Leslie v Buttner (No 2)[2022] QSC 164

SUPREME COURT OF QUEENSLAND

Introduction

1. [1]
   In this matter, the applicant sought declarations that development approvals granted by the second respondent to the first respondents were invalid and injunctive relief to remove renovation work undertaken pursuant to those approvals.  For the reasons which I gave in the principal judgment,^[1] the application was dismissed.  The parties have now filed written submissions on costs.
2. [2]
   The applicant accepts that costs should follow the event and submits that the appropriate order is that the applicant pay the respondents’ costs of the proceeding to be assessed on the standard basis.
3. [3]
   The first respondents and the second respondent each seek an order that the applicant pay their costs on the indemnity basis.
4. [4]
   The grounds which the respondents submit warrant the exercise of the discretion to order that costs be assessed on the indemnity basis fall into two broad categories, namely that the applicant:

   1. (a)
      acted unreasonably in refusing offers of settlement;
   2. (b)
      prolonged the case unduly by commencing or continuing the proceeding in circumstances where, properly advised, he should have known that he had no chance of success or otherwise acted unreasonably in his conduct of the proceeding.

Relevant principles

5. [5]
   The principles which apply on an application such as this were not in dispute.
6. [6]
   Under s 15 of the Civil Proceedings Act 2011 (Qld) and r 681 of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”), the costs of a proceeding are in the discretion of the court and are to follow the event unless the court orders otherwise.  As already mentioned, the applicant accepts that costs should follow the event.
7. [7]
   Under r 702 of the UCPR costs are ordinarily assessed on the standard basis.  However, r 703 of the UCPR provides that the court may order costs to be assessed on the indemnity basis. 
8. [8]
   In LPD Holdings (Aust) Pty Ltd & Anor v Phillips, Hickey and Toigo & Ors,^[2] Boddice J, with whom Holmes JA and McMurdo J (as their Honours then were) agreed, explained the exercise of the discretion to order that costs be assessed on the indemnity basis:^[3]

“The applicable principles for the awarding of indemnity costs were usefully summarised by Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd.  However, those principles operate as a guide to the exercise of the relevant discretion. They do not define all of the circumstances in which the discretion is to be exercised and do not limit the width of that discretion.  Further, the categories in which the discretion to award indemnity costs may be exercised are not closed.

Whilst the awarding of costs on an indemnity basis will always ultimately depend upon the exercise of a discretion in the particular circumstances of each individual case, the justification for an award of indemnity costs continues to require some special or unusual feature of the particular case.  As was observed by Basten JA in Chaina v Alvaro Homes Pty Ltd, the general rule remains that costs should be assessed on a party and party basis, and the standard to be applied in awarding indemnity costs ought not ‘be allowed to diminish to the extent that an unsuccessful party will be at risk of an order for costs assessed on an indemnity basis, absent some blameworthy conduct on its part’.”

Refusal of offers of compromise

9. [9]
   The relevant principles concerning costs orders where a Calderbank offer^[4] is refused were summarised by Bond J (as his Honour then was) in S.H.A. Premier Constructions Pty Ltd v Niclin Constructions Pty Ltd (No 2).^[5] 
10. [10]
    The fact that a Calderbank offer has been rejected does not create a presumption that the party which rejected that offer ought to pay costs on an indemnity basis if it obtains a less favourable result than it would have achieved had it accepted the offer.  The relevant questions is whether, in all of the circumstances, the party’s rejection of the offer was unreasonable so as to warrant a departure from the usual rule that costs are to be assessed on the standard basis.
11. [11]
    A non-exhaustive list of the considerations which a court should ordinarily have regard to in deciding whether the rejection of the offer is unreasonable in all the circumstances includes: the stage of the proceeding at which the offer was received; the time allowed to the offeree to consider the offer; the extent of the compromise offered; the offeree’s prospects of success, assessed as at the date of the offer; the clarity with which the terms of the offer were expressed; and whether the offer foreshadowed an application for indemnity costs in the event of the offeree rejecting it.
12. [12]
    The first respondents made three offers of settlement and they submit that the applicant acted unreasonably in rejecting each of those offers.
13. [13]
    The first offer of settlement was set out in a letter sent by email by the first respondents’ solicitors to the applicant’s solicitors at 9.13 am on 9 March 2022.  It was made at an early stage of the proceeding, before the parties had exchanged their points of claim and defence or written outlines of submissions, and only five days after the solicitors for the second respondent had notified the solicitors for the applicant that the second respondent had passed a resolution approving the first respondents’ development application, assessed against the DBCLs on the basis that Lot 98 is designated as a Development Parcel.^[6]  It included terms that extended beyond the subject of the application and would have required steps to be taken by both the applicant and first respondents in relation to the repair and waterproofing of the boundary fence between their respective lots.  It required that the applicant discontinue the proceeding with the parties to each bear their own costs to the date of discontinuance.  It was open for acceptance by the applicant for less than seven hours as it lapsed at 4.00 pm on 9 March 2022.  Although the letter was marked “Without prejudice save as to costs”, it was not expressed to be a Calderbank offer, did not set out any clear explanation as to why it was said the applicant’s challenge to the validity of the development approval was unlikely to succeed, and did not foreshadow an application for indemnity costs in the event it was rejected by the applicant.
14. [14]
    Having regard to those matters, and in particular the short period of time the offer was open for acceptance, I do not consider that the applicant acted unreasonably in refusing to accept the first offer of settlement.
15. [15]
    The second offer of settlement was set out in a letter sent by email by the solicitors for the first respondents to the solicitors for the applicant at 1.36 pm on 10 March 2022.  It was made only a day after the first offer of settlement, so the proceeding was at the same stage as referred to above.  The letter asserted that the applicant had commenced the proceeding in the wrong jurisdiction and should have commenced it in QCAT, but did not provide any explanation for that assertion.  The offer required that the proceeding be dismissed with the parties to each bear their own costs to the date of dismissal.  It was open for acceptance by the applicant for less than three hours as it lapsed at 4.00 pm on 10 March 2022.
16. [16]
    Having regard to those matters, and in particular the very short period of time the offer was open for acceptance, I do not accept that the applicant acted unreasonably in refusing to accept the second offer of settlement.
17. [17]
    The third offer of settlement was set out in a letter sent by email by the solicitors for the first respondents to the solicitors for the applicant at 6.55 pm on 12 May 2022, less than a week before the application was listed for hearing for two days commencing on 18 May 2022.
18. [18]
    Unlike the first two offers of settlement, the third offer was expressed to have been made with in accordance with the principles in Calderbank v Calderbank.  It stated that the letter would be relied upon to justify an award of indemnity costs against the applicant in the event it was unreasonably refused.
19. [19]
    As is to be expected given the imminent hearing, the proceeding had progressed since the first two offers had been made and rejected.  The letter referred to the applicant having filed his points of claim and having received the first and second respondents’ points of defence as well as the affidavit of Mr Jullyan, the Executive Architect for the ARC which reviewed the development application and recommended its approval. 
20. [20]
    It should be noted that the points of defence and the affidavit of Mr Jullyan were only filed on 11 May 2022, the day before the third offer was made.  That necessarily gave only limited time for the applicant and his counsel and solicitors to consider the contents of that material before the third offer of settlement was received.  At the time the third offer was made the parties had not filed outlines of argument.  That was ordered to be done by 4.00 pm on 16 May 2022.
21. [21]
    The offer was sent on the evening of 12 May 2022, which was a Thursday.  It was open for acceptance by the applicant until 5.00 pm on Monday, 16 May 2022, a period of four days including the weekend.  The letter acknowledged that this was a relatively short period of time but asserted it was reasonable in circumstances where the applicant was being advised by senior and junior counsel and experienced solicitors, the proceeding was being conducted in an expedited fashion at the applicant’s request and the requirement for outlines of argument to be filed the following Monday.
22. [22]
    As to the applicant’s prospects of success, the letter raised three matters in support of the offer of settlement:

    1. (a)
       the applicant’s proposed construction confronted the fundamental problem of contending that the express terms of the DBCLs should be ignored in favour of an interpretation informed by post-contractual conduct;
    2. (b)
       the court would not exercise its discretion to grant injunctive relief requiring the demolition of the first respondents’ home;
    3. (c)
       the commencement of the proceeding contravened provisions of the Sanctuary Cove Resort Act 1985 (Qld).
23. [23]
    I will address these matters further below, but I do not consider that the applicant’s arguments could be said to be without any prospects of success.  It should also be noted that the argument as to the court refusing to exercise its discretion to grant injunctive relief was said to follow from the fact that if such relief were granted it would expose a substantial number of other lot owners to similar injunctions.  That broad statement was not necessarily true as it ignores clause 1.1.1 of the second respondent’s Development Control By-Laws (“DCBLs”).^[7] 
24. [24]
    The terms of the third offer required that the application be dismissed and that the applicant pay the respondents’ costs of and incidental to the proceeding on the standard basis.  I accept the applicant’s submission that the terms of this third offer involved no genuine attempt to compromise and instead amounted, in effect, to a demand to capitulate.
25. [25]
    Given the limited amount of time in which the applicant had to consider the offer in light of the respondents’ points of defence (and without having received the respondents’ outlines of argument) and the lack of genuine compromise reflected in the terms of the offer, I am not satisfied that the applicant acted unreasonably in failing to accept the third offer of settlement.

The applicant’s conduct of the proceeding

26. [26]
    The respondents identified numerous matters they submitted demonstrated that the applicant had unduly prolonged the proceeding or otherwise acted unreasonably in his conduct of the proceeding:
27. [27]
    First, the second respondent submitted that the applicant’s construction of the DCBLs disregarded the express designation of Lot 98 as a Development Parcel in the Eastern Neighbourhood Plan and thereby proceeded in wilful disregard of known facts.
28. [28]
    The exercise of construing the DCBLs was complicated by the fact that the existing development on the lots within the Bauhinia precinct did not, at first glance, appear to accord with the requirements for a Development Parcel under the DCBLs.  Further, the fact that the development approval was initially assessed against the “Bauhinia Adopted Standards” rather than the DCBLs,^[8] and that the second respondent itself treated Lot 98 as having a designation other than that of Development Parcel,^[9] while not ultimately bearing upon the construction exercise, nevertheless tends to suggest that a construction that treated Lot 98 as something other than a Development Parcel was arguable.  Although the applicant’s construction was not accepted, I do not accept that the argument could properly be characterised as groundless or one in respect of which the applicant should, if properly advised, have known he had no prospects of success.
29. [29]
    Secondly, the respondents submitted that the applicant’s challenge to the validity of the development approval was unreasonable, in circumstances where the court found the proposed works would not have a significant effect upon the amenity of the applicant’s lot and, on the applicant’s proposed construction of the DCBLs, the applicant’s own house was not compliant.
30. [30]
    The question of amenity turned upon an assessment of the evidence of Mr Jullyan and Mr Curtis in circumstances where Mr Curtis’ opinions reflected a construction of the DCBLs which was not accepted,^[10] but which was nevertheless arguable.  The applicant explained the inconsistency between the relief he was seeking in respect of Lot 98 and the non-compliance of his own house when giving evidence.^[11]  While that inconsistency was a factor taken into account in considering the discretion to grant injunctive relief (had the applicant’s construction of the DCBLs been accepted) that is different to concluding that the applicant’s refusal to address his own residence’s non-compliance compelled the exercise of the discretion against the grant of injunctive relief. 
31. [31]
    Thirdly, the respondents relied on the finding that the applicant withheld his consent to matters the subject of the condition precedent to prevent the first respondents from undertaking any of the proposed building work.  The first respondents described this as a collateral purpose.
32. [32]
    The finding that the applicant’s refusal to provide his agreement on matters the subject of the condition was not reasonable was made in the context of determining whether the development approval was of lawful effect.^[12]  It cannot be equated with a finding that the applicant’s conduct of the proceeding was unreasonable.  The finding does not, in my view, support a submission that the applicant commenced or continued the proceedings for some ulterior purpose.  The applicant prosecuted the proceedings to prevent the construction of building work being carried out pursuant to what he argued was an invalid and ineffective building approval.  His argument failed, but his purpose in seeking the relief he claimed was not an impermissible ulterior purpose.
33. [33]
    Fourthly, the first respondent submits that the applicant abandoned alleged breaches of the DCBLs at the hearing which added to the length of the hearing and the respondents’ costs of responding to the allegations.
34. [34]
    The applicant’s complaints were originally based on the report provided by Mr Curtis.  While it is true that the applicant did not press his complaint about the eastern boundary set back or the location of the pool pump house at the hearing, the respondents have not sought to quantify the additional time or costs involved in addressing those matters.  In my view, it is unlikely that significant time and costs would have been saved if those complaints were abandoned at an earlier time.  The issues raised by the eastern boundary set back complaint still had to be addressed to resolve the complaint about the set back on the shared boundary on the western side of Lot 98.  The complaint concerning the location of the pool pump did not seem to be a primary focus of the evidence or the parties’ submissions. 
35. [35]
    In any event, the applicant’s conduct in abandoning those complaints must be assessed in the context that he and his lawyers did not receive the respondents’ points of defence or the evidence of the respondents’ expert, Mr Jullyan, until 11 May 2022, one week before the commencement of the hearing.
36. [36]
    Fifthly, the respondents submit that the applicant acted unreasonably by pursuing his application in this Court rather than in QCAT.
37. [37]
    Under the Sanctuary Cove Resort Act 1985 (Qld):

    1. (a)
       s 104B confers jurisdiction on QCAT in respect of a matter relating to an alleged contravention of a development control by-law and provides that a proprietor of a lot in a residential zone (among others) may apply to QCAT to deal with such a matter;
    2. (b)
       s 104C provides that QCAT must not decide the application unless satisfied that the applicant had made reasonable attempts to resolve the dispute using internal dispute resolution processes.
38. [38]
    The language in s 104B is permissive.  Although I accept that the applicant might have made his application in QCAT, I am unable to accept the submission of the second respondent that the applicant’s decision to proceed in this court amounted to disregard of the intention of Parliament that disputes about development control by-laws should be determined by QCAT.
39. [39]
    Further, given the complexity of the construction issue and the settlement terms offered in the three offers considered above, I doubt the result of proceeding in QCAT is likely to have been, as submitted by the second respondent, resolution at an early stage through a compulsory conference or mediation or, failing that, a determination by QCAT on the papers.
40. [40]
    Sixthly, the second respondent referred to a number of matters concerning the form of the proceeding: the commencement of the proceedings by way of originating application where there was a dispute of fact; the applicant filing, but not pursuing, an application for interim injunctive relief; and the amendment of the originating application just prior to the hearing.
41. [41]
    Once the existence of the factual dispute was recognised it was addressed by the filing of points of claim and points of defence and the provision of written outlines.  The affidavits filed prior to the exchange of pleadings remained relevant to the issues joined on those pleadings and were read on the hearing of the originating application.  It is difficult to see that the commencement by way of originating application added much, if at all, to the time and costs incurred.
42. [42]
    In my view, the applicant cannot be criticised for electing not to pursue interim injunctive relief but instead focussing on progressing the proceeding to a hearing expeditiously.  If anything, this reduced the time and costs incurred.
43. [43]
    It is not unusual for a party in the applicant’s position to amend the relief being sought when the matter is about to be heard.  In the circumstances of this case, the need for the amendment and its timing must be considered in the context of two matters:

    1. (a)
       when the applicant first commenced the proceeding he challenged the validity of a development approval based upon an assessment against the requirements of a document which did not form part of the DCBLs;
    2. (b)
       the applicant and his lawyers only received the respondents’ points of defence and the evidence of the respondents’ expert, Mr Jullyan, a week before the hearing of the application and did not receive the respondents’ outline of submissions until a matter of a day or so before the hearing.  In those circumstances, the timing of the amendments is unsurprising.
44. [44]
    Ultimately, I am not satisfied that any of the matters identified in the respondents’ submissions on costs warrant a finding that the applicant unduly prolonged the proceeding by advancing contentions that properly advised, he should have known had no chance of succeeding or otherwise acted so unreasonably in the commencement or prosecution of the proceeding as to warrant an order for indemnity costs.

Conclusion

45. [45]
    The order will be that the applicant pay the respondents’ costs of and incidental to the proceeding to be assessed on the standard basis if not agreed.