Peregrine Mineral Sands Pty Ltd v Wentworth Shire Council

The relevant Court rules on costs

1. Both parties accept that the governing provisions for determination of costs in the present case are those found in r 3.7 of the Land and Environment Court Rules 2007 (the LECR). That rule relevantly provides: "(1) This rule applies to the following proceedings: … (c) the following proceedings in Class 3 of the Court's jurisdiction: … (iv) appeals and applications under section 526 … or 574 of the Local Government Act 1993, …. (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." Subrule (3) of r 3.7 identifies circumstances in which the Court "might consider the making of a costs order to be fair and reasonable" to include (without limitation) the commencement or maintaining of proceedings where the claim "did not have reasonable prospects of success": r 3.7(3)(f)(i).
2. Rule 3.7(2) has been described as a "presumptive rule", that is, it is to be presumed that costs are not ordered in proceedings to which the rule is expressed to apply (Arden Anglican School v Hornsby Shire Council [2008] NSWLEC 103; 158 LGERA 224 at [6]). However, in exercising the discretion against the presumption identified in that rule, all relevant circumstances must be considered in order to determine whether they are sufficient to displace that presumption.
3. In the present case, the Council submits that the circumstances it identifies are sufficient to overcome the presumption. In particular, it relies upon a contention that the proceedings did not have reasonable prospects of success, invoking those provisions of r 3.7(3) to which I have earlier referred. For their part, the Applicants contend that the presumptive rule should apply and, in the circumstances should not be displaced, notwithstanding their discontinuance of the proceedings.

Statutory foundation for the Class 3 proceedings

1. In light of the submission by the Council that the Applicants' proceedings did not have reasonable prospects of success, it is necessary to consider the statutory foundation for the Applicants' appeal, namely s 574(1) of the Local Government Act. Subsection (1) relevantly provides: "(1) A person who has an estate in land … in respect of which a rates and charges notice is served may appeal to the Land and Environment Court: (a) in the case of a rate - against the levying of the rate on the ground that the land or part of it is not rateable or is not rateable to a particular ordinary rate or a particular special rate …".
2. Subsection (2) of s 574 provides that the section does not afford a ground of appeal on the basis that the land "has been wrongly categorised under Part 3". Reference to that Part is a reference to Pt 3 of Ch 15 of the Act. That Part addresses the different categories of land upon which ordinary rates may be imposed by a council. A right of appeal under that Part, against the declaration of a category applicable to particular land, is provided by s 526.

Respondent's submissions

1. In support of its application for costs on the basis that, in the circumstances, it would be fair and reasonable so to do, the Council relies upon three grounds or broadly expressed circumstances. First, it submits that the Applicants' claim had no reasonable prospects of success; second, that the proceedings were part of a broader dispute ultimately resolved adversely to the Applicants and third, "on general principles" there is no reason to deny the Council "as the successful party" its costs of these proceedings.

No reasonable prospects

1. The Council submits that the Applicants have never sought to maintain that there was any substance to the appeal founded upon the provisions of s 574 of the Local Government Act. In Part A of the Applicants' Statement of Facts and Contentions reference is made to what was said to be the Council's contention in the Supreme Court proceedings that by s 712(5) of the Local Government Act the Applicants would be barred from calling into question a rate notice in proceedings where an appeal had not been lodged under s 574 of the Act. The Statement then proceeds at [14]: "The Applicants do not agree with that contention, but bring this appeal in relation to the 2014 [sic] rates notice against the possibility that the Council's contention that s 574 applies is correct, and pending the outcome of the appeal to the NSW Court of Appeal."
2. In Part B of the same Statement, the Applicants contend that the rate notice in question was issued in breach of the Road Agreement (at [9]) and then contend (at [10]) that such a contention does not "constitute an allegation that the Gingko Mine is not rateable or is not rateable to a particular ordinary rate or a particular special rate" within the meaning of s 574(1)(a). In the alternative, it is contended (at [11]) that "if, which is denied", s 574(1)(a) is applicable, the Council was not entitled to levy rates in accordance with the rate notice "on the ground that the land is not rateable or is not rateable to a particular ordinary rate or a particular special rate, but is rateable only in accordance with clause 3.1(a) of the Road Agreement." In short, the Council submits that the facts asserted and contentions made by the Applicants in the Statement fail to demonstrate any basis upon which the provisions of s 574(1)(a) were properly engaged.
3. The only apparent justification said to be advanced by the Applicants for commencement of the present proceedings is found in [12]-[14] of the Applicants' Statement of Facts and Contentions. The essence of the facts there asserted are captured in [14] to which I have earlier referred. However, as the decision of Rein J had been delivered prior to commencement of these proceedings, his Honour having recorded at [117] the agreement of all parties that the Applicants' claims did not "fall within s 574" and there being no appeal in the Applicants' appeal to the Court of Appeal directed to that issue, commencement of the proceedings was not justified by reference to the Council's initially pleaded argument addressed to s 712(5) of the Local Government Act.

Resolution of the broader dispute

1. The Council submits that the Applicants' justification for commencement of the present proceedings, as articulated in paragraphs of the Statement of Facts and Contentions to which reference has already been made, was defensive of the position taken by the Council in the Supreme Court proceedings involving the dispute as to the operation of the Road Agreement. As the Applicants were unsuccessful in those proceedings, the result in the present proceedings should follow the event. Just as the Applicants were ordered to pay the costs of the Supreme Court proceedings, both before Rein J and before the Court of Appeal, so also they should be ordered to pay the costs of these proceedings.
2. In further support of that submission, reference is made to the judgment on costs by Rein J where, (at [14]), his Honour spoke of the transferred proceedings that were before him as being "closely interwoven" with the proceedings addressed to the wider dispute. As I have earlier recorded, the Applicants were ordered to pay all costs, including the costs of the transferred Class 3 proceedings.

General principles of discretion

1. The Council's submissions under this head are closely related to the matters addressed to the resolution of the broader dispute. The present proceedings before the Court were not proceedings instituted for the purpose of seeking administrative review. Rather, it was a case in which the parties were truly adversaries engaged in civil litigation of which the present proceedings were a component (cp Arden Anglican School v Hornsby Shire Council at [10]). The non-discouragement principle that informs the exercise of discretion under LECR 3.7(2) is inapplicable to circumstances of the kind that pertain in the present case.

The Applicants' submissions

1. In opposing the Council's application, the Applicants contend that the presumptive rule as to costs in proceedings of the present kind should be applied. The Council has not made a case that the award of costs in its favour is fair and reasonable in the circumstances that it identifies. The Applicants contend that they have acted reasonably in commencing the proceedings and that those proceedings did, at the time of their commencement, have reasonable prospects of success. Further, they contend that the costs claimed by the Council are, "excessive in the circumstances".

Acting reasonably in commencing proceedings

1. The Applicants acknowledge that the proceedings were commenced "on a defensive basis to protect [their] rights" (submissions at [11]). This course was taken because of the pleading filed by the Council in Supreme Court proceedings that identified the potential bar under s 712(5) of the Local Government Act.
2. In this context, the Applicants contend that had they been successful in the Court of Appeal, that decision would only have applied "to the rate notices the subject of the proceedings", being those issued between 2006 and 2012. In order to protect their position in respect of subsequent rate notices issued by the Council, it was contended that it was necessary to commence the present proceeding, relating, as it does to the 2013 rate notice, because of the prospect of the Council then seeking to invoke the provisions of s 712(5).
3. The Applicants further justify the present proceedings by reference to an exchange of correspondence between their solicitors and the solicitor representing the Council. On 5 August 2014 (sic) and again on 6 August 2014 the Applicants' solicitors wrote to the Council's solicitors concerning the 2014 rate notice received by the Applicants, relating to the period 1 July 2014 to 30 June 2015. In each letter the Council's solicitors were asked to advise whether the Council intended to rely upon s 574 in relation to that rate notice should the Applicants be successful in the Court of Appeal proceedings which by then had been heard but not yet determined. The Council's solicitors responded on 8 August 2014, stating that the Council "does not waive any entitlements or possible statutory defences, with respect to the 2014/2015 rating year".
4. While acknowledging that the correspondence just identified did not relate to the rate notice that was subject of the present proceedings, the Applicants submit that the Council was thereby indicating that it "reserved its right to argue every point available to it", with the consequence that the Applicants were justified in maintaining the present proceedings.

Reasonable prospects of success

1. In supporting their submission under this head, the Applicants rely upon the facts and circumstances identified in the previous submission. In essence, they submit that the Council pleading in the Equity proceedings, coupled with the exchange of correspondence to which I have referred, justified the Applicants in taking the course of commencing these proceedings. Although not articulated in that part of their submissions directed to reasonable prospects of success, the Applicants also identify the absence from the Council's submissions of any suggestion that their Supreme Court proceedings before Rein J or their appeal before the Court of Appeal "were hopeless or not arguable" (submissions at [6]). I take the submission to imply that, given the close "interweaving" of the case founded upon the Road Agreement with that founding proceedings by way of appeal under s 574(1) of the Local Government Act, it should be concluded that the present proceedings were not without substance, meaning, in context, that there were reasonable prospects of success, even if the Applicants were ultimately unsuccessful.

Costs claims are excessive

1. The Applicants state that the amount of costs claimed by the Council is $6,500. This is said to be excessive for two reasons. First, apart from the appearance before me in February last when leave to discontinue was granted, there had only been a total of seven brief appearances in the proceedings. At five of those appearances the Applicants had agreed to mention the matter without involving attendance by or on behalf of the Council.
2. Second, given the defensive nature of the proceedings, the Applicants had sought agreement from the Council that neither party be required to file and serve a Statement of Facts and Contentions so as to limit costs. The Council had not accepted that proposal but rather insisted that each party prepare, serve and file their respective Statements of Facts and Contentions. That they should do so was the subject of a direction made by Sheahan J on 27 September 2013. The Statement of Facts and Contentions filed on behalf of the Applicants was in substantially the same terms as the comparable Statement filed in the 2012 proceedings, with the consequence, so it is submitted, that the Council should not have incurred any significant expense in addressing that document.
3. These matters are identified to support a submission that the costs incurred by the Council ought reasonably to be only a small amount and in the circumstances "it is fair and reasonable that each party bear its own costs of the proceedings" (submissions at [9]).

Consideration

1. Earlier in these reasons I have identified the principle that informs the exercise of discretion under LECR 3.7(2). Applying that principle, I am satisfied that in the circumstances attending these proceedings, it is fair and reasonable to order that the Applicants pay the Council's costs. I have reached this conclusion substantially for the reasons advanced by the Council.
2. The critical circumstance supporting this conclusion is that, by the Applicants' concession, the proceedings were not appropriately founded in s 574(1) of the Local Government Act with the consequence that there was no reasonable prospect of the Applicants succeeding in their proceedings. I accept that a determination that a claim in proceedings identified in LECR 3.7(1) lacks reasonable prospects of success does not, by reason of LECR 3.7(3)(f)(i), necessarily carry the consequence that the ordering of costs against the unsuccessful party will be fair and reasonable. So much is made apparent in the chapeau to subrule (3) in its reference to circumstances in which the Court "might" consider the making of an order to be fair and reasonable. It is conceivable that there will be cases in which a decision that a claim or defence did not have reasonable prospects of success is reached only after detailed submissions addressing the issue are made, followed by anxious consideration of the decision-maker.
3. However, this is not a case that attracts a consideration of the kind identified in the preceding paragraph. There are two broad bases for so concluding.
4. First, the submissions of the Applicants did not truly engage with those of the Council that were directed to the prospects of success in the present proceedings. While the Applicants clearly and candidly explained the motivation for commencing the proceedings, that motivation was not directed to the statutory provisions that founded the entitlement to commence the proceedings and thus engage the Court's jurisdiction. A pleading in other, albeit related, proceedings asserting reliance upon s 712(5) provided, of itself, no foundation for the present proceedings. What was necessary for the Applicants to do was either seek to demonstrate in their Statement of Facts and Contentions that the Gingko Mine site was not rateable land, by reference to the provisions of the Local Government Act, or seek to demonstrate that a particular ordinary rate or a particular special rate that had been levied on the mine site, was a rate of either kind to which the land was not rateable. Section 574(1) required as much in order to engage the Court's jurisdiction.
5. Neither the Class 3 Application nor the Statement of Facts and Contentions filed by the Applicants sought to demonstrate that the Applicants were entitled to appeal on either basis that the subsection identifies. The assertion (at [11]) of the Applicants' contentions that the land was only "rateable" in accordance with the Road Agreement is neither a contention that the mine site is not rateable nor is it a contention that the site is not rateable to a particular rate or special rate levied by the Council. The foundation for a claim that land is not rateable to a particular ordinary or special rate requires a contention to that effect, founded in the provisions of the Local Government Act.
6. Secondly, even if the Applicants' understanding of the Council's position was, as is said to be articulated by the pleading in the Supreme Court proceedings, the need to take a "defensive" position, the foundation for that understanding had dissipated at the time at which the present proceedings were commenced. The agreement by the Council that the claims being litigated in the broader litigation did not engage the provisions of s 574 was recorded in the judgment of Rein J. Moreover, no ground of appeal had been advanced by the Applicants in their appeal to the Court of Appeal that had bearing upon any argument directed to s 574. Although the Applicants asserted that the present proceedings were maintained to preserve their position pending the determination of the Court of Appeal, no argument was advanced by them to assert how success in that appeal could have impacted upon the present proceedings. Having raised no argument directed to the topic in the Supreme Court proceedings, it is inconceivable that, had the Applicants been successful in their appeal to the Court of Appeal, the Council would have raised the very point that it apparently abandoned in those proceedings.
7. Further, I do not consider that the Applicant can draw support for their justification in commencing the proceedings from the exchange of correspondence in 2014 concerning the rate notice given for the 2014/2015 year. The response from the Council's solicitor, indicating that the Council would not "waive any entitlement or possible statutory defences" was stated specifically in respect of the 2014/2015 rate notice and was not directed to the notice that is said to have founded the present proceedings which were commenced almost 12 months prior to that exchange of correspondence.
8. Whatever may have caused the Applicants to commence the present proceedings, there is only one motivation for so doing that is relevant. Unless the purpose of the proceedings was to appeal against the levying of rates for the year 2013/2014 on a ground identified in s 574(1), the proceedings lack any reasonable prospects of success. For reasons that I have stated, the Applicants have not demonstrated that either of the relevant grounds were reasonably open to be argued. The fact that the case sought to be made by the Applicants in the Supreme Court proceedings, both at first instance and on appeal was neither hopeless nor unarguable, had no bearing upon the Applicants' prospects of success in the present proceedings.
9. Finally, I accept that the Applicants, through their solicitors, acted responsibly in seeking to minimise costs in the present proceedings. However, the complaint that they make as to the costs sought by the Council and the articulation of the measures taken on behalf of the Applicants to minimise costs, suggesting that the claim made by the Council is excessive, seems to me to be an argument directed to the quantum of costs rather than the principle as to whether it is fair and reasonable to make an order for the payment of costs. The determination of quantum is either for agreement between the parties or determination by a costs assessor.

Orders

1. For these reasons I make the following orders: 1. The Applicants must pay the Respondent's costs of these proceedings. 2. The proceedings are otherwise discontinued in accordance with the Notice of Discontinuance filed with leave by the Applicants on 20 February 2015.

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: 25 March 2015