Matic v Mid-Western Regional Council

BYT Nominees Pty Limited v North Sydney Council (No 3) [2008] NSWLEC 294 Grant v Kiama Municipal Council [2006] NSWLEC 70 CASES CITED: Matic v Mid-Western Regional Council [2008] NSWLEC 113 Matic v Mid-Western Regional Council [2008] NSWLEC 1419 Port Stephens Council v Jeffrey Sansom [2007] NSWCA 299

APPLICANT Ms S Duggan SOLICITORS Spiegel & Associates

LEGAL REPRESENTATIVES: RESPONDENT Mr P Clay SOLICITORS McIntosh McPhillamy & Co

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

07/11269 Branaslav Matic v Mid-Western Regional Council

1 ACTING REGISTRAR: This is an application made by the applicant for its costs of a preliminary question that was heard and determined by Jagot J in March 2008.

2 The proceedings were commenced by an application in Class 1 of the Court's jurisdiction, being an appeal pursuant to section 97(1) of the Environmental Planning and Assessment Act 1979. The applicant appealed from the refusal by the Mid-Western Regional Council ("the Council") of an application for development consent for the sub-division of a parcel of land in Pinnacle Swamp into five concessional allotments.

3 Early in the proceedings the parties' identified as being in issue the question of whether the development was permissible pursuant to the provisions of cl 13 of the Rylstone Local Environmental Plan 1996 (the LEP). The parties' identified this as the main issue in the proceedings as between the applicant and the respondent. The Statement of Facts and Contentions identified a number of contentions, much of which surrounded permissibility pursuant to cl 13 of the LEP. On 18 February 2008, when the matter came before the Acting Assistant Registrar in the telephone call-over, the parties indicated that no experts would be engaged by either party and that the only issue that remained was the interpretation of the LEP. The Council at that time advised that there were a number of objectors who would have to be heard in the hearing on the merits. The question of interpretation was then filed as a question of law in the proceedings on 20 February 2008 and fixed for hearing before Jagot J on 17 March 2008.

4 At the hearing of the preliminary question, Jagot J questioned whether the separation of this issue was appropriate in the context. The transcript of the proceedings reveals that there were two points made by Her Honour on the inefficiency of the separate question. The first point was that even if the question was answered against the applicant, it will still be open for the applicant to argue that an objection may be raised to cl 13 of the LEP in accordance with the State Environmental Planning Policy No 1 - Development Standards (p 3, line 17). The second point made by Her Honour in the course of discussions at the hearing of the preliminary question was that it is preferable for all issues, including merit issues, be heard together (p 6 line 42).

5 Ultimately the question was dealt with by Her Honour in circumstances where the parties had attended for the hearing of the preliminary question and the costs of the separate question had already marginally been incurred. Her Honour reserved her decision and on 17 March 2008 delivered her judgment in Matic v Mid-Western Regional Council [2008] NSWLEC 113 which determined the question in favour of the applicant with an affirmative answer to the question of permissibility pursuant to cl 13 of the LEP.

6 Following this determination, the proceedings advanced to a consent orders hearing before Commissioner Murrell on 20 May and 13 June 2008, at which time the Commissioner viewed the site and considered issues raised by the objectors. Commissioner Murrell reserved her decision and ultimately delivered a judgment on 21 October 2008 granting conditional consent to the development: Matic v Mid-Western Regional Council [2008] NSWLEC 1419.

7 Subsequently on 21 January 2009 the current application was made by the filing of a notice of motion by the applicant. The notice of motion seeks orders that the respondent pay the applicant's costs of the proceedings before Jagot J and the costs of the notice of motion.

8 It is common ground between the parties that the power to award costs arises pursuant to s 98 of the Civil Procedure Act 2005. However, the discretion to award costs must be exercised in accordance with r 3.7 of the Land and Environment Court Rules 2007 ("LEC Rules"). That rule applies to all proceedings in Class 1 of the Court's jurisdiction and provides: "(1) … (2) The Court is not to make an order for the payment of costs unless the Court considers that the making of an order as to the whole or any part of the costs is fair and reasonable in the circumstances. (3) Circumstances in which the Court might consider the making of a costs order to be fair and reasonable include (without limitation) the following: (a) that the proceedings involve, as a central issue, a question of law, a question of fact or a question of mixed fact and law, and the determination of such question: (i) in one way was, or was potentially, determinative of the proceedings, and (ii) was preliminary to, or otherwise has not involved, an evaluation of the merits of any application the subject of the proceedings, (b) …" 9 Ms Duggan, counsel for the applicant, submits firstly on behalf of the applicant that the preliminary question before Jagot J falls squarely within r 3.7(3)(a) and that I should therefore conclude that it is fair and reasonable for me to award costs in favour of the applicant for the preliminary question determined by Jagot J. In support of this submission the applicant says that the question of permissibility was potentially determinative of the proceedings as between the parties in accordance with r 3.7(3)(a)(i). That is, if the question was determined in favour of the applicant then the issues raised by the respondent would be resolved. Alternatively, if the question was determined in favour of the Council the sub-division would not be permissible and the matter would not proceed to a hearing on the merits. The applicant also says that the circumstances satisfy r 3.7(3)(a)(ii) in that the question was preliminary to the evaluation of the merits of the development application by Commissioner Murrell at the consent orders hearing.

10 The second, alternative submission made on behalf of the applicant is that even if the preliminary question does not strictly fall within r 3.7(3)(a), the circumstances are such that it is fair and reasonable to order costs in favour of the applicant given that the question was determined in favour of the applicant and that the circumstances are analogous to the requirements of r 3.7(3)(a)(i). The applicant also points out that there was no disentitling conduct on behalf of the applicant that would displace the operation of this rule.

11 The respondent submits that it is not fair and reasonable for me to make a costs order in favour of the applicant on two grounds. Firstly, it is submitted on behalf of the respondent that the circumstances in r 3.7(3)(a) did not arise. The respondent accepts that the determination of the preliminary question was separate to the merit considerations. However, the Council submits that the preliminary question was not, potentially or actually, determinative of the proceedings. That is, if the applicant succeeded on the preliminary question, it still remained for the Court to determine the development application on its merits in circumstances where the Council had refused the application. On the other hand, if the Council succeeded on the preliminary question it may have been open to the applicant to raise a SEPP1 objection and if that was allowed the merits issues would remain for determination. Counsel for the respondent, Mr Clay, points out that the question was re-formulated by Jagot J for the specific purpose of allowing the applicant to pursue that avenue. The respondent therefore submits it is not the case that either outcome would be determinative of the proceedings and thus that the circumstances fall within r 3.7(3)(a)(i).

12 The respondent, on this same point, makes a further submission that, in circumstances where the determination of the preliminary question resolved the only issue as between the applicant and the respondent, it is erroneous for the applicant to equate the words 'determinative of the proceedings' in r 3.7(3)(a)(i) with what is determinative of the issues between the Council and the applicant in the proceedings. It is asserted that this is of particular significance where the Court is required to assess the development application in order to finally determine the proceedings, and where in these proceedings the Commissioner determining the application required amendments to be made prior to the granting of consent.

13 Secondly, it is submitted that in any event, the circumstances particular to these proceedings do not render it fair and reasonable for a costs order to be made against the Council. The respondent submits that the criteria set out in r 3.7(3)(a) are not determinative of circumstances where it is fair and reasonable for the Court to make a costs order. Rather, the respondent submits that the Court must commence with a starting point that there ought to be no order as to costs. The Council submits that the Court must then weigh up all of the circumstances of the proceedings to which the costs order relate in order to form a view as to whether the making of a costs order is fair and reasonable. Included in those circumstances are those set out in r 3.7(3). It is submitted that the Court also ought have regard to the principles laid out in s 56 of the Civil Procedure Act 2005, that the Court and the parties have an obligation to ensure the just, quick and cheap resolution of the issues in the proceedings. Counsel for the respondent points out that the set of circumstances in these proceedings demonstrate that it is not fair and reasonable for the Court to make a costs order. That set of circumstances includes the following observations made by the respondent in written and oral submissions: · The applicant requested the separate determination of the preliminary question; · The respondent opposed the separation of the question; · Jagot J did not consider the question appropriate for separate determination, but proceeded to consider the question only in circumstances where the parties had appeared for hearing of the question; and · The question could have been dealt with by the Commissioner whilst also considering the merits of the application, which course would have been quicker and cheaper for the parties to the proceedings.

14 The respondent relies on the affidavit of Mr Crennan sworn 22 April 2009 in support of the assertion that the respondent opposed the separate hearing of the preliminary question. This evidence is also supported by comments made by Mr Crennan recorded in the transcript of the proceedings before Jagot J on 11 March 2008 (p 6 line 36).

15 In responding to the respondent's submissions, Ms Duggan submitted on behalf of the applicant that the respondent's view of what constitutes a question that is "determinative of the proceedings" pursuant to r 3.7(3)(a)(i) cannot be correct. This submission is made on the basis that if the respondent's submission is correct, in that a question is not determinative when the proceedings must nonetheless proceed to a hearing on the merits, then r 3.7(3)(a) can have no operation in proceedings on appeal from an actual refusal by council of a development application. Ms Duggan's submission is that it cannot be the intention of the rule to have such a limited application.

16 The applicant also submitted that the Council should not call into aide the fact that Jagot J reformulated the preliminary question, as this did not change the nature of the question before Her Honour or the submissions that were made by the parties in relation to that question.

17 In the course of submissions I observed that the question as to whether the circumstances of r 3.7(3)(a)(i) were made out fell within a "grey area". In resolving this question, and in determining whether I ought to make a costs order, it is worthwhile outlining some of the case law that surrounds r 3.7.

18 Prior to the introduction of the LEC Rules in their current form, the equivalent rule in relation to costs was contained in Part 16 r 4 of the Land and Environment Court Rules 1996. That rule provided that in proceedings in Class 1 there ought to be no order as to costs "unless the Court considers that the making of a costs order is, in the circumstances of the particular case, fair and reasonable". In contrast to the current rule, the former rule did not set out specific circumstances in which the Court might consider it fair and reasonable to make a costs order.

19 Both the current rule and its predecessor start with the preposition that there is no order as to costs in class 1. This is often referred to as the non-discouragement principle. That is, a person ought not to be discouraged from commencing proceedings for a merits review by the prospect of an adverse costs order: Port Stephens Council v Jeffrey Sansom [2007] NSWCA 299 ("Sansom").

20 As a result of the former rule and of the costs rules that preceded it, a body of case law developed which established the various circumstances in which it was considered 'fair and reasonable' for a costs order to be made. Those circumstances were summarised by Preston CJ in Grant v Kiama Municipal Council [2006] NSWLEC 70 at par 15, and were subsequently approved by the Court of Appeal in Sansom.

21 In Sansom, the Court of Appeal articulated the logic for the approach to costs in the Land and Environment Court and the basis upon which the various circumstances set out in the case law justified departure from the general preposition that there ought to be no order as to costs. In relation to a costs order for a separate question determined in the proceedings, Spigelman CJ said (at par 95-96): "95. A separate trial of a matter that can avert a full trial is a discrete proceeding and, where it can save costs for the parties and the Court, should be positively encouraged by the Court. That is to say persons ought to be encouraged, by the prospect of receiving costs, to institute proceedings that could determine the whole of the case in a more expeditious manner. 96. Even the losing party on a separate question is saved the burden of incurring the additional costs of conducting the whole of the proceedings in circumstances where it would not be entitled to an order for costs at all. Those additional costs may, and in the usual case would, be greater than an adverse costs order in the separate proceedings."

22 The Court of Appeal found that whilst it is appropriate for indicative guidelines or principles to be developed in relation to the exercise of the Court's discretion to award costs, those guidelines or principles should not be given presumptive or determinative weight. To do so would constitute a fetter on the discretion that was not intended by the legislature. It is that context in which the Court of Appeal approved the summary by Preston CJ in Grant v Kiama Municipal Council of the circumstances in which it is fair and reasonable to make a costs order.

23 The new rule 3.7 replaces the former Part 16 r 4 of the Land and Environment Court Rules 1996, but incorporates in r 3.7(3) a list that reflects the indicative guidelines formulated under the former rule and articulated in Grant v Kiama Municipal Council.

24 In light of the evolution of r 3.7 and the wording of r 3.7(3), it is clear that the circumstances outlined in r 3.7(3) cannot operate to fetter the discretion given to the Court to make costs orders in accordance with r 3.7(2).

25 I therefore accept the respondent's submission that the satisfaction of the provisions of r 3.7(3)(a) cannot be conclusive of circumstances in which it is fair and reasonable to make a costs order. In determining whether a costs order is appropriate, I ought not to be limited to the question of whether the circumstances meet, or are analogous to, the criteria set out in r 3.7(3)(a). Rather, I must have regard to the whole of the circumstances. In doing so, I form the view that in the current circumstances it is not fair and reasonable for a costs order to be made in favour of the applicant for the hearing of the point of law before Jagot J. I have reached this conclusion for the following reasons.

26 Firstly, the circumstances in these proceedings do not fit within r 3.7(3)(a)(i). The fact that there was a course available for the applicant if unsuccessful on the separate question precludes the preliminary question from satisfying r 3.7(3)(a)(i). Consistent with the Chief Justice's comments in Sansom, the object of this rule is for its application when the separate question, if determined in one way, would operate to dispose of the proceedings and avoid the necessity of a hearing on the merits. This is regardless of the potential that a determination in the other way would necessitate a hearing on the merits. Given that the question, even if answered against the applicant, could not have operated to dispose of the proceedings, it cannot be said that the provisions of r 3.7(3)(a)(i) are met.

27 This distinguishes this question from that considered by the Chief Judge in BYT Nominees Pty Limited v North Sydney Council (No 3) [2008] NSWLEC 294, wherein His Honour made an order for costs in circumstances where the preliminary question concerned whether the development was prohibited. In those proceedings the question was a discrete, threshold question that when answered against the applicant precluded the Court from having jurisdiction to consider the development application, therefore avoiding the necessity of a hearing on the merits. This is distinct from the current proceedings, where the question concerned permissibility and the construction of the LEP, and the resolution of the question against the applicant would not have disposed of the proceedings.

28 Secondly, however, even if I did find that the provisions of r 3.7(3)(a) were met, I cannot be satisfied that in the circumstances it is fair and reasonable for me to make a costs order in favour of the applicant. In circumstances where it was known to the parties that there were no experts to be engaged, there was little utility in separating the question from the hearing of evidence from the objectors and the assessment of the development application on its merits. I am satisfied that it was the conduct of the applicant that led to the separation of the question for preliminary determination. In doing so, the applicant failed to conduct the proceedings in accordance with the overriding objectives set out in s 56 of the Civil Procedure Act 2005 for the just, quick and cheap resolution of the issues in the proceedings. These objectives would have been best met by having all of the issues, including the issue of permissibility, dealt with at the final hearing.

29 The only additional cost that could have been avoided had the permissibility issue resolved the proceedings would be the costs of attendance at an on-site view of the property. I do not consider that the cost of such an attendance is such that it was appropriate for the applicant to have the question separated as a preliminary question. To do so was to take the proceedings on a course that caused the parties to incur additional costs by separating a question that ultimately could have been resolved at the final hearing. Further, if the concern for the applicant was that a Commissioner was not suitable for determining the construction of the LEP, they might have asked that the matter be listed for final hearing before a Judge and that request would then be considered by the Chief Judge.

30 Thirdly, if the appeal had been conducted in an efficient manner by proceeding directly to a final hearing where both the construction of the LEP and the merits issues could be considered, the applicant would not be in a position to raise the circumstances in r 3.7(3)(a). The applicant should not be able to put themselves in a better position, by virtue of obtaining a favourable costs order, where it has taken the proceedings on a course that caused the parties to incur additional costs by separating the question of permissibility in the circumstances outlined above.

31 In light of those considerations, I do not consider that it is fair and reasonable to make the costs order that is sought by the applicant in circumstances where the applicant requested the separate determination of the question of law, where there is evidence that such a course was opposed by the respondent, and where the separate determination of the question in the circumstances could not have resulted in any significant savings in cost or time for the parties to the proceedings.

32 Accordingly, I decline to make an order for costs in favour of the applicant and therefore order that the Notice of Motion filed 21 January 2009 be dismissed.

33 In its written submissions, the respondent asks for an order that the applicant pay the respondent's costs of the Notice of Motion. I accept that it is appropriate for me to make such an order. In circumstances where a party has stepped outside the usual conduct of a Class 1 proceedings by filing an application for costs which was ultimately unsuccessful, it is fair and reasonable that that party pay the costs incurred by the other party in defending the application. Accordingly, I make the following orders: 1. The Notice of Motion filed by the applicant on 21 January 2009 be dismissed; 2. The applicant pay the respondent's costs of the Notice of Motion filed 21 January 2009, as agreed or assessed.

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