49 Turnbull Hill replied on 21 July, on a "without prejudice" basis:
" We confirm that the undertaking given by our clients to your client, and by which our clients continue to abide, is to refrain from carrying out all contentious works the subject of these proceedings. The meaning of 'contentious works' is the 11 matters set out at 13(i)-(x) (sic) of your client's Points of Claim dated 2 July 2008.
It is difficult to see the basis on which your client could object to our client's current s96 application given that the very purpose of that application is to resolve the concerns your client has raised and which form the basis of the present proceedings."
50 The letter went on to detail a possible further s96 application proposing eight further modifications "in the interests of protecting the privacy of both parties". The letter also set out a timetable and some other possible terms of settlement.
51 There followed then a fairly hectic exchange of letters and offers between the parties from 22 July to 6 August (both inclusive), but a settlement of the proceedings was not concluded.
52 On 15 August Mr O'Sullivan wrote to Turnbull Hill alleging that the Respondents were in breach of the undertaking "given to the applicant and to the court". The letter says:
" The breaches include the following:
1. Work is being done on the computer room in Unit 1, including internal walls and wiring
2. Work is being done on the large eastern window in Unit 1
3. Work is being done on the laundry and ensuite in Unit 1
The above is part of the 'contentious works' referred to in paragraph 13 of the Applicant's Points of Claim dated 2 July 2008".
53 On 18 August Turnbull Hill wrote a lengthy letter to Mr O'Sullivan asserting that only the following four matters remained "contentious" between the parties and subject to the s96 amendment application:
" 1. Excavation of and construction of a storeroom as part of unit 2.
2. Construction of a set of steps to the upper rear deck of unit 2.
3. Addition of two windows to the unit 1 garage on the western side.
4. Addition of two windows to the unit 2 garage on the western side".
54 The letter went on to list a further eight matters which, in the Hainsworths' opinion, "are not longer contentious works". I will not set out those in detail here, but Unit 2 figures in several of them. Mr Walker deposes in respect of these eight matters (par 33b) that they appeared "to no longer be in contention, in light of the Applicant's letter of objection to the s96 application". The letter went on to state the Hainsworths' intention to "commence building in relation to the non-contentious items in one weeks time".
55 The letter concluded with a response to the breaches asserted on 15 August, in the following terms:
"1. The wiring is required regardless of whether this room is dedicated as a computer room or not
2. This item has not previously been raised as a contentious item
3. This item was not raised as a contentious item in your letter dated 15 May 2008. Our client's undertaking was given in response to this letter.
Our clients shall comply with their undertaking in relation to the remaining contentious work".
56 The relevant events between 15 August and the discontinuance in December were described in pars [15]-[19] above, culminating in the Council decision on 16 December that adequately addressed the major concerns felt by the Brents, and indeed made other improvements to their position.
The legal principles
57 The question of costs must be determined in this case under Uniform Civil Procedure Rules 42.19, which suggests that the discontinuing party will normally be responsible for the costs of the defendant/respondent, but that the court may, in its discretion, "otherwise order" if the discontinuing party not wishing to pay costs can satisfy the court it should so "otherwise order". Prodromos Anastasi Foukkare v Angreb Pty Limited & Ors [2006] NSWCA 335. See also discussion by Basten JA in Bitannia Pty Ltd v Parkline Constructions Pty Ltd ("Bitannia") [2009] NSWCA 32, at [70]-[81]. The discontinuing party needs to satisfy the court that there is "some positive ground or good reason for departing from the ordinary course" (per Bryson JA in Australiawide Airlines Ltd t/as Regional Express v Aspirion Pty Ltd ("Australiawide") [2006] NSWCA 365, at [54]).
58 Each case turns on its own facts, but there are many decided cases to give the trial courts guidance on the principles to be applied.
59 An order for costs is designed to adequately compensate a successful party for the expense held to be reasonably incurred, but not to punish the unsuccessful party for bringing and failing in the proceedings (or raising and losing a point in them). Latoudis v Casey (1991) 170 CLR 534.
60 Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 ("Oshlack") makes clear that the costs power is "purely discretionary" (per Bryson JA in Australiawide at [46]).
61 The power or discretion must be exercised "judicially", and the conduct of the litigation by and on behalf of all parties must be examined for its "reasonableness", in order to arrive at a "just" outcome in all the circumstances.
62 However, the Court in adjudicating costs must not hypothetically try the substantive proceedings (Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin ("Lai Qin") (1997) 186 CLR 622), and there is no absolute rule that, in the absence of "disentitling" conduct, the party seen as "successful" will necessarily succeed in achieving a compensatory costs order. See Oshlack, and Fordyce v Fordham & Another ("Fordyce") (2006) 67 NSWLR 497. Fordyce and Bitannia place McHugh J's judgment in Lai Qin into the UCPR context, in which these cases must now be decided.
63 On the subject of entitling/disentitling conduct, the relevant authorities were discussed by Biscoe J in Shellharbour City Council v Stewart [2007] NSWLEC 727 at [22] and in Ku-ring-gai Council v Minister for Planning (No.2) [2008] NSWLEC 276, and by me in Ray Fitzpatrick Pty Limited v Minister for Planning (No.5) [2008] NSWLEC 183 ("Fitzpatrick") at [39]-[43], and I need not restate the principles here.
64 On the subject of success/capitulation, One.Tel Ltd and Others v Deputy Commissioner of Taxation ("One.Tel") [2000] FCA 270; (2000) 101 FCR 548 (Burchett J) is a good example of a case where the courts have endorsed the general principle that when one party "effectively surrenders" (a popular charge and counter-charge in this case) a costs order generally follows. See also Kiama Council v Grant [2006] NSWLEC 96; (2006) 143 LGERA 441, at [80].
65 Where a "supervening event" (here the Council's approval of the modification application) "removes" the subject matter at the heart of the case, a costs order may not necessarily or automatically follow (Burchett J in One.Tel at [6]).
66 "Precipitately" commencing the proceedings may become a relevant factor (Newcastle City Council v Wescombe [2008] NSWLEC 301 at [16]).
Consideration
67 In this case the Brents were apparently content for the project at No.36 to be built in accordance with the DC and its (then) Amended Plans, but they became concerned when the project appeared to take a different shape (c.f. McCrohon v P J Gann and Another [2009] NSWLEC 8). Their concerns were not resolved by the actions taken by BCA following Brents' complaint, and they had no expectation of intervention by the Council.
68 Their solicitor then negotiated an appropriate "holding" undertaking, while Council and the certifier considered the matter, albeit that the Hainsworths' solicitor put on the record on 19 May a total denial of all the alleged breaches and illegalities (see [33]). It should also be noted that the undertaking so negotiated fell significantly short of the terms of the undertaking the Applicant sought (see the highlighted words in [31]). Such as it was, the Applicant was entitled to have the undertaking noted by the court which might eventually determine the competing claims.
69 Within two days the Hainsworths were seeking some relaxation of their commitment to cease all work, so as to confine it to "issues of contention" ([35]ff). A dispute quickly arose regarding work on Unit 2 ([36]-[40]), then everything went silent, and two weeks later these class 4 proceedings were commenced.
70 On those facts I could not conclude that the commencement of proceedings was either "premature" or "precipitate". The Council by 11 June had still shown no signs of taking any action on the CC. Until this court struck it down the Hainsworths had every right to rely upon it, and work to it, rather than "capitulate" on the point without litigation. On the other hand, the Applicant had no obligation to delay beyond 11 June commencing proceedings designed to give the owners of Nos. 36 and 38A some certainty in their dealings.
71 I do not accept Mr de Meryck's submission that his clients (BCA) should not have been joined in the proceedings, either at the outset or otherwise, and I rely on my reasoning in Shellharbour City Council v Dunmore Equestrian Centre Pty Ltd & Anor [2008] NSWLEC 163. Who else other than the certifier him/itself can properly defend a Wednesbury challenge to the CC, such as the Applicant here framed in the class 4 application and her POC? In this case the certifier was defensive of the CC when approached before the litigation commenced. (Exhibit A1). A submitting appearance might become an option, but I consider the certifier needed to be a party.
72 Furthermore, I am far from satisfied that the Applicant's case against the certifier was "doomed to failure". Talbot J's decision in Baulkham Hills Shire Council v Dix and Another [2004] 13 LGERA 149; NSWLEC 404 and a close examination of the relevant clauses (e.g. 145, 146 and 161) of the EPA Regulation 2000 indicate the lively and serious issues that can arise in cases such as this, where a CC could be set aside. BCA's own submissions (par 11) acknowledge that giving an "unreasonable" CC can amount to unsatisfactory professional conduct on the part of the certifier.
73 The Hainsworths having lodged their s96 modification application before case management of the proceedings commenced, all parties appear to have behaved very reasonably in agreeing to or accepting a series of adjournments while the s96 application was considered and the parties were negotiating. I can find no disentitling conduct in the usual "argy-bargy" which we see here. Indeed, the attitude of the Hainsworths began to "soften" towards the end of July ([49]-[50]).
74 It must be noted, however, that the original s96 application was designed merely to have the Council vary its consent to match what the certifier had done. It was only when Council indicated that it would not be approved in that form that the Hainsworths took steps, from 15 September 2008, to address more seriously the Applicant's concerns ([16]). What was always needed for the Brents' concerns to be resolved, in the absence of any initiative by the Council or the certifier, was a major shift in the position and attitude of the Hainsworths, either in substance or as presented on their behalf. That shift began to take effect really only when more information and further amended plans began to come forward on 15 September at the insistence of the Council.
75 There is absolutely no evidence to suggest that that necessary shift in the Hainsworths' position was even remotely likely to have occurred, absent the commencement of these proceedings, so the principles enunciated in Latoutis v Casey (see [59] above) would dictate that the Applicant should recover her costs from the Hainsworths.
76 The approval in December of the much modified s96 modification application was the "supervening event" which totally eliminated the need for action to continue against the Hainsworths.
77 The Applicant was, therefore, "successful", outside the Court and apart from the proceedings, as against the Hainsworths, as were the protagonists in Garwolin Nominees Pty Ltd v Statewide Building Society [1984] VR 469, Telstra Corporation Ltd v Australian Telecommunications Authority and Ors (Vic Supreme Court, Hayne J, Unreported, 30 June 1994), and similar cases among the relevant authorities to which counsel referred me.
78 Returning to the case against BCA, I note that throughout the negotiations the Applicant's solicitor does not appear to have retracted from his position that the s96 process (albeit that his position was stated before the Council's adverse indication in August) would not conclude the case against the CC ([47]). That position was firmly put on the record on 11 July, but serious "without prejudice" negotiations soon followed between the Brents and the Hainsworths. The Brents achieved their objective, the CC was superseded, and there was no need to pursue BCA further.
79 Having reached that stage where the Council's decision achieved her objectives, the Applicant sensibly concluded that there was neither a need for, nor any utility in, further pursuit of the certifier and its certificate, and she was perfectly entitled to relax her position in that regard. I do not believe, however, that she has made out any entitlement to an order that BCA should pay her costs.
80 On the question of the actual timing of the discontinuance, I reject the submission that the Applicant should have found/taken an earlier opportunity to discontinue the proceedings. She was entitled to await the relevant "supervening event".
81 In all these circumstances I conclude that the Applicant ought not to be ordered to pay any of the costs of any of the Respondents. Nor is there any basis for any order to be made as between the two pairs of Respondents.
Conclusions
82 I have, therefore, concluded that, as between the Brents and the Hainsworths, the latter should be ordered to pay the former's costs.
83 As between the objecting neighbour and the certifier, I think the most "just" result is that each party pay its own costs.
84 In so far as this costs hearing is concerned, all parties were perfectly entitled to pursue orders in their favour, and the most appropriate order here again is that each party pay its own costs.