Land and Environment Court of New South Wales CITATION : Lagzdins v Jones and Anor [2002] NSWLEC 104 APPLICANT: Lagzdins PARTIES : RESPONDENTS: Jones and Anor. FILE NUMBER(S) : 30153 of 2000 CORAM: Bignold J KEY ISSUES: Costs :- costs in class 3 proceedings-case settled but for question of costs-relevant principles. LEGISLATION CITED: Encroachment of Buildings Act 1922 CASES CITED: Coombwood Pty Ltd v Baulkham Hills Shire Council (1995) 86 LGERA 319; Re Minister for Immigration and Ethnic Affairs Ex parte Lai Qin (1997) 186 CLR 622 DATES OF HEARING: 1 May, 2001, 17 June 2002 DATE OF JUDGMENT: 06/28/2002 APPLICANT: Mr A Fernon, Barrister SOLICITORS Paul Crane LEGAL REPRESENTATIVES: RESPONDENT: Mr H Stowe, Barrister SOLICITORS Fishburn Watson and O'Brien JUDGMENT: IN THE LAND AND Matter No. 30153 of 2000 ENVIRONMENT COURT OF Coram: Bignold J. NEW SOUTH WALES 28 June 2002 MARA LAGZDINS Applicant v GEOFFREY JONES AND MICHIKO YOSHIDA Respondents JUDGMENT Bignold J: A. INTRODUCTION 1. The parties have settled these class 3 proceedings (involving a claim to relief under the Encroachment of Buildings Act 1922 (the Act)) except for the question of costs. 2. The proceedings were commenced 28 September 2000 after the Applicant had obtained an ex parte interlocutory injunction from Talbot J on 27 September 2000 restraining the Respondents "from doing any act that changes the physical condition" of a specified portion of land owned by the Respondents at Coffs Harbour "including any retaining walls and any vegetation thereon". 3. The relief claimed under the Act in the class 3 application was that an identified portion of the Respondents' land be "transferred" to the Applicant, who owns adjoining land. 4. On 3 October 2000, the Respondents were unsuccessful in moving for the discharge of the interlocutory injunction, which has continued in force. 5. On 18 December 2000, the Respondents filed a Notice of Motion seeking the summary dismissal of the class 3 application, upon the principal ground that the relief claimed under the Act exceeded the bounds of relief obtainable thereunder which depended upon the existence of an encroachment by a building on the subject land. 6. That Motion was argued before Sheahan J on 29 January 2001 when judgment was reserved. His Honour, on the interlocutory hearing, granted leave for the filing of an amended class 3 application in which the following relief was claimed: The Applicant seeks an order under section 3(2) of the Encroachment of Buildings Act 1922 that the triangular piece of land forming part of the land known as Lot 1 DP 8659386 and identified with the hath marking on the survey plan annexed, be transferred to her. Alternatively, the Applicant seeks an order that an easement be granted over the said land in favour of her land known as Lot 2 DP 8659386 requiring the physical integrity of the said land to be maintained, or creating an easement for support for the existing structure on the said land, or such other order as the court sees fit. 7. In his reserved judgment delivered on 15 March 2001, Sheahan J dismissed the Respondent's Notice of Motion and reserved the question of costs, "pending determination of the substantive proceedings". 8. In the meantime, the final hearing of the proceedings had been specially fixed for hearing at Bellingen for two days commencing on 30 April 2001. 9. On 27 April 2001 (ie the Friday immediately preceding the hearing dates commencing on Monday), the Respondents' Solicitors, by facsimile transmission, advised the Court's Registry "that this matter has settled, subject to the question of costs which issue we seek to have heard at a separate hearing in Sydney at a time to suit the Court". 10. On 1 May 2001, the parties presented their competing arguments on the disputed costs question upon the basis that the proceedings had in all other respects been settled. However, because the parties were not in the position to file the terms of settlement, judgment was reserved pending the filing of the terms of settlement. 11. Thereafter, the matter lay inexplicably dormant until, following a number of enquiries from the Court, the parties filed in Court on 17 June 2002, draft Consent Orders which had been signed by the parties' respective solicitors. A copy of the draft consent orders is annexed hereto and marked "A". 12. It is clear beyond argument that a number of the components of the terms of settlement cannot be translated into orders of this Court pursuant to the jurisdiction and power conferred upon the Court by s 3 of the Act, because such components clearly exceed the jurisdiction and powers so conferred. The right for the Respondents to remove the Norfolk Pine tree (Order 1) clearly exceeds the Court's jurisdiction (which cannot be extended by the consent of the parties: see Coombwood Pty Ltd v Baulkham Hills Shire Council (1995) 86 LGERA 319). 13. The creation of the cross-easements in respect of the existing sewer main (Order 3) is in the same position of exceeding the Court's jurisdiction. 14. In the circumstances, it would be appropriate for the Court to make consent orders in respect of draft orders 2, 4, 5, 6 and 7 upon the basis of the terms of settlement (including draft orders 1 and 3) reached between the parties, which terms could be noted in the Court's Orders. Order 2 provides the only substantive relief which is sustainable by reference to s 3 of the Act. 15. Upon the assumption that those consent orders are to be made, I am now in the position to adjudicate upon the disputed costs question. That the parties took some 14 months to finally settle the case after having informed the Court that the case "had settled", powerfully attests to the intrinsic difficulty which engaged the parties in the protracted settlement process. B. THE COMPETING COSTS CLAIMS 16. The parties advanced competing claims for orders for costs against one another. 17. The Applicant claiming success in the outcome of the litigation (reflected in the terms of settlement) claimed costs upon that basis. 18. She also claimed discretely costs in respect of the Respondents' unsuccessful Notice of Motion for the summary dismissal of the proceedings. 19. For their part, the Respondents claimed costs on the basis that the relief claimed under the Act was not attainable because it sought relief which exceeded the bounds of the relief that the Act provided for. They also claimed to be successful in the light of the outcome arrived at by the terms of settlement. 20. Finally, they claimed costs upon the basis that an applicant for relief under the Act was in essence seeking some indulgence from the Court and even if obtaining the relief claimed, should be ordered to pay the other party's costs if that party acted reasonably in resisting the claims, albeit ultimately unsuccessfully. C. ADJUDICATION ON THE DISPUTED COSTS CLAIMS 21. In my judgment, the appropriate principles for the required adjudication in the present case are those enunciated in the following passage from the judgment of McHugh J in Re Minister for Immigration and Ethnic Affairs Ex parte Lai Qin (1997) 186 CLR 622 at 624/625 which has often been cited and applied in decisions of this Court— "In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and a general rule the successful party is entitled to his or her costs (1) Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order (2) When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties (3). To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties had acted so unreasonably that the other party should obtain the costs of the action (4). In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd (5), the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent Council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans. Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission (6) where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases: (1) Latoudis v Casey (1990) 170 CLR 534. (2) Latoudis v Casey (1990) 170 CLR 534 at 543, 566-568 (3) Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201 (4) Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201 (5) [1971] QWN 13 (6) unreported; Federal Court of Australia; 10 February 1989 (7) See, eg, Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 22. In my judgment, it would be singularly inappropriate, particularly in the light of the outcome (achieved by the terms of settlement) for the Court to embark upon the trial of a hypothetical action between the parties. This means that I should chiefly consider the terms of settlement to determine whether one party could fairly be said to have been successful in the litigation. My consideration of the terms of settlement yields an equivocal appraisal on this score. Clearly the Applicant did not obtain a transfer of the land as sought in her originating process (as amended). However, the creation of the positive covenant in respect of the preservation and maintenance of the retaining wall structure is clearly to the Applicant's advantage and conversely to the Respondents' disadvantage. The creation of the positive covenant is the only relief that is accorded by the terms of settlement that is derivable from the Applicant's claim to relief under the Act. 23. However, in their terms of settlement, the parties have taken up the opportunity to settle between themselves other matters eg the creation of cross-easements in respect of the existing sewer main, which is to their mutual benefit, albeit not deriving from the Applicant's claim to relief under the Act. In the end, the terms of settlement do not, in themselves clearly pronounce a litigation victor or enable such a pronouncement to be fairly made. 24. For similar reasons, in view of the terms of settlement, I do not think the case is one where it could be said that the Respondents would almost certainly have succeeded if the matter had been litigated. 25. Their case that the relief claimed by the Applicant exceeded the bounds of relief available under the Act, was not accepted by Sheahan J in his judgment dismissing the Respondents' Motion for summary dismissal of the proceedings. He thought the question was best left to the trial judge. Since the parties have settled the case upon the basis of the terms of settlement there has been no trial and it is not appropriate that there now be a trial on the question, simply to resolve the disputed costs question. For myself, I have not been persuaded that the Respondents would have been bound to succeed if the matter had been litigated. If they were bound to succeed, why was the case settled upon the basis of the terms of settlement which do not vindicate one party over the other? 26. In my judgment, the usual approach when there is no trial on the merits that was acknowledged by McHugh J in Lai Qin should be applied in the present case, namely being satisfied that the parties acted reasonably in commencing and defending the proceedings until they were settled, it is appropriate that there be no order for costs in the proceedings. 27. This conclusion also applies to the interlocutory proceedings, including the Respondents' unsuccessful strike out Motion. It was a reasonable action taken by the Respondents in the proceedings even though they failed at that point to defeat the Applicant's claim. 28. Finally, the preponderance of authority in this Court (particularly that evinced by the more recent cases) is that the Court exercises its costs discretion in proceedings for relief under the Act in accordance with general litigation principles and not by reference to any special rule to the effect that the applicant for relief, even if successful, should be required to pay the whole costs of the proceedings, as if the applicant were obtaining some indulgence under the Act. D. CONCLUSIONS 29. For all of the foregoing reasons, it is appropriate that there be no costs order made in the proceedings and the parties should bear their own costs in the litigation which they themselves have ultimately settled. 30. Accordingly, I order that the parties 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.