Twelve Walker Street Pty Ltd v Lee

Judgment

1. These proceedings concerned an application by the plaintiffs for orders pursuant to s 88K of the Conveyancing Act 1919 (NSW) imposing an easement for rock anchors over the defendants' land in Rhodes. On 20 December 2017 the Court made orders to that effect, and further ordered that the plaintiffs pay the defendants' costs of the proceedings (see Twelve Walker Street Pty Ltd v Lee [2017] NSWSC 1807 at [125]).
2. On 22 December 2017 the plaintiffs, relying upon Uniform Civil Procedure Rules 2005 (NSW) r 36.16(3A), filed a Notice of Motion seeking to vary the costs order. The plaintiffs thereby sought an order that the defendants pay the plaintiffs' costs of the proceedings. By an Amended Notice of Motion dated 2 February 2018, the plaintiffs advanced two further orders as alternatives, namely, an order that each party bear its own costs of the proceedings, and an order that the plaintiffs pay 50% of the defendants' costs of the proceedings.
3. The parties have provided written submissions on costs in accordance with directions made by the Court. As no party has suggested a further oral hearing is necessary, the Court will deal with the question of costs on the papers.
4. The plaintiffs accept that the starting point is s 88K(5) of the Conveyancing Act which provides that the costs of proceedings under the section are payable by the applicant, subject to any order of the Court to the contrary. The plaintiffs submitted that an order to the contrary should be made, essentially for the following three reasons: 1. the defendants failed on a threshold question, being whether what was sought by the plaintiffs was in truth an easement for the purposes of s 88K of the Conveyancing Act; 2. the defendants failed to comply with various procedural directions made by the Court, resulting in delays to conclaves of experts and prejudice to the plaintiffs' case; and 3. the defendants sought to rely upon evidence that was unnecessary and "obstructive".
5. Both parties apparently accepted that the relevant principles were adequately summarised in McGrath v Mestousis (No 2) [2018] NSWSC 32 at [7]-[9] as follows: It is well established that an order to the contrary as envisaged by s 88K(5) may be made where the defendant has engaged in unreasonable conduct, including conduct that has made the proceedings more expensive (see 117 York Street Pty Ltd v Proprietors of Strata Plan No 16123 (1998) 43 NSWLR 504 at 523; Mitchell v Boutagy [2001] NSWSC 1045 at [60]; Khattar v Wiese [2005] NSWSC 1014 at [77]). In considering the reasonableness of the defendant's conduct, it is necessary to bear in mind that the conduct occurred in response to an application which, if successful, would result in the creation of an interest in the defendant's property. It has been held that s 88K bears a confiscatory nature (see, for example, Khattar v Wiese (supra) at [27]). Moreover, even though appropriate compensation is generally required to be paid, an application under s 88K is not analogous to a claim for damages (see Shi v Abi-K Pty Ltd (2014) 87 NSWLR 568; [2014] NSWCA 293 at [98]). Accordingly, it is inappropriate to employ that analogy to determine whether it was unreasonable for a defendant to a s 88K application to fail to accept a Calderbank offer (see Shi v Abi-K Pty Ltd (supra) at [97]-[98]). In Shi v Abi-K Pty Ltd (supra) Basten JA (with whom Barrett and Ward JJA agreed) went on to state (at [98]): The ordinary rule, that the applicant pay the costs of any proceeding, reflects the fact that an applicant for such an order has no right to the grant of an easement over the property of another. Further, the rule that the applicant pay the costs relates to proceedings which could only be brought after all reasonable attempts had been made (presumably by seeking agreement) but have been unsuccessful. The statutory scheme is not consistent with the proposition that an applicant can obtain a right to costs by offering more than the compensation ultimately ordered to be paid as a condition of the easement. The property owner is entitled to refuse to consent to the easement, thereby requiring the applicant to satisfy a court as to the various preconditions, including questions of the public interest, and that the grant of the easement is reasonably necessary in the sense provided by the section. Unless it has done more than reject reasonable offers of compensation, the property owner should not be put at risk of an adverse costs order in those circumstances.