Land and Environment Court of New South Wales CITATION : Glaser v Poole (No 2) [2010] NSWLEC 232 In 30948 of 2009 APPLICANT Amanda Poole RESPONDENTS Ivan Glaser Diane Glaser PARTIES : In 40276 of 2010 APPLICANTS Ivan Glaser Diane Glaser RESPONDENT Amanda Poole FILE NUMBER(S) : 30948 of 2009; 40279 of 2010 CORAM: Pain J KEY ISSUES: COSTS :- exercise of court's discretion - whether costs should be awarded on an indemnity basis in class 3 and class 4 proceedings Civil Procedure Act 2005 s 98 Encroachment of Buildings Act 1922 s 4(1), s 14, s 15 LEGISLATION CITED: Environmental Planning and Assessment Act 1979 Pt 4A Land and Environment Court Rules 2007 r 3.7 Uniform Civil Procedure Rules 2005 r 42 Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359 Ballina Shire Council v Stubberfield (No 2) [2006] NSWLEC 538 Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (No 2) [2009] NSWCA 12 Colgate Palmolive Co v Cussons Pty Limited (1993) 118 ALR 248 FAI General Insurance Co Ltd v Burns [1996] NSWCA 177; (1996) 9 ANZ Ins Cas 61-384 CASES CITED: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 39 Glaser v Poole [2010] NSWLEC 143 Latoudis v Casey (1990) 170 CLR 534 Packer v Meagher [1984] 3 NSWLR 486 Re Wilcox; ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 Rosniak v Government Insurance Office (1997) 41 NSWLR 608 Westfield Management Ltd & Ors v Direct Factory Outlets Homebush Pty Ltd & Ors (No 4) [2005] NSWLEC 168 DATES OF HEARING: 8 November 2010 DATE OF JUDGMENT: 12 November 2010 In 30948 of 2009 APPLICANT Mr I Hemmings SOLICITOR M E McMahon & Associates RESPONDENTS Mr P Tomasetti SC SOLICITOR Gerald Aronstan LEGAL REPRESENTATIVES: In 40276 of 2010 APPLICANTS Mr P Tomasetti SC SOLICITOR Gerald Aronstan RESPONDENT Mr I Hemmings SOLICITOR M E McMahon & Associates JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES PAIN J 12 November 2010 40276 of 2010 Glaser v Poole (No 2) 30948 of 2009 Poole v Glaser JUDGMENT 1 Her Honour: In Glaser v Poole [2010] NSWLEC 143 (Glaser No 1) (Class 4 proceedings) I made certain orders requiring Mrs Poole to remove a masonry pool deck and room area erected without development consent at the rear of her property, inter alia. The structure encroached onto the Glasers' land and the land of another neighbour. Mrs Poole's property is on top of a cliff at the rear of the Glasers' property. The Glasers now seek their costs of the Class 4 proceedings on an indemnity basis. 2 The Class 3 proceedings under the Encroachment of Buildings Act 1922 (the EB Act) (matter no 30948 of 2009) were commenced by Mrs Poole against the Glasers and another neighbour on 12 December 2009. The Class 3 proceedings sought an order that Mrs Poole be granted a conveyance transfer or lease of the subject land, and any estate or interest therein or any easement right or privilege, in relation to the encroaching structure she had constructed or cause to be constructed on the Glaser land. The Class 3 proceedings were set down for hearing on the same two days as the Class 4 proceedings. The Class 3 proceedings were discontinued on 3 August 2010, the first day of hearing. The Glasers also seek their costs of the Class 3 proceedings on an indemnity basis. 3 Mrs Poole through her counsel has offered to pay costs on the usual party/party basis in both proceedings. The only issue before me is whether costs ought be awarded on an indemnity basis in one or both proceedings. 4 In Glaser No 1 I had to determine if I would order removal of the unauthorized structure or make a mollifying order to enable the opportunity for a development application to be made to the Council. I determined that I should order removal of the unauthorized structure. I found at [68]-[69] that: Conduct of parties 68 The conduct of the parties is a relevant consideration. The Applicants' counsel has submitted that Mr Poole acted contumaciously without regard for the law and knowingly encroached on neighbouring land. Mr Poole gave oral evidence that the work undertaken was a mistake on his part. He could not recall the advice from Mr Cooney that he did require development consent. He also denied that he was aware that the building work encroached onto neighbouring land and did not seek to hide the work being undertaken. It appears from the photographs attached to Mr Poole's affidavit that pieces of plywood were placed against the wire fence to prevent debris falling below. The wood placed in that way did obscure the Applicants' view of the works but I do not consider that was deliberate. 69 I accept Mr Poole's evidence that he acted mistakenly, however he was careless in not complying with the requirements of the Home Building Act, failing to listen to the clear advice of his architect before the work was carried out that development consent for work of that kind would be required, and failing to understand the geotechnical requirements underpinning the design plan prepared by NB Consulting which he relied on. Failing to appreciate the limits of his property boundary was also careless. His conduct has resulted in a large masonry structure being built without development consent in a sensitive location, given the relationship of the Pooles' property to its neighbours. Costs provisions 5 Section 98 of the Civil Procedure Act 2005 provides: (1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. … 6 The costs provisions for certain Class 3 proceedings are in r 3.7(1)(c) of the Land and Environment Court Rules 2007 (the Court Rules). They do not apply to Class 3 proceedings under the EB Act. 7 Rule 42 of the Uniform Civil Procedure Rules 2005 (the UCPR) deals with costs and generally applies in Class 4 proceedings. Rule 42.1 states that: Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. 8 Rule 42.5 provides that indemnity costs can be awarded if unreasonably incurred. 9 Under the EB Act s 14 states: In any application under this Act the Court may make such order as to payment of costs charges and expenses as it may deem just in the circumstances and may take into consideration any offer of settlement made by either party. 10 Section 15 states; (1) Rules of Court may be made for the practice and procedure of the Court in applications under this Act. (2) The practice and procedure of the Court shall, except so far as they are inconsistent with this Act or any rules of Court, apply to applications under this Act. 11 To summarise, the same costs regime, r 42.1 of the UCPR, applies to my determination of costs in relation to the Class 3 and Class 4 proceedings. Chronology 12 The relevant chronology is as follows: 2007 10/7/07 DA365/2007 Alterations & additions to existing dwelling including rear balcony extension. 3/10/07 Development Consent granted to DA 365/2007. 19/11/07 DA365/2007A Section 96 2008: 8/5/08 DA365/2007B Section 96 28/5/08 CCB 205/2008 Construction certificate for alterations and additions. 27/6/08 DA365/2007C Section 96 Sept/Oct Builder's Foreman asked Glasers to stay out of bedroom for a few weeks; said the deck was merely being upgraded; no mention of the other works. Oct 08 Illegal building work commenced; carried out concurrently with CCB 205/2008. 2009 : 26/3/09 Hoarding comes down. Ivan Glaser ("IG") asks about imposing structure on the boundary that he does not recall seeing on the plans provided by Council. 26/3/09 Richard Poole's ("Poole") reply that there was no "change to heights or positions etc". 29/4/09 Max Hitter's complaint to Council about unauthorized building work. May 09 Illegal work completed. 19/5/09 IG notifies Poole re stormwater run off bringing sand and mud. 22/5/09 IG contacts Barry Johnson, PCA. He advises will be issuing Occupation Certificate for the house only. 1/6/09 Council's Notice of Intention to give Order S121H of EPA Act. 20/7/09 Council Demolition Notice pursuant to S121B of the Act. 27/7/09 Structural Certificate by McGeady of Northern Beaches Consulting; later clarified in affidavits filed in the class 4 proceedings that this pertains only to the house extensions. 31/7/09 Retrospective DA 399/2009 submitted for new deck & storage area. 12/8/09 Dan Novick letter of objection. 15/8/09 Ivan Glaser's letter of objection. +/- 15/8/09 Max Hitter's letter of objection. 24/10/09 Glaser's letter to Poole. 26/10/09 Rockfall on Glaser's property; IG hit with large rock; ambulance called out, but not taken to hospital. 28/10/09 IG's response to Poole's letter of 24/10/09. 18/11/09 Survey of boundary shows building encroachment of 0.8m2 on Glaser's land and 8.8m2 on Hitter's land and respectively 2m2 and 21m2 with fence (Does not take into account crank on fence). 19/11/09 Council's refusal of retrospective DA 399/09. 10/12/09 Jeffery and Katauskas ("J&K") proposal to commission by Poole. 17/12/09 Application Class 3 filed against Glaser & Hitter. Application Class 1 filed against Council's Demolition Order. 17/12/09 Inspection by J&K (ordered in Class 3 proceedings); access not sought from Glasers; risk of rockfall identified. 2010: 20/1/2010 Date of J&K Report. 2/2/2010 Gerald Aronstan Solicitor for Glasers ("GA") writes to Council to advise of rockfall on 16/10/09 and seeking appropriate orders to address the situation (copies to other parties' solicitors); Letter faxed to Poole's solicitor. 2/2/2010 Poole's solicitor faxes copy of J&K report of 20/1/2010. 4/2/2010 GA sends copy of J&K report to Council and requests urgent attention. 8/2/2010 GA requests certification from Poole's solicitor for the structure. 11/2/2010 Poole's solicitor furnishes copy of McGeady's structural certificate dated 20/7/09. 23/2/2010 Informal Mediation on Site with Council present. 24/3/10 IG notifies again re stormwater run-off from deck. 26/3/16 Poole's Facts and Contentions provided in class 3 proceedings. 31/3/10 PCA Brian Johnson issues Occupation Certificate for extension only. 16/4/10 Application Class 4 & Points of Claim filed and served by Glasers. 18/6/10 Class 3 – Court makes directions in preparation for hearing Class 3 proceedings to be fixed for hearing on same dates as Class 4 proceedings (with further directions for filing and serving of evidence); Class 4 – directions that Mrs Poole file defence and affidavits by 2/7/10. 2/7/10 DA330/2010 and application for building certificate BC61/2010 lodged with Council by Mrs Poole. 12/7/10 Defence class 4 filed. 3-4/8/10 Class 3 discontinued. Class 4 hearing for two days. 6/8/10 Judgment Glaser No 1. 27/8/10 Short hearing on appropriate orders to be made. 31/8/10 Orders finalised. Glasers' submissions 13 There is no disentitling conduct in either matter to displace the usual costs rule that costs follow the event in the Class 4 proceedings. Further the circumstances justify a finding that indemnity costs ought be paid because Mrs Poole acted unreasonably in maintaining a defence which was also an abuse of process because it was doomed to fail. 14 The Class 3 proceedings were unreasonable, an abuse of process and doomed to fail because the encroachment was the result of illegal development work, the structure was built by Mrs Poole's husband without a builder's licence or the necessary qualifications to carry out the work, there was gross negligence by Mrs Poole's husband in ignoring a survey diagram of the boundary, he ignored advice given by his architect that the structure would require development consent, made no attempt to bring the development to the attention of the Glasers, built on a clifftop without geotechnical assessment of the structural capacity of the ground and cliff, there was no evidence that any structural engineering, hydraulic engineering or architectural design input, there was no certification of the structure under Part 4A of the Environmental Planning and Assessment Act 1979 (the EP&A Act) and a demolition order of the Council was not complied with. A retrospective development application (DA) was refused on 19 November 2009 by the Council because the DA did not comply with relevant controls. The unauthorized work had a substantial impact on the environment given its location at the top of a cliff overlooking the Glasers' and other property. The Class 3 proceedings were commenced with an ulterior or collateral purpose, to acquire land to enhance Mrs Poole's development aspirations and to secure an advantage from delinquent conduct. 15 The application for a building certificate BC61/2010 which was lodged by Mrs Poole on 2 July 2010 to attempt to regularise a breach was doomed to fail as the building certificate could not be issued when the Council had issued a demolition order giving as a reason harm to public safety. 16 Class 4 proceedings were commenced by the Glasers after an undertaking sought from Mrs Poole on 9 April 2010 to remove the illegal structure was not given. The proceedings were necessary in order to ensure the removal of the illegal encroachment on the Glasers' property. Mrs Poole unreasonably maintained her defence to the proceedings in that she failed to disregard the legitimate safety concerns of the Glasers. Mr McGeady, Mrs Poole's structural engineer, gave evidence that the structure was built without his firm's knowledge or approval. Mrs Poole brought forward no evidence to support her position that the structure was stable and safe. Mrs Poole's architect's evidence was that he advised Mr Poole that development consent was required and gave him a survey. The substantial amenity impact on the Glasers was identified in the planning evidence of Mr Smith. The concession in the proceedings to seek a stay of a demolition order was a "claytons" concession. 17 Even after judgment had been handed down and the parties were asked to confer on appropriate orders, it was necessary to have another short hearing to finalise orders because Mrs Poole sought orders that were not in accordance with the judgment. A further expert report to support seeking orders not in accordance with the judgment was served by Mrs Poole's solicitor. (I note that report was not read before me). 18 The Glasers have been exposed to undue stress, anxiety and cost over a protracted period of time. In all the circumstances, there is no good reason as to why they should bear any of the costs they have had to incur in order to protect their safety, rights and interests. There is every good reason why Mrs Poole should be made to take responsibility for all of the Glasers' costs. 19 In reply the Glasers' counsel relied on Re Wilcox; ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 that circumstances may justify departure from the usual costs order where the justice of the case warrants such an approach. Costs are not punitive but compensatory; Latoudis v Casey (1990) 170 CLR 534. Mrs Poole's submissions 20 The Glasers' submissions are not based on the findings in the judgment at [68]-[69] (par 4 above) that Mr Poole was mistaken and careless and did not act deliberately or contumaciously in undertaking the unauthorised work. 21 Mr Poole was not aware until the two affidavits of Mr McGeady, the structural engineer employed by the Pooles, sworn in the Class 4 proceedings, that certification of the house extensions for which development consent was granted was not intended to include the deck structure on the rear boundary. The certificate issued by Mr McGeady appears to cover that work. 22 The Class 3 proceedings were commenced as a necessary complement to the Class 1 appeal against the demolition order issued by the Council. That appeal was bound to fail in the event that the neighbours, the Glasers and others, over whose property the structure encroached did not give consent to the encroachment. There was no ulterior motive in pursuing an avenue open to Mrs Poole under the EB Act. There is no impropriety in applying under the EB Act in these circumstances. For example s 4(1) provides that where the encroachment is deliberate (not found here in any event) any land value will be tripled as compensation. The Class 3 proceedings were discontinued when no agreement with the affected neighbours could be reached. It was appropriate and necessary for Mrs Poole to commence Class 3 proceedings as she was seeking to regularise the unauthorised work. The Jeffrey & Katauskas engineering report obtained in the Class 3 proceedings did not identify any safety concern with the work undertaken. 23 The issues between the parties could have been resolved within the Class 1 and Class 3 proceedings. The Class 4 proceedings were available to the Glasers but were not essential to the resolution of the matters in issue. In the Class 4 proceedings Mrs Poole accepted the breach of the EP&A Act and sought only to resist the making of orders on the basis of the exercise of the Court's discretion. Mrs Poole's approach in the Class 4 proceedings was not doomed to fail. 24 None of the circumstances referred to in the authorities relied on at par 14 of the Glasers' counsel's submissions apply in the circumstances. Mrs Poole is criticised for not responding to all the expert evidence filed in reply by the Glasers. If indemnity costs are awarded then vigorously pursuing Class 4 proceedings is encouraged. That Mrs Poole did not respond to all the expert affidavits filed in reply by the Glasers (affidavits of a town planner, valuer, structural engineer inter alia were filed) is not behaviour suggesting that an indemnity costs order ought be made. 25 The application for a building certificate was not necessarily doomed to fail. It is a frequent occurrence that an application and appeal against an order travel together so that in the event an appeal is successful a building certificate can be issued. 26 In Glaser No 1 the Court raised whether retention of the stormwater system should be considered as part of final orders. Pool equipment was also to be considered, as raised with the Court when judgment was delivered. Mrs Poole's counsel made appropriate submissions concerning the form of orders in accordance with the judgment. 27 It is not correct to say that the Glasers had no choice but to commence Class 4 proceedings, that is essentially a neutral consideration given the Class 1 and Class 3 proceedings provided an adequate means for the resolution of the issues between the parties. Finding 28 The decision to award indemnity costs depends on the exercise of the Court's discretion in light of the particular circumstances of the case. In Ballina Shire Council v Stubberfield (No 2) [2006] NSWLEC 538 at [21]-[22] I identified relevant principles for the determination of whether indemnity costs ought be awarded, referring in turn to my decision in Westfield Management Ltd & Ors v Direct Factory Outlets Homebush Pty Ltd & Ors (No 4) [2005] NSWLEC 168 as follows: Should Council get indemnity costs? 21 The Council seeks costs on an indemnity basis. Port Stephens involved a claim for indemnity costs in Class 4 proceedings, where the applicant had made a "without prejudice" offer of compromise to the respondent. The offer was not accepted, court proceedings ensued and the applicant obtained judgment in its favour. In considering its application for indemnity costs, Cowdroy J at [6] adopted the following principles identified by Einfeld J in Stelios Christofidellis & Ors v Ned & Visjna Zdrilic & Ors [2000] FCA 679: In my opinion, the two recent decisions of a Full Court of this Court in Re Wilcox: Ex parte v Venture Industries Pty Ltd (1996) 141 ALR 727 (Black CJ, Cooper and Merkel JJ) and Abbott v Random House Australia [1999] FCA 1540 (Beaumont, Miles and Drummond JJ) have settled this question. In this respect, the following extract of the judgment in Re Wilcox (at page 732-3 was quoted with approval in Abbott: In order to exercise the discretion [to award indemnity costs] judicially the following principles have been accepted by the court as applicable: (a) the court ought not to depart from the rule that costs be ordered on a party and party basis unless the circumstances of the case warrant the court in departing from the usual course; (b) the circumstances which may warrant departure from the usual course arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the court in departing from the usual course; (c) while the circumstances in cases in which indemnity costs have been ordered offer a guide, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for costs other than on a party and party basis… …these three authorities suggest that an order for indemnity costs is only appropriate in a case where an offer of settlement has been rejected in circumstances that made the further litigation of the proceedings plainly unreasonable. 22 In Westfield Management, I struck out the applicant's case, resulting in claims for indemnity costs from all respondents involved. In deciding whether to grant indemnity costs, I had regard to the following principles at [35]: Woodward J in [ Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397] at 401: I believe that it is appropriate to consider awarding "solicitor and client" or "indemnity" costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. Sheppard J in [ Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225] at 233: In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes ... at 141 said the Court had a general and discretionary power to award costs as between solicitor and client "as and when the justice of the case might so require". Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston ... at 637; namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, or warranting a departure from the usual rule. But as French J said (at p 8) in Tetijo , "The categories in which the discretion may be exercised are not closed". Davies J expressed (at p6) similar views in Ragata ... Mason P in [ Rosniak v Government Insurance Office 41 NSWLR 608] at 616: Later cases have emphasised that the discretion to depart from the usual "party and party" basis for costs is not confined to the situation of what Gummow J described as the "ethically or morally delinquent party" (Botany Municipal Council v Secretary, Department of the Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412 at 415): see Baltic Shipping Co v Dillon, "Mikhail Lermontov" [ 1991] 22 NSWLR 1 at 34; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233-234. Nevertheless the court requires some evidence of unreasonable conduct, albeit that it need not rise as high as vexation. This is because party and party costs remain the norm, although it is common knowledge that they provide an inadequate indemnity. Any shift to a general or common rule that indemnity costs should be the order of the day is a matter for the legislature or the rule-maker: Huntsman Chemical Co Australia Ltd v International Pools Australia Ltd [1995] 36 NSWLR 242 at 248. 29 I concluded in Stubberfield No 2 at [23] that indemnity cost orders are not lightly made. 30 The cases relied on by the Glasers in submissions (par 14 of submissions) were as follows: (a) Cases commenced or continued where there is no chance of success ( Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (No 2) [2009] NSWCA 12 at [4]; Westfield Management Limited & Ors v Direct Factory Outlets Homebush Pty Ltd (No 4) at [35]); (b) Where proceedings amount to an abuse of process ( Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359 at 362); (c) Where the proceedings are commenced other than in good faith or for an ulterior or collateral purpose ( Packer v Meagher [1984] 3 NSWLR 486 at 500); (d) Behaviour which causes unnecessary anxiety, trouble or expense ( FAI General Insurance Co Ltd v Burns [1996] NSWCA 177; (1996) 9 ANZ Ins Cas 61-384)); (e) Unreasonable conduct, not necessarily amounting to vexatious conduct ( Rosniak v Government Insurance Office (1997) 41 NSWLR 608); (f) Proceedings commenced or continued in wilful disregard of known facts ( Colgate Palmolive Co v Cussons Pty Limited (1993) 118 ALR 248). 31 Each case must depend on its own facts and the categories of cases where indemnity costs can be awarded are not closed, as reflected in the authorities referred to above where reference is made to unreasonable conduct (per Mason J in Rosniak) or that the interests of justice demand it (per Re Wilcox). A lengthy chronology was helpfully provided and is included above which identifies the relevant actions taken by the respective parties. It is not necessary that I refer to this in detail to resolve the issues between the parties. Considering the abovenamed authorities in relation to the Class 3 proceedings, cases commenced or continued where there is no chance of success can give rise to an indemnity cost orders (par 30(a)). In Hornibrook the Court of Appeal was considering circumstances unlike this matter. Whether the Class 3 proceedings were commenced with no chance of success is not self evident in the sense that the EB Act provides for applications of the kind made by Mrs Poole. As identified by Mrs Poole's counsel, s4(1) provides for compensation to be tripled where an encroachment is found by the Court to be deliberate. Her counsel submitted the proceedings were necessary in order to have any chance of success in the Class 1 appeal against the demolition notice. This must be correct as it is highly unlikely the Court would allow encroaching structures to remain in the absence of consent from the owners whose land is encroached upon in an appeal against a council demolition order (assuming that the Court was otherwise minded to uphold such an appeal). The Class 3 proceedings cannot be described as an abuse of process (par 30(b)). Whether the commencement of the Class 3 proceedings was reasonable in the circumstances I will consider further below. 32 As submitted by Mrs Poole's counsel, the authority relied on for the principle that behaviour causing unnecessary anxiety, trouble and expense justifies an award of indemnity costs, FAI General (at par 30(d) above) is not authority for that proposition. This was clarified by the Glasers' counsel to be a reliance on Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397 at 401 where Woodward J held that there can be an ulterior purpose if proceedings are doomed to fail. For the reasons stated in par 31 above, I do not consider there can be a finding of an ulterior purpose in relation to the Class 3 proceedings. I am unclear on the facts before me how par 30(f) (above) applies as there does not appear to be any wilful disregard of known facts in commencing the Class 3 proceedings on Mrs Poole's part. 33 In relation to the Class 4 proceedings, while the Glasers' counsel refers to Mrs Poole's defence as being unreasonable and having no prospects of success, the defence filed admits the relevant breaches. The matters raised are directed to the exercise of the Court's discretion, being claims of minimal encroachment on the Glasers' property, negligible environmental impact, delay in commencing proceedings so that the work was completed, seeking mediation and that offers of compensation have been rejected. Most of those matters are relevant to the exercise of the Court's discretion and were referred to in Glaser No 1. 34 In support of the Class 4 application the Glasers relied on affidavits of Mr Glaser and Mr McGeady, the structural engineer who certified the Pooles' house extensions. In reply they relied on further affidavits of Mr Glaser, Mrs Glaser, Mr Smith (a town planner), Mr McGeady, a report of Mr Wotton valuer, a report of Mr Wright structural engineer, and an affidavit of Mr Cooney, architect, who had worked for the Pooles on the house extensions. Mr Jack Kampel, Mr Glaser's father in law, also swore an affidavit because he was the architect of the Glasers' house and attested to its impact. Mrs Poole is criticised for not seeking to rebut this evidence. There was no requirement on Mrs Poole to respond to the large number of affidavits, including of several experts, filed in reply by the Glasers. As submitted by her counsel, an award of indemnity costs would essentially be requiring parties to dispute all matters another party chooses to place before a court in order to avoid such costs orders. 35 Criticism is also made of Mrs Poole's counsel's submissions in relation to the finalisation of final orders after judgment was delivered. While a further expert report was served this was not relied on before me. To the extent costs were thrown away as a result, these are payable on a party/party basis. There was nothing untoward in the orders sought by Mrs Poole as part of the process of finalising orders on 27 August 2010 to justify an indemnity costs order. 36 There is no particular aspect of the conduct of the proceedings in Class 3 or Class 4 once commenced which suggests that an award of indemnity costs ought be made. 37 The question remains of whether Mr Poole's behaviour in building the unauthorised encroaching structure and Mrs Poole's action in commencing the Class 3 proceedings to attempt to overcome a hurdle to success in the Class 1 appeal, causing the Glasers to be joined in proceedings through no fault of their own, was so unreasonable so as to justify an award of costs on an indemnity basis. I held in Glaser No 1 that Mr Poole acted mistakenly and carelessly but not deliberately and contumaciously. He was very careless given the matters he failed to have regard to before the work was done, particularly in failing to remember that he was told by his architect that development consent would be required, not paying attention to a survey of property boundaries and not ensuring that building work was conducted within Mrs Poole's property boundary, as identified in par [69] of Glaser No 1 above at par 4. The impact on the Glasers' amenity, and potentially their safety, was substantial, as also identified in Glaser No 1. The level of carelessness exhibited by Mr Poole does suggest that the justice of the circumstances justifies an award of costs on an indemnity basis to the Glasers in the Class 3 proceedings. 38 Mr Poole's careless behaviour must also be considered in relation to the Class 4 proceedings. The Glasers chose to commence the Class 4 proceedings, as they were entitled to do. I agree with the submission of Mrs Poole's counsel that this is a neutral consideration as the matters in issue could also have been dealt with in the Class 1 appeal against the Council's demolition notice. I do not consider an award of indemnity costs is justified in the interests of justice in these circumstances. 39 As neither party has been completely successful in its arguments on whether indemnity costs ought be paid, the appropriate costs order for the hearing on indemnity costs is that each party pay its own costs. Orders 40 The Court makes the following orders: 1. In matter no 30948 of 2009, the Applicant Mrs Poole must pay the Respondents Mr and Mrs Glasers' costs on an indemnity basis. 2. In matter no 40276 of 2010, the Respondent Mrs Poole must pay the Applicants Mr and Mrs Glasers' costs on a party/party basis. 3. Each party must pay its own costs of the hearing on indemnity costs. 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