Jukes v Larter [2013] NSWSC 103 | Case summary

Interlocutory proceedings 7The Jukes then approached this Court. On 25 March 2012, Hislop J granted an ex parte injunction restraining the Larters from any further excavation until 5 pm on 26 March 2012. This injunction was continued by undertakings given on 26 March 2012, 3 April 2012 and 10 April 2012 and a further injunction was made on 11 April 2012. 8On 28 March 2012, the Jukes filed a summons seeking the following relief: (1) An order that the Larters whether by themselves, their servants or agents be restrained from undertaking any excavation whether by jackhammer or otherwise on the property at XX XXXX XXXX, Rathmines until further orders of the Court. (2) An order that the Jukes have leave pursuant to Part 23 of the Uniform Civil Procedure Rules through their engineers and surveyor to attend upon XX XXXX XXXX, Rathmines to inspect, survey and take non-destructive samples of the soil and rock. 9The final relief sought was as follows: (3) An order that the Larters not do anything on or in relation to their land at XX XXXX XXXX, Rathmines that removes the support provided by that land to the land and buildings of the Jukes at XX XXXX XXXX, Rathmines. (4) An order that the Larters take such steps as are necessary, in light of the excavation done on their land at XX XXXX XXXX, Rathmines, to protect and preserve the Jukes' land and buildings at XX XXXX XXXX, Rathmines from damage including if necessary underpinning and supporting the Jukes' land and buildings in such manner as may be approved. 10Prior to the hearing, before Beech-Jones J, a number of experts' reports in relation to the works had been obtained by both parties and these were tendered to the Court. His Honour, at [15] of his judgment in Jukes v Larter [2012] NSWSC 369, set out the salient parts of the reports as follows: "In their report dated 3 April 2012 Douglas Partners stated, inter alia, under the heading 'Comments': 'Likelihood of affect on number 20 if excavation proceeds to its anticipated conclusion? ... The excavation for the heel of the retaining wall footing needs to be completed to allow retaining wall construction to proceed; For the sake of caution and in order to manage the risks associated with unsupported excavation, excavation further to the east should not proceed until the existing excavation is supported by the retaining wall; Reduction in unsupported length of excavation and construction in stages is a recognised method of managing risk of instability in excavations.' (emphasis added) 16 On the next page under the same heading, the authors proceed to state: 'The footing of No 10, shown on Fig 3, would transfer its load directly to the rock beneath it (through the 01 m thickness of clay, as described in the log of Pit 2 of the report by Valley Civilab). The underside of the footing lies outside the zone of influence, as defined by the two batter slopes shown in Fig 3, attached as Annexure 1, and the risk of effect from the existing excavation is minimal. The footing, therefore is not affected by the "maximum batter" shown on Fig 3. These comments notwithstanding, the excavation face is vertical and there is some risk of instability associated with a vertical unsupported face. The risk can be reduced by minimising the time that the excavation is left unsupported and carefully monitoring the excavation until the support measures have been completed. Assumptions, Reasoning and Conclusions expressed by Mr Burke? Mr Burke states that "... there is a clear and present danger, growing hour by hour ..." (of removal of support to the land at No 10 by the excavation at No 8). In his affidavit and report, Mr Burke presents no technical basis for this conclusion. Having regard to Mr Burke's assessment, we are not able to assess the growth rate of the risk but we agree with the opinion that the risk of instability increases with time. It is our opinion that the retaining wall should be constructed as a matter of priority to provide support for the excavation.' 17 The report continues on p 8, again under the heading 'Comments' to state as follows: 'We consider the risk to No 10, due to the existing unsupported excavation at No 8, is low but is increased by the delay in completion of the retaining wall. The excavation over about 4 m to 5 m length is at the maximum proposed depth, except for the 200 mm deep heel for the retaining wall footing. We recommend that the retaining wall should be completed as a matter of priority to provide support for the excavation. Similarly, the permanent drainage measures should be completed as a high priority as part of the excavation support works. We recommend that the excavation and retaining wall construction at No 8 should be subject to weekly inspection by the engineer, P M Engineering Services Pty Ltd, who should record the progress of the works by means of notes and photographs, view the exposed soil and rock and, if appropriate, request Douglas Partners to inspect the site to check stability of the excavation and risks to structures at No 10. 18 In his report of 4 April 2012 Mr Burke stated, inter alia, in relation to the Douglas Partners' report: 'Burke Engineering Services agree with the recommendations described in section 6 of their report titled "Comments". In particular we highlight Douglas Partners recommendation that "the retaining wall should be completed as a matter of priority to provide support to the evacuation. Further we recommend that P M Engineers be requested to provide structural certification that the existing and future construction works are structurally adequate to support & resist the imposed loads including any loads from No 10.' 19 In their report dated 4 April 2012 P M Engineering stated, inter alia: '10. I note the recommendations of the Douglas Partners Report No. 49450.01 relating to inspections and staging of works. I have no objection to the works being carried out in two stages of approximately 4m and 3m lengths of excavation and retaining (as a risk minimisation strategy). I note, however, that if the entire works were carried out promptly, in one continuous operation with regular inspection of the works (including monitoring of the condition of the excavation embankment), the majority of risk would relate to structures above the maximum batter line such as pathways and the boundary fence. The number and spacing of inspections and any staging of the works can be determined once a scope of works, procedures, and program have been agreed to and confirmed by the owners of XX XXXX XXXX.'" 11Counsel for the Jukes submitted that these experts' reports were capable of demonstrating there was presently an appreciable risk to the Jukes' home from the exposed excavation, that any further excavation would exacerbate the existing risk and that the Larters were aware of these matters, as they had referred to in their own experts' reports. His Honour agreed with those submissions. 12Beech-Jones J applied the test for the grant of interlocutory relief. The test was considered in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199. At [13] Gleeson CJ quoted from the well know passage from Mason ACJ in Castlemaine Tooheys Ltd v South Australia [1986] HCA 1; (1986) 161 CLR 148 at 153: "In order to secure such an injunction the plaintiff must show: (1) that there is a serious question to be tried or that the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief; (2) that he will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and (3) that the balance of convenience favours the granting of an injunction." 13His Honour discussed the form of the injunctive relief that the Jukes might seek: "28 In this matter, the final form of injunctive relief that Mr and Mrs Jukes may seek is quia timet relief under s 66(2) of the Supreme Court Act 1970 to restrain a threatened or apprehended breach of the duty of care owed by Mr and Mrs Larter. The existence of such a duty of care is either assumed or created by s 177 of the Conveyancing Act 1919... 29 This provision was discussed in detail by Macready AsJ in Piling v Prynew [2008] NSWSC 118. At [55], his Honour construed the phrase 'support for land' in s 177(1) as extending to "support for the land and the buildings erected upon it", which in this case would be Mr and Mrs Jukes' home." 14Section 177 of the Conveyancing Act 1919 relevantly reads: "177 Duty of care in relation to support for land (1) For the purposes of the common law of negligence, a duty of care exists in relation to the right of support for land. (2) Accordingly, a person has a duty of care not to do anything on or in relation to land (the supporting land) that removes the support provided by the supporting land to any other land (the supported land). (3) For the purposes of this section, supporting land includes the natural surface of the land, the subsoil of the land, any water beneath the land, and any part of the land that has been reclaimed. (4) The duty of care in relation to support for land does not extend to any support that is provided by a building or structure on the supporting land except to the extent that the supporting building or structure concerned has replaced the support that the supporting land in its natural or reclaimed state formerly provided to the supported land. (5) The duty of care in relation to support for land may be excluded or modified by express agreement between a person on whom the duty lies and a person to whom the duty is owed. (6) Any such agreement: (a) has effect in relation to any agent of the person on whom the duty lies, and (b) has effect in relation to any successor in title of the supported land if the agreement is embodied in a registered easement for removal of support relating to that land. (7) The right to agree to the removal of the support provided by supporting land to supported land is a right of the kind that is capable of being created by an easement. (8) Any right at common law to bring an action in nuisance in respect of the removal of the support provided by supporting land to supported land is abolished by this section. ..." 15Beech-Jones J held at [30] that there was a prima facie case in the sense discussed in Castlemaine Tooheys v South Australia for final quia timet relief restraining any further excavation to the east of the existing excavation. In relation to the risk of damage, his Honour said at [32]: "In this case, the irreparable injury is the increased risk flowing from the further excavation to the east of the existing excavation. The balance of convenience strongly favours Mr and Mrs Jukes. The risk of damage to the footings of their home is a worry that they should not have to bear. Against that, the form of order that I am contemplating will enable Mr and Mrs Larter to either elect to do nothing or continue with the work on their home by modifying their approach to the remaining work." 16His Honour stated that in the light of the relief as formulated, it was unnecessary for him to decide whether there was a prima facie case for final relief in the form of a mandatory injunction requiring the building of a retaining wall for the, at that stage, exposed excavation. 17On 11 April 2012, Beech-Jones J handed down judgment in relation to the relief claimed in the summons and made the following orders: "(1) Upon the Plaintiffs giving the usual undertaking as to damages and subject to order 2, the Defendants by themselves or agents are restrained from undertaking any excavation, whether by jackhammer or otherwise on the property at XX XXXX XXXX, Rathmines until further order save and except that the Defendants may undertake such excavation as certified by P. M. Engineering Pty Ltd ('P. M. Engineering') as is reasonably necessary to construct a retaining wall on that part of the excavation on the southern boundary of XX XXXX XXXX, Rathmines which as at 11 April 2012 is exposed; (2) In the event that the Defendants construct a retaining wall on that part of the excavation on the southern boundary of XX XXXX XXXX, Rathmines which as at 11 April 2012 is exposed then order 1 shall dissolve after the expiry of 7 days from the Defendants providing the Plaintiffs with certification by P. M. Engineering of its construction to a standard P. M. Engineering consider satisfactory." 18Costs were reserved. 19On 3 July 2012, Mr Burke of P M Engineering certified that the retaining wall had been constructed on that part of the excavation on the southern boundary of the property, which, as at 11 April 2012, was exposed; and the construction of the wall was to a standard that P M Engineering considered satisfactory. 20On 13 August 2012, the certification was served on the Jukes' solicitors. Orders 1 and 2 were effectively dissolved as at this date.

(1) Dismissal of the summons and costs 22On 5 September 2012, the Jukes' solicitor wrote to the Larters' solicitor informing them that the Jukes would not plead their case and would not seek any final relief except costs. 23It is common ground that summons should be dismissed. The Jukes seek their costs of the proceedings on an indemnity basis. The Larters submitted that before the summons is dismissed this Court should make a finding that there was no evidence that the Larters had been negligent and on that basis they are entitled to the costs of these proceedings on an ordinary basis. 24It is also common ground that the Larters owed the Jukes a duty of care to not interfere with the support for the Jukes' land as provided in s 177(2) of the Conveyancing Act 1919. The right to bring an action in nuisance for the removal of the support provided to supported land was abolished by s 177(8) and replaced by a right to bring a claim in negligence. The standard of care imposed by s 177 of the Conveyancing Act is "one to take reasonable care": Lym International Pty Ltd v Marcolongo [2011] NSWCA 303 at [198]. In those circumstances, the Jukes submitted that they were entitled to seek injunctive relief to effectively require the Larters to exercise the duty of care owed to them. 25Counsel for the Jukes submitted that the need for the injunction itself was brought about by the action of the Larters, and the injunction was granted by his Honour because of the agreement of the experts, two of which were from the Larters' side and one from the Jukes, that in order to minimise the risk to the Jukes, no further excavation should take place until the construction of the retaining wall. Once that was built, the Larters were free to do further excavation. 26The Larters submitted that the Jukes do not have a cause of action in relation to the right of support for land unless the Larters failed to take reasonable care in relation to that support. 27Had the matter proceeded to hearing, I accept that the Jukes would have had the onus to prove: (a) That the excavations being undertaken by the Larters had, or would have, on the balance of probabilities, removed the relevant support; (b) That it is "reasonably certain that what the defendant is threatening and intending to do will cause imminent and substantial damage to the plaintiff": Bendigo & Country Districts Trustees & Executors Co Ltd v Sandhurst & Northern District Trustees (1909) 9 CLR 474 at 485; or that there "is [or was] a substantial imminence of irreparable damage": R v MacFarlane; Ex parte O'Flanagan and O'Reilly (1923) 32 CLR 518 at 550-1. (c) That damages are an insufficient remedy; (d) That the Larters had not taken "such ... steps as are [reasonably] necessary ... to protect and preserve the Plaintiff's land and buildings". 28But the reality is that this did not need to occur as the matter resolved prior to a full hearing being necessary. 29It is difficult if not impossible to say what would have happened had Mr Larter continued with excavation without the construction of a retaining wall. It is a hypothetical situation. However, what is clear from the evidence is that Mr Larter had a trenchant view that he did not need to build a retaining wall before further deeper excavation took place. His view did not accord with that of the experts (including his own expert). The stance taken by Mr Larter is illustrated by the chain of correspondence between the parties and a passage of evidence he gave to this Court. I shall briefly refer to both. 30The chain of correspondence between the solicitors begins with a letter from the Jukes' solicitor to the Larters on 8 March 2012 and ends with letters on 5 April 2012. 31By letter dated 8 March 2012, the Jukes requested the Larters give a written undertaking to cease excavations until the impact was determined in accordance with recommendations of the Burke Engineering report of 5 March 2012. An undertaking was given by the Larters through their solicitors that they would do no further excavation work until 5.00 pm on 22 March 2012 unless the Larters considered such excavation was necessary to prevent damage to their property or any other damage for which the Larters might be liable at law. 32On 21 March 2012, the Jukes' solicitor sent a further letter stating that they required the Larters to undertake not to do any further excavation other than that identified by a qualified Geotechnical engineer as necessary to prevent any damage either to the Jukes' property or the Larters' and that the Larters should arrange for the impact and affect of the existing excavations be determined in accordance with the recommendations in the Burke Engineering Report of 5 March 2012. The Larters should then complete any stabilisation or rectification work that was identified. 33On 22 March 2012, the Larters' solicitor informed the Jukes' solicitor that as the Jukes had not adduced any evidence as to any damage suffered, and as it appeared the Jukes could not establish a prima facie case, they were not entitled to the benefit of an injunction restraining the Larters from continuing with the works and on that basis, the work would recommence on 23 March 2012. But this is not to point. The Jukes were concerned that further excavation would cause damage. They were trying to prevent that happening. This meant that in order to secure their property the Jukes had to take legal action to stop Mr Larter carrying out further excavation. 34On 23 March 2012, Hislop J granted an ex parte injunction. 35In correspondence from the Jukes' solicitor dated 5 April 2012, the Jukes referred to the reports of Douglas Partners of 3 April 2012, Burke Engineering Services dated 4 April 2012 and P M Engineering Services dated 4 April 2012. The letter contained the following: "As we have indicated in the past, our clients do not object to your clients taking whatever steps are necessary to construct the retaining wall recommended by Douglas Partners. What they do seek to restrain is any further excavation before the retaining wall is constructed, as recommended by Douglas Partners... Accordingly, we suggest that when the matter comes before the Court on Tuesday, either: 1. Your clients continue their undertaking; or 2. An order be made in similar terms, except that there be provision in the order or undertaking that your clients be at liberty to excavate as is necessary, in order to construct the retaining wall and that the order or undertaking continues up to a date by which your clients are satisfied that they will have completed construction of the retaining wall before further excavation occurs. We suggest that the matter be given liberty to apply so that if your clients complete construction of the retaining wall before that date, they are able to bring the matter back before the Court to have either the injunction dissolved or that your clients be released from their undertaking. Further, we suggest that there be included in the orders provision for periodic inspection by both PM Engineering and Burke Engineering Services by arrangement between the engineers." 36In their response, also on 5 April 2012, the letter from the Larters' solicitor contained the following: "1. Our clients will give your clients an undertaking that they will not conduct any further excavation works until the partially completed retaining wall... has been constructed along the presently exposed face of the excavation except such excavation works as is or may become necessary to facilitate the construction of that retaining wall; 2. Our clients will permit access to their property to PM Engineering Services for the purpose of conducting inspections, such inspections to be: a. conducted on reasonable notice (being not less than 48 hours unless our clients otherwise consent); b. arranged by your clients; and c. paid for by your clients; and 3. Your clients will give our clients the usual undertakings as to damages." 37The Jukes' solicitor then responded, again on 5 April 2012, with the following: "1. any undertaking by your clients must be to the Court; 2. the undertaking or order must contain a time constraint, subject to weather delays, for construction of the retaining wall. All the experts agree that this must be done quickly and our advice today from John Burke of Burke Engineering is that the construction should take place within one to two weeks; 3. our clients will pay for periodic inspections by Burke Engineering Services but your clients must be responsible for the cost of periodic inspections by PM Engineering." 38The matter then came before Beech-Jones J on 10 April 2012. In the final orders formulated by his Honour, any excavation work necessary to construct the retaining wall for the currently exposed excavation was to be certified by P M Engineering. The original relief sought by the Jukes was to allow Mr Burke to make inspections, from time to time, of the continuation of the retaining wall. The Larters' counsel submitted the point of contention between the parties was who was to be the supervisor and that this issue would have had to be argued before the Court in any case. However, it appears that up until the hearing commenced Mr Larter was unwilling to give an undertaking to the Court that he would not cease the excavation. It was submitted by the Larters that his Honour expressly rejected the part of the application concerning the supervisor. 39At [36], his Honour said: "...I consider that an order allowing the open ended entry by a stranger onto private property too draconian to allow. I add that Mr and Mrs Larter would be best advised to consider allowing such an inspection in order to minimise the scope for further litigation. However, I will not make such an order at this stage." 40I agree that his Honour rejected the notion of open-ended inspections. His Honour's orders included inspections by P M Engineering only, not P M Engineering and Burke Engineering Services. His orders were fashioned such that once the exposed excavation was supported by a retaining wall, the Larters could continue with the remaining excavation. This variation, in relation to the inspection of the works, was not matter that went to the crux of the relief granted, that the Larter were restrained by the Court to undertake further excavation work until the retaining wall was built. 41The orders and injunction made by Beech-Jones J had the effect that the Larters discontinued further excavation until engineers had assessed the works. The Larters complied with the orders, which led to the injunction being dissolved, and no further orders being necessary. 42Under cross-examination before me, the defendant Mr Larter gave the following evidence: "Q. Yes. Your position before BeechJones was that you wanted to complete the excavation before you put up the retaining wall? A. Correct. Q. And that was the position, notwithstanding that in a report of 3 April 2012 Douglas Partners had expressed the opinion that excavation further to the east should not proceed until the existing excavation is supported by the retaining wall; that is right, isn't it? A. I will say yes. With reservations. Q. Do not let me talk you into anything if the answer is no? A. The answer is not no because there is explanations for not doing it that way. Q. It was the position, was it not, that you also read in the Douglas partners report of 3 April 2012 that Douglas Partners were of the opinion that reduction in unsupported lengths of excavation and construction in stages is a recognised method of managing risk of instability in excavations? A. That's correct. Q. See the state of your knowledge was twofold. 1, that Douglas Partners were of the opinion that no further excavation should take place until a retaining wall was constructed? LOVAS: Objection, not what they say. Could you read the whole sentence? LAUGHTON: That is exactly what it says, on page 6. HER HONOUR: Are you reading: "For the sake of caution and in order to manage the risks associated with unsupported excavation, excavation further to the east should not proceed until the existing excavation is supported by the retaining wall". LAUGHTON Q. The proposition I was putting was the opinion of Douglas Partners was that excavation further to the east should not proceed until the further retaining wall is constructed. That is a fair interpretation of what has been said? A. It may be an interpretation but it also increases the time difference dramatically. And it is all about time. Q. It was all about the time as far as you were concerned? A. No, not as far as I was concerned. That wall could have been built in half the time had I been able to pull out the full the line of wall, and dig up the full length of the wall and pour the footings in 1 piece, which makes a stronger job and build one corner instead of two corners." 43Mr Larter gave the following evidence in relation to his attitude to building the retaining wall before he had finished all the excavation: "Q. I will ask the question again. Before BeechJones J, you proposed, notwithstanding what Douglas Partners said on p 6 that you complete the excavation before you construct, the retaining wall; that is right isn't it? A. That's right. Q. And that was in the face of the opinion expressed by Douglas Partners on 3 April 2012 that for the sake of caution, in other words to manage the risk associated with unsupported excavation, excavation further to the east should not proceed until the existing excavation is supported by the retaining wall? A. But they also say that is minimal risk as does my engineer. Q. I accept that but a risk is a risk whether a big or a little one? A. In this case it was a little one. Q. In circumstances where there was a risk identified by Douglas Partners? A. There is a risk to everything. Q. But, just one final question: That was a risk that you were asking the Jukes to run. You were not running the risk? A. I was. My property is involved in this as well. Q. You were asking the Jukes to run your risk, whereas your experts were telling you that in order to manage the risk, you should put up a retaining wall of the existing exposed excavation? A. That is what is written in the report yes. Q. You didn't accept it? OBJECTION; PRESSED. ALLOWED Q. And you didn't accept it? A. No." 44It was submitted by the Jukes' counsel that while Mr Larter was prepared to give an undertaking to the Jukes, he wasn't prepared to give one to the Court and the impression that could be taken from his evidence was that he wasn't going to comply with any undertaking in any case, as he believed it was quicker to complete the excavation first and then build the entire retaining wall. Once gain, the Larters submitted that the Jukes did not adduce evidence that the way in which the excavation was being conducted was a breach of duty of reasonable care. The Larters say that while a more cautious approach was recommended by the experts this did not mean that if they were to complete the excavation and then build the entire retaining wall, was negligent or a breach of duty of care. 45It was further submitted by the Larters, that Mr Larter did not draw a distinction between making an undertaking to the Jukes and making an undertaking to the Court. On this topic I do not agree. Mr Larter, by the time the hearing was to commence, would have received legal advice on this topic. 46So far as the point of difference being the supervision of Mr Burke, I do not agree. The undertaking given by both parties to the Court on 26 March 2012 was to permit a joint inspection between the Jukes' expert, John Burke of Burke Engineering Services, and one or both of the Larters' experts, P M Engineering Services and Douglas Partners. 47Douglas Partners were unavailable within the required timeframe for the inspection. Douglas Partners then recommended Coffey Geotechnics. The defendant refused to allow Coffey Geotechnics to do the inspection. The site inspection by Mr Burke and P M Engineering took place on Monday, 2 April 2012. 48It was submitted by the Larters' counsel that the suggestion by the Jukes to engage Coffey Geotechnics, as Mr Harvey from Douglas Partners was unavailable, was a breach of an agreement, that agreement being that each party would have their own experts present. It was submitted that using Coffey Geotechnics would mean that the Jukes had two experts present. However, this seems to ignore the fact that Coffey Geotechnics had been recommended by the Larters' own expert, Douglas Partners, as Douglas Partners were not available. 49Having heard the evidence of Mr Larter referred to earlier in this judgment, it is my view that it was most likely that Mr Larter would have completed all the excavations before building the retaining wall unless he was restrained by the Court. While all experts opined that there was risk in proceeding with further excavation without building the retaining wall, they disagreed on the magnitude of the risk but they agreed that the risk of instability increased with time. Mr Larter did not and still does not accept that these expert's opinions were correct. In my view, in these circumstances, it was reasonable for the Jukes to bring the application for an injunction before the Court. Had he agreed to build the retaining wall as requested by the Jukes, it would not have been necessary for the Jukes to approach this Court seeking an urgent injunction. It was reasonable and necessary for the Jukes to obtain the injunction and to fully argue whether or not the injunction should continue before Beech-Jones J. Mr Larter held and still holds a strong view that to build the retaining wall before further excavation work was carried out was unnecessary. Had he not been ordered to stop work by the Court, it is unlikely he would have done so. 50In so far as the Larters assert that the Jukes could not have proved negligence, the reality is that it is not possible to say what would have occurred had the injunction and orders not been granted and the dispute was then resolved. It became a hypothetical situation. It was the manner in which the injunction and orders were fashioned that obviated the need for further relief and averted any damage arising from further excavation. 51In Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Quin [1997] HCA 6; (1998) 186 CLR 622, McHugh J commented at 624 on the difficulties of allocating costs where there has been no hearing on the merits: "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 extracurial 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. ...But such cases are likely to be rare. 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." (citations omitted) 52As stated by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qui, the Court cannot try a hypothetical action. 53Counsel for the Jukes submitted that they seek their costs of the proceedings on an indemnity basis as it was open to the defendant to give an undertaking to the Court, before the proceedings were heard by his Honour, that the defendant would do no further excavation until the retaining wall supporting the existing excavation was built. 54The Larters submitted that the costs incurred in obtaining the injunctive relief should be costs "in the proceedings" for the following reasons: firstly, he experts eventually agreed that the interlocutory relief, a complete restraint of excavation, was imprudent and should not continue; secondly, the orders were not dependant on any findings, even on a prima facie basis, that the Larters had breached any duty of care; and thirdly, the order made by Beech-Jones J on 11 April 2012 were much closer to the offer made by the Larters by letter on 5 April 2012 than the orders sought by the Jukes. The Jukes insistence that their expert, Mr Burke, have inspection powers was rejected by his Honour. 55The Larters also submitted that as no tort was proved and that the Jukes have now abandoned their case, the Jukes are not entitled to their costs for the proceedings and should pay the Larters' costs of the proceedings pursuant to the undertakings given by the Larters to the Court. The Jukes have not abandoned their case. The granting of the injunction and the making of orders has resolved the dispute. 56Finally, counsel for the Larters further submitted that the Jukes should not have sued Mrs Larter, as there is no suggestion that she had done anything for which she should have been sued and she is entitled to her costs. However, as Mrs Larter is one of the occupiers of the property where the excavations were taking place, for the interlocutory orders to be effective they need to be made against her. 57The starting point for indemnity costs is s 98(4)(c) of the Civil Procedure Act 2005. It relevantly reads: "98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. ... (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount. ..." 58And Uniform Civil Procedure Rules 2005, 42.1 and 42.2 read: "42.1 General Rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court 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. 42.2 General rule as to assessment of costs Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis." 59The general rule is that costs are payable on an ordinary basis. A court should only depart from the general rule and award indemnity costs where the conduct of the party against whom the order is sought is plainly unreasonable: see Sydney City Council v Geftlick [2006] NSWCA 280 at [90]. Indemnity costs orders should be reserved for the most unreasonable action by an unsuccessful plaintiff: see Leichhardt Municipal Council v Green [2004] NSWCA 341 per Santow JA (at [57]). 60The usual order as to costs is that subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour, the primary purpose of costs being to indemnify the successful party. Fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [67]. In Oshlack v Richmond River Council, McHugh J discussed that the exceptions to the usual order as to costs concentrate on the conduct of the successful party, which disentitles it to the beneficial exercise of the discretion. At [69], McHugh J said: "'Misconduct' in this context means misconduct relating to the litigation, or the circumstances leading up to the litigation. Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation; unnecessarily protracts the proceedings; succeeds on a point not argued before a lower court; prosecutes the matter solely for the purpose of increasing the costs recoverable; or obtains relief which the unsuccessful party had already offered in settlement of the dispute." (citations omitted) 61In regards to costs which were reserved, Beech-Jones J stated the following: "46 In reserving costs, I bear three matters in mind. First, to make an order for costs may exacerbate what is already a strained neighbourhood dispute. Second, it may be that the reformulated relief sought by the Jukes concerning the exposed area of excavation on their northern boundary was something that resulted from the earlier relief that they obtained. I am not in a position to judge that but that may be weighed in the overall mix of costs at the end of the day. Thirdly, it should be noted that the orders I will make largely involve an acceptance of at least prayer 1 that Mr Laughton SC outlined yesterday morning. As I have stated, that order was based upon an assessment of the effect of the recently obtained expert material. It was open to Mr and Mrs Larter to negotiate around that framework yesterday rather than pursue a contested hearing." 62The Jukes were successful in obtaining the interim relief granted by Beech-Jones J. Mr Larter's compliance with those orders meant that no further relief was required. However, had Mr Larter agreed to build the retaining wall as requested by the Jukes, it would not have been necessary for the Jukes to approach this Court seeking an urgent injunction. It was reasonable and necessary for the Jukes to obtain the injunction and also to fully argue whether or not the injunction should continue before Beech-Jones. As Beech-Jones J stated, it was open to Mr and Mrs Larter to negotiate around the framework of the recent expert's material rather than pursue a contested hearing. An order for indemnity costs is not warranted. Mr Larter held and still holds a strong view that to build the retaining wall before further excavation work was carried out was unnecessary. Had he not been ordered to stop work by the Court it is unlikely he would have done so and carried out the works. Once that order was made, Mr Larter acted reasonably and no further criticism can be levelled at him. Hence, it is my view that the defendants should pay the plaintiffs' costs up to and including the granting of the interlocutory injunction before Beech-Jones J on 10 April 2012. While Mr Larter's attitude made it necessary for the Jukes to approach this Court, once the hearing took place and the injunction was granted, Mr Larter acted reasonably and complied with the orders. His behaviour of not compromising before the contested hearing he lost does in my view fall into the behaviour referred in Sydney City Council v Geftlick. It was Mr Larter's compliance with the Court orders that rendered any further court action unnecessary. In these circumstances in the exercise of my discretion it is my view that as the plaintiffs obtained the relief sought they should be entitled to their costs. The Larters were unsuccessful at this hearing before me. Hence, they should also pay the plaintiff's costs of this hearing on an ordinary basis.

Jukes v Larter

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Judgment (11 paragraphs)

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Cases Cited (25)