Council of the City of Sydney v Palladium Management Pty Limited & Ors

APPLICANT S Kondilios (Solicitor) LEGAL REPRESENTATIVES: Maddocks Lawyers RESPONDENT P Rigg (Solicitor) Deacons

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

COUNCIL OF THE CITY OF SYDNEY V PALLADIUM MANAGEMENT PTY LIMITED & ORS [No. 2]

1 HIS HONOUR: These proceedings were brought by the City of Sydney Council against a number of persons in relation to the use of parts of a residential flat building in Pyrmont for a real estate agency and building management office. The council originally brought proceedings against four respondents. 2 In an earlier judgment I dealt with the issue of costs consequent on discontinuance by the council against the second, third and fourth respondents: see City of Sydney Council v Palladium Management Pty Limited [2006] NSWLEC 787. That judgment sets out the circumstances that led to the council taking action and ultimately to discontinuing the proceedings against the second to fourth respondents. 3 The first respondent, as is disclosed in that earlier judgment, is the current owner of the real estate agency business that has an office in the residential flat building. 4 The first respondent determined, after the proceedings had been commenced against it by the council, to lodge a development application with the council for the use of the real estate agency in the building. Although the council officers recommended against the grant of consent, the council as the collegiate body resolved to grant consent. The council's resolution was on 11 December 2006 and a notice of determination would have been issued some time shortly thereafter. After the council resolved to grant consent, it instructed its solicitors to discontinue these proceedings against the first respondent. The council filed a notice of discontinuance save as to costs on 15 December 2006. 5 On 4 January 2007, the council filed a notice of motion seeking its costs of the proceedings against the first respondent. The first respondent replied with its own notice of motion seeking costs filed on 23 January 2007. 6 The two notices of motion for costs are before me for determination today. The council accepts that the usual principle governing questions of costs where there has been a discontinuance are those which were summarised by me in Kiama Council v Grant (2006) 143 LGERA 441 at para 80. Of relevance to the facts of this case is subpara (b) where I said the following: "Where some supervening event or settlement so removes or modifies the subject of the dispute that no issue remains except that of costs, the proper exercise of the costs discretion will ordinarily be to make no order as to costs unless:

(i) one of the parties has acted so unreasonably that the other party should obtain the costs of the action, or

(ii) even if both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried so that that party should obtain the costs of the action." 7 The council submits that the facts of this case fall within the exception in subpara (ii). The council submits that it acted reasonably in commencing the proceedings against the first respondent. However, it would almost certainly have succeeded if the matter had been fully tried, so accordingly the council submits it should obtain the costs of the action. 8 The applicant does not contest that the relevant principle is that which I have stated above. However, the applicant says that on the facts of this case, the exception in subpara (ii) is not enlivened. The applicant submits that there was, at the least, an arguable case that the applicant already had development consent authorising the use of the relevant part of the building as a type of real estate agency business. The applicant explains this argument as follows. 9 The applicant's predecessor lodged a development application for development consent which described the development for which development consent was sought as the "erection of a 10 storey building and an 8 storey building for the purpose of residential units and ground floor retail," and went on to answer the question "where development involves the erection of a building, the proposed use of that building when erected," as follows "residential and retail/commercial." The plans that accompanied the development application showed, on the ground floor, two retail spaces, namely unit 149 and unit 150, and a separate office area which had four components: a reception, a separate room labelled office, a separate room labelled "store", and a separate room labelled "WC". The balance of the ground floor and all other floors showed the residential units. 10 The council granted development consent to the development application. It identified in the consent the development application number that had been assigned to the development application and endorsed upon it. It described the development in the brief description of application as the "demolition of existing warehouse and development of a 7 to 10 storey residential building comprising 262 units (6 x bedsits, 37 x 1 bed, 215 x 2 bed, 4 x 3 bed) and 408 basement care spaces." It will be noted that there is no reference in this brief description of the application to either the retail uses or the commercial or office use that had been stated in the development application and on the plans. However, the development consent went on in condition 1(a) to state that "development must be generally in accordance with Development Application Z96-00095 dated 21 February 1996 and the Statement of Environmental Effects prepared by Scott Carver, dated October 1996, and drawings numbered...". One of those drawings was the ground floor drawing which showed the retail spaces and the space designated as office that I have earlier described. Later in the consent, condition 36 referred to the number of approved car parking spaces, namely 408 car spaces. The condition said that of those spaces "2 business/commercial spaces" were approved. 11 The applicant then referred to Sydney Regional Environmental Plan No 26 - City West, which was the applicable environmental planning instrument pursuant to which the development consent was granted. The proposed development was within the residential zone. In that zone, one of the uses that was permissible was, expressed in its compendious form, "small-scale restaurants, retail outlets, commercial undertakings and professional services to serve the neighbourhood." Of relevance to the commercial/office component would be that part of the description which refers to "commercial undertakings...to serve the neighbourhood." The applicant submits that on a proper construction of the consent, read in conjunction with this nominate permissible purpose, the council granted consent to use that part of the building that had the description office stated on the plan as being for the purpose of "commercial undertakings...to serve the neighbourhood." 12 The applicant then says that there was a reasonable argument that the business that the applicant was conducting fell within that approved use. The applicant referred to two letters that its solicitor had written to the council's solicitors, the first dated 26 September 2006 and the second dated 3 November 2006. In those letters the applicant's solicitors put forward the case that, although there was a real estate business being conducted in the designated office space, it was a limited form of real estate agent; the limitation being that the sales and lettings were restricted to residential units within the Palladium residential flat building. Accordingly, the applicant's solicitors contended the use fell within the restricted but approved use of "commercial undertakings...to serve the neighbourhood." 13 As has been set out above, the general rule where there is no hearing on the merits of the application but rather the proceedings are brought to an end by some supervening event or settlement is that ordinarily there will be no order as to costs. The reason is, as McHugh J said in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624 - 625, that where there has been no hearing on the merits, the court is necessarily deprived of the fact that usually determines whether or how it will make a costs order, namely the result of the proceedings and the reasons for that result. One of the exceptions is where, even without that contest at trial, it is clear that one party would have almost certainly succeeded. In those circumstances it would be unfair not to allow that party to have an award of costs in its favour. 14 In this case, I am not satisfied on the evidence that is before me, recognising that the matter has not gone to trial and I only have part of the evidence, that either the council or the first respondent would almost certainly have succeeded if the matter had been fully tried. 15 As I said in the previous judgment, it was reasonable for the council to commence these proceedings. I remain of that view. The question of whether the real estate agency being conducted on the premises fell within the approved use was open. Even assuming that the applicant's construction of the development consent is correct, a contention which the council did not necessarily accept and it is not necessary for me to finally determine, the facts of the actual use by the first respondent would have to be established at trial to determine whether they fell within the approved use or not. Some of the facts to which I referred in the earlier judgment might show a wider use, but equally other facts show a limited use. From the first respondent's perspective, it was reasonable for it to contest the council's application. There was a reasonable argument, as the first respondent has submitted and I have outlined above, that the development consent did approve a use for the purpose of commercial undertakings to serve the neighbourhood. There was a reasonable argument that the applicant might have been conducting its business in such a way that it fell within that purpose. 16 It is true that the first respondent determined to lodge a development application to put the matter beyond doubt. However, this cannot be seen to be an admission of guilt. The first respondent's solicitor's letters make clear that the lodging of the development application was being done without prejudice. But in any event, there may be a number of reasons which justify lodging a development application to avoid a debate about the proper construction of the consent and whether conduct has been conducted in breach of that consent. Certainly, it is not possible to say that the only reasonable inference that can be drawn from the circumstance of the first respondent lodging the application is that it has conceded the correctness of the council's case. 17 Just as I have said that it was not clear that the council would have certainly succeeded on the evidence in establishing that the use was outside the scope of the use approved by the development consent, equally it is not clear that the first respondent would certainly have succeeded in establishing that its use fell within the scope of the use approved by the development consent. 18 Accordingly, the exception is not established on the facts of this case. This means that the general rule is appropriate and that is that the proper exercise of the costs discretion will ordinarily be to make no order as to costs.

Orders 19 For these reasons I make the following orders:

1. Each party pay their own costs of the proceedings.

2. Each party pay their own costs of their respective notices of motion.

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