Vollmer v Hauber-Davidson [2005] NSWCA 237 | Case summary

11 JULY 2005 GISELLA VOLLMER v GUENTER HAUBER-DAVIDSON Judgment 1 THE COURT: This is a summons for leave to appeal from a costs order made by Macready M on 9 September 2004 following his decision on 24 August 2004 disposing of the claim and cross-claim of the parties under the Property (Relationships) Act 1984 (the Act). The Master ordered the defendant to pay the plaintiff's costs of the proceedings and the defendant seeks leave to appeal from this order. 2 The parties filed and exchanged written submission in accordance with the Rules and have sensibly agreed to the summons being disposed of in chambers without oral argument. 3 They lived in a de facto relationship between April 1994 and January 2001, and had one child who was born on 24 March 1997. The claimant also had a son from a prior marriage who is now 25. 4 The financial and property transactions of the parties were complex but their major asset, and the focus of the proceedings, was their jointly owned home at 32 Parry Street Putney (the property) which at the date of the trial had an agreed value of $875,000. This was subject to a mortgage for $135,000 leaving an estimated equity of $740,000. 5 The plaintiff moved out of the property in January 2002 and on 10 May that year commenced proceedings for an order adjusting the interests of the parties in their property. His statement of claim relevantly sought orders which would have made him the sole owner of the property subject to the existing mortgage and a payment to the defendant of $47,000. Prior to commencing proceedings he had on 28 March offered to pay the defendant $57,000 for her share in the property. 6 The defendant's cross-claim of 12 July 2002 sought orders which would have made her the sole owner of the property subject to the existing mortgage and a payment to the plaintiff of $200,000. On 10 March 2004 the plaintiff made the defendant an offer of 20% of the net value of the property. The proceedings were heard on 2 and 3 August 2004 and on the morning of the first day the defendant offered to settle for a payment of $250,000. The offers, other than those in the pleadings, appear to have been the Calderbank type without prejudice except as to costs. 7 In his reserved decision the Master awarded the defendant 30% of the equity in the property and ordered its sale. In his decision on costs he treated this order as being worth $220,000 to her. 8 The costs of proceedings in the Supreme Court are, in general, in the discretion of the Court, and this is particularly important in cases under the Act. This Court can only interfere with an order for costs which are in the discretion of the Court in accordance with the principles stated in House v The King (1936) 55 CLR 499, 504-5. 9 The Master referred to the various offers, other than those made in the pleadings and said that the defendant had done better than the offers made by the plaintiff. He then added: "Accordingly they can be put to one side". With respect those offers, and we would add, the plaintiff's even lower offer in the statement of claim which stood from 10 May 2002 to 10 March 2004 were material considerations. In fact they were most material yet it would seem that the Master thought that they could be put to one side. He may not have meant to convey that he was treating the plaintiff's offers as irrelevant but that is what he appears to have said. 10 He then referred to the defendant's offer and the result of the proceedings and continued: "The plaintiff naturally contends that costs should follow the event in the usual course". However in this case it is not easy to determine what was "the event". Ultimately the defendant sought an order for the sale of the property under her cross-claim, although this was not sought in the pleading as filed and the Master made this order. He said that "there were not really two distinct actions", which was clearly correct, and relied on the fact that the plaintiff was forced to commence these proceedings to obtain a settlement because the defendant was in possession. 11 Proceedings between these parties may have been necessary, and indeed inevitable, and as the Master inferred the plaintiff may not have obtained "a settlement" without bringing proceedings. However prior to commencing proceedings the plaintiff did not approach the question of "a settlement" on a realistic or fair basis. His offers of $57,000 on 28 March 2002 and $47,000 in his statement of claim were only a fraction of the amount the defendant ultimately secured. She was fully justified in refusing them and remaining in possession. For most of the time thereafter she was making the payments under the mortgage. Although the defendant's open offer in the cross-claim was well below the result ultimately achieved by the plaintiff her offer on the morning of the first day of the hearing was very close and did not provoke any counter-offer from the plaintiff. 12 The Court may be permitted to know that property values in Sydney increased substantially up to the end of 2003 but have since stabilised and fallen somewhat. There is nothing in the material before us to indicate the value of the property at other times except the purchase price of $440,000 paid by the parties in December 1997. One could infer that the greater part of the increase in value occurred before March 2002. We think that we can safely proceed on the basis that the changes in the value of the property did not substantially affect the relevance of the offers made by the parties in 2002. 13 Viewing the proceedings as a whole it seems to us that "the event" for costs purposes was the sale of the property and a 70/30 division of the proceeds. The plaintiff secured an adjustment in his favour which reduced the defendant's share from 50% to 30%, but by defending the proceedings the defendant increased her equity from the $47,000 offered in the statement of claim to $220,000. 14 In our judgment the Master erred in principle in putting "to one side" the plaintiff's unreasonable offers and in failing to take them into account when he later held that the plaintiff was "forced" to commence the proceedings and would not have obtained "the settlement" without having done so. This would only have been true if the plaintiff had made a reasonable offer before commencing proceedings. 15 We also conclude that the Master erred in principle or failed to take relevant considerations into account when he found that "the event" or result of the litigation favoured the plaintiff. The "event" may be characterised in more than one way but if one looks at what the defendant could have obtained without a contest, or further contest, she improved her position from $57,000 or $47,000 in 2002 to $220,000 in 2004. If the event is characterised in that way she was successful in the proceedings. 16 If one were to treat "the event" as one defined by the plaintiff's offer of 20% on 10 March 2004 treated as still available at the hearing, and the defendant's offer of $250,000 made on the first day of the hearing, the defendant was substantially successful. The plaintiff offered only 66% of what the defendant later obtained, while the defendant secured 88% of what she was willing to accept. 17 In these circumstances in seems to us that, in the language of the joint judgment in House v The King, the costs order was also "unreasonable or plainly unjust". For all these reasons the Master's exercise of discretion miscarried and the Court should grant leave to appeal. 18 We have reviewed the reported cases on the Act dealing with costs and 26 unreported cases decided over the last five years since Howland v Ellis [1999] NSWSC 1142 to see whether there is any established practice or some elucidation of principle which might support the order in this case or indicate the order that should now be made. In our judgment the best statement of principle was that by McLelland J in Parker v McNair (1990) DFC 76, 155 at 76, 160 where he said: "In this kind of case where the discretionary powers of the Court are invoked it is important on the question of costs, in my view, to see how reasonable or otherwise the parties have been in limiting issues for litigation and in making offers of settlement, and this is the kind of case in which parties would be wise, if they wish to make an offer of settlement, to adopt the Calderbank form of letter … or to make an open offer, because it is only in the light of that sort of information that the Court can really be properly placed to consider whether the litigation was necessary." 19 The 26 unreported cases have not revealed any settled practice or further development of principle. They do however demonstrate that, where offers have been made, orders for costs have been made in accordance with the principles stated by McLelland J. They also show that the Court has generally taken a broad, rather than a narrow, view of what constitutes the event in proceedings under the Act. Where offers have been made they have generally been treated as defining the real dispute and "the event" of the litigation has been judged accordingly. 20 In cases of this kind dealt with in chambers the Court does not normally give any reasons for its decision to grant or refuse leave to appeal. We have decided to give extensive reasons in this case for the benefit of the parties and to assist them, perhaps hopefully, in resolving this issue without the risk and expense of further litigation. We make the following orders:

Vollmer v Hauber-Davidson

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