Black Hill Residents Group Inc v Marist Youth Care Ltd

Black Hill Residents Group Inc v Marist Youth Care Ltd - [2021] NSWCA 314 - NSWCA 2021 case summary — Zoe

Judgment

HIS HONOUR: This is an application by the first respondent, Marist Youth Care Limited (trading as Marist180) for security for costs of an appeal instituted by Black Hill Residents Group Inc from a judgment of the Land and Environment Court (Black Hill Residents Group Incorporated v Marist Youth Care Limited (t/a Marist180) (No 5) [2021] NSWLEC 43 (Pain J)).
The first respondent to the appeal, and the applicant for security for costs ("Marist180") is a not-for-profit company that seeks to achieve positive change in the lives of young people and their families that are most at risk and on the margins of society. It is a designated agency within the meaning of s 137 of the Children and Young Persons (Care and Protection) Act 1998 (NSW) that can provide statutory out-of-home care under that Act. It was contracted by the then named Department of Family and Community Services to provide Intensive Therapeutic Care ("ITC") to children and young people over the age of 12 with identified high needs who were unable to be adequately supported in foster care or required specialised and intensive support to maintain stability in their care arrangements. For this purpose it operates a number of homes, some of which concentrate on providing Intensive Therapeutic Transitional Care ("ITTC") for a period of up to 13 weeks to help young people eventually move into less intensive types of care.
Mr Peter Monaghan, Chief Executive Officer of Marist180, whose evidence the primary judge accepted, deposed in the proceedings below: "The young people involved in ITC programs have typically been removed from a residential setting involving serious trauma where they may have been orphaned or have parents or guardians who can no longer provide acceptable care. Managing that trauma and preparing a child to move from a family residential setting into short or long term foster care, or other form of longer term care placement (as discussed below), requires high levels of social and psychological attention from qualified professionals. Often there are physical and medical issues requiring attention. Marist's experience and industry practice is that in order to successfully achieve the intended transitional preparation without additional avoidable trauma, it is critical to simulate a conventional residential family context to the nearest extent possible. It is for that reason, an important part of the ITTC program that it be delivered in a residential setting such as the dwelling the subject of this case."
For this purpose Marist180 purchased a residential property in Box Hill, a small semi-rural residential community outside Newcastle. On 12 February 2019 a news article was published in the Newcastle Herald about the residents' concerns. The appellant, Black Hill Residents Group Inc, was incorporated on 13 February 2019. It was formed to represent the concerns of at least a substantial number of local residents as to the feared effect the change of use would have on their personal safety, welfare and the security of their properties.
No development consent was sought for the change of use. The appellant brought proceedings in the Land and Environment Court arguing that development consent was required. The Court rejected that contention. Pain J held that development consent was not required by reason of cl 43(1) of the State Environmental Planning Policy (Affordable Rental Housing) 2009 (ARHSEPP).
Clause 43(1) of the ARHSEPP provided that: "(1) Development for the purpose of a … transitional group home on land in a prescribed zone may be carried out - (a) without consent if the development does not result in more than 10 bedrooms being within one or more group homes on a site and the development is carried out by or on behalf of a public authority;"
Clause 42(1) defined "transitional group home" as follows: "transitional group home means a dwelling - (a) that is occupied by persons as single household with or without paid supervision or care and whether or not those persons are related or payment for board and lodging is required, and (b) that is used to provide temporary accommodation for the relief or rehabilitation of people with a disability or for drug or alcohol rehabilitation purposes, or that is used to provide half-way accommodation for persons formerly living in institutions or temporary accommodation comprising refuges for men, women or young people, but does not include development to which State Environmental Planning Policy (Housing for Seniors or People with a Disability) 2004 applies."
The appellant argued below that the proper characterisation of the use of the house was not to provide temporary accommodation as refuges for young people, but to enable them to receive Intensive Therapeutic Transitional Care, which, it is argued, means that the property was not being used simply as a refuge. It was also contended that Marist180 was acting on its own behalf and not by or on behalf of a public authority, namely the Minister who had parental responsibility for the young persons in question.
The primary judge rejected these submissions ([129]-[140]; [147]-[151]). Her Honour concluded that development consent was not required.
The appellant provided $40,000 as security for the costs of the proceedings in the Land and Environment Court. This money was raised by donations from its members who also raised donations to fund its legal representation in the proceedings below. On 20 October 2021 Pain J ordered the appellant to pay Marist180's costs (Black Hill Residents Group Incorporated - INC1900196 v Marist Youth Care Limited (t/as Marist180) (No 6) [2021] NSWLEC 113). It is clear that those costs orders will not be satisfied except as to the amount of $40,000 provided as security for costs. The solicitor for Marist180 deposes that the costs actually incurred in those proceedings on a solicitor and client basis are in the order of $500,000: an astonishing amount. Although Marist180 is a substantial organisation with revenues in the tens of millions of dollars, mostly derived from government grants for the services it provides, it is a not-for-profit organisation whose revenues and assets are to be applied for its charitable purposes.
As Marist180 submitted, to the extent legal fees incurred by it in defending the appeal are irrecoverable if the appeal is dismissed, the amounts paid would diminish the funds available to meet its charitable purposes.
The application for security for costs is brought under r 42.21 and r 51.50 of the Uniform Civil Procedure Rules 2005. By r 51.50(2) no security for costs of an appeal is to be required, subject to subrules (1) and (3). Under r 51.50(1) the court may order security for costs "in special circumstances". Under r 51.50(3), the court may order security for costs if there is power to do so under r 42.21.
Under r 42.21(1)(d) security for costs may be ordered if there is reason to believe that the plaintiff (appellant), being a corporation, will be unable to pay the costs of the defendant (respondent) if ordered to do so.
The appellant does not dispute that it could not pay the costs of the appeal if the appeal failed. Rule 42(1)(d) is enlivened and it is not necessary for the respondent to show "special circumstances" under r 51.50(1).
The appellant submits that the appeal would be stultified if security for costs were ordered and submits that the appeal has good prospects of success. It has filed written submissions on the appeal which substantially repeat its submissions below. It submits that to characterise the purpose of the use of the land it is appropriate to look at the entirety of Marist180's proposal and that purpose was to provide residents with ITTC which goes well beyond providing temporary accommodation as a refuge for young people.
In Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1, the Full Court of the Federal Court said (at 4): "In our opinion a court is not justified in declining to order security on the ground that to do so will frustrate the litigation unless a company in the position of the appellant here establishes that those who stand behind it and who will benefit from the litigation if it is successful (whether they be shareholders or creditors or, as in this case, beneficiaries under a trust) are also without means. It is not for the party seeking security to raise the matter; it is an essential part of the case of a company seeking to resist an order for security on the ground that the granting of security will frustrate the litigation to raise the issue of the impecuniosity of those whom the litigation will benefit and to prove the necessary facts."
That decision has been frequently applied.
Here the appellant is acting for the benefit of local residents. It has no assets and depends on donations from members to meet expenses as they arise. The President as the appellant, Mr Adam Fairbairn, deposes that "…not all members of the Appellant have been able to contribute funds to the conduct of the Land and Environment Court proceedings or this appeal". He deposed: "7. Many of the members of the Appellant are retired persons with fixed incomes that have been impacted by reduced interest rates on investments and reduced superannuation payments brought about by the Covid-19 pandemic. 8. Many of the members operate small businesses which have been negatively affected by the Covid-19 outbreak in 2021, by way of having to close their businesses or managing with reduced cashflow. Those members no longer have available funds to contribute to these proceedings. 9. Given the difficult financial circumstances of the Appellant and its members, if security is ordered in this matter, I do not anticipate that the Appellant will be able to obtain those funds from its members as it has done in the past and will be unable to continue with these proceedings."
This evidence falls short of establishing that those standing behind the appellant who would benefit from a successful appeal do not have the means to provide the security sought.
The appellant submits that its prospects of success on the appeal are such that security for costs should not be ordered, notwithstanding that if the appeal fails the respondent will not be able to recover its costs of the appeal. Even if the reasoning in Bell Wholesale Co Ltd v Gates Export Corporation were inapplicable, I would not accept this submission.
The appellant submits that the purpose of the facility was primarily for intensive therapeutic assessment, treatment and therapy. The primary judge's finding was that the land, the purpose of whose use is in question, was not used for the provision of ITTC (at [140]). ITTC was conducted elsewhere and not on adjoining premises. The appellant's prospects of success are not more than arguable.
The order for security sought by the respondent was: "Pursuant to Rule 42.21 and Rule 51.50 of the Uniform Civil Procedure Rules 2005 (NSW), the First Respondent seeks orders that: a. Within 14 days the Appellant is to give security for the First Respondent's costs of the proceedings by paying such sum and in such manner as the Court thinks fit; b. In the absence of such security being provided by [insert date], the proceedings be dismissed;"
The appellant did not dispute the quantum of the security sought. Nor did the appellant otherwise dispute that if an order for security for costs were made it should include a self-executing order for dismissal if the security ordered were not provided. The appellant accepted that if security were ordered it would not be provided.
I will make the order for security as sought by the respondent but extend the period for provision of security to 28 days to give those standing behind the appellant more time to provide the security if they decide to do so.
For these reasons I order: 1. Within 28 days the appellant give security for the first respondent's costs of the appeal in the sum of $70,000 either by payment into court or by provision of security for that sum in a form approved by the registrar. 2. If security for costs is not provided in accordance with order 1 the appeal be dismissed.

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