First Plaintiff v First Defendant

2 The proceeding concerned, in substance, the use by the defendants (as owners of the dominant land) of a registered carriageway easement on land owned by the plaintiffs (the 'servient land'). The carriageway easement was created in 1934. It reserves to the owners of the servient land 'full and free right and liberty (but without any obligation so to do) to place, erect and maintain gates together with all necessary fixtures in connection therewith at such point or points across the said land coloured yellow on the said diagram as [the owners of the servient land] may at any time select and with the power to affix a lock or locks on such gates'.

3 The carriageway easement has long been covered by a gravel road (the 'roadway').[1] The roadway is wider than the carriageway easement registered on the title of the servient land. The defendants rely upon the roadway to access their land. They otherwise have no access to the public road system.

4 The dispute between the plaintiffs and the defendants concerned two principal issues:

(a) the plaintiffs' power as owner(s) of the servient land to place gates across the carriageway easement and the defendants' obligation to keep any such gates shut and locked; and

(b) the dimensions of the carriageway easement.

5 Of particular controversy was an existing gate located at or close to the entrance to the servient land adjacent to the railway line (the 'railway gate'). The extent of the defendants' obligation, pursuant to the easement, to close the railway gate was central to the dispute. The plaintiffs allege that the defendants have repeatedly failed to shut the railway gate.

6 Only days before the trial of the proceeding - and after years of disputation about the obligation to close the railway gate - the defendants established that the railway gate was not located on the carriageway easement at all and was therefore arguably not subject to the terms of the easement.

7 The dimensions of the carriageway easement crystallised as a legal issue between the parties on or about 9 September 2014, when the defendants lodged a caveat claiming an interest in the servient land that was wider than the registered carriageway easement (the 'prescriptive easement'). The interest was expressed to be as a result of 'long user'.

8 On 17 December 2014, the plaintiffs commenced a proceeding in the Magistrates' Court of Victoria alleging that the defendants had repudiated their obligations under the carriageway easement by failing to close the railway gate and seeking the extinguishment of the carriageway easement altogether or, in the alternative, an order that the defendants comply with the carriageway easement obligations and an order that the carriageway easement was as depicted in the registered easement. The plaintiffs also claimed damages for the removal of fencing and survey pegs and the costs of having the carriageway easement re-surveyed. Those damages were (much later) quantified at $594.89.

9 The Magistrates' Court proceeding was uplifted to the Supreme Court in August 2015, because of the impact on the value of the defendants' land of any order extinguishing the carriageway easement.

10 In the course of the proceeding, a further easement was identified, this time on the defendants' land (the 'appurtenant easement'). The plaintiffs claimed the benefit of the appurtenant easement and sought orders for the removal of fencing and the installation of a gate.

11 The proceeding was settled following a judicial mediation on 7 September 2016. The terms of settlement were, in substance, that:

(a) the defendants agree to install an automatic gate in the position of the railway gate, having obtained the approval of the plaintiffs to the design and functionality of the proposed gate, and to maintain it;

(b) the easement be amended in the relevant instruments to reflect the easement by prescription, being the roadway. Otherwise the terms of the easement remain unchanged;

(d) the plaintiffs agree to install no more than two gates on the easement and these gates will only obstruct the easement as is reasonably necessary to graze out the land comprising the easement;

(e) the defendants will install a gate on the appurtenant easement at the spot agreed and will keep it unlocked;

(f) the defendants will pay the plaintiffs $594.89;

(g) the court will determine the issue of costs; and

(i) the proceeding will be struck out with a right of re-instatement.

12 The Court has a wide discretion to award costs under s 24 of the Supreme Court Act 1986. The principles that govern the exercise of that discretion when the parties no longer wish to proceed with the litigation but have instead compromised their claims were conveniently summarised by Whelan and Ferguson JJA in Asta Developments (Aust) Pty Ltd v Amasya Enterprises Pty Ltd as follows:[2]

(a) Where neither party wishes to proceed with the litigation, the Court should be ready to facilitate that with an appropriate costs order.

(b) Normally, where there has been no trial on the merits, the Court is deprived of the necessary factor on which to make a costs order in favour of one or other party.

(c) It will rarely be appropriate for the Court to determine the outcome of a hypothetical trial in order to determine who should pay costs.

(d) It is appropriate for a court to consider whether the plaintiffs acted reasonably in commencing the proceedings and whether the defendants acted reasonably in defending them.

(e) In a rare case, a court may be confident that one side would inevitably have won.

13 These principles were largely derived from the law as stated by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin,[3] where his Honour stated that in an appropriate case, a court could make an order for costs even if there had been no hearing on the merits, although it could not try a hypothetical action between the parties. A court may be able to conclude that one of the parties acted so unreasonably that the other party should obtain the costs of the action. Moreover, in some cases, the judge might feel confident that, although both parties had acted reasonably, one party was almost certain to have succeeded, had the matter been fully tried. His Honour then said:

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 cost of the proceedings.

14 Relying on One.Tel Ltd v Commissioner of Taxation,[4] the plaintiffs submit that costs can be awarded without there having been a determination on the merits, where one party has effectively 'capitulated' in the settlement.

15 The plaintiffs seek an order that the defendants pay their costs of the proceeding on an indemnity basis on the following grounds:

(a) For the whole of the proceeding, on the ground that, after litigating the matter for two years, the plaintiffs achieved in substance all they were hoping to achieve at the outset; and

(b) Alternatively, from 28 April 2016, on the ground that the plaintiffs made an offer of compromise on that date which it was imprudent in the circumstances for the defendants to refuse.

16 The defendants seek an order that the plaintiffs pay their costs of the proceeding on an indemnity basis or alternatively on a standard basis, including their costs of the Magistrates' Court proceeding. They do so on the following five bases:

(b) The plaintiffs acted unreasonably in bringing the litigation, among other reasons, because there was no factual basis for the plaintiffs' claim and it was bound to fail;

(c) The plaintiffs' unreasonable refusal to accept the defendants' Calderbank offer dated 26 March 2015;

(d) The plaintiffs continued proceedings for an ulterior motive or collateral purpose; and

(e) The plaintiffs breached certain of the overarching obligations of the Civil Procedure Act 2010, including the obligation to ensure that the costs of litigation are proportionate and not excessive.

17 As to the first and second of these grounds, the defendants submit that as the only issue that remained between the parties as of the first day of the trial was the railway gate claim, that claim was bound to fail because the railway gate was not on the correct part of the easement or, indeed, on the easement at all.

18 As to alleged improper purpose, the defendants contend that the plaintiffs continued the proceeding with the intention 'to teach the defendants a lesson'. They rely on the evidence of their solicitor, Mr David Sharpe ('Sharpe') as to a discussion that he had with the plaintiffs' solicitor, Mr Sam Grindal ('Grindal'), on 15 January 2015. They also rely on the evidence of the first plaintiff, Anthony Bourne, as to discussions that he had with each of the plaintiffs in late March or early April 2015.

19 Some of the arguments put by the parties can be rejected without further inquiry into the facts.

20 I reject the plaintiffs' submission that the defendants have 'capitulated' and that the plaintiffs have obtained everything that they ever sought. At the outset, the plaintiffs resisted the installation of an automatic gate to replace the railway gate; they claimed to be entitled to install as many gates (of a non-automatic kind) as they chose across the roadway; and they claimed, in substance, that the carriageway easement was as delineated in 1934 and therefore narrower than the roadway. They have given considerable ground on each of these issues in the course of the proceeding and its settlement. As will be seen, the defendants have been agitating for an automatic gate for many years.

21 I also reject the submission that the defendants are entitled to their costs because the plaintiffs' claim would inevitably have failed. The defendants submitted that by the time the proceeding reached trial, the only outstanding claim concerned the railway gate, and that that claim would have failed because the gate in question was not on the easement.[5] This ignores the fact that there was at least one other important issue throughout the course of the proceeding, namely, the width of the easement. That issue was not settled until very recently.

22 As to the defendants' Calderbank offer and the plaintiffs' offer of compromise, in neither case can it be said definitively that the plaintiffs or the defendants did 'less well' on the settlement. These matters, in my view, fall to be considered under the rubric of the reasonableness of the conduct of the parties.

23 In my view, the question of costs will largely turn on whether one or other of the parties has acted unreasonably in the course of the litigation so as to warrant a departure from the default position that costs should lie where they fall.

24 In order to determine whether a departure from the default position is warranted, it is necessary to have regard to the history of the matter. The history of the matter also sheds light on whether the plaintiffs brought or continued the proceeding for an improper purpose or breached the overarching obligations of the Civil Procedure Act.

25 The second plaintiff, Kevin Stoneman, and his wife, Anne Stoneman (who I will refer to collectively as 'the Stonemans') are neighbours of the defendants, Anthony and Nicole Bourne ('the Bournes') and their two children. Kevin Stoneman and his brother Ronald have owned the land that includes the servient land since 1966; Kevin and Anne have lived on the property since the 1970s; the Bournes acquired their property in 2008 and have been using the carriageway easement since that time.

26 For many years, there has been friction between the Stonemans and the Bournes arising from the Bournes' alleged failure to close the railway gate each time they passed through it. The Bournes, and another neighbour, Nathaniel Aly, have to pass through the railway gate in order to access the nearest public road and the public road system generally. The gate in question is an old style farm gate that has to be manually unlocked and opened, then manually closed and locked. This is inconvenient to both the Bourne family and Mr Aly. Mr Bourne estimates that he and members of his family pass through the railway gate around 7,000 times a year. Mrs Bourne works irregular hours as flight crew and often leaves or arrives home in the dark. In the warmer months there are snakes.

27 Unsurprisingly, the Bournes and Mr Aly have been agitating for many years to replace the railway gate with a gate that will open and shut automatically ('automatic gate'). They repeatedly offered to install an automatic gate at their own expense. However, the Stonemans consistently resisted the installation of an automatic gate. Instead, Mrs Stoneman diligently kept a record of every time the railway gate was left open by the Bournes, Mr Aly or any of their friends or visitors. It is clear that she and Mr Stoneman were very vexed by the issue. They took to making secret recordings of conversations with the Bournes, as well as filming and photographing them. In turn, they have apparently been subjected to rudeness and taunting by the Bournes (or, more likely, their children).

28 Matters came to a head in mid 2014, when Mr Stoneman told Mr Bourne that he intended to fence the servient land and install more gates on the easement.

29 In July 2014, Mr Bourne attempted to organise a mediation through the Dispute Settlement Centre of Victoria to resolve the issue with the Stonemans. The Stonemans declined the opportunity to mediate the dispute. On 8 August 2014, Grindal wrote to the Department of Justice stating that the dispute with the Bournes could be 'simply and readily resolved - our clients merely ask that the Bournes adhere to their obligation to close and keep closed all gates along the carriageway. This obligation is an express term of the easement'. Grindal also wrote to Sharpe, stating that the Stonemans required the gate to be shut and that they intended to fence the easement and had engaged a surveyor to determine precisely where the easement lay.

30 At this point, as I understand the chronology of events, Mr Stoneman commenced constructing a fence along the easement. In the course of the fence construction, he planted a single very large fence post several meters (or about a third of the way) into the roadway.

31 In my view, the act of planting of the fence post on the roadway, in the context in which it occurred, was intended to send a clear message to the Bournes that the fencing would occur not along the edges of the roadway, but along a trajectory apparently reflecting the dimensions of the easement recorded on the title in 1934. The fence post on the roadway served as a reminder that the Stonemans could make the Bournes' lives very difficult by strictly enforcing what they believed to be their legal rights pursuant to the easement.

32 It can be seen from photographs that the fence post compromised the Bournes' ability to use the roadway. Had the proposed fencing followed the trajectory indicated by the location of the fence post on the roadway, such fencing would have impeded any large vehicle, such as a fire truck, from gaining access to the Bournes' land.

33 I infer that the Bournes were alarmed by this development. They obtained advice and, on 9 September 2014 lodged the caveat, asserting that through 'long user' the carriageway easement was now commensurate with the roadway. The interest described in the caveat was an 'equitable interest as grantees of a right of carriageway over the land'. Sharpe wrote to Grindal attaching the caveat and asserting that the Bournes had 'acquired carriageway easement rights beyond the easement marked on the plan on the basis of 'long user''.

34 In early September 2014, Sharpe attempted to speak with Grindal to request that the fence construction works cease. Following the lodging of the caveat, Sharpe wrote to Grindal repeating requests to put the fence construction works and the installation of the gates on hold.

35 On 1 October 2014, Grindal wrote to Sharpe pointing out that the easement clearly created a right to install gates across the easement and an obligation to close them. The letter stated that the 'long user' claim was not accepted and would be strenuously opposed, and that the firm was in the course of advising the Stonemans on whether the caveat had a proper basis. The letter advised the Bournes to investigate other means of accessing their property if the easement was no longer suitable for their needs.

36 On 12 October 2014, such fences as had been erected on the servient land by Mr Stoneman were pulled down. I do not think there is any doubt that the fencing was pulled down by the Bournes.

37 At this point, so Mr Stoneman deposed, he felt he had no option but to file a complaint in the Magistrates' Court. The complaint was filed on 17 December 2014, seeking the extinguishment of the carriageway easement on the basis of non-compliance.

38 On 15 January 2015, Sharpe met with Grindal to discuss the resolution of the dispute without the need for further litigation. Sharpe, on behalf of the Bournes, made an offer that the proceeding be resolved on the basis that each party pay their own costs, the Bournes would observe any obligation to close the railway gate, Mr Stoneman would agree to fence construction on the new boundaries of the easement and would agree to the caveat and the easement as varied.

39 Sharpe deposed that at this meeting Grindal said, 'it could be difficult to settle because I think my client wants to teach your clients a lesson. I will get back to you'. Grindal strenuously denies saying anything about the Stonemans wanting to teach the Bournes a lesson. Neither Sharpe nor Grindal made a file note of this exchange. Sharpe made a hand written note of the offer that he proposed that made no mention of the 'lesson' statement. However, the 'lesson' statement was recorded in an email that he sent early the following morning to the Bournes. Sharpe's email says, among other things:

He [Grindal] said Stonemans agenda was not to extinguish the easement, but that he wanted to teach you and your family a lesson for being rude to him. I objected to this.

40 In the event, on 22 January 2015, the Bournes' offer was rejected and no counter offer was made.

41 At this point, realising that his efforts to avoid litigation (and what he described as a 'slugfest') had failed, Sharpe referred the matter to a litigation specialist, Whitehead Summons ('WS').

42 On 5 February 2015, WS wrote to Grindal stating that the plaintiffs' claim was outside the jurisdiction of the Magistrates' Court and noting that the caveat had not been challenged. WS made an offer that the proceeding be discontinued with no order as to costs.

43 WS made a further offer to meet to discuss the resolution of the issues on 4 March 2015.

44 The Magistrates' Court proceeding was unsuccessfully mediated on 20 March 2015.

45 Mr Bourne gave evidence that a short time after the mediation, he endeavoured to discuss the matter with Kevin Stoneman and Ronald Stoneman with a view, he said, to finding a resolution. Mr Bourne gave evidence that he met Kevin Stoneman on the roadway and offered to resolve the dispute so that the Bournes and the Stonemans could live together as reasonable neighbours. However, Mr Stoneman said to him, 'I'll teach you a lesson and you will pay'. The next day, Mr Bourne rang Ronald Stoneman and offered to discuss settlement. Ronald Stoneman told Mr Bourne that the Bournes had insulted them and they did not care how much it cost, they were going to court.

46 Mr Aly gave evidence that Kevin Stoneman said something to him at around this time to the effect of, 'You're next, you're next', which he understood to be a threat of litigation.

47 The plaintiffs deny ever saying words to the effect that they commenced or continued the proceedings in order to teach the defendants a lesson.

48 On 26 March 2015, the Bournes made what was expressed to be a Calderbank offer to settle the Magistrates' Court proceeding. The defendants' Calderbank offer was in the following terms:

(a) The defendants would supply, install and maintain a solar powered gate to replace the railway gate and no additional gates would be installed by either party along the easement;

(b) The defendants would undertake to comply with the terms of the carriageway easement. The plaintiffs' lawyers were to provide a term for the deed of settlement by which a proven breach of that undertaking would expose the defendants to consequences for contempt;

(c) The defendants would remove their caveat and abandon their claim for a prescriptive easement;

(d) The plaintiffs would grant a lease of extra land at each end of the carriageway easement sufficient for safe ingress and egress by a fire truck;

(e) The plaintiffs would contribute to part payment of the defendants' legal costs in the sum of $5,000;

(g) The plaintiffs would pay for the reinstatement of survey pegs up to a maximum of $950 and the fence posts would not be reinstated;

(h) The plaintiffs' claim would otherwise be dismissed, specifically including the claim that the carriageway is and was extinguished.

49 There was some uncertainty about the date until which the defendants' Calderbank offer remained open. In the event, the Stonemans rejected the defendants' Calderbank offer on 20 April 2015. They did not make a counter offer.

50 The defendants, having identified that the Magistrates' Court proceeding exceeded the jurisdictional limit of the Magistrates' Court, made an unsuccessful application to strike out the proceeding.

51 On 26 August 2015, the proceeding was uplifted by consent from the Magistrates' Court to the Supreme Court, on the basis that the extinguishment claim, if successful, would reduce the value of the Bournes' property by an amount well over the jurisdictional limit of the Magistrates' Court.

52 On 5 October 2015, the Stonemans filed an Amended Statement of Claim which removed the extinguishment claim.

53 The Amended Statement of Claim also sought relief in relation to an 'appurtenant carriageway easement'. The Stonemans sought orders that the Bournes pay damages for the obstruction and interference with the Stonemans' use and enjoyment of the appurtenant easement, that they remove any fences or other items obstructing or interfering with the easement and that they be restrained from obstructing or interfering with it in the future.

54 Mr Bourne gave evidence that the first he heard of the appurtenant easement was when it was raised at the mediation in April 2015, while the dispute was still in the Magistrates' Court. Mr Stoneman was not happy about a fence that had been constructed on the Bournes' land. As a result, Mr Bourne shifted a fence about 50 meters, leaving the easement open. He gave evidence that he did this 'as soon as he [Mr Stoneman] mentioned it'.

55 The Bournes filed a Defence and Counterclaim on 4 November 2015 and, on 18 November 2015, the Stonemans filed a Reply. The Stonemans continued to deny that the carriageway easement had been varied by reason of long user. However, they pleaded, in the alternative, that if the carriageway easement had been varied by reason of long user, the easement was over the 'made road', that is, the roadway.

56 The parties attended a mediation on 24 November 2015, following which some inquiries were made, including of VicTrack, concerning the installation of an automatic gate.

57 On 7 December 2015, WS wrote to Grindal that the Bournes were still waiting for an offer from the Stonemans, noting that all offers made by the Bournes had been rejected and the Bournes were looking for a counter offer. Further prompts for an offer or counter offer from the Stonemans were made on 20 January and 2 February 2016.

58 On 22 February 2016, the Bournes made two further offers of settlement, one of which included an offer to purchase of the servient land at valuation. On 4 March 2016, the Stonemans responded that they were willing to sell the servient land for $520,000. They also sought $20,000 in costs. This offer was rejected by the Bournes, unsurprisingly, as their own valuation of the servient land valued it at around $100,000.

59 On 23 March 2016, the Bournes made yet another offer expressed to be a Calderbank offer, which again included the instalment of an automatic gate at their cost.

60 On 26 April 2016, the Stonemans made an offer of compromise as follows:

(a) The Bournes comply with the carriageway easement obligation to close and securely fasten any gate currently or in the future erected on the servient land and ensure that all their tenants, employees, agents, contractors and visitors do likewise;

(b) The Bournes remove the part of the fence on the appurtenant carriageway easement, install a gate at a particular location and keep it unlocked at all times;

(c) The Bournes pay the the costs of the Stonemans' claim on a standard basis;

(d) In relation to the counterclaim, the carriageway easement be varied, following a survey, by reference to 'ongoing use' and the Stonemans pay the Bournes' costs of the Magistrates' Court proceeding and the counterclaim on a standard basis, along with damages.

61 The Stoneman's offer of compromise was not accepted.

62 On 5 August 2016, the Bournes made a further offer of compromise that included the installation of automatic gates to the extent needed and the recognition of the easement by prescription.

63 On 12 August 2016, WS wrote an open letter to Grindal stating that the Bournes were willing to put in a gate to avoid litigation over the appurtenant easement claim and that they were willing to shut the railway gate each time they drove through it. However, they could not control the actions of others.

64 Grindal responded on 16 August 2016, accepting the offer to install the gate to the appurtenant easement and settling the easement dispute on the basis that the easement was the roadway. The amount of the claim for damages for trespass was given as $594.89. The letter purported to accept the offer to shut the gate, but asked for an order to be made to this effect.

65 Over the weeks leading up to 29 August 2016, the appurtenant easement claim, the easement claim itself (involving an amendment to reflect the easement by prescription, being the roadway) and the damages claims for trespass were settled, at least in principle. On 26 August 2016, Grindal wrote to WS stating that there was a binding agreement on settlement of all issues in dispute, save for costs, which should be referred to an Associate Judge for determination.

66 However, three days later, on 29 August 2016, WS advised Grindal that the railway gate was not on the easement as alleged.

67 Grindal's response was to write to WS stating that the Stonemans would deny that the railway gate was not on the land the subject of the registered easement and would plead, in addition, that there was an implied duty, alternatively a duty at common law, to keep the railway gate closed.

68 A further amended statement of claim pleading these matters was sent to WS on 6 September 2016. On the first day of trial, counsel for the Stonemans foreshadowed their intention to apply for leave to amend the statement of claim and counsel for the Bournes foreshadowed an intention to resist the application for leave to amend the statement of claim.

69 The proceeding was referred to mediation by an Associate Judge and settled on the terms outlined above.

70 I draw the following conclusions from the chronology set out above:

(a) The proceedings were brought in large part based on a factual error, which was that the railway gate was on the easement and was therefore indisputably subject to the terms of the easement requiring gates on the easement to be kept closed.

(b) The controversy surrounding the closing of the railway gate was seminal to the dispute and remained a central issue in the proceedings up until settlement. The plaintiffs' claim was based on their belief that they had a clear entitlement to insist that the railway gate be closed and they sought to extinguish the easement on the basis of non-compliance with this obligation.

(c) The Bournes repeatedly tried to negotiate a settlement that involved the installation of an automatic gate at their own expense.

(d) That solution was eventually, after years of litigation, accepted by the plaintiffs.

(e) The Stonemans threatened to construct further gates along the easement, which would have greatly inconvenienced the Bournes and exacerbated the dispute. While the Bournes have now agreed by the settlement to the installation of up to two more gates on the easement, those gates are to be kept open other than when the roadway itself is being grazed. Having regard to the terms of the easement, this represents a significant concession by the Stonemans.

(f) The other principal issue between the parties was the width of the carriageway easement.

(g) The caveat lodged by the defendants identified an interest in the roadway by reason of long user, that is, by reason of its use as a roadway by the defendants and their predecessors in title over the requisite period of time.

(h) The plaintiffs responded to the caveat by seeking orders extinguishing the easement altogether. They maintained that position until October 2015 (after the proceeding was uplifted to the Supreme Court), notwithstanding that Grindal had told Mrs Stoneman as early as 20 January 2015 that the Stonemans would not succeed in extinguishing the easement.

(i) Even after the extinguishment claim was removed, the Stonemans maintained the position that the easement was as delineated in 1934. Their Reply, filed on 18 November 2015, pleaded in the alternative that the easement was the roadway. However, their principal position remained that the easement was as delineated in 1934.

(j) Only on 26 April 2016 did the Stonemans make an offer of compromise that included a term that the carriageway easement be varied, following a survey, by reference to 'ongoing use'.

(k) In the settlement, it was agreed that the easement be amended in the relevant instruments to reflect the easement by prescription, being the roadway. Otherwise the terms of the easement remain unchanged.

71 In my view, the Bournes have been substantially successful in relation to the key questions of the railway gate and the width of the easement.

72 In relation to the latter, the plaintiffs submitted that by the caveat, the Bournes claimed an interest in land that was more extensive than roadway. A map showing different versions of the easement as overlays was handed up on behalf of the Stonemans. The Stonemans pointed out that their survey of the roadway (by Mr Webster) was the survey that was accepted in the settlement. By implication, it was suggested that the Bournes' survey (by Mr Loy) was significantly different and that the acceptance of the Webster survey in the settlement constituted a loss or concession by the Bournes.

73 I do not accept that there was any meaningful difference between the Bournes' survey prepared for the caveat and the survey used for the settlement. The fundamental proposition was that the easement was the roadway, that is, what was being used by the Bournes to access their property. That was the Bournes' position from the outset and that is the position that was accepted by the parties on settlement. The easement was eventually agreed to be altered on the basis of 'long user', as the Bournes claimed. If there was a quibble about the boundaries of such an easement, that should have been worked out without recourse to litigation.

74 As to the gates, the Bournes have had a clear win on the railway gate, whether or not it is treated as being on the easement. They have long agitated for an automatic gate. The Stonemans submit that they have secured the right to install two more gates on the easement. However, firstly, that represents a sensible limit on the number of gates that can be installed on the easement and, secondly, those gates are only to be closed when necessary to graze the easement itself.

75 As to the Bournes' agreement to install a gate on the appurtenant easement and to pay a small amount for the fencing that was pulled down, I do not consider that such agreement constituted a 'capitulation' by or a significant concession wrung from the Bournes. These were secondary issues. It is plain from his evidence that Mr Bourne was always prepared to compromise on the appurtenant easement, which was not a matter of any importance for him at all. Likewise, in the context of the enormous costs generated by the protracted litigation, the damages for trespass were always going to be agreed upon in order to resolve the dispute. There is no evidence that the Bournes, unlike the Stonemans, were inclined to become stuck on matters of principle. The evidence satisfies me that the Bournes were prepared to take a pragmatic approach to compromise in order to avoid a costly legal dispute.

76 This is reflected in the fact that the Bournes made at least seven serious attempts to settle the proceedings. I accept Mr Bournes' evidence that in his mind there is nothing that can't be sorted out 'over a cup of tea' and that he thought it 'insane' to spend so much money on something in respect of which middle ground could be found. This attitude or approach is consistent with the pattern of offers made by the Bournes and with the conduct of the litigation by them generally.

77 Sharpe gave evidence that the Bournes were advised to lodge the caveat to preserve their right to use the roadway. He gave evidence that he 'implored' Grindals to settle the dispute without litigation, but it went ahead anyway. I accept his evidence that the dispute about the width of the easement was generated by the Stonemans planting the fence post on the roadway. This was a provocative act, designed to remind the Bournes of the breadth of the Stonemans' asserted rights under the easement. The attendant threat to install more gates on the easement was also provocative, in my view.

78 The parties are to be congratulated on settling the proceeding. However, it should have settled much earlier than it did. What was at stake in the litigation was quite disproportionate to the costs being incurred. The Bournes made many serious attempts to settle that were rebuffed. I consider, in particular, that the Bournes' Calderbank offer, made in on 26 March 2015, was an offer to which the Stonemans responded unreasonably, given the terms on which the litigation was finally settled 18 months later. Apart from the supply, installation and maintenance by the Bournes of an automatic gate, the Calderbank offer included terms that the Bournes would undertake to comply with the terms of the carriageway easement and would remove their caveat and abandon their claim for a prescriptive easement. While there were also terms that the Stonemans would contribute to part payment of the Bournes' legal costs in the sum of $5,000, and that they would grant a lease of extra land at each end of the carriageway easement to allow a fire truck to come and go, these were matters that could and should have been the subject of a counter offer. Instead, things were allowed to escalate to a fully contested Supreme Court proceeding.

79 In my opinion, it was unreasonable for the Stonemans to simply refuse the offer of 26 March 2015. Their failure to build on what had been offered and make a reasonable counter offer has resulted in protracted litigation and unnecessary costs.

80 More generally, I find that the Stonemans acted in a high handed manner in instituting and pressing on with the litigation in the (mistaken) belief that the carriageway easement as registered on the title gave them inviolable rights that they were entitled to enforce regardless of both the history of the use of the roadway and the practical consequences. They used what they believed to be their legal rights as a 'big stick' with which to beat the Bournes, notwithstanding that the costs being incurred in the litigation were clearly disproportionate to what was at stake.

81 It is unnecessary to make findings in relation to the allegations of improper purpose based on the evidence that Grindal told Sharpe that the Stonemans were unlikely to settle because they wanted to teach the Bournes a lesson. The course of the litigation speaks for itself. It is sufficient to have regard to the conduct of the litigation by the Stonemans, which was unreasonable.

82 In so finding, I have taken into account that they had rights under the easement and as owners of the servient land that were not always observed by the Bournes and their guests. There was also childish behaviour on both sides.

83 Nonetheless, I have concluded that the default position that costs should lie where they fall has been displaced in large part by the manner in which the Stonemans have conducted the litigation. The Bournes are entitled to at least some of their costs. The question is from when and on what basis?

84 I do not consider that indemnity costs are called for. This is not a case where it can be said conclusively that the settlement produced a worse result for the Stonemans than one or other of the offers made by the Bournes. Moreover, the Stonemans were entitled to bring a proceeding to protect what they believed to be their rights, particularly following the lodgement of the caveat, which required some kind of legal response from them. However, I have found that their conduct of the litigation was unreasonable in that they pursued remedies that were draconian and, until well into 2016, turned their backs on compromise. Furthermore, they failed do their homework to ascertain what rights they actually had in relation to the railway gate, which was the source of much of disputation between them and the Bournes.

85 I have carefully considered the nature of the dispute between the parties and the course of the litigation. Having given the matter anxious consideration, I have concluded that the Bournes should have their costs of the proceeding in this court and in the Magistrates' Court from the date of the refusal of the Calderbank offer made on 26 March 2015, which occurred on 20 April 2015. Otherwise, costs should lie where they fall.

[1] Sometimes referred to by the parties as the 'driveway'.

[2] [2016] VSCA 186 [23]-[26].

[3] [1997] HCA 6; (1997) 186 CLR 622, 624-5.

[4] [2000] FCA 270; (2000) 171 ALR 227, 231 [6].

[5] Insofar as it was asserted by the plaintiffs that it was an implied term of the easement that the gate be shut or that they had a common law right to insist on the closing of the gate, the plaintiffs needed leave to amend the statement of claim and such leave would not be given in the absence of a satisfactory explanation as to why those matters had not been pleaded in the first place.