Land and Environment Court New South Wales Medium Neutral Citation: Smith v Kaddour (No 2) [2018] NSWLEC 21 Hearing dates: 31 October 2017 written submissions Date of orders: 07 March 2018 Decision date: 07 March 2018 Jurisdiction: Class 2 Before: Pain J Decision: See par 37 Catchwords: COSTS – whether fair and reasonable to award costs to successful respondents following dismissal of application under Trees (Disputes Between Neighbours) Act 2006 due to absence of jurisdiction and issue estoppel Legislation Cited: Civil Procedure Act 2005 s 98 Land and Environment Court Rules 2007 r 3.7 Trees (Disputes Between Neighbours) Act 2006 ss 7, 9, 10, 12, 13 Uniform Civil Procedure Rules 2005 r 13.4 Cases Cited: Fox v Ginsberg (No 3) [2011] NSWLEC 139 Harrison v Schipp [2001] NSWCA 13 Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 Smith & Hannaford v Zhang & Zhou [2011] NSWLEC 29 Smith v Kaddour [2017] NSWLEC 117 Category: Costs Parties: David James Smith (First Applicant) Lesley Sharon Hannaford (Second Applicant) Kareem Kaddour (First Respondent) Matin Kaddour (Second Respondent) Representation: COUNSEL: B Woolf (Applicants) M Parrino, solicitor (Respondents) SOLICITORS: Woolf Associates (Applicants) Project Lawyers Respondents) File Number(s): 17/196300 Judgment Costs 1. The Applicants Mr Smith and Ms Hannaford live in Amaroo Avenue Castle Cove. They applied unsuccessfully under s 9 of the Trees (Disputes Between Neighbours) Act 2006 (Trees Act) for orders in relation to a tree (the Tree) on their adjacent neighbours Mr and Mrs Kaddours' land in Allambie Road Castle Cove. I dismissed their application in Smith v Kaddour [2017] NSWLEC 117 (Smith No 1). The Respondents Mr and Mrs Kaddour now seek their costs on an indemnity or ordinary basis having been legally represented at the dismissal hearing. Mr Smith represented himself and Ms Hannaford at the dismissal hearing. A solicitor was engaged by Mr Smith to prepare written submissions on this costs application which I have taken into account. Applications under the Trees Act are heard as Class 2 proceedings. 2. 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. … 1. Rule 3.7 of the Land and Environment Court Rules 2007 (LEC Rules) provides: (1) This rule applies to the following proceedings: … (b) all proceedings in Class 2 of the Court's jurisdiction, … (2) The Court is not to make an order for the payment of costs unless the Court considers that the making of an order as to the whole or any part of the costs is fair and reasonable in the circumstances. (3) Circumstances in which the Court might consider the making of a costs order to be fair and reasonable include (without limitation) the following: (a) that the proceedings involve, as a central issue, a question of law, a question of fact or a question of mixed fact and law, and the determination of such question: (i) in one way was, or was potentially, determinative of the proceedings, and (ii) was preliminary to, or otherwise has not involved, an evaluation of the merits of any application the subject of the proceedings, … (d) that a party has acted unreasonably in the conduct of the proceedings, (e) that a party has commenced or defended the proceedings for an improper purpose, (f) that a party has commenced or continued a claim in the proceedings, or maintained a defence to the proceedings, where: (i) the claim or defence (as appropriate) did not have reasonable prospects of success, or (ii) to commence or continue the claim, or to maintain the defence, was otherwise unreasonable. 1. Section 9 of the Trees Act specifies that the Court has jurisdiction to make orders to remedy damage to property from a tree inter alia. Under s 10(2)(a) the Court cannot make an order unless satisfied that a tree has caused, is causing or is likely in the near future to cause damage to an applicant's property. The Applicants' earlier 2011 proceeding in relation to the Tree then owned by different people was dismissed by Craig J in Smith & Hannaford v Zhang & Zhou [2011] NSWLEC 29. His Honour was not satisfied that the Tree had caused or was causing damage to the Applicants' dwelling as required by s 10(2)(a). 2. The orders sought by the Applicants against the Respondents under s 9 of the Trees Act were: 1. Restrain approval of Development Application (Willoughby City Council DA-2017/81); 2. Further or in the alternative grant approval with the conditions: a. Removal of remaining parts of the tree including but not limited to root system; b. Adherence to engineers recommendations regarding removal of all parts of the tree; and c. Repair damage to the Applicants' land including boundary wall and buildings occasioned by tree and removal attempted by the Respondent. 3. Stabilise site including injection of cement or other into vacated space consequent upon performance of condition (ii)(A) hereof; 4. Supervision and certification of remedial and repair works by appropriately recognised engineers with knowledge of the project; and 5. Such further orders as the court may see fit including any necessary to comply with requirements of the Willoughby City Council 1. I held in Smith No 1 at [10] that "The Court has no power to make such orders [1-4] under ss 7, 9 or in light of s 12 of the Trees Act. Nor can the Court make orders under the Trees Act requiring compliance with the requirements of the Council [Willoughby City Council] as prayer 5 seeks." I held at [11] that "The orders sought by the Applicants in relation to the Council are not authorised by s 13 of the Trees Act. No reasonable cause of action on this basis is identified as referred to in r 13.4(1)(b)(1) of the UCPR" [Uniform Civil Procedure Rules 2005]. 2. At [12] I assumed that the Applicants were seeking orders 2(a), 3 and 4 under the Trees Act in relation to which the Court does have jurisdiction. I held at [21] that "The change of circumstance relied on by the Applicants of more damage to their home since 2011 is not the matter about which a material change of circumstance must arise to overcome issue estoppel. The relevant change in circumstance must relate to the issue of causation of damage to the Applicants' property in light of Craig J's decision. The many expert reports in the Applicants' bundle do not engage with this requirement." I also held that "In the absence of a material change of circumstance the issues already determined by Craig J cannot be re-litigated". At [27] I held "Any new evidence must accept the finding of engineering evidence before Craig J that the probable cause of any damage was rock movement and that none of the tree roots investigated in the course of those proceedings were found to be the cause." 3. The Respondents became owners of the adjacent property in September 2015. They caused the Tree to be reduced to a stump and poisoned on 1 August 2016. 4. I identified in Smith No 1 at [9] the numerous engineering reports ranging in date from August 2011 to April 2017 and an arborist's report dated March 2016 that the Applicants relied on. I also identified in [12] that the Applicants were seeking costs of rectification of damage to their home of $450,000. Evidence 1. A letter sent by the Respondents' solicitor to the Land and Environment Court Registry and the Applicants dated 18 August 2017 which outlined the issue of res judicata was relied on. A letter from the Applicants to the Registrar of the Court dated 21 August 2017 responding to that letter was also read. Material in the Applicants' bundle of documents filed in support of their application was also referred to in [9(a)-(u)] in Smith No 1. Respondents' submissions 1. Applying r 3.7(3)(a) of the LEC Rules the dismissal proceedings involved a question of mixed fact and law concerning whether the Court had jurisdiction to determine the matter at all. The determination of that question was determinative of the proceedings and was preliminary to an evaluation of the merits of any application the subject of the proceedings. 2. The Applicants acted unreasonably under r 3.7(3)(c) in circumstances leading up to the commencement of the proceedings: 1. at tab 22 in the Applicants' bundle ([9(m)] Smith No 1), the Applicants' then lawyers issued a letter dated 28 August 2015 to the former owners of the Respondents' property advising the Applicants in relation to removal of the Tree they, "are prepared to pay the costs which will be incurred in making that application and that if the application is approved, the costs of having the Tree removed"; 2. at tab 23 in the Applicants' bundle, the Respondents' lawyers at the time issued a letter dated 1 September 2015 ([9(o)] Smith No 1) to the Applicants seeking agreement between the parties in the form of a Deed of Indemnity for the removal of the Tree. The letter made it clear that the Respondents were, "prepared to enter into discussion and negotiations" regarding removal of the Tree; 3. at tab 24 in the Applicants' bundle, the Applicants sent a letter dated 22 February 2016 ([ 9(q)] Smith No 1) to the Respondents' solicitors rejecting the Respondents' offer noted in point 12(b) above and advised the Respondents of the Applicants' intention to commence proceedings under the Trees Act. 1. The Applicants acted unreasonably after rejecting the Respondents' offer to enter into negotiations regarding removal of the Tree and maintaining such a position without further discussion on the issue leading up to the commencement of the proceedings. 2. Under r 3.7(3)(e) the Applicants' commencement of the proceedings was for an improper purpose. The Applicants' proposed orders impinged on the jurisdiction of the Court where the Court had no power to make orders against the Council from dealing with a development application (DA) lodged by the Respondents or requiring the Council to approve the Respondents' proposed development with certain conditions imposed, Smith No 1 at [10]. 3. Under r 3.7(3)(f) the Applicants' commencement of the proceedings did not have reasonable prospects of success, or, to continue the claim was unreasonable where the Applicants received the letter dated 18 August 2017 prior to the hearing on 22 August 2017. This detailed the deficiencies in the Applicants' claim relating to the jurisdictional issues with regards to the Applicants' proposed orders and the principle of res judicata. Page 4 of the letter stated: "We note that the Respondents reserve all rights in relation to this matter, including the right to claim costs against the Applicants, in the event that they do not withdraw their Application after being placed on notice of the above legal submissions." 4. Costs should be awarded on an indemnity basis not only because the Applicants have lost but also to deter them from commencing fresh proceedings. Applicants' submissions 1. It is not fair and reasonable to make a costs order against the Applicants based on the matter in r 3.7(3)(a). The Applicants brought the proceedings based on what they understood were merit issues. They did not bring the proceedings based on an issue of law or mixed fact and law that, as a central issue, was determinative and preliminary and not involving an evaluation of the merits. The proceedings were commenced in July 2017 and the application was served on the Respondents on 18 July 2017. The legal issues were not raised prior to the commencement of the proceedings. There was no wilful ignoring of what transpired to be the determinative issue of law. 2. The Applicants were not legally represented in their application under the Trees Act. The parties to such applications come to the Court understanding that prima facie there will be no costs orders (LEC r 3.7(2)), that the Court considers it preferable that parties not be legally represented in such applications (Fox v Ginsberg (No 3) [2011] NSWLEC 139 Pain J at [9]), that the Court has adopted special procedures different to other Class 1 or 2 matters to assist and facilitate lay participation without legal representation in Trees Act applications (such as the special explanation given by the Registrar at the first callover of tree matters). 3. To a lay person the Applicants' case was strong if not overwhelming: the Applicants had obtained an arborist's report and several engineering reports including a report after the Tree was cut to a stump, expressing opinions that the Tree was the cause of the damage to the Applicants' house and further damage after the Tree was cut to a stump. To a lay person there were changed and new circumstances which justified a new application. Moreover the loss perceived by the Applicants was very significant. 4. In relation to r 3.7(3)(c) (circumstances leading up to the commencement of the proceedings) the correspondence recited by the Respondents' submissions at par 12(a), (b) and (c) above cannot be relied on as there is clearly material not in evidence between the letters in par 12(b) and (c) above. The last letter refers to terms of an offer not being acceptable but that offer is not contained in the earlier letter. However and in any event that correspondence should not form a basis for assertion of unreasonable action because the correspondence was before the Tree was cut to a stump. In the subsequent letter of 2 May 2017 from the Applicants to the Respondents, the Applicants refer to damage from the way the Tree was cut and in this respect rely on an engineer's report. The Respondents' response was a challenge to commence court proceedings: "If you feel strongly about this matter we suggest you apply to the court...". 5. In relation to r 3.7(3)(e) the Respondents alleged improper purpose because part of the relief claimed was found to be beyond the power of the Court. A finding that relief claimed is not within the power of the Court does not lead to a finding that seeking that relief was for an improper purpose. Further the Applicants explain how they thought that they could claim this relief in their letter of 21 August 2017 to the Court. 6. The Respondents rely on r 3.7(3)(f) referring to their solicitor's letter to the Court of 18 August 2017. The letter was sent on the Friday before the hearing which took place the following Tuesday. The Applicants responded by letter of 21 August 2017. Their arguments, although found not to be correct by the Court were reasonably based and, with respect to the Applicants, well-constructed. The matter was heard the next day. The Applicants' arguments were not accepted by the Court. There is no basis to argue that in putting the arguments this was to unreasonably continue the claim. 7. Although part of the application was found not to be a reasonable cause of action (at [11] Smith No 1), this formed only part of the application with substantial other parts of the application, being the removal of the remainder of the Tree and claim for damages being within jurisdiction. The Applicants further explained their position. 8. The Respondents raised the determinative issue after commencement of the proceedings and shortly before that issue was determined. Clearly the Applicants did not understand the limit on commencing these fresh proceedings. The Applicants had obtained a number of expert reports from engineers and an expert report from an arborist seeking a remedy on the merits under the Trees Act in relation to significant damage to their property. The Applicants submit that it is fair and reasonable in the circumstances of this matter that there be no order as to costs. Finding 1. Costs are compensatory per Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 at 543. This costs application concerns an unsuccessful application under the Trees Act by applicants acting for themselves. Ideally the nature of the issues raised and the conduct of proceedings before the Court in relation to the Trees Act are just, quick and cheap, preferably without recourse to lawyers, as I observed in Fox v Ginsberg (No 3) at [9]. As the Applicants' solicitor identified the Court has adopted procedures and practices to facilitate the resolution of such disputes without the need to engage lawyers. The usual rule that each party pays their own costs is informed by the nature of these proceedings. 2. No basis for awarding indemnity costs is identified by the history of the matter. An order for indemnity costs requires a finding that "some relevant delinquency" or "some special or unusual feature in the case" existed per Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [44]; Harrison v Schipp [2001] NSWCA 13 at [133]. Costs are not intended as punishment so the submission of the Respondents' solicitor that an indemnity costs order would also deter further proceedings by the Applicants is not accepted. 3. The Respondents rely on several subsections of r 3.7(1) of the LEC Rules in light of their successful application for dismissal as establishing that it is fair and reasonable to award costs. I should observe that the subsections of r 3.7(1) are not comprehensive as to when costs might be awarded nor mandatory in their application. 4. I agree with the Applicants that no improper purpose (r 3.7(1)(e)) arises from their actions in commencing the proceedings for the reasons provided by their solicitor set out above in par 21. Their actions should be judged on the basis of a lay person, not from the perspective of a lawyer. That they incorrectly sought orders in relation to the Council does not amount to commencing proceedings for an improper purpose. 5. The Respondents alleged the proceedings were unreasonably commenced due to the history of correspondence between the parties as outlined in their submissions above (r 3.7(1)(c)). The Applicants' solicitor identified that the correspondence before the Court was incomplete. From the perspective of a lay person, that the Applicants were unsuccessful in opposing the dismissal application does not give rise to a finding of unreasonableness given the nature of the merit issues they intended to pursue. 6. The proceedings were also alleged to lack reasonable prospects of success (r 3.7(1)(f)). As the Applicants' solicitor submitted the basis for the dismissal application was not identified until after the proceedings had commenced so that the Applicants did not commence proceedings aware of the legal issues they faced. 7. Rule 3.7(1)(a) concerns a finding on a question of law or mixed fact and law which is determinative. Orders were sought which the Court had no jurisdiction to make concerning the actions of the Council in relation to a DA. That matter was able to be quickly disposed of being self-evident from a legal perspective. For those orders where the Court had jurisdiction issue estoppel arose in terms of the case and evidence presented by the Applicants. My finding was determinative of the matter. That finding informs my overall assessment of the circumstances before me. 8. Given the context of Trees Act applications outlined above in par 25 another consideration is whether it was reasonable for the Respondents to obtain legal representation for the dismissal hearing. I am not intending any criticism of them in posing that question. It usefully encapsulates the desirability of such proceedings being conducted without undue legality and expense. This matter was not straightforward given the earlier case before Craig J in 2011. The Applicants did obtain legal advice during the period after that decision and before these proceedings were commenced by them according to material in the Applicants' bundle at the dismissal hearing. These proceedings were commenced without a legal representative being named on the record. 9. At the dismissal hearing the Applicants appeared to be claiming the cost of repairing all of the damage to their house which they considered had occurred since 2011 estimated at some $450,000. Their bundle of documents in support contained engineering reports and an arborist's report dating from 2011 to 2016, see par [9(a)-(h)] in Smith No 1. One engineering report dated 13 April 2017 ([9(i)] considered the removal of the Tree to stump height and alleged damage had occurred as a result. The Respondents became owners in September 2015 and caused the Tree to be cut to a stump in November 2016 when they had no legal obligation to do so. 10. The Applicants had the benefit of a solicitor preparing written submissions on the costs application who focussed on the claim being directed to the period after removal of the Tree to a stump in November 2016. My findings on issue estoppel apply to the removal of the Tree to a stump also. Had reliance been placed on that aspect of the matter alone the issues would have been appropriately confined. 11. It was reasonable for the Respondents to be legally represented as the issues raised concerning jurisdiction and issue estoppel were not straightforward from a lay person's perspective. The claim had a wide focus in time, included the period before the Respondents became owners of their home in September 2015 and the damages claimed were substantial. 12. This is an unfortunate matter for both the Applicants who consider they have ongoing structural problems at their house and the Respondents as incoming neighbours to a long-standing dispute. On balance I consider it is appropriate that the Applicants pay some of the legal costs of the Respondents for the dismissal hearing given the absence of jurisdiction for part of the orders claimed. As issue estoppel was not identified to the Applicants by the Respondents until after they commenced these proceedings and they acted reasonably in the context they faced I consider they should pay half the Respondents' costs. As the Respondents have been partly successful in their costs application they should receive half of their costs of the costs argument also. Orders 1. The Court makes the following orders: 1. The Applicants are to pay half the Respondents' costs of the dismissal hearing. 2. The Applicants are to pay half the Respondents' costs of the costs application. ********** 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: 09 March 2018