Steer v McLellan (No. 2)[2016] QDC 305

DISTRICT COURT OF QUEENSLAND

1. [1]
   Judgement in this matter was given on 14 October 2016. The plaintiffs’ claim was dismissed. The defendants were successful on all issues argued at trial. Orders were made for the parties to make written submissions on costs.

2. [2]
   In their submissions, the plaintiffs concede that they should be ordered to pay the defendants’ costs on a standard basis.

3. [3]
   The defendants submit that an indemnity costs order should be made. The defendants rely on one or more of the following grounds:

1. (a)
   the plaintiffs’ case was a hopeless proceeding;

2. (b)
   the proceedings were brought or continued in a way that was unreasonable, or for an ulterior motive; and

3. (c)
   the plaintiffs’ unreasonably refused an offer of settlement.

4. [4]
   On 4 September 2015, the defendants made an offer to settle the proceedings by the plaintiffs agreeing to the entry of judgment in favour of the defendants on all claims (except the damages in respect of the Grevillea tree) and with the plaintiffs to pay the defendants’ costs, to be assessed on a standard basis if not otherwise agreed. In respect of the damage caused by the Grevillea tree, the defendants offered to pay the amount of $2,200, being the full amount of the claim; a claim which I rejected in any event. The offer was said to be made pursuant to Chapter 9, Part 5 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) (in particular, r 361(3)) and Calderbank v Calderbank.^[1]  At the time of the offer, the proceedings were part heard and had been set down for a further two days in November 2015.

5. [5]
   The jurisdiction of the court to award costs is provided for in r 681 of the UCPR. That rule provides that costs of a proceeding are in the discretion of the court but follow the event, unless the court orders otherwise. The discretion of the court as to an order for costs is “absolute and unfettered”, but it must be exercised judicially.^[2]

6. [6]
   The normal order in this case would be that the plaintiffs pay the costs of the defendants on a standard basis. To make an order for the plaintiffs to pay the defendants their costs on an indemnity basis requires some special circumstances.

7. [7]
   An order for indemnity costs has been described as requiring “some special or unusual feature in the case to justify the court exercising its discretion in that way.”^[3] 

8. [8]
   Woodward J in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants^[4] said:

“[I]t is appropriate to consider awarding ‘solicitor and client’ or ‘indemnity’ costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion.”^[5]

9. [9]
   Gummow J in Botany Municipal Council v Secretary, Department of the Arts, Sport, the Environment, Tourism and Territories,^[6] accepting what Woodward J had said in Fountain, added, “However, I accept that the discretion conferred … is not so circumscribed that an order of this character may be made only against an ethically or morally delinquent party.”^[7]

10. [10]
    Davis J, in considering the question in Ragata Developments Pty Ltd v Westpac Banking Corporation,^[8] referred to indemnity costs being awarded:

“[W]here unsuccessful proceedings have been brought and prosecuted, not for the bona fide purpose of protecting and enforcing a legal right, but to achieve an ulterior or extraneous purpose.”^[9]

11. [11]
    After reviewing a number of authorities, Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd^[10] identified circumstances in which it may be appropriate to make an order for indemnity costs.  Those circumstances included:

1. (a)
   the making of allegations of fraud knowing them to be false or making irrelevant allegations of fraud;

2. (b)
   evidence of particular misconduct that causes loss of time to the court and to other parties;

3. (c)
   the fact that the proceedings were commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law;

4. (d)
   the making of allegations which ought never to have been made;

5. (e)
   the undue prolongation of a case by groundless contentions; and

6. (f)
   an imprudent refusal of an offer to compromise.

12. [12]
    In accepting that the categories in which the discretion may be exercised are not closed, Sheppard J said:

“The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.”^[11]

13. [13]
    In the process of analysing the facts, in subsequent cases the courts have adopted a number of different expressions in determining whether an indemnity costs order should be made.

14. [14]
    French J (as his Honour then was) in J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (No 2),^[12] referred to the opportunity for an indemnity costs order where “a party persists in what should on proper construction be seen to be a hopeless case.”^[13]

15. [15]
    Mason P in Rosniak v Government Insurance Office,^[14] after referring to the statement of Gummow J that for an order to be made it was not necessary for there to be an “ethically or morally delinquent party”,^[15] said:

“Nevertheless the court requires some evidence of unreasonable conduct, albeit that it need not rise as high as vexation.  This is because party and party costs remain the norm, although it is common knowledge that they provide an inadequate indemnity.  Any shift to a general rule that indemnity costs should be the order of the day is a matter for the legislature or the rule-maker.”^[16]

16. [16]
    Chesterman J in Emmanuel Management Pty Ltd v Foster’s Brewing Group Ltd,^[17] in awarding indemnity costs, stated:

“I have said enough to indicate that in my opinion there was a degree of irresponsibility in the plaintiffs’ bringing and prosecuting their action against the first defendants.  It is significant that extravagant claims of dishonesty, corruption and gross impropriety were made in support of which not the slightest evidence was called.  It is a case in which it is right to regard … the defendants as having been vexed.  It is therefore an appropriate case in which to order an order of indemnity costs.”^[18]

17. [17]
    In Grice v Queensland,^[19] McMurdo P (McPherson and Williams JJA concurring) stated, “Before ordering costs on an indemnity basis, a court requires some evidence of unusual circumstances or unreasonable conduct.”^[20]

18. [18]
    In their submissions, the defendants refer to the hopelessness of the plaintiffs’ case and the fact that the proceedings were brought or continued for an ulterior motive and in a way that amounted to unreasonable conduct by the Steers.

19. [19]
    In giving judgment, I dismissed the claim in nuisance on the basis that the acts complained of did not amount to a substantial and unreasonable interference with the plaintiffs’ rights in a way which entitled them to a remedy.

20. [20]
    It does not necessarily follow from that finding that the defendants are entitled to indemnity costs. There are, however, a number of aspects of this case which warrant a deeper consideration as to whether or not an indemnity costs order is justified.

21. [21]
    In this case, it was clear that not only was Mr Steer unreasonable in his approach to the conduct of the defendants, but was fixated by any noise made by any of his neighbours, not just the defendants. That fixation was such that Mr Steer threatened both past and present neighbours with various types of detriment; threatening to one that he could have her removed as a tenant, stating to another neighbour about the defendants that he hoped Mrs McLellan “had deep pockets” and threatening the McLellans that he would see them in court. He rejected out of hand the suggestion from one of the neighbours (who had been friendly initially with both parties) that they should try to mediate the dispute.

22. [22]
    Mr Steer complained to the police on a number of occasions about the noise from the McLellans. The police attended at the property on six occasions, four of them in response to telephone complaints from Mr Steer. Mr Steer had gone down to the Bribie Island Police Station on 11 occasions to lodge complaints regarding the conduct of the McLellans. On each occasion that the police attended at the property, it is clear from the police records that the police did not consider the noise was excessive.

23. [23]
    One might have thought that the attitude taken by the police would have indicated to Mr Steer that in fact he was being unreasonable. In fact, under cross-examination, the attitude expressed by Mr Steer was that he had complained and that the police had done nothing about it. Nevertheless, Mr Steer continued to pursue complaints to police and separately brought these proceedings with the intention of obtaining a court order, damages and an indemnity costs order for the costs of the proceedings against his neighbours.

24. [24]
    It is also apparent that Mr Steer was aware of his rights to complain about the dogs to the local authority but he chose not to exercise those rights on the basis that it would take “months and months and months”. Mr Steer was asked as to whether he was given the kit by the council relating to the barking dogs but his answers regarding any kit were unresponsive.

25. [25]
    Mr Steer was also asked about seeking relief from the Queensland Civil and Administrative Tribunal (QCAT) in relation to his complaints about the tree.  Mr Steer’s initial answers were completely non-responsive but eventually, upon further cross-examination on the topic, Mr Steer denied any knowledge of QCAT.  When Mr Steer was told it was a “non-cost jurisdiction”, he said “of course” he would have proceeded in that jurisdiction had he known about it.  Given his attitude to not proceeding through the council about the dogs and his evidence in general, I do not accept his evidence on this issue.

26. [26]
    The fact that Mr Steer has an unusual view of his legal rights was clear from the way in which he purported to enforce his statutory right of user. As I found in giving judgment, Mr Steer had no right to provide the access notices in the form in which he did nor did he have a right to enter his neighbours’ property in the manner in which he did.

27. [27]
    The defendant, Mrs McLellan, is a retired 69 year old widow. Her son, Iain McLellan, is a 39 year old living on a disability support pension. It would seem he has suffered from medical issues for much of his life. It is clear they led a quiet life, preferring to entertain small groups of people, rather than hold parties. Their lifestyle was confirmed by the neighbours called to give evidence in the proceedings. That evidence simply did not support the complaints made by the Steers.

28. [28]
    Having regard to the decision in Rosniak, which is quoted with implicit approval by the Court of Appeal in Smits v Tabone,^[21] an award of indemnity costs is justified.  The conduct of the Steers was completely unreasonable.  The proceedings were commenced and continued in complete disregard of the known facts.  Mr Steer knew the attitude of the police and had had discussions with the local council about the noise from the dogs.   He should have realised from at least the findings of the police that he was being unreasonable in his complaints.  Given his conduct generally, the proceedings were in a real sense vexatious.

29. [29]
    The difficulty of the Steers obtaining a successful conclusion to the proceedings would or should have become even more apparent at the time the offer of settlement was made by the defendants. Although not a generous offer, if it had been accepted, both parties would have been saved the unnecessary expense of two further days of hearing and delivery of written submissions.

30. [30]
    At that point, it was patently unreasonable for Mr and Mrs Steer to continue pressing a case after they had heard the opening by defence counsel, the evidence of the neighbours and had been cross-examined as to their unreasonable attitude. As stated by Dalton J in Hamcor Pty Ltd & Anor v State of Queensland & Ors,^[22] adopting the words used by Fraser JA in Mizikovsky v Queensland Television Limited & Ors,^[23] “the plaintiffs should have appreciated they had no worthwhile prospects of success in the proceeding.”^[24] 

31. [31]
    If I am wrong about the conduct of the whole of the case by Mr and Mrs Steer, I would have ordered that the Steers’ pay standard costs up until the date of the offer and indemnity costs thereafter under the principle discussed in such cases as Calderbank v Calderbank.^[25]

32. [32]
    In view of my findings, it is unnecessary to form any concluded view as to the effect of r 361 in the circumstances. The more commonly accepted view is that the rule has no application where the plaintiff does not obtain a judgement and the defendant is wholly successful in defending the claim.^[26]  There was no suggestion from the Steers in their submissions that they ought not be required to pay the whole of the defendants’ costs.

33. [33]
    In any event, r 361(3) permits the court to order otherwise. As was commented by Chesterman J in Emmanuel, a defendant who has been completely successful and has made an offer to settle which was better than the result obtained by the plaintiff should not be in a worse position than a partly unsuccessful defendant who made such an offer.  In the exercise of my discretion, if I had not ordered the plaintiffs to pay indemnity costs for the whole of the proceedings, I would have ordered that the plaintiffs pay the defendants’ costs up until the date of the offer on a standard basis and indemnity costs thereafter.

Order

34. [34]
    The plaintiffs are to pay the defendants’ costs of and incidental to the proceeding to be assessed on an indemnity basis.