Supreme Court New South Wales Medium Neutral Citation: Knox Farms Pty Limited v Upper Lachlan Shire Council [2023] NSWSC 1601 Hearing dates: On the papers Date of orders: 15 December 2023 Decision date: 15 December 2023 Jurisdiction: Equity - Real Property List Before: Peden J Decision: See [46] Catchwords: COSTS — Party/Party — Costs thrown away by reason of amendment of pleadings — Whether costs of whole proceedings to date of the amendment should be ordered COSTS — Party/Party — Where no hearing on the merits — Where claims against particular party discontinued — Whether effective discontinuance of claims against other parties — Whether capitulation on dismissed cross-claim and notice of motion Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) rr 41.19, 42.7 Cases Cited: IW & CA Price Constructions Pty Ltd v Australian Building Insurance Services Pty Ltd [2017] QSC 78 Nahata v Robertson (No 2) [2023] NSWSC 1297 Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681 Re Minister for Immigration & Ethnic Affairs (Cth); Ex Parte Lai Qin (1997) 186 CLR 622 Waterman v Gerling (Costs) [2005] NSWSC 1111 Category: Costs Parties: Knox Farms Pty Ltd (Plaintiff) Upper Lachlan Shire Council (First Defendant) Cameron John Willis (Second Defendant) Tania Renae Willis (Third Defendant) McCarthy Lawyers Pty Ltd (Fourth Defendant) Timothy McCarthy (Fifth Defendant) Dominic McCarthy (Sixth Defendant) Representation: Counsel: B Le Plastrier (Plaintiff) T Bagley (First Defendant) D Stewart (Second and Third Defendants) T Harris-Roxas (Fourth, Fifth and Sixth Defendants) Solicitors: HWL Ebsworth (Plaintiff) Pikes & Verekers Lawyers (First Defendant) Johnson & Sendall Lawyers (Second and Third Defendants) K&L Gates (Fourth, Fifth and Sixth Defendants) File Number(s): 2021/123548 Publication restriction: Nil JUDGMENT 1. This is a judgment on costs in relation to two issues. 2. By way of brief background, the substantive proceedings concern a Crown Road, which is used by the plaintiff (Knox Farms) to access its property in Crookwell, New South Wales. The second and third defendants, the Willises, have also used that road when accessing their property. 3. In 2018, Knox Farms entered into a deed with the Upper Lachlan Shire Council (Council), pursuant to which the parties anticipated that the Crown Road would be converted to a private road to then be owned by Knox Farms. In its original statement of claim filed 4 May 2021, Knox Farms sought to enforce that deed and compel the Council to transfer the road to it. 4. On 24 September 2021, Darke J ordered that the Willises be joined as defendants, because the conversion of the road would affect them and they sought to be heard. In October 2021, Knox Farms filed an amended statement of claim joining the Willises. 5. On 15 October 2021, the Willises filed and served a defence to the amended statement of claim and filed a cross-claim, in which they challenged Knox Farms and the Council's ability to convert the Crown Road as contemplated by Knox Farms on the basis of the proper construction of s 38F Roads Act 1993 (NSW). The Willises also sought final injunctive relief preventing Knox Farms obstructing the road. 6. On 25 August 2022, Knox Farms filed a Further Amended Statement of Claim adding a claim for professional negligence against the Council's former solicitors (Solicitors), the fourth to sixth defendants, and a claim that the Willises induced the Council to breach the deed. Knox Farms was ordered to pay the Council and Willises' costs thrown away by reason of the amendment. 7. On 17 February 2023, Knox Farms filed a Second Further Amended Statement of Claim, and was ordered to pay the Solicitors' costs thrown away by reason of the amendment. 8. On 31 March 2023, the matter was set down for final hearing from 9 - 13 October 2023. 9. On 1 September 2023, Knox Farms foreshadowed seeking leave to further amend its pleading and vacate the hearing dates. On 11 September 2023, the hearing dates were vacated. 10. As noted above, there are two costs issues to be determined in the context of the above. 11. First, costs must be determined in relation to the most recent leave granted to the Knox Farms to amend its claim. On 6 October 2023, Knox Farms filed a motion seeking leave to amend its statement of claim. On 20 October 2023 that leave was granted by consent. Costs were reserved. Knox Farms accepts it must pay the defendants' costs thrown away by reason of the amendment on the ordinary basis. The defendants seek orders that such costs include the whole costs of the proceedings to date and that they are paid forthwith. 12. Secondly, costs must be determined in relation to the Willises' cross-claim and notice of motion, both of which have been dismissed. Because the hearing of the Knox Farms' claim and the cross-claim were delayed, on 11 October 2023, the Willises filed a notice of motion seeking interim injunction preventing Knox Farms from preventing access along the road and also an order for Knox Farms to remove concrete blocks it had placed over the road. 13. As noted above, on 20 October 2023, leave was granted to Knox Farms to amend its pleading. One amendment was to abandon its claim against the Willises for allegedly inducing the Council to breach the deed. 14. On 27 November 2023, Knox Farms agreed to remove the concrete blocks, because the Council directed it to do so. It did so shortly thereafter. 15. On 1 December 2023, the Willises' motion and cross-claim were dismissed. No order as to costs between the Willises and the Council was made. The Willises seek their costs of the whole proceedings on an indemnity basis from Knox Farms, alleging that Knox Farms capitulated to their cross-claim and motion by removing the blocks. Third Amended Statement of Claim 1. In its third amended statement of claim (TASOC), Knox Farms makes claims against the Council and the Solicitors, and abandons its relief against the Willises. Council 1. The Council seeks its costs of Knox Farms' claim up to 26 October 2023, when the TASOC was filed. However, it accepts that Knox Farms should not be ordered to pay the Council's costs of the Willises' cross-claim. The Council seeks these costs payable forthwith. 2. Since the proceedings commenced, Knox Farms now appears to accept that it was impossible for the Council to perform that contract and convert the road as intended. 3. In its TASOC, Knox Farms now seeks damages against the Council and/or the Solicitors, for misleading and deceptive conduct in breach of the Australian Consumer Law. It also pleads estoppel, as it carried out roadworks in reliance on assumptions induced by the Council. 4. The Council submits that Knox Farms' TASOC effectively discontinues its original claims against the Council and bring new claims instead. It submits that Knox Farms should not be allowed to avoid the usual costs consequences of what in substance is a discontinuance. 5. I do not accept that there has been a discontinuance in the sense understood in Uniform Civil Procedure Rules 2005 (NSW) r 41.19. 6. The TASOC continues to rely upon the deed between Knox Farms and the Council. However, instead of claiming breaches of clauses of the deed, it is now pleaded that recitals and clauses of the deed amounted to representations by the Council, which were misleading or deceptive or gave rise to an estoppel. Further, works that Knox Farms carried out on the road, believing it would be transferred to it pursuant to the deed, are said to give rise to a quantum meruit claim. 7. The purpose of an order that Knox Farms pay the Council's costs thrown away by reason of the amendment is the usual order when an amendment is allowed. There is no reason to depart from that, and in particular, no reason why an order ought be made, as if Knox Farms had discontinued its claim against the Council. 8. The Council submits that it is the "true victor" in the proceedings as they have been run up until the filing of the TASOC, as Knox Farms has abandoned or failed on the claim it originally commenced and prosecuted, which the Council had to meet. It argues the situation is analogous to cases where the plaintiff abandoned its claim at an advanced stage of the proceedings, won on the remainder, and still had to pay costs. Examples were cited in Waterman v Gerling (Costs) [2005] NSWSC 1111 at [17] (Brereton J), and IW & CA Price Constructions Pty Ltd v Australian Building Insurance Services Pty Ltd [2017] QSC 78 (Lyons J). 9. While Knox Farms notified the Council of the amended pleadings about 5 weeks before the hearing dates, that was not so close to the hearing as the amendments in those cases cited. Again, I consider the usual order will provide adequate compensation to the Council. 10. To the extent that the Council submits that it has prepared evidence that will be wasted, I accept that the costs of such work ought be caught by the usual order, but only in relation to evidence that the Council has served, upon which it will not rely at the final hearing. What in fact has been "thrown away" or wasted can best be assessed at the end of the proceedings, which tells against a forthwith order. 11. Merely because the Council will be required to file further evidence to answer the TASOC is not a reason to order Knox Farms to pay all costs incurred in the past. 12. Previous orders made in favour of the Council when Knox Farms filed previous amended pleadings are taken to have dealt with any earlier costs thrown away. 13. The Council also seeks its costs forthwith as the proceedings have been on foot for 2.5 years and are unlikely to be completed for some months. 14. I do not consider a forthwith order is appropriate. Pursuant to UCPR r 42.7(2), interlocutory costs are ordinarily not payable until the conclusion of proceedings. Here, the amendment application was a separately identifiable matter; however, the application to amend was successful and the application was not unreasonable. While there has been some delay, there is no reason to believe the preparation for the hearing will not proceed in a timely way. Solicitors 1. The Solicitors seek their costs from 25 August 2022, when they were joined, to date, or alternatively the costs thrown away due to the amendment, to be agreed or assessed and payable forthwith. They also seek an order that Knox Farms bears its own costs from 4 May 2021 (commencement of proceedings) to 5 September 2023 (TASOC first served). 2. They submit that the original case against the Solicitors was based on the premise that it was legally permissible for the Council to close the Crown Road. They submit that at a very late stage, the substance of the case has fundamentally changed, as it is now premised on the Council never having had the power to close the Crown Road. They submit that this conduct of Knox Farms is unreasonable and warrants a different costs order. 3. I do not accept that characterisation. Instead, the claim against the Solicitors was always framed as a common law professional negligence claim based on a failure to advise. The particular form of negligent advice has now been amended. 4. There is no evidence from the Solicitors as to any costs thrown away in particular. I consider the usual costs order is appropriate. 5. I also do not consider a forthwith order is appropriate for the reasons relevant to the Council. Willis Motion and plaintiff's discontinuance against Willises 1. The Willises seek their costs of the proceedings on an indemnity basis. 2. In relation to the TASOC, they adopt the Council's submissions. 3. However, they are in a different position to the Council, because the TASOC has abandoned any relief against the Willises and the Willises' notice of motion and cross-claim have been dismissed. 4. The Willises further submit that Knox Farms' case was hopeless from the start due to the operation of s 38A Roads Act 1993 (NSW), but it persisted unreasonably in pursuing it and in refusing to remove obstructions it placed on a public road without legal basis: Nahata v Robertson (No 2) [2023] NSWSC 1297 at [10]-[12]. 5. The relief sought is now on the basis that the road closure was never permissible under law, which has been the Willis position since 2021. Thus, it is said that Knox Farms has effectively capitulated to them and that the Willises have had practical success. I consider that Knox Farms must pay the Willises the costs of defending the claim brought against them for inducing breach of contract, which has now been abandoned. The Willises are therefore in a different position to the Council, against whom Knox Farms still seeks relief. 6. However, the cross-claim and notice of motion are in a different category. In addition to the injunctive relief sought concerning the physical obstruction of the road, the Willises also sought other orders that Knox Farms and the Council be restrained from performing the deed and converting the road into a private road that would exclude them. 7. I do not accept Knox Farms "capitulated" in relation to either the cross-claim or the notice of motion. Knox Farms continues to deny that the Willises had the standing to seek an order requiring Knox Farms to remove the blocks from the Council's land. Once the Council, which Knox Farms accepts has standing, required Knox Farms to remove the blocks, it did so. The question of the Willises' standing has never been determined. I note that the cross-claim did not seek orders compelling the Council to take action in relation to the blocks, however the motion did. 8. It is open to the Court to make an order for costs against one party, despite there being no hearing on the merits, where that party has unreasonably pursued or defended the litigation: Re Minister for Immigration & Ethnic Affairs (Cth); Ex Parte Lai Qin (1997) 186 CLR 622 at 624 (McHugh J). However, such an order will only be made "where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon.": Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [8] per Basten JA; see also Payne JA at [33] (Meagher JA agreeing). 9. The question of the Willises' standing to seek orders concerning the Council's land has not been the subject of submissions or argument. It would not be appropriate for the Court to determine that question solely for the purposes of costs. 10. Just as the Willises and the Council have agreed that there ought to be no order as to costs between them concerning the cross-claim, I consider that is the appropriate order as between the Willises and Knox Farms. Orders 1. Based on the above, the appropriate orders are: 1. The plaintiff to pay the second and third defendants' costs of the plaintiff's claim. 2. The plaintiff to pay the first, fourth, fifth and sixth defendants' costs thrown away by reason of the Third Amended Statement of Claim, including any costs of the preparation of evidence, upon which the defendants no longer rely to support their defences. 3. In relation to the second and third defendants' notice of motion filed 11 October 2023 and cross-claim, there be no further order as to costs, and the second and third defendants and the plaintiff are to bear their own costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 December 2023