Mid-Coast Council v Gazecki

Agreed chronology of events relied on

1. On 16 February 2024, the Council commenced Class 4 proceedings against the Respondents in respect of unapproved works on a dam in Warranulla.
2. On 15 April 2024, the Respondents gave an undertaking in Class 4 to carry out certain interim works in respect of Dam 1.
3. On 4 July 2024, there was a mention before the list judge and an order was made allowing liberty to apply on 24 hours notice.
4. On 19 July 2024, Mr Cole (being the solicitor acting for the Respondents at that time) sent an email to Mr Cottom solicitor for the Council advising that the Respondents had been unable to engage a contractor to carry out the works within the required period and proposing to send a communication to the Court with the Council's consent requesting to amend the undertaking.
5. On 24 July 2024, Mr Cole sent an email to Mr Cottom asking whether he had instructions to agree to the proposed communication.
6. On 25 July 2024, Mr Cole sent an email to Mr Cottom stating that 'if we have not received a response from you by COB today we will assume that the Council consents to our communication and will send it to the Court on that basis'.
7. On 25 July 2024, Mr Cottom sent an email to Mr Cole stating that the Council did not consent to the proposed communication and that 'if the application to vary the undertaking is pressed, it will need to be made by way of notice of motion together with supporting affidavit material'.
8. On 1 August 2024, the deadline to complete the interim works expired.
9. On 3 August 2024, the Respondents filed a notice of motion to amend the undertaking to change the (already expired) deadline to complete the interim works.
10. On 8 August 2024, the Council was served with the notice of motion dated 3 August 2024 and an affidavit by Mr Cole dated 2 August 2024.
11. On 12 August 2024, the Respondents notified the Council they were now self-represented, and the Council sent a letter on 13 August 2024 inviting the Respondents to withdraw the notice of motion and stated that the Council would seek costs of the notice of motion.
12. On 13 August 2024, the hearing of the notice of motion commenced and was adjourned to 16 August 2024.
13. On 14 August 2024, the Respondents sent to the Council an alternative draft undertaking, and the Council sent a letter rejecting this proposal and reiterating that the Council would seek costs of the notice of motion.
14. At 7:15pm on 15 August 2024, the Respondents served, without leave, an amended notice of motion seeking release from the undertaking and entry into an alternative undertaking.
15. At 9:47am on 16 August 2024, the Respondents served, without leave: 1. an affidavit by Mr P Marshall dated 15 August 2024; and 2. an affidavit by Mr J Gazecki the First Respondent dated 16 August 2024.
16. At 1:48pm on 16 August 2024, the Respondents served, without leave, an affidavit by Ms N Decorte the Second Respondent dated 16 August 2024.
17. At 2:00pm on 16 August 2024, the hearing of the notice of motion resumed, and was adjourned to 19 August 2024.
18. On 18 August 2024, the Respondents served, without leave, a further amended notice of motion seeking release from the undertaking and entry into a further alternative undertaking (not heard).
19. At 10:30am on 19 August 2024, the Respondents served, without leave, a second further amended notice of motion seeking release from the undertaking and entry into a second further alternative undertaking (not heard).
20. At 2:15pm on 19 August 2024, the hearing of the notice of motion resumed.
21. Judgment was delivered on 20 August 2024.
22. The parties referred to some of the correspondence outlined in the chronology in their submissions.

Council's submissions

1. The Council outlined the circumstances leading up to the hearing of the notice of motion on 13 August 2024 and the amended notice of motion on 16 August 2024 as identified in the above chronology and submitted that as the successful party it should obtain a costs order, there being no disentitling conduct on its part. The Court accepted the Council's submissions that the proposed amended undertaking was unenforceable and complicated. Costs in interlocutory applications can be ordered in these circumstances, the court continues to be able to exercise its costs discretion to do so under r 42.7 of the UCPR.
2. The usual rule that costs are payable at the conclusion of proceedings can be varied as identified in r 42.7(2) to be payable forthwith and such an order is appropriate here, relying on Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1; [2002] NSWSC 432 (Fiduciary Ltd v Morningstar) at [10]-[11]. The subject matter of the notice of motion was a discrete matter from the issues in the substantive proceedings.

First Respondent's submissions

1. The First Respondent submitted that the default position in light of r 42.7 UCPR is that the costs of an interlocutory application are reserved or costs in the cause citing Verde Terra Pty Ltd v Central Coast Council; Central Coast Council v Verde Terra Pty Ltd (No 5) [2020] NSWLEC 48 (Verde Terra) at [21].
2. Further, the First Respondent alleged that there was disentitling conduct by the Council such that it should not receive its costs. First, the Council's actions contributed to the irregularities in the interlocutory application which caused greater costs to be incurred, relying on events at a call-over on 4 July 2024 before the list judge and correspondence between the parties' solicitors. The First Respondent disputed that they had to file a notice of motion in order to vary the undertaking and asserted that they could have restored the matter to the list on 24 hours notice as provided for in orders made by the Court on 4 July 2024. Secondly, the Council's insistence that a notice of motion was needed to vary the undertaking was wrong as the Court did not have such power in the absence of an agreement, MCC No 1 at [3]. The Council's assertions influenced the Respondents' actions to proceed on the erroneous path that they did and was therefore partly the cause of costs being incurred.
3. Second, the Council's solicitor unduly delayed in replying to a letter from the Respondents' solicitor of 19 July 2024, followed up on 24 July and 25 July by email with a response not received until later on 25 July 2024. This was unreasonable delay given that the undertaking expired on 1 August 2024.
4. Third, further correspondence between the Council's solicitor and the First Respondent between 14-16 August 2024 shows that the First Respondent offered to withdraw the notice of motion on the basis that costs were to be reserved. The Council's decision not to accept that offer and to pursue costs at the hearing set for 16 August 2024 and not to consent to vacation of that hearing date was unreasonable. The Council's approach of insisting on an argument on costs prompted the Respondents not to withdraw their notice of motion but seek to amend it and pursue a new undertaking, which was essentially defensive in light of the circumstance that a hearing would proceed regardless on 16 August 2024.
5. The Council was not completely successful in relation to whether the Respondents could have undertaken the work given weather conditions leading up to 1 August 2024 in light of findings at [17], [20], [21] in MCC No 1. Its success was technical, and does not warrant a costs order being made in its favour.

Consideration

1. Rule 42.7 of the UCPR identifies that unless a court otherwise orders, costs of an interlocutory application are to be dealt with the same way as general costs of the proceedings (often called 'costs in the cause') including if costs are reserved or no costs order is made. Under subr (2) unless an order is otherwise made costs ordered in subr (1) are not payable until the conclusion of proceedings. The Respondents submitted that the 'usual' costs rule in relation to interlocutory proceedings is that costs are reserved, or costs in the cause relying in that regard on Verde Terra at [21]. While costs of interlocutory applications are commonly expressed as 'costs in the cause' the costs discretion remains at large as also identified in Verde Terra at [21]. That paragraph appears in the course of helpful consideration of the principles applicable when determining costs of interlocutory applications at [11]-[25]. I am also mindful that part of the rationale for r 42.7 is to avoid extensive costs arguments on interlocutory matters which may distract the parties from the resolution of the main issues in substantive proceedings, see Mundi v Hesse [2018] NSWSC 1548 at [58].
2. Ultimately each case must be determined on its own facts being the nature of the interlocutory application and the circumstances in which it has been determined. The Council asks the Court to exercise that discretion in the circumstances of the amended notice of motion which sought to vary an undertaking given to the Court in relation to carrying out urgent interim work on Dam 1. As identified in Fiduciary Ltd v Morningstar at [10]-[11] (there considering former Pt 52A r 9(1) of the Supreme Court Rules 1970 (NSW), now UCPR r 42.7(2), in relation to factors which have caused courts to order that costs are payable forthwith) the issues raised were discrete as between parties which is one basis that suggests dealing finally with a costs order now is justified and an efficient use of court resources rather than postponing finalisation of costs to the end of proceedings. Although the First Respondent submitted the issue was not discrete it appears to me that it is. Such a circumstance suggests it is appropriate to make a costs order in the Council's favour rather than an order that costs are costs in the cause or costs reserved.

Was the Council successful and did it act reasonably?

1. The Council was successful in having the notice of motion dismissed and did facilitate the hearing of the amended notice of motion filed 16 August 2024 the Respondents sought to rely on without effective notice to the Council, together with evidence also sought to be relied on without leave on the day of hearing. The Council's success was more than 'technical'. I consider the Council did seek to accommodate in a reasonable way the Respondents' interlocutory application. The circumstances suggest that its costs ought to be paid by way of compensation in the absence of disentitling conduct. Given the Respondents' arguments, whether the matters said to be disentitling conduct arise such that no order for costs ought to be made is now considered.
2. Having reviewed the correspondence from the Council's solicitor sent on 25 July 2024 to the effect that if the application to vary the undertaking is pressed it will need to be made by notice of motion, no error is disclosed. The undertaking was then in force. I note that in MCC No 1 at [3] I found that the Court probably did not have power to extend an undertaking that had expired. In any event given that the Respondents were then represented by a solicitor it was up to the Respondents to determine how they should proceed, they were not bound by any views expressed by the Council's solicitor. The Council cannot be liable for the Respondents' tactical decisions in pursuing a notice of motion as has occurred.
3. In relation to the delay submission, I have reviewed the correspondence referred to in the period of 19-25 July 2024 noting that 20-21 July 2024 was a weekend, in the overall context that the Respondents were well aware of the possibility that they may not be able to comply with the undertaking, having raised that before the list judge on 4 July 2024. I do not consider there was any relevant failure by the Council's solicitor. Mr Cottom would have needed to obtain instructions and reasonably responded within four working days.
4. That the Council's solicitor wished to have costs of the Respondents' notice of motion heard on 16 August 2024 when advised that the Respondents would discontinue their notice of motion is not relevant or disentitling conduct in the context of this costs application. That the Respondents considered it was appropriate to seek to rely on an amended notice of motion filed 16 August 2024 as there was a hearing date already allocated was a decision for them alone. That decision resulted in further costs being incurred by the Council in having to respond on very short notice to that notice of motion and the evidence in support of it.
5. Concerning the correspondence of 14-16 August 2024 in evidence, the Respondents also criticised the Council for not agreeing to a 'simple' extension of time but that is a selective characterisation of the lengthy correspondence between the parties. For example, the Respondents flagged in a letter dated 14 August 2024 to the Council's solicitor that they would be pursuing a new undertaking.
6. No unreasonableness on the Council's part has been demonstrated. It follows that I consider a costs order in the Council's favour is warranted.

Payment forthwith?

1. The Council seeks an order that these costs be payable forthwith, a necessary order in light of r 42.7(2) as the costs are otherwise payable at the conclusion of the proceedings. The principle matter to consider is whether such an order is just in the circumstances. I do not consider such an order is warranted given that the Respondents are now self-represented and the matter is reasonably complex. No particular reason to make such an order now arises.

Should costs be ordered payable by the First Respondent only?

1. In a surprising submission in that it was not referred to at all at the substantive hearing before me, the First Respondent submitted that as only he filed the amended notice of motion filed 16 August 2024 and the Second Respondent did not play a role only he should be liable for costs. This was not a matter identified to me at the substantive hearing which the Second Respondent attended remotely and had the opportunity to make submissions. The Second Respondent stood to benefit from the orders sought in the amended notice of motion and was specifically named in these. That the cover sheet for the amended notice of motion stated that it was filed by the First Respondent does not suggest on its own given the overall conduct of the hearing by the Respondents that the Second Respondent was not a party to the amended notice of motion. The Second Respondent is a landowner of the land the subject of the Council's Class 4 application and a necessary party. No basis to confine the costs order to the First Respondent alone has been identified and the costs order will apply to both Respondents.

Orders

1. The Court orders that the Respondents are to pay the Council's costs of the notice of motion filed 3 August 2024 as amended by the notice of motion filed 16 August 2024.

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