Adams v Fairfield City Council

Bankruptcy Act 1966 (Cth) LEGISLATION CITED: Civil Procedure Act 2005 Environment Planning and Assessment Act 1979 Land and Environment Court Rules 2007

CASES CITED: Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56 Port Stephens Council v Sansom [2007] NSWCA 299; 156 LGERA 125

APPLICANT LEGAL REPRESENTATIVES: Yalda Adams RESPONDENT AJJ Thompson, Solicitor of Ritchie & Castellan Solicitors

THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

EX TEMPORE JUDGMENT 1 HIS HONOUR: By notice of motion filed on 13 January 2010, Fairfield City Council (the Council) seeks an order that the applicant, Yalda Adams, pays its costs of these proceedings. The trigger for this motion is the filing by the applicant on 16 December 2009 of a notice discontinuing the proceedings. 2 The applicant commenced these proceedings on 5 August 2009. On that date the applicant filed an application in Class 1 of the Court's jurisdiction, appealing to the Court pursuant to s 97 of the Environmental Planning and Assessment Act 1979 (the EPA Act), following the refusal by the Council of his development application that same day. The development application, which had been lodged with the Council on 1 June 2009 and which related to land known as 5 Washington Way, Cecil Park (the site), sought consent to retain fill material which had been brought onto the land some years earlier. Apparently the fill was used, at least in part, to support an elevated driveway and it also appears that this fill material was located so as to provide a building platform on the site. 3 The development application also sought consent to carry out remediation treatment on areas of the fill acknowledged to be contaminated and thereafter to use that fill material as a medium for landscaping. 4 Following the institution of the proceedings, steps were taken by the Council in accordance with the Court's practice directions for the preparation of Class 1 appeals for hearing. Those steps included the preparation and service by it of a Statement of Facts and Contentions in which it identified a number of issues, including a legal issue for determination. Ultimately, the proceedings were fixed for hearing before a Commissioner of the Court on 16 and 17 December 2009, there having been prior directions given for expert conferences to take place and for preparation of a joint expert report by 8 December 2009. However, that hearing did not proceed by reason of the applicant filing his notice of discontinuance in Court on 16 December 2009. The fact that he intended so to do was not notified to the Council until 11 December 2009. 5 In due course it will be necessary to refer in a little more detail to some of the events that preceded the filing of the notice of discontinuance. Suffice it is to record for present purposes the claim by the Council that the costs it incurred in preparing for hearing were unreasonably and unnecessarily incurred. Thus, it seeks an order for costs against the applicant. 6 The Council's notice of motion seeking costs was listed before Biscoe J on 1 March 2010. At that time the Court was informed that the applicant had become bankrupt on 19 February 2010. Although a copy of the sequestration order apparently made on that date was not tendered to this Court, counsel who had previously appeared for the applicant confirmed that his former client had become bankrupt. This necessitated the adjournment of the Council's notice of motion, as doubt existed as to whether that notice of motion could proceed, at least without the leave of the Federal Court given in accordance with s 58(3) of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act). 7 The notice of motion has since been before me on two occasions. It is unnecessary to detail the events that occurred on each of those occasions. It is sufficient to record that directions were given for notification of the Council's notice of motion to the applicant's trustee in bankruptcy. According to the evidence before me, such notice has been given but there is no appearance today by the trustee and correspondence tendered from the trustee does not indicate any intention to appear. 8 When the hearing of this matter commenced today, there was no appearance by or on behalf of the applicant. However, after I had commenced to deliver judgment, Mr Adams appeared in person. He indicated that he was concerned about the quantum of costs which he understood the Council was seeking. I explained that it was not my present function to determine the quantum of costs to be paid but only to determine whether an order for the payment of costs should be made at all. After I had explained that, should I make an order, there were procedures available for assessment of the quantum of costs, Mr Adams stated that he did not wish to say anything further as to whether a costs order should be made. 9 I also enquired of Mr Adams as to whether he wished to make any submission to me about the Council's application, in light of his bankruptcy. Again, he indicated that he did not wish to say anything further. 10 In order to determine the Council's notice of motion, there are two issues to be addressed. The first is whether it can proceed in the absence of leave under the Bankruptcy Act, given that the sequestration order made against the estate of the applicant remains current. The second issue is whether, in the exercise of the discretion available to me, an order for costs against the applicant should be made.

The bankruptcy issue 11 As I have earlier recorded, the applicant entered bankruptcy on 19 February 2010. His appeal to this Court pursuant to s 97 of the EPA Act had been discontinued some two months earlier on 16 December 2009. The question which then arises is whether, in the context of those events, leave of the Federal Court or Federal Magistrate's Court is required before the Council is able to proceed with its present notice of motion. 12 Section 58(3) of the Bankruptcy Act relevantly provides as follows: "(3) Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor: (a) to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or (b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding." 13 As will be apparent from the terms of s 58(3), the need for leave pursuant to that section will only arise if the Council's notice of motion involves taking a step in the proceedings commenced in this Court in respect of a "provable debt". That requirement then necessitates that attention be given to the provisions of ss 5 and 82. 14 The expression "provable debt" is defined in s 5 of the Bankruptcy Act to mean "a debt or liability that is, under this Act, provable in bankruptcy." Section 82 of that Act, in turn, relevantly provides for those debts that are provable in bankruptcy. 15 Subsection (1) of s 82 provides as follows: "(1) Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of bankruptcy, are provable in his or her bankruptcy." 16 Applying the language of the latter subsection according to its ordinary usage, the order for costs which the Council now seeks, if made, is not a debt or liability to which the applicant was subject on 19 February 2010, that is, on the date of his bankruptcy. Moreover, an order for costs, not yet made, is not a debt or liability to which the applicant "may become subject" by reason of an obligation incurred before 19 February 2010. No obligation to pay costs can arise until the discretion to make an order so requiring is exercised by this Court. Indeed, having regard to the provisions of Pt 3.7 of the Land and Environment Court Rules 2007 (LECR), no contingent liability for costs could be seen to arise or have arisen as at that date. Subrule (2) of Pt 3.7 provides that the court is not to make an order for the payment of costs in Class 1 proceedings unless it is determined to be "fair and reasonable" so to do in the circumstances of the case. The fact that the Council had not consented to the applicant's discontinuance in December last, because it wished to seek costs, would not seem to me to alter the position. It is necessary for the court first to pronounce upon the application for costs, taking into account the presumption against the making of such an order as expressed in subrule (2) and, in so doing to consider the particular circumstances potentially informing that exercise of discretion, as they are exemplified in subrule (3). 17 It follows that, uninstructed by authority, I would interpret the provisions of the Bankruptcy Act in a way that would present no bar to the Council proceeding with its present notice of motion. In so concluding, my interpretation of the relevant provisions of the Bankruptcy Act is consistent with the judgment of the majority of the High Court in Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56. The facts of that case bear a remarkable similarity to those which I am called upon to consider in the present case. 18 Mr Foots was the defendant in commercial litigation conducted in the Supreme Court of Queensland. In those proceedings judgment was entered against him on 1 September 2005 when he was ordered to pay damages to Southern Cross in the sum of $2,450,000. On 15 September 2005, some fourteen days later, he became bankrupt upon his own petition. However, it was not until 3 February 2006 that the issue of costs in the proceedings was determined, when the trial judge ordered that Mr Foots pay the successful party's costs on an indemnity basis. The terms in which the trial judge had expressed his disapproval of Mr Foots' case, when on 1 September 2005 he had entered judgment against him, made it readily apparent that an order for costs would, in all likelihood, be made against Mr Foots when the issue of costs came to be determined. 19 The order for costs having been made after he had become bankrupt, Mr Foots argued that the application for costs should have been stayed pursuant to s 58(3) of the Bankruptcy Act as no leave had been granted under that section to pursue the application. This argument necessarily involved consideration by the High Court of the operation of ss 58(3) and 82(1) of that Act. The majority (Gleeson CJ and Gummow, Hayne and Crennan JJ) rejected the contentions advanced by Mr Foots. 20 It was necessary for the High Court to determine whether the making of an order for costs, after Mr Foots had entered bankruptcy but consequential upon the determination of the principal proceedings prior to bankruptcy, concerned a debt to which he had become subject by reason of an obligation which he had incurred prior to bankruptcy. On that question, the majority said this: "[35] What, then of the appellant's first submission? This is, that his exposure to an adverse costs order arose from an "obligation" incurred prior to his bankruptcy. The submission should be rejected: no such obligation arose until the costs order was made…. [36] The most that can be said, as Mummery LJ observed in Glenister , is that "[o]nce legal proceedings have been commenced there is always a possibility or a risk that an order for costs may be made against a party" (citation omitted). But that risk is not a contingent liability within the sense of s 82(1). The order for costs itself is the source of the legal liability and there is no certainty that the court in question will decide to make an order. … ." 21 The considerations relevant to the interpretation of the provisions of the Bankruptcy Act were drawn together by the Court when addressing the issue in Foots in the following way: "[67] Had the costs order made by Chesterman J on 3 February 2006 been made and taxed before the appellant's bankruptcy ensued, it would have been a provable debt. Even if the order had not been taxed before bankruptcy, it would nonetheless have been provable as a debt incurred "by reason of an obligation incurred before the date of the bankruptcy"; namely the antecedent making of the costs order. However, the order was made only after bankruptcy had already intervened, and the appellant's liability to meet that order did not arise from an obligation incurred before bankruptcy. Thus, it was not a provable debt, and the stay contained in s 58(3) of the Bankruptcy Act was not engaged. His Honour was therefore entitled to make the costs order against Mr Foots." 22 The reasoning and judgment in Foots bears directly upon the present issue. Applying that reasoning, confirming as it does, with respect, my own interpretation of the relevant statutory provisions, I conclude that the Council is able to pursue its present application for costs without the necessity to seek leave under s 58(3) of the Bankruptcy Act.

Exercise of the costs discretion 23 The power of this Court to award costs is founded in s 98 of the Civil Procedure Act 2005. Subsection (1) of that section provides as follows: " 98 Courts powers as to costs (1) Subject to rules of Court and to this or any other Act: (a) costs are in the discretion of the Court … "

It will be seen that the opening qualification to the general discretion afforded by the subsection is important in the context of the rules of this Court. 24 I have earlier referred to Pt 3.7 of the LECR which applies, in terms, to proceedings brought in Class 1 of the Court's jurisdiction. Subrule (2) is in the following terms: " (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."

The rule so expressed, imposes a significant constraint upon the discretion otherwise available if s 98 of the Civil Procedure Act was the only relevant statutory foundation for an order. Indeed, a rule expressed in terms similar to (but not identical with) subrule (2) has been described as a "presumptive rule that there will be no order as to costs" ( Port Stephens Council v Sansom [2007] NSWCA 299 per Spigelman CJ at [48]; 156 LGERA 125 at 141). Nonetheless, his Honour observed in the same paragraph that the context in which the presumptive rule is to be seen is that the power to make an order is conferred "in the broadest terms ie what is 'fair and reasonable … in the particular circumstances'". The only restriction that his Honour articulates to the scope of considerations relevant to the formulation of judgment is that it not offend a rule of rationality. 25 Subrule (3) of Pt 3.7 identifies circumstances in which the making of an order might be seen to be "fair and reasonable". As the subrule makes clear, it is not intended to be exhaustive of such circumstances. The circumstances there identified include: "(b) that a party has failed to provide, or has unreasonably delayed in providing, information or documents: (ii) that are necessary to enable a consent authority to gain a proper understanding of, and give proper consideration to, the application; (d) that a party has acted unreasonably in the conduct of the proceedings."

It is with these considerations in mind that I turn to consider the events in the conduct of the present proceedings that preceded the filing of the applicant's notice of discontinuance on 16 December 2009. 26 As I have earlier recorded, the Class 1 application commencing these proceedings was filed with the Court on 5 August 2009. Attached to the application was a copy of the notice of determination issued to the applicant by the Council that same day, indicating its grounds for refusal of his development application. One of those grounds made reference to the quality of the fill that had been brought to the site which was required to be certified in accordance with EPA guidelines for consultants reporting on contaminated sites. 27 As was required of it, the Council filed its Statement of Facts and Contentions on 31 August 2009. Included among the ten contentions advanced by the Council for opposing the grant of consent by the Court was a question of law as to whether the development was prohibited by reason of the fact that an absence of hazardous material within the fill had not been demonstrated. A related merit contention was that the soil assessment prepared by a consultant retained by the applicant was inadequate for reasons which were specified. Reference was made to the presence of asbestos in the fill material. 28 When the matter came before the Court on 2 September 2009, the applicant was directed to file and serve a response to the Council's Statement of Facts and Contentions. No such response was ever filed. 29 However, on 16 September directions were made by the Acting Registrar for the separate hearing of the questions of law which the Council had identified in its statement of contentions. Directions were given for the preparation of an agreed statement of facts relevant to the determination of those questions and, as well, the parties were directed to file written submissions. The applicant co-operated, through his counsel, in settling an agreed statement of facts in conjunction with the Council's legal representatives and also prepared written submissions as the Acting Registrar's direction had required. 30 However, shortly prior to the date fixed for hearing of the legal question, the Chief Judge vacated the hearing and directed that the appeal be heard on all grounds, both legal and merit, before a Commissioner of the Court who had legal qualifications. This course was undoubtedly adopted because the Chief Judge formed the opinion that the tendered legal questions were not appropriate for separate determination. 31 Hearing of the appeal was fixed for 16 and 17 December 2009 with a direction that experts confer and prepare a joint report by 8 December 2009. The latter direction was not observed. 32 In preparation for the hearing, the Council briefed a consultant engineer in the employ of Geotechnique Pty Ltd to investigate the site and prepare a preliminary contamination assessment of the fill material on it. At about that same time the Council made a request of the barrister who had been retained by the applicant to nominate the expert who would address this issue on behalf of the applicant and therefore be available to confer with the Council's expert in compliance with the direction that had been given. The applicant's barrister was contacted on a number of occasions subsequent to 26 November 2009 requesting the name of his client's expert but on each occasion he indicated that he had not been provided with instructions enabling him to provide that information. 33 Ultimately, the matter was relisted on 9 December 2009 for further directions. That hearing took place before the Commissioner of the Court who had been appointed to hear the matter. At that time the barrister retained by the applicant informed the Court that no evidence had been prepared by or on behalf of the applicant and no experts had been retained by him. The Court was informed that the applicant would be advised to discontinue his appeal, although instructions to give effect to that advice were not forthcoming at that time. In consequence, the Council was directed to file and serve its evidence by 11 December 2009 and provide a copy of the report that had been prepared by Geotechnique Pty Ltd on 7 December 2009 to the applicant that same day. The original of the Geotechnique report together with a statement of evidence prepared by a town planner employed by the Council were filed and served on 10 December 2009. 34 It was not until 11 December 2009 that the applicant, through his barrister, sought to notify the Council that the proceedings were to be discontinued. Apparently, an attempt to file the notice of discontinuance in the registry of the Court on that day had been unsuccessful because the notice had not been signed by the Council. Ultimately, the notice of discontinuance was filed in Court on 16 December 2009, leave so to do having been given by the Acting Registrar. 35 This summary of events from the time of commencement of proceedings until the applicant filed his notice of discontinuance does, in my opinion, reflect circumstances in which it is fair and reasonable to order that he pay costs. Soil contamination was recognised, or ought to have been recognised, as an issue in the proceedings from the outset. The Council's notice of determination which was appended to the Class 1 application indicated as much. 36 If there was any doubt as to the need to prepare for a hearing on the basis that the quality of the fill and its contamination was to be a principle contested issue in the proceedings, such doubt ought properly have been dispelled upon service of the Council's Statement of Facts and Contentions on or about 31 August 2009. 37 Nonetheless, the applicant persisted. He appeared to co-operate in preparation for the hearing of the separate legal issue but save for the two steps taken on behalf of the applicant in that regard, namely agreement in a statement of facts and preparation of submissions, no other direction of the Court appears to have been met. Once the legal question was deferred for consideration at the final hearing, the applicant failed to take any of the steps which he was directed to take and, more particularly, he failed to retain a witness to address his position as to the quality of fill material, a matter which had been a significant issue from the outset. This conduct, so it seems to me, demonstrates that the applicant "acted unreasonably in the conduct of the proceedings". Paragraph (d) of subrule (3) of Pt 3.7 LECR identifies such conduct as potentially identifying a circumstance which might properly inform the making of an order for costs on the basis that so to do would be fair and reasonable. No circumstances that I can identify upon the evidence before me would militate against a determination that it is fair and reasonable in the circumstances of this case to make the order for costs which the Council seeks. 38 The only qualification that I express to the ambit of the order that I am prepared to make is that the Council should not have its costs associated with appearances before this Court while it considered whether it would make an application to the Federal Court for leave under s 58(3) of the Bankruptcy Act. It initially contemplated that course but ultimately abandoned it on the basis that no such leave was required. That argument was not foreshadowed until the matter came before me on 3 May last when I directed that a notice be given to the applicant's trustee in bankruptcy so as to afford him the opportunity to appear as a contradictor to the submission that the Council's solicitor then foreshadowed. As I have earlier recorded, the trustee did not appear before me today to address the Council's motion. 39 The orders that I make are as follows:

1. Applicant to pay the respondent's costs of the proceedings. 2. Applicant to pay the respondent's costs of this notice of motion other than those costs incurred of and incidental to appearances before the Court on 29 March and 3 May 2010.
2. Exhibits may be returned.

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