Supreme Court New South Wales Medium Neutral Citation: Kladis v Lowe (No 4) [2017] NSWSC 1259 Hearing dates: 6 September 2017 Date of orders: 19 September 2017 Decision date: 19 September 2017 Jurisdiction: Equity - Real Property List Before: Beech-Jones J Decision: First and second defendants to pay one-third of the plaintiff's costs of the proceedings. Catchwords: COSTS – dispute over whether easement allows dominant tenement owner to lodge Development Application for construction of a driveway – plaintiff succeeded on question of principle but defendants had some success in resisting relief – no question of principle Legislation Cited: Civil Procedure Act 2005, s 98(1) Uniform Civil Procedure Rules 2005, rr 42.1, 42.14 Cases Cited: Baker v Towle [2008] NSWCA 73 Cooper v Mulcahy; Mulcahy v Cooper (No 2) [2013] NSWCA 216 Kladis v Lowe [2016] NSWSC 1834 Kladis v Lowe [2017] NSWSC 249 Kladis v Lowe (No 3) [2017] NSWSC 815 Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd (No 2) [2014] NSWCA 391 Category: Costs Parties: Andrew Kladis (Plaintiff) Karen Lowe (First Defendant) Owners Corporation in Strata Plan 30459 (Second Defendant) Representation: Counsel: DE Grieve QC (Plaintiff) P Tomasetti SC (Defendants) Solicitors: Hones Lawyers (Plaintiff) Mills Oakley (Defendants) File Number(s): 2014/172551 Judgment 1. This judgment deals with costs. Background 1. On 23 June 2017, after three contested hearings, I made orders against the first and second defendants requiring them to give consent to the lodgement of a development application ("DA"), to be lodged by the plaintiff, seeking approval for the construction of a driveway over, inter alia, land owned by the defendants that is burdened by an easement in favour of the plaintiff (the "driveway"). 2. The course of the proceedings and the reasons for eventually making those orders is set in three earlier judgments which should be read together with this judgment, namely Kladis v Lowe [2016] NSWSC 1834 ("Kladis (No 1)"); Kladis v Lowe [2017] NSWSC 249 ("Kladis (No 2)") and Kladis v Lowe (No 3) [2017] NSWSC 815 ("Kladis (No 3)"). Nevertheless, it is necessary to describe the nature of the dispute and its outcome. 3. The plaintiff is the proprietor of the property known as No 26 Musgrave Street. The first defendant, Karen Lowe, is the proprietor of the property known as No 28 Musgrave Street. The second defendant, the Owners Corporation in Strata Plan 30459, is the proprietor of the common property of a strata plan for 30 Musgrave Street. A diagram of the properties and the relevant interests is set out in Kladis (No 2) at [5]. 4. At the hearing that lead to the judgement in Kladis (No 1) the plaintiff moved on a second further amended summons filed 24 August 2015 that, inter alia, sought an order requiring the defendants to execute consents to a DA served on the defendants' solicitors on 23 July 2015. In Kladis (No 1), I addressed three issues that arose in relation to the easements and that DA. First, I rejected the defendants' contention that the topology of the land in question meant that a right of carriageway for a vehicle over the relevant land was not "capable of enjoyment" (Kladis (No 1) at [41] to [46]). Second, I upheld the defendants' argument that they could not be required to consent to so much of the DA that sought permission to build a permanent encroachment on part of the second defendant's land over which the plaintiff had no rights (at [47] to [53]) (the "2m squared area"). Third, I rejected the defendants' contention that overall the proposed driveway was an unreasonable interference with their rights. 5. In resolving the second issue I rejected a further submission by the defendants to the effect that the proceedings were an "all or nothing" gambit by the plaintiffs in the sense that if any part of the proposed DA was objectionable then the entire proceedings had to be dismissed (Kladis (No 1) at [50] to [53]). Accordingly, I ordered the plaintiff to file and serve proposed orders to give effect to the findings in Kladis (No 1) including the deletion of the encroachment and various undertakings to ameliorate the effect on the defendants. 6. The plaintiff subsequently brought in revised orders. In Kladis (No 2), I rejected the orders proposed by the plaintiff and addressed and effectively rejected a further argument of the defendants that was overlooked in Kladis (No 1) (Kladis (No 2) at [35] to [43]). The vice in the plaintiff's proposed orders was that they did not identify a specific DA for the defendants to execute (Kladis (No 2) at [24]). Accordingly, I ordered the plaintiff to file and serve "proposed orders identifying the precise form of development application that he contends that either or both of the defendants should execute" (Kladis (No 2) at [47]). 7. Further, in Kladis (No 2) at [26] I observed that, in light of the deletion of the 2m squared area from the DA, the plaintiff had no entitlement to relief against the second defendant because it was not seeking the execution of a DA over any land of the second defendant in respect of which the plaintiff had rights. In doing so I overlooked that the DA the subject of Kladis (No 1) also proposed the undertaking of some minor regrading work over a tiny portion of the second defendant's land in respect of which the plaintiff did have rights ("strip E": see Kladis (No 2) at [5] to [6]). This area, which was not the subject of any submissions prior to Kladis (No 1), was brought to the Court's attention in written submissions lodged prior to Kladis (No 2), but was overlooked. Nevertheless, given that the specific relief sought by the plaintiff was wholly rejected in Kladis (No 2), the absence of any reference to this area in Kladis (No 2) was immaterial. 8. Prior to the hearing that lead to Kladis (No 3) the plaintiffs brought in a revised DA. This DA proposed substantial extensions over strip E such that it did raise a (more substantial) basis for obtaining relief against the second defendant. In Kladis (No 3) I rejected all of both defendants' arguments for resisting relief, some of which were inconsistent with the arguments put forward and accepted in Kladis (No 2) (see Kladis (No 3) at [22]). Submissions 1. In his written submissions the plaintiff contended that, as he was successful overall in the proceedings, an order for costs in his favour should follow. It was further submitted that the order should be made against both defendants given that the relief was granted against both of them and that a basis for relief against the second defendant always existed given the small regrading area that the Court overlooked in Kladis (No 2). 2. The plaintiff further submitted that any such order should be made on an indemnity basis. He relies on a letter of 24 June 2014 which offered to resolve the proceedings on terms requiring the defendants to execute the form of DA referred to in the prayers for relief in the plaintiff's amended summons filed 19 June 2014 with each party to pay their own costs. The letter enclosed an offer of compromise to the same effect. The written submissions contended that, by agreeing to forego their costs, the plaintiff was making a "real concession" because the proceedings were in effect an "all or nothing" matter (embracing the contention of the defendants in Kladis (No 1) noted above): Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd (No 2) [2014] NSWCA 391 at [43]. They contend that there was a "steadfast preparedness" on the plaintiff's part "to accommodate his neighbour's concerns" yet there was "an emphatic rejection by the defendants of every proposed compromise". 3. The defendants submitted that the plaintiff should pay their costs up to and including 17 March 2017, being the date of publication of Kladis (No 2). The defendants contended that until that time they had been successful in defending the plaintiff's claims for relief which sought orders that they execute consents to the lodgement of various iterations of the DA. They also noted that until that time no basis for relief against the second defendant was propounded and that it was not established that development approval for the regrading work noted on strip E was required given that that it only involved the removal of "10 small stones and weeds". The defendant accepted that they should pay the costs of the hearing on 16 June 2017 that resulted in the publication of judgment in Kladis (No 3). The defendants also contended that there were vast numbers of affidavits that were served by the parties that were not read. They contend that they should not have to wear the costs of their preparation. Consideration 1. The starting point for the determination of this application is s 98(1) of the Civil Procedure Act 2005, which provides that, subject to the rules of court, costs are in the discretion of the Court. Uniform Civil Procedure Rules, r 42.1 provides that "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". The submissions of the parties reveal a fundamental difference between them as to what constitutes the "event". The plaintiff effectively contended that the relevant "event" was their entitlement in a general sense to build a carriageway over the subject land. The defendants contended that the event was the plaintiff's entitlement to an order for the execution of a consent to a particular form of DA for the driveway. 2. These contentions illustrate that an attempt to use precision in identifying the event may distract from the proper exercise of the discretion (see Baker v Towle [2008] NSWCA 73 at [22] per Beazley JA; "Baker"). Instead, a determination of what constitutes the "event" requires an "evaluation of the outcome of the proceedings, the positions adopted by the parties during negotiations and their relative success in the matter" (Cooper v Mulcahy; Mulcahy v Cooper (No 2) [2013] NSWCA 216 at [9] per Hoeben JA citing Baker). 3. The positions adopted by the defendants appeared to be that they were not prepared to consent to any form of development application that was in fact put forward and were not prepared to engage in discussions over modifications to the DA. Otherwise, there were two interrelated issues in the proceedings, namely, whether the right of carriage way conferred in favour of the plaintiff over parts of the relevant land was capable of supporting a driveway and the precise form of DA that the defendants could be required to execute. The plaintiff was successful in relation to the first issue in Kladis (No 1) and again in Kladis (No 2). It was unsuccessful on the second issue in Kladis (No 1) and Kladis (No 2) but succeeded in Kladis (No 3). In Kladis (No 1) the proposed form of the DA suffered from the serious vice that it purported to affect a permanent trespass to the second defendant's property. In Kladis (No 2), I found that the plaintiff had wholly failed to undertake what was required of them, namely, to identify a specific DA for execution by the defendants. The defendants' opposition to the iteration of the DA considered in Kladis (No 3) was unreasonable. Subject to a consideration of the two issues next addressed, to reflect this assessment of success in relation to the "event" I would make an order that the defendants pay one-third of the plaintiff's costs of the proceedings. 4. The first issue concerns the letter dated 24 June 2014 and the offer of compromise enclosed with that letter. For the refusal of the defendants to accept the offer of compromise to result in an order for costs on an indemnity basis, it must engage UCPR 42.14. In particular, it must be demonstrated that the plaintiff obtained an "order or judgment on the claim no less favourable to the plaintiff than the terms of the offer". This directs attention to the order or judgment that was obtained. It was accepted that the DA the subject of the offer of compromise was the same as that considered in Kladis (No 1). Given that the orders proposed in the offer of compromise required the defendants to consent to a DA that effected a permanent trespass to the second defendants' property, it follows that I am not so satisfied. The same observations apply in respect of the letter dated 24 June 2014 to the extent it is relied on as a "Calderbank letter". It was reasonable for the defendants to reject that offer because the acceptance of the "offer" would require that they consent to what would otherwise be a trespass on the second defendant's land. Otherwise, contrary to the plaintiff's submissions on costs, these were never "all or nothing" proceedings. I rejected that contention in Kladis (No 1) at [51]. If I had accepted it I would have dismissed the proceedings and the plaintiff would be paying the defendants' costs. It follows that neither the defendants' failure to accept the offer in the letter dated 24 June 2014 nor the enclosed offer of compromise affect my determination of the appropriate costs order. 5. The second issue concerns the cost of the preparation of the affidavits that were prepared but not read at the hearing prior to the publication of Kladis (No 1). These are described in an affidavit sworn by the defendants' solicitor, Damian Ward, sworn 8 February 2017. Mr Ward explains that a number of (presumably expensive) affidavits from various categories of experts on planning and architectural issues were served by the parties but not read. In submissions, each party contended that their respective reports were only prepared because the other party served their expert's affidavit first and they were not read because the other party belatedly accepted that the material was irrelevant. Mr Ward's affidavit suggests that on 22 July 2014 the plaintiff first served reports from a traffic engineer (Mr Varga), and on or around 14 August 2014 the defendant first served reports from a registered surveyor (Mr Linker) and a town planner and engineer (Mr Coady). On or about 28 November 2014 the plaintiff's responded by serving an affidavit from an architect (Mr Vourtzoumis). Thereafter there was a blizzard of affidavits from experts served by the parties in response. In the end result, I am in no position to attribute responsibility for the cost incurred in preparing these affidavits. It will be a matter for assessment. Orders 1. Accordingly, I will make the costs order referred to in [15]. For the avoidance of doubt, it should be noted that the costs order I will make does not supersede any previous costs orders. 2. Accordingly, I order that: (1) The first and second defendants pay one-third of the plaintiff's costs of the proceedings. ********** 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 September 2017