Fairfield City Council v Mangos and Ors.

6

• - THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

41123 OF 2003 FAIRFIELD CITY COUNCIL v ANNA MANGOS; ALEX MANGOS; INCY PTY LTD; AAM HOLDINGS (NSW) PTY LTD

JUDGMENT 1 HIS HONOUR A. INTRODUCTION 2 HIS HONOUR: By its Notice of Motion filed 20 September 2004, the Applicant (the Council) seeks an order that the Respondents pay the Applicant's costs of the proceedings "pursuant to the provisions of Part 11, Rule 5 of the Rules of Court". 3 The reference to the Rules of Court dealing with costs on a discontinuance of proceedings is obviously an error, since the proceedings were concluded after a contested hearing which raised but one issue, namely whether the use made of premises known as No 206 Cecil Road, Cecil Park "other than its residential usage" was or was not for the prohibited purpose of development as a "transport depot" within the meaning of the Fairfield Local Environmental Plan 1994 (the LEP). 4 In my judgment delivered on 11 June 2004 (see [2004] NSWLEC 298). I declared that the first, second and third Respondents were using or causing to be used the subject premises for the purpose of a "transport depot" within the meaning of the LEP and restrained those Respondents from so using the premises or causing them to be so used. (I granted no relief against the fourth Respondent, which owned the relevant vehicles but leased them to the third Respondent because I held that that mere ownership of the vehicles did not implicate the fourth Respondent in the commission of the unlawful use of the premises). 5 In accordance with the parties' agreement, I suspended the injunction for the period of three months to provide the opportunity for the transport depot to be relocated elsewhere from the subject premises. 6 The question of costs having been reserved, the Council seeks an order for costs against the Respondents. (Again, the claim made in the Notice of Motion is loosely and erroneously made against the fourth Respondent in respect of which no relief was granted). The Respondents oppose the Council's claim to a costs order upon two discrete grounds - that costs were unnecessarily incurred in the proceedings - firstly by virtue of initial and repeated procedural defaults by the Council at interlocutory stages in the proceedings and secondly by virtue of the Council's non-acceptance of the Respondents' offer of compromise. 7 The Council's response to these submissions is that the asserted bases for the Respondents' argument for resisting the usual costs order in class 4 proceedings that costs follow the event, have not been substantiated. 8 In particular, the Council submits that the Respondents' offer of compromise was reasonably rejected by the Council because the proffered outcome would not deliver a satisfactory remedy to the Council's civil enforcement action to remedy a breach of the Environmental Planning and Assessment Act 1979 (the EP&A Act) quite apart from the fact that the suggested outcome proposed that each party bear its own costs in circumstances where the Council had already incurred costs in the order of $16,000. 9 In respect of the Respondents' claim that there had been procedural defaults by the Council in the litigation (eg the delay in serving Points of Claim), the Council submits that these are matters that may be relevant to the question of assessing costs, but they do not constitute a sound basis for disentitling the Council, as the successful party in the litigation, of its prima facie entitlement to an order for costs pursuant to the Land and Environment Court Act 1979, s 69. 10 I shall separately consider each of the grounds relied upon by the Respondents in resisting the Council's costs claim against them. B. THE COUNCIL'S PROCEDURAL DEFAULTS IN THE LITIGATION 11 The proceedings were commenced on 12 September 2003 by the filing of a class 4 application which nominated only the first and second Respondents and claimed declaratory and mandatory relief in respect of the use of the subject premises (No 206 Cecil Road, Cecil Park) as a "transport depot" or alternatively as a "home business" (the former category of development being an absolutely prohibited purpose in terms of the LEP and the latter being a permissible purpose thereunder subject to the grant of development consent). The originating process was supported by a number of affidavits. 12 The first procedural default by the Council in the proceedings was the delay in filing Points of Claim. The Court's 1999 pre-hearing Practice Direction (par 17) required the filing of points of claim and affidavits in chief within 14 days of the service of the Respondent's appearance. 13 The Respondents' appearances were filed on 29 November 2003, but the original Points of Claim were not filed and served until 30 January 2004. 14 The Council's further defaults are caught up in the fact that on two subsequent occasions following the commencement of the proceedings it moved the Court to add further Respondents, in circumstances where the Council either knew or was capable of knowing of the involvement of the third and fourth Respondents in the alleged unlawful use of the subject premises, before the Council commenced the proceedings. 15 The separate occasions of obtaining orders for the joinder of these additional Respondents necessitated the filing of further amended class 4 applications and amended Points of Claim. Additionally, leave had to be obtained to correct an error appearing in the amended Points of Claim misdescribing the alternative category of unlawful development alleged to be carried out on the subject premises. (On this occasion, the Council agreed to pay the Respondents' costs of the Motion.) 16 I have said sufficient of the Council's procedural defaults to indicate that although they obviously involved the incurring of unnecessary costs they fall well short of disentitling misconduct on the part of the successful party in the litigation. Nonetheless, if the Council obtains a costs order in these proceedings, any assessment of the costs payable thereunder should exclude these unnecessarily incurred costs. The costs were unnecessarily incurred because they were obviously avoidable if the Council had properly formulated and constituted the originating process and thereafter prosecuted its claims more efficiently without the necessity for too many interlocutory steps in the litigation. 17 Additionally, it is to be noted in this respect that ultimately I held that the Council was not entitled to relief against the fourth Respondent. This conclusion does not mean that the fourth Respondent was improperly joined but it simply reflects the fact that apart from its ownership of the relevant vehicles that were housed on the subject premises (thereby constituting the unlawful use), the fourth Respondent had not been implicated in that unlawful use of the premises. C. THE EFFECT OF THE RESPONDENTS' OFFER OF COMPROMISE 18 By letter dated 27 February 2004 (ie at a point in time when all Respondents had been joined as parties to the proceedings) their agent, Mr Ross Creighton of Australian Town Planning Consultants Pty Ltd, advised the Council's Solicitors in the following terms: We refer to the above proceedings in which we act as agents for the respondents. We are instructed that Incy Pty Ltd is contemplating relocating the garaging of vehicles associated with the business of In-City Concreting away from 206 Cecil Road, Cecil Park. Incy is considering taking that step in the near future. It seems wasteful to use Court time and incur costs in these proceedings when Council's ultimate objective (as we apprehend it) may be practically achieved in any event. From Incy's perspective, the cost of defending the proceedings could be better put to the cost of relocating. The respondents are prepared to compromise the proceedings on the following terms:- Council discontinues the proceedings against all respondents.

1. Incy Pty Ltd is to relocate the garaging of vehicles and equipment associated with the business of In-City Concreting within a reasonable time frame (to be specified).
2. Each party pays their own costs. This offer is open for acceptance for a period of two weeks from the date of this letter. 19 By subsequent letter dated 1 March 2004, Mr Creighton advised the Council's Solicitors that the period of time required to relocate was one month. 20 By letter dated 10 March 2004, the Council's Solicitors responded to the said letters of the Respondents' agent in the following terms: We refer to your letter dated 1st March, 2004 and 27th February 2004. We confirm that the Orders sought in the Further Amended Class 4 Applications in paragraphs 9 to 16 relate to business premises and not home business . We confirm that an application to amend this typographical error will be made in the Court during the next appearance. We further note your letter dated 27th February, 2004 and wish to indicate that the Council will not discontinue proceedings against all Respodnents. If your clients are mindful of relocating the business then we suggest that Consent Orders be entered in the terms as per the enclosed document for the purpose of efficient disposal of the present proceedings. We further confirm that costs will be sought under Part 15 Order 7 (sic) and note our costs at present at $16,961.14, including Council's (sic) fees. We await your urgent instructions in the matter. 21 The terms of the required consent orders were as follows: 1. That the First Respondent, the Second Respondent, the Third Respondent and the Fourth Respondent, and each of them and their servants, agents and assignees be restrained form using the premises Lot 31, Deposited Plan 874 589 known as No. 206 Cecil Road, Cecil Park for the purposes of a transport depot within the meaning of the Fairfield Local Environmental Plan 1994. 2. That the First Respondent, the Second Respondent, the Third Respondent and the Fourth Respondent, and each of them and their servants, agents and assignees be restrained from using the premises Lot 31, Deposited Plan 874 589 known as No. 206 Cecil Road, Cecil Park for the purposes of a business premises within the meaning of the Fairfield Local Environmental Plan 1994. 3. Orders 1 and 2 be suspended until 30th April, 2004. 4. The Respondents pay the applicant's costs as agreed and assessed. 22 It is clear from the foregoing exchange of correspondence that neither party accepted the other party's offer to compromise or to settle the case. In the result, the case proceeded to a defended hearing where the only issue in dispute that required adjudication was whether the use made of the subject premises (which are owned by the first Respondent and contains the dwelling in which the first and second Respondents permanently reside) by virtue of the garaging of vehicles and machinery owned by the fourth Respondent which are leased to the third Respondent and used by the third Respondent in its business of concrete laying and concrete formwork, was or was not for the prohibited purpose of a "transport depot" within the meaning of the LEP. As earlier noted, that question was determined in favour of the Council's contention. 23 For present purposes, attention need only be focussed on the terms of the Respondents' offer of compromise that was communicated to the Council's Solicitors in the two letters of Mr Creighton that I have earlier recited. The combined effect of the two letters was an offer that the relevant use of the subject premises be relocated within one month and to that end that the proceedings be discontinued with each party bearing its own costs. 24 The first point to be noted is that the offer was not expressed to be an offer made pursuant to the provisions of the Supreme Court Rules, Part 22 (offer of compromise). In these circumstances, I do not think that the offer can be regarded as an offer of compromise made in accordance with Part 22 of the SCR which is adopted by the Rules of this Court (Part 6 Rule 1(2)) with the consequence that the particular costs rules provided by Part 52A, Rule 22 do not apply (at least directly). 25 Nonetheless, the Respondents' offer of compromise may properly be regarded as a "Calderbank" offer - see Calderbank v Calderbank (1975) 3AllER 333 and the subsequent English cases cited and discussed in the judgment of Rogers J in Messiter v Hutchinson (1987) 10 NSWLR 525. 26 So to understand the Respondents' offer of compromise means to adopt the approach taken by Rogers J at 528 in Messiter, (as I respectfully do) that it should be "taken into account by the Court in determining whether a special order displacing that which generally obtains of costs following the event, should be made". 27 Whereas the Respondents' offer had suggested a practical solution to the Council's claim (namely that the offending use would be removed from the subject premises within a short period of time), it was a solution that understandably, from the Council's perspective, involved too many concessions being made by the Council. In particular, it involved each party bearing its own costs in circumstances where (reasonably or otherwise) the Council was claiming to have already incurred costs in the order of $16,000. But beyond the question of foregoing any claim to its costs, the Council was required to discontinue proceedings which it had commenced some six months earlier and only after some years of inconclusive attempts by the Council to enforce compliance by the Respondents with the requirements of the LEP. When the Council's Solicitors counter-offered (in a fashion that more rigorously ensured the desired outcome that the offending use cease) the Respondents' Agent's response indicated that the hitherto unresolved question of whether the Respondents' use of the subject premises relevantly constituted a development for the prohibited purposes of a "transport depot" remained an unresolved question, with the real risk, even if the use were relocated away from the subject premises, that the same question could be revived at some time in the future if that use or some similar use of the subject premises were commenced (a not improbable scenario given the history of the case). 28 Moreover, having regard to the outcome in the substantive proceedings, I do not think it can be fairly said that the Respondents' offer of compromise conferred upon the Council "everything to which it ultimately established its entitlement to substantive relief in the proceedings" (including, of course, a prima facie entitlement to a costs order as the successful party). D. CONCLUSIONS AND ORDERS 29 For all the foregoing reasons, the Respondents have not substantiated their grounds for denying the Council its prima facie entitlement, as the entirely successful party in the class 4 litigation, to an order for costs. However, they have satisfied me that the costs order should exclude costs that were unnecessarily incurred at interlocutory stages of the proceedings which in their nature were straightforward civil enforcement proceedings in respect of a factually uncontested land use (the only contest being its proper characterisation in terms of the LEP). Rather than leave this matter to the costs assessor, it is preferable that the costs order expressly exclude from its ambit any costs incurred in the joinder of the third and fourth Respondents and in the consequential amendments that were made to the originating process and points of claim. 30 Accordingly, I order that the first, second and third Respondents pay the Applicant's costs in the proceedings, but excluding all costs that were incurred at interlocutory stages involving the joinder of the third and fourth Respondents and any consequential amendments to the originating process and the points of claim - in the sum agreed or failing agreement, as assessed.

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