Kindimindi Investments Pty Ltd v Lane Cove Council & Anor [2006] NSWLEC 17 | Case summary

1 Cowdroy J: The Court delivered judgment in these proceedings on 19 August 2005: see Kindimindi Investments Pty Ltd v Lane Cove Council and Anor [2005] NSWLEC 398. Pursuant to such judgment the Court dismissed the application and ordered the applicant to pay the respondents' costs unless an application were made for a different order. The applicant now seeks an order that each party bear its own costs, or alternatively that the first respondent bear its own costs. The application is supported by an affidavit of Joseph Gailey sworn 7 November 2005. Background of the applicant 2 The applicant is a proprietary company formed on 24 June 1971 Its directors are Mr Gailey and Mr Anthony Hackett. Its current shareholders include Mr Gailey and members of his family. The applicant owns a strata title home unit in the vicinity of the challenged development. 3 Mr Gailey lives in Lane Cove and has worked as an architect since 1951. He has had an architectural practice in Lane Cove since 1955. Throughout his lifetime he has been involved in many community and charitable organisations including the Lions Club and the Cancer Council. During his career as an architect, Mr Gailey has designed numerous community buildings particularly in the Lane Cove area including many where he has provided architectural services free of charge. He has been awarded the City of Sydney Australia Day award (in 1983) and the Medal of the Order of Australia (in 1994) in recognition of his community service. 4 Mr Gailey deposed that as an adjoining owner to the proposed development, the applicant received notification of the proposal from the Council. Mr Gailey had numerous reservations with respect to the design of the proposal and forwarded, on behalf of the applicant, a submission to the Council. Mr Gailey deposed that since it was the applicant which had objected to the proposal before consent was granted, he considered it was appropriate for the applicant to institute proceedings in this Court. 5 Mr Gailey's reservations concerning the proposal related in particular to the failure of the proposal to comply with cl 19F of the Lane Cove Local Environmental Plan 1987. Mr Gailey deposed that the provisions of cl 19F had been included in the LEP following a commission of inquiry and were adopted by the Council in 1999. 6 Mr Gailey deposed: In essence I believed, and still do, that the proposal is simply not good enough for the Lane Cove that I love and not in the communities best interest. Although I own a property in the vicinity of the proposal, I was not concerned about the impact of the development upon me personally or that property. Rather I was greatly concerned that the development was bad for Lane Cove and someone had to do something about it. Submissions of the applicant 7 The applicant submits that the proceedings were public interest litigation driven by Mr Gailey's concern for the significant breaches of planning law and inappropriate aspects of the development on the community of Lane Cove. Accordingly the applicant submits that the Court should make no order as to costs. 8 In the alternative the applicant submits that the Court should make no order for the costs of the Council since they were a necessary party. The applicant says the Council benefited from a clarification of its powers and duties in relation to the granting of development consent. Further, the applicant submits that even though its conduct was not unlawful the Council's conduct was such as was likely to lead to community dissatisfaction with the decision. Submissions of the first respondent 9 The Council does not challenge Mr Gailey's personal standing in the community but submits that is irrelevant in the determination of costs in this matter. The applicant, not Mr Gailey, brought the proceedings presumably for reasons which appeared commercially appropriate to its directors. The applicant cannot lift the corporate veil and rely upon the good motives of one of its directors and shareholders. 10 The Council further submits that even if Mr Gailey could be equated with the applicant, his good fame and character is not relevant to the application for costs. 11 The Council submits that Mr Gailey clearly believed there were flaws in the design of the proposed development and believed that a better design solution was possible. His submission to this effect was considered by the Council but the Council accepted the design proposed by the second respondent. The Council says that disagreement with an ultimate planning decision cannot properly inform the exercise of a discretion to decline to award of costs in an unsuccessful class 4 challenge. 12 The Council also says that it must be assumed, in the absence of evidence to the contrary that the collegiate body was making its determination in the public interest. Inevitably members of the public will disagree with some decisions but elected councillors must be assumed to have made their decisions for the common good. 13 The Council says that this matter did not raise any significant and undetermined legal issues and that something more than a mere assertion that the proceedings were brought in the public interest is required before the Court would exercise its discretion against the making of an order for costs. Submissions of the second respondent 14 The second respondent submits that the proceedings were not properly characterised as public interest litigation. It says that the Court has been told very little about the applicant, and the Court cannot rule out the possibility that Mr Gailey had a pecuniary interest in the outcome of the proceedings. Further, the second respondent says that no broad community interest was at stake in these proceedings. The potential was confined to the vicinity of the development in Lane Cove, and Mr Gailey's own individual and factional view of the community's interest is not the same as the public interest. The law pertaining to costs The Court's power to award costs 15 The Court exercises a broad discretion to award costs provided by s 69(2) of the Land and Environment Court Act 1979 ("the LEC Act"). In Oshlack v Richmond River Council (1998) 193 CLR 72, Gaudron and Gummow JJ considered s 69(2) and recognising the wide discretion, observed (at 81): The terms of s 69(2) contain no positive indication of the considerations upon which the Court is to determine by whom and to what extent costs are to be paid. The power conferred by the section is to be exercised judicially, that is to say not arbitrarily, capriciously or so as to frustrate the legislative intent. The usual order as to costs 16 The High Court in Latoudis v Casey (1990) 170 CLR 534 enunciated the principle that "ordinarily it would be just and reasonable that the defendant against whom a prosecution has failed should not be out of pocket": see Toohey J at 565; see also Mason CJ at 542, 544 and McHugh J at 566-7. The purpose of ordering the payment of costs is not to punish an unsuccessful party, but to compensate a successful party for the expense involved in the legal proceedings. 17 However, in Oshlack the majority of the High Court emphasised that the usual order for costs is not a rigid rule but rather a guiding principle to be considered in the exercise of the Court's discretion to award costs. In Oshlack, Gaudron and Gummow JJ said (at 86): In the administration of the discretion conferred by these provisions upon courts of general jurisdiction, practices or guidelines have developed. Observations by Brennan J in Norbis v Norbis are in point. His Honour said: "It is one thing to say that principles may be expressed to guide the exercise of a discretion; it is another thing to say that the principles may harden in to legal rules which would confine the discretion more narrowly than the Parliament intended. The width of a statutory discretion is determined by the statute; it cannot be narrowed by a legal rule devised by the court to control its exercise." It is in that sense that there is to be understood the earlier statement in this Court as to the existence of "a general rule that a wholly successful defendant should receive his costs unless good reason is shown to the contrary". Their Honours added (at 88): There is no absolute rule with respect to the exercise of the power conferred by a provision such as s 69 of the Court Act that, in the absence of disentitling conduct, a successful party is to be compensated by the unsuccessful party. 18 Similarly, Kirby J said (at 121): It is because the general purpose of an order for costs in favour of a successful party is to provide compensation in the form of a partial indemnity for the costs incurred that the ordinary principle observed in civil litigation under the "English rule" … is that legal costs will usually be ordered in favour of the successful party. Absent special statutory provisions, Australian law has followed this English rule. But the compensatory principle cannot be treated as an absolute rule. Otherwise, the discretion conferred in unqualified terms would indeed be shackled and confined. The award of costs in this Court 19 In determining the principles to be applied in relation to the award of costs the statutory scheme under which cost are to be awarded is relevant. Kirby J in Oshlack referred to the specific statutory context of the costs discretion in this Court. His Honour said (at 113-4): But for s 123 [of the LEC Act] , it is unlikely that the appellant would have had the standing required by law to bring his claim for determination before a court of law. However that may be, the purpose of that section was to afford "open standing" to any person to enforce the provisions of the Act affecting the environment in a relevant way. The section is one of a number of like provisions designed to increase the rights of access to the law and the courts of persons having a particular interest in, and commitment to, environmental concerns. Such provisions, enacted in New South Wales by successive parliaments and under successive governments, portray an apparently consistent view that the legal barriers which formerly prevented environmental activists from engaging the jurisdiction of the courts should, in the specified cases and in the Land and Environment Court, be lifted. Inherent in the foregoing legislative innovation is a parliamentary conclusion that it is in the public interest that such individuals and groups should be able to engage the jurisdiction of the Land and Environment Court, although they have no personal, financial or like interest to do so. It can be assumed that Parliament would know that, sometimes, such applications would succeed and, sometimes, they would fail. The removal of the barrier to standing might amount to an empty gesture if the public character of an applicant's proceedings could in no circumstances be taken into account in disposing of the costs of such proceedings, either where they succeeded or (as here) where they failed. 20 Gaudron and Gummow JJ similarly observed (at 89): This background suggests that, in its operation upon litigation under s 123 of the EPA Act, s 69 of the Court Act is not to be narrowly construed. Further, it is applicable to new species of litigation and the discretion it confers is to be exercised so as to allow for the varied interest at stake in such litigation. 21 The High Court in Oshlack found that the Land and Environment Court, when awarding costs, was entitled to consider whether the litigation brought was "public interest litigation". Public interest litigation 22 One question which was not entirely resolved by the High Court's decision was the defining features of public interest litigation. McHugh J (in dissent) considered such concept was ill-defined and open-ended, which was one of the bases on which his Honour considered it was not a relevant consideration. Gaudron and Gummow JJ did not deal directly with the question, stating: The true issues here is not whether this was "public interest litigation" ... the question is whether the subject matter, the scope and purpose of s 69 are such as to enable the Court of Appeal to pronounce the reasons given by Stein J to be "definitely extraneous to any objects the legislature could have had in view" in enacting s 69. 23 Kirby J acknowledged that it was difficult to define the term "public interest litigation" but noted (at 123-4) that in other common law jurisdictions: … a discrete approach has been taken to costs in circumstances where courts have concluded that a litigant has properly brought proceedings to advance a legitimate public interest, has contributed to the proper understanding of the law in question and has involved no private gain. 24 His Honour further stated (at 125): The Land and Environment Court, as any court, is well able to distinguish the spurious from the arguable claim. The issue is not the subjective motivation of the litigant but the public or private character of the litigation. [emphasis in original] Were the proceedings public interest litigation? 25 The Court is satisfied that the applicant Mr Gailey represents the corporate mind of the applicant by virtue of his directorship and shareholding of the company. The Court accepts Mr Gailey's evidence that the proceedings were not brought by the applicant for its private gain. However this is not strictly relevant to the question of whether the proceedings are public interest litigation, since it is the character of the proceedings, rather than the motivation of the applicant, which is the defining feature of public interest litigation. 26 The Court accepts that the proceedings in this instance were public interest litigation. They were brought to enforce compliance with statutory provisions, particularly in relation to access to the development for less able members of the community and the impact upon the local school, and to prevent departure from provisions of the LEP which had involved significant public consultation in previous years. These were clearly public purposes. The Court also notes there was significant local public concern with respect to the development. Numerous objections were made to the Council prior to the resolution to approve the development, and many residents spoke in opposition to the development at the meeting. Awarding costs in public interest litigation 27 The decision in Oshlack allows the Court to consider the public interest nature of the proceedings in exercising its discretion to award costs. As Kirby J said in Oshlack (at 122): … The compensatory principle is adequately reflected by the adoption of a general practice by which, ordinarily (including in a case brought by a party under the "open standing" rule and purportedly in the public interest), costs are ordered in favour of the successful party. However, the general objects of the legislation must also find reflection in orders providing for costs. Regard may therefore be had to any public interest served by the party which has initiated the litigation, although it is ultimately unsuccessful. 28 The decision in Oshlack however does not require that no order for costs be made in all cases which may be classified as public interest litigation. As Kirby J said in South-West Forest Defence Foundation Inc v Executive Director, Department of Conservation and Land Management (WA) (No 2) (1998) 101 LGERA 114 (at 115): Nothing in the recent decision in Oshlack v Richmond River Council requires that every time an individual or body brings proceedings asserting a defence of the public interest and protection of the environment, a new costs regime is to apply exempting that individual or body from the conventional rule. To suggest that would be to misread what the court decided in Oshlack . It would require legislation to afford litigants such a special and privileged position so far as costs are concerned. No such general legislation has been enacted. 29 The Oshlack decision was also applied by Pearlman J in Save the Showground for Sydney Inc v Minister for Urban Affairs and Planning (1998) 105 LGERA 254. In that decision her Honour accepted that the proceedings brought by the unsuccessful applicants were of a public character, but considered that this did not "outweigh the fact that the applicant failed on all grounds of its challenge, and overall, there are no other factors which warrant a departure from an award of costs in favour of the respondent as the successful party": at [25]. Relevant factors to the award of costs in public interest litigation 30 Pearlman J in Save the Showground considered that several other factors were relevant to the award of costs in public interest litigation. Firstly, her Honour considered whether the applicant had any personal, private or financial gain to make from the litigation: see [21]. Her Honour found that in circumstances where the applicant was a litigant who was capable of pursuing private ends (that is, a private person or corporation as opposed to a body incorporated solely for public purposes), this would be a relevant factor. Applying her Honour's reasoning in the present proceedings, since the applicant was a private company, the fact that the applicant had no personal, private or financial gain to make from the proceedings (as found by the Court at [25] above) is a relevant factor. 31 Her Honour also considered that the question of whether the subject or decision under being challenged in the proceedings was final. Where the challenged decision was final in the sense that "irreversible damage" might result, her Honour considered that the Court would be less likely to make an order for costs: see [20]. In Save the Showground, the decision was merely a decision to rezone the site, but assessment of the proposed development, and development consent, was still required. In the present proceedings, the challenge was to a development consent. The development consent was final and allowed the construction of a major shopping centre complex in Lane Cove. As a practical reality, the shopping centre, once built, is likely to be in existence for many years. If it has significant design flaws, the development will remain flawed throughout its life and could thereby result in damage to the urban environment which would be for all practical purposes irreversible. Other relevant factors 32 The Court also takes into consideration the role of the Council in the proceedings. The Court notes the observations by Gaudron and Gummow JJ in Oshlack that it is often inappropriate for a local council to be an active participant in proceedings which have been instituted to overturn a decision of that Council. Their Honours said (at 77-8): The appellant sought declaratory and injunctive relief to restrain the developer proceeding without a valid development consent. The Council is the authority which had granted the consent upon which the developer relied. In those circumstances, and also having regard to the earlier litigation, it might have been expected that the Council would submit to such order as the Court might make and that it would not become a protagonist, lest by doing so it endanger the impartiality it would be expected to maintain upon any subsequent applications to it which might ensue were relief granted to the appellant. 33 Their Honours further stated (at 90): In a significant number of such litigious disputes, it will, in accordance with the reasoning in R v Australian Broadcasting Tribunal; Ex parte Hardiman, be entirely appropriate for, if not incumbent upon, the local government body not to assume the position of a protagonist and to avoid incurring substantial costs. The position of a protagonist will be filled by the party against which injunctive relief is sought and which is the real contradictor in respect of the application for declaratory relief. 34 In the present proceedings, the Council took on an extremely active role. Although the second respondent was separately represented, its case was essentially the same, and it adopted most of the Council's submissions. The Court considers that it was unnecessary for the Council to proceed in this manner. Given the size of the development, there could have been no doubt that the proceedings would have been defended by the second respondent, had the Council chosen not to take an active role. Further, given the local controversy concerning the Council's decision, as well as the differences of opinion within the Council body itself with respect to the development, the Court considers it would have been preferable if the Council in these proceedings had submitted to the orders of the Court. This is especially the case since part of the applicant's challenge related to the procedures of the Council in respect of the decision. Had the challenge to this Court been successful, the Court considers it highly unlikely that the Council could have appeared impartial in any subsequent consideration of the development, given its vigorous defence in these proceedings. 35 The Court notes that the active role of the Council in defending its decision has significance to access to this Court. In proceedings challenging a development consent in this Court, it is almost always necessary to join two parties, namely the consent authority and the party having the benefit of the consent. Obviously where both parties take an active role, the costs involved may be more than double those involved in proceedings against a single party. Such costs would represent a formidable disincentive to the institution of proceedings, especially public interest litigation, in this Court, and would act as a severe limitation upon the access to the Court. As the High Court found in Oshlack, the Parliament of New South Wales has seen fit to broaden public access to this Court. The Court considers that for this reason a consent authority should in most circumstances submit to the orders of the Court in proceedings of this nature. Conclusion 36 The Court considers that when all these factors are taken into consideration, in the exercise of the Court's discretion the appropriate order to be made is that the applicant pay the costs of the second respondent, but that the Council bear its own costs of the proceedings. Such result balances the competing factors by granting some concession to the applicant whilst recognising that the compensatory principle usually prevails. Orders 37 Accordingly, the Court makes the following orders:

The applicant is to pay the costs of the second respondent of the proceedings and of this motion.
The exhibits be returned.

Kindimindi Investments Pty Ltd v Lane Cove Council & Anor

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Judgment (11 paragraphs)

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