Buchan v Young (No 2)[2020] QDC 248

DISTRICT COURT OF QUEENSLAND

1. [1]
   On 3 September 2020, the plaintiff was awarded judgment on two of her three claims made in that proceeding.  The defendants were respectively ordered to pay her the sums of $7,757.73 and $209,475.84, each sum being inclusive of interest.  Other orders were made, including the declaration of a constructive trust in respect of real property and directions were made for written submissions as to costs. 
2. [2]
   The first sum relates to a claim in contract or debt, for what was referred to as the “Initial Expenses Claim”. It related to expenditure by the plaintiff in respect of a property, legally owned by the second defendant in the United Kingdom, and was conceded by the defendants on the second day of the trial.^[1] The claim upon which the plaintiff was unsuccessful related to subsequent expenditure by her in respect of the same property. It was a claim for restitution, having regard to a contention of unjust enrichment, and was referred to as the “Refurbishment Costs Claim”. This expenditure was interrelated to the most substantial of the plaintiff’s successful claims, in respect of her recovery of the balance of her contribution to the joint purchase of a property for the purpose of the cohabitation of the parties in Australia. That was in the sense that there were coincidental arrangements for the refurbishment of the property in the United Kingdom, at least in part, so that the plaintiff would reside there prior to moving to live in Australia. This was referred to as the “Kentish Road Claim” and was determined upon the basis of the unconscionability of the defendants’ retention of the full legal and beneficial interest in that property without recognition of the plaintiff’s interest to the extent of her outstanding contribution to acquisition of it.
3. [3]
   The plaintiff contends that in the premises of her substantial success in the proceeding and having regard to a sense of interrelationship of her claims, including that upon which she was unsuccessful and which comprised a claim for an amount that was less than 16 percent of the principle sum awarded to her, she should not, as an otherwise successful plaintiff, be deprived of any part of her costs.  As accepted for the defendants, determination of the issues is to be for the acknowledged purpose of compensation of a successful party rather than punishment of an unsuccessful party.
4. [4]
   For the plaintiff, reference is made to the observation in Australian Institute for Progress Ltd v Electoral Commission for Queensland,^[2] as to the operation of r 681 of the Uniform Civil Procedure Rules (“UCPR”), that “[g]ood reason is required to depart from the general rule that costs follow the event”. And also to the following observation, in Waterman v Gerling Australia Insurance Co Pty Ltd (No 2):

“A successful plaintiff who has failed on certain issues may be deprived of costs on those issues, or even ordered to pay the defendant’s costs of them.  But this course, while open, is one on which the court embarks with hesitancy.”^[3]

5. [5]
   Moreover and having regard to copies of letters attached and described as two “Calderbank” type offers made to the defendants, an order is sought pursuant to r 703 of the Uniform Civil Procedure Rules (“UCPR”) that her costs be assessed on the indemnity basis. 
6. [6]
   As is noted for the defendants to be appropriate, reference is made to the principles noted as follows, in J & D Rigging Pty Ltd v Agripower Australia Ltd (No 2) and as to consideration of such informal offers in the exercise of the Court’s discretion:

1. “[5]
   The failure to accept a Calderbank offer is a matter to which a court should have regard when considering whether to order indemnity costs. The refusal of an offer to compromise does not warrant the exercise of the discretion to award indemnity costs. The critical question is whether the rejection of the offer was unreasonable in the circumstances. The party seeking costs on an indemnity basis must show that the party acted “unreasonably or imprudently” in not accepting the Calderbank offer.
2. [6]
   In Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2), the Victorian Court of Appeal stated that a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard to at least the following matters:

1. “(a)
   the stage of the proceeding at which the offer was received;
2. (b)
   the time allowed to the offeree to consider the offer;
3. (c)
   the extent of the compromise offered;
4. (d)
   the offeree’s prospects of success, assessed as at the date of the offer;
5. (e)
   the clarity with which the terms of the offer were expressed;
6. (f)
   whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.””^[4]

7. [7]
   For the plaintiff, reference is also made to the following observations in Stewart v Atco Controls Pty Ltd (No 2):^[5]

“This Court has a general discretion as to costs. The non-acceptance of a Calderbank offer is a factor, in some cases a strong factor, to be taken into account on an application for indemnity costs. The respondent submits that its rejection of the offer was not unreasonable. If that be the test, it would appear to require at the least that the respondent point to a reason for not accepting the offer beyond the usual prospects of being successful in litigation.”

8. [8]
   In the first instance and as contended for the defendants, it should be accepted that it is not appropriate to take into account the first such letter, which is dated 8 December 2016.  As noted for the defendants, it may be most aptly described as a letter of demand, made before the institution of the proceedings and which inconsistently with the case advanced for the plaintiff at trial, sought engagement in respect of what was described as “the remaining Loan amount of £100,000” (or approximately $168,800AUD, at the relevant time). That was sought in the following terms:

1. “19.
   Our client would like to see an amicable resolution of this dispute without the need for protracted litigation in the Court and requests on a without prejudice basis an adequate proposal from you within 14 days of this correspondence for repayment of the remaining Loan amount of £100,000.”

Whilst there was reference to initiation of legal proceedings and to reliance upon the correspondence “on the issue of legal costs”, that was also expressed to be in the event that there was “fail[ure] to provide a reasonable response … on or before 22 December 2016”.

9. [9]
   Particularly having regard to the basis upon which the demand was premised and the absence of clarity as to any offer of settlement which might be found in this letter, it would not be appropriate to find any unreasonable rejection of it by the defendants.
10. [10]
    Reliance upon the second letter, dated 14 November 2017, has greater substance. Rather than it being expressly made “in accordance with the principles in the matter of Calderbank v Calderbank”, it might have been made under Ch 9 Pt IV of the UCPR. The offer was expressed to be “open for written acceptance on or before 28 November 2017”, in the following terms:

1. “1.
   Your clients pay to our client the amount of $167,521.90 (Settlement Amount) in full and final satisfaction of the issues in the Maroochydore District Court proceedings D23/17;
2. 2.
   The Settlement Amount to be paid in the following manner:

1. a)
   Payment of $83,760.95 within 28 days of written acceptance of this offer;
2. b)
   Payment of $83,760.95 (the ‘second amount’) within 2 years of written acceptance of this offer.
3. c)
   The Defendants to do all things necessary including signing of documents to put into effect a registered mortgage for the second amount in favour of the plaintiff on the title of the property at 56 Kentish Road, Kiels Mountain in the State of Queensland more particularly described as Lot 8 on Survey Plan 265513, Title Reference 71783920 (“the Property”) within 28 days of written acceptance of this offer;
4. d)
   Payments pursuant to a) and b) above to be paid into the following trust account:

…….

3. 3.
   The parties enter into a deed of settlement within fourteen (14) days of written acceptance of this offer which includes terms reflecting the settlement reached between the parties.
4. 4.
   Each party to bear their own costs.”

11. [11]
    As is not in contention, there is an unaccepted offer of settlement which is less favourable than the orders made in the plaintiff’s favour, which in the case of the claim in respect of “Kentish Road” was, excluding interest, in the sum of $177,521.90 and in respect of the other successful claim, in respect of the “Initial Expenses Claim”, an additional sum of $6,574.30, excluding interest. However, it was not an offer made pursuant to the rules and the significant practical effect is that rather than being in the position under the UCPR that “the court must order the defendant to pay the plaintiff’s costs calculated on the indemnity basis unless the defendant shows another order for costs is appropriate in the circumstances”, the plaintiff must satisfy the court that the rejection of the offer was unreasonable in the circumstances and/or that it is appropriate to make an order for indemnity costs.
12. [12]
    In addition to contending for a finding of imprudence and therefore unreasonableness in the rejection of the offer, particularly having regard to the favourable terms of it in allowance of part payment by instalments over a two year period, the plaintiff otherwise, relevantly, relied upon the following considerations:

    1. (a)
       the offer was made about nine months after the proceedings were commenced on 23 February 2017 and after the pleadings had closed and disclosure had been completed, to legally represented defendants;
    2. (b)
       the litigation proceeded to a trial held over five days, in February and May 2019;
    3. (c)
       prior to that trial, the defendants unsuccessfully sought that evidence-in chief for the trial be given by affidavit but did obtain leave to require the plaintiff to answer interrogatories by affidavit, with the costs of that application being reserved;
    4. (d)
       it was only during the trial that the defendants conceded their liability in respect of “the initial expenses claim”.

13. [13]
    For the defendants, the submission is that costs should not be awarded on the indemnity basis and the proper and just order is that the plaintiff be awarded 50 percent of her costs, to be assessed on the standard basis.
14. [14]
    As to the latter issue, it is correctly pointed out that the broad discretion otherwise to be exercised pursuant to UCPR 681 is subject only to the requirement that costs follow the event, unless the court otherwise orders.  Further, that as recognised in Interchase Corporation Ltd (in Liq) v Grosvenor Hill (Qld) Pty Ltd (No 3),^[6] “event” is to be taken to apply distributively and as allowing for separate orders in respect of one or more issues or events. 
15. [15]
    In support of the contention that the plaintiff should recover only 50 percent of her costs, the defendants advance two main reasons:

    1. (a)
       The significant time devoted to the issue upon which they succeeded, in the pleadings and the trial, including submissions; and
    2. (b)
       The defendants’ formal offer to settle the proceedings, expressly made pursuant to the UCPR and dated 8 December 2018. 

That offer is not relied upon in engagement of UCPR 361, as it may not be contended that the plaintiff did not obtain a more favourable order from the court. That is because the offer was made in the following terms:

1. “1.
   Subject to paragraphs 2 and 3, that the Plaintiff accept payment of the sum of ONE HUNDRED THOUSAND BRITISH POUNDS (GBP100,000.00) (‘the settlement sum’) in full and final satisfaction of the Plaintiff’s Claim subject to such payment being made in the following instalments and in the following time periods:

1. 1.1
   The sum of SIXTY THOUSAND BRITISH POUNDS (GBP60,000.00) to be paid to the Plaintiff or as she shall direct within 60 days of written acceptance of this offer;
2. 1.2
   The sum of TWENTY THOUSAND BRITISH POUNDS (GBP20,000.00) to be paid to the Plaintiff or as she shall direct within 3 years of written acceptance of this offer; and
3. 1.3
   The final payment of TWENTY THOUSAND BRITISH POUNDS (GBP20,000.00) to be paid to the Plaintiff or as she shall direct within 5 years of written acceptance of this offer.

PROVIDED THAT the Defendants shall be at liberty to:

1. 1.4
   make payments to the Plaintiff of any denomination (provided such payment shall be not less than FIVE THOUSAND BRITISH POUNDS (GBP5,000.00) at any one time) in advance of the instalment payment scheduled as referred to within this paragraph; or
2. 1.5
   upon the giving of 14 days prior written notice to the Plaintiff, make a final lump sum payment to the Plaintiff to discharge the balance settlement sum outstanding.

1. 2.
   In the event that the Defendants’ property situated at 56 Kentish Road, Kiels Mountain in the State of Queensland (“the Kiels Mountain property”) is sold prior to payment of the entire settlement sum, then the balance settlement sum then outstanding must be paid to the Plaintiff upon settlement of the sale of the Kiels Mountain property.
2. 3.
   Within 45 days of written acceptance of this offer, the Plaintiff:

1. (a)
   will cause a Request to Withdraw Caveat (“Request”) signed by her to be delivered to the solicitors for the Defendants, in relation to the caveat currently registered by her on the title of the Kiels Mountain property; and
2. (b)
   will authorise the solicitors for the Defendants to release the Request to enable registration of documents for the purpose of refinancing the mortgage currently secured over the Kiels Mountain Property to facilitate payment to her of the settlement sum instalment referred to in paragraph 1.1 of this offer.

1. 4.
   Each party must bear their own costs concerned with this Claim.
2. 5.
   This offer is open for written acceptance up until 5:00pm, 7^th January 2019, after which it will lapse.”

However and on the basis of an approximate exchange rate at the time the offer was made, it is contended that the effect was to offer $176,600 AUD and therefore an amount very close to the principal sum awarded on the plaintiff’s primary claim and that this occurred prior to the commencement of the trial. 

16. [16]
    Otherwise and in support of a submission that they had not unreasonably or imprudently failed to accept the plaintiff’s earlier offer and “that no other proper basis exists to award indemnity costs”, it is contended for the defendants that the plaintiff’s submissions do not appear to contain any clear contention that the defendants have pursued an unmeritorious or frivolous position,^[7] or that there are any “special or unusual features of this case that otherwise justify an award of indemnity costs”.^[8]
17. [17]
    As to any question of unreasonableness in respect of failure to accept the plaintiff’s, informal offer, the following factors are contended to be particularly apposite:

1. “(a)
   The offer required both the payment of significant funds in a short timeframe and the provision of security by the defendant, when (from the evidence that was before the Court) it was well within the knowledge of the plaintiff that the defendants had limited financial means and had secured the balance of purchase funds for the Kentish Road property by way of mortgage;
2. (b)
   The offer constituted, at best, a marginal compromise as against the plaintiff’s claim. It could by no means be characterised as a material or significant offer by the plaintiff to acknowledge any risk to her, or her role in the dispute, which emerged from family interactions;
3. (c)
   While expressing the intention that the offer will be relied upon on the question of cost, no mention of seeking indemnity costs was made.”

Conclusions

18. [18]
    Similarly to the position noted in The Australian Institute for Progress Limited v The Electoral Commission of Queensland & Ors (No 2),^[9] no reference is made in the submissions of the parties to UCPR 684, which was there noted as providing an exception to the general rule and providing an express power to order costs in relation to a particular question in, or a particular part of a proceeding. However, as also there noted:

“The general rule remains and necessarily the circumstances which would engage r 684 are exceptional.”

It is also convenient to note the following further observations in that decision:

1. “[15]
   Finally as to governing principles, the fact that the word “event” in r 681 is not confined to the final result of the proceeding, but may refer to the outcome of a separate issue where there are two or more issues in the proceeding, should not be thought to encourage a proliferation of issue identification. Instead, it recognises the injustice that may be produced if the word “event” was confined simply to the result or outcome of the proceeding. Moreover, the fact that a party has been unsuccessful on a particular issue, but successful on others, does not necessarily justify the awarding of costs on an issues basis. Courts may on occasions apportion costs in a way which fairly reflects both the outcome, and the costs associated with, the determination of different questions. However, ordinarily the fact that a successful party fails on a particular issue does not mean that it should be deprived of some of its costs. Also, a court will generally only deprive the successful party of the costs relating to an issue on which it was unsuccessful where that issue was clearly dominant or separable.” (citations omitted)

19. [19]
    Here and notwithstanding what has been noted as some sense of interrelationship with the arrangements leading to the Kentish Road Claim and upon which the plaintiff succeeded, the plaintiff’s unsuccessful Refurbishment Costs Claim was clearly separable as to the legal principles upon which it was based. And there was also a substantial amount of the evidential detail which was separable as only being relevant to the unsuccessful claim. It should also be concluded that there was a substantial proportion of the proceedings, in its various forms, which were directed at the separable aspects of this unsuccessful claim and such that there should be some deprivation of recovery by the plaintiff of her costs on the issue on which she failed. Neither is the level of significance of that unsuccessful claim to be simply assessed by reference to the relative quantum of the claim. A fair apportionment in the circumstances is that the plaintiff recover 80% of her costs of the proceedings. As there is no application pursuant to UCPR 698 or otherwise, that will include any reserved costs.
20. [20]
    As to the significance of the plaintiff’s informal offer, there is some difficulty, in light of the outcome of the case and the fact of the offer made by the defendants 13 months later for repayment of a marginally larger sum (measured in Australian dollars), in viewing the rejection of it by the defendants as being other than imprudent. But the question as to whether it was in the circumstances unreasonable to do so and more particularly whether the overall circumstances warrant recovery of the plaintiff’s costs on the indemnity basis, is complicated by the differing conditions in each offer as to the staged timing of repayment and by the factual and more particularly the legal complications attending the loose and emotionally tied circumstances of the interfamilial arrangements which underpinned the plaintiff’s claim. It suffices to note that although ultimately successful in the Kentish Road Claim, this was on one only of a number of bases of relief claimed by the plaintiff and the better view, in all of the circumstances, is that recovery of costs on other than the usual and standard basis of assessment is not warranted.
21. [21]
    Accordingly, the further order is that the defendants are to pay 80% of the plaintiff’s costs of the proceeding, as agreed or to be assessed on the standard basis.