Gee v Port Stephens Council

J Ayling SC (Barrister) Cleaves Mallik Gibbs (Solicitors) LEGAL REPRESENTATIVES: P W Larkin (Barrister) Sparke Helmore (Solicitors)

JUDGMENT: IN THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES 10743/03

FRIDAY 17 OCTOBER 2003 GEE Applicant v PORT STEPHENS COUNCIL Respondent JUDGMENT 1 HIS HONOUR: The applicant in these proceedings seeks an order for costs in relation to a preliminary question which arose in class 1 proceedings which the Council having conceded relevant matters, has been resolved in his favour. 2 The site the subject of the proceedings was the location for the processing, storage and associated administration of the mineral sands enterprise conducted for many years by RZM Pty Limited. That activity appears to have commenced on the site at the latest in about 1968 and continued until about 2001. From some time in the year 2000 the activities on the site appear to have been gradually wound down. RZM ultimately disposed of the site to Tomago Development Company Pty Limited. That sale was effected in April 2002. The current applicant, Mr Anthony Gee acquired the shares in Tomago Development Company Pty Limited on 9 April 2002, the same date upon which the land was purchased from RZM. 3 The Class 1 appeal relates to an application which was made to the Council for the redevelopment of the site to store and retail treated pine products. 4 Most of the site is zoned Rural 1(a) Agricultural and part of it is zoned 5(c) Proposed Road, pursuant to Port Stephens Local Environmental Plan 2000. In the relevant zones, the use of the site for the proposed storage and retail facility is prohibited. Accordingly, the development application may only be approved if the site has existing use rights. 5 As I have indicated, RZM began activities on the site in 1968 and continued until about 2001. During that time, the evidence does not indicate that the council ever suggested to RZM that its activities were illegal. 6 The evidence discloses that development consent to use the site was granted to RZM by the council in 1967. There was a further building approval granted in 1968 and there have been a number of approvals granted since that time. 7 When RZM came to consider the winding down of its operation and the prospective sale of the land, it undertook a number of investigations and had discussions with the council. As a result of those discussions, Mr Douglas, the council's development manager, wrote to RZM by letter dated 3 November 2000 in which he said, inter alia, "Mining is a use permissible with consent in Port Stephens Local Environmental Plan 1987. In this regard, the use of the subject land as a mineral separation plant and ancillary buildings was a use permissible with consent in 1967 and continues to be a use permissible with consent under the current planning provisions. In regard to the enquiries regarding existing use rights, it is suggested that legal advice be obtained. The proposed use clearly commenced lawfully and there has been a continuance of use since commencement. In any advice obtained, the issue of abandonment should also be addressed as RZM is clearly discontinuing the use." 8 A further letter was written to AB Nelson & Associates, consultants for Tomago Developments Pty Limited. That letter dated 12 October 2001, again signed by Mr Douglas, said the following: "There is nothing in the information provided to council which alters the view that the development was lawfully approved in 1967 as a permissible use and continues to be a permissible use pursuant to the current environmental planning instrument." 9 As it happens, on 10 May 1974 an interim development order was made which affected the subject land. A consequence of the making of that order was that the use of the land as "mineral separation plant and ancillary buildings" was prohibited, although mining was permissible. Accordingly, the advice given by Mr Douglas that the use remained permissible in 2000 and 2001 was not correct. It was only correct if the use was properly described as mining. However, it is plain from these letters that as recently as October 2001 the council's development manager accepted that the original use on the site was lawful and that it had continued since 1967. 10 Notwithstanding the position which was adopted by the council's development manager, when the present development application was lodged with the council a somewhat different view was taken. The council did not deal with the development application and an appeal was lodged with respect to the deemed refusal of the application by the council. The appeal having been initiated, the council elected to put in issue whether or not the site has existing use rights. 11 A number of propositions were advanced by the council. They were all directed to the question of whether the land has existing use rights. The council raised that question by filing a notice of a separate question for determination. That notice was referred by the registrar for determination by a judge and that was the position when the proceedings first came before me. 12 In the course of the proceedings, I encouraged the applicant to bring a Class 4 application seeking appropriate declarations. I encouraged this course for it seemed to me that this would enable a clear identification of the relevant issues and provide the possibility, if it be necessary, for an effective appeal in relation to the question which had been raised. That question is a substantial question which has significant implications in relation to the commercial value of this site. In other circumstances it may have been a question which the applicant itself had sought to litigate in separate proceedings in order to establish the rights which relate to the use of the land. However, although the matter was ultimately determined in class 4 proceedings, the issue now to be determined is whether an order for costs should be made in relation to the determination of a separate question in class 1 proceedings. 13 In his opening, counsel for the council indicated that although other propositions had been considered, only three matters remained to be argued with respect to whether or not existing use rights were available to the site. One of those matters, which was whether or not the use was properly described as a mine, or whether it was described as an industrial undertaking, was abandoned at an early stage of the proceedings. The respondent accepted that the use in respect of which existing use rights was claimed was relevantly prohibited. 14 The second matter, which I apprehend has occupied the greater part of the parties' time in preparation and which was the subject of significant evidence, was whether or not the activity on the site for which existing use rights was claimed was being conducted pursuant to a development consent. The parties had concentrated upon a development consent issued in 1967 and had prepared their arguments upon the assumption that it was the relevant consent. Amongst other matters, the council sought to argue that the activity which had been conducted on the site was not in accordance with the 1967 consent and also that there was no evidence that that consent had been commenced. Accordingly, the council was asserting that although the activity had been conducted on the site for more than thirty years without challenge from the council, it had always been illegal. 15 Approximately two weeks before the hearing commenced, the council, despite having previously conducted significant searches of its files, located further documents relevant to this matter. Amongst those documents a building approval granted in 1968 was identified. The court raised with the parties the question of whether or not that building approval had the consequence that there was a deemed development consent (see Drummoyne Municipal Council v Lebnan & Ors (1974) 131 CLR 350; (1974) 4 ALR 231). A search was then made of the relevant instrument - the Northumberland Planning Scheme Ordinance. Clause 21(2) of the ordinance provides the conventional deeming clause. As a consequence there could be no question but that the activity which was taking place on the site at all relevant times was authorised by the necessary building approval and development consent granted. Once this became apparent, counsel for the council indicated that that aspect of the matter would not be further pressed. 16 The final matter which remained alive for part of the proceedings, was the question of whether or not RZM had abandoned the use of the site so that existing use rights were lost. Oral evidence was given in relation to this issue and Mr Gee was cross-examined. Shortly after Mr Gee's evidence had been completed, counsel for the council indicated that the council would not further contend that existing use rights had been abandoned. In these circumstances, the submission that existing use rights did not exist on the site had no foundation and the council indicated that it would accept that existing use rights do exist. 17 The proceedings occupied two full days and a small part of the third day. As the evidence reveals, very considerable preparation was undertaken by both parties. 18 In these circumstances, senior counsel for the applicant seeks an order for the applicant's costs of the preliminary question. That application is opposed by the council. 19 The general principles to be applied when considering an order for costs were reviewed by the High Court in Latoudis v Casey (1990) 170 CLR 534 and Oshlack v Richmond River Council (1998) 193 CLR 72. Latoudis concerned the power of a magistrate's court to order that an informant pay the defendant's costs of successfully defending criminal proceedings. Mason CJ emphasised that exercises of discretion in relation to costs must demonstrate consistency in order to avoid injustice. He affirmed the principle that ordinarily, it would not be just or reasonable to refuse an order for costs to a defendant against whom a prosecution has failed. This is because, as McHugh J pointed out in Oshlack, "[i]f the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the successful litigation." 20 Oshlack involved the question of whether the trial judge had erred in holding that the public interest nature of the proceedings was a grounds for refusing a costs order to a successful defendant. In examining the power to award costs conferred by s 69(2) of the Land and Environment Court Act, the High Court affirmed the principle that, subject to certain limited exceptions, a successful defendant is generally entitled to an award of costs (Gaudron & Gummow JJ at 86, McHugh J at 96 -97, Kirby J at 126). In this respect McHugh J cited Devlin J in Smeaton Hanscomb & Co Ltd v Sassoon I Setty, Son & Co [No 2] [1953] 1 WLR 1481 at 1484; [1953] 2 All ER 1588 at 1590, where his Honour said that the results of a case are "one of the most, if not the most, important of the elements" to be taken into account in the exercise of a discretion to order costs. McHugh J said: "The combined force of the sentiments recognised … by Mason CJ, regarding the need for consistency in order to avoid injustice, and by Devlin J, regarding the most significant factor affecting the costs discretion, provides the jurisprudential basis for the important principle commonly referred to as the "usual order as to costs"." 21 The appropriate approach to costs in Class 1 proceedings has been considered both in this Court and previously in the Land and Valuation Court. Before the Land and Valuation Court began to hear building and subdivision appeals, they were considered by the District Court. When the Land and Valuation Court assumed that jurisdiction, together with jurisdiction in relation to development appeals, the question of the appropriate approach to the exercise of the court's discretion in relation to costs in merit appeals was considered. 22 From 1958 to 1972 merit appeals in relation to building and subdivision were heard by Boards of Appeal. It was the practice of these Boards to make no order as to costs, as was the case in their successor, the Local Government Appeals Tribunal. The rationale for the departure from the usual principles as to costs was that persons should be able to seek review of building and planning decisions of councils without being discouraged by the risk of costs if unsuccessful. 23 In his classic 1967 text, The Law of Land Development (Sydney: LBC, 1967), Murray Wilcox suggested that the Boards were in error in adopting a rigid rule against costs being awarded and proposed that each case should be assessed on its merits. He cited Sugerman J in Cole v Mosman Municipal Council (1960) 6 LGRA 31 at 34 where his Honour said: "Matters of the type which are brought before the Board for its decision are likely to vary in magnitude, importance and difficulty and in the considerations which may govern the proper exercise of discretion in awarding, or refusing to award, payment of the whole or part of the costs incurred by one party or the other. Some involve important considerations of public interest or affect the appellant to the extent of considerable sums of money or turn upon difficult questions of principle, and sometimes of law. Such cases may require skilled assistance for their proper presentation, require no inconsiderable expenditure in costs for their litigation, and lead to nice questions of discretion as to how in the result the costs should be borne as between the parties. Others may be of less, or small, importance or difficult in their subject matters, and yet require careful consideration of how these costs, if any have been incurred, should be dealt with. If … one uniform rule is applied automatically and inflexibly to all such cases, I find it difficult to see how the existence of that practice helps to support an inference from the scheme of the award that the discretion conferred by the second schedule to the Arbitration Act was in fact exercised in a particular case." 24 The position in the Land and Valuation Court was explained by Else-Mitchell J in Rio Pioneer Gravel Co Pty Ltd v Warringah Shire Council (1969) 17 LGRA 153: "It is clear that costs in a development appeal are in the discretion of the Court and although this has been treated as meaning that in general the costs of such appeals as are in the nature of adverse litigation should follow the event, the trend of decision and practice in recent years has been to decline to saddle with an appellant's costs any council which, as the responsible authority under a planning scheme, has acted reasonably in refusing development consent in a novel or unusual case and in contesting the subsequent appeal. The reason for this course is as I observed in Woollahra Municipal Council v Sydney City Council (1966) 12 LGRA 175 at 188-189 `that in cases of doubt or difficulty responsible authorities should be encouraged to seek the decision of the Land and Valuation Court on development applications which are novel or unusual or which cannot be disposed of by applying established principles or decisions'." 25 In this Court, the approach to this matter has been considered on a number of occasions. It was first considered by McLelland CJ in McDonald Industries Ltd v Sydney City Council (1980) 43 LGRA 428 where his Honour said: "Under s 69 of the Land and Environment Court Act a discretion is conferred on the Court to award costs but the general rule established by the Local Government Appeals Tribunal that, in appeals from decisions of local councils the parties should meet their own costs is one that the Court proposes to adopt. I refer to it as a general rule because the Court would not want the conclusion to be drawn that there would never be an occasion on which costs would be awarded. Some exceptional circumstance would need to be established to attract an order for costs." 26 The principle was originally aimed at the resolution of merit issues as pointed out by Talbot J in Gibson v Mosman Municipal Council (2001) 116 LGERA 397 at 400 where his Honour said: "[T]he raising of the issue of jurisdiction of the Court to determine a vital issue in the appeal goes beyond the resolution of merit issues which underlie the original basis for the adoption of the principle that there should be no order for costs in planning and building appeals except in exceptional circumstances ( McDonald Industries Ltd v Sydney City Council (1980) 43 LGRA 428). Although the raising of an issue for the first time on appeal does not necessarily lay the ground for a finding of an exceptional circumstance, as the then Chief Judge said in McDonald at p 446, my understanding is that the practice of not awarding costs related to matters where there were only merit issues to be decided." 27 In Raiti v Leichhardt Municipal Council (1991) 72 LGRA 333, Hemmings J said: "In ordinary circumstances in proceedings in this Court costs should follow the event unless there are special circumstances or conduct on the part of the successful party which warrants denial of such costs. The conduct of the unsuccessful party is irrelevant. This Court has had a policy however that in relation to matters in classes 1, 2 and 3 as the proceedings are by way of re-hearing of the application rather than an appeal against the determination by a consent authority that the parties should not be unduly deterred from exercising the rights of such review by the possibility of the burden of costs. The parties usually accept that the Court will only order that costs be awarded in unusual or exceptional circumstances. However, I am not of the opinion that before I can exercise my discretion to award costs in matters of this kind, I am compelled first to find such exceptional circumstances. I believe that it is now well established, consistent with the exercise of the discretion in other jurisdictions of this Court, that a successful party should be entitled to expect compensation for the costs incurred by an obligation to bring a matter before the court if that obligation should never have arisen: cf Latoudis v Casey (1990) 65 ALJR 151." 28 His Honour's remarks are reflected in the practice direction which presently exists in relation to costs in Class 1 and 2 matters in the court. Paragraph 10 of the Practice Direction 1993 provides as follows: "The practice of the Court is that no order for costs is made in planning and building appeals unless the circumstances are exceptional." 29 Paragraph 10A contains a similar direction in relation to Class 3 matters. 30 The appropriate role of paragraph 10A of the Practice Direction has recently been considered by the Court of Appeal in Maurici v Chief Commissioner of State Revenue (2001) 51 NSWLR 673. In the course of his reasons for judgment, Handley JA considered the decision of the trial judge, Lloyd J, who acknowledged that although the court had a wide discretion under s 69 of the Land and Environment Court Act to make an order for costs, it had to be exercised in accordance with established principles. Lloyd J reviewed the conflicting authorities on the question, including the decision of Talbot J in Tricas v Valuer General (Talbot J, NSWLEC, 29 May 1992, unreported) where an assessor had ordered that the valuation be altered from $162,000 to $161,000. Talbot J made no order as to costs, saying (at 3): "This Court will make an order for costs only when exceptional circumstances apply in building and planning appeals. It has been a long-standing practice of the Court and has now been enshrined in the Rules. The same practice has been applied in Class 3 applications where those applications are by way of an appeal against the refusal of an objection to a valuation. Accordingly, and, according to the practice adopted by the Court, it is necessary that exceptional circumstances be shown in the sense that they have been established by the practice of the Court before either party in Class 3 proceedings by way of appeal against refusal of an objection to land valuation can be successful in an application for an order for costs." 31 In Dobrel v Valuer General (No 2) (1993) 80 LGERA 26 Bignold J ordered costs in favour of an objector who had successfully appealed against a valuation. His Honour distinguished Tricas and said: "I do not understand this practice to have been so applied to such cases that are determined by judges of the Court for reasons of the complexity of the case or because the case may raise a question of valuation principle or a principle of law". 32 In New South Wales Golf Club Ltd v Valuer General (1994) 82 LGERA 188 Bannon J ordered that a successful objector receive two thirds of its costs. After noting the conflicting decisions of Talbot J in Tricas and of Bignold J in Dobrel, in resolving the question he accepted the reasoning of the Full Court of the Supreme Court of Victoria in Esso Exploration and Production Australia Inc v Shire of Morwell (1985) 60 LGRA 82. In that case, the Full Court held that the applicable principle was that stated by Lord Wilberforce in the Privy Council decision of Commissioner of Valuation v Jamaica Gypsum Ltd (1971) 14 RRC 4 (Ryde's Rating Cases): "In principle their Lordships consider that a person who successfully secures a reduction in the valuation, unless this is of a minimal amount, should be entitled to his costs, and that, unless by doing so he has added to the length or expense of the proceedings, the fact that he has supported a figure which turns out to be less than finally accepted should not be to his detriment." 33 In Murray Publishers Pty Ltd v Valuer General (1994) 84 LGERA 13 Stein J reviewed the authorities on this question and said: "With respect to Bignold J the rationale in Dobrel seeking to explain costs in valuation appeals as dependant on whether the case is heard by a Judge or an Assessor has little to commend it. Such a distinction appears artificial and will rarely have an effect on the way the matter is treated, save where real and substantial issues of law are argued. If his Honour was implying that when issues of valuation law or fundamental questions of valuation methodology are determined by a Judge, costs are likely to follow the event, then I respectfully agree. However, such circumstances do not here pertain. … The decision of Esso, a rating appeal, has limited relevance in the NSW context. In that case the legislative provisions allowed a qualified exercise of discretion by the Court to make costs orders only in favour of the successful party. This is to be contrasted with the wide discretion contained in s69 of the Land and Environment Court Act. The nature of the distinct legal provisions seem to have had greatest bearing on the result in that decision. It may also be noted that quite complex issues of valuation law were raised in the case. … Although I have great respect for the decision of the Privy Council in the Jamaica Gypsum case I do not think that the principles discussed by Lord Wilberforce should be universally applied to valuation appeals throughout the Common Law world. There is a great distinction in power and jurisdiction between the Land and Environment Court and the Valuation Board for the District of St. Thomas in Jamaica. This Court should decide its own policy and practice with regard to the costs of administrative appeals, including appeals against valuation of land.

In my opinion, the practice of the Court in valuation cases should be that no order for costs be made unless exceptional or special circumstances are shown to exist. I agree with Talbot J in Tricas. Precisely what will constitute exceptional circumstances is to be assessed on a case by case basis (Berk v Woollahra Council (No 2) (1992) 78 LGERA 180 at 184). The conduct of a party, whether successful or unsuccessful, may justify a costs award being made; see for example Raiti v Leichhardt Municipal Council (1991) 72 LGRA 333. Clearly costs may be ordered to follow the event of a determination of a question of law." 34 Having reviewed all these authorities, in Maurici Lloyd J ultimately held that the relevant principles were established by decisions of Talbot and Stein JJ and were now settled in the terms of the practice direction. However, Handley JA came to the conclusion that: "Paragraph 10A of the Practice Direction was not declaratory of the practice of the Court because the reported cases reflected a difference of views on the appropriateness of ordering costs in valuation appeals … Lloyd J considered that this difference had been "settled" by the Practice Direction, but such a document issued by head of jurisdiction is not an appropriate way of resolving differences of opinion on questions such as this. The question could have been resolved by a rule of Court." 35 His Honour went on to say: "A major difficulty with the practice direction construed as applying to land tax appeals in class 3 is that it purports to impose a rigid fetter on the judicial discretion as to costs conferred by s 69(2). Appellate courts have held more than once that judges should not fetter judicial discretions with self-imposed rigid rules." 36 Handley JA considered the decision of the majority in Oshlack, which noted that s 69(2) was indistinguishable from corresponding provisions in the Supreme Court Act 1970 and earlier legislation in the United Kingdom. Gaudron and Gummow JJ referred to: "The general proposition that it is inappropriate to read a provision conferring jurisdiction or granting powers to a court by making conditions or imposing limitations which are not found in the words used." (p 81) 37 Handley JA held that paragraph 10A of the Practice Direction, could not be given the effect which Lloyd J gave to it at first instance. As his Honour observed, Lloyd J treated paragraph 10A as applicable to the case before him and confined his attention to the question of exceptional circumstances. This was not an appropriate approach to the exercise of the direction. 38 The approach which Handley JA adopted in relation to paragraph 10A of the Practice Direction is the same approach which in my opinion must be adopted to paragraph 10. Appropriate amendment of the Practice Direction requires urgent consideration. In Maurici, the Court of Appeal remitted the notice of motion seeking costs to the Land and Environment Court, where it was reheard by Lloyd J: Maurici v Chief Commissioner of State Revenue (No 5) (2001) 119 LGERA 395. His Honour said: "In approaching the resolution of this question I am prepared to ignore the Practice Direction, which has been effectively set aside by the Court of Appeal as being an impermissible fetter on the exercise of the judicial discretion as to costs conferred by s 69(2) of the Land and Environment Court Act. As noted above, that section relevantly provides that costs are in the discretion of the Court." 39 It is now apparent that the resolution of the question before me must have regard to the ordinary principles which should be applied to the making of a costs order in any proceedings in this Court. 40 As Else-Mitchell J and Hemmings J identified in Rio Pioneer Gravel and Raiti, there are reasons why in a Class 1 appeal, in the ordinary course, it is not appropriate to make an order for costs. Where the proceedings are confined to consideration of the merits of a particular application, about which minds may reasonably differ, there are sound reasons to suggest that the conventional approach to orders for costs should not be followed and no costs order should be made. By this approach it is possible to ensure that individuals who have had an application rejected or not considered by the local council or other consent authority have an opportunity to have that decision reviewed without the fear that if they fail they will be ordered to pay the council's costs. The essence of the proceedings is a merit review of a decision of the council or other body where the court is required to exercise the powers of the decision maker and determine the application for itself. 41 However, different considerations seem to me to arise when a council puts in issue whether the application may be lawfully approved. In these circumstances, the council is seeking to raise a question which will either be framed as a pure question of law or as a question of mixed fact and law. In the present case it was submitted, correctly, that a negative answer to the separate question would raise a complete bar to the grant of any development consent. In these circumstances although the applicant seeks a review of the merits of the proposal the proceedings will in respect of the preliminary question take on the character of conventional litigation in which questions of fact and law are determined. 42 In Nahum v North Sydney Municipal Council 1994 83 LGERA 200, Stein J considered the appropriate approach in circumstances where a council had raised a preliminary issue which was a question of law. 43 His Honour was asked to make an order for costs in favour of the council. Stein J drew attention to the fact that Mr Nahum had given evidence in which he indicated at the time when he lodged his appeal the ordinary approach of the Court in class 1 matters was that each party pay their own costs. He also drew attention also to the practice direction to which I have earlier referred. His Honour then said: "However, the practice is subject to exceptions where special or exceptional circumstances are made out. This is referred to in the practice direction of the Court. No doubt with this in mind, the solicitors representing the council sought, and were diligent in their endeavours, to make Mr Nahum aware of the situation. Namely that there was to be a preliminary question of law regarding the permissibility of the development under the North Sydney Local Environmental Plan 1989. Council emphasised that this issue, restricted solely to the legal question, was to be heard by a judge on a preliminary basis. Furthermore, the council made it clear that it would be relying on the Mayoh decision. Finally, it was their view that the normal practice of the Court regarding costs in class 1 matters did not apply to the determination of preliminary questions of law. As a result if the council were successful it would be asking for its costs of arguing the preliminary issue." 44 His Honour finally concluded as follows: "There have been a number of occasions when the Court has found that exceptional circumstances have existed justifying an order for costs in class 1 or class 2. The most obvious circumstance is where the conduct of one party is such that causes the other party to incur unnecessary costs. An illustration is where there is discontinuance at the last moment and costs have been wasted or thrown away. When an issue of law has been determined as a preliminary matter on the basis that it might determine the litigation, the parties are obviously saved trouble, time and expense. Similarly, with a referral of a question of law by an assessor under s 36(5) of the Land and Environment Court Act, or an appeal on an error of law by an assessor under s 56A. From my experience in the Court since 1985 it has been normal and I think generally accepted that the Court would see the circumstances as exceptional and requiring a departure from the general practice set out in the direction. It may be that the practice, if I can refer to it in that fashion, is wrong. Indeed, Mr Green submits that it is because it is inconsistent with the policy of the Court with respect to litigants in classes 1 and 2. In my opinion, although I have reservations about the role of costs in litigation generally, whatever its nature, I would nonetheless conclude that it is appropriate that if a legal issue is determined as a preliminary matter or on a reference, then it should be seen as an ordinary piece of litigation. This is subject to general discretionary considerations which do not appear to be relevant here,( apart from Mr Nahum's apparent misunderstanding of the nature of the litigation). Costs should follow the event of the determination just as it would in class 4 of the Court's jurisdiction. In my opinion, there is a simple reason why this is so. There is a clear distinction between merit hearings which involve expert evidence and the corresponding discretionary assessment of issues arising from that evidence and pure issues of law such as one referred by the registrar in this case. I have no doubt that the intent of the practice direction save in exceptional circumstances was that no order for costs should be made in class 1 and class 2. This was on the basis that it applied to merit hearings by assessors and judges where the issues are of discretionary planning nature determined on the particular merit assessment. The policy embodied in the practice direction was never intended to have application to the determination of pure questions of law." 45 In Cadonia Pty Ltd v Leichhardt Council (Bignold J, NSWLEC, 5 August 1994, unreported), Bignold J considered the decision in Nahum, saying: "…I think the preferable basis for the decision in Nahum is that the determination of the preliminary question of law constituted exceptional circumstances within the meaning of the Court's Practice Direction. Again with respect, I would proffer a slightly variant formulation to the effect that a reference of a question of law in pending Class 1 or 2 proceedings may constitute exceptional circumstances within the Court's Practice Direction. This variant formulation provides the required flexibility inherent in the wide costs power conferred upon the Court by s69 of the Land and Environment Court Act 1979 and is consistent with the flexibility provided by the Court's Practice Direction." 46 Talbot J subsequently considered both Nahum and Cadonia in Teller Properties Pty Ltd v Randwick Council (1994) 84 LGERA 369 and concluded: "Whether or not costs orders have been based on an express understanding that determination of a preliminary question of law is, in itself, an exceptional circumstance, is not readily apparent to me. Although the observations by Stein J and Bignold J appear to reflect this possibility, I would prefer to approach the question on a more conventional basis untrammelled by the effect of the Practice Direction. … Such a dispute is not confined to the mere exercise of discretion based on merit. It is a determination of the legal rights between the parties. There is no reason, in my opinion, why, in those circumstances, the question of costs should not be decided by the exercise of the Court's discretion in the normal way. This, I suggest, explains the reason why Stein J had little difficulty with principle." 47 With respect, I agree with the approach of Stein J and Talbot J. I add only that I can see no relevant distinction between a preliminary question framed as a pure question of law and a preliminary question such as whether or not the site has existing use rights which may raise questions of both fact and law. The latter type of case is plainly an ordinary piece of litigation which attracts, in my opinion, the same consequences in relation to costs as a pure question of law. 48 There are some decisions of this Court which may not reflect the approach adopted by Stein J. In Outdoor Australia Pty Ltd v Auburn Council (1996) 89 LGERA 365, Pearlman CJ considered the approach to be taken to an application for an order for costs in relation to a preliminary question of law. Her Honour considered the authorities to which she was referred and said this: "I recognise (as was pointed out in Nahum, Cadonia and Teller ) that there is a distinction between determinations of merit issues on discretionary planning grounds, and determinations of questions of pure law, which in effect declare the legal rights of the parties. But that distinction was not the foundation for the practice direction; rather the practice direction was made to encourage dissatisfied parties to seek review of planning and building decisions by councils without risk of costs if unsuccessful. It is true that, in this Court, questions of law arising in class 1 and 2 are not determined by assessors of the Court but by judges. Questions of law in those proceedings may be identified by the parties at the first call-over( Land and Environment Court Rules 1980 NSW Pt 13, Div 7, r 14), upon which they are referred to a judge for determination or they may arise during the course of proceedings and be referred for determination by a judge of the Court on the parties' motion or the assessor's motion ( Land and Environment Court Act s 36(5). But the fact that judges of this Court decide legal questions and assessors are confined to decisions on the merits of the case does not of itself it seems to me call for a distinction in the awarding of costs. That is because this is one Court and the class 1 or 2 proceedings in which questions of law arise are one set of proceedings. Furthermore, the determination of a pure question of law may or may not be determinative of the issues between the parties. Often the determination of a legal question settles one aspect of a case (as in the instant case) and the proceedings return to an assessor for determination on the merits in the light of the decided legal issue. Just as often, I think, questions of law in class 1 and 2 proceedings are mixed questions of law and fact, (a matter adverted to by Talbot J in Teller Properties at 372). Another consideration which militates against the adoption of a principle that costs normally follow the event in respect to the determination of preliminary questions of law is that such a practice may unfairly disadvantage some parties. An applicant who appeals to the Court in belief (derived from the practice direction) that he or she will not be required to pay the respondent's costs may inadvertently find him or herself subject to an adverse costs order as a result of a question of law raised by the respondent which is decided in the respondent's favour even if the applicant is ultimately successful on the appeal. Likewise a respondent council whose decision is vindicated after a merits hearing may nonetheless be subject to an adverse costs order as a result of a hearing on a preliminary point of law. In Teller Properties, Talbot J pointed out that the alternative to the referral to a judge for determination of a question of law in class 1 or 2 proceedings is for either party to commence class 4 proceedings, where, conventionally, the practice is that costs normally follow the event. Talbot J was concerned that parties should not be forced to commence class 4 proceedings solely to achieve a result with costs. With respect, I do not share this concern because I think that as a matter of practicality a party will not hasten to commence class 4 proceedings where that party is at risk as to costs when, by raising the question of law in class 1 or 2 proceedings that party might not suffer an adverse costs consequence. In Gemstead Pty Ltd v Gosford City Council (1993) 78 LGERA 395 at 399, Cripps JA speculated as to why class 4 proceedings had been commenced in that case where the question of law for determination could have been referred to a judge in the class 1 proceedings. His Honour criticised the respondent council for not raising the question of law at the outset of the class 1 proceedings. It would derogate from the procedural benefit that Cripps JA was espousing if (as Bignold J pointed out in Cadonia (at 6) parties became reluctant to raise questions of law genuinely in dispute in class 1 or 2 proceedings for fear of being put at risk in costs. The advantage of raising a question of law at the outset of class 1 or 2 proceedings is, of course, that costs may be saved. Such a practice should be encouraged, not discouraged (see in particular the comments of Handley JA in Helman v Byron Shire Council (1995) 87 LGRA 349 at 360." 49 Her Honour then concluded: "For all these reasons I have concluded that the raising of a preliminary question of law in class 1 or 2 proceedings has the consequence only that is a factor to be taken into account considering whether there are exceptional circumstances. In my opinion, the Court should not be seen to be adopting a practice that costs will normally follow the event in respect of the determination of preliminary questions of law in class 1 or 2 proceedings, nor should the raising of a pure question of law of itself invariably be regarded as constituting exceptional circumstances. Rather, the practice direction should apply to class 1 and 2 proceedings without qualification, and is a matter for the Court on the facts on each case to determine if exceptional circumstances exist which would justify an exercise of the Court's discretion to award costs." 50 Her Honour then proceeded to consider whether in that case there were exceptional circumstances and concluded that exceptional circumstances had not been shown and as a consequence made no order for costs. 51 Having regard to the remarks of Handley JA in Maurici it is doubtful whether the approach which her Honour took in Outdoor Australia, which of course was determined before Maurici, remains appropriate. 52 In Gibson, Talbot J considered the effects of Maurici. He said: "Freed of the constraint of para10 of the Practice Direction, the Court is obliged to rely on the formulation of guideline principles established by judicial adjudication (see Latoudis v Casey at p541). It is clear that the Court of Appeal had regard to this aspect of the judgment (see Handley JA at para 47 and para 48 in Maurici). At the time Stein J made his observations in Nahum he was a judge who had enjoyed a long association with the Court. The same can be said about the experience of Bignold J at the time he delivered judgment in Cadonia. No challenge to the identification of the "normal order" referred to by Stein J at p203 in Nahum has been drawn to my attention. I propose to follow Stein J in this case and hold that, in the circumstances, the applicant is entitled to an order for its costs in respect of the preliminary issue." 53 In CSR Limited v Fairfield City Council [2001] NSWLEC 221, Pearlman CJ was again required to consider an application for an order for costs when a preliminary point of law had been raised. On this occasion, her Honour was required to consider the matter having regard to the remarks of the Court of Appeal in Maurici. Her Honour said this: "Paragraph 10 of the Court's direction in 1993 provides that the practice of the Court is that no order for costs is made in planning and building appeals unless the circumstances are exceptional. Whilst the validity of par 10 remains an open question following the decision of the Court of Appeal in relation to para 10A of the practice direction. (see Maurici v Chief Commissioner of State Revenue [2001] NSWCA 78), I take the view that paragraph 10 remains the practice of this Court and exceptional circumstances need to be established. I also take the view the raising of a preliminary question of law in class 1 proceedings has the consequence only that it is a factor to be taken into account in considering whether there are exceptional circumstances. I am aware that this view is contrary to that taken by Talbot J in Gibson v Mosman Municipal Council [2001] NSWLEC 201 but for the reasons which I set out in Outdoor Australia Pty Limited v Auburn Council (1996) 89 LGECA 365 I would not wish to depart from it." 54 Her Honour then turned to consider whether the raising of the preliminary question of law in the proceedings before her was an exceptional circumstance. She said: " I turn, then, to consider whether the raising of the preliminary question of law in these proceedings is an exceptional circumstance. The question here, of course, went to the whole basis for the class 1 appeal, and whether that appeal was incompetent. It raised an issue which was fundamental to the proceedings themselves, not simply to the issue of whether or not to grant consent to CSR's application on its merits . It was raised by the council very early in the proceedings, indeed, two weeks after the first callover, and it called the whole proceedings into question. In my opinion, those matters constitute exceptional circumstances, and it follows that the respondents are entitled to an order for costs in their favour." [emphasis added] 55 In Nazero Construction Pty Ltd v North Sydney Council (No 2) (2002) NSWLEC 194 Lloyd J adopted a similar approach to Pearlman CJ. However, his Honour relied upon the Practice Direction in making his decision. It would appear that his Honour was not referred to the decision of the Court of Appeal in Maurici and does not advert to it in his decision. 56 I have already indicated there will be many cases in class 1 and 2 where it is appropriate that there be no order as to costs. In my opinion this is likely to be the case where the issues in dispute are confined to merit considerations. However, a different approach may be required where a preliminary question is raised. If it happens that determination of the preliminary question will assist the commissioner who hears the merits of the matter by defining the content or limits on his or her discretion it is likely that no order for costs should be made. For example, the interpretation of provision of a local environmental plan containing height or floor space controls may be a circumstance where no order should be made. There will be others. However where the preliminary point raised is said to preclude consent at all, the proceedings cease to have the character of merits review and different considerations arise. 57 In the present case, the question of existing use rights was raised by the council. If that preliminary question had been determined in the council's favour, the matter would have come to an end and the applicant would not have been able to pursue a review of the merits of his application. 58 The council chose to put existing use rights in issue in circumstances where for many years it had raised no suggestion of an illegal use and furthermore had represented that the use on the site was lawfully commenced and had continued, at least up until the year 2001. By raising the issue, the council has imposed considerable cost burdens upon the applicant. In the events that transpired, the council came to the realisation that it could not sustain the position it had taken and accordingly consented to appropriate relief confirming that existing use rights existed on this site. 59 It is submitted by the council that there are a number of reasons why an order for costs should not be made or in the alternative only an order for part of the costs should be made. It is submitted that the council was justified in the public interest in raising the matter in order to ensure that the determination of the merits of the application was not founded upon a false premise. It is further submitted that the council should not suffer because it was unable to locate the 1968 building approval until shortly before the hearing, which, once located, had the consequence that a substantial part of the council's case fell away. It is further submitted that the council should receive the benefit of the fact that it made a concession during the course of the hearing rather than pursuing the matter to a conclusion which would have imposed additional costs upon the applicant and of course additional burdens on the Court. 60 I do not accept any of these submissions. As I have indicated, in my opinion in circumstances where a council chooses to put in issue the capacity for approval either by raising a preliminary question of law or as here a preliminary question involving matters of both fact and law, the usual approach to costs in class 1 appeals is inappropriate. By raising the question of capacity to grant an approval the council raises matters appropriate for ordinary litigation, and seeks to avoid consideration of the merits of the application. In such a case, in my opinion, the usual order should be that costs follow the event. 61 With respect to the late stage at which the 1968 approval was found, that of course was a matter entirely within the control of the council. It may be that the council's records have not been effectively maintained and as a consequence there were difficulties in locating appropriate documents but the applicant should not be required to bear the burden of the costs created by that fact. If the applicant had been the owner of the land and carried on the enterprise in 1968, a different approach may have been appropriate. However, the owner in this case is the successor in title and is entitled to expect that the council would have conducted an effective search of its records before it put existing use rights in issue. 62 With respect to the concession made by the council during the course of the proceedings, it is correct that after the relevant facts had been tendered and there was an opportunity for a mature appreciation of their consequences the council conceded. However the court is entitled to expect that this course should be taken by a council once the true situation is appreciated so that any further costs and delay can be avoided. In my opinion the concession does not justify any modification of the appropriate order for costs. 63 Accordingly, I am satisfied that it is appropriate for the Court to order the respondent to pay the applicant's costs of the preliminary question and I so order.

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