Hoch v Hoch (No 2)[2020] QSC 386

SUPREME COURT OF QUEENSLAND

1. [1]
   On 4 December 2020, the court made orders varying the scheme of partition for the partition of a grazing property in central Queensland known as “Kerand” (the property)^[1] and reasons for decision were published.^[2]  The orders followed a trial in an application filed in this proceeding by Ian Richard Hoch (the applicant) seeking such orders.  Andrew Grant Hoch (the respondent) was the respondent to that application. 
2. [2]
   When orders were pronounced and reasons published, the parties sought leave to file written submissions on the orders, if any, that should be made as to costs of the application. 

Costs

3. [3]
   On 14 December 2020, the parties filed written submissions about the orders, if any, the court might make about costs.   There are five costs questions raised by the written submissions.
4. [4]
   First, there is the general question of whether costs should follow the event.  The application to vary the scheme was a fully engaged contest between the parties.  The applicant succeeded.  There is no good reason why he should not recover his costs from the unsuccessful party, the respondent, who opposed a variation of the scheme.  The respondent’s submission that each party ought to bear its own costs is contrary to principle. 
5. [5]
   Secondly, the respondent submits the costs of the application, to which the applicant is entitled, ought to be reduced to account for the fact that “these proceedings were commenced by the applicant seeking an indulgence of the Court”.  This is not correct.  The application to vary the scheme was not of that nature.  The respondent also submits the “costs in taking the steps under section 38(5) were unavoidable for the applicant and would be borne by [him] in any event”.  This is also incorrect.  None of these costs would have been incurred had the respondent not decided to oppose the variation. 
6. [6]
   Thirdly, there is an issue about whether the respondent should pay some part of the applicant’s costs on the indemnity basis because the respondent rejected offers of settlement by the applicant. 
7. [7]
   The court may redress the position of a party who has incurred increased costs by another party acting in the litigation in a way that is “plainly unreasonable”.  It may do so by allowing the affected party to recover its costs on the more generous basis.^[3]  Other things being equal, the court may decide an award of costs on the standard basis would be insufficient to protect the successful party and an indemnity costs order is appropriate as a “means of achieving a fairer result”.  The failure of a party to consider seriously and accept a reasonable offer to settle is a particular aspect of unreasonable conduct that might lead to an increased cost burden on another party.^[4] The purpose of such a costs order is to encourage resolution of disputes without the necessity of a trial. Consonant with facilitating the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense, the court may exercise its discretion to make or refuse an order for indemnity costs, “to encourage and motivate parties to litigation to make bona fide and reasonable efforts to settle their litigation and to avoid the expense and expenditure of time involved in pursuing a claim to judgment in court”.^[5]
8. [8]
   The applicant made two offers.  The first, made on 19 January 2017, was an offer to acquire the respondent’s interest in the property for $2,127,500.  Although promptly rejected by the respondent, it was remade on 1 February 2017.  When remade, the offer invited the respondent to make “a reasonable offer to sell his interest or to buy [the applicant’s] interest”.  If the first offer had been accepted, the applicant would acquire the whole of the freehold interest in the property and so the question of partition would cease to be relevant.  However, this offer was not an offer to compromise the proceeding.  It dealt with a matter of much wider scope.  In the proceeding, the applicant could not and did not seek an order to acquire the respondent’s interest in the property.  Whatever the sense or consequence might have been of that approach, the first offer can play no role in the determination of the appropriate costs order. 
9. [9]
   The applicant’s second offer was made on 3 July 2020.  It had a primary and an alternative secondary element.  The primary offer was to consent to an order varying the scheme (as it transpired, in the manner the Court ultimately ordered), each party paying half of the trustees’ costs and the discontinuance of the application with no order as to costs.  The secondary offer was for the applicant to acquire the respondent’s interest in the property for $3.5 million, each party paying half of the trustees’ costs and the discontinuance of the application with no order as to costs.  The second offer (in both its primary and alternative secondary forms) was open for acceptance until 11 July 2020.  On 15 July 2020, the respondent rejected the second offer.  His solicitors’ letter seems to refer specifically to the secondary element of the offer, but it is clear neither element was accepted.^[6] 
10. [10]
    The primary element of the second offer was a “genuine offer of a realistic compromise” and not a “demand to capitulate in circumstances where the case has some prospect of success”.^[7]  Had the respondent accepted, the scheme would have been varied in the way the court has ordered.  The applicant would also have abandoned any right to an equality payment of $63,145 and to an allowance of $42,500 for improvements he effected to the property. He would also have abandoned any claim to be paid his costs of the application.  By accepting the offer, the respondent would have abandoned his claim to an allowance of $52,017 for improvements he effected to the property. 
11. [11]
    It may now be observed that rejection of the second offer was imprudent.  On a net basis, the extent of compromise on the part of the applicant would have been $53,628.  The respondent would have been better off by the same amount. 
12. [12]
    The equality payment, which is the most significant of the adjusting items, was readily calculable from the valuation reports filed in advance of the trial.  The allowances were different.  The amounts claimed by the parties far exceeded the amounts found by the court.  This was a Calderbank offer.  It was not open to the applicant to make an offer under Chapter 9, Part 5 of the rules.  In the present case there is no practical difference between the offer made and one that might have been made under the rules had the proceeding been commenced in a different form.  Had it been an offer under the rules, the court would be obliged to order the respondent to pay the applicant’s costs calculated on the indemnity basis unless the respondent showed another order for costs was appropriate in the circumstances. 
13. [13]
    For the respondent it was submitted that:

“it would be extraordinary to punish the respondent for believing the scheme given by the trustees as Court officers and after 2 years work should withstand scrutiny.”

14. [14]
    This submission mistakes the basis of cost orders.  They are not to punish an unsuccessful party, but to preserve and protect the rights of the successful party, so that its success is not significantly diminished by the costs of the successful proceeding.  The trustees’ scheme was plainly defective.  It departed very significantly from an equitable division of the property.  It did so on the basis of information and submissions put to the trustees by the respondent and by witnesses called by him at the trial.  It is unseemly of the respondent to now hide behind the skirts of the trustees and attribute his imprudent and unreasonable conduct to them.  In short, the respondent has not shown that any other order is appropriate in the circumstances. 
15. [15]
    Disputes between family members can be overlayed with emotional, historical and other factors that make them more hard-fought and less coolly rational than disputes between unrelated parties.  That is no reason to be more tolerant of plainly unreasonable conduct between family disputants.  Such disputes consume family assets to no good purpose.  They entrench conflict, rather than encourage compromise.  This may be a good reason to deter unreasonable conduct by applying established practices strictly. 
16. [16]
    It was plainly unreasonable for the respondent to reject the primary element of the second offer and continue to resist a variation to the scheme, despite the clear evidence that unvaried it would effect a marked inequality in the partition of the property ($2 million versus $3 million).  That unreasonable conduct caused the applicant to incur the additional costs of a hearing, including engaging counsel and calling an expert witness to be cross-examined.  The respondent should pay the applicant’s costs of the application to vary the scheme from and including 12 July 2020.  This is the day after the second offer lapsed.  
17. [17]
    Fourth, the applicant seeks an order that it was necessary and proper for the attainment of justice or for enforcing or defending his rights for him to incur the reasonable fees of senior and junior counsel for the trial.  The assessment of his costs on the indemnity basis from 12 July 2020 ought to enable the applicant to recover the fees in a reasonable amount of his two trial counsel, as they were reasonably incurred.  To remove any doubt about the matter, I am content to direct that it was necessary and proper for the applicant to incur the reasonable costs of two counsel.
18. [18]
    Fifth, the respondent seeks an order that the applicant pay his costs thrown away as a result of the adjournment on 10 August 2020.^[8]  The cause of the adjournment was the illness of the applicant’s senior counsel.  In such circumstances, the traditional and courteous approach is for counsel not to submit a fee note for any cancellation fee or retainer for the adjourned trial dates.  Solicitors are not entitled to recover cancellation fees.  So the costs thrown away are predominantly the costs of the solicitor arranging for witnesses to appear at the trial.  No figure or estimate was offered for the costs thrown away.  Had the trial proceeded in August 2020, the respondent would not have recovered such costs.  He will have incurred some of those costs again when the trial proceeded in November.  On both occasions, the costs were incurred in resisting the variation of the scheme.  The costs thrown away were incurred about a month after the respondent imprudently rejected the second offer.  The whole of these costs would have been avoided had the respondent not acted in a plainly unreasonable manner.
19. [19]
    The applicant seeks a form of order that would allow him to recover from the respondent the costs thrown away by the adjournment.  That also seems an inappropriate course.  The appropriate order is to the effect that the applicant not recover from the respondent any costs he incurred that were thrown away by the adjournment of the trial.  

Further directions

20. [20]
    The applicant seeks a relisting of the matter for “any orders or directions as to the implementation of the Court’s orders”.  The court has made orders.  The scheme has been varied.  The trustees are charged with the responsibility of implementing the scheme (as varied).  It is not clear that any further order or direction is required.  The rules provide for the parties to have liberty to apply. 

Trustees’ costs

21. [21]
    The applicant also submits “that the question of the trustees’ costs needs to be considered”.  It was considered at the time they were appointed.  If the applicant wished to contend that the Order of Mullins J (as her Honour then was) should be varied or vacated, it is odd that no such application has been filed and no such relief was sought in the application to vary the scheme. 
22. [22]
    Quite appropriately, the trustees played no part in the application to vary the scheme.  There are no trustees’ costs in the proceeding to be the subject of an order between the present parties.   
23. [23]
    If the applicant wishes to seek other relief, he should proceed, as he may be advised, in accordance with the rules and, if appropriate, on notice to the trustees. 

Final disposition

24. [24]
    The order of the court should be to the effect that:

    1. The respondent pay the applicant’s costs of the application filed 6 December 2018, save for the costs thrown away by the adjournment of the trial on 10 August 2020. 
    2. The applicant’s cost payable under paragraph 1 above are to be assessed on the standard basis up to and including 11 July 2020 and on the indemnity basis from and including 12 July 2020.
    3. Any assessment of the applicant’s costs is to proceed on the basis that it was necessary and proper for the applicant to incur the reasonable costs of Queen’s Counsel and junior counsel for the trial of the application. 
    4. Liberty to apply.