Janssen v Qureshi

Land and Environment Court (NSW)|2022-03-29|Before: Pain J

Judgment

Mr Brett Janssen and Ms Morna Lynch the Applicants commenced Class 4 proceedings on 15 September 2021 seeking interim injunctive relief, a declaration that a construction certificate is invalid and a final injunction restraining Ms Maureen Qureshi, Mr Christopher Qureshi and Ms Tiana McSevney the Private Certifying Authority (PCA) (the Respondents) from carrying out certain building works. The Third Respondent did not appear or take any role in proceedings. The First and Second Applicants and the First and Second Respondents are next door neighbours in Birchgrove, Sydney. The proceedings were finalised on 25 November 2021 without progressing to a final hearing when the Court made consent orders granting leave to the Applicants to discontinue the proceedings subject to costs. The orders of 25 November 2021 stated there was to be no order as to costs as between the Applicants and the Third Respondent Ms McSevney.
The factual context of these proceedings is that in July 2019 the Respondents lodged a development application which included a two-storey extension to the rear of the property which was approved by the Inner West Council (the Council) subject to conditions on 8 April 2020 (D/2019/252, the original development consent). A modification application was lodged by the Respondents on 25 August 2020 (MOD/2020/0293, the First Modification Application) seeking consent for a further single-storey extension at the back of the two-storey extension approved by the original development consent, to be set back 609 mm from the boundary. This was approved by the Inner West Planning Panel (IW Planning Panel) on 2 February 2021 subject to conditions including Condition 7(l). A Second Modification Application (MOD/2021/0238) was submitted on 21 June 2021 seeking clarification of Condition 7(l) inter alia.
The Applicants commenced proceedings by way of summons filed 15 September 2021. The legal basis for the summons was s 6.32 of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act) according to the Respondents' legal representative. That section provides a construction certificate inter alia may be declared invalid if not consistent with a development consent: s 6.32(b). Proceedings seeking such relief must be commenced within three months of the issue of the construction certificate: s 6.32(a). The summons does not expressly refer to s 6.32. The construction certificate was said to have been invalid on the basis that it was inconsistent with Condition 7(l). The Applicants discontinued proceedings on 25 November 2021.
The Respondents sought an order that the Applicants pay all their costs on an indemnity basis, or in the alternative, on an ordinary basis. The Applicants submit that the appropriate costs order is that each party pay their own costs.

Summons

The summons filed by the Applicants on 15 September 2021 stated as follows: Interlocutory Relief … 5 An order that the First and Second Respondents be restrained until further order (1) from themselves or by their employees, contractors, servants or other agents, (2) from carrying out any building work at No. 95 Grove St, Balmain ("No. 95"), that is (a) for the purpose of enabling the construction of, or (b) the construction of, a south western wall at or near the boundary (the "Boundary") No. 95 and No. 93 Grove St, Balmain ("No. 93") which is not set back a minimum of 900mm from that boundary. Final Relief 6 The Construction Certificate issued by the Third Respondent, dated 15.07.2021 and numbered 21/0411/01 , for the doing of building work at No. 95 (the "Construction Certificate") be declared (1) invalid, or (2) alternatively, invalid to the extent that it authorises building work at No. 95 for the construction of a south western wall that is not set back a minimum of 900mm from the Boundary. 7 An order that the First and Second Respondents be restrained (3) from themselves or by their employees, contractors, servants or other agents, (4) from carrying out any development at No. 95, that is (c) for the purpose of enabling the construction of, or (d) the construction of, a south western wall of which is not the set back a minimum of 900mm from the Boundary. 8 Costs. 9 Such further or other orders as the Court thinks fit. DETAILS OF DECISION 10 The Third Respondent, (1) as the principal certifying authority for development of No. 95 in accordance with a modified development approval No. MOD/2021/0293 dated 02.02.2021 (the "Modified Development Approval"), (2) issued the Construction Certificate. 11 By reference to the Approved Architectural Drawings specified in its section 3 and issued with it, the Construction Certificate authorised the development of No. 95 by the doing of building for the construction of a south western wall that was not for the entirety of its length set back from the Boundary by at least 900mm. GROUNDS 12 Condition 7(l) of the Modified Development required "Prior to the issue of a Construction Certificate, the Certifying Authority must be provided with amended plans demonstrating the following: (I) The setback of the south western wall shall be increased to be a minimum of 900mm from the boundary." 13 The Construction Certificate including the plans and specification referred to in it was required to, but did not, comply with Condition 7(l) of the Modified Approval. 14 In the premises in 12 and 13, the plans and specifications specified in the Construction Certificate were not consistent with Condition 7(l) of the Modified Development Approval, and it was, or was to that extent, invalid.

Condition 7(l) and amended Condition 7(l)

The IW Planning Panel approved the Respondents' First Modification Application on 2 February 2021 subject to Condition 7(l), which is set out above in [5] at paragraph 12 of the summons.
On 12 December 2021 the Respondent's Second Modification Application lodged 21 June 2021 which sought clarification about the meaning of Condition 7(l) inter alia was determined by the IW Planning Panel and approved. Condition 7(l) was amended to read: [t]he setback of the rearmost 3.949m single storey portion of the south-western wall of the rear additions be a minimum of 900mm from the side boundary.

Principles concerning costs where no final hearing

As there was no final hearing of the issues in dispute between the parties there is no 'event' to guide the consideration of costs. The general approach in such circumstances is that each party pay their own costs unless there is some disentitling conduct which suggests a different order ought to be made: Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 (Nichols) at [30].
Exceptions to this approach include where one party was almost certain to succeed, or a party has acted so unreasonably that the other party should obtain their costs: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 (Lai Qin) at 624-625 (McHugh J); Kiama Council v Grant (2006) 143 LGERA 441; [2006] NSWLEC 96 (Kiama) at [80] (Preston CJ).
The authorities draw a distinction between cases in which a party surrenders and those in which the matter concludes because of a supervening event. In ONE.TEL Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 (ONE.TEL) at [6] Burchett J stated the following: 6. In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs...
In Kiama at [55] Preston CJ endorsed this distinction as a way of explaining the decisions of this Court in relation to costs in civil enforcement or judicial review proceedings in Class 4. At [78] Preston CJ stated: 78. However, even in this second type of case, it may still be appropriate to make an order for costs where one of the parties has acted so unreasonably that the other party should obtain the costs of the action (Re Minister for Immigration and Ethnic Affairs: Ex parte Lai Qin (1997) 186 CLR 622 at 644) or one party was almost certain to have succeeded if the matter had been fully tried: Qin at 625.

Indemnity cost principles

In Colgate-Palmolive Co v Cussons Pty ltd (1993) 46 FCR 225; [1993] FCA 801 (Colgate-Palmolive) at 232-233, Sheppard J identified principles and guidelines from the authorities which are relevant to the award of indemnity costs: It seems to me that the following principles or guidelines can be distilled out of the authorities to which I have referred:- … 4. In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v. Barnes (39 Ch D at 141) said the Court had a general and discretionary power to award costs as between solicitor and client "as and when the justice of the case might so require." Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v. Preston ((1982) 1 All ER at 58) namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo, "The categories in which the discretion may be exercised are not closed". Davies J expressed (at 6) similar views in Ragata. 5. Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v. Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v. Hutchinson (1987) 10 NSWLR 525, Maitland Hospital v. Fisher (No. 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal), Crisp v. Keng (Supreme Court of New South Wales, 27 September 1993, unreported, Court of Appeal) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis. 6. It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice. …

Factual context

The parties read three affidavits, which overlapped to a very large extent, concerning the events leading up to the commencement of and during the litigation being the affidavit of Ms Qureshi dated 13 December 2021 and two affidavits of Mr Janssen dated 15 September 2021 and 31 January 2022. The material exhibited to Ms Qureshi's affidavit was Exhibit 1, and that exhibited to Mr Janssen's affidavits were Exhibits A and B respectively.
The parties have agreed on a detailed chronology based on these affidavits, which I will use as the relevant factual basis for my consideration: Joint Chronology 03.07.2019 Development application lodged (D/2019/252) 08.04.2020 D/2019/252 approved by Inner West Council, subject to conditions 25.08.2020 Modification application MOD/2020/0293 lodged (First Modification) 17.09.2020 Mr Janssen's [sic] objects to First Modification January 2021 Egan Development Assessment Report 02.02.2021 Inner West Planning Panel Meeting Transcript Inner West LPP approves First Modification. 02.02.2021 • Condition 7(l) imposed: '[t]he setback on the south western wall shall be increased to be a minimum of 900mm from the boundary' 02.02.2021 First Modification Stamped Consent 02.02.2021 First Modification Notice of Determination Minutes of Inner West Planning Panel Meeting: 02.02.2021 'The Panel supports the findings contained in the Assessment Report and resolves that the application be approved as per the recommendation contained in the report, subject to the following changes: That the following condition be added as new part (l) to existing Condition (7): The setback of the south western wall shall be increased to be a minimum of 900mm from the boundary.' Undated Mr and Mrs Qureshi instruct draft person Mr Edward Sarafian of ED Design to amend the plans to reflect condition 7(l). 01.03.2021 Email from Chris Qureshi to Eamon Egan (Inner West Council) seeking clarification as to the meaning of condition 7(l). May 2021 Conversation between Mr Janssen and Mr Qureshi regarding the parties' differing views about which parts of the south-western wall must be set back 900mm. 03.06.2021 Mr Janssen & Ms Lynch's solicitors (Kardos Scanlan) write to Council copied to Mr and Mrs Qureshi seeking a resolution about condition 7(l). 21.06.2021 Second modification application lodged by Mr and Mrs Qureshi, letter from Mr Edward Sarafian requesting to clarify condition 7(l) (MOD/2021/0238). 08.07.2021 Second Modification Application notified: Undated Council uploads documents relevant to the modification application to its website: • Proposed change to condition 7(l) not included in the documents available on Council's DA Tracker. 14.07.2021 Plans submitted to the Principal Certifying Authority showing a 900mm setback only for the single-level portion of the south-western wall. 15.07.2021 Construction certificate issued. • Approved plans show 900mm setback only for the single-level portion of the south-western wall. 26.07.2021 Mr Janssen objects to Second Modification Application 26.07.2021 Works commence on site (not to the south-western wall). 03.08.2021 Letter from Applicants' solicitors to PCA, copied to Mr and Mrs Qureshi: • 'our client of course expects the development to proceed in accordance with the conditions of consent' 25.08.2021 Mr and Mrs Qureshi's builder (Craig Harkins of Hall Group) gives notice of proposed excavation works: • Works expected to commence 6 September 2021. 25.08.2021 Mr Janssen sends an email to Craig Harkins of Hall Group (Mr and Mrs Qureshi's builder) seeking confirmation that the excavations for the south-western wall will be set back 900mm. Mr and Mrs Qureshi's builder writes to Council in relation to the commencement of building works. That email was cc'dd to Mrs Qureshi and stated that: 25.08.2021 • 'I am writing in response to complains [sic] received by our client Maureen Qureshi and Inner West Council' • Hall Group 'do not see any valid reasons for works on site not to commence'. 26.08.2021 The builder sends a letter to Mr Janssen requesting access to 93 Grove Street, stating that the "new wall" would be set back 900mm from the boundary as per the DA conditions. Mr Janssen writes to the builder: 27.08.2021 • requesting written confirmation that the two-storey and one-storey elements will be set back 900mm; and • identifies the modification application is still undetermined. The builder writes to Mr Janssen stating: 31.08.2021 • the builder is 'satisfied that we can proceed… as per the stamped drawings that the Construction Certificate was issued against' • if Mr Janssen has a problem with the approval, to direct any queries to the 'relevant parties' (Council and the PCA) 06.09.2021 Letter from Mr Janssen's solicitors (Kardos Scanlan) to Council. 07.09.2021 Email from Council to Kardos Scanlan: • The PCA is 'responsible for the subject development … and any concerns that may be raised' 08.09.2021 Letter from Kardos Scanlan to Council 08.09.2021 Email from Kardos Scanlan to PCA 09.09.2021 Email from Council to Kardos Scanlan Email from Tiana McSevney to Kardos Scanlan stating: 13.09.2021 • "I am certainly aware of your client's opinion and interpretation of DA Condition 7(l)." • In response, may I point out that Condition 7(l) was added as part of Section 4.55 Mod/2020/0293 and relates only to the extent of the modification the subject of Section 4.55 Mod/2020/0293." 15.09.2021 Mr and Mrs Qureshi apply for a standing plant permit for a mobile crane to lift 'excavator, cherry picker, etc.'. Application states commencement and finish date of '22-Sep-2021'. 15.09.2021 1. Proceedings commenced ex parte seeking orders for short service. 2. Service affected [sic] on Mr and Mrs Qureshi 16.09.2021 1. Mr and Mrs Qureshi give undertaking not to carry out works for south-western wall within 900mm of boundary until 8 October 2021. 2. Directions made by consent to progress claim for interim relief to hearing. Without prejudice letter from Mr & Mrs Qureshi to Mr Janssen & Ms Lynch: • Mr and Mrs Qureshi contend: the letter contained an offer to discontinue with no order as to costs; 06.10.2021 • Setting out Mr and Mrs Qureshi's position on condition 7(l); • Attaching the terms of the modification to condition 7(l); • Stating that Council does not expect the modification to be considered before November, and that 'it seems likely that the Court will determine the issue of the current wording of condition 7(l) before Council has a chance to consider the issue. If the Court finds in our favour, we will withdraw the request for clarification from the Council. Similarly, if we are able to resolve the dispute between ourselves further clarification from Council will no longer be necessary'. 08.10.2021 1. Proceedings set down for interlocutory hearing on 8 November 2021; 2. Mr and Mrs Qureshi extend undertaking to 8 November 2021. 15.10.2021 Period in s 6.32 of the EPA Act for commencement of the proceedings expires. Undated Egan Development Assessment Report relating to Second Modification Application End October 2021 Mr Janssen becomes aware that the Modification Application was to be considered by the Panel on 9 November 2021. Start November 2021 Mr and Mrs Qureshi's solicitors were informed by Mr Janssen and Ms Lynch's solicitors of the date for the Panel meeting. 05.11.21 1. Interlocutory hearing regarding interim relief vacated by consent 2. Undertaking extended to 15.11.21 08.11.2021 Interlocutory injunction listed for hearing - vacated by consent 1. Modification application approved by Panel. Condition 7(l) amended to read: 12.11.2021 '[t]he setback of the rearmost 3.949m single storey portion of the south-western wall of the rear additions be a minimum of 900mm from the side boundary'. 2. Mr and Mrs Qureshi offer to resolve the proceedings on the basis that Mr Janssen and Ms Lynch pay costs on an ordinary basis. 15.11.2021 1. Mr Janssen and Ms Lynch indicate willingness to discontinue on the basis that each party pay their own costs. 2. Mr and Mrs Qureshi's solicitors indicate that they are instructed to seek indemnity costs 18.11.2021 Mr Janssen and Ms Lynch offer again to discontinue on the basis that each party pay their own costs. 24.11.2021 Proceedings discontinued by consent.

Respondents' submissions

The Respondents seek an order for costs on an indemnity basis or, alternatively on an ordinary basis. Firstly, the Respondents were almost certain to have succeeded on the merits of their case and, secondly, the Applicants unreasonably commenced and carried on the proceedings. These two matters give rise to an entitlement to indemnity costs.

There was no supervening event

The timing of the IW Planning Panel decision in relation to the Second Modification Application was the inevitable culmination of a process set in motion three months prior to the filing of the summons, namely the Respondent's Second Modification Application of 21 June 2021 in which clarification of Condition 7(l) was sought. In context, the commencement of this litigation by summons filed on 15 September 2021 intervened in the Council's process of deliberation, not the other way around.

Certainty of success on the merits

A court will not be hearing a hypothetical case within the meaning of McHugh J's comments in Lai Qin simply where there is no hearing on the merits. A hypothetical case is to be understood as one in which the court has to assume certain facts to conduct the analysis, such as where evidence is not before the court or contested (Tcpt, 29 March 2022, p48(1-3)). In this case, all the facts are before the Court in documentary form and the construction process of the consent is an objective one. In Ansted v Northern Beaches Council [2021] NSWLEC 136 (Ansted), relied on by the Applicants, Duggan J had disputed facts before her: at [30] (Tcpt, 29 March 2022, p49(5-12)). The same is true in Nichols: at [22]. The language of Basten JA in Nichols at [3] is useful for determining what a hypothetical case would be; that is, it is a case in which success cannot be made "manifest on the face of the record" (Tcpt, 29 March 2022, p49(34-44)-50(3-18)).
As concerns success on the merits, the Applicants' complaint appears to be that the construction certificate approves plans that do not (on their case) comply with Condition 7(l), in that the two-storey section of the building along the south-west wall is not set back 900 mm from the boundary.
That position is flawed because the two-storey extension was approved by the Council on 8 April 2020 as part of the original development consent, whereas Condition 7(l) related solely to the First Modification Application approved on 2 February 2021. The First Modification Application approval did not touch the footprint of the original development consent.
The limited scope of the First Modification Application was made clear by the Council's Assessor, Mr Eamon Egan, in his Development Assessment Report. In that report, he specifically assessed an objection by Mr Janssen relating to the setback for the second storey, stating: The objection appears to refer to the approved two storey section of the originally approved additions that are not the subject of the modification application.
The Council's position was reinforced by the Chair of the IW Planning Panel on 2 February 2021 who explicitly told one objector: I don't want to get you upset by my interruption, but I just want to make sure that you don't end up addressing what has already been approved because that is not up for discussion today, the only thing that is up for discussion is the modification application.
Moreover, at the IW Planning Panel meeting Mr Janssen acknowledged that the Council was not dealing with the original development consent: Mr Chair, we are cognisant that the panel is only considering the modifications of the ground floor addition that seeks to increase its footprint by moving it 1.5m rearward and 1.3m closer to our boundary.
The Respondents complied with Condition 7(l) by amending the plans to ensure that the setback for the wall approved by the First Modification Application was increased from 609 mm to 900 mm. Those plans, as amended, were provided to Ms Tiana McSevney PCA who then issued the construction certificate. When the dispute over the construction of Condition 7(l) arose between the parties, the Respondents approached Mr Egan for guidance. Mr Qureshi asked: Sorry to trouble you again but just wanted to clarify that this additional condition is for the wall of the modification portion, ie the rear extension, that has to set back not the existing wall which was approved with previous DA?
Mr Egan responded: The Planning Panel was considering the modification to the consent, so the 900mm side setback applies to the study side wall.
In a letter to the Applicants' legal representative on 14 September 2021 Ms McSevney also was clear that Condition 7(l) did not relate to the original development consent: I am certainly aware of your client's opinion and interpretation of DA Condition 7(1). In response, may I point out that Condition 7(1) was added as part of Section 4.55 Mod/2020/0293 and relates only to the extent of the modification the subject of Section 4.55 Mod/2020/0293. The extent of the south western wall previously approved by original DA No. D/2019/252 did not form part of the proposed modifications the subject of Section 4.55 Mod/2020/0293. The audio of the Inner West Planning Panel meeting pertaining to S4.55 Mod/2020/0293 is freely available on Council's website. The basis of the objections raised and addressed within the meeting audio do not suggest any correlation to the previously approved extent of the south western wall approved by the original DA No. D/2019/252. The consent condition also does not state that it should apply to the extent of the south western wall previously approved by original DA No. D/2019/252.
Mr Egan prepared a second Development Assessment Report, in response to the Second Modification Application for clarification of Condition 7(l) inter alia. He wrote: Comment: On 21/6/2021 the applicant requested that the terms of condition 7(1) be clarified and the application was publicly notified as such. The intent of condition 7(1) is to increase the setback of that portion of the additions proposed to be located 609mm that were the subject of modification application MOD/2020/0293. The submitted plans with the current modification application the subject of this report have been altered to reflect that condition.
In other words, the Respondents had already done precisely what the Council required them to do following the approval of the First Modification Application and were not required to do anything further in relation to the setback from the south-west boundary.
There was no ambiguity in the original wording of Condition 7(l). Everyone from the Council's Assessor to the Chair of the IW Planning Panel, to the PCA, to Mr Janssen himself, knew that the Council's determination was limited to the subject of the First Modification Application. In these circumstances, the Respondents would "almost certainly" have won at final hearing. Indeed, had the matter proceeded as far as the hearing for interim relief, the Applicants are likely to have failed to establish even a prima facie case.
In relation to the Applicants' submission below in [52], the mere power for a consent authority to alter conditions of consent granted in relation to an earlier development application when considering a modification application does not mean that the power was used in this instance. The existence of the power does not mean that the meaning of Condition 7(l) changes to align with the Applicants' construction (Tcpt, 29 March 2022, p 71(16-24)). The limits of a discretion of a consent authority are defined by the matters raised for consideration by the application: 1643 Pittwater Road Pty Ltd v Pittwater Council [2004] NSWLEC 685 (1643 Pittwater) at [51]. Further, the Council imposed conditions originally which dealt with the issue of solar access, the issue was not discovered newly on consideration of the First Modification Application. The Council did not use the new modification as an opportunity to change the old development application conditions because someone had not thought about the issues before (Tcpt, 29 March 2022, p71(43-50)-p72(1-10)).

Unreasonable conduct by the Applicants

The Respondents submitted that the Applicants' conduct was so unreasonable in commencing and continuing the proceedings that the Respondents should be awarded costs.
The simple fact is that the Applicants commenced proceedings when an application to resolve the dispute was already before the Council. This made the Council the proper forum for resolution of the dispute. It also meant that any decision by the Court on the proper construction of the old wording of Condition 7(l) would eventually become redundant.
Mr Janssen's affidavit evidence is that he did not have a copy of the proposal for the new wording of Condition 7(l). Further, he gives evidence that there was a certain amount of construction related activity on site. Respectfully, this is no excuse for commencing the proceedings. The Applicants did not take the obvious and simple step of talking to the Respondents to: (a) ask about the changes to Condition 7(l); (b) ask when construction of the south-west wall would commence; or (c) ask for construction to be delayed pending the Council's decision. In short, they did not take any of the steps that a reasonable person in their position ought to take to satisfy themselves that litigation is necessary.
The Applicants were aware that the Second Modification Application included requested amendment of Condition 7(l). While the letter identifying the precise wording change was apparently not notified by the Council (not a matter the Respondents could control or were aware of) the Applicants could have asked them directly for that information or used processes under the Government Information (Public Access) Act 2009 (NSW) (GIPA). A GIPA request was made by the Applicants on 16 July 2021 for copies of documents concerning the development of the property, although it was not clear whether they took that opportunity to make inquiries about the terms of the proposed amendment to the language of Condition 7(l) (Ms Qureshi's affidavit par 33). If the Applicants were going to use that process, it could be expected that they would ask for information relating to the change of Condition 7(l) (Tcpt, 29 March 2022, p19(41-44)). If the Court considers that it is not reasonable to expect the Applicants, in a legal dispute with their neighbours, to personally ask their neighbours for information, the Applicants were legally represented at this stage and could have asked their lawyers to approach the Respondents (Tcpt, 29 March 2022, p22(34-40)).
In Nichols at [6], Basten JA stated: 6. First, weight was given to the fact that the applicants (being the defendants in the court below) appeared to have readily capitulated, allowing orders to be made against them as sought by the initiating party, by consent. However that fact is, by itself, neutral. If one party commences litigation without making a pre-litigation demand, and allowing the other party a reasonable opportunity to respond, it cannot expect to recover the costs of obtaining orders which would not in any event have been opposed. There may be an exception in circumstances where destruction of material is reasonably feared and an ex parte injunction is deemed necessary. There was no pre-litigation demand from the Applicants or their solicitors to the Respondents before proceedings were commenced…
There was no pre-litigation demand from the Applicants or their solicitors to the Respondents before proceedings were commenced (Tcpt, 29 March 2022, p 70(5-21)).
Instead, the Applicants commenced the proceedings without giving the Respondents notice and without giving them the opportunity to reassure the Applicants that the injunction was unnecessary. Given construction was not due to begin until 5 October, and the modification application was lodged several months earlier it would have been a reasonable expectation that very shortly the Council would be in a position to deal with it or put it on the IW Planning Panel's agenda (Tcpt, 29 March 2022, p28(5-13), Ms Qureshi's affidavit at par 53). It is evident from the Respondents' multiple voluntary undertakings that they would act reasonably in preserving the parties' rights pending resolution of the dispute by the Court or the Council.
There is no evidence for the Applicants' submission below in [55] and the Respondents' conduct indicates that they consistently tried to resolve the dispute. The submission should be disregarded (Tcpt, 29 March 2022, p 71(3)).
The letter of 6 October 2021 sent by the Respondents to the Applicants revealed the entirety of the Respondent's position and showed their hand in terms of the legal arguments that would be put. The letter was sent to give the Applicants the information they needed to reconsider their position and discontinue (Ms Qureshi's affidavit par 56). The Respondents were as reasonable as they could be in the interests of neighbourly relations and an offer was made that the proceedings could be discontinued with no order as to costs, which was more of less the order being sought by the Applicants at the costs hearing (Tcpt, 29 March 2022, p 47(13-32)).
The Applicants' conduct in commencing and continuing proceedings was diametrically opposed to the standard of conduct expected under s 56 of the Civil Procedure Act 2005 (NSW) (CP Act). It wasted both the Court's resources and the Respondents' resources.

Applicants' submission

Where proceedings have settled without a hearing on the merits and both parties have acted reasonably, the proper exercise of discretion will usually be that both parties bear their own costs: Nichols at [30].
Each party should pay their own costs where the proceedings were resolved by approval of a modification application amending Condition 7(l) which clarified the scope of that condition, and the Applicants acted reasonably in commencing and continuing the proceedings until the notice of discontinuance was filed.
The Respondents were made aware of the dispute about Condition 7(l) on three occasions, in oral discussions between Mr Janssen and Mr Qureshi in May 2021, in the Applicants' solicitor's letter to the Council dated 3 June 2021 and Mr Janssen's solicitor's letter dated 3 August 2021 to the PCA appointed by the Respondents. Both letters were copied to the Respondents, who did not respond to either.
The Qureshi's applied for a modification of the consent on 21 June 2021 to resolve the dispute over Condition 7(l) without informing the Applicants. This was notified by the Council on 8 July 2021.
Mr and Mrs Qureshi then took steps towards construction in accordance with their interpretation of Condition 7(l): 1. on 14 July 2021 plans were submitted to the PCA showing a 900 mm setback only for the further single-storey extension approved in the First Modification Application; 2. the Respondents' builder and project manager wrote to Mr Janssen stating that excavations for the south-west wall would most likely commence on 6 September 2021; 3. clear assurances were not given in response to Mr Janssen's requests that the south-west wall be set back 900 mm; 4. the builder indicated on 31 August 2021 that it was satisfied that it could proceed in accordance with the construction certificate plans; and 5. on 15 September 2021 the Respondents obtained a permit for the use of a crane and excavator for works to the rear of the property on 22 September 2021.
By 15 September 2021: 1. the IW Planning Panel had not determined the Second Modification Application; 2. neither authority was willing or (in Council's case) able to take enforcement action; 3. the Respondents were pressing on with plans for the south-west wall; 4. their builder indicated that works were to commence shortly in accordance with the construction certificate plans; and 5. a permit was obtained for use of a crane and excavator for works the following week.

Supervening event

The Applicants did not capitulate. The modification of Condition 7(l) removed the inconsistency between the development consent conditions and the construction certificate, and hence the subject matter of the proceedings. That was a supervening event which removed the subject matter of the proceedings in the sense discussed in ONE.TEL at [6]. The outcome of the IW Planning Panel's consideration was not a foregone conclusion or the working out of an inevitable process and it could have refused modification of the consent condition. That outcome would not have resolved proceedings because the Respondents made clear their view that the existing condition allowed them to undertake the work in any event (Tcpt, 29 March 2022, p 56(6-24)).
There being a supervening event means the appropriate order is that each party bear their own costs. The exceptions to this are when one party was almost certain to succeed on the merits and where a party has acted so unreasonably that the other party should obtain costs. Neither circumstance arises.

No hypothetical trial

A hypothetical trial of the proper construction of Condition 7(l) as urged by the Respondents' submissions is not open in this costs application: Lai Qin; Ansted at [30]. The Court cannot conclude that the Respondents would have been successful.

No certainty of success on the merits

Regardless, the Respondents adopt an incorrect approach to construction of the condition. A consent must be construed objectively, taking into account that it operates in rem: K&M Prodanovski Pty Ltd v Wollongong City Council (2013) 195 LGERA 23; [2013] NSWCA 202 at [23]. It is not a search for what the consent authority would have, or actually, intended: House of Peace Pty Ltd & v Bankstown City Council (2000) 48 NSWLR 498; [2000] NSWCA 44 at [37] (House of Peace). Comments by the IW Planning Panel, Council's planner, and the PCA are irrelevant.
What the condition required was clear from the ordinary meaning of the words used: [t]he setback on the south western wall [of No 95] shall be increased to be a minimum of 900mm from the boundary.
What may be relevant to construction of those words is the scope of the application itself, the planning matters that arose, and the power to modify in s 4.55(2): Hunter Industrial Rental Equipment Pty Ltd v Dungog Shire Council (2019) 101 NSWLR 1; [2019] NSWCA 147 at [68]-[80]; King, Markwick, Taylor & Ors v Bathurst Regional Council (2006) 150 LGERA 362; [2006] NSWLEC 505 at [103].
Also relevant is that when considering a modification application, a consent authority can reconsider "at least relevant elements of the original consent and, if it perceived a need to cure a problem, which may not have been apparent previously but now is, impose a new condition": 1643 Pittwater at [54]. This means that any submission to the effect that the consent authority could not have been considering previously approved parts of the development when issuing Condition 7(l) would be wrong.
The impact of these considerations on the construction of Condition 7(l) would have been addressed at full hearing. It was at least reasonably arguable that the condition required set back of the entire wall, not just the rear elements, to 900 mm (Tcpt, 29 March 2022, p55(6-8)). They are not properly the subject of an application for costs.

Proceedings not conducted unreasonably by Applicants

By 15 September 2021 works for the south-west wall with a setback less than 900 mm were due to commence despite the modification application being undetermined. That made it reasonable to commence proceedings. It is not to the point that Mr Janssen and Ms Lynch did not contact the Respondents personally. Correspondence was with their agent the builder, who was informed of the modification application, informed Ms Qureshi about his dealings with Mr Janssen, did not provide the clear assurances sought by Mr Janssen about the setback and made it clear that works would proceed in accordance with the construction certificate plans. The builder at least had ostensible authority from the Respondents and was dealing with the Council in relation to the works (Tcpt, 29 March 2022, p 65(4-10)). He was keeping the Respondents apprised of developments and it is fanciful to suggest that Mr Janssen's requests for assurances were not provided to the Respondents (Tcpt, 29 March 2022, p 65(15-17)).
Given the Respondents never indicated that, if the IW Planning Panel refused the modification application, they would set the south-west wall back 900 mm, the proceedings would have had to be commenced in any event because of the strict three-month limitation period in s 6.32 of the EPA Act.
The relief sought in the summons was confined to only that necessary to preserve the status quo in relation to the south-west wall (Tcpt, 29 March 2022, p 66(11-30)).
The criticism that the Applicants should have waited to commence proceedings until the determination of the modification application is misplaced when the Respondents were not so waiting (Tcpt, 29 March 2022, p 68(15-19)).
The Applicants acted reasonably in continuing and discontinuing proceedings. When Mr Janssen became aware of the IW Planning Panel's intention to determine the modification application, he took steps to inform the Respondents and apply to vacate the hearing, which was consistent with the overriding purpose in s 56 of the CP Act. Mr Janssen promptly took steps to discontinue proceedings after the determination of the modification application.

Indemnity costs

The Court should not award indemnity costs as none of the circumstances given as examples of conduct which would justify indemnity costs by Sheppard J in Colgate-Palmolive arise (Tcpt, 29 March 2022, p 69(25-27)).

Consideration

The Court's discretion in determining costs issues is wide (s 98 of the CP Act) albeit the discretion must be exercised on a principled and judicial basis (Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 at [24]; Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 at 539‑540, 557, 561‑562, 569 (Latoudis); Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [65], [134]. That is so in relation to awarding costs and, if awarded, whether these should be awarded on an indemnity basis. Costs are compensatory not punitive: Latoudis at 543, 562-563 and 567.
The parties generally agreed the applicable principles which apply in the circumstances of this case as set out above at [8]-[12] but differ in how they should be applied in these circumstances. The extensive chronology above at [14] identifies the various communications between the parties, their solicitors, the Council, the Respondents' builder and the Respondents' PCA.
I note that the Second Modification Application was made to the Council in June 2021. The proceedings were commenced on 15 September 2021. The Council determined the Second Modification Application on 9 November 2021 and the proceeding were discontinued on 15 November 2021. The three-month time limit in s 6.32(a) expired on 15 October 2021.
There are a number of inter-related matters to consider.

Commencement of proceedings without notice to Respondents unreasonable

The only evidence of direct communication between the parties before the commencement of proceedings was an oral conversation in May 2021. Commencement of proceedings without direct notice to the Respondents occurred on 15 September 2021. Doing so deprived them of an opportunity to respond by, for example, delaying building work related to the section of wall in dispute. I agree with the Respondents' submission that commencing legal proceedings against a neighbour including seeking an ex parte interim injunction is a substantial step that should not be undertaken without direct notice to them, unless the circumstances truly justify an ex parte application. The Applicants sought to demonstrate that commencement without notice was reasonable because of the Respondents' builder's and PCA's responses to their solicitor's letters conveying that work could proceed on the basis of the construction certificate, and the application for a crane permit. I don't need to resolve whether the builder was an agent for the Respondents. For the reasons given by the Respondents those circumstances do not remove the important pre-litigation step of notifying the intended respondents to litigation of the intention to commence proceedings in order to give them an opportunity to respond with the possibility of avoiding litigation. Work was not so imminent that no notice was justified.
Further, no pre-litigation demand was made directly of the Respondents, a matter identified in Nichols as relevant context to take into account when considering costs. The Applicants very promptly provided an undertaking on 16 September 2021 that certain work would not be undertaken. Additional undertakings were given on 8 October 2021 and 5 November 2021. The Respondents wrote a letter dated 6 October 2021 to the Applicants which set out the entirety of their case. All these circumstances suggest strongly that the Respondents should have had the opportunity to negotiate with the Applicants before proceedings were commenced without notice to them.
The commencement of proceedings by the Applicants without notice to the Respondents was unreasonable in these circumstances.

Was there a supervening event?

The decision of the Council to approve the Second Modification Application on 12 November 2021 which modified Condition 7(I) removed the subject matter of the proceedings in that the construction certificate plans as prepared were consistent with the original development consent as modified from the Applicants point of view. The Respondents argued that was already apparent. The issue arises of whether that outcome was a supervening event for the purposes of costs, the Applicants arguing it was, the Respondents to the contrary.
The Second Modification Application did clarify the scope of Condition 7(I). Whether this was legally necessary would require consideration of the parties' respective cases on the scope of the unamended Condition 7(I). The next matter to consider therefore is whether it is appropriate to consider the proper construction of Condition 7(I).

Prospects of success should not be considered

As identified in ONE.TEL at [5], a court should not generally determine the subject matter of proceedings in the absence of a hearing in order to finalise costs. This suggests the construction of Condition 7(l) should not be resolved, unless completely apparent on its face. The Respondents submitted that the context in which the First Modification Application was determined made crystal clear, including to the Applicants, that the modification related only to the further single-storey extension at the back of the two-storey extension the subject of the original development consent and therefore that only that section would be set back 900 mm from the boundary with the Applicants' property pursuant to Condition 7(l). The context relied on is set out above at [20]-[26] to the effect that that issue was raised during the course of the IW Planning Panel hearing, including by Mr Janssen, the Applicants' PCA, and by reference to the approved plans.
As the Applicants submitted none of these circumstances are relevant to the construction of the development consent as modified based on the principles in House of Peace inter alia as submitted above in [49]-[51].
I am not prepared to draw any final conclusion on the construction of Condition 7(l) for the purposes of determining costs. The construction is not immediately self-evident. Consequently the determination of the Second Modification Application can be regarded as a supervening event.

Who should have told who about proposed amendment of Condition 7(l)?

It is difficult to reach any conclusion about who should have taken steps to provide the Applicants with the modified Condition 7(l) wording which was inter alia the subject of the Second Modification Application. The Council did not exhibit the letter from the Respondents' representatives which set out the wording sought. The Applicants could have asked the Respondents for a copy, and the Respondents could have provided a copy to the Applicants, whether directly or via their solicitors. Ultimately this circumstance is neutral in terms of informing issues relevant to costs.

Time bar under s 6.32(a) EPA Act

Another matter to weigh up is that the Respondents had to commence proceedings by 15 October 2021 in order to preserve their right to challenge the construction certificate under s 6.32(b). The Council had yet to determine the Second Modification Application at that date. The Council made a decision about the Second Modification Application on 12 November 2021 which included changes to Condition 7(l).
Had the Applicants delayed commencing proceedings until the last possible date solely to preserve their position, it is likely far fewer costs would have been incurred by the parties. Several steps were taken in the proceedings in the 30 days between commencement and 15 October 2021 resulting in costs being incurred.

Costs should be awarded to Respondents on a party-party basis

Weighing up all these countervailing circumstances I consider the Applicants should pay the Respondents' costs on a party-party basis.
I will not exercise my discretion to award the Respondents indemnity costs. The circumstances before me do not fit any of the scenarios instanced by Sheppard J in Colgate-Palmolive at 232-233. No special or unusual feature in this case warrants a departure from the usual rule that costs orders are made on a party-party basis.

Costs of the costs proceedings

As the Respondents have been successful in their application for costs, they should receive their costs of the costs hearing.

Orders

The Court orders: 1. The Applicants must pay the Respondents' costs of the discontinued proceedings as agreed or assessed on a party-party basis. 2. The Applicants must pay the Respondents' costs of the costs proceedings as agreed or assessed on a party-party basis. 3. The exhibits are to 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: 20 April 2022

(2006) 143 LGERA 441

(2006) 150 LGERA 362

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