Garners Pty Ltd v Gloucester Shire Council

THE COSTS DISCRETION 10The Court's general costs discretion is found in s 98 of the Civil Procedure Act 2005. Subsection (1) provides: Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. 11Rule 42.19 of the Uniform Civil Procedure Rules 2005 governs the costs discretion in the case of discontinued proceedings. It relevantly provides: 42.19 Proceedings discontinued (1) This rule applies to proceedings that are discontinued by the plaintiff, as referred to in rule 12.1. (2) Unless the court orders otherwise or the notice referred to in rule 12.1 (2) otherwise provides, the plaintiff must pay such of the defendant's costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued. 12There is a similar provision in the case of dismissal of proceedings in r 42.20. 13It has been said that r 42.19 does not create a presumption that the discontinuing party ought to pay the costs of the proceedings: Fordyce v Fordham [2006] NSWCA 274, 67 NSWLR 497 at [84]. There appears to be some tension between the non-presumptive position expressed in Fordyce and subsequent authority. In Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [54] Hodgson JA (Tobias and Basten JJA agreeing) held: However, like UCPR 42.20, UCPR 42.19 states what the order for costs is to be unless there is a discretionary decision to order otherwise: Australiawide Airlines Limited v Aspirion Pty Limited [2006] NSWCA 365 at [53]. This means there is an onus on the discontinuing party to make an application in respect of costs if it does not propose to pay the costs of the other parties: Foukkare at [65]. In my opinion, it also means that there must be "some sound positive ground or good reason for departing from the ordinary course": Australiawide Airlines at [54]. 14I propose to apply that statement of principle in Bitannia. This is consistent with the approach taken in Eather v Mosman Municipal Council [2012] NSWLEC 92 at [35] by Pepper J. 15In matters such as this, recourse is frequently had to the decision of McHugh J sitting alone in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6, 186 CLR 622. In that case the prosecutrix brought proceedings in the High Court challenging the decision of the Minister, affirmed by the Refugee Review Tribunal, to refuse her a protection visa. One week later the Minister granted a protection visa to the prosecutrix who, having obtained the relief she sought, did not proceed with her action. McHugh J decided that there should be no costs order. His Honour held at 624-625 (omitting citations): ...it is first necessary to state the principles which govern an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means. In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation... Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried...But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. 16A distinction has been drawn between, on the one hand, an effective surrender by one party to the other which ordinarily would attract the usual costs order, and, on the other hand, a settlement, supervening event or extra-curial activity that so removes or modifies the subject matter of the dispute that no issue remains except that of costs where ordinarily no costs order will be made. In Kiama Council v Grant [2006] NSWLEC 96, 143 LGERA 441 at [80] Preston CJ, after reviewing the authorities, held: 80 The principles that emerge from these cases are that in a civil enforcement or judicial review case where there has been no hearing on the merits: (a) where one party effectively surrenders to the other party by: (i) discontinuing without the consent of the other party; or (ii) giving undertakings to the Court or submitting to the Court making orders against the party substantially in the terms or to the effect claimed by the other party; the proper exercise of the costs discretion will ordinarily be to make the usual order as to costs, unless there is disentitling conduct on the part of the other party; and (b) 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 the party should obtain the costs of the action. 17The applicant submits that the surrender of the first development consent and modification of the second constituted an effective surrender by the respondents to the applicant and therefore the proper exercise of the costs discretion will be to order the respondents to pay the applicant's costs. 18I do not accept the applicant's submission. In my opinion, as the respondents submit, the surrender of the first development consent and modification of the second constituted a supervening event so modifying the subject of the dispute that no issue remains except that of costs, and therefore the proper exercise of the costs discretion will be to make no order as to costs. 19The applicant's submission does not take account of two factual matters. First, the fourth ground of challenge (concerning flooding) to the second development consent was unrelated to the first development consent. Therefore it remained as an issue notwithstanding surrender of the first development consent and modification of the second. On any view, the applicant has abandoned that ground. Secondly, the surrender of the first development consent was the act of the second respondent and not the Council. 20More importantly, focusing on the surrender of the first development consent and modification of the second, there are three decisions of this Court on analogous facts in which, applying Lai Qin, no order for costs was made: Hayden Theatres Pty Ltd v Penrith City Council (1999) 105 LGERA 230, Murray v Valaire [No 2] [2001] NSWLEC 241 and Sydney City Council v Doltone House Wharf [2006] NSWLEC 81. These three decisions were discussed in Kiama at [72] - [77] where Preston CJ viewed them, like Lai Qin, as cases where some supervening event or settlement so removed or modified the subject of the dispute that no issue remained except as to costs: 72. The second type of case is where some supervening event or settlement so removes or modifies the subject of the dispute that no issue remains except that of costs. Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin was, of course, an example of such a case. 73. Another example of this type of case is Hayden Theatres Pty Ltd v Penrith City Council (1998) 105 LGERA 230. The applicant no longer wished to proceed with its judicial review action because the subject matter of the legal challenge, namely the original grant of development consent had been surrendered by one of the respondents, the developer, in exchange for a further development consent. Hence, the subject of the dispute had completely disappeared. Bignold J applied the principles in Lai Qin: at 233-234. There was no unreasonable conduct in the litigation by either the applicant or the respondents: at 234. No order for costs was made: at 235. 74. In Murray v Valaire (No 2) [2001] NSWLEC 241, the applicant brought civil enforcement proceedings claiming an order that the respondent be restrained from carrying out building works contrary to a development consent and an order that the respondent remove works already carried out contrary to the development consent. The respondent contended that the works were being carried out lawfully in that they were in conformity with a construction certificate issued by the relevant council. Subsequently, a new construction certificate was issued by the council. The applicant surrendered the first construction certificate and relied on the second. 75. Lloyd J held that the effect of the surrender of the first construction certificate and the issuing of the new construction certificate satisfied the applicant's claim and there was no utility in the matter proceeding to hearing: at [6]. Lloyd J held that both parties had acted reasonably and the Court could not find that the applicant was almost certain to have succeeded: at [9]-[11]. The proper exercise of the costs discretion was to make no order as to the costs of the proceedings at [12]. 76. In Sydney City Council v Doltone House Wharf Pty Ltd [2006] NSWLEC 81, the applicant council brought civil enforcement proceedings seeking a declaration that the respondents were using premises as a function centre without consent. The respondents contended the use was not unlawful because it was carried out under the authority of an existing consent, the terms of which were wide enough to permit use of the premises as a function centre. Without prejudice to this position, the respondents nevertheless sought and obtained a further development consent that expressly permitted use of the premises as a function centre. The respondents thereupon agreed to conduct their activities in accordance with the further development consent. The applicant discontinued the proceedings. 77. Cowdroy J held that the case fell within the circumstances in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin. The supervening event of the grant of consent and the agreement of the respondents to conduct their activities in accordance with that consent, removed the subject of the dispute. All parties acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the proceedings were discontinued: at [20]-[24]. 21The applicant seeks to distinguish those three decisions. The applicant argues that in adopting the Lai Qin principles, the judges in those cases did not discuss the fact that Lai Qin principles do not apply to a surrender and did not turn their minds to whether the cases before them were surrender cases and, in addition, Hayden was concerned with a costs rule which has since been repealed. I do not accept the argument. Although the judges in those three cases did not expressly refer to costs principles applicable in the event of a surrender, it is clear that they regarded the cases before them as falling within the Lai Qin supervening events category. Further, in Hayden the Court expressly turned its mind to a since repealed costs rule, which empowered the Court to award costs where it was satisfied that, in effect, the respondent had surrendered, and held that the rule was not satisfied. Moreover, in Kiama Preston CJ treated these three decisions as within the supervening events category, where the proper exercise of the costs discretion will ordinarily be to make no order as to costs. I understand the applicant to have gone so far as to submit that, if necessary, those three cases should be held to have been wrongly decided and that Preston CJ was also in error in approving them. I do not agree. 22Finally, I am insufficiently moved by the applicant's suggestion that it should be awarded costs having regard to the general costs principles that costs are compensatory, the costs discretion is broad, fairness should dictate how the costs discretion is exercised, and the exercise of the discretion often depends on matters of impression and evaluation. 23Accordingly, I propose to make no order as to the costs of the proceedings, subject to consideration of the respondents' application that the applicant pay the respondents' costs of this costs hearing. The basis of that application is that the Council indicated as soon as the substance of the matter had resolved, that the appropriate order would be for each party to pay its own costs. The respondents submit that the applicant has unreasonably maintained an entitlement to costs despite any hearing or determination of the merits of the case. The respondents have received the costs result which the Council proposed. The decision of the applicant not to agree to that proposal has led to the costs of the costs hearing being incurred, which otherwise would have been avoided. In the circumstances, I propose to order the applicant to pay the costs of the costs hearing. I understand the applicant to accept that that order should be made if it failed, as it has, on its costs application. 24The orders of the Court are as follows: (1)Subject to Order 2, no order as to the costs of the proceedings. (2)The applicant is to pay the respondents' costs of the costs hearing on 5 September 2012. 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: 13 September 2012