Paul Sapounas & Anor v Manly Council

Land and Environment Court (NSW)|2009-04-21

CITATION : Paul Sapounas & Anor v Manly Council [2009] NSWLEC 1353

APPLICANTS Paul and Merca Sapounas PARTIES : RESPONDENT Manly Council

KEY ISSUES: COSTS :- Where proceedings discontinued - Whether fair and reasonable to make a costs order

CASES CITED: Grant v Kiama Municipal Council [2006] NSWLEC 70 Port Stephens Council v Jeffrey Sansom (2007) 156 LGERA 125, [2007] NSWCA 299

APPLICANTS Mr Loukas, Solicitor Whitehead Cooper Williams LEGAL REPRESENTATIVES:

RESPONDENT Mrs Finn, Solicitor HWL Ebsworth Lawyers

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

JUDGMENT 1 ACTING REGISTRAR: This is an application made by the respondent for costs of the proceedings. The proceedings concerned an appeal by the applicant against an order issued by Manly Council ("the Council") on 1 October 2008 requiring, inter alia, works to be carried out in order to retain and stabilise an area that had been subject to landslip. The proceedings were commenced by the applicants on 29 October 2008 and were discontinued by them on 20 March 2009, at which time I granted leave to the applicants to file a Notice of Discontinuance and reserved the question of costs.

2 In support of its application for costs, the respondent relies on the affidavit of Lesley Finn sworn 26 March 2009 and the affidavit of Tony Pavlovic also sworn 26 March 2009. Each of the affidavits annexe numerous correspondence that has passed between the parties to the proceedings. 3 In reply, the applicants rely on the affidavit of Paul Sapounas sworn 3 April 2009, the affidavit of Chris Sapounas sworn 9 April 2009 and the affidavit of Bill Loukas sworn 9 April 2009. These affidavits generally set out the nature of the property the subject of the order, some of the history surrounding the receipt of the order, and the reasons why the proceedings were discontinued. History of the proceedings 4 The affidavits, taken together, spell out a fairly detailed history of the events surrounding and following the issue of the order by the respondent. On 20 June 2007, following a period of heavy and protracted rainfall, the retaining wall and boundary wall situated on the applicants' land collapsed and a landslip occurred. There is, and continues to be, some dispute over whether the cause of the landslip was movement in the land below the wall owned by the Council, or whether the landslip was caused by the failure of the wall to retain the land above the wall due to its poor design.

5 Following the landslip, the Council obtained recommendations from Douglas Partners Pty Ltd ("Douglas Partners"), a geotechnical firm, in relation to the immediate action to be taken in order to stabilise the area. Those recommendations, dated 22 June 2007, suggested that there be constructed a retaining wall across the area and that advice should be sought from a structural or civil engineer in relation to the most feasible design of such a structure. The recommendations did not make any assessment of the cause of the landslip. It stated that: "It is not apparent what the pre-failure boundary/retaining conditions were and therefore who is likely to be responsible for remediation of the slope."

6 Subsequent to these recommendations, on 13 August 2007 the Council issued an Emergency Order to the applicants, requiring them to, inter alia, repair or remove the landslip, retain a geotechnical expert or civil engineer to investigate and prepare a report in relation to the cause of the landslip, re-establish the retaining walls and re-instate vegetation that was the subject of the landslip.

7 The applicants' insurer, NRMA Insurance Ltd, then engaged the firm Stubbs Cruikshank Structural Building Engineers ("Stubbs Cruickshank") to prepare a report together with Intech Building Consultants Pty Ltd ("Intech") in relation to the landslip. Prior to this, the applicants had engaged a surveyor in order to determine the location of the boundary lines and what part of the slippage was on their land. In the meantime, the applicants wrote to the Council advising of the measures being taken in response to the Emergency Order and indicating that the time period of 45 days was unrealistic. On 31 August 2007 the Council responded to that letter, outlining the urgency of the works to be conducted and requesting the expedition of the engineer's advice.

8 The report by Stubbs Cruikshank and Intech, dated 21 September 2007, was prepared following two inspections of the land on 4 and 13 September 2007 and makes the following conclusions: "2.6 The front brick wall containing the garden terrace, and the contact soil immediately behind the brickwork, had been literally "sucked" off the face of the terraced garden bed by the negative force of the departing slope below.

2.7 The slope failure had taken place between the front boundary of the property and the road below with the front wall of the garden bed being the only resultant damage so far to the Insured's property.

3.1 The slope failure and the land slippage has occurred entirely beyond the confines of the Insured's front boundary presumably on Council land in front of the Insured's property.

3.2 The only damage on the Insured's property attributable to the land slippage is the loss of the front brick wall (11 metre run) and a small amount of garden soil. Further damage is likely, however, as the garden terrace is now totally unsupported on the sloping terrain.

3.3. The Insured should be advised to contact the local Council as a matter of urgency and seek to have the front of his property stabilised before further damage occurs."

9 This report was then forwarded to the Council under cover of a letter dated 24 October 2007. No response to that letter was received and a further letter dated 6 February 2008 was sent to the Council requesting a response. Mr Paul Sapounas, in his affidavit dated 3 April 2009, deposes that he then attended Council Chambers in May 2008 and spoke with Council representatives in relation to the rectification works. At paragraphs 17 and 18 of his affidavit he deposes that: "17. I met with Council's Manager of Compliance and Regulatory Services, Tony Pavlovic both at his office and also on site. My position, as explained to Mr Pavlovic, was that: (i) I was not responsible for the landslip, and (ii) I required Council to tell me what they proposed to do as I wanted them to rectify the landslip, and (iii) If Council insisted that my retaining wall had to be re-built, I could not re-build it until Council re-built or re-instated their land.

At our meeting in May 2009 [sic], Mr Pavlovic said to me words to the effect of: " I am sorry for the delay in responding to you. I have only recently joined Council and have taken from someone else. I will talk to Council about it. Don't worry, Council is insured for situations like this." "

10 Following this meeting in May 2008, on 10 June 2008 Mr Sapounas again wrote to the Council requesting a response to the earlier correspondence and seeking information in relation to how Council was intending to proceed in relation to the issue. No response to that letter was received.

11 The Council then, on 31 July 2008, obtained a report from Douglas Partners. The report indicates that it "presents a geotechnical assessment of the possible cause(s) of a retaining wall failure and landslip at 10 Amiens Roads, Clontarf." The report comments on the possible causes of the landslip, including responding to the report of Stubbs Cruikshank, and makes the following conclusion: "In summary it is not possible to positively identify nor proportion causes of failure, however it is considered that, if the boundary retaining wall had been appropriately designed, adequately constructed with full drainage behind and foundations taken into the underlying medium strength intact sandstone bedrock any failure of the slope on the low side of the wall should not have affected a properly constructed retaining wall."

12 There evidence that there was communication between council officers following receipt of the report and prior to the issue of a Notice of Intention to Issue an Order. Specifically, on 26 August 2008, Mary, who appears to be the Council's Risk Manager, e-mailed Tony Pavlovic seeking information in relation to the progress of the issue and relaying the contents of a letter received by her from the applicants dated 20 August 2008. Mr Pavlovic replied on 26 August 2008, briefly outlining the progress to date and the fact that the matter had been referred to the Council's insurer. That e-mail asks the reader to "Please note that the residents retaining wall cannot be re-built until such time the slippage on Council land has been corrected."

13 The Council subsequently issued a Notice of Intention to Issue an Order dated 4 September 2008. There is no evidence that any representations were received in response to the Notice of Intention, and the Council then issued the order on 1 October 2008. On 21 October 2008 the solicitors engaged by the applicants wrote to the Council asking for the Order to be withdrawn so that discussions can take place and an on-site meeting held. The letter, which is Annexure M to the affidavit of Mr Pavlovic dated 27 March 2009, states that an appeal against the order will be lodged if the Order is not withdrawn. The letter also makes the allegation, for the first time, that the cause of the retaining wall collapse was a large dead eucalypt on the Council's land that had fallen over in the period of heavy rain. The letter also made certain comments about the content of the report by Douglas Partners dated 21 July 2008.

14 In its reply on 29 October 2008, the Council re-iterated the contents of the Douglas Partners report, including the conclusion that, as set out in the letter: "while it was not possible to positively identify the causes of the failure, significantly, they considered that any slippage of the slope on the low side of the wall should not have affected a properly constructed retaining wall that had been appropriately designed and adequately constructed…" The letter also refers to a prior verbal agreement by the applicants to reconstruct the wall. It confirms the issue of the Order and the fact that the Council intended to pursue the reconstruction of the wall. 15 In the meantime, on 27 October 2008, engineers engaged by the Council issued a notice to residents in relation to rockface stabilisation works on Amiens Road "near the intersection with Beatrice Street, Clontarf".

16 The appeal to this Court against the Order issued by the Council was lodged on 28 October 2008. Subsequently to it being served, the applicants' solicitors wrote to the Council on 4 November 2008 requesting the production of a number of documents. The letter indicates that it "serves as a Notice to Produce to the Land and Environment Court." No issue in relation to this indication was raised by the Council, however I note that there is a prescribed form for a Notice to Produce and the Uniform Civil Procedure Rules 2005 specify that such a Notice to Produce is to be made returnable at a hearing or on a date fixed by the court for return of subpoenas.

17 On 7 November 2008 the solicitors for the respondent wrote to the representatives of the applicants enclosing a Notice of Appearance and requesting that the Statement of Facts and Contentions be filed by the applicants. A reply dated 11 November 2008 to the solicitors for the Council enclosed the letter dated 4 November 2008 and indicated that the Statement of Facts and Contentions could be prepared upon access being granted to the documents.

18 Subsequently correspondence passed between the parties in relation to the inspection of the documents. In my view I ought to take into account the conduct of each party in order to consider whether costs ought to be awarded as sought, and I will therefore outline the nature of the correspondence. Specifically, on 13 November 2008 the Council's representatives indicated that the Council's file was available for inspection at their office at a time suitable to the applicants' representatives. A reply from the applicants' representative on 14 November 2008 asked for confirmation that the documents available for inspection were "fully responsive to the description of documents set out in our letter… of 4 November".

19 On 17 November 2009 the respondent's solicitor confirmed that the Council "only has one file" in relation to the property, and that they had a complete copy of the file. On the same date, the applicants' solicitor replied, indicating that it "appears… that there is little or no likelihood that any of the documents referred to in the Notice to Produce letter sent to your client on 4 November are going to be contained within the one file…" The letter asserts that, as a result, the Statement of Facts and Contentions cannot be prepared. The letter then provides a list of the categories of the documents sought. On 20 November 2008, the respondent's solicitor provided to the applicants' solicitor a copy of the documents requested together with an account from a copying firm.

20 On 25 November 2008 a Notice of Intention to Issue an Order was issued to the applicants in relation to alleged unauthorised retaining walls, plants and landscaping works on Council's land.

21 The matter came before the Court for the first directions hearing on 27 November 2008. At that time, the Court was informed that the Council files were being inspected and that the applicants intended to file a Statement of Facts and Contentions. Directions were made by the Registrar for the filing of a Statement of Facts and Contentions by the applicant and for the filing of a reply by the respondent. The proceedings were then adjourned to 19 January 2009, which date was later changed to 20 January 2009.

22 Following the first directions hearing, the following correspondence ensued as between the solicitor for the applicants and the solicitor for the respondent: * An e-mail from the respondent's solicitor on 4 December 2008 indicating that Council's documents are available for inspection at their office; * A letter from the applicants' solicitor dated 9 December 2008 asserting that there has not been full and frank disclosure, and asking specific questions about documents that ought to exist but which had not been provided. The letter also indicates that as a result of the failure to provide the documents they would not be able to comply with the courts direction in relation to the filing of the Statement of Facts and Contentions; and * Letters from the respondent's solicitor dated 11 and 12 December 2008 enclosing documents as requested, together with accounts from a copying firm. 23 I note that much of the discourse concerning the documents sought related to the applicants seeking to inspect documents relating to the rock stabilisation works that were being undertaken by the Council on Amiens Road.

24 On 22 December 2008, the applicants through their solicitors wrote to the respondent's solicitors with a 'without prejudice' offer to the Council "the sum of $10,000 in full and final resolution of any liability (which is not admitted) in relation to these proceedings and the related matter of the further Notice of Intention to Issue an Order…" The letter sets out the grounds on which the applicants will rely in the proceedings, and indicates that the acceptance of the offer will "require Council to accept full liability in relation to same and to provide indemnity to our clients."

25 The letter of 22 December 2008 also makes various points in relation to why the issue of a further order, in accordance with the Notice of Intention, would be inappropriate. Specifically, the solicitors for the applicants assert that the retaining wall the subject of the Notice of Intention has been damaged because of trees on the Council's land, and that "we are of the opinion that it would be very difficult for Council to prove any liability against our clients".

26 On 16 January 2009 the Council obtained a further report from Douglas Partners in response to the allegation in relation to the dead tree. That report indicates that the evidence does not support the presence of a full trunk of a dead tree, and that "the presence of such a stump(s) would have had no impact on the stability of the embankment and an appropriately designed and constructed retaining wall."

27 On 19 January 2009 the applicants filed their Statement of Facts and Contentions in the form of a document titled Notice of Facts and Contentions. When the matter came back before the Court on 20 January 2009, directions were again made for the filing of a Statement of Facts and Contentions in reply.

28 On 23 January 2009 the solicitor for the applicants wrote to the respondent's solicitor asking for written advice of the refusal of the offer in the letter dated 22 December 2008. The letter indicates that in relation to the Notice of Intention to issue Order, they have not received any documentation in support of the Notice and that therefore they "consider that it is up to you to state your case to us and for us to submit our case in reply". In her reply of 27 January 2009, the respondent's solicitor asserts that the legislation does not require any documentation to be provided with the Notice. The reply indicates that it is not a matter for the solicitor or their clients to "state its case", and invites the applicants and their solicitor to make representations to the Council in relation to the Notice in accordance with the legislation. On 5 February 2009, the applicants' solicitor again wrote to the respondent's reiterating the content of its letter dated 23 January 2009. A further reply was then sent from the respondent's solicitor on 9 February 2009. This correspondence again concerned the separate Notice of Intention to issue Order of 25 November 2008. A report in relation to that Notice of Intention was provided to the applicants' solicitor under cover of a letter dated 10 February 2009. I note that as this correspondence relates to the Notice of Intention dated 25 November 2008, none of it can be said to be relevant to my determination in relation to whether, in the present proceedings, it is fair and reasonable for a costs order to be made in favour of the respondent.

29 The Statement of Facts and Contentions in Reply in the present proceedings was filed on 9 February 2009. On or around that same date, the applicants gave their solicitors instructions to discontinue the proceedings. The evidence of Mr Paul Sapounas is that this was a commercial decision made in circumstances where they understood that even if successful, they would be unlikely to recover their costs of the proceedings. As a result, the evidence is that they resolved to complete the works themselves. The evidence of Mr Loukas is that the intention to discontinue the proceedings was communicated to Mrs Finn, the solicitor for the respondent, on 11 February 2009. Mrs Finn disputes that evidence. Notwithstanding the intention to discontinue, the evidence is that Mrs Finn stated that her client required some certainty that the applicants would lodge the development application, and suggested that the matter be set down for a s 34 conciliation conference. Accordingly, when the matter came before the Court on 12 February 2009, it was set down for a s 34 conciliation conference.

30 On 18 February 2009, the applicants lodged a development application seeking approval to remove the existing retaining wall on the property and construct two new concrete retaining walls. This addressed both of the orders issued by the Council.

31 On 6 March 2009 the applicants wrote to the respondent by e-mail outlining again its intention to discontinue the proceedings. The e-mail also indicated that the development application had been lodged to conduct the works the subject of the order, and requested the respondent to consent to the filing of a Notice of Discontinuance. This e-mail tends to support the evidence that a discussion took place between Mr Loukas and Mrs Finn on 11 February 2009 as described above. In the chain of correspondence that followed, the respondent declines to consent to the Notice of Discontinuance and the applicants repeat their intention to discontinue the proceedings. Similarly, the respondent states that they seek their costs and therefore do not consent to the applicants discontinuing the proceedings. By e-mail to the solicitor for the respondent on 17 March 2009, the applicants propose to progress the matter by the filing of a notice of motion.

32 In the meantime, however, the Court received an e-court communication on 5 March 2009 indicating that the development application had been lodged and that the parties sought, by consent, to vacate the s 34 conference. The proceedings were thereafter listed for directions on 13 March 2009, at which time I vacated the date for the s 34 conference. There was no appearance on behalf of the applicants at that time as a result of their solicitors not having received the e-court communication.

33 The proceedings then came before me again on 20 March 2009, at which time the parties indicated that the applicants sought to file a Notice of Discontinuance but that the respondent did not consent to its filing in circumstances where the respondent sought its costs. I therefore granted leave for the filing of the Notice of Discontinuance and fixed the proceedings for a costs hearing.

34 The Council maintains its position that it was entitled to issue the order in circumstances where there is evidence that the failure of the wall was as a result of its poor design. In that respect, it relies upon the reports of Douglas Partners dated 31 July 2008 and 16 January 2009. It also relies on the affidavit of an engineering expert, Mr Malesevic, sworn 20 April 2009. That affidavit expresses the opinion that "the failure of the retaining wall at 10 Amiens Road, Clontarf is attributable to the poor choice of design for a retaining structure."

35 The applicants' position is that the landslip was caused by movement in the Council's land below the wall, which caused the collapse of the retaining wall. Their position is that they could undertake remediation works, including the construction of a new retaining wall, only upon re-stabilisation works being completed on the Council's land below the retaining wall. In this respect, the applicants rely on the joint report of Stubbs Cruikshank Consultants and Richard Ziade of Intech, dated 21 September 2007. Further, annexed to the affidavit of Paul Sapounas at Annexure C is a letter from Jim Dean, Structural Engineer, to the Council dated 14 September 1990 certifying that: "…the rear and side retaining walls have been constructed to a height to suit the retaining of the natural soils, but not the loose rocks and boulders at levels beyond. Structural details incorporated in the construction of these walls for the heights as mentioned are in accordance with design requirements, including the drainage required."

36 The applicants have alleged that the Council is responsible for the collapse of the retaining wall by the presence of the dead tree on the Council's land, and the deficiency of the embankments below the applicants' land. The applicants rely on an observation by a neighbour in order to support their allegation in relation to the dead tree. The applicants also rely on evidence that there are re-stabilisation works being undertaken by the Council along Amiens Road in order to draw the inference that the re-stabilisation works are required on the land below the applicants land, and that the collapse of the retaining wall was due to the landslip on the Council's land. In that regard, the applicants rely on the rock face assessment report conducted by Douglas Partners and dated June 2008. They also rely on the affidavit of Mr Chris Sapounas sworn 9 April 2009, which annexes a large number of photographs concerning the re-stabilisation works.

The present application 37 The Court's discretion to award costs arises by virtue of the provisions of s 98 of the Civil Procedure Act 2005. However, that discretion is required to be exercised in accordance with r 3.7 of the Land and Environment Court Rules 2007. That rule applies to proceedings of this nature and provides: "(1) … (2) 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. (3) Circumstances in which the Court might consider the making of a costs order to be fair and reasonable include (without limitation) the following: … (c) that a party has acted unreasonably in circumstances leading up to the commencement of the proceedings, (d) that a party has acted unreasonably in the conduct of the proceedings, (e) that a party has commenced or defended the proceedings for an improper purpose, (f) that a party has commenced or continued a claim in the proceedings, or maintained a defence to the proceedings, where: (i) the claim or defence (as appropriate) did not have reasonable prospects of success, or (ii) to commence or continue the claim, or to maintain the defence, was otherwise unreasonable."

38 Rule 3.7 results in the presumption that there is no order as to costs in proceedings in Class 1 of the Court's jurisdiction. This is often referred to as the non-discouragement principle. In other words, a person should not be discouraged from commencing and pursuing merits review proceedings by the prospect of an adverse costs order: Port Stephens Council v Jeffrey Sansom [2007] NSWCA 299 ("Sansom"). This is distinct from the general principle in civil proceedings that costs will follow the event. The rationalisation for such a distinction arises from the nature of planning appeals. This was explained by Spigelman CJ in Sansom in the following manner: "72 In my opinion, a significant purpose served by planning appeals is to improve the quality of the decision-making process. This is a purpose which any statutory consent authority should be presumed to be anxious to achieve as an incident of its exercise of the statutory powers which Parliament has reposed in it. Individuals and corporations who challenge such decisions do not have the same obligations. They do, however, have a legitimate expectation that the decision-making process will result in the correct or preferable decision. 73 One of the critical differences between ordinary civil litigation and planning appeals is the absence of a reciprocal relationship between the interests of the parties. They are not, or should not be, adversaries in the sense that can be said of the usual kind of civil litigation in courts." 39 In discussing the predecessor to rule 3.7, Spigelman CJ held that: "48. The starting point must be the presumptive rule that there will be no order as to costs. It is in that context that the power to make an order for costs is conferred in the broadest of terms i.e. what is "fair and reasonable … in the particular circumstances". There is no restriction, other than rationality, on the scope of the considerations relevant to the formulation of that judgment. However, those considerations must be, in the opinion of the first instance judge, of sufficient weight to overcome the presumptive rule."

40 The new rule 3.7 incorporates in r 3.7(3) a list of circumstances in which the Court may consider it fair and reasonable to make an order for costs. That list reflects the guidelines formulated under the former rule and articulated by Preston CJ in Grant v Kiama Municipal Council [2006] NSWLEC 70. In determining whether the circumstances are such that it is fair and reasonable to make an order for costs, I may take into account the matters set out in r 3.7(3). However, those matters are not determinative or conclusive of circumstances in which it is fair and reasonable to make a costs order.

41 The respondent submits that it is fair and reasonable for a costs order to be made in its favour firstly on the basis that the applicant commenced and continued a claim that did not have reasonable prospects of success. The respondent says that the applicants were at all times, and prior to the commencement of proceedings, aware of the professional opinion of Douglas and Partners Pty Ltd. The respondent submits that the applicants should therefore have known that they had poor prospects of success. Further, the respondent submits that in circumstances where the Council had produced its documents and reports, and where there was no expert evidence to the contrary, the applicants had no prospect of successfully pursuing its allegations in relation to the tree and the stability of the Council's embankment.

42 Secondly, the respondent argues that the applicant acted unreasonably in unnecessarily protracting the proceedings. The respondent submits that the applicants did so by raising issues in the Statement of Facts and Contentions without any supporting evidence, thereby causing the Council to further engage their experts in relation to those issues. The respondent also submits that the proceedings were delayed by the applicants' failure to inspect the documents when they were available. It was submitted that all documents were provided to the applicant as soon as available and as expeditiously as possible. Further, the respondent submits that the applicants' failure to obtain an expert opinion in relation to the failure of the retaining wall resulted in proceedings that were unnecessarily protracted.

43 Thirdly, the respondent submits that there is evidence that the applicant commenced the proceedings for an improper purpose. The respondent says that whilst the proceedings ought to have been concerned with whether it was open to the Council to issue the order, the applicants have been pursuing the proceedings in a manner which has focussed, inappropriately, on liability. In particular, the respondent submits that the applicants delayed their pursuit of the proceedings in order to enable them to obtain information that would establish a cause of the fall of the retaining wall other than the inherent deficiencies in the wall. It was also submitted on behalf of the respondent that the proceedings were discontinued by the applicants only upon them not being able to identify another cause of the failure of the retaining wall.

44 The respondent also submits that the Council has acted reasonably in its issue of the order and the conduct of the proceedings. Specifically, the respondent submits that in circumstances where it had obtained expert evidence in support of its position, it was open to the Council to issue the Notice of Intention to issue the order and subsequently the order. The respondent submits that its issue of the order is particularly reasonable in circumstances the applicants had properly responded to the issue of the Emergency Order but had then decided not to undertake remediation works following receipt of the report by Stubbs Cruikshank. The respondent also submits that it acted reasonably by offering documents sought by the applicants for inspection on a number of occasions. Upon that offer not being accepted, the respondent then provided the documents directly to the applicants. Further, once documents became available in relation to the rectification works, those documents were also provided. The respondent therefore submits that there is no evidence that they have been unreasonable in the conduct of the proceedings.

45 The applicants submit that they were not unreasonable in commencing and pursuing the proceedings in circumstances where: o There was a paucity of information from the Council; o There is evidence that the Council knew or ought to have known of the instability of the area the subject of the landslip, particularly in circumstances where rock stabilisation works were being conducted on embankments elsewhere on Amiens Road; and o There were differences of opinion in relation to the cause of the failure of the wall. 46 In their evidence, the applicants rely on the fact that there is no warning on the order issued indicating that if they appeal the order they may be subject to an adverse costs order. They also rely on the affidavit of Paul Sapounas, which deposes that the proceedings were commenced following legal advice that costs orders are not made in proceedings of this nature "unless unusual circumstances prevailed".

47 The applicants deny that they have unnecessarily protracted the proceedings. They say that delay in the proceedings was caused by the respondent's failure to provide documents to them when requested, particularly where those documents were required by the applicants in order to ascertain the basis upon which the order was issued. The applicants also submit that any delay arising prior to the issue of the order was occasioned by the Council failing to articulate and discuss its position in relation to the works. The applicants assert that since the issue of the Emergency Order, they have been seeking to understand the Council's position in relation to the works to be undertaken.

48 The applicants also submit that they have been reasonable in the manner in which they conducted the proceedings. Specifically, the applicants say that in circumstances where they had not received any information from the Council, they were reasonable in seeking to consult with the Council prior to the commencement of the proceedings. Further, they say that it was reasonable to offer the Council a sum of money to complete the re-stabilisation and remediation works. The applicants rely on evidence that they discontinued the proceedings on the basis that they were of the view that the costs of pursuing the proceedings would be oppressive, and following advice that there was a general preposition that there is no order as to costs in proceedings of this nature. The applicants submit that they conducted the proceedings in a manner that was reasonable by making a number of preparatory steps to defend their position, and subsequently determining that it wasn't in their interest to continue the proceedings and taking the steps to complete the necessary remediation works.

49 The applicants submit that it is unreasonable for the Council to seek its costs in circumstances where the applicants have acted reasonably in all aspects of the proceedings, and where there is therefore no compelling evidence to suggest that it is reasonable to make a costs order. In making this submission, the applicants rely on the general preposition that proceedings of this nature are not adversarial and that therefore costs should lie where they fall.

50 Finally, the applicants submit that it is unfair for costs to be sought against them in circumstances where they have discontinued the proceedings and agreed to undertake all of the work, including work on land owned by the Council and leased to the applicants. The cost of that work is estimated to be $45 000, and the applicants submit that the work goes further than what was requested by the Council in the order issued. It is submitted, on behalf of the applicants, that where there is an arguable case in relation to how the damage was caused to the retaining walls, it would be unfair for the Court to make a costs order in favour of the respondent in circumstances where the applicants are being put to the expense of repairing the damage.

51 In determining whether a costs order ought to be made, I am not of the view that I am required to consider the cause of the failure of the retaining wall. Nor am I of the view that it is appropriate for me to adjudicate on whether it was reasonably open for the Council to issue the order. The question for my determination is whether, in light of the evidence before it, the applicants were reasonable in commencing and pursuing the proceedings. However, in so determining, I must consider the merits of the proceedings insofar as they relate to the reasonableness or otherwise of the conduct of the applicants.

52 In circumstances where there was a report suggesting council's land had caused failure of retaining wall, and where there was a previous letter by the Structural Engineer in 1990 indicating that the construction of the wall was satisfactory, in my view it was reasonable for the applicant to commence the proceedings. I cannot accept, therefore, that the applicants commenced proceedings without reasonable prospects of success.

53 Further, I am not satisfied that there was any unreasonable conduct in the applicants' seeking to discontinue the proceedings. The evidence is that it was a commercial decision to discontinue the proceedings. I have no reason to discard that evidence. Further, I accept the evidence that the intention to discontinue the proceedings was communicated to the respondent prior to the directions hearing of 12 February 2009. I note, relevantly, that this was immediately following the filing of the Statement of Facts and Contentions in reply by the Council. It therefore cannot be said that the communication of the intention to discontinue was delayed. Further, having not reached an agreement in relation to the discontinuance, the applicants then agreed to progress the matter to a s34 conference. I cannot accept, therefore, that the applicants' decision to discontinue the proceedings was unreasonable or that there was any unreasonable conduct in, and following, the communication to the respondent of their intention to discontinue. 54 However, the commencement of the proceedings and the general rule in relation to costs in proceedings of this nature does not entitle an applicant to conduct the proceedings in a manner that causes undue delay and unnecessary expense. Where an applicant commences proceedings, it should be prepared to prosecute the proceedings to finality - whether by a conciliated outcome or by a hearing. Consistent with that, an applicant should therefore take the steps required in order to adequately prepare itself to take the proceedings to finality. In the present proceedings, there were a number of aspects of the applicants' conduct that demonstrate that they failed to take such steps. I therefore accept the respondent's submission that by their conduct the applicants unnecessarily protracted the proceedings.

55 The applicants did so by the following conduct. Firstly, the applicants failed to inspect the documents immediately following the indication from the Council's representatives that they were available for inspection. Rather, they chose to engage in unfruitful correspondence in relation to whether the documents held by the Council's representatives were the documents required. In doing so, they delayed the inspection of the documents and therefore delayed the request for the further documents that were not in the possession of the Council's legal representatives. Secondly, the applicants failed to comply with directions made by the Registrar on 27 November 2008. The applicants did not exercise their liberty to restore following difficulties in obtaining access to the documents sought and to seek an extension of the timetable. Ultimately, the Statement of Facts and Contentions was filed on 19 January 2009, almost three months after the commencement of proceedings and one day prior to the second directions hearing. The delay was said to have been occasioned by the applicants' late receipt of the Council's documents. However, the Statement of Facts and Contentions contains allegations that were already known to the applicants prior to the documents being inspected, including allegations that were already communicated to the Council. Thus it cannot be said that the documents contributed in any meaningful way to the preparation of the Statement of Facts and Contentions. The delay, which was caused initially by the applicants' refusal to inspect the documents, was therefore entirely unnecessary.

56 Further, whilst I cannot accept that there is sufficient evidence to establish that the applicants commenced the proceedings for an improper purpose, I am satisfied that the applicants' approach to the proceedings was somewhat misguided. The contentions allege as follows: "1. The Applicants contend that the Respondent Council's decision contained in Council's Order dated October 2008 should be quashed. 2. The Applicants deny that they are responsible at law to re-instate either the roadside batter/embankment or the boundary wall. 3. The Applicants contend that the Respondent Council is liable at all to re-instate the roadside batter/embankment and the boundary wall. 4. The Applicants contend that the cause of the land slip was the unstable and dangerous condition of the Council owned embankment. 5. The applicants contend that the Respondent Council knew or ought to have known about the unstable and dangerous condition of the embankment. 6. The cause of the landslip is attributable to the failure of the council to stabilise the embankment circumstances were [sic] Council knew or ought to have known that is was unstable."

These contentions are poorly drafted, inadequately particularised and raise points that rely on liability and thus resemble a damages claim. As such, the contentions fail to recognise that this is not a court of damages. Rather, proceedings of this nature are a merits appeal. The question for the Court to determine is whether it was open for the Council to issue the order. By their drafting of the contentions in this manner, the applicants raised issues of liability that had no reasonable prospects of enabling them to obtain the order sought in the originating process. This is particularly so in circumstances where the Council relies on the report of Douglas and Partners, which clearly expresses the expert opinion that regardless of the cause of the movement in the land, a properly constructed retaining wall would not have collapsed. 57 Further, the contentions failed to properly raise the issues that the applicants had previously raised that would be relevant to the question of whether it was open to the Council to issue the order. For example, the applicants have maintained their position that they cannot complete the works until such time as the Council re-instates its land. This is not articulated in the contentions.

58 Finally, I cannot accept that to award costs against the applicant would be to penalise it for making a reasonable decision to discontinue the proceedings and bear the costs of completing the required works. Costs orders are not made to penalise a party. Rather, they are made to compensate a party for the expense incurred by them as a result of their conduct of the proceedings. In the present application, I am satisfied that the respondent ought to be reimbursed for the expense incurred as a result of the unreasonable conduct of the applicants in unnecessarily protracting the proceedings and in taking the proceedings on a course that concentrated inappropriately on the issue of liability.

59 Therefore, costs should be awarded in favour of the respondent to reimburse the respondent for the unnecessary delay occasioned by the conduct of the applicants. In my view, the appropriate period during which that delay occurred was from the date on which the file was offered for inspection by the respondent's solicitors up to the date on which it was communicated to the respondent that the applicants intended to discontinue the proceedings. This period includes the period during which the applicant acted unreasonably in relying on contentions that were, as I stated, poorly drafted, inadequately particularised and improperly focussed on an issue of liability. It also includes the correspondence in which the applicants sought to resolve the proceedings by an offer that went to liability. The period excludes the directions hearing at which the proceedings were fixed for a s 34 conciliation conference, for on that occasion the proceedings were finally progressed in a manner consistent with the Court's practice, where conciliation conferences are fixed at the first directions hearing. 60 The delay that ensued following the communication of the intention to discontinue was a result of the respondent declining to consent to the filing of a notice of discontinuance on the basis of the issue of costs, and the parties subsequently failing to come to an agreement in relation to the issue of costs. Such discourse is usual in proceedings, and I am not satisfied that either of the parties conducted themselves in an unreasonable manner throughout that discourse. Rather, both parties took a conciliatory approach where the applicants lodged a development application for the proposed works, and where the respondent consented to the vacation of the date for the conciliation conference.

61 The respondent has been largely successful in its application for costs. Where a party has stepped outside the usual conduct of Class 1 proceedings by making an application for costs and is successful in doing so, it is generally considered fair and reasonable for their costs to be paid by the unsuccessful party. I accept that such a course ought to be followed in relation to the present application. However, in circumstances were the respondent was not wholly successful in its application, in my view the appropriate order is for the applicants to pay two thirds of the respondent's costs of the costs hearing before me on 21 April 2009. Such a proportion fairly represents the appropriate costs for which the respondent ought to be reimbursed as a result of it obtaining a favourable costs order for part of the proceedings. 62 I observe, with some dissatisfaction, that there is no evidence that either the Council or the applicant sought to come to an agreement in relation to the issue of costs in the proceedings. The costs borne by each party by preparing for, and having an appearance at, the costs hearing should have prompted a commercial decision by each of the parties to attempt to reach a resolution on the issue of costs. However, I cannot conclude that such attempts were not made, and I do not take into account this observation in determining the proper order as to costs. I make the following orders:

That the applicants pay the costs incurred by the respondent in the proceedings from 14 November 2008 to 11 February 2009, as agreed or assessed. 2. That the applicants pay two thirds of the respondent's costs of the costs hearing on 21 April 2009, as agreed or assessed.

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.

(2007) 156 LGERA 125

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Judgment (68 paragraphs)

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Cases Cited (3)