Plaintiffs v Defendants

"The purpose of conferring a discretion to make a special order is to enable the court to order greater costs where the case has about it some special characteristic justifying the order of greater costs. Our conclusion is, therefore, that to justify an order being made there must be some special circumstances associated with the case."[4]

In reaching that conclusion the Full Court relied on some older authority notably a statement by Lowe J in Sherwell v Armour,[5] as to Order 65 Rule 12 of the Supreme Court Rules, (in its then terms) where his Honour said:

"For a judge to otherwise order seems to me to involve that there must be something special in the nature of the case."

"We agree with the statements and are, therefore, of opinion that some special circumstances in the case must be looked for before an order is made departing from the prima facie rule laid down."

5 Counsel for Mr Glavinic submitted that the same approach should be taken in applying the quoted phrase in Rule 63.15 and that the plaintiffs, therefore, must identify special circumstances before the court can "otherwise order".

6 Care must be taken before construction of one rule is applied to the construction of another. Context is everything and here it is very different. The application of Rule 63.15 was considered by Habersberger J in Black Jack Executive Car Services Pty Ltd (in liquidation) v Koulax[6]. In that matter the liquidator sought leave to discontinue proceedings and sought an order for costs against the defendants. O'Doherty's case was not cited to his Honour. His Honour carefully considered a number of cases which in turn had considered the rule. His Honour concluded as follows:

"In my opinion, when the plaintiff discontinues a proceeding, the court is empowered under s 24 (1) of the Supreme Court Act 1986, to make whatever order for costs it considers appropriate, including an order that the defendant pay the plaintiff's costs, which is an order 'otherwise' within the meaning of Rule 63.15."

7 Accepting that proposition, the fact remains that in applying Rule 63.15, the ultimate onus must rest with the discontinuing party to persuade the court to "otherwise order". Counsel for the plaintiffs accepted that proposition.

8 In determining that critical question, it was common ground between the parties that it is relevant to consider the reasonableness of the conduct of the parties before commencing the proceedings, in commencing the proceedings, in conducting the proceedings and in the termination of the proceedings. It was also common ground that it is not appropriate where there has not been a trial of the merits for the court to consider the case on its merits and to try to determine the likely outcome of the hypothetical trial when determining the question of how the costs of the proceedings should be borne. Counsel referred to a number of authorities on this question.[7] One distinction drawn in the authorities is between cases where one party, after litigating for some time, effectively surrenders to the other and cases where some supervening event so modifies the subject of the dispute that although it cannot be said that one side won, no issue realistically remains between the parties except that of costs.[8]

9 Ultimately, the question appears to be whether the conduct of the parties in relation to the dispute and the issuing and handling of the proceeding, warrants a departure from the general rule that the plaintiff discontinuing should pay the costs of the defendant. Plainly, in ordering otherwise, the court may do so in respect of some[9] or all[10] of the costs. It would also appear to be generally accepted that where both parties have acted reasonably in commencing and defending a proceeding and their conduct continued to be reasonable until the proceeding was settled or became futile, courts will usually exercise the discretion as to costs not to make any order for the costs of the proceeding.[11] That practice, however, appears to have developed where a court has a general discretion to determine where the costs should lie in such circumstances.

Conduct and events leading up to the issue of the writ

10 The proceeding with which we are concerned was issued on 20 October 2003. It related, inter alia, to a claim that had been made by Mr Glavinic for adverse possession of a small strip of land owned by the plaintiff and described in argument as "area A". It is a strip of land which runs along the boundary from a street frontage to a point about half way along the properties. The land is shown in the plaintiffs' title to 47 Lancaster Street, but is occupied by Mr Glavinic, the owner of 49 Lancaster Street.

11 The plaintiffs acquired their land in 1987. Mr Glavinic acquired the adjoining property in 1997. In 1997, Mr Patsios approached Mr Glavinic about replacing the fence along the boundary of area A and moving it back on to the title boundary. He has deposed to five occasions in and between 1997 and 2000 on which he discussed this issue with Mr Glavinic, stating that on each occasion Mr Glavinic agreed to moving the fence back to the title boundary. Mr Patsios has deposed that his reason for wanting to move the fence was that he had been told by a utilities inspector that the hot water unit was in a position in breach of the regulations because of its proximity to the fence. Whilst Mr Glavinic, in his defence, has denied any such agreement he has not, in his affidavits, denied the affidavit evidence of Mr Patsios as to such agreements.[12] Mr Patsios deposes that on each occasion Mr Glavinic suggested deferral for different reasons such as lack of funds or because he was planning construction works which could cause damage to any fence. Again these matters are not disputed by Mr Glavinic in his affidavit. Mr Patsios deposes that around about October 2001, Mr Glavinic's construction works were completed and he sought quotations for the construction of a new fence. He also deposes that on about 19 November 2001 he met with the Mr Glavinic to discuss the fence issue again. He states that they agreed on the height and the type of wood to be used but, for the first time, Mr Glavinic said that he did not want the fence line moved and suggested reversing the palings which would have the effect of straightening the fence and moving it closer to the title boundary. In response, Mr Patsios says he suggested that they obtain a surveyor to determine the precise boundary but Mr Glavinic would not agree to the appointment of a surveyor.[13]

12 Following Mr Glavinic's indication that he did not want the actual fence line moved, Mr Patsios consulted a firm of solicitors to obtain advice. On 20 December 2001 his solicitors wrote to Mr Glavinic requesting the replacement of the boundary fence. They enclosed two quotes and asked that the new fence be placed on the proper title boundaries. No response was received from Mr Glavinic. As a result, on 30 January 2002 Mr Patsios served Mr Glavinic with a notice to fence. The notice required Mr Glavinic to contribute half the cost of the replacement fence except in relation to 10 metres of an unfenced area where Mr Glavinic's garage wall had been removed by him and in relation to which Mr Patsios required him to bear the entire cost. The height of the replacement fence was listed at 1.9 metres, the height previously agreed. Mr Glavinic responded on 12 February 2002 stating among other things that he would not pay for a fence to a height of 1.9 metres, that he would only pay for half the cost of re-fencing the 10 metre unfenced area and that he would only agree to replace the fence on the condition that the palings of the fence be reversed so as to face his property.

13 Because it appeared that the matter was not going to be resolved through negotiation, Mr Patsios filed a complaint on 15 May 2002 at the Dandenong Magistrates' Court seeking orders under the Fences Act 1968. It sought orders that Mr Glavinic contribute to construction of a new fence and pay part of its costs and that it be built in a straight line to meet with the brick pillar at the boundary of the property. This would have required the fence line to follow the title boundary.

14 The matter came on for hearing on 15 August 2002. At the hearing Mr Glavinic indicated that he intended to make an adverse possession claim in relation to that portion of the plaintiffs' land on his side of the fence - the A area. The magistrate indicated that the Court did not have jurisdiction to decide that issue and accordingly ordered that the proceedings be adjourned to enable the first defendant to issue proceedings seeking adverse possession.

15 On 6 September 2002 Mr Glavinic through his solicitors wrote to the plaintiffs stating that he had obtained an entitlement by adverse possession consistent with the fence line since 1983. He proposed a colorbond fence of 1.6 metres in height to be erected on the basis that the plaintiffs contributed one half of the cost of a standard paling fence and Mr Glavinic would pay the difference. In the alternative he proposed that the fence posts be moved "to the original position by 1/2 the width of a fence post" and a standard fence be constructed. He stated that if the offer was not accepted within seven days Mr Glavinic would commence an application for adverse possession and costs would be claimed against the plaintiffs.

16 By letter dated 11 September 2002, the Monash-Oakleigh Legal Service responded on behalf of the plaintiffs stating that they did not wish to defend the adverse possession claim that Mr Glavinic proposed but that they maintained their initial instructions that Mr Glavinic join with them and contribute to the construction of the fence along the common boundary of the type specified in the quotation of Southern Feature Fencing Pty Ltd dated 3 December 2001, that Mr Glavinic pay 100% of the cost of the 10 metres of the fence removed by him and 50% of the cost of the remaining length of fence, the palings of the fence remain facing the plaintiffs' property known as 47 Lancaster Street East Bentleigh, that the height of the fence be increased to 2.1 metres and that Mr Glavinic pay the costs of the plaintiffs.

17 The matter came before a magistrate again on 10 October 2002 at which time the proceedings were again adjourned to enable the first defendant to pursue his adverse possession claim.

18 By application dated 20 December 2002, Mr Glavinic lodged an application for a vesting order under s 60 Transfer of Land Act 1968 seeking an order from the Land Titles Office vesting part of the plaintiffs' land in Mr Glavinic - the area "A". It was made on the basis of adverse possession for a period greater than 15 years.

19 On 6 February 2003, the Registrar of Titles sent a requisition to Mr Glavinic requiring that:

"the survey . . . be extended further to the south, as excess land appears to exist along Lancaster Street, and may affect the area of land being claimed."

20 The requisition did not indicate how far south the survey should extend. Following receipt of that letter, and in response to a suggestion from a Land Titles Officer examiner, a surveyor, Mr Rickard, was engaged by Mr Glavinic to do a re-establishment survey. It appears to relate only to the boundaries of Mr Glavinic's land. A result of this survey was a suggested adjustment of the boundary line between the two properties so that there was only a very minor discrepancy between the existing fence line and a proposed new title boundary on the plaintiffs' land and his land. On 27 May 2003, Mr Glavinic's solicitors sent to the Registrar an amended plan of survey certified by Mr Rickard, his surveyor, dated 22 May 2003. Mr Glavinic deposed that that new survey showed the fence was 51/2 inches approximately on the plaintiff's side of the proposed boundary at the street line of Lancaster Street and narrowed to a width of 130 millimetres or 140 millimetres or 5 inches approximately at a point approximately half way along the boundary. Travelling further west the fence was in the same position as the title boundary. The result was that the discrepancy was an area of approximately 5 square metres. He deposed that a difference of about 100 millimetres in the position of the boundary can result from the reversal of the posts from one side to the other side of the palings.

21 On 27 May 2003 the solicitors acting from Mr Glavinic wrote to the plaintiffs' solicitors enclosing Mr Rickard's survey. The letter pointed out that the plan substantially reduced the area claimed by Mr Glavinic by adverse possession and argued that the small area now affected by adverse possession could be eradicated by the plaintiffs agreeing to the upright palings being on the side of the fence of Mr Glavinic. The letter stated that if the plaintiffs were agreeable to that course there would be no need for an adverse possession application to proceed and they were hopeful that a common sense resolution of the dispute could be achieved. The letter asked that the plaintiffs and the solicitors discuss the matter with the plaintiffs' surveyors.

22 On 12 June 2003, the plaintiffs' solicitors replied to that letter. They advised that the plaintiffs' position remained that they required the boundary fence to be positioned in accordance with the boundaries. By letter dated 13 June 2003 the solicitors for Mr Glavinic raised the same issues and sought the name of the plaintiffs' surveyor so that the two surveyors could confer to enable a new plan to be lodged. The solicitors for the plaintiffs did not supply the name of their surveyor.

23 The precise status of the attempted re-establishment survey is unclear on the materials. I note, also, that the plaintiffs challenge the accuracy of the Rickard survey of 22 May 2003 on the basis that it did not accord with their own survey plan nor did it accord with Mr Rickard's survey of 4 December 2002 and 19 December 2002. It is alleged that the 22 May 2003 survey was produced to support the first defendant's adverse possession claim. For Mr Glavinic it was put that the discrepancies between Mr Rickard's survey and that of the plaintiffs' surveyor was 50 mm (2 inches) and this was within the range of permissible discrepancy.

24 On about 5 September 2003, the plaintiffs received a letter from the Registrar of Titles informing them of the application for a vesting order and stating that it would be granted within 21 days unless they lodged a caveat pursuant to s 61 Transfer of Land Act 1958 (Vic). To protect their interests in the land claimed by Mr Glavinic the solicitor arranged for a caveat to be lodged. Mr Patsios was also advised by the Land Titles Office that to prevent the caveat expiring and Mr Glavinic's adverse possession application succeeding he would have to issue proceedings in the Supreme Court. As a result, on 20 October 2003, the plaintiffs issued the writ in the present proceedings.

25 Among other things, the statement of claim alleged that Mr Glavinic had represented in 1997, orally, that he would agree to move the boundary fence and place it in its proper alignment with the survey title boundary at a later time when he had more funds and it alleged that he had breached that representation. It also alleged that in May 2000 at a meeting conducted at the Offices of the City of Glen Eira the plaintiffs and the first defendant made an agreement, partly oral and partly in writing, that, in consideration of the plaintiffs withdrawing their objection to a development proposal of Mr Glavinic, Mr Glavinic would agree to move the boundary fence to its true survey title boundary position. The writ alleged breach of this agreement. A number of other matters were pleaded and alleged. For present purposes it is sufficient to note that reference is made, inter alia, to Mr Glavinic's application for a vesting order to the Land Office Victoria and damages are sought together with an order refusing the adverse possession application, an order that the boundary fence be replaced in the position of the survey title boundary at the sole cost and expense of the first defendant and an order for costs in favour of the plaintiffs.

Assessment of the conduct of the parties up to and including the issuing of the writ

26 In assessing the reasonableness of the conduct of the parties it is relevant to consider the strengths and weaknesses of their cases and their knowledge of each other's case.

27 At no time prior to issuing the writ do the plaintiffs appear to have had or been given any evidence or information to suggest that there was any substance in the claim of Mr Glavinic. As to their case, Mr Patsios has deposed that he observed the fence in question being built in July of 1987 shortly prior to their moving into the property in October 1987 and has given a plausible account as to how that occurred.[14] They also had evidence of agreements which do not appear to have been challenged on affidavit by Mr Glavinic. Those agreements raised issues about whether the necessary intention to possess continued,[15] possible estoppels and other arguments. While they could not predict the outcome of any litigation with any confidence, they had a reasonable case when they issued. They issued their writ as a result of Mr Glavinic pursuing his adverse possession claim through the Land Titles Office.

28 As to the case of Mr Glavinic, at the time of his vesting application he had very little information. What there was is revealed in his statutory declaration sworn on 10 December 2002 in support of his application for a vesting order. The only material he was able to provide at that time to support a finding that the fence in question had been constructed prior to 1987 was the following:

"5. That from inquiries made by me I believe that the fence was constructed in 1983.

6. That I have had discussions with the previous owner of the property Mr Gienek Mienelenwicz. He advised me that he never lived in the property and that during the course of his ownership of the property the property was rented. He informed me that in 1983 the tenant requested him to contribute to the construction of a boundary fence. He is unable to state which fence was built, however, he believes that it may have been the fence on the southern boundary. He did not pay for the construction of any other fence during the time of his ownership of the property. He owned the property between 1981 and 1997 when he sold the property to me. . . .

10. That to the best of my knowledge and belief no acknowledgement or (sic) ownership in respect of the claimed land or part thereof has been given."

A number of points may be made about this material. Evidence of Mr Glavinic's belief would not be admissible at any trial of the matter. If the only basis for his stated belief in paragraph 5 was what he had been told by Mr Mienelenwicz, he had no basis for his belief. That gentlemen apparently could not state which fence was built. His evidence was insufficient, in my view, to support an adverse possession claim and provided no basis, let alone a reasonable basis, on which to assert a right to the property by adverse possession.

29 The first defendant also faced a further problem in any event, namely the effect of the alleged agreements by him from 1997 to 2001 that the fence be moved to the title boundary. If in that period he had abandoned his adverse possession, then to prove that the fence was built in 1983 would not assist him. There was the further issue of the effect on the limitation period of the plaintiffs' action in issuing the Magistrates Court proceeding.

30 The making of the application for a vesting order was the act which brought the issue to a head and resulted directly in the issuing of a writ by the plaintiffs. At the time he made the application, Mr Glavinic had no sound basis for making a claim for adverse possession. The plaintiffs on the other hand were the registered proprietors and appeared to have a reasonable case. They acted reasonably in trying to defend their title by issuing the writ against Mr Glavinic. Mr Glavinic acted unreasonably in initiating his vesting application. To describe his conduct as opportunistic, as the Master did, is being generous.

31 In forming this view, I have rejected arguments advanced on behalf of Mr Glavinic. His counsel submitted that the plaintiffs acted unreasonably in rejecting the proposal to settle the matter advanced to them by the correspondence of 27 May 2003. This letter of offer arose out of the suggested re-establishment survey. Apparently, the point at issue was whether the original survey of the blocks of land had been conducted from the appropriate survey point. The re-establishment survey proposed by Mr Rickard would have had the effect of moving the boundary between the two properties a short distance to the south with the result that, if implemented, the land the subject to the adverse possession application was reduced in width to the point that the amount in dispute was approximately 5.5 inches wide and totalled approximately 5 square metres. Counsel for Mr Glavinic submitted that the refusal was unreasonable because if the proposal had been accepted, the palings on the fence would essentially have been on the suggested new title boundary.

32 This argument, I suggest, is disingenuous. The particular re-establishment survey was a proposal from Mr Glavinic. Its precise state and status were (and are) unclear. Whether owners of adjoining properties would need to be involved is not clear. What it did was suggest moving the common boundary closer to the location of the paling fence. It presumably would have involved a reduction of the total area of the plaintiffs' land unless their southern boundary might also have been the subject of a re-establishment survey. The proposal was not a compromise proposal but effectively gave the first defendant what he was seeking. It was a proposal requiring analysis by the plaintiffs' surveyor and lawyers and consideration of its implications generally. The important issue of costs was not dealt with in the letter. There was in reality nothing that could be accepted at that time. The defendant was still maintaining his case of adverse possession but had revealed little or no information about the facts relied upon to support the claim for adverse possession beyond the assertion that the fence was erected in 1983. The defendant also had the problem of the possible legal effect of the earlier agreements. In all the circumstances it cannot be said that the plaintiffs acted unreasonably in rejecting the proposal. The issues had become more complex, however, and settlement of the dispute even more desirable.

33 Counsel for the first defendant also submitted that the plaintiffs acted unreasonably in issuing the writ because they knew that the first defendant was only seeking a small area, some 5 square metres and this was commercially absurd as the plaintiffs have said. In addition it was going to make little difference to the enjoyment of the property. If those propositions are correct, they apply equally to Mr Glavinic. I note that the area in dispute was in fact more than 5 square metres but still a small area.

34 The first defendant had given no indication of a desire to compromise and the plaintiffs had no option but to issue the proceedings if they wished to protect their rights.

Conduct of the Supreme Court proceedings

35 As noted above, the writ of the plaintiffs was issued on 20 October 2003. A directions hearing took place before Master Bruce on 5 Feb 2004. Orders were made setting a time table for interlocutory steps following which an unsworn affidavit of documents dated 6 May 2004 was supplied by Mr Glavinic to the plaintiffs on 7 May 2004 and on 11 August 2004 the plaintiffs swore an affidavit of documents.

36 After issuing the writ, the solicitors for the plaintiffs wrote on 5 August 2004 to the first defendant's solicitors referring back to the letter of 27 May 2003 and seeking information and elaboration of the propositions made in that letter - in particular an explanation of the proposition that there was now a small area affected by adverse possession which could be eradicated by placing the upright palings on Mr Glavinic's side of the fence. Notes and diagrams were sought. The letter suggested that this material would be good material to discuss at a mediation to be held on 26 August 2004. The letter also requested the provision of a number of documents including statutory declarations of G Mienelenwicz sworn 30 May 2003 (together with exhibits), P. Archer sworn 13 June 2004, Mr Glavinic sworn 2 June 2003[16] D Scobarrs sworn 11 July 2003 and Bruce Granger dated 12 August 2003.

37 The first plaintiff, Mr Patsios, deposes that during the mediation it became clear to him that because of the enormous cost of legal representation and the fact that he would not be able to recover more than half of his legal costs even if the court found in his favour, the continued conduct of the proceeding was "impractical and uncommercial and accordingly futile". He went on to depose that the disputed land according to his surveys was, at its widest point, approximately 21 centimetres wide. Its effect on the value of his property was, therefore, minimal. It had no impact on the enjoyment of his property. Having formed that view, he then sought to negotiate a settlement with the first defendant. In particular, he proposed that the first defendant be permitted to obtain that part of the land subject to the adverse possession claim, that the proceedings be discontinued, that the plaintiffs and first defendant each pay half the costs of the erection of a new fence to a height of 1.9 metres and that each of the parties bear their own costs. A series of without prejudice communications passed between him and the first defendant following the mediation. The negotiations, however, were unsuccessful.

38 On 16 December 2004, Mr Patsios attended a directions hearing before Master Bruce. He informed Master Bruce that the plaintiffs did not wish to proceed against the first defendant and that they wanted to end the matter on the basis that each of the parties to the proceeding bore their own costs. The first defendant indicated to the Master that he was not willing to settle on that basis and that he required that the plaintiffs pay his costs. The Master urged the parties to negotiate a settlement before the next directions hearing on 3 February 2005.

39 At the next directions hearing, the parties' positions had not changed and the Master suggested that the first defendant provide the plaintiff with a bill of costs in taxable form. At the hearing on 3 March 2005, again the positions of the parties had not changed. The first defendant advised the Master that he was yet to provide the plaintiffs with a bill of costs in taxable form.

40 On 6 April 2005 the plaintiffs' solicitor sent a letter to the first defendant re-stating the terms of the previous offers of settlement. On 7 April 2005 the wife of Mr Glavinic contacted Mr Moss, the solicitor for the plaintiffs, to advise that the first defendant was not prepared to settle on the basis of the terms in the letter. Mr Moss then requested the first defendant to provide the plaintiffs with a counter offer for consideration and the provision of a bill of costs in taxable form. On 8 April 2005, the solicitor for the first defendant spoke to Mr Moss repeating the first defendant's rejection of the offer of settlement. In that conversation, Mr Moss repeated the request that the first defendant make a counter offer and provide the plaintiffs with a bill of costs in taxable form. There was a further conversation between solicitors on that day in the course of which the solicitor for the first defendant repeated that his client was only willing to settle on terms that the plaintiffs pay his costs but said that they would have to be paid on an indemnity basis.

41 On 12 April 2005, the Listing Master made orders setting the proceedings down for trial. On 6 May 2005, the plaintiffs' solicitor wrote to the solicitor for the first defendant noting that despite numerous requests the first defendant had not provided a bill of costs in taxable form stating that if it was not provided the plaintiffs would be applying for leave to discontinue the proceedings and for an order that each party bear their own costs. The solicitors for the first defendant having failed to provide a response, on 23 May 2005, the plaintiffs instructed their solicitors to file a summons seeking orders that the plaintiffs be granted leave to discontinue the proceedings and that the plaintiffs be awarded costs of the application and that otherwise there be no order as to costs. It was in those proceeding on 31 May 2005 that Master Evans made the orders from which the appeal is brought.

Assessment of conduct under the litigation

42 The steps taken by the parties to advance the proceedings up to and including the mediation were reasonable in all the circumstances and neither party should be criticized for them. Criticism, however, may be made about the conduct of the first defendant at or after the mediation.

43 Looking at the state of the parties' cases, some changes occurred in the evidence available to the parties subsequent to the lodging by Mr Glavinic of his vesting order application on 20 December 2002.

44 It is apparent from the discovered documents of Mr Glavinic that, at about the time of and shortly after the offer made by the first defendant in May 2003, he had been obtaining information and statutory declarations from various persons about the construction of a fence on the southern boundary of his land. Initially, his application had proceeded on the basis that the fence in question was built in 1983. The statutory declarations included the following:

• Statutory declaration of Gienek Mienelenwicz.[17] He was the proprietor of 49 Lancaster Street prior to Mr Glavinic. He stated that on 20 June 1983 he wrote a cheque for $583 being his contribution to the cost of a replacement fence. He states that to the best of his recollection he believes it was the fence in question on the boundary between 49 and 47 Lancaster Street. He recollected that the fence was organised by the owner of 47 Lancaster Street. To the best of his knowledge and belief the fence line remained unchanged from June 1983 till the time he sold the property to Mr Glavinic in May 1997.

I note that the statement is couched in terms of belief and best recollection. The cheque butt exhibited simply refers to "Home improvement fence at 49 Lancaster Street". Assuming it was on the southern boundary, nothing was said as to whether it was the whole or the front section or rear section that was "replaced". I note also that Mr Mienelenwicz had been reported in Mr Glavinic's original declaration as stating that he could not state which fence was built but believed it may have been the fence on the southern boundary. His own statutory declaration is only marginally stronger.

● Statutory declaration of Paul Archer.[18] He states that he and his wife resided at 49 Lancaster Street from 1981 to 1986 and that during that time the fence on the southern boundary remained unchanged. Mr Archer and his wife were tenants of Mr Mienelenwicz. On the other hand he exhibits a family photograph which he states was taken at the premises showing a relatively new fence along the southern boundary. He deposes that the fence may have been a new fence replacing an earlier older fence and that neither he nor his wife had any accurate recollection of a new fence being built. Thus, while the photographs may provide some evidence (depending on satisfactory proof of them and when they were taken), the declaration itself contradicts the defendants' original case and Mr Mienelenwicz' suggestion that the section of the fence in question was erected in 1983, although, if accepted, it might support an earlier potential start date for the adverse possession, depending on its alignment. Forensically, however, it had the disadvantage for Mr Glavinic that it complicated his case and introduced uncertainty.

● Statutory declaration of Danica Skoblar.[19] She declares she was a neighbour who lived at 40 Lancaster Street between 1984 and 1994 and states "from her knowledge and belief" that the boundary fence between 49 and 47 Lancaster Street was unchanged during that period.

45 It can be difficult to demonstrate adverse possession because of the lapse of time, the weakness and fallibility of memory and the lack of objective evidence. The statutory declarations in this case exemplify the problem. They are imprecise, and contradict each other. A brief reading of them throws up obvious areas from cross-examination. They should not have given a reasonable person in the position of Mr Glavinic any confidence. They should have given the plaintiffs some concern despite their weakness because there was the possibility that at trial the weaknesses might be overcome and a longer period of adverse possession established. On the other hand, as noted above, they were in the position that Mr Patsios was able to give plausible evidence that he saw the fence being erected in July 1987.

46 In assessing the state of the cases at this point, reference should again be made to the matters raised above as to the potential difficulties faced by the first defendant from the evidence of the agreements reached between 1997 and 2001 between the parties (never denied on oath by the first defendant) that Mr Glavinic had agreed to the fence being moved to the title boundary.

47 The first defendant, if acting reasonably, should have been proceeding on the basis that his prospects, at best, were unclear. The plaintiffs, on the other hand, had real prospects of winning so long as the evidence adduced by the first defendant remained in an unsatisfactory state. But their prospects depended very much on the credibility of Mr Patsios.

48 At that time of the mediation, therefore, I suggest that the plaintiffs had better prospects of success in the proceedings. I proceed on the basis, however, that the first defendant's position had marginally improved and the likely outcome of the case for either side was equally unclear. In that situation, the plaintiffs acted reasonably in appreciating the commercial futility of proceeding any further with the matter and in trying to end the litigation by offering the first defendant what he wanted, but on terms that each side bear their own costs.

49 Counsel for the first defendant submitted that that action was taken because the plaintiffs realised that their case had no merit. On the material before me, that is unlikely. The issue has also been the subject of evidence from Mr Patsios. In his affidavit sworn on 16 June 2005, he stated the following

"I dispute that my claim in these proceedings was at any time misconceived or had no chance of success. In contrast to the First Defendant's evidence, I know for certain that the fence at the northern boundary of my property was built in 1987 because I witnessed its construction myself. On this basis, I was always confident that I would succeed in my claim if the matter proceeded to trial, the reason being that the First Defendant had not adversely possessed my land for the 15 years required to obtain a vesting order. I, with my wife, came to the decision to discontinue the proceedings not because I doubted the merits of our claim, but rather for the reason that even if we succeeded, the cost of pursuing the claim far outweighed the value of the land in dispute."[20]

This position was also stated, for example, in a letter of 6 April 2005[21] in which the solicitors for the plaintiffs stated the following:

"Based on our clients' instructions and our review of all the documentation relevant to these proceedings, we are of the view that our clients' claim is well-founded and that they have a very good chance of success should the matter proceed to trial.

We note, in this regard, that the weight of evidence suggests that the fence separating your property from our clients was built sometime in July 1987, the time during which the disputed land was allegedly possessed by you stopped running on 17 May 2002 when our clients filed a complaint in the Magistrates' Court seeking an order that you contribute to the cost of erecting a new fence along the true boundary between the properties.

Accordingly, the Court would be bound to make a finding that the disputed land was possessed by you, if at all, for a period of 14 years and 10 months, not the 15 years required for a successful adverse possession claim."

50 Of course it might be said that a party and the party's solicitor would make statements like that in that situation. In my view, however, the views expressed had a reasonable basis. A reasonable defendant weighing up the weaknesses of his own case and facing an uncertain outcome would have readily accepted the offer. Instead he not only refused to accept the proposal but demanded that his costs be paid. Having demanded his costs be paid he failed to respond to requests for a taxable bill (suggested by the Master) and counter offer. By failing to provide a taxable bill, he denied the opportunity for further negotiation. The reason given in his affidavit material for that failure is that he was in dispute with the solicitors who had done most of the work and, therefore, was unable to provide a bill of costs in taxable form. This explanation is difficult to accept bearing in mind that his previous solicitors would have been keen to be paid and the issue went on for some months. It would be remarkable if those solicitors were not prepared to provide a bill of costs in taxable form. No evidence was produced from them and no explanation for its absence was given. Further, the first defendant's ultimate response was not merely to require payment of his costs but to require them on an indemnity basis. This in all the circumstances, could not be justified. I note that he is not seeking such an order now. The claim for indemnity costs demonstrated that he was not interested in settling the case but was trying to gain the most he could from the already generous attempt of the plaintiffs to settle. The best he could hope for in the circumstances was an order for costs on a party/party basis. It seems likely that he saw the plaintiffs' generous offer as a sign of weakness or capitulation and an opportunity to force them to give him everything he wanted. But to do so he was prepared to force the parties to a trial of the case.

Conclusion

51 This was a case in which the costs, if the case was fought, were always going to grossly exceed any value of the land in question. That should have been apparent to both parties at the outset but obviously was not. That is often the case. It is to the credit of the plaintiffs that they came to appreciate that reality and, when the did, they faced up to it and took the initiative in trying to negotiate a settlement.

52 The writ was issued because of the action of the first defendant in lodging a vesting application. For the reasons referred to above, the first defendant acted unreasonably in making that application and the plaintiffs acted reasonably in challenging it. If the better view be that both acted reasonably or unreasonably at that early stage, what becomes critical to this application is the conduct of the parties in the critical phase in the proceedings when the attempt was made to resolve the dispute prior to the trial at and subsequent to the mediation.

53 At that time the plaintiffs faced up to the realities and behaved in a more than reasonable fashion in trying to resolve the matter by agreeing to let the first defendant have adverse possession of the disputed land when, on the evidence revealed in these proceedings they had real prospects of succeeding. It is reasonable to infer that this was done on the basis that it was the best way to end the matter quickly. Having offered the first defendant more than he could be confident of gaining it was also more than reasonable on their part to propose that each side should accept the burden of their own costs. It was unreasonable on the part of the first defendant to reject that proposal and even more unreasonable to demand that his costs be paid and paid on an indemnity basis. It was also unreasonable on his part to expect the plaintiffs to agree to pay his costs without knowing what they were.

54 Counsel for the first defendant submitted that the critical feature of the matter was that the result of the actions of the plaintiffs was that the first defendant was successful and therefore the first defendant was entitled to his costs. Such an analysis is simplistic and inaccurate. It is true that the first defendant won. But he won because of the plaintiffs' reasonableness and his unreasonableness. The success of the first defendant did not reflect an acknowledgement by the plaintiffs that they could not win but reflected acknowledgement by the plaintiffs of the commercial stupidity of taking the matter any further. The first defendant's actions were unreasonable and resulted in the need for a hearing before Master Evans to have the issue of costs resolved.

55 If the better view is that both sides acted unreasonably in entering into the litigation, it was the plaintiffs who attempted to end the proceedings before the major costs of a hearing were incurred. They sought a negotiated resolution but the first defendant did not and, instead, as he had always done, demanded total victory. What he seeks now are orders that would punish the plaintiffs for being reasonable and sensible and doing the only thing left to terminate the proceedings, namely, seeking leave to discontinue. Again the plaintiffs were the people acting reasonably.

56 In the final analysis, it seems to me that it is important that the court assist parties to negotiate settlements in commercially unviable proceedings and if that is not possible because of the unreasonable intransigence of one party, the court should enable the party attempting to terminate the proceedings to do so \without being punished. It is true that our trial system is an adversary one but reasonable behaviour should not be punished and unreasonable behaviour should not be rewarded.

57 The plaintiffs do not seek to change their position so far as the costs of the proceedings are concerned and seek merely to maintain the order that was made below. They seek, however, the costs of this appeal if it be unsuccessful.

58 In my view the appeal should be dismissed and the first defendant should be ordered to pay the costs of the appeal. I will hear further submissions on the terms of the orders including the order as to costs of the appeal.

[1] Rule 77.05 (02).

[2] Rule 77.05.

[3] [1971] VicRp 75; [1971] VR 625.

[4] At 628.

[5] [1962] R V 197.

[6] [2002] VSC 380.

[7] Australian Securities Commission v Aust-Home Investments Ltd [1993] FCA 585; (1993) 44 FCR 194; Re the Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; ex parte lai Qin [1997] HCA 6; (1997) 186 CLR 622; Ringwood Plus Pty Ltd v Commissioner of State Revenue [2004] VSC 494;

[8] See discussion Hollingworth J in Ringwood Plus Pty Ltd v Commissioner of State Revenue, above, [13] - [23].

[9] E.g. Black Jack Executive Car Services Pty Ltd (in liquidation) v Koulax, above.

[10] E.g. Ringwood Plus Pty Ltd v Commissioner of State Revenue, above.

[11] Re the Minister for Immigration and Ethnic Affairs; ex parte lai Qin, above, at 625; Applied Ringwood Plus Pty Ltd v Commissioner of State Revenue, above, [33].

[12] Paragraphs 13, 15, 16, 17 & 18 of affidavit of Patsios 16 June 2005.

[13] See also account in earlier affidavit sworn 9 June 2005.

[14] He deposed that he was living around the corner and used to drive his daughter to school each day. The route took them past the property. The property was near an intersection at which he was required to stop and so he had time to take particular notice of the fence being constructed.

[15] Buckingham Shire County Council v Moran [1990] 1 Ch 623; JAPYE (Oxford) Ltd v Graham [2002] UKHL 30; [2003] 1 AC 419 [42] - [43], [53] - [54], [60] - [64], [71], [76] - [80]; P Butt, Landlaw, 5th Ed, 2006, 865

[16] It annexed a new survey and valuation.

[17] Sworn 30 May 2003.

[18] Sworn 15 June 2003.

[19] Sworn 11 July 2003.

[20] Paragraph 69.

[21] NP10.