The Owners - Strata Plan 17719 v Arcidiacono

Judgment

1. On 30 September 2019, I gave judgment in these proceedings: The Owners - Strata Plan No 61233 v Arcidiacono; The Owners - Strata Plan No 17719 v Arcidiacono [2019] NSWSC 1307 (principal judgment). These reasons assume familiarity with and adopt the same terms used in the principal judgment.
2. In the principal judgment, I found that Clarence House has the benefit of easements by prescription for rights of carriageway over the Passage and the Dock (prescriptive easements claim) but found that it did not have existing rights of way over the Passage and Dock by reason of express historic grants (historic easements claim). I also considered Clarence House's alternative claim and found that, had it been necessary to make them, Clarence House would be entitled to orders under s 88K of the Conveyancing Act 1919 (NSW) for easements over the Passage and the Dock for rights of carriageway (s 88K easements claim).
3. I deferred making final orders and invited the parties to bring in short minutes to reflect the reasons in the principal judgment. As agreement could not be reached on the terms of the easement or on the issue of costs, draft orders and written submissions on those issues were exchanged and the proceedings were listed for oral argument on 11 and 12 December 2019.
4. In anticipation of final orders being made, the defendants served a notice of motion seeking a stay pending determination of an appeal which they intend to file by the end of this year (Appeal). They had already filed a notice of intention to appeal dated 25 October 2019.
5. I heard argument on the terms of the easement and on the issue of costs on the morning of 11 December. On that occasion, Clarence House indicated that it would consent to a stay of the final orders, except the costs order, if the defendants agreed to the continuation of the injunction that was put in place at the start of the proceedings restraining them from locking a gate and placing skip bins on the Passage and the Dock.
6. When the hearing resumed on the morning of 12 December, I was informed that the parties had agreed the form of the orders to be made in respect of the easement and the stay pending determination of the Appeal. Accordingly, these reasons deal only with the issue of costs.
7. These reasons also take into account the supplementary written submissions on costs received from Clarence House on 13 December and from the defendants this morning.

Submissions

1. Clarence House seeks an order that the defendants pay 85% of its costs of the proceedings on an ordinary basis.
2. Clarence House submits that costs should generally follow the event and, subject to the costs of the historic easements claim, it should be entitled to all of its costs given its overall success in the proceedings. It submits that it should recover its costs of the s 88K easements claim in circumstances where the defendants effectively instigated the proceedings by blocking off access to the Passage and Dock which had been used by Clarence House for many years, resulting in the need to seek urgent interlocutory relief. Clarence House also points to the defendants having contested every aspect of the s 88K easements claim other than the issue of whether Clarence House made all reasonable efforts to obtain the easements.
3. Clarence House accepts that the costs incurred in respect of its historic easements claim might be considered to be both separable and dominant and that the Court might apportion them to the defendants given their success and Clarence House's loss on that claim.
4. In support of an apportionment of 85%, Clarence House relies on the affidavit of Jane Crittenden affirmed 3 December 2019, the solicitor for Clarence House, who estimates that approximately 15% of all legal costs incurred in the preparation of the proceedings for hearing and the time spent at the hearing itself related to the historic easements claim advanced by Clarence House. Ms Crittenden's evidence in relation to that issue was not challenged by the defendants and I accept it.
5. The defendants submit that, in the circumstances of this case, the Court should make no order as to costs.
6. The defendants argue that such an order is appropriate because Clarence House's success in the proceedings relates to the prescriptive easement claim, which was only raised on the first day of the hearing (with leave to amend being granted on a limited basis on the second day), and the s 88K easements claim for which the defendants should be paid their costs in accordance with the usual order under s 88K(5) of the Conveyancing Act.
7. They submit that all of Clarence House's costs prior to the hearing, including the cost of preparing the evidence, were directed to the historic easements and s 88K easements claims, with the evidence relied upon by Clarence House in support of it prescriptive easement claim comprising a small part of the evidence that it had already served. In those circumstances, they submit that Clarence House incurred no costs specifically referable to its successful prescriptive easement claim until the second day of the hearing.
8. They also submit that, as the prescriptive easements claim was a fundamentally new case raised late in the day, Clarence House's success should not lead to any entitlement to costs for work done before the amendment and in respect to the other claims.
9. The defendants submit that the costs of the s 88K easements claim should be carved out entirely in circumstances where it was an alternative claim that was brought as a matter of convenience only and resulted in additional costs being incurred by the parties. They contend that, on any view, they would be entitled to their costs from that part of the proceedings in the usual way in accordance with s 88K(5) of the Conveyancing Act, and that the costs order to be made by the Court should reflect that usual position.

Consideration

1. The power to award costs is a matter within the discretion of the Court. That discretion is a broad one which must be exercised judicially having regard to the circumstances of the case: Civil Procedure Act 2005 (NSW), s 98(1)(a); Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 (Oshlack), at [134].
2. The usual rule is that costs follow the event, unless it appears that some other order should be made: Uniform Civil Procedure Rules 2005 (NSW), r 42.1.
3. While an unsuccessful party typically bears the liability for costs, there is no absolute rule with respect to the exercise of the Court's discretion. A successful party has no right to an order for costs and there may be special circumstances, such as the conduct of the successful party, which justify not making a costs order in accordance with the usual rule: Oshlack, at [67], [69] and [134].
4. Generally, the Court will award costs to a successful party without seeking to apportion costs between the issues on which it has been successful and those on which it has failed, although it may be appropriate to do so if a particular issue or group of issues is "clearly dominant or separable": Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [14]-[19]; Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38].
5. The question of apportionment of costs is very much a matter of discretion, and mathematical precision is illusory. The exercise of the discretion depends on matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [36], citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 2) [2011] NSWCA 171 at [22].
6. The first issue raised is whether Clarence House's late amendment in respect of its successful prescriptive easements claim provides good reason to depart from the usual rule that costs should follow the event in these proceedings.
7. Where a plaintiff makes a late amendment which substantially alters the case the defendant has to meet and without which the action will fail, a defendant will, as a general rule, be entitled to the costs of the action to the date of the amendment: Beoco v Alfa Laval Co Ltd [1995] QB 137; Murrihy v Radio 2UE Sydney Pty Ltd [2000] NSWSC 318 at [9]; Leading Edge Events Australia Pty Ltd v Kiri Te Kanawa (No 2) [2007] NSWSC 568, at [13]; Waterman v Gerling Australia Insurance Co Pty Ltd (No 2) [2005] NSWSC 1111 (Waterman v Gerling) at [11].
8. The circumstances of a case may provide a proper basis not to apply the general rule relating to costs of a successful case based on a late amendment. Such circumstances include whether the claim would have been resisted even if it had been raised at an earlier date, where there was earlier notice of the matters raised by the amendment even though it was not formally pleaded, and where a plaintiff recovers from the newly pleaded case in substance what it sought at the outset: Kaines (UK) Ltd v Österreichische Warrenhandelsgesellschaft (formerly CGL Handelsgesellschaft MBH) [1993] 2 Lloyds Rep 1; Waterman v Gerling, at [26].
9. In this case, Clarence House obtained success on a claim, being the prescriptive easements claim, which was not formally pleaded until leave was granted to amend on the second day of the hearing. That is, Clarence House achieved success on a legal basis that was not originally articulated as part of its pleading.
10. That said, Clarence House's success on its prescriptive easements claim is in substance the same as what it sought at the outset of these proceedings, being the recognition of existing rights of way over the Passage and the Dock. While the pleading was of a different legal character, the relief obtained recognises that Clarence House may continue to access and use the Passage and the Dock in substantially the same manner it had previously.
11. This is not a case where it could be said that, despite Clarence House's loss on the historic easements claim and success on the amended prescriptive easements claim, the defendants were the true victors in this case: Waterman v Gerling at [20].
12. Despite the change in the legal character of the claim, the prescriptive easement claim is also not, in my view, a fundamentally different case, as the defendants submit.
13. Clarence House had asserted it had the benefit of existing rights of way based on long use, since at least 1981, prior to the proceedings being commenced: see letter dated 10 June 2016 from Clarence House's solicitor to the first defendant at CB785.
14. Clarence House's prescriptive easements claim succeeded on the same evidence relied on in support of the other claims it made in the proceedings, including the evidence of the use to which the Passage and Dock had been put prior to and after 1981. As I found in the principal judgment, Clarence House's pleading and evidence addressed the use to which the Passage and the Dock had been put by Clarence House since 1981 prior to the amendments being sought: at [36]-[37].
15. The factual basis of Clarence House's successful prescriptive easement claim had, therefore, been in issue and a matter about which the defendants were on notice since the start of the proceedings. As I also noted in the principal judgment, given it had been raised in the 71 York Street proceedings, at least some of the legal issues raised by Clarence House's prescriptive easements claim were matters which the defendants were prepared to meet: at [38].
16. I am also satisfied that, had the prescriptive easements claim been raised by Clarence House at the start of these proceedings, the defendants would still have vigorously resisted it.
17. The defendants resisted a prescriptive easements claim in the 71 York Street proceedings. They argued against leave to amend being granted to Clarence House in these proceedings and then spent significant time in oral and written submissions as to why the Court should not find for Clarence House on its prescriptive easements claim. The fact that the defendants have raised the prescriptive easements claim in its notice of intention to appeal also supports the conclusion that it would have been resisted whenever it had been raised by Clarence House.
18. It is also relevant, to my mind, that these proceedings were commenced by Clarence House in circumstances where the defendants had installed and locked a gate and moved skip bins, thereby obstructing access to the Passage and Dock. Clarence House had no real choice but to commence the proceedings seeking relief that it had existing rights to use the Passage and Dock, which I found, are prescriptive rights based on long user.
19. In my view, these factors together justify not applying the general rule in this case in respect of the late amendment of the prescriptive easements claim. I conclude that Clarence House's costs should not be reduced for the reason of the late amendment and, subject to a discount of 15% for the historic easements claim and what follows in relation to the costs of the s 88K easements claim, costs should follow the event.
20. The usual rule in relation to costs of a s 88K proceeding is that they are payable by the applicant subject to any order of the court to the contrary: s 88K(5) of the Conveyancing Act.
21. The meaning and application of the phrase 'subject to any order of the court to the contrary' is not completely open-ended. In a claim for an easement under s 88K, a property owner should not be put at risk of an adverse costs order "unless it has done more than reject reasonable offers of compensation", for example, by engaging in unreasonable conduct which might disentitle a defendant to the usual order for costs: Shi v ABI-K Pty Ltd [2014] NSWCA 293 at [98]; Ross Bilton & Ors v Georgia Ligdas (Costs) [2016] NSWSC 1585, at [17]; Rawson v Studholme (No 2) [2019] NSWSC 1273, at [3].
22. In Rawson v Studholme (No 2) [2019] NSWSC 1273, the Court concluded that the defendant's conduct was sufficient to warrant departure from the usual rule and ordered her to pay the plaintiffs' costs of the s 88K easement proceedings in circumstances where it found that the defendant had taken a number of unjustifiable stances in respect of issues that had no reasonable prospects of success, had abandoned arguments at trial, and had behaved in a peremptory and unreasonable manner by shutting off access which had been used for many years after buying the land knowing that it had been used in that way.
23. Clarence House submits, and I accept, there are some similarities between the defendants' position in this case and that in Rawson v Studholme (No 2) [2019] NSWSC 1273.
24. In my view the defendants acted in a peremptory way by blocking Clarence House's access in 2016 in circumstances where both the Passage and the Dock had been used by Clarence House for many years prior to 2016. As I found in the principal judgment, the defendants were aware that Clarence House used the Passage and the Dock at the time they bought the land: at [401] - [402].
25. Having installed and locked the gate, the defendants were put on notice that Clarence House asserted a right of way based on long term use and were requested to cease obstructing access: letter dated 10 June 2016 from Clarence House's solicitor to the first defendant at CB785. When the defendants refused, these proceedings had to be brought on an urgent basis.
26. The defendants also raised arguments in response to the s 88K easements claim on valuation which were seemingly inconsistent with their position in proceedings in 2008 where, as the owners of 100 Clarence Street, they sought to obtain for themselves easements over the Passage and the Dock under s 88K. They relied on valuation evidence which suggested that easements being granted to their benefit (similar to those sought by Clarence House) would not diminish the value of the Passage and Dock and evidence from Mr Arcidiacono which was not forthcoming in this case.
27. That said, I do not accept the thrust of Clarence House's submission which is that the defendants' conduct was of such a character that it would warrant the Court ordering the defendants to pay all of Clarence House's costs of the s 88K easements claim in the proceedings, as the Court ordered in Rawson v Studholme (No 2) [2019] NSWSC 1273.
28. The defendants were entitled to require Clarence House to satisfy the Court of the matters raised by s 88K and challenge the submissions it made. They did not advance arguments that led to wasted costs due to late changes in their position. Despite the Court's ultimate findings, I do not consider that all of the expert evidence led by the defendants could be characterised as totally unnecessary.
29. In this case, the s 88K easements claim was an alternative claim and no orders needed to be made by the Court as it found for Clarence House on its prescriptive easements claim. In my view, it was appropriate for Clarence House to have brought the alternative s 88K easements claim. It was not just a matter of convenience to do so given some of the overlapping issues and evidence relied on by Clarence House in support of its claims, such as the evidence of past use.
30. The purpose of a costs order is to compensate a successful party for the expense to which it has been put; in this case in having to bring proceedings to confirm Clarence House's entitlement to access to the Passage and the Dock by the recognition of existing easements: Sze Tu v Lowe (No 2) [2015] NSWCA 91 at [37]; Latoudis v Casey (1990) 170 CLR 534 at 543 (Mason CJ); Oshlack at [67].
31. In this case, to require Clarence House to pay the defendants' costs of the s 88K easements claim would largely deprive Clarence House of the benefit of its overall success in the proceedings and would also fail to take into account the conduct of the defendants to which I have referred above.
32. In all of the circumstances and in the exercise of my discretion, I consider that the appropriate approach is for the costs of the s 88K easements claim to be carved out of the costs order to be made in favour of Clarence House as the party who had overall success in the proceedings. Doing so will have the effect that the defendants are not required to pay the costs incurred by Clarence House.
33. That leaves the apportionment of the costs to be allocated to the s 88K easement claim and the final cost order to be made.
34. There is no dispute that Clarence House should not recover its costs of the historic easements claim. I accept that they are separable and should be carved out. Based on the evidence of Ms Crittenden, I consider that Clarence House should recover 85% of its costs less the additional costs relating to the s 88K easements claim.
35. As no evidence is before the Court of the percentage of costs incurred solely in respect of the s 88K easements claim, I have approached apportionment as a matter of discretion and in a broad-brushed and impressionistic manner, as the authorities referred to in [43] above suggest.
36. The bulk of the evidence that related solely to the s 88K easements claim was the expert evidence from the valuers, the fire experts and the traffic engineer. Their evidence took about one hearing day in total, noting that it was also relevant to the 71 York Street proceedings. When considered together, about one-third of Clarence House and the defendants' oral and written submissions related to the s 88K easements claim. In those circumstances, I consider it appropriate to allocate 35% as the percentage to apply to the costs of the s 88K easements claim which Clarence House should not recover.
37. Accordingly, I will order the defendants to pay 50% of Clarence House's costs of the proceedings on an ordinary basis.

Orders

1. For these reasons, I make the following orders in proceedings 2016/187385: 1. Declare that The Owners - Strata Plan No. 17719 is entitled to a right of carriageway giving full and free right for every person who is at any time entitled to an estate or interest in possession in the land herein indicated as the dominant tenement, being the whole of the common property comprised in Folio Identifier CP/SP17719, or any part thereof with which the right shall be capable of enjoyment, and every person authorised by that person, to go, pass and repass at all times with or without animals or vehicles or both, to and from the said dominant tenement or any such part thereof, for commercial, retail and residential purposes, appurtenant to the land in Folio Identifier 2/1052948 and Folio Identifier 1/619464. 2. The defendants to produce Certificate of Title, Folio Identifier 2/1052948 and Certificate of Title, Folio Identifier 1/619464 to the Registrar-General within 21 days of the date of these orders to enable registration of the said easement. 3. Reserve liberty to apply as to the implementation of orders 1 and 2 above. 4. Except in relation to costs which are the subject of orders previously made against the defendants in these proceedings, the defendants to pay 50% of the plaintiff's costs of the proceedings on the ordinary basis, in an amount to be agreed or assessed. 5. Orders 1, 2 and 3 be stayed until the appeal against the whole of the principal judgment and these orders, in respect on which a notice of intent to appeal dated 25 October 2019 has been filed by the defendants (Appeal), is determined or otherwise ordered. 6. Until the defendants' Appeal is determined or otherwise ordered, the defendants are restrained from: 1. locking a gate on the land comprised in Lot 1 in DP 619464 (Passage) and Lot 2 in DP 1052948 (Dock) and 2. placing any skip bin or other items in the Passage or Dock which obstruct vehicular access including garbage trucks.

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