Plaintiff v Defendant

1 Miroslav Facek died on 7 July 1996. He was survived by his two children, Mirek Facek ('the plaintiff') and Martina Gargano ('the defendant').

2 On 23 September 1997, the defendant was granted letters of administration of the estate of the deceased on intestacy. Accordingly, the deceased's estate passed to the plaintiff and the defendant in equal shares.

3 At the date of his death, the deceased's estate included two flats in Barkly Street, St Kilda ('the properties') with each flat valued at $100,000 in the inventory of assets and liabilities filed with the defendant's application for letters of administration.

4 By originating motion filed 18 July 2014, the plaintiff sought an administration account in relation to the valuation and sale of the properties and orders that the defendant pay the plaintiff half of the net proceeds of sale of the properties plus interest. Subsequently, by amendment to the originating motion, the plaintiff also sought orders for the removal of the defendant as administrator and trustee of the estate of the deceased.

5 The proceeding was ultimately compromised, save as to costs, and the parties filed written submissions for the issue to be determined on the papers.

6 The proceeding was commenced some 17 years after the death of the deceased and the grant of letters of administration. The plaintiff alleges that during this time the defendant sold the properties and failed to distribute his half share of the estate to him. The defendant rejects this, contending the plaintiff was contacted prior to the initiation of the proceeding regarding the distribution of the estate and it was the plaintiff's intransigence that has delayed the distribution.

7 The proceeding has been delayed over time, with little progress made towards resolution of the dispute. On 3 November 2017, the Court required the parties to file submissions quantifying their positions in respect of the monetary component of the plaintiff's claim. Upon filing of the submissions, the only issues in dispute were the appropriate rate of interest and the costs of the proceeding. The dispute as to the interest rate was limited, with the plaintiff seeking interest at 4.5 per cent per annum as opposed to the defendant seeking the rate at 4 per cent per annum.

8 The parties were unable to reach consensus on the interest payable and, on 15 December 2017, the Court required the parties to file a joint submission to clarify the issues remaining in dispute. The parties did not comply with this request. The Court listed the proceeding again on 25 May 2018 and determined the appropriate interest rate at 4.5 per cent per annum. The remaining issue was the costs of the proceeding, with the defendant claiming costs of $39,561.50 from the date of a Calderbank offer made on or about 26 October 2016 to the present date, such costs being on an indemnity basis.

9 On 19 September 2018, the plaintiff's solicitors filed a notice of ceasing to act for the plaintiff. Since then, the plaintiff was granted an extension to file any costs submissions and was referred to the Court's self-represented litigants coordinator to obtain further assistance. Ultimately the plaintiff did not file any costs submissions.

10 The jurisdiction of the Court as to costs is conferred by s 24(1) of the Supreme Court Act 1986. This general discretion must be exercised in accordance with Order 63 of the Supreme Court (General Civil Procedure) Rules 2015.[1] The prima facie position in respect of costs in litigation is for standard costs to be ordered by the Court, with the Court having the discretion to award costs other than on the standard basis.

11 The 'usual order as to costs' is that 'costs follow the event' and a successful party in litigation is entitled to an award of costs in its favour.[2] The relevant 'event' is success in the action or on particular issues.[3] The unsuccessful party bears the liability for the costs of the unsuccessful litigation.[4] The central principle is to make an order that is fair and just between the parties in the circumstances of each case.[5]

12 The power to order costs is usually exercised after a hearing on the merits. Success in the action or on particular issues is the factor that controls the exercise of the discretion in most cases. Where a proceeding is undetermined and has not been resolved by contest on a hearing on the merits, the Court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. The Court has discretion to make costs orders either where a defendant has consented to a grant of final relief or if there is consensus as to the outcome of the proceedings. In certain circumstances, a costs order can be made if it can be determined that one or other party would almost certainly have succeeded in the proceeding, or if one or other party has acted unreasonably in pursuing or defending the proceeding.[6]

13 Relevant to this discretion are the obligations imposed by the Civil Procedure Act 2010 ('the CP Act') and the powers that Act confers on the Court in respect of costs. Section 65C of the CP Act provides the Court may make any order as to costs to further the overarching purpose. When considering 'the furthering of the overarching purpose' the Court may have regard to 'the degree to which each person ... has complied with the overarching obligations in relation to the proceeding'.[7] Germane to this case are, inter alia, the parties' obligations to ensure the costs are reasonable and proportionate, to use reasonable endeavours to resolve disputes and to minimise delay.[8]

14 The defendant acknowledges that the plaintiff is entitled to his costs up to the date of the Calderbank offer on or about 26 October 2016 and seeks costs of $39,561.50 from the plaintiff as from the date of the Calderbank offer.

15 While Calderbank offers are canvassed in anticipation of the formal determination of a matter, such offers are still relevant where a matter is concluded by way of compromise.[9] A Calderbank offer in such circumstances becomes a relevant consideration in assessing the reasonableness or otherwise of the parties' conduct.[10]

16 The plaintiff has now been paid his entitlement to his one half share of the estate of the deceased and the administration of the estate finalised. With that result, it can be said that the plaintiff has been successful, notwithstanding no formal decision was made by the Court. The defendant submits that the offer made in October 2016 was reasonable given the eventual settlement and the plaintiff was unreasonable in refusing that offer, and there has been significant delay in the proceeding with further costs being incurred. Each of these considerations militate towards a cost order in favour of one of the parties.

17 While relevant, these issues must also be considered with the various obligations enshrined in the CP Act. The issues in dispute involved a small estate requiring an unambiguous and uncontroversial asset distribution to the plaintiff and the defendant. Notwithstanding this, the proceeding has been subject to significant delays since its commencement in 2014. At times, the proceeding was only advanced due to the Court's case management. What should have been the determination of a confined issue has taken over five years. This conduct is against the backdrop of the deceased having died in 1996 and the estate not been fully administered since then.

18 The CP Act obliges litigants to minimise delay, use reasonable endeavors to resolve their dispute and ensure costs are reasonable and proportionate. The history of this proceeding clearly exhibits a failure to comply with these obligations, given the duration of the proceeding and the claimed costs incurred in proportion to the modest amount and issues in dispute.

19 Where the proceeding resolved on an extra-curial basis, the conduct of the parties is of sufficient concern such that it outweighs any factors that would favour the departure from the default premise that that there be no order for costs. This is notwithstanding the fact that plaintiff obtained a positive outcome and the defendant's Calderbank offer.

20 Accordingly, the proceeding be dismissed with no orders as costs.

[1] Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3) [2012] VSC 399 (14 September 2012) [11]. See also Coombes v Ward (No 2) [2002] VSC 84 (27 March 2002).

[2] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 97 (McHugh J) ('Oshlack').

[3] Re Minister for Immigration and Ethnic Affairs (Cth); Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622, 624-5 (McHugh J) ('Lai Qin').

[4] Oshlack [1998] HCA 11; (1998) 193 CLR 72, 97 (McHugh J).

[5] Earnshaw v Loy (No 2) [1959] VicRp 44; [1959] VR 252, 253. See G E Dal Pont, Law on Costs (Lexis Nexis, 3rd ed, 2013) [6.15].

[6] Lai Qin [1997] HCA 6; (1997) 186 CLR 622, 624 (McHugh J); Seng Hpa v Walker [2017] VSC 320 (8 June 2017) [77]-[81].

[7] Civil Procedure Act 2010, s 9(2)(e); Lee Nyong Ptd Ltd v Di Blasi (Costs Ruling) [2018] VSC 5 (15 January 2018) [25]-[28].

[8] Civil Procedure Act 2010, ss 22, 24, 25.

[9] Seng Hpa v Walker [2017] VSC 320 (8 June 2017) [83]. See eg, Gunns Limited v Marr (No 4) [2007] VSC 91 (3 April 2007) [50]; Copping Refuse Disposal Site Joint Authority v Southern Beaches Conservation Society Inc (2016) 24 Tas R 166, 170; Edwards Madigan Torzillo Biggs Pty Ltd v Stack [2003] NSWCA 302 (16 October 2003) [22]; Transfield Services (Australia) Pty Ltd v Gaha [2012] NSWSC 865 (3 August 2012) [28]; cf Collins v Military Rehabilitation & Compensation Commission [2005] FCA 1862; (2005) 147 FCR 570, 579.

[10] See, eg, Stoneman v Bourne [2016] VSC 726 (2 December 2016) [22].