Lismore City Council v Dajoco Investments Pty Ltd

Facts relevant to costs

1. The initial Summons filed 12 July 2019 sought declaratory and injunctive relief with respect to the following unlawful development, as particularised in the Points of Claim filed 9 August 2019 (the POC): 1. The unlawful use of the property for the purposes of residential accommodation without development consent; 2. The construction of a deck without development consent; 3. The construction of a carport without development consent; 4. The installation of a spa without development consent; and 5. The construction and/or installation of a kitchen and cooking facilities which facilitated the unlawful residential use of the property.
2. An inspection of the Premises was undertaken by Council officer Graeme Bailey on 19 November 2019, where he observed that the deck around the spa had been removed and the plumbing associated with the spa had been disconnected. He also observed that the roof over the carport structure had been removed.
3. The Respondents' agent, Mr Alan Oshlack sent an email to the Applicant's solicitor on 21 January 2021, requesting that the POC be amended to remove certain parts of the claim, including those relating to the spa and carport.
4. On 27 January, the Applicant's solicitor wrote a letter to Mr Oshlack noting the Council's position that the spa and carport had been constructed without consent, but that the Council would not plead that the spa and carport were currently in breach of the relevant legislation due to the changes that had been made to these built items.
5. On or about 4 February 2021, the Council filed Amended Points of Claim (Amended POC) in which, inter alia, its claims with respect to the spa and carport were no longer pressed.
6. In relation to the deck, the Respondents had obtained a "Certificate of Structural Sufficiency" from Jonathan Quinn dated 6 April 2018 (the Certificate), which identified that certain works were required to be undertaken to the deck and its associated awning in order to comply with the National Construction Code 2011 and relevant Australian Standards.
7. On or about 3 March 2020, the Second Respondent lodged an application with the Council for a Building Information Certificate, to which the Council advised the application was insufficient as the Certificate was provisional upon certain works being undertaken.
8. The Respondents filed the affidavit of Jonathan Quinn sworn 19 August 2020 which attached a "Certificate of Compliance" with respect to the deck and its associated awning dated 19 August 2020.
9. The Applicant made offers of settlement during the proceedings by letters dated 9 September 2019 and 15 February 2021.

Relevant legislative provisions

1. The Court's general discretion to award costs is found in s 98 of the Civil Procedure Act 2005 (NSW): 98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act - (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.
2. Rule 42.1 of the Uniform Civil Procedure Rules (2005) applies to proceedings of this kind and provides that: 42.1 General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.
3. That rule operates as a presumption in favour of the usual order unless the Court, in the exercise of its discretion, determines that another order is appropriate.

Council's submissions

1. In its written submissions on costs filed 23 November 2021 (Council's Submissions on Costs), Council submits there were three primary issues for determination by the Court, being: (a) Whether the deck was exempt development pursuant to cl 2.12(1) of the State Environmental Planning Policy (Exempt and Complying Development) 2008 (the SEPP) and, if not, whether it required development consent; (b) Whether the stove in the kitchen was development that required consent; (c) Whether the Premises were being used for residential purposes and, if so, whether that use was ancillary to the commercial use as caretaker accommodation as a separate and independent use …
2. In relation to each of these issues, the final issue for determination was whether the Council should obtain the relief sought in the exercise of the Court's discretion.
3. There is a presumption that the successful party should be awarded its costs: Kiama Council v Grant (2006) 143 LGERA 441 at [49], [56], [72]; Ralph Lauren 57 Pty Ltd v Byron Shire Council (2014) 199 LGERA 424 at [23], [28]; Cutcliffe v Lithgow City Council (2006) 147 LGERA 330 at [13].
4. Council submits that they are entitled to their costs, having been successful in "primary" issue: obtaining orders that the Respondents cease the prohibited residential use of the Property. Whilst orders were not made in relation to the deck, the Council was successful in that non-compliances with respect to that structure were resolved during, and as a result of, the proceedings.
5. There is no proper basis for the Court to make any other order. An order for apportionment of costs is not appropriate in this case.
6. The case of Brown v Randwick City Council (No 2) [2012] NSWLEC 28 (Brown v Randwick (No 2)) establishes the relevant principles relating to apportionment of costs as follows: [9] One circumstance where the Court may consider it appropriate to make a different order as to costs is where multiple issues are involved and the successful applicant fails on one or more of the issues which are discrete from the issues on which the applicant succeeded. … [11] What is clear from these summaries of principles is that the mere fact that an applicant does not succeed on all issues raised in the proceedings is not sufficient by itself for the Court to depart from the usual rule and instead award costs only with respect to the issues on which the applicant did succeed. The issues on which the applicant did not succeed need to be "clearly dominant or separable" or "clearly discrete" from those on which the applicant did succeed: James v Surf Road Nominees (No 2) at [32] and [34] respectively. In determining the discreteness of the issues, it is relevant to consider whether the time taken on each issue, at the hearing and in evidence, can be identified or realistically estimated: James v Surf Road Nominees (No 2) at [35]. It may also be relevant to consider whether the issues on which the applicant did not succeed lacked real merit: see Centro Properties Ltd v Hurstville City Council at [21] and [23] and similar comments in the dicta quoted in [14], [16] and [20] and in McCallum v Sandercock (No 2) at [49(e)].
7. The issues on which the Applicant was not wholly successful were not "clearly dominant or separable" or "clearly discrete" from the dominant issue of the prohibited residential use and did not take up significant time during the hearing.

Deck

1. Although final orders were not made in relation to the deck, Council submits that it was successful in that the issues relating to the non-compliant deck were rectified as a result of the proceedings.
2. The Court held that the deck was not exempt development as it did not meet the requirements of cl 2.12(1) of the State Environmental Planning Policy (Exempt and Complying Development Codes) 2008 (the SEPP) requiring that all development standards had to be met. The Court agreed with both parties that the failure to obtain development consent could be regularised by the issuing of a Building Information Certificate (BIC).
3. The Court exercised its discretion and declined to grant the relief sought in respect of the deck. The Court considered that by the time of the hearing, Council had accepted that the deck was capable of benefitting from a BIC based on the evidence of the structural engineer filed during the proceedings confirming the deck's structural adequacy. As a result, whilst Council wished to have the deck regularised by a BIC, the Court determined it unnecessary given that any concerns in relation to the structural adequacy and environmental impact had been resolved.

Kitchen and stove

1. The Court did not accept Council's submission that the kitchen and stove required development consent, noting that the issue of whether the stove was being used for residential purposes would be resolved in the consideration of the nature of the Second Respondent's occupancy of the building. The Second Respondent was entitled to use the stove to provide amenities to the commercial uses undertaken pursuant to the development consent for a media centre.
2. Despite being unsuccessful on this ground, it was directly related to the "primary" residential use ground and did not take up significant time during the hearing and so should not be apportioned.

Residential use

1. The issue of whether the Second Respondent's residential use of the Premises was prohibited in the B1 Neighbourhood Centre zone was the primary issue for determination and took up the bulk of the hearing time, being the subject of extensive evidence and cross-examination of both lay and expert witnesses.
2. Council was successful in that the Court held that the proper characterisation of the residential use was separate and independent, and therefore prohibited in the zone. The caretaking activities undertaken by the Second Respondent did not alter the characterisation of the residential use to an ancillary caretaker use.
3. Council was therefore successful on this ground as it obtained final orders in relation to this primary issue relating to the prohibited residential use.

Spa and carport

1. The issues originally plead in relation to the spa and carport were removed from the POC as a result of works done by the Respondents after the proceedings were commenced. Council did not "abandon" those claims as submitted by the Respondents. As with the deck, Council was successful in that non-compliance was resolved as a result of the proceedings.

Respondents' submissions

1. The Respondents oppose Council's Notice of Motion for costs.
2. The Respondents submit that Council commenced the proceedings with pleadings in relation to five issues; that the Respondents did without development consent: 1. Construct a carport at the back of the Premises; 2. Install a spa; 3. Construct a deck at the rear of the Premises; 4. Construct and install a kitchen on the Premises; and 5. Utilise the Premises for residential purposes, being a prohibited use in the B1 Neighbourhood Centre zone.
3. The Respondents submit that based on the pleadings as commenced, Council was largely unsuccessful on 4 of the 5 pleadings and is therefore not entitled to its full costs of the whole of the proceedings as sought.
4. The facts of these proceedings are clearly distinguishable from those in Brown v Randwick (No 2) as where it was held in that case at [12] that the issues did not satisfy the threshold that they were "clearly dominant or separable; occupied such a significant time at the hearing that separate identification and estimation of the time spent on the issue is realistic; or lacked any real merit", those proceedings were conducted over a period of just over one day. These proceedings took place over four days of hearing, a two-day mediation, a court-ordered inspection, multiple interlocutory hearings and amendments to the pleadings two weeks out from the hearing requiring the Respondents to draft Amended Points of Defence.
5. Whilst Council was successful on the ground that the Second Respondent's residential use was not ancillary to the commercial use and a separate and independent use, an order of summary dismissal was not made and Council did not obtain orders in the form of the declarations sought. Rather, the Court held at [93] that: I consider that the form of declarations sought are too broad and not sufficiently specific to identify the breaches I have found. I consider that it is appropriate to make an order to restrain the residential use and that such orders alone will be sufficient to achieve the objective of compliant with the requirements of the EP&A Act.

Deck

1. Despite Council's submissions to the contrary, the Court held that there was insufficient evidence to satisfy the Court on the balance of probabilities that the floor level of the deck was not in conformity with the development standard at the time of construction. However, noting the deck's roof did exceed the height nominated in the SEPP, as was admitted by the Respondents, the deck and each of its component parts could not be characterised as exempt development.
2. The Court found that as a result of the expert evidence provided to the Court by the Respondents, the issues to which a BIC would relate were all the subject of evidence and consideration such that the requirement to obtain certification would be doing no more that requiring form over substance.
3. Council was therefore unsuccessful in obtaining the relief in the form sought.

Kitchen and stove

1. Council was unsuccessful on this ground as it was held that there was insufficient basis upon which its contention that the installation of the stove required development consent could be found. Council was therefore not entitled to the relief sought.

Residential use

1. As noted above, whilst Council was successful in that it obtained an order, suspended for 12 months, for the Respondents to cease the residential use of the Premises, it failed to obtain the declarations sought as it was held that these declarations sought were "too broad and not sufficiently specific to identify the breaches" (at [93] of Dajoco Investments (No 1)).

Spa and carport

1. Whilst the proceedings were commenced on 12 July 2019, it was not until 4 February 2021, 12 days before the hearing, that the Applicant obtained leave to amend its POC to abandon its grounds in relation to the spa and carport.
2. Due to this delay, the Respondents were required to prepare defences including expert evidence, attend mediation, and were subject to court-ordered inspections which found the carport and spa issues to be unfounded.

Findings

1. The fact that issues were articulated and determined separately is not a sufficient basis for the exercise of my discretion to apportion costs. Taking a "scoreboard" approach in this way has been warned against by Jacobs J in Cretazzo v Lombardi (1975) 13 SASR 4 at 16 as cited by Toohey J in Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748.
2. However, as noted by the Court of Appeal in James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34] and cited in Brown v Randwick (No 2), when exercising discretion in matters involving multiple issues, a distinction can be drawn between cases where "issues are inseparable, or at least sufficiently linked" and those "which involve clearly discrete issues for determination"; one example of which being where an application "makes separate claims for different relief". This distinction can also be made where the issues differ on a "disputed question of fact" at [34].
3. In these proceedings, in addition to the issues being articulated and determined separately in the parties' submissions and in the judgment, separate claims for different relief were made by the Applicant in its Amended Summons in relation to the prohibited residential use and the development without consent; the latter which encompassed both the external deck and internal kitchen and stove modifications.
4. Further, as raised by both parties, the case of Brown v Randwick (No 2) requires the consideration of the time taken at the hearing and in evidence and whether this can be realistically estimated, as well as whether issues on which the applicant was unsuccessful lacked real merit.
5. As will be further discussed below, whilst Council has submitted that there was a link between the kitchen and stove ground and the "primary" residential use ground, I find that this link was limited to the way in which Council framed its case in its submissions and evidence, where there was in fact no dispute in relation to whether the Second Respondent was residing at the Premises. Upon consideration of the time taken at the hearing and in evidence, as well as the way in which each claim was articulated in the Amended Summons, I find that each of the three issues of: (1) the prohibited residential use; (2) the deck; and (3) the kitchen and stove are clearly separable and discrete. In the circumstances, I consider it appropriate to review Council's respective success on each of these issues and apportion costs accordingly.
6. Whilst each party has made submissions concerning the discontinued issues relating to the spa and carport, for the purposes of determining costs, it is not the role of the Court to conduct a hypothetical trial: Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 (Lai Qin). As the carport and spa claims were withdrawn prior to the commencement of the hearing and no evidence was heard, it would be inappropriate to undertake a merit assessment of the success of those claims.

Deck

1. I accept Council's submission that it was largely successful on this ground in that I found that as the deck was not exempt development, it was development requiring consent which had not been granted.
2. Much of the dispute in evidence and at hearing related to a particular aspect of the deck, being whether the floor level of the deck was in excess of the 1m provided for in cl 2.12(1)(i) of the SEPP. The Respondents conceded in their supplementary submissions at [33] that the other aspect of the deck in dispute, the deck roof, was not exempt development and offered to obtain a BIC to bring this into compliance.
3. Whilst I found that on the basis of Council's witness, Mr Graeme Bailey, that there was insufficient evidence to satisfy me on the balance of probabilities that the floor level was not in conformity with the development standard at the time of construction, the non-compliance of the roof meant the whole of the deck could not satisfy the exempt development requirements.
4. A larger portion of the time spent on this issue related to the floor level aspect of this issue, as evidenced in the cross-examinations of Mr Bailey, the cross-examination of Mr Townend and the cross-examination of Mr Coyne. Further, the part of issue on which Council was successful (the roof height) was admitted by the Respondents.
5. Noting this, as well as the fact that I did not grant either the declaration or the rectification order sought relating to this issue, I cannot say that Council enjoyed complete success and therefore it is not appropriate that the Respondents be liable for the costs on this issue.

Kitchen and stove

1. The Council was unsuccessful on this issue. I found at [51]-[53] that there were insufficient grounds to establish that the stove required development consent and so Council was not entitled to the relief sought.
2. I do not accept Council's submission that this issue was so directly related to the primary residential use ground that it could not be viewed as a discrete and separate issue, nor that an insignificant or inestimable period of time was taken up in the hearing or evidence.
3. As noted above, this issue was articulated separately to the residential use issue in the Amended Summons as being one which, together with the deck, related to development carried out without consent which required rectification to return to its approved form. The orders sought in relation to the prohibited residential use of the Premises were separate.
4. I accept that a certain degree of overlap with the residential use ground was apparent in the hearing of the matter, however I attribute this confusion to the way in which Council put its case in its submissions, evidence and at hearing, not the nature of the issue itself as pleaded.
5. The 1963 baby health centre and 2003 media consultancy conversion plans of the Premises were tendered as evidence in the primary proceedings, as well as a number of photographs taken by Council officer Mr Bailey, some of which depicted the kitchen (as annexures to Mr Bailey's affidavit sworn 9 April 2020). Further photographs of the kitchen and its surroundings were also tendered in the course of the hearing. Mr Townend, Mr Coyne and Mr Bailey were each cross-examined on the evidence related to the kitchen and stove and whether the 1963 and 2003 plans accorded with that evidence regarding the size, use and installation of the stove.
6. At multiple points in its evidence and throughout the hearing, Council was asked to clarify the nature and purpose of this discrete issue.
7. For example, in a letter from the Applicant's solicitor, Michael Young, dated 27 January 2021 contained in Council's Bundle of Documents filed in these costs proceedings (Exhibit B), Mr Young clarified that in relation to this issue, his client's concern was not whether a kitchen was built or installed, but rather "that the kitchen (including the kitchen area) is not approved and its existence facilitates the use of the building as a dwelling".
8. Similarly, at multiple points in the course of the hearing, counsel for Council confirmed that despite the pleadings, it was not part of their case that the Respondents installed the kitchen; the issue related to the kitchen's unapproved existence and use for a domestic and residential use rather than a commercial one: Tcpt, 16 February 2021, p 16 (38)-(43); Tcpt, 18 February, p 193 (28)-(34).
9. It is clear that despite Council's pleadings articulating this issue as whether the kitchen was development without consent, the nature of this issue evolved throughout the proceedings in order to provide support for the separate residential use ground. Whilst this does go to Council's submission that this issue was directly linked to the residential use issue, it was uncontroversial and never disputed by the Respondents that the Second Respondent was in fact residing at the Premises and so the evidence provided for this issue did not assist nor form the basis for my determination of that issue.
10. Noting the above, I find this issue lacked a reasonable basis for its pursuit and the Respondents should not be responsible for the costs accrued in the hearing of this issue.

Residential use

1. Council was successful on this issue in that I found that the Premises were being used for residential purposes that were prohibited. More specifically, I found that the Second Respondent's residential occupation was not for the planning purpose of a caretaker, ancillary to the commercial use such that it could be discounted for planning purposes.
2. However, I do not agree with the Council's framing of this issue in its Submissions on Costs, being: (c) Whether the Premises were being used for residential purposes and, if so, whether that use was ancillary to the commercial use as caretaker accommodation as a separate and independent use …
3. Council's further submission that "the issue of whether the Second Respondent's residential use was prohibited … was the primary issue for determination and took up the bulk of the hearing time …" is inaccurate.
4. As noted above, the issue of whether the Premises were being used for residential purposes was never in dispute by the Respondents. The issue was specifically limited to whether the Respondents' caretaker use was ancillary to the commercial use and I do not accept that this aspect of this issue took up the bulk of the hearing time.
5. Evidence on this aspect of the issue was limited in the hearing of the matter to the cross-examination of Mr Mallam for approximately one hour on the first day of the hearing and a portion of the cross-examination of Mr Townend which did not take up a significant period of time.
6. As noted above in relation to the issue of the kitchen and stove, a large portion of Council's submissions and evidence at hearing went to proving the residential use of the Second Respondent. However, this portion of the evidence did not form any basis upon which my decision in relation the caretaker aspect of the residential use was made.
7. Noting this, as well as the fact that Council did not succeed in obtaining relief as sought, I find that Council should not be entitled to all of its costs on this issue.

Apportionment

1. I note that in the matter of apportioning costs, "mathematical precision is illusory and the exercise of discretion will often depend on matters of impression and evaluation": McCallum v Sandercock (No 2) [2011] NSWLEC 203 at [49].
2. Doing my best based on my above findings in relation to each key issue, and noting the time taken and the merits of each issue, I find it is appropriate that Respondents be responsible for 40 per cent of the total costs of the proceedings.
3. I decline to make the specific requests of the Respondents. In relation to the expert witnesses of Mr Townend and Mr Quinn, these witnesses provided evidence upon which I relied to make my determinations on the deck as well as the caretaker aspect of the residential ground. As the Respondents were not successful on those issues, I do not find it appropriate to make a specific order for Council to pay these costs.
4. Further, as contained in Mr Oshlack's letter of engagement as Agent pursuant to s 63 of the Land and Environment Court Act 1979 (NSW), Mr Oshlack proposed not to charge for his services other than expenses and disbursements accrued. I was not provided with evidence on these expenses nor on the Respondents' paralegal costs.
5. I also note that during the course of the costs proceedings, Council agreed to pay half the transcript costs as requested by the Respondents. Accordingly, I will so order.

Costs of the Notice of Motion

1. Each party seeks its costs of this Notice of Motion.
2. With respect to the costs of this Notice of Motion, as neither party has enjoyed complete success it is appropriate that each party bear their own costs.

Conclusion and orders

1. The Court orders that: 1. The Respondents pay 40 per cent of the total costs of the proceedings; 2. Council pay 50 per cent of the transcript costs; and 3. Each party bear their own costs for the costs of this Notice of Motion.

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: 28 March 2022