Parties Dispute Basis of Indemnification

Anderson & Anor v City of Stonnington & Anor [2022] VSC 216 (3 May 2022)

The plaintiffs applied for orders that the defendants indemnify them in relation to the costs they have been ordered to pay to the first defendant.  The defendant denies such liability.  The Court, in resolving this dispute, considered whether representations by the second defendant induced the plaintiffs to commence proceedings and join it as a defendant.

Facts:

On or about 27 November 2013, the Andersons caused a fence to be erected at the western end (Lovers Walk end) of the laneway (the ‘first fence’). On or about 19 December 2013, the Council removed the first fence.  On or about 29 August 2014, the Andersons constructed another fence to be erected at the western end of the laneway (the ‘second fence’).  On 18 September 2014, the Andersons commenced this proceeding and made an application for an injunction to restrain the Council from removing the second fence.  

The Council was named as the defendant in the proceeding.  On 29 September 2014, Dixon J made the following orders:

1. The application by summons filed 18 September 2014 is dismissed; 
2. The plaintiff pay the defendant’s costs of the application;
3. The originating motion filed 18 September 2014 stands as a writ;
4. The plaintiff file and serve a statement of claim by 29 October 2014.  On or about 1 October 2014, the Andersons remove the second fence.  

On 26 November 2014, the Andersons filed a statement of claim.  On the same date, the Andersons filed a summons seeking to join VicTrack as a party to the proceeding.  On 9 February 2015, consent orders were made joining VicTrack as second defendant to the proceeding.  On 17 February 2015, the Andersons filed an amended statement of claim (the ‘ASOC’) naming VicTrack as the second defendant.  

The Andersons sought declaratory relief as to the proper legal characterisation of the land subject to the easement created by Easement number 1935707 (the ‘easement land’), being part of the land described in Certificate of Title Volume 9990 Folio 084 (the ‘laneway’).  

The Andersons made a tortious claim of nuisance against VicTrack and claimed damages on that basis.  The Andersons also claimed loss and damage as a result of VicTrack’s alleged negligence.  On 21 March 2016, after the trial before McMillan J and before determination, Mr Anderson was repeatedly stabbed by an intruder at the rear of the Andersons’ property, and he sustained life-threatening injuries.

Mrs Anderson deposes that she instructed a builder to erect a fence (the ‘third fence’) blocking off the easement land at Lovers Walk to ensure their safety.  By summons filed on 26 July 2016, the Council sought orders for the removal of the fence and other orders for the disposal of the proceeding.  On 27 September 2016, McMillan J held that the Andersons must, at their own expense, remove the fence erected on or around 21 March 2016 and make good any damage to the laneway caused by the erection or the removal of the fence and that the costs of the Council’s summons filed on 26 July 2016 were to be costs in the proceeding.

Issues:

I. Whether or not there is any exceptional circumstance to warrant a departure from the usual order for costs.

II. Whether or not representations by the second defendant induced the plaintiffs to commence proceedings and join it as a defendant.

III. Whether or not the plaintiffs should pay the second defendant’s costs of application for summary judgment on an indemnity basis.

Applicable law:

Verna Trading Pty Ltd v New India Assurance Co Ltd [1991] VicRp 12; (1991) 1 VR 129 - where Beach J held that because the cassettes were not ‘in transit’ at the time they were stolen, having arrived in Melbourne and been placed into a warehouse, the insurance policy no longer applied.

Murray v Kingston City Council (No 2) [2004] VSCA 249; (2004) 9 VR 261 - concerned a dispute between the plaintiff ratepayer and defendant council regarding the valuation of the plaintiff’s property. 

Konstandellos v Harplex [2017] VSC 183 -  concerned, amongst other things, a dispute about the enforceability of a judgment debt and whether a settlement agreement could be enforced.

Konstandellos v Harplex Pty Ltd (No 2) [2018] VSC 702 - where the plaintiffs submitted they ought be excused from paying the second defendant’s costs and that the second defendant should, in effect, indemnify the plaintiffs from their liability to pay the first defendant’s costs. 

Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2) [2011] VSCA 398 - provides that where an offer does not involve a genuine compromise, but is an offer to capitulate or is derisory, it is not unreasonable for the plaintiff to reject. 

Charan v Nationwide News Pty Ltd [2019] VSCA 36 - provides that offersto capitulate are not truly offers of compromise at all because they are not genuine, rather, they are a trigger for costs, not a negotiated settlement.

Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435 - relied upon in outlining the applicable matters to which regard should be given in deciding whether a rejection of the Calderbank offer was unreasonable.

Analysis:

The Andersons have failed to establish a nexus between the proven representations made by VicTrack and their decision to issue proceedings and join VicTrack.  Further, any misapprehension as to VicTrack’s position must have been cured by the time it filed its defence, if not beforehand, by the VicTrack 10 Nov 14 letter.  There were no good reasons or special circumstances to deprive the second defendant of their entitlement to costs and, consequently, no basis to make an order that the second defendant pay the first defendant’s costs of the proceeding. The Andersons were legally represented long before the proceedings were issued. 

Accordingly, the Court cannot conclude they relied on the alleged representations when deciding to commence and continue the proceeding.  It cannot be suggested that the impact of VicTrack’s pleading was not properly explained to them.  There is no evidence produced of any representations made after the defence was filed or reliance on anything said or done after that.  There is no basis for ordering VicTrack indemnify the Andersons for any costs incurred by them prior to VicTrack being joined to the proceeding, given they were aware VicTrack opposed the fence at the end of the laneway and supported the Council prior to seeking an injunction.

Even if VicTrack had not taken that position, it cannot be assumed that the outcome of the litigation would have been different, particularly given the long user agreed fact.  Accordingly, even if the Court is satisfied the alleged representations were made by VicTrack and relied upon by the Andersons, there is no basis for ordering VicTrack pay their costs on an indemnity basis.  There is no basis to depart from the usual order that costs should follow the event.

Conclusion:

The plaintiffs’ application for costs is disallowed.  The Second defendant’s applications for costs on an indemnity basis is allowed.