Supreme Court New South Wales Medium Neutral Citation: Wargent v Bellamax Investments [2011] NSWSC 1461 Hearing dates: 18 November 2011 Decision date: 01 December 2011 Jurisdiction: Equity Division Before: Hallen AsJ Decision: (a) Order the Defendants to pay the Plaintiff's costs between 24 December 2010 and 8 June 2011, such costs to be calculated on the ordinary basis. (b) Make no order for costs for the period thereafter, including the costs of the hearing of the costs application, with the intent that each party shall pay her, or its, own costs. Catchwords: Costs where matter resolved and no hearing on the merits Legislation Cited: Civil Procedure Act 2005 Uniform Civil Procedure Rules 2005 Cases Cited: Ajkay v Hickey & Co Pty Ltd [2011] NSWSC 822 Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 Boscaini Investments Pty Ltd v Corporation of the City of Kensington and Norwood (1999) SASC 327 Chapman v Luminis Pty Ltd [2003] FCAFC 162 Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 Fire Containment Pty Ltd v Robins (No 2) [2011] NSWSC 547 Minister for Immigration and Ethnic Affairs, Re; Ex parte Lai Qin (1997) 186 CLR 622 Muhibbah Engineering (M) BHD and Anor v Trust Co Ltd and Anor [2009] NSWCA 205 Ohn v Walton (1995) 36 NSWLR 77 One Tel Ltd v Deputy Commissioner of Taxation [2000] FCA 270 One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548 Red Bull Australia Pty Ltd v Stacey and Graebner [2011] NSWSC 1350 Saeco International Group (Australia) Pty Ltd v Ubertini & Anor [2011] VSC 360 Category: Costs Parties: Gloria Rosemary Wargent (Plaintiff) Bellamax Investments Pty Limited (First Defendant) Muswellbrook Shire Council (Second Defendant) Representation: Counsel: Mr J Kildea (Plaintiff) Mr J Young (Defendants) Solicitors: NRM Thompson Norrie Lawyers (Plaintiff) Sparke Helmore (Defendants) File Number(s): 2011/15196 Judgment The Application 1HIS HONOUR: On 17 January 2011, the Plaintiff commenced proceedings, by Summons, in which she sought declarations and injunctive relief against two Defendants in relation to the use, or approval for use, of a sewer pipe that drained sewage from her land at Almond Street, Denman, across contiguous land, to connect with the second Defendant's sewer main in Bell Street, Denman. 2The first Defendant named in the proceedings is a company to which the second Defendant had granted development approval for a 25-lot residential subdivision of land in the vicinity of the Plaintiff's land. That subdivision was to be completed in three stages. It was at the end of the first, and the beginning of the second, stage, that the dispute between the parties erupted. 3The basis of the Plaintiff's claims appeared to be that she owned the sewer pipe. The first Defendant had connected to the sewer pipe with the approval of the second Defendant but without her consent or authority. The Defendants asserted that she did not own the sewer pipe and that she had no basis for the relief sought in the Summons. 4At the time of, or in the several months following, the filing of the Summons, the Plaintiff filed at least one affidavit in support of her Summons and then a Statement of Claim. During that time, there were several sets of consent directions made by the Court. The Defendants did not comply with a number of these. The parties then commenced negotiations and, finally, reached agreement regarding the relief claimed by the Plaintiff, except for the question of costs. 5In accordance with the agreement reached by the parties, the Defendants gave to the Court undertakings, which were noted by the Registrar on 23 September 2011. This finalised the dispute of the parties other than in respect of the costs of the proceedings. These reasons relate to the Plaintiff's application for costs. 6The Plaintiff seeks an order that the Defendants pay her costs on the ordinary basis, which application is opposed by the Defendants. The Plaintiff claims that, although the matter did not go to trial, nevertheless, she should be awarded costs because she is the successful party in the litigation or, alternatively, because of the conduct of the Defendants. 7The Defendants do not seek their costs, but submit that there should be no order as to the costs of the proceedings. 8The hearing of the application, whilst of some length, was well prepared and presented. Each of the parties filed comprehensive written submissions that I have found helpful. Those submissions will remain with the papers. 9The factual background set out below is taken from the facts stated in the submissions, with some amendments, which, for the most part, appear not to be in dispute. Background Facts 10The Plaintiff is the registered proprietor of land to which I shall refer as Lot 41. It is a battle-axe block, contiguous with land, which, until recently, was owned by the first Defendant, who was carrying out staged development on it. 11In 1999, the Plaintiff had acquired an easement to drain sewage from Lot 41 across the contiguous land, to connect with the second Defendant's sewer main. At her own expense, she had a sewer pipe installed in the easement. The land burdened by the Plaintiff's easement was the contiguous land. The easement covers a three-metre strip of the contiguous land. 12In 2006, the second Defendant granted the development approval to which I have referred. Stage 1a comprised the development of the contiguous land, into eight lots, being seven residential lots (Lots 1 to 7), and a residue lot. On registration of the plan of subdivision for Stage 1a, a second easement for drainage over the seven residential lots was created in favour of the second Defendant and the seven residential lots were connected to the sewer pipe. The land burdened by the second easement was the contiguous land. The easement covers the same three-metre strip of the contiguous land. 13Following the subdivision of Lots 1 to 7, the first Defendant constructed the dwellings on those lots and made connection to the sewer pipe of the sewerage facilities servicing the dwellings. 14On 9 August 2010, the second Defendant granted deferred development consent for the erection of houses on nine of the 18 lots forming part of stages 1b and 1c, which consent was to become operative upon registration of the plan of subdivision for stages 1b and 1c. By that consent, the nine houses to be constructed were to drain sewage through pipes that were to connect to the sewer pipe. Despite objection by the Plaintiff, the second Defendant granted development consent. 15The Plaintiff, through her solicitors, sought an undertaking from the first Defendant that the sewer drains for stages 1b and 1c would not be connected to the sewer pipe and that it would not be used to drain sewage from the land on which those houses would be built. The Plaintiff, through her solicitors, also sought an undertaking from the second Defendant that it would withdraw its assertion that the second easement authorised the use of the sewer pipe for stages 1b and 1c and an acknowledgement that the second Defendant had no entitlement to authorise anyone to use the sewer pipe. 16The principal question raised by the substantive proceedings was whether the Plaintiff owned the sewer line, and if so, the consequences that followed. 17Prior to the commencement of the proceedings, there had been letters, passing between the Plaintiff's solicitors and the second Defendant, in which the position of each party was articulated. It is fair to say that each party did not consider, in this correspondence, a practical solution to the legal problem that faced them. Rather, the solicitors for each of the parties advanced reasons why their client's position was legally and factually the correct one. 18On 22 December 2011, the second Defendant's solicitors wrote, in answer to the Plaintiff's claim that she "owned" the sewer line, that the second Defendant "relies upon the terms of [the] easement". That letter was not, apparently, received, because on 24 December 2011, the Plaintiff's solicitors wrote again, stating that if the second Defendant did not give the undertaking that had been sought, "we expect to receive instructions to commence proceedings without further notice". The Course of the Proceedings 19The first return date of the Plaintiff's Summons was 2 February 2011. On that date, the proceedings were stood over to 20 April 2011. It does not appear that any directions were made on the first return date of the Summons. 20On 21 March 2011, the Plaintiff served a Notice to Produce upon the second Defendant. She filed an affidavit of an expert on 15 April 2011. 21On 20 April 2011, it appears that directions were made, including for the service of expert evidence by the Plaintiff and the pleading of her claim. The Defendants were directed to file any evidence on which each intended to rely by 1 June 2011 and the Plaintiff's evidence in reply was to be filed by 15 June 2011. The matter was adjourned to 22 June 2011 "for the purpose of setting down for hearing". 22The Plaintiff filed a Statement of Claim on 17 May 2011 (six days late). 23The Defendants did not file, or serve, any evidence in accordance with the directions previously made (although it was not suggested that they did not propose to). 24On 22 June 2011, directions were made vacating the directions that had been made on 20 April 2011, and the proceedings were stood over until 20 July 2011. (I shall refer to events around 1 June 2011, later in these reasons.) 25On 20 July 2011, fresh directions were made regarding filing and serving "Points of Defence" and the affidavit evidence, including any expert evidence, by the Defendants, by 10 August 2011, and the Plaintiff's evidence in reply by 24 August 2011. The proceedings were adjourned until 31 August 2011, again "for the purposes of setting down a hearing date". 26On 31 July 2011, the Defendants still had not complied with the directions made and further directions were made. The proceedings were stood over until 12 September 2011. 27On 12 September 2011, the matter was stood over until 23 September 2011. 28An affidavit, sworn by the first Defendant on 15 September 2011, was filed on 23 September 2011. The affidavit went to the first Defendant's preparation of a revised sewer reticulation plan and the construction of an alternative sewer pipe within the contiguous land. The estimate of time required to complete the works was stated to be three weeks. 29On 23 September 2011, Minutes of Order were filed. The Court noted undertakings given to the Court by each of the Defendants "without admissions that the Plaintiff is entitled to any of the relief sought in the Summons". The Court noted that the only issue remaining to be determined was the issue of costs, in respect of which issue, the parties agreed upon directions for the service of affidavits by each. The orders of the Court were made by consent. 30In respect of the substantive relief sought by the Plaintiff, there was no hearing, no evidence read, no submissions made, and no determination of the merits, or otherwise, of the Plaintiff's case. 31Each party complied with the directions for the service of affidavits on the issue of costs. Two affidavits were filed and read on behalf of the Plaintiff and one affidavit was filed and read on behalf of the Defendants. The Negotiations to Settle the Proceedings 32Prior to 10 March 2011, the solicitors appear to have discussed the possibility of resolving the proceedings. On that date, however, the Defendants' solicitors advised the Plaintiff's solicitors that they were "not presently instructed to make an offer to settle the proceedings". The Plaintiff's solicitors did not, apparently, receive this letter when sent, because a copy of it was sent again under cover of letter dated 5 April 2011 by the Defendants' solicitors. 33I shall not set out all of the correspondence that passed, thereafter, between the parties' solicitors on the topic of resolution. 34On 1 June 2011, the Defendants' solicitors wrote a letter, marked "Without Prejudice except as to Costs", which, in my view, contained the first proposal to settle the proceedings. In summary, the Defendants' solicitors indicated, in this correspondence, and the correspondence that followed, that the first Defendant would "construct an alternative sewer pipe which would drain sewage from lots to be created", which construction "would be authorised by the second Defendant" and that they would provide undertakings. A term of the offer was that each party should pay her, or its, own costs of the proceedings. 35On 10 August 2011, the Plaintiff rejected the offer made by the Defendants on 8 August 2011 (which was in the terms described above), upon the basis that it offered "no comfort to our client in the circumstances of this protracted dispute and litigation". 36The rejection of the offer prompted a letter dated 17 August 2011, from the Defendants' solicitors, to the Plaintiff's solicitors, which, relevantly, stated: "In our view, the Defendants' proposal, made without admission in our letter dated 8 August 2011, would involve giving your client the substance of the relief sought in the proceedings (that is, confirmation that sewage from Lot 8 or subsequent lots will not be drained through the existing sewer pipe). Your client has rejected the offer in that letter in its entirety without indicating why the proposal does not satisfy her claim for relief. Having regard to the terms of your client's pleadings, if the proposed undertakings are given, the only matter in dispute between the parties should be costs. If the proposed undertakings are given, we do not consider it necessary for your client to seek a declaration about ownership of the pipe. This is particularly the case, when neither Council nor Bellamax assert ownership of the pipe. If undertakings are provided and your client will continue to seek a declaration from the Court about ownership of the pipe, Bellamax and the Council should be released from those proceedings. If the Defendants are not released from the substance of these proceedings, we are instructed to seek costs against your client." 37This, in turn, prompted a letter dated 24 August 2011, in response, from the Plaintiff's solicitors, which, relevantly, stated: "We are surprised to receive your letter of 17 August 2011. The writer assumed that the inadequacy of your clients' offer as affording some comfort to our client was patent. Our client is committed to proceeding to a hearing of these proceedings and we note that the matter is to be re-listed on 31 August 2011 to obtain a hearing date. The Defendants have not served any Points of Defence or Affidavit evidence as required by 10 August 2011 or at all. From the Plaintiff's point of view the offer contained in your letter of 8 August 2011 amounted to the following:- (a) The First Defendant would lay an alternative sewer pipe within Lots 6 and 7 through that part of those lands which are the subject of the easement created on 19 June 2009 by registration of DP xxxxxx; (b) The Defendants undertakings (not to drain or to authorise to drainage of sewage) are not to be given until the alternative pipe through Lots 6 and 7 is both constructed and operational. This part of the offer is staged more than once in your letter, and infers unlawful use of our client's pipe in the meantime. The difficulties with our client with this offer are:- (i) The First Defendant is not bound to any time by which the alternative pipe will be constructed (and presumably the existing draining lines disconnected from our client's pipe); (ii) The proposal now put forward by the Defendants was clearly an available course of action to them at all times after 19 August 2009 when the easement for drainage of sewage now proposed to be relied upon was created in favour of the Council; (iii) In these circumstances it is irrefutably the position that the course of action now being proposed was always available to your clients but they have chosen not to avail themselves of the rights until after the issue of proceedings by our client. (iv) In these circumstances the principles of Lai Qin and Robins (No. 2) have no application and, having in mind that your clients' offer directly responds to the relief claimed in paragraphs 2 to 7 inclusive of the Statement of Claim, costs will follow the event. In summary, our client is willing to consider any revised offer which deals with and rectifies the above inadequacies of the offer contained in your letter of 8 August 2011. Please advise urgently whether any further proposal will be forthcoming from your client. In the alternative we will prepare Short Minutes of Directions with the intention of seeking the earliest possible hearing date when the matter comes before the Court on 31 August 2011." 38The Defendants' solicitors then sent a letter dated 2 September 2011, in which a further offer was made, in the alternative, to the Plaintiff's solicitors. On 8 September 2011, the Plaintiff's solicitors wrote rejecting each of the alternative offers. 39Discussions must have then taken place between the legal representatives, because under cover of letter dated 19 September 2011, the Minutes of Order in accordance with which the matter was ultimately resolved on 23 September 2011 were sent. 40The Plaintiff did not discontinue the proceedings, but did not obtain any of the declaratory relief that she sought. The parties agreed that the giving of the undertakings obviated the need for those declarations. The matter was completed on 23 September 2011, leaving only the argument as to costs outstanding. The Statutory Regime and Legal Principles 41Pursuant to s 98(1) of the Civil Procedure Act 2005 ("CP Act"), subject to rules of Court and to the CP Act and any other Act, costs are in the discretion of the Court and the Court has full power to determine by whom, to whom, and to what extent costs are to be paid. 42Rule 42.7 of the Uniform Civil Procedure Rules 2005 ("the UCPR") provides that unless the court orders otherwise, the costs of any application or other step in any proceedings, including costs that are reserved, and costs in respect of any such application or step in respect of which no order as to costs is made, are to be paid and otherwise dealt with in the same way as the general costs of the proceedings. 43Section 28 of the CP Act deals with the costs of a mediation. 44Rule 42.1 of the UCPR provides that if the court makes any order as to costs, it is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole, or any part, of the costs. This rule, however, does not apply where there has been no adjudication on the merits because without a hearing on the merits, there is no "event" to enliven the rule: Fire Containment Pty Ltd v Robins (No 2) [2011] NSWSC 547 at [11]; Saeco International Group (Australia) Pty Ltd v Giorgio Massimo Ubertini [2011] VSC 360 at [2]. 45There is no specific rule in the CP Act or in the UCPR dealing with costs in circumstances where the parties resolve their differences without a hearing on the merits. Counsel did not dispute that, in those circumstances, the court has a wide discretion as to costs or that the discretion must be exercised judicially and in accordance with principle. 46In Muhibbah Engineering (M) BHD v Trust Co Ltd and Anor [2009] NSWCA 205, Young JA at [16]-[18] said: "[16] I should add that it is important that people be encouraged to settle their disputes. [17] If people know that, in a case like the present, no order for costs can be made because no evidence has been formally presented, there will be less financial impetus towards settlement. [18] If parties made a settlement subject to the court considering what is the appropriate order for costs, the court must resolve the matter of costs, justly, but simply and as cheaply as possible." 47The purpose of a costs order is to compensate, or indemnify, the person in whose favour it is made, not to punish the person against whom it is made: Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. 48I was referred to a number of authorities setting out in which the applicable principles in respect of the making of orders for costs where there has been no hearing on the merits, including, Re the Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622, particularly at 624-625; Australian Securities Commission v Aust-Home Investments Ltd [1993] FCA 585; (1993) 44 FCR 194 at 201-202; One Tel Ltd v Deputy Commissioner of Taxation [2000] FCA 270; Fire Containment Pty Ltd v Robins (No 2) ; and Ajkay v Hickey & Co Pty Limited [2011] NSWSC 822. Another that is, or may be, relevant, is Red Bull Australia Pty Ltd v Michael Peter Stacey and Christian Walter Graebner [2011] NSWSC 1350. Such cases provide guidance on circumstances that may constitute a basis for the exercise of discretion, but the overriding consideration will always be whether there is some circumstance that justifies a costs order so as to do justice between the parties. 49In Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin , at 624 -625, McHugh J said: "... it is first necessary to state the principles which govern an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means. In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. ... Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried... If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. The critical question in this case then is whether or not the prosecutrix acted reasonably in bringing these proceedings and whether the respondents acted so unreasonably in not informing the prosecutor that an application to review the decision to refuse a visa was being considered that it would be proper for the minister to pay the whole or part of the cost of the proceedings." 50In the second paragraph quoted above, McHugh J was contemplating a case where the party seeking costs, in effect, has effectively succeeded in obtaining the relief sought in the proceedings. This is made clear when his Honour made reference to that party not pursuing the action because he, she, or it, has achieved the relief sought in the action either by settlement or by extra-curial means: Muhibbah Engineering (M) BHD v Trust Co Ltd and Anor , per Sackville AJA at [52]. In so doing, McHugh J recognised that the general principle was not inviolable. 51In Australian Securities Commission v Aust-Home Investments Ltd , Hill J said: "These cases [including R v Gold Coast City Council; Ex parte Raysun Pty Ltd [1971] QWN 13; Liddle v Kooralbyn Pty Ltd (unreported) Supreme Court Queensland 9 October 1987 per Ryan J, Austcorp Finance and Leasing Pty Ltd v Thomas (unreported) Supreme Court Queensland Master White 23 August 1991 and J T Stratford & Son v Lindley (No 2) [1969] 1 WLR 1547 [1969] 3 AllER 1122], seem to me to support the following propositions being made: (1) Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a costs order: Stratford and the SEQEB case. (2) It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial: Stratford . This will particularly be the case were a trial on the merits would involve complex factual matters where credit could be an issue. (3) In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them ( SEQEB ). (4) In a particular case it might be appropriate to the Court in its discretion to consider the conduct of a respondent prior to the commencement of proceedings where such conduct may have precipitated the litigation: cf Sunday Times Newspaper Co Ltd v McIntosh (1993) 33 SR (NSW) 371. (5) Where the proceedings terminate after interlocutory relief has been granted, the Court may take into account the fact that interlocutory relief has been granted: cf Re Asiatic Electric Co Pty Ltd [1973] 1 NSWLR 603 at 605, a case, however, which depended on the specific wording of the statute under consideration." 52In One Tel Ltd v Deputy Commissioner of Taxation , Burchett J commented on Australian Securities Commission v Aust-Home Investments Ltd , saying at [6]: "In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion, otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs." 53This passage was cited, with approval, by the Full Federal Court in Chapman v Luminis Pty Ltd [2003] FCAFC 162, at [7] and by Davies AJA (with whom Mason P and Meagher JA agreed) in Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 at [5]. His Honour prefaced his reference to the relevant passage stating: "When proceedings are brought to an end without a determination after a trial, the judge may find it difficult, even impossible, to make an award of costs. If the judge does make an award, it will generally be because the judge is satisfied that one party has had a substantial victory and the other a substantial loss, or that there has been a marked difference in the reasonableness of the actions taken by the parties, so that one party should be rewarded for its reasonable actions and the other party should suffer a detriment in costs. ..." 54In Boscaini Investments Pty Ltd v Corporation of the City of Kensington and Norwood (1999) SASC 327 , Debelle J, said, of the third of Hill J's propositions, at [22]: "I immediately acknowledge the assistance of Hill J but suggest that proposition (3) is of limited assistance. The fact that a party has not conducted himself reasonably may disentitle him to costs. But, beyond that, the reasonableness of the conduct of the parties is not likely to assist in determining whether the applicant should recover his costs. The real question is whether the applicant had reasonable prospects of success. It seems preferable, therefore, to express proposition (3) in different terms. Depending on circumstances, where the applicant had acted reasonably in commencing proceedings, has an arguable case, and it is reasonable to conclude that that respondent has acted in consequence of the commencement of proceedings, the court may be prepared to make an order as to costs in favour of the applicant." The Submissions and Consideration 55It is not necessary to encumber these reasons with all of the comprehensive submissions made on behalf of the parties. The thrust of the submissions, on each side, went to conduct in bringing, and defending, the proceedings, the reasonableness, or otherwise, of the party's conduct in articulating and negotiating their dispute, and in the settlement of them and otherwise in the course of the proceedings. 56As will be seen, in my view neither party's submission should be wholly accepted. 57In broad summary, the Plaintiff claims costs on the basis that she is the successful party in the litigation. She submits that she effectively achieved the relief sought in the action as demonstrated by comparing the undertakings given by the Defendants with the relief sought in the Summons. The orders sought against the first Defendant in paragraphs 5 and 6 of the Summons are covered by the undertakings in paragraph 1(a) of the orders and the order sought against the second Defendant in paragraph 7 of the Summons is covered by the undertaking in paragraph 1(b) of the orders. 58That this is not a completely unreasonable submission is demonstrated by the terms of the Defendants' solicitor's letter dated 17 August 2011 addressed to the Plaintiff's solicitors, which I have quoted above. 59The Plaintiff also submits that there was no compromise by her and the Defendants' undertakings were not proffered to the Court as part of a commercial compromise in exchange for cash, or other benefits, provided by the Plaintiff, apart from her agreement not to pursue the litigation any further. This submission appears to be correct. 60However, this does not mean that in resolving the matter, the Defendants completely capitulated or surrendered. As pointed out, they continued to maintain, even in proffering the undertakings, that the Plaintiff was not entitled to the relief that she sought because she was not the owner of the sewer pipe. 61I accept that the giving of the undertakings, especially without admission, did not amount to a surrender or capitulation. The Defendants did not, after all, consent to any of the declarations sought by the Plaintiff, to which declarations they continued to maintain, she was not entitled. 62I also accept the Defendants' submission that the Plaintiff did not achieve all of what she sought to achieve in the litigation. She abandoned the claim for a declaration of ownership of the sewer pipe in the Summons. She also abandoned the other claims for declarations. 63Further, the effect of the agreement ultimately reached appears to have been that the new sewer pipe in stage 1b would not connect to the original sewer pipe, but that the owners of Lots 1 to 7, or most of them, would still be able to use the original sewer pipe. This was contrary to the Plaintiff's assertions of ownership of the sewer pipe and her assertion that nobody else was entitled to use it. 64These matters also mean that the Plaintiff's submission that in all the circumstances it was unreasonable for the Defendants to have defended the proceedings should not be accepted. Each party could not convince the other that the result that was being contended for was the correct one. Even on the hearing of the costs application, they were not able to agree on who would have, ultimately, succeeded had the proceedings not resolved. Each maintained that her, or their, position was legally correct. Neither party had sought summary judgment in, or summary dismissal of, the proceedings. This suggests that the other party's position was not unarguable. 65I am unable to offer any prognosis confirming that the Plaintiff almost certainly would have succeeded had the proceeding been determined. To reach a concluded view, I would have to engage in a hypothetical trial. This is not appropriate in circumstances where the court was not required to determine, as part of the principal relief, what was described by the Plaintiff's counsel as "vexed questions". In the circumstances, the Plaintiff is not entitled to the costs of the proceedings on the basis of the first ground relied upon. 66Apart from one matter, in respect of the conduct of each side, I am of the view that the parties did not act unreasonably. It was not suggested that the Plaintiff acted unreasonably in commencing the proceedings (although it was suggested that she would be unsuccessful). I am satisfied that she did not act unreasonably in commencing the proceedings. They were, after all, the catalyst for bringing the parties to a resolution, which had not been achieved prior thereto. 67Between the commencement of the proceedings and 1 June 2011, the Defendants made it clear that settlement could not be considered until the Plaintiff pleaded her case and served upon them the evidence upon which she intended to rely. Apart from being a few days late in the filing and service of the Statement of Claim, the Plaintiff complied with all of the directions made by the Court. The conduct of the Defendants in defending the proceedings led, inevitably, to the incurring of costs by the Plaintiff to comply with the directions that were made. 68The same cannot be said for the Defendants, who did not comply with any of the directions made by the Court. It was only by the letter of 1 June 2011, that they provided any real indication that they were prepared to consider an alternative to litigation. Until then, their solicitors had steadfastly maintained that the Defendants had not provided to them any instructions for settlement of the proceedings. The Plaintiff was put to trouble and expense in continuing the proceedings whilst the Defendants were not. 69The alternative method of solving the dispute should have been considered by the Defendants more quickly, and/or whilst that was being done, the Plaintiff should have been informed that alternatives were being considered, and that whilst they were being considered, the Plaintiff should not incur the costs of obtaining expert evidence and pleading her case. 70Additional costs may have been avoided had the Plaintiff been put in a position to make an assessment of the strength of the Defendants' defence and factual contentions being advanced within a reasonable time after the commencement of the proceedings and after the service of the Plaintiff's supporting affidavits. 71In my view, the conduct of the Defendants between 24 December 2010 and 1 June 2011 was unreasonable in failing to comply with the directions, whilst, at the same time, charting a course that would require the Plaintiff to incur costs and expense. The Defendants should pay the Plaintiff's costs of the proceedings during that period. 72Even if I am wrong on expressing that view, it may be that there is another way of looking at the matter. The Plaintiff had acted reasonably in commencing proceedings, there was no application to dismiss the proceedings summarily (which leads to the view that she had what appeared to be an arguable case), and it is reasonable to conclude that in making their offer, the Defendants acted in consequence of the commencement and perpetuation of the proceedings. On this basis also, the Plaintiff should have her costs for that period. 73However, after receipt of the letter dated 1 June 2011, the Plaintiff should have adopted a more sensible, reasonable, and commercial approach to the conduct of the negotiations and further costs should have been avoided by making every effort to exhaust the option of settlement. 74Yet, the tenor of the correspondence from the Plaintiff's solicitors appears to have been to require complete surrender, or capitulation, on the Defendants' part. That was unnecessary as what was being proposed was, as stated, being put forward on the basis of commercial and other considerations. In the resolution of the proceedings on the basis of compromise, there should have been some element of compromise on the part of the Plaintiff. 75To the extent that the complaint about the terms of the offer was that it was not clear as to when the work was to be done, again, a sensible and practical approach should have been followed. It is important, in negotiations for resolution, as it is in the conduct of litigation generally, that matters of clarification or interpretation should be discussed by the legal representatives and offers not refused upon the basis that the terms of the offer are not as clear as they ought to be. 76In this regard, I am of the view that it is the responsibility of the parties, through their legal representatives, to exercise a degree of co-operation in the conduct of settlement negotiations and in this regard there should be clarity, precision and openness. 77The Plaintiff's solicitors did respond by stating what the Plaintiff's complaints were, but that was in the context of the Plaintiff "being committed to proceeding to a hearing of these proceedings". That was hardly the flavour of attempting to find a practical, commercial or reasonable solution to the proceedings. 78In my view, the Plaintiff should not receive her costs after 8 June 2011. I have allowed a short time after the date of the letter of 1 June 2011 to enable the Plaintiff to have been advised and to enable discussions between the parties to have taken place before further costs and expenses of directions were incurred. 79Each party has obtained limited success on the application for costs. In the circumstances, I do not propose to make any order for the costs of the hearing of the costs application. 80I order the Defendants to pay the Plaintiff's costs between 24 December 2010 and 8 June 2011, such costs to be calculated on the ordinary basis. I make no order for costs for the period thereafter, including the costs of the hearing of the costs application, with the intent that each party shall pay her, or its, own costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 01 December 2011