The Owners - Strata Plan 85044 v Murrell; Murrell v The Owners - Strata Plan 85044 - [2020] NSWSC 1754 - NSWSC 2020 case summary

Supreme Court of NSW|2020-12-07|Before: Williams J, Community Association DP

(NSW) 227 Ex parte M'Gregor (1881) 2 LR (NSW) 45 Ex parte McEvoy (1868) 8 SCR (NSW) 16 Gordon v Lever (No 2) (2019) 101 NSWLR 427; [2019] NSWCA 275 O'Brien v Wilson (1884) 11 WN (NSW) 53 Pelechowski v Registrar, Court of Appeal (1999) 198 CLR 435; [1999] HCA 19 Shi v ABI-K Pty Ltd (2014) 87 NSWLR 568; [2014] NSWCA 293 Studholme v Rawson (2020) 19 BPR 40,293; [2020] NSWCA 76 The Owners - Strata Plan 85044 v Murrell; Murrell v The Owners - Strata Plan 85044 (2020) 19 BPR 40,575; [2020] NSWSC 20 The Owners - Strata Plan 85044 v Murrell; Murrell v The Owners - Strata Plan 85044 (No 2) [2020] NSWSC 1542 Tonna v Mendonca (No 2) [2020] NSWSC 306 Category: Costs Parties: In proceeding 2019/201673:

The Owners - Strata Plan 85044 (Plaintiff) George Anthony Calvert Murrell (First Defendant) Deirdre Frances Murrell (Second Defendant)

George Anthony Calvert Murrell (First Plaintiff) Deirdre Frances Murrell (Second Plaintiff) The Owners - Strata Plan 85044 (Defendant) Representation: In proceeding 2019/201673:

Counsel: Mr J J Young with Mr M Dalla-Pozza (Plaintiff) Mr T A Alexis SC with Ms M Ellicott (Defendants)

Solicitors: Comino Prassas Lawyers (Plaintiff) Hones Lawyers (Defendants)

Counsel: Mr T A Alexis SC with Ms M Ellicott (Plaintiffs) Mr J J Young with Mr M Dalla-Pozza (Defendant)

Solicitors: Hones Lawyers (Plaintiffs) Comino Prassas Lawyers (Defendant) File Number(s): 2019/201673; 2019/299582 Publication restriction: N/A

Judgment

On 1 October 2020, I delivered the principal reasons for judgment in proceeding 2019/201673 (the Owners Corporation proceeding) and proceeding 2019/299582 (the Murrell proceeding): The Owners - Strata Plan 85044 v Murrell; Murrell v The Owners - Strata Plan 85044 (2020) 19 BPR 40,575; [2020] NSWSC 20 (the Principal Judgment).
These reasons address the issue of the costs of both proceedings. Familiarity with the Principal Judgment is assumed and terms used in these reasons have the same meaning as in the Principal Judgment.
In the Principal Judgment, I upheld the claim that the Murrells had trespassed into the Airspace owned by the Owners Corporation on several occasions and gave judgment for the Owners Corporation in the sum of $10,000. I otherwise dismissed the Owners Corporation proceeding. In the Murrell proceeding, I upheld the Murrells' claim for the imposition of an easement over the Airspace pursuant to s 88K of the Conveyancing Act 1919 (NSW) and dismissed the Murrells' other claims.
I made directions for the parties to provide to my Associate within 14 days agreed draft orders giving effect to the Principal Judgment concerning the easement to be imposed pursuant to s 88K of the Conveyancing Act. I also directed the parties to provide draft orders concerning the costs of the two proceedings or, in the absence of agreement, a note setting out the costs orders for which each party contends, together with any supporting evidence. I ordered that the question of costs be determined on the papers.
On 13 October 2020, the Murrells filed a notice of motion in which they sought to set aside the judgment for the Owners Corporation in the sum of $10,000. The Murrells indicated that, if they succeeded on the notice of motion, they would seek a declaration to the effect that they had the benefit of implied easement over the Airspace (being a declaration that had not been sought in the pleadings or informally during the final hearing) and they may ask the Court not to impose an easement pursuant to s 88K after all. In those circumstances, the time for compliance with the abovementioned directions was extended pending the determination of the notice of motion.
On 3 November 2020, I dismissed the Murrells' notice of motion: The Owners - Strata Plan 85044 v Murrell; Murrell v The Owners - Strata Plan 85044 (No 2) [2020] NSWSC 1542.
On 17 November 2020, the parties provided agreed draft orders in relation to the imposition of the easement over the Airspace pursuant to s 88K of the Conveyancing Act and submissions concerning the costs of both proceedings.
I am satisfied that the parties' agreed draft orders concerning the easement are appropriate to give effect to the Principal Judgment, and orders will therefore be made in the terms proposed by the parties.
In relation to costs, the Murrells contend that there should be no order as to the costs of the two proceedings. The Owners Corporation seeks an order for the Murrells to pay its costs of both proceedings.

Owners Corporation proceeding

The Owners Corporation submitted that costs should follow the event of the judgment for $10,000 in its favour, and the Murrells should therefore be ordered to pay its costs of the proceeding: Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.1.
The Murrells submitted that the Court should depart from r 42.1 and make no order as to the costs of the proceeding because: 1. UCPR r 42.34 applies; 2. the residual discretion under UCPR r 42.34 to order the Murrells to pay the Owners Corporation should not be exercised in all the circumstances of this case; and 3. the Owners Corporation's conduct was "unreasonable and, in many respects, belligerent".

UCPR r 42.34

UCPR r 42.34 relevantly provides: "(1) This rule applies if - (a) in proceedings in the Supreme Court, other than defamation proceedings, a plaintiff has obtained a judgment against the defendant or, if more than one defendant, against all the defendants, in an amount of less than $500,000, and (b) the plaintiff would, apart from this rule, be entitled to an order for costs against the defendant or defendants. (2) An order for costs may be made, but will not ordinarily be made, unless the Supreme Court is satisfied that - (a) for proceedings that could have been commenced in the District Court - the commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted…"
The conditions of r 42.34(1) are satisfied. As the Murrells submitted, the judgment for the Owners Corporation in the sum of $10,000 is significantly below the $500,000 threshold in r 42.34(1)(a). In my view, apart from the potential application of r 42.34(2), the Owners Corporation would be entitled to an order for its costs in accordance with the usual rule in r 42.1 that costs follow the event. (I will explain the reasons for that view when addressing the Murrells' alternative submission that the Owners Corporation should not have an order for its costs because its conduct was unreasonable.)
It is therefore necessary to consider whether: 1. the Owners Corporation proceeding could have been commenced in the District Court; and 2. if so, whether the commencement and continuation of the Owners Corporation proceeding in the Supreme Court was warranted; and 3. if not warranted, whether the Court should nevertheless exercise the residual discretion that the Murrells accept the Court has under s 98 of the Civil Procedure Act 2005 (NSW) and UCPR r 42.34(2) to make a costs order in favour of the Owners Corporation.
The Owners Corporation's submissions did not address these questions, or refer to r 42.34 at all.
As to the first question, the Murrells submitted that the District Court had jurisdiction under s 44(1)(a) and s 46 of the District Court Act 1973 (NSW) to entertain the Owners Corporation's claims in trespass and nuisance and to grant ancillary equitable relief, including injunctive relief.
Subject to on qualification, I accept that submission. If brought in the Supreme Court, the Owners Corporation proceeding would be assigned to the Common Law Division: District Court Act, s 44(1)(a)(i). Although the Owners Corporation's pleading did not specify the quantum of damages sought for trespass and nuisance, the damages sought in closing submissions were $20,000 as general damages for trespass (including the trespasses into the Airspace and the alleged trespasses relating to the erection of the stud wall and the painting of the Boundary Wall). In addition, the Owners Corporation sought general damages of $40,000 for the alleged acts of nuisance. Aggravated and exemplary damages were also sought. On any view, the amount claimed did not exceed the District Court's jurisdictional limit of $750,000. The sum total of those amounts claimed as general damages fall comfortably within the District Court's jurisdictional limit of $750,000: District Court Act, s 44(1)(a)(ii). The District Court has power to award injunctive relief pursuant to s 46(1) of the District Court Act ancillary to its jurisdiction to hear and dispose of actions: Pelechowski v Registrar, Court of Appeal (1999) 198 CLR 435; [1999] HCA 19.
The qualification mentioned above is that s 48 of the District Court Act places certain limitations on the District Court's jurisdiction. Sub-sections (2) and (3) relevantly provide: "(2) Subject to subsection (3), the Court shall not have jurisdiction in an action in which title to land the value of which is more than the Court's jurisdictional limit is in question. (3) If the title to land the value of which is more than the Court's jurisdictional limit incidentally comes in question in an action, the Court shall have power to decide the claim which it is the immediate object of the action to enforce, but the judgment of the Court shall not be evidence of title between the parties or their privies in other proceedings in the Court or in any proceedings in any other court…"
An interesting issue arises as to whether title to the Airspace and/or title to the land on which the Boundary Wall is located was in question in the Owners Corporation proceeding within the meaning of s 48(2) of the District Court Act. If so, the District Court would not have had jurisdiction if the value of the Airspace or the land on which the Boundary Wall is located exceeded $750,000. The Murrells' submissions did not address this issue.
As presently advised, I am not aware of any authority on the interpretation of s 48(2) of the District Court Act.
There are some authorities concerning the interpretation of similar provisions in predecessor legislation, but those authorities do not speak with one voice.
Ex parte Charlton (1869) 8 SCR (NSW) 158 at 160-161 (Stephen CJ, Cheeke J agreeing) suggests that an action in trespass is an action in which title to land is in question, as proof of the plaintiff's ownership of the land on which the trespass was allegedly committed is an essential element of the cause of action in trespass. Even if the defendant does not dispute the plaintiff's title, the defendant cannot confer jurisdiction on the District Court by admission, consent or acquiescence.
However, Ex parte McEvoy (1868) 8 SCR (NSW) 16 at 17-18 (Stephen CJ, Hargrave and Cheeke JJ agreeing) suggests that the District Court has jurisdiction in an action for trespass unless there is a bona fide dispute about the plaintiff's title to the land in question: see also Ex parte Farrelly (1968) 7 SCR (NSW) 227; De Faur v Nichollas (1876) 14 SCR 382; O'Brien v Wilson (1884) 11 WN (NSW) 53.
Irrespective of which of the above two lines of authority may be preferred, it is my opinion that title to land was in question in the Owners Corporation proceeding within the meaning of s 48(2) of the District Court Act.
The Murrells' defence pleaded that the Owners Corporation's title to the Airspace was subject to the Restriction, and the Restriction (on the construction for which the Murrells contended) permitted the Murrells to enter into the Airspace to repair, maintain and/or improve structures on their land beneath the Airspace. Although the Murrells' ultimately failed in the construction of the Restriction for which they contended, this was a bona fide defence on the pleadings. In Ex parte M'Gregor (1881) 2 LR (NSW) 45, the Full Court of this Court, by majority, held that a defence to a trespass a claim which relied on a disputed right of way over certain land raised a question of title to land which had the effect of ousting the jurisdiction of the District Court under the predecessor provision to s 48(2) of the District Court Act.
It is not necessary to determine whether the additional issues concerning an implied easement of necessity over the Airspace that were raised by the Murrells during the hearing, but not pleaded, are a further matter that would attract the operation of s 48(2) of the District Court.
In addition, the claim in trespass in respect of the erection of the stud wall and the painting of the Boundary Wall turned entirely on whether the Boundary Wall was located on the common boundary of the land owned by the Owners Corporation and the land owned by the Murrells, or on the Owners Corporation's land or the Murrells' land adjacent to that common boundary. This involves a bona fide dispute giving rise to a question of title to land: see Ex parte Farelly (supra) at 229.
It is not possible to reach a final view about whether s 48(2) of the District Court Act deprived the District Court of jurisdiction in this matter because no evidence was adduced of the value of the Airspace or the land on which the Boundary Wall was said to be situated.
As to the second question identified in [14] above, I am of the view that the continuation of the Owners Corporation proceeding in this Court was warranted from the time that the Murrells commenced the Murrell proceeding in this Court on 25 September 2019, even assuming that the District Court had jurisdiction to determine the claims for relief in the Owners Corporation proceeding.
The Murrell proceeding was commenced in the Equity Division of this Court less than three months after the commencement of the Owners Corporation proceeding in the Common Law Division of the Court. The proper construction of the Restriction was a key issue raised by the Murrells in both proceedings: see Principal Judgment at [38]-[39] and [49]-[50]. The outcome of the Murrells' claims for declaratory relief concerning the proper construction of the Restriction and their alternative claims under s 89 and s 88K of the Conveyancing Act were clearly relevant to the Owners Corporation's claim for injunctive relief: see Principal Judgment at [45] and [49].
The Murrells' written submissions did not suggest that their claims for declaratory relief and their claims for relief under s 89 and s 88K could have been heard and disposed of in the District Court. It is doubtful that the District Court would have had the power to grant the declaratory relief sought by the Murrells: see BOC v MDL [2019] NSWSC 278 at [31]. Only this Court is able to make orders pursuant to s 89 and s 88K of the Conveyancing Act: see the definition of "Court" in s 7 of the Conveyancing Act.
In my opinion, if the Owners Corporation proceeding had been commenced in the District Court, the proceeding would inevitably have been transferred to this Court a short time later when the Murrell proceeding was commenced in this Court. Given the overlap of issues in both sets of proceedings, it would have been absurd for the two proceedings not to be heard together. Both the Murrells and the Owners Corporation recognised this when they consented to orders made to facilitate the two proceedings being heard together within weeks of the commencement of the Murrell proceeding. Because the Owners Corporation proceeding had been commenced in this Court rather than the District Court, the parties were spared from incurring the costs of applying for the proceeding to be transferred to this Court.
It remains to consider the third question identified in [14] above.
As the continuation of the Owners Corporation proceeding in this Court was warranted, this is not a case in which a costs order in favour of the successful plaintiff will not ordinarily be made by reason of UCPR 42.34(2). Nevertheless, the Murrells submitted that a costs order should not be made in favour of the Owners Corporation because it a substantial portion of the Owners Corporation's claims were unsuccessful. Those unsuccessful claims, it was submitted, took up a substantial amount of written evidence and hearing time. In this regard, the Murrells noted that: 1. the Owners Corporation's claim in nuisance was wholly unsuccessful because it did not have standing to pursue this claim on behalf of the Unit Owners; 2. the Owners Corporation did not show that the Murrells, or their agents, committed a trespass in respect of the claims relating to the Boundary Wall; 3. the Court found that the defence of necessity was established in respect of certain entries into the Airspace; 4. the claim for injunctive relief was unsuccessful; 5. the Court rejected the claim for aggravated and exemplary damages; and 6. the Court did not award damages in respect of the expenses which were particularised in amended statement of claim filed on 22 August 2019, awarding only general damages in the sum of $10,000.
The Murrells contended that the cumulative result of these failures was not the "event" that the Owners Corporation sought to vindicate by the prosecution of its claims in trespass and nuisance and that the the Owners Corporation was substantially unsuccessful.
In my opinion, the mixed outcome of the Owners Corporation's trespass and nuisance claims is no reason to exercise the residual discretion under UCPR r 42.34, or to depart from UCPR r 42.1, by declining to make a costs order in favour of the Owners Corporation as the successful plaintiff.
Where a party has achieved practical success in the outcome of their claim, the Court will ordinarily award to that party their costs of the proceeding, without attempting to differentiate between the issues on which that party succeeded and any issues on which that party failed. In an appropriate case, the Court may apportion the costs of the proceeding based on the particular issues in the proceeding.
The principles governing the apportionment of costs were helpfully summarised by Ward CJ in Eq in Tonna v Mendonca (No 2) [2020] NSWSC 306. Her Honour said (at [169]-[176]): "169. There is, in the authorities, a tension between the accepted general principle that a successful party should have the whole costs of the proceeding (including the costs of an issue on which it has failed) (as noted in Windsurfing International Incorporated v Petit (1987) AIPC 90-441 (Windsurfing)) and the recognition that in an appropriate case a costs order may be formulated to reflect the degree of success on distinct issues (see, eg, Lavender View v North Sydney Council (No 2) [1999] NSWSC 775 at [37]-[38], per Rolfe J; Uniline Australia Ltd v Sbriggs Pty Ltd (No 2) (2009) FCR 136; [2009] FCA 920 per Greenwood J; Leallee v The Commissioner of the NSW Department of Corrective Services [2009] NSWSC 518 at [17]-[29] per Price J; Sahab Holdings Pty Ltd v Registrar-General (No 3) [2010] NSWSC 403 at [36]-[40], per Slattery J). There are certainly cases where it is considered appropriate to apportion costs as between particular issues in proceedings, where a party has succeeded on some, but not others, of multiple issues. 170. The rationale underlying the general principle is reflected in the observation made by Jacobs J in Cretazzo at 16 that: '… trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.' 171. The rationale underlying a departure from the ordinary costs rule appears to be that, where there are multiple issues, the application of the general rule may involve hardship where a party succeeds on some issues but not others (see James v Surf Road Nominees Pty Limited (No 2) [2005] NSWCA 296 (James v Surf Road Nominees) at [32], per Beazley JA, as Her Excellency then was, Tobias, and McColl JJA). 172. However, it has been said more than once that the discretion to apportion costs is one to be exercised only in the most exceptional of circumstances (see for example Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 42 FLR 213 at 220, per Fisher J; Stena Rederi Aktiebolag v Austal Ships Sales Pty Ltd [2007] FCA 1141 at [12], per Tamberlin J). 173. A helpful summary of the principles in this area can be found in Corbett Court Pty Limited v Quasar Constructions (NSW) Pty Limited [2008] NSWSC 1423, where Hammerschlag J (referring to the relevant authorities collated by White J in Short v Crawley (No 40) [2008] NSWSC 1302, at [25]-[32]) said the following as to the question when the general rule may be displaced (at [31]): (a) a costs order in favour of a successful party can be modified to reflect its failure on particular issues even if the successful party did not act unreasonably in raising those issues: Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd; (Supreme Court of New South Wales, Hodgson CJ in Eq, 3 June 1998, unreported, BC9802305 at 10-11); (b) if a party unreasonably pursues or persists with points which have no merit, such conduct will constitute a consideration relevant to the ordering of costs even in circumstances where that party is generally successful: Oshlack v Richmond River Council (1998) 193 CLR 72 at 122; (c) conduct in relation to the matter may be discreditable to an extent warranting a party being deprived of costs: Jamal v Secretary Department of Health (1988) 14 NSWLR 252 at 271; (d) where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed: Hughes v Western Australian Cricket Association (Inc) (1986) 8 ATPR 40-748 at 48,136; (e) where the proceedings involve multiple issues departure from the general rule may be warranted particularly where the losing party has succeeded on issues which occupied significant time. Nevertheless the application of the general rule may involve hardship where a party succeeds on some issues but fails on others particularly where the losing party succeeds on some issues. However unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Ritchie's Uniform Civil Procedure NSW at [42.1.15]; Waters v PC Henderson (Australia) Pty Ltd (New South Wales Court of Appeal, 6 July 1994, unreported, BC9404952 at 5); Short v Crawley (No 40) at [27]-[28]; (f) a successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them: Hughes v Western Australian Cricket Association (Inc) at 48,136. 174. Thus the circumstances in which apportionment of costs as between different issues may be appropriate include: where, in respect of one or more issues, the successful party has "unfairly, improperly, or unnecessarily increased the costs" (Waddell J, as his Honour then was, in Windsurfing); where the bulk of the time has been taken on an issue on which the unsuccessful party had succeeded (see, eg, Waters v PC Henderson at 3, per Mahoney JA; Hughes v Western Australian Cricket Association (1986) ATPR 40-748 (Hughes) per Toohey J); or where a particular issue or group of issues is clearly dominant or separable (see, eg, Waters v PC Henderson at 3, per Mahoney JA; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [6], per Beazley JA (as Her Excellency was then) McColl, and Basten JJA). 175. In Pacific General Securities Ltd v Soliman & Sons Pty Ltd (Costs) [2006] NSWSC 724, Brereton J (at [10]) cited with approval Waterman v Gerling Australia Insurance Co Ltd (Costs) [2005] NSWSC 1111, in which it was held (at [10]) that it might be appropriate to award costs of a separate issue where a clearly defined and separate issue (on which the otherwise successful party failed) had occupied a significant part of the trial. Similarly, in Yazgi at [24], it was said that it may be appropriate to deprive a successful party of costs or a portion of costs if the matters upon which that party was unsuccessful took up a significant part of the trial either by way of evidence or argument. 176. Ultimately, as Finkelstein and Gordon JJ observed in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 (at [5]): 'Costs are in the court's discretion. Fairness should dictate how that discretion is to be exercised. So, if an issue by issue approach will produce a result that is fairer than the traditional rule, it should be applied.'"
The "event" in the present case is that the Owners Corporation succeeded in establishing most of the alleged instances of trespass in respect of the Airspace. Whilst the Murrells were able to establish the defence of necessity in respect of some of the 13 entries into the Airspace between November 2018 and July 2019, this did not materially detract from the Owners Corporation's substantial success regarding the other instances of trespass into the Airspace. The award of $10,000 in compensatory damages reflected the global success of the Owners Corporation in proving its claim in trespass in relation to the Airspace.
As will be apparent from the Principal Judgment, the issues on which the Owners Corporation failed did not unfairly, improperly or unnecessarily increase costs and did not dominate or take up significant time at the trial. In particular: 1. the Owners Corporation's claim in relation to trespasses to the Airspace dominated the trial and occupied most the of the time during the hearing and during opening and closing submissions; 2. the Owners Corporation's unsuccessful claim in trespass regarding the erection of the stud wall and the painting of the Boundary Wall occupied very little hearing time and did not involve the preparation of a considerable amount of written material; 3. that part of the trespass claim which related to various expenses incurred by the Owners Corporation was not the subject of affidavit or oral evidence and was not pressed at trial; 4. the Owners Corporation's unsuccessful claim for aggravated and exemplary damages did not occupy any material time at the trial; 5. the Owners Corporation was wholly unsuccessful in respect of its private nuisance claim, and that claim did involve the preparation of affidavit evidence. However, the prosecution and defence of this claim did not take up substantial oral evidence or hearing time over and above the Airspace trespass claim in which the Owners Corporation achieved substantial success; and 6. the Owners Corporation's claim for an injunction restraining the Murrells from entering into the Airspace was unsuccessful only because the Murrells succeeded in obtaining an order for the imposition of an easement under s 88K of the Conveyancing Act over the Airspace in the Murrell proceeding: see Principal Judgment at [487]-[488]. As will become apparent, the Murrells must pay the costs of the s 88K claim. It therefore would be unfair to deny to the Owners Corporation its costs on the basis that it failed in its claim for injunctive relief.

Unreasonable conduct of the Owners Corporation

As noted [11] above, independently of UCPR r 42.34, the Murrells submit that the Owners Corporation should not have an order for its costs on the basis that it engaged in unreasonable conduct.
As I understood this submission, the Murrells contend that it was the Owners Corporation's unreasonable conduct that resulted in the commencement of the Owners Corporation proceeding.
The Murrells rely on the correspondence between the parties set out in the Principal Judgment at [186]-[303] as showing that the Owners Corporation completely failed to engage in any sensible discussions or negotiations to resolve what was effectively a neighbourhood dispute. The Murrells point to: 1. the three letters sent by Professor Murrell to Mr Comino (the Owners Corporation's solicitor) dated 9 and 27 May 2019 and 5 June 2019: see Principal Judgment at [234]-[241]; and 2. the finding in the Principal Judgment at [222] that the pattern of correspondence "was that the Owners Corporation was countering each round of information provided by Professor Murrell with a demand for further detail and/or the imposition of additional conditions that the Murrells would have to agree to before the Owners Corporation would even consider granting permission".
I accept the Murrells' submission that the Owners Corporation's conduct was generally unreasonable. As stated in the Principal Judgment at [222], the level of precision in the information required by the Owners Corporation reached an unrealistic level by 1 May 2019. The reality was that the Owners Corporation was not prepared to grant to the Murrells an easement on any terms: Principal Judgment at [277]. This was a key factor that contributed to the hostility between the parties and the commencement of the Owners Corporation proceeding.
However, it is not clear to me why unreasonable conduct of a plaintiff that results in the commencement of a proceeding should deprive the plaintiff of a costs order when the plaintiff subsequently succeeds in that proceeding.
In any event, the unreasonable conduct of the Owners Corporation was responsive to the equally unreasonable conduct of the Murrells. From the outset, the Murrells adopted the attitude that they would inform the Owners Corporation what they were doing in the Airspace but that they did not require the Owners Corporation's consent to enter the Airspace: see Principal Judgment at [187]-[191]. As stated in the Principal Judgment at [229]-[233] and [325], the Murrells' conduct in continuing to cause or permit their contractors to enter the Airspace during the period from November 2018 to June 2019 was not informed by any legal advice they had received at the time. Despite this, and over the opposition of the Owners Corporation, the Murrells continued to access the Airspace in the full knowledge that the Airspace was owned by the Owners Corporation and that the Owners Corporation did not consent to the Murrells entering into the Airspace.
In circumstances where both parties have been equally unreasonable, I do not regard the unreasonableness of the Owners Corporation as a factor that should deprive it of its costs as the successful plaintiff.

Conclusion in respect of the Owners Corporation proceeding

For the reasons set out above, the Murrells will be ordered to pay the costs of the Owners Corporation in the Owners Corporation proceeding.

The Murrell proceeding

As noted at [3] above, the Murrells were successful in obtaining an order for the imposition of an easement pursuant to s 88K of the Conveyancing Act. The Murrells failed in their other claims in the proceeding.
In the Principal Judgment, I said (at [496], footnotes omitted): "Section 88K(5) of the Conveyancing Act provides that the costs of proceedings under s 88K are payable by the applicant for the easement, subject to any order of the Court to the contrary. I am not presently aware of any reason why the Court should order to the contrary in this case. If no such reason is identified, and if costs follow the event in relation to the balance of the Murrell proceeding, this would result in the Murrells paying the Owners Corporation's costs of the Murrell proceeding."
The Murrells submitted that the Court should depart from the usual position in s 88K(5) of the Conveyancing Act and make an order to the contrary that each party pay their own costs of the Murrell proceeding. This order was said to be appropriate due to the Owners Corporation's belligerent and unreasonable conduct in the lead up to, and during, the proceeding.
The Murrells developed this submission in two ways.
First, the Murrells submitted that the Owners Corporation displayed and maintained an entrenched resistance to a reasonable resolution of the dispute concerning the access of the Airspace and the grant of an easement. The Murrells again referred to the events set out in the Principal Judgment at [186]-[303] as evidence of intransigence and unreasonable conduct on the part of the Owners Corporation. In particular, the Murrells referred to their offers made to the Owners Corporation for the grant of an easement made on 3 December 2019, 24 April and 29 April 2020, all of which were either ignored or rejected by the Owners Corporation.
The Murrells accept that, in order to persuade the Court to depart from the position in s 88K(5) of the Conveyancing Act, they must do more than establish that the Owners Corporation rejected reasonable offers of compromise. That concession was appropriately made: Shi v ABI-K Pty Ltd (2014) 87 NSWLR 568; [2014] NSWCA 293 at [98]; Studholme v Rawson (2020) 19 BPR 40,293; [2020] NSWCA 76 at [175]-[176] (Basten JA, Bell P and Gleeson JA agreeeing). The Murrells submitted that the Owners Corporation's refusal to accept the offers referred to above, coupled with its unwavering attitude that it would not grant an easement on any terms (see Principal Judgment at [277]), is unreasonable conduct that warrants an order depriving the Owners Corporation of its costs of the Murrell proceeding to which it would otherwise be entitled under s 88K(5).
The Owners Corporation rejected this characterisation of its conduct. It relied on Studholme v Rawson (supra) in which Basten JA, with the agreement of Bell P and Gleeson JA, held (at [175]-[176]) that the owner of the proposed servient tenement was not obliged to accept the imposition of an easement and is entitled to reject reasonable offers without necessarily being exposed to the costs of the proceedings if they went to trial. Merely putting the plaintiffs to proof of the various elements contained in s 88K of the Conveyancing Act could not, of itself, provide any basis for an adverse costs order.
The Owners Corporation submitted that there was no additional element of unreasonable conduct on its part in the proceedings. The Owners Corporation relied on the findings of the Court that both parties had engaged in unreasonable conduct.
In my view, it was not unreasonable for the Owners Corporation to reject the offers made by the Murrells on 3 December 2019 and 24 and 29 April 2020. The easement proposed in those offers did not reflect the terms of the easement which the Court ordered to be imposed in respect of the Airspace, as they included access to the Airspace for improvements and did not specify that the entries into the Airspace would be for a temporary or transitory purpose. For the reasons set out in the Principal Judgment at [409], it was not unreasonable for the Owners Corporation to decline to agree to an easement conferring a right to access the Airspace for the purpose of undertaking improvements to the structures on the Murrells' land. In any event, the Owners Corporation was not obliged to accept the offers and was entitled to put the Murrells to proof in respect of each of the elements in s 88K of the Conveyancing Act: Studholme v Rawson (supra) at [175]-[176].
The unwavering attitude of the Owners Corporation that it would not grant an easement to the Murrells on any terms was unreasonable. However, this attitude was at least partly attributable to the Murrells' unreasonable and unwavering refusal to accept that they required the Owners Corporation's consent to enter the Airspace except in circumstances where entry was reasonably necessary to protect a person or property from a threat of real and imminent harm. For the most part, those circumstances did not exist when the Murrells entered the Airspace repeatedly during the period from November 2018 to June 2019: see Principal Judgment at [141]-[320].
The unreasonableness of the Murrells position is perhaps illustrated by the fact that their first offer to the Owners Corporation proposing the grant of an easement was made on 3 December 2019, several months after the Murrell proceeding was commenced: see Principal Judgment at [479]-[480]. Whilst this was not a basis for depriving the Murrells of an easement under s 88K, it does confirm my view that the Murrells should pay the costs of the proceeding.
In my view, the unreasonable conduct of the Owners Corporation borne out of (at least in part) the unreasonable conduct of the Murrells does not warrant a costs order that departs from the position under s 88K(5) of the Conveyancing Act.
Second, the Murrells submitted that the Owners Corporation engaged in unreasonable conduct during the course of the litigation and the hearing by maintaining various issues without reasonable cause, which caused the Murrells to incur unnecessary expense and prolonged the length of the hearing. This conduct was said to be contrary to the overriding purpose to facilitate the just, quick and cheap resolution of the real issues in the proceedings in s 56 of the Civil Procedure Act.
Examples were given of the Owners Corporation unreasonably opposing the various requirements in s 88K, including the question of whether the proposed easement was reasonably necessary, whether the imposition of the easement was consistent with the public interest, and maintaining the view that the Unit Owners had a compensable interest under s 88K(2)(b) which was contrary to the decision of the Court of Appeal in Community Association DP 270447 v ATB Morton Pty Ltd (2019) 240 LGERA 32; [2019] NSWCA 83 (Morton), albeit in the context of a different statutory scheme. In regard to the last of these issues, the Murrells noted that the issue of the compensable interests of the Unit Owners was the subject of contested expert evidence and detailed submissions, only for the Court to ultimately find that the decision in Morton was directly applicable. It was suggested that this valuation evidence proceeded on a false premise as the decision in Morton meant that the Owners Corporation had no reasonable prospect of succeeding on this issue.
I reject these submissions.
The submissions overlook that the Murrells were only partly successful on their submission that the easement was reasonably necessary for the effective use or development of their land. I found that the easement in the terms sought by the Murrells was not reasonably necessary insofar as it would have allowed access to the Airspace for the purpose of improvements. The terms of the easement imposed under s 88K differ from the terms sought by the Murrells in this respect: see Principal Judgment at [382]-[410]. The Murrells succeeded in establishing the other elements of s 88K only in respect of a more limited easement permitting them to access the Airspace for the purpose of repairs and maintenance, and not in respect of an easement in the terms that they sought.
Moreover, the submissions appear to be based on a misapprehension that the Murrells were required to address only those elements of s 88K that were contested by the Owners Corporation. The onus lay on the Murrells as the party seeking an order for the imposition of an easement to satisfy the Court of each and every matter in s 88K (see the chapeau to s 88K(2)).
The Murrells' submission in relation to Morton is made with the benefit of hindsight and with the knowledge of the Court's findings. The Murrells were not so confident at trial that the Owners Corporation's valuation evidence was based on a false premise. The Murrells' evidence in chief in relation to s 88K(2)(b) did not address any diminution in the value of units in the strata plan (as opposed to the Airspace). I infer that the Murrells made a strategic decision at that stage to present the case on the basis that any diminution in the value of units was not a relevant consideration under s 88K(2)(b). However, when the Owners Corporation put on responsive evidence that addressed the value of units, the Murrells wished to put on evidence in reply addressing the value of units rather than adhering to their original approach. The case was adjourned and an additional day of hearing time allocated in order for the Murrells to have the opportunity to do this. In all the circumstances, I do not consider that any expenses incurred by the Murrells in the preparation of this expert evidence should be visited on the Owners Corporation by the making of a costs order different to that prescribed by s 88K(5). I accept that the Owners Corporation's submission that this matter is best addressed in any costs assessment process (see Gordon v Lever (No 2) (2019) 101 NSWLR 427; [2019] NSWCA 275 at [94]).

Conclusion on Murrell proceeding

For the above reasons, the Murrells have failed to persuade me that the Court should depart from the default position in Conveyancing Act s 88K(5). As the Murrells have otherwise failed in all other claims in the proceeding, they should pay the Owners Corporation's costs of the proceeding.

Orders

For the above reasons, I make the following orders: In proceeding 2019/201673 1. Order that the defendants pay the plaintiff's costs of the proceeding. In proceeding 2019/299582 1. Pursuant to s 88K of the Conveyancing Act 1919 (NSW), order that an easement be imposed on CP/SP85044 in the terms of the s 88B instrument annexed hereto and marked with the letter "A". 2. Order that the defendant execute the easement forthwith and produce or arrange for the production of CP/SP85044 to the New South Wales Land Registry Services to enable registration of the easement as soon as practicable. 3. Grant liberty to the parties to apply on two days' notice in relation to the implementation of these orders or registration of the easement. 4. Order that the plaintiffs pay the defendant's costs of the proceeding.

Annexure "A" DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 December 2020

(2019) 101 NSWLR 427

The Owners - Strata Plan 85044 v Murrell; Murrell v The Owners - Strata Plan 85044

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