Hanrick v Donsky[2025] QDC 118

DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   The parties are in dispute about a trench that runs along the cadastral boundary line of their respective properties. The applicant is concerned that the existence of the trench will cause damage to buildings on the applicant’s property if it is not filled in.
2. [2]
   It is not controversial that the parties agreed that the respondent could dig the trench in April 2024, to allow the respondent to install a pipe along the length of the respondent’s property. The parties dispute, among other things, is whether it was part of the agreement that the trench would be refilled within a reasonable time.
3. [3]
   The applicant commenced the claim by originating application on 17 April 2025, seeking final relief in the form of a mandatory injunction.
4. [4]
   At the original hearing for the matter, Counsel for the respondent submitted that the matter should have proceeded by way of claim and statement of claim. The respondent also informed the Court that he objected to the admission of the entirety of a report prepared by a structural engineer, Mr Meng. The applicant was intending to rely on Mr Meng’s report as an expert witness report. The respondent objected to the admission of Mr Meng’s report on the grounds that it:

   1. was non-compliant with the expert evidence rules in the Uniform Civil Procedure Rules 1999 (Qld) (UCPR);^[1]
   2. is deficient in that Mr Meng fails to explain how he reaches his conclusions.
5. [5]
   Following the discussion about these matters raised by the respondent, I adjourned the hearing briefly so the parties could discuss how best to proceed and attempt to agree on directions for the progress of the matter.
6. [6]
   After the adjournment, the parties agreed to the following directions being made:

   1. that pursuant to r 14(2) of the UCPR, the proceeding continues as if started by claim;
   2. a timetable for the exchange of pleadings; and
   3. providing for the exchange of expert evidence.
7. [7]
   I then asked the parties to address me on the costs of the hearing being adjourned and directed the parties to exchange written outlines of submissions.
8. [8]
   The respondent submits that the costs of the applicant’s application should be paid by the applicant on an indemnity (or alternatively standard) basis by virtue of the adjournment of the hearing following issues concerning the form of the application and expert evidentiary issues.
9. [9]
   The applicant submits that the costs of the hearing be each parties’ costs in the cause. Alternatively, it is submitted that the court should not exercise its discretion to make an order for costs on the indemnity basis.

Consideration

10. [10]
    The starting point is that costs usually follow the event and are ordered to be paid on a standard basis.^[2] However, costs may be ordered to be paid on an indemnity basis under r 704(1) of the UCPR.
11. [11]
    The issue is whether the circumstances of this matter warrant an indemnity, as opposed to a standard cost order.
12. [12]
    Principles relevant to the exercise of a discretion to order indemnity costs are set out in numerous authorities, including Smits v Tabone and Blue Coast Yeppoon Pty Ltd v Tabone [2007] QCA 337 (Smits). In Smits, Cullinane J summarised the principles by reference to Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 as follows:

1. 42.
   The normal order for costs is on the standard basis and some special reason is required for any departure from that.

1. 43.
   Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 discussed the subject generally and identified categories of cases in which it would be appropriate to make such an order. These categories were not meant to be exhaustive:

"Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp (supra)); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davis J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Kent (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs of an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)). Other categories of cases are to be found in the reports."

1. 44.
   In Rosniak v Government Insurance Office (1997) 41 NSWLR 608, the New South Wales Court of Appeal sounded a cautious note at 616:

"… the Court requires some evidence of unreasonable conduct, albeit that it need not rise as high or 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 or common rule that indemnity costs should be the order of the day is a matter for the legislature or the rule-maker."

1. 45.
   In Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359, Powell J expressed the view that an order for indemnity costs was warranted where in effect the proceedings had no reasonable prospect of success.

1. 46.
   Rolfe A/JA (as he then was) in Huntsman Chemical Company Australia Ltd v International Pools Australia Pty Ltd (1995) 36 NSWLR 242 at 273 after reviewing the authorities, said:

"In my opinion the authorities support the proposition that where a party persists in a hopeless case, that justifies, for all the reasons given, the making of an order for costs on an indemnity basis."

1. 47.
   See also cases such as Di Carlo v Dubois & Ors [2002] QCA 225.

13. [13]
    The issue comes down to whether the application to adjourn the hearing could have been made prior to the commencement of the hearing and whether, in the applicant’s insistence on the matter, proceeding by way of originating application, the applicant’s conduct was conduct warranting an indemnity costs order.
14. [14]
    To determine this issue, it is necessary to understand the procedural history. I adopt the procedural history as set out in the applicant’s submissions as follows:

3. On 17 April 2025, the applicant was served with the originating application and supporting affidavits of Mr Hanrick and Mr Meng.

4. On 23 April 2025, the solicitors for the respondent proposed to adjourn the hearing of the originating application indefinitely.

5. On the same day, the applicant proposed directions for the conduct of the proceeding, which largely formed the basis of the directions subsequently made. At no point did the respondent suggest that the proceeding could not proceed by way of originating application.

6. On 28 April 2025, there was a directions hearing before Allen DCJ and, again, the respondent did not raise the issue of pleadings.

7. On 1 May 2025, the proceeding was listed for a final hearing for one day on 14 July 2025.

8. On 11 June 2025, the respondent filed and served the affidavits of Mr Donsky and Ms Donsky. Exhibited to Mr Donsky’s affidavit was the report of Mr Ryan.

9. On 3 July 2025, per the agreed extension to the directions of Allen DCJ, the applicant filed an affidavit of Mr Hanrick and his outline of submissions.

15. [15]
    The applicant submits that it was not made aware of the challenge to proceed by way of originating application until two days prior to the hearing, and therefore, a decision not to consent to that order was not unreasonable.
16. [16]
    The applicant points to the fact that:

    1. the respondent belatedly raised the issue of pleadings, after all the evidence had been filed and the applicant had provided his outline of submissions; and
    2. the applicant had proposed a course whereby the issue of whether there should be pleadings could be determined without the parties being put to costs thrown away if the hearing were ultimately aborted. That is, if the respondent has agreed to list the matter for directions prior to the hearing date; this pleading issue could have been resolved.
17. [17]
    The applicant states he principally sought an adjournment based on an objection taken by the respondent to the expert evidence of Mr Meng and there was no determination of that objection. This is correct; however, it was entirely the decision of the applicant to request an adjournment to allow for the provision of additional expert material. The applicant was put on notice that if the report of the expert did not comply with the UCPR requirements, it would be objected to in its entirety and may not be admitted. I also indicated that there appeared to be merit in the submission that the report was deficient in terms of the expert evidence requirements. I also queried how the report in its current form would assist the Court to make any determination on the issues raised and whether, if admitted, it would sufficiently put the respondent on notice of the arguments put against him. No determination of the objection was required because of the adjournment request.
18. [18]
    Once counsel for the respondent became involved, the respondent’s solicitors wrote to the applicant’s solicitors a week prior to the hearing:

(a) putting them on notice that ‘it is not appropriate to proceed by way of application because there are substantial disputes of fact’;

(b) identifying that pleadings were necessary; and

(c) attaching a draft order that permitted the proceeding to continue as if

started by claim, timetabled pleadings and reserved costs.

19. [19]
    That offer was rejected by the applicant.
20. [20]
    The respondent submitted:

    1. that the proceeding should never have been commenced by originating application; and
    2. the Court may order indemnity costs where the proceeding has no chance of success or without a contested hearing on the merits if the court can be almost certain which party would have won.
21. [21]
    I was not asked to form a view on the expert evidence, nor was I taken through the other affidavit evidence. As a result, I do not consider this matter an appropriate one to order indemnity costs based on a lack of prospects.
22. [22]
    The parties and the Court determined the appropriate way for the matter to proceed was by way of pleadings. This alone required the application to be adjourned. The applicant had seven days notice of the respondent’s position prior to the hearing. The respondent has identified that until he received the submissions of the applicant on 5 July 2025, the arguments to be raised were not fully known (in particular, the remedies sought for the tort of nuisance and pursuant to Property Law Act 1974 (Qld) s 179.  As already stated, it was the parties who agreed to adjourn the hearing to allow it to proceed by pleadings. I was asked to use my discretion under rule 14 of the UCPR, to order the matter proceed by claim. That was an appropriate order to make when the complexities of the issues became more apparent.
23. [23]
    The respondent referred the Court to the decision of Down v Murray [2017] QDC 313 at [11] where the Court found the matter was incorrectly commenced by originating application given the significant factual dispute and ordered the applicant to pay the respondent’s costs on a standard basis. Rule 11(a) of the UCPR, provides that matters may only be commenced by applications if:

(a) the only or main issue in the proceeding is an issue of law and a substantial dispute of fact is unlikely; or

(b) there is no opposing party to the proceeding or it is not intended to serve any person with the originating process; or

(c) there is insufficient time to prepare a claim because of the urgent nature of the relief sought. Here, at least once the affidavit had been exchanged, it should have been clear that there was a substantial factual dispute.

24. [24]
    I agree that it is more convenient for this matter to continue as if started by claim and that a cost order is appropriate. However, to order indemnity costs and depart from the general rule, there must be evidence of unusual circumstances or unreasonable conduct.^[3]
25. [25]
    I am not satisfied that this is a case where the applicant should have known they had no chance of success.^[4] The issues have not been fully argued or argued at all.
26. [26]
    The potential deficiencies in the expert evidence having been drawn to the applicant’s attention, the application was made to adjourn the matter to enable further evidence. It is for that reason that a costs order should be made, but I am not satisfied that there is anything special or unusual that warrants indemnity.
27. [27]
    In Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd [2020] FCA 598 (Colgate-Palmolive), Bromwich J (at [17]), said unreasonable conduct alone is not sufficient:

“The unreasonableness must be not only present, but sufficient to warrant a departure from the ordinary award of costs…”

28. [28]
    The Court in Colgate-Palmolive described this as a “high hurdle to surmount”.
29. [29]
    In MA v Qin (No 2) [2025] VSC 364, Cosgrave J (at [15]) referred to the fact that cases where an award of indemnity costs may be appropriate, where it appears that an applicant has commenced an action that they should have known had no chance of success, are rare. Cosgrave J, stated:

“In such a case, it must be presumed that the action was commenced for some ulterior motive, or because of some wilful disregard of the known facts or clearly established law. This is a high bar…”

30. [30]
    This is not a case like that described by Cosgrave J. The conduct of the applicant was not in wilful disregard of the law or motivated by some ulterior purpose.
31. [31]
    What has happened here is that inconvenience and expense has been caused which may have been spared if the parties had agreed to adjourn before the hearing. The fact that this did not occur has meant that a costs order is appropriate but only on a standard basis.
32. [32]
    Requesting an adjournment in these circumstances does not amount to conduct such that an order other than standard costs should be made.

Conclusion

33. [33]
    In the circumstances, the Applicant should pay the respondent’s costs thrown away by reason of the adjournment on a standard basis.