Norris v Hamberger

ACI Operations Pty Ltd v Berri Limited (No 2) [2005] VSC 55 Australian Securities Commission v Aust-Home Investments Limited [1993] FCA 100; (1993) 44 FCR 194 Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 Fordyce v Fordham [2006] NSWCA 274; (2006) 67 NSWLR 497 CASES CITED : Foukkare v Angreb Pty Ltd [2006] NSWCA 335 Garwolin Nominees Pty Ltd v Statewide Building Society [1984] VR 469 Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 Ohn v Walton (1995) 36 NSWLR 77 ONE.TEL Ltd v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548 Re Minister for Immigration & Ethnic Affairs (Cth); Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622

Elizabeth Anne Norris (Plaintiff) PARTIES : Stuart Neil Hamberger (First defendant) State of New South Wales (Second defendant)

COUNSEL : D A C Robertson (Plaintiff) S B Docker (First defendant)

SOLICITORS : Paul A Curtis & Co (Plaintiff) Rankin Nathan Lawyers (First defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

05847 of 2005 Elizabeth Anne Norris v Stuart Neil Hamberger and State of New South Wales JUDGMENT 1 HIS HONOUR: By her notice of motion dated 21 July 2008 the plaintiff seeks an order that she be given leave to discontinue the proceedings pursuant to UCPR 12.1. Subject to the matters referred to below, the first defendant does not oppose the making of that order and the second defendant has filed a submitting appearance. The plaintiff has also sought an order that the first defendant pay her costs of the proceedings. The first defendant opposes that order and seeks an order in his favour that the plaintiff pay his costs of the proceedings. Neither the plaintiff nor the first defendant seeks an order for costs against the second defendant. 2 UCPR 42.19 is in the following terms: "(1) This rule applies to proceedings that are discontinued by the plaintiff, as referred to in rule 12.1.

(2) Unless the court orders otherwise or the notice referred to in rule 12.1(2) otherwise provides, the plaintiff must pay such of the defendant's costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued." 3 The first defendant submitted that there were no reasons why this rule should not apply in the present case. The plaintiff contended that there were particular matters that ought to lead the Court to order otherwise. These arguments are considered below. The facts that are central to these proceedings in general and to the issues on the plaintiff's notice of motion in particular require some brief consideration beforehand. The facts 4 In 1937 Augustus Hamberger, the grandfather of the plaintiff and the first defendant, was the owner of certain land now known as lot 5 and lot 6, which for present purposes requires no other more particular description or identification. At that time the lots were divided by a road then known as Titaatee Creek Road, which the parties now refer to as the closed road. The route of this road was altered by notice published in the New South Wales Government Gazette on 9 April 1937, which effected a resumption of part of lot 6 and the dedication of it as a public road that then became known as Titaatee Creek Road. Although the notice indicated that the closed road was to be granted in compensation to the owner of lot 6, this never occurred and it remains in the ownership of the Crown. It divides lots 5 and 6, which share no relevant common boundary. 5 By his will Augustus Hamberger left lot 5 to his son Cyril and lot 6 to his other son Colin. Prior to his death in 1950 Augustus built a house partly on lot 5 and partly on the closed road. Cattle yards and a garage were also built partly on lot 5 and partly on the closed road. The Hamberger family has used the cattle yards continuously since their construction. 6 On 10 July 1981 the first defendant became the owner of lot 6 when he purchased it from his cousin Elaine Adams and her husband Robert Adams. Ms Adams had acquired the property from her father Colin Hamberger, an uncle of the plaintiff and the first defendant. 7 On 31 October 2001 the first defendant became the owner of lot 5 pursuant to the terms of the will of Cyril Hamberger who died on 28 October 2000. By his will the land was to be transferred to the first defendant subject to a charge in favour of the plaintiff and her sister for the whole of its value. Lot 5 was valued at $260,000 on the basis that the dwelling, the garage and the cattle yards were only partially located upon it. The first defendant attempted to raise funds by obtaining development consent to subdivide lot 6 into two lots but he was unable to sell either of the proposed lots within one year of Cyril Hamberger's death. 8 Gloucester Shire Council granted development consent on 3 September 2001. The subdivision contemplated by that consent was never effected. On 6 November 2001 the plaintiff became the owner of lot 5 by conveyance from the first defendant. The plaintiff and her husband have lived in the dwelling constructed partly on it and partly on the closed road since shortly thereafter. On 18 April 2002 the first defendant lodged a second development application for the subdivision of lot 6 and the realignment of the boundaries between lots 5 and 6. The plaintiff signed this development application. She alleges that it was made in part performance of the agreement that she contends was made with the first defendant and upon which her principal claims for relief are based. 9 On 26 April 2002 the Council granted consent to the 18 April 2002 development application. Between 2002 and 2005 there were negotiations among the plaintiff, the first defendant, the Council and the Department of Lands as to the proposed transfer of the closed road and the adjustment of the boundaries to each of the lots having regard to the location and use of the structures built partly on lot 5 and partly on the closed road. It is sufficient for present purposes to observe that these negotiations were lengthy and complex but ultimately unsuccessful. 10 In November 2005 the plaintiff commenced the present proceedings. By her statement of claim the plaintiff sought declarations and orders in the nature of specific performance of an alleged oral agreement made between her and the first defendant for the adjustment of the boundaries between lots 5 and 6. Alternatively the plaintiff sought orders that the first defendant transfer to her land within the closed road or the grant of an easement to her pursuant to the provisions of the Encroachment of Buildings Act 1922. 11 By his defence filed on 15 March 2006 the first defendant denied the agreement, contended that it was unenforceable for lack of writing and opposed the making of the orders in any event upon the basis that he did not own the closed road. 12 The plaintiff and the first defendant each made an offer to the other to settle the proceedings. Neither offer was accepted. The proceedings were listed for hearing commencing on 28 July 2008. The matters arising in consequence of the plaintiff's notice of motion were the only matters that were argued on that day. 13 It would appear that the plaintiff's application for leave to discontinue the proceedings was at least in part prompted by letters dated 7 May 2008 written by the second defendant to the plaintiff and the first defendant. The relevant terms of the letters were as follows: "The Department is of the opinion that neither the plaintiff nor the defendant in this matter have (sic) a legitimate claim against the Crown for the closed road or any part thereof. On the one hand the plaintiff's claim under the Encroachment of Buildings Act 1922 must fail because that Act does not apply to the Crown. On the other hand, the defendant's claim whether based on an equitable right possibly belonging to his grandfather/predecessor in title in 1937 or on a legitimate expectation arising from alleged representations made by Departmental officers in 2004 seem equally unsustainable. Therefore, whether and how the land is to be apportioned remains entirely at the discretion of the Minister. Ordinarily Crown land sold to private interests is assessed at market value.

To assist the parties to avoid incurring further unnecessary costs in this matter, the Minister is willing to gift (sic) the land to the parties on the terms below:

The triangular portion adjacent to Bucketts Way as per annexure B to this letter to be gifted (sic) to the plaintiff . . .

The balance of the closed road adjacent to Lot 6 to be gifted (sic) to the Hambergers.

Norris (Lot 5) to grant Hamberger (Lot 6) an easement allowing the owner of Lot 6 access to and use of the stockyards adjacent to Bucketts Way.

Costs of any survey and plan of subdivision to be divided equally between the parties.

Costs of the legal proceedings to be apportioned as agreed.

I am recommending to the Minister that if the parties do not settle this matter prior to the next hearing date that the land should be assessed at its market value and only disposed of on commercial terms in accordance with standard Crown lands policy.

Furthermore, if this matter goes to hearing and the Court indicates it intends making orders against the Minister, the Minister will seek leave to appear and challenge any such orders on the grounds that the Court lacks jurisdiction." 14 Nothing further of significance occurred after the letters were sent. The matter did not "settle" in accordance with the proposals contained in the letter although that fact is referred to in more detail below.

The plaintiff's position 15 The plaintiff contends that although she did not obtain relief in her favour as sought in the proceedings, the outcome was in all of the circumstances such that she achieved a result from the commencement of the proceedings that would not otherwise have been achieved. That is presumably based on a view that it is likely that the offer from the Minister will effect a resolution of the dispute between the parties and that this would not have occurred if she had not commenced the proceedings. The plaintiff draws upon comments such as those in Garwolin Nominees Pty Ltd v Statewide Building Society [1984] VR 469 at 472 in these terms: "Other circumstances in which a plaintiff might seek to discontinue might be after the close of pleadings in an action for possession the defendant has surrendered possession of the subject premises. In that event the plaintiff would have achieved what he set out to obtain by the issue of proceedings. It would be quite unjust and unfair if the plaintiff were denied his costs incurred in achieving the relief he sought by the commencement of his action. Furthermore, it would be quite unnecessary to force him to continue on to trial for the purposes of obtaining orders for possession and for costs. The procedure for obtaining leave to discontinue enables a party to bring to an end his litigation when the relief sought has been obtained". 16 The analogy is to some extent strained in as much as the plaintiff has not obtained any relief in the sense that the term is usually understood even though there appears to be a good prospect that she will in due course be relieved from the consequences of an ongoing and unpleasant dispute with her brother over the closed road and access to improvements that extended onto it. This is because the resolution, if it occurs, is not in terms a manifestation or realisation of any claim that the plaintiff made in the proceedings. Indeed, the first defendant pleaded and continues to argue that there was no relief sought against him by the plaintiff that could have been granted, as he was never the owner of the closed road. The first defendant specifically pleaded in paragraph 24(b)(ii) of his defence that the agreement alleged by the plaintiff was therefore impossible to perform. 17 The plaintiff goes further and argues that it was as a consequence of the first defendant's disavowal of any claim to title to the closed road in that very pleading that the plaintiff filed her amended statement of claim on 24 November 2006 that joined the State of New South Wales as a second defendant and owner of the road. The plaintiff argues that the Minister's letters sent to the parties offering a solution to compromise the dispute would not have materialised but for that fact. This analysis is also somewhat strained bearing in mind that the Minister's letters emphasised if the matter were to proceed to a hearing involving the prospect of orders against him that leave would be sought to oppose that course. 18 Perhaps more persuasively, the plaintiff emphasises the fact that the proceedings commenced by her were commenced in circumstances where "the first defendant claimed title to the whole of the closed road and had instructed the plaintiff to remove her house and the Council and Department of Lands had resolved to vest the whole of the closed road in the first defendant": plaintiff's written submissions par [38]. The plaintiff submitted that it was only because she indicated that she intended to commence proceedings that the Council and the Department of Lands refrained from taking further steps to implement their resolution: plaintiff's written submissions par [39]. While there is some dispute about the accuracy of the first submission, there is no doubt that the plaintiff was faced with an uncertain future with respect to her continued occupation of her house as the result of the first defendant's attitude to the title to the closed road. Furthermore the plaintiff argues that the first defendant no longer takes that approach so that there has in effect been a 'change of position' by the first defendant in the sense contemplated by the use of that phrase in ACI Operations Pty Ltd v Berri Limited (No 2) [2005] VSC 55 at par [28]. 19 There was evidence before me to suggest that even after the plaintiff joined the second defendant and it filed a submitting appearance, the first defendant continued in correspondence from his solicitor to the second defendant as recently as 5 May 2008 to maintain that he had "an interest in the land in the [closed] road and a legitimate expectation that it be transferred to him". The letter also asserted that there was "no reason for the State of New South Wales to transfer any of the land in the closed road to the plaintiff". It is perhaps not without significance that the Minister's letter that prompted the plaintiff's decision to seek leave to discontinue the proceedings was written two days later. 20 In summary the plaintiff submits that her commencement of the proceedings was reasonable, that she was compelled by the conduct of the first defendant to do so in order to protect her interests and that she obtained what she sought (even if not what she claimed) by doing so. The plaintiff submitted that even if she were not entitled to an order that the first defendant pay her costs, the appropriate order should be that there be no order as to costs. In this last respect the plaintiff relies upon what was said by McHugh J in Re Minister for Immigration & Ethnic Affairs (Cth); Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 at 624-5 as follows: "In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action . . . Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried . . . 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. This approach has been adopted in a large number of cases." 21 The plaintiff submitted in the further alternative that the first defendant should be ordered to pay her costs from 25 June 2008 in any event as she made an offer on that date that the proceedings be resolved and that each party pay his or her own costs. The first defendant did not accept that offer. 22 The plaintiff contended that the authorities clearly established that in considering a question of costs such as the present it will rarely, if ever, be appropriate for the Court to determine what would or might have been the outcome on the merits if the matter had proceeded to a hearing: see Australian Securities Commission v Aust-Home Investments Limited [1993] FCA 100; (1993) 44 FCR 194 at 201. The first defendant's position 23 The first defendant contended that rule 42.19 governed the matter. The starting point was therefore that the plaintiff should be ordered to pay the first defendant's costs: see Fordyce v Fordham [2006] NSWCA 274; (2006) 67 NSWLR 497; Foukkare v Angreb Pty Ltd [2006] NSWCA 335; Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365. The first defendant submitted that these cases established at least the following propositions: 23.1 The rule does not create a presumption that the plaintiff should pay the defendant's costs.

23.2 The plaintiff carries the onus of making an application if he or she does not propose to pay the defendant's costs and of establishing that some other order should be made.

23.3 As is generally the case with discretionary powers, the power should be exercised in good faith for a purpose relevant to the purpose for which the power to make orders for costs is conferred, and there must be some sound or positive ground or good reason for departing from the ordinary course.

23.4 The Court should consider all the relevant circumstances and not just the fact of discontinuance or whether the conduct of each party was reasonable. 24 The first defendant emphasised that the purpose of a costs order is to compensate or indemnify the person in whose favour it is made, not to punish the person against whom it is made: Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. Usually the successful party is compensated by a costs order unless there is some ground for refusing to make such an order: rule 42.1, Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534. 25 The first defendant argues that the ordinary course for which rule 42.19 provides is to compensate or indemnify him as the respondent to a claim having incurred costs in defending proceedings that were ultimately abandoned. It is said to be relevant in this respect that unlike rule 42.1, which operates in favour of plaintiffs and defendants, rule 42.19 operates only in favour of defendants. The rule contemplates that in the ordinary course a plaintiff should pay the defendant's costs because of the principles of compensation underpinning the Court's powers to make costs orders. 26 The first defendant accepted that it was inappropriate to consider what might have been the outcome if the proceedings had continued to a trial. Despite this concession, the first defendant sought to argue that the proceedings were fundamentally flawed as he was never the owner of the closed road and that the relief sought against him was never within the power of the Court to grant. It was therefore said to be unreasonable for the plaintiff to have commenced the proceedings in any event and that a departure from the ordinary rule, as sought by the plaintiff, should be rejected. If proceedings may not be commenced for a collateral purpose it is necessary, although not sufficient, that they not be commenced without reasonable prospects of success. 27 The first defendant also submitted that his own conduct was reasonable. He had no choice about commencement of the proceedings and he did not cause them to be commenced. He joined no-one to the proceedings. He filed his defence at the earliest opportunity clearly setting out his position that the plaintiff had no case against him. In any event he had sold the plaintiff's land to her in circumstances where all parties knew there was a problem of encroaching structures, which was reflected in the price, and the plaintiff had been represented by solicitors in the transaction. He had had no obligation to ensure that the plaintiff received more land. Discussion 28 The issues in these applications appear to me to distil to a consideration of whether or not the plaintiff acted reasonably in commencing the proceedings and whether the first defendant acted reasonably in defending them. As far as the second question is concerned, I consider that the first defendant did act reasonably in doing so. His defence was absolutely clear. The agreement alleged by the plaintiff was denied but in any event was said to be incapable of performance, as its subject matter was not owned by him. The plaintiff must clearly have known this and the adoption by the first defendant of a position asserting that the alleged agreement was impossible to perform seems uncontroversial in the circumstances. Even if the plaintiff were able to establish the existence of acts of part performance referable to an agreement of the type alleged, the framing and granting of appropriate relief to enforce performance seems questionable at best and probably illusory at worst. The joinder of the second defendant does not appear to have added any relevant dimension to the debate. 29 The plaintiff's decision to commence the proceedings against the first defendant is not easily or immediately explicable. The appropriate subject of the plaintiff's attention would appear clearly to have been the second defendant although not necessarily as a defendant. The claims against the second defendant under the Encroachment of Buildings Act 1922 may have been subject to some uncertainties but it was nevertheless the legal owner of the closed road and as such the repository of the ability to cure the plaintiff's practical problems. So much of the Amended Statement of Claim that pleads that the first defendant failed or refused to transfer "that part of the closed road comprising the area upon which the buildings of the plaintiff encroach upon the closed road" is in irreconcilable tension with an earlier assertion in the same document that the "closed road remains vested in the State of New South Wales as Crown Land under the Crown Lands Act 1989". The plaintiff did not plead that the first defendant had represented that he could effect a transfer of the closed road (even though he was not the legal owner) and no claim for damages of any sort is made in any event.

30 I am not satisfied that the plaintiff can derive any support for her position from the passage from Garwolin Nominees (supra) referred to in par [15] above. There is a significant difference between the actions of a defendant that produce a result following the commencement of proceedings against that defendant on the one hand and an outcome that appears to bear no necessary or obvious relationship to commencement of proceedings against that defendant on the other hand. The outcome that appears to have been achieved does not conform in any way to what the plaintiff claimed against the first defendant or to what she could have obtained against him as relief in the event of a contested hearing. It is not the case that the plaintiff obtained what she sought to achieve in the proceedings even if she may well have obtained what she sought to achieve by the proceedings. 31 It is instructive to recall the passage from ONE.TEL Ltd v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548 at 553, cited with approval in Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302: "[6] In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs." 32 In the present case it is true to say that some supervening event (which may or may not in due course result in a settlement) has led the plaintiff to choose to discontinue the proceedings. It is not, however, correct to say that the supervening event removed or modified the subject of the "dispute" so that no issue remains between the parties except that of costs. The dispute joined between the plaintiff and the first defendant in this case related to a claim for the enforcement of an alleged agreement. The supervening event did nothing to resolve any dispute concerning the enforcement or performance of that agreement. The anticipated settlement may never eventuate. Whether it does or not, it will not amount to a settlement of the litigation commenced by the plaintiff. There is in my opinion an absence of the flavour of mutuality that appears to emerge from the cases where the usual order has been discarded. On the contrary, the plaintiff's decision to discontinue these proceedings is distinctly unilateral, in contrast to the example of a defendant surrendering possession in proceedings claiming possession, thus rendering unnecessary the continuation of proceedings that had been reasonably commenced in the first place. 33 It is difficult to understand how the plaintiff could have formed a belief that the present litigation, encapsulated in terms of the current pleading upon which she relies, was or would have been either relevant to or necessary for the enforcement of any discernible right or claim to what she really sought from the first defendant. It is also difficult to see how the conduct of the first defendant, whatever view one might form in general about its reasonableness or otherwise in the circumstances of this case, could have led her to commence the actual proceedings that she did commence. It does not seem to me that the plaintiff can demonstrate either that she was justified in commencing these proceedings or that there existed some additional factor, such as the conduct of the first defendant, that led her to a reasonable belief that they were necessary to enforce some right that she had. In my view the plaintiff is beyond the circumstances contemplated by Basten JA in Australiawide Airlines Ltd v Aspirion Pty Ltd (supra) at pars [64] and [65] that would warrant interference with the statutory order: "[64] Rule 42.20(1) provides that, in the case of a dismissal of proceedings, "the plaintiff must pay the defendant's costs of the proceedings". The Court is given power to order otherwise, being a power which would usually be exercised on the application of the plaintiff, on the basis that the statutory rule would not do justice between the parties: see Civil Procedure Act , s 56(1). However, the mere fact that the plaintiff was "justified" in commencing proceedings, or that the parties acted "reasonably in commencing and defending the proceedings" would not necessarily warrant interference with the statutory order: c.f. Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 at 625 (McHugh J).

[65] In order to avoid the statutory order, it was necessary for the plaintiff to show more than justification, in the sense that it commenced proceedings in the exercise of a statutory right available to it. It would have needed to show some additional factor, such as that conduct of the defendant led it to the reasonable belief that litigation would be necessary to enforce its right to payment in a timely fashion or that winding up the defendant was an appropriate means of obtaining payment. As Bryson JA has shown, by detailed reference to the facts before the Court, Aspirion was unable to demonstrate any such basis for the Court to otherwise order." 34 Although it is extremely unfortunate that such a result should flow in proceedings between a brother and a sister who are also neighbours, I can find no proper basis to order that the costs of the proceedings should be paid otherwise than as provided for in rule 42.19. Orders 35 I make the following orders:

35.1 I grant leave to the plaintiff in accordance with UCPR 12.1 to discontinue the proceedings.

35.2 I order the plaintiff to pay the first defendant's costs.

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