Harper v Harper (No 2)

Category: Costs

Parties: Brenda Harper (Plaintiff/Cross-defendant)
Troy Harper (First Defendant/First Cross-claimant)
Donna Harper (Second Defendant/Second Cross-claimant)

Representation: Counsel:
NJ Simpson (Plaintiff/Cross-defendant)
CD Freeman (Defendants/Cross-claimant)
Solicitors:
Bartier Perry (Plaintiff/Cross-defendant)
Streeter Law (Defendants/Cross-claimant)

File Number(s): 2023/00045263

Publication restriction: Nil

JUDGMENT

1. These reasons deal with costs and an ancillary issue following my decision in Harper v Harper [2024] NSWSC 1540 (Judgment) concerning a transfer of vacant land at Port Macquarie (the Land) from the plaintiff, Brenda Harper, to her son, Troy Harper and his wife Donna Harper (the defendants).

2. For the reasons given in the Judgment, I concluded that (1) the plaintiff failed to establish that she was entitled to an equitable lien for the balance of the purchase price of $407,200 for the sale of the Land based, as pleaded, on an oral agreement for the sale of the Land for a purchase price of $540,000 reached at the end of September 2022 (the Agreement): Judgment at [115]-[121]; (2) the plaintiff failed to establish that the defendants had made to the plaintiff the false representation as pleaded, being that the terms of the contract which she signed on 23 October 2022 reflected the terms of the Agreement: Judgment at [141]-[146]; (3) while an oral agreement for the sale of the Land was reached by the parties in a conversation on 14 October 2022, it was on the terms set out in the Judgment at [79], and that agreement fell within the third category in Masters v Cameron (1954) 91 CLR 353 at 360: Judgment at [118]-[121]; (4) the contract signed by the plaintiff on 23 October 2022 did not reflect the terms of that oral agreement and both it, and the subsequent transfer of the Land to the defendants, were vitiated by unconscionable conduct or alternatively undue influence on the part of the defendants and the appropriate relief was that the contract and transfer should be set aside, and a receiver be appointed to sell the Land: Judgment at [170]-[174], [184], [188]; (5) the defendants’ cross-claim did not arise and should be dismissed: Judgment at [186].

3. On 12 December 2024, the court made the following orders to deal with the substantive issues in dispute:

(1) Declares that the contract for the sale of the property situated at 14 Florence Close Port Macquarie NSW 2444 (Folio 36/1137169) (Property) from the plaintiff to the first and second defendants dated 21 October 2022 (Contract for Sale) is voidable.

(2) Orders that the Contract for Sale be set aside.

(3) Orders that the registered transfer AS594875 dated 31 October 2022 with respect to the Property be set aside.

(4) Orders pursuant to section 138 of the Real Property Act 1900 (NSW) that the Registrar General amend Folio 36/1137169 so that the registered proprietor is recorded as “Brenda Muriel Harper.”

(5) Orders that the Cross-Claim dated 2 April 2024 be dismissed.

(6) Orders, pursuant to the Court’s inherent jurisdiction and section 67 of the Supreme Court Act 1970 (NSW), that Mr Christopher Darin be appointed as a receiver for the purpose of selling and disbursing the proceeds of the Property.

(7) Orders, pursuant to rule 26.7 of the Uniform Civil Procedure Rules 2005 that Mr Darin be authorised to:

a. collect, enter into possession and receive the Property;

b. manage the Property and discharge all expenses properly incurred in respect of the management of the Property;

c. sell the Property in the name of the plaintiff and undertake all other necessary steps to secure the sale of the Property.

(8) Orders that the first and second defendants give vacant possession of the Property to the receiver within 7 days of the date of these orders.

(9) Orders that the requirement for the receiver to file accounts pursuant to rule 26.5 of the Uniform Civil Procedure Rules 2005 be dispensed with.

(10) Orders that the receiver shall be entitled:

a. To make and be paid from the proceeds of sale of the Property all usual and proper charges, at the usual hourly rates as are charged by the insolvency and accounting practice in which he is engaged and on the usual terms as to payment of that practice, to be capped at $7,000 plus GST;

i. for the receiver’s work as receiver of the Property;

ii. for the professional and non-professional services rendered by the receiver or that insolvency and accounting practice in connection with the sale of the Property and the management and disbursement of the proceeds of sale; and

iii. to engage the services of any other legal practitioner, accountant, real estate agent or other professional adviser in relation to the sale of the Property where the receiver considers it necessary to do so and to pay from the sale proceeds of the Property the costs incurred in having those services provided.

(11) Orders that upon the sale of the Property, the Receiver is to deal with the proceeds of sale in the following manner and priority:

a. to pay from the proceeds of sale the reasonable costs of sale as per order 10;

b. to hold the balance of the proceeds of sale on trust, pending further order of the court.

4. The court also made orders for a timetable for the parties to file submissions and any evidence in relation to costs and any further orders in relation to the timing and remaining payment of the proceeds of sale by the receiver.

Settlement offers

5. On the question of costs, the parties relied on the lengthy exchange of settlement offers passing between their solicitors leading up to the hearing, which is summarised below.

6. The plaintiff commenced the proceedings on 10 February 2023 by summons filed in court before the duty judge and an order was made restraining the defendants from transferring, charging, encumbering or otherwise dealing with the Land until Tuesday, 14 February 2023. The matter came back before the duty judge on 13 February 2023, at which time an order was made extending the freezing order until further order of the court, and orders were made for the filing of pleadings.

7. On 17 February 2023, the defendants’ solicitors sent a letter to the plaintiff’s solicitor setting out a proposal to resolve the proceedings. The letter was expressed to be ‘without prejudice’, but reserved the defendants’ right to rely upon the letter on the question of costs. The proposal in the letter was as follows:

Our clients have always been willing to document what is effectively vendor finance on their purchase of the vacant land, and have two proposals for your client’s urgent consideration, before further costs are incurred unnecessarily.

Firstly, our client proposes that what they say the parties agreed to in October 2022 be documented. Our clients wish to build a home on the land, with finance, and following completion of the building, to refinance so as to enable repayment of their loan to the plaintiff. This could be achieved by the following:

∘ A formal loan agreement for the vendor finance be prepared and entered into;

∘ The loan be secured by the grant of an equitable mortgage;

∘ The equitable mortgage be recorded on title, by way of caveat, after the mortgage for the building finance is registered;

∘ The property be revalued after the residence is built, to enable repayment of the loan to the plaintiff.

Alternatively, our clients are ready to forego their house building plans and return the property to the plaintiff, upon repayment by the plaintiff of the monies they lent to her to enable her home purchase to complete, together with the expenses they have incurred as a consequence of what they maintain was the agreement between the parties.

If the plaintiff is not in a position to repay the loan in the short term, our client would be agreeable to cooperating in the sale of the land, at the plaintiff’s expense, and an agreed liability for interest on their loan. The plaintiff’s interest in the land could be formally recorded by way of mortgage or caveat, without the need for the proceedings to remain on foot.

These proposals are put forward in good faith, and we anticipate that more details for either of these proposals could be provided to you promptly if you receive instructions accordingly.

8. On 27 February 2023, the plaintiff’s solicitors responded by letter rejecting the offer and stating that the plaintiff maintains that the sum owing in respect of the balance of the purchase price of the Land is the sum pleaded in the statement of claim served on the same day, which was the amount of $407,600 (calculated as the purchase price of the Land of $540,000 less payments made by the defendants to the plaintiff in relation to the purchase of $130,000 and $2,400).

9. On 15 March 2023, the plaintiff’s solicitors sought particulars from the defendants’ solicitor of their bare denials in the defence of particular paragraphs of the statement of claim. These particulars were not provided until 28 April 2023.

10. On 20 March 2023, the defendants’ solicitor sent a letter to the plaintiff’s solicitor expressed to be without prejudice and made on the principles stated in Calderbank v Calderbank [1975] 3 All ER 333 and to be open for acceptance for a period of 28 days (Calderbank offer 1). The offer was as follows:

1. By consent orders, and/or other means your client considers desirable, such as irrevocable powers of attorney, your client be empowered to engage a real estate agent and effect a sale of the land, on the open market, within 6 months, with our clients being legally compelled to do all things and sign all documents to facilitate such sale.

2. Our clients be paid $130,000.00 from the net proceeds of the sale, on settlement, with the balance paid to your client or at her direction.

3. The parties grant mutual releases to one another by deed, with effect from completion of the sale.

4. The proceedings be otherwise dismissed with no orders as to costs, with the intent that each party bear their own costs.

11. The plaintiff’s evidence in chief was filed and served between 6 and 11 April 2023.

12. Calderbank offer 1 was rejected by the plaintiff’s solicitor by a letter sent on 17 April 2023, which repeated the statement made in the earlier letter of 27 February 2023 set out above that the plaintiff maintained an entitlement to a sum owing of $407,600 in respect of the balance of the purchase price, and noted that the defendants had yet to provide the particulars sought by the plaintiff of the bare denials contained in certain paragraphs of the defence.

13. On 29 April 2023, the defendants’ solicitor sent a further Calderbank offer to the plaintiff’s solicitor, expressed to be open for acceptance until 5pm on 5 May 2023 (Calderbank offer 2). The offer was as follows:

It remains the defendants’ wish to reach agreement with the plaintiff. Acknowledging that the plaintiff has now incurred costs (leaving aside whether institution of proceedings was justified or not), the defendants propose the following options for resolution of these proceedings, for the plaintiff’s consideration:

1. The land transaction be reversed, and the plaintiff be restored as registered proprietor of the land.

2A. The plaintiff pay the defendants the sum of $130,000 within 18 months, with no interest to accrue in the interim; OR

2B. In the alternative to 2A, the plaintiff pay the defendants the sum of $80,000 within 6 months, with no interest to accrue in the interim.

3. This agreement be recorded, either by orders of the court or by deed, with the proceedings finalised either way.

4. Each party to pay her/their own costs.

14. The plaintiff’s solicitor responded by letter dated 22 May 2023, which stated that Calderbank offer 2 had not been accepted because it was unfair to the plaintiff, in circumstances where the defendants had acted unconscionably and received title to the Land without paying the agreed purchase price, to require the plaintiff to assume responsibility for reversing the transfer of the Land (including paying the applicable stamp duty and other charges associated with restoring her as the registered proprietor) and to pay a large sum as a liquidated debt to the defendants while at the same time assuming the burden of selling the Land and the risk as to the ultimate sale price.

15. The letter of 22 May 2023 also set out a ‘counter-offer’ by the plaintiff, expressed as a Calderbank offer, involving ‘splitting the difference’ on the balance of the purchase price owing between $407,600 (plaintiff’s case) and $355,000 (defendants’ case). The terms of the counter-offer (C****ounter-offer) were in summary, judgment for the plaintiff in the sum of $381,300 together with interest, an order for an equitable lien as security for the judgment sum, and an order for the appointment of a receiver for the purpose of selling and disbursing the proceeds of sale of the Land. The offer was expressed to be open for acceptance by 5pm on 12 June 2023. It lapsed without a response from the defendants’ solicitor.

16. The defendants’ evidence was filed and served on 30 June 2023 and the plaintiff’s evidence in reply was filed and served by 9 August 2023.

17. On 25 October 2023, the defendants’ solicitor sent a further Calderbank offer to the plaintiff’s solicitor, expressed to be open for acceptance until 5pm on 31 October 2023 (Calderbank offer 3), on the following terms:

1. Subject to paragraph 2, the defendants pay the plaintiff the sum of $377,000 as follows:

(a) $307,000 by 16 February 2024;

(b) $70,000 by 1 November 2025.

2. Paragraph 1 is conditional upon:

(a) The court approving a variation to the current interlocutory orders to permit the defendants to:

(i) lodge an application for finance in an amount of $307,000 using [the Land] (Property) as security;

(ii) mortgage the Property in an amount not exceeding $307,000 for the sole purpose of paying the moneys to the plaintiff or as she shall first direct in writing;

(b) The sum of $307,000 is only to be paid to the plaintiff or as she shall first direct in writing;

(c) The defendants obtaining finance approval for a loan of $307,000 by 15 December 2023.

3. The plaintiff can lodge a caveat in respect of the sum of $70,000, provided that she agrees to remove it to enable a mortgage for construction finance to be registered on title (without prejudice to her lodging a further caveat claiming the same interest after the mortgage for construction finance is registered) and does not take priority to the mortgage referred to in paragraph 2.

4. The parties enter into a deed to give effect to these terms.

5. Upon compliance with paragraph 1(a) and 4, the proceedings be dismissed with no order as to costs.

6. In the event paragraph 2 is not satisfied, the matter go to hearing and this agreement is without admission by any party.

18. By a letter sent on 31 October 2023, the plaintiff’s solicitor sent a letter to the defendants’ solicitor rejecting Calderbank offer 3 for the reasons stated in the letter. These included that it was unfair to the plaintiff that she be paid at settlement sum of $377,000, without interest, over a period of 2 years and that the obligation to pay that amount was contingent on finance approval being obtained and in the event that finance approval was not obtained, the parties would be left with no option but to proceed to a hearing. The letter went on to reinstate the Counter-offer, expressed as a Calderbank offer and to be open for acceptance until 4pm on 10 November 2023.

19. By a letter dated 3 November 2023, the defendants’ solicitor made a further offer of settlement on an open basis, setting out two alternatives to resolve the proceedings, referred to as ‘option A’ and ‘option B’ (Open Offer). Option A was for the defendants to transfer the Land to the plaintiff (free of encumbrances) in return for which the defendants were to receive the sum of $143,200, and the proceedings would be dismissed with no order as to costs. Option B was for the Land to be listed for sale by public auction or private treaty at a price recommended in writing by the listing agent, and the proceeds of sale were to be distributed in payment of (a) agents and auction fees; (b) solicitor/conveyancing fees of sale; (c) $143,200 to the defendants; and (d) the balance to the plaintiff. On completion of the sale and compliance with the disbursement of the proceeds, the proceedings would be dismissed with no order as to costs. The offer was expressed to be open for acceptance for 14 days.

20. By letter dated 17 November 2023, the plaintiff’s solicitor rejected the Open Offer for the reasons stated in the letter. In the case of option A, the reasons given were essentially the same as those set out in the letter of 22 May 2023 for rejecting Calderbank offer 2. In the case of option B, the reason given was that it did not contain sufficient detail, in particular as to who would engage and instruct the listing agent (with the plaintiff wanting an impartial receiver to perform the role) and how the net proceeds of sale would be distributed between the parties. The letter went on to reiterate that the plaintiff was seeking the balance of the agreed purchase price for the Land ($540,000) which remained outstanding, and stated that this claim was supported by the evidence of the plaintiff and her daughters.

21. On 2 April 2024, the defendants filed an amended defence and a cross-claim seeking orders to set aside the transaction on the grounds of mutual mistake as to the purchase price, subject to the repayment to them of the amount of $143,200 (which was said to be the total amount paid towards the purchase price) or the plaintiff providing a mortgage to them to secure that amount, and that there be no order as to costs if the relief was not opposed. By order 4 of the consent orders made on 26 March 2024, the defendants were required to pay the plaintiff’s costs thrown away by virtue of their amended defence.

22. On 4 April 2024, the defendants’ solicitor sent a letter to the plaintiff’s solicitor which, after noting that the proceedings had been listed for a hearing of three days commencing on 22 April 2024, stated:

In our view, this is unnecessary given that since January 2024 we have communicated on behalf of our clients that the Property will be transferred back to your client, or in the most recent amendments to the pleadings filed on 2 April 2024, it can additionally be put on the open market for sale and sold under the supervision of an independent lawyer or by a method which both protects your client’s interests and minimises costs. Our clients’ only interest is to get repayment of the moneys they have expended on behalf of your client without interest and which are not disputed. Either of these options can be the subject of orders in the next 7 days.

Our clients would like to save the costs of the hearing and preparation. Can you advise by 9 April 2024 what your client wishes to do with the Property and what relief is pressed at the hearing?

If your client presses ahead with a hearing in light of our clients’ position in relation to the transfer or sale of the Property and substantially the same orders are made, this letter will be tendered on any question of costs.

23. On 10 April 2024, the plaintiff’s solicitor responded by letter rejecting that proposal for essentially the same reasons given previously for rejecting Calderbank offer 2 and stating that all the relief contained in the statement of claim was being pressed, including judgment for $407,200 (being the agreed purchase price of $540,000 less payments accepted as having been made by the defendant to the plaintiff in relation to the purchase of $130,000 and $2,800 for strata levies) and costs. The letter went on to reinstate the Counter-offer on an open basis, expressed to be open for acceptance until 12 noon on 19 April 2024.

24. On 11 April 2024, the defendants’ solicitor made a further offer to resolve the proceedings expressed as a Calderbank offer and on an open basis (Calderbank o****ffer 4). This involved the appointment of a receiver for the sale of the property on the basis that (a) the defendants would pay the costs of the receiver to an amount of $7,000 plus GST and the plaintiff would pay any amount over and above $7,000 plus GST; (b) from the net proceeds of sale the defendants would be repaid $143,200 less the costs of the receiver to a maximum of $7,000 plus GST, and the plaintiff would receive the balance of the net proceeds of sale; and (c) acceptance of the offer by the plaintiff would not prevent her ‘from making an application for the costs of the proceedings, should she believe it is appropriate’. This offer was expressed to be open for acceptance until 10am on 16 April 2024.

25. On 15 April 2024, the plaintiff’s solicitor responded by letter rejecting Calderbank offer 4 and stating that the plaintiff did not consent to the defendants receiving any payment from the sale proceeds in priority to the plaintiff in circumstances where the defendants have acted unconscionably and it would be grossly unfair to the plaintiff to be liable to the defendants for a large sum of liquidated debt in priority to the money owing to her from the net proceeds of sale.

The parties’ submissions

Plaintiff’s submissions

26. The plaintiff seeks the following orders:

a. ORDER that the plaintiff be paid her costs as a gross lump sum figure in the amount of $211,054.86 or such other figure determined by the Court (Lump Sum Costs Order);

b. ORDER that the Lump Sum Costs Order be paid from Defendants’ share of the proceeds of sale of the property located at 14 Florence Close Port Macquarie (Property) (being the sum of $132,800) with the balance of any such sum (if there is any) to be payable to the Defendants;

c. ORDER that the Defendants pay any shortfall to the plaintiff between the Lump Sum Costs Order and the sum of $132,800 with interest to be payable on any unpaid amount under section 101 of the Civil Procedure Act 2005 (NSW);

d. ORDER that the balance of the proceeds of sale of the Property be paid to the plaintiff.

27. The plaintiff submits that there are five reasons justifying her entitlement to costs:

28. She is entitled to her costs in relation to the amended defence filed on 2 April 2024, per order 4 of the consent orders made on 26 March 2024.

29. Since the defendant’s cross-claim was dismissed, the court ought to make an order that the defendants pay the plaintiff’s costs with the usual costs consequences on the event of dismissal pursuant to r 42.20(1) of the Uniform Civil Procedure Rules 2005 (NSW*)* (UCPR).

30. The issues regarding the equitable lien and fraudulent misrepresentation (the u****nsuccessful i****ssues) were not clearly dominant or separable from the issues of unconscionable conduct and undue influence (the s****uccessful i****ssues). Accordingly, the plaintiff submits that she should not be deprived of the costs concerning the unsuccessful issues: citing Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [64].

31. Although the plaintiff did not obtain her primary relief, she still obtained equitable relief as a result of the conduct of the defendants and the overlap between the relief sought and the relief granted by the court was substantial such that the plaintiff should still be awarded costs.

32. The plaintiff acted reasonably in commencing and maintaining the proceedings.

33. The plaintiff submits that a gross sum costs order should be made in accordance with s 98(4)(c) of the Civil Procedure Act 2005 (NSW) (CPA) because: (a) there is a high potential for any costs assessment process to prolong litigation; (b) a gross sum order would sever ties between the parties; and (c) the orders on 12 December 2024 provide the parties with an opportunity for the plaintiff’s costs immediately from the defendants’ entitlement to the proceeds of sale of the Land.

34. The plaintiff submits that the quantum of the gross sum should be $211,054.86, comprising: (a) $131,902.38 (including GST) in solicitor costs; (b) $71,973.00 (including GST) in counsel’s costs; and (c) $7,197.48 (including GST) in other disbursements. Alternatively, the court should make any other gross sum costs order the court deems appropriate.

35. Those figures entail a 40% discount for the solicitor fees, 10% discount for counsel fees and 10% discount for all other disbursements.

36. In relation to the appropriate orders for disbursement of the net proceeds of sale of the Land, the plaintiff submits that it is only fair and reasonable for the court to make further orders that the plaintiff’s costs ‘be paid out of the defendant’s share of the remaining proceeds of sale given the findings of unconscionable conduct and undue influence’. If the gross sum falls below $132,000, then the plaintiff submits that the court should order the amount to be paid out of the defendant’s entitlement from the proceeds of sale where the remainder (if any) will be returned to the defendants and the other proceeds will go to the plaintiff. Alternatively, if the sum is greater than $132,000, then the plaintiff submits that the court should order the defendants to pay their solicitor $132,800; the plaintiff be paid the remaining proceeds of sale; and the defendants required to pay the remainder of the lump sum payment.

Defendants’ submissions

32. Relying on Calderbank offers 1 and 2, the defendants submit that the appropriate orders as to costs are:

33. The defendants pay the plaintiff’s costs of the proceedings on the usual basis up to and including 20 March 2023 [or 29 April 2023].

34. The plaintiff pay the defendants’ costs of the proceedings on an indemnity basis [or alternatively, on the ordinary basis] incurred on and from 21 March 2023 [or 30 April 2023].

35. Regarding the final orders for the sale of the Land, the defendants seek an order that the receiver pay the proceeds of sale in the following manner and priority:

36. The sum of $132,800 to the defendants’ solicitor on behalf of the defendants;

37. The sum of $90,000 into an interest bearing account in the names of the solicitor for the plaintiff and the defendants and to be used to pay the defendants’ costs when agreed or assessed and any surplus refunded to the plaintiff;

38. The balance to the plaintiff.

39. The defendants submitted that the court has a wide discretion in relation to costs pursuant to s 98(1) of the CPA. They then pointed to three matters that should be taken into account regarding this discretion. First, the plaintiff failed on the substantial issues in the litigation of fraudulent misrepresentation and seeking equitable compensation. Second, the plaintiff caused unnecessary costs to be incurred by her failure to agree to the transfer of the property being set aside and instead pressed for a monetary sum of $407,600 (subsequently corrected to $407,200) under the guise of a claim for damages for fraudulent misrepresentation or equitable compensation. Third, the plaintiff rejected and failed to better several reasonable offers of settlement (being Calderbank offers 1 and 2 and four other offers).

40. The defendants submit that the plaintiff’s claim was not successful ‘in substance’. They point to several factors, both before and during the trial, that indicated that the plaintiff never sought to have the sale set aside but instead, persisted with her claim for damages for fraudulent misrepresentation and equitable damages which ultimately failed. The final orders which were made to set aside the transfer of the Land were not the relief the plaintiff sought, and were exactly the position that the defendants offered on 20 March 2023. In this way, there was not an ‘event’ where the plaintiff succeeded. Accordingly, the plaintiff has not been put to the expense of legal costs in setting aside the transaction given this was the defendants position since 20 March 2023.

41. The defendants submit that the plaintiff’s rejection of each of Calderbank offer 1 and Calderbank offer 2 was unreasonable. This was because the plaintiff has not achieved a better outcome than those offers which were made at an early stage, there was sufficient time to consider the offers, the compromise offered was setting aside the sale which was the ultimate decision, there was a lack of clear prospects of the plaintiff succeeding in the allegations she pursued, the offers were clear, and the application for a special costs order was foreshadowed in the event they were rejected: see the principles set out in E Group Security Pty Ltd v Chief Commissioner of the State Revenue (No 2) [2021] NSWSC 1296 at [56]-[59].

42. It was unreasonable for the plaintiff to press a claim for damages when the usual remedy for unconscionable conduct of setting aside the transaction was offered to her in 2023. The defendants submit it can be inferred that the reason why these Calderbank offers were rejected is that under the fee agreement between the plaintiff’s solicitors and the plaintiff, the plaintiff would be charged for professional costs only if (a) the court orders costs or (b) the defendants agreed to pay the costs or disbursements charged by her solicitors and counsel, and in either case she was able to recover some or all of those costs and disbursements from the defendants. Consequently, professional costs were only payable by the plaintiff to her solicitors under a settlement of the proceedings if the settlement included an order for costs or the defendants agreed to pay some or all of her costs, a matter about which the defendants’ solicitor was not aware at the time of the settlement discussions.

43. Furthermore, the defendants’ solicitor made numerous further attempts to settle the proceedings on terms that the Land would be transferred back to the plaintiff or listed for sale and the defendants would be repaid the amount previously paid by them, as set out earlier.

Plaintiff’s submissions in reply

39. The plaintiff submits that while she was unsuccessful in relation to the fraudulent misrepresentation claim and the claim for an equitable lien, she was successful in the unconscionable conduct and undue influence claims, both forms of equitable fraud, and the court’s finding on these issues and the granting of equitable relief (including the appointment of a receiver) was an event for the purposes of r 42.1 of the UCPR. Also, the defendants failed in their cross-claim.

40. It was submitted that there are a number of reasons why the Calderbank letters relied on by the defendants should have no cost consequences. First, all were made in circumstances where the parties proceeded on the agreed basis that there was a contract for sale with, among other things, the purchase price being the issue in dispute. That fact legitimises the monetary relief sought by the plaintiff. It was not until the defendants filed their amended defence and cross-claim on 2 April 2024 that they sought to reverse the transaction on the basis of mutual mistake.

41. Second, it was objectively reasonable for Calderbank offers 1 and 2 to be rejected. In relation to Calderbank offer 1, this was bettered by the appointment of a receiver and further does not carry any weight as to costs in circumstances where the offer was contingent on the plaintiff securing a purchase of the land. Calderbank offer 2 differed from, and was less favourable than, the outcome achieved at hearing because (a) it proposed the land transaction simply be ‘reversed’ and, absent equitable relief, stamp duty and other charges would have arisen, and (b) the offer required the plaintiff to pay a large sum, either $130,000 or $80,000, irrespective of whether she was able successfully to sell the Land thereby exposing her to a liquidated claim by the defendants.

42. Third, the court’s finding that the defendants engaged in unconscionable conduct and undue influence should be regarded as disentitling conduct in light of their consistent denial of these claims, and it would be perverse if the plaintiff was required to pay any part of the defendant’s costs given the seriousness of their conduct.

43. Finally, it was submitted that the defendants’ submission referred to at [37] above is unfounded in circumstances where the plaintiff was seeking to have a wrong against her corrected, and detailed reasoning was provided for the rejection of the defendants’ offers. I agree. The plaintiff’s solicitor, who was not cross-examined, gave detailed and objectively rational reasons for rejecting each of the settlement offers when responding to them, and rejected Calderbank offer 4 despite the offer being on terms that its acceptance would not preclude the plaintiff from making an application for costs.

Relevant principles

44. The court has a discretion to determine by whom, to whom and to what extent costs are to be paid, although in the exercise of this discretion, the usual order is that costs will follow the event unless it appears to the court that some other order should be made: CPA*,* s 98(1); UCPR, r 42.1.

45. An order for costs is compensatory not punitive, being for the purpose of indemnifying the successful party for the expense of the litigation, and the usual order ‘embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour’: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [67] (McHugh J).

46. The ‘event’ may be characterised in more than one way, but generally refers to the result of the claim or counter claim, as the case may be, and may be understood as referring to the practical result of a particular claim: Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15].

47. One situation where there may be a departure from the usual order is where there are multiple issues in the proceedings and there has been a mixed outcome, and it is seen to be appropriate to apportion costs as between those issues. In Ryde Developments Pty Ltd v The Property Investors Alliance Pty Ltd (No 2) [2018] NSWCA 40 at [7], Beazley P, Payne JA and Barrett AJA adopted the following summary of the relevant principles for the determination of costs on an issue by issue basis stated in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] (per Beazley, Ipp and Basten JJA):

Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported).

In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: SabahYazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal.

If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick (No 2) [2006] NSWCA 374 at [27].

Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed).

A separable issue can relate to “any disputed question of fact or law” before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34].

Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296, citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272.

48. Further to the observation in the last paragraph, it is accepted that where it is appropriate to entertain the process of apportioning costs as between different issues in the proceedings, in general such an exercise will be carried out on a relatively broad brush basis, and largely as a matter of impression and evaluation by the court: Avopiling Pty Ltd v Bosevski*;* Avopiling Pty Ltd v Workers Compensation Nominal Insurer (2018) 98 NSWLR 171; [2018] NSWCA 146 at [172].

49. The failure by a party to accept an offer of compromise which is a Calderbank offer where that party does not achieve a judgment more favourable than the offer is one of the circumstances in which the court may exercise its discretion under r 42.1 of the UCPR to make some order other than costs following the event on the ordinary basis. However, merely because the party to whom the offer was made does not ultimately obtain a more favourable judgment does not automatically lead to a favourable costs order, or raise a presumption that such an order should be made: E Group Security at [57].

50. The onus is on the party making a Calderbank offer to satisfy the court that it should exercise the costs discretion in its favour, in particular that (a) the Calderbank offer embodies a genuine compromise and (b) it was unreasonable for the other party not to accept it, which is an evaluative judgment to be made by reference to the terms of the offer and all the relevant surrounding circumstances at the time that it was made, and not with the benefit of hindsight: Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8], [11], [16]; Wheatley v Lakshmanan (No 2) [2022] NSWSC 851 at [97]; E Group Security at [57]-[58].

51. Relevant factors in determining whether the rejection of an offer was unreasonable include (a) the stage of the proceeding at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree’s prospects of success, assessed at the date of the offer; (e) the clarity with which the terms of the offer were expressed; and (f) whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it: Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 at [25]; Miwa at [12]; Wheatley at [98]; E Group Security at [59]. A finding of unreasonableness should not be made other than on clear grounds: E Group Security at [58].

52. In relation to (d), what is required is an objective assessment of the offeree’s prospects of success as at the date of the offer: Hazeldene’s Chicken Farm at [30].

53. The practice of treating Calderbank offers in this way is informed by the public policy objective of providing an incentive to the parties to end their litigation as soon as possible and discouraging wasteful and unreasonable behaviour by litigants: Commonwealth Bank of Australia v Gretton [2008] NSWCA 117 at [41]. However, the mere fact that the offer is a reasonable one does not make it unreasonable for the offeree to have rejected it: Gretton at [74] and [120].

54. Where an offer of settlement is not an offer under UCPR r 20.26 or a Calderbank offer, it may still be relevant to the exercise of the discretion under r 42.1 to make some order other than the usual order, on the basis that the court may take into account the conduct of the parties, including attempts at settlement, in exercising that discretion: Ziliotto v Hakim [2013] NSWCA 359 at [131]-[134] per Tobias AJA (Macfarlan JA agreeing).

55. 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 costs: Chandrasekaran v Western Sydney Local Health District (T/A Westmead Hospital) (No 2) [2024] NSWCA 21 at [12]; Gretton at [121] per Hodgson JA (Mason P agreeing at [1] and Beazley JA agreeing at [91]).

Consideration

56. I raised with the parties at the commencement of the hearing (T7.31) my concern as to the costs involved in a three-day hearing to resolve a dispute between family members, none of whom (on the evidence) was wealthy, over a sale of vacant land in circumstances where the parties were only $45,000 apart in their dispute as to the agreed purchase price (being on the plaintiff’s case $540,000 and on the defendants’ case $495,000).

57. However, it was apparent from what counsel for the parties said in their written and oral openings that the real dispute between them was more substantial. On the plaintiff’s case (consistently with her statement of claim) an oral agreement had been reached by the parties in September 2022 for the sale of the Land by her to the defendants, with the only dispute being as to the correct purchase price and she was seeking to recover monetary compensation equal to the balance of the unpaid purchase price by way of an equitable lien, damages for fraudulent misrepresentation or equitable compensation for unconscionable conduct or alternatively undue influence (T8-9). The defendants’ case (as pleaded in their amended defence and cross-claim), was that the contract and the transfer were vitiated by mutual mistake as to the purchase price and they consented to orders for the transfer of the Land back to the plaintiff or a sale of the Land by an independent solicitor subject to the return of the sum of $143,200 previously paid by them to the plaintiff (T10.14).

58. The plaintiff’s lack of success in her claim for monetary compensation turned largely on factual findings made by the court regarding the conversations between the parties in September and October 2022, in particular as to the time when the oral agreement was reached and its terms. However, the plaintiff succeeded in her claim that the contract and transfer were vitiated by unconscionable conduct (or alternatively undue influence).

59. It is necessary first to consider the exchange of settlement offers. The defendants rely on Calderbank offers 1 and 2 to support the orders as to costs they seek. In my view, it is not clear that either of those offers would have resulted in an outcome as good or better for the plaintiff than the Judgment for the reasons submitted by the plaintiff. Further, at the time each offer was made the defendants had not served their evidence. Given that the plaintiff’s prospects of success on her claim for monetary compensation turned on factual disputes which required an assessment of the defendants’ evidence, it was not unreasonable for the plaintiff to reject each offer.

60. Calderbank offer 3 involved a payment of $377,000 to the plaintiff over 2 years and was contingent on, among other things, the defendants obtaining finance approval for a loan of $307,000. In view of the uncertainty as to whether the finance approval would be obtained, the offer was not as good or better than the outcome achieved. In the circumstances, it was not unreasonable for the plaintiff to reject the offer. I reach the same conclusion in relation to the Open Offer which, in the case of option A, would have exposed the plaintiff to stamp duty and associated charges on the transfer of the Land back to her and, in the case of option B, would have given no influence or control to the plaintiff over the manner of sale of the Land.

61. Calderbank offer 4 is less favourable to the plaintiff than the outcome of the proceedings because based on the findings in the Judgment at [23], [35]-[38], [47] and [79], the total amount paid by the defendants in respect of the purchase price was $132,800 and not $143,200 claimed by the defendants. It was not unreasonable for the plaintiff to reject it for that reason and also because the plaintiff’s claim for monetary compensation turned on a factual dispute as to what was agreed in the conversations in September and October 2022 which was ultimately resolved by cross-examination. Bearing in mind the need to consider the plaintiff’s prospects objectively at the date of the offer and without the benefit of hindsight, it is not unreasonable for the plaintiff to have considered that her evidence of what occurred in the relevant discussions with the defendants would be preferred and to maintain her claim to monetary compensation despite the defendants’ offer.

62. Turning now to what order as to costs should be made, in my view each of the parties has achieved substantial success in the proceedings: the plaintiff succeeded in establishing that the contract and the transfer were vitiated by unconscionable conduct on the part of the defendants, and the defendants succeeded in establishing that no monetary compensation is payable by them to the plaintiff on any of the alternative grounds advanced by her. The overall outcome was essentially a draw. Where the outcome of proceedings is that it cannot be said that one party has been successful and the other party has been unsuccessful, it is recognised that it may be appropriate that there be no order as to costs: Diakou v Rouse [2019] VSCA 199 at [50] per Kyrou, McLeish and Emerton JJA. In my view, the present is such a case. The court in Diakou noted at [50] that this principle would not apply if there was conduct of one of the parties in relation to the litigation which warranted an order for costs being made against that party. In my view, there is no such conduct in the present case apart from the late filing of the amended defence and cross-claim, for which an order for costs has already been made and should not be disturbed.

63. Put another way, this is a case where an apportionment of costs is appropriate because the parties had mixed success on issues which were discrete and separable. Taking a broad brush approach to the question of apportionment, and bearing in mind the need to do what is fair having regard to the responsibility of the parties for the incurring of costs, I consider that the issues on which they won and lost were evenly balanced and the appropriate order to recognise this is that there be no order as to costs (but without disturbing order 4 of the consent orders made on 26 March 2024). This approach is preferable to an order requiring an apportionment of costs on an issue-by-issue basis because that is likely to lead to further costs being incurred, and further disputation between the parties, in the assessment of costs. That is undesirable given the limited financial resources of the parties and the fact that they are family members who have been in a bitter dispute throughout these proceedings. Avoiding that further cost and disputation is consistent with s 56 of the CPA which requires the court to give effect to the overriding purpose of facilitating the just, quick and cheap resolution of the proceedings and this includes the making of orders as to costs.

64. Turning now to the appropriate order to be made for the disbursement of the net proceeds of sale of the Land, it follows from the findings in the Judgment at [23], [35]-[38], [47] and [79], that the total amount paid by the defendants to the plaintiff in respect of the purchase price was $132,800. In light of the conclusion reached above as to costs, the net proceeds of sale of the Land after payment of the reasonable costs of sale as per order 10 of the orders made on 12 December 2024 should be disbursed first by payment of the amount of $132,800 to the defendants, and the balance should then be paid to the plaintiff.

Conclusion

65. For the above reasons, the court will make the following orders:

66. There will be no order as to the costs of the proceedings, but this will not disturb order 4 of the consent orders made on 26 March 2024.

67. For the purposes of order 11(b) made on 12 December 2024, the receiver is to pay the balance of the proceeds of sale referred to in that order in the following manner and priority:

(a) the sum of $132,800 to the defendants’ solicitor on behalf of the defendants; and (b) the balance to the plaintiff.

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