Evidence
5The Council read the affidavits of Mr Gray, Council's solicitor, dated 19 June 2012 (DZG1) and 18 July 2012 (DZG2); affidavit of Ms Grant, Council's solicitor, dated 18 July 2012 (DEG); and affidavit of Mr Baird, Council's solicitor in the Supreme Court proceedings, dated 19 June 2012. The Council tendered the transcript of proceedings before me on 15 June 2012 (exhibit A) and exhibits to the affidavits of Mr Gray and Ms Grant both dated 18 July 2012 (exhibits B and C). The exhibits to Mr Gray's and Ms Grant's affidavits refer to documents which are the basis for the chronology set out below and it is therefore unnecessary to summarise them here.
6Mr Baird's affidavit states that the Council commenced Supreme Court proceedings on 20 March 2012 to restrain seven councillors from taking action to terminate the general manager's contract of employment pursuant to s 20B of the Public Interest Disclosures Act 1994. An interlocutory injunction to this effect is currently in place. Mr Baird received a telephone call on 3 May 2012 from a man identifying himself as Mr Rush, who stated that he had been appointed by the Council as delegate in relation to the Supreme Court proceedings, had instructed Mr Pickup to act in the Supreme Court proceedings, that a notice of change of solicitors would be filed and that he would be discontinuing the proceedings and seeking costs against the mayor and general manager. Mr Baird has not had any contact with Mr Rush since their telephone conversation on 3 May 2012.
7On 7 May 2012 Mr Baird attended a hearing in the Supreme Court proceedings when there was no appearance entered by Mr Pickup or counsel, nor was any notice of change of solicitor filed. That day, Mr Baird spoke to Mr Pickup who indicated that his client would not take any action in the proceedings (including intervening) without first giving 24 hours' notice. Mr Baird has not received any notice in this regard. On 28 May 2012 the Supreme Court proceedings were adjourned until 12 September 2012 for the allocation of a hearing date following the release of the Independent Commission Against Corruption's findings on its current investigation into the Council.
8Mr Ryan, the Fourth Respondent, read in part his affidavits dated 22 July 2012 and 23 July 2012. Mr Ryan's first affidavit states that on 5 April 2012 he signed a request to the mayor to convene an extraordinary meeting to consider a motion regarding the Supreme Court proceedings. (A copy of this facsimile request dated 5 April 2012 and received by the Council on 30 April 2012 is annexed to Mr Ryan's second affidavit.) The motion sought to delegate the management and performance of those proceedings, initiated by the mayor, to the chair of Hunter Councils Inc, as a person independent of the Council. As there was no attempt to convene an extraordinary meeting, at the Council meeting on 2 May 2012 Mr Ryan moved as a matter of urgency the resolution to have the chair of Hunter Councils Inc take carriage of the Supreme Court proceedings. This motion was carried in accordance with the Council's Code of Meeting Practice cl 13.12.
9Mr Ryan annexed to his affidavit a letter from Mr Belling, solicitor for seven of the councillor Respondents in the Supreme Court proceedings, dated 18 June 2012. The letter states that Mr Belling was present in Court when Mr Baird said Mr Rush had given the Council an undertaking not to act on the resolution of 2 May 2012 without giving 24 hours' notice and confirms that Mr Belling said seven of the councillor Respondents gave a similar undertaking. Mr Belling had further indicated that the parties he represented had "no interest in taking any steps" under that resolution.
10On 15 June 2012 Mr Ryan met with Council's legal representatives and made an offer of compromise, a summary of which is contained in emails to the Council's solicitors dated 20 and 21 June 2012 (exhibited to Mr Gray's affidavit of 18 July 2012 at tabs 6, 7 and 8 and Ms Grant's affidavit of 18 July 2012 at tab 21). Mr Ryan suggested that the parties consent to the Court ordering that the councillors be restrained from acting on or seeking to pass a similar resolution, and that the Council be restrained from acting on the resolution until after the Supreme Court proceedings were finalised. This, Mr Ryan believed, would have served the purpose of removing any statutory obligation on the Council to implement the resolution as well as any Council concern of the councillors acting on the resolution. Mr Ryan thought this would have had the "added benefit of allowing Council to approach the important public task of determining what is an appropriate Code of Meeting Practice in more constructive conditions." The Council rejected this offer.
11On 19 June 2012 Mr Ryan received the POC. On 20 June 2012 he telephoned the Council's acting general manager offering to enter into consent orders and emailed the Council's solicitors. That email, a copy of which is exhibited to Ms Grant's affidavit of 18 July 2012 (tab 21), states that Mr Ryan and Mr Parker were willing to enter into consent orders to settle the matter on the basis that each party meet their own costs. Mr Ryan referred to the offer of compromise he made on 15 June 2012 which was rejected. Mr Ryan said his and Mr Parker's response in offering to enter into consent orders following receipt of the POC was reasonable because it included the argument that the delegation made by resolution on 2 May 2012 was not made to a legal person. This was only mentioned peripherally in the draft summons and not mentioned at all in the letter dated 14 May 2012. On 6 July 2012 Mr Ryan emailed the general manager and acting general manager seeking a copy of the Council's insurance policy. On 13 July 2012 he received a memo from the acting general manager stating that the Council's insurer had been notified of a potential claim for costs and had requested a copy of any judgment in the Court proceedings to identify whether a claim for costs would be covered under the insurance policy.
12A copy of an email sent by Mr Ryan on 6 July 2012 rejecting the Council's offer of compromise for Mr Ryan to pay the Council's costs in the sum of $8,000 and making a counter offer that each party bear its own costs was exhibited to Mr Gray's affidavit of 18 July 2012 (tab 15). It stated:
(i)Mr Ryan did not believe the Council was entitled to its costs after the Council's solicitors' letter of 14 May 2012 as it did not outline the Council's eventual claims in the proceedings and the point it contended for was not strong.
(ii)Mr Ryan did not accept that the Council was entitled to costs after the draft summons (attached to a letter dated 23 May 2012) as it did not allege, like the POC issued on 19 June 2012, that the resolution of 2 May 2012 did not give a delegation to a natural person. Mr Ryan also considered the Council did not provide any justification for why his offer of compromise made on 15 June 2012 to the Council could not be legally implemented.
(iii)On 20 June 2012, after receiving the POC on 19 June 2012, Mr Ryan indicated that he would be amenable to entering into consent orders save as to costs and reiterated the terms of his offer made on 15 June 2012 including the reasons he believed it was appropriate. This offer included the phrase "restraining Councillors from either acting on or seeking to pass on a like Resolution", which was an undertaking given in the Supreme Court.
(iv)At the mention on 22 June 2012 the short minutes of order presented by the Council were changed and included the phrase "or any similar Resolution or instrument". Mr Ryan alleged that the Council had taken advantage of the offer he made by widening the words of the consent orders in the manner he had suggested and therefore it was not appropriate for the Council to be awarded costs.
(v)The Council was not entitled to costs on the basis that Mr Ryan considered the Council acted in bad faith in the proceedings by not informing the councillors of their inclusion in the Council's insurance policies with regard to defending legal action taken against them in their role as councillors. In his view the Council officers had a duty to inform the councillors of this and that this failure had a material effect on the case.
(vi)Finally, if costs were to be awarded Mr Ryan indicated he would be objecting to the quantum of costs as he did not think it was appropriate for two senior solicitors and senior counsel to be present at each mention.
13Mr Ryan made similar submissions to those summarised above in the email at the costs hearing. Mr Parker, the Seventh Respondent, did not read any affidavits or tender any evidence.