PROCEDURE – COSTS – WHERE ACTION SETTLED OR OTHERWISE
DETERMINED WITHOUT HEARING – where the defendant, through
the third party
acting as her attorney, agreed to sell a property to the plaintiff – where
Source
Original judgment source is linked above.
Catchwords
PROCEDURE – COSTS – WHERE ACTION SETTLED OR OTHERWISEDETERMINED WITHOUT HEARING – where the defendant, throughthe third partyacting as her attorney, agreed to sell a property to the plaintiff – wherethe defendant defaulted in her obligationsunder the agreement – where theplaintiff commenced proceedings against the defendant for specific performance– wherethe defendant defended the proceedings and counterclaimed againstthe third party – where, prior to any hearing of the matter,the defendantapplied for leave to withdraw her defence against the plaintiff and discontinueher counterclaim against the thirdparty for financial reasons – where thedefendant sought an order that she pay the plaintiff’s costs on thestandardbasis only – where the plaintiff sought an order that thedefendant pay her costs on the indemnity basis on grounds that thedefendant’s case was hopeless or highly speculative – where the
parties sought orders that the costs payable be fixed
and set off against the
balance of the purchase price under the agreement - whether the award of costs
should be made on the standard
or the indemnity basis – whether the costs
to be paid by the defendant should be fixed
Uniform Civil Procedure Rules 1999 (Qld), r 307, r 687(2)
Amos v Monsour Pty Ltd [2009] 2 Qd R 303
[2009] QCA
65, considered
Chen v Kevin McNamara & Son Pty Ltd (No 2)
[2012] VSCA 229, considered
Deighton v Dewit [2021] NSWSC 852,
considered
Doerr v Gardiner (No 2) [2024] QCA
21, considered
Fairfield Services Pty Ltd (in liq) v Leggett
(2020) 5 QR 50
[2020] QSC 183, cited
ONE.TEL Ltd v Deputy
Commissioner of Taxation (2000) 101 FCR 548
[2000] FCA 270,
considered
Re Minister for Immigration & Ethnic Affairs
Ex parte Lai
Qin (1997) 186 CLR 622
[1997] HCA 6, considered
Seven Network Ltd v
News Ltd (2009) 182 FCR 160
[2009] FCAFC 166, considered
Willmott v
McLeay [2013] QCA
84, considered
Judgment (55 paragraphs)
[1]
[1] In August 2023, Emily Sivyer agreed to sell a house and land at Burleigh Waters to Haley Yafe. In December 2023, Mrs Sivyer refused to complete the transaction. Soon after that Ms Yafe commenced proceedings seeking, among other things, specific performance of the agreement and damages.
[2] In February 2024, James Trainor, Mrs Sivyer's son, was joined as a third party. In November 2024, Maureen Trainor (who is Mrs Sivyer's daughter and James Trainor's sister) was appointed as the plaintiff's litigation guardian.
[3] During 2024 the matter was before the court a number of times and directions were made which were not observed by Mrs Sivyer. In late 2024 a guillotine order was made requiring to Mrs Sivyer to file certain material. In December Mrs Sivyer advised the parties that she intended to withdraw her defence and discontinue her counter-claim and her third-party claim.
[4] The parties have agreed, or there is no opposition, on most aspects of the resolution of this matter. The live issues are:
[2]
(a) whether Mrs Sivyer should pay Ms Yafe's costs of the proceeding and pre-action costs on the standard or the indemnity basis and,
[3]
(b) depending on the answer to (a), whether those costs should be fixed and at what figure, and
[4]
(a) withdraw her defence and counterclaim, and
[5]
(b) discontinue her third-party claim against Mr Trainor.
[6]
[6] No party opposes leave. I grant leave with respect to both the defence and counterclaim and the third-party notice. That raises the question of costs.
_"(1) A party who discontinues or withdraws is liable to pay - _
[9]
(a) the costs of the party to whom the discontinuance or withdrawal relates up to the discontinuance or withdrawal; and
(b) the costs of another party or parties caused by the discontinuance or withdrawal.
[10]
(2) If a party discontinues or withdraws with the court's leave, the court may make the order for costs it considers appropriate."
[11]
[8] Mrs Sivyer and Mr Trainor have agreed that, subject to leave to discontinue being granted, she will pay his costs on the standard basis to be assessed plus 15% of the assessed amount, with the costs of the assessment to be shared equally by Mrs Sivyer and Mr Trainor. There is no reason not to make an order in the terms of that agreement.
[9] As far as Ms Yafe is concerned, Mrs Sivyer argues that she should only be required to pay costs on the standard basis but that, if ordered to pay indemnity costs, they should be less than that sought by Ms Yafe.
[12]
[10] An overriding principle in applications of this kind is that the court should not attempt to assess the merits by trying a hypothetical action. It was put this way by McHugh J:
[13]
"When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. ... The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action."[1]
[14]
[11] That statement, which has been endorsed many times, was made in light of the nature of the case before the High Court. McHugh J described it as "an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means." This is not such a case.
[12] In subsequent decisions a further distinction was drawn between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the first type of case, Burchett J, in ONE.TEL Ltd v Commissioner of Taxation[2], said that the court's discretion would ordinarily be exercised in favour of the successful party. But in the second, he said that there might be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs. These, and other cases, are considered in detail by Bond J in Fairfield Services Pty Ltd v Leggett[3].
[13] I do not need to consider this issue any further because of the concession by Mrs Sivyer considered below.
[15]
[14] In this case, Mrs Sivyer concedes that she should pay costs on the standard basis. The contest is over whether costs should be awarded on the indemnity basis.
[15] Mrs Sivyer says that she opted to withdraw and discontinue because she did not have the money to continue the action. She further argues that her prospects of success should not be assessed and that the only relevant question was whether there was a legitimate basis for defending the action. Her written submissions are confusing on this point as they rely upon the affidavit of Tegan Childs (a solicitor in the employ of Tusk Lawyers) wherein Ms Childs affirms that Mrs Sivyer gave instructions to commence the proceedings. She sets out, in some detail, the instructions she was given in October 2023. The submissions go on to assert that the instructions "justified the commencement of the proceeding." I have proceeded on the basis that the intention was to argue that Mrs Sivyer was, on her instructions, entitled to defend the action brought against her.
[16] The defence was in three parts:
[16]
(a) non est factum - because of her mental state and her poor hearing she signed the contract under a mistaken belief as to its nature,
[17]
(b) incapacity at the time of the transaction, and
[18]
(c) a breach of fiduciary duty by her attorney (Mr Trainor).
[19]
[17] Ms Yafe seeks to argue that none of these defences could ever have been successful. She contends that the history of the matter, Mrs Sivyer's conduct of the proceedings and the appointment of a litigation guardian well after the defence, counterclaim and third-party notice were filed were all inconsistent with the defences raised by her and that costs on the indemnity basis should be awarded.
[18] The contract of sale contains two clauses which were tentatively called in aid by Ms Yafe. Clauses 9.3 and 9.8 operate where the vendor has defaulted. They provide:
[20]
If the Buyer affirms this contract under clause 9.1, it may sue the Seller for:
[21]
The Buyer may claim damages for any loss it suffers as a result of the Seller's default, including its legal costs on an indemnity basis."
[22]
[19] Neither of those clauses create a right to recover any of the items referred to therein. They affirm the ordinary right of a buyer to pursue the relief identified. Similar clauses were considered in Willmott v McLeay[4]. Holmes JA referred to the Victorian Court of Appeal decision in Chen v Kevin McNamara & Son Pty Ltd[5] where the following was said:
[23]
"[8] An agreement to pay costs will be construed as an agreement to pay costs on a party and party basis, unless it is plain from its terms that costs are to be paid on a "special basis." Where the terms plainly and unambiguously provide for costs to be assessed on some special basis, the court will take such a provision into account but it is not bound to give effect to any extra-curial contract as to costs. An agreement to pay costs on a "special" basis is only a factor informing the exercise of the court's discretion, but not requiring the exercise of that discretion in a particular way. Generally however, where the parties have unmistakeably agreed to the making of a special costs order, such a term will be given effect to unless there is some other discretionary consideration that militates against the making of such an order." (emphasis added, citations omitted)
[24]
"[29] This is not a case in which the parties have contracted "plainly and unambiguously" for payment of costs on an indemnity basis. The right to claim such costs as a component of damages for loss resulting from the buyer's default is a different and less certain thing; apart from anything else, the recovered deposit could be brought to account in calculating the loss. Because the appellants have not established a clear right under the contract so as to warrant the exercise of the costs discretion in favour of granting indemnity costs, I would confine the award of costs here and below to costs on the standard basis."
[25]
[21] That does not conclude the matter. I was urged by Ms Yafe to find that there were grounds to support an order for indemnity costs. Part of the argument for indemnity costs rests upon the proposition that Mrs Sivyer's case was hopeless or highly speculative and that Mrs Sivyer's daughter was on notice of some "objective evidence" that her mother exhibited no significant dementia before the refusal to complete. To determine those arguments would effectively require the court to engage in the type of hypothetical trial referred to above. For the reasons given above, that road should not be travelled - whether the question is whether there should be a costs order at all or whether the costs should be standard or indemnity.
[22] The other arguments from Ms Yafe are to this effect:
[26]
(a) Mrs Sivyer was told of the difficulties of her position before she withdrew from the contract and was put on notice about indemnity costs.
[27]
(b) Mrs Sivyer was reminded of the perceived difficulties with her case after she filed her defence.
[28]
(c) Ms Yafe has been put to expense and delay without Mrs Sivyer putting on any evidence notwithstanding orders that she do so.
[29]
(d) The costs clause (cl 9.8) ought to lower the discretionary threshold for indemnity costs.
[30]
[23] In Doerr v Gardiner[6] Morrison JA and Livesey AJA said:
[31]
"[19] Before costs are awarded on the indemnity basis something more than success or failure must usually be shown. Indeed, it will usually be the case that something more than the failure to better an informal offer must be shown. Each case must, however, depend on its particular facts and circumstances.
[32]
[20] The award of indemnity costs is, as a result, usually reserved for those cases where, viewed in prospect before the hearing, the unsuccessful party should have recognised that it had "no chance of success". In that kind of case the award is made on the basis that it is presumed that the litigation was pressed for some ulterior motive or because of a wilful disregard of the known facts or clearly established law."
[33]
[24] The statement in Doerr v Gardiner was with respect to an appeal but it is generally applicable to matters in which there has been a hearing. In Seven Network Ltd v News Ltd[7] Dowsett and Lander JJ emphasised the need for some "special or unusual feature" to be present before the court would depart from the usual order for standard costs.
[25] There were several Calderbank offers made back and forth between the parties in this case. At the hearing, the parties accepted that they were irrelevant because they were directed to an outcome at trial.
[26] Mrs Sivyer's case is that she could no longer afford to litigate and she was discontinuing for that reason. There was nothing which could lead me to the view that her assertion of an inability to fund the continuing litigation was unfounded.
[27] Given Mrs Sivyer's inability to fund her case, and bearing in mind that it would be inappropriate to determine the arguments about her defence and counterclaim being entirely without merit, I am satisfied that the concession by her that she should pay costs on the standard basis is, in all the circumstances, one which should be reflected in an order.
[34]
[28] Ms Yafe urged me to exercise the power under r 687(2) UCPR to fix the costs to be paid. Mrs Sivyer submitted that I did not have sufficient evidentiary detail to justify a fixed costs order for matters such as Attwood Marshall's estimated work in progress, counsel's estimated work in progress and some unbilled disbursements. Those amounts come to a total of $37,210.90 on an indemnity basis. Ms Yafe seeks, on the standard basis, an order for payment of $155,319.79.
[29] Should the parties be condemned to a further extension of this contest? They are agreed that any order for fixed costs should be set off against the amount Ms Yafe will have to pay to complete the contract. Yet they are unable to compromise at this point on what is, given the sale price of the property ($1,655,000), a relatively small amount. The manner in which Mrs Sivyer and her litigation guardian have proceeded so far gives me no reason to think that this last hurdle would be cleared quickly and efficiently.
[30] In Deighton v Dewit[8] Wright J considered s 98(4) of the Civil Procedure Act2005 (NSW) which is similar to r 687(2)(c). He said:
[35]
"[9] The authorities establish that a gross sum costs order may be appropriate in situations such as:
[36]
(1) where the subject matter/litigation concerns modest sums of money;
[37]
(2) where the costs assessment would be protracted and expensive;
[38]
(3) where there is a risk of satellite litigation if costs are assessed;
[39]
(4) where the evidence reveals that the party against whom costs are awarded is unlikely, due to their financial position, to be able to pay those costs and, accordingly, the party in whose favour the costs were awarded would be unlikely to be able to recover tax costs in due course; and
[40]
(5) where the expense and delay of taxation is disproportionate to the amount of costs recoverable."
[41]
[31] I respectfully agree that those are matters which are also relevant to the consideration of an order under r 687(2)(c). In this case, the amount of costs in dispute is modest. The assessment should not be expensive but, in light of Mrs Sivyer's conduct of her defence, could be protracted. Satellite litigation is unlikely. On her own case, Mrs Sivyer could not pay the costs of assessment. While Ms Yafe would recover those costs on the basis of the agreed set-off, she would be held out of those funds until the conveyance takes place. It would also delay the settlement of the conveyance because there cannot be a set-off until those costs are fixed, assessed or agreed. Most importantly, the expense and delay of assessment is disproportionate to the real amount in issue.
[32] Each party relied on reports from costs assessors. There is disagreement between them over certain areas and the absence of cross-examination does not assist in the resolution of those issues. But r 687 does not require the court to engage in some sort of mini-assessment. The order is for "an amount for costs." That amount should be arrived at after consideration of evidence which is sufficient in the circumstances. The process was described by Fraser JA (with whom McMurdo P and Douglas J agreed) in the following way in Amos v Monsour Pty Ltd[9]:
[42]
"[28] UCPR draws a clear distinction between an assessment of costs and the process of fixing costs under r 687(2)(c). Whilst both processes require that procedural fairness be afforded to the parties, the latter is intended to be relatively speedy and inexpensive. What Giles JA said in Harrison & Another v Schipp about the specification of costs under the similar provision in r 6(2) of the New South Wales Supreme Court Rules 1970 applies with equal force to the fixing of costs under r 687(2)(c):
[43]
"Of its nature, specification of a gross sum is not the result of a process of taxation or assessment of costs. As was said in Beach Petroleum NL v Johnson [(1995) 57 FCR 119] (at 124), the gross sum 'can only be fixed broadly having regard to the information before the Court'; in Hadid v Lenfest Communications Inc [[2000] FCA 628] (at [35]) it was said that the evidence enabled fixing a gross sum 'only if I apply a much broader brush than would be applied on taxation, but that ... is what the rule contemplates'. The approach taken to estimate costs must be logical, fair and reasonable (Beach Petroleum NL v Johnson (at 123); Hadid v Lenfest Communications Inc (at [27])). The power should only be exercised when the Court considers that it can do so fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available (Wentworth v Wentworth (Court of Appeal, 21 February 1996, unreported) per Clarke JA)."
[44]
[33] The amount sought by Ms Yafe on the standard basis is $155,319.79. The amount estimated by Mrs Sivyer on the same basis is $143,424.27. That amount includes the sums (estimated work in progress and unbilled disbursements) which were the subject of objection. The evidence about those sums is slight. In an affidavit of Georgia Taylor it is deposed that those costs are recorded in the same way as the other costs charged by Attwood Marshall. An examination of the schedule to the bill concerning those costs discloses that they related to the preparation of the cost assessor's report and preparation for the hearing. The charges appear to be consistent with the costs agreement with Ms Yafe. It is not possible to determine whether they were reasonable. I do accept that Ms Yafe is generally liable for the costs incurred by her lawyers in preparing for this matter. On that basis, I am prepared to make some allowance for the estimated work in progress and unbilled disbursements.
[34] After considering the reports of the assessors and the evidence of the solicitors on both sides and by applying the "broad brush" referred to above, I fix the amount for costs at $150,000.00.
[45]
[35] Ms Yafe also claims damages in the sum of $16,655.55. That represents conveyancing costs wasted by the vendor's failure to complete and legal costs incurred before the date instructions were given to issue proceedings - charged on the standard basis. Mr Walter (the costs assessor retained by Ms Yafe) was of the view that they are not recoverable as costs, but I do not need to decide that. He opined that this expenditure was relevant to conveyancing matters arising under the contract. I agree that that is an appropriate characterisation. It was a loss that Ms Yafe suffered as a result of the default and comes within the damages contemplated by cl 9.8 of the contract. She is entitled to damages in that sum.
[46]
The parties are to consult and to bring in minutes of order reflecting these reasons and the agreements otherwise reached between them.