Christopher & Mary Borg v Sam & Jan Ellul
[2006] NSWLEC 620
•03/08/2006
Land and Environment Court
of New South Wales
CITATION: Christopher & Mary Borg v Sam & Jan Ellul [2006] NSWLEC 620 PARTIES: APPLICANTS
RESPONDENTS
Christopher and Mary Borg
Sam and Jan EllulFILE NUMBER(S): 41041 of 2005 CORAM: Jagot J KEY ISSUES: Costs :- Consent orders with respect to substantive issues - only remaining issue one of costs - neither party surrendered to the other - no disentitling conduct - each party ordered to pay its own costs LEGISLATION CITED: Land and Environment Court Act 1979 s 69 CASES CITED: Australian Securities Commission v Aust-Home Investments Limited and Others (1993) 44 FCR 194;
Kiama Council v Grant (2006) 143 LGERA 441;
One.Tel Ltd and Others v Commissioner of Taxation (2000) 101 FCR 548;
Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex Parte Lai Qin (1997) 186 CLR 622DATES OF HEARING: 03/08/2006 EX TEMPORE JUDGMENT DATE: 08/03/2006 LEGAL REPRESENTATIVES: APPLICANT
Mr E Ozen
SOLICITORS
Cumberland Frank Commercial LawyersRESPONDENT
Mr C Gough (solicitor)
SOLICITORS
Storey & Gough
JUDGMENT:
THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALESJagot J
3 August 2006
41041 of 2005
CHRISTOPHER & MARY BORG
ApplicantsJUDGMENTSAM & JAN ELLUL
Respondents
2 The applicants seek an order for costs against the respondents. The respondents seek an order for costs against the applicants. The power to make an order for costs is that contained in s 69 of the Land and Environment Court Act 1979. That section provides, relevantly, that subject to the rules and any other Act, costs are in the discretion of the Court, and the Court may determine by whom and to what extent costs are to be paid.1 These are civil enforcement proceedings in which the parties have reached an agreement about the substantive issues, with the assistance of expert engineers and their respective legal advisers. The only issue that remains in dispute is costs.
B. Submissions
3 I have been greatly assisted by the submissions from Mr Ozen on behalf of the applicants and Mr Gough on behalf of the respondents. Mr Gough submits that the proposed consent orders are substantially different from the orders that the applicants sought in the Class 4 application, and that there is no basis from which I would infer an adequate foundation for the matters sought in the Class 4 application. In other words, that the result which has been achieved has been achieved by compromise between the parties, rather than as a consequence of the Class 4 application.
4 Mr Gough also submits that the actions of the applicants in commencing the Class 4 proceedings on 9 September 2005 were peremptory and, thus, unreasonable. The dispute between the parties had been on foot since sometime in 1998. Correspondence between the legal representatives had, by the date of Mr Gough’s letter of 16 December 2004, established that the respondents were willing to resolve the matter without litigation, namely by the appointment of an independent engineer whose advice would be paid for by both parties equally on the basis that the decision of the expert would be binding on both parties.
5 Finally, Mr Gough submits that the applicants’ maintenance of the proceedings after a joint report had been filed in the proceedings, being a report between the original independent expert, Mr Stubbs, and the engineering expert retained by the applicants, Mr Henstock. Mr Gough says that this is not a case that may be characterised as surrender by the respondents to the applicants. Because the proceedings were unreasonably commenced and unreasonably maintained, there was conduct which disentitled the applicants from any order for costs in their favour and entitled the respondents to an order for costs against the applicants.
6 Mr Ozen submits that it is apparent that the dispute had been a very long running one from 1998, involving problems with the retaining wall on the respondents’ property and the seepage of water from the respondents’ property to the applicants’ property. Mr Ozen submits that it could not be said that the actions of the applicants in commencing the proceedings in September 2005 were unreasonable. The solicitors for the applicants sent a warning letter in December 2003 to the effect that the applicants were committed to seeking a Court order if agreement could not be reached.
7 A further letter from the applicants to the respondents of 2 December 2004 confirmed that no response had been received from the respondents and enclosed a copy of the draft Class 4 application, after which (on 16 December 2004) there was the response by Mr Gough for the respondents to which I have already referred. But by that time, as apparent from a letter of 11 January 2005, the applicants had already retained Mr Henstock, engineer, and obtained a report from him which they served upon Mr Gough. In so doing, they asked for instructions to be obtained from the respondents about whether the respondents would be prepared to accept Mr Henstock’s report as the basis of negotiations. Finally, this letter was followed up by a letter of 7 February 2005 which made clear the applicants’ position that they would be unable to accept any findings significantly in dispute with the outcomes of Mr Henstock’s report.
8 Mr Ozen submits that it was not unreasonable for the applicants to commence proceedings some six weeks after Mr Stubbs’ report became available, and in circumstances where the applicants had made it clear that they would not accept a report which had significantly different outcomes from Mr Henstock’s report. And, indeed, the Stubbs’ report did have those significantly different outcomes that were unacceptable to the applicants. Mr Ozen also refers to an attempt to give notice to the respondents of the commencement of proceedings.
9 In terms of the maintenance of the proceedings, Mr Ozen refers to the fact that it was not until the applicants received Mr Stubbs’ affidavit of 2 March 2006 that they were aware of the work that had been carried out. That work was not necessarily satisfactory to the applicants. The experts conferred and further works were agreed. Accordingly, Mr Ozen says it was not unreasonable for the applicants to maintain the proceedings.
10 Mr Ozen nevertheless accepts that this is not a case where I could be confident that the applicants would have been successful had this matter proceeded to a hearing on the merits. He says that the fact is that the Class 4 proceedings did bear fruit. Works were carried out. Even though those works were a compromise, and could not be said to be the same as the works the subject of the Class 4 application, they were not so different from what had been sought. The applicants had certainly not surrendered to the respondents.
12 Most relevantly, for present purposes, in Lai Qin at 625, McHugh J said that:11 The relevant guidelines which might be appropriate to be applied to the exercise of the costs discretion were addressed recently by Preston J in Kiama Council v Grant (2006) 143 LGERA 441. His Honour referred to a number of decisions, including that of McHugh J in Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex Parte Lai Qin (1997) 186 CLR 622 and Australian Securities Commission v Aust-Home Investments Limited and Others (1993) 44 FCR 194 at 201. In that latter decision, Hill J confirmed that, “Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a cost order”. However, “It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or ...” to have, in effect, a hypothetical trial. In determining issues of costs, it was appropriate for a court to determine whether an applicant acted reasonably in commencing the proceedings and whether a respondent acted reasonably in defending them. The conduct of parties prior to the commencement of litigation could be relevant to both questions.
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings.
13 This approach has been adopted in a large number of cases. In Kiama Council v Grant, Preston J also referred to a decision of Burchett J in One.Tel Ltd and Others v Commissioner of Taxation (2000) 101 FCR 548 at 553 where his Honour stated that:
In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court’s discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs.
14 Preston J summarised the principles as involving the identification of two classes of case. The first class of case is where one party effectively surrenders to the other. Costs generally follow the event, absent disentitling conduct. The second class of case is where some supervening event or settlement so removes or modifies the subject of the dispute that no issue remains except as to costs. In the second class of case, cost orders can nevertheless be made where one or other party has acted so unreasonably that there should be an order for costs in all the circumstances.
D. Decision
15 Neither party submits that this is a case where I could clearly come to the view that the applicants would have been successful in their claim against the respondents. Moreover, I am firmly of the view, having regard to the orders sought in the Class 4 application and the terms of the consent orders which have been agreed between the parties, that this is not a case in which it would be appropriate to characterise the outcome as one where the respondents have surrendered to the applicants.
16 Rather, with the assistance of expert engineering advice and legal advice, the applicants and the respondents have commendably managed to find a compromise solution to various problems which they have been experiencing in relation to their respective properties.
17 I accept the submissions of Mr Ozen that, given the long running nature of the dispute and the correspondence which flowed between the legal representatives prior to the commencement of the proceedings, it was not unreasonable for the applicants to commence the proceedings in the way they did and when they did. Nor was it unreasonable for the applicants to maintain the proceedings to allow the expert conference to occur. That conference seems to have had the desired effect of assisting these parties to reach a resolution of all of the issues between them - that resolution is reflected in the consent orders.
18 In other words, this is a case which falls squarely within the circumstances which McHugh J identified in Lai Qin - namely, that both parties have acted reasonably in commencing and defending the proceedings up until the point where the agreement which they reached, as reflected in the consent orders, rendered futile the further maintenance of the proceedings.
19 In those circumstances I consider that the appropriate exercise of discretion in this matter should be that each party pay its own costs of these proceedings and I so order. I also make the consent orders as proposed.
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