CBUS Property Pty Ltd v North Sydney Council [2024] NSWLEC 47 | Case summary | Zoe

NSWNSWLEC

CBUS Property Pty Ltd v North Sydney Council

[2024] NSWLEC 47

Land and Environment Court (NSW)|2024-02-06|Before: Pain J

View original source

At a glance

Source facts

Court

Land and Environment Court (NSW)

Decision date

2024-02-06

Before

Pain J

Catchwords

[1990] HCA 59 Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101
[2007] NSWCA 299 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355

Source

Original judgment source is linked above.

Catchwords

[1990] HCA 59 Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101[2007] NSWCA 299 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355

Judgment (102 paragraphs)

[1]

The Applicant CBUS Property Pty Ltd commenced a Class 1 appeal in relation to the deemed refusal of a development application for demolition and construction at a large site in North Sydney (the site) by North Sydney Council (the Council). The site is subject to a site-specific development control plan (DCP) under the North Sydney Development Control Plan 2013 (NSDCP). The Applicant sought to discontinue the proceeding by notice of motion dated 3 November 2023 pursuant to r 12.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). The Council did not consent as the Applicant did not agree to pay its costs from a certain date. Two notices of motion are before the Court. The Council's notice of motion dated 21 November 2023 seeks orders that its costs of the proceeding be paid by the Applicant from 2 June 2023. The Applicant's notice of motion dated 3 November 2023 seeks orders that the proceeding be discontinued, that each party pay their own costs of the proceeding and the Council pay the Applicant's costs of the motion. The Registrar granted leave to discontinue on 22 November 2023 so that only the issues of costs remains in relation to both notices of motion.
The motions were heard together and evidence in one motion was treated as evidence in the other.
The parties agree that r 3.7 of the Land and Environment Court Rules 2007 (NSW) (LEC Rules) applies. This states in part:

[13]

a) The large majority of the contentions in the Further Amended SOFAC remain unresolved following the joint conferencing of the parties' experts.

b) The main reason is that the Respondent has raised a contention regarding the gross floor area exceedance of the development in its letter dated 17 October 2023, when this contention was not explicitly raised previously, and was previously an insufficient information contention. A clause 4.6 request is not available to address this.

c) The NDSCP [sic] Amendment occurred after the filing of the appeal, and the Applicant had hoped to reach an agreed outcome with the Respondent following the s34 conciliation process and joint conferencing process considering this site was subject to a site specific DCP at the time of rezoning which did not change parking controls at that time. However, the number of contentions increased following the termination of the s34 conference, and majority of contentions including the parking and traffic contention have not been resolved.

d) The effect of the NDSCP [sic] Amendment was not only to require a significant reduction in parking in the amount of 92 spaces, but it also had a gross floor area impact which has now been raised by the Respondent as a contention. Other gross floor area impacts have been raised by Council such as with the basement.

e) Reducing the gross floor area by 2,690m2 (11.15%) (see paragraph 38) would necessitate a wholesale redesign of the development. The development has also been designed for a specific market segment that requires car parking spaces, as outlined in the Apartment Demand Review prepared by Charter Keck Cramer dated 1 August 2023 (Tab 18). A significant redesign of the development will take many months to complete to respond to a different target market, and the current design is not financially feasible. The Applicant will have to reconsider the development proposal entirely.

f) Discontinuing the proceedings now will prevent the parties from incurring significant costs, particularly as the Joint Planning Expert Report has not yet been undertaken.

[65]

9) Insufficient Information

a) General information

Insufficient information has been submitted with the application in order to enable a thorough assessment to be completed.

Particulars

...

(c) Amended plans are required to reduce the gross floor area to comply with the maximum permitted. With the parking proposed, (without including additional gross floor area), the development equals the maximum floor space ratio requirement of the NSLEP 2013. As detailed under heading b) On-site parking, below, amendments to the DCP have decreased the maximum parking requirements for the site. The current proposal includes 227 parking spaces and the maximum permitted is now 135 spaces, meaning there is an excess of 92 parking spaces. In accordance with the LEP definition of gross floor area, the new maximum parking rates would cause the proposal to exceed the maximum floor space ratio, as parking and access thereto that exceeds the permitted maximum must be included in gross floor area and floor space ratio calculations for the development proposed.

(d) Recalculation of gross floor area and floor space ratio must be carried out in accordance with the LEP definitions of these terms - which includes any habitable space enclosed by a wall/screen 1.4m or greater in height - this would include enclosed wintergardens, for example, which are not easily or clearly identified by the plans. As the proposed development exceeds the floor space ratio development standard the application must be refused unless the application is accompanied by a satisfactory request to contravene the standard in accordance with clause 4.6 NSLEP 2013.

...

b) North Sydney DCP 2013 Part B Section 10 Car Parking and Transport

...

On-site parking

Particulars

The proposed development exceeds the maximum car parking requirements permissible under clause 10.2 Part B NSDCP 2013, which may cause increased traffic congestion which is contrary to applicable objectives.

a. The submitted Traffic Report adopts the incorrect parking rates from NSDCP 2013 that are no longer applicable to the site.

b. NSDCP 2013 - Part B - Section 10 - Car Parking and Transport was amended on 4 May 2023 and applies to the site with no savings provision.

c. Provision of excessive car parking will result in the use of private motor vehicles as a travel mode and will undermine the submitted green travel plan future mode share targets, contrary to Objective 1, 2 and 3 of 10.2 of NSDCP and Objective 5, 6, 7 of 10.1.1 of NSDCP.

d. The objectives of the NSDCP are to contain the existing levels of traffic generation and reduce them which has not been adequately demonstrated by the proposal.

e. The proposed development will therefore generate traffic above what is permitted by the planning controls, which will increase delays in the road network and reduce any spare capacity of surrounding intersections.

f. The access into and out of Lower Walker Street is atypical and does not provide adequate geometry to permit all vehicle movements, reduced traffic volumes along Lower Walker Street should be sought to improve road safety.

g. The maximum permissible provision of car parking is 135 residential spaces and 18 motorcycle spaces as outlined below:

i. 9 @ 0.3 spaces per studio = 2.7 - 3 whole spaces;

ii. 45 @ 0.4 spaces per 1 bedroom apartments = 18.0 spaces

iii. 45 @ 0.7 spaces per 2 bedroom apartments = 31.5 - 32 whole spaces

iv. 71 @ 1 space per 3 or more bedroom apartments = 71 spaces

v. 6 @ 1.5 spaces per multi dwelling unit = 9 spaces

vi. 6 @ 0.25 visitors (to multi dwelling units) spaces = 1.5 - 2 whole spaces

vii. Motorcycle car parking - 1 space per 10 dwellings = 18 spaces.

[85]

The Council bears the onus of proving the partial costs order it seeks should be made following discontinuance of the merits appeal by the Applicant. A reflection of the no discouragement principle, the usual approach in Class 1 proceedings is that each party pays their own costs. The purpose of the no discouragement principle is that persons generally should not be discouraged from exercising their rights of appeal by reason of the risk of an adverse costs order, Arden Anglican at [10] citing Port Stephens Council v Sansom (2007) 156 LGERA 125; [2007] NSWCA 299 (Sansom) at [22]-[23]. The principle also applies when a party seeks to withdraw a Class 1 appeal unless the Court considers it is fair and reasonable, r 3.7(2) of the LEC Rules and Ross at [9].
The presumption in r 42.19 of the UCPR that a discontinuing party pays the costs of the other party does not apply to Class 1 proceedings, see Sch 1. Rule 3.7 of the LEC Rules applies in this case. Rule 3.7(3) identifies circumstances that may give rise to a costs order. The Council relies on subrr (3)(f)(i) and (ii), asserting that the Applicant unreasonably continued the appeal beyond the point in time when it should have been apparent that the DA would have to be refused if not amended due to the operation of the amended NSDCP, which came into effect on 4 May 2023. I note that much of the Council's evidence appeared to be directed to establishing that the Applicant was aware of the amended NSDCP. The Applicant accepts that it was well aware of that instrument and made submissions to the Council objecting to it being made.
The chronology set out above in [9 ] identifies that the Applicant commenced the Class 1 appeal on 25 August 2022. SOFAC and SOFAC in reply were exchanged. The Applicant sought to further amend plans and leave was granted to do so. It is clear from these circumstances there were many issues in play.
The Council submits that its costs from 2 June 2023 should be paid by the Applicant. That is the date the Applicant obtained orders for the vacation of hearing dates on 7-10 August 2023 and new hearing dates in November 2023 were fixed. By that stage the amended NSDCP had taken effect. It was obvious according to the Council that the Applicant could not succeed without major amendment of its DA, and accordingly that is when it should have discontinued the appeal if the Applicant was not going to amend the DA. That submission is too simplistic for the following reasons.
Firstly, the way that the application of the amended NSDCP was raised in the amended SOFAC and further amended SOFAC under the heading 'insufficient information' did not clearly articulate to the Applicant the Council's position in the terms it put in this costs motion. This is clear from the extracts of these documents above in [10 ]-[12 ].
The circumstances before the Applicant as of 2 June 2023 were not the same as those before the Applicant when deciding to discontinue in October 2023 as asserted by the Council. The unsolicited particulars letter sent on 17 October 2023 was the first time the Council's view was clearly stated to the Applicant that the DA in relation to parking if not amended could not be approved as cl 4.6 was unavailable. As the Applicant identified the Class 1 Practice Note required that such a contention should have been included in the SOFAC and no application by the Council to amend to do so was made. The Applicant was not squarely apprised of the Council's position until the particulars letter. The Applicant's complaint that the SOFAC should have been amended with leave of the Court based on the Class 1 Practice Note is well founded.
Secondly, I do not accept that the amended NSDCP was 'obvious' in its application to the Applicant's proposed DA. I am not going to rule on the application of the amended NSDCP to the Applicant's DA in order to resolve this costs issue, see caution against doing so in Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 per Mason CJ at 541-542, McHugh J at 566-567. The Applicant's contentions in reply which responded to the new insufficient information contention regarding parking arising under the amended NSDCP identify what appear to be arguable matters, summarised in the Applicant's submissions above in [31 ]-[32 ]. The Applicant referred to El Khouri providing a basis for it to submit that a development standard imposed by a local environmental plan was not a jurisdictional requirement mandating refusal where exceeded. It is not necessary that I determine the application of that case but I accept that this was a matter the Applicant could potentially have reasonably raised. I do not consider it was unreasonable for the Applicant to pursue these responses to the parking contention based on the amended NSDCP.
Thirdly, Murray Affidavit 2 identifies at par 49 multiple reasons why the Applicant decided to discontinue the proceeding, extracted above in [7 ]. These reasons appear reasonable in the circumstances of complex proceedings involving numerous expert disciplines where many issues were unresolved despite conciliation processes in the Court. These identify substantive matters in addition to the potential operation of the amended NSDCP. The Applicant also referred to the joint traffic report extracted in part above in [8 ] which highlights that there were a range of issues outstanding.
Contrary to the Council's argument, the appeal continued to have prospects of approval even if the proposed parking remained in excess of the maximum under the amended NSDCP. It cannot be safely assumed by the Council that an amendment would not have been proposed if the proceeding had continued to hearing.
The Applicant further evaluated the perceived strengths and weaknesses of the appeal having regard to the joint reports delivered in late October 2023 and determined not to proceed. There was nothing unreasonable in so doing. It would not be consistent with the no discouragement principle nor fair and reasonable for costs to be ordered against the Applicant. The circumstances are squarely within the propositions that discontinuance itself creates no presumption as to costs and a reasonable basis for discontinuance weighs against any costs order.
In light of all these matters I find that it is not fair and reasonable for the Council's costs from 2 June 2023 to be paid by the Applicant. The consequence of this finding is that each party must bear its own costs of the proceeding.

[99]

The Applicant has emphasised that the approach to the issue of costs in this context is a matter of statutory construction. In accordance with well‑established principles legislation must be read as a whole so as to give effect to all sections wherever feasible, Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [69]- [70] (McHugh, Gummow, Kirby and Hayne JJ). Where individual words require construction, their ordinary meaning must be considered in context, Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (Cth) (1981) 147 CLR 297; [1981] HCA 26 at 305 (Gibbs CJ) cited in Roden v Bandora Holdings Pty Ltd [2015] NSWLEC 191 at [42], Sydney Seaplanes Pty Ltd v Page (2021) 106 NSWLR 1; [2021] NSWCA 204 at [25]- [41] (Bell P). The principles of statutory construction are also applicable to the LEC Rules being delegated legislation, Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101; [2008] HCA 38 at 110 (Gummow ACJ, Kirby, Hayne, Crennan and Kiefel JJ) cited in D Pearce and S Argument, Delegated Legislation in Australia (6th ed, 2023, LexisNexis) at 591.
The consideration of costs of costs motions must commence with r 3.7(2) of the LEC Rules. The broad drafting of the rule applies on its face to 'any order for the payment of costs' in Class 1 proceedings. This must include costs of any motion seeking costs filed in Class 1 proceedings. On one view that is the end of the inquiry, which is essentially the case submitted by the Council. Subrule (3) provides examples of where it may be fair and reasonable to award costs, broadly where behaviour has been unreasonable in some way (subrr (3)(b), (c), (d), (e), (f)), or in subr (3)(a)(ii) where the evaluation of the merits of an application the subject of the proceeding was not involved or was determinative of the proceeding (subr (3)(a)(i)). Subrule (3) cannot confine the application of subr (2) given the latter's terms.
Such an approach is confirmed by Sansom, where in considering an earlier costs regime in Class 1 proceedings s 69(2) of the Land and Environment Court Act 1979 (NSW) and Pt 16 r 4 of the LEC Rules as then in force, the Court of Appeal (Spigelman CJ, Mason P, Beazley, Giles and Ipp JJA agreeing) identified that the formulation 'fair and reasonable' calls for a judgment to be made rather than a discretion to be exercised accepting that the evaluative process can be accurately described as conferring a wide discretion, at [51]. Spigelman CJ emphasised the importance of not unnecessarily limiting the evaluative judgment required in relation to costs with the starting point being the presumptive rule that there will be no order as to costs, at [48]. Spigelman CJ identified that principles and guidelines can usefully be adopted as long as these are not treated as rules and are accepted as indicative only, identifying that Grant v Kiama at [15] provides one such indication, at [54]-[56]. Similar observations by the Court of Appeal appear in Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council (2007) 71 NSWLR 230; [2007] NSWCA 300 (Thaina Town) at [35].
The differences between the former costs provisions considered in Sansom and Thaina Town and the current provisions were helpfully considered in Agonic Holding Pty Ltd v Lithgow City Council [2009] NSWLEC 34 (Agonic) at [4]-[5] (Biscoe J) cited in Hillsong at [43] as follows:

[101]

As essentially identified in Agonic the differences between the current and former costs provisions can be seen as minimal in effect and the observations in Sansom and Thaina Town continue to apply. A consequence of the Applicant's arguments is essentially that a separate approach to costs of costs motions is warranted and that approach should be that costs generally follow the event. While not expressly articulated by the Applicant in these terms that is the effect of its argument. While the Applicant's argument relied on Arden Anglican at [10] where the rationale for the presumptive rule was described by Biscoe J, the effect of its approach would be to separate out a particular costs category and that is not in accordance with the statutory scheme. Grant v Kiama and Jacobson decided under the earlier costs regime in Pt 16 r 4 of the LEC Rules identify one approach commonly applied by judges undertaking the necessary evaluative judgment in relation to the award of costs of costs motions, namely on the basis these follow the event.
No principle of statutory construction supports the limitation of the application of r 3.7(2) in this way. It follows that the observations in Sansom and Thaina Town apply to the LEC Rules in their current form as identified in Agonic and Arden Anglican. It is not appropriate that I seek to resolve the divergent approaches to the costs of costs applications, contrary to the Applicant's submission that I should do so.
As the large number of cases referred to by both parties show, various approaches have been taken by judges over time. The possibility of different approaches to the determination of costs of costs motions arises from the wide discretion to undertake the evaluative judgment arising from r 3.7(2). Once it is accepted that r 3.7(2) applies to all types of costs matters then adopting a universal 'rule' for how that discretion might be exercised, such as that costs for costs motions ought follow the event, is not appropriate. Ultimately the evaluative judgment in each case must be determined on its own facts and the Court has a wide discretion to be exercised judicially in considering costs in all the various contexts in which they arise under r 3.7(2).
The Council sought to distinguish cases which have considered interlocutory procedural matters and those where merit questions do not arise from its application for costs following the discontinuance because that occurred at the end of the proceeding. It is not clear that there is any useful distinction to be drawn on that basis. The Council's application for costs following discontinuance by the Applicant did not require the evaluation of any merit issues.
I consider the alternative approach the Applicant proposed in Drake has much to recommend it on this occasion. Rule 3.7(3)(a)(ii) can apply, while still a matter of discretion for a judge as to the outcome, which does lead to the approach taken in a number of the cases referred to namely that costs of this costs motion should follow the event. That is the approach I will take in this matter.
Consequently I do not need to consider the parties' conflicting submissions on why it would be fair and reasonable (or not) to award costs.

Parties

Applicant/Plaintiff:

CBUS Property Pty Ltd

Respondent/Defendant:

North Sydney Council

Legislation Cited (11)

Civil Procedure Act 2005(NSW)

Environmental Planning and Assessment Act 1979(NSW)

Land and Environment Court Act 1979(NSW)

Land and Environment Court Rules 2007(NSW)

Uniform Civil Procedure Rules 2005(NSW)

Procedure Act 2005

Planning and Assessment Act 1979

Environment Court Act 1979

Environment Court Rules 2007

Civil Procedure Rules 2005

Land and Environment Court Rules 1979

Cases Cited (37)

Council's submissions

There is a presumption in Class 1 proceedings that each party pays its own costs when proceedings are discontinued, r 3.7(2) of the LEC Rules. Relevant principles are identified in Ross v Lane Cove Council [2013] NSWLEC 109 (Ross) at [9] and Trustees of the Roman Catholic Church for the Diocese of Broken Bay v Willoughby City Council [2023] NSWLEC 88 at [10]-[14]. This presumption should be displaced pursuant to r 3.7(3)(f)(i), (ii).

Points in reply

In reply, the present matter is distinguishable from Crescent Newcastle Pty Ltd v Newcastle City Council and Friends of King Edward Park Inc [2021] NSWLEC 143 (Crescent Newcastle) at [74] citing Ross at [9]-[10]. In Ross Biscoe J observed that the decision of an applicant to discontinue in light of new evidence which would increase litigation risks, costs and time would weigh against ordering costs against the discontinuing party. Here, no new evidence emerged during the proceeding that was not already before the Applicant in June 2023.
The articulation of the issue in the amended SOFAC in relation to car parking and the amended car parking rates was sufficiently clear to highlight to the Applicant that if nothing was done to amend the DA it would be refused. It was not improper to raise the insufficient information contention in the amended SOFAC.

No discouragement principle applies

Under the 'no discouragement' principle applicants for development should ordinarily not be discouraged from pursuing merits appeals by reason of the risk of an adverse costs order, Arden Anglican School v Hornsby Shire Council (2008) 158 LGERA 224; [2008] NSWLEC 103 (Arden Anglican) at [10]. This principle is given effect by r 3.7 of the LEC Rules through the negative stipulation against making an order for costs except where the Court considers it 'fair and reasonable' to otherwise order, Crescent Newcastle at [68]. To overcome the presumptive rule, the Council must satisfy the Court there is sufficient weight in what is being said of the Applicant's conduct in continuing the proceeding past 2 June 2023, Arden Anglican at [9]. Something more than the circumstance of discontinuance is necessary, Crescent Newcastle at [73].

Cited By (2)

Simmattown Pty Ltd v Randwick City Council

Urban Link Architects Pty Ltd v City of Parramatta Council

Consideration

The Council bears the onus of proving the partial costs order it seeks should be made following discontinuance of the merits appeal by the Applicant. A reflection of the no discouragement principle, the usual approach in Class 1 proceedings is that each party pays their own costs. The purpose of the no discouragement principle is that persons generally should not be discouraged from exercising their rights of appeal by reason of the risk of an adverse costs order, Arden Anglican at [10] citing Port Stephens Council v Sansom (2007) 156 LGERA 125; [2007] NSWCA 299 (Sansom) at [22]-[23]. The principle also applies when a party seeks to withdraw a Class 1 appeal unless the Court considers it is fair and reasonable, r 3.7(2) of the LEC Rules and Ross at [9].
The presumption in r 42.19 of the UCPR that a discontinuing party pays the costs of the other party does not apply to Class 1 proceedings, see Sch 1. Rule 3.7 of the LEC Rules applies in this case. Rule 3.7(3) identifies circumstances that may give rise to a costs order. The Council relies on subrr (3)(f)(i) and (ii), asserting that the Applicant unreasonably continued the appeal beyond the point in time when it should have been apparent that the DA would have to be refused if not amended due to the operation of the amended NSDCP, which came into effect on 4 May 2023. I note that much of the Council's evidence appeared to be directed to establishing that the Applicant was aware of the amended NSDCP. The Applicant accepts that it was well aware of that instrument and made submissions to the Council objecting to it being made.
The chronology set out above in [9] identifies that the Applicant commenced the Class 1 appeal on 25 August 2022. SOFAC and SOFAC in reply were exchanged. The Applicant sought to further amend plans and leave was granted to do so. It is clear from these circumstances there were many issues in play.
The Council submits that its costs from 2 June 2023 should be paid by the Applicant. That is the date the Applicant obtained orders for the vacation of hearing dates on 7-10 August 2023 and new hearing dates in November 2023 were fixed. By that stage the amended NSDCP had taken effect. It was obvious according to the Council that the Applicant could not succeed without major amendment of its DA, and accordingly that is when it should have discontinued the appeal if the Applicant was not going to amend the DA. That submission is too simplistic for the following reasons.
Firstly, the way that the application of the amended NSDCP was raised in the amended SOFAC and further amended SOFAC under the heading 'insufficient information' did not clearly articulate to the Applicant the Council's position in the terms it put in this costs motion. This is clear from the extracts of these documents above in [10]-[12].
The circumstances before the Applicant as of 2 June 2023 were not the same as those before the Applicant when deciding to discontinue in October 2023 as asserted by the Council. The unsolicited particulars letter sent on 17 October 2023 was the first time the Council's view was clearly stated to the Applicant that the DA in relation to parking if not amended could not be approved as cl 4.6 was unavailable. As the Applicant identified the Class 1 Practice Note required that such a contention should have been included in the SOFAC and no application by the Council to amend to do so was made. The Applicant was not squarely apprised of the Council's position until the particulars letter. The Applicant's complaint that the SOFAC should have been amended with leave of the Court based on the Class 1 Practice Note is well founded.
Secondly, I do not accept that the amended NSDCP was 'obvious' in its application to the Applicant's proposed DA. I am not going to rule on the application of the amended NSDCP to the Applicant's DA in order to resolve this costs issue, see caution against doing so in Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 per Mason CJ at 541-542, McHugh J at 566-567. The Applicant's contentions in reply which responded to the new insufficient information contention regarding parking arising under the amended NSDCP identify what appear to be arguable matters, summarised in the Applicant's submissions above in [31]-[32]. The Applicant referred to El Khouri providing a basis for it to submit that a development standard imposed by a local environmental plan was not a jurisdictional requirement mandating refusal where exceeded. It is not necessary that I determine the application of that case but I accept that this was a matter the Applicant could potentially have reasonably raised. I do not consider it was unreasonable for the Applicant to pursue these responses to the parking contention based on the amended NSDCP.
Thirdly, Murray Affidavit 2 identifies at par 49 multiple reasons why the Applicant decided to discontinue the proceeding, extracted above in [7]. These reasons appear reasonable in the circumstances of complex proceedings involving numerous expert disciplines where many issues were unresolved despite conciliation processes in the Court. These identify substantive matters in addition to the potential operation of the amended NSDCP. The Applicant also referred to the joint traffic report extracted in part above in [8] which highlights that there were a range of issues outstanding.
Contrary to the Council's argument, the appeal continued to have prospects of approval even if the proposed parking remained in excess of the maximum under the amended NSDCP. It cannot be safely assumed by the Council that an amendment would not have been proposed if the proceeding had continued to hearing.
The Applicant further evaluated the perceived strengths and weaknesses of the appeal having regard to the joint reports delivered in late October 2023 and determined not to proceed. There was nothing unreasonable in so doing. It would not be consistent with the no discouragement principle nor fair and reasonable for costs to be ordered against the Applicant. The circumstances are squarely within the propositions that discontinuance itself creates no presumption as to costs and a reasonable basis for discontinuance weighs against any costs order.
In light of all these matters I find that it is not fair and reasonable for the Council's costs from 2 June 2023 to be paid by the Applicant. The consequence of this finding is that each party must bear its own costs of the proceeding.

Council's submissions

The Council submitted that if it is unsuccessful costs should not follow the event, rather r 3.7(2) applies so that costs of this costs motion are only awarded if it is fair and reasonable to do so. The Council had to file a motion in order to obtain costs. Each party should pay its own costs of the motion. The Council also submitted that if it was successful in obtaining an order for costs its costs ought be paid.
The Council identified categories of cases of the Court as follows: 1. Cases where r 3.7 has been applied to the costs of unsuccessful motions in various circumstances so that costs are only awarded if fair and reasonable to do so. The following cases relate to costs of costs motions, Brennan v Leichardt Council (No 2) [2013] NSWLEC 199 (Brennan) at [36]-[37], Hillsong Church Ltd v Council of the City of Sydney (No 2) [2012] NSWLEC 118 (Hillsong) at [54]-[56], Ross at [36]-[37], Crescent Newcastle at [105]-[109]. All of these cases apart from Brennan held it was not fair and reasonable to order costs for the costs motion. 2. Cases where costs of the costs motion follow the event, or the Court made orders where no issue was raised between the parties that the motion's costs should not follow the event, Awesome Corowa Pty Ltd v Federation Council (No 2) [2022] NSWLEC 93 (Awesome Corowa) at [57], Regional Architects Pty Ltd v Coffs Harbour City Council [2021] NSWLEC 29 (Regional Architects) at [120]-[121]. 3. Cases where determination of the costs motion included the costs of the motion, effectively treating costs as part of the costs of Class 1 proceedings, see Regional Architects at [120]-[121], Norton v Blacktown City Council [2009] NSWLEC 214 at [15]-[16]. 4. Cases where costs seem to follow the event following a motion seeking costs. Firstly, some include the observation that for such costs applications costs customarily follow the event, for example Twynam Investments Pty Ltd v Goulburn Mulwaree Council [2021] NSWLEC 7 (Twynam) at [64]. Secondly, the approach in Drake v Randwick City Council [2021] NSWLEC 97 (Drake) at [32] finding that 'costs of costs applications in Class 1 proceedings do conventionally follow the event, as such proceedings are to be regarded as falling within the scope of [r 3.7(3)(a)] as giving rise solely to legal issues'.
There is no established convention that the costs of a costs motion follows the event given the range of decisions identified above. In assessing the costs of the Council's costs motion, the following applies: 1. Based upon the wording of r 3.7, and as illustrated by the decisions cited for categories (1) and (3) above, costs for a Class 1 motion of any kind including costs are to be assessed under the presumption in r 3.7(2), and can only be awarded if it is fair and reasonable in the circumstances; 2. Where a party successfully brings a motion seeking costs under r 3.7, the party would also be entitled to the costs of its motion on the basis that this is fair and reasonable; 3. Where a party unsuccessfully brings a motion seeking costs, r 3.7(2) applies. The unsuccessful party should only have to pay the costs of the costs motion if it is shown that is fair and reasonable in the circumstances as costs of a costs motion are not treated differently from any other costs in Class 1 proceedings; 4. Given the various categories of cases identified, there is no identifiable practice or custom that costs of a costs motion generally follows the event. Instead, r 3.7(2) applies, and for a successful notice of motion the fair and reasonable result will generally be that the costs of the motion becomes the costs of the Class 1 proceeding. However, the converse does not necessarily apply to an unsuccessful motion. 5. It follows that there is nothing unfair or inconsistent with a party contending that, if successful, the costs of its motion should be paid by the other party, but if not successful, then there should be no order for the costs of the motion.
For the following reasons, if the Council was not successful on its costs motion, there is no basis to consider that it is fair and reasonable that the Council should have to pay the costs of the Applicant: 1. The circumstance in r 3.7(3)(a) is not engaged by the costs motion itself. Rule 3.7(3)(a) applies to the issues in the proceeding as a whole; 2. The circumstance in r 3.7(3)(d) is not triggered. There was nothing unreasonable in the Council's conduct of the proceeding including bringing its costs motion. The Applicant, on 2 June 2023, was aware of the changes to the NSDCP and, for reasons advanced in the oral hearing on 6 February 2023, by 2 June 2023 the Applicant had all the information it needed to decide to discontinue the proceeding. Instead the Applicant did not act until 3 November 2023 with costs being incurred in the meantime (this submission seems to assume that the Council was successful on its substantive motion, it was not); 3. The circumstances in r 3.7(3)(f)(i) or (ii) are also not engaged. Further, unlike Brennan at [36]-[37], the Council's application cannot be said to have lacked prospects of success; and 4. There are no other circumstances suggesting that it would be fair and reasonable for the Council to pay the Applicant's costs of the costs motion. A party such as the Applicant who embarks upon Class 1 proceedings does so knowing that such applications may be brought, particularly where that party discontinues its action after significant costs are incurred.
In reply the issue is to be determined by consideration of r 3.7. The decisions cited by the Applicant such as Grant v Kiama Municipal Council [2006] NSWLEC 70 (Grant v Kiama), Jacobson & McMillan v Ballina Shire Council [2006] NSWLEC 375 (Jacobson) do not support its approach that costs follow the event. The Council has identified where the Court has specified that r 3.7 applies to motions in Class 1 proceedings and contrasted these with other decisions citing matters such as 'conventions' or where the parties have agreed on how costs should be determined, for example Awesome Corowa at [57]. The cases cited by the Council demonstrate that r 3.7 requires the fair and reasonable test to be applied to motions including costs motions. The Council's approach is not inconsistent, it simply applies r 3.7 to the costs of the costs motion. An example of this approach can be seen in Ross at [37]. This decision shows that it was consistent for the council to contend that if successful costs of the motion should be paid but that it was not fair and reasonable to pay Mr Ross' costs if the council was not successful.
The Council's costs motion followed a discontinuance of the Class 1 proceeding and is not an interlocutory procedural dispute, or a preliminary issue having no bearing on the merits so that r 3.7(3)(a)(ii) does not apply. Provided the costs motion is bona fide and not brought for an ulterior purpose no reason exists in principle as to why that party should expect to pay the costs of that motion unless it is shown that bringing the motion was itself not fair and reasonable.

Applicant's submissions

There are divergent approaches in the Court to costs of costs applications in Class 1 appeals and whether r 3.7(2) applies. In Grant v Kiama at [74] Preston CJ concurred with the costs order made by a commissioner that for a partially successful motion for costs where each party succeeded on two out of four issues and each paid their own costs was said to reflect the usual order that costs follow the event, citing numerous cases where this approach had been taken. That decision pre-dates r 3.7 but remains relevant.
There are several decisions where the approach taken to costs of the costs application was that costs follow the event, for example Awesome Corowa at [57], Drake at [32], Regional Architects at [120], Twynam at [64].
Several decisions (many in Class 2 proceedings) exist where the fair and reasonable presumption in r 3.7(2) has been applied to costs of costs applications, for example Zhang v Davidson (No 2) [2020] NSWLEC 89 (Zhang) at [68]-[70].
A hybrid approach was adopted in Drake at [32] in making an order that costs follow the event on the basis that costs applications fell within r 3.7(3)(a).
If the scope, object, and purpose of r 3.7(2) is considered the better view is that costs of costs applications should follow the event. The purpose of the rule in applying the no discouragement principle is identified in Arden Anglican at [10].
In Jacobson, Jagot J discusses the distinction between the issue of costs in merits appeals as opposed to 'ordinary litigation' at [25]: … The substance of both notices of motion was unconnected to the merit appeal against the s 124 order, and was akin to ordinary litigation. In Gee v Port Stephens Council (2003) 131 LGERA 325, McClellan J considered the issue of costs in merit appeals. At [60], McClellan J distinguished between "matters appropriate for ordinary litigation" and the "merits of the application". The decisions referred to by Preston J in Grant v Kiama Municipal Council at [74] also disclose that notices of motion are generally treated as subject to the "usual order as to costs".
Applying the reasoning of Jagot J above in Jacobson, the Applicant submits that a costs application is 'unconnected to the merit appeal', involves no assessment of the 'merits of the application' itself and, therefore, is 'akin to ordinary litigation'. Therefore costs should follow the event.
There are sound policy reasons for taking this approach when regard is had to the underlying purpose of the 'special costs rule' in r 3.7(2) as opposed to the 'usual order' that costs follow the event. Whilst it is appropriate that the prospect of a costs order should not discourage a person from exercising their right of appeal to test the merits of the development, the situation is quite different with respect to a costs application itself. The parties should be encouraged to settle the costs dispute rather than litigating the costs dispute and risk incurring disproportionate costs by the parties.
In the alternative, adopting the reasoning of Moore J in Drake, the Court would find that the costs application ought be regarded as falling within the scope of r 3.7(3)(a) of the costs rules such that costs would follow the event.
The cases relied on by the Council to submit that costs of a motion are only awarded if fair and reasonable to do so (category (1) above) which do not concern costs motions are not relevant.

Consideration of costs of the costs motion

The Court has broad discretion to award costs under s 98 of the Civil Procedure Act 2005 (NSW) subject to any court rules. Rule 42.1 of the UCPR does not apply to Class 1 proceedings, as provided in Sch 1. That rule provides for the general rule that costs follow the event. Rule 3.7 of the LEC Rules applies in Class 1, 2 and 3 proceedings whereby under subr (2) costs are not awarded unless the Court considers doing so is fair and reasonable. Non-exhaustive circumstances where the Court may consider it is fair and reasonable to award costs are specified in subr (3). The application of r 3.7(2) means that generally each party pays their own costs unless a different order is made.
The parties' submissions referred to a large number of decisions of the Court where costs have been considered in Class 1 and 2 proceedings. Given the frequency with which costs issues arise in many contexts in Class 1 and 2 proceedings this will be far from exhaustive. The focus of this decision is the approach to the award of costs of a costs motion following the discontinuance of a Class 1 appeal. My analysis does not require that a distinction be made between decisions on costs in Classes 1 and 2 as the same rule applies in both.
The parties identify in various cases different approaches by various judges of the Court to determining how costs of costs motions are payable in Class 1 and 2 appeals, namely: 1. Costs follow the event, being the result in the substantive (costs) argument sometimes by agreement of the parties (above in [51(2)]), sometimes as part of the costs of the substantive motion (above in [51(3)]), and sometimes because the judge considered that was the usual convention (above in [51(4)], [57]). 2. Each party pays their own costs unless fair and reasonable to order otherwise as provided by r 3.7(2), for example Hillsong, Ross, Zhang. 3. Costs of costs applications come within r 3.7(3)(a) as considered in Drake so that costs can follow the outcome of the substantive proceeding.
The Applicant has emphasised that the approach to the issue of costs in this context is a matter of statutory construction. In accordance with well‑established principles legislation must be read as a whole so as to give effect to all sections wherever feasible, Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [69]-[70] (McHugh, Gummow, Kirby and Hayne JJ). Where individual words require construction, their ordinary meaning must be considered in context, Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (Cth) (1981) 147 CLR 297; [1981] HCA 26 at 305 (Gibbs CJ) cited in Roden v Bandora Holdings Pty Ltd [2015] NSWLEC 191 at [42], Sydney Seaplanes Pty Ltd v Page (2021) 106 NSWLR 1; [2021] NSWCA 204 at [25]-[41] (Bell P). The principles of statutory construction are also applicable to the LEC Rules being delegated legislation, Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101; [2008] HCA 38 at 110 (Gummow ACJ, Kirby, Hayne, Crennan and Kiefel JJ) cited in D Pearce and S Argument, Delegated Legislation in Australia (6th ed, 2023, LexisNexis) at 591.
The consideration of costs of costs motions must commence with r 3.7(2) of the LEC Rules. The broad drafting of the rule applies on its face to 'any order for the payment of costs' in Class 1 proceedings. This must include costs of any motion seeking costs filed in Class 1 proceedings. On one view that is the end of the inquiry, which is essentially the case submitted by the Council. Subrule (3) provides examples of where it may be fair and reasonable to award costs, broadly where behaviour has been unreasonable in some way (subrr (3)(b), (c), (d), (e), (f)), or in subr (3)(a)(ii) where the evaluation of the merits of an application the subject of the proceeding was not involved or was determinative of the proceeding (subr (3)(a)(i)). Subrule (3) cannot confine the application of subr (2) given the latter's terms.
Such an approach is confirmed by Sansom, where in considering an earlier costs regime in Class 1 proceedings s 69(2) of the Land and Environment Court Act 1979 (NSW) and Pt 16 r 4 of the LEC Rules as then in force, the Court of Appeal (Spigelman CJ, Mason P, Beazley, Giles and Ipp JJA agreeing) identified that the formulation 'fair and reasonable' calls for a judgment to be made rather than a discretion to be exercised accepting that the evaluative process can be accurately described as conferring a wide discretion, at [51]. Spigelman CJ emphasised the importance of not unnecessarily limiting the evaluative judgment required in relation to costs with the starting point being the presumptive rule that there will be no order as to costs, at [48]. Spigelman CJ identified that principles and guidelines can usefully be adopted as long as these are not treated as rules and are accepted as indicative only, identifying that Grant v Kiama at [15] provides one such indication, at [54]-[56]. Similar observations by the Court of Appeal appear in Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council (2007) 71 NSWLR 230; [2007] NSWCA 300 (Thaina Town) at [35].
The differences between the former costs provisions considered in Sansom and Thaina Town and the current provisions were helpfully considered in Agonic Holding Pty Ltd v Lithgow City Council [2009] NSWLEC 34 (Agonic) at [4]-[5] (Biscoe J) cited in Hillsong at [43] as follows: [4] The Land and Environment Court Rules 2007 commenced in January 2008 and replaced the Land and Environment Court Rules 1979. Rule 3.7(2) of the new rules replaced Pt 16 r 4(2) of the old rules which provided that: "No order for the payment of costs will be made in proceedings to which this Rule applies unless the Court considers that the making of a costs order is, in the circumstances of the particular case, fair and reasonable". The essential difference between those two provisions is the absence of the words "in the circumstances of the particular case" in the new rule. In relation to the old provision, Bryson JA in Hunter Development Brokerage Pty Ltd v Cessnock City Council (No 2) [2006] NSWCA 292, (2006) 151 LGERA 46 at [4] said that those words excluded "generalised approaches". By reason of the omission of those words in the new rule, it may be that generalised approaches are permissible, although a specific generalised approach may be insufficient to enliven the discretion or may be displaced by the circumstances of the particular case. The non-exhaustive list of circumstances in rule 3.7(3) directs attention to the circumstances of the particular case. The list is similar to the indicative guidelines formulated under the old rule in Grant v Kiama Municipal Council [2006] NSWLEC 70 at [15] by Preston J and approved by the Court of Appeal in Port Stephens Council v Sansom [2007] NSWCA 299 (2007), 156 LGERA 125 at [56]. [5] The effect of the costs rule is that, in the ordinary case, costs will lie where they fall. This presumptive rule is not displaced unless the Court considers that the making of a costs order is fair and reasonable in the circumstances. ...
As essentially identified in Agonic the differences between the current and former costs provisions can be seen as minimal in effect and the observations in Sansom and Thaina Town continue to apply. A consequence of the Applicant's arguments is essentially that a separate approach to costs of costs motions is warranted and that approach should be that costs generally follow the event. While not expressly articulated by the Applicant in these terms that is the effect of its argument. While the Applicant's argument relied on Arden Anglican at [10] where the rationale for the presumptive rule was described by Biscoe J, the effect of its approach would be to separate out a particular costs category and that is not in accordance with the statutory scheme. Grant v Kiama and Jacobson decided under the earlier costs regime in Pt 16 r 4 of the LEC Rules identify one approach commonly applied by judges undertaking the necessary evaluative judgment in relation to the award of costs of costs motions, namely on the basis these follow the event.
No principle of statutory construction supports the limitation of the application of r 3.7(2) in this way. It follows that the observations in Sansom and Thaina Town apply to the LEC Rules in their current form as identified in Agonic and Arden Anglican. It is not appropriate that I seek to resolve the divergent approaches to the costs of costs applications, contrary to the Applicant's submission that I should do so.
As the large number of cases referred to by both parties show, various approaches have been taken by judges over time. The possibility of different approaches to the determination of costs of costs motions arises from the wide discretion to undertake the evaluative judgment arising from r 3.7(2). Once it is accepted that r 3.7(2) applies to all types of costs matters then adopting a universal 'rule' for how that discretion might be exercised, such as that costs for costs motions ought follow the event, is not appropriate. Ultimately the evaluative judgment in each case must be determined on its own facts and the Court has a wide discretion to be exercised judicially in considering costs in all the various contexts in which they arise under r 3.7(2).
The Council sought to distinguish cases which have considered interlocutory procedural matters and those where merit questions do not arise from its application for costs following the discontinuance because that occurred at the end of the proceeding. It is not clear that there is any useful distinction to be drawn on that basis. The Council's application for costs following discontinuance by the Applicant did not require the evaluation of any merit issues.
I consider the alternative approach the Applicant proposed in Drake has much to recommend it on this occasion. Rule 3.7(3)(a)(ii) can apply, while still a matter of discretion for a judge as to the outcome, which does lead to the approach taken in a number of the cases referred to namely that costs of this costs motion should follow the event. That is the approach I will take in this matter.
Consequently I do not need to consider the parties' conflicting submissions on why it would be fair and reasonable (or not) to award costs.