Nadilo v Eagleton

The approach to the application for leave to appeal

1. The applicant bears the onus of establishing that leave to appeal against the primary judge's exercise of the costs discretion should be granted. The applicant accepted that this involved demonstrating the matters summarised by Payne JA in Lee Environmental Planning Pty Ltd v Reulie Land Co Pty Ltd [2020] NSWCA 254 at [30] and [31]: "Section 58(1) of the Land and Environment Court Act 1979 (NSW) confers a right of appeal to the Supreme Court in respect of orders made in Class 4 proceedings. Section 58(3) requires a grant of leave to appeal against an order about costs. While it is inappropriate to lay down rigid and exhaustive criteria about the circumstances in which leave to appeal will be granted, leave to appeal to this Court is ordinarily granted only where there is an issue of principle, a matter of general importance or where an injustice can be demonstrated with reasonable clarity: Schwartz Family Co Pty Ltd v Capitol Carpets Pty Ltd [2017] NSWCA 223 at [26]. Where an injustice is alleged, the applicant must do more than point to an error that is merely arguable: The Age Company Ltd v Liu (2013) 82 NSWLR 268; [2013] NSWCA 26 at [13]. The hurdle that an applicant for leave must clear is greater in a case limited to a challenge to the exercise of the costs discretion. To successfully challenge a discretionary costs decision it is necessary for an appellant to demonstrate that some error of principle has occurred, that the judge has failed to take material considerations into account, has taken irrelevant considerations into account, or that the order made below is "unreasonable or plainly unjust" such that "the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance": House v The King (1936) 55 CLR 499 at 505; [1936] HCA 40; Ross v Lane Cove Council [2017] NSWCA 299 at [2]-[3]."
2. The applicant's Amended Draft Notice of Appeal sought to establish that two errors of principle had occurred, one that the primary judge failed to take into account material considerations and the other that the costs orders made by the primary judge were unreasonable or plainly unjust.

Leave to appeal should be granted

1. I find that the applicant has not established that the primary judge erred in the manner claimed in the proposed first appeal ground, by failing to take into account a material consideration, but has established that the primary judge's costs orders are unreasonable or plainly unjust so as to sustain the proposed second appeal ground. Leave to appeal should be granted in terms of the second appeal ground, and the appeal on this ground should be upheld. The respondents should pay the costs of the applicant in the court below, on an ordinary basis and not an indemnity basis, and the costs of the appeal in this Court.

The failure to take account of material considerations ground

1. The applicant claimed three matters were "material considerations" that the primary judge was bound to consider, but failed to consider, in the exercise of the costs discretion under r 42.20(1). Two of these considerations concern what the applicant described as a Calderbank offer made by the applicant on 28 August 2020. The applicant had written a letter to the respondents on 28 August 2020 offering to settle the proceedings by the entry of consent orders to the effect of the nine orders suggested in the letter.
2. The first three suggested orders were for the respondents to replace the heat pump water heater with a standard electric hot water service; relocate one air conditioning unit (referred to as AC1) to a position adjacent to the other air conditioning unit (referred to as AC2); and enclose both air conditioning units AC1 and AC2 in an acoustic enclosure to achieve a specified noise level when operated. The fourth and fifth suggested orders concerned certification that the air conditioning units AC1 and AC2 would satisfy acoustic performance standards. The sixth suggested order was that air conditioning unit AC1 not be operated until after it had been relocated. The seventh suggested order concerned the entry into a deed between the parties. The eighth suggested order was that the question of costs be set down for hearing by the Court if no agreement was able to be reached. The ninth suggested order was to vacate the final hearing of the proceedings.
3. The letter stated that the applicant's offer remained open until 18 September 2020, that the offer was made in accordance with the principles of Calderbank v Calderbank [1976] Fam 93; [1975] 3 All ER 333, and that if the offer was not accepted, the applicant would seek to rely on the letter in support of an application for indemnity costs.
4. The applicant claimed that the respondents did not formally respond to the applicant's letter containing the Calderbank offer.
5. The applicant submitted that both the Calderbank offer and the respondents' failure to respond to that offer were material considerations that the primary judge was bound to take into account in exercising the costs discretion under UCPR r 42.20(1). The applicant did not identify why or how the Calderbank offer or the respondents' non-response to the offer were matters that the primary judge was bound to take into account in determining whether to make an order for costs otherwise than the order provided for in r 42.20(1) that the applicant pay the respondents' costs of the proceedings that had been dismissed. The applicant merely asserted that the Calderbank offer "was relevant to the respondents' conduct not only on the question of indemnity costs, but in relation to costs generally" (at [22] of the applicant's reply). The applicant submitted that the primary judge erred in taking into account the Calderbank offer only on the limited basis of relevance to the applicant's claim for indemnity costs.
6. The respondents rebutted the applicant's assertion that either the Calderbank offer or the respondents' non-response to that offer was a relevant matter that the primary judge was bound to consider in exercising the costs discretion under r 42.20(1). The rule neither expressly nor impliedly by reference to the subject matter, scope and purpose, bound the primary judge to take the Calderbank offer or the respondents' non-response to that offer into account in exercising the costs discretion under the rule, citing Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 1 at 40; [1986] HCA 33. The primary judge cannot, therefore, have erred in law by failing to take into account the Calderbank offer or the respondents' non-response to the offer in deciding that the proper costs order in the circumstances was that there should be no order as to costs.
7. The respondents submitted that, in any event, the primary judge did in fact take into account the Calderbank offer and the respondents' non-response to the offer. The primary judge noted that the applicant's counsel had taken the primary judge to the letter containing the Calderbank offer (at [42]) and the primary judge both summarised and quoted the terms of the letter (at [78]-[80]). The respondents submitted that the primary judge noted that the applicant's counsel relied on the failure of the respondents to accept this offer as the foundation for the applicant's proposal for indemnity costs (at [43]-[45]). The primary judge's consideration of the Calderbank offer at these stages in his reasons for judgment was not limited to the issue of whether costs should be awarded on an indemnity basis. That issue was addressed later at [111], where the primary judge found that, given his conclusion that there was no proper basis upon which to make a costs order in favour of the applicant on the ordinary basis, there was no need to consider whether the applicant's letter containing the Calderbank offer justified ordering costs on an indemnity basis.
8. In these circumstances, the respondents submitted that the applicant has not established that the primary judge did fail to take into account the Calderbank offer.
9. I find that neither the Calderbank offer nor the respondents' non-response to the Calderbank offer were relevant matters that the primary judge was bound to consider in exercising the costs discretion under r 42.20(1). In order to establish that the primary judge's exercise of the costs discretion miscarried on some error of principle, in this instance failure to consider a relevant matter, the applicant had to establish that the Calderbank offer and respondents' non-response to the offer were in law matters that r 42.20(1) expressly or impliedly obliged the primary judge to take into account in exercising the costs discretion under the rule. The applicant cannot establish that these are such relevant matters. The Calderbank offer and the respondents' non-response to the offer were facts that the primary judge was permitted to consider, but the primary judge was not bound to consider them.
10. This is sufficient to dispose of this aspect of the first appeal ground of failure to consider a relevant matter. The Calderbank offer and the respondents' non-response to the offer are, however, relevant to the applicant's argument on the second appeal ground that the primary judge's orders were unreasonable or plainly unjust. I will return to consider the Calderbank offer and the respondents' non-response to the offer when I deal with this ground.
11. The third matter the applicant argued was a material consideration that the primary judge was required to take into account in the exercise of the costs discretion was "the timing of the works carried out by the respondents after 28 August 2020 which reflected the offer". As the consent orders had noted, the respondents had taken actions to replace the hot water heater with a silent electric water heater, relocate one air conditioning unit to an alcove near the other air conditioning unit and enclose both air conditioning units in an acoustic enclosure. As a matter of timing, these actions were completed after the date of the applicant's letter of 28 August 2020 and before the Court made orders in accordance with the parties' consent orders. The applicant argued, however, that the actions taken by the respondents "reflected" the Calderbank offer. This was said to be the material consideration. As the applicant expressed the consideration in the applicant's reply, it was "the timing of the work undertaken as reflected in the Calderbank offer being reflected in the consent order".
12. Again, the applicant did not assay the task of establishing why or how this consideration was a matter that the primary judge was bound to take into account in exercising the costs discretion under r 42.20(1), and was not just a matter of fact that the primary judge was permitted to consider. The applicant merely asserted that it was a material consideration.
13. The respondents maintained, as they had with regard to the other two matters claimed by the applicant to be material considerations, that this third matter of the timing of the actions taken by the respondents was not one that the primary judge was bound to take into account.
14. In any event, the respondents took issue with the factual assumption implicit in the applicant's argument that the respondents' actions were done in response to the applicant's letter of 28 August 2020 containing the Calderbank offer. The respondents' contended that there was a history of interactions between the applicant and the respondents about the air conditioning units and hot water heater, obscuring the establishment of any necessary causal link between the applicant's letter of 28 August 2020 and the respondents' actions. The respondents' further response to the applicant's reply summarised these actions and events as follows: "(a) There had been a fencing dispute between the parties in 2018 and the first complaint in relation to air conditioner noise was on 6 January 2019; (b) From January to February of 2019, the Respondents took steps for inspection of the units and for rubber mounts, hole sealing, installation of sound-proof blanketing on the compressor and other works to be done, voluntarily and at their own expense at a time well before any type of proceedings were on foot; (c) Two inspections were conducted by the local Council in June and August 2019, after which that Council's officers confirmed then (as well as later) as set out in a letter to the Applicant dated 20 June 2019 "Council considers that the Unit is in accordance with the SEPP and that no further action is warranted by the Council"; (d) The Applicant commenced the Noise Abatement proceedings in the Local Court on 19 August 2019 (Judgment at [3]); (e) The Respondents had the units inspected again by the air conditioner installer on 20 February 2020, who represented in correspondence that the units were manufactured, installed and were operating in compliance with the relevant SEPP and POEO Act and Noise Control Regulations; (f) The Respondent's conducted further work on 26 March 2020 to install a grated fence to improve air flow; (g) The proceedings in the Land and Environment Court were commenced on 5 May 2020 and on 3 July 2020 Moore J heard and determined the interlocutory application with the Applicant only partially successful; (h) Pre-dating the Applicant's Calderbank correspondence, on 25 August 2020, the Respondents' solicitors wrote a Calderbank letter to the Applicant's solicitors which offered: (i) The relocation of AC1 to the position adjacent to AC2; (ii) Replacement of the hot water service to a version with no pump or fan; (iii) Issues relating to their fencing dispute and an offer that parties pay their own costs; (i) The Applicant's Calderbank dated 28 August 2020, appears to engage and work with the Respondents' suggestions in their 25 August 2020 Calderbank as is evident from a comparison of the terms and to some degree the terms upon which the matter was ultimately resolved; (j) By correspondence dated 2 September 2020 the Respondents again wrote to the Applicant indicating that the hot water service was being replaced that day and the AC unit was being moved on 16 September 2020. This having been done was confirmed in later correspondence dated 16 October 2020 which also indicated that further work (two offset acoustic walls) had been installed. In Calderbank correspondence from the Respondents dated 18 November 2020, further attempts were made to resolve the litigation."
15. The respondents submitted that in these circumstances it cannot be established as a fact that the works carried out by the respondents after 28 August 2020 reflected or responded to the applicant's letter of 28 August 2020 contained in the Calderbank offer.
16. I find that the applicant has not established that the claimed matter of "the timing of the works carried out by the respondents after 28 August 2020 which reflected that offer" was a material consideration that the primary judge was bound to take into account in exercising the costs discretion under r 42.20(1). The rule neither expressly nor impliedly obliged the judge to consider that matter in exercising the costs discretion; at most it was a permissible fact that, if established on the evidence, the primary judge was permitted to take into account, but he was not bound to do so.
17. Again, this is sufficient to dispose of this aspect of the first appeal ground of failure to consider a relevant matter. The fact that the respondents did take actions to the effect sought in the Calderbank offer and in the summons is, however, relevant to the applicant's argument on the second appeal ground that the primary judge's orders were unreasonable or plainly unjust. I will return to these matters when I deal with this ground.
18. For these reasons, proposed appeal ground 1 does not raise or establish any error of principle.

The applicant's arguments

1. The applicant's proposed second appeal ground was that the order of the primary judge was unreasonable or plainly unjust. The language of this appeal ground picked up the words "unreasonable or plainly unjust" from Lee Environmental Planning Pty Ltd v Reulie Land Co Pty Ltd at [31]. There, Payne JA explained that a basis for challenging an exercise of a costs discretion is that the order made "is 'unreasonable or plainly unjust' such that 'the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance'". The unreasonableness or plain injustice of the order is looked to as providing a basis for the appellate court to infer that the court below has failed in some way to properly exercise the discretion.
2. The applicant pleaded in its Amended Draft Notice of Appeal three respects in which it claimed the primary judge's orders were unreasonable or plainly unjust: first, that the result achieved (the actions taken by the respondents to replace the hot water heater and relocate and acoustically enclose the air conditioning units) could not have been obtained without the applicant having brought the proceedings; second, the consent orders made by the primary judge noted and reflected the fact that the respondents had carried out all of the work that had been proposed in the Calderbank offer and had been sought in substance in the relief claimed in the summons; and third, the applicant's costs "were unnecessarily elevated" because of the respondents' conduct.
3. The applicant reframed the respects in which the primary judge's orders were unreasonable or plainly unjust in oral argument in this Court.
4. First, the applicant argued that the primary judge's orders were the product of the primary judge misdirecting himself as to the proper inquiry required. The applicant contended the primary judge asked himself the wrong question in two ways. The primary judge summarised what he saw to be the inquiry as being "whether the outcome would sustain my finding, without any hypothetical trial of an issue, that the Applicant has succeeded on all issues pressed in a fashion demonstrating complete surrender by the Respondents" (at [98]). The primary judge considered that this approach accorded which what had been discussed in Ralph Lauren 57 Pty Ltd v Byron Shire Council (2014) 199 LGERA 424; [2014] NSWCA 107 at [26].
5. The primary judge considered that in order to determine whether the applicant had succeeded on all issues, "it is appropriate to compare the prayers for relief in the Class 4 summons and what can be seen to have been achieved by the Applicant in the resolution of the proceedings" (at [99]). The primary judge, therefore, asked two questions: first, had the applicant succeeded on all issues and, second, had the applicant achieved the relief sought in all of the prayers for relief in the summons. The applicant submitted the primary judge thereby asked the wrong questions.
6. The applicant accepted that, in order to ascertain whether the respondents had effectively surrendered to the applicant by taking the actions and consenting to the Court making orders, in substantially the same terms and effect as had been sought by the applicant in the summons, there needs to be a comparison between the outcomes reflected in the consent orders and what had been sought by the applicant in the summons, but this did not involve the inquiry undertaken by the primary judge.
7. Distilled to their essence, the proceedings brought by the applicant sought to remedy breaches of two laws, the Exempt Development SEPP and the Noise Control Regulation, by restraining the use of two air conditioning units and a hot water heater that were too noisy until they were made compliant with the noise performance criteria in those laws. The prayers for relief in the summons sought that the respondents provided certification that the air conditioning units and hot water heater had been rendered compliant with the noise performance criteria in the laws.
8. The applicant argued that this outcome was achieved. The respondents replaced the hot water heater with a silent electric water heater, relocated one air conditioning unit (AC1) to an alcove near the other air conditioning unit (AC2) and enclosed both air conditioning units in an acoustic enclosure. The taking of these actions had reduced the noise levels, completely for the electric water heater and to be compliant with the noise performance criteria in the Exempt Development SEPP for the air conditioning units. The respondents had arranged for certification of these actions, including that the air conditioning units comply with the noise performance criteria in the Exempt Development SEPP. These actions and certification were recorded by the parties in the notation in the consent orders agreed by the parties.
9. The parties also agreed in the consent orders that the Court should order the respondents to ensure that both air conditioning units AC1 and AC2 meet on an ongoing basis the noise performance criteria in the Exempt Development SEPP. The Court made that order.
10. The applicant argued that a simple comparison of the actions taken by the respondents to make the air conditioning units and hot water hearing noise compliant, and for certification of those actions, as well as the order made by the Court as to the future operation of the air conditioning units, with the substantive terms and effect of the orders claimed in the summons, reveals that the respondents had effectively surrendered to the applicant.
11. The applicant contended the primary judge's decision to the contrary was in error. The primary judge embarked on an inquiry as to whether the applicant would have succeeded on each of its claims of breach of the Exempt Development SEPP and the Noise Control Regulation. This was to engage in the very hypothetical trial that the primary judge acknowledged that he should not conduct. The primary judge found that the applicant would have established a breach of the Exempt Development SEPP (at [76] and [101]) but not a breach of the Noise Control Regulation (at [107] and [108]).
12. The applicant argued that the primary judge's inquiry was also misdirected. The relief claimed by the applicant was essentially the same regardless of the breach of law: the respondents were to be restrained from using the air conditioning units and the hot water heater until they complied with, and the equipment was certified to comply with, the noise performance criteria in the Exempt Development SEPP and Noise Control Regulation. The noise performance criteria in each of these laws were substantially similar, so that the equipment's compliance with the noise performance criteria in the Exempt Development SEPP would result in the equipment's compliance with noise performance criteria in the Noise Control Regulation.
13. Accordingly, if the applicant would have succeeded in establishing that the respondents were in breach of the Exempt Development SEPP, they would have been entitled to an order remedying that breach to the effect sought in the summons that the respondents be restrained from using the air conditioning units and the hot water heater until the noise levels were made compliant with the noise performance criteria in the Exempt Development SEPP. Such an order would also cause the air conditioning units and hot water heater to comply with the noise performance criteria in the Noise Control Regulation. Thus, the primary judge's finding that the applicant would not have established a breach of the Noise Control Relegation would not have the consequence of causing the applicant not to obtain in substance the relief it had sought in the summons.
14. The second way in which the applicant argued that the primary judge's orders were unreasonable or plainly unjust was that the primary judge failed to consider the unreasonableness of the respondents' conduct in not accepting the Calderbank offer. In oral argument, the applicant accepted that in substance the actions that the Calderbank offer sought for the respondents to undertake were the same as the actions sought in the summons. In this regard, the Calderbank offer did not offer a compromise. Nevertheless, the applicant argued that the Calderbank offer renewed what had been sought in the summons. Just as the respondents had not agreed to undertake the actions sought in the summons, the respondents also did not agree to undertake the actions sought in the Calderbank offer. The respondents' conduct in not responding to either the summons or the Calderbank offer, but instead continuing to defend the proceedings up until they agreed to the consent orders on 3 December 2020, was unreasonable. The primary judge erred in not considering the Calderbank offer and the respondents' non-response to the offer in evaluating the unreasonableness of the respondents' conduct.
15. The third way the applicant argued the primary judge's orders were unreasonable or plainly unjust was by reference to the outcomes: the primary judge made no costs order as to the substantive proceedings and ordered the applicant to pay the respondents' costs of the costs motion. In circumstances where the applicant had achieved substantive success - the applicant achieved the outcomes it had sought in bringing the proceedings - and the respondents acted unreasonably in continuing to defend the proceedings until they effectively surrendered to the applicant by taking the actions to render noise compliant the air conditioning units and hot water heater and consenting to the Court making orders that the respondents ensure on an ongoing basis that the air conditioning units be noise compliant, the primary judge's orders were unreasonable or plainly unjust.

The respondents' arguments

1. The respondents submitted that a plaintiff whose proceedings are discontinued or dismissed without any substantive trial of the issues ordinarily will not be entitled to an order for costs in its favour unless the plaintiff not only achieves some practical success by having brought the proceedings but also establishes some extra circumstance such as the unreasonableness of the conduct of the defendant: Ralph Lauren 57 Pty Ltd v Byron Shire Council at [23]. The unreasonableness in the conduct of the defendant may be prior to the commencement of the proceedings or in the defence of the proceedings.
2. Unreasonableness in the defence of the proceedings may involve a defendant continuing to defend the proceedings until it surrenders to the plaintiff by consenting to the court making orders in substantially the same terms and effect as sought by the plaintiff in the proceedings. The defendant's unreasonableness lies in defending litigation that it would almost inevitably have lost up to the point of surrender, causing the plaintiff unnecessarily and unreasonably to have incurred costs up to that point: Ralph Lauren 57 Pty Ltd v Byron Shire Council at [26].
3. The respondents submitted that in order for the primary judge to ascertain whether the respondents did unreasonably defend the proceedings up until the point the parties agreed for the Court to make the consent orders, it was legitimate for the primary judge to engage in a comparison of the relief sought in the summons with the result obtained in the consent orders. The respondents submitted that this was the exercise undertaken by the primary judge: at [99]. The primary judge found that although the applicant would have succeeded in establishing a breach of the Exempt Development SEPP, she could not have succeeded in establishing a breach of the Noise Control Regulation: at [103], [107]. The respondents submitted that in this circumstance, it could not be said that the applicant would almost inevitably have succeeded if the matter had been fully tried. The applicant could not have succeeded in obtaining relief in the terms sought in the summons in order 1(ii) or 2(iv), regarding compliance with the Noise Control Regulation of either the air conditioning units or the hot water heater (at [103]-[109]).
4. The respondents submitted that the primary judge's finding was corroborated by a closer analysis of the alleged statutory breaches and the terms of the relief claimed in the summons. The respondents submitted that the provisions of the Exempt Development SEPP are directed to regulation of the "construction or installation" of the air conditioning units and hot water heater, not their use: see cl 2.5 and cl 2.46A. In order for the air conditioning units and hot water heater to be exempt development, the installation of that equipment must meet the development standards for that equipment, in cl 2.6(1) and cl 2.46B. These development standards concern the design of the equipment, that is to say, the equipment must "be designed as not to operate" at a noise level that exceeds the different levels specified in the development standard. In contrast, the provisions of the Noise Control Regulation are concerned with the use, not the construction or installation, of the air conditioning units or hot water heater: see cl 45 and cl 53. A person breaches these provisions, and thereby commits an offence, by causing or permitting that equipment "to be used on residential premises in such a manner that it emits noise that can be heard within any room in any other residential premises" during the proscribed hours: see cl 45 and cl 53(1).
5. The respondents argued that the prayers for relief in the summons do not observe this distinction in the statutory provisions of the Exempt Development SEPP and the Noise Control Regulation between the construction or installation of the equipment for the former, and the use of the equipment for the latter. The prayers for relief sought orders restraining the use of the equipment until such time as the equipment was certified to comply with the Exempt Development SEPP and Noise Control Regulation. Whilst the design of the equipment could be certified as meeting the respective development standards for air conditioning units and hot water heater in cl 2.6 and cl 2.46B of the Exempt Development SEPP, such certification of the design could not be given for the use of the equipment under cl 45 or cl 53 of the Noise Control Regulation. The respondents submitted, therefore, that the Court could never have made orders in terms of the prayers for relief in the summons regarding the alleged breach of the Noise Control Regulation.
6. Indeed, the respondents submitted that the Court could not have made any order for certification or the air conditioning units or hot water heater. There is no statutory basis in the Exempt Development SEPP or the Noise Control Regulation for certification that an air conditioning unit or a hot water heater meets the noise performance criteria in these statutory instruments. The Court could not therefore order that that equipment be certified to comply with the statutory instruments where there is no statutory basis for such certification.
7. The respondents further submitted that even if a breach of the Exempt Development SEPP and Noise Control Regulation were to have been established at trial, there was no inevitability that the Court would have, in its discretion, granted relief. The respondents had pleaded in their defence that the applicant was not entitled to any relief. Whilst not particular, this pleading was sufficiently wide to raise the Court's discretion to deny relief even if breach be established. The primary judge's reasons in his judgment on the application for interlocutory relief were indicative of what the respondents could have put on discretion and what might have persuaded the Court to deny relief.
8. For these reasons, the respondents submitted that it could not be said that the applicant would almost certainly have succeeded if the matter had been fully tried, so that the respondents' conduct in defending the proceedings up to the time of the consent orders could be said to be unreasonable.
9. The respondents submitted that their conduct would not otherwise be found to be unreasonable. The respondents referred to the summary of events, quoted earlier when dealing with the first appeal ground. The respondents submitted that their conduct, and the timing of their conduct, was demonstrably reasonable. The respondents had advice from the local council as well as from an air conditioner installer that there was compliance with the relevant standards. The respondents defended the proceedings, in their amended points of defence, on reasonable grounds, including defending the claimed breach of the Noise Control Regulation, which defence was accepted by the primary judge (at [103]-[109]). The respondents' conduct in the defence of the proceedings leading up to the settlement could not be said to be unreasonable.
10. The respondents made a particular submission responding to the applicant's contention that the final orders made by the primary judge, with the notation on one of the orders, reflected the fact that the respondents had carried out the works proposed in the Calderbank offer as well as reflecting the substance of the relief claimed in the summons. The respondents submitted that this was incorrect. The orders made by the primary judge cannot have reflected what was claimed in the summons regarding the claimed breach of the Noise Control Regulation, as the primary judge found that the applicant would not have succeeded in establishing this breach (at [103]-[109]). The orders made by the primary judge also did not reflect the fact that the respondents had carried out the works in the Calderbank offer, firstly because that assumes that the Calderbank offer was the cause of the respondents' carrying out the works, and secondly, because the terms of the Calderbank offer themselves reflect the offers made by the respondents on 25 August, 2 September, 16 October and 18 November 2020, so that the primary judge's orders could equally be said to reflect the respondents' offers.
11. Finally, the respondents submitted that the applicant's argument was based on the Calderbank test of comparing the judgment against earlier settlement offers, which is not the approach the authorities establish should be used when determining whether to make an otherwise costs order where proceedings are resolved without judgment by discontinuance or dismissal of the proceedings.

The costs orders are unreasonable or plainly unjust

1. I consider the primary judge's costs orders are unreasonable or plainly unjust, such that this Court may infer that there has been a failure properly to exercise the costs discretion. The unreasonableness or injustice derives firstly from the results of the costs orders that were made. The applicant, who had been successful in securing the outcomes she sought by bringing the proceedings, not only was not compensated for her costs of doing so, as the primary judge's order was that there be no order as to costs of the proceedings, but also was ordered to pay the respondents' costs of the costs motion.
2. The primary judge did seek to evaluate the applicant's success in the proceedings, but did so by asking the wrong questions. The applicant's success was to be evaluated not by a close comparison of the precise terms of the orders made by the Court by consent of the parties and the prayers for relief in the summons, but rather by looking to the substance of the outcomes sought and obtained by the applicant.
3. The applicant's case was simple. The respondents' use of the two air conditioners and the hot water heater emitted excessive noise, disturbing the applicant's quiet enjoyment and amenity of her house, and she wanted that use to cease until the noise levels of the equipment were reduced so as no longer to interfere with her enjoyment and amenity of her house. The applicant claimed that the respondents' use of the equipment breached the noise performance criteria in both the Exempt Development SEPP and the Noise Control Regulation. There was a degree of overlap in the noise performance criteria, particularly those applicable during the off-peak time. The applicant sought orders restraining the respondents' use of the equipment unless and until the equipment complied with the noise performance criteria.
4. These outcomes were achieved. The respondents replaced the noisy hot water heater with a silent electric water heater. The respondents moved one air conditioning unit into an alcove near the other air conditioning unit, and enclosed both in an acoustic enclosure. The taking of these actions brought both the hot water heater and the air conditioning units into compliance with the noise performance criteria in the Exempt Development SEPP and the respondents arranged for certification of this result. Each of these outcomes was recorded in the notation section of the consent orders.
5. The applicant and respondents also agreed that the respondents should ensure that their use of the air conditioning units will meet, on an ongoing basis, the noise performance criteria in the Exempt Development SEPP and that the Court should order the respondents to ensure this outcome. The primary judge made that order.
6. In these circumstances, the applicant achieved the outcomes she had sought in bringing the proceedings. The fact that the consent orders did not require the respondents to ensure and to arrange certification that the use of the air conditioning units meets the noise performance criteria in the Noise Control Regulation does not detract from this fact that the applicant achieved the outcomes she had sought in bringing the proceedings. There was no added utility in so ensuring or certifying compliance with the noise performance criteria in the Noise Control Regulation. The actions that had already been taken to reduce the noise of the air conditioning units and the hot water heater and to certify and ensure on an ongoing basis compliance with the noise performance criteria in the Exempt Development SEPP were sufficient to achieve the desired outcome of ensuring the quiet use of that equipment. Requiring compliance with the noise performance criteria in the Noise Control Regulation would have yielded little if any additional benefit for the applicant.
7. Thus, it mattered not whether the applicant would or would not have succeeded, let alone almost certainly succeeded, in the claim of breach of the Noise Control Regulation, had the matter been fully tried. It was sufficient that the applicant would have almost certainly succeeded in the claim of breach of the Exempt Development SEPP and that the applicant secured the outcomes she had sought by bringing the proceedings.
8. The primary judge therefore erred in inquiring whether the applicant would have succeeded on all of the claims and, having determined that the applicant would not have succeeded on one of the claims, that of breach of the Noise Control Regulation, finding that the applicant had not demonstrated that the respondents had capitulated on all issues.
9. The primary judge also erred in undertaking close comparison of the outcomes achieved with the detailed terms of the prayers for relief. It may be accepted that the prayers for relief were drafted in terms that the Court might not have made even if the applicant were to have established a breach of each of the Exempt Development SEPP and the Noise Control Regulation. As the respondents have noted, there is no statutory basis for certification of compliance of the air conditioning units or hot water heater with the noise performance criteria in the Exempt Development SEPP or the Noise Control Regulation. Even if certification were to be possible, the object of certification would be different under the two statutory instruments, being certification of the construction or installation of the equipment for the Exempt Development SEPP and of the use of the equipment for the Noise Control Regulation. But none of this matters. The Court was not bound to make orders in terms of the prayers for relief in the summons. The Court could delete the reference to and requirement for certification from any injunctive orders that it might make and could also make such further or other order as the Court saw fit, as prayer for relief 9 sought. The task of the Court was simply to grant such remedy or relief for any statutory breach it found proven as the Court thought fit.
10. The proper inquiry was to look to the substance not the form of the relief sought in the summons. When this is done, it can be clearly seen that the applicant succeeded in achieving in substance the relief she had sought. The present matter involved "a clear winner", to use the words of Burchett J in ONE.TEL Ltd v Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 at [7].
11. Establishing that the applicant would inevitably have succeeded is necessary, but insufficient; there needs also to be the extra circumstance that the respondents' conduct in defending the proceedings up to the time they agreed to the primary judge making consent orders was unreasonable: Ralph Lauren 57 Pty Ltd v Byron Shire Council at [1], [2], [23], [26], [27], [33], [108]. Again, this question of the unreasonableness of the respondents' conduct needs to be viewed practically and substantively, not by focusing on the precise terms of the summons or the pleadings.
12. It may be accepted that the respondents had a more than arguable defence to the applicant's claim of breach of the Noise Control Regulation. But that was insufficient if there was no arguable defence to the breach of the Exempt Development SEPP. As the respondents' conceded at the hearing in this Court, in order for the air conditioning units and hot water heater to be exempt development, that equipment needed to satisfy the noise performance criteria during both peak time and off-peak time. The respondents contested that the equipment breached the noise performance criteria for the off-peak time, but did not seriously contest that it breached the noise performance criteria during peak time. In this circumstance, the respondents accepted that the primary judge's finding that the equipment breached the development standards in the Exempt Development SEPP, and hence was not exempt development, was open and inevitable. This meant that the applicant would have succeeded, if the matter had proceeded to trial, in establishing a breach of the Exempt Development SEPP and hence the EPA Act. Such a breach would have been sufficient by itself to justify the Court ordering the respondents to cease using the equipment unless and until such use was compliant with the noise performance criteria in the Exempt Development SEPP. The respondents' defence to the claim of breach of the Noise Control Regulation was therefore insufficient to prevent the applicant succeeding in establishing a breach of the Exempt Development SEPP and obtaining injunctive relief to remedy that breach.
13. The respondents' argument that the Court might not have made any order remedying the breach of the Exempt Development SEPP, in the exercise of its discretion, is not tenable in the circumstances. It would be most unlikely that the Court would not make an order that the respondents ensure that the air conditioning units and hot water heater comply with the noise performance criteria fixed for that equipment in residential premises.
14. It may also be accepted that, over a couple of years, there had been to-ings and fro-ings, offers and counter-offers, and other interactions between the applicant and the respondents about the air conditioning units and hot water heater. But behind this surfeit of activity can be seen to be a simple cause and effect relationship: the applicant sought for the respondents to make the noisy air conditioning units and hot water heater quiet and the respondents did so. The respondents' delay in doing so, however, is what is unreasonable. The respondents, in delaying taking action and in defending the proceedings up to the time they consented to the Court making orders noting and requiring the respondents' actions, caused the applicant unnecessarily and unreasonably to have incurred costs up to that point in time. This provides the justification for a costs order in favour of the applicant.
15. The applicant's letter of 28 August 2020 offering to settle the proceedings and the respondents' non-response to this offer are but part of this conduct. The applicant's letter in substance offered no more than what had already been sought in the summons and the respondents' non-response to the letter was no different to their non-response to the summons. The respondents' delay in taking the actions to make the air conditioning units and hot water heater quiet and agreeing to the consent orders was general and not particular to the letter of 28 August 2021.
16. Again, the primary judge erred in failing to identify and give weight to the respondents' unreasonable conduct in delaying taking the actions and consenting to the orders that were ultimately taken and made.

Conclusion and orders

1. The applicant has not established the proposed first appeal ground of failure to consider material considerations but has established the proposed second appeal ground that the costs orders were unreasonable or plainly unjust. Leave to appeal should be granted to raise this second appeal ground and the appeal should be upheld. The primary judge's costs orders should be set aside and instead the respondents should be ordered to pay the applicant's costs of the proceedings in the court below and of the costs motion. I note that the applicant no longer pursued the application for costs to be awarded on an indemnity basis. The respondents should also pay the costs of the applicant in this Court.
2. I propose that the Court should make the following orders: 1. Leave to appeal is granted on the second appeal ground in the Amended Draft Notice of Appeal filed on 18 August 2021. 2. The appeal is upheld. 3. The orders of Moore J of the Land and Environment Court made on 11 February 2021 are set aside. 4. Instead, the respondents are to pay the applicant's costs of the proceedings in the Land and Environment Court and of the costs motion in the proceedings. 5. The respondents are to pay applicant's costs of the proceedings in this Court.

Endnotes

1. In contravention of Environmental Planning and Assessment Act 1979 (NSW) ("EPA Act"), s 4.2, by reason that the machinery did not qualify as exempt development, so as to be permissible without development consent under State Environmental Planning Policy (Exempt and Complying Development Codes) 2008 (NSW) ("Exempt Development SEPP"); and its operation did not comply with the development standards ("SEPP Development Standards") for air conditioning units in cl 2.6(1)(f1), nor for heat pump water heaters as specified in cl 2.46B(a1), in that, during peak time, the noise level exceeded 5dB(A) above the ambient background noise level measured at the property boundary, and during off-peak time, the noise level was audible in habitable rooms in the applicant's adjoining residence.
2. In contravention of the Protection of the Environment Operations (Noise Control) Regulation 2017 (NSW) ("Noise Control Regulation"), cll 45(a) (with respect to the air conditioning units) and 53(1)(a) (with respect to the heat pump water heater), as the noise they emitted could be heard in rooms in the applicant's residence (other than excepted rooms) during the prescribed hours of the day and night, being before 8am or after 10pm on any Saturday, Sunday, or public holiday, or before 7am or after 10pm on any other day.
3. The italicised words were not in the agreed form of consent order but were added by the primary judge, with the consent of the parties: see Nadilo v Eagleton [2021] NSWLEC 9 at [15] (Moore J) ("Primary judgment").
4. Primary judgment at [118(2)].
5. Lee Environmental Planning Pty Ltd v Reulie Land Co Pty Ltd [2020] NSWCA 254 at [30]-[31] (Payne JA; Leeming JA and Simpson AJA agreeing), citing House v The King (1936) 55 CLR 499 at 505 (Dixon, Evatt and McTiernan JJ); [1936] HCA 40 and Ross v Lane Cove Council [2017] NSWCA 299 at [2]-[3] (Macfarlan JA).
6. Commonwealth v Gretton [2008] NSWCA 117 at [121] (Hodgson JA; Mason P agreeing); Ohn v Walton (1995) 36 NSWLR 77 at 79 (Gleeson CJ).
7. Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [53]-[54] (Hodgson JA; Tobias JA agreeing), [69]-[74] (Basten JA) ("Bitannia"); Fordyce v Fordham (2006) 67 NSWLR 497 at 512 [84] (McColl JA; Beazley JA and Santow JA agreeing); [2006] NSWCA 274.
8. Bitannia at [75] (Basten JA); Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624 (McHugh J); [1997] HCA 6 ("Lai Qin").
9. Lai Qin at 624-625 (McHugh J).
10. (2000) 101 FCR 548 at 553-555 [6]-[8] (Burchett J); [2000] FCA 270 ("ONE.TEL").
11. Primary judgment at [76].
12. Tcpt, 2 September 2021, pp 7(48)-8(48), 9(32)-(33). DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 September 2021