The Owners-Strata Plan 6636 v Bickley

Legal Principles in the Application of r 3.7 of the LEC Rules

1. In Agonic Holdings Pty Ltd v Lithgow City Council [2009] NSWLEC 34, Biscoe J discussed the effect of the promulgation of r 3.7 and its operation (at [4]-[5]). I respectfully endorse, without repetition, his Honour's remarks.
2. Rule 3.7(2) is a presumptive rule insofar as costs are not be ordered in proceedings in which the rule is expressed to be applied (Arden Anglican School v Hornsby Shire Council [2008] NSWLEC 103; (2008) 158 LGERA 224 at [6]). The rationale underpinning the rule is the 'no discouragement principle' (Arden at [10]) as identified by Court of Appeal in Port Stephens v Sansom [2007] NSWCA 299; (2007) 156 LGERA 125 (at [22]-[23]) and elaborated upon in Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council [2007] NSWCA 300; (2007) 156 LGERA 150 at [75]-[76]).
3. In St Marys Land Limited v Valuer-General of New South Wales [2011] NSWLEC 2 the Court described the operation of r 3.7, albeit in the context of Class 3 proceedings but nevertheless apposite here, in the following terms (at [54]-[55]): 54 ... As identified by Biscoe J in Agonic Holdings Pty Ltd v Lithgow City Council [2009] NSWLEC 34 and Arden Anglican School v Hornsby Shire Council [2008] NSWLEC 103; (2008) 158 LGERA 224, the rule may properly be characterised as a presumptive rule to the effect that ordinarily costs will lie where they fall (see also Port Stephens Council v Sansom [2007] NSWCA 299; (2007) 156 LGERA 125 at [50] where similar language was employed by Spigelman CJ). This is not to say that the Court does not retain a broad discretion to determine that an award of costs is appropriate if the circumstances are fair and reasonable. Once the Court's jurisdiction to award costs is enlivened, it clearly does. 55 The presumption may be displaced. Some of the factors that might rebut the presumption are set out in r 3.7(3). These are neither prescriptive nor exhaustive. I accept that, for example, the character of the litigation and the conduct of the proceedings by the parties are factors to which the Court may have regard in assessing whether, as a matter of fairness and reasonableness, the presumptive rule ought to be displaced. For the Court to have regard to these factors, including the character of the litigation, be it akin to ordinary litigation or to a merits appeal, is not, as the Court of Appeal in Sansom (at [53]) and Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council [2007] NSWCA 300; (2007) 71 NSWLR 230 (at [68]) cautioned against, to adopt a principle or guideline which of itself is entitled to presumptive or determinative weight. This approach would lead to error.
4. More recently in Barich v Parramatta City Council [2015] NSWLEC 98 at ([24]-[25]) Craig J, in applying the principles stated above, further noted that: 24 Rule 3.7(2) has been described as a "presumptive rule", that is, it is to be presumed that costs are not ordered in proceedings to which the rule is expressed to apply (Arden Anglican School v Hornsby Shire Council [2008] NSWLEC 103; 158 LGERA 224 at [6]). In considering the exercise of a discretion against the presumption identified in the subrule, all relevant circumstances must be considered in order to determine whether, in their totality, they are sufficient to displace the presumption. As Pepper J observed in Hillsong Church Ltd v Council of the City of Sydney (No 2) [2012] NSWLEC 118 at [42], the particular circumstances identified in subrule (3) are neither prescriptive nor exhaustive of those circumstances that may justify the exercise of discretion against the presumption. So much must follow from the opening words of the subrule referring to circumstances that the Court "might" consider the making of an order to be fair and reasonable. 25 The circumstance that Mr Barich was successful in his appeal is not, of itself, sufficient to displace the presumption reflected in r 3.7(2) (Maygood Australia Pty Ltd v Willoughby City Council [2013] NSWLEC 142 at [40]). As Pepper J also observed in that case, if success, of itself, was sufficient to override the presumption, the provisions of r 3.7(2) would be rendered otiose.
5. Some support for the latter proposition stated by his Honour may be drawn from recent comments made by the Court of Appeal in Community Association DP270253 v Woollahra Municipal Council [2015] NSWCA 80; (2015) 207 LGERA 268 (at [55]).

The Costs Hearing is Ex-parte

1. Having regard to the affidavit of Mr Christopher Prestipino affirmed 3 July 2015 (Mr Prestipino is a solicitor employed by the solicitor for the applicant), an email from the Court to both the applicant's then solicitor and Mr Bickley at his last known contact email address on 3 July 2015, together with an email from Mr Prestipino to Mr Bickley, at that email address, on 7 July 2015, it is clear that Mr Bickley was aware of the date and time of today's hearing of the costs application and has elected not to appear at the hearing of the notice of motion for costs.
2. The same affidavit of Mr Prestipino also demonstrated that Mr Bickley had been served with all of the evidence relied upon by the applicant in respect of the Notice of Motion. That is to say, in addition to the affidavit affirmed 3 July 2007, the evidence included: 1. an affidavit of Mr Prestipino affirmed 6 May 2015; 2. an affidavit of Ms Jane Crittenden (the solicitor for the applicant), affirmed 6 May 2015; and 3. a final affidavit of Mr Prestipino affirmed 17 June 2015.
3. In these circumstances, the Court proceeded to determine the notice of motion on an ex parte basis.

The Unreasonable Conduct of Mr Bickley

1. The applicant submits that Mr Bickley acted unreasonably for the purpose of Rule 3.7(2) of the LEC Rules, both prior to the commencement of the proceedings, during the conduct of the proceedings, and after the conclusion of the proceedings before Fakes C.
2. In respect of the unreasonableness of Mr Bickley leading up to the commencement of the proceedings, the evidence referred to above disclosed that: 1. as early as December 2012, the applicant attempted to contact Mr Bickley about remedying the damage that had been, and was continuing to be, caused to its retaining wall and garage wall by the trees on Mr Bickley's property; 2. in late August 2013, notwithstanding receipt of the applicant's building consultant's report prepared by Sutech Pty Ltd dated 30 May 2013 ("the Sutech Report"), Mr Bickley continued to deny that the trees needed to be removed from his property; 3. on 24 October 2013 the applicant sent a letter to Mr Bickley asking him to pay half of the costs of the estimated repair works to the retaining wall and the garage wall totalling $18,550. Mr Bickley was invited to provide the applicant with evidence from his own engineer or builder if he wished to challenge the findings of the Sutech Report; 4. on 15 November 2013, after having received no response from Mr Bickley to its letter of 24 October 2013, the applicant emailed Mr Bickley stating that it would obtain legal advice if it did not receive a response within 10 working days. After receiving no response within the stipulated time, the applicant engaged a solicitor; 5. on 18 February 2014 the applicant again requested that Mr Bickley remove the trees from his property and stated that if they were not removed, the applicant would seek an appropriate order from the Court. Importantly, the letter offered to settle the claim on the basis that Mr Bickley pay a quarter of the quotation referred to above in (c), that is to say, to $4,637.50; 6. again no response was received to this letter. Accordingly, the applicant engaged the services of an arborist to prepare a report on which of Mr Bickley's trees were causing damage to its property ("the arborist report"). The report concluded that the damage was caused by the fact that the retaining wall was not built correctly for its purpose, and also that trees and roots from the trees located on Mr Bickley's property were planted too close and were pushing the wall over. It recommended that three trees on Mr Bickley's property be removed and observed that an additional two trees may potentially need to be removed; 7. the arborist report was sent to Mr Bickley on 26 September 2014. Mr Bickley was requested to remove the three trees as recommended in that report and to contribute to the cost of repairing the damage caused to the applicant's property by the trees. The letter put Mr Bickley on notice that if no response was received by 16 October 2014, the applicant would commence proceedings in the Court without further communication; and 8. on 19 November 2014, the applicant received an email from Mr Bickley saying that he disagreed with the applicant's position and that he would not take any action on the matter until he returned from overseas. Mr Bickley did not indicate when this might be. Therefore, on 15 January 2015, the applicant filed a tree dispute application in the Court commencing the proceedings. It relied upon the Sutech Report and the aborist report.
3. The unreasonable conduct of Mr Bickley relied upon by the applicant during conduct of the proceedings is as follows: 1. Mr Bickley requested, and was granted, an adjournment of the first preliminary hearing on 17 February 2015 but then failed to appear at the second preliminary hearing on 5 March 2015, notwithstanding that the Court allowed him to appear by telephone and warned him in an email dated 3 March 2015, that costs may be awarded against him if he did not attend. The costs incurred by the applicant in attending the preliminary hearing on 5 March 2015, were directly as a result of Mr Bickley's request for an adjournment in February 2015; 2. although Mr Bickley requested the adjournment on 17 February 2015 for the express purpose of preparing evidence in response to the applicant's evidence, Mr Bickley failed to file or serve any evidence during the course of the entire proceedings; 3. prior to the final hearing, Mr Bickley tried to sell the property where the trees were located without giving any notice to the applicant. The applicant therefore incurred costs in obtaining the contract for sale, and in informing the real estate agent and conveyancer acting for Mr Bickley that there had been no disclosure to the potential purchasers that the property was currently involved in proceedings before the Court; 4. the applicant filed and served its evidence in accordance with the directions made by the Court, whereas Mr Bickley ignored all orders of the Court, served no evidence, and filed his appearance 12 days late; 5. Mr Bickley made claims that the applicant's garage was an illegal structure without any evidence supporting the allegation, but which nevertheless had to be met by the applicant; and 6. the applicant was prepared to accept compensation in the amount of $4,637.50 from Mr Bickley on 18 February 2014, but Mr Bickley did not reply to the offer. Mr Bickley again rejected this offer on 9 April 2015. At 8.18pm on the day before the final on-site hearing at Freshwater, Mr Bickley consented to the orders made by the Court on 22 April 2015. The orders made by the Court were in exactly the same terms as the offer made to Mr Bickley by the applicant on 21 April 2015 (The Owners-Strata Plan No 6636 v Bickley [2015] NSWLEC 1109 at [10]). The orders included the removal of the three trees and payment of compensation by Mr Bickley to the applicant in the amount of $7500. This amount was more than applicant was prepared to accept in February 2014, almost a year prior to commencing the proceedings. The fact that Mr Bickley did not consent to these orders until 8.18pm on the night before the hearing meant that the applicant incurred costs in preparing for and attending the hearing, costs which would not have been necessary had Mr Bickley agreed to the terms of the applicant on 9 April 2015, or within a reasonable time prior to the final hearing.
4. The unreasonable conduct of Mr Bickley has regrettably continued since the hearing: 1. the applicant's notice of motion for costs was initially given a hearing date of 20 May 2015, however, on that date there was no appearance by Mr Bickley. The hearing was adjourned with attendant costs having to be thrown away by the applicant. As a matter of prudence, the Court ordered the applicant to file and serve an affidavit of service. Had Mr Bickley attended on 20 May 2015, the preparation of that affidavit would not have been required and no wasted costs would have been incurred by the applicant; and 2. none of the orders made by the Court for the preparation for the hearing of the notice of motion for costs have been complied with by Mr Bickley.

It is Fair and Reasonable that Mr Bickley Pay the Applicant's Costs

1. In my opinion, the conduct of Mr Bickley described above compels the conclusion that he should pay the applicant's costs of the proceedings before Fakes C and before me.
2. First, Mr Bickley was aware at all material times leading up to the litigation of the undisputed fact that his trees were the cause of the damage to the retaining wall and the garage wall, and that they would continue to cause damage if not removed. There was no relevant change in circumstances or in knowledge between Mr Bickley's continual rejection of the applicant's requests that he take steps to remedy the situation and his eventual acquiescence to, on the night prior to the hearing, the consent orders made by the Court on 22 April 2015. No satisfactory explanation has been provided as to why he could not have offered to take the action he subsequently agreed to take with respect to the trees and the compensation payable earlier.
3. Second, had Mr Bickley acted earlier, including accepting the offer made by the applicant on 18 February 2015, the costs of the hearing could have been avoided.
4. Third, the offer represented, a substantial discount on what Mr Bickley ultimately agreed to pay to the applicant by way of compensation. Its rejection by him was, in the absence of any explanation for doing so, also unreasonable.
5. Fourth, as was held by Preston J in Tou v Maskiney [2010] NSWLEC 105, Mr Bickley was not entitled to repel all reasonable demands by the applicant to remedy harm being caused by his trees to its property until such time as proceedings were commenced. As his Honour stated in that case (at [27]): I reject Ms Welshman's submission that a tree owner is entitled to repel any demands by a neighbour who has suffered, is suffering and will continue to suffer property damage caused by the tree owner's tree, however reasonable, until such time as the neighbour brings proceedings. That is indeed unreasonable conduct.
6. Fifth, by his conduct, Mr Bickley caused unnecessary delay in the finalisation of the proceedings.
7. Finally, I observe that while Mr Bickley's conduct after the proceedings had concluded before Fakes C is irrelevant to whether or not it is fair and reasonable to pay the applicant's costs of the proceedings, it nevertheless assists to reinforce the overall characterisation of his conduct as unreasonable, and it is material to my finding that he should be made to pay the applicant's costs of the motion.

Fix Costs or as Agreed or Assessed?

1. The applicant seeks an order that the costs of the proceedings, and of this motion, be payable fixed in the sum of $12,944.21. The applicant submitted that an award of fixed costs was preferable because otherwise further delay and further costs would result in having to have the costs assessed, particularly in circumstances where it is highly unlikely that Mr Bickley, given his conduct to date, would agree to a fixed amount of costs to be payable by him.
2. In support, an itemised schedule of costs, both professional and disbursements, was contained in Mr Prestipino's affidavit affirmed 17 June 2015. Annexed to the affidavit were two bills of costs issued to the applicant on 13 February 2015, for $2,510.33, and 8 April 2015, in the amount of $5,332.64.
3. The power to award a specified gross sum instead of assessed costs is contained in s 98(4) of the Civil Procedure Act 2005: (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.
4. In Puruse Pty Ltd v Council of the City of Sydney [2009] NSWLEC 163; (2009) 169 LGERA 85 the Court summarised the principles applicable to the exercise of the Court's discretion to make an award of costs fixed in a specific sum (at [83]-[84], subsequently applied in Woollahra Municipal Council v Tilley [2010 NSWLEC 75 at [25] and Broken Hill City Council v Tumanic [2012] NSWLEC 162 at [63]): 83 The principles applicable in exercising the discretion to make an award of costs fixed in a specific sum are set out in the decision of Harrison J in Hamod v State of New South Wales (No 13) [2009] NSWSC 756 at [3]-[4], citing Einstein J in Idoport Pty Limited v National Australia Bank Limited [2007] NSWSC 23 at [9]: 9 For present purposes it seems convenient to commence with a recitation of the principles which inform the exercise of the discretion: i. the purpose of the rule is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation: Beach Petroleum NL v Johnson (1995) 57 FCR 119, Von Doussa J page 265: [following Purchase J in Leary v Leary [1987] 1 All ER 261 who described the purpose of the rule allowing the fixing of a gross sum as "the avoidance of expense, delay and aggravation involved in protracted litigation arising out of taxation" (All ER page 265)]; ii. the touchstone requires that the Court be confident that the approach taken to estimate costs is logical, fair and reasonable: Beach Petroleum at [16]; iii. the fairness parameter includes the Court having sufficient confidence in arriving at an appropriate sum on the materials available: Harrison v Schipp (2002) 54 NSWLR 738, per Giles JA at para [22]; [following (Wentworth v Wentworth (CA, 21 February 1996, unreported, per Clarke JA) and adopted in Sony Entertainment v Smith (2005) 215 ALR 788; [2005] FCA 228; BC200500963 at para [199]; iv. a gross sum assessment, by its very nature, does not envisage that a process similar to that involved in a traditional taxation or assessment of costs should take place: Harrison v Schipp at para [22]; v. the gross sum "can only be fixed broadly having regard to the information before the Court": Beach Petroleum at 124; [In Hadid v Lenfest Communications Inc [2000] FCA 628 at [35] it was said that the evidence enabled fixing a gross sum "only if I apply a much broader brush than would be applied on taxation, but that ... is what the rule contemplates".] vi. nevertheless the power to award a gross sum must be exercised judicially, and after giving the parties an adequate opportunity to make submissions on the matter: Leary v Leary [1987] 1 WLR 72 at 76, and Beach Petroleum NL v Johnson (No.2) (1995) 57 FCR 119 at 120'; vii. in terms of the necessity for the approach taken to be logical, fair and reasonable, Von Doussa J in Beach Petroleum NL & Anor v Johnson & Ors (No 2) (1995) 57 FCR 119, put the matter as follows, at paras [16]: 'On the one hand the Court must be astute to prevent prejudice to the respondents by overestimating the costs, and on the other hand must be astute not to cause an injustice to the successful party by an arbitrary "fail safe" discount on the cost estimates submitted to the Court: Leary v Leary at 265.' 84 These principles were endorsed by this Court in SDA Australia Pty Ltd v Ashfield Municipal Council [2009] NSWLEC 123 at [16] per Lloyd J. In that case his Honour said (at [12]-[16]): 12 Mr Clay relies upon a number of authorities, in particular the judgment of Palmer J in Sherborne Estate (No 2): Vanvalen v Neaves [2005] NSWSC 1003; (2005) 65 NSWLR 268 in which his Honour outlined some of the principles that apply when a court is considering whether to exercise its power under s 98(4). 13 Palmer J notes, at [40], that one of the justifications for exercising that power is to give effect to the overriding purpose facilitating the just, quick and cheap resolution of the real issues in dispute as mandated by s 56 of the Civil Procedure Act. His Honour continued to state, at [41], however, that the power under section 98(4) must be exercised judicially. That is, the exercise of the power must have a proper factual foundation and must be explicable according to legal principle. 14 His Honour went on to say, at [42], that the court's decision under s 98(4) would have to be an informed one; that is, founded on a consideration of the costs actually incurred, the circumstances at the time at which they were incurred, whether they were reasonable in those circumstances and what would have been a reasonable amount to have incurred. 15 In that particular case, Palmer J noted that there was no evidence before the Court sufficient to enable the Court to make any logical, fair and reasonable estimate of what would be an appropriate gross sum to incorporate in the costs order. 16 Mr Clay also refers me to the judgment of Einstein J in Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 in which his Honour also set out, at [9], a number of principles relevant to the exercise of the discretion to make an order under s 98(4)(c) of the Civil Procedure Act. Those principles include, inter alia (i) that the court has to be confident that the approach taken to estimate costs is logical, fair and reasonable; and (ii) the courts must have sufficient confidence in arriving at an appropriate sum of materials available.
5. There is no doubt that the order sought by the applicant would avoid the expense, delay and aggravation involved in the assessment process.
6. However, and notwithstanding that the amount claimed does not appear to be excessive, I cannot with confidence conclude that the sum sought is either appropriate or that it would be logical, fair or reasonable to award costs fixed in this sum. This is because, first, the underlying material attached to Mr Prestipino's affidavit of 17 June 2015, founding the calculation of the fixed amount, is incomplete. The amounts detailed in the attached bills of costs do not add up to the fixed sum claimed, they total no more than $7,842.97. This leaves a short fall of approximately $5,000, the basis of which is unclear. I was not willing, particularly in an ex parte hearing, to accept from the bar table evidence as to how this additional amount of costs was arrived at. Second, there was no evidence that formal assessment would disadvantage the applicant, other than its participation in the process (Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 at [28]-[29]). And third, the length and complexity of the assessment process is unlikely to be burdensome or disproportionately costly.
7. For these reasons I decline to make an order that the applicant's costs be payable in a fixed sum.
8. As the applicant has been successful in their notice of motion seeking an order for costs, it should also receive their costs of the motion, also as agreed or assessed (Tou at [31]).

Orders

1. The formal orders of the Court are therefore as follows: 1. the respondent is to pay the applicant's costs of the proceedings, as agreed or assessed; 2. the respondent is to pay the applicant's costs of its notice of motion filed 8 May 2015, as agreed or assessed; and 3. the exhibits are to be returned.

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