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- Unreported Judgment
Scanlon v McLeay (No 2) QDC 59
DISTRICT COURT OF QUEENSLAND
Christine Robyne Scanlon v Michelle Ann McLeay (No 2)  QDC 59
CHRSTINE ROBYNE SCANLON
MICHELLE ANN MCLEAY
19 of 2014
District Court, Brisbane
12 April 2018
On the papers
EQUITY – DECLARATIONS – INTEREST – where the applicant received judgment to the extent of a declaration that the respondent held her interest in the subject real property on trust for the applicant to the extent of $49,000 – where there is no evidence as to the current value of the property – whether the applicant is entitled to interest on the $49,000
COSTS – GENERAL RULE: COSTS FOLLOW THE EVENT – PARTIAL SUCCESS – where the general rule is that costs follow the event – where the applicant was successful on some but not all of her claims – where r 684 UCPR allows a court to make an order for costs of a particular question or part of a proceeding – whether there are any special or exceptional circumstances to enliven r 684
COSTS – INDEMNITY COSTS – RELEVANT CONSIDERATIONS – where the applicant argued for an award of indemnity costs – where the applicant submitted that the proceedings were defended with some ulterior motive or in wilful disregard of known facts or clearly established law – where the applicant submitted that the respondent pleaded scandalous and irrelevant allegations – where the applicant submitted that the respondent prevented mediation – whether indemnity costs ought to be awarded
COSTS – SCALES OF COSTS – APPLICABLE SCALE – where the respondent submits that because the applicant was only successful in her claim in relation to the deposit sum of $49,000 that costs ought to be on the Magistrates Court scale – whether costs ought to be on the Magistrates Court scale or District Court scale
Uniform Civil Procedure Rules 1999, r 159, r 681, r 684
Della-Vedova v State Planning Cmn (1989) 1 WAR 1
BP Exploration v Hunt (No 2)  1 WLR 783
Osborne v Kelly (1993) 61 SASR 308
Kalls Enterprises Pty Ltd (in liquidation) v Baloglow (No 3)  NSWCA 298
Camm v Salter  2 Qd R 342
Interchase Corporation Ltd v Grosvenor Hill (qld) Pty Ltd  1 Qd R 26
Serisier Investments Pty Ltd v English  1 Qd R 678
Alborn v Stephens  QCA 58
BHP Coal Pty Ltd v O & K Orenstein & Koppel AG (No 2)  QSC
Australand Corporation (Qld) Pty Ltd v. Johnson  QSC 128
Scanlon v Mcleay  QDC 17
Di Carlo and Dubois & Ors  QCA 225 at .
Rosinak v Governor Insurance Office (1997) 41 NSWLR 608
Emmanuel Management Pty Ltd (in liquidation) v Fosters Brewing Group and Ors  QSC 299
Todrell Pty Ltd v Finch (No 2)  QSC 386
T O'Brien for the applicant
D Topp for the respondent
MacDonald Law for the applicant
Advance Family Lawyers for the respondent
- The trial in this matter took place before me on 16 and 17 November 2017. Judgment was delivered on 28 February 2018. A declaration was made that the respondent held her legal interest in the real property, described in the reasons as the Chermside property, on trust for the applicant to the extent of $49,000.
- The applicant was unsuccessful in persuading me that the contributions she made to the respondent’s set-off account described as ‘mortgage repayments’ in the sum of $86,127.99 and also the payments she made of $8,920 for blinds and a fence for the Chermside property, gave rise to a resulting or constructive trust in her favour.
- In the originating application the applicant claimed $13,872 for non-financial contributions. This claim was addressed at length in the affidavit material, particularly by the respondent, and was the subject of at least some cross-examination. It was not until after the oral evidence had closed and at the commencement of oral submissions, that counsel for the applicant informed the court that this claim was no longer being pursued.
- Written submissions were invited as to the appropriate form of the orders for performance of the trust and costs. These were provided by both parties on 14 March 2018. In the applicant’s written submissions, a claim for interest was made where it had not been claimed in the originating application. The basis of the claim was somewhat vague. For this reason, both parties were invited to provide further written submissions addressing this limited issue. These were provided by the applicant and respondent on 27 and 28 March 2018 respectively.
- Further oral submissions are still required as to the appropriate form of the orders. This is in circumstances where the respondent requires the applicant to remove a caveat she has lodged over the Chermside property, so that the respondent can discharge her obligations in relation to the judgment.
- The applicant claims an equitable right to interest on $49,000 using the Reserve Bank of Australia pre-judgment rates. She claims it from early September 2013, which is when she moved out of the Chermside property. This results in an interest claim of $13,560.42. The respondent opposes any award for interest being made.
- The court has the discretion to award interest, including the rate and period over which it is awarded.
- This proceeding was commenced by an originating application. Interest was not claimed. The explanation as to why interest was not originally claimed seems to be that the proceeding was commenced with some haste, as the caveat which had been lodged by the applicant over the Chermside property was due to expire. It was submitted on behalf of the respondent that the applicant’s solicitors ought to have been aware of this time limitation and further that the proceeding ought to have been commenced by a claim rather than an originating application. Be this as it may, irrespective of whether the claim was commenced by originating application or claim, the orders or other relief sought in the proceeding were required to be listed. This would include a claim for interest.
- Ordinarily, pursuant to r 159 of the Uniform Civil Procedure Rules 1999 (‘the UCPR’), a party who intends to apply for an award of interest is required to provide particulars of the amount on which the interest is claimed, the rate at which it is claimed, the day from which it is claimed and the method of calculation. This did not occur in this case. However, this is in circumstances where an order was made by Dorney QC DCJ on 18 November 2015, that the proceeding continue by claim and that the affidavits filed in the proceeding be treated as pleadings. The respondent submits that after this direction was made, the applicant should have deposed to her claim for interest in an affidavit. However, I accept that claims for interest would not typically find their way into such an affidavit. I consider that although the applicant’s claim for interest ought to have been listed in the originating application, the fact that it was not is not fatal or determinative of the issue of her entitlement to interest.
- In paragraph 19 of the applicant’s affidavit dated 14 November 2018, the applicant deposes to the following:
“Shortly after separation Michelle and I had a verbal conversation where Michelle offered to pay my $50,000 back. I did not accept this as I said the property is half mine and that I should be entitled to more than that.”
- The respondent asserts in her written submissions dated 14 and 28 March 2018, that in these circumstances the applicant does not have an entitlement to interest as it is her own conduct which has led to her being deprived of the $49,000. However, in the respondent’s affidavit dated 5 January 2015, she denied there was such a conversation between herself and the applicant. Then, in cross-examination, she conceded that she had made this offer but only in ‘the heat of the moment’. In these circumstances, the offer on the part of the respondent shortly after separation to repay the applicant her contribution to the deposit, does not exonerate the respondent from a liability to pay interest. The reason for this is that the respondent did not remain ready and willing to pay.
- The purpose of an award of interest is to compensate the successful applicant for being kept out of the judgment sum and thereby deprived of the use of the money, rather than to punish the respondent for the delay in payment.
- The respondent contends that a further reason why the applicant is not entitled to an award of interest is because she has prosecuted her case in a dilatory manner.
- While delay can be a reason for refusing or reducing the inclusion of interest, this is not ordinarily the case. I am not persuaded that the delay in this case warrants a refusal to award interest or a reduction in the amount to be awarded. There are a few reasons for this. First, I would not describe the delay that has occurred here to be substantial or unreasonable. Second, there is no evidence that the responsibility for any period of inactivity is the responsibility of the applicant rather than her solicitors. Third, there is no suggestion of deliberate delaying tactics on the part of the applicant and even if there were, once the originating application had been filed on 17 April 2014, the respondent could have prevented such conduct in any number of ways, including an application to the court. Fourth, the respondent has had the benefit of the $49,000. Fifth, there has been no particular financial detriment to the respondent.
- The question becomes the rate of interest. I am not persuaded that the respondent is liable for interest at a commercial rate. This is because there is no evidence as to the current value of the Chermside property. The best evidence available, which is of marginal assistance only, is the comparison between the purchase price of approximately $690,000 in January 2010 and the Valuer-General valuation of the land of $415,000 as at 1 October 2016. This comparison does not enable a conclusion to be drawn that there has in fact been any increase, let alone a significant increase, in the value of the Chermside property.
- Further, this case is concerned with a property holding trust rather than a money earning trust. The trust property has not been used in a commercial context. While there was some evidence from the respondent’s current partner that she has paid a small amount of rent and contributes to household and general living expenses, there is no cogent evidence that the respondent has made a profit out of the trust money.
- In all the circumstances, I have allowed interest at the rate of inflation. Allowing an annual inflation rate of 1.8% since September 2013, equates to approximately $3,600. I have rounded this up to $4,000.
- The applicant seeks these orders:
- (i)the costs of the proceeding;
- (ii)alternatively, the amount of costs to be paid to the applicant not be reduced by more than 5%; and
- (iii)the costs of the proceeding on an indemnity basis.
- The orders sought by the respondent are:
- (i)the applicant pays the respondent’s costs of the proceeding on an indemnity basis;
- (ii)alternatively, any costs awarded to the applicant be on a standard basis; and
- (iii)any costs awarded to the applicant be on the Magistrates Court scale.
- The starting point is r 681 of the UCPR, which provides that costs of an application in a proceeding are in the discretion of the court, but follow the event, unless the court orders otherwise. Rule 684 provides an exception to this and enables the court to make an order for costs of a particular question in, or a particular part of, a proceeding and by r 684(2), a court may declare what percentage of the costs of the proceeding is attributable to that question or part.
- Ordinarily, the fact that a successful party fails on particular issues does not have the consequence that the party is inevitably, or even, perhaps, normally deprived of some of its costs. In other words, the general rule remains that costs should follow the event. The question is whether there are any special or exceptional circumstances about the present case that justifies a departure from the general rule sufficient to engage r 684.
- One circumstance in which it may be appropriate to award costs of a particular question or part of a proceeding, is where the matter is definable and severable and has occupied a significant part of the trial.
- Turning to the particular parts of the litigation which may justify a reduction in the costs to be paid by the respondent. The first issue is the contributions the applicant made to the respondent’s set-off account in the sum of $86,127.9, which were said to be ‘mortgage repayments’. The applicant failed entirely in respect to this issue. It was a substantial part of the claim and the quantum of it is nearly double that of the deposit. The applicant’s claim that these financial contributions gave rise to a resulting trust was bound to fail given the well-established law. She also failed to persuade me that they gave rise to a constructive trust in her favour. My analysis of this issue is discussed in my judgment at paragraphs 16 to 18, 47 to 52 and 54 to 57. It received as much attention at the hearing as did the categorisation of the deposit. Each party was cross-examined about these payments. If the applicant had not claimed these payments, the hearing would have been less protracted. Each party also clearly utilised preparation time and resources in addressing this issue. As much is apparent from the affidavit material filed by the parties.
- The second issue is the contributions the applicant made to the payments of the fence and blinds, totalling $8,920. The applicant failed to discharge her onus that all of the payments made in relation to the blinds were for the common intention of the parties. She otherwise failed to establish that any proportion of these payments gave rise to a resulting or constructive trust. My analysis of this issue is discussed in my judgement at paragraphs 19 to 21 and 53 to 57. While matters relevant to this issue received less attention at the hearing than both the issues of the deposit and the ‘mortgage repayments’, they added time to the hearing and inevitably to the preparation.
- The third issue is the non-financial contribution claim that was not abandoned by the applicant until after the conclusion of the oral evidence. The respondent clearly incurred costs in the preparation of this part of the case and it remained a live issue at the hearing, with time devoted to it by both counsel in cross-examination.
- While I am cognisant of the need to exercise caution when depriving successful parties of their costs, this does appear to be a special case. The issues in relation to the ‘mortgage repayments’, the payments for the fence and blinds and the non-financial contributions are clearly identifiable and severable. I am satisfied that allowances should be made for these matters by reducing the costs which might otherwise be recoverable by the applicant.
- The apportionment must necessarily be by a broad approach, because while I was present at the trial, my knowledge of the preparation is clearly more limited. It is my impression that an apportionment of 60 per cent of the overall costs of this claim would broadly reflect my view of the extent to which the claims for the ‘mortgage repayments’, blinds and fence and non-financial contributions probably increased the preparation and length of the trial. It is assumed that the costs of both parties in relation to these issues would have been approximately the same. Therefore, I consider that it is in the interests of justice to reduce the costs otherwise recoverable by 60 per cent.
- Turning to the issue of indemnity costs, no offer to settle has been made in this matter. The parties’ respective arguments for indemnity costs are on the bases that the other party’s conduct of the litigation was unreasonable. Given my conclusions above, the question is whether the applicant is entitled to her costs on an indemnity basis.
- Rule 702 of the UCPR provides that the usual rule is that costs are paid on the standard basis. It is accepted that litigation is very expensive and that a limited indemnity is provided to a successful party. However, in Di Carlo and Dubois & Ors, White J said that this divergence between those costs which are actually incurred and those costs which can be recovered “does not mean that it is open to a judge to award costs having regard to his or her own view as to the adequacy of party and party costs so fixed.”
- To make an award of indemnity costs, it is not necessary for the party seeking such an order to establish moral or ethical delinquency on the part of the opposing party. It is sufficient to establish unreasonable or irresponsible conduct by the opposing party, which has exposed the successful party to costs, which in all fairness, should be ordered on an indemnity basis. 
- I now turn to the particular arguments for indemnity costs. One such argument is that the proceedings were defended with some ulterior motive or in wilful disregard of known facts or clearly established law. In support of this, the applicant contends that while the respondent has denied holding the deposit on trust, she recanted from this position when being cross examined. I am not satisfied that this was her evidence. Rather, she simply accepted that the applicant had contributed $49,000 to the purchase price. Further, as is apparent from paragraph 10 above, it was the applicant’s own evidence that she was not prepared to accept just her contribution to the deposit, as she considered the Chermside property ‘is half mine’.
- The second argument is that the respondent pleaded scandalous and irrelevant allegations against the applicant. This is the extent of the applicant’s submission on this point and I am not persuaded by it. A number of what could be described as scandalous allegations were put to the applicant in cross-examination. However, she in fact admitted to some of these. Further, many of these issues were explored I presume in defence of the applicant’s claim for non-financial contributions, which claim was not abandoned until after the oral evidence had been completed. If issues were being raised by the respondent that were irrelevant, it was open to counsel for the applicant to object to them.
- The final argument is that the respondent prevented mediation from occurring by failing to agree to allow a valuer to access the Chermside property, causing lost time to the court and the applicant. This submission is apparently made in reliance on the contents of the affidavit of Sarah-Jane McDonald sworn and filed on 2 November 2015. This issue was not ventilated before me. Further, it is based on an affidavit dated some two years prior to the hearing and before directions and a cost order were made by Dorney QC DCJ on 18 November 2015.
- The result is that I am not persuaded that the conduct of the respondent could be characterised as so unreasonable, irresponsible or otherwise improper as to justify taking the usual step of ordering costs on the indemnity basis.
- It is finally contended for on behalf of the respondent that because the applicant only succeeded in relation to the deposit in the sum of $49,000, that the costs ought to be on the Magistrates Court scale. This submission cannot be accepted. The proceeding was necessarily filed in the District Court, because it sought equitable relief, which is beyond the jurisdiction of the Magistrates Court.
- Taking into account all of the relevant factors, the appropriate order is that the respondent pay 40 per cent of the applicant’s cost.
- I order that:
- (i)The respondent pay the applicant $4,000 in interest.
- (ii)The respondent pay 40 per cent of the applicant’s costs of the proceeding.
 Transcript p 1-39, ln 2-3.
 Della-Vedova v State Planning Cmn (1989) 1 WAR 1.
BP Exploration v Hunt (No 2)  1 WLR 783 at 845; Osborne v Kelly (1993) 61 SASR 308 at 311.
 Kalls Enterprises Pty Ltd (in liquidation) v Baloglow (No 3)  NSWCA 298 at .
 Camm v Salter  2 Qd R 342; Interchase Corporation Ltd v Grosvenor Hill (qld) Pty Ltd  1 Qd R 26 at  per McPherson JA.
 Serisier Investments Pty Ltd v English  1 Qd R 678 at 680.
 Interchase at p 53.
 Alborn v Stephens  QCA 58 per Muir J at ; Todrell Pty Ltd v Finch and Ors  QSC 386 by Chesterman J.
 BHP Coal Pty Ltd v O & K Orenstein & Koppel AG (No 2)  QSC 64; Australand Corporation (Qld) Pty Ltd v. Johnson  QSC 128.
  QDC 17.
  QCA 22.
 at .
 Rosinak v Governor Insurance Office (1997) 41 NSWLR 608 at 616.
 Emmanuel Management Pty Ltd (in liquidation) v Fosters Brewing Group and Ors  QSC 299; Todrell Pty Ltd v Finch (No 2)  QSC 386 at 4.
 Transcript p 1-46, ln 5-6.
 Transcript p 1-14, ln 14-45 to 1-15, ln 1-12.
- Published Case Name:
Christine Robyne Scanlon v Michelle Ann McLeay (No 2)
- Shortened Case Name:
Scanlon v McLeay (No 2)
 QDC 59
12 Apr 2018