Gillespie v Wolseley Investments Pty Limited and Woollahra Municipal Council

The Relationships among the parties 6The applicant holds shares in the company (see share certificate dated 17 November 2000 - Exhibit G1 , tab 1), entitling her to exclusive use and occupation of Unit No.9 on level 5 of a residential flat building 'Cliveden', owned by the company at 22-24 Wolseley Road, Point Piper, within Council's area. She became a director of the company on 16 October 2001. Munday resides in Unit No.8, and has been chairman of the company since 6 September 2005. 7Ms Gillespie entered a further agreement with the company on 22 March 2005 ('the deed' - Exhibit G1 , tab 2), to acquire for $800,000 a further parcel of shares and the right to occupy the rooftop caretaker's flat of the building (to become Unit No.11). It was not intended that Unit 11 become an upstairs storey of Unit 9, but conversion of the use of the flat to private residence appeared to require the Council's consent. Completion of the agreement was conditional upon the company obtaining that consent from the Council, and the company's " whole point " in selling the flat was to use the proceeds to fund fire measures to a standard satisfactory to the Council. (As an older residential flat building, 'Cliveden' had apparently had fire concerns for some years, according to Bonanno). 8Access to Units 9 and 10 is obtained via the elevator or an internal stairway to level 5. However, access from level 5 to level 6 and the caretaker flat was via a separate external stairway. There appears to have also been some dispute between Ms Gillespie and the company as to whether she would have exclusive rights to the new internal stairway linking levels 5 and 6 and providing access to Unit 11 (T15.7.10, p31, LL27-49). 9As required by the deed, the company lodged a development application ('DA' - Exhibit G2 , tab 5), on 7 June 2005, for consent " to use the caretakers (sic) flat as a residence ". No works on the residence were proposed - if the sale proceeded and the consent was granted, the new owner would lodge her own application for any works. 10Munday wrote to Council on 4 October 2005, stating that the intent of the company's DA was to obtain, not approval of a change of use, but an acknowledgement of Council's awareness of the existence of the caretaker's flat since at least 1955, and its use as a residence since that time. 11Council refused the DA on 17 November 2005, on the grounds that insufficient information had been provided in relation to fire safety. At the time, the company's solicitor was negotiating with a Mr Koloadin of BCA Performance Pty Ltd to prepare a fire report. 12On 19 December 2005, Ms Gillespie commenced Supreme Court proceedings for specific performance of the March 2005 deed. 13By 15 November 2006, the company was able to prove occupation of the flat as a residence as early as 1937. An application under s 82A of the EPA Act was lodged, enclosing a copy of the BCA Performance report, but that report did not deal with Unit 11, only the balance of the building. A Council inspection took place on 16 January 2007. 14Brereton J gave judgment in Ms Gillespie's favour in the specific performance proceedings on 9 March 2007, but an appeal was lodged.

The Council grants consent 15The Council completed its review of the company's DA on 28 August 2007, and granted consent 350/2005/1 subject to conditions ( Exhibit G1 , tab 8), approving a " change in nature of the use of a dwelling from a caretaker's flat to a private residence and internal alterations ". Condition A.3 referred to plans indicating the new stairway extension would go through bedroom space in the existing flat. Condition C.2 provided: " C.2 Building upgrade (Cl. 94 of the Regulation) Pursuant to clause 94 of the Environmental Planning and Assessment Regulation 2000 Council as the consent authority requires the building to be brought into partial conformity with the Building Code of Australia as the measures contained in the building are inadequate to protect persons using the building, and to facilitate their egress from the building, in the event of fire, and to restrict the spread of fire from the building to other buildings nearby. a. New construction shall comply with the provisions of the Building Code of Australia 2007 and the recommendation of the Building Code of Australia assessment report by BCA Performance Pty Ltd dated May 2007 by John Koloadin. b. The proposed sole occupancy unit shall be separated from the remainder of the building by wall and floor construction with an FRL of 90/90/90 and in accordance with the requirements of Clause C1.1 and Table 3 of the specification C1.1 of the Building Code of Australia. Notes: The building shall be the subject of an order for fire safety upgrade issued under (s) 121B (6) of the EP and A Act requiring fire upgrade of the whole of the building in conjunction with the occupation of the new part ." 16Following the issue of that consent, the company purported to serve a notice under the deed requiring Ms Gillespie to complete the purchase of the shares entitling her to the occupation of Unit 11. While the appeal was still pending she compromised her specific performance proceedings by short minutes of orders, made on 28 September 2007, as follows ( Exhibit G1 , tab 7): " BY CONSENT :

1. The notice issued on 10 September 2007 by the Defendant calling for the Plaintiff to complete the agreement between the parties dated 22 March 2005 ('the Agreement') within 35 days is withdrawn.
2. The Defendant satisfy the conditions imposed by Woollahra Municipal Council ('Council') to Development Consent No. 350/2055/1 (sic) such as to allow Council to issue an Occupation Certificate or an Interim Occupation Certificate in relation to that part of the Defendant's building known as Unit 11 prior to completion of the Agreement.
3. Without limiting the generality of Order 2, that the Defendant carry out to the satisfaction of Council the building work referred to in conditions A.3 and C.2 of Development Consent No. 350/2055/1 (sic) prior to completion of the Agreement.
4. The Defendant proceed with all due despatch and use its best endeavours to comply with the provisions of orders 2 and 3 within a reasonable time or such time as the Court may order on the application of the Plaintiff.
5. No order as to the costs of the parties to the intent that they each bear their own costs of the notice of motion". 17The appeal against Brereton J's March 2007 decision was heard on 30 November 2007, and upheld by the Court of Appeal on 12 December 2007.

The original class 4 proceedings 18On 27 March 2009, Ms Gillespie commenced proceedings in Class 4 of this court's jurisdiction (40199 of 2009) seeking to set aside construction certificate 350/08 approved by Council on 25 August 2008, despite much of the work required by that certificate having been completed. Her concern in those proceedings was that she was under pressure to complete the purchase of the flat while fire safety works had not been completed and the fire safety order for the building as a whole (noted under condition C.2) had not been issued. Those proceedings were resolved by Consent Orders made on 23 July 2009 by Pepper J, setting aside the construction certificate and declaring it void and of no effect.

The relevant s 121B Order 19The relevant order under s 121B was issued by Council to the building on 18 June 2009 ( Exhibit G1 , tab 4). It was of considerable length, was signed on Council's behalf by its fire officer, Smith, detailed all the works required to upgrade the fire safety of the building, and stipulated dates for the completion of work in three stages, 90 days (16 September 2009), 180 days (15 December 2009), and 360 days (13 June 2010). 20The order did not fully replicate the terms of the April Notice of Intention, as there had been a meeting subsequent to that notice, between Smith, Munday, and Koloadin. (Smith affidavit, par 7). 21The company did not appeal against the order, nor comply with it. Council saw no need to take any peremptory action against the company when the first nominated date passed (Smith affidavit, par 9), and the company saw its " best interests " being served by continuing dialogue with Council (Munday affidavit, par 9).

Negotiations begin 22On or about 11 December 2009, as was expected following Pepper J's July 2009 Consent Orders, Wynn-Jones (Ms Gillespie's fire expert) finally met with Boyce (who had replaced Koloadin by this stage as fire expert for the company), to discuss an acceptable fire rating solution for Unit 11. (Note that Boyce is from a company called " BCA Logic Pty Ltd ", apparently not related in any way to Koloadin's company " BCA Performance Pty Ltd "). 23Boyce prepared a letter dated 22 December 2009 on his letterhead, and clearly marked it " draft", but did not sign it. It was intended to become a joint formal response/experts' submission to Council, and " a starting point for discussion with Council " about the order (see tab 11, fols 136ff). By email dated 23 December 2009 (fol 141), Boyce sent that draft joint document to Wynn-Jones, to the company's solicitors, to the architects, and to Craig Jenner of the Council. The email invited agreement from Wynn-Jones, whereupon Boyce would " finalise for signing and submission ". He asked for a response " ASAP ". 24The email included a note to Jenner that " this is for your information only at this stage - once the document has been finalised between Michael and myself we will likely seek to arrange a meeting with yourself and Richard Smith to discuss the issues in detail. At this stage we formally request Council withhold any actions on the fire order until the submission is made and discussion can take place ". Jenner was invited to contact Boyce if he had " any queries ". Jenner responded next morning, looking forward to a meeting in the New Year (Smith affidavit, fol 35). 25Wynn-Jones deposes to the fact that he did not agree to the contents of the 22 December letter, nor did he agree that Boyce submit it to the Council. Nonetheless, Smith wrote a letter on 6 January 2010 agreeing to some of the amendments Boyce was proposing (tab 12, fols 142-3). 26On 12 February 2010, Wynn-Jones wrote to Boyce thanking him for the December draft " report ", but saying (Wynn-Jones affidavit, tab 4) : " I do not agree with some of the content of the draft report, was not given an opportunity to review the draft report and did not agree that the draft report should be sent to Council. I am unable to support the outcomes in the draft report as some of the issues do not relate to the fire safety order and some of the upgrading strategies need to be reviewed and refined. The items in the fire safety order must be finalised by the building owners to Council's satisfaction prior to any occupation certificate being issued to use any area subject to Development Consent 350/2005/1 dated 28 August 2007 ". 27On 24 February 2010, Ms Gillespie's solicitor, Bonanno, wrote to the Council pointing out that Wynn-Jones had not in fact supported the submissions made in the draft letter, and seeking confirmation that the Smith letter did not purport to be a modification to the existing s 121B order ( Exhibit G2 , tab 13). Bonanno said that Boyce had replied to Wynn-Jones' letter on 15 February 2010 by stating " the report was a draft for all to comment on ". Bonanno's letter continued: " Our client has been concerned for some months at what appears to be the Council's undue deference to the Company's attitude to fire safety. Although a fire safety order has been issued, no action has taken place ". 28The present proceedings were threatened, failing a satisfactory response to that letter within seven days, and if those proceedings were necessitated by " failure to respond, or by an inadequate response ", a copy of the letter would be produced to the court in support of an application for indemnity costs. 29Also on 24 February 2010, Bonanno wrote to Legg, solicitor for the company, enclosing a copy of the letter to Council, in which he stated that his client was still happy to discuss a resolution to the Unit 11 issue. A meeting was being considered, but he stated that: "Our client has been concerned that the deadlines for works under Stage One and Stage Two have been exceeded without any work being done whatsoever and we forward a copy of our letter to Mr Jenner so as to appraise (sic) you of an application which our client may make to the Land and Environment Court to enforce the fire safety order in the very (sic) future . While our client is still happy to negotiate with you on other issues as between the Company and herself, she is not prepared to compromise her own safety and will shortly seek the assistance of the Court in compelling compliance with the fire safety order ". 30Smith responded to Bonanno on Council's behalf on 26 February 2010, indicating that his response to Boyce was in no way a modified order, but an outline of alternative orders which might be considered ( Exhibit G2 , tab 14). Mr Smith went on to say: " It is advantageous that a cooperative solution is obtained to improve the Fire Safety of the building. I would like to have a meeting with Michael Wynn-Jones and Stuart Boyce to go through the Order to obtain a consensus on a solution and timetable in rectifying the building at the earliest possible time. The outcome of the meeting will determine the owner's commitment to finalising the Fire Safety Order within a reasonable timeframe. It is advised that action if any will be taken after this meeting ". (emphasis added) 31Legg responded at length to Bonanno on the company's behalf on 3 March 2010 (letter in evidence as Annexure A to Munday's affidavit), " to make plain the company's position in relation to the letter to the Council" , sent by Bonanno on 24 February 2010. Mr Legg outlines the company's position on 3 March 2010 32Legg wrote that he had been told by Boyce that his draft 22 December letter " carefully had regard to the communication which had taken place between him and Mr Wynn-Jones ", and that they had spent " a substantial amount of time " discussing the issues. It was copied to Smith, because it was understood that Smith was going away for some six weeks and Boyce was anxious that that " time would not be lost ". 33Legg continued: " A careful examination of the letter from the Council dated 6 January 2010 reveals that it is simply a statement of the Council's general intentions and viewpoint and does not purport to constitute a variation of the existing Order. Our client does not say that the existing Order has been modified and acknowledges that the existing Order remains in place. ... It is plain that what is occurring is a series of communications between the company and the Council pursuant to which the company seeks modification of the Order ... The Council is indicating a sensible consideration of the company's proposals for modification but has not yet finally taken a position to modify the Orders". (emphasis added) 34The letter then said to Bonanno, as Legg later said to the court on behalf of the company: " The company takes its obligations under the Fire Order seriously. It is looking to achieve the safest outcome which is economically reasonable for the benefit of all shareholders. ... It specifically invited Mr Wynn-Jones to participate in the process with a view to obtaining a consensus to avoid the necessity for further expensive and wasteful Court proceedings ". (emphasis added). 35The letter noted that Boyce was available to meet Wynn-Jones at short notice, and that the legal representatives could be involved, " if desired on your Client's part ", with a view to addressing Wynn-Jones's " legitimate concerns which may well be accommodated by the company in its dealings with the Council seeking modification of the Order ". It asks Bonanno to advise if such a meeting is sought by his side. 36Legg also noted that Wynn-Jones, in his email to Boyce dated 12 February 2010, made " only very general comment " concerning the report that was in the 22 December letter. Boyce had told Legg that he had some understanding of Wynn-Jones' questions concerning Unit 11, but his concerns had not been stated with precision. " We request that those matters be specified and particularised to us urgently ". 37Legg concluded his letter with an expression of severe disappointment on the company's part that further legal proceedings were threatened. On the basis of the matters set out in the letter, the company really should not be a party to any such proceedings. Section 121ZJ of the EPA Act makes enforcement of the order " a discretionary matter for the Council . The company's position is that in the circumstances of it making a constructive effort to obtain a consensus with your Client's expert concerning a modification of the existing Order which will be satisfactory to the Council, any attempt to compel the Council to take action for a failure to comply with the Order would be entirely premature ". (emphasis added).

The Applicant's reaction to the Legg letter 38Bonanno made no reply to Legg's letter of 3 March 2010, but, on 9 March 2010, he wrote to Jenner and Smith, responding to Smith's letter of 26 February 2010, and expressing appreciation for the confirmation that the letter of 6 January does not act as a modification of the order of 18 June 2009. That letter then said ( Exhibit G2 , fol 16): " We do not agree that a meeting with Mr Boyce for the company, and Mr Wynn-Jones on behalf of Mrs Gillespie would be advantageous . The Council has already issued its order and our client sees no reason why she should be required to spend additional money to ensure that the Council order is carried out ". (emphasis added). 39The letter went on to detail Ms Gillespie's outstanding complaints, and concluded: " In short, our client has little confidence in either the company's wish to carry out the fire safety orders given that the company has taken no action whatever for six months before sending in a report which wrongly implies that Mrs Gillespie, through her agent, is supportive of the compromises it contains. Nor is our client confident that the Council intends to compel Wolseley Investments Pty Limited to carry out its orders as the Council appears to have taken no action at the stage one and stage two milestones, and has appeared to compromise its original order as a result of a letter which wrongly attributes support from our client's fire safety expert. In the absence of Council's advice that the Council intends to compel Wolseley Investments Pty Limited to abide by the order, our client feels she has no choice but to bring the matter to the attention of the Court for orders requiring the company to abide by your own orders of 18 June 2009." 40The tenor of the correspondence became more formal, and less consensus-seeking, after this letter threatening legal action. It drew a response on 11 March 2010 from Smith to the company ( Exhibit G2 , tab 17), referring to the order and to the timetable for works, which remained incomplete. (A status of works schedule of 4 pages was attached). The letter stated that: " The consequence of your failure to carry out the fire safety works required by the Order is that the occupants of the building (including emergency personnel who would enter the building to carry out fire-fighting and search and rescue activities) are at continuing risk of serious injury in the event of a fire emergency . Given the seriousness of this matter Council requires that within fourteen days (14) days (sic) from the date of this letter, you provide a 'works completion schedule'... If you fail to submit the information... Council has no other option but to commence legal proceedings against you in the [LEC] to enforce the order without further notice. ... Council considers the above non-compliance to be of a very serious nature. It is important that you treat this correspondence as a matter of urgency and act upon it immediately ". A copy of that letter was sent by Smith to Bonanno on Friday morning 12 March 2010. 41The " 14 days " would expire on 25 March 2010. On that date, Boyce wrote on behalf of the company to the Council ( Exhibit G2 , tab 18). He stated that: " ... the purpose of this correspondence is to provide to Council a formal request on behalf of the company ... to amend the fire order in line with the detailed discussions we had with your office at the end of December 2009 and Council's written response dated 6 th January 2010 ". (emphasis added) 42The letter provided a detailed critique on the order (running to four pages in a table format) and concluded with the observation: " The period for compliance with the conditions of the fire order are also be sought (sic) to be amended to be recommenced from the date of the revised Fire Order to be issued, as currently until resolution of the various issues above can be made completion (sic) of the fire order works is in our opinion not achievable nor practical." 43On Friday 26 March 2010, one day after the 14 day deadline, Bonanno emailed Smith, stating that he had been told by telephone that Boyce had written in response to the letter of 11 March, and he asked to be provided with a copy of the response. He added the following comments: " As you are aware, my client is frustrated that 9 months after the issue of your order no action has been taken by the Company to fulfil the order, notwithstanding clear directions for works to be finished at 90 and 180 days after the issue of the order. Surprisingly, the Council has taken no action to enforce its own order, other than when my client has threatened Court action. ... My client reserves her right to bring this matter to the Court's attention if it appears that this is no more than an attempt to further delay completion of the Orders" . 44Mr Smith responded 32 minutes later ( Exhibit G2 , tab 20): " As previously discussed the final Fire Order due date has not come up. Two stages of the staged compliance times have come up however the company has made representations to Council in relation to certain terms of the Order and ways to meet compliance. Council's objective is not to spend ratepayers money on legal action when negotiations on the Order are being undertaken. To apply for a copy of the information you request, a freedom of information request will have to be made to Helen Tola of governance. Helen can be contacted on (02) 9391-7001 ". 45Bonanno wrote on 30 March 2010 to the Council ( Exhibit G2 , tab 21), noting that at his request Smith had sent him on 15 March a copy of a letter of 11 March giving the company 14 days, but failed to provide a copy of the company's response dated 26 March. The letter concluded: " Our client is an interested party in the completion of the fire safety orders for the above reasons, and she also requires that her representations on this issue be heard. Therefore, we seek your assistance in providing us with a copy of any representations which have been received, as well as your confirmation that any representations on the merits of any attempt to vary the fire safety orders will be given to our client ".

The present proceedings are commenced 46The summons and Points of Claim ('POC') were filed in these present class 4 proceedings the next day, 31 March 2010, and sought the following relief: " 1. A declaration that the First Defendant, Wolseley Investments Pty Limited is in breach of an order issued by the Second Defendant Woollahra Municipal Council dated 18 June 2009 pursuant to Section 121B(6) of the Environmental Planning and Assessment Act 1979 ('the Order'). 2. An order that the First Defendant does all things and carries out all necessary works to comply with the said Order. 3. Further or other order for the carrying out of that work in such manner and at such times as the Court may order. 4. Further or other order as the Court may direct. 5. Costs." 47At the call-over of the matter on 23 April 2010, Council indicated that it was considering representations from the company regarding the order. Bonanno sought on 27 April 2010, and again on 5 May 2010, an assurance that Council would also " consider representations " by the applicant regarding the order. Council's solicitor (Mr Webber) responded on 10 May 2010 (Smith affidavit, fol 80) confirming that it had " never sought to exclude consideration of any relevant document or representation " from the applicant, and had " in the past invited [her] to meetings to discuss the issues ". " Timely representations " would be considered on their merits. 48On 11 May 2010, Wynn-Jones wrote to Smith expressing, in detail, general agreement to some of the amendments to the order, as proposed by Boyce in his letter of 25 March 2010.

The applicant proposes a settlement 49On 14 May 2010 Bonanno wrote to Council's solicitors, copy to Legg, defending Ms Gillespie's stand against Council and the company, taking the credit for prompting Council to put pressure on the company, and then offering, " without prejudice ", to bring the proceedings to an end " on the basis of an amended fire safety order which establishes appropriately high standards of compliance as well as shorter time limits ..., as determined by " the three parties' fire experts, " with such order that was made (sic) by the Court so that any failure to comply on the company's part would be a matter for contempt proceedings ". 50Neither defendant responded to this " offer ". Their solicitors told Bonanno, when he enquired, that " there were no instructions pending on response to the letter " (' Notes ' document, Exhibit G2 , par 29). However, on 29 June 2010, Boyce emailed to both Smith and Jenner, with copies to Legg, Munday, and the architect (Tony Freeman) " some suggested wordings for the clauses we spoke about [ at our meeting last week ]", plus other detailed comments and proposals, " as discussed " at that meeting (which the court was told took place on 21 June).

Points of Defence 51The Council filed its Points of Defence ('POD') on 30 June 2010, confirming that it was in discussions with the company in relation to the potential to modify the order. If those discussions did not resolve the matter, the Council would agree to the orders the applicant sought. Council's solicitors followed up with a letter dated 12 July 2010. As no relief was sought against the Council and no breach was alleged against it, Council saw its involvement in the matter as " a matter of courtesy " and " tenuous at best ". Council was conscious of its involvement as the source of the s 121B order at the heart of the proceedings, but notes that it had no legal obligation to enforce that order. (See Ryde City Council v Echt [2000] NSWCA 108; 107 LGERA 317). Council pleaded that it should not be liable for any costs claimed, and reserved its right to seek its costs against either of Ms Gillespie or the company. 52The company, in its POD dated 1 July 2010, replied to the contention that it was in breach of the order, by asserting that it had " made application to [the Council] for modifications of the Order pursuant to s 121ZF of the Environmental Planning & Assessment Act, as it is entitled to do ", and was confident that the Council would issue a modified order " reducing the scope and expense of the Order without imperilling the safety of the occupants of the building ".

The applicant's further settlement proposal 53On 2 July 2010 Bonanno wrote to Legg, with a copy to Council, offering " without prejudice save as to costs ", settlement on the basis ( Exhibit G2 , fol 176): "1. The Council modify Fire Safety Order of 18 June 2009 in terms of the modifications sought by Mr Boyce and his letter of 25 March 2010 and subject to the refusal to grant certain concessions which the NSW Fire Brigade have now communicated about the company and to the Council; 2.The company's compliance with the modified section 121B Order referred to above be the subject of a mandatory Order of the Court; 3. The parties be granted liberty to apply for such further or other orders as are necessary to finalise the terms of the modified section 121(b) Order referred to in 1 above; 4. First Respondent to pay the applicants costs of the proceedings on a party/party basis". 54Again, neither defendant made any response. The order is modified 55The s 121B order was modified by agreement on 9 July 2010, and the proceedings - which had, on 18 June, been set down for hearing on 14-15 July 2010 - immediately lost any utility. 56There was much debate during the costs hearing before me as to when, in fact, the company had applied to the Council for modification of the 18 June 2009 fire order. Was it sought by the emailed letter of 29 June 2010 ( Exhibit G3 ), as the applicant now contends, or by the " formal request " made by Mr Boyce on 25 March 2010 ([41]-[42] above)? 57Modification was clearly being sought from December 2009 onwards ([21]ff above). There is nothing in the 29 June 2010 email which the court could construe as a/the relevant initiating request/application for modification, whereas clearly the 25 March 2010 letter could and should be so construed. It is implicit in the language of Mr Boyce, that meetings had already taken place between him and Council officers to discuss the terms of a possible modified order, and he was now asking for one. Discontinuance 58On 9 July 2010 the Chief Judge vacated the hearing fixed for 14 July, and gave directions for the applicant to file her NOM by 12 July, and for it to be heard on 15 July 2010. 59Mr Wilson confirmed in his opening on 15 July that, as the modification of the s 121B order on 9 July 2010 meant that a breach of the order could no longer be asserted, the applicant wished to discontinue the proceedings.

The costs hearing and its aftermath 60The hearing on the questions of costs was concluded on 15 July 2010, and the court's decision was reserved. 61On 16 July 2010, Bonanno wrote to my Associate, purporting to withdraw a submission which Legg had advised him had been inappropriately made by Mr Wilson. On 19 July 2010, " due to the passing of correspondence between the parties ", Bonanno asked for the matter to be relisted. 62On 28 July 2010, Messrs Wilson, Legg and Webber appeared before me again. Messrs Wilson and Legg clarified their positions on the making of that submission. There was no application by any party to reopen for the making of any further submissions, and I have reviewed the relevant passages of transcript to put the matter in its proper perspective during my consideration of the NOM.

The principles 63In Brent v Levick [2009] NSWLEC 40, at [57]-[66], I recited the legal principles in relation to where the burden of costs should fall when a matter is discontinued prior to any hearing on the merits, absent any " public interest " aspect to the proceedings. See also Biscoe J's excellent summary of those principles in Perre v State of New South Wales [2009] NSWLEC 51, at [40]-[49], which I respectfully adopt, but will not repeat here. 64The awarding of costs is in the discretion of the court (see s 98 of the Civil Procedure Act 2005), and, under UCPR 42.19 (2), the " default " position is that the discontinuing plaintiff pay the costs of the defendant(s) incurred in relation to each claim in respect of which proceedings are discontinued. (See also Beilby v Viney Pty Ltd [2000] NSWLEC 93, (2001) 113 LGERA 450, at [42]-[54]). 65In Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622, McHugh J held, at 624-625: " 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... 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... 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 ." 66In Kiama Council v Grant [2006] NSWLEC 96; (2006) 143 LGERA 441, Preston CJ referred to various decisions in this jurisdiction, as well as in the Federal Court, where there is a dispute as to costs, but no hearing on the merits, and at [80], his Honour provided the following summary of the principles: "(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 ." 67For discussions of authorities relevant to questions of entitling/disentitling conduct on the part of parties to discontinued litigation, see my judgments in Monaghan v Holroyd City Council, Holroyd City Council v Monaghan & Others [2009] NSWLEC 112; (2009) 167 LGERA 321 (at [74]-[84]), Ray Fitzpatrick Pty Limited v Minister for Planning (No.5) [2008] NSWLEC 183 (at [31]-[43]), and Great Lakes Council v Wilkes [2010] NSWLEC 117, and Biscoe J's judgments in Shellharbour City Council v Stewart [2007] NSWLEC 727 and Ku-ring-gai Council v Minister for Planning (NSW) (No.2) [2008] NSWLEC 276.

The applicant's position 68On the applicant's behalf, Mr Wilson says that, in seeking to discontinue, she cannot be said to have " surrendered " or, to have " abandone d" the proceedings; this is a case where a " supervening event " removed her cause of action. The primary issue for the court is, therefore, whether the parties acted reasonably in commencing and defending the matter. 69Mr Wilson made much of the facts that the validity of the original fire order was never challenged, but yet no work on stages 1 and 2 had begun. It was the strong stand taken by Ms Gillespie which stirred the Council into action, and it was reasonable conduct on her part to commence the proceedings more than 14 days after her solicitor's letter of 9 March 2010 ([39] above) and Council's letter to the company dated 11 March ([40]). In addition, he draws to the court's attention that her settlement proposals ([49] and [53]) were ignored. She should be held entitled to her costs.

The company's position 70The company's case, as put by Mr Legg in his submissions, is that the company had, and exercised, its undoubted option to seek, from late 2009, a modification of (aspects of) the order, albeit informally until March 2010 ([56]-[57]). It had also invited Ms Gillespie and her expert to engage in the process of modification. 71The attempt to make it a joint application to Council, by both the company and Ms Gillespie, was not successful, and she proceeded to file her (second) class 4 application. Her purported settlement proposals were not really capable of acceptance, in the sense that it was unreasonable for the company and/or the Council not to respond to them. (See Leichhardt Municipal Council v Green [2004] NSWCA 341). 72The Council eventually accepted the company's representations, and, once the respective experts reached their consensus, the modifications were agreed, and the modified order was put in place. 73Ms Gillespie's proceedings, therefore, achieved nothing. The company was already actively pursuing the modification at the time of their commencement; it defended the present proceedings on the basis that the modification discussions were taking place with the Council; and it put her clearly on notice that those discussions could render such proceedings nugatory. 74However, she would not allow her expert to join the discussions occurring between representatives of the company and the Council (the invitation having been first extended in December 2009, and renewed during February and March 2010), and Bonanno failed to respond to Legg's letter of 3 March 2010 ([32]-[37]), during the three weeks prior to the proceedings being launched. 75What Legg predicted, in his letter of 3 March, would occur (Council's modification of the order) did in fact occur, within a reasonable timeframe from 3 March. Accordingly, these proceedings never had any utility. The more reasonable option for the applicant to pursue would have been constructive involvement in the modification negotiations. 76In now discontinuing her proceedings, the applicant is not simply responding to the " supervening event" (modification of the order), but is abandoning the injunctive relief upon which she had insisted throughout, and would not negotiate. Her proceedings should be seen to have been commenced with the " supervening event " already in her mind. They might not have always been " doomed to fail ", but it would prove futile to pursue that relief if and when the order was modified.

The Council's position 77Mr Wilson put to the court that it is most relevant to note that the Council chose not to file the usual (?) submitting appearance, but filed a defence, and did not seek to have itself removed as a party. The court also notes that the Council had filed no evidence in advance of the planned hearing of the case on the merits. 78On Council's behalf, Mr Webber's submissions noted the long history of the matter, and Council's preparedness to entertain the company's representations. In all those circumstances, the Council did not need to be joined in any of these proceedings - no breach of the law was alleged on its part, no relief was sought against it, and the Council had done nothing wrong - but, having been joined, it could not be said that the Council's active, but tenuous, role in the proceedings, rather than submitting, was " disentitling conduct ". Council remained a party in order to facilitate the discussion already on foot to resolve the impasse with the company, which was of specific concern to the applicant. 79Bonanno's letter to Council dated 9 March 2010 stated that the applicant did not wish to expend further money by having her expert attend a meeting of the other fire experts to settle the terms of a modified order; yet, only three weeks later, she commenced expensive Class 4 proceedings to enforce the original order.

Consideration 80Mr Legg's submissions on the company's behalf are clearly to be preferred over those put by Mr Wilson on the applicant's behalf. 81The company was correct to advise the applicant's solicitor against bringing the proceedings, when the issue of concern to both of those parties was close to resolution with the Council. The commencement of the proceedings at that time was precipitate, and not appropriate. (See Newcastle City Council v Wescombe [2008] NSWLEC 301, at [16]). 82I also find the Council to have been correct in its non-submitting response to being joined in the proceedings. I find its conduct regarding the proceedings both responsible and reasonable, whatever complaint may be made about its attention to the subject matter, outside the court's processes. 83There is no evidence to support the contention that Ms Gillespie's proceedings in any way facilitated or hastened the resolution of the dispute about the order. In fact, it could easily be inferred that her adversarial approach to both the company and the Council may have hindered or delayed such resolution. 84The applicant has been unsuccessful in establishing that the circumstances of the case call for the court to reverse the normal position that a discontinuing applicant should pay the costs of the respondents. She has certainly made out no grounds at all for an award of costs in her favour. 85In those circumstances her NOM, in so far as it deals with costs, should be dismissed. Having been unsuccessful in the main issue she litigated, she should be ordered to pay the respondents' costs of the proceedings, and of the NOM, the costs hearing held on 15 July 2010, and the mention on 28 July 2010.

Conclusion 86As the Council does not press for its costs of the substantive proceedings, and as there is no submission that any of the respondents' costs should be payable on an indemnity basis, the orders of the court will be as follows: 1.Leave is granted to the applicant to discontinue the proceedings. 2.The applicant is ordered to pay the first respondent's costs of the proceedings to date on a party-party basis, as agreed, or as assessed according to law, including the costs incurred by the first respondent on the applicant's NOM, and in respect of the hearings on 2, 9, 15 and 28 July 2010. 3.The applicant is ordered to pay the second respondent's costs on the applicant's NOM and in respect of the hearings on 2, 9, 15 and 28 July, on a party-party basis, as agreed, or as assessed according to law. 4.The exhibits may be returned.

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: 01 March 2011