Owners Strata Plan 13635 v Ryan

Supreme Court of NSW|2006-04-20|Before: Rein AJ, Hodgson CJ

CITATION : Owners Strata Plan 13635 v Ryan [2006] NSWSC 342

CATCHWORDS : COSTS - easement - disentitling conduct - offer of compromise

Conveyancing Act 1919, s 88K(5) LEGISLATION CITED : Supreme Court Rules, Part 22 Uniform Civil Procedure Rules, Rule 42.14

117 York Street Pty Ltd v Proprietors of Strata Plan 16123 (1998) 43 NSWLR 504 Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; 118 ALR 248 Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795 CASES CITED : Mitchell v Boutagy (2001) 10 BPR 19,187; [2001] NSWSC 1045 Owners Strata Plan 13635 v Ryan [2006] NSWSC 221 Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (FCA, 3/05/91, unreported), Wilson v Forrester-Babcock (2000) 10 BPR 18,377; [2000] NSWSC 1208 Woodland v Manly Municipal Council (2003) 11 BPR 20,915; [2003] NSWSC 524

Owners Strata Plan 13635 (First Plaintiff) PARTIES : Patrick James Bryant (Second Plaintiff) Deborah Ann Bryant (Third Plaintiff) Jennifer Marie Ryan (Defendant)

COUNSEL : J O Anderson (Plaintiffs) J E Armfield (Defendant)

SOLICITORS : Surry Partners (Plaintiffs) P J Chapman (Defendant)

2 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

6146/04 The Owners - Strata Plan No 13635 and 2 Others v Jennifer Marie Ryan

1 HIS HONOUR: In this matter on 5 April 2006 I handed down reasons for my conclusion that easements in favour of the Plaintiffs should be imposed on the Defendant's land pursuant to s 88K of the Conveyancing Act 1919 and acceded to the request of counsel that they have an opportunity to consider the precise form of orders. (See Owners Strata Plan 13635 v Ryan [2006] NSWSC 221.)

2 On 20 April 2006 the parties had largely agreed on the form of orders but there remained several points of disagreement. Those were resolved either by me or by the parties and I directed that a re-engrossed form of order be filed, which has occurred, and I have made orders in accordance with those Short Minutes of Order. One matter to be noted is that the easements end at a western point in line with the boundary fence between the Defendant's property and No 42 Cabramatta Road. I had made reference to that possible adjustment in my reasons of 5 April 2004.

3 The other matter left in abeyance was the question of costs. I had heard argument on the issue at the hearing, but again at the request of counsel, deferred ruling on that until I had heard further submissions. These reasons should be taken as incorporating my earlier reasons.

4 The Plaintiffs seek an order that the Defendant pay their costs, and on an indemnity basis from 13 April 2005, and the Defendant seeks an order that the Plaintiffs pay her costs. I was referred to four cases by the parties: 117 York Street Pty Ltd v Proprietors of Strata Plan 16123 (1998) 43 NSWLR 504; Mitchell v Boutagy (2001) 10 BPR 19,187; [2001] NSWSC 1045; Woodland v Manly Municipal Council (2003) 11 BPR 20,915; [2003] NSWSC 524 and Goodwin v Yee Holdings Pty Ltd (1997) 8 BPR 15,795.

5 The Plaintiffs, in support of their application for an order that the Defendant pay their costs, also relied on an offer of compromise made on 13 April 2005 and which is found annexed to the affidavit of Mr Anthony Kenneth Brooks of 11 April 2006.

6 The starting point is s 88K(5) Conveyancing Act, which is in the following terms: "(5) The costs of the proceedings are payable by the applicant, subject to any order of the Court to the contrary."

7 In 117 York Street Pty Ltd, Hodgson CJ in Eq (as he then was) held that s 88K(5) indicated that even where the circumstances appropriate for the grant of an easement are established, the defendant is entitled to have the costs of having the proceedings determined by the Court and the costs of assessing appropriate compensation. He continued at 523G-524A: "I think it is fair to say that the necessity for these proceedings arose because of very different views about compensation, and that my decision has been in favour of the plaintiff's view and against the defendant's view. However, it still seems to me that unless one can characterise the defendant's conduct as unreasonable, and in particular as unreasonably bringing about legal costs or increased legal costs, then the prima facie result contemplated by the statute would follow. I do not believe that the various points taken by the defendant could, having regard to the current state of the law, be regarded as unreasonable. It may be that the time will come when the taking of such points will be unreasonable, because the principles have become well-established. I do not think that stage had been reached at the time this case was conducted."

8 In Mitchell v Boutagy, Austin J at [60] identified the legislative policy thus: "The policy is that the Court should be empowered to require the defendant to grant an easement to the applicant against his or her will, but generally on the basis that the cost of obtaining the easement is to be borne by the applicant. It would only be if there were circumstances of unreasonableness on the defendant's part that the Court would exercise its discretion to make an order to the contrary under subs (5)."

9 Austin J held that the defendants, having proceeded on the basis of the views of a valuer, were entitled as reasonable persons to adhere to the valuer's view.

10 In Goodwin v Yee Holdings Pty Ltd (a case mentioned by Austin J), Windeyer J dealt with costs of the easement application, holding that the defendant should not have the costs of the valuer and quantity surveyor because the contents of the valuation evidence were for the most part without foundation.

11 In Wilson v Forrester-Babcock (2000) 10 BPR 18,377; [2000] NSWSC 1208, Young J considered whether the normal rule as to costs under s 88K(5) should be displaced for counsel's fees given the unattractive arguments that were advanced by counsel, but held that the case was not "sufficiently outside the pale to make some other order for costs": at [23].

12 From these cases the following principles can be extracted: (1) that there is a statutory indication that generally the person upon whose land the easement is imposed will be entitled to his or her costs; (2) that notwithstanding (1), the Court has a discretion to: (a) order the defendant to pay the plaintiff's costs (per Austin J in Mitchell v Boutagy );

(b) order the defendant to pay some of the plaintiff's costs (per Young J in Wilson and per Windeyer J in Goodwin ); where there is conduct of an unreasonable nature on the part of the defendant (including the nature of the arguments maintained at the hearing).

13 I think it follows from the above that two further orders can be made where there has been unreasonableness: (c) that there be no order as to costs;

(d) that the defendant recover only a portion of his or her costs.

14 In my view the concept of "unreasonableness" in this context embraces the type of conduct which enlivens the discretion of the Court to award indemnity costs against a party. In Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; 118 ALR 248, Sheppard J cited with approval the words of French J in Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (FCA, 3/05/91, unreported), in which it was said that the categories of case in which discretion may be exercised are not closed. Sheppard J then said at ALR 257: "it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152 evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo ); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata ) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp ); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata ); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records ). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis."

15 Mr Armfield, whilst he did not cavil with the view that "unreasonableness" was extensive in scope, did contend on the basis of 117 York Street Pty Ltd that the only reduction in costs awarded to a defendant who has acted unreasonably or whose conduct is disentitling, are those additional costs directly attributable to the disentitling conduct. I do not understand Hodgson CJ in Eq to be laying down a rule that the only disentitling conduct ever relevant in relation to s 88K(5) is conduct that has extended the proceedings or that the only reduction of costs to be made is the reduction due to the extra length of the hearing, since he was dealing in that case with a specific approach to the legislation that he thought, due to the limited authority then available, although erroneous, was not unreasonable.

16 Mr Anderson, in his submissions on the appropriate costs order, quite apart from the offer of compromise, emphasised that his clients are owners of land, land which for many decades had effectively used the easement which they now seek be regularised, they are not developers who have decided to make more profitable use of the land, and who have sought to impose a completely new right of way or other easement.

17 I do not think that s 88K(5) can be seen as limited, or as having been intended to be limited to cases involving developers, nor did Mr Anderson's submission go that far, but I think that the Court is entitled, in considering whether a different costs order should be made than that which the legislation envisaged, to have regard to all the circumstances of the case, including that aspect.

18 The offer in the offer of compromise was to pay $35,000 in respect of the easements sought - the easements sought were in the same form as annexed to Mr Kimber's affidavit and to which I referred in [2] of my reasons of 5 April 2006, and see also [89], [90] and [121].

19 The offer was expressed to be made pursuant to Part 22 of the Supreme Court Rules and was said to expire if not accepted within 30 days.

20 It was agreed that although the offer was made pursuant to Part 22 of the Supreme Court Rules, the effect of the offer is to be determined by the new Uniform Civil Procedure Rules Rule 42.14 (which it was agreed is in effect identical, in any event, with Part 52A Rule 22).

21 There was an issue about the failure of the offer to deal with costs. In my view, what was required to be in the notice and what would have occurred had the offer been accepted within the requisite period is governed by Part 22, because that was the rule in force when the offer was made.

22 Mr Anderson pointed out that the Plaintiffs have been ordered to pay $34,000, so that Rule 42.14 is brought into play because an offer of $35,000 was made.

23 Mr Anderson argued that there was no conflict between s 88K(5) and Rule 42.14.

24 Mr Armfield argued that Rule 42.14 had no application because the offer was silent on the question of costs and the easements offered were more extensive than those imposed (because of the alignment with the boundary fence).

25 Mr Anderson responded arguing that the offer should be seen as one which took into account s 88K(5), and that the difference in length of the easement was small and not generated by any assertion by the Defendant that that is where the easement should end.

26 An offer pursuant to Rule 22 is not required to deal with costs although it may do so (see the notes to Rule 22 in Ritchie's Supreme Court Practice). Rule 42.14 requires the Court to consider whether the plaintiff has obtained a judgment "on the claim concerned" no less favourable to the plaintiff "than the terms of the offer".

27 No cases were cited on the point but I think that what is to be compared is the offer of $35,000 (with the easements indicated in the offer) and the result of $34,000 (with the easements as ordered). In my view, the question of costs does not bear upon this comparison for two reasons. First, the rule speaks of the "judgment on the claim concerned", and the "claim concerned" I take to be the claim contained in the offer. No offer was made on the issue of costs. Second, if the contrary construction were adopted, the Court would first have to determine what order for costs should be made absent the issue of the offer of compromise, and compare that to the costs incurred at the time of the offer, neither of which would be readily assessable.

28 If a defendant accepts an offer made pursuant to Part 22.1A then the Rules (now Rule 42.14 UCPR) indicate a disposition of the Rules to an award of costs in favour of the plaintiff (just as s 88K(5) of the Act indicates a disposition to make an award of costs in favour of a defendant), but Part 22.1A (like s 88K(5)) makes it clear that the Court may make a different order. If a landowner accepted an offer of compromise in relation to an easement there would be a very good prospect that the Court would apply the approach of s 88K(5) and award the defendant costs.

29 The easements imposed by the Court were marginally less extensive in length than the easements that were the subject of the offer of compromise, but looking at the substance of the matter (and quite apart from the fact that the squaring off of the easement arose out of my suggestion and was not sought by the Defendant, and involved an element of compromise on the part of the Plaintiffs that they may not strictly have been required to make), I think the Plaintiffs have obtained a judgment no less favourable to them then the terms of the offer made in the offer of compromise (the judgment being less in dollar terms and the length of the easement being marginally shorter).

30 It follows in my view that the Plaintiffs are prima facie entitled to an order that their costs be paid to 13 April 2005 on the ordinary basis and from thereafter on an indemnity basis. Rule 42 however reserves a discretion in the Court.

31 Quite apart from the issue of the offer of compromise and even bearing in mind the statutory approach, it would be most undesirable if parties over whose land an easement is sought were to approach the matter on the basis that there was nothing that they and their legal advisors could do in resisting the easement that would deprive them of their costs. Such a result would not be conducive to settlement or, where appropriate, to determination only of the appropriate amount of compensation. This concern was touched upon by Windeyer J in Goodwin in dealing with costs in the third last paragraph of his judgment.

32 There is a strong policy content to the rules relating to offers of compromise, namely to encourage parties to make and accept realistic and reasonable offers. I do not think, however, that Rule 42.14 (or its predecessor Part 52A Rule 22) should be viewed as "trumping" s 88K(5). Rather the Court is required to have regard to both the offer of compromise (if effective) and s 88K(5) in determining what order should be made. When the defendant's conduct has been entirely appropriate (other than in failing to accept the offer made) that would be very relevant and may well lead to a significantly reduced burden of costs, although generally speaking a defendant who failed to accept a reasonable offer of compromise would I think be unlikely to obtain an order for costs in his or her favour.

33 Taking into account the following matters: (1) The factual matters the Defendant put forward to resist the grant of the easement were spurious and in large measure manufactured for the purpose of the case: see [18], [86]-[102] of my earlier reasons. The Defendant took action to bolster her case that was precipitous and inappropriate, because Council's approval was conditional on this case being heard and determined.

(2) The Plaintiffs offered at an early stage before proceedings were commenced an amount ($28,800), which whilst it was less than the amount awarded ($34,000), was of a similar order. The Defendant had previously indicated that she would require at least $100,000 to grant the easements. The written offer made by the Plaintiffs was met with a rejection and no counter-offer: see pp 72-73 of the Defendant's affidavit of 19 February 2005.

(3) The Plaintiffs offered (by an offer of compromise that was not accepted) $35,000 to settle the case, with easements proposed that vary only marginally from the easements imposed. (4) The long history of use of the lane by 49 and 47, and the fact that the lane was already the subject of a formal easement in favour of Lot 2 of the Defendant's property (see [7]-[14] and 68), made the Plaintiffs' case a meritorious one, that could of itself justify departure from the usual approach indicated by s 88K(5). (5) The existence of a dispute between the valuers as to the proper amount of compensation (which whilst not of itself sufficient to preclude an order for costs following an offer of compromise) and which led to an assessment higher than the amount assessed by the Plaintiffs' valuer, points to the appropriateness of an order less burdensome to the Defendant than an order for indemnity costs;

in my view, the appropriate order in this case is that the Defendant pay the Plaintiffs' costs from the commencement of the proceedings but on the ordinary basis.

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