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1. The parties to this dispute are family members who jointly own a residential house in Dickson (the Property). The first and second plaintiffs are husband and wife respectively. The defendant is the first plaintiff’s mother and the second plaintiff’s mother-in-law. The parties jointly purchased the Property in 2021 and lived together in the Property for a short time. The family relationship then broke down, which resulted in the first and second plaintiffs moving out of the Property in early 2024. To facilitate the separation of their living arrangements, the parties have decided to sell the Property and use the proceeds of sale towards the purchase of separate dwellings or alternative rental accommodation.

Remaining dispute for resolution by the court

2. The plaintiffs initially sought the sale of the Property on certain conditions which were not acceptable to the defendant. An application was then filed seeking a court order for sale, pursuant to s 244 of the Civil Law (Property) Act 2006 (ACT) (Property Act).

3. However, by the time of the hearing of the application on 1 May 2025, the parties had reached a resolution of all issues concerning the sale of the Property, save as for the question of the costs of the proceeding. Accordingly, that is the only dispute remaining for resolution by the court, with the orders for sale to be made by consent.

Applicable principles

4. The following are overarching principles that shape the exercise of the court’s discretion as to costs:

(a) Costs are in the discretion of the court: r 1721(1) of the Court Procedures Rules 2006 (ACT) (Rules).

(b) The discretion is wide, though it must be exercised judicially, in accordance with established principle and the statutory context: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 (Oshlack) at [35] and [65].

(c) The fundamental purpose of the discretion is to compensate the successful party, not to punish the unsuccessful party: EMI Songs Australia Pty Ltd v Larrikin Music Publishing Pty Ltd [2011] FCAFC 92 at [9].

(d) Fairness is the touchstone. The court must make a broad evaluative judgment as to what is in the interests of justice: Gray v Richards (No 2) [2014] HCA 47; 89 ALJR 113 at [2]; Clarkson Williams Partners Pty Ltd v Vaughan (No 2) [2016] ACTCA 8 at [12]; and Wu v Wu (No 3) [2024] ACTCA 35 at [8].

5. Where the substantive dispute in a proceeding has settled or a party no longer wishes to proceed with the litigation, following Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin [1997] HCA 6; 186 CLR 622 (Lai Qin) at [7]-[8], there are further well-established principles that inform the court’s discretion as to costs:

(a) The court does not try a hypothetical action between the parties.

(b) However, in some (rare) cases, notwithstanding that there has been no trial on the merits, the court may conclude that although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried.

(c) Further, where one of the parties has acted unreasonably, the court may determine that the other party should obtain the costs of the action.

(d) This may include circumstances where a party has no reasonable alternative but to commence litigation.

6. The specific circumstances in a proceeding may also give rise to additional discretionary principles. Here, the proceeding involves the sale of a property by court order. The relief to be granted is in the nature of appointing a trustee for sale and prescribing the conditions of the sale process. The parties each accepted that the usual course in such a proceeding is for the legal costs to be paid out of the proceeds of sale, the rationale being that the costs of such an application are an incident of joint ownership: Kardos v Sarbutt (No 2) [2006] NSWCA 206 at [28].

Competing positions of the parties

7. The plaintiffs sought an order that the defendant pay their costs of the proceeding. They submitted that costs follow the event, and they have been substantially successful in obtaining an order for sale. They argued that there was effectively a capitulation by the defendant in agreeing to the order for sale. The plaintiffs argued that the defendant’s conduct meant that there was no reasonable alternative but to commence litigation. The plaintiffs made reasonable offers seeking to settle the proceeding. The defendant did not engage reasonably with those offers. The plaintiffs further submitted that the proceeding that was commenced sought relief similar to what is now sought by consent.

8. The defendant sought an order that each party pay their own costs of the litigation. She argued that she had never opposed the sale of the Property. Rather, it was the terms on which the Property was to be sold that posed difficulty, and the logistics of ensuring that she had appropriate accommodation before vacating the Property. She did not capitulate, as there was a reasonable defence in equity based on a promise said to have been made by the first plaintiff to the defendant many years ago. The validity of that defence was never tested at trial and the court should not engage in the hypothetical exercise of determining that issue on a costs dispute. Otherwise, the defendant’s conduct was not unreasonable. Her delay in agreeing to an order for the sale of the Property was due to the parties having competing ideas about the terms on which the Property would be sold.

Evidence as to procedural history and conduct of the parties

9. The evidence before the court disclosed the parties’ exchanges in legal correspondence and text messages, extending from prior to the proceeding being commenced up to shortly before the proceeding resolved.

10. The plaintiffs sent correspondence on 14 February 2024 requesting that the Property be sold by way of public auction. This was followed by a text message from the first plaintiff to the defendant, sent on 2 March 2024 in the following terms: If you agree to sell the house, I can help you buy a one-bedroom apartment. A one bedroom apartment is about $350,000. If your 1/3 share of the sale can pay for the apartment whole, I will help with all paperwork and moving. If your 1/3 share of the sale is not enough to buy the apartment and you need to borrow money from bank, I can help with joint-owning the property with you to help with getting approval from the bank. You will need to pay for everything, but it will be cheaper than Dickson house. This is just between you and me. Anh is not involved in this. Please reply to me by tomorrow Sunday afternoon. If not, I will force sell the house with court. And I will not help you find a new place and move.

11. The proceeding was commenced on 5 September 2024. Negotiations followed, but in October 2024, the defendant’s solicitor advised that she was not willing to sign the consent orders proposed by the plaintiffs.

12. Further negotiations ensued in January 2025 and an agreement in principle was reached in April 2025 save as to costs. Ultimately, the parties only managed to agree on the orders giving effect to the agreement following the hearing on 1 May 2025. Should the defendant pay the plaintiffs’ costs of the proceeding?

13. The material before the court confirms that each party acted reasonably.

14. First, this is not a case where there was any clear capitulation. It is true that the plaintiffs made offers that were not accepted by the defendant. It is also true that the defendant did not offer an explanation for rejecting the offers. However, the offers made by the plaintiffs had conditions attached to them which were different from the conditions upon which the parties later came to an agreement for sale. Further, and significantly, the orders sought in the originating application were that the plaintiffs be appointed as trustees for sale and that the defendant vacate the property within 42 days of the date of the orders.

15. The orders the parties ultimately agreed upon have all parties effectively performing the role of a trustee for sale, through joint instructions of a named agent and conveyancer. While I accept that what was sought was an order for sale, and the plaintiffs will obtain such an order by the consent orders proposed, that is properly to be viewed as part of a suite of orders (set out below) which represent a compromise on material aspects of the claim rather than a total capitulation on the part of the defendant.

16. Otherwise, I accept the defendant’s submission that it would be inappropriate to attempt to determine the merits of the equitable defence raised. That would amount to impermissibly trying a hypothetical dispute.

17. As to the contents of offers made, the fact that a reasonable offer was made but not accepted does not necessarily equate to the defendant adopting an unreasonable position that would result in an unfavourable costs order. None of the correspondence was relied upon as constituting either a formal offer of compromise under the Rules or an offer of compromise at common law.

18. I do not accept that this was a case where the conduct of the defendant meant that the plaintiffs had no reasonable alternative but to commence litigation. The fact that the defendant did not accede to the option presented by the plaintiffs does not mean that they were forced to file an application in the court seeking relief under s 244 of the Property Act. That is particularly the case when the option presented by the plaintiffs (by text message, set out above) was only open for 24 hours, its terms were unclear as to what the defendant was being asked to pay for, and it did not address the critical matter of concern to the defendant, which was how the defendant was going to afford alternative accommodation in the period before she received any proceeds of sale.

19. There were also reasonable alternatives available which do not appear to have been discussed by the parties. For example, the defendant’s difficulties with her future accommodation needs may have been met in part by the parties agreeing that any contract for sale would include a condition permitting release of part of any deposit paid by a purchaser, to be used for temporary accommodation for the defendant prior to completion. The point is that, rather than choosing to explore other alternatives, the plaintiffs chose to embark upon litigation.

20. That is not to be taken as any criticism of the plaintiffs, nor is it to suggest that a party must demonstrate rejection of a diverse range of alternatives proffered before a finding of unreasonableness will be made. It is simply to explain why this case is different to the types of administrative law matters contemplated by McHugh J in Lai Qin (which was an administrative law case) where his Honour (at [7]) discussed the position of a party who found themselves with no reasonable alternative but to commence proceedings as being entitled to a costs order in their favour.

21. Taking the totality of the correspondence in evidence into account, none of the material established that the proceeding fell outside the usual circumstances where a hearing on the merits has not occurred. Applying Lai Qin, that might have warranted an order that each party pay their own legal costs. However, in the circumstances here, the subject matter of the dispute is a jointly owned asset. The legal costs were directly referable to the mechanics of that asset being sold and the best way to ensure that the parties achieved their respective objectives. I therefore consider that there is no reason to depart from the order commonly made that the legal costs of this proceeding should be paid out of the proceeds of sale of the Property.

Conclusion and orders

22. For the above reasons, the costs of the proceeding will be paid out of the proceeds of sale of the Property and will be included as part of the orders otherwise made by consent (the ultimate form of which is slightly varied below).

23. The Court orders as follows:

Sale of the Property (1) Forthwith, the parties are to do all acts and things and sign all documents necessary to market for sale and sell Section 21 Block 26 on Deposited Plan 3031 in the Division of Dickson, also known as 64 Davenport Street Dickson ACT 2602 (the Property), by auction (or such method as is agreed in writing by the parties). (2) Within 30 days of the date of these Orders, the parties are to jointly list the Property for sale with Sophie Luton and Richard Luton of Lutons (the Agent) at 14 Bougainville Street, Griffith, ACT, 2603 or such other agent as is agreed upon by the parties in writing, including executing all documents requested by the Agent for the sale of the Property by auction. (3) In the event that the Parties cannot agree on the terms of the Agent's contract within 7 days of the Agent being selected, the contract is to be in the agent's standard terms and with the agent's standard fees. (4) The sale is to proceed by public auction after a marketing period determined by the Agent unless otherwise agreed by all parties in writing. (5) Within 7 days of the date of these Orders, the parties are to give such instructions as are necessary to a legal practitioner appointed to effect the conveyance agreed upon by the Parties, being Richard James Baker of BDN Lawyers at Level 1, 1 Farrell Place Canberra City ACT 2601 or such other practitioner as the parties agree in writing. (6) If the Property does not sell at the auction, then within 21 days thereafter, the parties are to sell the Property at the best price then obtainable, and the parties are to accept any offer made to purchase the Property within 5% of the reserve price as recommended by the Agent. (7) If the Property is not sold at the auction contemplated and is not sold in the period provided thereafter for sale by private treaty, the Agent is to market the Property for sale by a further public auction on a date within 42 days of the date of the conclusion of the period of sale by private treaty, with a reserve price 5% below the reserve price at the earlier auction. (8) In the event that the reserve price set for that auction is not reached, the Agent will negotiate with the highest bidder and the second highest bidder and will accept the highest offer to purchase made within 5% of the reserve price set for that auction. (9) The parties are to do all things necessary to execute the contract for sale of the Property and in the event that the Parties fail to agree to the terms of the contract for sale, the terms recommended by the Legal Practitioner are to be adopted. (10) The parties are to co-operate in every way with the Agent in relation to the sale of the Property at all times requested by the Agent and ensure that the Property is in a neat and clean condition. (11) The parties are to execute all other documents necessary to complete the sale within the time required by the contract of sale to ensure that the purchasers do not have a right to terminate or rescind due to a failure to do so. (12) The Plaintiffs are to pay the Agent any marketing and advertising costs over and above $4,000.00 incl GST.

Vacant possession (13) The Defendant is to vacate the Property within 90 days of the date of these Orders. (14) To allow her to vacate the Property in accordance with Order 13, the Plaintiffs will advance $100,000.00 (the Advance) to the Defendant, for her benefit, to be paid as follows: i. $20,000.00 of the Advance to be paid to the Defendant's solicitors' trust account and released to the Defendant by no later than 1 day after the date of these orders. ii. $80,000.00 of the Advance to be paid to the Defendant's solicitors' trust account within 7 days of the making of these orders and to be payable to the Defendant personally upon confirmation and evidence from the Plaintiffs and the Defendant that she has vacated the Property. (15) If the Defendant fails to vacate the Property within 90 days of the date of these Orders, the First and Second Plaintiffs are permitted, without compliance with rule 2015 of the Court Procedures Rules 2006 (ACT), to apply for an order delivering possession of the land under rule 2451 of the Court Procedures Rules 2006 (ACT). Parties’ rights to attend auction and to purchase (16) Pursuant to section 245 of the Civil Law (Property) Act 2006 (ACT): (a) The Plaintiffs, jointly or severally, or the Defendant, are entitled to purchase the Property, at public auction, without the payment of a deposit; and (b) The Plaintiffs, jointly or severally, or the Defendant, are entitled to purchase the Property, at public auction, by setting off that party's entitlement to the net proceeds against the money bid or offered. (17) The defendant may attend any auction in person or remotely by electronic means and the Plaintiffs may attend any auction remotely by electronic means.

Restraint on further encumbrance (18) The parties are restrained from drawing down on any loan facility secured by the mortgage to IMB or otherwise offering the Property as security other than in accordance with these Orders.

Distribution of proceeds of sale (19) On settlement of the sale of the Property, the parties are to do all acts and things necessary to distribute the proceeds of the sale in the following manner and priority: (a) Payment of the amount to effect a discharge of the mortgage to IMB; (b) Payment of any amounts owing to Icon Water and/or the ACT Revenue Office in respect of the Property not otherwise taken up as a credit in favour of the vendor; (c) Payment of legal conveyancing costs of the sale; (d) Payment of any PEXA (online settlement) or any physical paper settlement fees associated with the sale; (e) Payment of the Agent's commission, marketing and advertising costs, auctioneer's fees and any other expense incurred in respect of the sale of the Property; and (f) Payment of the parties’ costs of this proceeding. (20) Following the payment of all expenses in accordance with Orders (19)(a) – (19)(f) above, the net sale proceeds shall be distributed as follows: (a) Bogdana Reljic: 1/3 of the net proceeds of the sale, minus the sum of $100,000.00 pursuant to Order 14; (b) Darko Reljic: 1/3 of the net proceeds of the sale; (c) Anh Hien Phuong Hoang: 1/3 of the net proceeds of the sale; (d) Darko Reljic and Anh Hien Phuong Hoang: the sum of $100,000.00 pursuant to Order 14.

I certify that the preceding twenty-three [23] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Justice McWilliam Associate: Date: