Court of Appeal (Vic)|2010-05-07|Before: NEAVE and REDLICH JJA and VICKERY AJA

Tayles v Davis (No 2) [2010] VSCA 107 (7 May 2010)

Davis v Tayles [2006] VSC 219 (Smith J)

1 The appellant, Ian Tayles, seeks an order that the respondent, Susan Davis, his former de facto partner, pay the costs of his appeal on a party/party basis and also pay Mr Tayles' costs of the trial.

2 In the proceedings below, Mrs Davis sought an order under s 285 of the Property Law Act 1958. Mrs Davis claimed that the couple had co-habited in a de facto relationship from September 1999 until September 2003 and that it was just and equitable to adjust the parties' property interests on the basis of the financial and non-financial contributions she had made to their Glen Iris home and to Mr Tayles' financial resources.

3 During the trial Mr Tayles' initial position was that the Court did not have power to adjust the parties' property interests because they had not lived together for the requisite period of at least two years.[1] His position on that matter later changed. The learned trial judge described the course of the trial as follows:

At the commencement of the hearing, his position was that a relationship commenced when they moved into premises in Glen Iris in January 2001 and terminated in about the middle of 2002. On the fifth sitting day, the period was extended to the end of 2002. On the sixth day of sitting, after a period of cross-examination, Mr Tayles indicated through his counsel that he now conceded that there had been a domestic relationship within the meaning of the Act in the period from January 2000 to June 2002 and a de-facto relationship from January 2001 to June 2002. He also conceded that Part IX of the Property Law Act had application to him and Mrs Davis. He continued, however, to vigorously contest, the issues of the nature of the relationship and its history and the duration of the 'domestic relationship'. [2]

In final submissions his counsel put forward a number of alternative submissions as to when the relationship ended, with the latest date being June 2003.

4 At the trial it was also submitted on behalf of Mr Tayles that, although the parties were registered as joint tenants in the Glen Iris home, they had in fact intended that they should own it in proportion to their respective financial contributions. In his counter-claim, Mr Tayles sought a declaration that he and Mrs Davis held the Glen Iris property on trust for each other in proportion to the financial contributions made by or on their behalf, resulting in Mrs Davis being entitled to an interest reflecting her financial contribution of $300,000. Counsel for Mr Tayles contended that Mrs Davis's financial and non-contributions to the parties' property and the welfare of the family did not require any further adjustment of property interests.

5 The learned trial judge made adverse credit findings against Mr Tayles. His Honour said that '[h]is obsession to win the case and deprive Mrs Davis of any adjustment in her favour resulted in him going to absurd lengths to deny the existence of a de facto relationship and relationship of a domestic nature for the relevant time of two years'.[3]

6 His Honour accepted Mrs Davis's evidence that the parties had lived together until September 2003[4] and held that the intention of both the parties was that they would hold the Glen Iris property as joint proprietors in law and equity. Having considered the evidence as to the parties' respective contributions to Glen Iris and other properties his Honour ordered that Mr Tayles transfer half his interest in the Glen Iris property to Mrs Davis. In the result she received 75 per cent of the value of that property.

7 The appeal raised the following issues for decision:

(a) whether his Honour erred in finding that Mrs Davis and Mr Tayles owned the Glen Iris property equally;

(b) whether his Honour erred in finding that the parties lived in a four-year de facto relationship;

(c) whether his Honour's findings as to Mrs Davis and Mr Tayles' respective contributions to the Glen Iris property and as to Mrs Davis's contributions to Mr Tayles' financial resources were wrong;

(d) whether his Honour incorrectly relied on the evidence of Mrs Davis's expert witness as to the valuation of Mr Tayles' Laverton property;

(e) whether his Honour over-estimated the increase in the value of properties owned by Mr Tayles, by failing to take account of capital gains tax; and

(f) whether his Honour gave insufficient weight to Mr Tayles' contributions to Mrs Davis's Burwood property, or to the benefit derived by Mrs Davis in living at Glen Iris.

8 On appeal, Mr Tayles failed to make out the claims raised in paragraphs (a), (b), (e), and (f). So far as (c) is concerned, the Court held that his Honour had correctly assessed the parties' respective contributions to the Glen Iris property, and had correctly held that Mrs Davis had made some contribution to the increase in value of Mr Tayles' other properties, by allowing him to buy time and avoid selling them.

9 In relation to (d), the Court held that in fixing the value of one of the properties owned by Mr Tayles (the Laverton land for which a subdivision permit had been obtained) the learned judge should have deducted an amount for the contribution of service provision and road development. The Court held that the orders made by his Honour in favour of Mrs Davis, based on her contributions to Mr Tayles' property and financial resources were unduly favourable to her and ordered that Mrs Davis receive 65 per cent of the value of the Glen Iris property, rather than the 75 per cent ordered by the learned trial judge.

10 Mr Tayles, through his counsel, now submits that he is entitled to the costs of his appeal because he succeeded in his claim that the trial judge's adjustment of the parties' property interests was not just and equitable. He also contends that such an order should be made because, although an adverse finding as to Mr Tayles' credit was made by the trial judge 'it was agreed by the parties that the finding was not supported by the evidence and was not open to the trial judge'.

11 Mr Tayles relies on the uncontroversial proposition in Chen v Chan[5] that:

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 the claim.

It is submitted that Mr Tayles did not engage in any disqualifying conduct and succeeded because the findings of the trial judge had been varied by a considerable margin in his favour. It is also submitted that Mrs Davis should pay Mr Tayles' trial costs, though no additional arguments were made in support of that submission.

12 Mrs Davis submits that Mr Tayles succeeded only to the extent that her share of the value of the Glen Iris property was reduced by 10 per cent. Her counsel submits that a considerable part of the costs of the appeal related to the issue of whether the parties were living in a de facto relationship for four years (which Mr Tayles denied) and whether his Honour should have approached the exercise of his discretion under s 285 of the Property Law Act 1958 from the starting point that each of the parties had a half interest in the property. Mr Tayles failed on both of these issues on appeal.

13 In relation to his Honour's adverse credit finding, counsel for Mrs Davis submitted that Mr Tayles could not accurately claim that this finding was reversed on appeal. Rather, Mrs Davis had, prior to the hearing of the appeal, compromised an application for the admission of fresh evidence made by Mr Tayles, on the basis that one matter found by the trial judge to have affected Mr Tayles' credit would not be taken into account on the appeal. Once Mr Tayles abandoned that application, he did not contend that his Honour had erred in his credibility finding in other respects. Mrs Davis's counsel submitted that the issue could not affect the costs of the appeal as it was contrary to the compromise reached between the parties concerning the application to admit fresh evidence and was in any event inconsistent with the costs order made with respect to that application. We accept that submission.

14 Although Mr Tayles successfully contended that the trial judge had given excessive weight to Mrs Davis's contributions to Mr Tayles' property and financial resources and had placed too great a value on the Laverton property, he failed in his attack on his Honour's findings as to the length of the relationship, and his Honour's rejection of Mr Tayles' claim that the starting point of the property adjustment should have been that Mrs Davis's equitable interest in the Glen Iris property was a financial contribution of only $300,000. We concluded that his Honour did not err in finding that the parties lived together in a four-year de facto relationship or in his assessment of the extent of the parties' interests in the Glen Iris property prior to the exercise of the court's adjustive jurisdiction. Both of these were threshold issues which had to be determined before the jurisdiction under Part IX could be exercised and were central to the appeal. Had Mr Tayles been successful on either of these matters, the orders made in Mrs Davis's favour would have required very substantial variation.

15 While as a general rule costs should follow the event, and a successful party should obtain all of the costs of the appeal even although he or she failed to make out all of the grounds, it may be appropriate in some circumstances to make costs orders which reflect the success or failure of the parties on particular issues. This is a course not uncommonly followed with respect to the costs of a trial. Thus in Pricom v Sgarioto,[6] Eames J said that:

in the exercise of its discretion the court may decline to order costs in favour of a successful party, or may order the successful party to pay the costs of the unsuccessful party, where the plaintiff failed to establish discrete heads of claim, or failed to establish issues which it pursued in its claim, although ultimately succeeding on the basis of another discrete head of claim: Hughes v Western Australian Cricket Association Inc (1986) ATPR 40- 748, per Toohey J at p 48, 136.[7]

16 His Honour acknowledged the caution of Jacobs J in Cretazzo v Lombardi[8] against an increasing tendency to apply for an apportionment of costs in cases where a party who was 'wholly or substantially successful nevertheless fails along the way on particular issues of fact and law'. Although Jacobs J considered it might be contrary to the interests of justice to dissuade a party from canvassing all the issues which might be relevant to the case, Eames J noted that in State of Victoria v Master Builders Association of Victoria,[9] Ormiston J observed that in a time of congested lists and demands for greater court efficiency, the concern expressed by Jacobs J might now have lesser weight. This consideration may also be relevant to an appeal where substantial time is devoted to grounds of appeal which ultimately fail.

17 In McFadzean v CFMEU[10] this Court dismissed an appeal against costs orders made by Ashley J (as he then was). In that case there were a large number of parties. Some plaintiffs were successful on some causes of action, while other plaintiffs and some defendants were wholly unsuccessful.[11] His Honour ordered that the plaintiffs pay 40 per cent of the defendants' costs and apportioned individual liability for those costs between the plaintiffs. He explained the 40 per cent figure as follows:

why 40 per cent? The answer is that it is my best attempt at synthesis of a series of considerations pertinent to the plaintiffs' claim: The success of some plaintiffs on some causes of action; the failure of some plaintiffs altogether; the success of some defendants altogether; the fact that even the successful plaintiffs failed upon many causes of action; the fact that the causes of action upon which some plaintiffs succeeded represented only a small fraction of the causes of action which were pleaded; the fact that there were very many issues joined upon which the plaintiffs failed, including issues pertinent to most of the causes of action upon which some plaintiffs ultimately succeeded; the fact that the plaintiffs succeeded upon some issues joined even though that did not always mean that a cause of action was established; and the fact that any additional costs payable by the plaintiffs to [the deceased defendant's] estate would involve, in the overall scheme of things, a very small amount.[12]

18 The appellants challenged the costs orders which were made against the successful plaintiffs on the ground (among others) 'that his Honour had failed to apply the fundamental principle that a plaintiff should be indemnified for all expenditure reasonably and properly incurred in obtaining judgment'.[13]

19 In its reasons the Court of Appeal said that:[14]

The judge below acknowledged that in the normal course, a plaintiff who was only successful on one of a number of pleaded causes of action would be entitled to costs. In our view, the reasons his Honour gave for departing from this course were sound. The Rules of Court are wide enough to permit an apportionment of costs according to issues or causes of action.[15] Importantly, the judge regarded the case brought by the successful appellants as a 'substantial failure ... whether assessed by references to causes of action or issues.' His Honour observed that the plaintiffs had been successful in eight of the 63 causes of action they had brought, and that, assessed as a proportion of the disputed questions of fact resolved in their favour, the success of the plaintiffs was substantially less than that. In these circumstances, there was clearly a reasonable basis for his Honour's conclusion that a 'substantial injustice' would result from an award of costs in favour of the successful plaintiffs.[16]

20 In Spotless Group Ltd v Premier Building and Consulting Pty Ltd[17] Spotless Group appealed against costs orders requiring it to pay the costs of the successful claims made by Premier and North Suburban for payment of costs associated with clean up notices issued by the Environment Protection Authority as a result of pollution of the land. Premier and North Suburban failed on the other claims it made against Spotless Group. In these circumstances the trial judge held that it would be unfair to order that Spotless pay the whole of Premier's costs of the trial, but did not order that Premier should pay Spotless Group's costs in relation to the unsuccessful parts of their claim against Spotless Group. This Court (Redlich and Dodds Streeton JA) dismissed the appeal against Byrne J's costs orders, commenting in doing so that:[18]

The rules of court are wide enough to permit an apportionment of costs according to issues or causes of action,[19] which enable a court to look at the realities of the case and attempt to do substantial justice.[20]

Thus a pragmatic approach may be taken in cases where no party is wholly successful and there are clearly practical difficulties in awarding costs on an issue by issue basis. In exercising its discretion as to costs the court is entitled to take into account the failure of a party on certain 'issues'.[21] 'Issue' is not used in the technical pleading sense, but refers to any disputed question of fact of law. In Reading Entertainment Australia Pty Ltd v Whitehorse Property Group Pty Ltd this Court observed:

'In cases where neither party is wholly successful there are clearly practical difficulties in awarding costs on an issue by issue basis which would involve making separate costs orders. His Honour took a pragmatic approach, which has much to commend it, of apportioning the costs between the parties.'[22]

21 The making of a single costs order which involves an apportionment of the costs between the parties having regard to the nature and outcome of the issues may also be made by this Court with respect to the costs of the appeal. Such a course was followed in Investec Bank (Australia) Limited v Glodale Pty Ltd[23] where this Court considered the costs orders to be made in circumstances where each party was partially successful. The respondents successfully defended the trial judge's finding that the appellants had breached its duty to the respondents in some respects, but failed to establish in its cross-appeal that there had been other breaches of duty as well. The nature of the breach was relevant to assessment of the loss suffered by the respondents. Neither the appellants, nor the respondents in their cross-appeal, succeeded in challenging the trial judge's findings as to the appropriate market value of the property which was sold in breach of the appellant's duty as mortgagee. The respondents' cross-appeal also failed in respect of his Honour's decision to award damages rather than order a taking of accounts. Because there was a 'mixed outcome - none of the parties has achieved total success and a sizeable part of the appeal has been devoted to issues upon which the respondents failed',[24] the Court ordered that the appellant pay 70 per cent of the respondents' costs of the appeal and that there be no order as to costs in relation to the cross-appeal. A similar approach was taken in Zachariadis v Allforks Australia Pty Ltd,[25] where the respondent successfully defended the learned trial judge's findings, which were challenged by four of the five grounds of appeal. The appellant was successful on the fifth ground. In that case this Court ordered that the respondent should pay 50 per cent of the appellant's costs of appeal.

22 Whether the costs order on appeal should reflect an apportionment of the costs of the parties having regard to their success on various issues will obviously depend upon the particular circumstances. Unlike the situation which arose in some of the case to which we have referred, Mrs Davis had only one claim against Mr Tayles; the claim under Part IX of the Property Law Act 1958. Mr Tayles succeeded only in reducing the quantum of the order in favour of Mrs Davis. It is clear that the Court's broad discretion in relation to costs allows it to take into account the success or failure of Mr Tayles on particular issues.[26]

23 A considerable part of the parties' outlines of submission was taken up with the grounds of appeal on which Mr Tayles failed. Mrs Davis's preparation for the appeal would have required detailed attention to these issues. As we have said, they were the primary grounds upon which Mr Tayles relied and which, if successful, would have produced an adjustment between the parties of an entirely different order. Since the hearing lasted only one day, an allocation of the time spent during the hearing on the various grounds of appeal has less relevance to the making of costs orders than it might have in a case extending over several days. We consider this to be an appropriate case in which to apportion the costs having regard to the nature of the claims made and the varying success which each party enjoyed with respect to the issues. We would therefore order that each party bear their own costs of the appeal.

24 We do not accept the submission that Mrs Davis should pay the costs of the trial. The trial lasted 15 days. Much of it was occupied with the question whether the parties had been in a de facto relationship for two years. It was unduly prolonged by Mr Tayles' claim that this was not the case and his claim that although Mrs Davis was registered as a joint tenant, it was not intended that she should have a joint interest. No reason of any substance has been advanced why we should disturb the costs orders made by the trial judge.

[1] Property Law Act 1958, s 281(1). It does not appear to have been contended by Mrs Davis that the alternative basis for exercising jurisdiction in s 281(2) applied.

[2] Davis v Tayles [2006] VSC 219 ('Reasons'), [32]-[33].

[6] (Unreported, Supreme Court of Victoria, Eames J, 24 April 1995).

[9] (Unreported, Supreme Court of Victoria, 15 December 1994, Tadgell, Ormiston and Eames JJ), 6-7.

[11] McFadzean v CFMEU (No 2) [2004] VSC 480, [32].

[15] Woolf v Burman (1940) 13 ALJR 431; Byrns v Davie [1991] VicRp 93; [1991] 2 VR 568, 569 (Gobbo J).

[16] In Permanent Building Society v Wheeler [No 2] (1992) 10 WAR 569, a case involving multiple causes of action against multiple defendants, Anderson J (at 574) said that in awarding costs '[t]he court will always look at the realities of the case and attempt to do substantial justice'.

[19] Woolf v Burman (1940) 13 ALJR 431; Byrns v Davie [1991] VicRp 93; [1991] 2 VR 568, 569 (Gobbo J).

[20] Permanent Building Society v Wheeler (No 2) (1992) 10 WAR 569; Semco Developments Pty Ltd v Graham [2005] VSCA 268, [24] (Eames JA, with whom Chernov and Ashley JJA agreed).

[21] Byrns v Davie [1991] VicRp 93; [1991] 2 VR 568; Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748, 48 136 (Toohey J); Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1987) 17 FCR 211, 222 (Bowen CJ, Morling and Gummow JJ); Pricom Ltd v Sgarioto (Unreported, Supreme Court of Victoria, 24 April 1995) 8-10 (Eames J).

[22] [2007] VSCA 309, [89] (Chernov, Redlich and Kellam JJA).

[24] Ibid [8] (Neave, Redlich JJA and J Forrest AJA).

[26] See also G E Dal Pont, Law of Costs (2nd ed, 2009), [8.2]-[8.3], [20.4]-[20.5].

Tayles v Davis

At a glance

Court

Decision date

Before

Source

Judgment (62 paragraphs)

Tayles v Davis (No 2) [2010] VSCA 107 (7 May 2010)

Parties

Legislation Cited (1)

Cases Cited (4)