Applicant v MOSMAN COUNCIL

APPLICANT Mr P Tomasetti

FIRST RESPONDENT Mr J Ayling Barrister LEGAL REPRESENTATIVES: SOLICITOR Ms J Walsh of Hill Thomson & Sullivan SECOND RESPONDENT Mr W Henningham Solicitor of Henningham & Ellis-Jones

IN THE LAND AND Matter No: 40160 of 1998 ENVIRONMENT COURT Coram: Sheahan J OF NEW SOUTH WALES 12 April 1999

MOSMAN COUNCIL First Respondent GEORGE O'NEIL Second Respondent

These are Class 4 proceedings in which the applicant ("Thomson") sought a declaration that development consent 636/97, granted by the First Respondent ("Council") to the Second Respondent ("O'Neil"), for first floor additions and landscaping work, at O'Neil's home, 30 Botanic Road Mosman (next door to Thomson's home), was invalid, void and of no effect.

The substantive dispute between the neighbours has been settled by mediation, and they have agreed, as between themselves, that each will pay his own costs. The two respondents have also agreed that, as between themselves, each will pay his/its own costs. The only issue remaining to be resolved by the Court is the question of costs as between Thomson and the Council.

In view of the agreements reached, and with the consent of all parties, I formally dismissed the application, save as to the one outstanding question as to costs. O'Neil's representatives then obtained leave to withdraw, and the Court heard argument on the outstanding costs issue, upon which this decision was reserved.

This Court has an unfettered discretion as to costs, but that discretion must be exercised judicially, i.e. not by reference to irrelevant or extraneous considerations, but upon facts connected with the litigation. See Land & Environment Court Act 1979 ("LECA") s 69; and Donald Campbell & Co Limited v Pollak [1927] AC 732. Some useful guidance as to the exercise of the discretion can be found in Oshlack v Richmond River Council (1998) 193 CLR 72 (see especially the judgment of Kirby J at par 134, pages 120-123).

In deciding the outstanding question of costs in this matter, it is not necessary for the Court to reach a " final " conclusion as to the likely outcome of the proceedings, had they been tried, but the Court must form some impression of the prospects of the applicant's success. See Re Minister for Immigration; Ex parte Lai Qin (1997) 186 CLR 622; and Hayden Theatres v Penrith Council & Anor (40210 of 1995, Bignold J, 1 April 1998).

Only the method of final and formal disposition of the proceedings differentiates this matter from the case of Jan Yee Australia Pty Limited v Woollahra Council & Kurts Development Pty Limited (" Jan Yee ") (40232 of 1995, Bignold J, 26 March 1997).

As in this case, in Jan Yee the challenge to the validity of the development consent rested upon assertions of a denial of procedural fairness on the part of Council in processing the application, and upon allegations that no notice was given to the applicant, and that Council failed to properly consider relevant matters in terms of s 90 of the Environmental Planning & Assessment Act 1979 ("EPAA"). These grounds were described by Bignold J, in his judgment, as the " conventional grounds of challenges to the validity of development consents ".

In Jan Yee the dispute as between the neighbours was resolved prior to the hearing, and the applicant filed a notice of discontinuance, bearing the endorsement of the consent of the private respondent, but not that of the Council. In the course of his judgment on the question of costs as between the applicant and the Council, Bignold J said (at 4-5):

It is always to be hoped … that the Court does not … have to try a case which has settled in order to arrive at a fair conclusion as to how the only outstanding question of costs is to be resolved. That would … be an extremely wasteful way to proceed …

His Honour acknowledged the difficulty in arriving at a " reasonable prognosis of the fate of the litigation had it been fully litigated " and in the circumstances of that case found himself unable to draw " any inference on the very limited evidence available that might be favourable to the applicant " that the result of the litigation would have been its successful prosecution by the applicant.

Bignold J formulated the test for making a costs order in terms of the trial judge asking the question whether " the proceedings were justifiably commenced, justifiably continued, justifiably settled and in all probability would have succeeded… had they been fully litigated ".

In this case, in order that some inference might be drawn as to the likely outcome of these proceedings, the parties agreed that, despite their objections to various elements of the evidentiary material filed, the Court should have regard to all the affidavit material.

However, prior to submissions being made in respect of that material, Mr Tomasetti, on behalf of the applicant, sought the Court's leave to file amended points of claim, in the form in which they had been foreshadowed to the Council approximately one week prior to the scheduled hearing of the case. It was appreciated by the Court and by all parties that the remaining costs issue could not be addressed until the question of leave to amend points of claim has been dealt with by the Court.

Mr Tomasetti explained that the need to amend arose from the opportunity provided during the preparation of the litigation, for Thomson's legal team to have a proper inspection of the Council's documentary material. The result of that inspection was the discovery that some of the documents, copies of which had been previously briefed by the applicant to his legal representatives, had relevant printing on their previously uncopied/unbriefed reverse sides. The contents of such documents were various advisings to Thomson as to Council's procedures, practices and policies in respect of its consideration of building and development applications.

Mr Ayling, Counsel for the Council, conceded that his client incurred no direct prejudice as a result of the amendment sought, but objected to the late notice given.

Leave was granted to file the amended points of claim, and Council's amended points of defence were then filed without objection. It is important for me to note, in this context, that, given Mr Tomasetti's explanation, I would have allowed the amendments to be made had the case proceeded to a full hearing.

A close perusal of the affidavit material reveals a large amount of common ground among the parties and a few factual issues which the Court would have had to decide.

On or about 15 January 1998, Thomson received notification of O'Neil's DA (lodged on or about 24 December 1997), and availed himself of the opportunity to make a submission. Council undertook both to take account of issues raised in submissions, and that " if you make a submission you will be informed of the outcome ". On its reverse side the letter provided information to assist in the making of a submission.

Once amended plans were available, Thomson submitted a written objection to Council in late March 1998, as a proposed terrace was depicted very close to his boundary, and he formed the view that it would have an adverse impact on both the privacy and amenity of his home. He wished to have that feature deleted from the proposal altogether.

When the O'Neil proposal was to be reported to the Council's Works Committee on 7 April 1998 , Thomson was invited to attend and address the meeting. He saw that the Council officers had noted his concerns, and had suggested a condition requiring deletion of the terrace. Thomson decided he no longer need object to the granting of consent, and he so informed the Committee. He heard O'Neil's representatives argue for the deletion of the relevant condition, but he thought the Committee resolved to adopt the officers' recommendation.

Council met to consider the DA on 14 April 1998, but Thomson did not know that until he received letters of 22 and 29 April 1998, advising that Council had deferred the DA to the next Works Committee meeting, and advising also of the Committee's procedures.

Mr and Mrs O'Neil invited Mr and Mrs Thomson to visit their home " in about the week commencing 3 May 1998 " to discuss " the matters of concern to the applicant ". O'Neil deposes to his having offered, in those discussions, to build a privacy screen, and to Thomson's having promised to " get back " to him, but not doing so. A few days later, O'Neil further deposes, " the applicant's wife visited us and asked to inspect the plans " but " made no comment about our proposal ".

Thomson was invited to address the Committee on 5 May 1998 . Again he sighted the officers' report, which reaffirmed their recommendation that the condition requiring deletion of the terrace should stand, and again he addressed the Committee to the effect that that condition resolved his objection. He heard O'Neil argue for deletion of the condition, but indicate a preparedness to install a privacy screen as an alternative.

Thomson deposed that he formed the impression at the end of the 5 May meeting that the Committee adopted the officers' recommendation that the DA be approved with the terrace deleted .

He did not receive any written notification from the Council of the outcome of that 5 May meeting but O'Neil denies Thomson's assertion that the Works Committee resolved to adopt the Council officers' recommendation. O'Neil says that the Committee resolved to support the recommendation in the report subject to an amendment contemplating " alternative methods of privacy screening ", and that he was eventually advised that Council deferred the matter to the Works Committee meeting on 2 June.

On 12 May, Council resolved to defer the development application for consideration at the next Works Committee meeting, to be held on 2 June. Thomson did not receive from the Council any written notification of the outcome of that Works Committee meeting but, in due course, received a letter dated 16 June 1998 advising that the application and his submission had been considered by Council at its meeting on 9 June, and the application had been approved subject to conditions.

The conditions imposed did not contain the same condition 3 that Thomson had expected, but a condition which read as follows: A privacy screen is to be provided along the north-western edge of the terrace adjacent to the boundary with No 28 Botanic Road. The privacy screen is to incorporate full height lattice of industry standard to a height of 1.8metres above deck level to minimise the impact on the privacy and overlooking of the adjoining property.

On inquiry, Thomson was informed that the " alteration " was passed by the Works Committee on 2 June, and by Council on 9 June. He deposed that he received no notice of either of those June meetings. In view of the fact that he had also received no notification of the outcome of the 5 May meeting, it is suggested that a notification dated 22 May 1998 must have gone astray.

There is also a suggestion in the evidence that an unidentified Councillor told one of the June meetings that " the neighbours have reached an agreement regarding the terrace ". Thomson alleges that Council, accordingly, when it determined O'Neil's DA, did not take into account his objection to the terrace.

O'Neil denies indicating to any Councillor or Council officer that an agreement had been reached with Thomson. He attended the 2 June meeting where the Committee resolved to amend the suggested condition of consent to require a lattice privacy screen. He deposed to the Council's adopting a recommendation from the Committee in those terms at the Council meeting on 9 June and to his receiving formal notification from Council on or about 17 June 1998 to that effect.

The Council witnesses deposed to the Council's practices, procedures and office systems relevant to the nomination of people to receive notices and to the dispatch of such notices. They assert that all relevant notices were despatched to Thomson and other objectors. Those witnesses corroborate Thomson's understanding of the Council policies on notification and submissions, and O'Neil's evidence as to the decisions taken by Council and its Works Committee at relevant stages of the consideration of the O'Neil DA.

(i) he was at home throughout the relevant period, and received mail in the normal course; (ii) he would have sought to address the Works Committee on 2 June 1998 if he had received a notice; (iii) he relied on the Council procedures outlined to him earlier, expected to be notified of all relevant meetings, and was not so notified; (iv) before he commenced these proceedings he acquainted the members of the Council with his complaint about lack of notice; (v) he was aggrieved to hear that the Works Committee was misled by the totally inaccurate comment that he was party to an agreement with O'Neil; and (vi) he asked Council to rescind the approval, and commenced the proceedings only as a last resort.

Relevantly, and in summary, the amended points of claim (apart from some factual assertions covered by the above summary of the affidavit evidence) allege that:

(i) at all material times Council had a policy of causing neighbours adjoining a proposed development site to be notified of a development application, invited to make submissions, and kept informed. (ii) the Works Committee of Council decided major applications, and, if a written submission were made about any application, it would be considered when the decision was being made. (iii) notice was given of meetings of the Works Committee, and potentially affected persons were advised of the procedures to be followed at such meetings. The authors of written submissions would be given the opportunity to address the Works Committee. (iv) Council undertook to notify in writing persons who had made a written submission of the outcome of Works Committee meetings within a few days. (v) the conduct of the Council gave rise to an enforceable expectation that, before any determination of the development application, Thomson: (a) would be notified in writing of the outcome of the 5 May 1998 meeting; (b) would be notified in writing of the outcome of the 2 June 1998 meeting; (c) would be given an opportunity to be heard at the Works Committee meeting; and (d) would have his objection to the development application taken into account in its determination. (vi) in the circumstances that Thomson was not so notified, he was denied procedural fairness and natural justice, and, thereby, his objection was not taken into account.

Council's amended points of defence comprehensively deny the amended points of claim.

Council concedes that it had a practice of advising in writing the owners of properties which might be adversely affected by a proposal and of supplying them with a pamphlet giving certain information.

Relevantly Council denies that in the circumstances it was under any obligation to notify Thomson of the Committee meeting to be held on 2 June. Council contends that as Thomson was present at the 5 May meeting, he must have been aware of the outcome of that meeting, as it affected the relevant application. He could have, but chose not to, attend the meeting of 12 May and, therefore, the Council was not under any obligation to notify him of the outcome of the meeting on 2 June.

When the hearing commenced following the mediation, a document containing the details of the settlement reached between Thomson and O'Neil was tendered as Exhibit T1 . Put simply, O'Neil undertook not to act on the current development consent in its current form until it was modified in certain ways, which were agreed and set out in the document. He and Thomson further agreed, as noted above, that, as between themselves, each of them would pay his own costs of the proceedings.

The settlement document ( Exhibit T1 ) was signed by the parties personally, and proceeds on the presumption that the suggested modification of Council's consent to O'Neil's proposal will in due course receive the Council's approval. Counsel for the Council expressed no objections on behalf of the Council to what was proposed by the settlement agreement.

The material terms of the settlement presuppose that the consent will be modified to " provide for a screen wall comprising masonry to a height of 1 metre, topped by an obscure light weight screen to an overall height of 1.8 metres to be erected " in a position agreed upon and shown on a plan comprising part of the exhibit. " The screen wall will be landscaped by the provision of a series of planter pots with shrubs which will grow to a height not exceeding the screen wall ". The agreement is stipulated " to provide a non trafficable setback to the proposed terrace, and landscaping of the proposed screen ", and requires that " the landscaping will be adequately maintained at all times ".

On behalf of the Applicant , Mr Tomasetti submits that Thomson had a right to be heard even if his submission would have made no difference. He was told the procedures, and followed them diligently, from a ratepayer/objector's point of view. He was entitled to written notifications, and the Council procedures miscarried on and/or after 5 May. Council laid down its policy and created an enforceable legitimate expectation. Thomson's objection, in the end, was not taken into account. Contrary to his expectations, the terrace, in fact, continued as part of O'Neil's application.

The foundation of the applicant's substantive case is the following statement by Cripps J in Hardi v Woollahra Municipal Council & Wasserman (" Hardi ") (No.40196 of 1987, 17 December 1987) (p 8):

… the Council's policy and the continuous application of it gave rise to an enforceable legitimate expectation that Council would receive neighbour objections and representations and consider them before making a decision with respect to a building application before it. Such a reasonable expectation arising from a public promise by a local authority is enforceable not only because it would be unfair to a person acting on that promise were it to do otherwise, but also to further the public interest requirement that when a public authority has promised it will follow a certain procedure, it ought, in the interest of good administration, be held to that promise so long as the implementation of it does not interfere with its statutory duty. Furthermore, it can be inferred, I think, that when a local council adopts a policy of obtaining representations, it does so because it considers that by receiving them it will be better able to discharge its duty or function under the relevant legislation.

Cripps J revisited the issue, when Chief Judge of the Court, in Porter & Anor v Hornsby Shire Council (" Porter ") (1989) 69 LGRA 101, where he went on to consider in some detail the High Court's decision in Kioa & Ors v West & Anor (" Kioa" ) (1985) 159 CLR 550.

In Sommerville v Dalby & Ors (" Sommerville ") (1990) 69 LGRA 422 Hemmings J held that the Council's longstanding practice to give written advice to adjoining owners with respect to any development application gave rise to an enforceable expectation that such notice would be given and that representations made pursuant thereto would be considered before determination of the application. However, he held that the Council was entitled to assume that such notice would be duly received in the ordinary course, and proceeded to determine the application if no representations were received in the time specified.

Mr Tomasetti submits that as Thomson did not reach any agreement with O'Neil, he had no alternative but to challenge the Council's consent in the Court. Because Council could proceed to make the same decision on the DA in the future, if the current consent were declared void, Thomson has made a prudent compromise to settle the proceedings, but as he had no alternative but to come to Court, he should get his costs.

On behalf of the Council , Mr Ayling submits that Thomson should be ordered to pay its costs. In any event, Council is strongly opposed to an order that it should pay any of Thomson's costs. The outcome of the litigation, the agreement in Exhibit T1 , involves only minor alterations in a plan already approved by the Council. The Council is not a party to that settlement agreement, but it proceeds upon the assumption that the consent is valid and can properly be amended in the agreed way.

Council submits that discretion would have been a big issue in the final outcome, if the matter had been litigated. The Council's policy and procedures are clear as to the dispatch of advisings. The evidence as to receipt and non-receipt is " mixed ", and the Court would have found, on the balance of probabilities, that the relevant notices were produced and dispatched. If that were the case, Sommerville would dictate a verdict for the first respondent.

In Kioa the High Court laid down the principle that the Judge must examine the whole process and all the circumstances of the case (see Mason J at 585, Wilson J at 594, Brennan J at 609 and 613-4, and Deane J at 633), such as I did in Cousins v Wingecarribee Shire Council (1998) 100 LGERA 17, where my decision turned on " minor ", c.f. " significant ", changes made to the proposal after the objector was heard.

Mr Ayling pointed out that many of the recollections of Mr Thomson were factually incorrect. However, he submitted that the evidence makes clear that the Council gave " due and relevant " consideration to all the concerns of the neighbours. That is the requirement of the EPAA. A notification scheme is secondary to the exercise of the statutory power.

Thomson had his opportunity to present to the Council. He made voluminous written submissions which were embodied in Council reports, and he was granted a hearing by the Works Committee. Unquestionably he may have made further submissions, given the opportunity, but there is no indication given in the evidence of what he could possibly have added to what he had, in fact, put before the Council in the early stages.

The Councillors reached a decision designed, in their view, to protect the amenity of Thomson's property, and they imposed a condition (following debate and exhaustive investigation) which was different from that in the recommendation, but which dealt solely with Thomson's problem and objection. In this regard, the Council did precisely what it was obliged by statute to do.

In these circumstances, Mr Ayling submits, the Court will be left in a sense of doubt as to the likely outcome of any trial, such that:

(a) if I were to conclude that Thomson's case would fail, he should pay the Council's costs; (b) if it is not clear that he would have succeeded, the fairest outcome would be to make no order and leave each party to pay its own costs; (c) if I come to the view that Thomson would succeed only on the point lately made by amendment of the points of claim, but should get an order for costs, LECA s 69 would dictate that, as most of the costs were incurred at an early point, Thomson should get an order for only a small proportion of his costs.

Further on behalf of the Applicant , Mr Tomasetti submitted that the Court must find whether or not the Council breached its policies and procedures in such a way that the Court would exercise its discretion to grant relief to Thomson. In any circumstances, it would be unreasonable for him to be ordered to pay Council's costs. The Council's evidence is a favourable reconstruction of events, with the wisdom of hindsight, and there are factual inconsistencies also in its material.

Kioa was decided before Porter and Sommerville, and is debated in Hardi and in Porter . Sommerville basically endorses Hardi and Hemmings J's reasoning reflects that of Mason J in Kioa . (See also Stein J in Nelson & Ors v Burwood Municipal Council & Anor (1991) 75 LGRA 39 at 42-43 quoting Hardi with approval).

The Council documents which are sent to objectors must be interpreted on the basis they are prepared by and for lay persons. The message to a lay reader is not ambiguous; it guarantees some action on Council's part, regardless of the Committee Chairman's usual practices. The fact that Thomson misunderstood some events is also not relevant. The Council's decision-making discretion radically miscarried in this case, and there is no evidence of what, in fact, it took into account in making its final decision.

The Council fully defended the proceedings all along, as evidenced by its comprehensive denials in its points of defence and amended points of defence, and its resistance to the amendment of the points of claim. The attack on the consent is an attack on the decision-making processes and outcomes within the Council. In cases such as this, generally the respondent neighbour is relatively passive.

While I do not have to determine with certainty what the outcome of the litigation would have been, I am certainly satisfied that Thomson had a very serious case to be argued in respect of the miscarriage of the Council's procedures and policies, and that his case, and prospects of success, were probably strengthened by the amendment of the points of claim.

I have, therefore, come to the conclusion that it is probably more likely than not that Thomson would have succeeded in upsetting the consent, had the trial proceeded.

However, that is not the only matter that should be taken into account by the Court in exercising its judicial discretion as to costs.

The fundamental issue at the heart of the dispute between the two neighbours was resolved, somewhat late but still " in due course ", by mediation, and I take account of the fact that, while Council was still considering his DA, O'Neil initiated some direct " settlement " discussions with Thomson. Shortly afterwards, Mrs Thomson also visited the O'Neil house to inspect some plans.

However, there seem to have been no personal or direct follow-up negotiations between the neighbours until the mediation, and it could be argued that Court proceedings were not Thomson's last resort, at least as against the neighbour. The situation between them is that an offer of settlement was made, but not responded to. A mediation was eventually organised for the day of the trial (some 9 months later), and resulted in a settlement which, like O'Neil's initial settlement proposal, involved his building some " privacy screen ".

O'Neil had put to the Council a firm proposal to erect some screening, after he had put that suggestion to Thomson, without securing the latter's agreement. Council then resolved to require screening as a condition of its consent. That condition was not sufficient to satisfy Thomson, and, even though there is no evidence before me as to whether or not he endeavoured to have further negotiations with O'Neil, he was presumably advised that his best or only option, after Council declined to revisit its decision, was to challenge the consent on the basis that the Council's procedures had miscarried in the assessment of O'Neil's DA.

I am satisfied that these proceedings may well have succeeded, and, in the absence of any evidence to support an assertion, in terms of the test articulated by Bignold J in Jan Yee (see par 10 above), that they were not " justifiably commenced " and/or " justifiably continued ", to the extent necessary to underpin an order for costs, I do not believe that the Council is entitled to an order for costs against Thomson.

I have also come to the view that it would not be an appropriate exercise of the judicial discretion to make no order at all as to costs. Thomson has satisfied the test laid down in Jan Yee , in so far as he brought proceedings against the Council, and the formal orders of the Court will, therefore, be that:

Noting the agreement reached between the applicant and the first respondent, as embodied in Exhibit T1 , the application is dismissed and the first respondent is ordered to pay such of the applicant's costs as were incurred by the applicant in respect of his claim against that respondent.

I HEREBY CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD OF THE REASONS FOR JUDGMENT HEREIN OF THE HONOURABLE JUSTICE T.W. SHEAHAN.

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.