Gormick Constructions Pty Limited v City of Sydney Council

On 29 June 2001, the proceedings were fixed for hearing on 23, 24 and 25 October 2001.

On 4 September 2001, the Council agreed to the Applicant amending the development application to reduce the number of floors to 7 and the number of flats to 26 and on the same day the Council filed an amended Statement of Issues raising as a new issue whether the existing building erected on the appeal site should be retained, having regard to its social heritage value as a Co-Masonic Temple.

On 23 October 2001, when the hearing commenced, the Council informed the Court that the draft LEP had come into force on 19 October 2001 when the Minister had made the plan (the LEP) and that the proposed development well exceeded the prescribed maximum height limit of 12 metres imposed by the LEP and that the Council had been served on 22 October 2001 with an objection pursuant to State Environmental Planning Policy No 1 - Development Standards (SEPP No 1) prepared on behalf of the Applicant in respect of the maximum height prescribed by the LEP.

The hearing was confined to the consideration of the impact on the appeal of the LEP, the Applicant claiming to be severely prejudiced by the making of the LEP just a few days before the hearing dates and to be additionally prejudiced by the Council's proposal that the existing building on the appeal site be included as a heritage item in the Council's Heritage Local Environmental Plan. Ultimately, and by consent, the hearing was adjourned to 25, 26 and 27 February 2002 upon the Council undertaking to notify the Applicant of any resolution of the Council to prepare a draft LEP to include the existing building on the appeal site as a heritage item. In so adjourning the hearing, I gave the following directions by consent: 1. The applicant to file and serve any Point of Law by 6 November 2001. 2. The applicant to file and serve any Amended SEPP 1 Objection, and any evidence in support of the Amended SEPP 1 Objection or the Point of Law by 23 November 2001. Such evidence, to the extent that it deals with non-expert evidence, to be in affidavit form. 3. The respondent to file and serve any affidavits in reply to the affidavits referred to in paragraph 2 above by 7 January 2002. 4. The applicant to serve written submissions on the Point of Law by 4 February 2002. 5. The respondent to serve written submissions in reply to the Point of Law by 18 February 2002. 6. Experts Reports to be served by 11 February 2002. 7. Experts reports in reply to be served by 18 February 2002.

These directions had been given in response to the foreshadowed submission by the Applicant's Senior Counsel that the Applicant would wish to argue that the concept of "unreasonableness" expressly adopted by SEPP No 1 included the circumstances in which the relevant development standard had come into being, and the manner in which the relevant development standard undermined or prejudiced a pending development application, such as had occurred in the present case.

On 14 December 2001, the Council's Solicitor notified the Applicant's Solicitors that the previous day the Council had resolved to include the existing building on the appeal site as a heritage item in terms of the Heritage LEP.

On 18 December 2001, the Applicant's Solicitor notified the Council's Solicitor that the Applicant wished to continue with its appeal, the subject of the present proceedings, and enclosed two sworn affidavits and an unsworn affidavit. It was also advised that the Applicant's objection pursuant to SEPP No 1 was "amended and supplemented" in the following two ways: Unreasonableness The applicant asserts that the behaviour by Council officers at the pre development meetings in June and July 2000 prior to his purchase of the site was unreasonable, in that they failed ever to advise him of Council's resolution to review the height and floor space standards, which resolution had been made by Council on 5 June 2000, shortly prior to the meetings. Waiver of Standards The applicant will rely on the approval of 17 December 2001 for 52 Regent Street as evidence of Council's waiver of the development standards contained in Central Sydney LEP 1996 (amendment No. 13).

On 7 January 2002, the Applicant's Solicitor advised the Council's Solicitor that the Applicant was prepared to delete some of the residential floors from its current proposal "so that the proposed development fits in with the already approved proposal for No 52 Regent Street" (the adjoining property), and requested that the Council's instructions be sought for the possible resolution of the proceedings by accepting a reduction in the height of the Applicant's proposed development.

On 22 January 2002, the Applicant filed a Notice of Motion seeking leave of the Court that the Applicant be entitled to rely at the hearing of the appeal upon further amended plans in substitution for the originally amended plans. The amended plans depicted inter alia a reduction in the height of the proposed building by two storeys.

On 7 February 2002, Talbot J dismissed with costs the Applicant's Notice of Motion and later that day the Applicant filed its Notice of Discontinuance of the proceedings.

There is, in my opinion, nothing in the foregoing recitation of the history of the present litigation which even remotely suggests any relevant disentitling conduct by the Council. On the contrary, that history clearly indicates a deliberate decision by the Applicant to prosecute the appeal initially (ie in October) in the face of the LEP and ultimately (ie in December) in the face of the Council's decision to include the existing building on the appeal site as a heritage item in terms of the Council's Heritage LEP. This deliberate decision was at all relevant times communicated to the Council's Solicitor.

However, in January 2002, a significant change in the Applicant's case emerged when it initially sought the Council's agreement to resolve the dispute by the Applicant amending the development proposal to render it compatible with the Council's recent approval (in December 2001) of the development on the adjoining property at No 52 Regent Street and thereafter, it sought the Court's leave to rely upon amended plans.

Having failed to obtain either the Council's agreement or the Court's leave for the Applicant to rely upon the amended plans, (depicting a development of a reduced scale and intensity), the Applicant deliberately and unilaterally discontinued the proceedings on 7 February 2002, some 18 days prior to the adjourned hearing dates.

Of course, there can be no criticism of the Applicant in respect of its conduct in the litigation. However, the clear and important fact is that it was the Applicant who deliberately kept the appeal on foot during almost the entire period of the four month adjournment. The deliberateness of the Applicant's decisions throughout this crucial period of the litigation history is highlighted by the fact that it declined three offers (the last of which was open to 10 December 2002) made by the Council throughout this period that the Applicant discontinue the proceedings without any adverse costs consequences. Again, there can be no criticism of the Applicant in declining these offers, but the litigation history so far narrated clearly indicates that the proceedings remained on foot throughout the four month period of the adjournment solely because of the Applicant's deliberate decisions and that the proceedings were abruptly terminated solely because of the Applicant's deliberate decision.

What then, is it that supports the Applicant's resistance of the Council's claim for costs in the proceedings, which prima facie is entirely conformable to the Rules of Court Part II Rule 5?

The Applicant complains of two separate actions of the Council taken at different times. The first action concerns the Council's conduct during the period June/July 2000 when the Applicant and its architect engaged in pre-development application discussions with planners employed by the Council concerning development potentiality of the appeal site (which at that stage had not yet been acquired by the Applicant). Here the Applicant's complaint is that in those discussions, reference was made to the existing development controls in force under the Council's then relevant planning instruments but no reference was made to the fact that in May 2000, the Council had resolved to review the existing height controls and floor space ratio controls applying to a group of adjoining properties known as Nos 50 to 70 Regent Street.

The second action concerns the Council's processing of the draft LEP during the period May to October 2001 which period coincided with the pendency in this Court of the Applicant's appeal pursuant to the EP&A Act, s 97 against the Council's deemed refusal of the Applicant's development application. Here in particular, the Applicant relies upon Council's response to the suggestion from the Department of Planning that the draft LEP, when made, include a savings provision in respect of pending and undetermined development applications.

That response was to recommend that no savings provision be included in the LEP for a number of stated reasons, including the following (which appear in the Report to the Minister pursuant to the EP&A Act, s 69 recommending that he make the LEP): - c) it will undermine the intent and objectives of the Draft Amendment by providing a potential avenue for approval of development in excess of the proposed height and Floor Space Ratio provisions. Should any development be approved in excess of the proposed height and Floor Space Ratio provisions, the character of the entire precinct will be compromised and the heritage significance of the Mortuary Station likely to be adversely affected. Such buildings may subsequently become dominant and intrusive elements in the streetscape adversely impacting on important vistas of the nearby State and local heritage listed Mortuary Station; d) it would likely adversely influence the outcome of two current development applications (for 52 Regent Street and 54 Regent Street) which do not comply with the provisions of the Draft Amendment. The current development application for 52 Regent Street does not comply with the proposed standards in the Draft Amendment, having a height of 18.9 metres and an FSR of 3:1. The development application for 54 Regent Street, which was refused by Council and is the subject of an appeal to the Land and Environment Court, proposes a height of 22.8 metres and an FSR of 4.85:1. These two sites are directly adjacent to the State Heritage listed Mortuary Station and have the most potential to adversely affect its heritage significance. Development of the magnitude proposed in both these instances will undermine the strategic intentions of the City I this precinct as expressed in Draft Amendment No. 13; e) it should be noted that a similar nine storey proposal to that currently subject to appeal at 54 Regent Street was refused by the Central Sydney Planning Committee on 23 November 2000. In this instance, the applicant appealed to the Land and Environment Court and subsequently withdrew the appeal following a judgment on the adjoining site (see point f below). The proponent is the same as for the current 54 Regent Street development application; f) notwithstanding the current Land and Environment Court appeal for 54 Regent Street, the Court has handed down a judgment in relation to a previous appeal against the refusal of a development application for a nine storey building at 52 Regent Street (Land and Environment Court No. 10424 of 2000). This Court judgment upheld the refusal and recognised the importance of the historic setting of the Mortuary Station, which includes 52 and 54 Regent Street. The following is an extract from the judgment: The heritage significance of the Mortuary Station and its setting cannot be overestimated. It is not simply a matter of its diminutive but robust architectural form. It is a matter of its setting and its historical context both on its own account and as part of the adjacent railway complex. Preservation of views of the octagonal spire and fleche are not only criterion which must be satisfied. Regard must be had to the views of the whole of the Mortuary Station in its setting. g) The historic context of the Mortuary Station and views of the spire and fleche will likely be severely compromised should either of the development previously outlines be approved.

In my judgment, neither of these two actions of the Council relevantly constitutes misconduct by the Council in the litigation disentitling it from any order for costs to which it may otherwise be entitled. The first action occurred well before the commencement of the litigation history. Not only is it temporally remote from the litigation, but it is causally unconnected with the litigation. At a time before the Applicant had lodged its second development application with the Council (following its discontinuance of its appeal in respect of its original development application for the appeal site) the Council had resolved in April 2001 to prepare the draft LEP reducing the maximum permissible height and floor space ratio of buildings erected on designated lands in Regent Street (including the appeal site), that resolution thereby effectively superseding its May 2000 decision "to review existing controls" for development of properties known as Nos 50 to 70 Regent Street.

Accordingly, there is no relevant disentitling misconduct on the part of the Council established by the Applicant's evidence of what was, or was not, disclosed by Council's planners in the June/July 2000 pre-development application discussions with the Applicant.

The second action of the Council, likewise in my judgment, does not involve any relevant misconduct by the Council in the litigation, but for different reasons from those relevant to the Council's first action, because clearly the processing by the Council of the draft LEP was both temporally and causally connected with the Applicant's second development application and subsequent pending appeal to this Court. However, these connections do not, of themselves, mean of imply any relevant misconduct by the Council in the litigation by virtue of the Council's role in processing the draft LEP. In so acting, the Council was exercising its statutory functions conferred by the EP&A Act, Part 3.

As I have noted, the Council's decision to prepare the draft LEP preceded the lodgement of the Applicant's second development application for the appeal site. In processing the draft LEP, the Council considered representations received to the public exhibition of the draft LEP, including the representations made by and on behalf of the Applicant. Those representations included a request that a savings provision be included in the draft LEP if and when it was made. Similar representations were made to the Department of Planning on behalf of the Applicant. In the report to the Minister pursuant to the EP&A Act, s 69 the existence of the Applicant's pending appeal to this Court was expressly noted, as was the fact that it had requested the inclusion in the LEP of a savings provision and the fact that the Council was opposed to the inclusion of such a savings provision for the reasons it had advanced. The processing of the draft LEP was transparently fair and reasonable insofar as it expressly recognised the prejudicial impact of the LEP if made by the Minister, on the Applicant's pending development appeal, and gave a reasoned account to the Department of Planning as to why no savings provision should be included in the LEP. The fact that the LEP was made by the Minister without there being any savings provision, when that question was expressly addressed in the s 69 Report submitted to the Minister, inevitably means that the Minister must be taken to have accepted the Council's submissions on this point.

In these circumstances, it is a bold and ultimately impossible task, for the Applicant to make good its complaint that in so processing the draft LEP the Council is to be adjudged as being guilty of relevant disentitling misconduct in the litigation.

Accordingly I find that the Applicant has not established any relevant misconduct on the Council's part which would disentitle it to any order for costs otherwise justified by virtue of the Applicant's discontinuance of the proceedings.

B. THE RELEVANT PRINCIPLES FOR THE EXERCISE OF THE COURT'S DISCRETION ON COSTS WHERE PROCEEDINGS ARE DISCONTINUED

The parties' competing submissions commonly adopt the line of authority that is well established by relevant decisions of this Court in cases involving the discontinuance of a planning appeal especially at a time after it has been fixed for hearing.

Those principles are, in my respectful opinion, aptly collected in the following passage from the judgment of Lloyd J in Menangle Sand and Soil Pty Ltd v Wingecarribee Shire Council (2000) 108 LGERA 209 at 213: The question of costs has been considered in a number of cases where a planning or building appeal has been discontinued without the consent of the other party to the litigation. The following general principles emerge from those cases: a) in planning and building appeals it is first necessary to look for some exceptional circumstance so as to found an order for costs. This is a direct consequence of the Practice Direction to which I have referred; b) ordinarily, the filing of a notice of discontinuance without the consent of the other party to the litigation will satisfy the exceptional circumstance test. This is because the discontinuance usually represents an abandonment of the applicant's claim, so that costs incurred by the other party are necessarily wasted or thrown away; c) a relevant consideration in every case is whether the discontinuance was reasonable conduct on a part of the discontinuing party in the circumstances of the case, such as to negate the ordinary costs consequences of a discontinuance of the proceedings. Such conduct may be based on some action by the other party to the litigation or some supervening event beyond the parties' control. ( Bryant v Lismore City Council , Talbot J 4 July 1997, unreported; Manly Wharf Pty Limited v Manly Council (1997) 98 LGERA 245; Chris Lonergan & Associates v Byron Shire Council , Pearlman J, 27 April 1998, unreported; Gilling v Hawkesbury City Council , Bignold J, 7 May 1998, unreported; David Crane & Associates Pty Limited v Kogarah Council , Lloyd J, 10 June 1998, unreported; Kentgreen Dural Pty Limited v Hornsby Shire Council (1999) 103 LGERA 219; Tobaquero v Campbelltown City Council [2000] NSWLEC 68, unreported).

Immediately following that summary of relevant principles, Lloyd J briefly notes the result in each of the seven cases he had cited. In respect of three of those cases which resulted in costs orders being made against the discontinuing party, Lloyd J makes the following observations at 214, which in my judgment apply to the facts of the present case as I have narrated them - In those cases in which an order for costs was made against the discontinuing party, the discontinuance had occurred well after the case had been set down for hearing and relatively shortly before the hearing date. It is self-evident that in those circumstances the other party to the litigation would have incurred substantial costs in its preparation for the hearing, which costs were necessarily wasted.

The Applicant, in resisting the Council's claim for costs, seeks to invoke principle (c) enunciated in Menangle Sand by submitting that its discontinuance of the proceedings in the circumstances I have narrated, was reasonable conduct on its part, based upon "supervening events beyond the parties' control". Such "events", so the Applicant submitted, were - (i) the coming into force of the LEP just a day or two prior to the fixed hearing dates; (ii) the decision of the Council in December 2001 to include the existing building on the appeal site as a heritage item in terms of the Council's Heritage LEP; (iii) the Council's decision in December 2001 to grant development consent to a development on the adjoining property No 52 Regent Street which did not comply with the height and floor space ratio development standards of the LEP; and (iv) the Council's refusal to agree to the Applicant amending the development application.

The Solicitor for the Applicant submitted that costs incurred up to the commencement of the hearing should not be recoverable because the coming into force of the LEP was a relevant "supervening event" which justified the Applicant's decision to discontinue the proceedings. He also submitted that costs incurred after the proceedings were adjourned likewise should not be recoverable because of the other "supervening events" that I have mentioned.

A formidable difficulty in accepting the Applicant's submissions arises by virtue of the fact that even assuming that the making of the LEP was a "supervening event" which may have justified the discontinuance of the proceedings, the Applicant deliberately chose to keep the proceedings on foot for nearly four months after the occurrence of that supervening event. In other words, the discontinuance of these proceedings does not appear to have been relevantly connected (temporally or causally) with the suggested "supervening event".

A similar difficulty confronts the Applicant's submission based upon the other suggested "supervening events" which occurred during the period the hearing was adjourned.

Firstly, in respect of the Council's decision to grant development consent to development of the adjoining property (No 52 Regent Street) which did not comply with the height controls of the LEP and the Council's decision to include the existing building on the appeal site as a heritage item, the Applicant's immediate response was to inform the Council's Solicitor that the Applicant intended to prosecute the appeal and in that respect to amend its objection pursuant to SEPP No 1. Again the Applicant's discontinuance of the proceedings is not relevantly connected (temporally or causally) with each of these suggested "supervening events".

Secondly, whereas it appears that the Applicant's discontinuance of the proceedings was relevantly connected with the Council's decision not to agree to the Applicant amending its development application (it would be more accurate to conclude that the discontinuance was more obviously connected with the Court's decision to refuse leave for the Applicant to rely upon amended plans), it cannot, in my judgment, be concluded that that was a "supervening event" beyond the parties control and in respect of which they were innocent victims. Rather, the decision of Talbot J refusing leave to the Applicant's Motion to rely upon the amended plans vindicated the Council's refusal to agree to the development application being amended. More importantly, it was a supervening event brought into being by the Applicant's own initiative and desire to amend its development application in circumstances where it was ultimately held that there was no available power vested in the Council or the Court to sanction the Applicant's initiative and desire to so amend its development application.

Returning to the Applicant's suggestion that the coming into force of the LEP was a relevant supervening event which would justify, as reasonable conduct in the litigation, the Applicant's decision to discontinue the proceedings, I am by no means convinced that the coming into force of the LEP was a relevant supervening event, in the sense that it would justify and hence exonerate from any costs consequence, the Applicant's discontinuance of the proceedings because of the existence of that event. This is because the Applicant was aware from the time that it lodged its appeal to this Court against the Council's deemed refusal of its second development application that the Council was processing the draft LEP, the terms of which were publicly exhibited and in respect of which the Applicant had made submissions both to the Council and to the Department of Planning. Given the statutory antecedent processes to the coming into force of the LEP and their temporal coincidence with the making and pendency of the Applicant's appeal to this Court, the Applicant must be taken to have realized throughout the entire process that there was a real risk that the draft LEP would come into force during the pendency of the appeal.

Moreover, the effect of the LEP was not to absolutely prohibit the development proposed by the Applicant for the appeal site in that the relevant height and floor space ratio controls, though considerably more stringent in terms of the LEP, remained amenable to objection under SEPP No 1 and the Applicant's immediate response to the coming into force of the LEP was into lodge with the Council an objection pursuant to SEPP No 1, which objection was before the Court when the hearing commenced on 23 October 2001 and which objection was amended and supplemented by the Applicant in December 2001 at the same time as it notified the Council's Solicitor that it intended to prosecute the appeal.

For all of the foregoing reasons, I must reject the Applicant's submissions that its discontinuance of the proceedings was reasonable conduct in the litigation which should not invoke any adverse cost consequences, because it was induced or caused by "supervening events" beyond the parties' control.

In my judgment, the Applicant's discontinuance of the proceedings in the circumstances of this case was not relevantly "reasonable conduct on the part of the discontinuing party…such as to negate the ordinary costs consequences of a discontinuance of the proceedings" within principle (c) enunciated by Lloyd J in Menangle Sand.

Rather, I find that the discontinuance occurred in circumstances which enliven the application of the ordinary costs consequences that the discontinuing party should pay the costs of the other party: see Manly Wharf, Kentgreen Dural; Tabaquero and Bennette v Byron City Council (2001) 116LGERA 235.

Part 11 r 5 of the Rules of Court may be compared with the provisions of the Supreme Court Rules concerning discontinuance of proceedings. Where pursuant to S.C.R. Part 21 r 2 a plaintiff discontinues the proceedings before the beginning of the trial or hearing, either with the consent of all other parties or with the leave of the Court, the discontinuing party must pay the other party's costs, unless the Court otherwise orders or the notice of discontinuance contains a statement that no order for costs occasioned by the discontinuance will be sought: Part 52A, r 21.

In my judgment, the existence of these Rules places the discontinuance of proceedings (without the other party's consent) in a special category of case from the perspective of the making of costs orders which is to be differentiated from other cases where there is no adjudication on the merits because the case is settled or because further prosecution of the case has become futile: see Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186CLR 622. I attempted to distinguish these different categories of cases in Joanou v Randwick City Council (1998) 105 LGERA 237 where in ordering the discontinuing party in class 4 proceedings to, pay the other parties' costs I rejected the submission that the principles enunciated in Lai Qin should be applied to the discontinuance. That reasoning is equally relevant to the exercise of the costs discretion in a planning appeal which has been discontinued without the consent of the other party. C. ORDERS

For all of the foregoing reasons, I make the following orders -

1. Pursuant to Part 11 r 5(2) of the Rules of Court, the Applicant shall pay the Council's costs occasioned by the discontinuance of the proceedings that were reasonably incurred before service of the notice of discontinuance in the sum agreed or failing agreement as assessed.

2. The Applicant shall pay the Council's costs of the Council's Notice of Motion in the sum agreed, or failing agreement, as assessed.

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