(c) the proceedings were unnecessarily commenced: Pittwater Council v Varney [2005] NSWLEC 651 (15 November 2005) at [78]. The breach of the EPA Act, which the order of the Court remedied, was a technical breach and posed no immediate environmental harm warranting the commencement of civil enforcement proceedings by the Council. Furthermore, the Council and the applicant were in communication about the breach.
The approach to costs where no hearing on the merits
43 The civil enforcement proceedings were concluded by the making of injunctive orders by consent. These were substantive orders, yet they were not the product of a final hearing and determination of the applicant's claim. What is the proper approach to the question of costs in this situation?
44 In Australian Securities Commission v Aust-Home Investments Limited (1993) 44 FCR 194 at 201, Hill J reviewed a number of cases dealing with costs in this situation and proffered the following summary:
"These cases seem to me to support the following propositions being made.
(1) Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a cost order: Stratford and the SEQEB case.
(2) It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial: Stratford . This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue.
(3) In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them ( SEQEB ).
(4) In a particular case it might be appropriate for the Court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation: cf Sunday Times Newspaper Co Ltd v McIntosh (1933) 33 SR (NSW) 371.
(5) Where the proceedings terminate after interlocutory relief has been granted, the Court may take into account the fact that interlocutory relief has been granted: cf Re Asiatic Electric Co Pty Ltd [1973] 1 NSWLR 603 at 606, a case which, however, depended upon the specific wording of the statute under consideration.
Where interlocutory relief has been granted, that fact carries no implication as to the ultimate merits of the case but does ordinarily suggest that the Court granting interlocutory relief has accepted or found that there is an arguable issue to be tried between the parties and that the balance of convenience favours the grant of that relief."
45 In Australian Securities Commission v Berona Investments Pty Limited (1995) 18 ACSR 772 at 774, Cooper J added, after citing these principles:
"These propositions are of assistance in focusing attention upon some of the relevant circumstances which should be considered in the exercise of the discretion to award costs where proceedings do not proceed to a final hearing. However, they are not the only circumstances; nor are they intended to limited the discretion."
46 In Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622, the prosecutrix applied for costs of a proceeding she had instituted in the High Court for an order nisi for writs of prohibition, certiorari and mandamus directed to the Minister for Immigration and Ethnic Affairs and the Refugee Review Tribunal. The prosecutrix had been refused a protection visa by the Minister under the Migration Act 1958 (Cth). She applied to the Refugee Review Tribunal for a review of the Minister's decision. The Tribunal affirmed the Minister's decision. The prosecutrix then brought proceedings in the High Court. One week later, the Minister granted a protection visa to the prosecutrix. The prosecutrix, having obtained the relief she sought, did not proceed with her action.
47 McHugh J determined the prosecutrix's application for costs. He commenced with a discussion of the principles "which govern an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means": at 624. This prefatory statement is important because it sets the circumstances in which the principles are to apply. There has been a tendency in subsequent cases to apply the principles in circumstances other than those with which McHugh J was concerned in that case. McHugh J stated:
"In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs [ Latoudis v Casey (1990) 170 CLR 534]. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order [ Latoudis v Casey (1990) 170 CLR 534 at 543, 566-568]. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.
In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties [ Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201]. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action [ Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201]. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd [[1971] QWN 13], the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent Council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans.
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission [Unreported; Federal Court of Australia; 10 February 1989] where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare.
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases."
48 The result in that case was that McHugh J held that there should be no order for costs.
49 In One.Tel Limited v Commissioner of Taxation (2001) 101 FCR 548, Burchett J considered Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 and Re Minister for Immigration and Ethnic Affairs: Ex parte Lai Qin (1997) 186 CLR 622. Burchett J then stated at 553 [6]:
"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".
50 In One.Tel, Burchett J found at 554 [7] that the matter involved a clear winner:
"The applicants, by their proceeding, sought to challenge the validity of certain notices, and to have then set aside. The respondent, after initially defending these notices, encountered at least an evidentiary difficulty, and acknowledged that they were to be set aside. That means that the applicants have succeeded, just as the respondent succeeded in Ahmetaj v Minister for Immigration and Multicultural Affairs [1999] FCA 332, where a proceeding failed by reason of the occurrence of an event that was always liable to occur and to defeat the proceeding; in those circumstances, Sackville J, when the hearing did not proceed, distinguished Ex parte Lai Qin and made a costs order. As in that case, so here, the result one party sought was achieved without a hearing, but not by a "settlement" in the ordinary sense, or as McHugh J used the word, and certainly not by what His Honour called "extra-curial means".
51 Accordingly, the respondent was ordered to pay the costs of the applicant in that case.
52 In Cassegrain v CTK Engineering Pty Ltd (2005) 54 ACSR 249 at 252 [10], White J accepted, as Burchett J had pointed out in One.Tel, that:
"there is a distinction in cases in which one party after litigation effectively surrenders to the other, and cases where some supervening event or settlement removes the subject of the dispute, so that although it could not be said that one side has simply won the only remaining issue is that of costs".
53 White J held at 252-253 [11] that the facts of that case fell within the first type of case because the second defendant effectively surrendered to the plaintiffs when they no longer opposed the Court granting the orders that the plaintiffs had sought:
"11. This is not a case where the plaintiffs do not wish to proceed with the action. The primary relief which they sought was that CTK be wound up. They succeeded on that claim, and prima facie are entitled to their costs up to the time the second defendant advised the plaintiffs that he would not oppose the making of a winding-up order."
54 Accordingly, White J determined that there should be orders that the defendants pay the plaintiffs' costs.
55 The distinction drawn by Burchett J in One.Tel between the two types of cases can be used to explain the decisions in this Court to order or not to order costs in civil enforcement or judicial review proceedings in Class 4 of the Court's jurisdiction.
56 The first type of case is where one party effectively surrenders to the other without there being a hearing and determination on the merits.
57 A classic illustration of this type of case is where one party discontinues without the consent of the other party or parties. A line of authority in this Court establishes "as a general rule that when proceedings are dismissed or discontinued because the applicant chooses not to proceed with them, the ordinary rule is that costs follow the event, it being concluded in such cases that the event is relevantly the discontinuance of the proceedings": see Joanou v Randwick City Council (1998) 105 LGERA 237 at 240 citing Hamilton v Woollahra Council [1992] NSWLEC 48 (10 July 1992), Logwon Pty Ltd v Warringah Shire Council [1993] NSWLEC 143 (27 August 1993), Jan Yee Australia Pty Ltd v Woollahra Council [1997] NSWLEC 33 (26 March 1997), Morris v Gosford City Council [1996] NSWLEC 254 (29 November 1996) as well as the Court of Appeal's decision in Pavements and Excavations Pty Ltd v Tones (unreported, Court of Appeal (NSW), 28 March 1991).
58 In Jan Yee Australia Pty Ltd v Woollahra Council [1997] NSWLEC 33 (26 March 1997), the applicant filed a notice of discontinuance of its Class 4 proceedings thereby bringing the proceedings to an end. The notice of discontinuance bore the consent of one respondent but not that of another respondent, the Council. The Council applied for its costs. Bignold J ordered the applicant, as the discontinuing party, to pay the costs of the Council thrown away by the discontinuance together with the cost of the proceedings generally. Bignold J rejected the applicant's submission that the conventional rule that costs follow the event should be departed from because the proceedings were justifiably commenced, justifiably continued, justifiably settled, and in all probability would have simply succeeded had they been fully litigated. Bignold J held that the applicant had not made out these matters.
59 In Byron Shire Council v McAdam (2001) 116 LGERA 418, the applicant Council sought its costs against the respondent in Class 4 proceedings which were discontinued by consent. The applicant Council had commenced Class 4 proceedings and obtained interlocutory orders restraining the respondent from using or allowing others to use the premises without consent. Subsequently, the respondent succeeded in Class 1 proceedings obtaining development consent for the use of the premises. The parties by consent sought to discharge the interlocutory orders and to discontinue the Class 4 proceedings. The applicant sought its costs on the discontinuance pursuant to Part 15 rule 7 of the Rules. Talbot J determined, first, that the applicant Council was successful in causing the respondent to satisfy the claim made against her. Next, Talbot J determined that there was no disentitling conduct on the part of the applicant's council. Accordingly, Talbot J ordered the respondent to pay the applicant's costs of the proceedings.
60 Another illustration of the first type of case is where a party consents to the Court making orders or gives an undertaking to the Court in substantially the same terms or effect as sought by the other party in the proceedings.
61 In Wollondilly Shire Council v Anh Nhu Le (2004) 137 LGERA 416, the Council had issued an order under s 121B of the EPA Act requiring the respondents to demolish and remove certain horticultural structures including a greenhouse erected unlawfully on the land. The Council commenced civil enforcement proceedings seeking declaratory relief that the respondents were using the land for the purpose of agriculture or intensive horticulture contrary to the EPA Act and consequential injunctive relief in relation to future use and to remedy the past breach by demolishing and removing the unlawful horticultural structures. Subsequently, the parties reached a settlement and the Court made consent orders reflecting the settlement. The orders were that the respondent use the land in conformity with the EPA Act, and demolish and remove the horticultural structures from the land unless a building certificate for those structures was obtained by a certain date.
62 Pain J held that the orders made, while differing somewhat from those sought in the Council's application, achieved the substantive result sought by the Council in that the offending structures would be either approved in a building certificate process or demolished: at 420 [14].
63 Pain J held that the decision of the Council to commence the civil enforcement proceedings, in circumstances where the respondents had failed to comply with the s 121 B order for some 11 months and attempts to negotiate with the respondents to have the structures removed had been unsuccessful, was reasonable. Conversely, the respondent's actions were unreasonable prior to the Council's proceedings being commenced: at 420 -421 [18]. The Council's actions in settling the matter were reasonable: at 421 [19].
64 Pain J concluded that "the Council achieved the substantive outcomes which it sought and acted reasonably in commencing and settling the proceedings and is entitled to an order of costs in its favour": at 421 [19].
65 In Kurnell Lodge Pty Ltd v Bourne [2004] NSWLEC 329 (24 May 2004), the applicant applied for costs against the respondents in a case which had been settled by the respondents giving certain undertakings to the Court. The proceedings were commenced by the applicant seeking declaratory and injunctive relief against the respondents for using land otherwise than in accordance with a development consent issued by the Court. Lloyd J held that the fact that the respondents gave an undertaking in terms similar to that which the applicant sought suggests that the claim of the applicant was satisfied after the proceedings had been commenced. Lloyd J relied on Part 15 rule 7 of the Rules. The Court held that there was no sufficient disentitling conduct on behalf of the applicant. Accordingly, Lloyd J ordered the respondents to pay the applicant's costs.
66 In Newcastle City Council v Winwood [2005] NSWLEC 294 (3 June 2005), the applicant Council brought civil enforcement proceedings seeking declaratory relief in relation to the demolition of a verandah of a building in a heritage conservation area without consent, prohibitory injunctive relief restraining further demolition work and mandatory injunctive relief to re-instate the verandah. The respondent gave a written undertaking not to carry out any further works on the property. This satisfied the Council's claim for prohibitory injunctive relief. The respondent also sought and obtained consent to demolish the whole building. This removed the subject matter of the Council's claim for mandatory injunctive relief.
67 Pain J held that the proceedings were reasonably commenced but the Council's claim was only partially satisfied: at [26] and [27]. The Council had also decided to allow the demolition on the building: at [30]. The Council had decided to discontinue the proceedings where it had not achieved all it sought in the proceedings: at [29]. In these circumstances, Pain J decided that the Council should receive only half of its costs: at [36] and [38].
68 In Pittwater Council v Varney [2005] NSWLEC 651 (15 November 2005), the Council brought civil enforcement proceedings seeking declaratory relief that the respondent was carrying out development without consent, prohibitory injunctive relief restraining the carrying out of further work and mandatory injunctive relief to remedy works already carried out. The Court made both interlocutory and final orders, by consent, to that effect. Bignold J held that, based on the outcomes reflected in both the interlocutory and final orders made, the Council was the successful party: at [77]. Bignold J held that the usual order as to costs should be made, absent misconduct.
69 Bignold J rejected the respondent's argument that the proceedings were unnecessarily commenced or unreasonably prosecuted by the Council up to a certain juncture (at [84]) but accepted the respondent's argument from that juncture on (at [93]). Accordingly, Bignold J ordered the respondent to pay the Council's costs up to the relevant juncture but made no order for costs from that time on: at [102].
70 Manly Council v Kelly [2005] NSWLEC 685 (29 November 2005) is another illustration of the first type of case. The Council had brought proceedings seeking declaratory relief that the respondent had not complied with an order issued by the Council under s 124 of the Local Government Act 1996 to remove car bodies and other rubbish from the respondent's land and mandatory injunctive relief that the respondent so remove the car bodies and other rubbish. By consent, the Court granted injunctive relief substantially to the effect sought by the Council, but did not make any declaration.
71 Pain J held that "the Council succeeded in large part in achieving what it set out to do in these proceedings": at [23]. However, Pain J held that "given the matters in dispute between the parties, I am unable to conclude that the Council would have completely succeeded at the hearing": at [23]. Accordingly, Pain J awarded most but not all of the costs of the Council: [23] and [25]. Pain J rejected the respondent's argument that there was any disentitling conduct by the Council: at [24].
72 The second type of case is where some supervening event or settlement so removes or modifies the subject of the dispute that no issue remains except that of costs. Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 was, of course, an example of such a case.
73 Another example of this type of case is Hayden Theatres Pty Ltd v Penrith City Council (1998) 105 LGERA 230. The applicant no longer wished to proceed with its judicial review action because the subject matter of the legal challenge, namely the original grant of development consent had been surrendered by one of the respondents, the developer, in exchange for a further development consent. Hence, the subject of the dispute had completely disappeared. Bignold J applied the principles in Lai Qin: at 233-234. There was no unreasonable conduct in the litigation by either the applicant or the respondents: at 234. No order for costs was made: at 235.
74 In Murray v Valaire (No. 2) [2001] NSWLEC 241 (7 March 2001), the applicant brought civil enforcement proceedings claiming an order that the respondent be restrained from carrying out building works contrary to a development consent and an order that the respondent remove works already carried out contrary to the development consent. The respondent contended that the works were being carried out lawfully in that they were in conformity with a construction certificate issued by the relevant council. Subsequently, a new construction certificate was issued by the council. The applicant surrendered the first construction certificate and relied on the second.
75 Lloyd J held that the effect of the surrender of the first construction certificate and the issuing of the new construction certificate satisfied the applicant's claim and there was no utility in the matter proceeding to hearing: at [6]. Lloyd J held that both parties had acted reasonably and the Court could not find that the applicant was almost certain to have succeeded: at [9]-[11]. The proper exercise of the costs discretion was to make no order as to the costs of the proceedings: at [12].
76 In Sydney City Council v Doltone House Wharf [2006] NSWLEC 81 (7 February 2006), the applicant council brought civil enforcement proceedings seeking a declaration that the respondents were using premises as a function centre without consent. The respondents contended the use was not unlawful because it was carried out under the authority of an existing consent, the terms of which were wide enough to permit use of the premises as a function centre. Without prejudice to this position, the respondents nevertheless sought and obtained a further development consent that expressly permitted use of the premises as a function centre. The respondents thereupon agreed to conduct their activities in accordance with the further development consent. The applicant discontinued the proceedings.
77 Cowdroy J held that the case fell within the circumstances in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622. The supervening event of the grant of consent and the agreement of the respondents to conduct their activities in accordance with that consent, removed the subject of the dispute. All parties acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the proceedings were discontinued: at [20]-[24].
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: Re Minister for Immigration and Ethnic Affairs: Ex parte Lai Qin (1997) 186 CLR 622 at 625.
79 An example of a case where these exceptions were applied is Perera & Dee v Gorczynski [2002] NSWSC 639 (25 July 2002). The respondents (Perera and Dee) substantially achieved the relief they had sought when the appellant (Gorczynski) provided the relief without the necessity for a court order. The subject of the dispute was thereby removed. Nevertheless, an order for costs was made against the appellant. Gzell J held that the appellant acted unreasonably before action and effectively required the respondents to commence the proceedings and the respondents were bound to succeed if their proceedings had been determined on the merits: at [20].
Summary of principles
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: