Burrell Place Community Action Group Incorporated v Griffith City Council

CITATION : Burrell Place Community Action Group Incorporated v Griffith City Council [2009] NSWLEC 120

Burrell Place Community Action Group Incorporated (Plaintiff) PARTIES : Griffith City Council (First Defendant) Duneba Investment Group Pty Ltd (Second Defendant)

KEY ISSUES: PRACTICE AND PROCEDURE :- security for costs - incorporated association - insufficient assets - power to order security for costs - relevant considerations

Civil Procedure Act 2005 s 98 LEGISLATION CITED: Corporations Act 2001 (Cth) s 57A, s 1335 Land and Environment Court Rules 2007 r 4.2 Uniform Civil Procedure Rules 2005 r 42.1, r 42.21

Anderson v Director-General of the Department of Environment and Climate Change [2008] NSWLEC 299 Anderson v Minister for Planning (No. 2) [2008] NSWLEC 235 Co-operative Farmers' and Graziers' Direct Meat Supply Ltd v Smart [1977] VR 386 Belmore Residents Action Group Incorporated v Canterbury City Council [2005] NSWLEC 258 Diamond v Birdon Contracting Pty Ltd [2007] NSWLEC 92 Engadine Area Traffic Group Inc v Sutherland Shire Council (No. 2) [2004] NSWLEC 434; (2004) 136 LGERA 365 F & D Bonaccorso Pty Ltd v City of Canada Bay Council (No. 5) [2008] NSWLEC 235 CASES CITED: Jazabas Pty Ltd v Haddad [2007] NSWCA 291; (2007) 65 ACSR 276 KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 Ku-ring-gai Council v Minister for Planning (No. 2) [2008] NSWLEC 276 Melville v Craig Nowlan & Associates Pty Ltd [2002] NSWCA 32; (2001) 54 NSWLR 82 Notaras v Waverley Council [2007] NSWCA 333; (2007) 161 LGERA 230 Pacific Acceptance Corporation Ltd v Forsyth (No. 2) [1967] 2 NSWR 402 Rajski v Computer Manufacture and Design Pty Ltd [1982] 2 NSWLR 443 Sharples v Minister for Local Government [2008] NSWLEC 67; (2008) 159 LGERA 391

Plaintiff: A Pearman (barrister) Solicitors: Cater & Blumer

First Respondent: LEGAL REPRESENTATIVES: R M McCulloch (solicitor) Solicitors: Pikes Lawyers

Second Defendant: J E Robson SC Solicitors: Mackenzie & Vardanega

JUDGMENT:

• 11 - IN THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

BURRELL PLACE COMMUNITY ACTION GROUP INCORPORATED v GRIFFITH CITY COUNCIL & ANOR

JUDGMENT 1 HIS HONOUR: Burrell Place Community Action Group Incorporated seeks a declaration that a development consent granted by Griffith City Council to Duneba Investment Group Pty Ltd for a supermarket at Burrell Place, Griffith is invalid and of no effect, together with consequential relief. Both the Council and Duneba now apply by notice of motion for an order for security for costs.

The court's power to order security for costs 2 The court has jurisdiction under r 42.21 of the Uniform Civil Procedure Rules 2005 to make an order for security for costs and to stay the proceedings until the security is given, in any of the circumstances set out in the rule. The particular circumstance relied upon in the present case is: "(d) that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so...". An alternative source of power may be s 1335(1) of the Corporations Act 2001 (Cth) which enables the court to order security against a corporation that is likely to be unable to pay costs ordered in favour of a defendant. In that Act, a corporation includes "any body corporate (whether incorporated in this jurisdiction or elsewhere)": s 57A(1)(b). 3 The Council and Duneba also rely upon par (e) of r 42.21: "(e) that a plaintiff is suing, not for his or her own benefit, but for the benefit of some other person and there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so". 4 The court also has an inherent or implied power to make an order for security for costs - which power is unfettered and is not restricted or excluded by rules made on the subject for the purpose of regulating the practice and procedure of the court: Rajski v Computer Manufacture and Design Pty Ltd [1982] 2 NSWLR 443, affirmed on appeal, [1983] 2 NSWLR 122. 5 The Action Group is an incorporated body. It was incorporated on 4 March 2009 under the Associations Incorporation Act 1984, s 15. The public officer nominated for the incorporated association is Mr Ian Geddes, who is also its solicitor in these proceedings. The nominated address for the public officer is No. 102 Binya Street, Griffith, which is the residential address of Mr Ian Geddes. The principal activity of the Action Group is described as "taking reasonable action with respect to planning issues at Burrell Place". It has, as I understand it, 22 members, who each paid the membership joining fee of $2.00. According to the evidence, the Action Group's solicitors were holding $2,560.40 in their trust account on behalf of the association as at 3 June 2009; and the Action Group's bank statement to 5 June 2009 shows that it had a credit balance of $5,795.00. These assets are clearly insufficient to pay the costs of either the Council or Duneba if the application fails and the Action Group is ordered to do so. 6 Ms A Pearman, appearing for the Action Group, submits that it is not a corporation. She relies upon a statement to this effect by Bignold J in Belmore Residents Action Group Incorporated v Canterbury City Council [2005] NSWLEC 258 at [42]. In that case, Bignold J referred to s 6 of the Associations Incorporation Act 1984, which provided that an incorporated association is declared to be an excluded matter for the purposes of s 5F of the Corporations Act 2001 (Cth) to the extent specified in that section. Section 5F of the Corporations Act states that either the whole of the corporations legislation or a specified provision of the corporations legislation does not apply if a provision of a law of a state or territory declares a matter to be an excluded matter for the purposes of that section. That is to say, the Associations Incorporation Act excludes the application of certain provisions of the Corporations Act to incorporated associations. I accept that the Action Group is not a corporation within the meaning of the corporations legislation. 7 In my opinion, however, an incorporated association nevertheless remains a "body corporate" which is capable of suing and being sued like any other body corporate and, in particular, must be treated like any other body corporate within the meaning of the word "corporation" in r 42.21 of the Uniform Civil Procedure Rules. Rule 42.21 does not refer to "a corporation" within the meaning of the Corporations Act 2001 (Cth) - it refers to "a corporation", which would clearly include any body corporate and therefore an incorporated association. 8 In Co-operative Farmers' and Graziers' Direct Meat Supply Ltd v Smart [1977] VR 386, it was held that a society registered under the Co-operation Act 1958 (Vic) is not subject to the provisions of s 363 of the Companies Act 1961 (Vic). That section was to the same effect as s 1335(1) of the Corporations Act 2001 (Cth). In that case, however, it was conceded by consent for the defendants that because the plaintiff is not a company defined by s 5 of the Companies Act 1961, s 363 of that Act had no application to it. The Court did not go on to consider the effect of any rule of court such as r 42.21 in the present case. That rule is a separate source of power to s 1335(1) of the Corporations Act, and, in my view, can apply to corporations that are not corporations within the meaning of the Corporations Act to which s 1335(1) of that Act applies. I conclude, therefore, that r 42.21 applies to the corporate applicant plaintiff in the present case. 9 In Jazabas Pty Ltd v Haddad [2007] NSWCA 291; (2007) 65 ACSR 276, Basten JA said in relation to the statutory purpose of the Corporations Act power to order security for costs at [12]: "As explained by Connolly J (Campbell CJ and Demack J agreeing) in Harpur v Ariadne Australia Ltd (No 2) [1984] 2 Qd R 523 at 532; 8 ACLR 835 at 842: The mischief at which the provision is aimed is obvious. An individual who conducts his business affairs by medium of a corporation without assets would otherwise be in a position to expose his opponent to a massive bill of costs without hazarding his own assets. The purpose of an order for security is to require him, if not to come out from behind the skirts of the company, at least to bring his own assets into play. If however he is already available for whatever he is worth, the object of the legislation is seen to be satisfied." 10 If, however, I am wrong in concluding that the Action Group is a corporation for the purpose of r 42.21(d), then the alternative source of power in r 42.21(e) is available. It is self-evident that the Action Group was incorporated for the purpose of bringing these proceedings on behalf of its members. That is, the action has been brought for the benefit of its members. 11 In the present case, the liability of the members of the Action Group is limited and debts are enforceable only against the association. The mischief identified by Connolly J and endorsed by Basten JA to which the statutory purpose of r 42.21 of the Uniform Civil Procedure Rules is directed, namely, protecting the defendants from unjust consequences of an unsuccessful claim against them, would be defeated if Ms Pearman's submissions were accepted. 12 Although the courts' inherent or implied power to order security for costs is unfettered and although the statutory power to order security for costs in this Court "is not to be narrowly construed" - see Melville v Craig Nowlan & Associates Pty Ltd [2002] NSWCA 32; (2001) 54 NSWLR 82 at [104] and [108] - the courts have identified the kind of factors to be taken into account in the exercise of the court's discretion. Those factors are conveniently set out by Beazley J in KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 197-198:

(i) whether the application for security has been brought promptly;

(ii) the strength and bona fides of the case in which security is sought;

(ii) whether the impecuniosity of the applicant results from the respondent's conduct;

(iv) whether the application for security is oppressive, in the sense of denying of an impecunious citizen or organisation a right to litigate;

(v) whether there are any persons standing behind the plaintiff applicant who are likely to benefit and be willing to provide the security;

(vi) whether persons standing behind the plaintiff applicant offered any personal undertaking to be liable for the costs and if so, the form of any such undertaking;

(vii) whether the applicant for security is in substance a plaintiff or the proceedings are defensive in nature. 13 The factors described by Beazley J have been consistently taken into consideration and applied in this Court: see, for example, Belmore Residents Action Group Incorporated v Canterbury City Council [2005] NSWLEC 258, Diamond v Birdon Contracting Pty Ltd [2007] NSWLEC 92; Sharples v Minister for Local Government [2008] NSWLEC 67; (2008) 159 LGERA 391. 14 Apart from these factors, there is the consideration that in proceedings such as the present, which are brought under the open standing provisions of the Environmental Planning and Assessment Act 1979, s 123(1), an order for security for costs does not deprive the applicant plaintiff of any fundamental right where there are others who might prosecute the case under that provision: Melville v Craig Nowlan at [109]. 15 The matters to which the Court should have regard in determining whether to make an order for security for costs require consideration of the relevant facts in the present case, to which I now turn.

The relevant facts 16 In 2006, Duneba's architects lodged a development application with the Council for a development at nos. 2-12 Burrell Place, Griffith. On 9 May 2006, the Council granted development consent to the application. An application was then made under s 82A of the Environmental Planning and Assessment Act to review eight conditions of consent. Although the application for review sought a review of conditions, the Council, as it was entitled to do, then refused the whole development application. An appeal against the Council's decision was dismissed by Commissioner Brown on 4 September 2007. 17 On about 26 September 2008, Duneba lodged a second development application with the Council for a supermarket on the land, taking into account the matters raised by Commissioner Brown in the earlier proceeding. On 16 February 2009, the Council granted consent to that application. As noted in par [5] above, the Action Group was incorporated on 4 March 2009. On 4 May 2009, the Action Group commenced these proceedings. On 4 June 2009, both the Council and Duneba filed their respective notices of motion for security for costs. 18 The amended points of claim allege the following grounds of invalidity:

(a) a non-compliance with State Environmental Planning Policy (Infrastructure) 2007 in that prescribed notice of the development application was not given to the Roads and Traffic Authority;

(b) a failure by the Council to take into consideration the objectives of the relevant zone under the Griffith Local Environmental Plan 2002;

(c) a failure by the Council to take into consideration the findings of Commissioner Brown in the earlier proceeding; and

(d) the Council's decision to grant the development consent was manifestly unreasonable.

An order for security for costs should be made 19 A consideration of the relevant factors described in par [12] to [14] above leads me to the conclusion that an order should be made for security for costs. I have come to this view for the following reasons.

(a) The application for security was brought promptly, one month after the commencement of the proceedings and having been previously foreshadowed to the Court on the return date of the summons, 29 May 2009.

(b) The strength of the Action Group's case is in dispute. As to the alleged non-compliance with the State Environmental Planning Policy, there is some evidence before me that the Council complied therewith and gave notice of the second development application to the Roads and Traffic Authority, and the Authority advised the Council before the notice of determination that it had no objection to the proposed development. As to the allegations of a failure to take into consideration the objectives of the zone and the findings of Commissioner Brown, there is evidence which shows that the Council had at least two town planner's reports when it made its determination and it is thus unlikely that these considerations were overlooked. Moreover, it is by no means clear that the decision of Commissioner Brown was a matter that the Council was bound to consider. The final ground of manifest unreasonableness is notoriously difficult to prove, particularly in the light of the limits on the use of this ground described in Notaras v Waverley Council [2007] NSWCA 333; (2007) 161 LGERA 230 at [121] - [125]. It could not be said in my opinion, that the Action Group's case is particularly strong. On the contrary, at least at this preliminary stage, it appears to be inherently weak.

(c) There is no question of any impecuniosity of the Action Group resulting from any other party. There is no evidence that an order for security for costs would be oppressive in the sense of denying to an impecunious citizen or organisation the right to litigate, particularly in view of the factor described in par [12] above.

(d) There is no evidence that any person standing behind the Action Group is willing to provide security. No persons standing behind the Action Group have offered any personal undertaking to be liable for the costs. Neither the Council nor Duneba are in substance a plaintiff, and the proceedings are not defensive in nature. 20 Ms Pearman submits that the Action Group is raising matters of public interest in respect of the Council's statutory duty as a consent authority to determine development applications under s 79C and s 80 of the Environmental Planning and Assessment Act, referring to Belmore Resident Action Group Incorporated v Canterbury City Council, inter alia. 21 However, the fact that the Action Group is said to be raising matters of public interest does not, of itself, mean that it would not be ordered to pay costs in the event that it is unsuccessful at the hearing. Although r 4.2(2) of the Land and Environmental Court Rules 2007 states that the Court may decide not to make an order requiring an applicant plaintiff to give security for costs if it is satisfied that the proceedings have been brought in the public interest, it is but one factor amongst others to be taken into consideration in the discretion of the Court. The fact remains that the provisions of s 98 of the Civil Procedure Act 2005 and r 42.1 of the Uniform Civil Procedure Rules continue the basic proposition that costs are in the discretion of the court and that the usual order is that costs follow the event: F & D Bonaccorso Pty Ltd v City of Canada Bay Council (No. 5) [2008] NSWLEC 235; Anderson v Minister for Planning (No. 2) [2008] NSWLEC 235; Anderson v Director-General of the Department of Environment and Climate Change [2008] NSWLEC 299; Ku-ring-gai Council v Minister for Planning (No. 2) [2008] NSWLEC 276. That is, in order to justify a departure from the usual order for costs, it is necessary that there be some other factor in addition to the public interest nature of the litigation, such as an important question of statutory construction, or the breaking of new ground on a matter of legal principle: Engadine Area Traffic Group Inc v Sutherland Shire Council (No. 2) [2004] NSWLEC 434; (2004) 136 LGERA 365 at [18]-[20]; F & D Bonaccorso at [22]-[29]. The points of claim in the present case do not appear to raise any question of construction or new principle.

The amount of security 22 Ms Pearman estimates that the hearing would take one day. Mrs R McCulloch, appearing for the Council, and Mr J E Robson SC, appearing for Duneba, both estimate that the hearing would take three days. Having regard to the issues, and in particular to the allegation of manifest unreasonableness (which will probably require the calling of expert evidence), I agree that three days is a more realistic estimate. 23 The Council estimates its costs as $65,480 made up as follows:

Counsel's fees $22,000 Consultant expert's fees $18,680 Council officers' expenses (including travelling) $1,200 Solicitors' costs $23,600 24 Duneba's estimated costs are in the range of $42,000 to $47,000, made up as follows: Counsel's fees $25,000 - $30,000 Approximate solicitor's fees $15,000 Out of pocket expenses (including travelling expenses) $2,000 25 That is, the total estimated costs are in the range of $107,480 to $112,480. These estimates have been made by experienced litigation solicitors in each case and in the case of Duneba, are expressly said to be on a party and party basis. The Action Group has not provided any evidence to contradict these estimates. 26 In my opinion, the amount of security for the Council should be $43,000, since it appears that Mr Griffith's estimate is based on actual costs rather than party and party costs. I am prepared to adopt Mr Rowe's estimate of $42,000 as Duneba's party and party costs. Security for costs is to be given in such matter, at such time and on such terms as the Court may by order direct: r 42.21(2); and if the applicant plaintiff fails to comply with the order the Court may order that the proceedings on the plaintiff's claim for relief in the proceedings be dismissed: r 42.21(3). The proceedings will be stayed pending the giving of security. 27 Although the total amount of security - $85,000 - may seem at first sight to be oppressive, it is in truth not so. According to the affidavit of Mr Geddes, there are 22 members of the Action Group. If each member were to contribute equally, it would be around $3,900 per member listed. Moreover, Mr Geddes has provided an additional list of 31 financial supporters, of which 16 are not members. If one included their financial support then the security reduces to $2,237 per person (or couple) listed. Finally, Mr Geddes has supplied a list of another 100 individuals and couples who are current supporters of the Action Group and who are against the proposed development, of which 69 are not included on the other lists. If one includes this group then the security is equivalent to $794 per person (or couple) listed. Of course, if the Action Group is successful in the proceedings, then the security will be returned, together with the likely payment of its costs. 28 Of course, some members or supporters may be prepared to contribute a greater proportion, thereby reducing the contributions of others. It is reasonable, in my opinion, that members and supporters of the Action Group should bear some risks in relation to these proceedings, since the Council, and particularly Duneba, are required to do so. In this respect, I adopt the observation of Moffit J in Pacific Acceptance Corporation Ltd v Forsyth [1967] 2 NSWR 402 at 407: "The court in considering whether it ought to make an order as between two parties to an action ought pima facia to leave to the plaintiff to determine now it can best overcome any problems arising from its own impoverishment, internal structure and composition of its assets and liabilities ... with or without the assistance of individuals interested in the assets of the company and the outcome of the litigation."

(1) The applicant plaintiff, Burrell Place Community Action Group Incorporated, provide security for the costs of the first respondent, Griffith City Council, of and incidental to the proceedings in the amount of $43,000, in a form satisfactory to the Registrar, by 31 August 2009.

(2) The applicant plaintiff, Burrell Place Community Action Group Incorporated, provide security for the costs of the second respondent, Duneba Investment Group Pty Ltd, of and incidental to the proceedings in the amount of $42,000, in a form satisfactory to the Registrar, by 31 August 2009.

(3) The proceedings are stayed until the security referred to in orders 1 and 2 above is provided.

(4) If the security referred to in orders 1 and 2 is not provided by 31 August 2009, the summons will stand dismissed with costs.

(5) The applicant plaintiff, Burrell Place Community Action Group Incorporated, must pay the costs of the motions for security for costs.

I hereby certify that the preceding 29 paragraphs are a true copy of the reasons for judgment herein of the Honourable Mr Justice D H Lloyd.

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.