McKeand v Thomas [2006] NSWSC 1356 | Case summary

1864/05 ROSS TYNDALL McKEAND & ANOR v MARETA THOMAS & ANOR JUDGMENT - Ex Tempore 1 HIS HONOUR: I gave judgment in this matter on 25 October 2006, McKeand v Thomas [2006] NSWSC 1028. 2 The issues that were involved in the case are ones that were set out at paragraph [7] of that judgment. In broad terms, the outcome of the case was that there was an agreement between Mr McKeand and Mr Thomas for the granting of an easement, but Mr Thomas did not have authority to bind Mrs Thomas, that Mrs Thomas had not ratified the precise agreement that Mr Thomas had made, but had ratified what might be regarded as a part of that agreement, namely, the granting of permission for cables to remain in the trench on Mrs Thomas' land. In circumstances where the agreement had not been ratified by Mrs Thomas, the fourth issue, concerning part performance, did not arise. There was found to be an estoppel which prevented Mrs Thomas from refusing to treat herself as bound to permit the cables remaining in the land, although not an estoppel, preventing her from refusing to treat herself as bound to grant an easement. No easement was granted under 88K. Mr Thomas was found to have engaged in a breach of warranty of authority, resulting in damages for that breach, in the sum of $23,430. The question of negligent misrepresentation did not really arise, and other questions concerning interest and costs were not disposed of in that hearing. 3 As a result of the proceedings, two alternative forms of short minutes of order have been presented. In my view there is utility in making a declaration that there was no oral or other agreement entered into between the plaintiffs and Mrs Thomas for the creation of any easement. Accordingly, I shall make order one in the defendant's proposed short minutes of order. 4 The next issue of dispute between the parties concerning the orders relates to whether the injunction restraining Mrs Thomas ought to run from six months from today, being the date of making the orders, or ought run from six months from the date that any judgment actually gets paid by Mr Thomas. In my view, the latter is the appropriate position. 5 In paragraph 127 of my earlier judgment, I said that: "... it seems to me that the availability of a right of damages against Mr Thomas affects what is conscionable behaviour for Mrs Thomas in the circumstances: if the McKeands were to recover from Mr Thomas damages which enable them to have the services connected through a connection located solely on their own land, it would not, it seems to me, be unconscionable for Mrs Thomas to revoke the license, from a date which gave the McKeands enough time to establish their alternative connection." 6 That is in substance a finding that it is the receipt of damages, not the bare availability of a judgment, which would release Mrs Thomas from the obligations of conscience that she would otherwise be under. For those reasons, the appropriate injunction against Mrs Thomas is that proposed in the first paragraph of the plaintiffs' draft short minutes of order. 7 It is also appropriate to make an order requiring the McKeands to disconnect their current underground services, within six months from the time of receipt of damages. An order along the general lines of order 4 of the defendants' short minutes of order, but with the time period modified to relate to six months from the date of receipt of damages, ought therefore be made. 8 It is common ground that the caveat placed on the title ought be removed. A preferable form of order to achieve that objective is that contained in paragraph 7 of the defendants' short minutes of order, but that is preferred solely as a matter drafting, not as a matter of substance. It is also appropriate to make an order for entry of a judgment against the second defendant for breach of warranty of authority for $23,430. 9 That leaves a question as to what should be done concerning the costs of the proceedings. The defendants contend that they have in substance won the proceedings, because the significant objective that the plaintiffs were seeking was an order for the granting of an easement, and that the plaintiffs have failed to achieve that objective. The defendants point out, correctly, that there were four different paths that the plaintiffs relied upon to achieve an easement - that there was actual or ostensible authority in Mr Thomas, that there was ratification, that an easement should arise in accordance with Wheeldon v Burrows (1879) 12 Ch D 31, or that an easement should be granted under section 88K. The plaintiffs failed on all of these contentions. Nonetheless, the plaintiffs did succeed in establishing a limited right to retain the services presently in the ground. They were faced with a cross-claim which sought a declaration that their services being in the trench constituted a trespass, and an order that they do all things necessary - impliedly, forthwith - to fully disconnect their current services and have them reconnected through their own land. The plaintiffs succeeded in resisting those orders. 10 It is, therefore, a situation in which neither party has achieved a total success. However, the plaintiffs were in a situation where they were faced with defendants who were denying such rights as the plaintiffs had, and the plaintiffs needed to bring proceedings to enforce those rights that the plaintiffs have been found to have. 11 The defendants rely upon some letters before action. One of them is a letter of 21 February 2005, that the defendants solicitors wrote to the male plaintiff, suggesting that an easement could be granted on payment of compensation of $30,000. That letter did not deal with the question of whether Mr Thomas had any authority from Mrs Thomas to make the agreement which, by that time, the defendants knew the plaintiffs were asserting had been made. 12 When there were more issues involved in the proceedings than mere grant of an easement, I do not regard that letter of 21 February 2005 as affecting the appropriate order for costs that should be made. 13 A separate issue relating to costs concerns the costs that were involved in an application to remove a caveat that the plaintiffs placed on the land. The defendants caused a lapsing notice to be filed, which resulted in the plaintiffs bringing an application to extend the caveat. That application was heard by his Honour Justice Palmer: McKeand & Anor v Thomas & Anor [2005] NSWSC 419. The application was made against a background where, by the time the caveat was lodged, proceedings had begun, and the solicitors for the defendant had written saying that their clients would not interfere with the status quo pending the determination of the current proceedings. 14 The caveat was extended by his Honour Justice Palmer, notwithstanding the proffering of that undertaking. It was extended in circumstances where there was no immediate threat by the defendants to deal with their land, but, as his Honour found, no prejudice suffered by the defendants as a result of the caveat remaining on their land beyond irritation and annoyance at a personal level. As well, his Honour accepted the plaintiffs' submission that they needed the caveat to protect the interest that they claimed against those who might take title to the land without notice. 15 His Honour reserved the costs of that application. 16 The costs of that application ought be dealt with by reference to principles analogous to those that affect an interlocutory injunction. The usual principle in accordance with which costs of a plaintiff obtaining an interlocutory injunction are decided, are that, if the plaintiff succeeds in obtaining the interlocutory injunction, the costs of that interlocutory application become the plaintiff's costs in the cause. I see no reason why that principle ought not be applied in the present case, even though, now, the outcome of the proceedings is known. 17 The offer that had been made on 21 February was withdrawn by the defendants on 18 March 2005. 18 On 2 May 2005, a Calderbank letter was written by the solicitors for the defendants. It said: "In order to avoid costly legal proceedings, I am instructed to make the following offer of compromise, which will effectively put your clients in exactly the same position they would have been in but for the alleged oral agreement (which is denied): 1. My clients will arrange for Mr Leo Wehbe of Mid-West Communications Pty Ltd to restore your clients' power to its original overhead position, at their sole cost. It is noted that in this regard the trench and underground cabling do not need to be physically disturbed and that the re-connection may be performed without causing any damage to either property. 2. My clients will reimburse your client for costs incurred to date for the installation of its utilities in my clients' trench. We understand such costs totalled $1,650. Please advise if this is not correct. 3. My clients will pay your clients' reasonable costs, to be agreed, and if not agreed, to be assessed. The above offer is purely a commercial one and is made without any admission of liability whatsoever. The offer is open until 4 pm Monday, 9 May 2005. Please note that this is a Calderbank offer which shall be tendered on the question of costs." 19 In submissions, the plaintiffs criticised that offer in several respects. They say, first, that Mr Wehbe did not have the necessary license to restore the power at all. It is true that Mr Wehbe personally did not have that license, but he was capable of, and from time to time did, engage people who did have the appropriate license, and I do not see why the offer ought not be regarded as encompassing an offer for Mr Wehbe to be the person who procured the restoration of the power to the original overhead position, even though he might not do that task personally. 20 Another attribute of the offer that the plaintiffs criticise is that, as things have eventuated, it would not have been possible for the power to be restored to its original overhead position. That fact became known as a result of the filing of the affidavit of Mr Schimke of 2 June 2006. The fact remains, however, that the plaintiffs have succeeded in obtaining a remedy which is more extensive than had been offered. The defendants did not make an expanded offer of settlement, encompassing the method of reconnection of service that Mr Schimke said was possible, once the difficulties that Mr Schimke had pointed out became known. Rather, the stance of the defendants, manifested in cross-examination in the course of the hearing, was to challenge Mr Schimke's opinions. 21 For this reason, it seems to me, the plaintiffs have done better than was offered by the Calderbank offer. For that reason, I do not regard the Calderbank offer as something that ought affect the result concerning costs that would otherwise apply. 22 The defendants also submit that the litigation has been demonstrated to involve a scale of effort and expenditure that is quite out of proportion to the result that has been achieved. I accept that the award of damages of $23,000-odd is a modest award, to result from such a complex case. However, that is not the only success that the plaintiffs have achieved. They were faced with an allegation that essential services to their home were being supplied in a way that the defendants had the right to cut off at will. To preserve their right to those essential services was something that could be effected only through the application of equitable principles, and in this Court. 23 By virtue of the nature of the issues, it was, it seems to me, necessary for there to be the examination of expert evidence, of a kind that was involved in the present case, to decide what kind of equitable remedy the plaintiffs had established a title to. 24 The defendants submit that this is a case where the principle of proportionality ought apply. I recognise that section 60 Civil Procedure Act 2005 makes recognition of the principle of proportionality of costs to outcome. In Roberts v Rodier [2006] NSWSC 1084, I said, at [43]-[44]:

"It is clear that proportionality is a matter which can be taken into account in the quantification of costs. In Skalkos v T & S Recoveries Pty Ltd (2005) 65 NSWLR 151 Ipp JA (with whom Sheller JA and Grove J agreed) said at [8], 153: "In my opinion, in determining whether costs have been reasonably and properly incurred, it is relevant to consider whether those costs bear a reasonable relationship to the value and importance of the subject matter in issue. See in this regard Szlazko v Travini [2004] NSWSC 610; Moore v Moore [2004] NSWSC 587, Gallagher v CSR Ltd (unreported, Supreme Court of Western Australia, 31 March 1994). This conclusion is supported by section 208G(f) of the Legal Profession Act ." See also Sherborne Estate (No 2); Vanvalen and Another v Neaves and another; Gilroy v Neaves and Another [2005] NSWSC 1003; (2005) 65 NSWLR 268 at [30], 274 per Palmer J. However in the vast majority of cases the appropriate way for proportionality to be taken into account is in the course of the assessment process. I do not see any reason for this case being distinguishable from that vast majority. I note that Skalkos was itself an appeal concerning the principles which had been applied in an assessment of costs." 25 I see no reason to depart, in the present case, from the views there expressed. In accordance with them, while I accept that proportionality is a matter which can be taken into account in the quantification of costs, the proper way to do it is in the course of the assessment process. 26 The plaintiffs submit that, while there has been a verdict obtained against the second defendant arising from the agreement to grant an easement, but no verdict obtained against the first defendant which enforces the entirety of that agreement, the defendants have defended the case in a joint fashion, and the first defendant has, by the stance of joint representation that was adopted, supported the second defendant's evidence, to the effect that no agreement granting an easement was ever entered. I accept that submission. I see no reason, in the present case, to differentiate between the costs that ought be ordered against the first and second defendant. 27 That leaves a question of whether the plaintiffs ought recover the entirety of their costs. 28 It is a common situation that, where a plaintiff has succeeded in only some of the issues raised, the plaintiff has not received an order for all its costs to be paid by the defendant. 29 There has been a principle whereby the costs of litigating those issues on which a plaintiff has failed are dealt with in a separate way to the costs of litigating those issues on which the plaintiff has succeeded, if the issues on which there has been failure are the ones which were clearly the dominant issue in contest, or were very clearly separable from the matters on which the parties succeeded. 30 The present case does not fit comfortably within that principle, as so stated. The principle as so stated is not itself a rule of law, but is rather a guideline, that can be helpful in deciding the application of the Court's discretion as to the way in which a costs order ought be made. In the present case, it is impossible, in my view, to ignore the fact that the plaintiffs have not received the main remedy that they came to Court to receive. Nonetheless, the remedy that they have received is a remedy that is a significant and valuable one. The issues that were involved in vindicating the remedy that they have received, were closely related to the issues involved in seeking to enforce the claim to an easement. Even so, the plaintiffs have, in many ways, received second prize, and I would infer that it was because of their belief of entitlement to an easement, by virtue of the agreement that was reached between Mr McKeand and Mr Thomas, that they were unresponsive to settlement offers that were made to them. 31 In all these circumstances, the order that I make is that the defendants pay 75 percent of the plaintiff's costs.

McKeand v Thomas

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Judgment (11 paragraphs)

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Cases Cited (8)