//
[2020] VSC 539
General information, not legal advice.
Supreme Court of Victoria
2020-08-26
Cavanough J
Original judgment source is linked above.
COSTS - Plaintiffs obtaining final orders as sought in statement of claim by consent - No trial on the merits - Principles - Relevance of capitulation or surrender by defendants - Whether same result at trial 'almost certain' - Whether defendants' conduct unreasonable - Costs of costs dispute - Whether further hearing required - Defendants to pay plaintiffs' costs of proceeding proper and 75% of plaintiffs' costs of dispute about costs.
1 This is a ruling on the question of the costs of this proceeding.
2 On Thursday 31 October 2019, the plaintiffs commenced the proceeding by writ and statement of claim. They pleaded, in effect, that they had a right arising by prescription (long use) in the nature of an easement of way over a certain area of the defendants' land; and that the defendants were threatening to interfere with that right by building over a part of the relevant area. The plaintiffs claimed a declaration of right, injunctions (interlocutory and permanent) to restrain the defendants from interfering with the claimed right, and costs. On the same day, they filed a summons for interlocutory relief and six affidavits in support. The documents were served on Monday 4 November 2019.
3 On Thursday 7 November 2019, the plaintiffs filed and served comprehensive written submissions in support of the summons. On the same day, the defendants apparently served written submissions relating to the summons, but did not file those submissions or otherwise provide them to the Court at that stage of the proceeding. On Monday 11 November 2019, counsel for both parties appeared before me in the Practice Court and, by consent, I granted the plaintiffs an interlocutory injunction substantially as sought in the summons with liberty to the defendants to apply for the discharge of the injunction on 48 hours' notice. Also by consent, I gave a direction for the filing of a defence by 29 November 2019, directions for mutual discovery by 9 December 2019, inspection of documents to take place by 20 December 2019, directions for a mediation by 14 February 2020 and a direction for the matter to be listed for further directions on 28 February 2020 before a judicial registrar.
4 It appears that the proceeding was resolved between the parties, except as to costs, on the due date for the filing of a defence, 29 November 2019, without a defence having been filed.
5 The Court was advised of the (partial) resolution of the case on 5 February 2020. On 12 February 2020, again by consent but this time 'on the papers', I granted the plaintiffs final relief substantially as sought in the statement of claim, i.e. a declaration of right and a permanent injunction, and, also by consent, I gave directions for the filing and service, in the period between 14 February and 23 March 2020, of further affidavits and submissions in relation to costs, with a hearing on costs scheduled for 15 April 2020.
6 In early April 2020, as a consequence of the COVID-19 pandemic, the hearing date of 15 April 2020 had to be vacated. The parties agreed upon a timetable for the filing and service of further affidavits and submissions, with the matter to be determined by me 'on the papers'.
7 In the result, between 14 February and 8 May 2020, the parties between them filed eight (more) affidavits and four (more) sets of written submissions, all of these relating specifically to the question of costs.
8 The plaintiffs submit that the defendants should pay their costs of the proceeding on the standard basis. The defendants submit that there should be no order as to the costs of the proceeding proper, i.e. that the parties should bear their own costs of the proceeding proper, and that there should be a further hearing about the costs of the dispute about costs.
9 In my opinion, the defendants should pay the plaintiffs' costs of the proceeding proper (i.e. the plaintiffs' costs of the proceeding up to and including 12 February 2020) but not including any costs that comprise survey expenses or similar expenses that the plaintiffs would have incurred in any event in delineating the precise area claimed, and the defendants should pay 75% of the plaintiffs' costs of the dispute about costs (i.e. 75% of the plaintiff's costs incurred after 12 February 2020).
10 In their initial submissions, the defendants accepted that the plaintiffs had achieved a successful result in this case;[1] and that the normal principle in litigation in the courts, namely that 'costs follow the event', was provisionally applicable.[2] They advanced three particular points only, as to why, nevertheless, there should be no order as to costs. Each point related to the attitude or position of the plaintiffs prior to or at the commencement of the proceeding: first, that the proceeding was issued 'precipitously';[3] second, that the plaintiffs needed an order of the Court for the easement in any event;[4] and, third, that the plaintiffs were determined to commence the proceeding regardless of any response of the defendants.[5]
11 In their initial response, the plaintiffs identified, by reference to certain authorities, certain principles which, they said, applied to cases determined without a hearing on the merits. They submitted that the Court had power to make an order for costs against a defendant who has consented to judgment.
12 In their reply, the defendants sought to take advantage of the submissions which the plaintiffs had made about the applicable principles. In so doing, the defendants departed significantly from the approach adopted in their initial submissions.
13 Thus the defendants now submit,[6] in effect, that there has been no 'event' in the sense intended by the expression 'costs follow the event', because the case did not go to trial and was not determined on the merits. As a matter of law, the defendants now say, where there has been no hearing on the merits, the 'starting point' in the exercise of the Court's discretion is that there ought be no order as to costs.[7] They submit that the plaintiffs are in error about this 'starting point'. Moreover, they submit that unless the Court accepts that the defendants have acted 'unreasonably' or that the plaintiffs were 'almost certain' to have obtained at trial the orders that were made by consent, the finishing point should also be that there is no order as to costs.[8]
15 Further, the defendants have now expanded upon their three original points and have integrated them into their final argument, such that those points may now be summarised as follows:
(a) the proceeding was issued by the plaintiffs' 'precipitously', in that the plaintiff did not serve an adequate demand before action;[11]
(b) the plaintiffs needed the Court's judgment irrespective of whether or not there was a dispute with the defendants; and therefore it cannot be said that the defendants 'induced' the proceeding;[12] and
(c) the plaintiffs sought the Court's judgment irrespective of whether or not there was a dispute with the defendants and regardless of the defendants' conduct; and therefore, again, it cannot be said that the defendants induced the proceeding or acted unreasonably.[13]
16 On the other hand, the defendants do not submit that the plaintiffs themselves have at any time not acted 'reasonably' or acted 'unreasonably'.
17 The plaintiffs' ultimate response, in short, is that their success in the proceeding supplies the proper 'starting point'; that they have acted reasonably; that the defendants have acted unreasonably; and that nothing advanced by the defendants should deprive the plaintiffs of their costs.
18 For reasons to be explained, I do not accept that the defendants' revised submissions about the relevant principles of law relating to costs are fully sufficient. Unfortunately, those submissions omit reference to the category of case in which a party may properly be found to have substantially capitulated or surrendered to the other party, and, in my view, this is such a case. Further, even if, in such a case, it remains necessary, as a matter of principle, for the court to be satisfied that a corresponding victory at a trial on the merits was 'almost certain', I am so satisfied in the present case. Further again, if it matters, I am satisfied, on the admitted facts, that the defendants have behaved so 'unreasonably' in connection with the litigation as to warrant an order for costs against them.
19 Apart from my view that the plaintiffs should bear their own survey and like expenses, I do not accept any of the three submissions that were originally made by the defendants, nor those submissions as now expanded upon. In that regard, as will be seen, the defendants' submissions are either unsupported by any relevant material or are flatly contradicted by the admitted facts.
20 On the other hand, I consider that there should be a 25% 'discount' on the costs of the argument about costs, in part because the plaintiffs themselves have not fully addressed the relevant legal principles as to costs but more so because the plaintiffs' affidavits and submissions stray into areas that are of peripheral relevance at best and join battle on points of fact that were not only of limited relevance but were also known by the plaintiffs to be controversial. Such controversies cannot be resolved on an application such as this and should not be pursued.[14]
The parties' submissions on the legal principles relating to costs
21 As indicated above, the defendants, in their initial costs submissions of 28 February 2020, did not rely at all on the absence of a trial. They cited no authority relating to the award of costs where there is no hearing on the merits. The only authorities that they cited concerned the three specific points that they raised. They implicitly accepted that the present case was equivalent to the ordinary case where a plaintiff succeeds at trial, subject only to the three particular points.
22 Subsequently, as is also mentioned above, the plaintiffs filed their initial written submissions dated 13 March 2020. Notwithstanding that the defendants had not taken any point about the absence of a hearing on the merits, the plaintiffs submitted that the principles to be applied where there has been no hearing on the merits were to be derived from two particular 'leading cases', namely Australian Securities Commission v Aust-Home Investments Ltd ('Aust-Home Investments'),[15] a judgment delivered in 1993 by Hill J sitting as a trial judge of the Federal Court and Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin ('Lai Qin'),[16] a judgment delivered in 1997 by McHugh J, sitting as a trial judge of the High Court. In relation to Aust-Home Investments, the plaintiffs submitted that Hill J had stated five principles to be applied, as follows:[17]
(1) Where neither party desires to proceed with litigation the court should be ready to facilitate the conclusion of the proceedings by making a costs order.
(2) It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial. This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue.
(3) In determining the question of costs it would be appropriate, however, for the court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them.
(4) In a particular case it might be appropriate for the court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation.
(5) Where the proceedings terminate after interlocutory relief has been granted, the court may take into account the fact that that interlocutory relief has been granted.
23 As to Lai Qin, the plaintiffs extracted the following passages from the judgment of McHugh J:[18]
In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.
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. ...
24 The plaintiffs submitted that those two cases demonstrated that the focus of the court's enquiry was on the reasonableness of the conduct of the parties; that is, the plaintiffs submitted, the conduct of the plaintiffs in bringing the proceeding and the conduct of the defendants in defending the claim, and if relevant, in precipitating the litigation. The plaintiffs then turned to the facts of the present case, to which I will come in due course.
25 In their final written submissions dated 24 April 2020, the defendants say that they adopt the passages from the plaintiffs' submissions dated 13 March 2020 that I have reproduced above 'as they set out the applicable law as to the Court's discretion to award costs without a hearing on the merits'. Moreover, as already mentioned, the defendants seek to derive from those passages the proposition that the plaintiffs had adopted the wrong 'starting point' in their submissions. More particularly, the defendants seek to derive from the cited passages the proposition that, in the absence of a hearing on the merits, there should be no order for costs against a defendant unless the defendant has acted 'unreasonably' or the plaintiff was 'almost certain' to have obtained at trial the orders obtained by consent.
26 The plaintiffs commenced their (final) reply submissions of 8 May 2020 by submitting that the defendants' submissions of 24 April 2020 are erroneous as to the 'starting point'. The plaintiffs submit that the starting point is that a successful party is prima facie entitled to a costs order.[19] For that proposition, the plaintiffs refer in particular to a sentence from Lai Qin which is included in the first of the paragraphs from that judgment set out above.[20] The plaintiffs point out that 'the defendants elected not to defend the claim against them'.[21] On the other hand, the plaintiffs proceed to say that 'relevant factors' include (a) the merits of the claim; (b) the plaintiffs acting reasonably in commencing the proceeding; (c) the defendants acting unreasonably in defending the proceeding; and (d) conduct by the defendants that precipitated the litigation. The plaintiffs do not cite any new authorities in support of this approach. The balance of the plaintiffs' final submissions is mainly structured around the four 'factors' that they identified.
27 What neither side mentions in their submissions is that in the period of more than two decades since Aust-Home Investments and Lai Qin were decided, the principles set out in those cases have been the subject of a great deal of judicial consideration and of some relevant explanation and refinement. That is particularly so in relation to cases where it can be said that, despite the absence of a hearing on the merits, one side or the other has had a substantial victory in connection with the litigation or where it can be said that one side or the other has substantially capitulated or surrendered to the other. As I have mentioned, I consider that the present is such a case.
28 A comparable recent case (decided on 8 April 2020) was Kevin Hughes Investments Pty Ltd v Ebert Unit Development Pty Ltd ('Kevin Hughes').[22] In that case, Connock J reviewed many authorities relating to the incidence of costs. So far as relevant to the present case, his Honour's analysis of the authorities was as follows:[23]
[24] It is well established that the power to award costs is a discretionary power, but that it is a power that must be exercised judicially, by reference only to considerations relevant to its exercise and upon facts connected with or leading up to the litigation.[25] While the width of the discretion 'cannot be narrowed by a legal rule devised by the court to control its exercise',[26] the formulation of principles according to which the discretion should be exercised does not 'constitute a fetter upon the discretion not intended by the legislature'.[27] Rather, the formulation of principles to guide the exercise of the discretion avoids arbitrariness and serves the need for consistency that is an essential aspect of the exercise of judicial power.[28]
[25] A guiding principle by reference to which the discretion is to be exercised - indeed, 'one of the most, if not the most, important' principle - is that the successful party is generally entitled to his or her costs by way of indemnity against the expense of litigation that should not, in justice, have been visited upon that party.[29] The application of that principle may be modified or displaced where there is conduct on the part of the successful party in relation to the conduct of the litigation that would justify a different outcome. For example, a successful defendant may be refused its costs on the ground that its conduct induced the plaintiff to believe that he or she had a good cause of action.[30] But in the present case, there was nothing of this kind in the conduct of the appellant in relation to the litigation that might have weighed against the exercise of the discretion in its favour.[31] There was no suggestion of any conduct on the part of the appellant, whether by unreasonable delay or a want of the cooperation required of litigants to ensure the 'just resolution of the real issues in civil proceedings with minimum delay and expense',[32] that might have been taken into account to justify refusing the appellant an order for its costs.
Relevant principles
[10] The contentions of the parties raise a number of questions relevant to costs orders on appeal. The principles relevant to these questions can be summarised as follows:
(1) The general rule is that costs should follow the event. Absent disqualifying conduct, the successful party should recover its costs even where it has not succeeded on all heads of claim.[34]
(2) The Rules of Court[35] permit significant flexibility in determining questions of costs. In particular, the court is entitled to examine the realities of the case and will attempt to do 'substantial justice' as between the parties on matters of costs.[36]
...
[48] Section 24(1) of the Supreme Court Act 1986 confers on the Supreme Court a wide discretion in deciding questions of costs.[38] However, that discretion must be exercised judicially, by reference only to considerations relevant to its exercise and upon facts connected with or leading up to the litigation.[39] There are well-established principles that provide guidance for the exercise of the discretion and avoid it being exercised in an arbitrary or inconsistent manner.[40]
[49] One such well-established principle is that costs usually follow the event, that is, that the unsuccessful party is usually ordered to pay the successful party's costs. Recently, in Northern Territory v Sangare, the High Court said the following about that principle:
[50] Consistent with this principle, where the outcome of the proceeding is such that it cannot be said that one party has been successful and the other has been unsuccessful, it may be appropriate that there be no order as to costs.[42] That is also the case in a proceeding where its subject matter or the relief sought are such that neither party can be said to have succeeded.[43] However, the conduct of one of the parties in relation to the litigation may be such as to warrant an order for costs being made against that party.
[9] The parties agree that the general rule to be applied in circumstances such as the present is that stated by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin[45] in the following terms:
...It will be necessary to return in a little more detail to the facts of the case, but it is first necessary to state the principles which govern an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means.
In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.
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. This is perhaps the best explanation of the unreported decision of Pincus J in The South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare.
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.[46]
[10] In Nichols v NFS Agribusiness Pty Ltd,[47] the New South Wales Court of Appeal applied the principles stated in Lai Qin, as explained in later cases,[48] and allowed an appeal against a trial judge's decision to award costs.[49] In the course of reviewing the authorities following Lai Qin, Payne JA (Basten and Meagher JJA agreeing) accepted that, absent any consideration of the merits of the proceeding, costs may be ordered where there is a capitulation by one party - in the sense that it 'effectively surrenders to the other'.[50] In his Honour's view, this approach is consistent with the judgment of McHugh J in Lai Qin.[51] Payne JA referred to the dissenting judgment of Sackville AJA in Muhibbah Engineering (M) BHD v Trust Co Ltd,[52] and to the reference by Sackville AJA in that decision to the following statement by Burchett J in ONE.TEL Ltd v Deputy Commissioner of Taxation:
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.[53]
[11] In Nichols, Payne JA considered that, in Muhibbah Engineering:
Sackville AJA was explaining that when in Lai Qin McHugh J described a case where the party seeking costs "in effect, has succeeded in obtaining the relief sought in the proceedings", his Honour was referring to a case where one party, after litigating for some time, effectively surrenders to the other.[54]
[12] In fact, the quoted words which Payne JA attributes to McHugh J in Lai Qin do not appear in McHugh J's judgment. They are a quote from Sackville AJA's judgment in Muhibbah Engineering.[55] However, the principles stated by McHugh J in Lai Qin were, in his words, intended to 'govern an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means'.[56] We accept as a general principle that where a party litigates for some time and then acts so as to effectively surrender or capitulate to the other, that will usually be a strong ground to award costs against the party who has surrendered or capitulated. But each case will depend on its own facts.
29 As can be seen in the passages from Kevin Hughes quoted above, in 2018 in Yue'e Zhao v Suzhou Haishun Investment Management Co Ltd[57] ('Zhao') the Court of Appeal accepted that the view of the NSW Court of Appeal in Nichols v NFS Agribusiness Pty Ltd[58] ('Nichols') was that absent any consideration of the merits of the proceeding, 'costs may be ordered where there is capitulation by one party - in the sense that it "effectively surrenders to the other"'. Further, it can be seen that in Zhao[59] the Court of Appeal noted with apparent approval the distinction made some 20 years ago by Burchett J in ONE.TEL Ltd v Deputy Commissioner of Taxation[60] ('ONE.TEL') in this regard, together with the statement of Burchett J to the effect that where a party, after litigating for some time, effectively surrenders to the other, an award of costs against the surrendering party will 'commonly' follow. I interpolate that in ONE-TEL Burchett J had considered both Aust-Home Investments and Lai Qin, among many other cases relevant to the present point. Burchett J determined that the plaintiff had been a 'clear winner'. The respondent Deputy Commissioner of Taxation had consented to orders setting aside statutory notices for the provision of information that he had issued to ONE.TEL Ltd. The Deputy Commissioner had encountered an evidentiary difficulty in the course of the proceeding and acknowledged that the notices were to be set aside accordingly. Burchett J commented that this was the kind of event that was 'always' liable to occur in litigation; that the result was not achieved by a 'settlement' in the ordinary sense, or in the sense used by McHugh J in Lai Qin; and that it had certainly not been achieved by 'extra-curial means'.[61]
30 It can also be seen from Kevin Hughes that in Zhao the Court of Appeal went on to accept 'as a general principle that where a party litigates for some time and then acts so as to effectively surrender or capitulate to the other, that will usually be a strong ground to award costs against the party who has surrendered or capitulated',[62] although the Court of Appeal concluded by observing that each case would depend on its own facts.
31 In Kevin Hughes, after examining the relevant authorities as indicated above, Connock J turned to the disposition of the case before him. His Honour expressly applied the principles set out above against the capitulating defendant. Connock J said:[63]
Connock J went on to summarise the effect of the communications and exchanges between the parties and the other events that were said to be relevant in that case. In the end, his Honour ordered that the defendant pay the plaintiff's costs of the proceeding.
32 In at least three cases decided since Kevin Hughes, judges have expressed views more or less consistent with those expressed by Connock J in Kevin Hughes in relation to situations involving alleged capitulation or surrender by a party.
33 First, on 1 June 2020, in Re Howden; Howden v Rackstraw ('Howden'),[70] McMillan J of this Court dealt with the costs of an application for removal of the defendant as an executor and trustee of a deceased estate. The proceeding was not adjudicated on its merits. Her Honour summarised the general principles applicable to questions of costs. As to cases where there is no hearing on the merits, her Honour initially referred to the judgment of the Victorian Court of Appeal in 2016 in Asta Developments (Aust) Pty Ltd v Amasya Enterprises Pty Ltd,[71] reproducing from that case the passages from Aust-Home Investments and Lai Qin set out above. However, her Honour went on to refer to the distinction drawn by Burchett J in ONE.TEL and drew from that case the proposition that 'where one party effectively surrendered such that there was a "clear winner", costs should be awarded to the successful party'. Her Honour noted that the approach of Burchett J had been approved by the Full Court of the Federal Court (in 2003)[72] and had been cited (in 2003) by the NSW Court of Appeal in support of the proposition that costs may be awarded where a judge is satisfied that one party has had a substantial victory and the other a substantial loss.[73] McMillan J concluded by saying that, more recently, however, in the context of discontinuance, the NSW Court of Appeal had emphasised analysis of the reasonableness of the parties' conduct, rather than relying upon the mere fact that a party may have achieved 'practical success'. This was a reference by her Honour to Ralph Lauren 57 Pty Ltd v Byron Shire Council,[74] decided in 2014. In Howden, McMillan J determined in the end that each party should bear their own costs.
34 Second, on 18 June 2020, in Fairfield Services Pty Ltd (in liquidation) v Leggett,[75] the plaintiff discontinued a commercial case about three weeks before a scheduled ten day trial. It is true that cases of discontinuance can be distinguished from cases of settlement.[76] However, Bond J of the Supreme Court of Queensland carefully considered many of the authorities that had also been analysed by Connock J in Kevin Hughes, including Lai Qin, ONE.TEL and Zhao.[77] Strikingly, Bond J observed[78] that the significance of the distinction drawn by Burchett J in ONE.TEL had been recognised in many subsequent cases, noting that the Jade citator identified 84 cases in which the significance of that distinction had been acknowledged. Bond J expressed his conclusions in the matter as follows:[79]
[80] In my view, the distinction to which Burchett J referred in ONE.TEL Ltd can be drawn in this case. This case falls into the category of plaintiffs having surrendered or capitulated to the defendants. There was no supervening event which removed, or modified, the subject of the dispute. Nor did the plaintiffs obtain the relief they sought in the action by settlement or by extra-curial means. Nor did the proceeding become futile for some external reason. All that happened is that the plaintiffs formed the view, three weeks out from trial, that it was better for them to withdraw from the contest they had started, rather than to fight it to the end. That assessment might well have been a prudent assessment from the plaintiffs' subjective perspective, but that does not matter when one comes to consider what costs order should be made from the point of view of doing justice as between the two contesting sides.
[81] The plaintiffs unilaterally abandoned the contest into which they had drawn the defendants, in the full knowledge that, as was the fact, the defendants must have incurred considerable costs in preparing for the contest and were apparently ready willing and able to participate in it. This gives rise to a strong reason to award costs against the discontinuing plaintiffs. The plaintiffs have not established anything which outweighs that reason in the discretionary balance. In my view, the only just exercise of the costs discretion in the present circumstances is one which requires the plaintiffs to compensate the defendants for the costs they incurred in having to defend the proceeding which the plaintiffs decided not to pursue. The plaintiffs must also pay the defendants their costs of the current application.
35 Third, on 8 July 2020, in Re Rush; Holt v Rush ('Re Rush'),[80] the plaintiff had sought, among other things, the removal of the executors of an estate. The removal application was compromised. McMillan J held that in the circumstances it was unreasonable of the defendant executors to attempt to defend the removal application. That would have been sufficient to warrant the order for costs that was made, namely that the defendants pay the costs of the plaintiff on the removal application. Her Honour also addressed the plaintiff's alternative contentions that she would certainly have succeeded or that she had had a substantial victory. Her Honour agreed that the plaintiff had substantially succeeded in achieving all that she sought through commencing the proceeding. There was a sufficient nexus between the orders eventually consented to and the relief initially sought by the plaintiff.[81] In any event, her Honour said, the circumstances also appeared to fall within the scope of cases where one party capitulates after litigating for some time.[82] The overall justice of the case required that the defendants pay the costs of the plaintiff.[83]
36 In Re Rush,[84] in dealing with the relevant general principles as to costs, McMillan J had said (my emphasis):
37 In the portion of her judgment in Re Rush that is italicised above, McMillan J says that Ward CJ in Eq has 'associated' the category of cases where a judge is confident that one party was almost certain to have succeeded if the matter had gone to trial with 'cases where one party effectively capitulates or where the Court is satisfied that one party has had a substantial victory and the other a substantial loss'. McMillan J here cites Jun International Property Pty Ltd v Fullerton Property Pty Ltd ('Jun'),[97] a NSW case, which was decided by Ward CJ in Eq in 2019. In Jun,[98] Ward CJ in Eq considered Lai Qin, Nichols and several other NSW cases, including, notably, Transfield Services (Australia) Pty Limited v James Gaha,[99] relating to the capitulation/inevitability of success point. On my reading of Jun and the other cases, it may be that in NSW the view is taken that, absent a trial on the merits, the 'starting point' is that each party bears their own costs; that there are only two things that may warrant a departure from that 'starting point', namely conduct 'so unreasonable' as to warrant such a departure, or else a finding that the party seeking costs would almost certainly have succeeded; that capitulation by a party is not a free-standing basis for departure from the 'starting point'; and that, rather, capitulation by one party may or may not lead to a finding that the other party would almost certainly have succeeded. Indeed, it does seem that in NSW a defendant who yields to all of the plaintiff's claims, even after litigating for a time, is still free to deny that the plaintiff was 'almost certain' to have succeeded at trial. In Jun, the defendant seems to have successfully done just that, and thus to have avoided liability for costs. In Nichols,[100] this issue did not squarely arise because, in the opinion of the NSW Court of Appeal, the trial judge had been wrong to characterise what had happened before him in that particular case as demonstrating capitulation by the 'unsuccessful' party.[101] Basten JA specifically noted that orders made by consent may or may not demonstrate capitulation by the 'unsuccessful' party.[102] More generally, the members of the NSW Court of Appeal, especially Basten JA, warned in Nichols that, absent a trial on the merits, it will only be in unusual cases that it will be possible to say that one party has been successful and the other unsuccessful.[103]
38 In the present case, as already mentioned, the defendants submit that, unless there is a finding of unreasonableness on their part, the plaintiffs must demonstrate that it was 'almost certain' that the plaintiffs would have succeeded at trial, and this notwithstanding that the defendants consented to all or substantially all of what was sought in the statement of claim. It is not necessary for me to decide whether the defendants are correct as to the law to be applied in Victoria in that respect. As will be seen, in my view the defendants did effectively capitulate or surrender within the meaning and intent of the authorities. According to the Victorian Court of Appeal in Zhao, that will usually be a strong ground for the award of costs. At the very least then, in Victoria, such a capitulation or surrender must usually carry significant weight in any 'almost certain' assessment and it may also legitimately contribute to a finding that the prior attitude of the surrendering party was unreasonable.[104]
39 As I have mentioned, the parties are in dispute about the correct 'starting point'. Fundamentally, of course, the true starting point is that costs are in the discretion of the Court, albeit that the discretion must be exercised judicially, i.e. so as to do justice between the parties according to law. However, having regard in particular to the NSW cases referred to above, I will assume in favour of the defendants, without deciding, that, in the absence of a trial on the merits, the 'starting point' (in the sense referred to in those cases) is that each party should bear their own costs and that there are only two things that may warrant a departure from that starting point, namely unreasonableness or that the result was 'almost certain'. Accordingly, I will assume (without deciding) that 'capitulation/surrender' is not a free-standing basis for departure from the 'starting point', but I reiterate that, at least in Victoria, capitulation/surrender must usually carry significant weight in any 'almost certain' assessment and may also contribute to a finding of unreasonableness.
40 Finally, as already indicated and as the defendants submitted, I should not purport to resolve any significant conflict of fact thrown up by the evidence. There are two reasons for this. First, the parties have agreed to the matter being determined 'on the papers'. Genuine conflicts of fact simply cannot be properly resolved 'on the papers'. There must be an oral hearing at which each party has an opportunity to challenge the witnesses of the other party. Second, having regard to the Civil Procedure Act 2010 (Vic), it is not usually appropriate, in any event, to review 'large swathes of evidence', or to conduct a hearing on contested questions of fact, in order to decide a question of costs.[105]
41 The factual matters set out below are common ground or undisputed except where otherwise indicated.
42 The plaintiffs and the defendants live next door to each other in Elsternwick. They are both married couples. The plaintiffs are both practising lawyers. The first plaintiff, Jennifer Firkin, is a silk at the Victorian Bar. Her husband, Andrew O'Bryan, the second plaintiff, is a partner in a firm of solicitors, Galbally & O'Bryan. The second defendant, Charles Pease, is also a lawyer. He is a solicitor whose area of practice is family law. He has his own firm, CRP Lawyers. The first defendant, Elizabeth Pease, carries out home duties.
43 The defendants, Mr and Mrs Pease, have owned and occupied their house since July 2015. The plaintiffs moved in next door about two years later, in June 2017. Until the present dispute arose, the parties had had a cordial relationship.
44 Many years earlier, in about 1969, the predecessor in title of the defendants, a Ms Buzzard, had sold off part of her land to the plaintiffs' predecessors in title, Frank and Wilma Dooley. The idea was for the Dooleys to build a rear garage for themselves on the transferred land. There was already a rear garage on Ms Buzzard's property. As part of the same arrangement, a bit more of Ms Buzzard's land was made the subject of a perpetual easement in favour of the Dooleys' land, in order to facilitate vehicular access to and egress from the proposed garage. The easement was created by instrument and was registered on the Dooleys' title.
45 In about 1970, the Dooleys' new garage was built. In the same year, Ms Buzzard sold her property to a Mr and Mrs Snell. About two years later, in 1972, the Snells removed the old garage on their land and built a new one in the same spot. In the meantime, the Dooleys began using their own (new) garage. They did so until they sold up and moved out in the year 2000. The purchasers were Luisa Bazzani, who is now a magistrate, and her partner, Andrew Hockley. They commenced to use the garage. In 2004, they demolished it and built another one in exactly the same place. Then they commenced to use that. They sold up in the year 2007.
46 Throughout the period from 1970 to 2007, at least, the Snells remained in occupation next door.
47 The essence of the plaintiffs' claim in the present proceeding was that, throughout the period when the Snells were in occupation of the property now owned by the defendants, the Dooleys and their successors (Luisa Bazzani and Andrew Hockley) regularly used not only the land the subject of the registered easement, but also some relatively small additional areas adjacent to that land for the purposes of entering and leaving the garage, and that this gave rise to an easement of way over those additional areas by prescription (long use). The plaintiffs relied principally on alleged use by Wilma Dooley, because she claimed to have used slightly more additional land than her successors claimed to have used. Moreover, under the relevant principles of law concerning easements by prescription, the plaintiffs needed to prove at least 20 years of use of the claimed land while that claimed land was in the same ownership, and Mrs Dooley's alleged use, by itself, satisfied that time requirement.
48 It is desirable now to summarise briefly what occurred between the parties prior to the commencement of the proceeding, so far as relevant, and during the proceeding. The following summary draws heavily on the factual chronology set out in the plaintiffs' initial outline of submissions on costs dated 13 March 2020, especially to the extent that that summary is common ground or undisputed.
49 Since late 2018, the defendants have proposed to renovate and extend their home. Their proposal includes newly constructed built form up to the boundary of the registered easement.
50 On 20 January 2019, the second defendant visited the plaintiffs at their house and provided a copy of architectural plans which included 'Sheet 4' dated 14 January 2019. The plans showed that the defendants intended to build up to the edge of the easement registered on title with the exception of a small triangle of land on the southern edge of the easement.
51 In mid-February 2019, the plaintiffs learnt that the defendants had applied to the City of Glen Eira for town planning permission for their proposed building works. The deadline for objections to the application was 22 February 2019. In the days leading up to the objection deadline, the parties attempted to arrange a meeting, but they were unable to do so due to their respective commitments. The meeting was ultimately held on 24 February 2019.
52 In the meantime, on 21 February and 22 February 2019 respectively, the first and second plaintiffs each filed with Council an objection to the defendants' town planning permit application. Both objections included a ground based on the new built form adjacent to the registered easement said to be causing difficulties for the plaintiffs in entering and exiting their garage by vehicle.
53 On 24 February 2019, the plaintiffs met with the defendants at the defendants' house to discuss the defendants' proposal. The plaintiffs raised the issue of their use of some areas outside of the registered easement to drive into and out of their garage. During this meeting, the four parties went out to the plaintiffs' garage and discussed the issue and the parking manoeuvres which would be required. At the meeting, the defendants maintained that the plaintiffs did not need any area outside the easement to access their garage, that the land outside the easement was the defendants' land and that the plaintiffs could not tell the defendants what to do with it.
54 On or around 4 April 2019, Council approved the defendants' planning permit application based on a revised ground floor design shown in 'Sheet 4' of architectural plans dated 25 March 2019.
55 On 23 August 2019, the second defendant emailed the second plaintiff and advised that he expected building works to commence in mid to late September 2019, and that he would like to meet to discuss any concerns.
56 On 24 August 2019, the defendants served a Building Protection Works Notice on the plaintiffs.
57 On 1 September 2019, the second plaintiff and the second defendant met at a café to discuss the defendants' proposed building works. The second plaintiff again raised concerns with the garage access arrangements. Later that day, the second defendant arranged for temporary fencing to be installed along the line of the registered easement and the second plaintiff and the second defendant met on site. Later that day, with the temporary fencing in place, the second plaintiff drove into and out of the garage to test the situation and for the observation of the second defendant. The second plaintiff claims that the manoeuvres were very difficult, whereas the second defendant claims that, even with the fence in place, there was sufficient room to drive in and out of the garage, at least in the cars that the second plaintiff was using for demonstration purposes.
58 On 7 and 16 October 2019, the second plaintiff sent emails to the second defendant's email address. The email of 7 October 2019 read as follows:
Dear Charles & Liz,
I write to advise Jenny & I are making a prescriptive easement claim via legal proceedings.
The claim is obviously relevant to your build footprint at the rear of your property.
We expect the claim will only encompass minimal additional areas outside the existing easement which will assist us to get in & out of our garage.
We anticipate being in a position to file & serve the proceeding by mid next week.
Regards
The letter was sent in the name of Mr O'Bryan as a partner of Galbally & O'Bryan and the business address and business contact details for Mr O'Bryan were stated.
Dear Charles & Liz,
Further to my email of 7 October 2019 I advise:-
. the area we seek to claim by prescriptive easement is set out on the attached headed - Non Easement Areas Used For Manoeuvring By Wilma;
. the area is shaded orange [the shaded orange area];
. legal proceedings have been prepared & will be filed and served;
. preliminary to doing so we seek the following written undertaking from yourselves:-
'that you, your servants & agents will not interfere with our unrestricted access to the shaded orange area or carry out works which would result in us being excluded from the orange shaded area until the hearing and determination of the legal proceeding' [the undertaking].
To enable you to know the precise location of the area on which unrestricted access is sought we propose to engage a surveyor to survey the area and provide a copy to you.
The survey would require the surveyor to access your land restricted to the shaded orange area.
Please advise by 4.00pm Wednesday 23 October 2019 whether:-
. the undertaking;
. access to your land restricted to the shaded orange area for survey purposes; and
. the removal of the temporary fence to the extent it encroaches on the shaded orange area
are agreed.
Once again, Mr O'Bryan sent this email as a partner of Galbally & O'Bryan. Attached to the email was a plan of the area claimed, which included an endorsement that the claimed area occupied approximately 4.48m². The plan had been prepared by a professional organisation, Traffix Group.
60 The defendants received both the 7 October email and the 16 October email on the days they were respectively sent. However, neither defendant made any response to either email prior to the commencement of the proceeding on 31 October 2019.
61 The affidavits filed on behalf of the defendants in relation to the costs dispute include an affidavit of the second defendant setting out his account of the pre-litigation contact between the parties, and also a briefer affidavit of the first defendant relating to the same matter. Each affidavit is dated 28 February 2020. Affidavits later filed on behalf of the plaintiffs take issue with some of the statements made in the defendants' two affidavits of 28 February 2020. However, as already mentioned, those conflicts cannot be resolved in this proceeding. In my view, I should proceed on the basis that everything said in the affidavits of the defendants dated 28 February 2020 is correct. It is desirable to set out in full the contents of each of those affidavits, except the first paragraph in each case, which is largely formal. Omitting that paragraph, the affidavit of the second defendant, Charles Pease, reads as follows:
62 The affidavit of the first defendant, Elizabeth Pease, dated 28 February 2020 (omitting paragraph one, which is purely formal) reads as follows:
63 As mentioned above, the writ, statement of claim, summons and supporting affidavits were filed on 31 October 2019.
64 The relief sought by the plaintiffs at the interlocutory stage was, in essence, the same as the assurance sought from the defendants by the request for an undertaking contained in the email of 16 October 2019.
65 The plaintiffs allege that the second plaintiff emailed the second defendant on Friday 1 November 2019 to advise that he would personally serve the court documents over the coming weekend. That does not appear to be in dispute. However, the second plaintiff further alleges that he made efforts to serve the documents over the weekend and suggests that service was being avoided. However, partly by reference to an allegation that their front doorbell was out of order at the time, the defendants deny that they avoided service. Again, I must accept that the defendants did not seek to avoid service. Service was actually effected on Monday 4 November 2019.
66 As already mentioned, the summons for interlocutory relief was returnable on 11 November 2019 and the plaintiffs filed and served a comprehensive outline of submissions (together with a list of authorities) on 7 November 2019.
67 On the same day, the defendants served an outline of submissions relating to the application for the interlocutory injunction. As mentioned above, those submissions were not filed. As also mentioned already, the submissions adopted the plaintiffs' summary of the law relating to prescriptive easements. It was stated that, subject to the form and timing of the injunction, the defendants did not oppose the application. However, the submissions continued, in order to preserve the defendants' right to apply to vary or discharge the injunction in the future, the defendants would set out brief submissions as to the merit of the application. The submissions went on to say that, although the proceeding 'will be opposed', the defendants accepted that the plaintiffs had shown that there was a serious question to be tried that a prescriptive easement had arisen. On the other hand, it was stated that the defendants did not accept that an easement was capable of burdening the whole of the claimed area. However, those differences were described as 'minimal' in the context of an application for an interlocutory injunction. The point was simply reserved for trial. It was accepted that, at that stage, the balance of convenience favoured the plaintiffs because there would be no immediate interruption to the defendants' construction works. A submission was made that it was premature for an injunction to be ordered until the area had been properly identified by survey. Without a survey, it was said, the defendants could not know with precision whether any specific location was inside or outside the claimed area. In addition, even after survey, the injunction sought would be too broad, according to the submissions. The relief sought by way of injunction was to prohibit any interference with the plaintiffs' unrestricted access. Yet, according to the submissions, infringement of an easement is only actionable if there is 'substantial' interference.[106] There was then a point taken about restraining interference with conveyances other than motor vehicles. Then it was said that the injunction should protect not access to the claimed area, but carriage over it to the plaintiffs' garage. A form of words was proposed to which the defendants were prepared to consent.
68 As well as the submissions, the defendants served on the plaintiffs a without prejudice offer to compromise the proceeding as a whole. The offer was contained in a letter dated 7 November 2019, signed by the defendants. The letter noted receipt of the court documents. It contained two criticisms, only, of the plaintiffs' material. First, according to the letter, the sole relevant evidence of use of the land was the evidence of Mrs Dooley (who was the deponent of one of the plaintiffs' affidavits). It was asserted by the defendants that any use, especially greater use, of any subsequent owner is irrelevant because that use did not continue for 20 years. That point was only partly correct. Subsequent use was capable of being added to Mrs Dooley's use, provided the Snells were still in occupation at the time of the subsequent use.[107] On the other hand, it was correct to say that any greater use would not avail the plaintiffs because it did not continue for 20 years or more. However, the plaintiffs had not suggested that the subsequent use (by Ms Bazzani and Mr Hockley) had been any greater than the use of Mrs Dooley.
69 Next, it was asserted that Mrs Dooley's evidence was brief to the point of unreliability and that it lacked precision as to the relevant measurements. It was said that any attempt to correct this in the future would be 'tainted' by Mrs Dooley's willingness to give 'flattering' evidence in support of the plaintiffs' claim. In my view, there was no substance whatever in that criticism of Mrs Dooley's affidavit evidence. I note that Mrs Dooley had provided to the plaintiffs' Traffix engineer, Mr Koorn, on site, all such information as Mr Koorn had required for preparing his professional diagrams and the report which is exhibited to his own affidavit, being another of the six affidavits originally relied on by the plaintiffs. Ms Bazzani and Mr Hockley had also been interviewed on site by Mr Koorn, as appears from Mr Koorn's exhibited report.
70 The letter went on to say that the value of the easement sought was 'minimal', and that it was doubtful that the easement would change the value of the parties' property. It was said that the defendants had no desire to waste further money on legal fees for a claim of 'trivial value'. An offer was then made to resolve 'the dispute' on terms that this proceeding would be struck out with no order as to costs, with a right of reinstatement; that a survey of the claimed area would be prepared; that the parties would vary the existing registered easement so as to include the surveyed claimed area (or, if necessary, there would be the express grant of another carriageway easement over the surveyed claimed area); that the defendants would undertake not to breach the enlarged easement; and that the plaintiffs would execute a form stating that a revised design for the plaintiffs' building work (a plan of which was attached to the offer) would not cause any detriment to the plaintiffs. As the plaintiffs submit, that last proposed term related to matters beyond the scope of the proceeding. It was a request for the plaintiffs to consent to non-compliances with rear setbacks required by the Building Regulations 2018 (Vic).
71 On 8 November 2019, the plaintiffs served an open offer to settle the interlocutory application. Enclosed with the letter of offer was a dimensioned plan of survey of the claimed area. This was the first time that precise measurements had been supplied by the plaintiffs. The offer to settle the interlocutory application was accepted by the defendants on the same day, with a suggested change to the form of orders.
72 On 11 November 2019, as mentioned above, the Court made interlocutory orders by consent, one of which required the defendants to file and serve a defence by 29 November 2019.
73 On 28 November 2019, the solicitor for the defendants (being Mr Pease himself, writing under the name CRP Lawyers) wrote to Mr O'Bryan (at Galbally & O'Bryan). The letter was marked 'without prejudice save as to costs'. The letter noted that the defendants' defence was due the next day. The defendants offered to consent to judgment in favour of the plaintiffs, with no order as to costs, subject to certain comments about the form of the order. In particular, it was suggested that the form of order make express reference to the recognition of an easement of carriage, which was said to be a form of order utilised by the courts in the past. Again, it was proposed that the (permanent) injunction restrain only 'substantial' interference.
74 Later the same day, 28 November 2019, Mr Pease (as CRP Lawyers) wrote to Mr O'Bryan (at Galbally & O'Bryan) noting that the defendants' defence was due the next day and advising that the defendants would not be filing a defence. It was stated that the defendants 'do not defend the proceeding and consent to the plaintiffs obtaining the substantive relief sought in the proceeding'. Previous suggestions about the form of order were referred to and repeated. It was denied that the plaintiffs should receive their costs of the proceeding. It was said that the letter was 'not the place for that argument to be set out in full'. However, the letter continued: 'It is sufficient to state that there was no crystallised dispute between the parties at the date of issue such that the proceeding was unnecessary'. No other reason why the plaintiffs should not have their costs was specified in the letter.
75 The wording ultimately agreed between the parties for the final consent order was in accordance with the prayer for relief in the statement of claim, save that, again, it was agreed that the word 'substantially' should be inserted in the proposed form of permanent injunction.
76 Having regard to the history of events detailed above, there could hardly be a clearer case of effective capitulation or surrender by a defendant in relation to the substantive relief claimed in a proceeding. I note that in the defendants' written submissions of 24 April 2020, their counsel referred to the defendants' without prejudice offer of 7 November 2019 as involving 'almost full capitulation by the defendants', the only condition being the proposed term that the plaintiffs relinquish any objection to the defendants' non-compliances with the rear setbacks required by the Building Regulations 2018 (Vic). In the end, of course, the defendants dropped that condition too.
77 Indeed, it seems that the defendants conceded even more than the plaintiffs were prepared to accept by way of substantive relief. In one of their more recent affidavits, the plaintiffs exhibit a 'without prejudice' letter of their own (from Galbally & O'Bryan) to the defendants (via CRP Lawyers) dated 29 November 2019. In that letter, the plaintiffs rejected both of the defendants' prior without prejudice offers. The plaintiffs made a counter-offer to accept a personal undertaking from the defendants not to substantially interfere with the plaintiffs' carriage over the claimed area, instead of a property right in the form of an easement. However, it appears that the defendants preferred to submit to a declaration of the existence of the right claimed in the writ and statement of claim (which amounted to an easement) (as well as submitting to the claim for a permanent injunction). In any event, that is what happened in the end.
78 In my view, it is almost certain that the plaintiffs would have obtained, at a trial on the merits, judgment for a declaration and injunction in much the same terms as the judgment that was given by consent on 12 February 2020.
79 There was and is no dispute in this case about the principles of law that apply in Victoria in relation to easements by prescription, being the principles covered by the doctrine of lost modern grant.[108] Those principles were summarised in the plaintiffs' written submissions dated 7 November 2019 in support of the summons for interlocutory relief and that summary was not disputed, indeed it was 'adopted', in the defendants' written submissions in response that were served (though not filed) on the same day.
80 Prior to the settlement, the only point that the defendants raised against the easement claim was the suggestion (advanced only in without prejudice correspondence) that Mrs Dooley's evidence was insufficiently specific as to the paths taken by her vehicles in travelling in and out of the garage while she and Mr Dooley were in residence. The defendants did not raise any such suggestion in the initial written submissions on costs prepared by their counsel dated 28 February 2020. The suggestion was revived in the defendants' final submissions on costs. It was accompanied by a belated contention that the 'border' of the claimed area adjoined the garage on the defendants' property, and that it is 'absurd for the plaintiffs to assert that there had been 20 years or more of continuous use of land up to and including the external face of the garage, which would have involved continuous scraping of vehicles'. It was further suggested in the defendants' final submissions on costs that the 'broad' nature of Mrs Dooley's evidence undermined the swept path diagrams prepared by Mr Koorn.
81 I have already indicated that, in my view, the suggestion that Mrs Dooley's evidence did not support the claim made was entirely without substance. Further, as the plaintiffs say in their final costs submissions dated 8 May 2020,[109] the matters now raised by the defendants go only to the precise parameters of the prescribed easement, not to the existence of an easement substantially as claimed. Moreover, the defendants wrongly make no allowance for the fact that a clearance area around the relevant vehicles was at all times required.
82 In addition, it is appropriate to take into account the very fact that the defendants capitulated to the plaintiffs' claims, as indicated above. They have not sworn to any particular reason for doing so. I infer that they believed that they were bound to lose at trial. In my opinion, their belief was well founded.
83 These matters, alone, are sufficient to warrant departure from the asserted 'starting point' that each party should bear their own costs. Further, subject to the remaining points needing to be dealt with, these matters are sufficient, alone, to indicate that the defendants should pay the plaintiffs' costs of the proceeding.
84 For completeness, I indicate that, in my view, there was relevant unreasonableness on the part of the defendants.
85 In favour of the defendants, I accept that the plaintiffs did not identify the legal basis of their claim or proposed claim until the email of 7 October 2019, and that they did not set out in writing the approximate dimensions of the claimed area until they sent the email of 16 October 2019. Further, I must accept that Mr Pease was bedridden and in pain at that time, as he deposes. But he is a solicitor and he admits that he knew at that time the rudiments of the law relating to prescriptive easements. And there is no explanation for the absence of a response on the part of Mrs Pease. Ample time was allowed by the plaintiffs for a response. Moreover, the defendants admit that they were seeking specialist legal advice on the matter at this time. Despite that, they made no response at all. It turned out that the defendants had no real defence to the claim. Nevertheless, they litigated it until 29 November 2019. They tried to obtain, by their temporary resistance, a collateral benefit in the form of a concession by the plaintiffs in respect of the rear setbacks of the defendants' proposed re-build. Only when this attempt failed did the defendants actually capitulate. In combination, in my view, these matters amount to unreasonableness within the meaning of the authorities. Hence, this supplies a second, related, basis for an award of costs to the plaintiffs.
86 I turn now to the first of the three specific grounds originally raised by the defendants against the plaintiffs' claim for costs, as those grounds have since been elaborated by the defendants.
87 In their initial submissions as to costs dated 28 February 2020, the defendants cite the following passage from the judgment of Robb J of the NSW Supreme Court in Windgap Foundation Ltd v Solomons:[110]
[I]f a plaintiff does not seek appropriate relief from the defendant by writing a letter of demand before suit, the plaintiff may be at risk as to its costs, if in response to the proceeding that the plaintiff institutes, the defendant immediately concedes the entitlement of the plaintiff to the relief claimed and establishes that the defendant would have accepted the plaintiff's right to relief without suit.
Here, at no time have the defendants defended the allegations of the plaintiffs, either before or after the issue of proceedings. Accordingly, had a proper demand been made of the defendants, the proceeding would have been avoided.
88 The defendants seek to distinguish Marrickville Council v Cleary[111] in which Craig J found that adequate notice had been given, taking into account the urgency of the claim in that case and the opportunity for consideration that the demands made had afforded.
89 But here, the defendants submitted, although the parties had been in discussion as to the plaintiffs' use of land outside the registered easement for some time, at no time prior to the proceeding were the defendants given proper notice of the claim that was to be made against them to allow consideration of their position.
90 That is, the defendants submit, prior to the issue of the proceeding, the plaintiffs only asserted the right to use parts of the defendants' property beyond the registered easement -
(a) on 24 February 2019 solely by reference to the 'Land Titles Act' and because it was necessary and convenient;
(b) on 1 September 2019 without reference to any basis to do so;
(c) on 7 October 2019 by reference to the doctrine of prescriptive easements but without reference to the area claimed; and
(d) on 16 October 2019 by reference to the doctrine of prescriptive easements by reference to a diagram of the area claimed that lacked dimensions,
and also, in none of the discussions nor correspondence did the plaintiffs ever provide a factual basis for the allegation.
91 The defendants go on to submit that, in those circumstances, before the issue of the proceeding, the plaintiffs only ever obliquely referred to the basis of the claim and never set out the claimed area. Accordingly, the defendants say, the demand was never capable of being 'accepted'. The defendants were never able to assess the claim that was made against them or given an opportunity to concede the claim to the plaintiffs.
92 In their final submissions as to costs, the defendants further say that a respondent to a demand cannot be expected to give credence to it if it is not expressed with sufficient clarity to enable due consideration; and that it is not the role of a putative defendant to consider all possible ramifications of vague statements.[112] The defendants also seek to draw an analogy with the particularity required in notices of default required by contract or by statute. They further seek to draw an analogy with Calderbank letters, submitting that while Calderbank letters do not need to set out with reasonable specificity the basis for the sender's contention that the offer should be accepted, the court's discretion will take into account the extent to which the strength of the recipient's position had been exposed.[113]
93 In those final submissions, the defendants contend that if the defendants were not given sufficient detail of the claim against them, it cannot be unreasonable for them not to have engaged further with the plaintiffs.
94 I have already indicated that I do not agree with the thrust of the defendants' submissions in this regard.
95 It is simply not the case that 'at no time have the defendants defended the allegations of the plaintiffs'. As the chronology set out above shows, the defendants gave no indication, prior to the issue of proceedings, that they would concede anything to the plaintiffs. Moreover, after the issue of the proceedings, the defendants served submissions on the summons indicating that the proceeding itself would be defended generally, and not merely in relation to the precise dimensions of the area claimed. The defendants continued to resist judgment up until the very day on which the defence was due. For all of that period, they had the benefit of very detailed affidavits and submissions from the plaintiffs. The defendants' submission that, had a proper demand been made of them, the proceeding would have been avoided is simply not borne out on the admitted facts.
96 As I have already indicated, I proceed on the basis that the plaintiffs did not articulate any or any viable legal basis for their claim until 7 October 2019. However, long before that, the defendants were well aware of the nature and extent of the plaintiffs' concerns. They were well aware of the general location and dimensions of the area in question. On 7 October 2019, the defendants were told in terms that the claim would be for a prescriptive easement. Mr Pease is a solicitor. He knew immediately, in general terms, what the claim meant. The defendants then sought specialist legal advice. By 16 October 2019, a more precise description of the area claimed had been provided. Still the defendants made no response, notwithstanding that they and the plaintiffs were next door neighbours who knew each other quite well, and notwithstanding the urgency of the situation (reasonably perceived by the plaintiffs, given the ongoing building works at the defendants' property). The defendants had every opportunity to seek more particulars from the plaintiffs before the proceeding was commenced, if they needed such particulars. They could have given the undertaking sought. They could have attempted to negotiate an outcome with the plaintiffs in advance of the commencement of the proposed proceeding. They did none of that.
97 In my view, there is nothing in this first ground raised by the defendants.
The plaintiffs did not need the judgment of the Court
98 The second point raised in this connection in the defendants' initial written submissions was to the effect that 'it is not clear' that the defendants could have avoided the proceeding even by their full capitulation to the plaintiffs' demands (such as they were). The defendants submit that there is no mechanism under the Transfer of Land Act 1958 (Vic) for a claimant of a prescriptive easement to have that easement recognised by the Registrar of Titles without a court order.[114] Rather, the defendants say, the power to have the easement recognised arises only once a court's order has been made. Here, the defendants refer to s 72(2) of the Transfer of Land Act 1958 (Vic). So, the defendants submit, their agreement to the plaintiffs' claim prior to issue would not have aided the plaintiffs to obtain the relief sought. It follows, the defendants submit, that the plaintiffs have taken no step that they would not otherwise have been required to take to obtain the relief that they sought.
99 The short answer to this point is that s 72(2) of the Transfer of Land Act 1958 (Vic) provides not only for the registration of an easement recognised by an order of a court, but also for the registration of an easement created by 'any instrument, deed or other written document'. As mentioned above, the defendants themselves proposed at one stage that the result sought by the plaintiffs could be achieved by amending the terms of the existing registered easement or by adding a second easement created by instrument.
100 As already indicated, I would accept that the plaintiffs should bear the expense of delineating, by survey, the dimensions of the area they claimed. They should not recover those costs as part of the litigation.[115] Otherwise, there is no merit in this objection of the defendants. It was not necessary for the plaintiffs to have obtained an order of a court in order to achieve the relief they sought.
The plaintiffs were not determined to go to court regardless
101 In their written submissions of 28 February 2020, the defendants contend that the plaintiffs would have issued this proceeding regardless of the defendants' response to the pre-litigation correspondence. They say that the 7 October 2019 email did not call for a response. Rather, they contend, that email gave notice of an impending claim and that proceedings would be filed and served the next week. The defendants submit that the 16 October 2019 email again gave notice of an impending claim and proceeding, and 'only' called for an undertaking by 23 October 2019 in relation to use of the claimed area pending the hearing and determination of the proceeding. Further, the defendants say that the material filed by the plaintiffs indicates that Mr Koorn had been engaged to prepare his Traffix report as early as 15 September 2019 and that at least one of the affidavits was sworn prior to 16 October 2019, and that the remainder were at least under preparation.
102 In my view, taking into account that the plaintiffs did not in fact need a judgment of a court to achieve the result they sought, I do not accept that these additional matters relied upon by the defendants indicate that the plaintiffs would have issued the proceeding regardless of their response to the correspondence. In my view, contrary to the defendants' submissions, both emails did call for a response by the defendants. It is particularly noteworthy that the defendants did not even respond to the request for a temporary undertaking. There is nothing sinister in the fact that the plaintiffs had commenced their work towards the establishing of their claim from about mid-September.
103 There is nothing in this third point relied upon by the defendants.
There should be no further hearing about the costs of the dispute about costs
104 In my view, it would be quite disproportionate to have yet another round of submissions and/or another hearing in relation to the costs of the dispute about costs. To do so would be out of harmony with the principles on which the Civil Procedure Act 2010 (Vic) is based.[116] It would also be contrary to the spirit of the agreement that the question of the costs of the proceeding should be determined on the papers.
105 As indicated above, I consider that there should be a 25% 'discount' on the costs recoverable by the plaintiffs in relation to the argument about costs, for the reasons I have indicated.
106 For these reasons, orders should be made principally in favour of the plaintiffs as indicated above. Accordingly, I will make orders in the following form or to the same effect:
The Court orders that:
(1) Subject to paragraph 2, the defendants pay the plaintiffs' costs of the proceeding (including any reserved costs) up to and including 12 February 2020 but not including any costs that comprise survey expenses or similar expenses that the plaintiffs would have incurred in any event in delineating the precise area of the easement claimed in this proceeding.
(2) Any dispute between the parties as to whether any particular expenses fall within the exception specified in paragraph 1 be referred to the Costs Court for hearing and determination.
(3) The defendants pay 75% of the plaintiffs' costs (including any reserved costs) incurred in this proceeding after 12 February 2020.
[1] Defendants' submissions as to costs dated 28 February 2020 [1]-[2] ('defendants' initial costs submissions').
[2] Defendants' initial costs submissions (n 1) [16]. See Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 97 [67] (McHugh J) ('Oshlack v Richmond River Council').
[3] Defendants' initial costs submissions (n 1) [2(a)], [3]-[11], [16].
[5] Ibid [2(c)], [14]-[15], [16].
[6] Defendants' reply submissions as to costs dated 24 April 2020 [2] ('defendants' final submissions').
[12] Ibid [15]-[18], [23]-[24].
[13] Ibid [19]-[21], [23]-[24].
[14] Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84; (2018) 97 NSWLR 681, 682-683 [3], 683-684 [8]-[9] (Basten JA); 688-689 [31]-[34] (Payne JA, with whom Meagher JA agreed) ('Nichols'); Re Rush; Holt v Rush [2020] VSC 412, [39] (McMillan J) ('Re Rush').
[15] [1993] FCA 585; (1993) 44 FCR 194 ('Aust-Home Investments').
[16] [1997] HCA 6; (1997) 186 CLR 622 ('Lai Qin').
[17] Aust-Home Investments (n 15) 201 (footnotes omitted by the plaintiffs).
[18] Lai Qin (n 16) 624-625 (footnotes omitted by the plaintiffs).
[19] Plaintiffs' reply submissions on costs dated 8 May 2020 [2] ('Plaintiffs' final submissions').
[20] The sentence reads: 'A successful party is prima facie entitled to a costs order.'
[21] Plaintiffs' final submissions (n 19) [3].
[22] [2020] VSC 167 ('Kevin Hughes').
[23] Ibid [16]-[20] (footnotes renumbered and in some cases omitted).
[24] [2019] HCA 25; (2019) 265 CLR 164, 172-173 [24]-[25] (Kiefel CJ, Bell, Gageler, Keane and Nettle JJ) ('Sangare') (footnotes in original).
[25] Donald Campbell & Co v Pollak [1927] AC 732, 811-812; Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534, 539-540, 557, 561-562, 569; Oshlack v Richmond River Council (n 2) 96 [65], 120-121 [134].
[26] Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513, 537. See also at 533.
[27] Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534, 541-542, see also 558-559; Oshlack v Richmond River Council (n 2) 96 [65], 121 [134].
[28] Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513, 519; Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534, 541- 542, see also 558; Oshlack v Richmond River Council (n 2) 96 [65], 121 [134].
[29] Smeaton Hanscomb & Co Ltd v Sassoon I Setty, Son & Co [No 2] [1953] 1 WLR 1481, 1484; [1953] 2 All ER 1588, 1590. See also Harold v Smith [1860] EngR 516; (1860) 5 H & N 381, 385 [1860] EngR 516; [157 ER 1229, 1231]; Oshlack v Richmond River Council (n 2) 96‑97 [66]-[67], see also 86 [35], 120-121 [134].
[30] See, eg, Bostock v Ramsey Urban District Council [1900] UKLawRpKQB 143; [1900] 2 QB 616, 622, 625 and 627; Ritter v Godfrey [1920] 2 KB 47, 53, 60 and 66; Scottish Gympie Gold Mines Ltd v Carroll [1902] St R Qd 311, 315-316; Stewart v Moore [1921] St R Qd 182, 190; Redden v Chapman [1949] NSW St Rp 28; (1949) 50 SR (NSW) 24, 25.
[31] Anglo‑Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873, 874; Oshlack v Richmond River Council (n 2) 97-98 [69].
[32] Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, 210 [90]. See Supreme Court Rules [NT] r 1.10.
[33] [2009] VSCA 233, [10]. It is not necessary to reproduce the rest of this footnote.
[34] Ritter v Godfrey [1920] 2 KB 47; Oshlack v Richmond River Council (n 2) 97-98 (McHugh J); 124 (Kirby J).
[35] Supreme Court (General Civil Procedure) Rules 2005 (Vic) r 63.04 at first instance and r 64.24 on appeal.
[36] Spotless Group Limited v Premier Building and Consulting Pty Ltd and Northern Suburban Properties Pty Ltd [2008] VSCA 115, [14].
[37] [2019] VSCA 199, [48]-[50] (Kyrou, McLeish and Emerton JJA) (footnotes in original [but, as mentioned above, now renumbered]).
[38] See also Civil Procedure Act 2010 (Vic) s 65C(1) ('CP Act').
[41] The passage omitted from the extract is the quote from Sangare (n 24) set out above.
[42] See, eg, National Australia Bank Ltd v Horne [2011] VSCA 414, [3]; Apostolidis v Kalenik (No 2) [2011] VSCA 307; (2011) 35 VR 563, 612 [59]-[60]; Amalgamated Engineering Union v The Metal Trades Employers' Association [1935] HCA 61; (1935) 53 CLR 658, 664; Chiarella v Accident Compensation Commission [1992] Vic Rp 55; [1992] 2 VR 103, 108.
[43] See, eg, Board of Examiners v XY [2006] VSCA 190; (2006) 25 VAR 193, 201-3 [17]-[22], 208-9 [37]-[38]. Although the respondent in that case succeeded in overturning the decision of the Board of Examiners that she was not a fit and proper person to be admitted to legal practice, the Court held that the nature of the proceeding was such that no order as to costs should have been made.
[44] [2020] VSCA 34, [9]-[12] (Tate, McLeish, and Hargrave JJA) (footnotes and emphasis in original) ('Zhao').
[46] Ibid 624-625 (citations omitted) (emphasis added [by Court of Appeal in Zhao (n 44)]).
[52] [2009] NSWCA 205 ('Muhibbah Engineering').
[53] [2000] FCA 270; (2000) 101 FCR 548, 553 [6]; [2000] FCA 270, [6] (emphasis added [by Court of Appeal in Zhao (n 44)]), referred to with approval by the Full Federal Court in Chapman v Luminis Pty Ltd [2003] FCAFC 162, [7] ('Chapman v Luminis').
[55] Muhibbah Engineering (n 52) [52].
[60] [2000] FCA 270; (2000) 101 FCR 548 ('ONE.TEL').
[63] Footnotes renumbered and in some cases omitted. A footnote of my own has been added at the end of [29] of the judgment of Connock J.
[64] See paragraph 19 [of Kevin Hughes (n 22)] above.
[65] The reference here was to the CP Act (n 38). This footnote is otherwise omitted.
[66] Which is not to ignore the exchange of views in the exchange of correspondence between the parties and their respective legal advisers.
[68] But noting also that substantial additional costs would have been incurred by the parties had the matter proceeded through its interlocutory stages to trial.
[69] In this paragraph [29], Connock J mentions that the defendant in that case, in the course of submitting that the plaintiff had acted 'unreasonably and precipitously', contended that the plaintiff had breached various provisions of the CP Act (n 38). In the present case, by contrast, the defendants have not relied on the CP Act. They have submitted that the plaintiffs acted 'precipitously', but not 'unreasonably'. Rather, the defendants have confined themselves to denying that they themselves acted 'unreasonably'. For their part, the plaintiffs have made no reference to the CP Act either. Nevertheless, the CP Act is not entirely irrelevant. As Connock J said in paragraph [23] of his Honour's judgment, the proposition that the Court cannot try a hypothetical action between the parties when addressing the question of costs is consistent with the obligations of the Court imposed by ss 8 and 9 of the CP Act.
[70] [2020] VSC 315, [40]-[46].
[71] [2016] VSCA 186, [24]-[26].
[72] Chapman v Luminis Pty Ltd (n 53).
[73] Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302, [5] (Davies AJA, Mason P and Meagher JA agreeing) ('Edwards Madigan').
[74] [2014] NSWCA 107; (2014) 199 LGERA 424, 430-1 [23] (Preston CJ of LEC, Beazley P and Ward JA agreeing).
[75] Fairfield Services Pty Ltd (in liquidation) v Leggett [2020] QSC 183 ('Fairfield Services').
[76] Bitannia Pty Ltd v Parkline Constructions [2009] NSWCA 32, [66]-[80] (Basten JA); Nichols (n 14), 691 [44] (Payne JA).
[77] Fairfield Services (n 75) [11]-[24].
[84] Ibid [36]-[39] (footnotes in original but renumbered).
[85] Supreme Court Act 1986 (Vic) s 24.
[87] Ibid 173 [24]; Diakou v Rouse [2019] VSCA 199, [48] (Kyrou, McLeish, Emerton JJA).
[88] Earnshaw v Loy (No 2) [1959] VicRp 44; [1959] VR 252, 253 (Scholl J); Seng Hpa v Walker [2017] VSC 320, [76] (McMillan J).
[89] Oshlack v Richmond River Council (n 2) 97 (McHugh J).
[91] Nichols (n 14) 688 [30] (Payne JA).
[93] Jun International Property Pty Ltd v Fullerton Property Pty Ltd [2019] NSWSC 450, [53] ('Jun'), citing_, inter alia,_ Lai Qin (n 16) 624-5 and Edwards Madigan (n 73) [5] (Davies AJA, Mason P and Meagher JA agreeing).
[98] Ibid [52]-[55]. See also at [57]-[63].
[99] [2012] NSWSC 865, [27] (Ball J).
[101] Ibid 682-683 [2]-[3] (Basten JA), 689 [33] (Payne JA, with whom Meagher JA agreed).
[105] Nichols (n 14) 682-683 [3], 683-684 [8]-[9] (Basten JA); 688-689 [31]-[34] (Payne JA, with whom Meagher JA agreed); Re Rush (n 14) [39] (McMillan J).
[106] Citing Ausbal Pty Ltd v Grandsea Holdings Pty Ltd [2014] VSC 625, [46].
[107] Adrian J Bradbrook and Susan V MacCallum, Bradbrook and Neave's Easements and Restrictive Covenants (LexisNexis, 3rd ed, 2011) [5.15].
[108] See, e.g., Hampshire Automotive Centre Pty Ltd v Centre Com (Sunshine) Pty Ltd [2019] VSCA 77, [49]-[59].
[110] [2018] NSWSC 809, [65]. I note that in Galea v Camilleri [2019] NSWSC 167, [59] Robb J referred to and repeated this statement.
[112] Defendants' final submissions (n 6) [7].
[113] Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 14 VR 435, 442 [27].
[114] The defendants contrast s 60 of the Transfer of Land Act 1958 (Vic) relating to claims of adverse possession.
[115] See and compare Rise Home Loans Pty Ltd v Chambers & Anor [2009] VCC 31, [11]-[13] (Judge Anderson); EMCDG Investments Pty Ltd v Monash Gate Project Pty Ltd [2011] VSC 52, [47] (Daly AsJ).
[116] See, generally, Nichols (n 14) [3] (Basten JA).
Firkin
Pease [2020] VSC 539
(1998) 193 CLR 72
(2018) 97 NSWLR 681
(1993) 44 FCR 194
(1997) 186 CLR 622
(2019) 265 CLR 164
(1990) 170 CLR 534
(1986) 161 CLR 513
(2009) 239 CLR 175
(2011) 35 VR 563
(1935) 53 CLR 658
(2000) 101 FCR 548
(2014) 199 LGERA 424
(2005) 14 VR 435