Coolah Holdings Pty Ltd v Eurobodalla Shire Council

Council Documents, Plans and Policies 5Council's 2004 Development Control Plan ('DCP' - in cl 3.4.2) states as an objective: "minimise flooding impacts created by new development and additional hardstand". The DCP encourages the capture and re-use of stormwater and the orderly control of overflows to Council's drainage system, i.e. "water sensitive urban design". Associated with the DCP is the Eurobodalla Residential Design Code (Harvey's materials at fols 47-48), one of the objectives of which is to achieve the DCP objective - minimise flooding impacts created by new development and additional hardstand. A key design principle is stated as follows: Water Sensitive Urban Design (WSUD) aims to keep the balance between infiltration and runoff from individual sites as close as possible to pre-development flows. WSUD incorporates the permanent and temporary storage of stormwater on the urban allotment, reducing the peak flow and volume of water that leaves the site. It is also used to improve the quality of urban runoff in residential areas. Techniques to reduce flow velocities and volumes from the block can be achieved through the use of rainwater tanks, natural filtration, surface storage and infiltration into aquifers. 6The applicant relies upon the Code's nomination of the following as an acceptable solution "for residential flat buildings", namely that "the volume of stormwater runoff is to be managed using absorption pits, grass swales, infiltration trenches or landscape features". 7The Council's policy "Stormwater Disposal - Urban Land" (Harvey at fol 137) became effective on 24 November 2009, and provides in respect of infill development (my emphasis): For other than single residences, all infill development be required to discharge stormwater (over and above that captured for re-use) to or by way of an approved gravity drainage facility other than directly to a rubble drain. This may require the creation and piping of an interallotment stormwater drainage easement. 8The applicant submits on the costs issue that the proposal it put forward was in accordance with, and was found by Commissioner Hussey to be in accordance with, the Council's design principles, but that Council reads the word "may" in the last sentence of the policy as "must".

Background 9The applicant's architect, Ian McKay, lodged the DA on 30 June 2009, and it soon emerged that it generally complied with Council's controls, with the only real issue between the parties being the question of stormwater management and disposal. When Council sought further information, the applicant engaged consulting engineer Bill Payne, whose stormwater management plan was provided on 8 September 2009. 10Council insisted from the outset of the DA that the only acceptable means of managing stormwater on the site was by the creation of an easement over the adjoining downstream property, and the construction of a pipe to take the stormwater away - first of all to the next road, and from that point down to the nearest pit, requiring some 99m or 176m of pipe to be constructed (applicant submissions par 7, c.f. Tp3, L3). 11The Council refused the application on 7 October 2009, and the applicant appealed to the court on 22 September 2010. Pursuant to directions made on 25 October 2010, the parties filed their individual and joint expert reports. Council relied on its senior development and subdivision assessment engineer, Michael McIlveen, and the applicant relied upon Payne. Commissioner Hussey inspected the site and held a s 34 conference on 29 November 2010, but, when the day was disrupted by problems with the flight schedule to and from Moruya, the parties agreed to adjourn the s 34 conference to allow the applicant to prepare some amended plans to take into account possible redirection of stormwater to Karoo Crescent. Various additional plans and documents were provided, and a hearing took place in Sydney on 4 February 2011. 12On that day, Commissioner Hussey gave an interim judgment, upholding the appeal, and requiring the parties to file an amended and agreed set of conditions to reflect his decision. In particular, the Commissioner wanted a draft condition prepared, providing for a positive covenant for the maintenance of the stormwater detention system to bind all subsequent landowners (McIlveen par 39). 13Draft conditions of consent, generally agreed (save particularly for No 6), were filed on 11 February 2011, and, on 18 February 2011, Commissioner Hussey handed down his judgment and final orders. 14In the costs hearing, the applicant relied upon affidavits from Payne, and solicitor Katherine Harvey, who had the carriage of the matter on its behalf. The Council relied upon a detailed affidavit from McIlveen. 15Payne deposed to his negotiations with Council officer Wayne Nicholson between November 2009 and February 2010, during which he says (par 4) that Nicholson made plain that the Council would not accept any form of stormwater disposal other than a piped solution as it did not wish to create a precedent while it remained concerned about exposure to litigation from downstream property owners over stormwater damage. 16Council officer Glen Oakley told McKay on 15 July 2009 that the easement option was a firm requirement of the Council (Harvey fol 15). McKay responded on 8 September 2009 (Harvey fols 16-17), enclosing Payne's stormwater plan of 7 September 2009 (fols 18-22), commenting (fol 17, par 4a) that: An approach has been made to the adjoining owners on the lower and northern side (Lot 56 in DP 227810). Our client is about to embark upon a negotiation with that owner. In relation to Councils' requirement that a Stormwater easement over adjoining properties be registered for disposal of Stormwater run off, we request that this requirement be made the subject of a deferred commencement condition, if Council is minded to grant approval of the DA. This is a common way for a Council to deal with issues such as Stormwater drainage, where proprietary rights of adjoining owners are affected. 17In s 2.2 of Payne's plan (Harvey fol 19), the following appears: Conventionally Councils require detention of proposed increases in stormwater runoff so that existing runoff levels are matched so as to not cause damage or overload downstream infrastructure or property. Eurobodalla Shire Council's position, as described in their fax of 15 July 2009, does not require detention but rather provision of downstream easement(s) for construction of Inter Allotment Drainage (IAD) from the subject site to Council's stormwater infrastructure. ... It has been our experience (albeit not in Eurobodalla Shire) that Councils do not require stormwater easements to be created over existing properties where upstream development is proposed, provided stormwater discharge rates, volumes and points of discharge are maintained to the existing case. For increased hard surfacing this normally requires detention of stormwater (to limit rates and volume) and dispersion (to limit concentrated points of discharge). Using this approach (detention and dispersion) an easement-free solution has been determined and is described on the attached sketch DA03. This solution provides for a minimum of 6.5 cubic meters of on-site detention plus dispersion via a broad-crested weir and swale at the bottom of the site. The site is ideally suited to this solution as contours are virtually parallel to the back boundary and relatively uniform. The proposed detention and dispersion solution is considered to provide more desirable environmental outcomes as it limits stormwater discharge to the existing case and reduces need for additional construction and maintenance of civil infrastructure. 18McIlveen's affidavit contains a full copy of Payne's letter to McKay dated 7 September 2009. In terms of understanding the diagrams in Payne's plan, McIlveen insisted that the court note that what were depicted were dispersion swales, not infiltration trenches. 19On 21 September 2009, Oakley wrote to McKay saying in part (Harvey fol 21): Plans have been submitted which illustrate potential options for stormwater disposal including disposal to the street, on-site detention and easement over adjoining properties. Disposal requiring pumping to the street and on-site detention are not considered satisfactory methods of disposal and cannot be supported by Council. You have requested that the requirement for stormwater disposal via easements(s) be made the subject of a deferred commencement condition if approval can otherwise be granted to the development. However Council is unable to issue a deferred commencement consent unless there is certainty that the deferred commencement condition can be satisfied. The required easement represents development on the adjoining property and the property owner is required to be a co-signatory to the development application. This, or a legal agreement regarding the easement is required to enable Council to issue development approval. It is therefore recommended that the application be withdrawn by 5 October 2009. The application can be resubmitted when the legal agreement of the adjoining property owner is obtained. In the absence of a request for withdrawal of the application, determination by refusal will occur on or after the above date. 20In Council's development assessment report, dated 7 October 2009 (Harvey fols 23-34), Council officers concluded (at fol 34): The general architectural form and design of the proposal is considered to comply with zone provisions, however an appropriate method of stormwater disposal has not been achieved. Thus the proposal may impact negatively on adjoining properties and is not considered suitable for the site in the absence of easements for the effective disposal of stormwater. Alternative methods of disposal were submitted which include pumping to the street. This is considered unsatisfactory given the issues of mechanical and electricity reliability and environmentally sustainable energy use. Plans for potential on-site detention were also submitted. This is is (sic) also deemed unacceptable given the site constraints (eg. limited area) and limited ability to manage overflows via absorption pits or other landscape features. There is a high possibility that downstream properties would be affected by increased overflows during rain events and seepage at other times. Easements for disposal over these properties are required, but no agreement has been reached at this time, and no indication that an agreement is likely. 21The refusal decision was signed that same day, and Oakley advised McKay (Harvey fols 35-36), that the development had been refused on the grounds only of the stormwater proposal. 22On 15 October 2009, Steve Lambert (a director of the applicant company) emailed Oakley regarding the Council's dismissal of what he said was Payne's "plausible solution" to the stormwater disposal issue, without explanation. Lambert indicated that approaches were underway to the downstream owners, who had objected to the DA, in order to pursue the Council's suggested solution. Lambert also indicated his preference to avoid the costs of a Land and Environment Court appeal (Harvey fol 37), and sought a discussion with senior Council officers. It appears that he received no response (Tp4, L41). 23Downstream neighbour/objector Elizabeth Cornhill replied to McKay, on 23 October 2009 (Harvey fol 38), refusing to agree to an easement on the eastern side of her property, as a result of the need of a wheelchair pathway for her daughter-in-law, and on the account of trees and shrubs they did not wish to lose. 24When these class 1 proceedings were commenced, Council, in its Statement of Facts and Contentions (filed 29 October 2010), repeated, as contentions, the reason given in its refusal advice (see Harvey fols 45-6), the only matter in dispute being stormwater treatment. 25The applicant filed its Statement of Facts and Contentions in Reply on 4 November 2010, and subsequently filed an expert report from Payne, on 17 November 2010. Of the applicant's proposal, Payne's report said (at fol 59): In summary, the proposed system will capture and detain runoff in detention tanks and infiltration trenches where water is held and treated prior to discharge across flow control weirs and small pipes. The proposed system has the capacity to more than adequately manage stormwater at the site to ensure that no stormwater from the proposed development adversely affects downstream properties through overflows or seepage. 26The report went on to set out the proposed development and the requirement of stormwater management in more detail, and to detail the asserted shortcomings of the Council's position, saying (at fol 65-6): Eurobodalla Shire Council's preferred solution is to capture all stormwater runoff by a pipe system - and 'end of pipe' system. This system requires a defined underground and above ground flow path to be identified by a drainage easement. Drainage pipes for small rainfall events are installed in the easement. Overland flow for bigger rainfall events is usually provided across the same easement provided no obstructions exist. A separate above ground easement would be required if insurmountable objects were encountered. Usually both easements co-exist in the same space. ... The benefits of this system are that: On site infrastructure to the proposed development is minimised hence reducing development costs provided easements and downstream access for pipe work installation are readily available. The end of pipe solution acts as a centralised item of infrastructure which can therefore be efficiently maintained by Council and funded through its normal rate base. The drawbacks to this style of solution are that: With infill development creation of the drainage easement is rarely straight forward in practical and legal terms. It also imposes restrictions on existing downstream land use by restricting building over the easement. This restriction is required so that access to the minor rainfall pipework system is available for maintenance and so that an overland flow path is kept free of obstacles for larger rainfall events. The end of pipe solution is often not available (as is the case here) and even if available, without proper maintenance, can be overwhelmed by pollutant loads which at times can create a worse environment outcome than untreated stormwater. The end of pipe solution imposes a cost burden on people who may not derive any benefit from the cause of the increased stormwater. This is considered to not be in the best interest of the community. 27In the next section of the report (3.4, fol 66) Payne said: The applicant's Stormwater Management Plan proposes a distributed flow system to hold the increased runoff generated by the proposed development in detention tanks and then discharged (sic) the detained volume at the predevelopment rate via a control weir and dispersion swales system above ground in the area over the sewer pipe. Disposal will then be spread across the site via swales constructed across contours with a low point for low flow drainage near the existing sewer manhole. This solution is an 'at-source control' system. 28After outlining in more detail the technical advantages of the applicant's proposal, Payne went on to say (at fol 69): The particular benefits of the applicant's Revised Stormwater Management Plan are: User Pays. The proponent is required to meet the cost of preventing any increase in runoff and pollutant load. The system can be constructed into the natural fall of the land and landscaped to create an attractive component of the development. Maintenance of the system requires removal of small amounts of filtered solids and local scouring compared to the large scale removal of solids and settlement from end of pipe solutions. Failure to maintain properly has a relatively small impact on the overall catchment due to the scale of the treatment system. Downstream properties are not burdened by easements for stormwater flow. The drawbacks of this system are that there is little control over the system performance by Council once the system is completed. Hence, proper and adequate maintenance may not be undertaken by residents leading to temporary or permanent failure of the system and consequential transport of pollutants to and increased runoff on downstream properties. However this is intrinsically offset by the small scale nature of the proposal and the backup systems provided (Infiltration after detention). 29During the costs hearing, Mr Bradbury took the court through plans and detailed diagrams to give it a clear understanding of what was proposed, the location of the various properties etc. Mr Bradbury submitted that "one of the effects of the applicant's proposal was to evenly distribute the flow across a 'swale'" depicted in the diagram (at fol 94) and commented (Tp6, L47-9) "so as well as reducing the overall level of runoff, it spreads it more evenly across the back of the property, rather than concentrating it in a particular location". 30Before the Commissioner, the respondent Council relied upon an expert report prepared by McIlveen dated 23 November 2010, and included in Harvey's materials (fols 124 ff). Mr Bradbury pointed to the summary to the Council's approach at the end of McIlveen's statement of evidence (fol 130, s 5 of the report), where McIlveen said: 5.1 The Respondent contends that the proposed development should not be approved unless a design for the disposal of stormwater from the site via an easement through the lower land is accepted and legal mechanism available for registration of such easement. This would be consistent with the Council's adopted Policy "Stormwater Disposal - Urban Land". 5.2 Any on-site Detention scheme is not supported by the Council and would unreasonably, and unnecessarily, adversely impact on the development on adjoining land (being 45 Yugura Street). 31The Council's policy and attitude are explained in some detail in McIlveen's costs hearing affidavit (pars 48-53). He confirmed again, as did Mr Jayne in submissions (Tp10), that the Council's only issue with the development, and its only objection to it, concerned satisfactory management of stormwater. He asserted that the Council's preferred option of an IAD easement was consistent with the Council's long-standing engineering practice, as reflected in the November 2009 policy. In his affidavit (appendix K) he identified a number of other local government areas where similar requirements are enforced. He deposed that the IAD solution Council advocated was "an entirely reasonable alternative stormwater solution to the retention system advocated by the applicant". 32As the subject site has a total area of 828m², the development represented, in McIlveen's words, "a significant increase in hardstand area from 19.3% to 51.3%" (par 44). That significant increase meant that there was a corresponding decrease in "impervious area", which would allow water to infiltrate naturally. Council's paramount consideration was to ensure that adjoining down-slope properties were not subjected to nuisance overland stormwater flows (pars 45-47). Had the applicant been able to secure an agreement for a stormwater easement presumably the applicant would have installed such a system (par 54). 33For completeness, I set out the following from McIlveen's affidavit: 51. The location of the overflow swale was located immediately above the common boundary and relies heavily on ongoing maintenance by an inexperienced owner to ensure flow is spread. It was this very reason that Commissioner Hussey required a positive covenant for the on-going maintenance of the system. Unfortunately, this is not the fool-proof, fail-safe system that the Council continues to prefer over ad-hoc, site specific solutions for these types of infill urban renewal developments. 52. The infiltration/detention solution advocated by the applicant was based on assumed ground infiltration rates of 45mm/hour in the expert's filed report on 17 November 2010. See paragraph 4.7(g) in my expert report filed on 25 November 2010, a copy of which can be found in Harvey: Appendix 'T', at page 129. 53. The infiltration rate was critical to the design/size of the infiltration trenches. Site testing of infiltration rates were finally undertaken by the applicant, which found a significantly lower infiltration rate of 5mm/hr, provided in the applicant's expert report filed on 18 January 2011. This was after the initial site inspection/s 34 conference on 29 November 2010 and before the resumed s 34 conference/binding adjudication on 19 January 2011. 34Mr Jayne rejected the suggestion that Council treated the "may" in the policy ([17] above) as a mandatory requirement. He said (at Tp13, LL29-34): Yes your Honour my friend's quite rightly pointed out that the last sentences of this may require the creation of piping on the inter-allotment stormwater drainage easement. The reason the, may, is there is council didn't treat this as mandatory it just means that when it looks at a particular site there may well be that there's a council reserve or something. There could be a system designed so that that could be discharged into there. So the issue about the, may, was they'll look at the site and if there's no other option in terms of they'll look at the inter-allotment drainage and the seeking of an easement through. I don't think there's too much can be drawn from that particular document. 35He emphasised the movement in the applicant's position following the Commissioner's visit (see Tp12). On 17 November 2010 - after the s 34 conference had been fixed for 29 November, and the respondent Council had agreed that it should progress to binding adjudication on that date, if the parties did not reach an agreement - the applicant submitted an amended plan. After discussions with the Commissioner on site on 29 November 2010, further amended plans were submitted on 16 December, and included several alterations to the infiltration trench design and changes to the driveway construction to prevent sheeting of water off the road. A third set was produced on 18 January 2011, the day before the s 34 process resumed in Sydney. 36During that period of adjournment, from 29 November 2010 to 19 January 2011, the parties worked collaboratively, despite Council's enduring preference for the IAD option. 37The two options ultimately considered by the court were the one adopted by the applicant after that reconsideration, and the one insisted upon by the Council, requiring an easement. 38In his submissions on Council's behalf at the costs hearing, Mr Jayne said (pars 47-48): The Final Approved Plans were significantly more detailed and refined than the plans that had been before the Council as part of the original development application in 2009. Although the Council still preferred the IAD solution, the work collaboratively undertaken by the Council provided for a better detention design solution reflected in the approved plans. To this end, we do not see how the applicant could claim that the Council was being unreasonable in the conduct of the proceedings. In the respondent's opinion, the final approved plans represented a qualitative improvement over the proposal that had been originally before the Council in 2009. 39After the hearing on 4 February 2011, the parties reached agreement on additional conditions to address outstanding matters, and, in his judgment on 18 February 2011, Commissioner Hussey described the options (at [9]-[14]), and discussed WSUD and compliance issues ([30]-[34]). He then indicated his preference for the applicant's modified proposal, and rejected the Council's "piecemeal" approach to drainage in the neighbourhood ([36]), but insisted upon (at [40]) something neither party had proposed, namely, a positive covenant, to ensure the maintenance of the on-site detention system, and to prevent or limit the nuisance flows the Council was seeking to avoid. 40In par [42] of his judgment, he expressed his satisfaction that "the development reasonably satisfies the relevant objectives and design controls to merit consent". 41Mr Bradbury said (Tp15, LL1-3): "a responsible consent authority ... having ... perfected the applicant's design would have agreed either to consent orders being made or grant a consent itself".

The Rules and Authorities 42Costs in class 1 proceedings are provided for in r 3.7 of the Land and Environment Court Rules 2007. Rules 3.7(2) and (3) provide: (2) The Court is not to make an order for the payment of costs unless the Court considers that the making of an order as to the whole or any part of the costs is fair and reasonable in the circumstances. (3) Circumstances in which the Court might consider the making of a costs order to be fair and reasonable include (without limitation) the following: (a) ... (b) ... (c) that a party has acted unreasonably in circumstances leading up to the commencement of the proceedings, (d) that a party has acted unreasonably in the conduct of the proceedings, (e) ... (f) that a party has commenced or continued a claim in the proceedings, or maintained a defence to the proceedings, where: (i) the claim or defence (as appropriate) did not have reasonable prospects of success, or (ii) to commence or continue the claim, or to maintain the defence, was otherwise unreasonable. 43The presumption is that there will be no order for costs, but costs remain within the discretion of the court, a discretion which must be exercised judicially. The party claiming an order for costs bears the onus of displacing the rule, and convincing the court that an order in its favour is "fair and reasonable", and "just and equitable", in all the circumstances of the case. 44Leading cases to which the parties referred, relevant to adjudicating questions of costs in class 1 on this basis, include Port Stephens Council v Sansom [2007] NSWCA 299; (2007) 156 LGERA 125, Morrison Design Partnership Pty Ltd v North Sydney Council [2007] NSWLEC 802; (2007) 159 LGERA 361, Caroona Coal Action Group Inc v Coal Mines Australia Pty Ltd (No 3) [2010] NSWLEC 59; (2010) 173 LGERA 280, Arden Anglican School v Hornsby Shire Council [2008] NSWLEC 103; (2008) 158 LGERA 224, Aldi Foods Pty Ltd v Holroyd City Council [2005] NSWLEC 338; (2005) 142 LGERA 141, Grant v Kiama Municipal Council ("Grant") [2006] NSWLEC 70, Telstra Corp Ltd v Hornsby Shire Council ("Telstra") [2006] NSWLEC 285; (2006) 148 LGERA 124, Vigor Master Pty Limited v Warringah Council ("Vigor Master") [2006] NSWLEC 140, and O'Keefe v Water Administration Ministerial Corporation (No 2) [2010] NSWLEC 89. 45However, those, and other cases I have either decided, or, in preparation of this judgment, again reviewed, all turn on their own facts and circumstances. Often judges see no point in quoting authorities, only the established general principles. See, for example, Preston J's decision in Jeffman Pty Ltd and Lawrence Dry Cleaners Pty Ltd v Environment Protection Authority of NSW, Sydney Water Corporation and Douglas and Hilary Hutchinson (No 2) [2011] NSWLEC 205, and Pain J's decision in Noun v Sutherland Shire Council (No 2) [2012] NSWLEC 39. 46Preston J found, in Telstra, that it was unreasonable for a party to maintain a position in the face of expert evidence (in that case from a court-appointed expert), which the court found "overwhelming". In Grant, his Honour found that to maintain an alternative position does not, of itself, constitute "unreasonable conduct", if it has (per Vigor Master) a "reasonable evidentiary foundation". In Pyramid Pacific Pty Limited v Ku-ring-gai Council [2006] NSWLEC 522 (at [84]), his Honour saw nothing wrong in parties drawing different conclusions from the same expert evidence, so long as there was "a legitimate debate" on the central issues in the case.

Consideration 47In the present case, Council clearly and repeatedly told the applicant its preferred position. The applicant produced a plan in support of its alternative preferred position, but also canvassed neighbours to explore the easement proposal. The Council adhered to its position, and refused the DA. 48The conflict on that stormwater issue was virtually the only issue for the court in the subsequent proceedings, and the court directed that the respective experts confer, creating the element of "legitimate debate". However, that did not result in either side's position prevailing as "overwhelmingly" to be preferred. 49Both positions remained tenable, and were argued before Commissioner Hussey, but the applicant's proposal by that time had been refined during the consultation phase. The court accepted the applicant's plan, but insisted, on its own initiative, upon a safeguard, to protect the interests which Council had set out to protect. 50On those facts I can find no authority which lends any support to a submission that this case is so "out of the ordinary" in class 1, that the respondent ought to be ordered to pay the applicant's costs. 51I specifically reject the applicant's submission (par 15) that the Council's position lacked "any rational basis", and I do so, despite Commissioner Hussey finding that its "no risk" position was too strict, in the face of the DCP's objective to "minimise" (not "eliminate") flood impacts ([5] above). 52To claim costs in all these circumstances is also not reasonable on the applicant's part. 53Accordingly, the court will both refuse the application, and order the applicant to pay the respondent's costs of the costs hearing.

Orders 54The formal orders of the court will be: 1.The applicant's Notice of Motion of 18 February 2011 is dismissed. 2.The applicant is ordered to pay the respondent's costs on the motion, on a party-party basis, as agreed or assessed. 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. Decision last updated: 03 May 2012