Body Corporate for Vision Centre Gold Coast Community Title Scheme 29190 v Nerang Qld Pty Ltd [2024] QSC 183

SUPREME COURT OF QUEENSLAND CITATION: Body Corporate for Vision Centre Gold Coast Community Title Scheme 29190 v Nerang Qld Pty Ltd [2024] QSC 183 PARTIES: BODY CORPORATE FOR VISION CENTRE GOLD COAST COMMUNITY TITLE SCHEME 29190 (first applicant) AND DR ROGER THOMAS WELCH (second applicant) v NERANG QLD PTY LTD ACN 667 994 569 (respondent) FILE NO: BS 1203/24 DIVISION: Trial PROCEEDING: Originating Application, Cross Application ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 26 August 2024 DELIVERED AT: Brisbane HEARING DATE: Heard on the papers JUDGE: Freeburn J ORDER: 1. Subject to paragraph 2 below, there is no order as to the costs of the application filed on 1 February 2024 and the cross-application filed on 6 March 2024. 2. The respondent pay the applicants’ costs of the argument concerning costs. CATCHWORDS: PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – DEPRIVING SUCCESSFUL PARTY OF COSTS – where an application was brought for the respondent to remove obstructions on a right of way easement – where the respondent brought a cross-application to remove an encroachment to an easement for support – where the parties were misunderstood about the location of the right of way easement, but upon finding out, still proceeded with the applications – where both the application and cross application were unsuccessful – whether it is appropriate to depart from the general rule that costs follow the event and make no order as to costs Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304, cited -- 1 of 7 -- 2 Dixon v Dixon (No 2) [2022] NSWSC 944, cited Dynamics Co Pty Ltd v G and M Nicholas Pty Ltd (No 2) [2012] NSWSC 301, cited Peter Holmes Investments Pty Ltd v S&C Nicola Pty Ltd (No 3) [2024] NSWSC 965, cited Vickers v Taccone [2005] NSWSC 646, cited COUNSEL: V Brennan for the applicants A Skoien for the respondent SOLICITORS: Sarah Davies Legal Pty Ltd for the applicants Kekatos Lawyers for the respondent [1] Both the application and the cross-application have been dismissed.1 [2] An application of the general rule that costs follow the event2 would mean that the appropriate order is that each party is entitled to the costs of the opposite party’s application against them. However, in dismissing both applications I expressed two preliminary views. One was that a rough apportionment of the total costs of both applications was that about two-thirds of the costs was attributable to the Vision Centre’s application3 and about one-third was attributable to Nerang’s cross- application. The second preliminary view was that there should be no order as to costs. [3] After delivering reasons, and expressing those preliminary views, the parties were invited to make submissions on costs. The parties accepted that invitation with some enthusiasm. Nerang delivered written submissions on 26 July 2024 (4 pages). Vision Centre delivered costs submissions on 2 August 2024 (13 pages). And on 16 August 2024 Nerang delivered reply submissions (2 pages). Both parties filed and served further affidavits directed to the costs issues. Nerang’s Submissions about Costs [4] Nerang sought the following costs orders: (a) Vision Centre pay the whole of Nerang’s costs of the proceeding until 7 February 2024 – the date of the orders of Kelly J; (b) Vision Centre pay one-third of Nerang’s costs of the proceeding between 8 February and 23 May 2024 – the date an offer to settle was rejected; and (c) Vision Centre pay the whole of Nerang’s costs of the proceeding after 23 May 2024 on an indemnity basis, including the costs of this application for costs.4 [5] Nerang sought those costs orders for a variety of reasons. The principal reasons were that Nerang was compelled to come to court to respond to Vision Centre’s application 1 The reasons are published as Body Corporate for Vision Centre Gold Coast Community Title Scheme 29190 v Nerang Qld Pty Ltd [2024] QSC 152. 2 Uniform Civil Procedure Rules 1999 rule 681. 3 For convenience, I will refer to both applicants as the Vision Centre. 4 The orders proposed by Nerang have been simplified. The costs sought in paragraphs (a) and (b) are sought on a standard basis and the costs order sought in paragraph (c) is sought on an indemnity basis. -- 2 of 7 -- 3 and that Vision Centre unreasonably rejected Nerang’s reasonable offer of compromise. Neither reason withstands scrutiny. Was Nerang compelled to defend itself? [6] Nerang portrays itself as compelled to come to court to defend Vision Centre’s proceedings. Specifically, Nerang submits that it was “brought to court to respond to the Applicants’ Application (including to discharge the interlocutory injunction against it)”. [7] The costs discretion needs to be exercised having regard to all the circumstances. In the circumstances it was the conduct of Nerang that led to the bringing of the proceeding. At a time when both parties were operating under the mistaken belief that the driveway was on the easement, Nerang refused to properly respond to correspondence from Vision Centre’s lawyers and then Nerang unilaterally erected the gates. [8] That conduct showed a lack of respect for the rights of Vision Centre.5 It led to the proceedings. Certainly, the true alignment of the easement was later discovered, and Nerang was entitled to rely on the correct alignment. But that was only discovered in March 2024 – after the litigation had commenced and after Vision Centre was forced to obtain an injunction. Even once the injunction was obtained, and the case was on its way to trial, Nerang arranged for the erection of both the southern and northern gates. Then it removed the gates. [9] Once the proceedings were commenced, Nerang prosecuted its own cross-claims. And Nerang changed its position in substantive ways. Nerang’s cross-claims started as both an encroachment and a realignment claim. And then both those cross-claims were abandoned. And then the encroachment case was run at trial. [10] And so, in those circumstances, it is difficult to characterise Nerang as a victim of litigation, forced into the position where it was required to defend itself. Nerang was a willing participant in the litigation. Nerang eventually settled on a cross-claim which it decided to prosecute but it lost that cross-claim. Other Factors [11] The other difficulty is that neither party properly understood the location of the easements and the driveway until March 2024 – well after the litigation was underway. The proper alignment could have easily been ascertained by either party. Indeed, given that Nerang had completed the purchase of its property in late 2023, and it was at least considering development of the property,6 it is odd that the misalignment of the driveway – on Nerang’s property - only came to light in March 2024. [12] A related issue is that Nerang was quick to accuse Vision Centre of being deceptive about the alignment of the driveway. In fact, the true situation was that both parties were mistaken about the location of the easements. Neither checked. And then, when 5 Or at least what both parties perceived to be their rights. 6 The property was sold with a development approval. Nerang said it did not wish to proceed with that development but was considering its options, include a sale of the property. -- 3 of 7 -- 4 the mistake was discovered neither party sought relief designed to properly rectify the situation. That was one of the reasons for the preliminary view that neither party was entitled to their costs. [13] Nerang’s analysis of the litigation sought to split the case into three distinct periods. I am not satisfied that is appropriate. It ignores the period prior to the filing of the proceedings when Nerang failed to respond substantively to Vision Centre’s overtures. Nerang also emphasises the offer made by Nerang on 20 May 2024 when there were in fact a series of offers by both parties interspersed with complaints and allegations. The Offer of Compromise [14] Nerang’s offer of compromise was a ‘Calderbank’ offer made by letter on 20 May 2024. In substance, the offer was that Nerang would undertake not to create any obstruction which prevents or restricts the free and uninterrupted right-of-way created by the easements and that both applications be dismissed, with no order as to costs. [15] There are four problems with the offer. The first is that, in the offer, Nerang advised that it was no longer proceeding on its application regarding the realignment or the encroachment. Ultimately, Nerang changed its position again and did proceed with the encroachment allegation. Thus, Nerang contends that Vision Centre unreasonably refused an offer made in circumstances where even the essential skeleton of the dispute was subject to change. [16] The second is that the offer made by Nerang was merely not to “create” any obstruction. That is narrower than the express obligations in the easements which required Nerang not to obstruct, or to permit an obstruction, and also required Nerang to permit Vision Centre “free and uninterrupted right-of-way” over Nerang’s land. [17] The third is that the rather narrow offer did not propose the sensible or obvious solution,7 or anything like it. Instead, the offer has the appearance of a tactical offer rather than a genuine offer of compromise. That leads to, and is interrelated to, the fourth problem. The offer finishes with a serious accusation that Vision Centre had misled the court. Not surprisingly, Vision Centre’s solicitors demanded that the allegation be substantiated or withdrawn. The correspondence does not disclose that either course was adopted. [18] In the circumstances, it is doubtful that the offer was a reasonable offer, or that Nerang has achieved a more favourable result, or that Vision Centre acted unreasonably in rejecting the offer. And, of course, the offer was made on the basis that Nerang was proposing to abandon its cross-claims completely but had not yet done so. Nerang then ‘resurrected’ the encroachment part of its claim and proceeded with that claim at trial. Nerang lost that claim. [19] Importantly, Nerang contends that it made a genuine offer of compromise in circumstances where the offer was accompanied by an unsubstantiated allegation of misleading the court. It was an offer more likely to promote antagonism than a spirit of compromise. To adapt the language from a slightly different context, the offer was 7 See the discussion in the substantive reasons at [17]-[19]. -- 4 of 7 -- 5 made more in the hope of obtaining an advantage on costs rather than for the purpose of genuinely compromising the dispute.8 [20] For those reasons, I do not accept Nerang’s submissions that it ought to have the benefit of a costs order. Vision Centre’s Submissions on Costs [21] Vision Centre points to various conduct of Nerang and proposes costs orders that follow the event, namely: (a) Vision Centre pay Nerang’s costs of Vision Centre’s application; (b) Nerang pay Vision Centre’s costs of Nerang’s cross-application; and (c) Nerang pay Vision Centre’s costs of the costs argument. [22] Alternatively, Vision Centre was willing to embrace the preliminary view that each party ought to bear its own costs. [23] Putting aside for the moment the argument about the costs of the costs argument, Vision Centre’s proposed costs orders are close to the preliminary view expressed in delivering the reasons on 19 July 2024. However, there are a number of practical difficulties with Vision Centre’s primary position that each party pay the costs of their opponent’s application. [24] First, it would be undesirable for reciprocal costs orders to be made, each requiring that party’s opponent to pay costs of the unsuccessful applications. That would require a set-off of costs under rule 741 of the Uniform Civil Procedure Rules 1999. The result would be that a significant portion of the costs orders would cancel each other out – at least to some extent. That raises the prospect that the costs of the assessment of both sides’ costs, and then the setting off the respective costs orders, is likely to be disproportionate to the amount ultimately at stake. [25] Second, the likely set-off or overlap in costs is likely to be significant. As the New South Wales Court of Appeal said in Bostik Australia Pty Ltd v Liddiard (No 2): Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation.9 [26] At the time of giving the substantive reasons, I advised the parties of my pragmatic evaluation of the apportionment, applied with a broad brush. At that time, my impression was that a reasonable apportionment is that the costs of the application would comprise about two-thirds of the total costs and the cross-application about one-third. But there was no precision in that.10 Nerang accepted that as a rough apportionment. On the other hand, Vision Centre assessed the apportionment as the reverse - one-third/two-thirds. Vision Centre, rightly, points out that significant portions of the affidavit material was directed to either the encroachment issue or the abandoned application to vary Easement P. It is sufficient to say that the 8 See the discussion in Dal Pont, The Law of Costs (LexisNexis, 5 th ed, 2021) at [13.7]. 9 [2009] NSWCA 304 at [38]. 10 See the discussion in the following paragraph. -- 5 of 7 -- 6 apportionment could be two-thirds/one-third, or the inverse of that, or something in between. On any view, there is a significant overlap. [27] Third, the costs of the application and cross-application are not likely to be easily separated by the costs assessor. In the applicant’s submissions, for example, there is a significant section devoted to the background. That section is relevant to both application and cross-application. Pages 9 to 18 (9 pages) are devoted to the application and pages 19 to 28 (9 pages) are devoted to the cross-application. In the respondent’s final submissions pages 1 to 9 (9 pages) are not specific to either application, pages 10 to 17 (8 pages) are devoted to the application, and pages 18 to 22 (5 pages) are devoted to the cross-application. In my reasons, the non-specific discussion covers pages 1 to 4 (about 4 pages), the application is dealt with at pages 4 to 15 (about 10 pages) and the cross-application covers pages 16 to 22 (about 7 pages). There is no direct connection between the pages devoted to the different applications and the costs incurred by each party. At best they are a rough guide. But, those figures do suggest that, if there were reciprocal orders, there would be a significant overlap. [28] Overall, making reciprocal costs orders is an unattractive solution. No Order as to Costs [29] For a number of reasons, it is appropriate to depart from the general rule in this case, but not in the way that is proposed by either Nerang or Vision Centre (as its primary case). These are the major factors that are relevant to the exercise of the costs discretion in this case. [30] First, as both parties’ submissions explain, the purpose of a costs order is to indemnify the successful party, not to punish the unsuccessful party.11 Here it is hard to describe either party as having been successful. Once the true alignment of the driveway was known, neither party has been shown to have proposed, at least through the court process, a sensible resolution.12 The result is that the parties have litigated long and hard and achieved nothing of substance. [31] Second, for the reasons already explained, it would be undesirable to make reciprocal costs orders where such an order would result in a significant overlap which would, in all likelihood, require a sizeable set-off under rule 741 UCPR. [32] Third, the correspondence between the solicitors for the parties features responses required within short time frames, failures to respond, serious allegations and a distinct lack of focus on the real issue. That correspondence was plainly sent on the instructions of each client. It is hard to justify an order of the court that will entitle either party to recover the costs of that correspondence or the costs of the stances adopted by that correspondence. [33] In the circumstances it is appropriate that there be no order as to costs. The Costs of the Costs Argument 11 Oshlack v Richmond River Council (1998) 193 CLR 72 at 97. 12 At one stage Nerang did propose realignment, but that was not pursued. And then Vision Centre made a without prejudice offer that included a realignment, but that was not pursued in court. -- 6 of 7 -- 7 [34] The parties also litigated long and hard concerning costs. Both parties now seek the costs of the argument about costs. [35] There is something unpalatable about the idea that the court is required to entertain the argument about the substantive merits of a case, and then the argument about who should bear the costs of the case, and then a further argument about which party should bear the costs of the argument about costs. Ordinarily, the costs of the argument about costs will be included as part of the costs order and the court will not separately entertain a dispute about the costs dispute. However, there are numerous examples of cases where the costs of the costs argument have been divorced from the balance of the costs and treated separately. Examples include Peter Holmes Investments Pty Ltd v S&C Nicola Pty Ltd (No 3) (no order as to the costs of the costs argument),13 Dixon v Dixon (No 2) (costs of the costs argument apportioned equally),14 Vickers v Taccone (no order as to the costs of the argument as to costs),15 and Dynamics Co Pty Ltd v G and M Nicholas Pty Ltd (No 2) (no variation to overall costs order).16 [36] As I say, in the usual course, it is undesirable for the court to divorce the costs of the costs argument from the balance of the costs. Those costs only rarely deserve separate treatment. Here, though, it was Nerang that declined to accept the preliminary view that there ought to be no order as to costs. Instead, Nerang sought a complex order that largely required Vision Centre to pay Nerang’s costs.17 Nerang has not enjoyed any success in that argument and the order made conforms to the alternative order sought by Vision Centre. In the circumstances, Nerang ought to pay Vision Centre’s costs of this costs battle on the basis of the general principle that costs follow the event. 13 [2024] NSWSC 965 at [109]. 14 [2022] NSWSC 944 at [89]. 15 [2005] NSWSC 646 at [30]-[34]. 16 [2012] NSWSC 301 at [6]. 17 See paragraph [4] above. -- 7 of 7 --