McIntosh v Morris

1. [1]

   WHITE JA: This is an application for leave to appeal from orders of the District Court (Balla ADCJ). (Graeme Morris & Anor v Jill McIntosh & Anor, 14 August 2020: no medium neutral citation). The primary judge ordered that the applicants pay the respondents’ costs on the “usual basis” to 31 January 2020 and on an indemnity basis thereafter. The applicants were the defendants in the proceedings below. The applicants and the respondents (plaintiffs in the proceedings below) are adjoining land owners. The respondents sued the applicants for damages for trespass by reason of the alleged encroachment on the respondents’ land of a sewer pipe, a stormwater pipe, a stormwater pit, and electrical cables encased in a conduit. The respondents sought damages for trespass and a mandatory injunction pursuant to s 46 of the District Court Act 1973 (NSW) to require the applicants to remove the encroachments and to remediate the respondents’ land from any damage associated by works required to remove the encroachments.

2. [2]

   Initially the respondents sought exemplary damages on the basis that the first applicant is a barrister and in refusing to comply with the respondents’ demands to remove the encroachments, she displayed a contumelious and high-handed disregard of the respondents’ proprietary interests.

3. [3]

   The claim for exemplary damages was rightly abandoned. But its inclusion exacerbated the feelings of acrimony that typically attend a neighbourhood dispute.

4. [4]

   The applicants did not lay the encroaching pipes, stormwater pit and conduit. They purchased their property from a Mr and Mrs Steedman on 3 May 2016. The applicants alleged that the Steedmans laid the encroaching pipes, stormwater pit and electrical conduit some time between 17 January 1997 and 3 May 2016. They also alleged that the respondents built retaining walls over the encroaching pipes.

5. [5]

   In reply the respondents pleaded that, during the Steedmans’ occupation, they (the respondents) were not aware of any encroachment or trespass of pipes under the surface of their land. They pleaded that they did not become aware of the extent of the “subterranean trespass of the services” until removal of soil in April and October 2017 and April 2018 exposed the full extent of the alleged subterranean trespass. It can be inferred from the respondents’ reply that the encroaching pipes, corner of stormwater pit, and conduit were laid over the boundary of what is now the respondents’ land, before the respondents purchased their property. Neither the pleadings nor the evidence before the primary judge on the costs application disclosed whether this was done with or without the consent of the then owner of the respondents’ land.

6. [6]

   The respondents’ claim did not proceed to trial. The applicants caused work to be done to render the encroaching pipes inoperable and rerouted the pipes to their side of the boundary.

7. [7]

   On 21 July 2020 the applicants filed an amended notice of motion seeking orders that the Amended Statement of Claim be dismissed and that there be no order as to the costs of the proceedings to the intent that each party bear their own costs. The latter order was sought:

8. [8]

   The applicants sought an order for their costs of the notice of motion.

9. [9]

   The primary judge found:

10. [10]

    The primary judge rejected the applicants’ submission that the work that was done was done pursuant to an acceptance of the applicants’ offer.

11. [11]

    Rule 42.20 of the Uniform Civil Procedure Rules provides:

12. [12]

    The primary judge found in relation to this rule:

13. [13]

    The primary judge held that the respondents were entitled to rely upon an offer served on 4 December 2019 as a Calderbank offer. Her Honour held:

14. [14]

    The grounds of appeal upon which the applicants would rely if leave to appeal is given may be summarised as follows:

15. [15]

    I would grant leave to appeal. The court heard full argument as on appeal. For the reasons which follow the primary judge erred in concluding that the applicants had no reasonable basis for defending the claim. There would be a substantial injustice if leave to appeal were not given.

Notice of Motion dated 8 February 2021

1. [16]

   On the summons for leave to appeal the applicants sought to rely upon additional affidavits. By notice of motion dated 8 February 2021 they also sought leave to amend the summons to seek a personal costs order against the respondents’ solicitor, Mr Stephen Churches, and an order that the respondents pay the costs of the proceedings on the indemnity basis from 11 November 2019. They also sought an award of exemplary damages. 11 November 2019 was alleged to be the date upon which Mr Churches made a complaint to the Bar Association about the first applicant, Ms McIntosh. In fact it appears that the complaint was not made by Mr Churches but by the Legal Services Commissioner. That complaint and its supplementation over time is irrelevant to what order the primary judge ought to have made as to the costs of the proceedings.

2. [17]

   In any event, Mr Churches has not been joined as a respondent to the application. Any application for a third party costs order against him would have to be made by a separate application in the District Court to which he was joined as a party and upon which he could be heard.

3. [18]

   No order could be made for the payment by the respondents of exemplary damages when no such claim was litigated.

4. [19]

   Paragraph 2 of the amended notice of motion filed on 8 February 2021 seeking leave to amend the summons seeking leave to appeal should be dismissed with costs.

Procedural Fairness

1. [20]

   The application first came before the primary judge on 3 August 2020. The parties appeared by audiovisual link. The respondents consented to an order dismissing their statement of claim. The respondents said that they would be seeking an order that the applicants pay their costs. The first applicant, Ms McIntosh, told the primary judge that she had filed two affidavits on the issue of costs. Both affidavits were filed electronically on 2 August 2020. The affidavits, including annexures, run to 300 pages. The primary judge asked whether extracts from whatever documents were to be relied on could be attached to written submissions. But Ms McIntosh said that the evidence was contained in an updating affidavit filed on 2 August 2020. It was noted that that affidavit, although not printed and not currently on the court file, was on JusticeLink.

2. [21]

   The primary judge fixed the argument for hearing on 13 August 2020 and gave directions for the filing of written submissions noting that the list was very fluid.

3. [22]

   In accordance with the directions for the filing of written submissions, the applicants filed written submissions on 5 August 2020. They indicated that they relied upon Ms McIntosh’s affidavits sworn on 10 March 2020 and on 1 August 2020. The applicants did not comply with the primary judge’ request to attach the particular documents to be relied upon to their submissions. The submissions attached a chronology. The submissions were to the effect that the applicants carried out work that ultimately resulted in the respondents’ agreement to the dismissal of their statement of claim on the basis of an offer of compromise that there be no order as to the costs of the proceedings.

4. [23]

   The respondents filed a written submission as to costs on 9 August 2020 accompanied by a 240-page “exhibit”. The respondents submitted that they enjoyed overwhelming prospects of success and that the applicants had eventually capitulated to their claim. They denied that there was a binding agreement for the compromise of the claim on the basis that there be no order as to the costs of the proceedings.

5. [24]

   In reply, the applicants submitted that the documents emailed to the court to accompany the respondent’s written submissions could not be admitted. They objected to the documents. Their submissions in opposition to the material put forward by the respondents descended to hyperbole. They submitted that:

6. [25]

   To say the least, this was unhelpful.

7. [26]

   The primary judge heard submissions on 13 August 2020 by audiovisual link. At the outset of the applicants’ submissions Ms McIntosh referred to two affidavits that had been filed in support of the applicants’ amended notice of motion, being affidavits of 10 March and 1 August 2020. Ms McIntosh referred to her affidavit of 10 March 2020 that attached the offer of compromise of 5 February 2020. The primary judge sought to find it in the bundle (being the bundle of documents sent up by the respondents with their submissions) and Ms McIntosh said that she objected to those documents. After further submissions, Ms McIntosh referred to a letter she wrote on 6 December 2019 to submit that the applicants had always agreed to remove the pipes. There then occurred the following exchange:

8. [27]

   Although the respondents’ counsel did not formally tender the 240 page “Exhibit”, there could have been no doubt that the primary judge treated it as being before her so far as her Honour considered it to be relevant. Thus, the primary judge dealt with the applicants’ objection to the 240 page “Exhibit” that accompanied the respondents’ written submissions as to costs by saying she would not have regard to any of the documents that were irrelevant. There was and could have been no objection to their authenticity.

9. [28]

   The applicants had no right of cross-examination and it is hard to conceive that leave to cross-examine would have been given had the documents been exhibited to an affidavit of the respondents’ solicitor.

10. [29]

    One of the documents in the exhibit (a letter from the Law Society rejecting a complaint by Ms McIntosh against Mr Churches) was irrelevant and contained inadmissible opinion evidence. It was not specifically objected to. It was not referred to in the primary judge’s reasons. Her Honour, having noted that the dispute had been acrimonious and inflammatory, correctly said that it was neither necessary nor appropriate to embark on a detailed examination of the affidavit evidence which had not been tested.

11. [30]

    Ms McIntosh complained to the primary judge that her Honour did not have her affidavits.

12. [31]

    But those affidavits were available to the primary judge. On 3 August 2020 the primary judge had asked the parties to attach to their written submissions extracts from whatever documents the parties were to rely upon rather than refiling lengthy affidavits which might or might not be on the court file.

13. [32]

    The applicants did not comply with that request. Given that Ms McIntosh is a barrister, the primary judge was entitled to expect that she would have complied with that request and extracted and attached to her submissions the particular documents that were annexures to her affidavits upon which she relied on the question of costs.

14. [33]

    Ms McIntosh referred the primary judge only to her letter of 6 December 2019 (referred to below at [39]) from her affidavit. She did not explain its relevance.

15. [34]

    In any event, the primary judge reserved her decision to the next day. I do not assume that her Honour did not have regard to Ms McIntosh’s affidavit before she gave judgment. Her Honour expressly referred to Ms McIntosh’s affidavit of 10 March 2020 (see [12] above).

16. [35]

    The applicants were afforded procedural fairness. They were given the opportunity to place before the primary judge the evidence on which they relied and did so. They could have taken objection to particular documents relied on by the respondents but did not do so.

17. [36]

    An allegation that a judge has denied a party procedural fairness is serious. It should not be made lightly. There was no proper basis for the allegation in this case.

Offers of Compromise

1. [37]

   The second substantial challenge to the primary judge’s orders was that her Honour ought to have found that the work done that ultimately resolved the proceedings was done pursuant to the applicants’ offer of 5 February 2020 that included a term that there be no order as to costs of the proceedings. It was on this basis that the applicants filed their notice of motion seeking that there be no order as to the costs of the proceedings.

2. [38]

   In their letter of 4 December 2019 the respondents had offered to compromise the proceedings on the following terms:

3. [39]

   Ms McIntosh responded on 6 December 2019. She asserted that the respondents’ “offer” of 4 December 2019 was not at all clear and that there were no particulars proffered as to how the works could be done. She said that there was no suggestion as to how works to render the “trespassing pipes” inoperable were different from works to remove them and that the applicants could not make any assumptions as to what the respondents meant in their offer. Ms McIntosh made a counter offer that the applicants would undertake all works to remove or render inoperable the trespassing pipes and stormwater pit (dependent upon which was possible and at the least cost) if the cost were shared equally between the applicants, the respondents and the Steedmans. There was no response to Ms McIntosh’s letter of 6 December 2019.

4. [40]

   The applicants’ offer of 5 February 2020 proposed that the applicants would “…cut off and redirect the trespassing pipes to the extent as to what can be reasonably reached from underneath both retaining walls (leaving dormant all of the pipes running the 16 metre length of the fence which are on the plaintiffs’ side) and then redirecting them the full length down our side.” The applicants offered to attempt to move the electrical conduit and relocate it under the fence and that the stormwater pit would be cut off as much as possible to minimise or reduce any trespass with the intention being to eliminate the trespass.

5. [41]

   The applicants’ offer did not refer to their rendering inoperable the stormwater pipe and sewerage pipe that encroached on the respondents’ land.

6. [42]

   The applicants’ offer of 5 February 2020 was made on the basis that the parties bear their own costs of the litigation and that there be no order as to costs.

7. [43]

   The respondents did not say that they accepted the terms of Ms McIntosh’s letter of 5 February 2020. But arrangements were made for a plumber engaged by the applicants to attend the property. On 13 February 2020 Ms McIntosh advised Mr Churches that the applicants’ instructions to the plumber were to:

8. [44]

   On 13 February 2020 Mr Churches wrote to the applicants as follows:

9. [45]

   This was not an acceptance of the applicants’ offer.

10. [46]

    The applicants engaged a plumber, a Mr Joel Atkins, to carry out the work. On 20 February 2020 he reported that he carried out the following work:

11. [47]

    On 28 February 2020 Mr Churches complained that his letter of 13 February 2020 had made it clear that the trespassing pipes could remain in situ only if they were made completely redundant and that had not occurred. He said that two pipes of 4.8 metres in length remained on the respondents’ land that still serviced the applicants’ land and that this remained an adverse affectation to the respondents’ land.

12. [48]

    A plumber retained by the respondents (a Mr Catania) made an affidavit on 19 March 2020 in which he deposed that he closely inspected the works that the applicants’ plumber had carried out on the applicants’ land which involved the digging of a trench and the laying of pipes on the defendants’ land. He deposed that the pipes “trespassing under the plaintiffs’ land” had not been made completely redundant and were still servicing the applicants’ property. To achieve redundancy of the active pipes trespassing on the respondents’ land the pipes needed to be cut on the applicants’ land at a point before they entered the respondents’ land and needed to be cut again at a point where they re-entered the applicants’ land. He described this as a simple task and provided a quote.

13. [49]

    The applicants offered to engage Mr Catania at the price he quoted to carry out the works he described. The respondents objected to Mr Catania being retained to do the work on the basis that he had been retained as an expert witness.

14. [50]

    On 30 June and 1 July 2020 the applicants instructed another plumber to install a second set of pipes in their land.

15. [51]

    On 3 July 2020 Mr Churches wrote to Ms McIntosh saying that he was instructed that the respondents believed that the remaining 4.8 metres of pipes trespassing on the respondents’ land had now been made redundant and asking for confirmation that that was the case. He advised that if that confirmation were given, then his clients would cut what they believed were now redundant pipes on their land.

16. [52]

    On the same day Ms McIntosh wrote to Mr Churches. She said her letter crossed with that of Mr Churches. Ms McIntosh confirmed that the pipes remaining on the respondents’ land were completely redundant but did not agree that the respondents should have those pipes because, so she asserted, the respondents clearly wished to retain them for their use. She asserted that the pipes remaining on the respondents’ land were connected to the mains.

17. [53]

    Mr Churches responded by saying that he did not understand how it could be contended that the pipes were still connected to the mains. In her affidavit of 1 August 2020 Ms McIntosh acknowledged that this was a mistake.

18. [54]

    In her letter of 3 July 2020 Ms McIntosh asserted that the respondents intended to retain the pipes that remained on their land at no cost to them. The applicants sought compensation for the cost of installing the second set of pipes and offered to finalise the matter on the basis that the respondents pay the applicants $6,935 for the cost of the redundant pipes.

19. [55]

    Apparently to meet that objection the respondents smashed the pipes on their land and provided the applicants with video evidence of having done so.

20. [56]

    The primary judge rejected the applicants’ claim that the matter had been resolved by an agreement between the parties arising out of the correspondence of 5 and 13 February 2020. The primary judge said:

21. [57]

    The primary judge did not err in this reasoning. Mr Churches’ letter of 13 February 2020 was not an acceptance of the terms of Ms McIntosh’s email of 5 February 2020 including that each party bear their own costs. Rather it was an acknowledgement that the respondents would permit the applicants to remove or make completely redundant the trespassing pipes, which had been the respondents’ position from 4 December 2019.

22. [58]

    What followed could be regarded as a capitulation to the respondents’ demands from 4 December 2019 that the encroaching pipes be either removed or made redundant. I would reject this ground of appeal.

Unreasonable Defence?

1. [59]

   The substance of ground 5 of the proposed appeal was that the applicants had acted unreasonably in the proceedings.

2. [60]

   This ground included a challenge to the primary judge’s finding (quoted at [19]) that the respondents’ case had excellent prospects of success and the applicants did not have any prima facie viable defence to the respondents’ original claim for the encroachments to be removed.

3. [61]

   As noted above, the statement of claim alleged the encroachment of the sewer pipe, the stormwater pipe, the stormwater pit and electrical cables encased in a conduit. The statement of claim pleaded that those encroachments constituted the tort of trespass to land. The respondents pleaded that they had requested on five occasions that the applicants remove the encroachments and that the respondents had failed to do so and that the continued encroachment on the respondents’ land of subterranean pipes, stormwater pit and cables amounted to a continuing and ongoing trespass.

4. [62]

   The plaintiffs claimed damages for trespass and a mandatory injunction requiring the removal of the encroachments and remediation of their land.

5. [63]

   In a letter of 16 January 2018 to the applicants, Mr Churches said that evidence provided from a surveyor and a plumber clearly indicated that the services trespassing on the respondents’ property were services for the applicants’ property. He said that the respondents had no knowledge when they constructed their home of the trespass and in any event this was irrelevant. He drew the applicants’ attention to Proprietors of SP 20297 v G&S Developments Pty Ltd [2008] NSWSC 257; Stoneman v Lyons (1975) 133 CLR 550; [1975] HCA 59; and Bocado SA v Star Energy UK Onshore Ltd [2011] 1 AC 380; [2010] UKSC 35. No doubt he did so in the knowledge that the first applicant, Ms McIntosh, is a barrister.

6. [64]

   In Proprietors of SP 20297 v G&S Developments Pty Ltd the defendant drilled rock anchors into the plaintiffs’ land for the purpose of the construction of an apartment building and thereby occasioned considerable damage to the plaintiff’s building (at [4]). Windeyer J held that it was perfectly clear that this was a trespass unless there was consent and held that the onus of establishing consent or licence lay on the defendant (at [6] and [7]).

7. [65]

   Stoneman v Lyons was concerned with the liability of an owner of land for the acts of an independent contractor engaged as a builder who committed acts of trespass. Bocado SA v Star Energy UK Onshore Ltd held that an owner of land was entitled to maintain damages for trespass in respect of underground pipes that had been bored under its land to extract oil. Apart from its being an example of subterranean trespass, the case is of no relevance to the issues. The defendant was responsible for the boring of the pipes.

8. [66]

   The statement of claim did not allege a trespass by the applicants’ tenant’s use of the pipes.

9. [67]

   The defence admitted that there were encroachments (although not to the extent alleged by the respondents) but pleaded that the encroachments existed when the respondents purchased their land and had been installed by the Steedmans.

10. [68]

    As noted above, assuming the truth of the respondents’ reply to the defence, it could be inferred that the pipes, and other encroachments, were laid down before the respondents purchased their property. If that work were done by the Steedmans with the consent of the respondents’ predecessors in title, then the Steedmans’ laying of the pipes, stormwater pit and electrical cables would not have constituted a trespass.

11. [69]

    In Proprietors of SP 20297 v G&S Developments Pty Ltd, Windeyer J said (at [6]) that consent or licence is a defence to a claim in trespass and that the burden of establishing consent lies on the defendant. In Lord v McMahon [2015] NSWSC 1619, Slattery J said (at [145]) “…strictly speaking it is necessary for the plaintiff to negative consent to make out the action in trespass”.

12. [70]

    It is unnecessary to resolve that question. Suffice it to say that if the Steedmans laid the pipes on the land now owned by the respondents with the consent of the then owner of the land, the laying of the pipes would not have been a trespass.

13. [71]

    The respondents cited Hudson v Nicholson (1839) 5 M&W 437; 151 ER 185. There the declaration stated that the defendants had wrongly and injuriously placed shores and timbers on the plaintiff’s land before the plaintiff became possessed of it and kept and continued the said shores and timbers although they were requested to remove them (at 437, 185). The defendants were held to be liable in trespass at the plaintiff’s suit. As applied to the present facts, Hudson v Nicholson would support a claim in trespass by the respondents against the Steemans if they did not have their adjoining owners’ consent to the laying of the encroachments.

14. [72]

    There is authority that if the original placing of the encroachments by the Steedmans was trespassory then the applicants, as the Steedmans’ successors in title, would be liable for a continuing trespass (Billiet v The Commercial Bank of Australasia Ltd [1906] SALR 193 at 200 (Way CJ)). (It is unnecessary to consider whether Penruddock’s Case, 5 Co Rep 100b supports the proposition that when there is a trespass, as distinct from a nuisance, of a continuing nature, the successors in title of the original wrongdoer are liable for continuance of the wrong (at 200)).

15. [73]

    In Billiet’s case Sir Samuel Way added (at 201) that for there to be a continuing trespass there must have been an original trespass.

16. [74]

    The pipes and other alleged encroachments became fixtures in the respondents’ land. This is not the occasion to decide issues as to the law of continuing trespass where the defendant was not the party responsible for the encroachment and the encroachment had become part of the plaintiff’s land. It is strongly arguable that, at least if the original laying of the pipes were not trespassory, because the pipes and other encroachments become fixtures on the respondents’ land, the applicants were not liable in trespass for failing to remove them (Lakes Edge Developments Ltd v Kawarau Village Holdings Ltd [2017] 3 NZLR 336 at [41], [58]-[60]; Lord v McMahon at [160]).

17. [75]

    As noted above, the respondents did not plead that a trespass was committed by the applicants by their tenant’s use of the pipes.

18. [76]

    Even if the encroachment of the pipes, pit and electrical cable constituted a continuing trespass, neither the primary judge nor this Court was referred to any evidence that showed that the respondents had or would suffer damage by reason of the encroachments, or their use. Even if the applicants were liable in tort for trespass, it is highly doubtful that the respondents would be entitled to a mandatory injunction requiring removal of the encroachments in the absence of any evidence (and none was referred to before her Honour or on appeal) that the presence of the encroachment caused any material interference with the respondents’ enjoyment of their property. Nor was there evidence before the primary judge on the costs application that the respondents had suffered any damage as a result of the encroachments.

19. [77]

    The primary judge’s conclusion that the respondents’ case had excellent prospects of success and the applicants had no viable defence, and accordingly that the applicants acted unreasonably in defending the proceedings, cannot be sustained.

Surrender?

1. [78]

   The primary judge also found that the applicants effectively surrendered so that the respondents were the successful party. I agree that the applicants eventually complied with the applicants’ offer of 4 December 2019 that the applicants render the encroaching pipes inoperable. But they did not capitulate to the relief claimed in the statement of claim that they remove the encroachments, reinstate the applicants’ land and pay damages.

2. [79]

   Under r 42.20 of the Uniform Civil Procedure Rules the default position following an order for dismissal of proceedings is that the plaintiff pay the defendant’s costs. The plaintiff bears the onus of showing that a different order should be made. Here, there was no dispute that a different order should be made. If the defendant has surrendered or capitulated to the plaintiff’s claim that is a circumstance in which the plaintiff may be entitled to its costs (One.Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548 at 553; Ralph Lauren 57 Pty Ltd v Byron Shire Council [2014] NSWCA 107 at [26]).

3. [80]

   In Ralph Lauren Preston CJ of LEC said (at [27]):

4. [81]

   The relief sought by the respondents in the proceedings was the relief sought in its amended statement of claim. That did not include a mandatory injunction to require the applicants to take steps to require the encroachments to be rendered inoperable.

5. [82]

   The applicants did not surrender to the respondents’ claim in the proceedings but rather carried out work which the respondents were prepared to accept in compromise of their claim in the proceedings.

6. [83]

   The respondents rightly did not submit that the applicants thereby agreed to pay the respondents’ costs.

7. [84]

   The applicants contended that the respondents’ offer of 4 December 2019 was not a genuine offer of compromise (ground 7). I do not agree. The offer was a substantial compromise as it offered the applicants the option of rendering the encroachments inoperable rather than requiring their removal and reinstatement of the respondents’ land and structures built over the encroachments.

8. [85]

   Nonetheless, there was no basis for the award of indemnity costs. The respondents did not obtain an order that bettered their offer of 4 December 2019.

9. [86]

   In Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622, McHugh J said (at 624-625):

10. [87]

    This is the principle that ought to have been applied. Remarkably, given that the first applicant is a barrister, the primary judge was not assisted by any submission based on this principle.

Conclusion and Orders

1. [88]

   The primary judge erred in finding that the applicants did not act reasonably in defending the proceedings and effectively surrendered to the respondents’ claim.

2. [89]

   This requires that the costs discretion be re-exercised by this Court. For the reasons above, the order for costs that should have been made for the proceedings below was that the parties bear their own costs of the proceedings.

3. [90]

   This was the order sought by the applicants below. Prima facie they would be entitled to their costs of their notice of motion of 2 July 2020. But the grounds on which the applicants should have succeeded were not advanced by them.

4. [91]

   The applicants have succeeded on appeal but not on the grounds they propounded. I would make no order as to the costs of the appeal.

5. [92]

   I propose the following orders:

   1. (1)

      Order that para 2 of the applicants’ notice of motion filed on 8 February 2021 be dismissed with costs.

   2. (2)

      Grant the applicants leave to appeal.

   3. (3)

      Allow the appeal.

   4. (4)

      Set aside the orders for costs made by the District Court on 14 August 2020.

   5. (5)

      In lieu thereof order that there be no order as to the costs of the proceedings in the District Court, including as to the applicants’ amended notice of motion in the District Court dated 21 July 2020, to the intent that the parties bear their own costs of those proceedings.

   6. (6)

      No order as to the costs of the appeal to the intent that the parties bear their own costs.

6. [93]

   BRERETON JA: I have had the benefit of reading in draft the judgment to be delivered by White JA, with which I agree.

7. [94]

   This is not a case in which the applicants capitulated, in the sense that they gave the respondents everything for which they sued. The respondents sued for a mandatory injunction requiring removal of the encroachments and also for damages (including, initially, a wholly inappropriate claim for exemplary damages). What the applicants gave them was not even complete removal of the encroachments; they merely rendered the encroachments inoperable and redundant to the extent that they remained. That the respondents were prepared to accept that outcome, and no damages, does not make it a capitulation, but a compromise. In those circumstances, as his Honour explains, the principle that ought to have been applied, in accordance with Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin, [1] is that if both parties appear to have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled, the proper exercise of the costs discretion will usually be that the Court will make no order as to the cost of the proceedings.

8. [95]

   That it was not unreasonable for the applicants to defend the proceedings to the extent that they did is established not only by the circumstance that the result was, in fact, well short of what the respondents had claimed in their statement of claim; but also by the circumstance that it was no more beneficial for the respondents than their Calderbank offer of 4 December 2019; the improbability that, if they succeeded, the respondents would have recovered anything other than nominal damages; and the considerable doubt that attends whether the respondents could have succeeded at all.

9. [96]

   The respondents’ Calderbank letter of 4 December 2019 offered to compromise the proceedings upon the following terms:

10. [97]

    The applicants did not accept that offer, but they substantially performed the works stipulated in the first two paragraphs, though not entirely within the timeframe stipulated in the third. The potential relevance of a Calderbank offer is that, if the party who makes an offer that is not accepted proceeds to obtain a more favourable result in the proceedings, that will generally indicate that the offer has been unreasonably rejected, and thus support a costs, and sometimes indemnity costs, order in favour of the party that made the offer. In this case, even if they were to retain an order for costs, the respondents did not better their offer – as their Counsel accepted in the course of the hearing of the appeal. [2] The Calderbank offer thus provides no basis for a conclusion that it was unreasonably rejected, or that the applicants acted unreasonably.

11. [98]

    As White JA observes, this case is not the occasion for the authoritative resolution of how the law of continuing trespass applies to a defendant who was not the party originally responsible for an encroachment, where the encroachment has become part of the plaintiff’s land. However, it is appropriate to make some observations.

12. [99]

    First, there is no doubt that it may be a trespass for a defendant, without lawful justification, to place chattels on, or in the subsoil of, a plaintiff’s land. [3]

13. [100]

    Secondly, for that purpose, consent is lawful justification, but if the consent is withdrawn and the chattel is not removed within a reasonable time, there is a trespass. [4]

14. [101]

    Thirdly, as White JA observes, there is authority that if the original placement of the encroachment by the defendants’ predecessor in title (in this case, the Steedmans) was trespassory, then the defendant would be liable for a continuing trespass if it continued or adopted it, for example by maintaining it after it was drawn to its attention. [5]

15. [102]

    Fourthly, however, if what is placed on or in the plaintiff’s land becomes affixed to it so as to become the property of the plaintiff, there is authority that there can be no continuing trespass. In this respect, the respondents lodged supplementary written submissions, after the hearing, which argued that there was no reason at law why the respondents would not have succeeded in their claim, as the applicants were responsible for the continuing trespass of “their chattels, being their pipes” on the land of the respondents. In those submissions, reference was made to Lakes Edge Developments Ltd v Kawarau Village Holdings Ltd (“Lakes Edge”), [6] and to Lord v McMahon (“Lord”). [7] The passages referred to in Lakes Edge supported the following propositions: [8]

    1. (1)

       If A inserts an object into the subsoil of land belonging to B without lawful justification, A has committed a trespass against B;

    2. (2)

       So long as the object remains in B’s land without lawful justification, its presence constitutes a continuing trespass; and

    3. (3)

       While the trespass is ongoing, A’s successor in title can be liable for continuing it, and B’s successor in title has standing to sue;

    4. (4)

       If B has given consent to A’s installation of the object, that will be a lawful justification for the object’s presence and there will be no trespass;

    5. (5)

       However, consent without the grant of an interest is only a bare licence, which does not bind third parties and expires upon transfer of B’s land to a third party;

    6. (6)

       Once the licence has expired or been revoked, the object’s presence becomes a trespass, for which the then-owner of A’s land is liable.

16. [103]

    The passages referred to in Lord supported the proposition that upon expiry of a licence to have material on the plaintiff’s land, there is a continuing trespass, even though an earlier owner had given permission for the chattels to be there. [9]

17. [104]

    However, this was a somewhat selective use of those two authorities, both of which in fact proceed to distinguish the situation where the object becomes affixed to B’s land, and thus the property of B. In Lakes Edge, the central issue was whether there was a continuing trespass in respect of rock anchors which had been inserted in B’s land, initially with consent, which had later been revoked. It was held that an item which had been affixed to land with the consent of the owner could not found an action in trespass, because it became the real property of the owner to whose land it was affixed, and that the rock anchors were fixtures, having been “incorporated into the land at the time that they were put into place”. As the plaintiff’s predecessor in title had consented to the installation of the rock anchors when they were installed, and they were now fixtures on that land, they could not give rise to an action in continuing trespass. [10]

18. [105]

    In Lord, the batter of a dam wall encroached onto a neighbouring property. Slattery J explained that a continuing trespass does not arise upon every expiry (or withdrawal) of consent to a trespass to land: [11]

19. [106]

    After considering Clegg v Dearden, which held that while a defendant which had made an excavation and aperture in the plaintiffs' land was liable to an action of trespass, no cause of action arose from its omission to re-enter the plaintiffs' land and fill up the excavation, which was neither a continuation of a trespass nor of a nuisance nor a breach of any legal duty, [12] his Honour continued: [13]

20. [107]

    In my judgment, those cases – in particular Lord, a decision of the Supreme Court – placed considerable obstacles in the way of the respondents’ success. The pipes were no longer chattels but had become incorporated in the respondents’ land upon installation. They were not a movable item on the surface of the respondents’ land, but could only be restored by the applicants entering onto the respondents’ land and excavating them. They were a permanent alteration to the land. They had ceased to be a readily removable chattel distinguishable from the land. Whether their original installation was consensual or trespassory, there was no longer anything belonging to the applicants on the respondents’ land.

21. [108]

    I agree with the orders proposed by White JA.

22. [109]

    EMMETT AJA: These proceedings are concerned with an order for costs made by a judge of the District Court (the primary judge) on 14 August 2020, for reasons published on that day. The order was made in proceedings brought by the respondents, Graeme and Deborah Morris (the Plaintiffs), against Jill McIntosh and Robert Patane (the Defendants). The proceedings were resolved by compromise and, on 3 August 2020, the primary judge made an order by consent that the Plaintiffs’ amended statement of claim filed on 31 May 2020 be withdrawn and dismissed. The proceedings then came before her Honour to deal with the question of costs.

23. [110]

    The Plaintiffs asked the primary judge to make one of the following orders:

24. [111]

    The dispute between the Plaintiffs and the Defendants concerned land situated at Brightwaters, New South Wales, where the Plaintiffs and the Defendants own adjoining parcels of land. A dividing fence is erected between the land owned by the plaintiffs (the Plaintiffs’ Land) and the land owned by the Defendants (the Defendants’ Land).

25. [112]

    The dwelling houses erected on the Defendants’ Land are serviced by subterranean sewer and stormwater pipes, a stormwater pit and electrical cables encased in conduit. Parts of the pipes, stormwater pit and electrical cables cross the boundary between the Plaintiffs’ Land and the Defendants’ Land, pass through the Plaintiffs’ Land and cross the boundary back into the Defendants’ Land. In their amended statement of claim of 31 May 2019, the Plaintiffs alleged that those encroachments, both singularly and in combination, amounted to the tort of trespass to land and that the continued encroachment amounted to a continuing and ongoing trespass to land. The Plaintiffs claimed damages at common law in relation to trespass to land and a mandatory injunction that the Defendants take such action as is required to remove the encroachments and to remediate the Plaintiffs’ Land from any damage associated with or occasioned by the removal.

26. [113]

    By their defence to the amended statement of claim, the Defendants admitted that the pipes, stormwater pit and electric cables encroached on the Plaintiffs’ Land but not to the extent alleged. They did not admit that the encroachments amounted to the tort of trespass to land other than to an extent that was set out in their admissions. They denied the extent of the trespass claimed by the Plaintiffs and said that, if trespass lay, they denied that they were liable for the payment of any damages as the trespass did not cause any damage or loss to the Plaintiffs, as any encroachments lay under grass, a fence and a retaining wall, which the Plaintiffs themselves constructed. The Defendants also denied that the Plaintiffs were entitled to the relief of a mandatory injunction.

27. [114]

    Lengthy negotiations were undertaken between the parties following the commencement of the proceedings. Ultimately the negotiations resulted in a compromise whereby the Defendants constructed new pipes, pit and electrical conduits on the Defendants’ Land and the existing pipes, pit and conduits remained on the Plaintiffs’ Land unaltered.

28. [115]

    By their amended notice of motion of 21 July 2020, the Defendants sought orders for costs as indicated above. The primary judge rejected the contention by the Defendants that the question of costs was resolved by way of an agreement arising out of communications between the parties.

29. [116]

    UCPR r 42.20 relevantly provides that, if the Court makes an order for the dismissal of proceedings, then, unless the Court orders otherwise, the plaintiff must pay the defendant’s costs of the proceedings. The primary judge observed that UCPR r 42.20 did not give rise to a presumption that costs should be ordered against the Plaintiffs but created a starting point. Her Honour observed that there had to be a good reason for departing from the ordinary position and that one of those reasons is where a plaintiff achieves practical success in the proceedings. Her Honour considered that the Plaintiffs did achieve practical success in the proceedings. Her Honour was also satisfied that the costs had been significantly increased by “the unreasonable conduct of the Defendants” in circumstances where they did not serve any evidence to show that the services were not on the Plaintiffs’ Land and ultimately “impliedly accepted that there had been a trespass”.

30. [117]

    The primary judge also held that, after embarking on an analysis of the proceedings, she was satisfied that the Plaintiffs acted reasonably in commencing the proceedings but that the Defendants did not act reasonably in defending them. Her Honour was satisfied that the Defendants effectively surrendered and that there should be an award of costs “in favour of the successful party”. Her Honour also considered that the findings that she made provided “proper justification, sound positive ground and a good reason” for departing from the ordinary position.

31. [118]

    The primary judge then considered whether there should be an order on the usual basis or an indemnity basis. Her Honour concluded that an offer made by the Plaintiffs on 4 December 2019 was made at a time when the Defendants were well aware of the Plaintiffs’ case. Her Honour was satisfied that the Plaintiffs’ case had excellent prospects of success as at the date of the offer and that the Defendants did not have any prima facie viable defence to the Plaintiffs’ original claim “for the encroachments to be removed”. Her Honour concluded that the Defendants’ conduct in failing to accept the compromise offer was unreasonable and therefore made an order for indemnity costs from 31 December 2019, representing a reasonable time for consideration of the offer. Her Honour ordered the Defendants to pay the costs of the Plaintiffs on the usual basis up to 31 January 2020 and on the indemnity basis thereafter.

32. [119]

    By summons filed on 3 September 2020, the Defendants seek leave to appeal from the orders made by the primary judge. Various grounds of appeal have been proposed, including denial of procedural fairness. In the course of the hearing of the application for leave, which was heard concurrently with the appeal, the Court raised with counsel for the Plaintiffs the nature of the claim made by them. It was accepted by counsel for the Plaintiffs that the claim as formulated in the amended statement of claim could not have succeeded, since there was no evidence that the Defendants had been involved in the construction of the encroachments, which had been constructed many years before the Defendants acquired the Defendants’ Land.

33. [120]

    The pleadings are ambiguous in so far as the amended statement of claim did not allege that the Defendants had committed trespass but simply alleged that the encroachments amounted to trespass. To the extent that that allegation was admitted, it is of no assistance to the Plaintiffs. It may well be that the construction of the encroachments was a trespass but it was committed by some person or persons other than Defendants. In those circumstances, the Plaintiffs could never have succeeded in obtaining a mandatory injunction against the Defendants. Further, the Plaintiffs could not have recovered damages from the Defendants.

34. [121]

    The primary judge proceeded on a misapprehension as to the claims being made by the Plaintiffs and the Defendants’ prospects of success. In the circumstances, leave to appeal should be granted and the appeal should be allowed. I have had the advantage of reading in draft form the reasons of White JA. I agree with the orders proposed by his Honour for the reasons given.