Hill v Higgins

[2012] NSWSC 743

Supreme Court

New South Wales

Medium Neutral Citation:	Hill v Higgins [2012] NSWSC 743
Hearing dates:	25 June 2012
Decision date:	05 July 2012
Before:	Harrison J
Decision:	Mr and Mrs Higgins should pay Mr and Mrs Hill's costs of the proceedings up to and including 4.00pm on 5 May 2011.
Catchwords:	PROCEDURE - costs - general rule costs follow the event - costs of whole action - where offers of compromise made - Calderbank offer - whether reasonable for plaintiffs to reject offer - whether genuine offer to compromise
Legislation Cited:	Encroachment of Buildings Act 1922 Civil Procedure Act 2005
Cases Cited:	Calderbank v Calderbank [1975] 3 WLR 586; [1975] 3 All ER 333 Hill v Higgins [2012] NSWSC 270
Category:	Costs
Parties:	Andrew Steven Hill (First Plaintiff) Julie Hill (Second Plaintiff) Anita Michelle Higgins (First Defendant) Alan Higgins (Second Defendant)
Representation:	Counsel: M R Hall (Plaintiffs) J J Young (Defendants) Solicitors: Trisley Lawyers (Plaintiffs) Sparke Helmore (Defendants)
File Number(s):	2009/296191

Judgment

1. HIS HONOUR: I published my reasons for judgment in the principal proceedings on 27 March 2012: see Hill v Higgins [2012] NSWSC 270. I did not then deal with the question of costs. These reasons are limited to consideration of that issue. They assume a familiarity with the factual background to the litigation.

1. Mr and Mrs Hill contend that they are entitled to an order for the payment of their costs of the proceedings by the defendants. They submit that they succeeded and that costs should follow the event. Mr and Mrs Higgins contend that the question of costs should be determined in the light of a letter written by their solicitor on 27 August 2010, with the result that the Hills should pay their costs up to and including 3 September 2010 on the ordinary basis and thereafter on an indemnity basis. These competing contentions are made in the context of considerable "without prejudice" and open correspondence exchanged between the parties or their lawyers over the period of the litigation, and in the context of other practical steps taken by them in attempts to achieve a solution to their dispute. It is necessary for present purposes to consider these things in some detail.

Correspondence

1. The proceedings were commenced by summons filed on 26 August 2009. Mr and Mrs Hill sought declarations that their neighbours had encroached upon their property and had trespassed and created a nuisance. They asked for the encroachment to be removed and sought an order that Mr and Mrs Higgins pay them compensation pursuant to s 4 of the Encroachment of Buildings Act 1922. The Hills also asked for damages and exemplary damages. A statement of claim seeking similar relief was filed on 9 December 2010.

1. By letter dated 19 February 2010 the Higgins' solicitor wrote to the Hills' solicitor proposing on a "without prejudice" basis that the dispute be mediated on-site. The letter described that approach as "the most effective approach to resolve the issues between our respective clients". This suggestion was not embraced by the Hills who apparently gave instructions to their solicitor to oppose any order for mediation.

1. By letter dated 15 April 2010 the Hills' solicitor submitted a settlement offer in the following relevant terms:

"1. That the existing retaining wall and fence be removed and an appropriate retaining wall be constructed on your client's property in accordance with the scope of works as detailed in the report of Mr Shepherd dated 31 October 2008.

...

Your clients may pay damages to our client in the sum of $42, 671 and allow access to their property to enable our clients to complete the works.

Alternatively, your client may arrange for the works to be completed by a licensed and insured contractor. However, the scope of the works must be approved by our client...

2. The retaining wall to be installed on your client's property will allow for a sufficient area to the boundary to enable an appropriate dividing fence...Both parties will make equal contributions to the reasonable cost of the installation of the dividing fence.

3. Your clients to pay damages for trespass and nuisance in the sum of $40,000.

4. Your clients to pay our clients' costs as agreed or assessed."

1. That offer was expressed to remain open only until 29 April 2010. It was rejected by letter dated 28 April 2010. On 27 August 2010 the solicitor for the Higgins made the following settlement offer:

"1. Our clients will remove the existing retaining wall and erect a new retaining wall wholly within the boundaries of 40 Kurrawong Avenue, Hawks Nest. As the retaining wall will be located on our clients' property and is for the sole purpose of supporting our clients' property, it will be a matter for our clients as to how the retaining wall is constructed.

2. No damages will be payable to your clients.

3. Each party will pay its own costs of these proceedings."

1. That letter went on to set out a series of points, which the Higgins felt made the offer a reasonable one. They were as follows:

"Our clients have always been prepared to rebuild the retaining wall. They have only been prevented from doing so by your clients restricting access to their property, including calling the police to complain of an alleged trespass.

Our clients have been attempting to mediate and/or settle these proceedings with your clients for some time.

Our clients were forced to put on a notice of motion to attempt to have the matter mediated, and to spend further unnecessary costs in these proceedings because your clients were reluctant to discuss the matter with them.

The evidence filed for the defendants in these proceedings indicates that the retaining wall is in fact the responsibility of your clients, due to the fact that their land has been excavated. If the matter proceeds to a hearing, our clients will be contending that your clients are, in fact, liable for the rebuilding of the retaining wall.

Your clients have not established that they have suffered any damage. It was unnecessary to commence legal proceedings and incur legal costs when no real damage was occurring."

1. That letter expressly conveyed an offer in accordance with the principles discussed in Calderbank v Calderbank and was intended to be relied upon in support of the Higgins' claim for indemnity costs.

1. That letter had not been replied to by 10 September 2010, when the Higgins' solicitor wrote again drawing attention to "numerous telephone calls" seeking a response. That letter was also expressly described as one upon which the Higgins would rely for the purposes of supporting a claim for indemnity costs.

1. Apparently without any intervening correspondence between the parties dealing with the subject of settlement or costs, the Higgins' solicitor wrote to the Hills' solicitor on 22 September 2010 communicating the following further offer of settlement:

"1. Our clients will remove the existing retaining wall and erect a new retaining wall wholly within the boundaries of 40 Kurrawong Avenue, Hawks Nest. As the retaining wall will be located on our clients' property and is for the sole purpose of supporting our clients' property, it will be a matter for our clients as to how the retaining wall is constructed.

2. No damages will be payable to your clients.

3. Our clients will pay your clients' costs in the sum of $10,000."

1. It is uncontroversial that the Hills retained new solicitors after the last letter was written. Accordingly, in a letter dated 22 March 2011 dealing with other aspects of the litigation generally, the Higgins' solicitor included the following paragraph:

"As you have recently been engaged by your clients, you may not be aware that an offer was made, through your clients' previous solicitors, to settle the proceedings in 27 August 2010. That offer was revised on 22 September 2010."

1. That letter then went on to reiterate the terms of the settlement offer contained in the 22 September 2010 letter and to repeat the matters that the Higgins suggested made the offer a reasonable one, which had been referred to earlier in the 27 August 2010 letter.

1. For what could only be considered more abundant caution, the Higgins' solicitor then wrote to the Hills' solicitor on 28 March 2011 in these terms:

"We refer to our letter of 22 March 2011, which contained an offer to settle the proceedings on the following basis:

1. Our clients will remove the existing retaining wall and erect a new retaining wall wholly within the boundaries of 40 Kurrawong Avenue, Hawks Nest. As the retaining wall will be located on our clients' property and is for the sole purpose of supporting our clients' property, it will be a matter for our clients as to how the retaining wall is constructed.

2. No damages will be payable to your clients.

3. Our clients will pay $10,000 in legal costs to your clients."

1. That offer was expressed to remain open until 30 March 2011.

1. Without having apparently received any response to the last letter, the Higgins' solicitor then made an even more generous offer by letter dated 27 April 2011. The offer was expressed to remain open only until the following day, but its contents are instructive and were in these terms:

"We refer to recent discussions between the parties about potential settlement of the above proceedings.

Without prejudice to our clients' right to rely on previous offers made to your client, in the spirit of compromise, our client is prepared to offer settlement of the matter on the following basis:

The Retaining Wall

1. Our clients will remove the existing retaining wall and erect a new retaining wall wholly within the boundaries of 40 Kurrawong Avenue, Hawks Nest. The materials for construction of the retaining wall will be a matter for our clients.

2. Prior to construction of the retaining wall, our clients will provide to your clients a copy of the design for the wall and a certificate from an engineer confirming that the wall as designed is structurally adequate.

3. Your clients will have a certain period of time to seek advice from an engineer (at their own cost) and provide that advice to our clients for consideration.

4. Access to your clients' property for the purposes of constructing the retaining wall will be limited to weekdays only and 48 hours notice will be provided prior to entry.

5. No machinery will be used on the strip of land between your clients' house and the retaining wall unless absolutely necessary and with the consent of your clients (which will not be unreasonably withheld). Our clients reserve their rights to make an application under the Access to Neighbouring Land Act 2000 if necessary.

The Fence

6. A dividing fence will be erected on the boundary between the two properties.

7. The height of the fence will be 1200mm from the ground level of our clients' property (being the top of the retaining wall).

8. The fence will be constructed of 'colorbond', which will either be of a light colour or painted a light colour on your clients' side of the fence.

9. The parties will pay equal contributions to the reasonable costs of the installation of the dividing fence, including any development application costs.

Damages

10. No damages will be payable to your clients.

Costs

11. Our clients will pay $15,000 in legal costs to your client."

1. The offer was again made in terms for the purpose of claiming indemnity costs if necessary. It prompted the following reply dated 28 April 2011:

"The plaintiffs offer to settle the proceedings on the following basis:

1. Your clients to remove the existing retaining wall and erect a new retaining wall wholly within the boundaries of 40 Kurrawong Avenue, Hawks Nest.

2. No damages will be payable to the plaintiffs.

3. The plaintiffs' costs to be paid on a party/party basis as assessed or agreed."

1. That offer was expressed to remain open until the commencement of the hearing on 4 May 2011. The Higgins did not accept it.

1. On the first day of the hearing before me, Mr Hall of counsel for the Hills made the following open offer at page 18 of the transcript:

"HALL: I thank the court for giving us that indulgence. Regrettably it has not changed the position of the proceedings but it does result in my having instructions to put on the record openly for the court an offer that has been communicated to my learned friend. With the court's leave I will read onto the transcript the offer that has been made.

The plaintiff has proposed to the defendants that the proceedings would settle on the basis the defendants consent to an order that they remove the encroachment and construct a retaining wall entirely within the defendant's property substantially in the location of the wall prior to October 2005.

Secondly, that the defendant would undertake in the terms put by its counsel today that the current wooden fence adjacent to the boundary is to be removed without replacement in its current location.

Thirdly, that the defendant would undertake, again as put by its counsel, to propose a dividing fence to be constructed on the boundary with its extension above the top of the retaining wall not to exceed 1.2 metres, each party reserving their rights under the Dividing Fences Act.

Fourthly, that the defendant would pay two thirds of the plaintiff's costs as assessed or agreed.

Fifthly, that the summons would otherwise be dismissed."

1. The matter continued and the hearing concluded on the second day. A discussion then took place between counsel and me. I made orders by consent but without admission of liability. Paragraph [8] of my principal judgment records the detail of what happened in these terms:

"[8] I then proceeded to make the following orders:

On the application of the plaintiffs and with the consent of the defendants without admission of liability:

1. Order that the encroachment by the defendants' land onto the plaintiffs' land more fully described and identified in the report of C R Hutchison & Co dated 14 February 2007 being annexure G to the affidavit of Alan Higgins sworn 10 June 2010 be removed by the defendants.

2. Stand over these proceedings for further hearing before me on Friday 4 November 2011.

3. Grant liberty to the parties to apply to me on two days' notice by arrangement with the other side and in consultation with my Associate.

4. Reserve consideration of all other outstanding matters including the plaintiffs' claims for relief and the question of costs."

1. In circumstances that are recorded in my earlier reasons, Mr and Mrs Higgins ultimately removed the encroachment. That left outstanding only the questions of damages and costs.

Discussion

1. By no later than 5 May 2011, Mr and Mrs Hill had become the beneficiaries of an order requiring Mr and Mrs Higgins to remove the encroachment. To that extent at least they had achieved "success" in the proceedings. Nothing that happened thereafter, whether as part of the litigious process, or with respect to the physical removal of the encroachment from their land, was relevantly productive of legal costs associated with that issue. In summary, Mr and Mrs Hill had sought the removal of the encroachment and by 5 May 2011 I had made an order corresponding to the order that they had sought. The order was not immediately enforceable, because it was in the contemplation of the parties and the Court that it would be finally complied with at some time during the following six months. That time frame was intended to take account of the practical realities of carrying out work on Mr and Mrs Higgins' land, with access via Mr and Mrs Hill's land, involving workmen and the likely use of machinery and other equipment. The correspondence between the parties reveals some competing views about how the work should proceed and by when, but in the end it was completed and in circumstances about which neither party raises any presently relevant complaint.

1. Putting aside the question of the claim for damages and the costs of the litigation, if Mr and Mrs Hill had chosen to accept Mr and Mrs Higgins' offer to settle on terms providing for the removal of the encroachment but without the payment of damages or costs, they would, as long ago as shortly after 27 August 2010, have been in the very position that they found themselves in on the afternoon of 5 May 2011. They would have been in an even better position if they had accepted one or other of Mr and Mrs Higgins' subsequent offers on similar terms, but with offers of first $10,000 and later $15,000 in costs. I acknowledge, and Mr and Mrs Hill emphasise, that the later of those further offers was complicated by additional elements that did not adorn the earlier offers, so that consideration of it was to some extent made more difficult.

1. It also follows that once the order was made on 5 May 2011, there was nothing left in the proceedings upon which to expend legal costs, except submissions upon the questions of damages and costs. Mr and Mrs Higgins contend that the ultimate result for Mr and Mrs Hill, in terms of damages, has been so desultory that their prosecution of the litigation after 5 May 2011 was a complete waste of time and effort. Mr and Mrs Higgins contend that the final result supports their argument that Mr and Mrs Hill's conduct after 5 May 2011 was unreasonable, in the sense that they should not thereafter have pursued damages at all. Mr and Mrs Higgins say that the damages recovered by Mr and Mrs Hill are in truth only nominal damages and represent the fruits of an over zealous, not to say officious, prosecution of their undoubted legal rights for no tangible or practical result. Inherent in Mr and Mrs Higgins' submission is the proposition that there must be a point, particularly in the era of s 56 of the Civil Procedure Act2005 and the overriding purpose, where Mr and Mrs Hill's purely principled assertion of a theoretical legal right must yield to a fundamental countervailing practical imperative: that responsibility for the costs generated by pursuing the right must ultimately be informed by the genuine usefulness of the result that is achieved.

1. Mr and Mrs Higgins insist in these circumstances that the whole case was over, or should have been, somewhere soon after 3 September 2010 and certainly by no later than 5 May 2011. They submit that at the very least Mr and Mrs Hill should be liable for the whole of their costs from 3 September 2010, preferably on an indemnity basis. They also contend in this context that Mr and Mrs Hill are liable for the payment of their costs incurred up to that time on the ordinary basis.

1. Mr and Mrs Hill contend on the contrary that they have been wholly vindicated. First, by the consent order made on 5 May 2011. Secondly, by the final result. From their point of view they have achieved a favourable outcome from this Court in terms of an order made pursuant to the Encroachmentof Buildings Act and they contend that no other jurisdiction could have provided that relief without at least an equivalent accumulation of legal costs. Furthermore, they submit that even though the outcome in terms of damages was modest, it nevertheless represents both practical success in the litigation as well as a solemn vindication of their legal entitlements. Mr and Mrs Hill take issue with the notion that small or nominal damages are any less significant than substantial damages, particularly where any award of damages serves in part to mark out the Court's disapprobation of the disregard by one party of another party's undoubted legal rights.

1. Mr and Mrs Hill also say that their failure to accept any of the offers that Mr and Mrs Higgins rely upon was not unreasonable having regard to the current of ill-feeling, not to say distrust, by then apparent between the two sides, as well as by the fact that the offers were to an extent entwined with other issues, such as the fence and the involvement of the local council. These were said to be things that rendered the acceptance of what appears to be a series of outwardly simple or uncomplicated offers a somewhat more complicated and difficult task. They emphasise that the reasonableness of the offers, and the reasonableness of their decisions not to accept the offers, must be viewed contemporaneously and in the context when their decisions about them were actually made, and not with the benefit of hindsight, which on one view illegitimately and unfavourably colours the factors that influenced their decision.

Consideration

1. It seems to be beyond dispute that Mr and Mrs Hill were obliged to commence these proceedings if they wanted to be able to get Mr and Mrs Higgins to remove the encroachment. No offer to remove it had been made by Mr and Mrs Higgins until some time after the original summons was filed. It never even looked likely that Mr and Mrs Higgins would do so of their own accord before that occurred. As I observed in my earlier judgment, Mr Hill has given evidence that Mr Higgins told him in 2006 that he did not intend to do anything about the state or location of the retaining wall "until it falls over". The costs incurred by Mr and Mrs Hill up to and including 5 May 2011 were therefore necessarily incurred in the course of an action intended to achieve a certain practical and physical result of benefit to them. I pass over the question of just precisely how practically beneficial the removal of the encroachment was, or has ended up being, for Mr and Mrs Hill.

1. The 27 August 2010 offer effectively gave Mr and Mrs Hill the opportunity to acquire the benefit of that relief at a relatively early stage of the proceedings. It would have required them to forego any claim for costs of doing so up until then, or all but as much as $15,000 of their costs if the latest version of the offers is taken into account. On one view it was reasonable for Mr and Mrs Hill to reject the offers as and when they did having regard to the fact that they had been forced to commence the proceedings in the first place and well before they were offered anything approaching enforceable cooperation by Mr and Mrs Higgins. In other words, the offers made by Mr and Mrs Higgins were arguably not genuine offers to compromise the proceedings in the sense that they did not realistically take account of the strength of Mr and Mrs Hill's case on the encroachment issue, or the amount of costs that they had incurred to that time. The reasonableness of any rejection of the offers has to be assessed by reference to that fact.

1. That reasonableness has necessarily to be contrasted with Mr and Mrs Hill's simultaneous pursuit of rather less significant forms of relief. True it is that Mr and Mrs Hill recovered damages for trespass and for the encroachment. But these victories were realistically meaningless and irrelevant in the context of how grownups go about the important business of life in an organised society. I am not comfortable with the idea that litigation for the sake of it is socially or morally defensible, particularly having regard to the increasing calls on this Court's resources and the importance of maximising access to litigants with the greatest and most pressing needs.

1. By the same token, I am unable to identify precisely, or even generally, what costs may have been incurred or generated by Mr and Mrs Hill's claim for compensation for the encroachment or for damages for nuisance or trespass that would not have been incurred or generated otherwise as part of the case seeking removal of the encroachment. The damages and compensation were at large, and were not the subject of either evidence or costly calculation by experts. If there are any such discretely identifiable costs, I do not consider that Mr and Mrs Higgins should pay them. The damages recovered by Mr and Mrs Hill are nominal for all practical purposes, and an award of nominal damages should not, apart perhaps from exceptional circumstances, operate as a vehicle for submissions about where the burden of a costs order should fall.

1. In my opinion it was reasonable for Mr and Mrs Hill to proceed with their case up to and including 5 May 2011, unless the removal of the encroachment and the costs incurred to achieve that result had previously either been paid or offered. That position was in practical terms arrived at by 5 May 2011 when Mr and Mrs Hill could have abandoned the balance of the proceedings and argued the question of costs there and then. It was in my view reasonable for Mr and Mrs Hill to reject any offer that did not include a sum for all of their costs incurred up to the time of the offer. The offer to settle the proceedings made by Mr and Mrs Higgins was not in my view a genuine offer to compromise the proceedings as much as an offer that required Mr and Mrs Hill to forego all or most of the costs incurred to that time, without any regard for the likelihood that they would be entitled to their costs if the matter proceeded to a hearing. However, it was not in my opinion reasonable for Mr and Mrs Hill to incur legal costs after 5 May 2011, by which time the only acceptable reason for the prosecution of the proceedings had passed.

Conclusion

1. I consider that in all of the circumstances of this case Mr and Mrs Higgins should pay Mr and Mrs Hill's costs of the proceedings up to and including 4.00pm on 5 May 2011. I consider that there should be no order for the costs of the proceedings thereafter, including the costs of the appearances before me on 4 November 2011 and 9 December 2011, or for the costs of or incidental to the appearance before me on 25 June 2012 for the purposes of arguing the question of costs. It follows as well that any costs incurred after 5 May 2011 that were, or may have been, associated with actually getting the encroachment removed in fact, are not recoverable in accordance with my order.

1. I expressly indicate that the costs of the proceedings for which Mr and Mrs Higgins have by my order now become liable should not extend to or include the costs incurred in or associated with the qualifying of experts, or the preparation of reports by them, to the extent that they are concerned with the expression of opinions or the giving of advice of any sort about alternative proposals for replacement of the encroaching retaining wall or the costs of so doing, or of the fence between the properties, or of making good the area between the properties following removal of the fence and the encroachment. I have previously indicated that replacement of the fence and encroachment, or the costs of doing so, was never any part of the proceedings and Mr and Mrs Hill have not become entitled to any order or relief of that type. Costs associated with those matters, therefore, do no represent any part of the costs of the proceedings up to 5 May 2011.

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Decision last updated: 05 July 2012