Laming v Jennings [2018] VSCA 354

COSTS - Costs of appeal - Success on appeal - Where successful arguments not raised at trial - Whether Court should make no costs order.

1 On 7 December 2018, the Court published its reasons for allowing an appeal from a declaration and other orders made by a judge of the County Court upholding a claim for an easement for recreation.[1] The Court deferred making orders and directed the filing of written submissions as to costs.

2 It is the expectation of the Court that costs should be addressed on the delivery of judgment unless there are very good reasons to defer the question. The process of written submissions on costs filed after the delivery of judgment is inefficient and adds to the costs of the proceeding. However, the Court made an exception on this occasion because it was necessary to enable the parties to read the reasons for judgment before making submissions as to costs.

3 There is no dispute as to the form of orders, other than as to costs and these reasons deal with the question of the costs of the trial and appeal. It is convenient to deal first with the costs of the trial before addressing the costs of the appeal.

4 The appellant seeks his costs of the trial on an indemnity basis. He relies on three 'Calderbank' offers made to the respondent on the following terms:

(a) by the first offer, made on 11 February 2016, the appellant proposed orders to the effect that he (the appellant) have exclusive ownership and use of the disputed land and that there be no order as to costs;

(b) by the second offer, made on 5 October 2016, the appellant proposed orders to the effect that he (the appellant) have exclusive ownership and use of the disputed land and the respondent pay the appellant's costs fixed at $60,000 (in circumstances where costs in excess of $75,000 had then been incurred); and

(c) by the third offer, made on 2 February 2017, the appellant proposed orders to the effect that he (the appellant) transfer a 60 cm strip of the disputed land to the respondent and the respondent pay the appellant's costs.

5 The appellant says that each of the three offers provided tangible benefits to the respondent. He submits that there are good grounds for ordering indemnity costs from the date of the first offer but that, at the least, indemnity costs should be ordered from the date of the third offer because the respondent's refusal of that offer was unreasonable. The appellant's position is said to be reinforced by the fact that he is properly to be regarded as the defendant to the respondent's assertion of title over the disputed land and thus an involuntary participant in the proceeding.

6 The respondent accepts that he is liable for the appellant's costs of the trial, but says those costs should be on the standard basis. He submits that his rejection of each of the three Calderbank offers was reasonable in the circumstances and there is therefore no basis for an order for indemnity costs.

7 In relation to the first offer, the respondent notes that it was made early in the proceeding at a time when the respondent did not know the case against him. The offer involved no substantive compromise but rather invited the respondent to capitulate. The second offer was made relatively early in the proceeding before the applicant had provided substantial particulars and outlines of witness evidence and it too involved no substantive compromise on the part of the appellant. As to the third offer, the respondent submits that it involved a 'very minor substantive compromise' which, in effect, amounted to a capitulation. It is said that it was not unreasonable for the respondent to take his case to trial and that his success at first instance is a factor to which the Court should have regard in determining the reasonableness of his decision to reject the third offer.

8 The three offers made by the appellant were expressed to be Calderbank offers and are therefore not regulated by the County Court (General Civil Procedure) Rules 2008.[2] In contrast to the position under the Rules, where a party makes a Calderbank offer, there is no rule or prima facie presumption that the failure by the offeree to obtain judgment more favourable than the offer which has been rejected will result in an order for indemnity costs or some other special costs order.

9 In most cases, as in this one, the critical factor in determining whether the rejection of a Calderbank offer should give rise to an order for indemnity costs is whether the rejection was unreasonable in all the circumstances. A non-exhaustive list of factors relevant to the discretion was set out by this Court in Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2).[3] The factors identified by the Court were:

(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 as 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's rejecting it.[4]

10 Having regard to those factors, we are of the view that the respondent's rejection of each of the three offers was not unreasonable so as to justify a departure from costs on the standard basis. Critically, none of the three offers involved a 'real element of compromise'.[5]

11 By the first offer, the appellant invited the respondent to give up his assertion of title over the disputed land with each party to bear his own costs. The only benefit to the respondent in accepting the offer was that he would avoid the risk of losing at trial and having an adverse costs order made against him. The offer was made at a very early stage in the proceeding at a time when the respondent could not have been fully aware of the case against him and could not have made an informed assessment of his prospects of success. In those circumstances, the rejection of the offer was not unreasonable.

12 For similar reasons, the decision to refuse the second offer was not unreasonable. By that offer, the appellant repeated his invitation to the respondent to give up his claim to title and, in addition, pay a very substantial proportion of the costs incurred by the appellant. Although the appellant's case was clearer when the second offer was made, on no view was the case against the respondent so strong as to make the refusal of the offer unreasonable.

13 The third offer represented a greater degree of compromise on the part of the appellant in that it involved an offer to transfer a strip of land to the respondent. Nevertheless, having regard to the size of the strip of land as against the size of the disputed area, it could not be said that the offer represented a genuine compromise. The third offer was made in February 2017, four months prior to the trial. We accept the respondent's submission that his prospects of success were reasonable at the date of the offer. This was a legally and factually complicated matter, and the respondent's success at first instance supports his contention that it was not unreasonable for him to take the case to trial.

14 As the respondent did not act unreasonably in rejecting each of the three offers, there is no basis for an order for indemnity costs. The respondent should pay the appellant's costs of the trial on the standard basis.

15 The appellant submits that, in accordance with the usual rule, the respondent should pay his costs of the application for leave to appeal and the appeal on the standard basis. The respondent resists the making of a costs order in the appellant's favour. He says there should be no order as to costs because the appellant succeeded on matters that were not raised at trial.

16 The appellant succeeded on two of his four grounds of appeal, namely grounds 1 and 2. In relation to ground 1, which concerned knowledge of user, the respondent submits that the appellant did not make any submissions at trial regarding the presumption of knowledge, despite the fact that he needed to displace that presumption in the face of the 'proven open recreational use' of the land. In relation to ground 2, which alleged that the easement was too broad, it is said that the appellant did not make any submission to the trial judge that the easement could not arise because of the individual rather than communal nature of the recreational easement claimed.

17 It is true that the appellant did not make the above submissions at trial. Further, the appellant did not take advantage of the invitation made by the primary judge to address the form of relief in the light of Mulvaney[6] and the judge did not have the same assistance as this Court on the form of relief.[7] However, the appellant should not be deprived of his costs altogether given that he did succeed on appeal and the issues of knowledge and the breadth of the easement, on which he succeeded, were central issues both at trial and on the appeal. In the circumstances, it would be appropriate that the respondent pay 75 per cent of the appellant's costs of the application for leave to appeal and the appeal.

18 For those reasons, the respondent should pay the appellant's costs of the trial on the standard basis. The respondent should pay 75 per cent of the appellant's costs of the application for leave to appeal and the appeal on the standard basis. There will be orders to that effect. The other substantive orders as indicated on the publication of reasons will also be made.

19 The Court will grant to the respondent an indemnity certificate pursuant to s 4 of the Appeal Costs Act 1998.

[1] Laming v Jennings [2018] VSCA 335.

[3] [2005] VSCA 298; (2005) 13 VR 435.

[6] Jackson v Mulvaney [2003] 1 WLR 360.

[7] Laming v Jennings [No 2] [2017] VCC 1932 [56].