Inner West Council v Sheree Waks

Background facts

1. The procedural history in this matter is lengthy and relevant to the costs application. It is therefore useful to set it out in some detail.
2. The Summons filed on 27 July 2015 sought the following orders: 1. An Order that the respondents and each of them be restrained from using the dwelling situated at Lot 2 in Deposited Plan 592489, 136 Louisa Road, Birchgrove NSW for any purpose other than a dual occupancy as defined by Leichhardt Local Environmental Plan 2013. 2. An Order that the respondents and each of them remove all unauthorised additions and alterations to the dwelling situated at Lot 2 in Deposited Plan 592489, 136 Louisa Road, Birchgrove NSW and restore it to its approved use as a dual occupancy as defined by Leichhardt Local Environmental Plan 2013. 3. An Order that the respondents and each of them remove from the dwelling and curtilage of the dwelling at 136 Louisa Road, Birchgrove NSW ("the property") all goods which are likely to present a significant fire risk to occupants stored or in the property within 28 days of Order. 4. An Order that the respondents and each of them erect a child restraint barrier around the swimming pool constitute on Lot 2 Deposited Plan 592489, 136 Louisa Road, Birchgrove, within 28 days of Order. 5. An Order that the respondents and each of them pay the applicant's costs.
3. The parties attended a mediation before Commissioner Pearson on 26 November 2015, however were unable to reach an agreement.
4. On 2 December 2015, Council filed a Notice of Motion seeking an interim injunction requiring the respondents to remove all occupants other than themselves within fourteen days ('First Motion'). The First Motion was heard by Craig J on 11, 14 and 16 December 2015, with Craig J making orders on 18 December 2015 which reflected an agreement reached between the parties in the following terms ('Consent Orders'): ... 2. An Order that the respondents and each of them be restrained from using the dwelling situated at Lot 2 in Deposited Plan 592489, 136 Louisa Road, Birchgrove NSW ("the Premises") for any purpose other than a dual occupancy as defined by Leichhardt Local Environmental Plan 2013. 3. An Order that the respondents and each of them remove from the dwelling and curtilage of the dwelling at 136 Louisa Road, Birchgrove NSW ("the Premises") all goods which are likely to present a significant fire risk to occupants stored or in the property within 28 days of Order. The Court notes the following undertakings by the respondents: 4. The respondents undertake to remove all timber and debris in the area noted as "Subfloor Area 1" in photographs 9, 10, 11, 12, 14, 15, 15(a) and 15(b) in Exhibit D within 7 days of the date of this undertaking being noted by the Court. 5. The respondents undertake not to use, or allow to be used, any room not approved as a bedroom in Building Permit BA No. 93/157 issued by Council on or about 9 June 1993, for the purpose of a bedroom. 6. The respondents undertake to carry out the schedule of outstanding fire safety works as set out in Annexure "GRS-2" to the affidavit of Graham Richard Scheffers, sworn on 10 December 2015, in accordance with the timeframes recommended at page 2 of that report and to provide the additional certification to Council in accordance with Annexure "A". 7. The respondents undertake to use their best endeavours to evict the person known as Scott Heyde from the premises known as Dual Occupancy No. 2/136 Louisa Road, Birchgrove. 8. Pending final determination of the proceedings, the respondents undertake to permit no more than 7 persons to occupy Dual Occupancy No. 2 noting that the present occupiers are, Rebecca Anne McQueen, Jason Christopher Shepherd and baby Callan, Simon Philips, Russel Withers and Kaphil Niraula. 9. The respondents undertake not to relist the Premises on the website www.airbnb.com.au or any similar website. 10. Costs reserved.
5. Council also informed the Court on 18 December 2015 that it would not be pressing Order 4 of the Summons. Also on that day, Craig J gave further directions for the preparation of evidence.
6. On 22 March 2016, a Building Certificate application was lodged with Council by the first respondent. This related to unauthorised works undertaken at the premises and the relief sought in Order 2 of the Summons. The application was refused on 7 July 2016, and on 22 July 2016 the respondents lodged an appeal against the refusal of the Building Certificate application (proceedings 2016/00221524).
7. On 29 July 2016 a Notice of Motion was filed by Council seeking to consolidate the Class 4 and Class 1 proceedings ('Second Motion'). The Second Motion was heard before Moore J on 19 August 2016, with his Honour refusing to make an order for consolidation and, according to the Court's record, reserving the issue of costs.
8. On 14 November 2016 the Class 1 proceedings were heard before Senior Commissioner Martin, with the appeal being allowed on 23 June 2017.
9. On 14 July 2017, at the request of, and with the consent of the parties, Molesworth AJ dismissed prayers 2 and 4 of the Summons. On 21 July 2017 the respondents filed a Notice of Motion seeking to be released from the undertakings given to the Court on 18 December 2015, noted above in [7] ('Third Motion').
10. The respondents then filed another Notice of Motion on 10 August 2017 seeking orders including the vacation of the hearing date for the Third Motion on 31 August 2017, with Molesworth AJ agreeing to vacate the hearing on 23 August 2017 ('Fourth Motion').
11. The hearing was later set down for 15 November 2017 by Registrar Froh. On 3 November 2017, the respondents advised they did not wish to be released from the relevant undertakings given to the Court on 18 December 2015.
12. Consequently, when the matter came before me on 15 November 2017, the only outstanding issue was costs.

Legislative framework

1. The Court has a wide discretion in the award of costs, as set out in s 98 of the Civil Procedure Act 2005 (NSW) ('Procedure Act'): 98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. ... (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount.
2. Relevantly, this discretion is guided by r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) ('UCPR'), which provides: 42.1 General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.

Evidence

1. The evidence in the proceedings before me comprised a bundle of documents tendered by Council (which included various material and affidavits which had previously been before Craig J), and the transcript of the Court proceedings before Craig J on 11, 14, 16 and 18 December 2015 tendered by the respondents. Council also relied on further new material including the affidavit of Austin John Joseph Thompson, solicitor for Council, dated 10 November 2017. The respondents relied on two affidavits, being the affidavit of Borivoj Maksimovic dated 8 November 2017 and the affidavit of Sheree Waks dated 7 November 2017.

Applicant's submissions

1. Council submits that the relevant legal principles where proceedings have settled are set out in Kiama Council v Grant [2006] NSWLEC 96; (2006) 143 LGERA 441 ('Kiama') at [80]: The principles that emerge from these cases are that in a civil enforcement or judicial review case where there has been no hearing on the merits: (a) where one party effectively surrenders to the other party by: (i) discontinuing without the consent of the other party; or (ii) giving undertakings to the Court or submitting to the Court making orders against the party substantially in the terms or to the effect claimed by the other party; the proper exercise of the costs discretion will ordinarily be to make the usual order as to costs, unless there is disentitling conduct on the part of the other party; and (b) where some supervening event or settlement so removes or modifies the subject of the dispute that no issue remains except that of costs, the proper exercise of the costs discretion will ordinarily be to make no order as to costs unless: (i) one of the parties has acted so unreasonably that the other party should obtain the costs of the action; or (ii) even if both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried so that the party should obtain the costs of the action.
2. Council also relies on the principles in Coffs Harbour City Council v West [2017] NSWLEC 94 at [30]-[40], which summarise the general rules on costs in Class 4 proceedings.
3. In summary, Council submits that the proceedings are a "surrender" case of the first type articulated in Kiama, which is reflected Council submits by the fact that it succeeded in the precise terms of prayer 2 of the Summons. Further, Council submits that the Class 4 proceedings were necessarily commenced and continued, and that Council has incurred unnecessary costs in prosecuting the proceedings over a lengthy period.
4. Council submits that the Class 4 proceedings were necessarily commenced and continued to remedy a breach of the Environmental Planning and Assessment Act 1979 (NSW) ('EPA Act'), and consequential concerns over fire safety. Council notes that there had been a fire at the premises in September 2010, and that the parties' experts in the Class 1 proceedings agreed in their joint report that the building in its current condition was unsafe for a number of reasons, including fire safety.
5. The experts also stated in their report that "...the apparent existing use, as we observed to be occupancy for each of the dwellings by unrelated person, must be resolved." Council notes in this respect that the respondents ultimately accepted that any use of the property for use other than a dual occupancy required additional consent.
6. Council notes that it was successful in requiring the removal of numerous items stored at the premises, therefore succeeding in relation to prayer 3 of the Summons. However, Council submits that, notwithstanding the Consent Orders, the fire safety relief was not secured until appropriate works were performed in 2017 as part of the Class 1 proceedings. Accordingly Council submits that it was proper for it to maintain the Class 4 proceedings pending those works.
7. Council submits that, given its well-founded concerns regarding the use of the building and its fire-safety, Council cannot be criticised for not having acceded to the terms of the respondents' offers to resolve proceedings on 1 December 2015 and 15 December 2015. Council notes the respondents' submission that the matter should have proceeded by way of mediation, however submits that the parties did in fact attend mediation before Commissioner Pearson, which did not yield a successful outcome. Accordingly, Council submits that it was only as a consequence of the Class 4 proceedings and Council's First Motion filed on 2 December 2015 that the respondents engaged a planner and fire safety engineer, following which the Consent Orders and undertakings were made.
8. Council submits however that notwithstanding the Consent Orders and undertakings, Council's Fire Safety Officer, Mr Blaydon, had not as of 11 July 2016 received any certification in respect of additional fire safety works required under Order 6 of the Consent Orders. Council submits that it was only following the building and fire safety works undertaken pursuant to the Class 1 proceedings that further consent orders were able to be entered into on 14 July 2017 that ultimately resolved the issues primarily in dispute.
9. Council disputes the suggestion that it caused the respondents to incur unnecessary costs in the proceedings, submitting that the respondents could have agreed in a far timelier manner to enter into consent orders on similar terms as those to which it ultimately agreed. Council submits that the respondents did not adopt this course based on a misconceived undertaking of their prospects of defending the Summons, and that the respondents' "trenchant and ultimately erroneous view" resulted in Council incurring significant, unnecessary expense.
10. Council submits that the delay in the proceedings arose as a result of the respondents' various absences, and the ongoing difficulty experienced by Council in accessing the premises to conduct inspections necessary to file its evidence. Mr Thompson gives evidence in his affidavit of conversations that he had with the first respondent, Ms Waks, attesting that the preparation of Council's affidavit evidence has been hampered by Ms Waks' reluctance to allow Council officers and experts to access to the property. Council submits that considerable time was spent on the conduct of the matter and multiple appearances were made since August 2016, many of which would have been unnecessary had the respondents permitted access to the premises, worked towards their own preparation for the substantive proceedings, and acceded at an earlier time to the orders sought in the Summons.
11. Council also notes that the parties were required to adjourn on multiple occasions, which, absent illness on the part of the respondents and their legal representatives, was due to the respondents' failure to have regard to the orders of the Court.
12. Council further notes that it sent a letter to the respondents' solicitors on 25 August 2016 about listing of the premises on Airbnb that day, which was also noted in the affidavit of Ms Townsend. Council submits that this took place despite being contrary to the undertakings given to the Court in the Consent Orders. Further, while the respondents depose that neither of them has personally relisted the property on Airbnb and mention a lease to Ms Waks' brother of 2/136 Louisa Road, Birchgrove since June 2016, Council submits that there is no evidence of any such lease.
13. In the circumstances, applying Kiama, Council submits that, there being no disentitling circumstances and Council having been successful on the relief sought in the Summons, costs should follow the event. Council submits that it is entitled to its reasonable costs of bringing and maintaining the proceedings, including the hearing on costs.
14. Indeed, Council submits that not only is there no disentitling conduct of the kind alluded to in Kiama, the present case is of a more serious nature because it involves a fire risk, putting it in a more urgent category.
15. In relation to the usual rule that costs should follow the event, Council submits that the Court would not accept the argument of the respondents that the two Notices of Motion in the proceedings are the relevant event, but rather find the event is the final outcome which Council characterises as "surrender".
16. Council also rejects the submission of the respondents that there was no reply to the respondents' solicitors' letters of 6 July and 16 July, stating that there was a written response after receipt of the first letter and a telephone call between Council and the respondents' solicitors after receipt of the second. Council submits that the respondents got what they wanted; there being a three week period between the receipt of the second letter and Council's institution of proceedings, at any point during which the respondents could have made appropriate concessions in an attempt to resolve the matter.
17. Council submits that the two parties have very different conceptions of the urgency of the action to be taken. In Council's submission, both letters prepared by the respondents' solicitors failed to concede or treat with appropriate seriousness the risk of fire presented by the use of the property. Council submits that the suggestion that the fact of the respondents having replaced the timber floor in the premises with concrete resolved Council's concerns failed to take into account the fuel load in the relevant parts of the building. As such, Council submits its conduct in continuing to agitate the proceedings cannot be disentitling in a Kiama sense.

Respondents' submissions

1. The respondents seek the costs of the proceedings in toto. In the alternative, the respondents seek the costs of and incidental to the First Motion and the Second Motion, and as from 1 December 2015, being the date on which an offer was made by the respondents to Council.
2. The respondents' position is that apportionment is not appropriate in the circumstances. However if the Court were minded to apportion the costs of the proceedings, the respondents submit that there should be a significant discount applied to Council's costs. Regardless of the above, the respondents argue that they should not be required to pay Council's costs of any part of the proceedings.
3. In considering the competing costs applications, the respondents have brought to the Court's attention a number of salient background facts, which are summarised below: 1. The respondents submit that they are the registered proprietors of the premises, and that while they reside in one of the two dwellings, they have no control over the other dwelling which is leased to Ms Waks' brother. The respondents submit that as at the first inspection date, being 18 June 2015, Council officers were given uninhibited access to the property and asked questions of Ms Waks, all of which were answered. The respondents submit that at the second inspection date, 1 July 2015, they informed Council officers that they had plans to depart overseas from 1 August 2015 to 13 October 2015. 2. The respondents submit that they received a letter of demand from Council on 3 July 2015 alleging inter alia, unauthorised works, lack of pool fence, fire hazard and risk due to stored materials and unauthorised use of the property as 11 separate tenancies and change of the building form from a Class 1 to a Class 3 as the result of alterations and additions. The respondents submit that they were threatened with legal proceedings should they not execute the enclosed Deed of Undertaking by 8 July 2015. The respondents submit that their solicitor sent a letter to Council's solicitors requesting an extension to 29 July 2015, to which no response was received. 3. On 16 July 2015 the respondents submit that their solicitors sent a substantive response to the letter of demand, seeking to resolve the matter in good faith. The respondents submit that Council, without providing any notice to the respondents, then commenced these Class 4 proceedings. The respondents submit that the Summons and Points of Claim were served on Ms Waks only on 31 July 2015, being the day before the respondents were due to depart overseas. 4. The respondents submit that it is fundamental to their contention that Council's conduct was oppressive to appreciate the difference between the letter of demand and the Deed of Undertaking sent to them on 3 July 2015 and the relief actually sought in the Summons. Specifically, the respondents submit that all the Deed of Undertaking required was for "All matters stored" to be removed. 5. The respondents submit that they were dissatisfied with how the matter was proceeding, and accordingly attempted to organise mediation between the parties. The respondents submit that Council was unresponsive to their attempts to mediate, and that Ms Waks accordingly approached the Court on 6 November 2015 seeking orders to refer the parties to mediation, which were made. 6. Within this time, while the respondents accept that solicitors for Council sought access to the property to prepare town planning evidence, the respondents submit that access was denied until after the meeting with Council arranged by Mayor Darcy Byrne had occurred, which took place on 11 November 2015. 7. On 26 November 2015 the parties attended mediation facilitated by Commissioner Pearson, and the respondents submit that after the mediation Council sent a confirmation of an offer to the respondents that was made during mediation marked "Confidential and Without Prejudice Save to Costs". Also on 26 November, Council sent to the respondents a letter stating that if the dispute was not resolved to its satisfaction by 2 December 2015, Council would seek an interim injunction to remove all non-owner occupiers from the property within 14 days. The respondents noted that this would include the respondents' own daughters. 8. On 1 December 2015 the respondents made a counter-offer to Council, which consented to the making of the prayers for relief in paragraphs 1 and 3 of the Summons, agreed to infill the pool obviating the need for the fence sought in paragraph 4, and provided for each party to bear its own costs. The respondents submit that this offer ought to have satisfactorily addressed Council's concerns, and brought the proceedings to a conclusion. The respondents submit that Council rejected the counter-offer, and on 4 December sought the interim injunction foreshadowed in its letter dated 26 November 2015. 9. The respondents submit that on 15 December 2015 they made another offer to Council attempting to resolve the proceedings, which they submit ought also to have brought the proceedings to an end.
4. The relevant principles in determining a costs application are, the respondents submit, summarised by Sheahan J in Friends of King Edward Park Inc v Newcastle City Council (No 3) [2016] NSWLEC 74; (2016) 218 LGERA 197 at [78]-[92].
5. Relying on Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 at 543 per Mason CJ, the respondents submit that costs are compensatory not punitive. Further, relying on Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [22], the respondents submit that the costs discretion is to be exercised judicially, "that is to say not arbitrarily, capriciously, or so as to frustrate the legislative intent". The respondents also note the comments of Gaudron and Gummow JJ at [40], [41] and [44] that: [40] There is no absolute rule with respect to the exercise of the power conferred by a provision such as s69 of the Court Act that, in the absence of disentitling conduct, a successful party is to be compensated by the unsuccessful party. Nor is there any rule that there is no jurisdiction to order a successful party to bear the costs of the unsuccessful party. [41] If regard be had to the myriad circumstances presenting themselves in the institution and conduct of litigation, and to the varied nature of litigation, particularly in the equity jurisdiction, it will be seen that there is nothing remarkable in the above propositions. Several examples will suffice. In a suit for redemption, the successful mortgagor, being obliged to do equity, was required to bear the mortgagee's general costs of the suit, unless the mortgagee had forfeited them by some improper defence or other misconduct. One of several joint promisees who refused to be joined as a plaintiff could, after an offer of indemnity against costs, be made a defendant. Likewise an equitable assignor of a present legal chose in action could, on receiving a similar indemnity, be required to permit an assignee to sue in the name of the assignor. However, if the recalcitrant joint promisee or assignor had not been offered the indemnity before joinder as a defendant, the promisor or assignee who had failed to take that step, although otherwise successful in the action, was obliged to bear the costs of that defendant. ... [44] It may be true in a general sense that costs orders are not made to punish an unsuccessful party. However, in the particular circumstance of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs but for costs on a "solicitor and client" basis or on an indemnity basis. The result is more fully or adequately to compensate the successful party to the disadvantage of what otherwise would have been the position of the unsuccessful party in the absence of such delinquency on its part.
6. While the respondents recognise that apportionment of costs is available to the Court, it submits, relying on Cretazzo v Lombardi (1975) 13 SASR 4 at 16 that: The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.
7. The respondents further note the decision of Toohey J in Hughes v Western Australia Cricket Association (Inc) [1986] FCA 382 at 740-748, where his Honour awarded the applicant 75% of his costs on the basis that although he had failed in the majority of causes of actions pleaded, he had succeeded in his primary claim.
8. The respondents submit that there were two events in the proceedings, being the First Motion and the Second Motion. The respondents submit that the Notices of Motion are correctly identified as "events", rather than the proceedings as a whole, as there was no determination on the merits, with the proceedings rather being resolved through compromise. Once the Motions are identified as the relevant events, the respondent submits that Council failed in each of these Motions, and that costs should follow the event such that Council should be ordered to pay the respondents' costs.
9. The respondents submit that neither the First Motion nor the Second Motion was necessary or appropriate and submit that Moore J formally entered orders reserving the question of costs when refusing to grant Council's request that the Class 1 and Class 4 proceedings be merged. In relation to the First Motion, the respondents submit that the relief sought (the eviction of all of the residents save for the respondents) went beyond what was claimed in the primary proceedings. Further, Council submits that agreement was only reached when Council dropped its request that the respondents' daughters be removed from the house after adverse commentary on the relief sought from the bench.
10. The respondents further refer to their offer to Council made on 1 December 2015, and in their written submissions set out a table comparing the offer made as against the orders sought in the Summons. The respondents submit that when compared against the Summons, it is clear that this offer should have satisfactorily addressed Council's concerns and brought the proceedings to an end.
11. The respondents further submit that Council has engaged in disentitling conduct. First, the respondents submit that the manner in which the proceedings were commenced and managed failed to afford procedural fairness to the respondents, and failed to engage with the real issues therefore leading to costly and time-consuming litigation. The respondents submit that this conduct is indicated by: 1. the deadline in the letter of demand which gave the respondents only three business days to respond to serious and complex matters; 2. Council's failure to respond to the respondents' solicitors' request for an extension of time; 3. Council's failure to respond to the respondents' letter regarding the letter of demand dated 16 July 2015, with Council instead initiating proceedings, waiting four days to serve the Court documents, and serving the respondents the day before they were due to depart overseas; 4. Council's failure to communicate with the respondents with a view to settling the matter and minimising costs on both sides, with it only being with the assistance of Councillor Darcy Byrne that the respondents were able to meet with Council; 5. the failure of Council officer, Mr Bonanno, to provide information relevant to the dispute when requested by Ms Waks in advance of the mediation; 6. Council's failure to accede to many requests for mediation made by Ms Waks.
12. With reference to Hillpalm Pty Ltd v Tweed Shire Council & Anor [2002] NSWLEC 17; (2002) 119 LGERA 86, the respondents submit that the granting of extra time after receipt of the respondents' solicitors' letters gave rise to a legitimate expectation that Council would take those matters into account and that the respondents would receive a response before Council instituted proceedings.
13. Furthermore, the respondents submit that the fact that Council commenced proceedings without making an application for expedition or any other interlocutory relief undermines Council's argument that it wanted to commence proceedings as quickly as possible owing to the risk of fire at the premises.
14. Second, the respondents submit that Council did not act in accordance with the Model Litigant Policy for Civil Litigation, particularly paragraphs 3.1, 3.2(a), (c), (d) and (e).
15. Third, the respondents submit that Council has failed to act in accordance with the overriding purpose of just, quick and cheap resolution to proceedings pursuant to ss 56-58 of the Procedure Act. The respondents rely on Kunc J's decision in Ken Tugrul v Tarrants Financial Consultants Pty Limited ACN 086 674 179 (No 5) [2014] NSWSC 437 ('Ken Tugrul') where his Honour held that, when having regard to s 56 of the Procedure Act, parties are required to engage in prompt, courteous and genuine cooperation with the firm intention of resolving interlocutory issues without, as far as possible, involving the processes of the Court. The respondents submit accordingly that Council failed to conduct itself in this way.
16. Fourth, the respondents submit that if the matter were in the Federal Court and the Civil Dispute Resolution Act 2011 (Cth) ('Commonwealth Dispute Act') were applicable, Council would have failed to have undertaken genuine steps and accordingly would not be entitled to its costs. While the respondents accept that this Act is not applicable, the respondents submit that the conduct it is endeavouring to prompt should be encouraged in respect of Council as a public authority and model litigant.
17. Fifth, the respondents submit that Council acted unreasonably in its heavy-handed and punitive approach to the proceedings. The respondents submit that this is demonstrated in issue 2 of the Deed of Undertaking, which was excessive and overreaching in comparison to paragraph 3 of the Summons. This is further demonstrated, the respondents submit, by Council's conduct in attempting to evict the respondents' daughters from the property.
18. Sixth, the respondents submit that Council's disentitling conduct is evidenced by its failure to accept the respondents' offers dated 1 December 2015 and 15 December 2015. Instead, the respondents submit that Council pressed unrelated and separate prayers in the First Motion that did not form part of the proceedings as articulated in the Summons.
19. Seventh, the respondents submit that the matters raised in the Summons could have been addressed by Council making orders under s 124 of the Local Government Act 1993 (NSW). The respondents submit that adopting such a course would have avoided the need for litigation and saved significant costs and time.
20. In oral submissions, Mr Baird, solicitor for the respondents, submitted that whilst Council would be entitled to its costs in the ordinary course, three elements of its conduct made that inappropriate in the present case: 1. Council's demands and requirements to enter deeds went beyond what they sought in the Summons; 2. Council acted unconscionably by demanding that the building be cleared of all occupants apart from the respondents, and continuing to press this claim when informed of the fact that the respondents' daughters were in that class and informed of the distress this caused; and 3. To the extent that Council achieved what it originally sought in the Summons, it was Council's conduct which prevented that outcome from being reached sooner.
21. For the reasons set out above, and in the circumstances, the respondents submit that the proceedings were unnecessary, and that Council's conduct did not seek to reduce costs and ensure that the dispute resolved in a timely manner.

Consideration

1. The principles relating to the Court's exercise of discretion with respect to costs are uncontroversial, and I accept the submissions of the parties as to the law to be applied. I note particularly those passages of Kiama extracted above at [19].
2. It was properly conceded by the respondents that in the circumstances that Council achieved the orders which it originally sought in the Summons it has a prima facie entitlement to costs. However, as Preston J held in Kiama, disentitling conduct on the part of the successful party will warrant a departure from the usual order that costs follow the event (UCPR r 42.1).
3. For the reasons that follow, I do not find that Council's conduct prior to or during the proceedings was disentitling as per the test enunciated in Kiama.
4. First, whilst I accept that the demands originally sought by Council in their first letter go beyond what was sought in the Summons, I do not find this to be determinative. It is clear that between the communication made by the respondents' solicitor to the Council and the institution of the proceedings, there was some communication between the parties, but it is unclear on the evidence before the Court exactly what was said.
5. On the evidence that was before me, I can note that in response to the first letter of the respondents dated 6 July 2015, a letter from Council's lawyers was received on 8 July 2015, granting a week's extension to the time for the response. The formal reply received to Council's letter of 3 July 2015 was received on 16 July 2015. I note that this letter made no concession in relation to fire safety, and stated "the property as it presently stands does provide a high standard of fire safety." I further note that subsequent expert material shows that this was not the case.
6. Between receipt of the letter on 16 July 2015 and the filing of the Summons on 27 July 2015, it is agreed there was a phone call between the respondents' solicitors and Council. There is no evidence as to what was said during that call.
7. In any event, some three weeks was given between receipt of the first letter and the filing of the Summons. Relevantly, as stated above, in the letters of the respondents' solicitors, there had been no concession by the respondents on the point of fire safety which was a real concern of Council. In those circumstances, I find that it was not unreasonable or disentitling for Council to commence proceedings.
8. Secondly, whilst I appreciate that offers of compromise were made I do not consider these to be determinative in any way.
9. Council's offer, detailed in a letter dated 26 November 2015, was that Orders 1, 2 and 3 sought in the Summons be made instanter; that the respondents do all things necessary to remove occupiers other than the respondents; that the respondents comply with conditions of their building permit within six months; and that there be no order as to costs.
10. The respondents' counter-offer dated 1 December 2015 was that Orders 1 and 3 in the Summons be made; that a Building Certificate application be made in relation to Order 2 not later than 23 December 2015; that the balance of works required to comply with the outstanding consent conditions be completed within 90 days of the agreement; that the swimming pool be "in-filled"; and that there be no order as to costs.
11. The difference between the offer and the counter-offer is essentially the terms of compliance with Order 2. I appreciate that the unauthorised works were of real concern to Council and were of significant importance both in relation to the unauthorised use and the fire safety concerns. Ultimately, the unauthorised works were regularised some months later by way of an order of this Court allowing an appeal against the refusal of a Building Certificate application. The fact that this decision was reached does not lead me to find that it was unreasonable for Council to have refused an offer which contemplated that course of action given the concerns it had at the time.
12. A second offer was made by the respondents on 15 December 2015. The terms of that offer were that: the First Motion be dismissed; that the respondents consent to the making of Order 1 in the Summons and discontinue any use of the premises other than as dual occupancy unless and until further development consent was granted; the respondents lodge a development application for three residential apartments to be configured within floors one to four of the premises; that the respondents carry out the work recommended by Mr Scheffers, the respondents' fire safety expert, in his report in accordance with the timetable he recommended; that Mr Heyde be evicted from the premises; and costs of the First Motion be reserved. I note that according to the transcript of the proceedings before Craig J, this was an offer to settle the First Motion rather than the entire proceedings.
13. In any event, I do not consider the terms of the second offer to be more generous than that of the first. Indeed, it appears to contemplate less fulsome compliance with Order 3 sought in the Summons than the first offer. In those circumstances, I do not consider that Council's decision to refuse the second offer was unreasonable.
14. Thirdly, I note that there was some criticism of the way in which the First Motion, seeking the removal of the residents from the premises apart from the respondents, was formulated. However, I note in this regard that Council was unaware of precisely who was living in the premises at that point in time, and that the First Motion was in some respects a "catalyst" towards the parties settling the substantive dispute.
15. In relation to the proposed order that the respondents' daughters be evicted from the premises, I appreciate that this was a real concern which understandably caused the respondents distress. However, I take note of the fact that Council was not aware at all times exactly who was residing at the premises and that ultimately the order was not pressed. It is not a matter which tips the balance in favour of the respondents.
16. Fourthly, I do not accept that it was unreasonable for Council to have sought to amalgamate the Class 1 and Class 4 proceedings. There was some confusion as to whether Moore J made a formal order reserving the question of costs in the Second Motion. I accept the Short Minutes of Order on the file do not canvass the question of costs, but the Court file and records otherwise indicate that Moore J made a separate order on that occasion formally reserving the question of costs. I note that Mr Baird appeared in Court for the respondents on that occasion and the records are consistent with his recollection of events.
17. In those circumstances, where the Second Motion was dismissed but where I find there was some merit, and indeed some potential costs savings, in the course Council pursued, I find it appropriate to order that there be no costs order in respect of the Second Motion. I am strengthened in that view by the fact that the Motion involved Class 1 proceedings where the usual course is that there be no order as to costs. Whilst the Second Motion to merge the proceedings was instituted in the Class 4 proceedings, I find that it is an appropriate exercise of the Court's discretion to order no costs on that occasion.
18. Fifthly, I do not accept the submission made by the respondents that Council's conduct precluded the parties from reaching an agreement earlier. In this regard, I note that no concession was made in correspondence received by Council that there was a fire risk associated with the respondents' use of the premises.
19. Although I accept that the respondents through their solicitor genuinely sought to have the matter resolved, Council was entitled to continue to seek the relief it had claimed especially as it involved proper and full compliance with appropriate applicable environmental planning laws which related to actual use, compliance with conditions of consent of an earlier approval, fire safety, and structural and building concerns as detailed in various of the joint reports, including the joint expert report of Graham Scheffers and Brett Daintry dated 10 November 2016.
20. Further, although I note that the fire safety expert retained by the respondents, Mr Scheffers, in an expert report prepared for the respondents, referred to further work which had been undertaken by the respondents which had significantly reduced the fire safety risk to the "current occupants", I also note that Council had before it advice from its own fire safety officer, Mr Blaydon. In an email to Council's solicitor of 15 December 2015, Mr Blaydon disputed that there had been substantial reduction in fuel loads in various areas of the premises, and that there had been no significant reduction in the amount of materials stored in various "unauthorised storerooms" and other unapproved "sub-floor storage spaces" which, it was stated, contributed to the amount of combustible material in an area where there had been an earlier fire in 2010.
21. Mr Blaydon had prepared a table detailing areas of the various levels of the premises where building work had been carried out that was not in accordance with the earlier approval. He noted that the unauthorised work "enables the premises to be divided and used as multiple sole occupancy units".
22. In addition to the above and in response to the contention raised by the respondents that Council was unwilling to mediate, it is clear that the parties participated in mediation facilitated by the Court which led to further discussions between the parties. The fact that the mediation did not result in a resolution is not, on its own or combined with other matters referred to above, sufficient to amount to disentitling conduct.
23. In relation to the respondents' submission that Council adopted a "heavy-handed and punitive" approach, I accept that Council was entitled to take a firm position in relation to the matters about which it was concerned which related to compliance with the relevant planning schemes combined with public health and safety matters. Whilst I accept Council's position may have caused some concern if not distress to the respondents, I do not find that Council's conduct was manifestly inappropriate in relation to the matters about which it retained concerns.
24. In making that finding, I have had regard to Kunc J's decision in Ken Tugrul as well as the Model Litigant Policy for Civil Litigation. I also considered the Commonwealth Dispute Act to the extent that it informs Council's responsibilities as a model litigant. The respondents correctly conceded that the Commonwealth Dispute Act is not strictly applicable in these proceedings. I accept that as a public authority Council has responsibilities which go beyond that of private litigants. However, it is also tasked with the important role of ensuring compliance with environment and planning laws which involve public purposes relating to matters such as safety. Council's responsibility as a model litigant does not mean that it is prevented from taking a firm, albeit reasonable, position in relation to enforcement of those public purposes.
25. With respect to the issue of apportionment, the respondents directed me to the decision of the Court of Appeal in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 in which the Court stated at [38]: The principles governing the making of an order as to costs so as to reflect the time taken in dealing with a particular issue in which the successful party in the proceedings or on the appeal did not succeed were reviewed by this Court in Elite Protective Personnel Pty Ltd & Anor v Salmon (No 2) [2007] NSWCA 373. Those principles may be summarised as follows: - Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported). - In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal. - If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 at [27]. - Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: State of New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed). - A separable issue can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34]. - Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272.
26. I accept these principles. The difficulty for the respondents in arguing that apportionment should apply in the present proceedings is that this is not a matter where the issues won were split evenly between the parties. Rather, I find that it is a case of surrender similar to that dealt with in Kiama. Therefore the default position is that costs follow the event except in the circumstance of disentitling conduct on the part of Council.
27. In all of the above circumstances, and in spite of the detailed and careful submissions made by Mr Baird, I do not consider that Council's demands and requirements amounted to disentitling conduct. Therefore, I do not consider that it is appropriate to deal with costs on any apportionment basis, save for the fact that, as outlined above, I consider that there should be no order for costs in respect of the Second Motion.

Orders

1. The Court orders that: 1. The Notice of Motion is dismissed. 2. There is no order for costs in respect of the Notice of Motion heard before Moore J on 19 August 2016. 3. The respondents are otherwise to pay the applicant's costs.

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: 29 March 2018