Moussa v Owners Corporation of Strata Plan 65404 & Ors

PARTIES : THIRD RESPONDENT Richard & Annalese Nyz

FOURTH RESPONDENT John & Anne Teychenne

FIFTH RESPONDENT Lorraine & Stephen Jones

SIXTH RESPONDENT Peter & Robyn Stock

FILE NUMBER(S) : 20096 of 2007; 40097 of 2007

KEY ISSUES: Costs :- interlinked proceedings - whether any costs order in class 2 proceedings fair and reasonable in the circumstances - respondents unsuccessful on certain issues in class 4 proceedings - whether any apportionment of costs appropriate - applicant ordered to pay respondents' costs of both proceedings

Civil Procedure Act 2005 LEGISLATION CITED: Land and Environment Court Act 1997 Strata Schemes (Freehold Development) Act 1973

F & D Bonnacorso Pty Ltd v City of Canada Bay (No 3) [2007] NSWLEC 569 Moussa v Owners Corporation of Strata Plan 65404 & Ors [2007] NSWLEC 807 CASES CITED: Ohn v Walton (1995) 36 NSWLR 77 Port Stephens Council v Sansom (2007) 156 LGERA 125 Stena Rederi Aktiebolag v Austal Ships Sales Pty Ltd [2007] FCA 1141 Thaina Town (On Goulburn) Pty Ltd v Sydney City Council (2007) 156 LGERA 150

DATES OF HEARING: Written submissions received 27 February, 17 March, and 27 March 2008

APPLICANT Mr Justin Doyle SOLICITORS Thomson Playford LEGAL REPRESENTATIVES: RESPONDENTS Mr Francis G Kalyk SOLICITORS Redmond Hale Simpson

THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

OWNERS CORPORATION OF STRATA PLAN 65404 First Respondent

LEN & VERONICA HENWOOD Second Respondent

RICHARD & ANNALESE NYZ Third Respondent

JOHN & ANNE TEYCHENNE Fourth Respondent

LORRAINE & STEPHEN JONES Fifth Respondent

JUDGMENT Jagot J: 1 On 20 December 2007 I dismissed the applications in proceedings 20096 of 2007 (the class 2 proceedings) and 40097 of 2007 (the class 4 proceedings) (Moussa v Owners Corporation of Strata Plan 65404 & Ors [2007] NSWLEC 807, referred to below as the principal reasons). The respondents, by notices of motion filed 21 December 2007, seek an order that the applicant pay the respondents' costs of both proceedings. The parties agreed that the issue of costs should be determined in chambers on the basis of written submissions (filed 27 February, 17 March, and 27 March 2008).

2 The principal reasons describe the proceedings and their resolution. The class 2 proceedings involved an application to defer the time for conclusion of and to amend a development scheme under a strata development contract as provided for in s 28QA and s 28K of the Strata Schemes (Freehold Development) Act 1973 (the Strata Schemes Act). The class 4 proceedings primarily involved the applicant claiming declarations concerning the respondents' obligations and applicant's rights under the contract. 3 The parties agreed about the following matters in submissions: (1) The Court's power to make an order for costs is contained in s 98 of the Civil Procedure Act 2005.

(2) Rule 42.1 of the Uniform Civil Procedure Rules 2005 applies to the class 4 proceedings.

(3) However, r 42.1 does not apply to the class 2 proceedings (r 1.5(2) and Sch 1). Instead, r 3.7 of the Land and Environment Court Rules 2007 applies.

4 Under r 42.1 of the Uniform Civil Procedure Rules, "if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs". Under r 3.7(2) of the Land and Environment Court Rules 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". In both cases, the purpose of any costs order is compensatory, to reimburse the successful party and not to punish the unsuccessful party (for example, Ohn v Walton (1995) 36 NSWLR 77 at 79 as cited in Port Stephens Council v Sansom (2007) 156 LGERA 125 at [49]).

5 The parties did not address the potential effect of cl 17 of Sch 6 to the Civil Procedure Act permitting things commenced under the "unamended L & E legislation" to be completed under that legislation. The "unamended L & E legislation" is defined in a manner that includes the Land and Environment Court Act 1979 before s 69 of that Act dealing with costs was deleted and the Land and Environment Court Rules 1996 (which contained an equivalent provision to rule 3.7(2), being Pt 16 r 4). However, that is of no material consequence because the effect of the pre-existing provisions is the same as the provisions considered by the parties.

6 With respect to the class 2 proceedings the applicant submitted that: - (i) the proceedings are allocated by s 18(f) of the Land and Environment Court Act to class 2 of the Court's jurisdiction and are thus subject to the presumptive effect of rule 3.7(2) that there be no order as to costs, (ii) the respondents had the onus of identifying circumstances sufficient to displace that presumptive rule, (iii) it could not be sufficient merely to note that the respondents had been wholly successful, (iv) nor could it be sufficient that most of the respondents were individuals, and (v) accordingly, the presumptive rule applied.

7 With respect to the class 4 proceedings the applicant submitted that: - (i) the proceedings would have been unnecessary but for the respondents' denial that they were bound by the contract, (ii) the respondents had not raised the issue of utility in their defence and when it was first raised at the hearing by the trial judge the applicant properly conceded the point, (iii) the applicant failed in the class 4 proceedings on the issue of utility and if that had been the only issue raised by the respondents the costs of those proceedings would have been very small, (iv) instead, the respondents raised numerous issues in the class 4 proceedings about the validity, enforceability and construction of the contract in respect of which the respondents were unsuccessful, (v) the respondents raised other issues at the proceedings that were dismissed or withdrawn (such as validity of the consent granted by the Court), and (vi) accordingly, costs should be apportioned as the issues on which the respondents failed involved significant time and were separable (see F & D Bonnacorso Pty Ltd v City of Canada Bay Council (No 3) [2007] NSWLEC 569 at [15]).

8 Having regard to the broad-brush approach appropriate to matters of costs the applicant submitted that a single order that the applicant pay 40% of the respondents' costs should be made (subject to earlier costs orders).

9 The respondents submitted that: - (i) the class 2 proceedings were different from most such proceedings, which generally involve an appeal by a person against the decision or action of a regulatory authority, (ii) these proceedings involved a developer and a strata corporation (and owners of lots within a strata scheme) disputing their private rights and obligations, (iii) the class 2 and class 4 proceedings were linked, (iv) the legal issues raised by the respondents were not "clearly dominant or separable" (Bonnacorso at [15]), (v) the class 2 proceedings involved little evidence or time beyond the class 4 proceedings, (vi) there had been no disentitling conduct by the respondents, (vii) the respondents were wholly successful, and (viii) if any apportionment were considered appropriate, the applicant had grossly overstated the significance of the issues on which the respondents failed. 10 Spigelman CJ identified the principles applicable to proceedings subject to Pt 16 r 4 in Sansom. Similar issues were discussed in Thaina Town (On Goulburn) Pty Ltd v Sydney City Council (2007) 156 LGERA 150, although the proceedings in that case were not subject to the presumptive rule. Rule 3.7(2) 7 is in the same terms as Pt 16 r 4. Rule 3.7(3) provides examples of circumstances in which the presumptive rule against any order for costs might be displaced. Rule 3.7(3) is neither definitive nor exhaustive. Accordingly, Sansom and Thaina Town should be considered when dealing with the costs of the class 2 proceedings.

11 The following matters may be discerned from Sansom and Thaina Town relevant to the class 2 proceedings: (1) The starting point is the presumptive rule that there be no order as to costs ( Sansom at [48]).

(2) The criteria of "fair and reasonable…in the particular circumstances" are broad ( Sansom at [48]).

(3) There is no restriction other than rationality on the scope of considerations relevant to that judgment ( Sansom at [48]).

(4) There can be no rigid constraints on the considerations that might make a costs order fair and reasonable, as this would impermissibly fetter the broad evaluative process the rule contemplates by reference to the circumstances of the case. However, indicative guidelines to promote consistency do not offend this requirement ( Sansom at [58]).

(5) Not all merits review proceedings are equivalent. The capacity of most administrative tribunals to stand in the shoes of the primary decision-maker is usually a significant element in the practice of not awarding costs in such proceedings ( Thaina Town at [73] - [79]). 12 I accept the applicant's submission that full effect must be given to the facts that: - (i) proceedings under s 28QA and s 28K of the Strata Schemes Act are allocated by s 18(f) of the Land and Environment Court Act to class 2 of this Court's jurisdiction, and (ii) all class 2 proceedings are subject to the presumptive rule that there be no order as to costs. Nevertheless I am satisfied that the circumstances of this case displace the presumption for the following reasons.

13 There are an infinite number of circumstances in which a person bound by a strata development contract might seek to alter the time for completion of a development scheme or amend the contract. In this case the applicant, being the developer under the contract, sought to do so where: - (i) the requirement for the extension arose because of decisions taken by the applicant in the applicant's own interests at the time, (ii) despite the relatively generous time allowed for completion of the development scheme by the contract, stage 2 of the development scheme had not and could not be commenced within the time allowed because the applicant had elected not to acquire the adjoining land on which that development was to be carried out until a time that made completion within the allowed time impossible, (iii) the applicant gave no adequate explanation for many of the significant delays which led to the need to make the application under s 28QA, and (iv) the applicant knew the respondents objected to the proposed extension. Further, the applicant's approach to the amendment of the contract was complicated, time consuming and ultimately unpersuasive. The applicant: - (i) unsuccessfully argued that no such amendment was required and thus failed to recognise the material discrepancies between what the contract authorised and what the applicant wished to do (a position that itself changed on numerous occasions), (ii) failed to identify an amendment in terms that could be meaningfully considered in the mistaken belief that such matters were mere technicalities, and (iii) did not establish the facts necessary to found the power to approve the amendment. Finally, the respondents were wholly successful in defending the proceedings.

14 These factors have to be considered together with the fact that the class 2 proceedings sought to defer the time for completion of the development scheme until December 2008, thereby enabling the applicant to carry out the whole of the development scheme the contract permitted if completed by December 2007. If deferred, each of the respondents would have been subject to substantial obligations circumscribing their proprietary rights in a direct and immediate manner for that additional period of 12 months. This is not to say that the general nature of the proceedings should themselves involve any presumptive result on costs. It is merely to recognise the nature of the rights sought by the applicant in the class 2 proceedings (and the corresponding obligations sought to be imposed on the respondents) in a real and practical context.

15 These matters, considered against the compensatory purpose of any costs order, make it fair and reasonable in the circumstances to order the applicant to pay the respondents' costs of the class 2 proceedings. Taken together they are sufficient to displace the presumption against any order for costs.

16 The respondents' various defences to the applicant's claims in the class 4 proceedings were not all successful. It is also the case, however, that the class 2 and class 4 proceedings were interlinked. One of the primary difficulties with the relief that the applicant sought in the class 4 proceedings was that it implicitly assumed the applicant would be successful in the class 2 proceedings and thus sought declarations with respect to anticipated (not present) rights and obligations. The respondents were entitled to defend the class 4 proceedings on all reasonably arguable grounds. Their defences based on invalidity, unenforceability and construction of the contract did not involve substantial additional evidence and were reasonably arguable in the circumstances.

17 Consistent with the respondents' submissions, I am not satisfied that any apportionment of costs of the class 2 or class 4 proceedings is appropriate. The bulk of the time taken by the proceedings was not the result of the respondents' defences but, rather, the applicant's need to adduce evidence in both sets of proceedings to found the claims for the relief sought. That evidence involved a complicated history of development consents, modifications, appeals to the Court about development consents and modifications, amended plans and proposals and the like. The respondents' defences in the class 4 proceedings primarily arose from the applicant's own evidence and were interlinked with the class 2 proceedings. In short, any grant of relief to the applicant in the class 2 proceedings depended on the validity and enforceability of the contract. Any grant of relief to the applicant in the class 4 proceedings assumed the time for completion of the development scheme under the contract would be deferred. The respondents' defences, accordingly, were not separable. A costs order in the respondents' favour would properly accord with the compensatory purpose of such orders and would not reward the respondents for any "injudicious pursuit of issues without substance" (Stena Rederi Aktiebolag v Austal Ships Sales Pty Ltd [2007] FCA 1141 at [12]).

18 For these reasons, the applicant is ordered to pay the respondents' costs of proceedings 20096 of 2007 and 40097 of 2007, as agreed or assessed.

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