Studholme v Rawson

[2020] NSWCA 76

Court of Appeal

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:

Studholme v Rawson [2020] NSWCA 76

Hearing dates:

30 March 2020

Date of orders:

24 April 2020

Decision date:

24 April 2020

Before:

Bell P at [1];
Basten JA at [30];
Gleeson JA at [200]

Decision:

(1)   Allow the appeal and set aside orders 1-10 made in the Equity Division on 30 January 2019 and order 1 made on 3 October 2019.
(2)   Order that the defendant pay the plaintiffs’ costs in the Equity Division incurred between 4 May and 17 May 2017.
(3)   Subject to order (2), order that the plaintiffs pay the defendant’s costs of the trial in the Equity Division.
(4) Remit the proceeding to the Equity Division for the purpose of determining the appropriate terms and conditions of the grant of an easement for a right of carriage way for the purposes of Sch 8, Pt 1 of the Conveyancing Act 1919 in favour of the plaintiffs.
(5)   Order that the respondents pay the appellant’s costs in this Court.
(6) Grant the respondents a certificate under the Suitors’ Fund Act 1951 (NSW).

Catchwords:

APPEAL – grounds – order of consideration – bias – effect on trial – need to address first

 

BIAS – prejudgment – trial judge expressed views based on filed evidence – views expressed to counsel in chambers – reliance on statements in judgment – reliance on overriding purpose in Civil Procedure Act 2005 (NSW), Pt 6 – acquiescence or waiver – statements revealing legal error, not prejudgment

 

REAL PROPERTY – easements – compensation – assessment of compensation for owner of servient tenement – application of valuation principles in determining compensation payable – need to determine terms and conditions of easement before assessing compensation – Conveyancing Act 1919 (NSW), s 88K(4)

 

REAL PROPERTY – easements – whether reasonably necessary – terms and conditions of easement – need to determine when deciding whether easement reasonably necessary – drainage works – joint report of expert engineers rejected – need for remittal – Conveyancing Act 1919 (NSW), s 88K(3)

 

COSTS – easement application – statutory entitlement of land owner – objection based on joint report of experts – whether conduct of land owner unreasonable – basis for departure from statutory entitlement – Conveyancing Act 1919 (NSW), s 88K(5)

  PRACTICE AND PROCEDURE – open justice – holding “informal directions hearings” in chambers – no access for public – absence of parties – no record of conversation – risk of participants becoming witnesses – practice decried

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 56, 60, 98; Pt 6
Conveyancing Act 1919 (NSW), ss 88, 88K; Sch 8, Pt 1
Court Suppression and Non-publication Orders Act 2010 (NSW), s 6
Evidence Act 1995 (NSW), s 131
Judiciary Act 1903 (Cth), ss 16, 17, 34, 69, 76, 77RR
Supreme Court Act 1970 (NSW), s 11
Supreme Court Act 1986 (Vic), s 4

Legal Profession Uniform Conduct (Barristers) Rules 2015 (NSW), r 101
Uniform Civil Procedure Rules 2005 (NSW), rr 20.26, 42.1, 42.14, 51.53

Cases Cited:

Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57
Apokis v Transport for NSW [2020] NSWCA 39
Bilgin v Minister for Immigration and Multicultural Affairs (1997) 149 ALR 281
Commissioner of the Australian Federal Police v Zhao (2015) 255 CLR 46; [2015] HCA 5
Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd (2006) 229 CLR 577; [2006] HCA 55
Dillon v Gosford City Council [2011] NSWCA 328
Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337; [2000] HCA 63
Forbes v Smith [1998] 1 All ER 973
Gordon v Lever [2018] NSWCA 43
Hodgson v Imperial Tobacco Ltd [1998] 1 WLR 1056
John Fairfax & Sons Ltd v Police Tribunal (NSW) (1986) 5 NSWLR 465
Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85
McPherson v McPherson [1937] AC 177
Medical Board of Victoria v Meyer (1937) 58 CLR 62
Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427; [2011] HCA 48
Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344
Moorebank Recyclers Pty Ltd v Tanlane Pty Ltd [2012] NSWCA 445
Rawson v Studholme (No 2) [2019] NSWSC 1273
Raybos Australia Pty Ltd v Tectran Corporation Pty Ltd (1987) 62 ALJR 148; (1987) 76 ALR 69
Reid v Commercial Club (Albury) Ltd [2014] NSWCA 98
Rinehart v Welker (2011) 93 NSWLR 311; [2011] NSWCA 403
Royal Guardian Mortgage Management Pty Ltd v Nguyen [2016] NSWCA 88
SCAA v Minister for Immigration and Multicultural and Indigenous Affairs [2000] FCA 668
Scott v Scott [1913] AC 417
Shi v ABI-K Pty Ltd (2014) 87 NSWLR 568; [2014] NSWCA 293
Spencer v The Commonwealth (1907) 5 CLR 418; [1907] HCA 82
Tempe Recreation Reserve Trust v Sydney Water Corporation [2014] NSWCA 437
Vakauta v Kelly (1989) 167 CLR 568; [1989] HCA 44

Texts Cited:

M Aronson, M Groves and G Weeks, Judicial Review of Administrative Action and Government Liability (Lawbook Co, 6th ed, 2017)

 

M Groves “Waiver of the rule against bias” (2009) 29 Monash ULR 315

 

Report of the Law Reform Commission on Supreme Court Procedure, (1969) at 15, cl 31

  Sir Edward Coke, Institutes, Part 2, p 103

Category:

Principal judgment

Parties:

Elizabeth Patricia Studholme (Appellant)

  John Warwick Leslie Rawson (First Respondent)
Diana Jane Rawson (Second Respondent)
Edward John Wilson (Third Respondent)
Patricia Ann Wilson (Fourth Respondent)
Carmen Richards (Fifth Respondent)
Tara Marie Robertson (Sixth Respondent)
Terence Kenneth Little (Seventh Respondent)
Lesley Little (Seventh Respondent)
Sydney Reinhardt (Ninth Respondent)

Representation:

Counsel:
Mr G P McNally SC / Mr N Roucek (Appellant)
Mr P Tomasetti SC / Ms M Carpenter (Respondents)

  Solicitors:
Breene and Breene Solicitors (Appellant)
D G Briggs and Associates (Respondent)

File Number(s):

2019/10822

 Decision under appeal 

Court or tribunal:

Supreme Court

Jurisdiction:

Equity Division

Citation:

[2018] NSWSC 1764

Date of Decision:

14 December 2018

Before:

Pembroke J

File Number(s):

2017/142835

headnote

[This headnote is not to be read as part of the judgment]

The appellant, Ms Elizabeth Studholme, owns a home at Heights Crescent, Middle Cove, in Sydney. On the northern boundary of her property there is a laneway running approximately east-west. The laneway permits rear access to eleven properties on the southern and northern sides. The original subdivision in 1947 included part of the laneway as a 6-foot wide right of way. The appellant’s neighbours used a further 3-foot width on the appellant’s land. In 2003 or 2004 they resurfaced the whole laneway with concrete. The appellant contended that the increased height of the laneway caused by the resurfacing contributed to rising damp in her property and that the usage of the laneway as a carriageway diminished the amenity of her property.

On 4 May 2017, the appellant gave four days’ notice to the owners of properties along the laneway that she intended to build a fence on the northern boundary of her land, which would effectively reduce the laneway’s width, so as to prevent most vehicular access along it. In response to the notice, nine of the affected residents (the respondents to the appeal) sought and obtained an interlocutory injunction in the Equity Division and the imposition of an easement pursuant to s 88K of the Conveyancing Act 1919 (NSW).

Shortly before the trial, Ms Studholme consented to an order imposing an easement over an area extending the right of way by 800mm, so as to provide a right of way a little under 2.7m wide. The Court was required to resolve (i) the conditions of the easement and, in particular, any engineering works that were required to address the concerns about rising damp; (ii) the amount of compensation payable to Ms Studholme, and (iii) liability for the costs of the proceedings.

On 14 December 2018, the trial judge granted the easement, assessed compensation, and imposed conditions requiring that the plaintiffs undertake certain drainage works on Ms Studholme’s land (order 6), with orders entered on 30 January 2019. Order 6 differed from the agreed position of a joint expert engineers’ report (“option 1”). On 3 October 2019, the judge made further orders with respect to the costs of the proceedings. Ms Studholme was ordered to pay the plaintiffs’ costs, to be assessed from 15 October 2018 on the indemnity basis.

On appeal, the following issues arose:

(a)   whether the judgments were infected by actual or apprehended bias;

(b)   with respect to the engineering works (order 6), whether the trial judge was in error in imposing that order rather than option 1;

(c)   whether the trial judge’s award of compensation of $45,000 was inadequate; and

(d)   whether the costs order was justified.

The Court (Bell P, Basten JA, Gleeson JA) allowed the appeal and held:

by Basten JA (Bell P and Gleeson JA agreeing at [1] and [200]):

1. Where a party alleges bias, that allegation must be addressed first, as the necessary result of an affirmative finding of bias is a retrial: [49]. Difficulties arise in attempting to claim that bias only infected the costs judgment and not also the earlier substantive judgment to avoid the prospect of a retrial: [57].

Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd (2006) 229 CLR 577; [2006] HCA 55; Vakauta v Kelly (1989) 167 CLR 568; Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427; [2011] HCA 48, applied; Royal Guardian Mortgage Management Pty Ltd v Nguyen [2016] NSWCA 88, discussed.

2. While the judge’s remarks about the appellant’s conduct appeared to have erroneously reflected a standard of reasonableness that did not derive from the statutory scheme, they did not disclose pre-judgment or partiality: [85].

3. The mandatory language of s 88K(3) and 88K(4) of the Conveyancing Act 1919 (NSW) requires the court to specify in its order imposing an easement the terms and conditions of that easement: [44]. In this case, there were serious doubts as to whether either engineering option 1 or order 6 was capable of being imposed as a condition of the easement: [108]. These doubts cannot be resolved on appeal so remittal is required: [108]-[109].

Gordon v Lever [2018] NSWCA 43; Moorebank Recyclers Pty Ltd v Tanlane Pty Ltd [2012] NSWCA 445, applied.

4.   The exercise in valuation in assessing compensation for the imposition of an easement is that required by Spencer v The Commonwealth, namely a “before and after” assessment of what a willing but not anxious purchaser and a willing but not anxious vendor would agree upon as the market value of the property: [147]. In this case, that exercise resulted in a figure of $65,000, but that sum relied on assumptions made by the trial judge that may change following the determination of the terms and conditions of the proposed easement on remittal: [151]-[152].

Spencer v The Commonwealth (1907) 5 CLR 418; [1907] HCA 82, applied.

5. In relation to costs, s 88K(5) of the Conveyancing Act 1919 (NSW) required the plaintiffs to pay the costs of the proceeding, subject to any contrary court order. It is not possible to prescribe the circumstances in which an owner of land will be deprived of his or her costs in resisting an application under s 88K, and departure from that position does not entail a particular result: [188].

6. There was no basis for concluding that the appellant litigated unreasonably. The appellant was not obliged to consent to the easement, and merely putting the plaintiffs to proof of the various elements contained in s 88K could not, of itself, provide a basis for an adverse costs order: [175]-[176]. The “informal directions hearing” in this respect is troubling. Criticisms of the appellant and findings made by the trial judge about the appellant’s conduct of the litigation were not open: [178]-[179], and pursuing a joint expert opinion at trial was not unreasonable: [180]. Further, the appellant’s rejection of the offers of compromise was not unreasonable: [183]-[185].

Shi v ABI-K Pty Ltd (2014) 87 NSWLR 568; [2014] NSWCA 293, applied; Tempe Recreation Reserve Trust v Sydney Water Corporation [2014] NSWCA 437; Dillon v Gosford City Council [2011] NSWCA 328, discussed.

by Bell P:

7. “Open justice”, subject to stringent exceptions, is a hallmark of the contemporary Australian judicial system: [20]. An “informal directions hearing” of the kind that occurred in the present case, with neither the parties present nor a transcript taken, is singularly inappropriate and should be discouraged: [28]-[29].

Scott v Scott [1913] AC 417 at 445; McPherson v McPherson [1937] AC 177; Medical Board of Victoria v Meyer (1937) 58 CLR 62; Raybos Australia Pty Ltd v Tectran Corporation Pty Ltd (1987) 62 ALJR 148 at 149; (1987) 76 ALR 69, Hodgson v Imperial Tobacco Ltd [1998] 1 WLR 1056; Rinehart v Welker (2011) 93 NSWLR 311; [2011] NSWCA 403; Commissioner of the Australian Federal Police v Zhao (2015) 255 CLR 46; [2015] HCA 5, discussed.

Judgment

1. BELL P: I have had the benefit of reviewing the reasons for judgment of Basten JA with whose reasons and orders I agree. I wish only to add some observations about what the primary judge referred to in his principal judgment as “an informal directions hearing” at which he “queried why [certain] matters were being put in issue”: [2018] NSWSC 1764 at [43]. This is by way of supplementation to Basten JA’s observations on this topic at [172]-[175] with which I agree.

2. In [43] of his principal judgment which appeared in a section headed “Costs – Section 88K(5)”, the primary judge said:

“I have already said enough to indicate that, in my view, the defendant’s behaviour has been unreasonable and has caused the plaintiffs to incur undue expense and endure unnecessary stress. I well understand that proceedings for an order pursuant to Section 88K(1) [of the Conveyancing Act 1919 (NSW)] are in a special category. They are not conventional adversarial proceedings. An applicant for such an order has no ‘right’ to the grant of an easement and must satisfy the Court of certain things. This is the point that Basten JA sought to emphasise in Shi v ABI-K Pty Ltd at [98]. However, in the particular circumstances of this case, the defendant’s stance in relation to reasonable necessity, public interest and the other issues required to be proved by Section 88K(1) and (2), was never justified. There was no reasonable prospect of her ever succeeding on those questions – or persuading a court that they could not be satisfied. It was irresponsible of her to maintain her position in relation to those issues for over fifteen months until she abandoned them on 25 October 2018. She kept alive her position with knowledge that the plaintiffs were incurring considerable expense in responding to it. Her abandonment was not brought about by fresh evidence from the plaintiffs. It occurred following an informal directions hearing at which I queried why those matters were being put in issue.” (emphasis added).

3. No transcript was taken of this “informal directions hearing”. The “informal directions hearing” took place in the judge’s chambers without either the plaintiffs or the defendant being present.

4. At [44] of his principal judgment, the primary judge expressed his conclusion that “the stance taken by the defendant for so long was inconsistent with the statutory obligation of parties to civil proceedings in this Court pursuant to Section 56(3) of the Civil Procedure Act, 2005”. His Honour continued at [45] stating that:

“At its simplest, the defendant caused the Court to list, and the plaintiffs to prepare for, a five-day hearing when the real issues in dispute required only a two-day hearing. She caused the plaintiffs to prepare evidence on multiple issues when the real issues in dispute were far fewer. She caused the plaintiffs’ solicitors to retain experts who were unnecessary and the plaintiffs to apprehend that they were required to give evidence and be cross-examined, when there should have been no necessity for them to do so. She caused unnecessary stress, anxiety and discomfort to ordinary people, unaccustomed to the business of litigation, who were forced to come to this Court because the defendant chose to ignore an understanding that had persisted satisfactorily for over 60 years. And she failed to accept reasonable offers and practical solutions proposed by the plaintiffs, or to engage with them on a sensible and co-operative basis.”

5. At [47], the primary judge concluded that this was:

“a case in which the discretion pursuant to Section 88K(5) to make ‘an order of the Court to the contrary’ has been enlivened. I do so, not simply because the defendant refused to accept the offers and proposals summarised in paragraphs [11] to [15] above, but on a broader basis, having regard to the defendant’s unreasonable behaviour, her entrenched resistance to reasonable resolution and her maintenance of issues without reasonable cause.”

6. Notwithstanding these conclusions, the primary judge deferred making a costs order for the purposes of s 88K(5) of the Conveyancing Act1919 (NSW) until he had received evidence of the costs involved in the proceedings. At [53] of his judgment, the primary judge said:

“I propose, subject to receiving that evidence, that a significant proportion of the plaintiffs’ costs be paid by the defendant. There may be remaining additional questions as to whether any part of the plaintiffs’ costs should be paid on an indemnity basis and whether any orders should be made pursuant to Section 98(4) or 99 of the Civil Procedure Act. If those matters are to be agitated, there will need to be a further hearing.”

7. A subsequent costs hearing took place on 26 September 2019. In the course of that costs hearing, counsel then appearing for the defendant (Mr Roucek) sought to read an affidavit of David Benjamin Andrews (Mr Andrews), a solicitor in the employ of the solicitor for the defendant, which annexed correspondence between the parties seeking to reach agreement as to what had been said at the “informal directions hearing” of 19 October 2018. That correspondence included a note by Mr McNally SC who represented the defendant at trial and “appeared” at the informal directions hearing. In the affidavit, Mr Andrews said:

“The defendant will make a submission in relation to costs that in circumstances where there has been judicial encouragement to narrow the issues and shorten the case and where that encouragement is adopted and the case shortened, there should not be a costs order made against the party who has acted in accordance with the Court’s suggestion by virtue of the fact that they acted at that stage in shortening the proceedings rather than at an earlier time.”

8. The “judicial encouragement” referred to was evidently a reference to what the primary judge had said in the course of the “informal directions hearing” of 19 October 2018. As will be seen below, the defendant perceived that that “encouragement” was accompanied by a threat to award costs against her if she did not abandon particular issues.

9. The solicitor for the plaintiffs, Mr Briggs, also filed an affidavit responding both to Mr Andrews’ affidavit and also to an affidavit of Mr McNally which had been sworn and filed on 13 February 2019. The transcript of the costs hearing discloses that Mr McNally’s affidavit was not sought to be read even though it had been filed.

10. The primary judge rejected both of the solicitors’ affidavits. In the course of argument as to the admission of these affidavits, the primary judge said:

“I just don’t think that there is any controversy about – there need not be any controversy about what happened and I am not going to make any finding based upon what happened other than to commend Mr McNally for the decision that was made”.

11. Later in the transcript, in the context of the tender still being pressed and reference having been made to [43] of the principal judgment which I have set out at [2] above, the primary judge said:

“… my judgment does not say explicitly that there was a necessary connection between the abandonment and the informal directions hearing, although it may seem to imply that because of the syntax.” (emphasis added).

It did indeed.

12. Notwithstanding the rejection of the solicitors’ affidavits, a short affidavit of the defendant, Ms Elizabeth Patricia Studholme, dated 29 January 2019 was admitted into evidence without objection. In this affidavit, the defendant referred to the “informal directions hearing”, describing it as a “meeting”, and said:

“As a result of what was conveyed to me about what was said at that meeting, I believed that his Honour would grant an easement to the plaintiffs and if I did not consent then there was a real risk that I would suffer an adverse costs order against me.

In those circumstances I decided to consent to the grant of an easement and argue only about the conditions of the grant, notwithstanding that to that point I believed that I had grounds for resisting such an order for reasons set out in my earlier affidavits filed in these proceedings.”

13. As Basten JA says in [174] of his judgment:

“It is possible that such views were not expressed by the trial judge in chambers prior to the hearing of the application, but, given the clarity with which the judge expressed on more than one occasion in his reasons his criticism of Ms Studholme for failing to abandon her defence at an earlier point in time, the only plausible inference is that he did indeed convey to Ms Studholme’s senior counsel what appears to have been conveyed to her.”

14. Basten JA goes on to say “[t]his situation is troubling”: at [175]. I agree with his Honour for the reasons he expresses. It is not surprising that the defendant wished to adduce evidence as to what had been said in the “informal directions hearing” as it obviously influenced her forensic strategy, and may well have been thought to have been calculated to achieve that outcome.

15. In my opinion, the holding of so called “informal directions hearings” in chambers of the kind that took place in the current case is strongly to be deprecated. Not only are they inconsistent with the cardinal principle of open justice but, in the absence of a transcript, they may be apt to give rise to disputes as to what was said which may, in turn, create the need for the participants in such “hearings”, typically counsel, to have to make affidavits as to what was said. Not only is this potentially invidious but, depending on the circumstances, it might jeopardise a counsel’s ability to continue in the case (see Legal Profession Uniform Conduct (Barristers) Rules 2015 (NSW) r 101(d), requiring a barrister to refuse to retain a brief where the barrister has reasonable grounds to believe that the barrister may, as a real possibility, be a witness in the case). This may, in turn, cause potentially significant further expense to the client and great disruption to the orderly ongoing conduct of the case.

16. The attempted tender of affidavits by counsel or solicitors as to what transpired in turn may become utterly problematic for the judge. If he or she rejects the tender, a perception may arise that the judge does not wish what was said to be made known; alternatively, if the evidence is admitted but does not align as between the parties and or the judge does not agree with what is said, the judge may have to rule on the accuracy of one or both counsel’s recall, many months after the private hearing when it is notorious that memories, including a busy judge’s memory, can fade.

17. None of these most unfortunate and unsatisfactory consequences would arise if the “informal directions hearing” that occurred in the present case or “hearings” like it take place in open court, and are transcribed. Informal short cuts will often produce a false economy.

18. The exclusion of the public, let alone parties to the litigation, from a hearing (including a directions hearing) is the antithesis of transparency, and does not conduce to confidence in the administration of justice. This observation is scarcely novel. Almost 400 years ago, in Part 2 of his Institutes at 103, Sir Edward Coke wrote that:

“In curia domini regis.] Thefe words are of great importance, for all caufes ought to be heard, ordered, and determined before the judges of the kings courts openly in the kings courts, whither all perfons may refort; and in no chambers, or other private places: for the judges are not judges of chambers, but of courts, and therefore in open court, where the parties councell and attorneys attend, ought orders, rules, awards, and judgements to be made and given, and not in chambers or other private places, where a man may lofe his caufe, or receive great prejudice, or delay in his abfence for want of defence. Nay, that judge that ordereth or ruleth a caufe in his chamber, though his order or rule be juft, yet offendeth he the law, (as here it appeareth) becaufe he doth it not in court. And the opinion is good, and agreeable to this law, qui aliquid ftatuerit parte inaudita altera, æquum licet ftatuerit, haud æquus fuerit : Neither are cafes to be heard upon petitions, or fuggeftions and references, but in curia domini regis.”

19. In Scott v Scott [1913] AC 417 at 445 (Scott), Earl Loreburn said that he could not:

“think that the High Court has an unqualified power in its discretion to hear civil proceedings with closed doors. The inveterate rule is that justice shall be administered in open Court. I do not speak of the parental jurisdiction regarding lunatics or wards of Court, or of what may be done in chambers, which is a distinct and by no means short subject, or of special statutory restrictions.”

In the same case, the Earl of Halsbury said (at 440), that “every Court of justice is open to every subject of the King”. In McPherson v McPherson [1937] AC 177 at 200 (McPherson), the Privy Council observed that “publicity is the authentic hall-mark of judicial as distinct from administrative procedure” and that “[t]he remoteness of the possibility of any public attendance must never by judicial action be reduced to the certainty that there will be none.”

20. “Open justice”, subject to stringent exceptions, is a hallmark of the contemporary Australian judicial system. Section 6 of the Court Suppression and Non-publication Orders Act 2010 (NSW) refers to the fact that “a primary objective of the administration of justice is to safeguard the public interest in open justice.” In Commissioner of the Australian Federal Police v Zhao (2015) 255 CLR 46; [2015] HCA 5 at [44], the High Court noted that:

“The rationale of the open court principle is that court proceedings should be subjected to public and professional scrutiny, and courts will not act contrary to the principle save in exceptional circumstances.”

21. In Rinehart v Welker (2011) 93 NSWLR 311; [2011] NSWCA 403 at [32] (Rinehart), Bathurst CJ and McColl JA said the following in relation to the principle of open justice:

“The principle of open justice is one of the most fundamental aspects of the system of justice in Australia: John Fairfax Publications Pty Ltd v District Court of NSW [2004] NSWCA 324; (2004) 61 NSWLR 344 (at [18]) per Spigelman CJ (Handley JA and Campbell AJA agreeing). Open justice ensures public confidence in the administration of justice: see Moti v R [2011] HCA 50 (at [100]) per Heydon J; Hogan v Hinch (at [20]) per French CJ; R v Tait (1979) 46 FLR 386 (at 401 - 403) per Brennan, Deane and Gallop JJ. It is unnecessary to add to the large body of judicial opinions discussing the concept. It is sufficient, in our view, to illustrate the proposition embedded in s 6 by referring to Lord Atkinson's statement in Scott v Scott [1913] AC 417 (at 463) , that ‘in public trial is [to be] found, on the whole, the best security for the pure, impartial, and efficient administration of justice, the best means of winning for it public confidence and respect.’”

See also John Fairfax & Sons Ltd v Police Tribunal (NSW) (1986) 5 NSWLR 465 at 476-477.

22. An “informal directions hearing” of the kind that occurred in the present case, with neither clients present nor a transcript taken, is not to be confused with a “chambers” hearing.

23. The tradition of judges sitting out of court and at or in chambers was traced by Dixon J in Medical Board of Victoria v Meyer (1937) 58 CLR 62 at 93ff; [1937] HCA 47 (Meyer), with his Honour describing it as having become a “familiar feature of the judicature system” and something that was “confirmed and increased by statute and by practice”: at 95. The Judiciary Act 1903 (Cth), for example, is replete with references to the jurisdiction of the High Court and of State Supreme Courts invested with federal jurisdiction being exercisable “in Chambers” and dealing with the effect of orders made in chambers: see, for example, ss 16, 17, 34, 69(3), 76(3), 77RR.

24. On the other hand, s 11(1) of the Supreme Court Act 1970 (NSW) abolished the distinction between court and chambers; see also, for example, Supreme Court Act 1986 (Vic) s 4(1). The rationale for the abolition of this distinction was explained by the New South Wales Law Reform Commission in its Report of the Law Reform Commission on Supreme Court Procedure, (1969) at 15, cl 31:

“The distinction between the sittings of a Judge in Court and in Chambers is abolished. This distinction is bound up with the ancient concept that the Court always sat as a bench of all Judges of the Court, and certain powers of the Court were delegated to Judges sitting alone when the whole Court was not sitting. The preservation of the old system leads to needless technicality, and often involves considerable research. The Court, in its various Divisions, is to be presided over by a Judge. The abolition of the distinction will simplify matters by eliminating the various differences that have been held to exist under the present system.”

25. The practice in England as to chambers hearings was described by Sir Jack Jacob in Forbes v Smith [1998] 1 All ER 973 at 974 as follows:

“A chambers hearing is in private, in the sense that members of the public are not given admission as of right to the courtroom. Courts sit in chambers or in open court generally merely as a matter of administrative convenience. For example, in the Chancery Division the normal practice for urgent interlocutory cases is for the matters to be heard in open court, the application being made by way of motion. Corresponding applications in the Queen's Bench Division are normally made in chambers. There is no logic or reason as to why exactly the same sort of case in one Division should be in open court and, in another Division, in chambers.

Furthermore, until about ten years ago, appeals in the Chancery Division (appeals such as this, for example) were normally taken in open court. Now they are taken in chambers. The change was the result of an administrative decision, not a change in the law. Take other instances. The Commercial Court sits in 'chambers' but with its doors open. So normally, does the Patents Court.”

26. In the same year, in Hodgson v Imperial Tobacco Ltd [1998] 1 WLR 1056 at 1070 (Hodgson), Lord Woolf observed that:

“Hearings in private in chambers already make an important contribution to the administration of justice. They allow issues to be determined informally and expeditiously. They allow less strict rules as to representation to apply. They allow matters to be discussed which the parties might not wish to discuss in open court. They encourage openness. They are less intimidating to litigants which is particularly important in the case of the small claims jurisdiction. With the movement which is now taking place in relation to case management chambers hearings are likely in the future to make a greater contribution to the administration of justice than they do already.”

At first blush, these observations would appear to be inimical to, or at least in tension with, the strong commitment to open justice of which the observations of Earl Loreburn in Scott and the Privy Council in McPherson cited above stand as well known exemplars, confirmed by the many contemporary statements by Australian courts to like effect: see [20]-[21] above. That tension is resolved, however, by the subsequent observation by Lord Woolf in Hodgson about “chambers hearings” (at 1071):

“However it remains a principle of the greatest importance that, unless there are compelling reasons for doing otherwise, which will not exist in the generality of cases, there should be public access to hearings in chambers and information available as to what occurred at such hearings.”  

27. In Raybos Australia Pty Ltd v Tectran Corporation Pty Ltd (1987) 62 ALJR 148 at 149; (1987) 76 ALR 69 at 72, Toohey J addressed the notion of “public chambers”, observing that:

“Historically the distinction between a judge sitting in open court and sitting in chambers was the distinction between a hearing to which the public had access and a hearing to which it did not. With the prevalence of public chambers, that distinction has lost most of its significance.“

28. In the current case, there was nothing public about the “informal directions hearing”. No transcript was taken and no party was present. The judge did not permit evidence of what had been said at it to be adduced.

29. Whilst it is both common and entirely appropriate for orders by consent to be made by a judge in chambers, private “hearings” in chambers are, in my opinion, singularly inappropriate, at least in circumstances where no transcript is taken and the parties are excluded. The awkwardness for the defendant, her counsel and indeed the Court produced by the “informal directions hearing” in the present case, and its sequelae in terms of attempts to adduce evidence as to what was said during the “hearing”, provide a salutary illustration of why that is so.

30. BASTEN JA: The appellant, Elizabeth Studholme, owns a home at Heights Crescent, Middle Cove, in Sydney. The front of the house faces in a westerly direction. The houses on her southern boundary face on to Cawarrah Road, which runs in an east-west direction where it joins Crescent Heights and then curves to the north-west.

31. On the northern boundary of her property there is a laneway running approximately east-west. The laneway permits rear access to five properties on the southern side which front onto Cawarrah Road and a further six properties on the northern side which front on to Heights Crescent. Heights Crescent curves from a north-south alignment in front of the appellant’s house to a more easterly alignment to the north of the laneway. (The layout of the properties may be seen on the annexed plan.)

32. The original subdivision in 1947 included the laneway as a right of way six feet (1.83m) in width, burdening the title of the land to the north of the laneway. However, a survey undertaken in 1954 in relation to the appellant’s land contained the following notation:

“The Right of Way along the Northern boundary of subject area is shown by Certificate of Title and Deposited Plan as a strip of land 6 feet wide, whereas the strip of land actually used for access to lots to the East of subject area is approximately 9 feet wide, including about a 3 feet strip of subject area, as indicated in sketch.”

33. On 4 May 2017 the appellant gave notice to the owners of properties along the laneway that she intended to build a fence on the northern boundary of her land, which would effectively reduce the laneway to the six foot right of way. That step would have been to prevent most vehicular access along the laneway.

34. In response to the notice, nine of the affected residents (the present respondents) sought and obtained an interlocutory injunction in the Equity Division and sought the imposition of an easement pursuant to s 88K of the Conveyancing Act 1919 (NSW). (It is convenient to continue to refer to those owning properties seeking the benefit of the easement as “the plaintiffs”.)

35. Shortly before the trial, Ms Studholme consented to an order imposing an easement over an area extending the right of way by 800mm, so as to provide a right of way a little under 2.7m wide. There remained a strip approximately 115mm wide between the edge of the easement and the wall of the appellant’s home. The issues left for determination by the Court were:

1. the conditions subject to which the easement was to be imposed, including any necessary engineering works;

2. the amount of compensation payable to Ms Studholme, and

3. liability for the costs of the proceedings.

36. On 14 December 2018 Pembroke J granted the easement, assessed compensation, and imposed conditions requiring that the plaintiffs undertake certain drainage works on Ms Studholme’s land. [1] The orders were entered on 30 January 2019. On 3 October 2019 the judge made further orders with respect to the costs of the proceedings. Ms Studholme was directed to pay the plaintiffs’ costs, to be assessed from 15 October 2018 on the indemnity basis. [2]

    1. Rawson v Studholme [2018] NSWSC 1764 (“Primary judgment”).

    2. Rawson v Studholme (No 2) [2019] NSWSC 1273 (“Costs judgment”).

37. The principal orders made on 30 January 2019 were as follows: order 1 granted the easement; order 2 required that the plaintiffs pay Ms Studholme compensation of $45,000 and order 6 read:

“6.   Within 6 months of the date of the registration of the Easement, the plaintiffs are to carry out following (Works):

a.   Cut away and remove that portion of the existing concrete driveway which extends beyond the southern edge of the Easement;

b.   Carry out subsurface drainage works to collect and discharge water to the Council’s street drainage system in accordance with the following schedule:

i.   Excavate a trench no greater than 300mm in depth of that portion of the defendant’s land between the southern edge of the Easement and the northern wall of the defendant’s dwelling, and extend that excavation by the most direct route from the western boundary of the defendant’s land across the pedestrian footway to the back of the kerb to the roadway in Heights Crescent (Trench),

ii.   Place blue metal aggregate and thereupon a socked agricultural line in the Trench upon the defendant’s land;

iii.   If there be no existing drainage pipe into which to connect, place a solid PVC pipe in the Trench across the pedestrian footway from the western boundary of the defendant’s land and connect that pipe through a cylindrical hole (of equivalent diameter to the PVC pipe) cut through the back of the kerb to the roadway in Heights Crescent;

iv.   Connect the socked agricultural line to the solid PVC pipe at the western boundary of the defendant’s land;

v.   Backfill the socked agricultural line with blue metal gravel to the finished level of the adjoining driveway.

vi.   Remove and lawfully dispose of all excess excavated soil from the defendant’s land and clean the surface of the adjoining driveway.”

There were additional orders dealing with consequential matters.

Issues on appeal

38. The appellant’s notice of appeal raised the following issues:

1. with respect to the engineering works (order 6), the failure of the judge to impose “option 1” agreed by the engineers in a joint expert report;

2. awarding compensation in an amount of $45,000, and seeking an award of $275,500;

3. setting aside the costs order in favour of the respondents and seeking an order that the plaintiffs pay her costs of the trial, and

4. setting aside the judgment on the basis of “actual bias against the appellant.”

39. The notice of appeal pre-dated any order as to costs, but in circumstances where the judge had foreshadowed in the first judgment his views as to the appropriate orders as to costs. An amended notice of appeal was filed on 29 January 2020 which added the costs judgment as one from which the appeal was brought and amended the particulars of the ground relating to costs. It also added further particulars with respect to the ground challenging the assessment of compensation and expanded the claim of actual bias to “apprehended and/or actual bias”.

39. The legal structure within which the claimants’ application arose was s 88K of the Conveyancing Act, which relevantly provides:

88K   Power of Court to create easements

(1)   The Court may make an order imposing an easement over land if the easement is reasonably necessary for the effective use or development of other land that will have the benefit of the easement.

(2)   Such an order may be made only if the Court is satisfied that—

(a)   use of the land having the benefit of the easement will not be inconsistent with the public interest, and

(b)   the owner of the land to be burdened by the easement … can be adequately compensated for any loss or other disadvantage that will arise from imposition of the easement, and

(c)   all reasonable attempts have been made by the applicant for the order to obtain the easement or an easement having the same effect but have been unsuccessful.

(3) The Court is to specify in the order the nature and terms of the easement and such of the particulars referred to in section 88(1)(a)–(d) as are appropriate and is to identify its site by reference to a plan that is, or is capable of being, registered or recorded under Division 3 of Part 23. The terms may limit the times at which the easement applies.

(4)   The Court is to provide in the order for payment by the applicant to specified persons of such compensation as the Court considers appropriate, unless the Court determines that compensation is not payable because of the special circumstances of the case.

(5)   The costs of the proceedings are payable by the applicant, subject to any order of the Court to the contrary.

The terms of s 88(1), referred to in s 88K(3) should also be noted:

88   Requirements for easements and restrictions on use of land

(1)   Except to the extent that this Division otherwise provides, an easement expressed to be created by an instrument coming into operation after the commencement of the Conveyancing (Amendment) Act 1930, … shall not be enforceable against a person interested in the land claimed to be subject to the easement or restriction, and not being a party to its creation unless the instrument clearly indicates—

(a)   the land to which the benefit of the easement or restriction is appurtenant,

(b)   the land which is subject to the burden of the easement or restriction — …,

(c)   the persons (if any) having the right to release, vary, or modify the restriction, other than the persons having, in the absence of agreement to the contrary, the right by law to release, vary, or modify the restriction, and

(d)   the persons (if any) whose consent to a release, variation, or modification of the easement or restriction is stipulated for.

41. The court’s order 1 identified the land owned by the plaintiffs as the land which obtained the benefit of the easement, although the rights conferred by the easement were not identified. Order 1 described a plan said to be attached, which was not attached. (The plan relied on by the plaintiffs was a plan by Brunskill McClenahan & Associates dated 22 June 2017.)

42. For reasons explained below, it is necessary to consider the issue of bias (issue (d)) first. If the appellant were to succeed on that ground, the whole of the proceedings below would be set aside and the matter would have to start afresh. As will be explained, that ground should not succeed.

43. It will then be appropriate to return to issue (a), addressing the engineering works required by order (6). That ground should be upheld, again for the reasons articulated below. However, on an appeal by way of rehearing, it will not be possible to resolve that aspect of the plaintiff’s application for an easement. Accordingly, the matter will need to be remitted to the Equity Division. That in turn has consequences for the form of the orders which this Court should make. In particular, it raises a question as to whether the scope of the remitter can be limited so as to avoid relitigation of issues unnecessarily.

44. This issue arose in Gordon v Lever. [3] The case involved a proposed right of carriageway for the owners of land to the south of the Richmond River, seeking access to a roadway on the northern side of the river following a flood which had washed away a bridge previously used for access to the road. The owner of the proposed servient tenement agreed that an easement was reasonably necessary, but sought to limit the times at which it could be used to those at which the river was otherwise impassable. There were difficulties with the formulation of a term imposing such a temporal limitation. Further, although the primary judge had concluded that a bridge should be built by the applicants for the easement, at a cost of about $48,000, the orders did not address the mechanism by which that was to be achieved, [4] nor as to the maintenance of the track and bridge. [5] Noting the mandatory language of s 88K(3) (“the court is to specify in the orders the nature and terms of the easement”) and s 88K(4) (“the court is to provide in the order for payment” of appropriate compensation),[6] Sackville AJA continued:

“[97] This emphatic language of s 88K(3) makes it clear that the court lacks power to make an order imposing an easement unless the terms of the easement are specified in the order itself. The purpose of the statutory requirement is to ensure that an easement imposed in the exercise of the power conferred by s 88K(1) will be registered in a form that includes all particulars of the easement, as envisaged by s 88K(7). Those particulars may have a marked impact on the respective rights and obligations of the owners of the dominant and servient tenements. …

[98] When s 88K of the Conveyancing Act is read as a whole it is evident that the reference to ‘an easement’ in s 88K(1) is to an easement the ‘nature and terms’ of which are specified by the Court. This follows from the conferral of power on the Court to make an order imposing an easement, coupled with the requirement that the Court is to specify in the order the nature and terms of the easement. The terms include any limitation on the times or circumstances in which the easement ‘applies’. In the case of an easement of carriageway, the relevant terms will include any constraint on the times or circumstances in which the owner of the dominant tenement can use the carriageway.”

3. Gordon v Lever [2018] NSWCA 43 (Sackville AJA, McColl and White JJA agreeing).

4. Gordon v Lever at [67].

5. Gordon v Lever at [86].

6. Gordon v Lever at [96].

45. This statement of principle echoed statements made by this Court in Moorebank Recyclers Pty Ltd v Tanlane Pty Ltd: [7]

“[96] Section 88K(1) of the Act empowers the Court to impose an easement if the Court considers it reasonably necessary for the effective use and development of the land that will have the benefit of the easement. …

[97]   Although the primary judge found that the easement was reasonably necessary for the effective use and development of the Tanlane land the approach he ultimately took did not reflect this. …

[98] Further, s 88K(4) of the Act provides that the order imposing the easement also deal with any compensation which is to be paid. Even if liberty to apply can be reserved to affected persons to apply for further compensation if some unforeseen event occurs … the subsection does not, in our opinion, enable an order that compensation ordered be refundable in certain circumstances, or adopting the equivalent approach, an order on condition that there is an undertaking to that effect. Further, it must be remembered that s 88K(2)(b) provides that the Court must be satisfied, as a precondition to the grant of an easement, that persons having any estate or interest in the servient tenement can be adequately compensated. If the Court cannot make a determination as to the compensation payable at the time the order is made, there is no power to grant the easement. The need to satisfy that precondition cannot be avoided by providing for payment of an amount subject to a refund if certain events do or do not occur.

[99]   There are other problems with the order of the primary judge. Although an easement can be subject to conditions and restrictions on its enjoyment, these conditions must in our opinion be specified in the order imposing the easement and not in an order or undertaking independent of the easement…. There is good reason for this. The easement will take effect on registration and persons dealing with the dominant and servient tenement will only be bound by what appears on the register, not by some extrinsic order or undertaking which is made between parties to litigation.

7. [2012] NSWCA 445 (Bathurst CJ, Beazley and Meagher JJA).

46. It follows from this reasoning that if this Court cannot be satisfied as to the appropriate engineering works, it cannot identify the terms and conditions of the easement and therefore whether it is reasonably necessary. It must follow that the whole of the orders made in the Court below must be set aside if one aspect of the conditions was erroneously determined and cannot be redetermined by this Court.

47. As explained below, the judge’s assessment of compensation was also flawed, although an assessment of the compensation which should appropriately have been ordered, having regard to the evidence before the trial judge, can be made. However, as the trial judge himself noted, the assessment of compensation may well depend upon the scope of the engineering works and the extent of any intrusion on to Ms Studholme’s land.

48. Finally, the challenge to the costs order should also be upheld, but on a basis which allows this Court to dispose of the costs of the trial.

Allegation of bias

(a)   legal principles

49. In Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [8] the High Court noted the importance of a party alleging bias (or apprehension of bias) addressing the appropriate relief, in the event that the challenge were upheld. Further, a plurality held that questions of bias should be addressed first. That is because the necessary result is a retrial. There would, for example, be no basis upon which the appellate court could vary orders made below on an appeal by way of rehearing if the trial had wholly miscarried. [9]

    8. (2006) 229 CLR 577; [2006] HCA 55.

    9.    Concrete at [2]-[3] (Gummow ACJ), [117] (Kirby and Crennan JJ), [172] (Callinan J).

50. Aspects of the reasoning in support of this approach require elucidation. First, similar reasoning should operate with respect to other elements of procedural unfairness. Secondly, Kirby and Crennan JJ, with whom Gummow ACJ agreed, stated that, in an intermediate appellate court, the party making an allegation of bias should be put to an election as to whether to pursue that allegation, with the consequence that the trial judgment must be set aside and a retrial ordered. [10] That step was not taken in the present appeal.

    10. Concrete at [117].

51. In Royal Guardian Mortgage Management Pty Ltd v Nguyen,[11] I expressed concern as to how the possibility of an election would operate in a practical way. It is necessary to consider how such an election would arise in circumstances where it is open to a party to “waive” a complaint of bias (or apprehension of bias). [12] The possibility that a person may waive the right to challenge a judgment on the basis of partiality where, with knowledge of the circumstances giving rise to such a claim, he or she has stood by or failed to raise an objection to the continuation of the proceeding was noted in Vakauta v Kelly [13] and in Michael Wilson & Partners Ltd v Nicholls. [14]

    11. [2016] NSWCA 88 at [11].

    12. Royal Guardian at [23]-[24]. The language of “waiver” was questioned by Heydon J in Michael Wilson & Partners at [118], perhaps referring to observations as to the use of that term in Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57 at [100]. The use of the term is conventional in relation to the “bias rule”: M Aronson, M Groves and G Weeks, Judicial Review of Administrative Action and Government Liability (Lawbook Co, 6th ed, 2017) at [9.360]; M Groves “Waiver of the rule against bias” (2009) 29 Monash ULR 315.

    13. (1989) 167 CLR 568 at 572 (Brennan, Deane and Gaudron JJ); [1989] HCA 44.

    14. (2011) 244 CLR 427; [2011] HCA 48 at [76], [84]-[85] (Gummow ACJ, Hayne, Crennan and Bell JJ).

52. In the present case, the appellant sought to avoid a finding of acquiescence or waiver by submitting that she could only be satisfied that there had been bias when the second judgment (on costs) was delivered. However, if that were so, then there were difficulties in relying upon a reasonable apprehension of bias, as opposed to actual bias. The joint reasons in Michael Wilson & Partners stated:

“[67]   … An allegation of apprehended bias does not direct attention to, or permit consideration of, whether the judge had in fact prejudged an issue. To ask whether the reasons for judgment delivered after trial of the action somehow confirm, enhance or diminish the existence of a reasonable apprehension of bias runs at least a serious risk of inverting the proper order of inquiry (by first assuming the existence of a reasonable apprehension). Inquiring whether there has been ‘the crystallisation of that apprehension in a demonstration of actual prejudgment’ impermissibly confuses the different inquiries that the two different allegations (actual bias and apprehended bias) require to be made.”

53. Although the “serious risk” of inverting the proper order of inquiry is no doubt one to be avoided, the conclusion reached by the plurality crystallised into a finding of error because this Court accepted a reasonable apprehension of bias “only by (impermissibly) reasoning backwards from what was decided at trial, and how it was decided, to the conclusion that it might reasonably be apprehended that the judge might have prejudged those matters.” [15]

    15. Michael Wilson & Partners at [73].

54. It is trite to say that the outcome of the case will not demonstrate pre-judgment; it will be the exercise of judgment. [16] It is also important to keep in mind the focus of the different tests, namely the state of mind of the judge (for actual bias [17] ) and the views of the hypothetical lay bystander (apprehended bias). However, it is not clear that reliance on the reasoning is always impermissible. For example, in Vakauta v Kelly, Brennan, Deane and Gaudron JJ stated: [18]

“If the above comments made by the learned trial judge in the course of the trial had stood alone, we would have been of the view that the appellant, having taken no clearly stated objection to them at the time and having stood by until the contents of his Honour's judgment were known, could not now found upon them in order to have that judgment set aside on the grounds of a reasonable apprehension of bias. The statements which the learned trial judge had made about his preconceived views of Dr Lawson [a witness] were, however, effectively revived by what his Honour said in his reserved judgment. The appellant's failure to object to the comments made in the course of the trial cannot, in our view, properly be seen as a waiver of any right to complain if comments made about Dr Lawson in the judgment itself would, in the context of those earlier comments, have the effect of conveying an appearance of impermissible bias in the actual decision to a reasonable and intelligent lay observer.”

16. See SCAA v Minister for Immigration and Multicultural and Indigenous Affairs [2000] FCA 668 at [38] (von Doussa J), applied by this Court in Reid v Commercial Club (Albury) Ltd [2014] NSWCA 98 at [74] (Gleeson JA).

17. But see, as to unconscious bias, Bilgin v Minister for Immigration and Multicultural Affairs (1997) 149 ALR 281 at 290 (Finkelstein J).

18.    Vakauta at 573.

55. Similarly, in Concrete Pty Ltd Callinan J stated: [19]

“[179]   The respondents were correct in submitting, and the Full Court in holding, that it was right in determining this issue to look not only at the course of the trial, but also at the reasons for judgment, and to read them together to see whether the cumulative effect was one of apparent bias. As I have already indicated, the judicial interventions during the trial itself would not give rise to an apprehension of bias. Nor would the reasons for judgment, of themselves standing alone.”

Although no finding of a reasonable apprehension of bias was accepted in that case, the approach adopted of considering both the interventions and the reasons, was expressly approved. The availability of such reasoning was not addressed in Michael Wilson & Partners and may not have been universally rejected. Indeed, universal rejection of a composite approach to assessing a reasonable apprehension of bias might be inconsistent with the underlying principle, derived from Ebner v Official Trustee in Bankruptcy,[20] and summarised in Michael Wilson & Partners at [63], that the application of the apprehension of bias principle requires two steps:

“First, it requires the identification of what it is said might lead the judge to decide a case other than on its legal and factual merits. And secondly, there must be an articulation of the logical connection between that matter and the feared deviation from the course of deciding the case on its merits.”

A theoretical connection may only be seen to have materialised by reference to the reasons for judgment.

19.    Possibly with the agreement of Gummow ACJ at [4] and Kirby and Crennan JJ at [117], although the scope of the agreements may have been more limited.

20. (2000) 205 CLR 337; [2000] HCA 63 at [8].

56. Properly understood, the statements in Vakauta and Michael Wilson & Partners must be read in their respective contexts. In Vakauta, the trial judge repeated in his final reasons the opinions said to have constituted prejudgment expressed in the course of the hearing. By contrast, in Michael Wilson & Partners the claim of apprehended bias was grounded on the conduct and making of orders against the applicant in the course of seven ex-parte applications, on which the applicants were not heard and which they had no opportunity to challenge. Acceptance in the final judgment of evidence of witnesses whose credit was not challenged and was not in issue on the ex parte hearings, did not permit reliance on the final judgment to demonstrate apprehension of bias.

57. Faced with the possibility that the whole of the trial might have to be repeated, the appellant suggested that the claim of actual bias only infected the costs judgment. However, that attempt at bifurcation does not sit easily with the fact that the appellant was able to formulate grounds of appeal with respect to the costs orders prior to the second judgment. Indeed, the second judgment demonstrated a close connection between findings made in the first judgment and the judge’s conclusions as to the appropriate costs order.

58. Bearing these considerations in mind, it is appropriate in this case to deal with the question of bias first. While in many cases it will be difficult to identify the grounds on which bias (or a reasonable apprehension of bias) is asserted, absent a broad understanding of the issues in dispute, in the present case the focus is on the manner in which the issues were addressed and on the procedural steps underlying the determination of the issues. It is therefore both possible and appropriate to address the factual basis of the bias allegations first.

(b)   factual basis of allegation of bias

59. If, as appeared from the 1954 survey of the appellant’s land, the actual use already extended to a right of way some 2.7m wide, it must be inferred that previous owners of the appellant’s land tolerated such use for some decades before she acquired the property in 1998. A development application made on her behalf in 2002 recorded that, whilst it was proposed to extend the building to an existing wall on the southern boundary of the laneway, there was an express agreement not to extend further into the laneway. Noting objections from those who used the laneway, architects acting on the appellant’s behalf stated in a letter to Willoughby City Council dated 14 October 2002:

“We have undertaken to not build projections in the wall in the spirit of good neighbourliness because at least five of our rear neighbours use the northern metre of our property as a convenient access to their backyards, and any projections that we might construct would interfere with that neighbourly convenience.”

60. The letter further noted, after expressly identifying the right of way as being “about 6 feet wide” and noting that the current driveway to which one of the neighbours had referred “is partially constructed on the northern metre or so of our property” continued:

“Ms Studholme appreciates that the neighbours do use her property to access their rear yards and in the spirit of good neighbourliness does not wish to put a stop to it or inconvenience anyone.”

This may, in retrospect, have been a missed opportunity to resolve consensually the legal status of the laneway.

61. Against this background, the appellant wrote on 4 May 2017 a letter addressed to the owners of the properties fronting Cawarrah Road (that is, on the south side of the laneway) in the following terms:

“I have decided that access over my land is no longer acceptable and advise that a boundary fence will be built, and therefore give you 4 days notice from today to remove your vehicles. Access is not available after Sun. 7 May 2017.

I would like you to understand my valid reasons for this decision and why I am uncomfortable with the trespass.

Access over my land has been a privaledge [sic] & convenience for you at my discomfort. If the perception by you is that there is a legal right to access over my land, then I inform you that this is not so.

The fact is – the only legal way to get access over my land is to “own the whole of land.’” (Emphasis as in original.)

62. The letter then set out six reasons for the appellant taking that position, identified as (i) noise, fumes, privacy; (ii) nuisance; (iii) negligence; (iv) a problem with the wall of the house following laying of the concrete surface to the laneway; (v) light, sun, warmth and air, and (vi) the need for a fence for security.

63. Between June 2017 and about April 2018, both the lay evidence from the parties and expert reports were served and filed. Offers of compromise were also served, to which reference will be made below. On 16 October 2018 the associate to Pembroke J wrote to the parties in the following terms:

“His Honour has read the papers on the court file and is concerned at the proportionality and expense of a five day hearing when the only bona fide issue in dispute may well be the terms and conditions that should be attached to the imposition of a formal easement.

Would you please let me know if the hearing is proceeding? If yes, His Honour would like to hold a directions hearing as soon as convenient.”

64. Senior counsel for the appellant and for the respondents met the judge in chambers at 9am on 19 October 2018 for what was described in the judgment as “an informal directions hearing”.

65. On 25 October 2018 the appellant’s legal representatives advised the respondents and the Court that Ms Studholme would not resist the imposition of an easement. Ms Studholme later swore an affidavit as to the reason for taking that step, which included the following statement:

“As a result of what was conveyed to me about what was said at that meeting, I believed that his Honour would grant an easement to the plaintiffs and if I did not consent then there was a real risk that I would suffer an adverse costs order against me.

In those circumstances I decided to consent to the grant of an easement and argue only about the conditions of the grant, notwithstanding that to that point I believed that I had grounds for resisting such an order for reasons set out in my earlier affidavits filed in these proceedings.”

66. The trial had been fixed to commence on 12 November 2018. On 6 November the matter was relisted at the request of senior counsel for the plaintiffs, in effect to allow for further directions to be given in the light of the limitation on the issues in dispute, following consent to the imposition of an easement. In the course of that hearing the judge stated: [21]

“There's no need to hear the plaintiffs, and there's no need to have a view. Mrs Studholme should give evidence first thing on Monday morning, followed by the two valuers. I must say I'm unimpressed that this decision has been made by Mrs Studholme through her lawyers at this late stage. I was aghast at the amount of work, and the amount of cost that have been involved in what on its face is a pretty straightforward case. And that may well result in a cost order against Mrs Studholme, whatever the result, which may well be substantial.”

21.    Tcpt, 06/11/18, p 2(23).

67. Senior counsel for the plaintiffs, Mr Tomasetti, nevertheless sought to insist that the two engineers, Mr Mackay and Mr Moulsdale, give evidence. The judge then engaged in the following exchange with Mr McNally, senior counsel for Ms Studholme: [22]

“HIS HONOUR: I really don't think we should be calling the engineers, Mr McNally. I mean you're running a serious risk of over stepping the mark with evidence and cost if you do.

MCNALLY: Well, your Honour, the engineering issue was first introduced by the plaintiffs who served evidence in relation to it. The defendant then responded—

HIS HONOUR: Mr McNally, that's because your client put every issue on the table which was, if I may say, most unreasonable.”

22.    Tcpt, p 2(49).

68. The discussion on 6 November then diverted to a question as to how the costs issue should be dealt with, to which reference will be made below. The judge and Mr McNally then returned to the question of the engineers. The judge indicated a view that the matter would be completed in one day, to which Mr Tomasetti raised a question as to whether he was required to have experts in attendance. The judge appears to have then turned to Mr McNally and the following exchange occurred: [23]

    23.    Tcpt, p 5(10).

“HIS HONOUR: Are you talking about the engineers you mentioned before, or something else?

MCNALLY: No. My friend gave notice requiring the engineers, and the valuers, and the town planners for cross-examination. We have done the same.

HIS HONOUR: Well, he doesn't want them anymore.

MCNALLY: Well, we certainly want the engineers, your Honour. Because it really is a large issue.

…

And the town planning. There is one issue that the town planners haven't considered in relation to the effect of the paving on the concrete driveway, in that that reduces—

HIS HONOUR: I can make that decision. I don't need town planning evidence, Mr McNally, on an issue like this.

…

I'll just let the parties make up their own minds about that. I'm certainly not keen to hear the engineering or the town planning evidence. It's hard to see at the moment why it's necessary for the resolution of the bona fide issues in dispute.

MCNALLY: Certainly the engineering issue is 100% necessary, your Honour.

TOMASETTI: No, I accept that. It's the other people.”

69. It may be inferred from these exchanges that the judge had, before the commencement of the trial, formed a view that (i) any resistance to the imposition of an easement expanding the right of way to allow a continuation of current use, that is by an agreed 800mm, was unreasonable; (ii) such an easement was reasonably necessary for the effective use of the plaintiffs’ land; (iii) rear access to their land, given the topography, was not inconsistent with the public interest; (iv) the offers, which were contained in the filed documents, demonstrated reasonable attempts to obtain the easement, which had failed, and (v) accordingly, the only issue to be determined was the scope of the compensation payable to Ms Studholme. Assuming, in favour of Ms Studholme, that it is permissible to look at the judgments for this purpose, the inferences noted above were expressly set out in the first judgment at [4]-[10]. Ms Studholme gave evidence, of which the judge was critical. In particular he stated that, “[s]he has had tribulations in her life but they do not excuse or justify her unreasonable behaviour.” [24]

    24. Primary judgment at [16].

70. It was therefore open to conclude that such views had been formed before the hearing, but on the basis of the filed materials. Whether the pre-trial views were not amenable to change was not clear because, except in determining costs they were of limited relevance once Ms Studholme had accepted an easement would be imposed.

71. In addressing the question of costs in the first judgment, the judge stated:

“[43]   I have already said enough to indicate that, in my view, the defendant’s behaviour has been unreasonable and has caused the plaintiffs to incur undue expense and endure unnecessary stress. … [T]he defendant’s stance in relation to reasonable necessity, public interest and the other issues … was never justified. There was no reasonable prospect of her ever succeeding on those questions – or persuading a court that they could not be satisfied. It was irresponsible of her to maintain her position in relation to those issues for over fifteen months until she abandoned them on 25 October 2018. She kept alive her position with knowledge that the plaintiffs were incurring considerable expense in responding to it.”

72. The judge expressly repeated those findings in the costs judgment at [4]. He also set out in some detail the exchange of offers of compromise which he found to involve genuine attempts to resolve the proceedings on the part of the plaintiffs, describing her responses as “opportunistic and unreasonable”. [25] The judge identified her conduct in precipitating the litigation as “behaving in a peremptory and unreasonable manner” and as “neither reasonable nor rational”. [26]

    25. Costs judgment at [28].

    26. Costs judgment at [34].

73. The appellant’s case is that, although these pejorative findings were made after hearing oral evidence and considering both written and oral submissions, they confirmed that the judge had formed strong views adverse to Ms Studholme before she gave evidence and before the trial had commenced.

(c)   inference of pre-judgment or partiality

74. Claims of partiality or pre-judgment based on remarks made by a trial judge in the course of a hearing are inherently fraught. First, the circumstances in which a trial judge expresses any views about the conduct of a proceeding may depend on the model of case management which has been adopted. The Equity Division does not use a “docket system”, but the pre-trial management in this case reveals similar characteristics. In Concrete Pty Ltd, Callinan J made the following observations about such a system:

“[174]   The Federal Court has adopted a docket system. In that system a number of cases are assigned to a particular judge who then oversees, and makes directions with respect to, all interlocutory matters before hearing a case assigned to him or her. The procedure for trials in the jurisdiction also involves the preparation, exchanging and filing of statements and documents in advance of the hearing which may, and almost always will, be read before the trial begins.

[175]   This system has its disadvantages and dangers. On the one hand, the trial judge will be well educated in many of the details of the case on each side by the time that the hearing starts. But on the other hand, it may sometimes be difficult for the trial judge, apparently fully conversant with the facts and issues, not to have formed some provisional view at least of the outcome of the case. …

[176]   I mention these matters because in sum they may well incline a trial judge towards a degree of outspokenness of a kind to which he or she would not be inclined in a conventional trial on largely oral evidence. That this is so does not provide any excuse for the manifestation of apparent bias on the part of a trial judge but it may explain why a judge finds himself or herself speaking more candidly and strongly than he or she might otherwise do, or even have been able to do, in the past or in other jurisdictions. The question nonetheless remains whether the fair-minded lay observer might reasonably have apprehended that the judge might not be bringing an impartial and unprejudiced mind to the resolution of the questions he was required to decide. [27] ”

27. See Johnson v Johnson (2000) 201 CLR 488 at 492 [11] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ.

75. There is no doubt that in the present case the trial judge was conscious of the obligation imposed on the Court by Pt 6 of the Civil Procedure Act 2005 (NSW), requiring the court to seek to give effect to the “overriding purpose” which is “to facilitate the just, quick and cheap resolution of the real issues in the proceedings”: s 56(1), (2). He was also conscious of the obligation to adapt procedures to the purpose of resolving the issues “in such a way that the cost to the parties is proportionate to the importance and complexity of the subject matter in dispute”: s 60. He expressly adverted to those obligations.

76. Although a court should be wary of forming a firm view based on documents filed before the trial, some views will inevitably be expressed or implied; the adoption of active case management should not be used as a basis for unwarranted claims of apprehended bias. Such claims should not arise in a case which turns to a large extent on expert evidence where the experts have prepared joint reports, as in the present case. That is because hypothetical lay, but informed, bystanders should have imputed to them knowledge of the nature of the proceedings and the value of active case management in reducing costs and achieving just, quick and cheap resolution of the real issues. Nevertheless, application of the overriding purpose should not be relied on to justify directions which diminish the scope and value of an oral hearing.

77. Where a judge expresses his or her tentative views in colourful language, there will be a real risk of an apprehension of bias and, very occasionally, actual bias. The question in the former case is whether such an apprehension is reasonable in all the circumstances. Actual bias will rarely arise because, absent some extraneous interest or other confounding factor, the views being expressed are based on the material before the judge and not on extraneous material or prejudice.

78. In giving effect to the dictates of Pt 6 of the Civil Procedure Act and the overriding purpose, two important constraints are to be borne in mind. First, Pt 6 does not provide a basis for departing from principles of procedural fairness as generally reflected in rules of civil procedure. Those principles are reflected in the requirement that the proceedings must be “just”. Secondly, while the judge is entitled to form a view as to what are the “real issues” in dispute between the parties, within limits the parties are entitled to define those issues. The limits are not easily defined, because they will depend upon the relevant legal principles, the available evidence and the professional practice obligations engaged in the particular case.

79. Bearing these considerations in mind, the expressions of opinion by the trial judge complained of by the appellant, are explicable on two bases which do not demonstrate a reasonable apprehension of bias, let alone actual bias. The two main complaints raised by the appellant related to her apparent unwillingness to concede the strength of the plaintiffs’ case at trial and, secondly, warnings given that she might face adverse costs consequences if she remained obdurate in her defence.

80. The approach adopted by the trial judge must be viewed against the requirements of s 88K of the Conveyancing Act. There were four considerations to be addressed by the Court in considering whether to make an order imposing an easement, namely:

1. was the easement “reasonably necessary for the effective use or development of other land that will have the benefit of the easement”;

2. was the Court affirmatively satisfied that the use of the land having the benefit of the easement “will not be inconsistent with the public interest”;

3. that the owner of the land to be burdened “can be adequately compensated for any loss or other disadvantage that will arise from imposition of the easement”, and

4. whether the applicants for the order have made “all reasonable attempts … to obtain the easement … but have been unsuccessful.”

81. The second factor was not in issue: there was no suggestion that the plaintiffs’ use of their lands as residential dwellings was in any way inconsistent with the public interest. The proposed easement did not seek to vary or add to the existing uses of the lands, with the possible exception of one block which was in the process of subdivision [28] with the result that one new development would have no street frontage other than the laneway. However, the subdivision was not said to be inconsistent with the public interest.

    28.    A dual occupancy had been approved, preventing a subdivision for a period of five years.

82. The first condition may have been treated by the judge as not realistically in issue because the premises on the south side of the lane fell away steeply to Cawarrah Street so that access from Cawarrah Street was, at least for several of the houses, up steep flights of steps. All of them had become dependent upon vehicular access via the laneway. There was a strong case for the proposition that the laneway was “reasonably necessary” for their effective use of their lands.

83. The third and fourth factors were less clearly established in the abstract. If one were to consider whether all reasonable attempts had been made to obtain the easement at the date of the application to the court, the answer might well be no. That was because no attempts had been made prior to the letter from the appellant giving notice of her intention to fence off the three foot strip of her land forming part of the laneway. On the other hand, if as seems the better reading of s 88K, the assessment of “all reasonable attempts” is to be made at the time the court is considering the application, then it would be necessary to have regard to offers which had been made after the proceedings commenced. An assessment of the reasonableness of any offers would need to take into account the requirement that the appellant be adequately compensated for any loss or other disadvantage arising from the imposition of the easement.

84. Finally, it is necessary to note the provision in s 88K(5) that, subject to any order of the court to the contrary, the plaintiffs were required to pay the costs of the proceeding. This provision reflects the presumption that the applicants for an easement lack any lawful entitlement to use the land in the way proposed absent the imposition of an easement. They must establish the various elements set out above to the satisfaction of the court, in order to obtain the easement. The imposition of an easement constitutes a derogation from the otherwise unqualified title of the owner. The section does not in terms envisage any obligation on a land owner to concede an entitlement to a proposed easement. In fact, the section envisages that reasonable attempts to obtain the easement have been rejected: s 88K(2)(c). Implicitly, the owner of the land is entitled to reject reasonable offers, require the court to determine the issues, and recover her costs in any event.

85. For reasons more fully explained below, the judge’s remarks as to the unreasonable behaviour of the applicant appear to have reflected a standard of reasonable behaviour which did not derive from the statutory scheme. To that extent, they revealed legal error implicit in the approach adopted by the judge; but that is a different matter from pre-judgment or partiality.

86. Similarly, while the judge was properly concerned to contain costs, his suggestion that he did not need to hear from the engineers, a position contradicted by both parties and by what in due course happened, demonstrated a failure to grasp at least one important issue in the case. Although in a colloquial sense that might be referred to as an unfortunate “pre-judgment”, it is not an error of the kind which vitiated the proceedings. Rather, it was a misunderstanding of the issues which was in fact partly corrected in the course of the proceedings.

46. Primary judgment at [31].

151. The judge also stated that the proposed easement would “do no more than formalise a long-standing state of affairs” and would “result in no practical change to the defendant’s amenity or enjoyment of her land.” [47] These assumptions must be subject to reassessment once it has been determined what engineering works should be carried out for the purpose of the proposed easement.

     47.    Primary judgment at [32] and [33].

152. Finally, the judge rejected claims based on the loss of amenity resulting from use of the laneway by the plaintiffs’ vehicles. He did so on the basis that “[t]hese factors are not new”. [48] However, in the absence of a determination as to the conditions of the proposed easement, it is not possible to make a final assessment of the compensation payable.

Costs

48. Primary judgment at [33], set out at [144] above.

(a)   reasoning of trial judge

153. The trial judge ordered that Ms Studholme pay the plaintiffs’ costs of the proceedings, to be assessed on an indemnity basis from 15 October 2018.

154. The costs judgment, delivered on 3 October 2019, correctly set out the approach to be adopted in determining issues of costs generally, [49] noting that s 88K(5) provides that the landowner’s costs are to be paid by the applicants for the easement, subject to any order of the court to the contrary. The judge considered the circumstances in which it might be appropriate to depart from the general provision in the statute. He referred to the observations in this Court in Shi v ABI-K Pty Ltd [50] in dealing with a proposal to otherwise order on the basis that the landowner had refused an offer of compensation which was greater than that awarded, “by analogy” with principles relevant to a Calderbank letter. This Court held:

“[98]   The analogy proposed by counsel should not have been accepted. This proceeding was not a claim for damages, or any analogous form of compensation: it was a claim for an interest in property, for which appropriate compensation was required to be paid. The ordinary rule, that the applicant pay the costs of any proceeding, reflects the fact that an applicant for such an order has no right to the grant of an easement over the property of another. Further, the rule that the applicant pay the costs relates to proceedings which could only be brought after all reasonable attempts had been made (presumably by seeking agreement) but have been unsuccessful. The statutory scheme is not consistent with the proposition that an applicant can obtain a right to costs by offering more than the compensation ultimately ordered to be paid as a condition of the easement. The property owner is entitled to refuse to consent to the easement, thereby requiring the applicant to satisfy a court as to the various preconditions, including questions of the public interest, and that the grant of the easement is reasonably necessary in the sense provided by the section. Unless it has done more than reject reasonable offers of compensation, the property owner should not be put at risk of an adverse costs order in those circumstances.”

49.    Costs judgment at [3(a)-(e)]

50. (2014) 87 NSWLR 568; [2014] NSWCA 293 at [96]-[98].

155. The judge also set out passages from compulsory acquisition cases, apparently accepting the submissions for the plaintiffs that these passages applied by way of analogy with respect to proceedings under s 88K. In particular, the judge set out the following passage from the reasons of Leeming JA in Tempe Recreation Reserve Trust v Sydney Water Corporation: [51]

“[103]   There is a difficulty in applying offers of compromise to compensation proceedings in Class 3 of the jurisdiction of the Land and Environment Court. The ordinary rule that costs follow the event, which underlies the making and acceptance of offers of compromise in most proceedings, does not apply. Instead, an applicant will have been dispossessed of an interest in land, and ordinarily, if he, she or it acts reasonably, is entitled to a favourable costs order. Because the starting point is different, it is necessary to consider whether a different approach ought to be taken to effectuate the purpose of an offer of compromise. For it would distort the ordinary operation of offers of compromise to permit the acquiring authority to make a low offer of compromise and cause the applicant to have to run the risk of a large adverse costs order, especially where as here there was essentially a binary issue as to construction.

[104]   In my view, the appropriate way to give force to the evident purpose of an offer of compromise, in a jurisdiction where the dispossessed plaintiff who litigates reasonably is ordinarily entitled to costs, is in the present case for the Trust to obtain its costs of the proceedings up to and including 13 February 2013, but that there be no order thereafter, with the intention that the parties bear their own costs.”

51. [2014] NSWCA 437.

156. The judge then relied on the following passages from Dillon v Gosford City Council: [52]

“[70]   In other respects, however, the appellants' propositions may be accepted. They support the proposition that a claimant for compensation in respect of a compulsory acquisition should usually be entitled to recover the costs of the proceedings, having acted reasonably in pursuing the proceedings and not having conducted them in a manner which gives rise to unnecessary delay or expense.

[71]   That approach is also consistent with the absence of any general presumption that costs should follow the event: the owner who has been compulsorily dispossessed is entitled to take reasonable steps to seek the judgment of the Court in respect of the adequacy of any compensation offered.

[72]   Whether steps taken in maintaining proceedings are reasonable will depend upon the circumstances of the particular case. These may include a comparison between the positions adopted by the parties at the commencement of proceedings and the final outcome. To the extent that a claimant obtains less than the valuation provided by the Valuer-General, the claimant has been unsuccessful in the litigation. That will be a factor to be taken into account, but the weight given to that factor may depend upon the extent of the failure. The Court may also take into account the time and expense incurred in relation to specific items. Beyond such general statements, it is unhelpful to go, lest the very generality of the discretion be thought to be fettered in some way. In short, the purpose of an award of costs must be taken into account, namely to compensate the party for expenditure incurred in the course of litigation; the nature of the litigation and the reasonableness of the conduct of the litigation are central considerations.”

52. [2011] NSWCA 328.

157. The trial judge appears to have derived two broad principles from these authorities. First, the dispossessed owner “who litigates reasonably is ordinarily entitled to costs”, terminology derived from Tempe at [104]. Secondly, whilst failure to accept a reasonable offer which was more beneficial than the outcome of the proceedings will not necessarily justify an adverse costs order against the landowner, it may provide evidence of litigating unreasonably. As will be explained further below, these propositions cannot be accepted without qualification.

158. The trial judge made findings that the plaintiff acted unreasonably at all stages. The findings may be summarised in the following propositions:

1. sending the letter of 4 May 2017 threatening to fence off part of the laneway in five days’ time, and taking steps to implement the threat;

2. failing to engage with attempts by the plaintiffs to negotiate an outcome prior to the commencement of the litigation and before costs had been incurred;

3. maintaining opposition to the imposition of an easement up until 25 October 2018; and

4. refusing reasonable offers of settlement, including a Calderbank offer made in October 2019 shortly prior to the trial.

159. The judge set out and considered each of the offers and the counter offer made on behalf of Ms Studholme. His factual findings were made in strong terms in the following passages:

“[27]   I am satisfied that the defendant has done more than reject reasonable offers of compensation and that she has not litigated reasonably. The plaintiffs’ offers in May, June and July 2017 (before significant expenditure had been incurred) and in October 2018, were reasonable. The offer of $300,000 in July 2017 was exceedingly generous. The other three offers were soundly based and rational. The final offer reflected the precise amount ($76,500) that the parties’ valuers had agreed for the freehold value of the land constituted by the area of the proposed easement.

[28]   All of the plaintiffs’ offers were a genuine attempt to resolve the proceedings and address the concerns of the defendant. I am afraid that the defendant’s responses, and the letters from her former solicitor, were not. …. She was, among other things, opportunistic and unreasonable, apparently believing – no doubt on advice from her former solicitor – that she had no responsibility for the plaintiffs’ costs and would ultimately receive her own costs from them. The situation was exacerbated, and the costs substantially increased, because the defendant and her former solicitor conducted the litigation and the negotiations as if they were oblivious to the reality of the long history of use of the laneway and the demonstrable reasonable necessity of access for the plaintiffs, or most of them.

…

[30] The defendant’s conduct in generating the dispute that led to the litigation, and her conduct of the litigation, deserves to be criticised. Reasonable parties, well advised, would never have come to this. The defendant has done far more than reject reasonable offers of compensation. She has not litigated reasonably. That is why I concluded that this is an appropriate case for making an ‘order contrary’ within the meaning of Section 88K(5).

[31]   In my view, the unique facts of this case justify a departure from the usual presumption in these cases. The defendant should be deprived of her prima facie entitlement to have her costs paid by the plaintiffs. She should also, in the circumstances of this case, pay the plaintiffs costs. It was always necessary that there be a court order to create the easement, but given the long history and the reasonableness of the plaintiffs’ position, contentious litigation should not have been necessary.

[32]   I have also concluded that the plaintiffs should have the benefit of an indemnity costs order from 15 October 2018. The plaintiffs’ final offer of compromise conformed with the requirements of Uniform Civil Procedure Rules 2005 Pt 20 Rule 20.26. The failure to accept the offer entitles the plaintiffs to indemnity costs under UCPR Pt 42 Rule 42.14 unless the Court orders otherwise.

…

[34]   Finally, I should conclude by stating that a decision on costs is a discretionary decision. It depends to a large extent on the individual judge’s findings of fact, his subjective assessment of the conduct of the parties and the evidence of the witnesses. In this case, the plaintiffs are entire[ly] blameless. They have been put to enormous inconvenience and expense when it should never have come to this. And the defendant precipitated the litigation in the first place by behaving in a peremptory and unreasonable manner. Given the long history of use of the laneway by the plaintiffs and their predecessors in title, and her own architect’s assurances to the council, the defendant’s behaviour in May 2017 was neither reasonable nor rational – unless she was merely attempting to engineer the situation to her own advantage. Her behaviour and her responses to the various subsequent offers from the plaintiffs suggest that she erroneously believed, or was advised, that she would receive her costs from the plaintiffs no matter how badly she behaved.”

(b)   grounds of challenge

160. The appellant challenged these factual findings on a number of bases. She said that the principles derived by the judge from cases were either wrongly stated or wrongly applied.

161. Some of the findings of fact made by the judge were (i) imprecise as to the conduct in question, (ii) unavailable, in the sense of not being open on the evidence, or (iii) ignored countervailing considerations. There was merit in the appellant’s criticisms, but they failed to grapple with the possibility that the judge was right in particular respects in his assessment and that if, for example, some aspects of the appellant’s conduct were unreasonable, then a more nuanced approach should be adopted to the question of costs. It is appropriate to commence with the legal principles.

(i)   applicable legal principles

162. While the circumstances of a compulsory acquisition bear some similarity to the imposition of an easement, the similarity is superficial. A compulsory acquisition is undertaken by the executive arm of government for a public purpose; the imposition of an easement is undertaken by a court, usually in resolving practical difficulties of access to private land as between land owners. Secondly, with a compulsory acquisition it is the landowner who initiates the litigation and seeks to justify a higher award of compensation than that offered. A s 88K application is initiated by those claiming the benefit of an easement. Thirdly, the elements of the litigation are quite different. Thus, with respect to compulsory acquisition, the only relevant issue before the Land and Environment Court in its class 3 jurisdiction is the assessment of compensation on just terms. The issues to be addressed in applying s 88K of the Conveyancing Act are more varied and include matters going to the reasonable necessity for the imposition of the easement, being a matter which has no analogy in the valuation jurisdiction of the Land and Environment Court.

163. Fourthly, the legal regimes applicable to the allocation of costs in each case are not identical. The relevant rules applicable in both Dillon and Tempe turned on the unfettered discretion to award costs under s 98 of the Civil Procedure Act. That principle is qualified by the rules, and particularly UCPR r 42.1 which provides that generally costs follow the event. However, r 42.1 did not apply with respect to class 3 proceedings in the Land and Environment Court. [53] Accordingly, as explained in Dillon at [60], “the discretion remains unfettered, in the sense that there is no presumption that costs should follow the event.” As further recognised in Dillon, by reference to a number of cases involving compulsory acquisition, the unfettered discretion is generally exercised in a particular way, namely that “a claimant for compensation in respect of a compulsory acquisition should usually be entitled to recover the costs of the proceedings, having acted reasonably in pursuing the proceedings and not having conducted them in a manner which gives rise to unnecessary delay or expense.” [54]

     53. UCPR, Sch 1, Land and Environment Court, Excluded provisions of rules.

     54. Dillon at [70].

164. The guidance given by that principle provides limited assistance in considering liability for the costs of an application under s 88K of the Conveyancing Act. Further, the relationship between such court created guidance for the exercise of the discretion and the statutory rule with respect to offers of compromise also involves different considerations from those arising where there is a statutory rule favouring one party. (Dillon involved no offers of compromise, but Tempe did.)

165. There are, as explained in the passage from Shi set out above, two aspects of s 88K which must govern the allocation of costs in proceedings under that section. First, there is the general rule that the costs of the land owner will be payable by the applicant for the easement: s 88K(5). Secondly, there is the requirement that all reasonable attempts have been made by the applicant to obtain the easement, which attempts have been unsuccessful, the court’s satisfaction as to which is a precondition to an order imposing an easement: s 88K(2)(c). These provisions led the Court in Shiv ABI-K to conclude that “[t]he statutory scheme is not consistent with the proposition that an applicant can obtain a right to costs by offering more than the compensation ultimately ordered to be paid as a condition of the easement.” [55] The conclusion was worded in that way because the basis on which the land owner was required to pay the applicant’s costs was that compensation had been offered in amounts which exceeded the amount determined by the court. It does not follow that the reasoning is restricted to offers of compensation; rather, a reasonable attempt to obtain an easement will generally have to address all of the requirements identified in subs (1)-(4) of s 88K. The significance of an offer will need to be assessed on that basis.

     55. Shi v ABI-K at [98].

(ii)   unreasonable conduct

166. An appeal court will generally be reticent in reviewing the findings of a trial judge that the conduct of one party has been unreasonable. Not only is this an evaluative judgment about which minds may readily differ, but it is a judgment based upon the experience of running the trial which the appeal court lacks. Nor, as is often said, are such impressionistic matters easily conveyed in written reasons. Nevertheless, the broad basis of such a finding should be identified in the reasons and may be testable against the objective circumstances.

167. As noted above, some of the findings made were imprecise as to the conduct in question. In part, the imprecision resulted from the use of hyperbole and colourful language. Apart from the assertion that she had rejected reasonable offers of compensation, which will be addressed below, the judge stated that she had done more in that “she has not litigated reasonably.” Yet the only factor relied upon beyond the rejection of the offers appears to have been the abrupt manner in which the letter was sent on 4 May 2017, which gave rise to the litigation. It is convenient to commence with the latter criticism.

168. The finding, at [30], that Ms Studholme’s conduct “in generating the dispute that led to the litigation ... deserves to be criticised” should be accepted. The sending of the letter of 4 May 2017 with the threat effectively to close the laneway to vehicular traffic on five days’ notice, without any warning or prior discussion, was unreasonable conduct. It led to the commencement of the proceedings and the application for an interlocutory injunction. Orders were made by consent halting the construction of the fence pending resolution of the proceedings under s 88K on 16 May 2017. Ms Studholme was not represented at that time and appears to have instructed solicitors in the week between 19 May and 25 May 2017.

169. The application for interlocutory relief was incidental to the application for an easement under s 88K and not a necessary part of the s 88K proceedings. Had Ms Studholme acted reasonably at that stage, the interlocutory application would not have been necessary. It is appropriate that she pay the plaintiffs’ legal costs incurred between 4 May and 17 May 2017.

170. The rest of the matter concerned the imposition of an easement and the terms on which it was to be imposed. Although the judge formed the view that an order imposing the easement was “inevitable” that was an overstatement if it covered all aspects of the application. Because there was a hearing in relation to disputed issues concerning drainage and costs, it is clear that the judge did not intend such an broad finding. In substance, it must be assumed that three factors were seen as beyond reasonable resistance, namely (i) that the easement was reasonably necessary for the effective use of the plaintiffs’ land, (ii) that their use of their lands was not inconsistent with the public interest, and (iii) that all reasonable attempts had been made by them to obtain the easement, unsuccessfully.

166. Satisfaction of the court as to these matters was a precondition which the plaintiffs bore the burden of establishing. How they went about it was a matter for them. If they incurred substantial costs in obtaining reports from a range of experts, that was presumably because they did not see the outcome on those issues as inevitably favourable to them. If they misjudged what was required, that was not a reason to require Ms Studholme to pay their unnecessarily incurred costs. She had no obligation to consent to the imposition of an easement.

167. To the extent that the judge considered that Ms Studholme was responsible for the plaintiffs’ costs of establishing that the imposition of the easement was reasonably necessary, such costs ceased to be incurred as at 25 October 2018, when the issue was conceded. That event should not be left unexamined. At the hearing in relation to costs on 26 September 2019 counsel for Ms Studholme sought to read an affidavit setting out what had been said by the judge in chambers to counsel for each party on 19 October 2018. The evidence was tendered in part in response to the statement in the substantive judgment in which the judge had expressed the view, at [43], that “the defendant’s stance” in relation to the abandoned issues “was never justified.” The judge continued:

“It was irresponsible of her to maintain her position in relation to those issues for over fifteen months until she abandoned them on 25 October 2018. She kept alive her position with knowledge that the plaintiffs were incurring considerable expense in responding to it. Her abandonment was not brought about by fresh evidence from the plaintiffs. It occurred following an informal directions hearing at which I queried why those matters were being put in issue.”

173. At the hearing with respect to costs, the judge interrupted counsel for Ms Studholme to say, “but my judgment does not say explicitly that there was a necessary connection between the abandonment and the informal directions hearing, although it may seem to imply that because of the syntax. … I will make it quite clear in my judgment on costs that I am not founding my decision on any connection whatsoever”. The affidavit setting out the discussion in chambers was rejected. [56] Despite that ruling, the judge admitted Ms Studholme’s affidavit of 29 January 2019 which referred to the meeting in chambers and stated:

“As a result of what was conveyed to me about what was said at that meeting, I believed that his Honour would grant an easement to the plaintiffs and if I did not consent then there was a real risk that I would suffer an adverse costs order against me.”

56.    Tcpt, 26/09/19, p 231(36)-(46).

174. It is possible that such views were not expressed by the trial judge in chambers prior to the hearing of the application, but, given the clarity with which the judge expressed on more than one occasion in his reasons his criticism of Ms Studholme for failing to abandon her defence at an earlier point in time, the only plausible inference is that he did indeed convey to Ms Studholme’s senior counsel what appears to have been conveyed to her.

175. This situation is troubling. As the owner of the proposed servient tenement, Ms Studholme was not obliged to accept the imposition of an easement; indeed, she was entitled to reject reasonable offers without necessarily exposing herself to costs of the proceedings if they went to trial. It was no part of case management for the judge to threaten that she might face an adverse costs order if she continued to resist the orders sought by the plaintiffs. The fact that such a statement was made in the privacy of chambers where the discussions were not recorded and that evidence as to what was said was rejected as irrelevant to the costs hearing, does not remove the unease created by the statement. As noted above, active case management is not to be discouraged, but the judge’s position as the ultimate arbiter of the dispute must not be compromised by expressing premature views combined with statements as to the possibility of adverse costs orders if a party does not accept such views.

176. Merely putting the plaintiffs to proof of the various elements contained in s 88K could not, of itself, provide any basis for an adverse costs order.

177. Before turning to the issues which were not conceded, it is convenient to note the aspects of the findings which were not reasonably open to the judge, and contraindications which were ignored.

178. One particular criticism was not open. At [28], the judge said that Ms Studholme was “opportunistic and unreasonable, apparently believing – no doubt on advice from her former solicitor – that she had no responsibility for the plaintiffs’ costs and would ultimately receive her own costs from them.” There were three propositions contained in that finding, none of which had been put to Ms Studholme in cross-examination. The findings should not have been made, let alone in pejorative language.

179. A significant example of a finding which ignored contraindications was the statement at [34] that “the plaintiffs are entire[ly] blameless.” That statement ignored the undisputed fact that they (or some of them) laid a concrete roadway over part of Ms Studholme’s land without consultation or consent. So far as the evidence went, it was an extraordinarily substantial structure involving an increase of half a metre in the height of her land against her northern wall. It was that conduct which was thought to have caused the rising damp in her house. Whether or not it had that effect was a central issue in the proceedings. The trial judge must have accepted the engineering evidence that it did have such an effect, because he ordered that the plaintiffs carry out drainage work against her wall. Accordingly, to describe the plaintiffs as entirely “blameless” was unjustified.

180. It is convenient to turn next to the rejection of the plaintiffs’ offers, dealing separately with the two issues of the engineering works and assessment of compensation. With respect to the former, there is some irony in the combination of the reluctance of the judge to hear any evidence from the engineers and Ms Studholme’s position that the engineers for each party had reached an agreement as to what was required and she proposed that the court adopt that agreement. If the judge did not need to hear from the experts, presumably at that stage he intended to accept their joint recommendation. The judge’s decision not to accept the joint position of the engineers was open to him, though perhaps primarily because there had been further analysis of the basis of the joint recommendation in the course of the oral testimony. Be that as it may, the finding that Ms Studholme’s position in that regard was unreasonable is difficult to understand. It cannot have been unreasonable to pursue at trial the joint recommendation.

181. The second substantive issue between the parties concerned the amount of the compensation payable to Ms Studholme. Again, there was a joint report of the respective parties’ experts. On the preferred “piecemeal” approach, Ms Studholme’s expert reached a figure of $295,750; the plaintiffs’ expert reached a figure of $108,250. On the “before and after” approach, Ms Studholme’s valuer assessed the diminution in value as $237,500. Understandably, Ms Studholme contended for the higher valuation proposed by her valuer, Mr Ecclestone. However, on the basis that the lower valuation of Mr Lunney for the plaintiffs was $108,250, she contended on appeal that it was reasonable for her to expect that the judge would adopt a figure within that range.

182. Again, on the basis of the oral testimony it was undoubtedly open to the judge to adopt a figure below that range; for the reasons set out above, this Court would also adopt a figure below that range, though somewhat higher than that of the trial judge. However, there is no indication in the costs judgment as to why it was unreasonable for Ms Studholme to pursue a claim falling within the range accepted by the expert valuers.

183. The judge’s characterisation of the plaintiffs’ offers as genuine attempts to resolve the proceedings, being soundly based and rational, should be accepted. However, it did not follow that rejection of those offers was unreasonable. After the initial interlocutory proceeding, there was no basis to find that Ms Studholme’s behaviour founded an order displacing the application of s 88K(5).

184. The offer which formed the basis of the order to pay indemnity costs was that made by the plaintiffs on 14 October 2018. That offer proposed compensation in the sum of $76,500, an amount significantly below the lower amount proposed by the plaintiffs’ own expert in the joint valuation report. That fact did not mean that the offer was unreasonable; however, it does mean that Ms Studholme’s rejection of the offer was also not unreasonable.

185. The second element of the offer of 14 October 2018 involved removing the existing concrete slab so that it did not abut the wall of the adjacent building. However, that offer fell far short of the proposed solution in the joint engineers report. It failed to allow any amelioration of the drainage problem which resulted from the laneway having been supposedly constructed to a height of some half metre above the floor level of the appellant’s home. Again, the offer was not unreasonable, but neither was the appellant’s rejection of it. The counter offer which sought rectification of the laneway in accordance with option 1 contained in the joint report of the engineers could not be described as unreasonable.

186. It remains to consider how an offer of compromise, whether in accordance with UCPR r 20.26, or one effective as a Calderbank offer, can operate with respect to a proceeding under s 88K of the Conveyancing Act. Broadly speaking, offers of compromise under the UCPR and the general law operate within the context of a rule that provides that costs “follow the event”, in the sense that the successful party will recover its costs from the unsuccessful party. An offer of compromise either leads the court not to apply the general rule under r 42.1, or it resets the parameters of success. [57] Thus, a party which obtains a judgment less beneficial than the offer becomes the unsuccessful party. The costs provisions in the UCPR applicable to offers of compromise which have not been accepted reflect that approach. [58] However, such an approach can have no direct application where the primary rule is that one party must pay the other party’s costs regardless of the outcome, as provided by s 88K(5).

     57. Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85 at [13]; Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [7].

     58. UCPR, r 42.14.

187. Unless the statutory provision in s 88K(5) overrides the rules relating to offers of compromise, the power of the court to order otherwise under s 88K(5) must be exercised in accordance with the provisions of UCPR r 42.14. The parties assumed that both UCPR r 42.14 and the Calderbank principles applied to offers made in proceedings under s 88K. That is a large assumption; it is not possible to think that either can operate without qualification. Where the offeror betters a non-statutory offer, Calderbank requires the court to decide if the rejection of the offer was unreasonable. As explained above, that is not the approach permitted by s 88K(5). Where the offeror betters an offer complying with r 20.26, a costs order in favour of the offeror will follow unless the court is affirmatively satisfied some other order should be made. The better view is that a rejected offer is a relevant factor to be considered in allocating costs contrary to s 88K(5), but carries no particular weight.

188. It is not possible to prescribe the circumstances in which an owner of land will be deprived of his or her costs in resisting an application under s 88K of the Conveyancing Act. Further, departure from the general rule does not entail a particular result. For example, if the court were satisfied that the land owner had acted so unreasonably so as to warrant a departure from s 88K(5), there would be a number of options open. The court could (i) deprive the applicant of some part of his or her costs; (ii) deprive the applicant of all of his or her costs so that neither party would pay costs; (iii) order that the owner pay some part of the applicant’s costs; (iv) order that the owner pay all of the applicant’s costs to be assessed on the ordinary basis, or (v) order that the owner pay some or all of the applicant’s costs to be assessed on an indemnity basis. These options are in ascending order of departure from the statutory position and require increasing degrees of unreasonableness on the part of the owner.

Conclusions with respect to costs

189. The order made by the trial judge cannot stand, except to the extent that Ms Studholme should pay the plaintiffs’ costs incurred between 4 May and 17 May 2017.

190. Thereafter, the objective circumstances do not demonstrate that Ms Studholme acted unreasonably. Nor, despite a suggestion in the costs judgment, is there a basis to conclude that her solicitors gave her inappropriate advice.

191. To the extent that the trial judge relied upon her imputed subjective motivations, those findings should be rejected. There was objectively nothing to suggest she was abusing the processes of the court, nor was such a suggestion put to her.

192. The abandonment of her resistance to the imposition of an easement meant that the evidence of the experts on those matters was not tested, the subject of submissions, or of assessment by the trial judge. Even if the evidence provided by the plaintiffs were to be preferred on those issues, she was not obliged to concede. If the judge indicated that she was likely to face an adverse costs order if she did not concede, such a suggestion would have been improper.

193. It follows that, subject to Ms Studholme paying the plaintiffs’ costs incurred between 4 May and 17 May 2017, the plaintiffs must pay her costs of the trial.

Conclusions

194. The most puzzling aspect of this case is the nature of the work undertaken by the plaintiffs (or some of them) in resurfacing the laneway in 2003/2004. None gave evidence of this, because the judge said he did not need to hear from them. Their affidavits were not read. The engineers said that the concrete surface of the laneway was half a metre above the level of the floor in the rooms adjoining the laneway. That, they believed, was not the case when her development plans were prepared in 2001/2002. As noted above, the basis for that conclusion was quite uncertain. The plaintiffs did not, it seems, seek approval for the concreting work, so there were no plans for it in evidence. (Council approval may not have been required; the town planners did not address that issue.)

195. The engineers’ bland statement of their opinion in this regard was puzzling for at least four reasons. First, the laneway is said to have a gradient of 1:30. If Ms Studholme’s floor was level and not stepped, it cannot have been at the same level of the laneway for the depth of the house. Secondly, it is implausible that the plaintiffs laid concrete half a metre thick. No one investigated this suggestion. Thirdly, there is a letterbox in the wall on the northern side of the laneway which, so far as can be told from a photograph, appears to be at a normal height. Fourthly, it is clear that the laneway was not raised at the bottom end where it joins the street.

196. One might speculate that the practical way to test the theory that the increased height of the laneway led to the rising damp is to cut away the concrete and test its depth. The importance of some determination of this issue for the resolution of the case is self-evident. Until the cause of the damp can be determined, the extent of the drainage to be paid for by the plaintiffs as a condition of the grant of the easement cannot be determined. It therefore follows that at a further hearing in the Equity Division, further evidence may need to be obtained.

197. Order 4 made by the trial judge required that a registrable instrument be executed by Ms Studholme and delivered to the solicitor for the plaintiffs within 28 days of the date of the orders, which were made on 12 November 2019. It is not known whether this step has been taken, but given the need for a further timetable, the order should be set aside. Order 5 is dependent on non-compliance with order 4. Order 6 is the primary focus of the proposed remitter.

198. Order 1, granting the easement, should be varied to identify the nature of the easement, so that it provides that the easement be for a right of carriage way for the purposes of Sch 8, Pt 1 of the Conveyancing Act 1919, and to attach the relevant plan. However, no order can be made granting the easement until the necessary terms and conditions have been determined, as explained in Moorebank and Gordon v Lever, discussed above. Accordingly, despite Ms Studholme’s acceptance that an easement should be imposed on her land, an order cannot be made to that effect until the terms and conditions of the easement have been determined. The subsequent substantive orders, 2-10, are interdependent and must also be set aside.

199. The Court should make the following orders:

1. Allow the appeal and set aside orders 1-10 made in the Equity Division on 30 January 2019 and order 1 made on 3 October 2019.

2. Order that the defendant pay the plaintiffs’ costs in the Equity Division incurred between 4 May and 17 May 2017.

3. Subject to order (2), order that the plaintiffs pay the defendant’s costs incurred in the Equity Division.

4. Remit the proceeding to the Equity Division for the purpose of determining the appropriate terms and conditions of the grant of an easement for a right of carriage way for the purposes of Sch 8, Pt 1 of the Conveyancing Act 1919 in favour of the plaintiffs.

5. Order that the respondents pay the appellant’s costs in this Court.

6. Grant the respondents a certificate under the Suitors’ Fund Act 1951 (NSW).

200. GLEESON JA: I agree with Basten JA.

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Studholme v Rawson Plan (772 KB, pdf)

Endnotes

Decision last updated: 24 April 2020