Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Denning Real Estate Pty Ltd v XR Property Developments Pty Ltd [2016] NSWCA 286 Hearing dates: 13 October 2016 Date of orders: 13 October 2016 Decision date: 19 October 2016 Before: Leeming JA; Sackville AJA Decision: Summons seeking leave to appeal filed 5 August 2016 dismissed with costs. Catchwords: APPEAL – leave to appeal – subject matter confined to costs – applicable test – no issue of principle or question of public importance or reasonably clear injustice Legislation Cited: Supreme Court Act 1970 (NSW), s 101 Cases Cited: Gibson v Drumm [2016] NSWCA 206 House v The King (1935) 55 CLR 499 Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 XR Property Developments Pty Ltd v Denning Real Estate Pty Ltd [2015] NSWSC 1937 Yu v Cao (2015) 91 NSWLR 190; [2015] NSWCA 276 Category: Principal judgment Parties: Denning Real Estate Pty Ltd (Applicant) XR Property Developments Pty Ltd (Respondent) Representation: Counsel: M Ashhurst SC (Applicant) I J King (Respondent) Solicitors: HWL Ebsworth Lawyers (Applicant) Connor Stevens (Respondent) File Number(s): 2016/168741 Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Citation: [2016] NSWSC 556 Date of Decision: 5 May 2016 Before: Young AJA File Number(s): 2015/259773 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Judgment 1. THE COURT: These are our reasons for ordering, following the hearing on 13 October 2016, that the summons seeking leave to appeal be dismissed with costs. 2. The subject matter of this application for leave to appeal is costs. For that reason, leave is required: Supreme Court Act 1970 (NSW), s 101(2)(c). The amount of those costs is not disclosed by the evidence, although the Court was told that it was common ground that they exceeded $100,000. 3. The parties to the proceedings are the owners of abutting blocks of land in Alexandria in inner Sydney. The plaintiff was undertaking a large scale redevelopment of its land; the defendant's land, according to the primary judge, was "due for redevelopment" but the defendant had not commenced the redevelopment process. 4. A statement of claim was filed on 4 September 2015. The matter was readied for hearing quickly (the plaintiff claimed that the defendant's encroachment hindered the redevelopment of the plaintiff's land). The primary judge conducted a trial over three days, one of which was a site view, in November 2015 and delivered a first judgment on 18 December 2015: XR Property Developments Pty Ltd v Denning Real Estate Pty Ltd [2015] NSWSC 1937. There was a further hearing on 29 April 2016, and a second judgment delivered on 5 May 2016: XR Property Developments Pty Ltd v Denning Real Estate Pty Ltd [2016] NSWSC 556. 5. The primary judge ordered that each party should bear its own costs of the view, and of the proceedings after 18 December 2015, but that the defendant should otherwise pay the plaintiff's costs up to and including 18 December 2015. The only orders from which the applicant seeks leave to appeal are those concerning costs. 6. The plaintiff succeeded in establishing an encroachment. The encroachment was not so great as that for which it had originally contended. Ultimately, it granted a licence for a period of some 14 months, for a fee of $3,250, and rescheduled the building works planned for the relevant portion of the site. It also obtained damages for disturbance in the amount of $500. It had sought an injunction requiring the encroachment's removal, and damages for trespass or nuisance in the amount of $60,000. The primary judge dismissed that aspect of the plaintiff's case, on the basis that when the encroaching structures were built, the land was in common ownership. 7. The defendant had cross-claimed. It sought an order compulsorily acquiring the land on which there was an encroachment, and an injunction preventing the demolition of any support to its land. 8. The primary judge addressed costs at some length at [8]-[12] of the second judgment, in the following terms: "8. This brings me to the question of costs. As I noted in my earlier judgment the problem was brought about because the previous owner of both blocks of land when it had its buildings constructed did not pay particular regards to where it subdivision line was going to take place in later years. It is accepted that this is an unintentional encroachment. Nonetheless, there is an encroachment and the Defendant is not entitled to maintain its encroachment once its existence came to light. I held there was no continuing trespass because there was no initial trespass and if there is no initial trespass there can be no continuing trespass. Notwithstanding this, the use of the Plaintiff's land without consent for the Defendant's purlins is something that the Plaintiff is not required to continue to countenance. 9. When the matter was raised the Defendant countered by making a series of allegations against the Plaintiff as to how its building work had detrimentally affected the Defendant. It did not actually deal with the problem of encroachment and solicitor's letters went back and forth dealing with all sorts of disputes the parties had between them. Thus it was necessary for the Plaintiff to commence these proceedings in order to pave the way to a solution. 10. The proceedings started in earnest with counsel on both sides including Senior Counsel for the Defendant and a view was held on site. However in the latter part of 2015 the parties both realised that commercially speaking this particular dispute between them could be settled by a licence at the appropriate fee. Thereafter the only expense appears to have been a report from a valuer which both parties have accepted as to the value of the land in dispute or easement or licence to be granted to deal with the problem and both parties have accepted that valuation. It is reflected in the licence fee. Both parties seek some order for costs in their favour. 11. The Defendant points out that the Plaintiff got nowhere near what it sought and in particular its case in nuisance and in trespass were dismissed and it ended up with compensation of less than $4000 taking into account the licence fee. However the Plaintiff was virtually forced to take this litigation to protect its own land so that at the very least the Plaintiff would be entitled to the costs of issuing the proceedings, the initial affidavits and the return day. The High Court recently in Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; 90 ALJR 270 made it clear that it was not appropriate to decide questions of costs by working out who had succeeded on what issue and it was usually more appropriate just to make a general order for costs even though the Plaintiff had not succeeded on all issues. That decision is merely by way of guidance even though it is binding because it recognises that each case will be dealt with on its own facts. I must also note that under s 14 of the Act 'the Court may make such order as to the payment of costs, charges and expenses and it may deem just in the circumstances and may take into consideration any offer of settlement made by either party.' 12. Section 14 has only been mentioned on a few previous occasions, none of any real note. The mention of taking into account offers of settlement give the flavour of there being a very pragmatic general discretion in the Court to deal with questions of costs. I believe that it is relevant to look at the situation where a person seeks relief against a restrictive covenant. The common practice is that persons being served with applications to vary a covenant are entitled to their reasonable and proper costs necessary incident to the application to get legal advice as to it and to put on reasonable evidence though if the application develops into adverse litigation costs normally follow the event (see e.g. Re Rose Bay Bowling and Recreation Club Ltd (1935) 52 WN (NSW) 77). By analogy it seems to me that the Plaintiff would be entitled to its costs up until the time when the Defendant had a fair opportunity to investigate and to react. It is difficult for me to draw the line but doing the best I can I would consider that the Plaintiff is entitled to its costs up to 18 December 2015 on the ordinary basis other than the costs of the view which each party should bear its own costs. Each party should bear its own costs after 18 December 2015." 1. The draft notice of appeal identifies three ways in which it is said that the exercise of the discretion as to costs miscarried. It is said that the primary judge (a) erroneously concluded that the defendant's correspondence "did not actually deal with the problem of the encroachment", (b) erroneously found that the plaintiff was "virtually forced" to take this litigation, when it could have avoided the litigation by requesting the defendant to remove the encroaching purlins within 14 months, and (c) drew an inappropriate analogy, or misapplied that analogy, when considering cases about the removal of a negative covenant. 2. The applicant invites this Court, in the event that error is found, to re-exercise the discretion by making a costs order of 90% of the costs up to 18 December 2015 in its favour, or alternatively that there be no order as to costs. 3. If this were an appeal as of right, Denning Real Estate would fail unless it could show error answering the description of House v The King (1935) 55 CLR 499. However, Denning Real Estate also requires leave. In order to obtain leave, the words of Campbell JA, with whom Young and Meagher JJA agreed, have regularly been applied: "Ordinarily it was appropriate to grant leave to appeal only concerning matters that involve issues of principle, questions of general public importance or an injustice which is reasonably clear, in the sense of going beyond [what is] merely arguable": Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 at [46]. 1. Many of the cases applying those principles are collected in this Court's judgment in Gibson v Drumm [2016] NSWCA 206 at [19]. There are many others. In its written submissions, the respondent relied on this statement of principle. 2. Mr Ashhurst SC, who appeared in this Court and at first instance, submitted orally that there was no separate requirement to obtain leave. He submitted that once the requisite House v King error was made out, then a party seeking leave to appeal from a judgment confined to costs would invariably be granted leave to appeal. In support, he relied on what had been said in Yu v Cao (2015) 91 NSWLR 190; [2015] NSWCA 276. That was an appeal from a decision to order costs against a non-party. At [157], McColl JA, with whom Sackville AJA and Adamson J agreed, said: "It was common ground that as the costs order involved the exercise of the s 98 costs discretion, the success of the appeal depended on demonstrating error in the House v R sense. Such error may be demonstrated if the primary judge acted upon a wrong principle, mistook the facts or failed to have regard to material considerations or reached a conclusion which was, on the facts, 'unreasonable or plainly unjust'." 1. However, at [5], her Honour had made it clear that no submissions had been addressed to the question of leave, and that leave had been sought out of an abundance of caution. Her Honour said that it was not necessary to resolve the question whether s 101(2)(c) applied, because "for the reasons that follow, I am of the view that, if required, leave to appeal should be granted". Ultimately the appeal was allowed. 2. It is quite plain that Yu v Cao is not authority for any proposition concerning the principles on which leave is to be granted. The point was not argued. The reasons expressly record that the point was not argued. There is no mention in the judgment of the familiar propositions governing the grant of leave, let alone any statement in terms that, for some reason, a different approach applied. The passage on which reliance is placed is expressed to turn on what was required in order for the appeal, not the application for leave to appeal, to be allowed. 3. It is tolerably plain that in its decision in Yu v Cao the Court addressed an important question concerning the approach to making costs orders against non-parties, and chose to do so (entirely appropriately, the point not having been argued) without determining whether s 101(2)(c) applied to a third party costs order. It is, with respect, quite plain that Yu v Cao does not support Mr Ashhurst's submission. 4. Mr Ashhurst's submission is also wrong in point of principle. As was pointed out during submissions, if his submission were correct, the effect is to deny to s 101(2)(c) any qualifying effect upon the right of appeal conferred by s 101(1), something which collides with the basal principle that "a court construing a statutory provision must strive to give meaning to every word of the provision": Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [71]. 5. More fundamentally, the submission conflates two distinct legal concepts. Review of a discretionary decision in accordance with the principles in House v The King reflects the measure of restraint that an appellate court must accord to the judicial exercise of discretionary power. That measure of restraint applies to a wide range of powers (including the power to impose sentence, which was the exercise of power in House v The King itself). On the other hand, the requirement to obtain leave is imposed by the Legislature, and qualifies the statutory right of a party to appeal, for a range of reasons reflecting an important public policy consideration, namely, that not every adverse determination of a court entitles a party as of right to an appeal by way of rehearing. 6. Accordingly, we reject the submission that House v The King error is sufficient. We apply the orthodox test for the grant of leave. 7. It is clear that there is no issue of principle in this application for leave, nor is there any question of general public importance. The applicant says that it was mostly successful, and that there is considerable injustice in its having to bear not only its own costs but also most of the costs of the plaintiff. We do not accept that characterisation of the position. It is not demonstrated that there is a reasonably clear injustice in a plaintiff who did not by any means have complete success, but who nevertheless obtained relief based on its fundamental claim that its neighbour was encroaching on its land, and obtained pecuniary relief on that basis, receiving a large proportion of its costs. The plaintiff was asserting an encroachment by the defendant in March 2015, which was ultimately formalised in its statement of claim filed six months later. The defence did not admit there was any encroachment. It was not until the defendant's written submissions were served (they were dated 17 November 2015), that it formally acknowledged that there was any encroachment on to the plaintiff's property. 8. There was, undoubtedly, a variety of approaches which could have been applied in exercising the costs discretion, following the plaintiff's partial success. Indeed, the alternatives contained in the draft notice of appeal confirm as much. This simply goes to demonstrate the difficulty faced by the applicant in demonstrating that there should be a grant of leave to appeal and a further hearing to make good its contention that there is House v The King error. 9. What has been said above is sufficient to require the application for leave to be dismissed. However, we would add the following. 10. Even if there were a grant of leave, it is far from clear that House v The King error is made out. The applicant pointed to what it said were two errors of material fact in the second and third sentences of [9] of the reasons of the primary judge, reproduce above. There is no such error. As to the error said to exist in the second sentence, there was, as noted above, no acceptance by the defendant of its encroachment until shortly before the hearing, notwithstanding that it had been squarely pointed out many months earlier. As to the error said to exist in the third sentence, the applicant said that because, by the afternoon of the last day of the trial, it had offered a licence for a period of 14 months, it was wrong for the primary judge to find that it was necessary for the plaintiff to commence proceedings. But that ignores the fact that for some ten weeks even after proceedings were commenced, the applicant did not accept that there was any encroachment; why in those circumstances should it be inferred that the applicant would have been more accommodating had litigation not been commenced? In any event, the point the primary judge was making was simply that the plaintiff was not required to countenance the continued encroachment on to its land and had to institute proceedings to assert its entitlement. 11. The third House v The King error was said to be the reliance by analogy on principles relating to removal of restrictive covenants. On a fair reading of the reasons, the primary judge appears to have been doing little more than saying that there was a significant difference between (a) the case where parties required some time and expense to investigate the position, and (b) the case where the parties enter into adverse litigation. It was plain that this was a case where there was adverse litigation. Rather than making an order that costs followed the event of the plaintiff's success as to the encroachment, and acknowledging that it was "difficult for me to draw the line", and observing that the primary judge was applying an analogy, his Honour made a lesser order. 12. There is, however, force in the applicant's submission that to the extent there is an analogy, it is a somewhat strained one, which is reflected by the fact that the order actually made differs from the type of order which would be made in a restrictive covenant case. Nonetheless, it may be doubted that the highly qualified reliance by the primary judge on an analogous approach to the exercise of the discretion as to costs amounts to an error of principle. As previously noted, it falls short of involving an issue of principle warranting the consideration of this Court. 13. For those reasons, the Court dismissed the summons seeking leave to appeal filed on 5 August 2016. It was not suggested that there was any reason for costs in this Court not to follow the event. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 19 October 2016