Land and Environment Court of New South Wales CITATION : Tenacity Investments v Ku-Ring-Gai Council and Ors (No 2) [2008] NSWLEC 171 APPLICANT: Tenacity Investments FIRST RESPONDENT: Ku-ring-gai Council SECOND RESPONDENTS: Russell and Angela Cooke THIRD RESPONDENTS: Vicki and Daniel Ming FOURTH RESPONDENT: Peter Dobrijevic FIFTH RESPONDENT: Yvonne Forsyth PARTIES : SIXTH RESPONDENTS: Ivan and Janet Lum SEVENTH RESPONDENTS: John and Virginia Hill EIGHTH RESPONDENTS: Christopher and Aini Wong NINTH RESPONDENTS: Patrick Lee and Liza Lam TENTH RESPONDENT: Marina Brun-Smits ELEVENTH RESPONDENTS: Gavin and Lynn Hucker TWELFTH RESPONDENTS: Steven and Gum You; Kwok and Sylvia Ng FILE NUMBER(S) : 30688 of 2006 CORAM: Pain J KEY ISSUES: Costs :- exercise of discretion whether to make costs order in accordance with s 40(8) Land and Environment Court Act 1979 - whether applicant for easement entitled to indemnity costs - whether respondents acted unreasonably in the litigation Civil Procedure Act 2005 Conveyancing Act 1919 Land and Environment Court Act 1979 s40 LEGISLATION CITED: Land Acquisition (Just Terms Compensation) Act 1991 Local Government Act 1993 Supreme Court Rules 1970 Uniform Civil Procedure Rules 2005 117 York Street Pty Ltd v Proprietors of Strata Plan 16123 (1998) 43 NSWLR 504 Antipas v Kutcher and Anor (2006) 144 LGERA 289 Bhagat v Royal & Sun Alliance Life Assurance Australia Ltd [2000] NSWSC 159 Cachia v Haynes (1991) 23 NSWLR 304 Cachia v Haynes (1994) 179 CLR 403 Calderbank v Calderbank [1975] 3 All ER 333 Evagelakos v Roads and Traffic Authority of New South Wales [2006] NSWLEC 514 Fitzpatrick v Keelty (No 2) [2008] FCA 742 Leichhardt Municipal Council v Green [2004] NSWCA 341 Maitland Hospital v Fisher (1992) 27 NSWLR 221 CASES CITED: Mitchell v Boutagy (2001) 118 LGERA 249 Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 Ng v Chong [2005] NSWSC 385 Niezabitowski and Anor v Roads and Traffic Authority of NSW (2006) 147 LGERA 417 Oshlack v Richmond River Council (1998) 193 CLR 72 Owners Strata Plan 13635 v Ryan [2006] NSWSC 342 Property Partnerships Pacific Pty Ltd v Owners of Strata Plan 58482 [2006] NSWLEC 709 Swann v Spiropoulos [2006] NSWSC 1016 Tenacity Investments Pty Ltd v Ku-ring-gai Council [2007] NSWLEC 246 Tenacity Investments v Ku-Ring-Gai Council [2007] NSWLEC 535 Tenacity Investments v Ku-Ring-Gai Council and Ors [2008] NSWLEC 27 Wengarin Pty Ltd v Byron Shire Council (1999) 9 BPR 16,985 TEXTS CITED: LexisNexis, Ritchie's Uniform Civil Procedure NSW (Service 20 – May 2007) DATES OF HEARING: 7 May 2008 Additional written submissions: 9 May 2008 DATE OF JUDGMENT: 22 August 2008 APPLICANT Mr J Webster SC SOLICITOR LEGAL REPRESENTATIVES: Sattler & Associates FOURTH RESPONDENT In person TENTH RESPONDENT Mr L Smits (Agent) JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES Pain J 22 August 2008 30688 of 2006 Tenacity Investments v Ku-Ring-Gai Council and Ors (No 2) JUDGMENT ON COSTS 1 Her Honour: In Tenacity Investments v Ku-Ring-Gai Council and Ors [2008] NSWLEC 27 I determined that the Applicant should be granted an easement under s 40 of the Land and Environment Court Act 1979 (the Court Act). The Applicant had filed an application under s 40 of the Court Act seeking an order that the Court grant the Applicant an easement to drain stormwater from land at 2-4 Everton Street, Pymble (the land) into Ku-Ring-Gai Council's (the First Respondent's) existing stormwater drain located in an existing easement across a number of properties. The conditional development consent granted by the Court (see chronology par 12) required drainage along the Council's stormwater drain either by agreement of the downstream owners to the discharge or the creation of a new easement along the existing Council drainage easement. The Second to Twelfth Respondents own land over which the Council's existing drainage easement lies. In my judgment, at [213], I deferred consideration of costs at the Applicant's request. 2 The Applicant seeks various costs orders including some on an indemnity basis from the Fourth and Tenth Respondents. These orders are opposed and the Fourth and Tenth Respondents seek their costs and/or disbursements. The Fourth Respondent has represented himself throughout these proceedings. The Tenth Respondent has been represented by her agent, Mr Smits, in the latter stages of the litigation but had legal representation early in the proceedings. All the other Respondents settled with the Applicant before the final hearing. 3 Although proceedings commenced before the Civil Procedure Act 2005 (the CP Act) applied to the Land and Environment Court, by virtue of Sch 6 cl 15 of the CP Act, the CP Act applies to this costs application. Section 98(1) of the CP Act provides that the award of costs is at the discretion of the Court and is subject to other Acts and rules of the Court. Section 40(8) of the Court Act continues to be applicable. It provided: The costs of the proceedings, in so far as they relate to an order sought or made under this section, are payable by the applicant for the order, subject to any order of the Court to the contrary. 4 Section 40(5) of the Court Act provided that: An owner of land affected by the proposed easement and an owner of land on which it may be necessary for works to be carried out in connection with the easement: (a) may object to the proposed easement or works, and (b) is entitled to appear before the Court in support of the objection. The Court must consider each objection. (Note: Section 40 has since been amended, effective 1 July 2008). 5 In my earlier judgment I awarded compensation under s 40 to the Fourth and Tenth Respondents on the basis of the court appointed valuer's opinion of the amount of $2,500 for the Fourth Respondent and $5,750 to the Tenth Respondent. Evidence relied on by parties 6 The Applicant relied on evidence which was tendered during the primary proceedings which was extensive as well as new evidence tendered for the purposes of this costs application. Leave was granted for the Applicant to rely on a tender bundle "ADS 2" (exhibit O, annexure to the affidavit of Mr Tony Sattler, solicitor of the Applicant, sworn 22 February 2008) which contains new material including email correspondence between the Applicant and Respondents (tabs 1, 3, 11 and 15, see below at par 12 for a summary of relevant correspondence); a statement of evidence of John Wall, hydrology expert, dated 11 December 2006 (tab 2); a joint statement on hydrology issues prepared by John Wall and John Lawrence dated 1 March 2007 (tab 4); the transcript of a mention before Talbot J on 8 March 2007 (tab 5); a statement of issues submitted on behalf of the Tenth Respondent in relation to the hydrology hearing (tab 6); the transcript of the s 96 application before Talbot J on 13 June 2007 (tab 7); the judgment of Biscoe J in Tenacity Investments v Ku-Ring-Gai Council [2007] NSWLEC 535 in relation to an application for security for costs delivered on 27 July 2007 (tab 8); offers of compromise from the Applicant to the Fourth and Tenth Respondents dated 3 August 2007 (tabs 9 and 10); the transcript of the valuation hearing heard before Pain J on 31 October 2007 (tab 12); Calderbank letters sent from the Applicant to the Fourth and Tenth Respondents dated 13 October 2007 (tabs 13 and 14); a Notice to Produce filed by the Fourth Respondent on 21 September 2007 (tab 16) and a Notice of Motion filed jointly by the Fourth and Tenth Respondents on 24 September 2007. 7 The Applicant also relied on another affidavit sworn by Mr Sattler on 27 March 2008 and a transcript of the hydrology hearing before Biscoe J on 24 April 2007 and 30 April 2007 annexed to it. 8 Of the evidence tendered during the primary proceedings, the Applicant relied on exhibits A (the exhibit annexed to the affidavit of Mr Jonathan Poole, director of the Applicant, of 8 October 2007), D (the exhibit annexed to Mr Sattler's affidavit sworn 8 October 2007), J (affidavit sworn by Mr Poole sworn 15 October 2007), and M (affidavit of Mr Sattler sworn 30 October 2007). 9 The Fourth Respondent relied on exhibits 1-5 (affidavits of Mr Peter Dobrijevic sworn on 24, 27 September 2007, 10, 4 and 15 October 2007 respectively), A, D, F (affidavit of Mr Sattler sworn 15 October 2007) and J, all of which were tendered in the primary proceedings in addition to submissions he made on 12 October 2007. The Fourth Respondent also relied on affidavits sworn by him on 4 March 2008 and 9 May 2008 (filed after the costs hearing itself) both dealing with offers of settlement made by the Applicant on 11 July 2007, 3 August 2007 and 14 October 2007. The Tenth Respondent relied on evidence already filed in the substantive proceedings. 10 The most relevant correspondence and events are identified in the chronology below. Much of the further material relied on by the Applicant and the Fourth and Tenth Respondents demonstrates, at an unnecessary level of detail, discussions and disagreement between the parties on various matters such as availability for mediation, hearing dates and progress of the matter in the Court. Correspondence between the Respondents not addressed to the Applicant but relied on by the Applicant is also not included as I do not consider it to be relevant to this costs application. 11 Material relied on by the Applicant in relation to actions taken by the Fourth Respondent outside this litigation and material relied on by the Fourth Respondent in relation to the actions of the director of the Applicant outside the litigation is also not included as I do not consider that is relevant. It is necessary to consider the parties' actions as they relate to these proceedings in determining costs. Chronology 12 A brief chronology of this litigation and related Class 1 proceedings is as follows (key dates for when the matter was before the Court are in bold): 17 August 2005 Letter from Council/First Respondent to Applicant in relation to the development application, highlighting issues and objections in relation to vehicle access and stormwater drainage 2 May 2006 Applicant's Class 1 appeal upheld – conditional development consent DA 657/2005 granted by Roseth SC 31 July 2006 Email from Fourth Respondent to Council's solicitor noting that he had joined the action 7 August 2006 Section 40 application filed seeking (i) amendment to existing easement or (ii) new easement to allow drainage of stormwater from Applicant's development into public drain 12 August 2006 Section 40 application amended to include indemnity for loss or damage from the Applicant's land in relation to amendment of existing easements 31 August 2006 Second Respondent settles 29 October 2006 Letter from Applicant to Respondents generally in relation to the drainage easement, highlighting various concerns of the Respondents and a recommended course of action 11 December 2006 Statement of evidence of John Wall in relation to hydrology issues 12 December 2006 Emails from Mr Poole to Respondents confirming an offer of $1000 compensation plus $1000 legal costs for cooperation in the matter – offer open until 14 December 2006 December 2006 Emails between Mr Poole and the Respondents in relation to the easement and compensation; email from Fourth Respondent in reply to Mr Poole stating he had received no offer from the Applicant since May 16, and that he rejects the current offer 23 December 2006 Email from Fourth Respondent to Applicant's solicitor, Mr Sattler, complaining that the Applicant was undertaking negotiation, mediation and litigation simultaneously late January and early February 2007 Emails between Mr Poole, director of the Applicant, and Tenth Respondent in relation to adverse impacts and appropriate compensation 27 February 2007 Third Respondents settle 1 March 2007 Mediation session held; Joint statement on hydrology issues prepared by John Wall and John Lawrence 4-7 March 2007 Email exchange between Tenth Respondent and Mr Poole, including 4 March 2007 email from Tenth Respondent to Mr Poole saying he had "engaged expensive lawyers… at the hourly rate of $500"; by email dated 7 March 2007, the Tenth Respondent notified Mr Poole that his lawyers were "now full time on the case" 7 March 2007 Email from Mr Sattler to the Respondents attaching a draft s 88B instrument (the actual instrument is not attached to the exhibit) and seeking comment from the Respondents 8 March 2007 Mention in relation to hydrology issues before Talbot J 16 April 2007 Section 96 application for modification of development consent granted in Class 1 proceedings lodged by Applicant 23 April 2007 Email from John Wall, hydrological expert, to the Fourth Respondent (in reply to his email of the same day) stating he had not liaised inappropriately with the Applicant at the site 24 and 30 April 2007 Hydrology hearing before Biscoe J 4 May 2007 Judgment handed down by Biscoe J in favour of Applicant 29 May 2007 Applicant offers Tenth Respondent compensation 13 June 2007 Section 96 hearing before Talbot J; decision delivered to modify condition 89A(d) July 2007 Letter from Mr Sattler to Fourth Respondent offering $3000 for settlement and attaching proposed terms of easement 11 July 2007 Applicant offers compensation as settlement to Tenth Respondent 26 July 2007 Letter from Applicant's solicitor to Fourth Respondent enclosing valuation advice from W K Wotton and Partners, with a recommended compensation amount of $750 to downstream land owners 27 July 2007 Security for costs hearing by Notice of Motion of Tenth Respondent - Biscoe J ordered Applicant to pay security for costs of the Tenth Respondent 29 July 2007 Email response to above letter from Fourth Respondent to Mr Sattler, stating that the value is "absurdly" low and ignores the rights the current easement affords the Fourth Respondent 3 August 2007 Offers of compromise sent by Applicant to Fourth and Tenth Respondents in the amount of $3000 (offer open for 30 days) as well as explanatory emails dated 6 and 7 August 2007 from Mr Sattler 7 August 2007 Email from Mr Sattler to Fourth and Tenth Respondents explaining the effect of the letters of compromise including as to costs; Email from Fourth Respondent to Applicant rejecting the offer dated 3 August 2007 8 August 2007 Twelfth Respondent settles 13 August 2007 Email in which Mr Sattler further explains the legal effects of offers of compromise to the Fourth Respondent August 2007 Emails between parties relating to available dates for a hearing 18 September 2007 Email sent by Mr Sattler to Kent Wood, court appointed valuer, with questions in relation to his preliminary report 21 September 2007 Email from Mr Sattler to Council's solicitor negotiating terms of easement; email from Mr Sattler to Respondents attaching proposed terms of easement; Notice to Produce filed by the Fourth Respondent seeking documents from the Applicant with respect to steps to obtain easements, jurisdiction, competence of the application, the hydrology matter and valuation, inter alia 24 September 2007 Email from Mr Sattler to the Fourth Respondent objecting to the Notice to Produce served by the Fourth Respondent, with reasons. Notice of Motion, returnable 29 September, filed jointly by Fourth and Tenth Respondents seeking dismissal of the proceedings plus costs 27 September 2007 Eighth Respondent settles 29 September 2007 Mention before Biscoe J of Notice of Motion of Fourth and Tenth Respondents (filed 24 September 2007) raising several matters; Applicant advises that not pursuing variation of existing easements; motion stood over to 16 October 2007 4 October 2007 Notice of Motion, returnable 16 October, filed jointly by Fourth and Tenth Respondents seeking that orders appointing Mr Wood, valuer, be vacated 5 October 2007 Final report of Mr Wood, single expert valuer sent to all parties 14 October 2007 Calderbank letters dated 13 October 2007 sent by Applicant to Fourth and Tenth Respondents, offering $2500 for the Fourth Respondent to offer expire on 22 October 2007 and $5750 for the Tenth Respondent offer to expire on 18 October 2007 16 October 2007 Mention before Pain J - hearing of the Notice of Motion dated 24 September 2007 not otherwise dealt with stood over to hearing on 30 October 2007; Court order that final easement terms be provided; Applicant abandons claim for amendment to existing easements. Applicant's Notice of Motion seeking orders to rely on an additional valuation report. Respondents' Notice of Motion seeking orders that the court appointed valuer be struck out refused 17 October 2007 Email from Fourth Respondent to Mr Sattler seeking final terms of easement and stating that the offer of 14 October 2007 is incomplete without them 18 October 2007 Tenth Respondent accepts Applicant's offer to settle by email; terms of proposed easement agreed between Applicant and First Respondent (the Council) pursuant to Court order dated 16 October 2007 22 October 2007 Calderbank offer expires for Fourth Respondent 24 October 2007 Email from Fourth Respondent to Mr Sattler (in reply to email dated 24 October 2007 wherein Mr Sattler answers questions asked on 19 October 2007 by Fourth Respondent) stating the answers are too late as the Calderbank offer had already expired 25 October 2007 Eleventh Respondent settles 26 October 2007 Seventh Respondent settles 29 October 2007 Notice of Appearance filed by Tenth Respondent's solicitor Sixth Respondent settles 30-31 October 2007 Application to stay proceedings by Tenth Respondent refused. Section 40 application hearing before Pain J. Fifth Respondent settles on 30th 31 January 2007 Pain J delivers judgment Applicant's submissions 13 The usual position is that an applicant for an easement must pay the respondents' costs as identified in s 40(8) of the Court Act. This approach can be varied if there is unreasonable behaviour warranting a departure from the usual approach; see Antipas v Kutcher and Anor (2006) 144 LGERA 289 at [52], 117 York Street Pty Ltd v Proprietors of Strata Plan 16123 (1998) 43 NSWLR 504 per Hodgson J at 523F-524B, Mitchell v Boutagy (2001) 118 LGERA 249 per Austin J at [60] – [69] and Owners Strata Plan 13635 v Ryan [2006] NSWSC 342 per Rein AJ at [12] – [14]. 14 In relation to whether indemnity costs ought be awarded the Applicant relied on Niezabitowski and Anor v Roads and Traffic Authority of NSW (2006) 147 LGERA 417 at [52] and Evagelakos v Roads and Traffic Authority of New South Wales [2006] NSWLEC 514. In relation to offers of compromise the relevant principles are found in Maitland Hospital v Fisher (1992) 27 NSWLR 721 at 724-725 per Kirby P (Mahoney JA and Samuels AJA concurring). These include the principles of minimising unnecessary public and private costs and indemnifying a party against costs which, having made an offer of compromise later found to be reasonable, should not bear costs of litigation incurred by the party rejecting the compromise and whose attitude is notionally the real cause of litigation thereafter. 15 In this case the conduct of the Fourth and Tenth Respondents has been unreasonable for numerous reasons. These are that: (a) the Fourth and Tenth Respondents continued to defend the proceedings for an ulterior purpose; (b) the Fourth and Tenth Respondents continued to defend the proceedings in circumstances where it was unreasonable to do so; (c) the Fourth and Tenth Respondents continued to defend the proceedings in wilful disregard of clearly established law; (d) the Fourth and Tenth Respondents made allegations which ought never to have been made; (e) the Fourth and Tenth Respondents caused the undue prolongation of the case by groundless contentions; (f) the Fourth Respondent imprudently refused an offer of compromise; (g) the Fourth Respondent engaged in conduct during the proceedings which was intended to frustrate the process. 16 In addition, the Applicant relied on the failure of the Fourth and Tenth Respondents to accept Calderbank offers made and other unreasonable conduct. 17 The Applicant submitted that having regard to the unreasonable and or disentitling conduct of the Fourth and Tenth Respondents in the proceedings the Court should not make an order that the Applicant pay the Respondents' costs rather the Court should order to the contrary, that the Fourth and Tenth Respondents pay the Applicant's costs of the proceedings. To the extent that the Fourth and Tenth Respondents used the proceedings for an ulterior motive the Applicant submitted the resulting costs should be awarded on an indemnity basis. The ulterior motive was causing the Applicant to incur legal costs, to force the Applicant to pay compensation beyond what s 40 requires, and to prevent the Applicant's development on adjoining land. 18 The facts of these proceedings are unique. In these proceedings the drainage easement sought by the Applicant was over the site of an existing drainage easement already held by the Council. The expert hydrology evidence before the Court showed that the development site already drained into the existing easement. Further, as a result of the proposed development, the rate and quantity of water being discharged through the proposed easement would be less than that already being discharged through the existing easement. In Owners Strata Plan the applicant for the easement also sought to regularise an existing regime but in that case there was no decrease in intensity. This was also a relevant factor in the Court's decision to make an order contrary to the legislative policy in s 40(8) and award the costs of the proceedings to the plaintiff on the usual basis. Costs of hydrology hearing 19 In his affidavit of 27 March 2008, Mr Sattler contends that, during the hydrology hearing before Biscoe J on 24 and 30 April 2007, the Fourth Respondent made submissions and questioned expert witnesses in a way that caused the proceedings to become unnecessarily protracted. To this end, Mr Sattler highlights various points in the two-day transcript annexed to his affidavit (spanning in length from a few lines to a few pages) where he believes the Fourth Respondent acted unreasonably. These can be summarised as follows: asking irrelevant questions of the court appointed hydrologist, Mr Wall, and the Applicant's hydrologist, Mr Lawrence, including questions in relation to riparian zones and the DRAINS engineering model; cross-examining Mr Wall in relation to the DRAINS engineering model and its inherent errors; claiming prejudice for evidence tendered pursuant to the experts meeting on-site without the parties present; attacking the credibility of Mr Wall and Mr Lawrence; making submissions unsupported by evidence. Mr Sattler also states that the need for him and Biscoe J to respond to and investigate the substance of the Fourth Respondent's submissions and questions in cross-examination identified above contributed to the hearing's length. With respect to the Tenth Respondent, Mr Sattler states in his affidavit that her legal representatives did not adduce expert evidence to support her submissions, and that contentions contained in the Tenth Respondent's statement of issues were not relevant to the issue before the Court. Mr Sattler also states that the preliminary hearing in regard to hydrology was only held for the benefit of the Fourth and Tenth Respondents and that they had agreed it would take less than a day but it took much longer due to the actions of these Respondents. 20 The Fourth and Tenth Respondents alone of all the Respondents raised the hydrology issue, being whether there was capacity in the Council's stormwater drain to accept stormwater from the Applicant's site. The Applicant provided the Fourth and Tenth Respondents with a report from an expert hydrologist, Mr Lawrence, that confirmed that there was adequate capacity in the existing easement and that the development would result in a decrease in stormwater flow through the easement so that there was in fact no hydrology issue. Notwithstanding the report of Mr Lawrence, a single parties' expert, Mr Wall, was appointed at the Applicant's expense to report to the Court and the parties on the hydrology issue. Mr Wall agreed with Mr Lawrence's conclusions that there was in fact no hydrology issue. 21 Notwithstanding the Fourth Respondent agreeing to a limited brief the Fourth and Tenth Respondents expanded the contentions in the hydrology hearing to include irrelevant matters. 22 The judgment on hydrology Tenacity Investments Pty Ltd v Ku-ring-gai Council [2007] NSWLEC 246 was delivered on 4 May 2007. Ultimately the Court accepted the findings of Mr Wall and Mr Lawrence and dismissed the contentions raised by the Fourth and Tenth Respondents. This evidence was said to support a submission that both Respondents were pursuing an agenda of attempting to default or delay the implementation of the Applicant's development in its entirety, rather than being a serious inquiry into the question of hydrology. Security for costs hearing 23 The Tenth Respondent brought a motion for security for costs with the ulterior motive of causing the Applicant to incur legal costs so as to force the Applicant to pay compensation beyond what is required by s 40. The Applicant was unable to provide its financial information to oppose the claim for security for costs because of the Fourth Respondent's history of attempting to interfere with the Applicant's financial arrangements. The fact that the Applicant was able to provide the security ordered by the Court indicates that the Applicant was solvent and capable of meeting any costs order. Notice of Motion/Notice to Produce filed 24 September 2007 24 The Respondents' Notice of Motion filed 24 September 2007 was heard on 29 September 2007. The jurisdictional issues raised were stood over to the substantive hearing and were determined in favour of the Applicant. The Notice to Produce was unsuccessful and was a "fishing expedition" and sought documents for no forensic purpose relevant to the proceedings. Easement hearing 25 The easement hearing took place on 30 and 31 October 2007. The Fourth and Tenth Respondents were the only Respondents who contested the granting of an easement at the hearing. The parties agreed to the appointment of a single expert valuer, Mr Wood, to report to the Court and the parties on the amount of compensation payable under s 40. Mr Wood provided a preliminary report on 11 September 2007 and a final report on 5 October 2007. Ultimately the Court accepted the findings of Mr Wood in his final report and dismissed the contentions raised by the Fourth and Tenth Respondents. 26 The Fourth Respondent engaged in the easement hearing with the ulterior purposes of preventing the development from proceeding, obtaining compensation for the impact of the development on his property, delaying the proceedings and causing the Applicant to incur interest, and extracting an uncommercial payment of compensation for the easement. 27 The Fourth and Tenth Respondents engaged in the easement hearing with the ulterior purpose of causing the Applicant to incur legal costs so as to force it to pay compensation beyond what is required by s 40. 28 The Fourth and Tenth Respondents acted unreasonably in failing to accept the findings of Mr Wood, valuer, and continuing to contest the easement hearing particularly in circumstances where they called no expert to put a contrary position. 29 The Fourth and Tenth Respondents raised groundless jurisdictional contentions that caused the need for and prolongation of the easement hearing. The jurisdictional issues raised were made in wilful disregard of clearly established law. 30 The Fourth and Tenth Respondents sought to reagitate issues at the easement hearing against findings already made in the hydrology hearing. The Applicant was successful in the easement hearing and the Fourth and Tenth Respondents were entirely unsuccessful. 31 In addition to the above the Applicant submitted that the Fourth Respondent remained a party to these proceedings not because of any concerns in relation to the Applicant's use of the easement past the point of the first statement of evidence of John Wall which clearly confirmed that post development discharges would be less than the present: his participation was aimed at frustrating the development being carried out. 32 I should note that I do not consider the evidence sought to be relied on concerning actions taken outside this litigation by the Fourth Respondent are relevant to my consideration of costs in the litigation. (see par 83, 84, 86 of the Applicant's submissions). Actions sought to be relied on related to actions taken outside the litigation such as contacting the Applicant's financier and his employer and are not relevant. Offers of compromise/settlement 33 Numerous offers to settle and negotiate with the Fourth Respondent were unsuccessful. No clear counter offer was ever put forward for a straight payment of compensation to settle the matter. Relevant correspondence is summarised in par 90 of the Applicant's written submissions. The Fourth Respondent was served with a Calderbank letter dated 14 October 2007 offering to settle on the basis that the amount identified by the court appointed valuer, Mr Wood, be paid together with reasonable legal costs as agreed or assessed. A s 88B Conveyancing Act 1919 instrument setting out the terms of the drainage easement as then proposed was in substance the same as the terms of the easement finally agreed with the Council on 18 October 2007. By that time the terms of the easement were clear and the capacity of the pipes to accept stormwater discharge was confirmed. The Fourth Respondent could have accepted the offer at any time after the expiry period or make a counter offer but failed to do so. The Applicant responded to an earlier query from the Fourth Respondent about the relevant court rules concerning offers of compromise when an earlier offer was made by letter of 3 August 2007. Two emails were sent explaining the operation of the court rules in relation to costs. 34 The Tenth Respondent has acted unreasonably by accepting the offer in the Calderbank letter dated 14 October 2007 and then repudiating that acceptance on 18 October 2007, and contesting the application at the hearing. Her agent caused a great deal of additional time to be spent as he was given leave to file additional submissions after the hearing and filed a lengthy submission of 147 paragraphs which had to be responded to. The Applicant seeks the costs of doing so. Groundless claims/contentions 35 The Fourth Respondent told the Court at the final hearing that he wanted $8,000 for the blot on title and $400,000 or $500,000 for injurious affectation. That approach is untenable in light of the valuation evidence which suggested minimal compensation was warranted. By raising groundless contentions in the hydrology hearing and groundless jurisdictional issues and refusing to negotiate on an amount of compensation, the Fourth Respondent unnecessarily prolonged the litigation. Talbot J made observations to that effect in an unpublished, ex tempore judgment dated 13 June 2007 when his Honour granted the s 96 modification application to the development consent. 36 Further unreasonable behaviour by the Fourth Respondent included issuing a Notice to Produce which sought a number of financial documents related to the project and the cash profits to be made by the Applicant. This was argued to be sought as a means of gaining information to frustrate the project. Despite several attempts and invitations to negotiate settlement with the Respondents, the Fourth Respondent only agreed to meet once, in October 2007, on a without prejudice basis and the matter did not settle. The Fourth Respondent never provided a clear statement of what he wanted until the hearing when he stated he wanted $8,000 for the blot on title and injurious affectation of up to $500,000. He continually rejected settlement offers. He chaired meetings of the other Respondents and said the pressure was on the Applicant to raise the amount of offers. Raising groundless contentions in the hydrology hearing and groundless jurisdictional issues and refusing to negotiate cased undue prolongation of the matter. 37 Further unreasonable conduct arose because a statement by Mr Smits suggested that lawyers were engaged by his client when his later conduct suggested they were not then engaged. He also claimed he was unavailable for a hearing in a certain time frame and then came to Court on several interlocutory matters within that time frame (this is disputed by Mr Smits, the agent). Costs orders sought 38 The Applicant submitted that in all the circumstances the Court should make the following orders: (i) The Fourth and Tenth Respondents bear their own costs of the proceedings; (ii) The Tenth Respondent pay a half share of the legal costs and costs of Mr Wall relating to the second day of the hydrology hearing; (iii) The Tenth Respondent pay a half share of the Applicant's legal costs for preparation and attendance at the rescheduled hearing of the issues raised in the Respondents' Notice of Motion dated 24 September 2007 which was heard on 16 October 2007. (iv) The Tenth Respondent pay a half share on an indemnity basis of the Applicant's legal costs from the time of his acceptance of the letter of offer of settlement dated 13 October 2007 and accepted on 18 October 2007 (see affidavit of Mr Sattler dated 30 October 2007) until the conclusion of the proceedings including a half share of the costs of Mr Wood. (v) The Fourth Respondent pay the remainder of the Applicant's legal and consultants' costs (other than costs already accounted for by Court order) on the basis of party/party costs prior to service of the Applicant's offer of compromise dated 3 August 2007 and on an indemnity basis from that time to the completion of the costs hearing. Fourth Respondent's submissions 39 The Fourth Respondent sought costs on an indemnity basis in his written submissions. He argued that the easement does not benefit the public only the Applicant, and there is a strong legislative intention contained in s 40(8) that the Applicant pay his costs. 40 The supporting document lodged by the Applicant's solicitor with the s 40 application was incorrect in relation to the letters of notification sent. This shows dishonest and disentitling conduct by the Applicant and its solicitor. The objections to valuations were reasonable and appropriate in light of s 40(5) which requires these to be taken into account. 41 The behaviour of the Applicant has been to bully and threaten residents who were not legally represented. The offer of compromise of 3 August 2007 was aimed at intimidating the Respondents and was not a genuine attempt to settle. It did not comply with the terms of the Supreme Court Rules 1970 (SCR) as it was incomplete as the terms of the easement were not then agreed with the Council. The easement terms were not finalised until 18 October 2007 which was after the letters of compromise under the SCR and the Calderbank offer were made. The terms of the easement finally agreed were important as these included conditions 2 and 3 concerning access restriction and drainage indemnity clauses. The Applicant had resisted these conditions earlier. These conditions provide an important benefit for the Respondents. The purported offer of compromise dated 3 August 2007 should be disregarded as it was uncertain given that the easement was not yet agreed. No easement was attached to it. 42 Further, SCR Pt 52A r 22(4) (now Uniform Civil Procedure Rules 2005 (UCPR) r 42.14 – 42.17, applied in the Court by virtue of Pt 1 r 1.5 UCPR) does not apply because the Fourth Respondent considered that he bettered his position as the access restriction and drainage indemnity clauses agreed on 18 October 2007 more than offset the awarding of compensation in a lesser amount than he had sought. 43 The purported Calderbank letter dated 14 October 2007 from the Applicant was also not genuine. The easement was still not then agreed. Issuing the Calderbank letter so close to the hearing date was unconscionable conduct. It should be ignored when determining costs. 44 The affidavit of the Fourth Respondent dated 4 March 2008 attaches an exchange of emails between he and the Applicant's solicitor, Mr Sattler, which took place immediately after the issue of the Calderbank letter on 14 October 2007. The Fourth Respondent replied to Mr Sattler's email of 14 October on 17 October 2007 with a follow-up question asking whether the final wording of the easement terms had been agreed with Council. The Fourth Respondent also stated in this email that the Calderbank offer was incomplete without the final terms. A further email of 19 October 2007 was sent by the Fourth Respondent to Mr Sattler asking two further questions in relation to the offer and the proceedings, to which a reply was given by Mr Sattler on 24 October 2007. The Fourth Respondent then emailed Mr Sattler in reply on the same day to declare that his answers were too late, as the Calderbank offer had already expired. The Fourth Respondent denied there had been a conversation with Mr Sattler (as he attested) during this period. 45 In his affidavit of 9 May 2008 the Fourth Respondent considered that all the offers of settlement were made on the basis of "minimalist" terms of the easement. The terms of the easement agreed between the Council and the Applicant by 18 October 2007 were not "minimalist" and included a drainage indemnity and access restriction clauses. These additions were a substantial improvement in his view. 46 The offer of compromise did not comply with UCPR r 20.26 (cf Pt 22 SCR, now repealed) because the Applicant did not provide all necessary documents. It was not a genuine offer to settle but a threat; see Santow JA in Leichhardt Municipal Council v Green [2004] NSWCA 341 at [23]: … an offer with no real element of compromise in it, which is designed merely to trigger the costs sanction, will not be treated as a genuine offer of compromise. 47 Hamilton J in Ng v Chong [2005] NSWSC 385 at [13] held that the making of an offer better than the result ultimately obtained does not mean an indemnity costs order automatically ought to follow. Caution must be used where departing from making a costs order on the ordinary basis. Campbell J in Swann v Spiropoulos [2006] NSWSC 1016 at [14] did not regard the defendant in that case as having achieved a result worse in the overall than that offered, even though in monetary terms she was worse off compared to the offer. 48 Much of the costs sought relate to other Respondents who also participated in the proceedings and should not be claimable against the Fourth Respondent. The finalisation of the easement with the Council only occurred just prior to the final hearing exposing the Respondents to extensive costs and inconvenience. The arrangements with the other Respondents are unknown. Indemnity costs should not be awarded. 49 In relation to the hydrology hearing, the court appointed expert Mr Wall found the onsite drainage system designed by Mr Lawrence unsatisfactory. The design of the onsite drainage system was improved in the mediation process. The Council required a drainage indemnity to protect all the Respondents despite the results of the hydrology hearing. 50 The substantial costs incurred by the Applicant are a result of its conduct in the proceedings. It failed to agree the final terms of the easement until 18 October 2007, proceedings having commenced in August 2006. It knew it needed an easement from March 2005 when the Council so advised. The Applicant raised the making of a s 59A Local Government Act 1993 application to the Council which took several months to resolve. The Applicant also made a s 96 modification application to the Court after its s 40 application was commenced. These actions demonstrate that the delay in proceedings was due solely to the Applicant's behaviour. 51 Any unconscionable conduct has been by the Applicant in its conduct of these proceedings. There has been an unnecessarily large volume of documents relied on by the Applicant. An excessive amount has also been spent on counsel fees by the Applicant. There are numerous examples of the Applicant failing to meet deadlines and failing to serve documents in a timely way. 52 There is no equivalent to s 40(5) in s 88K of the Conveyancing Act so that cases under s 88K are not directly applicable. The principles in Owners Strata Plan do not state the relevant principles for s 40 as the legislative intention under s 40(5) is to ensure objections are fully considered. 53 The litigation has resulted in improved onsite stormwater treatment on the Applicant's land, an easement which restricts access by the Applicant on the Fourth Respondent's property and $2,500 in compensation for the easement. 54 The Notice to Produce dated 21 September 2007 did not cause the Applicant to incur unnecessary or excessive legal costs. 55 The Fourth Respondent denied having any ulterior purpose. He considered his argument based on injurious affectation was reasonable. Accepting an easement less than the diminution in value of his property would have been uncommercial. There was no wilful disregard of already established law. 56 I have not summarised all the matters referred to by the Fourth Respondent. The matters at par 25-33 of his written submissions are not relevant. I agree with the Fourth Respondent that where there are unsubstantiated comments of Mr Poole relied on by the Applicant, these should be ignored (par 36). Allegations are also made by him about the conduct of Mr Sattler, the Applicant's solicitor, but I do not consider these allegations to have much significance in the consideration of costs. To the extent Mr Sattler admitted to inaccuracies in material filed, that is unfortunate but no more than that. I do not accept the unsubstantiated submission of misconduct by Mr Sattler in relation to the hydrology hearing (par 46). I am also not going to determine the issue raised in relation to Mr Webster, senior counsel for the Applicant, by the Fourth Respondent at par 52-53. There are numerous disagreements about the accuracy of evidence between Mr Sattler and the Fourth Respondent. It is unnecessary that I resolve the issues in dispute in the level of detail submitted by the respective parties in evidence and submissions, in order to determine the award of costs. Tenth Respondent's submissions 57 The Tenth Respondent adopted the Fourth Respondent's submissions and raised additional matters. I will not refer in this summary of submissions to arguments raised which concern issues I have already determined in the substantive judgment and are therefore settled. Costs were sought on an indemnity basis from the Applicant in the written submissions. The following orders were also sought: (i) that the Applicant release the specified gross sum of $30,000 held as security for costs to the Tenth Respondent instead of assessed costs; (ii) that no order for costs be made to the extent that the Court determines that any litigious conduct of the Tenth Respondent was unreasonable; (iii) that costs be deemed to be offset; (iv) that costs of the proceedings be awarded in stages of the proceedings if any Respondents are held liable to pay costs; (v) that costs be awarded in specified proportions if any Respondents are held liable to pay costs; and/or (vi) that any costs awarded against the Tenth Respondent not exceed a specified amount for all or particular stages of the proceedings; as determined to be appropriate by the Court. 58 The Applicant failed to settle the final terms of the easement until just before the final hearing which meant that settlement before that date was not feasible. This exposed the Respondents to substantial, avoidable costs and the inconvenience of these proceedings. The original s 40 application filed on 7 August 2006 was not capable of being satisfied. The s 96 modification application was necessary. That application was determined by Talbot J on 13 June 2007. Indemnity costs should be payable up to that date. 59 The approach of Biscoe J in Property Partnerships Pacific Pty Ltd v Owners of Strata Plan 58482 [2006] NSWLEC 709 should be adopted. (I note that case dealt with whether indemnity costs ought be paid by an applicant under s 40(8) and I do not consider the facts of this case give rise to the same considerations.) 60 The Applicant did not take adequate steps to negotiate with the Respondents. The arguments raised complex questions in relation to the Court's jurisdiction and a number of unclear legal questions have been clarified. 61 The Tenth Respondent did not receive a letter of 24 May 2006 offering compensation of $1,000. The matter could have been settled after the mediation if the Applicant had agreed to the offer then made by the Tenth Respondent of $10,000. 62 In relation to hydrology, the Tenth Respondent was entitled to express objections, seek judicial confirmation and test the hydrology evidence of the court appointed expert. The judgment of Biscoe J does not suggest the process was misconceived or an abuse of process; see particularly [13], [15] and [17] of that judgment. The Applicant joined in the formulation of the preliminary issues, the finalisation of the brief to the expert and the engagement of an additional expert and the conduct of the application. 63 The Applicant chose to call its expert Mr Lawrence in addition to Mr Wall, the court appointed expert. This suggests it had serious reservations about his evidence. Alternatively, if the Applicant accepted Mr Wall's evidence, it was unreasonable for it to require the Respondents to deal with both Mr Wall and Mr Lawrence. This suggests indemnity costs ought be awarded. The Applicant's argument that there was no issue is groundless and not supported by the judgment of Biscoe J. There is no basis for the Applicant's submission that the Respondents engaged in the hydrology hearing for the ulterior purpose of causing the Applicant to incur more legal and other costs. The Tenth Respondent reasonably incurred substantial legal costs for the hydrology hearing which the Applicant should pay. On the Applicant's approach every submission of a respondent has to be upheld as being valid and well grounded or it should automatically result in an indemnity costs order against that respondent. 64 The security for costs order was granted by Biscoe J and the orders have not been appealed against. There is no basis to award costs in favour of the Applicant in relation to that application. 65 The offer of compromise on 13 October 2007 (Calderbank letter) required acceptance by 18 October 2007. The easement was not agreed with the Council until 18 October 2007. The Applicant argued the settlement was repudiated. There was no determination by the Court of whether there was an agreement to settle in the circumstances. There could be no binding agreement to settle in these circumstances because costs were not finalised. The Tenth Respondent has not acted unreasonably. 66 The Applicant is also seeking to claim costs from the Fourth and Tenth Respondents incurred in dealing with other Respondents. This submission is supported by Mr Sattler's affidavit dated 8 October 2007 at par 24-26. That affidavit was said to support a finding that a large part of the work done by the Applicant's lawyers concerned other Respondents. The costs orders sought by the Applicant undermine the intent of the legislation as found in s 40(5). 67 The Applicant and its solicitor's behaviour in the course of the proceedings has been unconscionable in the way the litigation has been conducted including improperly briefing the court appointed expert valuer Mr Wood with another valuer's report, supporting the s 40 application with inaccurate correspondence and statements about the notification of the Respondents and maintaining an argument that the existing easements could be amended until just before the hearing. Finding 68 In an application for the grant of an easement under s 40, s 40(8) provides that the Applicant pay the legal costs incurred by the Respondents. Both Respondents have claimed costs in their written submissions and I have clarified with the Fourth Respondent that he is seeking disbursements only. He has not incurred legal costs having represented himself in the proceedings. The Fourth Respondent is entitled to claim his out of pocket disbursements but not personal time spent on the litigation; Cachia v Hanes (1994) 179 CLR 403, affirming Cachia v Hanes (1991) 23 NSWLR 304. His submissions and evidence were otherwise to the effect that the Applicant and its solicitor have acted unreasonably throughout the proceedings and are not deserving of any award of costs. 69 The Tenth Respondent also cannot claim the costs of her agent contrary to his written submissions. The Tenth Respondent is not entitled to costs in relation to her agent as he was not acting as a legal practitioner (see the numerous cases referred to in LexisNexis, Ritchie's Uniform Civil Procedure NSW (Service 20 – May 2007) [42.2.25] including Cachia v Hanes). The only legal costs able to be claimed are legal costs incurred earlier in the proceedings particularly in relation to the hydrology hearing when the Tenth Respondent was represented by a solicitor for a period. The detailed orders otherwise sought by the Tenth Respondent are identified in par 57 including that the security for costs be released in her favour. The Tenth Respondent was also represented briefly by a solicitor who filed a Notice of Appearance on 29 October 2007 the day before the hearing. That solicitor was instructed to make an application for a stay of the proceedings which was considered and refused at the outset of the hearing on 30 October 2007. That solicitor then ceased to act. These costs are not claimed by the Tenth Respondent. The Tenth Respondent otherwise made submissions that the Applicant's behaviour in seeking costs was unreasonable given its conduct in the litigation. 70 The Applicant seeks an order, inter alia (see orders sought in par 38), for costs on a party/party basis from the Fourth Respondent for the whole of the proceedings with costs from 3 August 2007 sought on an indemnity basis. Half the costs from 18 October 2007 are also sought on an indemnity basis from the Tenth Respondent (otherwise payable by the Fourth Respondent). Specific orders are sought for additional costs incurred by the Applicant in relation to the hydrology hearing and the hearing of a Notice of Motion dated 24 September 2007, heard on 16 October 2007, to be paid by the Tenth Respondent. 71 Consideration of costs should focus on the conduct of the litigation: see Oshlack v Richmond River Council (1998) 193 CLR 72 at 97 per McHugh J. Evidence filed and a number of submissions made have focussed on the conduct of the Fourth Respondent and of the Applicant outside the litigation and are not relevant, so I have not included them in this judgment. The motives which the Applicant attributes to the Respondents in its submissions (par 15) as to why the litigation has been pursued for an ulterior purpose are strongly denied by the two Respondents. It is unnecessary for me to draw any conclusion on that part of the Applicant's argument relying on events outside the litigation. I will consider the Applicant's other arguments in the circumstances of the litigation. 72 It is first necessary to consider what legal framework arises for consideration of costs under s 40(8) particularly in light of s 40(5) of the Court Act. The provisions of s 88K(5) of the Conveyancing Act are in similar terms to s 40(8). That was recognised in Antipas at [52] where Lloyd J stated that the policy reflected in s 88K and s 40 was that costs should be borne by the Applicant. His Honour also cited Mitchell as authority for the proposition that s 40, like s 88K, reflects the legislative policy that a court may be empowered to grant an easement to an applicant against a respondent's will. In Antipas an applicant was granted an easement under s 40 to extend the benefit of a presently existing right of way over the respondent's land. Lloyd J ordered that compensation ought be paid by the applicant to the respondent pursuant to s 40(8). There was no costs dispute in Antipas and s 40(8) was applied to the award of costs. 73 Rein AJ in Owners Strata Plan (application for an easement under s 88K Conveyancing Act) identified relevant principles on costs at [12] and [14]: [12] From these cases the following principles can be extracted: (1) that there is a statutory indication that generally the person upon whose land the easement is imposed will be entitled to his or her costs; (2) that notwithstanding (1), the Court has a discretion to: (a) order the defendant to pay the plaintiff's costs (per Austin J in Mitchell v Boutagy); (b) order the defendant to pay some of the plaintiff's costs (per Young J in Wilson and per Windeyer J in Goodwin); where there is conduct of an unreasonable nature on the part of the defendant (including the nature of the arguments maintained at the hearing). [14] In my view the concept of "unreasonableness" in this context embraces the type of conduct which enlivens the discretion of the Court to award indemnity costs against a party. In Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; 118 ALR 248, Sheppard J cited with approval the words of French J in Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (FCA, 3/05/91, unreported), in which it was said that the categories of case in which discretion may be exercised are not closed. Sheppard J then said at ALR 257: "it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152 evidence of particular misconduct that causes loss of time to the court and to other parties (French J in Tetijo ); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata ) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata ); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson [1987] 10 NSWLR 525; Maitland Hospital v Fisher (No 2) [1992] 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Kent (SC(NSW)(CA), 27 Sept 1993, unreported) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records ). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis." 74 A number of the criteria for awarding costs summarised by Rein AJ are relied on by the Applicant as applicable to one or both of the Respondents in this case (see par 15(a), (c), (d), (e) and (f)). Rein AJ also referred to 117 York and Mitchell v Boutagy, when he found that unreasonable conduct in general can be an exception to the usual result in a s 88K matter that a defendant/respondent is generally entitled to costs. 75 In 117 York, another application under s 88K of the Conveyancing Act, it was held that the entitlement of a defendant/respondent to costs would only be lost if there had been unreasonable conduct by it which made the proceedings more expensive (at 523F per Hodgson J). In that case the defendant was seeking indemnity costs. Hodgson J ordered that the plaintiff pay the defendant's costs on the usual basis, that is, not on an indemnity basis. In Mitchell, also considering an application under s 88K, Austin J interpreted the costs provision under s 88K(5) as reflective of legislative policy that a respondent, being required to grant an easement against its will, should generally have its costs borne by the applicant except in circumstances of unreasonableness on the part of the respondent, in which case the court, in its discretion, may order to the contrary (at [60]). His Honour recognised that an offer made by the plaintiff in that case for compensation, which had been rejected by the defendant, did not carry as much significance as it ordinarily would because of this legislative policy. The defendant was not unreasonable in rejecting the offer in reliance on this policy. His Honour, however, in granting the defendant's costs in that matter, noted at [67] that if, in the court's assessment, "it is unreasonable for the owner of the servient tenement to disregard or not favourably respond to a letter of offer, then a contrary order may well be justified." In Mitchell the plaintiff was ordered to pay, inter alia, the costs of the proceedings on the usual basis. 76 The Fourth Respondent submitted that these s 88K cases did not apply because s 40(5) provides him with the right to have his objection heard by the Court and s 88K does not have an equivalent provision. While that is a correct observation in relation to s 88K, I do not agree that s 40(5) means that an objector to the grant of an easement sought under s 40 is entitled to have his objection heard by the Court regardless of his conduct in the litigation and the making of settlement offers by an applicant, for example. An objector relying on s 40(5) must still behave reasonably as must any litigant before a court if s 40(8) is to apply in his or her favour. This finding also applies in relation to a similar submission from the Tenth Respondent that the Court is statutorily obliged to consider the Respondents objections. The purpose of s 40(5) is to provide a statutory basis for any objector to an easement to be a party in a s 40 application. A party to litigation is always bound by the rules of court as a general proposition. The necessity for this approach was also identified by Rein AJ in Owners Strata Plan at [31] because there would otherwise be no incentive to settle if parties believed they would get their costs paid by an applicant seeking an easement regardless of anything they did. 77 I consider the principles identified in Owners Strata Plan, Mitchell v Boutagy and 117 York can inform the Court's attitude to the application of s 40(8). Ultimately the Court must consider the conduct of the litigation to determine whether any parties have acted unreasonably in deciding how costs ought be awarded in light of s 40(8). 78 There is no doubt the Applicant has faced considerable opposition to its application for an easement from both Respondents. Given that s 40(8) specifies that the Applicant would usually pay the Respondents' costs I have to determine in the circumstances of this case whether the Respondents' behaviour in this litigation has been so unreasonable that I should not award any costs or disbursements in their favour and make no order as to costs but rather make cost orders in the Applicant's favour. The Applicant has been represented throughout by a solicitor and one or two counsel while the Fourth Respondent represented himself throughout and the Tenth Respondent was largely represented by her agent. I must consider the relevant conduct of the parties within the litigation to determine if any of the criteria identified in Owners Strata Plan arise (see [14] quotation at par 73). 79 The correspondence and conduct of the Applicant, its solicitor and the Respondents shows parties in considerable personal conflict over the issues within the litigation. The level of antagonism generated between the parties has also lead to unnecessarily detailed evidence and submissions about who said what to whom to a far greater extent than is usual or appropriate in a costs application. The Applicant's evidence and submissions raise various communications between the parties and are extensively countered by the Respondents. The specific and minute details of this evidence and submissions is not necessary to resolve for this costs application. Each party argues that the history of the litigation demonstrates how unreasonably the opposing party has behaved. Apart from observing that an unfortunate tone arises in the correspondence from all parties I am not going to dissect in the detail it has been presented by them the precise outcome of each instance in which one party alleges another party has presented incorrect evidence or misled the Court. Whether costs of whole proceedings should be paid by Fourth Respondent 80 The first issue to determine in view of the order sought by the Applicant (par 38(v)) is whether the costs of the whole proceedings should be paid by the Fourth Respondent on a party/party basis apart from where costs are sought from the Tenth Respondent. When the overall nature and conduct of the proceedings are considered, there are a number of reasons why the Fourth Respondent should not be required to pay the Applicant's costs from the outset up to the letter of compromise of 3 August 2007 or the later Calderbank letter of 16 October 2007. I will consider separately the offers of compromise sent by the Applicant to the Fourth Respondent. 81 The Applicant's s 40 application sought from the outset as its first option the amendment of the existing easements burdening the various Respondents. The Respondents submitted that the Applicant acted unreasonably because it pursued but then abandoned on 16 October 2007 its application to amend existing easements. This was a substantive issue which the Respondents wished to oppose. I consider this was an issue which the Respondents were entitled to contest and did raise a new issue about the application of s 40. This basis for the application was not dropped by the Applicant until 16 October 2007. Further, the final terms of the easement were not agreed with the Council until 18 October 2007, shortly before the hearing in this matter. The Respondents have submitted that the final terms of the easement were significant to them and that the terms of the easement finally agreed by the Applicant were a substantial improvement on what had been originally proposed by the Applicant to the Council. I accept their submissions on this aspect. 82 There were at the outset numerous other Respondents apart from the Council, who settled at different times over the course of the proceedings (see chronology at par 12). The Second Respondent settled early in the proceedings in August 2006, followed by the Third Respondents in February of 2007. The Twelfth Respondent settled in August 2007, followed by the Eighth Respondents in September 2007. The Sixth, Seventh and Eleventh Respondents settled in October 2007. The Applicant obviously had to deal with them in the course of the proceedings and incur costs in relation to them. The last to settle before the hearing was the Fifth Respondent in October 2007. I consider the legal costs incurred by the Applicant must also have related to these other Respondents in the proceedings and are not costs which the Fourth Respondent should be required to pay. 83 As submitted by the Respondents, the conduct of the proceedings by the Applicant also caused their prolongation with the s 96 modification application lodged in the Class 1 proceedings in April 2007 after this s 40 application had been filed in August 2006. The s 96 modification was determined on 13 June 2007 and facilitated this s 40 application. It clearly caused a prolongation of the proceedings. To the extent the Applicant also explored with the Council the possibility of an agreement based on s 59A of the Local Government Act after these proceedings were commenced, that also would have extended their duration. 84 Another consideration in this matter is that both Respondents were not represented by a lawyer. The Applicant had a solicitor and one or two counsel throughout the process. It is necessary in these circumstances to take into account the lack of familiarity with litigation processes when considering whether the Fourth Respondent's behaviour has been so unreasonable that an award of costs in the Applicant's favour is warranted. The challenges of having litigants in person (and I would include agents) before the Court is well recognised in numerous cases because the conduct of litigation involving litigants in person does raise particular challenges for a court and a legally represented party on the other side: see Bhagat v Royal & Sun Alliance Life Assurance Australia Ltd [2000] NSWSC 159 at [13] per Hodgson J, considered in Fitzpatrick v Keelty (No 2) [2008] FCA 742. 85 I also agree with the Fourth Respondent's submissions that the matter did not justify the level of legal representation which the Applicant employed. If I award costs in favour of the Applicant it will not include the costs of senior counsel. 86 Taking into account all these circumstances of the litigation, I do not consider that the Applicant can argue that the Fourth Respondent has acted so unreasonably in contesting the application from the outset that he ought to pay costs. The evidence the Applicant based its argument on was concerned largely with conduct outside the litigation. The observations of Talbot J relied on by the Applicant were obiter and cannot be a basis for the adverse findings the Applicant seeks. This does not require me to make any findings which the Applicant urged concerning the ulterior motives of the Fourth Respondent in engaging in the litigation (par 15(a)). Nor is there evidence suggesting I should find that there was undue prolongation of the case or conduct that was intended to frustrate the process (par 15(e) and (g)). Security for costs (Tenth Respondent) 87 In relation to the specific aspects of the litigation raised by the Applicant, the security for costs hearing process does not provide any basis for arguing there was unreasonable behaviour by the Tenth Respondent. The judge hearing the matter determined that it was appropriate to make an order requiring security for costs and there was no appeal from that order. While the submissions and original orders sought by the Applicant did seek these costs the later orders sought in submissions in reply from the Applicant (set out at par 38) did not, so that it appears these are not now claimed by the Applicant from the Tenth Respondent. Hydrology hearing (Tenth and Fourth Respondents) 88 The Applicant seeks an order that the Tenth Respondent pay a half share of the legal costs and costs of Mr Wall for the second day of hearing on the hydrology issue. The balance is sought from the Fourth Respondent (par 38(ii) and (v)). Voluminous material has been filed by the Applicant in support of its argument including parts of the transcript of the hearing before Biscoe J. The costs of the second day are sought because the process was argued to be prolonged by the Respondents' behaviour and parts of the transcript are relied on as demonstrating that unreasonable behaviour. 89 The Respondents submitted that the issues raised by them were entirely justified and that the court appointed expert, Mr Wall, considered that the onsite detention basin required changing. They were entitled to act as they did as it was necessary to test the evidence of the court appointed expert and the Applicant's expert. It was the Applicant's choice to call its own expert in any event. No suggestion was made at the time by the judge hearing the matter that the proceedings were a waste of time. 90 The Respondents were unsuccessful in their arguments at the hydrology hearing but that alone does not suggest unreasonableness on their part. It is not immediately apparent from reviewing the extensive material relied on by the Applicant that the Respondents, one of whom was legally represented at that stage, were doing any more than vigorously exploring the evidence of the court appointed expert and the Applicant's expert. There is no indication from the judgment of Biscoe J of unreasonable behaviour by either Respondent. I do not consider that there is such unreasonable behaviour demonstrated that I should award costs in favour of the Applicant in relation to this part of the proceedings. Notice to Produce (Fourth Respondent) 91 Very little Court time was taken up by the Notice to Produce filed by the Fourth Respondent on 29 September 2007 when the matter was before me and I held it did not have to be answered. I consider the Applicant would have incurred few costs in relation to it. Whether it was issued for the ulterior purpose identified by the Applicant of gaining information in order to frustrate the Applicant's development is denied by the Respondent and is not a matter I am prepared to infer. The Fourth Respondent argued it was issued to enable a claim to be made under the Wengarin principle of compensation (see Wengarin Pty Ltd v Byron Shire Council (1999) 9 BPR 16,985 per Young J at [26]) and that principle was included in his written and oral submissions at the hearing as an appropriate basis for valuation. There is no basis for awarding costs in favour of the Applicant in relation to the Notice to Produce. Hearing on 16 October 2007 of Notice of Motion of Applicant dated 24 September 2007 (Tenth and Fourth Respondents) 92 The Applicant seeks an order that the Tenth Respondent pay half the costs of the hearing of the motion on 16 October 2007, with the rest payable by the Fourth Respondent (par 38(iii), (v)). The Applicant argued that because the "jurisdictional" issue of whether s 40(2)(d) had been satisfied (and therefore whether a threshold requirement of s 40 had been met) was stood over to the hearing and was a matter determined against the Respondents the Applicant's costs ought be paid. While the "jurisdictional" matter raised by the Respondents' Notice of Motion listed before me on 16 October 2007 was not dealt with on that day as I considered it more appropriate to be dealt with as part of the substantive argument in the matter, several issues related to the conduct of the hearing were considered and resolved on that day. The nature of the easement application sought in the Applicant's case was also clarified. 93 Additional matters considered that day included consideration of the Applicant's Notice of Motion seeking leave to rely on an additional valuation report, which was refused. The Respondents' Notice of Motion to have Mr Wood, the court appointed valuer, dismissed on the ground of bias was also considered and refused. I do not consider the hearing was a waste of the Court's time or of the Applicant's. The matters not dealt with on that day were heard at the hearing on 30 and 31 October 2007 so that preparation of argument was not wasted. No award of costs in the Applicant's favour is justified. Offers of compromise/settlement (Tenth and Fourth Respondent) 94 The Applicant alleged the Respondents unreasonably refused offers of compromise. Offers to settle are not generally able to be relied on in cost arguments given the general principle of litigation directed to encouraging settlement negotiations by the parties. In this case the Applicant relied on offers of compromise made under the relevant SCR as they then applied in this Court and further letters sent in reliance on the principle in Calderbank v Calderbank [1975] 3 All ER 333. Such offers are able to be considered in costs arguments, as the Applicant has done in this matter. 95 Part 52A r 22 of the SCR as then in force provided for the making of offers of compromise. If refused, and the matter determined on terms no less favourable to the plaintiff than the terms of the offer, the plaintiff was entitled to an order against the defendant for costs from the day the offer was made, assessed on an indemnity basis. Costs up to the date of the letter of compromise could be payable on a party/party basis. A court has discretion to make a different costs order however. Offers of compromise can also be made in the form of a Calderbank offer, being an offer that complies with Calderbank v Calderbank, a without prejudice offer save as to costs. A Calderbank type of offer will not justify an indemnity costs order unless its rejection was unreasonable, see cases referred to in Ritchie's Uniform Civil Procedure NSW [42.13.26] stating the settled principle in NSW. While there is a mixing up of the principles relevant to offers under the SCR and the making of Calderbank offers as recognised under the general law by all the parties in their submissions, the principles of what must be considered on costs are broadly similar. Refusal of Calderbank offers are to be weighed up in the Court's consideration of costs. 96 The Applicant alleged the Fourth Respondent imprudently refused offers of compromise. The history of the offers of compromise made by the Applicant to the Fourth Respondent pursuant to the SCR or as a Calderbank offer is referred to in the chronology and the respective affidavits and submissions of the parties. The offers relevant to the argument were to pay an identified sum together with reasonable legal costs. 97 The Applicant claims costs on an indemnity basis from the date of refusal of the letter of 3 August 2007, sent pursuant to the SCR, from the Fourth Respondent arguing the refusal was unreasonable. Emails dated 7 and 13 August 2007 were sent by Mr Sattler to the Fourth Respondent identifying the costs implication of offers under the SCR. This offer was refused. A further settlement offer was made in the Calderbank letter of 13 October 2007 to the Fourth Respondent (in other words not an offer under Pt 52A r 22 of the SCR). In the letter from the Applicant's solicitor the amount of compensation allowed by the court appointed valuer Mr Woods was offered to the Fourth Respondent together with legal costs, with the offer open until 22 October 2007. The Fourth Respondent relied on the circumstance that the final terms of the easement were not agreed as between the Council and the Applicant until 18 October 2007 to argue that neither offer by the Applicant was complete. The Fourth Respondent asked questions about the terms of the easement by email on 19 October 2007. This was responded to on 24 October 2007 by Mr Sattler. The Fourth Respondent replied on that day by email that the answers were too late as the offer period had expired. The Fourth Respondent also submitted that the offers of compromise (par 46) were not genuine but there does not appear to be any basis for such a submission given that the offer was for the amount identified by the court appointed valuer and included the offer to pay reasonable legal costs. 98 The key question to consider is whether the Fourth Respondent's argument that the refusal of the offers of compromise was reasonable because the terms of the easement were not yet finalised at the time the offers were made, is valid. While the Applicant submitted that the terms of the easement were for most of the proceedings in accordance with the usual terms under s 88B of the Conveyancing Act and the additional matters agreed with the Council on 18 October 2007 were not significant, the Respondents argued that the final terms of the easement amended to include a restriction on access and a drainage indemnity were significant to them. The fact the easement was not agreed earlier in the litigation supports the Fourth Respondent's argument. The final terms of the easement were agreed (18 October 2007) very close to the hearing (30-31 October 2007) when proceedings had been commenced on 7 August 2006. That suggests the offer of compromise dated 3 August 2007 to the Fourth Respondent was not complete. It also suggests the refusal of the Calderbank offer dated 13 October 2007 was not unreasonable given the sequence of events leading up to the email exchange on 24 October 2007, after the offer closed on 22 October 2007. I consider the final terms of the easement were significant to the Fourth Respondent and that the terms of the easement were as important to him as the amount of compensation awarded to him. That is a relevant consideration as recognised in Swann v Spiropoulos at [14]. I do not therefore consider his refusal of (or, strictly, failure to accept) the letter of compromise was unreasonable. 99 Given the indemnity costs order (par 38(iv) and (v)) sought by the Applicant against the Tenth Respondent I must consider the offer of compromise in a Calderbank letter dated 13 October 2007 sent to the Tenth Respondent offering the amount of valuation identified in Mr Wood's final report together with reasonable legal costs. That offer was accepted by email from the Tenth Respondent's agent on 18 October 2007 but then refused shortly before the final hearing at which the Tenth Respondent appeared as a contesting party by her agent. The Tenth Respondent's agent argued that there was no finding of a binding contract to settle between the parties and he was entitled to act as he did because the final terms of the easement were not agreed until 18 October 2007 and were not provided with the offer so that Pt 52A r 22 was not complied with. 100 The Tenth Respondent initially accepted then resiled from her acceptance of the Calderbank letter of offer. Her agent argued that as the Court made no finding on whether there was a binding contract to settle, this was not unreasonable. It is true that I did not make such a finding (nor was it necessary that I did so) but there is clear evidence that the Tenth Respondent did accept the offer made and later resiled from that position. I have held that the failure to have the agreed terms of the easement finalised in time for acceptance of the letters of offer by the Fourth Respondent meant his refusal was not unreasonable. That can also apply to the Tenth Respondent, as her agent argued, however the initial acceptance of the offer by her suggests that was not a key consideration at the time of acceptance of the offer. The decision by her to appear at the hearing via her agent, make an application for stay of proceedings and contest the hearing when that was refused resulted in further additional costs being incurred by the Applicant, as I discuss further below in the context of the easement hearing. 101 There is extensive case law about costs in relation to the application of the SCR in relation to offers of compromise and Calderbank letters. Cases referred to in the Applicant's submissions identify the principles which apply to the consideration of offers of settlement under Pt 52A r 22 of the SCR, see Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 and Maitland Hospital. While I agree with the Applicant that these cases do provide guidance on the general principles which apply to each of those circumstances it is always necessary to apply those general principles in the particular statutory context. The consideration of these principles in the context of s 40 cases is limited, possibly because there have been relatively few cases decided under s 40 by this Court. The interaction between s 88K(5), and the UCPR r 42.14 (previously Pt 52A r 22 SCR) concerning offers of compromise was considered by Rein AJ in Owners Strata Plan at [32] as follows: There is a strong policy content to the rules relating to offers of compromise, namely to encourage parties to make and accept realistic and reasonable offers. I do not think, however, that Rule 42.14 (or its predecessor Part 52A Rule 22) should be viewed as "trumping" s 88K(5). Rather the Court is required to have regard to both the offer of compromise (if effective) and s 88K(5) in determining what order should be made. When the defendant's conduct has been entirely appropriate (other than in failing to accept the offer made) that would be very relevant and may well lead to a significantly reduced burden of costs, although generally speaking a defendant who failed to accept a reasonable offer of compromise would I think be unlikely to obtain an order for costs in his or her favour. 102 The approach that an offer of compromise, whether it be pursuant to rules of court or by way of a Calderbank offer, does not "trump" s 40(8) is one which I adopt in this matter also. Section 40(8) is in similar terms to s 88K(5) and reflects a similar legislative intention (per Owners Strata Plan and Mitchell v Boutagy and Antipas). In other words the refusal of an offer of compromise whether under the SCR or a Calderbank offer must be weighed up in the circumstances of the particular case when considering costs. I have included this discussion as it is relevant to the consideration of the Tenth Respondent's behaviour in accepting then rejecting an offer of compromise. Easement hearing 103 The Applicant's submissions concerning the unreasonable behaviour of the Respondents at the easement hearing allege the Fourth Respondent engaged in the easement hearing for the ulterior purposes of preventing the development, obtaining compensation for the impact of the development on his property, delaying the proceedings, causing the Applicant to incur interest, defending the proceedings in wilful disregard of clearly established law and made allegations which ought never to have been made. Both Respondents acted unreasonably in not accepting the opinion of Mr Wood, the court appointed valuer, in raising groundless jurisdictional issues and reagitating issues already determined in the hydrology hearing. 104 The Applicant also seeks the costs it incurred in responding to the lengthy submissions of the Tenth Respondent which her agent had leave to file after the hearing. This leave was given by me because her agent had sought a stay of proceedings which I refused at the outset of the hearing. I allowed additional time to provide an opportunity to the Tenth Respondent to participate via her agent because he said he was not properly prepared for the hearing. The submissions filed were extensive and required a lot of work by the Applicant, and ultimately the Court, to answer after the hearing. Had the Tenth Respondent been ready for the hearing then all issues could have been dealt with through the usual procedures at the hearing. 105 The Respondents raised a large number of issues at the hearing and in subsequent submissions as identified in my first judgment, in relation to which they were unsuccessful. These included four issues said to be determinative of whether the Court had jurisdiction to consider the application. The Applicant argued they raised groundless jurisdictional issues which disregarded the existing law. Further, the Applicant argued the Respondents continued to defend the proceedings in wilful disregard of established law and caused prolongation of the proceedings by groundless contentions (par 15(c) and (e)). 106 Mounting arguments that are unsuccessful does not of itself suggest unreasonable behaviour. The material relied on by the Applicant as demonstrating unreasonable behaviour focuses on the Respondents raising issues in relation to which they were unsuccessful. I do not consider that most of the issues raised by the Respondents were doomed to fail, which is essentially the thrust of the Applicant's submissions. Many of the issues raised were arguable. Had the Respondents had competent legal representation it is likely that the arguments mounted by them would have been more refined and the large number of issues raised would have been reduced but I do not consider that is the appropriate standard I should apply. Rather I must determine, given that the Respondents did not have legal representation, whether their actions were unreasonable in raising all the matters that they did and considering the matter overall I do not consider that they were, with one exception in relation to the Fourth Respondent. 107 The Fourth Respondent was informed by Jagot J in case management that compensation was payable in relation to the imposition of the easement and its effects, not in relation to the development: see extract of transcript in exhibit A (exhibit to Mr Poole's affidavit dated 8 October 2007, vol 2, tab C) and also letter from Mr Sattler to the Fourth Respondent dated 11 July 2007. The Fourth Respondent nevertheless argued at the hearing that he was entitled to a substantial amount for injurious affectation as result of the proposed development. That approach was rejected in my judgment at [99]. That argument was doomed to fail and given that it is why the Fourth Respondent argued for a very large amount of compensation over $400,000, which was substantially beyond the amount of valuation he was ever likely to recover, does suggest unreasonable behaviour on his part. That unreasonableness needs to be considered in the context that I have otherwise held the issues raised by the Respondents' arguments were not unreasonable. 108 The failure to call another expert witness apart from the court appointed valuer Mr Wood does not suggest the Respondents acted unreasonably. They applied by Notice of Motion unsuccessfully to have Mr Wood replaced on the ground of bias before the hearing commenced, another matter heard on 16 October 2007. They were entitled to ask Mr Wood questions as they did and test his evidence. Should costs be awarded in favour of the Respondents? 109 The first question to ask in light of all these findings is whether s 40(8) should be applied in favour of the Respondents. 110 The Tenth Respondent has incurred legal costs in relation to the hydrology hearing. Taking into account all that Respondent's actions through her agent I do not consider that any costs order in her favour is warranted. She accepted the reasonable offer of compromise made by the Applicant in October 2007, then refused it and contested the grant of the easement at the hearing. Her agent applied for a stay of proceedings which was refused and in order to enable him to prepare his arguments before the Court I gave leave for further submissions to be filed after the hearing. These were substantial and required significant additional work to be carried out by the Applicant due to the lengthy submissions raising multiple issues filed after the hearing. To the extent she has incurred legal costs earlier in the proceedings these should be borne by the Tenth Respondent. It follows that the monies held under the security for costs order dated 27 July 2007 should be released to the Applicant. 111 The Fourth Respondent is not entitled to disbursements as he also acted unreasonably in maintaining a hopeless argument at the hearing which meant he sought an unrealistic amount of compensation. Should costs be awarded in favour of the Applicant 112 If there is unreasonable behaviour, the issue then arises of whether costs should be payable to the Applicant and if so whether this should be on an indemnity basis. The Applicant referred to several cases in its submissions (par 14) where indemnity cost orders have been considered in proceedings under the Land Acquisition (Just Terms Compensation) Act 1991 (Niezabitowski, Evagelakos) and the general principles for the award of indemnity costs identified. Indemnity cost orders must be considered in light of s 40(8). In Owners Strata Plan the awarding of costs against a defendant/respondent where there was a provision similar to s 40(8) was held to be justified if behaviour justifying an award of costs on an indemnity basis was found to have occurred. The award of costs in that matter was not made on an indemnity basis rather on the usual party/party basis. 113 I have ordered that the Respondents ought not receive any costs or disbursements. The Applicant seeks various costs orders (par 38). As follows from my findings on various aspects of the proceedings identified earlier in my judgment I do not consider most of these orders should be made. The only issue that does require determination and is finely balanced in the circumstances of this case is the indemnity costs order sought in relation to the behaviour of the Tenth Respondents in relation to her acceptance then repudiation of a Calderbank letter, and the impact that had on the proceedings. I consider the Tenth Respondent in particular has acted unreasonably in accepting then rejecting a reasonable offer of settlement. Her involvement at the hearing and subsequently did result in substantial additional costs being incurred by the Applicant after the hearing. That is the basis on which I have ordered the Tenth Respondent not to have her legal costs paid by the Applicant, the usual order under s 40(8). On balance I do not consider I should also award an additional amount of costs in favour of the Applicant in all the circumstances before me and in light of the discussion at par 101-102. 114 The appropriate costs order in this matter is that all parties should pay their own costs and disbursements. I will otherwise make the orders handed up by the Applicant in relation to the easement terms and the award of compensation including the specific amounts of compensation to be awarded. I also need to make an order in relation to the payment of monies pursuant to the security for costs order dated 27 July 2007. I will provide draft orders to the parties in case any party wishes to raise any matter before these are finalised. 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.