"These illustrations are in no way exhaustive but what they point up is that a refusal of costs to a successful defendant will ordinarily be based upon the conduct of the defendant in relation to the proceedings brought against him or her."
30. Kirby J in Oshlack also accepted (at 121) the compensatory principle and its application to order for costs under s 69(2) of the Land and Environment Court Act 1979. Kirby J further said (at 122):
[134] … 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.
31. Although McHugh J (Brennan CJ agreeing) were in the minority in the overall result in Oshlack, the principles explained by his Honour and by Kirby J represent the majority view of the relevant principles that apply in the exercise of the Court's discretion under s 69(2) of the Land and Environment Court Act.
32. In the present case the applicant failed in every point that she raised. Many of the points she raised had no merit at all, neither was there any evidence to support them. She persisted with arguments that were clearly excluded by s 101 of the EP&A Act. The principal thrust of the applicant's submissions seems to have been based on a "suspicion" that something may have been wrong in the processing by the council of the first respondent's development application. In applying the principles which govern the exercise of the Court's discretion on costs was explained in Oshlack, the most important factor guiding the exercise of the discretion is the fact that the respondents were successful. Importantly, there was nothing in the conduct of the successful respondents which disentitles them from the beneficial exercise of the discretion on costs. The respondents were brought to the Court at the suit of the applicant and to defend serious allegations that were made against them and which, in the result proved to be baseless. These circumstances call for an order for costs in favour of the respondents.
33. I now turn to the respondents' application for costs on an indemnity basis.
34. In Degmam Pty Ltd (in liq) v Wright (No 2) (1983) 2 NSWLR 354, Holland J considered an application for costs order on an indemnity basis. In making the order sought his Honour said (at 358):
The next question therefore is whether there is a case made out for a special order. I think that there is. I do not wish to repeat what I had to say in my reasons for judgment, about the merits of the defences and causes of action put forward by the defendant or the manner in which she conducted herself in the course of the litigation and in the witness box. It is sufficient to say that the allegations of fact she made as the basis of her defences and causes of action were in my opinion false and deliberately concocted by her in an attempt to deny the plaintiff its rights and to shift all blame and legal liability to the plaintiff from herself to the second cross-defendant. As well as that, she so conducted herself in the proceedings, by multiplying allegation upon allegation, and by prevaricating in the witness box, as grossly to prolong the litigation, thereby to cause the other parties to incur liability for solicitor and client costs far beyond what they could reasonably have expected to incur in litigation of genuine issues. The discretion which the court has as to costs is, as have been said many times, to be exercised judicially, that is to say upon proper grounds and the court will not lightly depart from standard practice in the awarding of costs.
35. In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd & Ors (1988) 81 ALR 397, Woodward J said (at 401), in a passage that has been subsequently followed:
I believe that it is appropriate to consider awarding "solicitor and client" or "indemnity" costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion.
36. Cases which have followed Fountain Selected Meats, however, appear to have widened the basis upon which indemnity costs may be ordered. In Botany Municipal Council v Secretary, Department of the Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412; 76 LGERA 213, Gummow J, after citing the above-mentioned passage of Woodward J in Fountain Selected Meats, said (at 415):
However, I accept that the discretion conferred by s 43 is not so circumscribed that an order of this character may be made only against an ethically or morally delinquent party.
37. This approach was accepted by Mason P (with whom Clarke A-JA agreed) in Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 616:
Later cases have emphasised that the discretion to depart from the usual "party and party" basis for costs is not confined to the situation of what Gummow J described as the "ethically or morally delinquent party" ( Botany Municipal Council v Secretary, Department of the Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412 at 415): see Baltic Shipping Co v Dillon, "Mikhail Lermontov" (1991) 22 NSWLR 1 at 34; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233-234. Nevertheless the court requires some evidence of unreasonable conduct, albeit that it need not rise as high as vexation. This is because party and party costs remain the norm, although it is common knowledge that they provide an inadequate indemnity. Any shift to a general or common rule that indemnity costs should be the order of the day is a matter for the legislature or the rule-maker: Huntsman Chemical Co Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 at 248.
38. The cases relied upon by Mr Tomasetti are decisions of this Court where orders for costs have been made on an indemnity basis. In my opinion, Waverly Council v Refkin Pty Ltd is distinguishable because that was a case where the applicant had discontinued. In Wyong Shire Council v Smith the Court found that the case brought by the applicant was "hopeless". In Morris v Gosford City Council the applicant informed the Court at the commencement of the hearing that she did not wish to prosecute the proceedings because the council had subsequently granted a further development consent which cured the suggested invalidity of the first development consent, the validity of which the applicant had sought to impugn. Bignold J made an order for indemnity costs because, if the proceedings had been litigated, the respondent's defence based on s 104A of the EP&A Act (the predecessor to the present s 101) would have meant that the applicant's claim was statute-bared and there was thus a deliberate decision by the applicant to continue with a claim that was hopeless. Carver v Bankstown City Council was another instance of a discontinuance (on the morning of the hearing).
39. In my opinion, in the exercise of the Court's discretion under s 69(2) of the Land and Environment Court Act, the order for costs against the applicant should be on an indemnity basis. I have come to this view for the reasons I have previously indicated, which may be re-stated as follows. The applicant adopted a "scattergun" approach, alleging that the development consent was invalid on every possible basis, without regard to whether there was any evidence in support thereof. The applicant made assertions relating to invalidity of development consent although there were no facts to support such assertions and, in some instances, even where the applicant's own evidence simply did not support her case. The applicant persisted with the allegations of invalidity which were clearly excluded from consideration by s 101 of the EP&A Act, despite that the effect of that section had been drawn to her attention by the first respondent's solicitors before the proceedings were commenced. The effect of s 101 was that the applicant, if properly advised, should have known that the proceedings could not possibly be successful. The applicant's allegation of mala fides was made "on suspicion" without any basis for doing so and without any evidence to support such allegation. In my opinion, the making of a serious allegation of mala fides without evidence to support it is equivalent to making allegations of fraud without any basis, amounts to an abuse of process and is deserving of the severest condemnation. The respondents, moreover, were self-evidently put to considerable trouble and expense in meeting the applicant's groundless claims. As in Degmam Pty Ltd v Wright the applicant so conducted herself by multiplying allegation upon allegation, thereby causing the other parties to incur liability for solicitor and client costs far beyond than what they could reasonably be expected to incur in litigation of genuine issues. As in Fountain Selected Meats the applicant persisted in her claims that had no chance of success and so must be presumed to have brought or continued the proceeding for some ulterior motive, or because of some wilful disregard of the known facts or the clear established law. Even if the applicant's conduct could not be so described, her conduct was clearly unreasonable.
40. I acknowledge the submission of Mr Dupree that Talbot J, in dismissing the first respondent's motion for summary dismissal of the proceedings, thought that the applicant had an arguable case. However, Talbot J was solely concerned with the applicant's allegations set out in the application and in the Amended Points of Claim. His Honour did not have regard to the actual evidence in support of the applicant's claims. Even so, Talbot expressed the opinion that "in many respects the case can be regarded as a weak one" (Maule v Liporoni & Anor [2001] NSWLEC 141 at par [40]).
41. I refer also to Mr Dupree's submission that there was no need for the second respondent to be a protagonist. In this respect Mr Dupree relies upon the joint judgment of Gaudron and Gummow JJ in Oshlack v Richmond River Council at 90:
[46]… In a significant number of such litigious disputes, it will, in accordance with the reasoning in R v Australian Broadcasting Tribunal ; Ex parte Hardiman [ (1980) 144 CLR 13 at 35-36. See also Australian Conservation Foundation v Forestry Commission (1988) 76 LGRA 382 at 386; Kerr v Verran (1989) 28 IR 179 at 206; Vidler v Secretary, Department of Social Security (1995) 61 FCR 370 at 382-383 ] , 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 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.
42. In the present case, however, the council had been joined as a party by the applicant. It was the council's decision to grant development consent which was sought to be impugned. Importantly, the applicant made serious allegations of mala fides against the council and against certain officers of the council. The council was thus fully justified in assuming the position of a protagonist so as to protect the integrity of its decision-making and to protect its officers against the unjustified attack of mala fides brought against them.
43. The respondents seek not only an order for the costs of the proceedings but also an order including costs which are incidental to the proceedings. They submit that this is because they have been put to considerable trouble and expense in investigating and meeting the claims raised and particularised by the applicant which were not pressed at the hearing. I agree with the respondents' submission. Having regard to s 69(1)(a) of the Land and Environment Court Act 1979 (which provides that "costs" includes costs of or incidental to proceedings in the Court) it may not be strictly necessary to do so. Nevertheless, in order to remove any possibility of doubt, I will so order.
Order
44. The Court orders that the applicant pay the respondents' costs of or incidental to the proceedings on an indemnity basis, including reserved costs and the costs of the motions for costs.
I hereby certify that the preceding 44 paragraphs are a true copy of the reasons for judgment herein of the Honourable Mr Justice Lloyd.