(a) Costs are compensatory, not punitive: Latoudis v Casey (1990) 170 CLR 534, at 566-7.
(b) The power to award them is " purely discretionary ": Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72.
(c) The discretion must be exercised " judicially ": Port Stephens Council v Sansom ("Sansom") [2007] NSWCA 299; (2007) 156 LGERA 125. On its exercise in classes 1 and 2 matters, see Arden Anglican School v Hornsby [2008] NSWLEC 103; (2008) 158 LGERA 224, and my discussion in Universal at [5]-[14].
(d) The court needs to find " some positive ground or good reason for departing from the ordinary course ": Australiawide Airlines Ltd t/as Regional Express v Aspirion Pty Ltd [2006] NSWCA 365, at [54] per Bryson JA. See also Residents Against Improper Development Inc v Chase Property Investments Pty Ltd [2006] NSWCA 323; (2006) 149 LGERA 360 at [219]-[251].
(e) There is no absolute rule that, in the absence of " disentitling " conduct, the party seen as " successful" will achieve a compensatory costs order: Fordyce v Fordham (2006) 67 NSWLR 497.
(f) " Effective surrender " by one party may indicate " success " on the part of the other, but does not necessarily dictate a costs order: One.Tel Ltd & Ors v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548.
(g) The court must look at all the circumstances pertaining to each particular stage of the litigation: South Eastern Sydney Area Health Service v King [2006] NSWCA 2, per Hunt AJA; and Green per Santow JA.
(h) " Precipitately " commencing proceedings may become a relevant factor: Newcastle City Council v Wescombe [2008] NSWLEC 301, at [16].
(i) On whether an order should be for " indemnity costs " see my decision in Fitzpatrick No.5 at [10]-[79], especially [79] viz:
" To result in an order for indemnity costs the behaviour of the party concerned, whether generally or in regard to its rejection of an offer of compromise, must be found to be "imprudent", "unreasonable", or tainted by fraud, misconduct, an ulterior motive, wilful disregard for known facts or settled law, groundless contentions, "disentitling conduct", "plainly unreasonable conduct", or "relevant delinquency" (see Santow JA in Green, summarising various cases. See also Oshlack, Ritchie 8752, and Canterbury City Council v Roads and Traffic Authority of New South Wales [2004] NSWLEC 536). Even so, as Lloyd J concluded in Canterbury, the rejection of a reasonable offer is but "one among many" factors to be considered."
Consideration
84 Costs foisted on parties by their opponents, or by the work practices adopted by the lawyers involved, must be "proportionate to what is truly at stake" (per Sackville J in Seven Network Limited v News Limited [2007] FCA 1062, at [18]), and the community is increasingly looking to the courts to ensure such proportionality.
85 All five separate matters involved in this case have their origins in allegations by Council of wrongdoing on Monaghan's part. The history recounted above highlights important steps along the way: Serious investigations were carried out, and Council's powers deployed; Monaghan was asked for written undertakings, and they were given; Monaghan has strenuously denied all wrongdoing throughout; Statutory orders were issued by Council, and Monaghan challenged them in this court; Class 4 proceedings were commenced because Council alleged Monaghan was in breach of the undertakings given; demands were particularised by Council on 19 March; Monaghan sought to modify relevant consents, and appealed against Council's refusal to approve those modifications; Monaghan largely failed in all the class 1 proceedings, and then settled the class 4 proceedings.
86 The Council contends that it has been entirely successful in its class 4 proceedings and in all four of Monaghan's class 1 proceedings.
87 It argues that in the class 4 matter Monaghan "effectively surrendered" on the eve of a hearing where Monaghan was doomed to lose. In support of that argument the court is asked to examine the two schedules provided by way of submission on behalf of Council (see par [65] above). The second may become relevant if the 15 May letter takes effect as a Calderbank letter. However, in terms of assessing the question of "success" in the proceedings, the more useful comparison is that made (in submissions, par 158) between the amended class 4 application and the consent orders. In any event, counsel for Monaghan hotly contests the accuracy of that analysis, and submits, in my view correctly, that once the s 121B appeals were dismissed the class 4 proceedings lost their utility (McCrohon).
88 In the two pairs of class 1 proceedings it is simply not correct for Council to assert that it was completely successful. The evidence before me, and Commissioner Hoffman's two judgments, make clear that Council made concessions in the s 96 appeals, and that its position on the s 121B appeals was not entirely implemented by the court.
89 Further, it cannot be suggested that Monaghan was guilty of any "unreasonable" or "disentitling" conduct in the conduct of any of those four matters, although Monaghan could be criticised for not having its planner at the s 34 conference on 19 May 2008 to advance its argument.
90 Council submits that the first pair of class 1 appeals were brought to determine if the s 121B orders were reasonable, and that the class 4 proceedings were brought to enforce them. However, the enforcement proceedings were commenced, and were progressed at an astonishing and hugely expensive rate, while the class 1 challenges to the Council's orders were still very much on foot.
91 The class 4 proceedings were actually filed on the eve of a conference organised at the first callover of the s 121B appeals, to discuss the settlement of the whole dispute between the parties.
92 If it were so imperative that class 4 proceedings had to be urgently commenced at that early stage of negotiations between the parties, it seems extraordinary to me that more care was not taken to join all necessary parties, and properly particularise the relief sought in respect of all appropriate respondents, and that no interlocutory relief was sought. (When the amendment was sought three months later, Monaghan was entirely cooperative, and was content for costs to be reserved, even though clearly entitled to an order in its favour in the circumstances).
93 I cannot accept that it was reasonable to commence class 4 proceedings, as so inadequately formulated, at that time, so many months after the serious investigation of Monaghan had commenced, and when Council had opted for the s 121B process to enforce its duties (c.f. Goldberg).
94 Council's solicitors continued to escalate the class 4 proceedings at an extraordinary pace, and in a very adversarial (almost belligerent) manner, accumulating huge amounts of claimed costs, while the subject matter was comprehensively before the court in two, and later four, class 1 proceedings, and Monaghan was complaining about "duplication" of proceedings (as a result of the commencement of the class 4 proceedings), and seeking to "streamline" the litigation between the parties (see Exhibit C1, fols 56 and 117).
95 The conduct of the class 4 proceedings by the Council, or at least in Council's name by its solicitors, was, I believe, also quite unreasonable.
96 I deprecate the amount of costs allegedly incurred in prosecuting the class 4 proceedings. I find it hard to accept them as "proportionate", and am troubled by the unseemly focus on costs in so much of the often unnecessary, even self-serving, correspondence contained in Exhibit C1.
97 On the other hand, Monaghan had every right to defend himself against Council's allegations of wrongdoing, to challenge Council's s 121B orders, to make applications to modify Council's consents, and to then appeal Council's peremptory refusals. Citizens take the opportunity to access this court for such purposes every day, and part of the court's costs regime is designed so that they are not discouraged from exercising their rights in class 1, even though clearly responsible in almost every case for all their own costs. See Sansom at [54], [76], [92], [93], and [97].
98 It is very unfair for Council to describe, without supporting evidence, Monagahan's s 96 applications as a "sham designed to delay proceedings", and it is not a valid submission on costs, to label proceedings as improperly commenced and/or "lacking merit", simply because, in the end, they did not succeed.
99 In this case Monaghan had to exercise its class 1 or 2 rights of appeal under the shadow of class 4 proceedings, the enormous costs of which, according to Council's solicitors' correspondence, was almost certain to fall on Monaghan. Certainly, in the ordinary course, a costs order against Monaghan could be expected to be more likely in class 4 than class 1, but it is never beyond doubt.
100 Any timetable slippage on Monaghan's part - and there certainly was some - came largely at the cost of delaying his own proceedings, and has to be viewed against the background of Council's provocative approach to what is supposed to be a cost-effective dispute resolution regime designed to avoid escalating hostility. In any event such slippages as did occur do not appear to have unduly delayed or prolonged the proceedings, and Monaghan accepted the eventual and unfavourable decisions made by Hoffman C, without further challenge.
101 The Calderbank principles require that the reasonableness of the offeree's response to a relevant settlement proposal must be assessed by the court when costs are being determined.
102 If Monaghan had agreed to the consent orders suggested in the 15 May 2008 letter, its position could have been seen to be more favourable than it is under the eventual orders, because, for one thing, as a result of sheer incompetence on the part of Council's solicitors, one of the Monaghan companies would not have been caught by them.
103 The 23 October 2008 letter simply presumed that Council would get an order for costs against Monaghan, and gave Monaghan no basis upon which to evaluate whether acceptance of the proposal would prove to be a better outcome than resisting a costs application, and/or insisting on a costs assessment.
104 Monaghan's failure to respond to the costs proposals put by the Council throughout this matter was, in my view, entirely reasonable. Two of them (1 April and 15 May) were made before the class 4 proceedings had been properly formulated. Given the decision I have now reached, Monaghan's stand on all of them has been fully vindicated.
105 Monaghan gave the undertakings sought by Council in September 2007, freely and quickly, and has consistently denied that he conducted a funeral business (rather than collected/stored a few coffins as a hobby), or did anything else contrary to the law. No such allegations have ever been proven or admitted. It was entirely reasonable for Monaghan to defend itself against them. Monaghan took its chances in class 1 and accepted the outcome when the appeals did not succeed, at least on the major issues in contention.
106 The overhanging class 4 enforcement litigation was then settled by entering consent orders which, Mr Kalfas submits, were less comprehensive in their burden than the undertakings which had been freely given, and Monaghan even agreed to an order - Order 2 (no coffins on the premises without consent) - beyond the relief sought in the application.
107 The outcome of the class 4 proceedings certainly did not advance the Council's position much (if at all, given the undertakings) beyond what would have pertained had they not been brought. I, therefore, cannot accept that I should conclude that the Council was genuinely the "successful" party in the litigation.
Conclusion
108 Monaghan is entitled to an order for costs in its favour in the class 4 proceedings, and to a "no order as to costs" decision in respect of each of the class 1 proceedings.
109 The Council having been entirely unsuccessful in its applications for costs, it should also pay Monaghan's costs on all five of those applications.
110 The orders of the court will be:
A. In each of the four class 1 matters:
1. The respondent's Notice of Motion dated 10 October 2008 is dismissed.
2. The respondent is ordered to pay the applicant's costs of the Notice of Motion dated 10 October 2008, as agreed or as assessed according to law.
B. In the class 4 matter:
3. The applicant is ordered to pay the costs of all three respondents, including the costs of the hearing on costs, on a party-party basis, as agreed or as assessed according to law.
C. All the exhibits are returned.