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Costs of proceedings commenced without a prior letter of demand

April 18th, 2011 · No Comments

In PMCDG Investments Pty Ltd v Monash Gate Project Pty Ltd [2011] VSC 52, Associate Justice Daly accepted a referral from the trial judge, Justice Robson, to decide who should pay the costs of a proceeding the trial of which Justice Robson had presided over. That referral, it seems to me, is an interesting development in itself. Associate Justice Daly was asked to depart from the usual order that the winner get a partial indemnity for their actual legal costs from the losing party, and instead make no order as to costs. It was said that though the plaintiff had succeeded, litigation was not necessary, and that proceedings had been commenced precipitiously. Her Honour did not uphold the submission, but did usefully digest a number of authorities on point:

‘Counsel for Monash Gate relied upon a number of authorities to support its contention that the circumstances in the current case justified denying PMCDG its costs of the proceeding, as follows: Wilson Parking Australia 1992 Pty Ltd v Rush (No 2) [2008] FCA 1619 (“Wilson Parking”), Melbourne University Publishing Ltd v Williamson [2005] FCA 1910, Lollis v Loulatzis (No 2) [2008] VSC 35, and Verna Trading Pty Ltd v New India Assurance Co Ltd [1991] 1 VR 129 (“Verna Trading”).  A review of these authorities leads one to observe that it is difficult to distil any firm principles, apart from the principle that courts have a broad discretion with respect to costs, and that discretion must be exercised judicially, such that any departure from the “usual” rules and practices with respect to costs should be based upon identifiable grounds.

In Wilson Parking Australia v Rush, Jessup J made adverse orders against an applicant for interlocutory relief, in part because there was no express request for relief prior to the issue of a notice of motion seeking orders, some of which were successfully resisted, and some of which were made by consent.  The difficulty in comparing this case with the current case is that the judgment does not descend into detail regarding the factual background to the dispute between the parties and the application.  Further, the application was partially unsuccessful and there were a number of different respondents.

In Melbourne University Publishing Ltd v Williamson, Heerey J refused to make an order for costs in circumstances where orders for injunctive relief were made by consent, stating:

“It seems to me that it is more than speculation that had a letter of demand been sent the parties would have reached the commonsense resolution that they have.  In fact, it is a widespread and salutary practice in all forms of civil litigation for a prospective plaintiff to write a letter of demand, for the very reason that a prospective defendant can take advice and, if there is no defence, save the substantial costs that would be involved even for a brief undefended application like the present one.”

This case is superficially similar to the current case, and the above statement is uncontroversial.  However, it is apparent from the reasons that the defendant in this case immediately consulted a solicitor, and quickly agreed to the consent orders.  It also seemed to be relevant that the plaintiff was an established publisher and the defendant was a small photocopy shop.  In the current case, while negotiations were under foot at an early stage, Monash Gate actively defended PMCDG’s claims, at least in the court documents, and had builders and equipment on site ready to carry out works on the disputed land.

In Lollis v Loulatzis, Kaye J reduced the costs awarded to the successful plaintiff on two primary grounds:  the first on the basis that the plaintiff failed in relation to a substantial part of her claim (a claim of damages), and secondly, because the plaintiff was substantially responsible for the excessive time that was required to complete the trial.

The current case is readily distinguishable from the circumstances of the application currently before the court.  In the current case, PMCDG was substantially successful in obtaining the relief it sought in its statement of claim.  Furthermore, to the credit of both parties, the proceeding was substantially resolved within four weeks of its commencement, and consumed very little court time.  This is to be contrasted with the situation facing Kaye J, where a trial with an estimate of hearing time of 6 to 7 days ultimately lasted for 19 days.

Finally, in Verna Trading, the court awarded costs against a successful defendant on the basis that the defendant had not communicated the critical basis of its defence to the plaintiff until the trial had commenced, which put the plaintiff to unnecessary expense.  Counsel for Monash Gate submitted that by failing to make a demand, or to communicate its claim for adverse possession, PMCDG had put Monash Gate to unnecessary expense.’

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Tags: Ethics · litigation ethics · Party party costs