Local Democracy Matters Inc v Minister for Local Government

Background

1. The Summons raised a discrete alleged jurisdictional error in relation to the amalgamation process similar to that which had been found by the Court of Appeal in Kur-ring-gai Council v West as delegate of Acting Director-General, Office of Local Government [2017] NSWCA 54; (2017) 220 LGERA 386 ('Ku-ring-gai v West') in a judgment handed down on 27 March 2017.
2. In separate proceedings brought to oppose the proposed amalgamation, Woollahra Municipal Council ('Woollahra Council') on 12 May 2017, was granted special leave to appeal to the High Court ('Woollahra appeal') from the decision of the Court of Appeal in Woollahra Municipal Council v Minister for Local Government [2016] NSWCA 380; (2016) 219 LGERA 180 ('Woollahra v Minister') and was given leave to amend its Notice of Appeal to include the grounds that had been successful in Ku-ring-gai v West.
3. Although Local Democracy did not formally amend its Summons, in an email dated 22 May 2017 from the solicitor for Local Democracy to the solicitors for the Minister, Local Democracy stated that it intended to abandon "any ground [in these proceedings] that goes beyond the High Court decision". The issues in these proceedings were thereby limited to those raised by Woollahra Council in the Woollahra appeal which was at that time pending in the High Court.
4. Rule 59.10(1) of the UCPR imposes a three month time limit on the commencement of "proceedings for judicial review of a decision". Given the Delegate's Report was prepared in March 2016, as noted above, prayer 1 of the Summons sought an extension of time under UCPR r 59.10(2) to allow Local Democracy to commence proceedings outside of the time limit.
5. On 19 May 2017, the Minister filed a Notice of Motion seeking expedition of the separate question.
6. Although overtaken by subsequent events, the evidence relied upon by the Minister on the separate question comprised affidavits of senior lawyers annexing extensive background documentation detailing the procedural history of the proposed amalgamation. Local Democracy marshalled evidence comprising documents relating to the public inquiry into the proposed amalgamation. Local Democracy also filed correspondence dated 24 May 2017 confirming that it intended to abandon "any ground that goes beyond the High Court decision" and stating that accordingly there was no utility in the proceedings continuing, and that it opposed the Motion filed 19 May 2017 seeking the determination of the separate question. A further email was filed by Local Democracy from the Minister's solicitors at the Crown Solicitor's Office, dated 9 June 2017, which read "I refer to our recent telephone conversation and confirm my instructions to seek the Minister's consent to Local Democracy Matters Inc. discontinuing the proceedings on the basis of [there being] no order as to costs".

Parties' submissions on the separate question

1. Although I have determined to dismiss the proceedings, some understanding of the positions adopted by the parties on the separate question is helpful to understand the exercise of the Court's discretion with respect to costs.
2. In the proceedings on the separate question, the Minister submitted that the onus of proof lay with Local Democracy to demonstrate why an extension of time should be granted under UCPR r 59.10(2). The Minister gave four reasons why the extension should not be granted.
3. First, the Minister submitted that the proceedings lacked utility as, given Local Democracy confirmed by email to the Crown Solicitor's Office on 22 May 2017 that it intended to abandon any grounds in its Summons other than those raised by Woollahra Council in the Woollahra appeal, if the High Court allowed the appeal, the Delegate's Report and the report prepared by the Boundaries Commission would be presumptively declared invalid, meaning the relief sought in the proceedings would be otiose. On the other hand, if the High Court dismissed the appeal, the grounds relied upon by Local Democracy would have been rejected.
4. Second, the Minister submitted that Local Democracy's delay of 14 months (after the Delegate's Report) in filing proceedings, without a reasonable explanation for that delay, was a "potent factor" that spoke against the grant of an extension of time especially when the proposal to merge Woollahra, Waverley and Randwick councils had been well publicised, as were the proceedings initially commenced by Woollahra Council in this Court challenging the proposed amalgamation.
5. Third, the Minister noted that Local Democracy only came into existence on 8 May 2017 and submitted that there was no reasonable explanation as to why those standing behind Local Democracy could not have learned of the Delegate's Report prior to incorporation.
6. Fourth, in response to Local Democracy's explanation for the delay - that it was not aware of the possibility of relying upon the grounds in the Summons until the Ku-ring-gai v West decision was handed down by the Court of Appeal - the Minister submitted that the grounds of review were articulated in those proceedings as early as 22 March 2016, and there was no reason why, if Ku-ring-gai Council was in a position to articulate those grounds, Local Democracy could not also have done so.
7. In summary, the Minister submitted that Local Democracy should not be granted an extension of time to bring proceedings in circumstances where the proceedings could easily have been brought within time, and ultimately served no real purpose.
8. Local Democracy submitted that the separate question was misconceived for two reasons: first, properly understood, the relief sought in the proceedings ultimately related to a potential future decision of the Minister to recommend the amalgamation of the councils under s 218F(7) of the Local Government Act 1993 (NSW) ('LGA'), and the time limit in UCPR r 59.10 could not attach to a decision that had not yet been made; and second, even if leave to extend time was required, it would be just in the circumstances to grant it given the significant merit of the application, the fact that Local Democracy acted with alacrity as soon as it came into existence, and the fact that the grounds of review arose from the decision in Kur-ring-gai v West, which was delivered less than three months before the application was made to this Court in the proceedings.
9. With respect to the first point, Local Democracy submitted that the proceedings related to: first, the Delegate's Report provided to the Minister under s 218F of the LGA; second, the review of the Boundaries Commission in relation to the proposed amalgamation sent to the Minister on 22 April 2016; and, third, any recommendation by the Minister to implement the proposed amalgamation under s 218F(7) of the LGA.
10. Local Democracy submitted that a "decision" was not required to be made before a review of the Minister's prospective recommendation under s 218F(7) could be commenced as the Court's jurisdiction arose under s 674 of the LGA, which provides for remedy or restraint against a breach of the Act, including in respect of a threatened or apprehended contravention or failure to comply with the Act. In that sense, Local Democracy submitted that despite the Minister not yet having made a recommendation under s 218F(7), the relief sought in the proceedings was not premature as it sought to restrain a threatened breach of the Act.
11. In the alternative, Local Democracy submitted that if the Court was required to extend time for the purposes of UCPR r 59.10, it should exercise its discretion to do so, given the following circumstances: 1. if the Woollahra appeal was not on foot, this Court would have been bound by the decision in Kur-ring-gai v West, and Local Democracy would have been entitled to the relief sought; 2. Local Democracy had not come into existence until 8 May 2017, and it acted with alacrity in commencing proceedings on 11 May 2017; 3. the substantive basis of the challenge in the proceedings could not have been known until the Court of Appeal delivered judgment in Kur-ring-gai v West on 27 March 2017; 4. the proceedings were commenced within three months of the decision in Kur-ring-gai v West, and accordingly Local Democracy acted appropriately; and 5. there would be no prejudice to the Minister in granting the extension of time given the state of the Woollahra appeal.
12. Local Democracy accepted that if the High Court dismissed the Woollahra appeal on the basis that there was no duty of procedural fairness in relation to the Delegate's Report, the proceedings would fall away. However, if the High Court did determine that there was a duty of procedural fairness then the proceedings would retain utility, as Local Democracy would then be entitled to make submissions that the duty was similarly owed to them, as it represented people whose interests were directly affected.
13. In response, the Minister disputed Local Democracy's submission that the reports prepared by the Delegate and the Boundaries Commission were not "decisions" for the purposes of UCPR r 59.10, and noted that the reports were treated as such in Kur-ring-gai v West. The Minister submitted that Local Democracy did not have a genuine desire to obtain the relief sought in the proceedings in light of the granting of special leave in the Woollahra appeal, and accordingly the proceedings were being continued only so as to escape the default costs consequences.

Parties' position on costs - post Premier's announcement

1. The Minister submits that it is clear that Local Democracy accepts that the proceedings should be dismissed, and that the only remaining dispute is as to costs. Accordingly, the Minister submits that the appropriate course of action is for the Court to dismiss the proceedings and order that Local Democracy pay the Minister's costs. In the alternative, the Minister submits that there should be no order for costs in the proceedings.
2. Relying on Immigration and Ethnic Affairs, Re Minister for; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 ('Ex parte Lai Qin') at 625 per McHugh J, the Minister submits that where proceedings are rendered futile without determination, the usual course is for each party to bear its own costs. However, the Minister submits that the current proceedings are different, in that Local Democracy is reliant on an extension of time, and the Premier's decision not to proceed with the amalgamation affects the Court's consideration of whether to grant the extension, rather than simply rendering the determination of the merits futile.
3. The Minister submits that it is appropriate in the present circumstances for the Court to form a "general view" as to which party was likely to succeed in the proceedings for the purposes of exercising its discretion as to costs. Unlike the circumstances in Ex parte Lai Qin where McHugh J cautioned against a court forming a hypothetical view for the purpose of determining costs where the issue has not proceeded to trial, the Minister submits that in these proceedings there was a contested hearing on the merits of the application for an extension of time. The Minister submits that this is similar to the circumstances in Hunter Development Corporation v Save Our Rail NSW Inc [2015] NSWCA 346 ('Hunter Development No 1') and Hunter Development Corporation v Save Our Rail NSW Incorporated (No 2) (2016) 93 NSWLR 704; [2016] NSWCA 375 ('Hunter Development No 2'), where the Court heard the appeal and reserved judgment, but legislation was passed before the judgment was delivered such that the substantive dispute was rendered moot.
4. Adopting this approach, the Minister submits that the Court should not exercise its discretion under r 59.10 of the UCPR in favour of Local Democracy, as the decision it seeks to have reviewed is no longer operative.
5. Even if the Court does not determine the separate question, the Minister submits that it cannot be said that Local Democracy was bound to succeed in the proceedings because, first, Local Democracy was reliant on an extension of time being granted, and second, the Minister submits that, as in Shellharbour City Council v Minister for Local Government [2017] NSWCA 256 ('Shellharbour v Minister'), the circumstances in these proceedings are distinguishable from those in Ku-ring-gai v West where the Delegate accepted the KPMG report uncritically. The Minister submits that Local Democracy was in fact bound to fail, and accordingly the Court should make a costs order against Local Democracy.
6. In the circumstance that the Court is not minded to make a costs order against Local Democracy, the Minister submits that the Court should make no order as to costs. The Minister submits that the Premier's announcement was not a capitulation, and that while Local Democracy achieved the outcome that it was seeking, it did not obtain the relief sought (which was predicated on finding that the Minister lacked power because of miscarriages in the statutory process of examination and report).
7. The Minister further submitted that it was reasonable and appropriate to have sought to have Local Democracy's application for an extension of time determined as a preliminary question, and that this is demonstrated by the fact that Moore J found it appropriate to order the separate question. Finally, the Minister submits that Local Democracy's reliance on its offers of settlement is misconceived, and repeats the submission made at the hearing on the separate question that Local Democracy's continuation of the proceedings despite its admission that it would discontinue proceedings if provided with certainty as to a costs order, constitutes an abuse of process.

Local Democracy's position on costs - post Premier's announcement

1. Local Democracy submits that the Court should dismiss the proceedings and order that the Minister pay the costs of the other parties and, if the Court is not minded to make those orders, the Court should make no order as to costs.
2. Local Democracy also submits that the starting point for costs in proceedings that have been rendered futile is set out in Ex parte Lai Qin at 625: 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.
3. Local Democracy submits that the appropriate consideration is whether or not the proceedings were reasonably commenced, rather than whether the proceedings required an extension of time. Local Democracy submits that the Minister has not identified any conduct on the part of Local Democracy that would suggest that the proceedings were unreasonably commenced, and accordingly that there is no basis for the submission that Local Democracy pay the Minister's costs and the costs of other parties to the proceedings.
4. Local Democracy submits that the Minister mistakenly seeks to argue and have the Court determine the question of an extension of time. Local Democracy submits that this directs the Court away from the correct test enunciated in Ex parte Lai Qin, and in effect constitutes the Minister seeking an advisory opinion from the Court, and asking the Court to exercise its jurisdiction with no practical purpose or utility.
5. Further, Local Democracy submits that the Minister has not identified any unreasonable conduct on the part of Local Democracy that would bring the proceedings within the test described in Ex parte Lai Qin. Accordingly, in Local Democracy's submissions, there is no basis for the Minister's submission that Local Democracy should bear the costs of the proceedings.
6. Rather, Local Democracy submits that its costs should be borne by the Minister on the basis that the parties had agreed to stand the matter over until September, and that no costs would have been incurred in the proceedings had the Minister abided by that agreement. Local Democracy further submits that before Moore J it opposed the Minister's Motion for a separate question, and that the separate question was agitated at great expense to the parties and significant court time and resources. Local Democracy submits that this was exacerbated by the Minister's initial failure to serve the Motion seeking an order pursuant to r 28.2 of the UCPR in relation to the separate question on all parties, with the effect that the hearing on the Motion that was set down before Moore J on 29 May 2017 had to be vacated, and relisted.
7. Local Democracy also submits that it made an offer to settle the proceedings on 16 June 2017, which was rejected by the Minister and that it repeated this offer at the hearing of the Motion, however the offer was again rejected. Local Democracy submits that it was unreasonable for the Minister to necessitate the incurring of costs by agitating the separate question and refusing offers to settle, particularly in circumstances where the Minister ultimately made a decision rendering the proceedings futile.
8. Local Democracy submits that had the Premier not discontinued the amalgamations, Local Democracy was bound to succeed in the proceedings in light of the decision in Ku-ring-gai v West, which had not been the subject of a special leave application to the High Court and the grounds of which were raised in the present proceedings.
9. Local Democracy also refers to the recent decision in Shellharbour v Minister and notes that the Court of Appeal applied the usual rule in relation to proceedings rendered futile by a supervening event to find that the costs of the appeal should be borne by each party.
10. Local Democracy submits that the circumstances warrant a departure from the usual order that there be no costs order and weighs in favour of an order that the Minister pay the costs of the proceedings.

Consideration

1. It is appropriate, as agreed between the parties, that the proceedings be dismissed. Each party seeks its costs for the reasons noted above. The principles regarding costs in proceedings that have been rendered otiose have been considered in Ex parte Lai Qin at 625, Kiama Council v Grant [2006] NSWLEC 96; (2006) 143 LGERA 441 at [43]-[80], One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 ('One.Tel') at [6], and Shellharbour v Minister at [5]-[7]. However, the present facts are different to those cases which involved the occurrence of a supervening event which rendered the proceedings futile before there had been a full argument on the merits.
2. In Hunter Development No 1 at [122], the Court of Appeal found that it was appropriate to hand down a judgment which had been rendered inoperative save as to costs by the passing of legislation between the full hearing having concluded and the judgment being delivered. The decision in Hunter Development No 1 was upheld in Hunter Development No 2, which contains a summary of the principles applied at [47]-[57] and [74]-[79]. Special leave to appeal to the High Court was refused: Save Our Rail NSW Incorporated Inc 9883299 v Hunter Development Corporation [2017] HCASL 143.
3. This matter is distinguishable from that case because the hearing which took place related to a discrete preliminary question which, even if resolved in favour of the Minister, may not have been determinative of the proceedings. According to Local Democracy, this is because, despite its own pleading seeking an extension of time to commence the proceedings, it did not need the extension because the "decision" that was to be ultimately challenged was the recommendation by the Minister to implement the proposed amalgamation pursuant to s 218F(7) of the LGA. Because that recommendation had not been made (and will now not be made), the time limit pursuant to UCPR r 59.10 is not (and was not) relevant.
4. Local Democracy maintains that the separate question (which was promoted by the Minister and opposed before Moore J by Local Democracy) was misconceived because the relief sought in the proceedings related to a potential future decision of the Minister to recommend the amalgamation.

Should the separate question be determined?

1. This is not a matter where one party has surrendered, and while the Premier's announcement is a classic supervening event which removes the subject of the dispute in the proceedings, it cannot be said that one side has "simply won" (adopting the dichotomy of Burchett J in One.Tel at [6]).
2. For that reason, I find the present position is different to that which was considered in Hunter Development No 1 where the Court had heard full argument on the merits in the substantive proceedings which were rendered moot by the supervening legislative enactment. So whilst, in Hunter Development No 2, Beazley P said at [79] that it was "indeed appropriate, to discern a 'clear winner'", it is not necessary, nor possible, to determine a clear winner in these proceedings.
3. Depending on what I had found in relation to the separate question, a finding which I have determined I now should not make, I may have been minded to order that the costs of the separate question be costs in the cause.
4. A court may proceed to determine a matter, notwithstanding that, for whatever reason, the substantive issue is no longer an issue. This is particularly so where the decision may affect other cases (Hunter Development No 2 at [47]), however I reiterate this is not the present situation. The separate question, by its nature, was discrete.
5. Consequently, though I accept there has been argument on the separate question, because a finding either way would not necessarily be determinative of the whole of the proceedings, I find that in awarding costs, it is appropriate to adopt the approach of the High Court in Ex parte Lai Qin at 625. Hence, consideration should be given to whether the parties have acted reasonably in commencing and defending the proceedings and whether the conduct of the parties continued to be reasonable.
6. Thus, whilst I was requested by the Minister to form a "general view" as to which party was likely to succeed in the separate question for the purpose of exercising my discretion as to costs, I do not consider that to be an appropriate course for the reasons stated above. Even if I had found in favour of the Minister, that finding would not have necessarily determined the substantive proceedings, nor do I consider that it would have necessarily been determinative on the question of costs.
7. I find that there is little to be gained from an advisory opinion from the Court in relation to this matter in circumstances where, given the supervening event, it can have no advisory or other effect upon this or any other proceedings.

Reasonable conduct?

1. Each party submitted that the other party had conducted the litigation in an unreasonable manner. I find those arguments unpersuasive. Although Local Democracy submits that no costs would have been incurred had the Minister acceded to a suggestion that the conduct of the proceedings (and the separate question) be stayed to allow the Woollahra appeal to be heard by the High Court, I accept that given the issues that had then been raised in the High Court included certain grounds upon which Kur-ring-gai Council had been successful in the Court of Appeal, the Minister's desire to have the separate question determined was reasonable in the circumstances.
2. Local Democracy submits that the Minister's refusal of its earlier offers that the proceedings be settled with no order for costs was further indication of unreasonable conduct on behalf of the Minister. Again, in circumstances where Local Democracy specifically pleaded that it needed leave pursuant to r 59.10(1) of the UCPR, the conduct of the Minister was understandable.
3. Further, Local Democracy submits that the Court should give consideration to the fact that it was the Minister who ultimately made the decision that rendered the proceedings futile and provided a "practical victory" for Local Democracy which "exceeded what it could have achieved in the proceedings". I do not accept that the abandonment of the proposed amalgamation was a "capitulation". The media release of 27 July 2017, which was in evidence, reflected a political decision and made no reference to the merits of any of the proceedings challenging the amalgamations. I therefore accept that the Minister made a policy decision to exercise her power under s 218F(8), and I note a similar sentiment was expressed in Shellharbour v Minister at [12].
4. I do not find the above matters warrant a finding that the Minister's conduct was unreasonable such that the Minister should be ordered to pay Local Democracy's costs.
5. Although the Minister submits that Local Democracy has conducted itself unreasonably, I do not find that this is the case. I accept that there did not appear to be an appropriate explanation for the delay in the commencement of the proceedings, and I am aware that the proceedings were co-extensive with Woollahra Council's proceedings challenging the same decision which were brought within time. However, it was at least arguable that the extension of time was unnecessary and that, at any rate, there were discretionary factors which could have led a court to allow the extension in the circumstance that it was required. I note also that there was significant public interest in the proposed amalgamation, which although not determinative in these proceedings, is one factor which leads me to accept that the bringing of the proceedings was not unreasonable.
6. With respect to the Minister's submission that Local Democracy was continuing with the proceedings merely to avoid an adverse costs order and that this constituted an abuse of process, I do not accept that the matter before the High Court necessarily rendered the proceedings otiose given that, as Local Democracy submitted, each judicial review question turns on its particular facts. Therefore it may have been the case that even if the High Court had decided the Woollahra appeal and found a duty to accord procedural fairness, there still would have been issues in these proceedings that needed to be resolved. In the circumstances, I do not find that Local Democracy's conduct was unreasonable.
7. For the reasons above, I consider the appropriate orders are to dismiss the proceedings and make no order for costs.

Orders

1. The Court orders that: 1. The proceedings are dismissed. 2. There is no order as to costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 February 2018