Sunshine Retail Investments Pty Ltd v Wulff [1999] VSC 454

5. Essentially, there are two applications made with respect to the costs. In the ordinary way, the costs would follow the event and, unless a contrary order was made, an order that the plaintiffs by counterclaim pay the costs of the defendants to counterclaim of the proceeding would be made.

8. Mr. Cawthorn, counsel for the claimants against the developer at the trial, argued for a diminished order for costs against his clients.

11. He did not deny that the guiding principle was that an order for costs ordinarily follows the event. His submission was, however, that the very substantial discretion conferred upon the Court as to costs, either by virtue of s.24 of the Supreme Court Act or Order 63 of the Rules placed no inhibition upon depriving a successful defendant of part of the costs which might ordinarily have followed the event, when a substantial amount of the time of the litigation was spent on issues which were decided against the successful defendant, although that did not produce a successful result for the plaintiff. He cited Byrns v. Davey [1991] VicRp 93; [1991] 2 V.R. 568, a case in which Gobbo, J., then of this Court, concluded there might be an apportionment of costs against a defendant who had succeeded because of the time spent on other issues on which that defendant failed but not so as to lose the action. In that case the plaintiffs failed on a threshold issue, namely the construction of the covenant under consideration. However the substantial part of the hearing had been devoted to another issue, raised by the second and third defendants, as to whether the plaintiffs had consented to the breach of covenant. The plaintiff succeeded on that issue. His Honour considered statements made by English Courts in the well-known decisions of the Court of Appeal in Ritter v. Godfrey [1922] K.B. 47 (see the statements of Atkin, L.J. in that case) and the House of Lords in Donald Campbell & Co. Ltd. v. Pollak [1927] A.C. 732 at 811-812, confirming the reasonable expectation that a successful defendant would obtain an order for the payment of costs by the plaintiff, but the retention in the court of an absolute and unfettered discretion to award or not award them, so long as the discretion was exercised judicially. However, I note that the issues that led to the diminishing of the costs to be awarded to the successful defendant arose out of an easily separable issue, namely a matter of fact and not a matter of law.

14. In Verna Trading (Aust.) Pty. Ltd. v. New India Assurance Co. Ltd. [1991] VicRp 12; [1991] 1 V.R. 129, the Full Court of this State declined to interfere with an order of the trial judge not only depriving a successful defendant of its costs but also ordering the successful defendant to pay a substantial part of the plaintiff's costs, based upon the right in the trial judge to exercise his discretion in the whole of the circumstances.

17. Counsel for the claimants argued that of the multitude of issues that were raised in the case, in effect only two were won by the successful defendant. He could not deny, however, that they were the critical issues. There does not appear to be much disagreement between the parties that the principal reasons for the developer's success in the proceeding were two: (1) that the servient owner did not have knowledge of the use of the walkway by the Woodside Crescent residents; (2) that because the servient tenement was subject to tenancy at the commencement of each period of use by each claimant, no easement-of-way could be presumed and the servient owner did not have power to prevent the use of the pathway, nor did the tenants have power to grant an easement.

20. Mr. Cawthorn identified a number of matters which he claimed could be and ought be considered, and relied on, to make an order for costs other than the grant to the successful developer of the whole of the costs. I identify the main ones and make observations on them.

23. He claimed that the developer put in issue a large number of matters which were ultimately found against the developer and which it was unnecessary to have contested, thereby causing a substantial period of time and costs in respect of the matters. The first of these was the resistance to the claims by each of the claimants that they had used the walkway for a period in excess of 20 years, a matter denied in the defence. However, in my judgment it was not unreasonable for the developer (who only acquired the property in 1998) to require claimants claiming use of the walkway going back a period of 20-plus years to establish by credible evidence the use upon which they relied. It is true that not only was the use of it originally deposed to in affidavits cross-examined upon, but some features of the use, namely the width and line of the easement, whether it was used with permission of the owner and whether the easement was sufficiently defined, were also tested. In my view, the cross-examination and time spent on those matters was by no means unreasonable and I do not regard that as being a matter which would lead to the making of any different order.

26. It was also put that the developer had pleaded and argued that the easement did not accommodate the dominant tenement, which was allegedly used solely for recreational purposes. This matter was raised and occupied some time in evidence and submissions. I formed the view that the easement did accommodate the dominant tenement. However, all of the matters relating to this issue were inter-connected with the various elements necessary to be established to make out an easement of this kind in accordance with the principles in Dalton & Angus, set out and discussed by me in my reasons for judgment. It was submitted the cross-examination of each of the claimants was unnecessary, that none of this should have been disputed by the developer and, in association with that submission, it was argued that, had those matters all been admitted, a significant amount of time would have been saved. It would be just as relevant to say that if the claimants had accepted that they could not succeed because they would not be able to establish that the owner of the servient tenement was aware of and had consented to the use, or accepted they could not succeed because the whole of the property on which the pathway lay was tenanted throughout the whole of the period, then not only time would have been saved but the whole proceeding.

29. Reliance was placed upon the defence plea that there had been an attempt to prevent or interrupt access. All of this was bound up, however, with the issue of the alterations made to the walkway. On this aspect it was strongly put by counsel for the claimants that the defence position had originally been that the garden bed and the dog leg in the path had been put in in 1974, and that it was only upon the calling at a late stage of the witness Kanis (whose evidence I accepted) that it became clear that there was a case that it all occurred in 1971. But it appears to me that both sides in their pleadings and in their conduct of the case up until the filing of the affidavit at a late stage of Kanis, and the calling of him, proceeded on the mistaken belief that the garden bed and dog leg went in in 1974. The claimants so claimed in their statement of claim and the defendant said the same thing in the defence. Kanis's evidence, which I accepted, destroyed this fallacy. This had the effect of substantially knocking out the claimants' argument that the owner of the servient tenement Rosuma had consented in 1974 to the construction of the alterations in order to keep out cars and residents. This result was merely a by-product of the calling of evidence, the type of consequence that ensues in virtually all litigation. The claimants were not misled by the defendant but by their own belief and assertions in the statement of claim which were, at that stage, not denied by the defendant developer. In my judgment, nothing connected with this aspect ought alter the costs order. The fact is that, although a number of the issues were established, the plaintiffs by counterclaim failed to prove all of the necessary elements of the cause of action on which they had the burden of proof. The developer was entitled to maintain the defence that was run and it was not unreasonable that it should have done so, without being imperilled in respect of costs. See the statements in Australian Conservation Foundation v. Forestry Commission (1988) 81 A.L.R. 166 at 169 which express the view that a party against whom a claim is brought is not to be forced by the fear of being deprived of costs

"to abandon every defence he is not sure of maintaining and opposes to his adversary only the barrier of one hopeful argument: he is entitled to raise his earthworks in every reasonable point along the path of the salt. At the same time, if he multiplies issues unreasonably, he may suffer in costs. Ultimately the question is one of discretion of judgment."

33. Issues which were raised and run by the developer were in effect these: (i) the use made by each resident of the pathway; (ii) whether the pathway accommodated the dominant tenement; (iii) the definition physically of the claimed easement (I note that there had been a number of differing versions in the schedules to the counterclaim about this); (iv) whether the servient owner contested use of the pathway or sought to interrupt it and (v) whether the previous servient owner had given permission to use the pathway. These are matters that, in the general way, I did not find sustained but I am a long way from accepting that it was unreasonable for the developer to raise these matters and to put the plaintiffs to the proof of these elements. This is particularly so in a case in which the course of conduct of the claimants relied on ran back for a quarter of a century.

36. The statements in Ritter v. Godfrey (supra) pronounced by Atkin, L.J. have not been accepted as amounting to any inhibition upon the exercise of discretion in Victoria: see Thorne v. Doug Wade Consultants Pty. Ltd. [1985] V.R. 476 at 498, Verna Trading at 153-5 and my own decision in Bendigo Bank v. Russo & Ors. (unreported, 3 October 1997).

39. Whilst I take the view that the claimants in this case were entitled in the whole of the circumstances to bring this litigation, the defendant developer did not bring it about other than by exercising what would generally be regarded as a reasonable incident of ownership, action to make the non-tenanted premises secure. In my judgment, although the case was hard-fought on both sides, I do not identify anything in the developer's conduct of the proceeding that would attract the exercise of my discretion to diminish the cost. This is another way of saying I do not find any wrongful act on the part of the developer. It is true that the handling by the developer of the lodgment of plans of the proposed development, and its dealings with the claimants prior to the commencement of the proceedings, lacked something in the way of candour. However I do not regard that as amounting to wrongful conduct of the kind here under consideration.

42. One of the arguments advanced by counsel for the claimants was that one of the decisive points for my conclusion was that the whole of the servient tenement had been let out during each period of user by each resident, thereby eliminating the presumption of an easement-of-way and effectively destroying the case. It was put that that issue may have been brought as a preliminary issue and should have been. However, in my opinion, this could not reasonably have been dealt with as a preliminary issue or, for example, as an Order 47 pre-trial point. The likelihood of agreement about the facts was negligible. Moreover, the question (and on the authorities it could only be tried as a preliminary point if it was virtually certain to dispose of the proceeding, if found for the developer) involved consideration of the time of commencement of each period of user in relation to the relevant tenancies. It involved critical and difficult legal questions. The lengthy submissions made about this during and subsequent to the actual hearing at trial would indicate that it would have taken many days to try as a preliminary issue. Since agreement about the facts really had to come from the multiple claimants, there was no reason why the claimants might not have raised this matter. However, they did not. Thus I do not regard the failure of the developer to seek a preliminary determination of the tenancy issue amounts to any basis for adjusting the costs order. Reference was also made to the claim by the developer that the claimants had campaigned against the developer (a matter I described as "florid hyperbole"). This is a minor matter and could not affect the costs.

45. A similar claim was made that certain parts of the costs should not be allowed in any event, e.g. the preparation of a very detailed written reply by the developer. Whilst I take the view that the developer's post-trial submissions were unnecessarily lengthy and went beyond what I had indicated might be done, I deem this to be a matter for the Taxing Master. For these reasons I am not prepared to make any alteration to the ordinary order for costs in favour of the defendants to counterclaim against the counterclaimants.

48. The remaining matter is an application by the successful developer for an order that the Wulffs (the first and tenth plaintiffs by counterclaim) should pay the costs of the defendants by counterclaim of the proceeding on a higher scale, namely indemnity costs. This submission is founded upon the contention that the Wulffs' claim was hopeless and bound to fail because (1) they could not as a matter of law aggregate their period of user while residents of 2 Woodside Crescent, Toorak with their later residence at 38 Woodside Crescent, Toorak. (2) That they could not successfully rely upon any user by their predecessor at 38 Woodside Crescent. Previously 38 Woodside Crescent had been occupied by one Mrs. Merle Thomas. Initially the Wulffs had relied upon user by them of the claimed pathway aggregated to their occupation of No. 38. Later, they sought to rely upon the user by the late Mrs Thomas to achieve the 20-year period of use. I found that there was no evidence of any kind of the use by Mrs Thomas of the walkway, a conclusion made partly on the basis that the evidence indicated that she was virtually a hermit who rarely emerged from her home. The contention by counsel for the developer was that the Wulffs must have known that there would be no evidence of user by their predecessor and their claim was thereby hopeless. Reliance was also placed on a letter of warning sent by the developers' solicitors to the solicitors for the Wulffs that costs on an indemnity basis would be sought against the Wulffs if they failed on those grounds.

51. There have been in recent years many authorities dealing with the question of the exercise of discretion to award indemnity costs: see the judgment of Sheppard, J. in Colgate-Palmolive Company v. Cussons Pty. Ltd. [1993] FCA 536; (1993) 46 F.C.R. 225 at 232-233 and my own judgment, acknowledging my indebtedness to Sheppard, J.'s analysis of the principles in Colgate-Palmolive in Shepherd v. National Mutual Insurance Co. Ltd. & Anor. (unreported, 2 November 1994) and Bendigo Bank v. Russo (supra). See also Re Wilcox; ex parte Venture Industries Pty. Ltd. (No. 2) (1997) 72 F.C.R. 151 at 152 ff. It was argued that the writing of the letter in this case adds some dimension to the application for an indemnity costs order. That letter was rather oppressive in style. The principles and circumstances in which such costs might be ordered are those set out in Colgate-Palmolive and in my own decisions. Whilst it might be said that it should have been appreciated that the Wulffs could not rely upon the period of user as residents of 2 Woodside Crescent in conjunction with their later occupation of 38 Woodside Crescent, I cannot conclude that there could never have been any satisfactory evidence of the use by the late Mrs Thomas of the walkway. Indeed, one's expectation would be that someone living so close to it would be likely to use it. What defeated the matter at trial was the absence of that evidence but I am not prepared to conclude that that point was always going to be a hopeless one. Moreover, I am satisfied, having heard Dr. Wulff, that the action was not commenced for some improper motive. In my judgment it is not the kind of case for which any order for indemnity costs should be made in respect of the first and tenth counterclaimants. Such orders are made but rarely and only in unusual cases, frequently attended with some ulterior purpose. Nor am I satisfied that the proceeding was commenced on behalf of the Wulffs in wilful disregard of the known facts or clearly established law. Moreover, it appears to me that the developer's submissions were to the effect that it was not convenient or proper to distinguish between the claimants for the purpose of the developer's costs. It cannot be doubted that the developer's costs would have been only marginally decreased if the Wulffs had not been claimants, probably only by the cost of answering the Wullf evidence.

54. For these reasons, I refuse the developer's application for any order over and above the usual party-party costs.

60. I order that the defendants-plaintiffs by counterclaim pay the plaintiffs'-defendants by counterclaim's costs including reserved costs and transcript.