Hopkins v Quinn (No 2) - [2017] NSWLEC 76

Land and Environment Court

New South Wales

Medium Neutral Citation: Hopkins v Quinn (No 2) [2017] NSWLEC 76
Hearing dates: 23 May 2017
Date of orders: 26 June 2017
Decision date: 26 June 2017
Jurisdiction: Class 4
Before: Moore J
Decision:
See conclusion at [136]

Catchwords: COSTS - Applicant commences Class 4 civil enforcement proceedings - Respondents’ cross-claim pursuant to Encroachment of Buildings Act 1922 in Class 3 - consideration of regime within which costs are appropriate to be determined - costs appropriate to be determined on the basis applicable in Class 4 proceedings
COSTS - Calderbank offer by Applicant - offer rejected by Respondents - Applicant seeks indemnity costs based on offer said to propose outcome more advantageous to Respondents than result of the proceedings - tests to be applied - outcome of proceedings more favourable to Respondents than terms of offer - indemnity costs rejected
COSTS - Applicant not completely successful - Respondents propose apportionment of costs - presumption costs follow the event in Class 4 proceedings - apportionment not appropriate - Applicant awarded costs - costs to be as agreed or assessed
COSTS - Applicant proposes variation to an aspect of the determined outcome in the primary proceedings - no proper procedural basis for doing so - no evidentiary basis for doing so - abuse of process - appropriate to award costs of this element of the proceedings to the Respondents - abuse of process warrants these costs to be on an indemnity basis
COSTS - application to reopen - Respondents sought reopening on four aspects of matters determined - reopening permitted on only three of four matters - Respondents failed on dominant matter in reopening proceedings but obtained some beneficial amendments on remaining lesser matters - Respondents propose that each party to bear their own costs of the reopening application - presumption that costs follow the event - partial success warrants departure with limited apportionment of costs - apportioned costs in favour of the Applicant - Respondents to pay 75% of the Applicant’s costs of the reopening application - costs to be as agreed or assessed
Legislation Cited: Civil Procedure Act 2005, s 98
Encroachment of Buildings Act 1922
Environmental Planning and Assessment Act 1979, s 123
Uniform Civil Procedure Rules 2005, Pt 42 r 1
Cases Cited: Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304
Calderbank v Calderbank [1975] 3 WLR 586
Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145
Hopkins v Quinn [2016] NSWLEC 163
Hopkins v Quinn [2017] NSWLEC 31
Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59
Sze Tu v Lowe (No 2) [2015] NSWCA 91
Category: Costs
Parties: John Hopkins (Applicant and First Cross-Defendant)
Sally Hopkins (Second Cross-Defendant)
David Quinn (First Respondent and First Cross-Claimant)
Maria Quinn (Second Respondent and Second Cross-Claimant)
Representation:
Counsel:
Mr N Eastman, barrister (Applicant and Cross-Defendants)
Mr M Hall SC/Mr G Stapleton, barrister (Respondents and Cross-Claimants)
Solicitors:
Hones Lawyers (Applicant and Cross-defendants)
Sattler & Associates (Respondents and Cross-claimants)

File Number(s): 153093 of 2017
Publication restriction: No

TABLE OF CONTENTS

Introduction

Mr Hopkins’ proceedings
The Quinns’ cross-claim
The initial hearing
The attempt to change the stormwater drainage design
The reopening application
The costs’ dispute
The costs’ hearing
Mr Hopkins’ indemnity costs’ application
Introduction
The 7 September 2016 letter
The first portion of the 7 September 2016 letter
The Quinns’ rejection of the offer
Consideration of Mr Hopkins’ offer
Introduction
Certainty
The offer and an “outcomes package”
The garden bed and cabana easements
The first offer term
The second offer term
The third offer term
The fourth offer term
The fifth offer term
The sixth offer term
The fate of the Quinns’ cross-claim
The 7 September offer and the reopening proceedings

Conclusion on the 7 September offer
The Quinns’ position on costs of the first phase hearing
Introduction
The Quinns’ submissions on apportionment
Inaccuracy of the Quinns’ summary of outcomes
The shotcrete wall outcomes
Drainage in the passageway
Further consideration of Appendix 1 not warranted
Consideration of apportionment
Conclusion on apportionment

Costs of the reopening proceedings
Costs of the costs’ hearing
Conclusion

Judgment

Introduction

Mr and Mrs Hopkins and Mr and Mrs Quinn live on adjoining properties in Sydney's northern beachside suburb of Curl Curl. As part of the renovations to the Quinns’ property, Mr Quinn excavated, at the eastern end of the Quinns’ property, some 75 millimetres across the boundary of the Hopkins’ property for the purposes of constructing a shotcrete retaining wall for a new garage. The reinforcing within the shotcrete wall was supported, during construction, by a series of steel pins inserted some 200 millimetres further into the Hopkins’ property.

Mr Hopkins’ proceedings

In December 2015, Mr Hopkins commenced proceedings in Class 4 of the Court’s jurisdiction pursuant to the open standing provision of s 123 of the Environmental Planning and Assessment Act 1979 seeking, as his primary relief, the demolition of the encroaching retaining wall. Although Mr Hopkins commenced his action by Summons filed in Court in December 2015, leave was granted by Pain J on 4 March 2016 to rely on an Amended Summons. The Amended Summons was filed on 23 March 2016. In addition to changing the relief sought, the Amended Summons also added Mrs Quinn as a respondent.
The relief sought in Mr Hopkins’ Amended Summons was in the following terms:

RELIEF CLAIMED
1   An order that, within 28 days of the date of these orders the First and Second Respondents and each of them demolish and remove, or procure the demolition and removal of, the following buildings, structures and or works situated on land comprising Lot 6 in DP 5539 and otherwise known as 9A Farnell Street, Curl Curl ("No. 9A”):
a.   The shotcreted reinforced wall (Shotcrete Wall) located on the southern boundary of No. 9A;
b.   All dowels, underpinnings, rock anchors and support structures installed by the First and Second Respondents in respect of the Shotcrete Wall and that have been drilled or inserted into the wall located upon And within the northern boundary of No 9A;
c.   The sub surface drainage system located at the rear of the Shotcrete Wall;
d.   All services located on and within the southern boundary of No.9A, including without limitation, the storm water drainage system and the sewerage, intended to service land described as Lot 867 in DP 595584 and otherwise known as 11 Farnell Street, Curl Curl ("Land"); and
e.   All timber hoarding erected on No. 9A and intended to support the Shotcrete Wall.
2   An order that the First and Second Respondents carry out the remedial drainage works and remedial structural works to, and upon, the Land in accordance with the report prepared by Dr Daniel Martens.
3   An order that the First and Second Respondents, in carrying out development upon the Land pursuant to development consent number DA2014/1321 issued by Warringah Council and dated 21 July 2015 ("Consent"), comply with the terms of the Consent except as otherwise ordered pursuant to orders 1 and 2 above.
Costs
4   An order that the Respondents pay the Applicant's costs of and incidental to these proceedings.

The Quinns’ cross-claim

Mr and Mrs Quinn filed a cross-claim on 13 April 2016, seeking, primarily, to regularise the encroachment. The regularisation sought was pursuant to the provisions of the Encroachment of Buildings Act 1922 (the Encroachment of Buildings Act), which is legislation that provides a framework for addressing such neighbour disputes. Mrs Hopkins was made a Cross‑Defendant to the cross-claim.

The initial hearing

The matter was initially heard by me over three days in November 2016. I gave an ex tempore decision on the day following the conclusion of the hearing (Hopkins v Quinn [2016] NSWLEC 163) (my first decision).
In my first decision, at [145], I said the following concerning costs of this litigation:

Although there have been varying degrees of success, I am satisfied that the appropriate costs outcome would be to order that the Quinns are to pay Mr Hopkins' costs of the proceedings as agreed or assessed unless, within 14 days of the date of these orders, either or both parties notify my Associate that they wish to be heard as to why some alternative costs order should be made.

The attempt to change the stormwater drainage design

During the period after I gave my first decision, there were several further mentions of the matter before me because the parties were unable to agree on the terms of the orders necessary to give effect to my first decision. In part, that arose because of Mr Hopkins seeking to implement a stormwater disposal design for the area between the Quinns’ house and the wall of the Hopkins’ property, where the Hopkins’ expert’s now proposed revised design differed in more than minor respects from the design dealt with in my first decision at [37] to [46].

The reopening application

Mr and Mrs Quinn subsequently applied to reopen the proceedings. Leave was granted to reopen with respect to three of the four matters that formed the basis of that application. The reopening application was heard on 10 February 2017 and I reserved my decision. My decision on the merits of the matters requiring to be dealt with in the reopening proceedings was given on 21 March 2017 (Hopkins v Quinn [2017] NSWLEC 31) (my second decision).
In my second decision, at [38], I made the following observation concerning costs of the reopening application:

… if the overall orders to dispose of the proceedings, including costs, are able to be settled between the parties, pursuant to the directions set out below, it is my view that, as the Quinns have only been successful on two of the aspects sought to be addressed by reopening (and those aspects were of far less significance in their outcome when compared to those upon which they were unsuccessful), the Quinns should be ordered to pay 75% of the costs of the reopening application.

The costs’ dispute

The parties were in dispute over the costs orders appropriately to be made arising out of the first and second decisions.
In short, Mr Hopkins sought that his costs be paid on an indemnity basis from 7 September 2016 as a consequence of what he asserts is the failure of the Quinns to accept a reasonable offer of compromise of his dispute with them. On the other hand, the Quinns propose that, with respect to the proceedings leading to my first decision, the costs order should be that the costs’ liability of the Quinns should be confined to 50% of Mr Hopkins’ costs, whilst they propose that, for the reopening proceedings leading to my second decision, each party should bear their own costs.
This decision deals with where, and to what extent, the burden of paying those costs should fall.

The costs’ hearing

A further hearing was held on 23 May 2017 to deal with costs issues. It is to be noted that, in an affidavit of Mr Quinn read at the costs’ hearing on 23 May 2017, costs actually incurred by Mr Hopkins before the end of 2017 were in excess of $260,000, whilst those incurred by the Quinns to the end of February 2017 were only a few dollars shy of $100,000. Many might regard this as disproportionate to the matters in dispute.
At the commencement of the costs’ hearing, I indicated to Mr Eastman, counsel for Mr Hopkins on the costs’ application, and Mr Hall SC and Mr Stapleton, counsel appearing for Mr Quinn on the costs’ application, that, in addition to the major dispute between the parties as to the costs of the hearings leading to the first and second decisions, a separate, much smaller issue required to be considered, this being such costs as were incurred by either party that related to the proposal advanced by Mr Hopkins’ engineer for a new stormwater design, as earlier noted. I indicated that, although my prima facie inclination was that such costs as arose from that minor aspect of the overall proceedings should be borne by Mr Hopkins, it was appropriate to request counsel to address those costs as to how they should fall and on what basis.

Mr Hopkins’ indemnity costs’ application

Introduction

Mr Hopkins seeks to have, for the first phase of the proceedings that led to my first decision, his costs paid on an indemnity basis from 7 September 2016. This application is made on the basis of what is said to be a Calderbank offer (see Calderbank v Calderbank [1975] 3 WLR 586) made by Mr Hopkins to Mr and Mrs Quinn on 7 September 2016 (the 7 September offer), an offer that was rejected by letter from the Quinns’ solicitor dated 8 September 2016.

The 7 September 2016 letter

The letter from Mr Hopkins’ solicitors to the Quinns’ solicitor requires some detailed consideration. It is necessary to reproduce the terms of the letter to understand the discussion that follows concerning it. The terms of the letter were:

You should by now have been served with our Clients’ evidence in these proceedings. From that evidence, our clients are confident that the Court will accept:
Mr Hopkins’ primary position, that rather than any order be made under the Encroachment of Buildings Act 1922, instead, the Court should order demolition and remediation pursuant to s 124 of the Environmental Planning and Assessment Act 1979;
Or alternatively, if an order is to be made under the Encroachment of Buildings Act 1922, that the works carried out on their land by your Client were either carried out negligently or intentionally such that compensation ought to be awarded to them consistent with the amounts set out in the statement of evidence of David Lunney (pursuant to s 4(1) of the Encroachment of Buildings Act 1922; and, in addition to such an order, the evidence of Dr Martens is such that remediation works are still required to be carried out so as to rectify damage occasioned to their property by your Clients works, even if a conveyance of land is also ordered

Offer of settlement
We have been instructed to put the following settlement proposal to you in a genuine attempt to resolve the proceedings and avoid either party incurring further costs in the preparation of the matter for hearing.
1.   Verdict in favour of the Applicant.
2.   An order that the Respondents procur the carrying out of the works set out in the statements of evidence of Dr Daniel Martens dated 13 May 2016 and 19 July 2016 in particular the works at section 2.4 of Dr Martens statement of July 2016 by a suitably licenced and qualified builder within 60 days.
3.   An order that the Second Cross Defendant, Sally Hopkins, convey that part of the land known as 9 Farnell Street, Curl Curl (Land) and referred to as the overland flow-path in Dr Martens statement of evidence of 16 July 2016 and report of David Lunney dated 19 July 2016 (but retaining an easement in favour of the Land for existing structures to remain, such as the Applicants footings).
4.   An order that the Respondents pay compensation to the Second Cross Defendant in respect of the conveyance of that part of the Land referred to in the order set out in paragraph [3] above in the amount of $35,000.
5.   An order that the Respondents pay the Applicants costs of the proceedings as agreed or assessed.
6.   The works referred to in the order set out in paragraph [3] above are to be supervised by a suitably qualified civil and structural engineer with a works as executed plan and certificate of adequacy provided for Dr Martens final approval within 7 days following completion.
Please note that this offer is open for a period of 28 days from the date of this letter, after which time it will expire.
The offer is a genuine compromise of the proceedings because our clients consider that they will succeed in this matter and, consequently, be entitled to compensation in the amount set out in Mr Lunney’s report (which is greater than the offer made in this letter) as well as remediation orders consistent with those recommendations contained in Dr Martens’ reports.
We draw your attention to the fact that this offer has been issued in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333. In the event that this offer is not accepted and this matter proceeds to hearing and your clients obtain a result that is less favourable than the terms of this offer, you are advised that we will rely upon this letter in support of an application for indemnity costs commencing from the date of this offer.
This Calderbank offer has been formulated taking into account the factors set out in detail above. With the likely escalation of legal costs due to the directions concerning filing of submissions and preparation of appeal books this offer is made in a genuine attempt to resolve the proceedings on a commercial basis and so avoid either party incurring further unnecessary legal costs.
The Applicant considers the offer to be reasonable in the circumstances and that the offer ought to be accepted by your clients.
We invite you to consider the above and obtain instructions. Please forward your response to the attention of the writer.

As can be seen from the terms of the letter, it can be regarded as being in three separate parts.
The first part sets out what is posited on behalf of Mr Hopkins as being the likely alternative outcomes of the primary matter in dispute, being the fate of the shotcrete wall constructed by Mr Quinn at a location which encroached upon the Hopkins’ property.
The second part of the letter contains the offer, the rejection of which is said to provide the basis for the awarding of indemnity costs to Mr Hopkins by virtue of its refusal.
The third part, that which follows after the offer, sets out what might be regarded as a general procedural commentary of matters potentially arising from the rejection of the offer, if that were to be the outcome of its consideration by the Quinns. This third element is, in its general terms, unexceptional and does not require further detailed analysis.
Before commencing my analysis of the individual terms of the 7 September offer, it should be noted that there are two errors contained in it. First, in offer term (3), the reference to Dr Martens' Statement of Evidence should be to 19 July 2016, rather than to 16 July 2016. Second, in offer term (6), the cross-referencing to offer term (3) should, in fact, be a cross-referencing to offer term (2). The first of these errors was noted as to be corrected during the course of the costs hearing but the second was not. Neither of these errors, however, is of any materiality in my considering whether or not an indemnity costs order should be made in favour of Mr Hopkins.

The first portion of the 7 September 2016 letter

It is to be observed that, in broad terms, the first element of the 7 September 2016 letter positing two potential outcomes on the primary matter in dispute is, effectively, merely a submission on behalf of Mr Hopkins for consideration by the Quinns and their legal advisers.

The Quinns’ rejection of the offer

It is next to be observed that, by letter dated 8 September 2016 from the Quinns’ solicitor, the Quinns rejected the offer made on behalf of Mr Hopkins.
This letter of 8 September 2016 is a lengthy one and much of it constitutes a detailed submission in rebuttal of Mr Hopkins’ claim. The letter also contains an express rejection of the offer in Mr Hopkins’ solicitor’s letter of 7 September 2016 and put a further counteroffer. This, and other counteroffers, was raised in the submissions made on behalf of the Quinns in support of their costs apportionment proposal. The fact that the Quinns have made counteroffers goes to reasonableness of their behaviour, not matters of quantum.
It is obvious from the detailed nature of this 8 September 2016 letter on behalf of the Quinns that it had been prepared (at least for the major part) prior to the receipt of the offer on behalf of Mr Hopkins.

However, given the conclusion which I have reached concerning the lack of effect of the offer on behalf of Mr Hopkins triggering any entitlement to an indemnity costs order, it is unnecessary to undertake any detailed analysis of the content or timing of the response on behalf of the Quinns.

Consideration of Mr Hopkins’ offer

Introduction

In determining whether the terms of the offer provide an appropriate basis upon which to found an order for indemnity costs in favour of Mr Hopkins, it is necessary to consider, in detail, a number of the elements set out in the offer before considering whether, taken together, the various elements provide an adequate and appropriate basis for an indemnity costs order.
In doing so, there are a number of matters that may require consideration. These are:

Is each of the elements of the offer certain as to its proposed outcome?

How should I characterise the outcome for the Quinns on each of the matters proposed by the letter of 7 September 2016?

Did the 7 September offer propose an overall outcome for the Quinns more beneficial than the overall outcome which they actually achieved? and

Was the offer a reasonable one?

Certainty

I am satisfied that, to the extent the offer did deal with matters in dispute between the parties, the offer did propose certainty of outcome. However, for the reasons later set out, the offer did not deal with all matters in dispute between the parties.

The offer and an “outcomes package”

For the purposes of the test earlier noted as to whether or not Mr Hopkins has achieved an outcome less beneficial to the Quinns than the offer contained in Mr Hopkins’ solicitor’s letter of 7 September 2016, it is necessary to make that assessment, in my view, on an overall outcome basis.
However, in order to be able to undertake such an overall outcome assessment, it is necessary to go through each of the elements contained in the offer and analyse how each of them might be regarded to have fallen (for Mr Hopkins or for the Quinns) when compared to the outcome on the relevant point flowing from my first decision.
Only after such a process has been undertaken is it possible then to consider how the benefit of the total package of outcomes might be regarded as having fallen when compared to the overall outcomes to Mr Hopkins and to the Quinns as a consequence of my first decision.
In this context, although the final, precise terms of orders to give effect to my first decision (and incorporating such modifications to the outcomes of my first decision as arise from my second decision) have not yet been settled between the parties, the nature of the outcomes on the various matters in contention are clear and sufficient for me to undertake the necessary evaluative process for determining what should be the appropriate costs order to follow from my first decision.

The garden bed and cabana easements

Although my first decision provided outcomes (subsequently revised to a minor extent by my second decision) for two of the encroachments (the garden bed adjacent to the swimming pool being the first, and the encroachment of the cabana and the vent pipe being the second), these are matters where the necessity for their resolution arose during the course of the hearing and the agreed desirability of resolving all issues of encroachments along the entirety of the boundary between the Hopkins’ and Quinn properties. However, the easement element for the encroachment of the cabana and the vent pipe needs further mention on the question raised for the Quinns – whether there should be some apportionment of the costs of the proceedings.
I do not consider that the outcome of these two western elements of the encroachments along this common boundary can play any role in determining whether Mr Hopkins should be entitled to indemnity costs on the basis of the offer contained in the letter from his solicitors of 7 September 2016.

The first offer term

I now turn to consider the first term in the offer contained in the letter of 7 September 2016. It is appropriate to repeat what it says:

1, Verdict in favour of the Applicant.

This offer term merely proposes a formal outcome to ensure that Mr Hopkins’ proceedings are finalised if the offer were to be accepted. What might be the effect of the offer on the Quinns’ cross-claim is discussed later.

The second offer term

The second element of the offer of the letter of 7 September 2016 was in the following terms:

1. An order that the Respondents procure the carrying out of the works set out in the statements of evidence of Dr Daniel Martens dated 13 May 2016 and 19 July 2016 in particular the works at section 2.4 of Dr Martens statement of July 2016 by a suitably licenced and qualified builder within 60 days.

To understand what is the position that would have arisen had the Quinns agreed to comply with that which is proposed in this term, it is necessary to turn to the specifics of what was contained in the two reports of Dr Martens to which the second offer term refers.
A close reading of Dr Martens' Statement of Evidence of 13 May 2016 discloses that no works were proposed by him in that report. This document was confined to his observations as to what was the then position and potential risks arising from it. This element of offer term (2) is meaningless.
To provide a proper and complete understanding of the reference to Dr Martens’ Statement of Evidence of 19 July 2016, it is appropriate to set out the relevant elements of it to enable a proper understanding of the works proposed to be required by offer term (2). The relevant portion of this Statement of Evidence reads:

17   The following scope of works is recommended for rectification of various hydrologic and structural issues considered to have occurred as a result of construction activities on No. 11.
a.   Install a drainage system in the area between the dwellings at No 9 and No 11.
i   Sub-surface drain: Install a sub-surface drain to capture sub-surface flows between the two dwellings and direct these to the new stormwater pit at the south eastern corner of the dwelling at No. 11. The drain should consist of a 100 mm agricultural drain pipe, wrapped in woven geotextile, and be positioned within a trench backfilled with durable clean drainage aggregate.
ii.   Overland flow-path: Seal the entire surface (ideally with pavers or similar over concrete) between the two dwellings and install a centrally located overland flow-path to capture overland flows between the two dwellings and direct these to the new stormwater pit at the south eastern corner of the dwelling at No. 11. The sealed area should extend in width fully from the Hopkins Site Retaining Wall to the southern wall of the dwelling at No. 11. The overland flow-path should ensure that no water can infiltrate into the soil, and be of sufficient capacity to capture the 1 in 100 year flow event such that no water is directed towards No 9.
iii.   Connect Drainage Cells: Drainage cells behind the shotcrete walls should be connected to the new stormwater pit at the south eastern corner of the dwelling at No. 11. This will ensure that water pressure does not accumulate behind the shotcrete walls, and prevent the redirection of groundwater flows onto adjoining lands.
b.   If the shotcrete wall is to be retained, and I see at this point no engineering reason why it should not, then the following works will be required:
i.   Complete garage: The garage construction should be completed so that the top of the wall is braced by the garage roof, which will serve to connect the northern, western and southern shotcrete walls. This will prevent further movement of the shotcrete wall adjacent to Hopkins’ Site Retaining Wall.
ii.   Grout void between walls: High strength grout (at least 80 MPa) should be inserted at a number of strategic locations between Hopkins’ Site Retaining Wall and the southern shotcrete wall. This is required to ensure that the Site Retaining Wall does not have the capacity to move into the ‘gap’ currently created by the drainage cell in the void between the two walls. The grout will need to be strategically placed to ensure that water flow within the drainage cell is not significantly impeded.
c.   Make good any damage that has occurred at the Site that has arisen out of the works undertaken on No. 11. This would include:
i.   Provided that the same tiles and/or pavers can be sourced, replacement of cracked tiles and/or pavers on the adjoining stairwell adjacent to the Site Retaining Wall. Alternatively, if such tiles and/or pavers cannot be sourced, then entire stairwell should be retiled using a similar paving/tiling product.
ii.   Grouting joints and cracks in brick and block work within the site and repainting the affected surfaces in the same paint colour. If the paint cannot be matched, then the entire affected area should be repainted in a similar matching colour. All paintwork should be suitable for outdoor purposes.

It is now necessary to consider the extent to which that which was proposed by Dr Martens was achieved in the outcomes determined by my first decision.
First, it is to be observed that implementation of the drainage works described above in (17)(a)(i) and (ii) was the subject of joint conferencing between Dr Martens and Mr Bennett, the Quinns’ engineer. The outcome of that joint conferencing was a Joint Expert Report. The relevant elements of the joint report concerning the comparatively minor disagreement between the experts on the relevant drainage issue were dealt with in the course of the concurrent oral evidence given by them. My determination on these comparatively minor matters was set out in my first decision.
With respect to that which is set out in (17)(a)(iii) of Dr Martens’ 19 July 2016 scope of works, the Joint Engineering Report of Dr Martens and Mr Bennett (Evidence Book, Tab 17) records, on page 4, with respect to this topic, that Mr Bennett agreed with Dr Martens’ position, a position expressed in the joint report in the following terms:

The drainage cell behind the shotcrete wall should be tested to determine its operation and where suitable base drainage outlets can be created. If possible, the drainage cells should be hydraulically connected to the internal drainage system at No. 11 Farnell Street.

In my first decision, the bulk of that which I needed to consider concerning the shotcrete wall arose on the question of discretion as to whether or not the wall should be demolished. That does not require further discussion in these proceedings.
Dr Martens’ proposed scope of works of 19 July 2016 contained two elements that were contingent on retention of the shotcrete wall. The first of those was the proposal that the Quinns should complete construction of the garage so that its top slab would provide bracing for the shotcrete wall. The reason given for this in the proposed scope of works was that:

This will prevent further movement of the shotcrete wall adjacent to Hopkins site retaining wall.

The Joint Expert Report of Mr Bennett and Dr Martens dealt with four matters recommended by Dr Martens under the report’s third heading – one entitled:

If the shotcrete retaining wall constructed on No. 11 Farnell Street is to be retained, what remedial engineering works are required?

The first was that contained in (17)(a)(iii) dealt with above.
The second of Dr Martens’ recommendations gave rise to the single matter (in the event the wall was retained), where there was disagreement between Dr Martens and Mr Bennett. This was the item under the heading “Grout void between walls”, set out at (17)(b)(ii) of Dr Martens’ 19 July 2016 proposed scope of works and repeated as item 2 in topic (3) of the joint report.
At [84] of my first decision, I indicated that I preferred the approach adopted by Dr Martens to that proposed by Mr Bennett. The consequence of that conclusion is that Mr Hopkins succeeded on the sole contested engineering construction issue that remained between the parties if I were to have concluded (as I did) that the shotcrete wall should be retained.
That determination – in favour of the outcome sought by Mr Hopkins – is not, from the face of the specified works themselves, merely a trivial matter of detail. It was, self-evidently, in the opinion of Dr Martens, a matter of some substance and import in order to provide a proper engineering foundation to enable the retention of the shotcrete wall.
The third of Dr Martens’ recommendations was:

Install the garage top slab to provide bracing for the shotcrete walls.

Mr Bennett agreed with this proposition.
The fourth of Dr Martens’ recommendations was:

The connection between the garage top slab and the northern boundary wall of No. 9 Farnell Street should be sealed to prevent any rainwater or stormwater ingress.

Mr Bennett agreed with this proposition.
To the extent that (17)(c)(i) and (ii) require to be considered, it is my understanding that the Quinns accept that it will be necessary for them to rectify any damage to the Hopkins’ property that might have arisen as a consequence of their construction activities the subject of these proceedings. It is my understanding that it is uncontroversial that the extent of such rectification as may be necessary will be determined by before-and-after dilapidation reports and that there will be a process for rectification of identified matters (whether or not by insurance claim being irrelevant for this general proposition). To that extent, this element of what was proposed by Dr Martens in his 19 July 2016 scope of works will be attended to after completion of the Quinns’ works.
For assessing how the balance of success in the substantive proceedings should be seen when measured against offer term (2), there are two observations to be made:

The outcomes in the matters from topic 1 and the agreed matters in topic 3 of the joint report (to the extent also encompassed by Dr Martens’ proposed scope of works of 19 July 2016) were positive outcomes proposed for Mr Hopkins; and

Second, it cannot be said that achieving the retention of the shotcrete wall should be regarded as an unqualified successful outcome for the Quinns – it is to be regarded as a success tempered by the ancillary success on engineering matters enjoyed by Mr Hopkins.

However, retention of the shotcrete wall on the terms arising from my first decision is, on balance, a better outcome for the Quinns because of the easement gained despite the compensation required for it.

The third offer term

The third element of the offer of the letter of 7 September 2016 was in the following terms:

1 An order that the Second Cross Defendant, Sally Hopkins, convey that part of the land known as 9 Farnell Street, Curl Curl (Land) and referred to as the overland flow-path in Dr Martens’ statement of evidence of 16 July 2016 and report of David Lunney dated 19 July 2016 (but retaining an easement in favour of the Land for existing structures to remain, such as the Applicants footings).

Although, strictly speaking, this element of the offer was made by Mr Hopkins and that which he offered (conveyance of an element of the freehold title of the Hopkins’ property) was not within his power, strictly speaking, to effect, as the Hopkins’ property is, as a matter of fact and law, vested solely in Mrs Hopkins, I do not propose to regard this as any form of impediment in assessing this aspect of the offer. That is because, in the proceedings, when it became necessary for Mrs Hopkins to agree to one element of the outcome, she readily authorised Mr Eastman to indicate that her consent would be given.
With respect to the offer to convey the freehold strip necessary to permit coherent implementation to resolve the overland flow-path drainage issues in the strip between the Quinns’ residence and the wall on the Hopkins’ property, the outcome obtained of an easement rather than a freehold conveyance of the relevant strip can, in practical effect, be regarded as a neutral outcome, in my view.
This is because, whichever method of legal resolution was to be adopted, the Quinns would receive legal certainty as to their right to address and resolve drainage issues across the full width of this strip of land, with that right being guaranteed in perpetuity.

The fourth offer term

The fourth element in the offer of 7 September 2016 was in the following terms:

1 An order that the Respondents pay compensation to the Second Cross Defendant in respect of the conveyance of that part of the Land referred to in the order set out in paragraph [3] above in the amount of $35,000.

It is to be observed that this element of the offer is expressly confined to the compensation that was proposed to be paid as the price of the limited strip of land encompassed within offer term (3).
It is necessary to set out the relevant portion of Mr Lunney's report dated 19 July 2016 dealing with the valuation of the portion of the overland flow-path located on the Hopkins' property. Relevantly, Mr Lunney wrote (Exhibit F, Tab 3, folio 52):

16) I note that in his expert report, Dr Martens has addressed an overland flow-path which would run along the common boundary.
17) The overland flow-path is addressed by Dr Martens in the following terms:
"Overland flow-path: Seal the entire surface (ideally with pavers or similar over concrete) between the two dwellings and install a centrally located overland flow-path to capture overland flows between the two dwellings and direct these to the new stormwater pit at the south eastern corner of the dwelling at No. 11. The sealed area should extend in width fully from the Hopkins Site Retaining Wall to the southern wall of the dwelling at No. 11. The overland flow-path should ensure that no water can infiltrate into the soil, and be of sufficient capacity to capture the 1 in 100 year flow event such that no water is directed towards No 9."

18) From my interpretation of Dr Martens' report it appears to me that the area of the Subject Property which would be occupied by the overland flow-path is the area between the brick fence and the common boundary. The Survey Report indicates that the offset distance between the brick fence and the common boundary varies from 75mm adjacent to Farnell Street and 100mm at the rear boundary. The average width of the offset would therefore be 87.5mm. I have calculated the area of land within this offset distance as follows:
Common Boundary 41.28m x average offset (0.0875m) = 3.612m2.

19)   I have excluded the area of “Area 3” which is the area of the existing alleged garage encroachment (0.2m2).
20)   I have also excluded the area of "Area 1" which is the area of the existing alleged encroachment close to the Farnell Road frontage (0.5625m2).
21)   The net area of land which would be occupied by the overland flow-path is therefore 3.612m2 less 0.2m2, less 0.5625m2 = 2.8495m2.
22)   By applying the rate of $5,612/m2 (as detailed above) I have calculated the value of the area which would be occupied by the overland flow-path to be $15,991.

As a consequence of the uncontradicted evidence of Mr Hopkins’ valuation expert, the value of the overland flow-path area was a little less than $16,000.
On this point, the outcome of my first decision is that, for the resolution of the overland flow-path portion of the matters in contention, the Quinns' are required to pay the sum of a little less than $22,000 for the easement giving them the right to effect a comprehensive stormwater drainage resolution along the strip of land involved.
These positions are both to be compared with the sum of $35,000 proposed in this term of the 7 September offer.
Given that I have concluded, with respect to term (3) of the offer, that the easement that will result from the orders giving effect to my first decision will have the same functional outcome as the proposed freehold transfer and easement back to Mrs Hopkins, the cost saving of ~$13,000 resulting from my determination (when compared to the payment by the Quinns proposed in the offer) clearly shows that acceptance of this element of the 7 September offer would have resulted in a significantly disadvantageous position for the Quinns when compared to the actual outcome.

The fifth offer term

This element of the 7 September offer read:

1 An order that the Respondents pay the Applicants costs of the proceedings as agreed or assessed.

Given that this element of the offer represented a proposed costs’ outcome before Mr Hopkins incurred the expenses of the hearing in November 2016, a hearing that resulted in me expressing the view that Mr Quinn should pay Mr Hopkins' costs as agreed or assessed, there can be no doubt that this element of the offer would have resulted, if accepted, in a better outcome for Mr Quinn than that posited by my first decision.

The sixth offer term

The sixth term in the 7 September offer was:

1 The works referred to in the order set out in paragraph [3] above are to be supervised by a suitably qualified civil and structural engineer with a works as executed plan and certificate of adequacy provided for Dr Martens final approval within 7 days following completion.

This offer can be regarded as purely a process aspect of element (2) and, therefore, need play no part in my assessment of the outcome to be derived from my first decision when compared to what would have been the outcome for Mr Quinn had he accepted the 7 September offer.

The fate of the Quinns’ cross-claim

At the date of the making of the 7 September offer, the Quinns’ cross-claim pursuant to the Encroachment of Buildings Act was before the Court, as the cross-claim had been filed in April 2016.
The Hopkins’ offer letter, in its six terms set out in the second of the three portions of the letter as earlier discussed, makes no express mention of the Quinns’ cross-claim. There are two matters that arise from this position. The first is whether it is to be understood that the first term of the 7 September offer (“Verdict for the Applicant”) should be regarded as encompassing dismissal of the cross-claim. If so, that outcome needs to be weighed as part of the consideration of the benefit/disbenefit outcome assessment to the Quinns of accepting the offer.
Second, I accept it is highly unlikely that the 7 September offer could be considered as not encompassing the Quinns’ cross-claim. However, if it was to be so regarded, this would be a factor weighing on the reasonableness of the offer and the fact that it would not give certainty to the Quinns by resolving all the issues in dispute in the litigation. My hesitancy on this point arises as offer term (1) does not say “Verdict for the Applicant on the Summons and for the Cross-Defendants on the Cross-Claim”.
I turn, first, to consider the cross-claim on the basis that the 7 September offer, through its first term, was proposing that the Quinns’ cross-claim be dismissed. In this context, it is necessary to consider precisely what relief was being sought by the Quinns through their cross-claim under the Encroachment of Buildings Act. That relief was in the following terms:

1 Order pursuant to section 3(2)(a) of the Encroachment of Buildings Act 1922 (Encroachment of Buildings Act) that the First and Second Cross-claimants pay the Second Cross‑defendant the minimum amount of compensation payable pursuant to s.4(1) of the Encroachment of Buildings Act for any encroachment arising from:
a.   Construction on 12 December 2015 of a new wall along the boundary between 9A Farnell Street, Curl Curl (9A Farnell Street) and 11 Farnell Street, Curl Curl (11 Farnell Street) by the First and Second Cross‑claimants pursuant to the development consent [DA2014/1321] (DA) for 11 Farnell Street, Curl Curl; and
b.   The re-determination on 19 February 2016 by the NSW Land & Property Information of the title boundary between 9A Farnell Street and 11 Farnell Street (Re‑determination).
2 Further order pursuant to section 3(2)(b) of the Encroachment of Buildings Act that the Second Cross-defendant grant the First and Second Cross-claimants an easement to permit an encroaching structure at 9A Farnell Street arising from construction by the First and Second Cross-claimants pursuant to the DA to remain for the life of the encroachment.
3 Order pursuant to section 3(2)(a) of the Encroachment of Buildings Act that the First and Second Cross-claimant do not pay the Second Cross-defendant any compensation for the part of the building at 11 Farnell Street that:
a.   Has existed at 11 Farnell Street since at least 1986; and
b.   Has encroached upon 9A Farnell Street since 17 March 2016, when the period for appealing against the Re-determination expired.
4 Further order pursuant to section 3(2)(b) of the Encroachment of Buildings Act that the Second Cross-defendant grant the First and Second Cross-claimants an easement to permit the encroaching structure to remain at 11 Farnell Street for the life of the encroaching structure, which encroaching structure:
a.   Has existed at 11 Farnell Street since at least 1986; and
b.   Has encroached upon 9A Farnell Street since 17 March 2016, when the period for appealing against the Re-determination expired.
5 Alternatively, order pursuant to section 3(2)(a) and (b) of the Encroachment of Buildings Act that:
a.   The Second Cross-defendant convey and or transfer to the First and Second Cross-claimants that area of land representing the increase in the area of 9A Farnell Street and decrease in the area of 11 Farnell Street caused by the NSW Land & Property Information re-determination of the title boundary between 9A Farnell Street and 11 Farnell Street on 19 February 2016; and
b.   The First and Second Cross-claimants pay the Second Cross‑defendant the amount representing the land value of that land area determined by a licensed valuer appointed by the Court.

As can be seen, the cross-claim sought resolution of all encroaching elements owned by the Quinns for the full length of the boundary between the Hopkins’ and Quinns’ properties. The proposed resolution was for an easement of variable width (depending on the extent of encroachment), a result which, by running with the land, would have granted the Quinns and their successors in title certainty against Mrs Hopkins and her successors in title concerning all encroaching elements as discussed above.
In the context of offer term (3) of the 7 September offer, the proposed conveyance to the Quinns with an easement back to Mrs Hopkins for the footings of her retaining wall would have only provided guaranteed certainty concerning that element of the matters in dispute at the present time.
Whilst the nature of the litigation and its resolution through acceptance of the 7 September offer as a resolution incorporating disposal of the Quinn's cross‑claim would likely have acted as a bar to future litigation between the present owners of each property, the lack of certainty in resolution of the other encroaching areas by the creation of mutual rights and/or obligations for the other encroaching elements would have resulted in the Quinns being left in the position, should they propose to sell their property, that a survey would disclose no formal legal resolution of the shotcrete wall encroachment (although it is to be expected that the pins that form an element of dispute in these proceedings could not be known for the purposes of such a survey and, therefore, the full extent of that encroachment would not be disclosed) and it would also note the other, more minor encroachments to the west of the overland flow-path area.
Viewed in this fashion, it seems to me that the invisible but implicit outcome of offer term (1) of the 7 September offer (that the Quinns’ cross-claim was to be dismissed) can only be regarded as being significantly less favourable to the Quinns than the outcome that will actually be effected by the orders that dispose of both Mr Hopkins’ proceedings and the Quinns’ cross-claim – as those dispositive orders will provide legal certainty, running with the land, to the Quinns and their successors in title for all encroachments along the full length of the boundary between the two properties.
I have earlier indicated it was highly unlikely that the 7 September offer, in its term (1), did not encompass dismissal of the Quinns’ cross-claim. If dismissal was not, in fact, to be regarded as the intent of the offer, it would have lacked the utility of resolving all the matters between the parties in the litigation. On that basis, it would not provide an appropriate foundation for concluding that Mr Hopkins could be awarded his costs on an indemnity basis from the date of the offer.
However, in light of my conclusion concerning what can be regarded as the substantive, operative elements of the 7 September offer, any lack of precision in offer term (1) is immaterial.

The 7 September offer and the reopening proceedings

I now turn to consider whether or not the reopening element of the proceedings (coming as it does prior to the finalisation of dispositive orders in the proceedings) should alter the balance so as to change what would be expected to be the outcomes of the 7 September offer, if accepted, when weighed against matters contained in my first decision.
I have already set out my preliminary conclusions as to how the offer of 7 September 2016 should be seen in light of the outcomes for the Quinns contained in my first decision. I now turn to consider to what extent, if any, the outcome of the reopening application should weigh in my overall assessment of the rejection of the offer. I do this because the final dispositive orders have not yet been made and because, although in only minor aspects, the outcome of the reopening proceedings was to adjust two elements arising from my first decision to a more favourable outcome for the Quinns.
At the conclusion of the reopening proceedings, I explained, in my second decision, that I was inclined to order that the Quinns pay 75% of Mr Hopkins' costs of those proceedings. For the reasons later explained, I have concluded that, in these proceedings, it would be appropriate to confirm that position as the appropriate outcome of the reopening proceedings.
The consequence of that is that, weighing that costs' outcome (adverse to the Quinns) against the modest merit alterations in their favour, the balance requires to be taken into account when considering the final outcome of the Quinns’ rejection of the offer of 7 September 2016.
Doing so now, on fine balance, I am of the view that I should not regard the additional minor benefits from the reopening proceedings versus their additional costs’ liability as supporting any conclusion as to whether or not, overall, the Quinns have found themselves in a better position than had they accepted the 7 September offer. The reopening proceedings should be regarded as a neutral element in the 7 September offer assessment.

Conclusion on the 7 September offer

I set out above all matters which I consider constitute benefits or disadvantages that will accrue to the Quinns as a consequence of the making of dispositive orders based on my determinations in my first and second decisions. I have no doubt that, in a cumulative sense, it is self‑evident that the disadvantages to the Quinns that would arise, had they accepted the terms of the 7 September offer, substantially outweigh the benefits that would have accrued to them had they done so.
Thus, it is the position that the 7 September offer fails to satisfy the requirements to provide a foundation for an indemnity costs order in favour of Mr Hopkins as the result achieved by the Quinns, in totality, as a consequence of rejecting the offer and continuing to pursue the litigation to finality, is more advantageous to them than would have been the position had they accepted the offer.
It also follows from all that I have set out above that the Quinns’ rejection of the 7 September offer was reasonable.
Mr Hopkins’ indemnity costs application fails.

The Quinns’ position on costs of the first phase hearing

Introduction

Before turning to consideration of the submissions made that some apportionment of costs should be made for the first phase of the proceedings, there are a number of matters to be observed:
Although the presumption is that costs will follow the event (Pt 42 r 1 of the Uniform Civil Procedure Rules 2005 (UCPR) and Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59), s 98 of the Civil Procedure Act 2005 makes it clear that there is discretion to order otherwise in the circumstances of the case;
Apportionment can be appropriate in some circumstances and that, in an instance such as this, where apportionment is proposed, I would need to be satisfied that there was some particular and proper basis arising from these proceedings that would cause me to depart from the general principle (Sze Tu v Lowe (No 2) [2015] NSWCA 91); and
Costs are compensatory for the party in whose favour they are awarded and are certainly not to be regarded as punitive of the unsuccessful party.
I have, also, earlier noted (at [13]) the quantum of costs actually incurred by Mr Hopkins as at 13 December 2016 and the Quinns as at 1 March 2017 (shown by the annexures to Mr Quinn's affidavit of 17 May 2017). Whilst a rational consideration of the matters in dispute arising out of Mr Hopkins’ Summons and the Quinns’ cross-claim would lead a disinterested observer to conclude that the costs involved might appropriately be regarded as disproportionate to the matters in dispute between the parties, that is also not a matter arising for my consideration in my costs assessment. If, with respect to the costs orders that I make in these proceedings, there is no agreement between the parties as to how they are to be satisfied, the statutory costs assessment process will address that in a separate fashion entirely divorced from this consideration by me.
I now turn to consider the basis upon which it is submitted that there should be some apportionment of costs for the first phase of the proceedings and that, as a consequence, I should depart from my initial disposition to order costs of that phase of the proceedings in favour of Mr Hopkins.

The Quinns’ submissions on apportionment

Mr Hall's written submissions as to why some apportionment of the costs of the first phase of the hearing should be made were succinct. He wrote:

Costs Generally
20.   The Court recognised at [138] of the decision that there had been a balance of outcomes. The reasoning at [142] is based on appropriateness of compensating the Applicant for the necessity to bring the proceedings.
21.   The Court identified the complex question of what is the “event” for the purposes of a costs order at [137] of the decision.
22. Different approaches have been taken to the identification of the relevant “event” for the purposes of r.42.1 of the UCPR.
23.   Generally the “event” refers to the event of the claim and the practical result of it: Sze Tu v Lowe (No 2) [2015] NSWCA 91 at [39]. Generally, that means an unsuccessful party can be ordered to pay the entirety of the costs of the successful party, even though the successful party did not succeed on all issues: James v Surf Road Nominees Pty Ltd (No2) [2005] NSWCA 296 at [32], Roads and Traffic Authority v McGregor & Anor (No2) [2005] NSWCA 453 at [17].
24.   There are cases where a party, successful overall, may be deprived of part of its costs, or ordered to pay the costs of a discrete issue. The circumstances in which that can occur are not limited: Sze Tu at [40].
25.   Considerations for when the normal order will be departed from include where a particular issue or group of issues is clearly dominant or separable (i.e. a separate disputed question of fact or law before a court on which a party fails) or matters upon which the party was unsuccessful took up a significant part of the evidence and or argument at trial: Sze Tu [40] citing Bostik Australia Pty Ltd v Liddiard (No2) [2009] NSWCA 304 at [38].
26.   Further, whether an “issue by issue” approach will produce a fairer result than the traditional rule is also a central consideration: Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No2) [2008] FCAFC 107 at [5], cited by White J in Leppington Pastoral Co Pty Ltd v Chief Commissioner of State Revenue (No2) [2017] NSWSC 68 at [8].
27.   Where there is a mixed outcome, apportionment of costs depends on impression and evaluation rather than mathematical precision: Dodds Family Investments Pty Ltd Lane Industries Pty Ltd [1993] 6 IPR 261 at [272].

The above propositions are reflective of the matters earlier set out at [92].
The next section of the submissions dealt with the Calderbank offer. Given my earlier discussion and conclusion concerning Mr Hopkins’ proposal for his being awarded indemnity costs, it is not necessary to address those concerning that matter.
The submissions then continued to deal with the Quinns’ proposal for apportionment of costs for the first phase of the hearings:

Apportionment
52.   The Court must now consider whether the outcomes justify a departure from the normal rule and dictate that an “issue by issue” approach to apportionment of costs will be a fairer result.
“Clearly dominant or separable”
53.   The issues in the proceedings can be identified in the following dominant and separable categories:
Applicant’s case
(a)   Breach of condition 2 of the Respondents’ development consent (DA) and s.76 of the EP&A Act for construction of the shotcrete wall;
(b)   Other alleged breaches of conditions of the Respondents’ DA.
Respondents case
(c)   Any remedy for 53(a) above should be limited to an easement with compensation payable, not demolition of the wall;
(d)   There were no other breaches of the DA;
(e)   The encroachments pre-existing the parties’ ownership of their respective properties, not raised by the Applicant, should be regularised by an easement or a conveyance of the whole to resolve 52(c) above.
54.   The Court recognised there was a balance of outcomes. That balance is outlined in Appendix 1.
Findings
55.   The Applicant established two serious breaches of condition 2 of the DA, both relating to encroachment, but failed in its primary relief of a demolition order. That demolition order was persisted with in the face of the Applicant’s own evidence that it was unnecessary for engineering reasons.
56.   The relief ordered was relief the Court could order because of the Respondents’ cross-claim pursuant to the EOB Act.
57.   The Applicant ran his case based on multiple other breaches of the DA including conditions 3(a), 3(e)(i), 3(e)(ii), 4, 7 and 18. They were related to the construction of the new wall but were pressed in circumstances that the Applicant’s own evidence was there was no engineering reason to order demolition of the wall. The Applicant was not successful in pursuit of those claims.
58.   These claims of the Applicant increased the amount of cost that the Respondents had to incur, including at least:
(a)   Preparing their defence: para 11(b), (c), (d), (e), (f)
(b)   Adducing responsive evidence:
(i)   Affidavit of David Quinn dated 17 May 2016 [25] to [30], [46] to [50], [56] to [57], [62]-[63], [66]-[69];
(ii)   Statement of evidence of Edward Bennett dated 27 October 2016 [6]-[12], [13] to [32], [33] to [49], [51] to [79], [80] to [91];
(iii)   Affidavit of David Quinn dated 27 October 2016 [4] to [14], [16] to [18], [19]-[22];
(iv)   Affidavit of Glenn Coltman dated 27 October 2016 [1], [2], [4];
(v)   Affidavit of David Quinn dated 16 November 2016 [13], [19], [20], [40], [41];
(c)   Preparing for trial, challenging evidence and arguing their case at trial: represented in and not limited to the Respondents’ written submissions dated 16 September 2016 [24] to [32], [40] and Transcript of 23 November 2016, p.73 to p.82.
59.   Parts of the material referred to in paragraph [58] above included pleadings, evidence and submissions on the question of remedial drainage works. Whilst remedial drainage works were ordered, the Respondents acceded to an order that was foreshadowed during the hearing. If it had been opposed it would have been made anyway, but the order itself was made in the absence of an adverse finding about non-compliance with the stormwater conditions of the DA at [119] of the Judgement. It could not have been without first finding there was a fault with the stormwater design, which was not possible because it had not been completed and could not be tested.

60.   So, whilst remedial drainage works were ordered, they were ordered without legal liability in the Respondents for DA breaches. That order is neutral, so far as costs considerations are concerned.
61.   The Respondents were successful in disproving DA breaches apart from the encroaching wall.
62.   The extent of the preparation required for trial and the conduct of the trial itself were increased significantly because of the further claims of the Applicant that the Respondents succeeded on: see SzeTu[40] and paragraphs [24] to [27] above.
Fairness of an “issue by issue” approach
63.   The Respondents were successful in having their encroaching wall regularised with an easement instead of demolition.
64.   They also achieved an easement for the encroaching structures that pre-existed their ownership which was not an issue raised by the Applicant. They are now ordered to pay a market rate of compensation for those easement that arise from pre-existing causes outside of their control without any future benefit from that land.
65.   The Respondents were ordered to pay compensation for the drainage works on the overland path. Leaving aside the merits of the works themselves, the Respondents:
(a)   Were ordered to do the works without a finding of breach of stormwater conditions;
(b)   Had in their offer of 31 March 2016 proposed to carry out works that could be agreed between the parties’ respective experts;
(c)   Were ordered to pay compensation at three times the market value on the basis of “intention” imputed from the Court compelling them to perform them and without the Applicant seeking compensation for an easement for the overland path and without themselves seeking an easement for an area which was not at the time the proceedings were commenced, the subject of a dispute about encroachments; and
(d)   Have no future benefit from the use of the strip of land for which the easement is granted and compensation paid.
66.   The outcome of the proceedings fell the way it did for the Respondents. That does not however detract from it being manifestly unfair for the Respondents to have to pay:
(a)   Their own costs of defending the further DA condition breach claims despite their success; and
(b)   The Applicant’s costs of his unsuccessful claims.
67.   Without any mathematical precision, a fair and balanced outcome would take into the account the following matters:
(a)   The dominant and separable elements of the case identified in [53] above;
(b)   The balance of outcomes between the parties outlined in Appendix 1;
(c)   The evidence of the Respondents’ three genuine offers to compromise the proceedings at different stages in Exhibits 5, 6 & 7;
(d)   The Applicant’s own costs of the proceedings at c.$268,000 that were three times those of the Respondents at c.$81,000 as outlined in Appendix 2.
68.   Taking into account the factors listed above, the proper and fair exercise of the Court’s discretion is to order that the Respondents pay 50% of the Respondents, as agreed or assessed.

During the course of the costs hearing, Mr Hall addressed these submissions. It is, however, for the purposes of this costs’ consideration, unnecessary to go beyond these written submissions as the substantive elements contained in them encompass all the matters upon which he addressed me.

Inaccuracy of the Quinns’ summary of outcomes

The written costs submissions on behalf of the Quinns’ attached Appendix 1, which was headed “Balanced Outcome Summary” and “Respondents and Cross-Claimants’ Outcomes at Trial”.
There are two matters immediately observable from that summary which warrant some detailed comment as to how I should have regard to what actually occurred at the first-phase hearing and how those matters were dealt with in my first decision.

The shotcrete wall outcomes

With respect to the primary issue in dispute between the parties, the construction by Mr Quinn of the encroaching shotcrete wall and its retaining pins, the Quinns’ summary sets out, under the heading “Finding”, what are said to be the outcomes on this matter. The description is in the following terms:

Two serious findings of breach of EPA Act being the wall and pins encroaching. Demolition not awarded. Not a proportionate remedy. Compensation.

I should also observe that, whilst in his offer of 7 September 2016 Mr Hopkins was prepared to concede, for the purposes of the offer, that the shotcrete wall should be retained, the substantive contest before me was not so confined, and it was necessary for me to determine, as I did, whether or not I should order demolition of the wall. That aspect of the outcomes is accurately reflected in the element of the Quinns’ Appendix 1 reproduced above.
However, for the reasons earlier set out in my discussion of offer term (2) of Mr Hopkins’ offer of 7 September 2016, the outcome concerning the shotcrete wall was more nuanced than has been set out in the Quinns’ summary. The item concerning additional works set out in (17)(b)(ii) of Dr Martens’ proposed schedule of works in his Statement of Evidence of 19 July 2016 was carried forward as a matter dealt with in the joint report of Dr Martens and Mr Bennett.
In that joint report, Mr Bennett disputed the necessity for the works proposed in that element of the list prepared by Dr Martens. My resolution of that, adopting the position advocated by Dr Martens and contrary to Mr Bennett's position, was set out at [84] of my first decision. As earlier noted, that constituted resolution of one contested matter, concerning the shotcrete wall, being determined in Mr Hopkins’ favour. This position is not reflected in the summary of outcomes prepared as part of the Quinns’ written submissions on costs.

Drainage in the passageway

With respect to the issue pressed by Mr Hopkins concerning drainage in the passageway between the Quinns’ dwelling and the Hopkins’ wall, this arose from Mr Hopkins raising what he said was non-compliance with condition 7 of the Quinns’ development consent. The Quinns’ summary sets out, under the heading “Finding”, what are said to be the outcomes on this matter. The description is in the following terms:

No breach. Prospective. Judgment [114], [120]

This description does not reflect either the trial or the outcome recorded in my first decision. I explain why in the following section.
Dr Martens’ report of 13 May 2016 records that he had been asked to address, inter alia, matters relating to the inadequate drainage system and subsequent water ingress onto “the site”.
In this context, “the site” referred to is the Hopkins’ property. The two aspects of the Hopkins’ property with respect to which Dr Martens had been asked to address this issue related to the ongoing structural integrity of the Hopkins’ retaining wall and the stairs immediately adjacent to it leading from Farnell Street to the dwelling.
Although Dr Martens’ report of 13 May 2016 sets out what Dr Martens observed concerning the Quinns’ construction activities and what he expected would be the consequences of them for the matters upon which he had been asked to comment, this report contains no recommendations as to what works might be needed to be carried out in order to address the identified concerns.
Dr Martens’ letter of instruction providing the basis for his further report (which became, when provided, his report of 19 July 2016) requested that he address four questions relating to the Quinns’ building works. Those questions are set out at [4] of the report of 19 July 2016). Relevant to matters of rectification proposals (being the matter here requiring consideration), Dr Martens was asked, in question 4, to address the following:

The scope of works should also then be included in the report which sets out:
(a)   Schedule of rectification works with a view to rectifying or preventing further damage;
(b)   A timeframe for these works; and
(c)   Estimates on the costs of the rectification works.

Dr Martens’ May 2016 report formed part of the Evidence Book and his July 2016 report formed part of the same exhibit. At 2.4 of his July 2016 report, Dr Martens addressed the question of rectification works he considered that were desirable. With respect to these drainage matters, Dr Martens said:

Subsurface drain: install a subsurface strain to capture subsurface flows between the two dwellings and direct these to the new stormwater pit at the south-eastern corner of the dwelling at No 11. The drain should consist of the 100 mm agricultural drain pipe, wrapped in woven geotextile, and to be positioned within a trench backfilled with durable, clean, drainage aggregate.

This matter was the subject of contest between Dr Martens and Mr Bennett during the on-site inspection, necessitating entry into the rear foundation area of the Hopkins’ garage where informal commentary was given by these experts. A photo was taken of the exposed earth and the underside of the Hopkins’ staircase and this was subsequently tendered. The photo was of an earthen slope down which water flow-paths could be observed.
After the rest of the inspecting party left the site, Dr Martens and Mr Bennett remained behind to conduct a practical experiment to assess water ingress from the Quinns’ property into this footings area. This experiment demonstrated that the Quinns’ construction activities (independent of the relevant condition of development consent) were causing water ingress into this portion of the Hopkins’ property. This did not need to be dealt with in the judgment as it was subject of an agreement between Dr Martens and Mr Bennet that it needed to be rectified – the only argument being as to the detail of doing so.
This was dealt with as a merit issue in my first decision at [37] to [46] and later, concerning the substance of condition 7’s prospective operation, at [119] and [120]. None of this contest and the practical outcome broadly favourable to Mr Hopkins on this point is reflected in the anodyne terms set out on this topic in the Quinns’ costs submission’s Appendix 1. Whilst there may not have been, at that time, a breach of condition 7, nonetheless, there was an impact caused by Mr Quinn’s construction activities which required to be remedied.

Further consideration of Appendix 1 not warranted

I did not consider it appropriate that I be required to undertake a critical and detailed analysis of the remainder of the Quinns’ outcomes’ summary to determine whether or not there were other matters where the summary was deficient. It is sufficient for the purposes of this decision for me to conclude that, at least in two material respects on issues (including the most significant issue in contest), the summary does not accurately reflect the way the balance of outcomes fell.

Consideration of apportionment

The two instances discussed above demonstrate clearly that a “tick-a-box” approach, as set out in the Quinns’ Appendix 1, to matters dealt with in my first decision is entirely inappropriate. Having said that, it is now appropriate to turn to some matters of principle arising out of matters discussed in the decision of the Court of Appeal in Sze Tu.
First, it is appropriate to observe that these proceedings were appellate ones and, thus, some of the matters may be approached from a slightly different perspective when being dealt with for a first instance decision rather than for an appellate one.
Second, Sze Tu drew attention to the fact that, on questions of apportionment where there are multiple issues, there may be a proper basis for taking different positions on costs depending on whether the successful party is a plaintiff or a defendant (Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145 at [19] per Hodgson JA).
However, although this approach might, superficially, apply in these proceedings; it is to be observed that, by commencing their cross-claim, the Quinns assumed, by analogy, a plaintiff-like role in the pursuit of the matters so raised. It therefore seems to me that, on balance, the combination of the originally initiated proceedings and the Quinns’ cross-claim, in combination, put Mr Hopkins and the Quinns on equal footing in this regard.
A summary of the general principles providing guidance on departing from the general rule (of costs following the event) was set out in Sze Tu at [40] – quoting from Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]. That summary [citations omitted] was:

●   Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. 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.
●   In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the 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.
●   If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue
●   Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed.
●   A separable issue can relate to “any disputed question of fact or law” before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter.
●   Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation

Not only was there a mixture of outcomes but some of the outcomes are, despite the attempt in Appendix 1 to the Quinns’ costS’ submissions to paint them otherwise, nuanced rather than “black or white”. I am satisfied that, on a proper consideration of the above principles, the second, third and fifth of them are those potentially engaged by the matters put on behalf of the Quinns. Properly understood, my first decision does not give rise to results strongly engaging these principles (if at all) in favour of the Quinns.
Looking at the outcomes through the lens of the sixth and final principle, my “impression and evaluation” is that there is nothing from the overall package of outcomes that would warrant departure from the general principle by invocation of the exception provided by the second element of Pt 42 r 1 of the UCPR.

Conclusion on apportionment

I have carefully considered the matters that were raised by Mr Hall in his submissions, but I have concluded, for the reasons set out above, that it would not be appropriate to depart from my original disposition that, for the first phase of the proceedings, costs should follow the event and that, as a consequence, the costs order for that phase of the hearing should be that the Quinns are to pay the Hopkins’ costs as agreed or assessed.
In light of that conclusion, it is unnecessary for me to analyse the submissions made by Mr Eastman in support of that proposition.

Costs of the reopening proceedings

As I have earlier observed, my initial disposition on costs of the reopening proceedings, as noted at the end of my second decision, was that the Quinns should pay 75% of Mr Hopkins' costs of the reopening proceedings. Mr Eastman, during the hearing on costs, did not seek to contest that proposed outcome.
However, Mr Hall did contest that proposition on behalf of the Quinns. The position advanced by Mr Hall was that, effectively, of the four matters advanced for reopening, the Quinns had succeeded on two of them but failed on the other two. Mr Hall submitted that this represented an appropriate balancing of outcomes and, as a consequence, the appropriate costs order for the reopening proceedings would be that each party bear his own costs of the reopening element.
This proposition, it seems to me, fundamentally misconceives the nature of the matters sought to be contested in the reopening proceedings and the nature of the outcome of those proceedings. I do not accept that a "tick‑a‑box" approach to determining how those proceedings fell out is appropriate (nor would some “word count of transcript” basis be appropriate).
The first point to be observed is that leave to reopen on one of the four matters sought to be pressed (the overland flow-path area between the Quinns' house and the Hopkins' wall) was rejected during the course of the reopening hearing for the reasons explained in my second decision.
Second, of the three items for which leave to reopen was granted, the most significant of them was that concerning the basis for compensation to be paid as a result of the encroachment of the shotcrete wall and its intruding reinforcing pins that had been installed to support the steel framework, reinforcing the shotcrete wall proper. The Quinns were unsuccessful, entirely, on this point.
The question of compensation for the encroachment of the shotcrete wall was the "big ticket" item in the reopening proceedings. The combination of the Quinns’ complete failure on this point and the fact that the second unsuccessful element was rejected as being appropriate for reopening (rather than being permitted to be argued and rejected on the merits) makes it entirely appropriate, in my view, that the Quinns should bear a significant portion (but not the totality) of Mr Hopkins' costs of the reopening element of these proceedings.
I was, as I indicated in my comment at the end of my second decision, disposed to order that the Quinns pay only 75% of Mr Hopkins' costs of this phase of the proceedings.
Taking into account the two significant failures by the Quinns on their reopening application, and balancing them against the comparatively modest success they obtained with respect to the other two elements of the reopening phase of the proceedings, I remain of the view that the appropriate order concerning the reopening phase of the proceedings is that the Quinns should pay 75% of Mr Hopkins' costs of this phase.

Costs of the costs’ hearing

As I was not persuaded on behalf of either party that I should vary the positions I had initially indicated I thought would be appropriate, and as both parties unsuccessfully sought departure from those positions, the appropriate order with respect to the costs’ hearing is that each party is to bear their own costs of this element of the proceedings.

Conclusion

I have concluded that:

Mr Hopkins' claim for indemnity costs as a consequence of the Quinns’ rejection of the offer of 7 September 2016 fails;

The Quinns’ proposal that there should be some apportionment of the costs of the first phase of the proceedings also fails;

As a consequence, for the first phase of the proceedings, the appropriate outcome is that the Quinns should pay Mr Hopkins' costs as agreed or assessed;

With respect to that element of the proceedings which took place after the giving of my first decision by which Mr Hopkins' solicitor sought to reagitate the design of the stormwater system dealing with the overland flow-path between the Quinns' residence and the Hopkins' wall, what was undertaken constituted an abuse of process. As a consequence of that, Mr Hopkins is to pay the Quinns’ costs of that element of the proceedings on an indemnity basis;

There is no proper basis for the reopening application to order that each party should bear their own costs of this phase of the proceedings. Thus, the appropriate outcome concerning costs of the reopening phase of the proceedings is that the Quinns should pay 75% of Mr Hopkins' costs of this phase, as agreed or assessed; and

Each party is to bear their own costs of the hearing as to costs.

As the dispositive orders for the proceedings have not yet been finalised and provided to me, the four cost determination elements arising from this decision are to be incorporated in those orders when provided to me for making in chambers or, if the parties remain unable to agree on the substantive dispositive orders, in the competing proposed dispositive orders to be subject of argument before me at 8.30 am on 30 June 2017.

**********

Decision last updated: 26 June 2017

Medium Neutral Citation:	Hopkins v Quinn (No 2) [2017] NSWLEC 76
Hearing dates:	23 May 2017
Date of orders:	26 June 2017
Decision date:	26 June 2017
Jurisdiction:	Class 4
Before:	Moore J
Decision:	See conclusion at [136]
Catchwords:	COSTS - Applicant commences Class 4 civil enforcement proceedings - Respondents’ cross-claim pursuant to Encroachment of Buildings Act 1922 in Class 3 - consideration of regime within which costs are appropriate to be determined - costs appropriate to be determined on the basis applicable in Class 4 proceedings COSTS - Calderbank offer by Applicant - offer rejected by Respondents - Applicant seeks indemnity costs based on offer said to propose outcome more advantageous to Respondents than result of the proceedings - tests to be applied - outcome of proceedings more favourable to Respondents than terms of offer - indemnity costs rejected COSTS - Applicant not completely successful - Respondents propose apportionment of costs - presumption costs follow the event in Class 4 proceedings - apportionment not appropriate - Applicant awarded costs - costs to be as agreed or assessed COSTS - Applicant proposes variation to an aspect of the determined outcome in the primary proceedings - no proper procedural basis for doing so - no evidentiary basis for doing so - abuse of process - appropriate to award costs of this element of the proceedings to the Respondents - abuse of process warrants these costs to be on an indemnity basis COSTS - application to reopen - Respondents sought reopening on four aspects of matters determined - reopening permitted on only three of four matters - Respondents failed on dominant matter in reopening proceedings but obtained some beneficial amendments on remaining lesser matters - Respondents propose that each party to bear their own costs of the reopening application - presumption that costs follow the event - partial success warrants departure with limited apportionment of costs - apportioned costs in favour of the Applicant - Respondents to pay 75% of the Applicant’s costs of the reopening application - costs to be as agreed or assessed
Legislation Cited:	Civil Procedure Act 2005, s 98 Encroachment of Buildings Act 1922 Environmental Planning and Assessment Act 1979, s 123 Uniform Civil Procedure Rules 2005, Pt 42 r 1
Cases Cited:	Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 Calderbank v Calderbank [1975] 3 WLR 586 Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145 Hopkins v Quinn [2016] NSWLEC 163 Hopkins v Quinn [2017] NSWLEC 31 Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 Sze Tu v Lowe (No 2) [2015] NSWCA 91
Category:	Costs
Parties:	John Hopkins (Applicant and First Cross-Defendant) Sally Hopkins (Second Cross-Defendant) David Quinn (First Respondent and First Cross-Claimant) Maria Quinn (Second Respondent and Second Cross-Claimant)
Representation:	Counsel: Mr N Eastman, barrister (Applicant and Cross-Defendants) Mr M Hall SC/Mr G Stapleton, barrister (Respondents and Cross-Claimants) Solicitors: Hones Lawyers (Applicant and Cross-defendants) Sattler & Associates (Respondents and Cross-claimants)
File Number(s):	153093 of 2017
Publication restriction:	No