Filetron Pty Ltd v Innovate Partners Pty Ltd atf Banton Family Trust 2 and Goulburn Mulwaree Council

JUDGMENT

1. THE COURT: In this matter, orders were made on 29 February 2024, allowing an appeal by Filetron from orders made in the Land and Environment Court in proceedings arising out of a dispute as to the determination of a development application in respect of land owned by the first respondent (Innovate) (see the first instance judgment: Filetron Pty Ltd v Innovate Partners Pty Ltd atf Banton Family Trust 2 and Goulburn Mulwaree Council [2023] NSWLEC 45; and the judgment of this Court: Filetron Pty Ltd v Innovate Partners Pty Ltd atf Banton Family Trust 2 and Goulburn Mulwaree Council [2024] NSWCA 41).
2. In lieu of the orders that had been made in the Land and Environment Court on 11 September 2023, this Court declared that the decision purportedly made by the second respondent (the Council) on 15 September 2021 in relation to the disputed development application was invalid and ordered that the decision be quashed. The Court remitted the determination of the said development application to the Council by itself and not by its delegate or sub-delegate.
3. The question of costs of the proceedings both in the Land and Environment Court and in this Court was reserved and directions were made for the filing and exchange of submissions (and submissions in reply) as to costs, with a view that costs be determined on the papers. Submissions have been filed by the respective parties. These are the Court's reasons for the costs orders which will now be made to dispose of the proceedings in this Court. In these reasons the same terminology is adopted as set out in the principal judgment of this Court and familiarity with the background facts to the dispute is here assumed.
4. As to costs, the primary judge had ordered that Filetron be paid 80% of its costs incurred in the primary proceeding, with 75% of that amount to be borne by Innovate and 25% by the Council (see Filetron Pty Ltd v Innovate Partners Pty Ltd atf Banton Family Trust 2 and Goulburn Mulwaree Council (No 3) [2023] NSWLEC 104 (the costs judgment) at [32]). The deduction in the overall costs awarded to Filetron was referable to the relatively short amount of time occupied by the delegation claim that his Honour had determined against Filetron (see the costs judgment at [18]). Filetron sought leave to appeal that costs order (but only insofar as a different order would be appropriate if it succeeded on the appeal). There was no challenge by either of the respondents to the costs orders at first instance.
5. In summary, the position of the parties as to costs is as follows.
6. Filetron, the successful appellant, seeks orders that the respondents pay its costs of the appeal as well as its costs of the proceedings in the Land and Environment Court (including in relation to the Council's notice of motion filed on 24 May 2023) but without disturbing two particular costs orders made during the course of the proceedings before the primary judge (Order 2 made on 5 August 2022 and Order 2 made on 8 November 2022). Further, Filetron seeks an order that the said costs liability be borne as to 75% by Innovate and as to 25% by the Council (i.e., in the same proportions as the primary judge had considered appropriate).
7. Innovate's position is that both it and the Council should be jointly and severally liable, on the ordinary basis, for: (i) 50% of Filetron's costs of the proceedings in the Land and Environment Court up to 8 November 2022; (ii) Filetron's costs of those proceedings on and from 9 November 2022 (except in relation to the Council's notice of motion filed 24 May 2023, in respect of which Innovate submits there should be no order as to costs, with the intent that the parties bear their own costs of that motion); and (iii) Filetron's costs of the appeal.
8. The Council's position is consistent with that of Filetron. The Council submits that Innovate should pay 75% and the Council should pay 25% of Filetron's costs both of the appeal and of the proceedings in the Land and Environment Court with the qualification that the costs orders made on 5 August 2022 and 8 November 2022 (which operate as between Filetron and Innovate) should not be disturbed. The Council did not wish to be heard in relation to the costs orders made on 5 August 2022 and 8 November 2022 other than to say that it considers that there is no reason for them to be disturbed.
9. All parties accept (implicitly if not explicitly) that the costs orders made by the primary judge on 16 October 2023 should be set aside.

Determination

1. The principles applicable when considering the discretion as to costs are well-known and were not in dispute between the parties. It is unnecessary here to restate those principles.
2. There is no dispute that, in accordance with the general rule as to costs following the event, there should be an order in favour of Filetron in respect of its costs. As is apparent from the summary above of the respective parties' position as to costs, there are only two main areas of contention.
3. First, in relation to the costs of the proceedings at first instance, as to whether Filetron should only be awarded 50% of its costs up to 8 November 2022 (which is contended for by Innovate on the basis that costs were incurred up to that date on claims or contentions that were abandoned in the amended summons for which leave was given on that date) and as to whether those costs should include the costs of the Council's 24 May 2023 notice of motion (brought under s 25C of the Land and Environment Court Act 1979 (NSW) (LEC Act)).
4. Second, as to whether (as between Innovate and the Council), the respondents should be jointly and severally liable for the costs awarded to Filetron in respect of one or both of the sets of proceedings (as Innovate contends) or there should be an apportionment of costs liability as between the respondents in line with the percentage apportionment that the primary judge considered appropriate.

Costs before and after amendment of the summons

1. Turning first to whether there should be a distinction drawn as to the costs of the first instance proceedings as between the costs incurred up to and including 8 November 2022 and costs incurred thereafter, as adverted to above the significance of the November 2022 date is that this was when Pepper J granted Filetron leave to file an amended summons. Innovate points out that by the amended summons Filetron abandoned four of the six grounds on which it had initially sought to impugn the development consent and that it also significantly narrowed the contention as to the Council's failure to have regard to mandatory considerations. Innovate says that the amendment to the summons occurred after the parties had served their evidence; and that much of that evidence had been directed to either the abandoned grounds or the abandoned particulars of the Council's failure to take one or more mandatory considerations into account in granting the Consent. Innovate notes in this regard that in the first instance hearing only limited portions of the affidavits served by the parties were read into evidence.
2. There was an order made at the time leave was granted for the filing of the amended summons that Filetron pay Innovate's cost thrown away by reason of the amendment. Innovate submits that it would be incongruous if, having been made liable to pay Innovate's costs thrown away by the amendment, Filetron were then to be entitled to all of its costs for the period before the filing of the amended summons (including in respect of what Innovate submits might be seen as costs caused to be thrown away by Filetron's own conduct in not having narrowed its pleaded contentions from the outset). Innovate submits that had Filetron initially adopted the approach ultimately taken in its amended summons the costs of the first instance proceeding below would have been significant lower.
3. In response to the contention that costs should be limited to 50% for the period up to the filing of the amended summons, Filetron says that this argument was rejected by the primary judge and it submits that, as there was no application by Innovate for leave to appeal from the costs judgment, Innovate should not now be permitted to challenge his Honour's findings on that issue. Further, Filetron says that Innovate already has the benefit of an order for costs thrown away by reason of the amendments made to the summons and that it (Filetron) should not be further penalised for withdrawing claims which had previously been made. Filetron says that the withdrawal of those claims does not change the "event" for the purposes of r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), nor does it provide a basis for any differential costs order.
4. In our opinion, the suggestion by Innovate that Filetron should only have an award of 50% of its costs of the Land and Environment Court proceedings up to 8 November 2022 (to reflect the fact that Filetron had abandoned a number of its claims or contentions) ignores the effect of the order made by Pepper J on 8 November 2022 that Filetron pay the costs thrown away by that amendment. Those costs would include the costs of preparing evidence to respond to allegations no longer pressed when the amended summons was filed. No further reduction in costs is warranted. Indeed, it would be in effect double counting to make a further reduction when there is in place a costs thrown away order (which Filetron accepts should not be disturbed).

Costs of the s 25C motion

1. As to the submission by Innovate that the costs order in Filetron's favour of the proceedings at first instance should not extend to the costs of the Council's 24 May 2023 notice of motion pursuant to s 25C of the LEC Act, with the intent that each party should bear its own costs of that motion, all parties accept that the costs of the Council's s 25C application would not have arisen had the primary judge found in its favour on the delegation point.
2. The qualification that Innovate raises on this issue relates to the Council's notice of motion filed 24 May 2023 seeking declarations under s 25C(2) of the LEC Act that there had been substantial compliance with the terms on which, pursuant to orders made by the primary judge under s 25B of that statute, the Consent would be validated.
3. Innovate accepts that (as the other parties have emphasised) but for the errors now found on the part of the primary judge, there would have been no need for the Council to make that application and therefore no need for Filetron to incur costs in resisting it. However, Innovate says that, in resisting the Council's motion, Filetron relied on grounds that, in addition to having been rejected by the primary judge: (i) were not sought to be agitated on appeal (such as the suggestion that it was impermissible for the Council to seek, by a delegate, to comply with the terms imposed under s 25B); (ii) though raised in the amended notice of appeal were expressly abandoned in Filetron's written submissions (referring to Ground 2); or (iii) ultimately depended upon the assertion (which Innovate characterises as unreasonably pedantic) of a distinction as to the proposed plan of management as between one dealing with guest numbers and guest management (that is required to be consistent with a condition that, staff and security guards aside, the cellar door host no more than four groups of 14 persons per day) and one required to be observed in order to ensure that, staff and security guards aside, the cellar door host no more than four groups of 14 persons per day.
4. Innovate argues that, although the effect of the determination by this Court of Ground 1 of the grounds of appeal was that there was no occasion for the Council to have applied for orders under s 25C of the LEC Act, the costs incurred by Filetron in connection with that application should not be seen as being in the same category as its other costs in this litigation. Innovate says Filetron's costs of the Council's notice of motion are better seen as having been incurred as the result of a decision by Filetron to raise points that were manifestly devoid of merit. In that regard, Innovate argues that there is an analogy between that notice of motion and the kind of separable issue that justifies an apportionment of costs in accordance with the principles discussed in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] (per Beazley, Ipp and Basten JJA); and hence that it is appropriate that on the separable, and separate, issues that were litigated in connection with the Council's notice of motion, the parties bear their own costs.
5. Filetron, in response to this contention, argues that this is not akin to the situation considered in Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6, see at 624-626 (per McHugh J) as to the incidence of costs where the matter has not been determined on the merits; rather, the s 25C application did not need to be determined because of the applicant's success on other issues. Filetron argues that in such a case the costs of the undetermined issues usually follow the event (citing Bailey v Director-General, Department of Natural Resources NSW [2015] NSWCA 318 at [118] (per Basten JA); Friends of King Edward Park Inc v Newcastle City Council (No 3) [2016] NSWLEC 74 at [168]-[169] (per Sheahan J); and Girchow Enterprises Pty Ltd v Ultimate Franchising Group Pty Ltd (Final Orders) [2023] FCA 500 at [8] (per Thawley J)).
6. As to this issue, we consider that the costs of the Council's 24 May 2023 motion should follow the event. Those costs would not have been incurred but for the conclusion of the primary judge (now overturned on appeal) on the delegation argument. The Council's s 25C application is thus not sufficiently separate from the determination of the delegation argument to warrant different treatment. Nor does the fact that some of the points initially raised by Innovate were ultimately abandoned in relation to the s 25C application (or might, had they needed to be determined, have failed) warrant separate treatment by way of costs.

Should the costs liability of the respondents be joint and several or limited to the proportions indicated by the primary judge?

1. As noted, both Filetron and the Council contend for the proportionate cost liability to be borne by each of the respondents to be calculated by reference to the respective proportions determined by the primary judge in the costs judgment; whereas Innovate submits that the liability should be joint and several liability as between itself and the Council. Filetron argues that the primary judge was best placed to make the assessment as to how the costs liability as between the respondents was to be allocated. Similarly, the Council notes that his Honour had the benefit of close familiarity with the parties' conduct of the proceedings at first instance.
2. On this issue, Innovate places reliance on the observation by Biscoe J in Cutcliffe v Lithgow City Council [2006] NSWLEC 463 at 50 that "where the beneficiary [of the decision] does defend the proceedings, albeit unsuccessfully, the applicant's costs will ordinarily be awarded against both the beneficiary and the consent authority, whether or not the latter enters a submitting appearance".
3. Innovate accepts that "the mere fact that the cause of the invalidity [of a consent] is an error of the consent authority is not, of itself, a sufficient reason to order costs against the consent authority" (citing Platford v van Veenendaal and Shoalhaven City Council (No 2) [2018] NSWLEC 86 at [22] (per Preston CJ); and noting Rossi v Living Choice Australia Ltd [2015] NSWCA 244 (Rossi) at [73] (per Basten JA)).
4. However, Innovate contends that the submitting appearance filed by the Council was not a proper and valid one under r 6.11 of the UCPR (since the Council submitted only in respect of one ground of review - the asserted failure to take account of a mandatory consideration). Innovate argues that the Council should be seen as a party that, while taking an active role in the proceeding below, simply did not wish to be heard on a particular issue (noting that r 6.11 of the UCPR makes provisions for submitting appearances in respect of the making of "all" orders sought and the giving or entry of judgment in respect of "all" claims made).
5. The Council contends that it has acted consistently with the principle in The Queen v Australian Broadcasting Tribunal; Ex parte Hardiman (1980) 144 CLR 13 (Hardiman) at 35-36; [1980] HCA 30 in filing a submitting appearance in respect of the first ground of review and making no submissions as to the question whether an order should be made under s 25B of the LEC Act. The Council says that although it was required to be the moving party on its motion of 24 May 2023, it also made only limited submissions in support of an order pursuant to s 25C of the LEC Act. The Council notes that it took the same approach to the appeal grounds concerning s 25C.
6. The Council says that the submissions both at trial and on appeal in relation to the second ground of review (on the issue of the delegate's authority) were, consistently with Hardiman, limited to the proper construction and interpretation of its policies and delegations (the Council supporting the proposition that its delegate was properly authorised to grant consent to the development application).
7. Thus, the Council resists an order for joint and several costs liability. As to the appropriate apportionment of costs, the Council submits that the 75%/25% ratio, as ordered at first instance, is appropriate for the following reasons.
8. First, it says that both in the proceedings below and on appeal, Innovate appeared "as an active contradictor, and the primary contradictor" in relation to all grounds (a description with which Innovate cavils, as explained below). Second, the Council emphasises that the mere fact that it has been determined that development consent was not validly granted is not an independent basis for an award, or a greater award, of costs against the Council (as Innovate accepts). Third, the Council says that it could not, by taking some different course, have avoided the way the proceedings unfolded (pointing out that as Innovate did not surrender its development consent, it was not open to the Council unilaterally to revoke that consent and to re-determine the DA, referring to what was said by Pain J in Charara v Ku-ring-gai Council [2019] NSWLEC 183 at [27]); rather, it was following the primary judge's order pursuant to s 25B of the LEC Act.
9. Innovate's position is that the approach of the primary judge in assessing apportionate costs liability proceeded on the incorrect premise that the Council had filed a proper and valid submitting appearance (referring to what his Honour said in the costs judgment at [21]). As noted above, Innovate argues that there was not a proper and valid submitting appearance and says that in those circumstances the observations in Rossi should not govern the costs outcome in this case.
10. Further, Innovate argues that his Honour's approach was informed by "the relatively short amount of time that the delegation claim required to be pleaded and considered" (referring to the costs judgment at [18]), an observation made by his Honour in the context of explaining the percentage deduction in the overall costs awarded to Filetron having regard to the failure of the delegation claim at first instance. Innovate argues that, in apportioning costs as between Innovate and the Council, his Honour had regard to the fact that the Council confined its submissions to ground 2 in the amended summons (as to the scope of the power delegated to Mr Hedges) and that this ground occupied less time during the hearing.
11. Innovate says that the bulk of the hearing of the appeal was devoted to the delegation of power to Mr Hedges, contrasting this with the matters raised in relation to the s 25C application. Innovate argues that this would justify a different apportionment of the costs of the appeal but submits that, rather than apportioning costs in a manner that reflected the time taken by the parties and the Court in addressing the delegation point at first instance and then on appeal, there should simply be an order that Innovate and the Council be jointly and severally liable for Filetron's costs both at first instance and on appeal.
12. In the alternative, Innovate submits that even if the costs of the proceedings at first instance are to be apportioned in accordance with the approach of the primary judge, there should be an order for joint and several liability in respect of the costs of the appeal. Innovate says that the Council participated in the contest concerning the limits of Mr Hedges' delegated power (in circumstances where Innovate was already playing the role of an active contradictor) and points out that the balance of the issues raised in the appeal concerned a notice of motion filed by the Council.
13. Innovate cavils with the suggestion by the Council that Innovate was an "active, and the primary, contradictor" on all grounds on the appeal; arguing that, if this is based on the fact that it was named as first respondent, that does not mean that it should bear a greater proportion of the costs and that, if this is a description of the vigour with which the matter was conducted, the Council was no less active a contradictor than Innovate on the delegation of power argument. Innovate argues that, irrespective of whether the Council's role conformed to the principle in Hardiman, there is no scope for a conclusion that the Council served little more than the function of an amicus curiae in this Court.
14. Hence, Innovate maintains its submission that there is no basis for apportioning costs as the primary judge did, across both the proceedings at first instance and the appeal.
15. Filetron, in reply submissions, makes clear that it is content to leave the appropriate proportions of cost liability as between the respondents as a matter for the Court.
16. On this issue, we consider that it is appropriate to apportion the costs liability as between the respondents in the proportions identified by the primary judge, both for the first instance proceedings and the proceedings in this Court. We accept that the Council acted appropriately and conscious of the Hardiman principles in the conduct of the appeal (and the primary judge appears to have been of a similar view as to its role in the first instance proceedings). The fact that the Council limited its submissions to the question of delegation was appropriate and there is nothing to suggest that the Council unduly prolonged the length of the hearing in either Court.
17. As to the complaint that there was not a proper submitting appearance, it is by no means uncommon for parties to file submitting appearances except as to costs. If that is an acceptable practice, then it is difficult to see why there is not a proper and valid submitting appearance in relation to one of a number of grounds of appeal or review as the case may be. In any event, it is unnecessary to explore this issue. Whether or not the submitting appearance should have been accepted for filing in that form it does not alter our conclusion on this issue. It is clear that Innovate was the party that had the primary interest in resisting the application by Filetron (irrespective of its joinder as the first respondent). It is appropriate that Innovate bear the bulk of the responsibility for costs, the Council being a necessary party but having an active role only in relation to the issue of delegation of authority to its delegate.

Conclusion

1. Accordingly, the orders of the Court are as follows: 1. Set aside the costs orders made by Robson J in the Land and Environment Court on 16 October 2023. 2. In lieu thereof, subject to order 3, order the first respondent to pay 75%, and the second respondent to pay 25%, of the appellant's costs of the appeal and of the proceedings in the Land and Environment Court. 3. Note that the following costs orders made in the Land and Environment Court are not disturbed: 1. Order 2 made on 5 August 2022; and 2. Order 2 made on 8 November 2022.

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