Applicants v Respondents

**1 In Proceeding No. 9134 of 2009 ('the first order for review'), the first respondent seeks an order for costs on a solicitor/client basis against the applicants. An order for costs, as such, is not resisted by the applicants. The question is by what standard they should be assessed. Mr McLeod submits that the first respondent should get costs on a higher than usual basis because, first, he was brought to court in part to answer allegations that the Building Appeals Board erred in failing to properly take account of the first respondent's negligence. This allegation was not abandoned until trial. Secondly, the first respondent's conduct in the proceeding was at all times reasonable. His solicitors sought to progress resolution of the underlying dispute in the matter by way of the s 160 application and did so by way of a series of letters. They also, on his behalf, supported a without prejudice proposal to settle both orders for review and remit the matter to the Building Appeals Board for further consideration.

2 The applicants submit that they took up and pursued the s 160 application option and it is not their fault that it failed. It seems to me that the argument for costs on a special basis rests critically on the first ground advanced on behalf of the first respondent. In turn, the fact that he has acted reasonably would support the award of costs on a special basis but the critical question is whether the basis on which he was brought to court is such as to activate the Court's discretion to vary the usual basis on which costs are awarded.

3 I accept that the grounds for review which were maintained for some 18 months before abandonment expressly alleged negligence on the part of the first respondent as a component of significant underlying circumstances in the factual matrix relevant to the decision of the Building Appeals Board. This claim was not pursued at trial before me. The first respondent came to court in circumstances where his professional competence and reputation were directly under attack. That attack was abandoned. The application for review was conducted on the basis that the first respondent had made no error in his initial decision to issue a building order and the Board's decision was not impugned on the basis that it had somehow erred in failing to take into account the first respondent's conduct at or about the time of the commencement of building without a building permit.

4 If the grounds for review had been formulated on the basis of the points ultimately taken at the hearing, it seems to me likely that the first respondent would simply have adopted the position of abiding by the Court's order. In the event, he was brought to court on the basis of what must, from his point of view, have amounted to a very serious allegation. This allegation was simply not pursued and, in my view, he should get his costs on the higher basis and the case is one which fits within the accepted principles relating to this type of order. The whole manner in which the trial was conducted leads to the inescapable inference that the grounds on which the order for review was obtained were too broad and inappropriate and the first respondent should therefore obtain his costs on a solicitor/client basis.[1]

5 I turn then to the fifth and sixth respondents. They also seek costs in respect of the first order for review. They were the substantial contradictors in respect of the matters that were argued by the applicants upon the hearing of the first order for review. In my view, costs should follow the usual course and they are entitled to an order in which their success upon the outcome of the proceeding results in costs following the event.**

**6 I turn then to Proceeding No. 4207 of 2010 ('the second order for review'). The applicants seek orders for costs against the Schumacks who hitherto have been referred to as the interested parties in this proceeding. The order for review called on the Schumacks to show cause why the Board's determination under review should not be set aside. They were the substantial contradictors in this proceeding and although I have foreshadowed making one direction for their benefit, it seems to me that the applicants were substantially successful upon the hearing of this application and once again, costs should follow the event.

7 This said, those costs should be limited to some extent because the greater part of the hearing before the Court was concerned with the first order for review. I propose to limit the costs of the trial hearing relating to the second order for review to half a day. I will also grant an indemnity certificate to the Schumacks. I respectfully accept that the decision of Cavanough J in Dawson v Bethonga[2] to which I was referred and the authorities considered by him make clear that the Appeal Costs Act 1998 ('Appeal Costs Act') applies to proceedings of the type before me. Those proceedings are proceedings in which relief in the nature of the prerogative writs is sought and there is now a long and consistent line of authority in this court that such proceedings are to be regarded as appeals in the relevant sense contemplated by the Appeal Costs Act.

8 For the avoidance of doubt, I propose to formally add the Schumacks as respondents to this proceeding. I would not wish there to be any doubt hereafter that their status as interested parties meant that they were somehow not respondents within the meaning of the Appeal Costs Act. The order for review called upon them to show cause as to why the decision issue should not be set aside. They were thus in form, and as it turned out, in substance, respondents to the application.

9 In my view, whatever considerations may have caused the matter to proceed in the first instance with them being named only as interested parties, they should now be joined as respondents. The fact that I have determined that they should be parties to the s 160 application when it returns to the Board also supports this view.

10 I turn then to the costs of the Schumacks themselves, that is, the fourth and fifth respondents as they will now be in Proceeding No. 4207 of 2010.

11 Mr Forrest sought these costs against the applicants or, in the alternative, against the Building Appeals Board. As he points out, the fount and origin of this proceeding is the construction of an illegal building by the applicants to the detriment of his clients. I accept that this is the underlying basis of the proceedings and I accept that, in essence, the applicants are seeking an indulgence with respect to conduct which has been unlawful and which continues to cause Mr Forrest's clients some detriment although the extent and nature of that detriment is contentious.

12 Despite accepting these submissions, however, I accept Mr Brown's submission that the points raised by the second order for review were distinct points of law relating to the s 160 application which his client sought to agitate in good faith. The applicants have succeeded on the primary jurisdictional question raised by them. They have also succeeded in reviving their application before the Building Appeals Board. No order for costs should be made against them. They were entitled to come to this court and obtain the relief which I have granted. I turn next to the Board itself.

13 I do not accept that the Board's decision was perverse or constituted serious misconduct in the relevant sense which the authorities have articulated as necessary, before setting aside the usual rule that a statutory tribunal should not pay costs in cases of this type. The relevant principles are stated by Brooking J in the decision of Magistrates Court of Victoria at Heidelberg v Robinson:[3]**

In my view, the notion of serious misconduct or serious impropriety may be said to underlie the award of costs against inferior courts provided that it is understood that there may be misconduct or impropriety notwithstanding the absence of any knowing departure from elementary principles. By this I mean that the person or persons constituting the court may be said to be guilty of serious misconduct or serious impropriety if they failed to observe some fundamental principle of justice notwithstanding that they were ignorant of that principle. Some principles are so fundamental that it may be regarded as misconduct or impropriety in the necessary sense for an inferior court not to observe them notwithstanding that the court is unaware of them. There is, I think, here to be drawn a distinction between rules of substantive law and the fundamental rules of natural justice. The superior court may be prepared to regard even 'an astounding blunder' in a matter of substantive law as not exhibiting 'gross ignorance' in a necessary sense and, in the absence of 'perversity', may decline to make an order for costs against the inferior court, although a stage might be reached at which the rule of substantive law that had, albeit through ignorance, not been applied was so fundamental as to require the case to be viewed as one of misconduct or impropriety and so as making an award of costs appropriate. But when one is concerned, not with some 'ordinary' rule of substantive law, but with the fundamental principles concerning procedural fairness or natural justice, the inferior court may be held not to be excused by its own ignorance.

...

But in saying this I do not wish to suggest that a mere blunder should attract an award of costs: the approach should still be benign, or reasonably so, where a bona fide mistake has been made.

...

A settled practice has developed of not awarding costs against an inferior court merely because that court has made a mistake. The practice has been to require a clear case of serious misconduct - misconduct of such a nature as to justify an award of costs. Categories of such misconduct have come to be recognised. They are not exhaustive. What the courts have done is lay down principles or guidelines for the exercise of the discretion.[4]

**14 In the present case, the Board formed its own view on a difficult question of statutory construction. There is no suggestion that it acted other than in good faith. I have found that it did err in law and indeed, the nature of the error was one that went to its jurisdiction. Nevertheless, it seems to me that the ordinary rule should prevail. This was not some disregard of accepted principle. It was a judgment made in a particular regulatory context which, as I have said, I accept involves difficult questions of statutory construction.

15 It follows that the ordinary rule should prevail and I do not accept that the fourth and fifth respondents should get an order for costs against the Board. Accordingly, the appropriate orders in the second order for review are simply that the fourth and fifth respondents pay the applicant's costs but such costs be appropriately limited and an indemnity certificate be granted pursuant to the Appeal Costs Act to the fourth and fifth respondents.

[1] See, for example, Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397, 401; Macedon Ranges Shire Council v Thompson [2009] VSCA 209, [15]; Auswest Timbers Pty Ltd v Secretary to the Dept of Sustainability and the Environment [2010] VSC 513.

[2] [2009] VSC 172.

[3] [2000] VSCA 198; (2000) 2 VR 233, 237-241.

[4] Magistrates Court of Victoria at Heidelberg v Robinson [2000] VSCA 198; [2000] 2 VR 233, 237-241. Footnotes omitted.