(4) Costs
25The Plaintiffs seek costs of these proceedings from the Defendants. On the other hand, the Defendants seek costs from 27 October 2010 (when the Plaintiffs' Notice of Motion for a sale under s 66G was argued before Macready ASJ) to 3 March 2011 when the Plaintiffs agreed to partition the land.
26The principles are set out in Kardos v Sarbutt (No. 2) [2006] NSWCA 206 at [28]-[31] and Spathis v Nanos (No 2) [2008] NSWSC 470 at [2]-[3].
27In Kardos Brereton J (with whom Basten JA and Hunt AJA agreed) said:
[28] However, the costs of adjusting property interests consequent upon the failure of a domestic relationship are an incident of the failure of a joint relationship, usually without attributable fault. In this sense, there is an analogy with partnership disputes. In partnership proceedings, it was once the rule that no costs would be given up to the decree directing the account, a position that was not departed from except in cases of gross misconduct [ Hawkins v Parsons (1862) 8 Jur (NS) 452; Parsons v Hayward (1862) 4 De GF&J 474]. The prevailing rule nowadays is that the costs of both parties of an action for dissolution are paid out of the partnership assets, unless there is some good reason to the contrary [ Hamer v Giles (1879) 11 Ch D 942], except where the action is one which in substance is to try some disputed right, in which case the unsuccessful party will be ordered to pay the costs [ Hamer v Giles; Warner v Smith (1863) 9 Jur (NS) 169]. The costs of taking accounts, although disputed, are usually defrayed out of the partnership assets [ Butcher v Pooler (1883) 24 Ch D 273; Newton v Taylor (1827) 19 Eq 14]. Similarly, in proceedings under Conveyancing Act , s 66G, for the appointment of trustees of sale of jointly held land, the costs are usually paid out of the proceeds, the rationale being that the costs of such an application are an incident of joint ownership.
[29] In this type of litigation, it is artificial to resolve liability for costs according to the accident of who is plaintiff and who is defendant, so as to leave a plaintiff free to litigate confident that he will receive costs however unreasonable his claim, unless the defendant betters her offer. There is no reason why the defendant should bear the risk of costs to the exclusion of the plaintiff where neither makes a realistic offer. Similar views have been expressed by Hislop J, with whom Mason P and Ipp JA agreed, in Vollmer v Hauber Davidson [2006] NSWCA 79, as follows (at [21]):-
a) In the absence of agreement between the parties it was necessary for them to resort to the courts, whether pursuant to the Act, the Conveyancing Act 1919 s 66G or general equitable principles to obtain finality in respect of their property interests.
b) The parties were unable to reach agreement in respect of the adjustment of their interests, neither being prepared to make a realistic settlement offer to the other.
c) In these circumstances the commencement of the court proceedings was necessary from the perspective of each party, not just the respondent.
d) The fact that the respondent issued a Statement of Claim and the appellant a Cross-Claim, rather than vice versa, was a chance event. Accordingly it should not be regarded as a relevant factor in determining the costs issue, a proposition which counsel accepted on the appeal.
e) The effect of the Master's adjustment of the parties' interests was that the appellant's share of the property was valued at approximately $220,000, the respondent's at approximately $520,000. As is apparent from a comparison of the Master's orders and the pleadings, each party was unsuccessful in that he or she failed to obtain the adjustment that he or she sought, though each was successful in exceeding the adjustment that the other party offered. These were material considerations which were not taken into account by the Master.
[30] Subsequently, in Chanter v Catts (No 2) [2006] NSWCA 179, Hodgson JA, with the concurrence of Bryson JA and Hunt AJA, said that Vollmer did not tell against the award of costs to a plaintiff on the basis of "substantial success", where the plaintiff, on appeal, obtained a result which bettered the defendant's offer by $60,000. Hodgson JA said (at [6]):-
In my opinion, although the proceedings achieved less than the appellant claimed, the result is substantially better than the appellant could have obtained without court proceedings and counts as substantial success. I do not think that Vollmer counts against costs being awarded on the basis of that substantial success.
[31] For this purpose, "substantial success" is not to be judged merely by the circumstance that a plaintiff obtains an adjustment in his or her favour. It involves an evaluation of the outcome, in the light of the forensic and negotiating positions of the parties, such that it can be said that one party has been clearly more successful than the other, to the extent that the costs of the proceedings can be seen to be attributable to the unsuccessful party's opposition, rather than to the matters referred to by Hislop J in Vollmer - including, in particular, the necessity for both parties that their property interests be separated, and the failure of both parties to adopt a realistic position.
28In the present case I do not think I should depart from the ordinary rule that the costs should be paid from the sale price achieved for the land which will be subject to the appropriate accounting referred to in para [8] above. My reasons can be briefly stated. First, the Plaintiff wished to sell the whole of the land and sought orders under s 66G for that purpose. The Defendants proposed by October 2010 that the land be partitioned. Ultimately the Plaintiff accepted in the following year that partition was appropriate.
29Secondly, the Plaintiffs were unsuccessful in obtaining the sale which they sought by Notice of Motion before Macready ASJ in November 2010. One reason at least for their failure was that they did not have Affidavits of Fitness in respect of the proposed trustees.
30Thirdly, although the Plaintiffs may in the first instance have been required to commence proceedings because the Defendants failed to respond to correspondence that proposed what should happen to the land and the partnership, the Plaintiffs have not achieved exactly what they sought in the pre-litigation correspondence. Fourthly, the Plaintiffs have not been successful in the present proceedings in obtaining an order for possession against the First Defendant.
31On the other hand, the Defendants were unsuccessful in resisting the appointment of the trustees and receivers proposed by the Plaintiffs. These matters tend only to highlight the reason for the usual rule and raise the same considerations set out in paras (a)-(d) in Vollmer v Hauber Davidson [2006] NSWCA 79 at [21], quoted with approval in Kardos at [29].
32I therefore consider it appropriate that the costs that should be paid from the proceeds of sale should include the costs of the valuation obtained by the Defendants. That valuation seems to have been significant in achieving agreement on partition.