Gong v The Owners Strata Plan 44560

[2023] NSWSC 157

Supreme Court

New South Wales

Medium Neutral Citation:

Gong v The Owners – Strata Plan 44560 [2023] NSWSC 157

Hearing dates:

On the papers

Decision date:

27 February 2023

Jurisdiction:

Equity - Real Property List

Before:

Peden J

Decision:

1) The Plaintiffs are granted leave to discontinue the proceedings.

2) The parties are to pay their own costs of the proceedings.

Catchwords:

COSTS — Party/Party — Exceptions to general rule that costs follow the event — Where specific performance of agreement granting easement and alternatively s 88K relief sought — Where after commencement easement lodged by consent — Where defendant servient owner was unresponsive to plaintiffs’ correspondence prior to commencement — Where no evidence of terms of consent to easement – Where no consent terms for dismissal or discontinuance of proceedings or costs

Legislation Cited:

Conveyancing Act 1919 (NSW) s 88K

Civil Procedure Act 2005 (NSW) s 98

Uniform Civil Procedure Rules 2005 (NSW) rr 42.19, 42.20

Cases Cited:

Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194

Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32

Newcastle Wallsend Coal Co Pty Ltd v Industrial Relations Commission of NSW [2006] NSWCA 129

Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681

Re the Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622

Studholme v Rawson (2020) 102 NSWLR 490

Category:

Costs

Parties:

Long Yao Gong (First Plaintiff)
Yun Fang Zhang (Second Plaintiff)
The Owners – Strata Plan 44560 (Defendant)

Representation:

Counsel:
J L Polese (Plaintiffs)

Solicitors:
Birch Partners (Plaintiffs)
J S Mueller & Co (Defendant)

File Number(s):

2022/161257

Publication restriction:

Nil

Judgment

1. This is an application for costs to be determined on the papers.

2. The substantive dispute related to the redevelopment of a residential property into boarding houses in Northmead, New South Wales. The Plaintiffs are the developers. The Defendant is the owners corporation of a strata plan on the neighbouring land.

3. To advance the development the Plaintiffs sought an easement over the Defendant’s land for the purposes of access and discharge of stormwater into an existing drainage pit.

4. Various development applications were made, experts were engaged by the parties and discussions took place between them about the nature and extent of an easement.

5. The Plaintiffs alleged that the parties’ discussions culminated, on 26 June 2020, in an agreement for the grant of the easement subject to approval by the Defendant at a general meeting (Draft Deed).

6. The Plaintiff paid the Defendant $5,165 for legal costs for the Defendant’s lawyer to prepare the Draft Deed. That Draft Deed included an obligation on the Plaintiffs to pay the Defendant $4,000 for the grant of the easement. There is no evidence as to whether that or any other sum of money has been paid by the Plaintiffs. I note that in May 2022, the Plaintiffs asserted they were ready, willing and able to pay that sum and execute any necessary documents giving effect to the Draft Deed since June 2020.

7. It was only on 9 December 2021 that the Plaintiffs provided the Defendant with a survey plan, which was essential to the registration of any easement and was required for the Draft Deed in any event.

8. On 10 March 2022, the Plaintiffs’ solicitor sent a form of letter of demand, requiring a response by 17 March 2022 “and a reasonable, proposed date for the duly, executed, Transfer Granting Easement being provided to my office for registration”. The Plaintiffs threatened making an application for orders that the Defendant be compelled to execute the transfer and pay the Plaintiffs’ costs. It appears that no response to this letter was received prior to the Plaintiffs commencing the proceedings almost three months later on 3 June 2022.

9. In their Summons, the Plaintiffs sought specific performance of the Draft Deed or alternatively relief under s 88K of the Conveyancing Act 1919 (NSW).

10. Before the first return date on 28 July 2022, the Defendant indicated to the Plaintiffs and the Court that the parties were “finalising the settlement” of the proceedings.

11. On 16 September 2022, the Defendant’s solicitor emailed the Court with the consent of the Plaintiffs, indicating that a meeting of the owners corporation had taken place “to approve the easement in question and a Deed regulating the relations between the parties”. Neither the approved easement nor the “Deed” referred to were in evidence.

12. On 6 October 2022, the parties explained a further adjournment request was “to enable [the registering of the relevant easement] to be completed” and on the expectation “that orders will be made for the finalisation of the proceedings”.

13. Amendments to a draft transfer document were being discussed and agreed as late as 24 October 2022.

14. By 26 October 2022, an easement was set up in the PEXA online system to be registered.

15. On 16 November 2022, the Land Registry Services issued 9 requisitions concerning the documents lodged including that the easement description needed to be revised and that the plan was unacceptable.

16. No registered easement was in evidence.

17. No orders finalising the proceedings, including the issue of costs, were ever agreed. Instead, the proceedings remain on foot and the Plaintiffs seek a determination of the terms upon which the proceedings ought to be finalised, and, in particular, submit that the Defendant ought to pay their costs.

Issues

18. There are several factors present in this case that impact on the Court’s costs discretion.

19. First, the parties appear to accept that the proceedings have no further utility, even though no notice of discontinuance has been filed and no consent orders dismissing the Summons on terms have been provided to the Court.

20. In their submissions, the Plaintiffs appear to recognise that because they seek to discontinue the proceedings without the Defendant’s consent, they bear the burden of persuading the Court not to make a costs order against them: see Uniform Civil Procedure Rules 2005 (NSW) rr 42.19 and 42.20.

21. The Plaintiffs seek:

1. an order that the Court “order otherwise” than the orders provided for in UCPR r 42.19(2), so they are not liable for the Defendant’s costs; and

2. an order that the Defendant pay their costs because of its “unreasonable conduct”.

22. The principles guiding the application of rr 42.19 and 42.20 are not disputed. As Basten JA observed in Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [70]-[71]:

[70] The first proposition, which should be uncontroversial, is that the discontinuing plaintiff must be the moving party on an application for an alternative costs order. If it is necessary to establish a factual basis for such an order, the plaintiff will bear the onus of proving the relevant facts. Similarly, if it is necessary to draw particular inferences from primary facts, the plaintiff will also bear that burden. Finally, the plaintiff will bear the burden of persuading the court that some other order is appropriate.

[71] A significant fact underlying each notice of discontinuance will be that the party which commenced the proceedings has abandoned them, though without prejudice to its entitlement, such as it may be, to claim the same relief in fresh proceedings: r 12.3.

23. The mere fact of discontinuance does not alone generate a presumption that the discontinuing party will face an adverse costs order: Fordyce v Fordham (2006) 67 NSWLR 497 at [84] (McColl JA). However, the Plaintiffs must still supply a sound basis for a different costs order: Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [54] (Basten JA). That will turn on the reasons for the discontinuance in a particular case and all relevant factors.

24. Secondly, the Defendant’s submitted that the usual order in s 88K(5) would require the Plaintiffs to pay the Defendant’s costs if an easement was granted. As noted, the Plaintiffs sought primary relief in the form of specific performance of an agreement granting an easement and in the alternative an easement pursuant to s88K. While the Court has not been asked to adjudicate the s 88K application, I note the usual s 88K(5) order but also note that it would be open to the Court to make an order that Defendant pay any part of the Plaintiffs’ costs: see Studholme v Rawson (2020) 102 NSWLR 490 at [188] (Basten JA).

25. Thirdly, the Court has a broad discretion as to costs, the exercise of which is ordinarily informed by the outcome of the proceedings and the overriding purpose of the civil procedure regime. That proposition is reflected in ss 56 and 98 of the Civil Procedure Act 2005 (NSW) and r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW).

26. Where parties reach a compromise on all issues except dismissal/discontinuance and costs, the Court’s discretion must, of necessity, be exercised without the benefit of what is ordinarily the determinative, or at least the principal, factor to be taken into account.

27. It is open to the Court to make an order for costs against one party, despite there being no hearing on the merits, if it can be shown that that party has invited the litigation by its unreasonable behaviour. However, such an order will only be made “where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon.”: Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [8] per Basten JA; see also Payne JA at [33].

28. The Court can make costs orders where it is concluded that one of the parties has acted so unreasonably having regard to the conduct of “both parties in commencing and defending the proceedings”: Re the Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624-625 (McHugh J). The Court may consider the conduct of the Defendant prior to the commencement of the proceedings where such conduct precipitated the litigation: Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201 (Hill J).

Determination

29. It is not for me to determine whether the Plaintiffs were entitled to the relief sought in their Summons. Instead, all I am asked to determine which party ought to bear the costs of these proceedings that have now become otiose through the transfer of an easement.

30. It has not been suggested by the Defendant that the Plaintiffs acted unreasonably in commencing the proceedings. However, merely because the Plaintiffs obtained an easement by consent after commencing does not automatically entitle them to costs of the Summons that was not determined on its merits.

31. The Plaintiffs submitted that the Defendant ought to pay their costs because the Defendant’s conduct was:

unreasonable, being of significant delay in finalising the easement, and not responding to the Plaintiffs’ letter of 10 March 2022. The lack of response, ambiguity and pressure to have the easement finalised, forced the Plaintiffs’ hand into commencing proceedings. Ultimately the proceedings brought about finalization of the easement, which was unnecessary.

32. I deal with each allegation in turn.

33. First, it is alleged that there was a delay in “finalising the easement”. It appears that the parties executed a deed granting transfer, which included some compensation, other terms, and a transfer granting easement.

34. However, the none of the executed deed, attached easement or final transfer were in evidence. The Plaintiffs’ submissions appear to assert that the executed versions were in a form provided to the Defendant before the proceedings commenced. There is no direct evidence to that effect. It appears that I am asked to infer that this is the case from a large volume of emails and letters between the solicitors and that is a task that ought not be engaged in for the purposes of determining costs of a matter not determined on its merits.

35. In any event, the form of Draft Deed in evidence included marked up comments by the Plaintiffs’ solicitors explaining some track changes and a query whether the Defendant was seeking further legal costs for preparing the Draft Deed. There is no response from the Defendant in evidence.

36. On their face the Draft Deed and draft transfer are inconsistent in relation to the easement. The Draft Deed referred to an easement for drainage “200 millimeters wide and 200 millimeters in length”. The solicitors for the Plaintiffs included a marked up comment about the width in the Draft Deed which reads:

Although a 150mm PVC pipe will be installed an area 200mm wide is required to enable installation.

37. In contrast, the draft transfer described an “easement to drain water 2.2 wide”. The plan of easement attached to the draft transfer also referenced an “easement to drain water 2.2 wide”.

38. There is no explanation of the apparent inconsistency and whether they were resolved in the final documents and if so on what terms.

39. It is not possible for me to determine with certainty that the final deed was in any particular form, so as to compare its terms with the Draft Deed in order to conclude the Defendant’s conduct was unreasonable in failing to execute that document prior to commencement by the Plaintiffs. Further, the final agreement did not provide for the dismissal of the Summons on terms dealing with the costs of the proceedings.

40. Therefore, it is not possible to conclude that the Defendant behaved unreasonably in delaying in agreement as to the final form of transfer of an easement on particular terms. This is not an appropriate case to find, with the requisite degree of certainty, that the Plaintiffs would have been successful: Newcastle Wallsend Coal Co Pty Ltd v Industrial Relations Commission of NSW [2006] NSWCA 129; Re the Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624-625 (McHugh J).

41. I accept that it was professionally inappropriate of the Defendant’s solicitor not to respond to the 10 March 2022 letter for many months and the failure to respond left the Plaintiffs with no choice but to commence the proceedings.

42. However, in circumstances where the parties have resolved the matter by consent on terms undisclosed to the Court and without a final hearing, I consider it appropriate to order that each party pay their own costs.

Orders

43. The appropriate orders are:

1. The Plaintiffs are granted leave to discontinue the proceedings.

2. The parties are to pay their own costs of the proceedings.

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Decision last updated: 27 February 2023