. The first is Ms Donnelly's success on her claim for relief as sought in the ASOC. The second is KLALC's success on its cross-claim.
4. In the ASOC, Ms Donnelly claimed that KLALC should pay her an amount of money reflecting the value of improvements she had made to the Property in circumstances where she had occupied the Property and carried out the works in reliance on an understanding that she had a 99-year lease of the Property and a representation by KLALC to the effect that she had been granted that lease which was rendered void by operation of the Aboriginal Land Rights Act 1983 (NSW) (ALR Act), and where Ms Donnelly understood that she was permitted to install a house on and make improvements to the Property and would enjoy the benefit of them by living on the Property for the remainder of her life. .
5. Ms Donnelly pleaded three causes of action and was successful on two of them; equitable compensation based on proprietary estoppel by encouragement and a common law claim for restitution. As Ms Donnelly submits, the unsuccessful claim for a Baumgartner equity did not occupy a significant part of the proceedings and the evidence relating to that issue was the same as the evidence in respect of the issues upon which she succeeded. Further, her claim for declaratory relief that KLALC held the Property on constructive trust for Ms Donnelly was not pressed at the final hearing and could not be said to have been a separable issue in respect of which Ms Donnelly should be ordered to pay KLALC's costs or denied her costs of success.
6. KLALC's defences (that KLALC was immune from Ms Donnelly's suit by reason of the provisions of the ALR Act, an Anshun estoppel, unclean hands by reason of continuing trespass, laches and that Ms Donnelly's works to the Property were not improvements of any value) were found not to preclude Ms Donnelly's claim: at [5] and [282]. The judgment entered in favour of Ms Donnelly reflected what was considered to be the appropriate remedy on her primary claim, with the judgment sum based on the value of the improvements that Ms Donnelly had made to the Property and a discount that took into account Ms Donnelly's acceptance that she has been trespassing (and had received a benefit from storing her possessions and animals on the Property without any right to do so from November 2016 when KLALC took possession of the Property) and her delay in commencing the proceedings: at [280], [283] and [284].
7. KLALC's cross-claim may have arisen out of the same factual background as Ms Donnelly's claims, but it pleaded a different cause of action based on Ms Donnelly's trespass on the Property. KLALC had success in its claims by obtaining injunctive relief (in the form of the 19 October consent orders) and judgment for nominal damages.
8. In my view, Ms Donnelly's position does not seek to differentiate the issues upon which each party succeeded, as KLALC's submissions suggest. Rather, the final orders made by the Court reflect the two 'events' for the purposes of assessing costs in this case, with Ms Donnelly and KLALC each obtaining judgment on their respective claims.
9. The main thrust of KLALC's submissions is that departure from the ordinary rule that costs follow the event is warranted because Ms Donnelly has engaged in disentitling conduct.
10. KLALC argues that, by failing to bring her claim for equitable compensation in respect of improvements in the 2013 proceedings, Ms Donnelly has caused the parties to incur the duplicated costs of conducting these proceedings separately. Reference is made to these proceedings involving the same parties and factual background as the 2013 proceedings and the timing of the commencement of these proceedings.
11. In my view, the possibility that duplicated costs may have been incurred due to the overlap between the parties and the factual issues in these and the 2013 proceedings is not a sufficient reason to disentitle Ms Donnelly to her costs of her successful claims in this proceeding. This is particularly in the context where, as Ms Donnelly submits, the Court found that the 2013 proceedings were not a bar to Ms Donnelly bringing her claims in this proceeding and did not operate to give rise to an Anshun estoppel: at [253] - [270].
12. While accepting there had been a significant delay in Ms Donnelly bringing her claims in this proceeding, as noted in the Judgment, that delay could be explained, to some extent, by the parties' attempts to reach a resolution of their disputes, Ms Donnelly's lack of funds and her reliance on pro bono legal advice, which has resulted in multiple lawyers representing her throughout the relevant period: at [263]. I found it likely, if not inevitable, that had Ms Donnelly pursued her claim for monetary relief in relation to her improvements as part of the 2013 proceeding, a separate hearing on that issue would have been needed: at [268]. Further, while Ms Donnelly's delay in commencing this proceeding did not disqualify her claim entirely, it was a relevant factor considered by the Court in assessing the quantum of the compensation payable to Ms Donnelly: at [283].
13. In those circumstances, I do not consider that it could be said that Ms Donnelly's delay in bringing her equitable claim in respect of her improvements and failure to prosecute it as part of the 2013 proceedings was "calculated" to occasion unnecessary expense or that it undoubtedly led to significant duplicated costs in respect of the 2013 proceeding and Ms Donnelly's claims as determined in this case. Most of the facts in this proceeding were not in dispute (at [17]) and the legal issues raised by Ms Donnelly's claims and KLALC's defences were not the subject of debate in the 2013 proceedings.
14. KLALC also relies on Ms Donnelly's conduct by way of her trespass on the Property. It refers to her remaining in occupation of the Property despite the Court granting KLALC a writ of possession on 7 March 2016 and the time taken by Ms Donnelly to concede that she had been committing trespass for the duration for the proceedings and, it is said by KLALC, by extension, at all times since 7 March 2016.
15. Pausing here, I do not accept that Ms Donnelly's concession that she had been trespassing extended to or supports a finding that she did so at all times from 7 March 2016, the date on which KLALC obtained a writ of possession for the Property: at [48]. As noted in the Judgment, after Ms Donnelly consented to judgment for possession in favour of KLALC in 2015, various attempts were made to settle the disputes between the parties on terms that included offers for Ms Donnelly to remove the structures from the Property, remain in occupation and pay rent, or purchase the Property: at [266]. Further, after obtaining possession in November 2016, KLALC acquiesced in Ms Donnelly retaining her personal belongings and animals at the Property until it sent the letter to her solicitors on 19 March 2018 that expressly withdrew all previous consents: at [267].
16. In any event, in circumstances where Ms Donnelly's trespass on the Property up to the date of judgment was a factor considered as part of the assessment of what amount of compensation should be payable to Ms Donnelly (at [283]), I am not persuaded that the matter constitutes misconduct that should disentitle her to the costs of her successful claim. This is particularly as Ms Donnelly's trespass conduct was the subject of KLALC's cross-claim, in respect of which KLALC has obtained orders in its favour and for which Ms Donnelly accepts she should be ordered to pay KLALC's costs.
17. In support of KLALC's submission that Ms Donnelly should be ordered to pay KLALC's costs of her claim, KLALC also asserts that Ms Donnelly has remained in occupation of the Property beyond 14 January 2021 in default of the 19 October consent orders by "continuing to keep items of personal property on the property". This was referred to in KLALC's submissions as amounting "to a contempt of the Court's orders" and "a continuing trespass".
18. KLALC's submission that Ms Donnelly remains in occupation by way of items of personal property remaining on the Property relies on the contents of Mr Maher's affidavit which annexes, amongst other things, email communications between himself and the solicitors for Ms Donnelly in which it is asserted that KLALC has undertaken inspections of the Property since 14 January 2022 that had identified that Ms Donnelly had failed to remove personal property, including volumes of rubbish, equipment (such as lawn mowers), tables, chairs and green waste from the Property.
19. KLALC argues that absent Ms Donnelly's default in respect of the 19 October 2021 orders, it could be said that both parties to these proceedings have enjoyed a measure of success, with each of their claims being vindicated. It is submitted that Ms Donnelly's default has the result that the judgment in her favour has not crystallised as the payment of the judgment sum is conditional on Ms Donnelly complying with the orders made on 19 October 2021 to remove her personal belongings from the Property. KLALC submits that, accordingly, Ms Donnelly has not, as at the date of these submissions, achieved any measure of success. In those circumstances, KLALC submits that it is open for the Court to order that Ms Donnelly pay KLALC's costs of the proceedings, particularly as, by reason of Ms Donnelly's default it is almost inevitable that the Court will need to be once again engaged to bring finality to the substantive issues between the parties.
20. Ms Donnelly submits that her post judgment conduct is not relevant to the issue of costs of the substantive issues in the proceedings and objects to those parts of Mr Maher's affidavit which relate to Ms Donnelly's alleged default of the 19 October orders on that basis. She also submits that it is inappropriate for KLALC to assert that Ms Donnelly is in contempt of the Court's order. To the extent necessary, she relies on the terms of the correspondence annexed to Mr Maher's affidavit in response to that claim, and contends that Mr Maher's affidavit provides a partial, not a full account of what has passed between the parties.
21. In my view, there is force to Ms Donnelly's submissions.
22. While the categories of misconduct to which the Court may have regard in determining whether a successful plaintiff ought to be deprived of their costs are not closed, I am not persuaded that Ms Donnelly's conduct after the "event" of judgment is a matter which is germane to the exercise of the Court's discretion as to who should pay the costs of a successful claim. Irrespective of whether Ms Donnelly was in default of the 19 October consent orders after 14 January 2022 (or continues to be), her actions post judgment did not lead to the circumstances which gave rise to Ms Donnelly's claims in this proceeding or the incurring of the costs for which the orders now sought to be made are to compensate. In that sense, I do not accept that it would be fair or consistent with the principles to which I have earlier referred (at [10], [16] - [20]) for Ms Donnelly to be disentitled to costs of her successful claim based on conduct engaged in subsequent to the judgment in the proceeding and ordered to pay KLALC's costs.
23. In the context where the issue presently before the Court is what costs orders should be made in respect of the outcomes of the parties' claims that led to the Judgment, I do not consider it appropriate to make findings on the papers as to whether Ms Donnelly is in default of the consent orders made on 19 October 2021 that required Ms Donnelly to remove her personal belongings from the Property by 4 pm on 14 January 2021 and restrain her from entering upon or using the Property for any purpose without KLALC's written permission after that time. This is particularly as the affidavit evidence and submissions identify there are contested issues of fact and law that, in my view, should be properly ventilated before any findings are made. I agree with Ms Donnelly's submission that, to the extent that there are issues between the parties regarding compliance with the 19 October consent orders, those are matters that should be raised and dealt with separately, such as by a notice of motion.
24. Without commenting on the merits of KLALC's position or the evidence, I accept that the terms of the 19 October consent orders and Ms Donnelly's post judgment conduct in relation to the Property could give rise to disputes which protracts the proceedings or leads to future litigation. If and when that possibility arises, Ms Donnelly's post judgment conduct can be considered by the Court on the assessment of the issues for determination, including on the issue of costs. As Ms Donnelly's submissions identify, if there are additional costs to the parties arising from any deficient performance of the Court's orders, they can be dealt with, where appropriate, by orders under r 42.10 of the UCPR, which provides: "If a party fails to comply with a requirement of these rules, or of any judgment or order of the court, the court may order the party to pay such of the other parties' costs as are occasioned by the failure." (emphasis added)
25. I also do not accept KLALC's submission that Ms Donnelly has not achieved any measure of success as the judgment in her favour has not yet crystallised. As I have said, the "event" is the judgment awarded in favour of Ms Donnelly in the amount of $115,000. That judgment was based on the finding that Ms Donnelly had established her primary claim for equitable compensation based on proprietary estoppel by encouragement, and that KLALC's various defences did not operate to preclude that claim. While the judgment sum may not yet have been paid, Ms Donnelly had success on a claim that was contested by KLALC. And, as outlined above, I am not persuaded that the post judgment conduct on the part of Ms Donnelly referred to by KLALC justifies departing from the usual rule that costs should follow the event in respect of that claim.
26. KLALC also submits that, if the Court is not minded to order Ms Donnelly to pay KLALC's costs of the proceedings generally, the only appropriate order can be that there be no order as to costs, with the intent that each party bear their own costs. I am not persuaded by that submission. In my view, the overall outcome of the proceeding was that each party had their own claim vindicated and the costs orders should fairly reflect this.
27. Finally, I should record that the evidence of Ms Donnelly and KLALC annexed correspondence between the parties which referred to an attempt by Ms Donnelly to settle the proceedings in late 2020 and an offer by KLALC on 15 December 2021 to resolve the issue of costs on the basis of there being no order as to costs, with the intent that each party pay their own. As neither evidenced an offer that bettered the outcome of the proceeding or this decision, they did not bear on the issue to be determined in these reasons.
28. Accordingly, I have concluded that the costs of both Ms Donnelly and KLALC's claims should follow the event and will make orders in the terms sought by Ms Donnelly.

Orders and costs

1. Ms Donnelly seeks her costs in relation to the current dispute as to who should pay costs. As she has had success on that separable issue, I see no reason why those costs should also not follow the event and will make such an order.
2. For these reasons, I make the following orders: 1. The Defendant to pay the Plaintiff's costs of the Plaintiff's claims in the Amended Statement of Claim filed on 18 September 2020 and on the issue of costs, as agreed or assessed on the ordinary basis. 2. The Plaintiff to pay the Defendant's costs of the Defendant's cross-claim filed on 26 November 2020, as agreed or assessed on the ordinary basis.

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: 24 March 2022