Simo Popovac v Dominic Kennedy

[2022] NSWLEC 9

Land and Environment Court

New South Wales

Medium Neutral Citation:

Simo Popovac v Dominic Kennedy [2022] NSWLEC 9

Hearing dates:

14 February 2022

Date of orders:

14 February 2022

Decision date:

14 February 2022

Jurisdiction:

Class 2

Before:

Pepper J

Decision:

Notice of motion dismissed.

Catchwords:

COSTS: application for costs in Class 2 tree matter – presumptive rule that each party pays their own costs unless fair and reasonable to otherwise order – whether fair and reasonable to order that an unsuccessful applicant pay costs – whether proceedings brought for an improper purpose – whether non-acceptance of a Calderbank offer a basis to award costs on an indemnity basis in Class 2 proceedings – no order as to costs.

Legislation Cited:

Civil Procedure Act 2005, s 98(1)

Land and Environment Court Rules 2007, r 3.7

Trees (Disputes Between Neighbours) Act 2006, ss 14A, 14A(1), 14E(2), Pt 2A

Cases Cited:

Arden Anglican Schoolv Hornsby Shire Council (2008) 158 LGERA 224; [2008] NSWLEC 103

Blackmore Design Group v Manly Council (2014) 205 LGERA 76; [2014] NSWLEC 164

Brett Hodgson v The Hills Shire Council (No 2) [2021] NSWLEC 133

Calderbank v Calderbank [1975] 3 All ER 333

Carey v Pattinson (No 2) [2020] NSWLEC 177

Commonwealth of Australia v Gretton [2008] NSWCA 117

Fox v Ginsberg (No 3) [2011] NSWLEC 139

Hutley v Cosco(No 2) [2021] NSWCA 335

Lister v Fraser [2018] NSWLEC 25

Marks v Perham (No 2) [2020] NSWLEC 84

McLaren v Lewis (No 2) (2011) 183 LGERA 344; [2011] NSWLEC 176

O’Connor v Kerr (No 2) [2015] NSWLEC 1542

Popovac v Kennedy [2021] NSWLEC 1635

Port Stephens Council v Sansom (2007) 156 LGERA 125; [2007] NSWCA 299

SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323

Twynham Investments Pty Ltd v Goulburn Mulwaree Council (No 2) [2021] NSWLEC 50

Zhang v Davidson (No 2) [2020] NSWLEC 89

Category:

Costs

Parties:

Simo Popovac (Applicant)
Dominic and Jessica Kennedy (Respondents)

Representation:

Counsel:
C Koikas (Applicant)
L Sims (Respondents)

Solicitors:
McCabes Lawyers (Solicitors) (Applicant)
Bick & Steele (Solicitors) (Respondents)

File Number(s):

2021/199974

Publication restriction:

Nil

EX TEMPORE Judgment

The Kennedys Seek Their Costs in a Class 2 Tree Dispute

1. Simo Popovac filed a Class 2 Tree Dispute application on 13 July 2021 (“the application”) seeking orders to prune trees and a hedge on the property of Dominic and Jessica Kennedy (“the Kennedys”).

2. On 18 October 2021 the application was heard by Galwey AC. The application was dismissed (Popovac v Kennedy [2021] NSWLEC 1635).

3. The Kennedys filed a notice of motion on 8 November 2021, seeking the following orders as to costs:

1.   The Applicant is to pay the First and Second Respondents’ costs on an ordinary basis until 30 August 2021.

2.   The Applicant is to pay the First and Second Respondents’ costs on an indemnity basis from 31 August 2021.

4. For the reasons below, I have determined that the notice of motion should be dismissed because it would not be fair and reasonable to depart from the presumptive rule in r 3.7 of the Land and Environment Court Rules 2007 (“the LEC Rules”) applicable to Class 2 proceedings that each party is to bear their own costs.

Popovac Seeks to Have a Hedge and Trees Pruned

5. The background facts to this costs application are found in:

1. an agreed statement of facts;

2. the application;

3. the expert arborist report of Melanie Howden dated 14 September 2021, relied upon by Popovac (“the Howden Report”);

4. the expert arborist report of Catriona Mackenzie dated 1 October 2021, relied upon by the Kennedys (“the Mackenzie Report”); and

5. an affidavit affirmed by Jessica Kennedy on 1 October 2021, that was also read in the proceedings before Galwey AC.

6. Popovac owns a property at 135 Headland Rd, North Curl Curl. The Kennedys own an adjoining property located at 12 Parr Ave in the same suburb.

7. In March 2015 the Kennedys engaged a landscape architect to develop a landscape plan for their garden. Subsequently, a number of trees were planted. The following trees form the subject-matter of the present costs application:

1. a row of 12 brush cherry trees (“T3”) approximately 2.7 to 2.9 m tall growing in planter boxes adjacent to the Kennedys’s rear northern fence (which is shared with Popovac);

2. a row of three blueberry ash trees (“T2”) approximately 4.8 m tall growing in a planter box along the Kennedys’s eastern boundary; and

3. a tuckeroo tree (“T1”) near T3 described as a “screening tree” on the landscape plan. It is 3.8 m tall and grows in a planter box.

8. The Kennedys regularly prune the hedges identified as T2 and T3. T1 is also pruned to balance the shape of the tree.

9. Prior to commencing the proceedings, Popovac wrote to the Kennedys requesting that the trees, especially T1, be pruned.

10. In February 2021 Popovac unsuccessfully attempted to mediate the dispute, however, the Kennedys declined to take part in any mediation.

11. In the application Popovac sought the following orders:

1.   The Respondent to prune the tree (reference “T1” in the attached “Claim Details – High Hedges” document), so that its height does not exceed the height of the wall at the boundary of the Applicant’s property and the Respondent’s property by more than one (1) meter [sic]. Also, the Respondent to ensure that the pruning is done regularly, so that this maximum height is maintained. All the works carried out are to be at the Respondent’s cost.

2.   The Respondent to prune the trees in the hedge that runs along the boundary between the applicant’s and the respondent’s properties (reference “T3” in the attached “Claim Details – High Hedges” documents), so that their height does not exceed two-point-eight (2.8) meters from the ground level on the Applicant’s side of the boundary. Also, the Respondent to ensure that the pruning is done regularly, so that this maximum height is maintained. All the works carried out are to be at the Respondent’s cost.

3.   The Respondent to maintain the current height of the trees in the hedge that runs along the right-hand boundary of the respondent’s property (reference “T2” in the attached “Claim Details – High Hedges” documents). All the works carried out are to be at the Respondent’s cost.

12. On 11 August 2021 the Kennedys unsuccessfully attempted to resolve the dispute in a telephone call to Popovac. The following exchange took place:

Simo Popovac

I am happy with the height of the back hedge of Lilly Pilly [T3] and also the Blueberry Ash Hedge [T2]…

My reasons for including those two hedges in my application to the Court is because they have the potential to obstruct our views and affect the value of our property. I would like to have orders placed on them so as to preserve our views, and so that should we sell our property in the future, I can assure potential purchasers that their views will be maintained.

My only current concern is the Tuckeroo Tree [T1]. I believe that it takes a significant percentage of our view. I want it trimmed to no higher than 1 metre from the top of the wall.

Jessica Kennedy

We are disappointed that you have commenced litigation against us particularly given the fact that our garden is well maintained.

Trimming the Tuckeroo to this height would significantly affect the look of the tree, the design of our garden, and take away from the screening and visual privacy that it provides.

In relation to the Lilly Pilly and Blueberry Ash hedges, we regularly maintain them.

I suggest that we come over and view the garden from your perspective to hopefully avoid the cost of litigation and maintain an amicable relationship going forward.

Simo Popovac

I am happy for you to come over, but I want a hard directive, and everything agreed in writing. I have been to Court before in my lifetime and I am willing to spend money to get what I want.

13. The Kennedys met Popovac at his property and they offered to prune T1 by 30 cm. The offer was rejected.

14. The Kennedys engaged solicitors on 12 August 2021. A letter was sent from the Kennedys’s solicitors to Popovac on 16 August 2021 that offered to resolve the proceedings. The letter was stated to be written pursuant to the principles in Calderbank v Calderbank [1975] 3 All ER 333:

The purposes of this letter are:

(a)    to explain that the power of the Court to make such orders has not been enlivened;

(b)   to note that the orders you seek are redundant because our clients already regularly prune the trees so as to maintain your views;

(c)   to set out an offer to resolve the proceedings made in accordance with the principles set out in Calderbank v Calderbank [1975] 3 All ER 333; and

(d)   to put you on notice that, if the proceedings continue, our clients reserve the right to seek an order for indemnity costs including on the basis that the application does not have reasonable prospects of success and constitutes an abuse of process.

15. In relation to T1, the letter stated that:

2      Power of the Court to make Orders has not been enlivened

2.1   Tree T1

The vegetation identified as “T1” comprises single native Tuckeroo tree endemic to the area and popular due to its compact height and rounded form. It was not planted as part of a group of 2 or more trees with the intent that it would form part of a hedge.

It follows that the requirements of s 14A of the Trees (Disputes Between Neighbours) Act 2006 (Trees Act) have not been satisfied. Accordingly, the Court does not have the power to make the order you seek in respect of T1.

16. With respect to trees T2 and T3 it said:

2.2   Trees T2 and T3

The jurisdiction of the Court to make the orders you seek is relevantly enlivened only if the requirements of s 14D(1) of the Trees Act are satisfied.

In this case, this means that the vegetation identified as T2 and T3 would need to severely obstruct a view from your dwelling.

However, your own case is that T2 or T3 “currently do not affect the ocean of the Curl Curl valley or lagoon views” from any of the vantage points listed in your application.

Rather, you merely speculate that such obstruction might occur in the future. This is not a case where severe obstruction has occurred in the past and is likely to happen again.

The requirements of s 14D(1) of the Trees Act have clearly not been satisfied and so the Court does not have the jurisdiction to make the orders you seek.

3     Current pruning

Among the reasons why the vegetation identified as T2 and T3 does not severely obstruct (or obstruct at all) views from your dwelling is because our clients engage a professional gardener to prune those plants on a regular basis.

There was a temporary interruption to pruning last year but this was due to restrictions imposed in response to the COVID-19 pandemic. Even during this interruption to pruning, no severe obstruction to your views arose.

4     Improper purpose

We are instructed that you have informed our clients that:

you accept that the vegetation identified as T2 and T3 does not severely obstruct views from your dwelling; but

you perceive that it will make your properly easier to sell in the future if prospective purchasers can be told that our clients are subject to orders of the sort you seek in these proceedings.

With respect, this is a wholly improper purpose for bringing the proceedings.

17. The Kennedys’s offer was therefore in the following terms:

For the reasons explained above, your prospects of success in the above proceedings are poor. However, to avoid wasted time and costs of continuing litigation, our clients offer to resolve the proceedings on the following basis:

(a)   our clients will undertake to arrange for the vegetation identified as T1, T2, and T3 in your application to be regularly pruned at their cost so as to prevent any severe obstruction of views from your dwelling as follows:

a.   T1: so that its current height is reduced by 30cm and maintained at that new height;

b.   T2 and T3: so that their current height is maintained; and

(b)   each party bears its own costs.

18. The offer was open for 14 days and expired on 30 August 2021.

19. Shortly after 16 August 2021, Popovac engaged Paul Vergotis, a solicitor at McCabes Lawyers, and later, Howden, to advise him. The Kennedys subsequently received the following reply to their settlement offer from Popovac on 30 August 2021:

We are the solicitors for the applicant, Mr Simo Popovac of No 135 Headland Road, North Curl Curl.

Attached by way of service is our Notice of Appearance filed today.

Our client has handed to us your letter of 16 August 2021. We respond as follows on a Without Prejudice basis adopting your paragraph numbering:

1.   (a)   Disagree;

1.   (b)   This is matter for evidence;

1.   (c)   There is no basis for a Calderbank offer to be made as these are Class 2 proceedings with each party bearing their own costs;

1.   (d)(i)   Your clients have no entitlement to costs unless they can demonstrate that our client has been unreasonable; there is no basis for a claim for indemnity costs;

2.1   Disagree – matter for expert evidence;

2.2   Disagree – matter for expert evidence.

3   Disagree.

4   Disagree.

5   Our client is open to having without prejudice discussions with your clients with a view to entering into consent orders.

20. No further settlement discussions were entered into by the parties.

21. On 17 September 2021 the Kennedys engaged Mackenzie of Urban Forestry Australia to advise them in respect of the proceedings.

22. Both expert arborists agreed that the trees that were the subject of the proceedings were in good health and could be pruned and/or maintained without impacting their viability (see the Howden Report at [3.1.1]-[3.1.4] and the Mackenzie Report at [47], [50] and [52]).

23. However, the experts disagreed on the question of whether T1 and T3 formed a hedge. The Howden Report stated that T1 and T3 formed a “continual visual block” and thereby constituted a hedge (at [4.2.1]):

4.2.1   Hedge 1

The group of trees in T3A and T3B together with T1 have been planted. Although T1 is a difference species, is offset from the lineal plantings in T3A & T3B and has not been pruned to the height of trees T3A & T3B, the canopy foliage of T1 forms a continual visual block of vegetation with T3A & T3B trees and therefore T1 is considered to be part of Hedge 1.

All the trees within Hedge 1 are in excess of 2.5m in height.

24. The Mackenzie Report disputed this and indicated that T1 was not a species “commonly associated with hedging” and that it had been placed to “bookend” T3’s planter box rather than to form part of the hedge (at [18]-[19]).

25. Various photos in the Howden and Mackenzie Reports showed T1 obscuring part of the Popovac’s view, however, only Mackenzie opined that the view was not obscured. Howden was silent on this issue.

Costs in Class 2 Matters

26. While the statutory framework that governs the Court’s power to make a costs order in Class 2 matters was discussed in detail in Marks v Perham (No 2) [2020] NSWLEC 84 (at [22]-[29]), it is nevertheless convenient to set out the statutory regime.

27. Section 98(1) of the Civil Procedure Act 2005 (“CPA”) confers power on the Court to make a costs order subject to the LEC Rules:

98   Courts powers as to costs

(1)   Subject to rules of court and to this or any other Act—

(a)   costs are in the discretion of the court, and

(b)   the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

(c)   the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.

28. Rule 3.7(2) of the LEC Rules sets out a presumptive rule with respect to costs in Class 2 of the Court’s jurisdiction:

3.7   Costs in certain proceedings

(2)   The Court is not to make an order for the payment of costs unless the Court considers that the making of an order as to the whole or any part of the costs is fair and reasonable in the circumstances.

29. The LEC Rules further relevantly state the circumstances in which a Court may consider that it is fair and reasonable to depart from the presumptive rule contained in r 3.7(2):

3.7    Costs in certain proceedings

(3)   Circumstances in which the Court might consider the making of a cost order to be fair and reasonable include (without limitations) the following ––

…

(c)  that a party has acted unreasonably in circumstances leading up to the commencement of the proceedings,

(d)  that a party has acted unreasonably in the conduct of the proceedings,

(e)  that a party has commenced or defended proceedings for an improper purpose,

(f)   that a party has commenced or continued a claim in the proceedings, or maintained a defence to the proceedings, where:

(i)   the claim or defence (as appropriate) did not have reasonable prospects of success, or

(ii)  to commence or continue the claim, or to maintain the defence, was otherwise unreasonable.

30. The Court’s discretion is not confined to the considerations in r 3.7(3) of the LEC Rules and it may assess “all rational considerations” in making a costs order (Arden Anglican Schoolv Hornsby Shire Council (2008) 158 LGERA 224; [2008] NSWLEC 103 at [9]).

31. The presumptive rule as to costs for Class 2 matters is founded upon the “no discouragement principle” (Port Stephens Council v Sansom (2007) 156 LGERA 125; [2007] NSWCA 299 at [22]-[27]). That principle establishes that a person should not be discouraged from making or defending an application because of the risk of an adverse costs order (Arden Anglican School at [10]).

32. In Perham (No 2) Robson J described the importance of the principle in relation to Class 2 matters in the following way (at [29]):

29 The no discouragement principle is particularly important in the context of applications made pursuant to the Trees Act, as such applications are designed to facilitate the just, quick and cheap resolution of tree disputes through an appropriate and easily accessible procedure.

33. Class 2 matters are intended to be an efficient and cost effective means of facilitating justice in tree disputes between neighbours. The statutory regime has been designed to enable parties to represent themselves (Fox v Ginsberg (No 3) [2011] NSWLEC 139 at [8]). Therefore, there must be considerations of “sufficient weight to overcome the presumptive rule” (Arden Anglican School at [9]). The Court will be slow to find that such circumstances exist.

34. In Perham (No 2) Robson J stated that the task that the Court undertakes in exercising its discretion to award costs under r 3.7(2) is informed by r 3.7(3) as follows (at [30]):

30   …first, to identify whether there is anything within the judgment of the Commissioner which indicates that an order for costs may be fair and reasonable; and second, to look to the conduct of the parties both before and during the hearing for any indication that such an order may be appropriate.

35. His Honour’s approach to the question of costs in Class 2 proceedings has been followed and applied in the present application.

Acting Commissioner Galwey’s Decision

36. As stated above, Galwey AC refused the application. The Acting Commissioner commented by outlining the jurisdictional tests under Pt 2A of the Trees (Disputes Between Neighbours) Act 2006 (“the Trees Act”) (at [2]).

37. Relevantly ss 14A and 14E of the Trees Act state:

14A   Application of Part

(1)   This Part applies only to groups of 2 or more trees that:

(a)   are planted (whether in the ground or otherwise) so as to form a hedge, and

(b)   rise to a height of at least 2.5 metres (above existing ground level).

…

14E   Matters of which Court must be satisfied before making an order

(1)   The Court must not make an order under this Part unless it is satisfied:

(a)   that the applicant has made a reasonable effort to reach agreement with the owner of the land on which the trees are situated, and

(b)   if the requirement to give notice has not been waived, that the applicant has given notice of the application in accordance with section 14C.

…

(2)   The Court must not make an order under this Part unless it is satisfied that:

(a)   the trees concerned:

(i)   are severely obstructing sunlight to a window of a dwelling situated on the applicant’s land, or

(ii)   are severely obstructing a view from a dwelling situated on the applicant’s land, and

(b)   the severity and nature of the obstruction is such that the applicant’s interest in having the obstruction removed, remedied or restrained outweighs any other matters that suggest the undesirability of disturbing or interfering with the trees by making an order under this Part.

38. Relevantly, in regards to s 14E(1)(a) of the Trees Act Galwey AC found that (at [5]):

5   Mr Popovac wrote to the respondents asking for trees to be pruned. He attempted to arrange mediation with the respondents, unsuccessfully. I am satisfied that his efforts to reach agreement with the respondents were reasonable.

39. Galwey AC’s finding that Popovac had made reasonable efforts to resolve the proceedings goes some (but not all of the) way to concluding that Popovac did not commence the proceedings unreasonably.

40. The Acting Commissioner noted that Popovac did not claim that T2 and T3 were impacting his views, rather it was T1 that was causing obstruction ([at [10]).

41. Pursuant to s 14A(1) of the Trees Act, Galwey AC was therefore required to determine if T1 formed part of a hedge with T3. Only if he was satisfied that T1 and T3 constituted a hedge was he then required to decide whether T1 severely obstructed a view from Popovac’s dwelling (s 14E(2)(a) of the Trees Act).

42. Galwey AC provided the following reasons as to why, in his opinion, T1 did not form a hedge with T3 (at [15]-[16]):

15   I find that T1 is not part of a hedge. The landscape plan indicates it was planned and planted as a separate element to the hedge. In Johnson v Angus (2012) 190 LGERA 334; [2012] NSWLEC 192 at [28], Chief Justice Preston found that s 14A(1)(a) of the Trees Act limits the application of Pt 2A: not only must the trees form a hedge in the present, but the intent at the time of planting must be to form a hedge. The landscape plan suggests otherwise – tree T1 would be a separate landscape element. Furthermore, in the present, tree T1 does not appear as part of a hedge. Figure 2.2. of [Ms Howden’s Report] shows T1’s foliage is physically separate from the foliage of trees in T3. All trees in T3 are planted in a single straight line, while T1 is not part of that line. T1 is a different species and is taller than trees in T3. For these reasons, a person coming into the garden would be likely to identify trees in T3 as a hedge, but would be unlikely in my view to regard T1 as part of that hedge. The Mepstead survey reinforces this notion. The applicant’s own sketch plan in Exhibit A also shows T1 as a separate element, not part of the T3 hedge.

16 T1 is not planted to form a hedge. As a result, Pt 2A of the Trees Act does not apply to T1. The hedge along the respondents’ northern boundary is made up of trees in T3 only. By the applicant’s own statements, trees in T3 do not obstruct a view, so orders cannot be made for those trees. It follows that the application must be refused.

43. Galwey AC alternatively considered whether T1 severely impacted Popovac’s views. The Acting Commissioner held that the views were not severely obstructed (at [17]):

17   Had I found that T1 formed a hedge with trees in T3, I would have reason to assess the severity of any view obstruction it causes. I rely here on the range of terms used at [28] of Tenacity Consulting v Waringah (2004) 134 LGERA 23; [2004] NSWLEC 140: “negligible, minor, moderate, severe or devastating.” While T1 obstructs a view of North Head from parts of the applicant’s terrace (Plates 8 and 9 of Ms Mackenzie’s report and Figure 8.4 of Ms Howden’s report), and that part of the view might be regarded as iconic, the impact on the overall view might be mildly annoying, or ‘minor’, but is not severe. The view of North Head is readily available from most of the applicant’s rear terrace, and is also available from other viewing points shown in the kitchen and dining room. The Court should consider the view in its entirety rather than slicing up the outlook: Haindl v Daisch [2011] NSWLEC 1145. From most viewing points, tree T1 obstructs a small part of the distant water view, as shown in Figures 3.2, 8.1 and 8.3 of Ms Howden’s report and Plates 5 and 6 of Ms Mackenzie’s report. The remaining view is expansive. The obstruction is not severe.

44. Accordingly, the proceedings were dismissed.

45. There is nothing on the face of Galwey AC’s judgment that indicates that Popovac, either in commencing or conducting the proceedings, acted so unreasonable that an order for costs would be fair and reasonable. No transcript of the hearing was furnished to the Court. However, this is not the end of the matter.

The Issues in Dispute

46. The Kennedys submitted that Popovac should pay costs (on an ordinary basis until 30 August 2021) principally for two reasons:

1. first, Popovac brought the proceedings for an improper purpose (see r 3.7(3)(e)), namely, to preserve his future views from obstruction and to assure potential purchasers of his property that the views would be protected; and

2. second, Popovac acted unreasonably by commencing and continuing a claim that had no reasonable prospects of success.

47. The Kennedys further argued that Popovac should pay costs on an indemnity basis from 31 August 2021 because of the Calderbank letter.

48. Popovac submitted that he had brought the proceedings for a proper purpose, although he acknowledged that bringing proceedings to prevent the future obstruction of his views was a misapprehension of the law.

49. He further submitted that he had not acted so unreasonably that costs ought to be awarded against him because:

1. he had attempted to resolve the proceedings and arrange mediation, as noted by Galwey AC in his judgment (at [5]);

2. he was entitled to rely on the legal and expert arborist advice that he had received that had indicated either expressly or by inference that he had reasonable prospects of success; and

3. he was entitled not to accept the settlement offer because it did not resolve his concerns regarding the height of the trees, and moreover, because mere non-acceptance of an offer is not in and of itself unreasonable for the purpose of r 3.7 of the LEC Rules.

Popovac Did Not Act Unreasonably in Commencing and Continuing his Claim

50. While Popovac’s application to prevent the future obstruction of his views in relation to T2 and T3 was misconceived, it did not, in my view, amount to an improper purpose. The bringing of proceedings based upon a misapprehension of the law does not, without more, mean that the losing party has been vindictive, vexatious, or motivated to bring the proceedings for an impermissible collateral, or some other, improper purpose.

51. The Kennedys further contended that Popovac had acted unreasonably because his claim that T1 formed part of a hedge that severely obstructed his views had no prospect of success. Accordingly, his application failed at a threshold level and this was sufficient for an award of costs in their favour.

52. It must be recalled, however, that Popovac sought independent legal advice and engaged an expert to provide advice and give evidence in the proceedings (albeit after he filed the application). In the application Popovac did not claim that T1 and T3 formed a hedge. It was Popovac’s expert, upon whom he relied at the hearing, who had opined that the trees constituted a hedge (at [4.2.1] of the Howden Report).

53. It may also be presumed that Popovac was not told by his legal representative, a solicitor with considerable experience in the Court’s jurisdiction, that his application had no or very limited prospects of success (an inference which is consistent with the content of the 30 August 2021 email).

54. As the Court observed in Pattinson (No 2) (at [45]):

45   For lay people to rely and act upon the advice of their own…expert does not, without more, constitute unreasonable behaviour in the commencement or maintenance of their claim.

55. The mere fact that Popovac’s expert evidence was not accepted with respect to the trees, especially T1, and that the Court did not accept his claim that they (T1 in particular) severely obstructed his views, does not make it fair and reasonable for him to pay the Kennedys’s costs.

56. As Preston J said in McLaren v Lewis (No 2) (2011) 183 LGERA 344; [2011] NSWLEC 176 (at [23]-[24]), “having brought the application, Mrs McLaren was entitled to have it heard by the Court…the fact that Mrs McLaren was ultimately unsuccessful in her application under the Trees Act is not sufficient in itself” to justify awarding costs.

Popovac Was Not Unreasonable to Not Accept the Settlement Offer

57. Rule 3.7(3)(d) provides that a Court can consider making a costs order where a party has acted unreasonably in the conduct of the proceedings. This includes where a party has acted unreasonably by not accepting a settlement offer (Twynham Investments Pty Ltd v Goulburn Mulwaree Council (No 2) [2021] NSWLEC 50 at [66] and see also Pattinson (No 2) at [47]).

58. In Twyham Investments Moore J assessed whether rejection of a letter of offer was unreasonable conduct for the purposes of r 3.7(3) by reference to four considerations (at [92]):

92        (1)   The extent and reasonableness of the financial compromise embodied in the offer;

(2)   The information context in which the offer was made;

(3)   The period of time allowed to the Council within which to consider and respond to the offer; and

(4)   The extent of the Company’s success measured against the revised second offer.

59. The offer to reduce T1’s height by 30 cm was a compromise but not, in my opinion, one of sufficient moment. The expert evidence, including photographs in the Mackenzie Report and the Howden Report, show that T1 had grown significantly above the fence and that a reduction of its height by only 30 cm did not represent a real compromise to Popovac, or at the very least, did not represent a compromise that Popovac unreasonably rejected.

60. In respect of the second factor, I note that the Kennedys set out in detail the deficiencies in Popovac’s case in their letter of offer; deficiencies that ultimately proved correct in the hearing before Galwey AC. But again, it must be emphasised that in rejecting the offer, Popovac did so in reliance upon legal and expert advice. Without more this did not render the rejection unreasonable in all the circumstances.

61. In relation to the third factor, Popovac had 14 days to accept the offer. This was adequate time to consider the letter and obtain advice (which Popovac did) prior to rejecting it. I am satisfied the settlement offer was open for a sufficiently reasonable period of time.

62. Finally, while the Kennedys were wholly successful in the principal proceedings, it should be noted that Popovac conceded during the proceedings that T2 and T3 would not cause any measurable view impacts. The concession came late, but it was nevertheless made.

63. In conclusion, I find that it was not unreasonable for Popovac to reject the letter of offer. Popovac’s primary concern in bringing the proceedings related to the perceived obstruction of his view by T1, the proposed settlement did not represent a meaningful compromise in this regard. Put another way, the rejection of the offer of settlement was not so unreasonable that the presumptive costs rule in r 3.7 ought to be displaced.

64. To the extent that both parties took the Court to decisions where an award of costs in Class 2 tree matters was either made (the Kennedys relied upon Lister v Fraser [2018] NSWLEC 25 and O’Connor v Kerr (No 2) [2015] NSWLEC 1542) or not, it is an almost trite observation that each case turns on its own facts.

65. I therefore dismiss the Kennedys’s application for ordinary costs up to 30 August 2021.

Costs on an Indemnity Basis

66. The 16 August 2021 letter sent by the Kennedys was stated to be a Calderbank offer.

67. The Kennedys submitted that if the Court finds the Calderbank offer was a “genuine offer of compromise” that was “unreasonable for the offeree not to accept” (Commonwealth of Australia v Gretton [2008] NSWCA 117 at [4]), the Court ought to impose costs on an indemnity basis from the date that the offer expired.

68. Popovac asserted that the common law rule in Calderbank does not apply in Class 2 proceedings because it is displaced by the operation of r 3.7(2) and (3) of the LEC Rules.

69. This gives rise to two questions:

1. first, do Calderbank offers apply in Class 2 proceedings?; and

2. second, if they do, was it unreasonable of Popovac to reject the letter of offer?

Calderbank Offers are Displaced by the Statutory Framework in Class 2 Proceedings

70. Calderbank offers are creatures of the common law. The principles enunciated in Calderbank are to the effect that if served the offer may be tendered in an application for costs in circumstances where if the offer is not accepted, and the offer proposes a more favourable outcome than achieved, costs may be assessed on an indemnity basis from the date of the offer. There must be a basis for concluding that the failure to accept the offer was unreasonable in all the circumstances (Hutley v Cosco (No 2) [2021] NSWCA 335 at [11]).

71. The rejection of the offer does not automatically result in an award of indemnity costs, rather, as opined by Giles JA in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 (at [37]):

37   …the question is whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs…

72. The Court’s discretion to award costs is governed by the CPA and the LEC Rules, which displace the common law as a matter of construction. In Blackmore Design Group v Manly Council (2014) 205 LGERA 76; [2014] NSWLEC 164 Biscoe J observed that (at [36]):

36   Calderbank offers are a creation of the common law developed in the context of civil litigation where costs ordinarily follow the event. That is a very different costs regime from that which applies to this Court’s merits review, public law jurisdiction under r 3.7 of the Land and Environment Court Rules.

73. In that case, his Honour declined to order indemnity costs where such an offer had been served. His Honour held that the mere non-acceptance of a Calderbank offer is not, of itself, unreasonable conduct that warrants the departure from the presumptive rule in r 3.7(2) (Blackmore Design Group at [38]). Similarly, Moore J in Twynham Investments stated that r 3.7 of the LEC Rules creates a “distinctly different first-step costs’ regime” (at [62]) and that the Court’s task is to consider whether a settlement offer was unreasonably rejected under the LEC Rules (at [61]-[66]).

74. Both Biscoe and Moore JJ were deciding Class 1 applications. However, because r 3.7 of the LEC Rules apply to both Class 1 and 2 applications, Biscoe and Moore JJ’s findings are apposite and applicable to this application. In any event, in Kerr (No 2) Registrar Gray reached the same conclusion in a carefully reasoned judgment (at [34]).

75. In this context, it should be recalled that the Trees Act is intended to “facilitate the just, quick and cheap resolution of tree disputes” (Perham (No 2) at [29]). The “no discouragement principle” is a corollary of this statutory purpose that serves to limit litigation costs in these matters. It is for this reason that Pain J noted in Ginsberg (No 3) (at [13]):

13   I make… no assumption in tree dispute matters that legal representation is essential and…I am emphasising that in matters of this type legal representation is not the norm and will not automatically be compensated.

76. Although there is nothing express in r 3.7 that abrogates the power of the Court under s 98(1) of the CPA to order indemnity costs, the principles that underlie r 3.7 of the LEC Rules mean that the Court should tread cautiously in any exercise of its discretion to award costs on this basis (Carey v Pattinson (No 2) [2020] NSWLEC 177 at [8]). There would have to be compelling “matters out of the usual course of a merits proceeding” (Brett Hodgson v The Hills Shire Council (No 2) [2021] NSWLEC 133 at [7]) for it to be fair and reasonable to award indemnity costs.

77. In summary, in Class 2 proceedings cost applications are not determined upon the basis of Calderbank offers, rather the Court’s task is to consider whether it is fair and reasonable in the circumstances to depart from the usual rule that parties bear their own costs (r 3.7(2) and (3)). Plainly enough, the service and subsequent rejection of such a letter is, however, a factor that the Court must take into account in determining whether or not an award of costs is fair and reasonable under r 3.7.

78. Notwithstanding that the offer contained in the letter would have, had it been accepted by Popovac, resulted in a better outcome for him in respect of the hedge and trees, for the reasons given above, I am not satisfied that Popovac was unreasonable to reject the letter of offer. To reiterate, Popovac commenced proceedings to address alleged obstruction of his views by T1 and the settlement terms did not wholly resolve this concern. To the extent that Popovac relied upon the erroneous advice of his expert and possibly his legal adviser (assuming that the advice was consistent with the email dated 30 August 2021), he was entitled to do so, or at the very least, it was not unreasonable for him to do so.

79. For completeness, it should be observed that in the email dated 30 August 2021, Popovac correctly identified the reason why the Court would not award indemnity costs. This reinforces the conclusion that it was not unreasonable for him to reject the offer. At least insofar as the question of costs are concerned, the Kennedys have enjoyed less, and not more, success in the proceedings.

80. I therefore reject the Kennedys’s application for indemnity costs.

Costs of the Application

81. The motion seeking costs also falls within Class 2 of the Court’s jurisdiction, and therefore, r 3.7(2) applies (Zhang v Davidson (No 2) [2020] NSWLEC 89 at [70]).

82. There is no evidence before me that would justify a departure from the presumptive rule in r 3.7(2). Therefore, each party is to bear their own costs of the notice of motion.

Orders

83. The notice of motion is dismissed.

84. The exhibits are to be returned after the publication of this decision on CaseLaw.

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Decision last updated: 15 February 2022