Baulkham Hills Shire Council v Hahn [2008] NSWLEC 184 | Case summary

3 The circumstances from which these proceedings arise are best understood chronologically. 4 In January 2006, the respondent retained the services of a Corey Stone to provide virgin topsoil as fill on his land at No. 86 Days Road, Maroota. On 6 February 2006, the council wrote to the respondent alleging that he was carrying out development in the nature of earthworks and land filling, depositing and storage of waste (including asbestos waste) without the requisite development consent. Such development is prohibited in the Rural 1(b) zone (Baulkham Hills Local Environmental Plan 2005 cl 13) and the polluting nature of the waste contravenes s 144 of the Protection of Environment Operations Act 1997 (NSW). The letter demanded that the respondent make an irrevocable written undertaking by 9 February 2006 that he would cease to carry out any development on the land, engage the services of suitably qualified consultants to survey the land and identify appropriate remediation measures and remove all fill material and waste within the specified timeframe. The letter also gave notice that failure to give the undertaking would result in the commencement of Class 4 civil enforcement proceedings in the court. 5 On 8 February 2006, the respondent's solicitors promised the council that no further activity would take place at the property pending resolution of the dispute and until 20 February 2006 further negotiations occurred between the parties regarding the respective timeframes. Some extension of time was granted by the council but it insisted that proceedings would be filed if the written irrevocable undertaking was not received by 28 February 2006. 6 On 27 February 2008, the respondent's solicitors wrote to the council denying any wrongdoing and taking exception to the allegations that the property is being used as a "waste facility". Three more denials of a similar nature were made by the respondent to the council in the month of July 2006. 7 On 5 July 2006, the respondent notified the council that he planned to commence rehabilitation works on the basis of a report he had commissioned. The council later instructed the respondent that no rehabilitation works are to be carried out on the land without approval by the council and that the council would seek injunctive relief if the respondent commenced work without consent. Throughout the month of July, the respondent's solicitor was persistent in notifying the council of his intention to commence rehabilitation works. The council issued a final warning to the respondent on 31 July 2006, and on 22 May 2007 it advised the respondent of its intention to commence Class 4 proceedings in the Court. 8 Somewhere between 22 May 2007 and 27 June 2007, the respondent retained a new solicitor, Mr W M Szekely, who on the day before the first return date of the matter notified the council of the respondent's intention to seek a direction for mediation and that there would be no opposition to the making of an order in terms of the first declaration sought by the council, namely that the respondent had carried out development without development consent contrary to s 76A(1)(a) of the Environmental Planning and Assessment Act 1979. On the first return date of the matter on 20 July 2007, the Court ordered by consent that the matter be referred to formal mediation pursuant to s 61D of the Land and Environment Court Act 1979 and the matter be stood over to 31 August 2007. 9 On 10 September 2007, the parties participated in a mediation. A mediation agreement was made between the parties in which they agreed, at cl 7.3, to be jointly and severally liable for the costs of the mediator. After the mediation, various correspondence ensued between the parties regarding the finalisation of the outcome of the mediation, namely the remediation plan to be agreed upon and the consent orders to be made by the court. 10 On 20 October 2007, the respondent offered to pay the council two instalments of $2,000, a month apart, following the making of consent orders as a costs contribution. This offer was rejected by the council, and according to the affidavit of Mr Szekely, the council stated on 23 November 2007: "The applicant's costs and disbursements are $80,000 but they accept that it is in excess of what they can get." On 16 January 2008, the council requested that the respondent pay $70,000 in finalisation of costs which the respondent rejected. 11 On 8 February 2008, the Court made final consent orders in relation to the results of the mediation, reserving the question of costs. 12 I now need to decide who should pay the costs of the proceedings. At common law, the courts have no jurisdiction to award costs. The jurisdiction is statutory: Owners Corporation of Strata Plan 4521 v Zouk & Anor (2007) 69 NSWLR 61 at [26]. Under s 98 of the Civil Procedure Act 2005 ("the Act") the court has the discretion to award costs, and: (1) Subject to rules of court and to this or any other Act: … (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. Relevantly, the court may make an order that a party is entitled to 'costs up to, or from, a specified stage of the proceedings' (s 98(4)(a) of the Act); and r 42.1 of the Civil Procedure Rules 2005 prescribes the prima facie principle that costs are generally to follow the event. 13 The council submits that the respondent should pay the whole of the costs of these proceedings as agreed or as assessed. According to the council, the salient circumstances that guide the exercise of the court's discretion are: · the council brought proceedings in its public capacity seeking orders to remedy breaches of public welfare legislation; and · the council was successful in the proceedings because the respondent submitted to remedial orders. 14 The council also relies on the prima facie presumption in Latoudis v Casey (1990) 170 CLR 534 that the successful party is entitled to costs. Although there was no hearing on the merits, the council submits that where the respondent effectively submits to the orders sought by the applicant, the applicant should be entitled to costs in the absence of any disentitling conduct: Kiama Council v Grant (2006) 143 LGERA 441 at [80]. Although the final mediated consent orders were not precisely the same as those originally sought by the council, they are fundamentally of the same nature and achieve the substantive result sought: Wollondilly Shire Council v Anh Nhu Le (2004) 137 LGERA 416 at [19]. The council argues that it was therefore successful and should be entitled to costs as agreed or assessed. 15 The respondent submits that there should be no order as to costs or that each party should bear their own costs on the following bases: · Although the council could be viewed as successful in the sense that the respondent submitted to Order 1 as sought by the council, this was only on the proviso that the council participate in a bona fide mediation. The mediation achieved the resolution of the proceedings and the process which followed was for the purpose of perfecting the result by way of final orders. The council was not, therefore, successful in the requisite sense. · The respondent has acted reasonably in the proceedings, particularly in instigating the mediation. Conversely, the council did not explore all avenues of resolution prior to the institution of proceedings because it failed to accept the respondent's offer to mediate the dispute. This raises a question as to the reasonableness of the council's conduct which is a factor to be taken into account: Kiama Council v Grant at [63]; Wollondilly Shire Council v Anh Nhu Le at [18]- [20]. · There is no evidence to assert that the council would have been successful if the matter had been fully tried. · Subsequent to the mediation, the council allowed the resolution of the mediation to stagnate and be dragged on until the court made final consent orders. · On the whole both parties have acted reasonably and accordingly, there should be no order as to costs or each party should bear their own costs: Hayden Theatres Pty Ltd v Penrith City Council (1998) 105 LGERA 230, 233-5 cited in Kiama Council v Grant at [73]. 16 The respondent's main argument, however, is that the costs of mediation are ordinarily borne by each party. According to the respondent, mediation encompasses both the time spent in preparation of the mediation and the finalisation of its result; therefore, the steps taken from 19 July 2007 to 10 September 2007 in preparation of the mediation and the time up until the finalisation of the consent orders on 8 February 2008 comprise the mediation; and in these circumstances any order as to costs against the respondent should only be from the date of commencement of proceedings up until 20 July 2007. 17 I acknowledge the authorities relied on by both parties and the factual submissions which are decisive. These proceedings were catalysed by the actions of the respondent who caused fill to be brought onto his land. The respondent proceeded on a number of occasions to express his intent to carry out development without consent in the form of remediation measures. On four occasions the respondent made denials to the council of any wrongdoing. The defiant action of the solicitors initially retained by the first respondent justified the commencement of court proceedings by the council despite the belated willingness of the respondent by his newly retained solicitor to participate in mediation one day before the scheduled return day. These actions on the part of the respondent and his former solicitors fall short of unreasonable conduct yet they do produce circumstances in which it would be unfair that the council bear the costs of the proceedings up until the mediation. I find that in the circumstances, the council was fully justified in commencing the proceedings. 18 The costs of the mediation fall into a different category. The decision of Mason CJ in Latoudis v Casey makes it clear that the purpose of costs is to indemnify the successful party in litigious proceedings where the types of expenses or fees which can be recuperated are those "reasonably incurred in connexion with the litigation" (at 566). The Supreme and Federal courts have held that costs of the proceedings do not encompass costs of mediation because, as a matter of policy, the court should be careful not to impede a consensual mediation or create disincentives to it: Mead v Allianz Australia Insurance Ltd [2007] NSWSC 500; Innovative Agricultural Products Pty Ltd & Ors v Richard Crawshaw & Ors [1996] FCA 758. In Innovative Agricultural Products Lee J stated (at 4): I consider that unless there are unusual circumstances which require such an order, … no order should be made that the costs of any party incurred in the conduct of mediation proceedings are to be included in the costs of the litigation. Mediation is a consensual proceeding in which the parties are encouraged to resolve or compromise their differences without subjecting themselves to the risks and the costs of a trial. It is in the public interest that parties be encouraged to undertake mediation proceedings without being concerned that additional party and party costs will be incurred if they do so. 19 I therefore find the mediation process in which the parties participated was separate to the litigation process and that costs of the mediation should be borne equally by the parties. I do not, however, agree that the mediation period began on 19 July 2007 when the respondent wrote to the applicant. The applicant was entirely justified in bringing these proceedings and I therefore find that the relevant mediation period began when the parties began preparing for the mediation after the consent orders referring the matter to mediation were made by the Court on 20 July 2007. Consequently, there will be no order as to costs for the period thereafter.

Baulkham Hills Shire Council v Hahn

At a glance

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Before

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Judgment (12 paragraphs)

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Legislation Cited (1)

Cases Cited (7)

Cited By (1)