Port Stephens Council v Jeffrey Sansom

Statutory Scheme 8 Section 69 of the L&E Court Act makes the following relevant provision with respect to costs: "69(2) Subject to the rules and subject to any other Act: (a) costs are in the discretion of the Court, (b) the Court may determine by whom and to what extent costs are to be paid, and (c) the Court may order costs to be assessed on the basis set out in division 6 of Part 11 of the Legal Profession Act 1987 or on an indemnity basis." 9 The application in the present case was the subject of a rule, namely Pt 16 r 4 which relevantly provided at the time: "(1) This rule applies to the following proceedings in classes 1, 2 and 3 of the Court's jurisdiction: (a) proceedings under Sections 95A, 96, 97, 98, 109K, 121ZK, 121ZM and 149F of the Environmental Planning and Assessment Act 1979, … (2) No order for the payment of costs will be made in proceedings to which this Rule applies unless the Court considers that the making of a costs order is, in the circumstances of the particular case, fair and reasonable." 10 The rule has subsequently been extended to all Class 1 and 2 proceedings. It was not suggested that anything turned on those words which were omitted at the relevant time.

Judgment on Costs 11 Pain J referred to the aforementioned rule and to a number of the relevant authorities. In particular her Honour set out par [15] of the judgment of Justice Preston in Grant v Kiama Municipal Council [2006] NSWLEC 70 where the Chief Judge said: "[15] An examination of the cases reveals a variety of circumstances where courts have considered that it would be fair and reasonable to make an order for costs. These include the following circumstances, although these do not exhaust the circumstances: (a) where the proceedings cease to have the character of merits review, such as where a central issue is whether there is power to grant the approval sought at all: Teller Properties Pty Limited v Randwick City Council (1994) 84 LGERA 369 at 371; Gee v Port Stephens Council (2003) 131 LGERA 325 at 339 [56] and 340 [60]; Pancho Properties Pty Limited v Wingecarribee Shire Council [2004] NSWLEC 620 (9 November 2004) at [19]; Shaynd v Ku-ring-gai Municipal Council (2005) 138 LGERA 395 at 400, [21]-[22]; and Kinder Investments Pty Ltd v Sydney City Council [2005] NSWLEC 737 (9 December 2005) at [52]; but there may be exceptions where no order is appropriate: Broadwater Action Group Inc v Richmond Valley Council (No. 2) (2003) 129 LGERA 401 at 405 [7] - 407 [12] and Hunter Development and Brokerage Pty Ltd v Cessnock City Council [2005] NSWLEC 727 (16 December 2005) at [15]-[19]; (b) where the matter the subject of the costs application involves only a preliminary question of law: Teller Properties Pty Limited v Randwick City Council (1994) 84 LGERA 369 at 371; Gibson v Mosman Municipal Council (2001) 116 LGERA 397 at 400; Gee v Port Stephens Council (2003) 131 LGERA 325 at 339 [56] and 340 [60]; Shaynd v Ku-ring-gai Municipal Council (2005) 138 LGERA 395 at 400 [21]-[22]; but, again there may be exceptions where no order is appropriate: Broadwater Action Group Inc v Richmond Valley Council (No. 2) (2003) 129 LGERA 401 at 405 [7] - 407 [12] and Hunter Development and Brokerage Pty Ltd v Cessnock City Council [2005] NSWLEC 727 (16 December 2005) at [15]-[19]." 12 Preston CJ of the Land and Environment Court set out a range of other circumstances, which Pain J did not regard as pertinent to the present case. 13 Pain J gave the following reasons for concluding that there should be no order as to costs: "[6] As indicated in [15(b)] of Grant v Kiama it is more likely that an award of costs will be made in favour of the successful party on a preliminary question of law as an exception to the usual rule that each party pay its own costs. An award of costs to the successful party should not be assumed, however. The issue of whether costs are payable in relation to a preliminary question of law is determined in part by the nature of the question of law raised and whether it is truly separate from the merit review. The question of law raised here was how the development the subject of the development application ought be characterised under the relevant LEP. If characterised as commercial premises it was prohibited development and I so held. The question of law while distinct from the merit issues in the case involved a consideration of the development proposal and its manner of operation. In these circumstances there was some overlap with issues that could be considered in a merit hearing. [7] I am mindful of comments in Broadwater Action Group at 406 and Outdoor Australia at 369-370 of the importance of applicants in Class 1 proceedings not being discouraged from commencing those proceedings or raising preliminary questions of law for fear of adverse costs orders, a view I share. These comments apply as equally under the 'fair and reasonable' test for costs ( Broadwater Action Group ) as for the previous 'exceptional' circumstances test ( Outdoor Australia ). [8] Taking these considerations into account and in the circumstances of this case, I consider each party should pay their own costs on the preliminary question of law." 14 I note that her Honour's analysis refers to par [15(b)] of Grant v Kiama i.e. "a preliminary question of law", whereas the present case may have been more appropriately classified within [15(a)] i.e. whether there was power to grant consent. However, this does not involve a material difference.

The Costs Rule 15 The origins of the present rule are found in the Report by the Honourable Jerrold Cripps QC, a former Chief Judge of the Land and Environment Court and a former judge of this Court: Report of the Land and Environment Court Working Party, September 2001 ("the Cripps Report"). He said: "Section 69(2) of the Land and Environment Court Act 1979 provides that costs are in the discretion of the Court. The Court has issued Practice Direction 1993 which states that: 'The practice of the Court is that no order for costs is made in planning and building appeals unless the circumstances are exceptional.' Recently, the Court of Appeal determined the Practice Direction 1993 amounted to a fetter on the discretion of the Court and that there was no court rule as to costs. ( Maurici v Chief Commissioner of State Revenue [2001] NSWCA 78.) Accordingly, the Working Party recommends that the present practice be abandoned. The rule was, broadly, a recognition that with respect to minor developments (being a majority of development applications brought to the Court) an application (for example, for permission to add a room to a house) might result in the whole house being sold if the application were unsuccessful and an order for costs were made. On the other hand, it is also recognised that so far as major developments were concerned, for example, shopping centres and the like, the obtaining of development consent from the Court was simply a part of the process which commenced with the concept and finished with the building of the shopping centre. Thus if the Minister called in the development and after an inquiry was held and the decision was made the beneficiary would not ordinarily expect an order for costs directed to the council which opposed it. Moreover, it was generally recognised that there were grey areas between major and minor development and also that in both categories parties were sometimes being put to unjustifiable expense. A number of submissions have been made to the Working Party to the effect that the old practice (which in any event is unenforceable) should be widened and costs should be awarded when it is just and equitable for that to happen. Without raking over old decisions of the Court (which to the extent that they relied on the old 'practice' would be less than helpful) the Working Party believes that the practice should become a rule and should be expressed as follows: 'Ordinarily in planning appeals each party will pay its own costs unless the judge is of the opinion that it is fair and reasonable for one party to pay all or some of the costs of another party.'" 16 Mr Cripps went on to identify a number of circumstances in which consideration should be given to awarding costs: · Where a party raises unmeritorious issues; · Where a party has failed to place relevant material before the council; · Where an approval body has failed to provide a council with information necessary for the assessment of integrated development applications; · Where a council seeks to avoid politically sensitive decisions by leaving them to the court to decide; · Where an SEPP 1 application by a developer is completely without merit; · Where a council seeks to have a matter returned from the court so that it can reconsider its decision, in a situation where it is clear that council has no intention of changing its view and merely seeks to delay the development; · Where developers engage in repetitive appeals to the court after a series of substantially similar development applications. 17 I note that in RAID at [245] McClellan CJ at CL identified an additional example, namely, where a Council raises a point of law in the context of a development application where delay could destroy the project. 18 None of these examples apply in the present case, but they indicate the scope and range of the considerations which arise in this sphere of legal disputation and which may satisfy the "fair and reasonable" test. 19 Nevertheless, it is clear from the Cripps Report that prior authority under the former "exceptional circumstances" test and the basis upon which the Practice Direction was formulated, are no longer applicable or, at the very least, must be treated with considerable care. As Bryson JA said in Hunter Development supra at [3]: "With r 4(2) there was a new beginning, and earlier practices, case law and the Practice Note have no influence on the application of r 4(2)." 20 That does not, however, mean that the kinds of considerations which arose in earlier case law, and their treatment, will not provide some insight when similar factors arise. (As Preston CJ of the Land and Environment Court indicated in Grant supra at [15].) However, the previous cases must be approached in a different manner to the way they have been applied in the past. 21 The issue arises by reason of the particular combination of functions imposed upon the Land and Environment Court. It is, simultaneously, both a court of law and an administrative tribunal. The determination of whether or not a particular development is prohibited, particularly when decided as a preliminary question, bears the character of ordinary litigation in a court. The determination of a development application by way of a process of merits review is an administrative tribunal function. It is understandable that in the former case the analogy with judicial proceedings has led to a preparedness to adopt the ordinary rule as to costs applicable in judicial proceedings. In the latter case, the usual approach to administrative decision-making, where there is no general tradition of costs being awarded, is more clearly applicable. 22 Practice in this respect by administrative tribunals with a merits review jurisdiction is often based on the particular statutory provisions or rules which either provide expressly that no costs will be awarded or which do not confer any power to award costs. Sometimes there are particular heads of jurisdiction where a specific power to make such awards is conferred. (See generally Enid Campbell and Matthew Groves "Award of Costs in Administrative Proceedings" (2004) 11 AJ Admin L 121.) 23 The prior practice of the Land and Environment Court, reflected in the Practice Direction, was based on the analogy with merits review in administrative law decision-making processes. However, an intellectual justification was never fully articulated in any authority of which I am aware. It has been most frequently characterised in terms of a "no discouragement" principle i.e. that persons should not be discouraged from exercising their rights of appeal via the prospects of an adverse costs order. (See e.g. Gee v Port Stephens Council (2003) 131 LGERA 325 esp at [40]; RAID supra esp at [231].) 24 However, clearly there are circumstances in which such proceedings ought to be discouraged, as the list set out at [16] above from the Cripps Report shows. Perhaps, such circumstances could have been encompassed within the "exceptional circumstances" exclusion. However, that is no longer the test, if it ever was a valid test. 25 There are other justifications for the practice in the administrative context. Provisions such as s38 of the L&E Court Act, which provide that a tribunal is not bound by the rules of evidence and should proceed without technicality are of particular significance. The practice of awarding costs may encourage an adversarial approach to litigation that is not consistent with the fulfilment of this legislative stipulation. 26 Furthermore, one of the purposes served by the rule that costs follow the event in civil litigation is to encourage parties to settle their dispute. This can be more readily achieved in a context where both sides are pursuing private interests which can be reduced to the single metric of money. In disputes about administrative decision-making what one side may "gain" is not readily commensurable with what the other side may "lose". The risk of an award of costs cannot be readily placed into a settlement equation. 27 Finally, it is usual for the statute to provide, as s39(2) of the L&E Court Act does, that the tribunal stands in the shoes of a primary decision-maker and exercises all the powers and discretions of that decision-maker. A power to award costs is not a power usually given to an administrative decision-maker. Nevertheless, once a court is invested with a merits review jurisdiction, it is almost inevitable that its procedures will take on the appearance of adversary processes which were not a feature of the first instance administrative decision-making process. This creates the difficulty with which the Land and Environment Court has long grappled.

Appellate Differences 28 In Hunter Development supra this Court was concerned with the same rule as arises in the present case, i.e. Pt 16 r 4(2). Basten JA delivered the principal judgment of the Court. His Honour outlined the history of the practice in the Land and Environment Court with respect to the making of costs orders in the period prior to the enactment of Pt 16 r 4(2), when the general discretion in s69(2) was not relevantly confined. His Honour referred to the basic authorities: Latoudis v Casey (1990) 170 CLR 534 and Oshlack v Richmond River Council (1998) 193 CLR 72. He also referred to the existence of the Practice Direction with respect to the award of costs which had been characterised by this Court as a fetter on the discretion to award costs. (See Maurici v Chief Commissioner of State Revenue (2001) 51 NSWLR 673 esp at [44].) 29 Basten JA said: "[39] Applying the principles articulated in Latoudis v Casey to the unfettered discretion granted by s 69(2), prior to the promulgation of the rule, the proper approach to questions of costs must have required that costs follow the event unless there were circumstances which justified a different rule. Whether the nature of the merits review jurisdiction provided such a justification need not be determined in this case, because the rule now governs. Nevertheless, the approach adopted by the primary judge that there was no substantive difference between the discretion conferred by the rule and that reflected in the practice direction (articulated at [12]) is doubtful. The test of "exceptional circumstances" provides a higher hurdle for departure from the general approach (that there be no order as to costs) than does the language of the rule." 30 His Honour referred to practice in the Land and Environment Court after the new rule came into existence. 31 His Honour also said: "[49] On one view, the original 'no costs' principle appears to have been a judicial gloss on the unfettered discretion conferred by the Parliament, prior to the introduction of the rule. Nevertheless, accepting the gloss as appropriate, the authorities do not explain why the fact that the consent authority may be acting beyond power removes the need to encourage challenge without risk of costs. Accordingly, on these materials, it is not possible to say that, by implication alone, the rule must be understood to require a 'costs follow the event' regime where questions of capacity arise. The failure of the rule to incorporate expressly this simple principle adds weight to the conclusion that no such confinement of the discretion was intended. [50] The 'costs follow the event' principle is based upon questions of perceived fairness as between litigants. It depends entirely upon the outcome of the litigation, and not upon the reasonableness of the parties in litigating. Questions of reasonableness can be taken into account through special costs rules based on formal and informal offers of compromise in the course of the proceedings. These rules, taken together, accept that the likelihood of an adverse costs order is a deterrent to litigation and an encouragement to settlement. By way of contrast, the introduction of a 'no costs' regime is likely to reflect a policy of encouraging the use of particular tribunals or courts for dispute resolution. Thus, the choice of one or other of these regimes as the standard approach will reflect the adoption of one or other policy to particular forms of litigation. Where a 'no costs' rule applies in relation to a class of litigation broadly defined, it would be surprising if the rule-maker, without any direct indication of such a purpose, intended the Court to decide which cases within that class should be subject to the rule encouraging litigation and which should not. As appears from the examples of no costs rules referred to above, where exceptions are identified by reference to particular circumstances, the circumstances refer to the conduct of the parties in commencing or maintaining the particular litigation. Thus, in relation to r 4, the preferable approach is to treat the power granted to the Court to depart from the general principle as one to be exercised in relation to a particular case, dependent upon the conduct of those proceedings. The rule itself does not distinguish categories of Class 1 proceedings: rather it provides a general approach subject to the Court otherwise ordering "in the circumstances of the particular case". This language provides an indication that a general alternative approach was not intended to be adopted for particular categories of cases within Class 1, 2 or 3." 32 His Honour was there considering a submission with respect to the weight to be given to the fact that the disposition of a Class 1, 2 or 3 proceeding occurred on the basis of a point of law and was, therefore, analogous to the jurisdiction exercised by the Court in Class 4 proceedings. Indeed, it was a matter that could have been raised in such proceedings. McClellan CJ of the Land and Environment Court in Gee v Port Stephens Council (2003) 131 LGERA 325 had given significant weight to this factor in the formulation of the judgment under the rule as to whether an award of costs was fair and reasonable. 33 This line of authority in the Land and Environment Court proceeds on the basis that the no costs rule was a reflection of the fact that matters in Classes 1, 2 and 3 involve a merit review jurisdiction, whereas points of law affecting the power of the Court raise an issue of the kind involved in ordinary civil litigation. There is, however, an alternative line of authority in that Court. (See Outdoor Australia Pty Limited v Auburn Council (1996) 89 LGERA 365 at 369 per Pearlman J.) 34 In Hunter Development, Basten JA referred to the two lines of authority in the Land and Environment Court in this regard and said: "[60] … [T]he disparity arises from the view on the part of those who espouse the principles in Gee that the resolution of a question of legal capacity must, as a general rule, result in costs following the event, whereas those who espouse the principles articulated in Outdoor Australia , give that factor no such determinative weight. Rule 4 does not itself distinguish between Class 1 applications which may be decided on "merit review" issues and those which are ultimately determined on questions of legal capacity. Accepting that the distinction is a relevant consideration, and may be a consideration of some importance, authorities which raise it to the level of requiring a particular result fetter the discretion unduly. Accordingly, it cannot be said that there is an error of law in failing to follow those authorities. To the contrary, it is difficult to derive from the principle underlying the rule a policy which would identify questions of legal capacity as definitively different from other legal questions which might be determined by a judge rather than by a commissioner, or to separate cases which turn entirely on the facts from those which may involve mixed questions of fact and law. Each of these classifications may be relevant: the subject matter, scope and purpose of the rule do not require that any be treated as definitive of whether an order that costs follow the event should be made." 35 Three weeks after the decision in Hunter Development, this Court reconsidered the matter in RAID supra, in which the Court comprised Justices Giles, Tobias and McClellan. In his judgment McClellan CJ at CL referred to the history of the exercise of the costs discretion in the Land and Environment Court and emphasised that the practice in the Class 1, 2 and 3 jurisdiction reflected its role as an administrative tribunal when exercising the merits review jurisdiction. He also set out the history of the adoption of the rule which followed from the Cripps Report. 36 His Honour also referred to his earlier judgment in Gee v Port Stephens Council, when Chief Judge of the Land and Environment Court, and said: "[241] … It may be, having regard to the subsequent discussion of my reasons in Hunter Development Brokerage v Cessnock City Council [No 2] [2006] NSWCA 92, that I did not adequately explain the position. I intended to make plain that the approach which the LEC had taken to the exercise of its discretion with respect to costs in Class 1 matters was that, being an administrative review of a council's decision, in the ordinary case a costs order would not be made in favour of the successful applicant. The purpose of the LEC in providing the Practice Direction was to ensure that all members of the public who may be contemplating an appeal against a decision to refuse their development application would not be in fear of the prospect that if they lost they would suffer an order to pay the costs of the consent authority in defending an appeal. The parties should know 'upfront' the general approach which the LEC would generally adopt. [242] I identified in Gee that the usual approach of the LEC was not to order costs in Class 1 proceedings, but concluded that where a party raised as a separate question whether the consent authority had the power to consent to the application, notwithstanding the usual approach, an order for costs may be appropriate. By raising a question of permissibility the character of the litigation, at least for the purpose of resolving that question, changes, and assumes the character of conventional adversarial litigation. … [244] Once a separate question of permissibility is raised in a Class 1 or 2 appeal, the proceedings become litigation of a character previously determined in the Administrative Law Division of the Supreme Court and in respect of which, in my opinion, the conventional approach to costs in adversarial litigation may be appropriate. This is also the approach which has been adopted in this Court whenever a 'separate question' has been determined on appeal. Notwithstanding that this Court is in fact hearing an appeal in Class 1 proceedings, it usually orders that costs should follow the event: see eg Hunter Development at [61]; Strathfield Municipal Council v Poynting (2001) 116 LGERA 319; Helman v Byron Shire Council (1995) 87 LGERA 349. [245] In coming to my conclusion in Gee I was mindful, amongst other matters, of the fact that time, or more correctly delay, will often be critical to the financial viability of a project and that by raising a separate question a council or third party could delay its implementation for months. Even if the council or third party lost the separate question, this delay could destroy the project. Unless costs orders were a real possibility in such a case, a party could take a point in relation to power without the risk that it may be liable for a costs order if it failed." 37 His Honour made further reference to the judgment of this Court in Hunter Development and then added: "[249] All that I intended to say in Gee was that when a party seeks in the course of merit review proceedings to raise as a separate matter of law being whether or not the proposed development is prohibited, the character of the litigation changes and the usual approach to costs in Class 1 proceedings may not be appropriate. There is no question of encouraging or, as it should be properly understood, not discouraging litigation, which is the principle accepted to be of great importance in administrative review. Of course, each case must be determined in accordance with its individual circumstances which will include the issues raised, the conduct of the litigants and the outcome of the proceedings. These circumstances will inform the answer to the question raised by the Rule, being whether it is 'fair and reasonable' to depart from the usual position that there be no order for costs. If it is determined that departure should occur, the form of any order including whether 'costs should follow the event' will require consideration. [250] I accept the criticism made in Hunter Development that in Gee I may not have defined the appropriate principle with sufficient care. However, my concern, which is now reflected in the Rule, was to identify that where a separate challenge to the capacity to approve an application was raised in merit review proceedings, the parties should be mindful of the fact that the character of the litigation would change and would no longer be a merits review of an administrative decision. Accordingly, the usual practice of the LEC that there should be no order for costs may not be appropriate. This fact, as well as the conduct of the parties and the outcome of the proceedings, is relevant to whether an order for costs should be made and the terms of any order." 38 Tobias JA also made some observations on this matter in RAID. He referred to the judgment of McClellan CJ at CL in the following way: "[199] … His Honour confirmed that in his decision in Gee v Port Stephens Council (2003) 131 LGERA 325 he intended to say that when a party seeks in the course of a Class 1 proceeding to raise as a separate or preliminary matter of law whether or not the proposed development is prohibited, the character of the litigation changes and the usual approach to costs in Class 1 proceedings may not be appropriate. Relevantly, the raising of such a separate matter may well inform the answer to the question raised by the rule as to whether it is ' fair and reasonable' to depart from the usual position that there be no order for costs and that if it is determined that such a departure should occur, the form of any order including whether ' costs should follow the event' will require consideration." 39 His Honour noted that the approach of this Court in Hunter Development differed from that adopted by McClellan CJ at CL in Gee as explained in RAID and added: "[202] As I perceive that difference, whereas his Honour espouses the approach to r.4(2) that, as a general provision, the resolution in Class 1 proceedings of preliminary questions of law should result in an order that costs should follow the event, Basten JA approached the Rule upon the basis that it did not distinguish, for the purposes of determining whether it was fair and reasonable to depart from the prima facie position that there be no order for the payment of costs in Class 1 proceedings, between a preliminary hearing on questions of law to which the ' costs follow the event' principle should generally be applied and the ' merits review' proceedings before a commissioner where the ' no order for costs' principle should generally apply. [203] Thus, in Hunter Development Basten JA observed (at [60]) that it was : 'difficult to derive from the principle underlying the rule a policy that would identify questions of legal capacity as definitively different from other legal questions which might be determined by a judge rather than a commissioner or to separate cases which turn entirely on the facts from those which may involve mixed questions of fact and law. Each of these classifications may be relevant: the subject matter, scope and purpose of the rule do not require that any be treated as definitive of whether an order that costs follow the event should be made.' [204] It appears to me, therefore, that there is a fundamental tension between the approach to the application of Pt 16 r.4(2) as adumbrated by this Court in Hunter Development and that which McClellan CJ at CL in his reasons in the present matter has indicated as being the proper approach to the application of the rule given the circumstances under which it was made and in the light of the history of the approach of the LEC to the awarding of costs in Class 1 proceedings given their particular character so identified by his Honour." 40 His Honour indicated that it was not appropriate in that case to determine the correct approach to the application of the rule. 41 Since these two judgments in the Court of Appeal, Biscoe J has considered the line of authority in Maurici v Commissioner of State Revenue (No 8) [2007] NSWLEC 37 and concluded at [53] that the earlier practice of the Land and Environment Court should have no influence on the application of Pt 16 r 4(2). 42 It is by no means clear to me that Tobias JA at [202] accurately characterised Justice McClellan's reasoning as "generally" requiring that costs follow the event after a preliminary question of law has been determined. Justice McClellan adopted the formulation that such a result "may be appropriate". (See at his Honour's [242], [244], [249], [250] set out at [31] and [32] above.) Nevertheless, it does appear that his Honour was of the view that this matter was entitled to considerable, albeit not determinative, weight. 43 Similarly, Justice McClellan's explanation of Gee in RAID leads to a need to qualify Basten JA's observations at [60] in Hunter Development that there was a "general rule" giving "determinative weight" to the circumstance that an issue of capacity had been raised. 44 In my opinion, the judgments of Basten JA in Hunter Development and McClellan CJ at CL in RAID concur in most respects: · The adoption of Pt 16 r 4 constituted a new beginning for practice with respect to orders for costs. · Rule 4 does not in terms distinguish between cases which are decided on "merits review" issues and those which are determined on the basis of a separate point of law, relevantly, whether the development is prohibited. · The fact that the proceedings are determined on the basis that the development is prohibited is a relevant consideration when deciding whether an award of costs is fair and reasonable. · Neither characterisation of the proceedings as "merits review", nor as an issue of "capacity" or "permissibility" or equivalent, is determinative. 45 The difference between their Honours appears to me to involve an issue of weight. McClellan CJ at CL would give substantial, albeit not determinative, weight to the character of the proceedings. Basten JA appears to treat that matter as only one element in the formulation of the judgment under the rule. However, his Honour's approach suggests that it is not an element generally entitled to significant weight. Indeed, his Honour's analysis at [50] suggests that the characterisation of a separate question in terms of capacity or lawfulness or permissibility would not, of itself, be entitled to weight. It may, however, be a factor in making an assessment of the conduct of a party in the proceedings.

The Applicable Principles 46 This Court should be and is reluctant to intervene with the practice of a specialist court on an issue of practice and procedure. Nevertheless, where there appears to be significantly different approaches by the judges of the Court (see e.g. the analysis by McClellan CJ of the LEC in Gee at [33]-[55] and by Basten JA in Hunter Development at [34]-[38]) it is appropriate for this Court, within the restraints of an appeal limited to a question of law, to provide guidance. (See Latoudis v Casey supra at 558-559, 562.) Notwithstanding the wide ranging terminology of the statutory formulation - "fair and reasonable" - the administration of justice requires a high level of consistency in approach. 47 The longstanding debate amongst judges of the Land and Environment Court in this respect has proceeded on the basis of analogy. Are proceedings like merits review proceedings in an administrative tribunal or are they like adversarial litigation in a court? Such analogical reasoning, in my opinion, diverts attention from the power conferred by the statute and the rule. It is not the analogy that matters. The focus should be on the principles that underlie the practice in, respectively, administrative tribunals and courts. 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. 49 As Gleeson CJ said in Ohn v Walton (1995) 36 NSWLR 77 at 79: "The point of Latoudis v Casey is that the purpose of an order for costs is to indemnify or compensate the person in whose favour it is made, not to punish the person against whom it is made. When legislation confers a power to order costs it is, in the absence of any contrary indication, to be understood as conferring a power to be exercised for that purpose. … … The usual rationale of making a costs order is that it is just and reasonable that the successful party should be reimbursed for costs incurred …" 50 The same approach is applicable here, albeit in the context of a presumption that no costs will be awarded. The question is whether, despite the basic rule, in the particular circumstances of the case, it is fair and reasonable that a party should be reimbursed for the costs it incurred. 51 Although it would be more accurate to describe the formulation - "fair and reasonable" - as calling for a judgment to be made, rather than as a discretion to be exercised, the evaluative process can be accurately described as conferring a wide discretion. (See the authorities discussed in Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 at [34]-[39].) Nevertheless, subject to restrictions such as s57(1) of the L&E Court Act, it is a judgment reviewable in terms of Warren v Coombes (1979) 142 CLR 531, rather than House v The King (1936) 55 CLR 499. (See Khoshaba at [100], [107].) 52 When Parliament confers such a broad discretion on a court it intends that the process of evaluation is in fact undertaken by the repository of the power. However, the intention of Parliament particularly when conferring such a power on a court, is to ensure that the power will be exercised judicially and consistently, so that the result does not depend on idiosyncratic views. Although a judicial officer exercising a merits review jurisdiction stands in the shoes of the primary decision-maker, s/he cannot behave in the same ways as an administrator. A court is required to manifest a high level of impartiality, independence and consistency in its decision-making. 53 The formulation of principles or guidelines for the exercise of such a discretion, or the formation of such an evaluative judgment, is permissible. As Mason CJ put it in the context of an award of costs, in Latoudis v Casey supra at 541: " … [I]t does not follow that any attempt to formulate a principle or a guideline according to which the discretion should be exercised would constitute a fetter upon the discretion not intended by the legislature. Indeed, a refusal to formulate a principle or guideline can only lead to exercises of discretion which are seen to be inconsistent, a result which would not have been contemplated by the legislature with any degree of equanimity." 54 However, it is not permissible to adopt a principle or guideline which is entitled to presumptive, let alone determinative, weight. The non-discouragement principle, save insofar as it underlies the basic rule in Pt 16 r 4, appears to me to be such a guideline. So, in my opinion, is any proposition that the fact that what is involved is an issue of capacity is entitled to presumptive weight. 55 The adoption of either approach in a rigid way would constitute an impermissible restraint on the formation of the broadly based evaluative judgment for which the rule provides. Principles or guidelines for the process of formulating such a statutory judgment may be developed, particularly in order to promote consistency of decision-making, so long as those principles or guidelines are not treated as rules and accepted to be indicative only. (See e.g. Norbis v Norbis (1986) 161 CLR 513 esp at 519-520, 537-538; Latoudis v Casey supra 541-542, 558-559, 562-563; R v Henry (1999) 46 NSWLR 346 at [12]-[29]; Wong v The Queen (2001) 207 CLR 584 at [45], [56], [58], [65], [83], [137], [139]; R v Whyte (2002) 55 NSWLR 252 at [68]-[87].) 56 The formulation by Preston CJ of the Land and Environment Court of such principles in Grant supra at [15] appears to me to be consistent with this line of authority. 57 Similar issues have recently been considered in a directly analogous costs context by Gillard J in Vero Insurance Limited v The Gombric Group Pty Limited [2007] VSC 117 esp at [28]-[34], [36]-[39]. In that case the court was concerned with s109 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) (the "VCAT Act") which similarly established a basic rule that each party pay its own costs of a hearing before VCAT, subject to a power in the Tribunal to make an order for costs "if satisfied that it is fair to do so, having regard to" a list of matters culminating in "any other matter the Tribunal considers relevant". 58 The issue in Vero Insurance turned on a VCAT precedent which suggested that an order for costs should not be made in a case which was an administrative review, but was more likely to be made if the proceedings were an "inter partes commercial dispute". Gillard J emphasised that this precedent was only a guideline, not a rule, and could be departed from. (See at [28]-[39].) 59 His Honour concluded that there was no proper basis for adopting a guideline based on whether the proceedings could be characterised as "administrative review proceedings". He relied particularly on the statutory provision that amongst the matters to which regard was to be had was "the nature and complexity of the proceedings". His Honour indicated that this required the Tribunal to focus on each proceeding and that a general classification such as "administrative review" is not helpful. (See at [53] and [59].) 60 The same requirement arises in the present case where Pt 16 r 4(2) requires the Court to determine what is "fair and reasonable", but only "in the circumstances of the particular case". The focus upon such circumstances indicates that a general characterisation of proceedings, such as "merits review", cannot be determinative or, indeed, be entitled to presumptive weight. The same conclusion applies to characterising the issue as one of capacity, etc. 61 As recognised in Vero Insurance, this issue had been considered by the Victorian Court of Appeal in Transport Accident Commission v O'Reilly [1999] 2 VR 436. The Court was there concerned with the power to award costs of the predecessor of VCAT, the A.A.T. Such powers were conferred both by its general constitutive legislation and by legislation conferring specific jurisdiction on the tribunal. In some cases the power was relevantly unconfined - expressed in terms of "as it thinks fit" or "just" - without an express presumptive rule. However, in a residual category, the statute provided that each party should bear its own costs, unless the Tribunal formed "the opinion in a particular case that there are circumstances that justify it doing so". 62 Tadgell JA said at [1999] 2 VR 436 at 441 [8], that the statutes where a specific power was conferred "did not contemplate that the very making of a costs order should be justified by circumstances". For present purposes, there appears to me to be an analogy between these specific provisions and s69(2), on the one hand, and between the residual provision and Pt 16 r 4(2) on the other hand. In the latter case, as Tadgell JA put it at [8]: "in the absence of justifying circumstances, no order of any kind with respect to costs could be made". 63 Tadgell JA rejected the submission that the issue before the Court should be determined on the basis that there was no relevant distinction between the tribunal and a court. His Honour noted the different formulations applicable in different kinds of proceedings and said at [15]: "By comparison, the nature of the discretionary statutory power given to a court to award costs in curial proceedings does not usually vary according to the nature of the particular case." 64 However, in this case Pt 16 r 4 does create such a position because of the reference to "in the particular circumstances". 65 Tadgell JA concluded at [17]: "It is to my mind very clear that the diverse and disparate powers of the A.A.T. to award costs were generally not to be assimilated to those of courts of law." 66 There is some analogy with the present case. Classes 1, 2 and 3 of the jurisdiction of the Land and Environment Court encompass a wide range of incommensurable powers and discretions including planning appeals, claims for compensation, orders with respect to conduct, etc. Furthermore, there are a number of features of the L&E Court Act which distinguish the position from court proceedings. The Act provides: · For the assignment of proceedings to a particular Division of the Court into which the Court is divided "for the more convenient dispatch of business" (s26 and s28). · For the Chief Judge to allocate a particular judge or commissioner to exercise the Court's jurisdiction in a particular class of matter (s30(1)(a)). · To permit commissioners to exercise the jurisdiction of the Court in Classes 1, 2 and 3 (s33(1)). · For requiring pre-trial settlement conferences before a commissioner in Classes 1, 2 and 3 (s34). · For making special procedural provisions in the case of Class 1 proceedings under s97 of the EP&A Act (s34A to s34D). · For authorising the Chief Judge to direct that proceedings in Class 1, 2 or 3 are to be heard and disposed of by a commissioner (s36). · For proceedings in Class 1, 2 or 3 to be conducted without formality and technicality, with expedition and without being bound by the rules of evidence (s38). · That, in appeals to the Court in Class 1, 2 or 3, that the Court has all of the functions and discretions of the person from whose decision the appeal is brought and that such an appeal is by way of rehearing on fresh evidence, if permitted, and any decision is deemed to be the final decision of the person from whose decision the appeal has been brought (s39). 67 Like Tadgell JA, I do not find it helpful to approach the interpretation of the statutory power by characterising the proceedings as more or less like litigation in a court and to proceed by way of analogy. Although many, perhaps most of proceedings in Classes 1, 2 and 3 of the Court's jurisdiction answer the description of merits review, they are not all equivalent in this respect. (In RAID McClellan CJ at CL confined his remarks to Classes 1 and 2 and see at [251], see also the analysis in Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council [2007] NSWCA 300 at [73], [75].) 68 It is pertinent to note that pursuant to s26 of the L&E Court Act it is proceedings in Class 1, 2 or 3, to which Pt 16 r 4 applies, which may be delegated by the Chief Judge to a Commissioner of the Court. Although Commissioners exercise the functions of the Court, and their decision is deemed to be a decision of the Court (s36(2) and (3)), the Commissioners are not judicial officers. The qualifications for appointment as a Commissioner extend to experience in local government, town planning, environmental management, architecture, engineering, building etc (s12). Appeals lie to a single judge of the Court on a question of law (s56A). Although proceedings before a Commissioner are more readily classified as administrative review, nevertheless, any such case could be heard by a Judge and r 4 applies irrespective of the status of the decision-maker. 69 The application of r 4 must be determined in the context of the scope and purpose of the legislative scheme under consideration. Simply because r 4 is expressed to apply to a number of different statutes, which are classified in a certain way under the L&E Court Act, it does not follow that the relevant principles will necessarily apply in the same way to all of them. Each statutory regime must be considered separately in this respect. For present purposes the focus of attention is the Environment Planning and Assessment Act 1979 ("the EPA Act"). 70 In this respect I have found the analysis of Tadgell JA in Transport Accident Commission v O'Reilly particularly helpful. His Honour was concerned with the Victorian system of non-fault compensation for transport accidents, in which a range of functions was conferred upon the Commission. His Honour referred to proceedings by way of administrative review of the Commission's decisions and said: "[18] … Such a proceeding by way of review is - or is likely in many respects to be - an element of the management by the Commission of the transport accident compensation scheme established by the Transport Accident Act … The Commission is a party to the review proceedings … but the review is in no sense to be treated as raising a lis or amounting to an adversarial contest. The review proceeding is not to be regarded as brought in invitum; nor is the Commission akin to a defendant or respondent in a civil litigation or in summary proceedings; or a respondent to disciplinary proceedings. In so far as the appearance of the Transport Accident Commission before the A.A.T. is to be seen as an incident of the management of the statutory scheme, the proceeding cannot be regarded as analogous to a curial proceeding … In such a case it is by no means obvious that in the ordinary run of proceedings it would be just and reasonable that the commission should be reimbursed for the costs it incurs in the management or administration of the scheme. It might be said with equal justification that a person making a claim pursuant to the statutory scheme, and reasonably and in good faith pressing it, albeit unsuccessfully, within the limits provided by the constituting statute, should not on that account necessarily be out of pocket. In those circumstances it might be reasonable to regard the Transport Accident Commission as having incurred administrative costs in the management of the scheme rather than as a 'successful party' to whom costs should be paid by the applicant. That of course is not to say that, a power to award costs having been given to the A.A.T., an unsuccessful applicant might not suffer an order for costs in an appropriate case. The task of deciding what is an appropriate case is, however, that of the A.A.T., without any predisposition against the unsuccessful applicant. Parity of reasoning should, in my opinion, lead to a conclusion that a successful applicant should not necessarily receive an order for costs and that an unsuccessful applicant should not necessarily be denied an order for costs …"

(See also per Ormiston JA at [47]-[49].) 71 There is, in my opinion, a clear analogy with the role of a consent authority under the EPA Act. An appeal from a consent authority is similarly "an element of the management" of the scheme of the EPA Act by that authority. To treat such a review as equivalent to a lis between adversarial parties is, in most cases, a considerable oversimplification. In particular, it does not give weight to the public interest regulatory responsibilities of the consent authority, which should itself be anxious to ensure that it has made the correct decision. In such a context, characterisation of the proceedings either as "merits review" or as equivalent to adversarial litigation does not appear to me to be a particularly useful approach to the formulation of the judgment for which r 4(2) provides. 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. 74 Underlying Justice McClellan's approach is an assumption that each side in a planning appeal should be treated the same as a matter of fairness: whether the proceedings are classified as "merits review" or as raising an issue of capacity. In my opinion, a comparison of the interests to which I have referred at [71]-[73] above, suggest that an unsuccessful consent authority should be more likely to suffer an adverse costs order than an unsuccessful applicant. 75 This issue now falls to be determined in the context of the broadly based judgment to be made as to what is "fair and reasonable" in the particular circumstances. It is wrong, and in my view inconsistent with principle, to impose upon that judgment any kind of presumption or to identify a matter, however expressed, which is determinative of what is "fair and reasonable" or which, in every circumstance, is entitled to presumptive weight. 76 In my opinion, it is not permissible to proceed to determine the "fair and reasonable" issue on the basis of the application of a non-discouragement principle. That would constitute an unreasonable fetter on the discretion. Similarly, it is not permissible to characterise an issue of capacity or permissibility as not constituting merits review and to give that consideration presumptive, let alone determinative, weight when formulating the judgment for which the rule now provides. 77 In each case, the invocation of an analogy - with merits review or adversarial litigation - risks imposing upon the evaluative judgment involved in applying a fair and reasonable test what Gaudron and Gummow JJ referred to in Oshlack supra at [38] as 'arterial hardening'.

Alleged Errors of Law 78 In par [8] of her Honour's judgment on costs, set out above, her Honour commenced by saying: "Taking these considerations into account and in the circumstances of this case …". The "considerations" to which her Honour referred were the overlap of issues with a merits review, referred to at par [6] and the non-discouragement principle referred to at par [7]. 79 Mr M Craig SC, who appeared for the Appellant, submitted that her Honour had not identified any additional "circumstances of this case" and accordingly focused his attention on the matters identified by her Honour in pars [6] and [7]. However, her Honour had published an earlier judgment in which a range of relevant circumstances were set out. Furthermore, her Honour had said at par [1] of the judgment on costs: "The Council was successful on the question of law. As a result the Class 1 appeal in this matter cannot proceed". It was not necessary for her Honour to set out again the full range of "circumstances" to which she had earlier referred. 80 The Appellant submitted that her Honour failed to take into account a relevant consideration or, alternatively, failed manifestly to accord that consideration weight. This was the fact that the appeal was with respect to prohibited development. Her Honour clearly referred to this in par [1] of her judgment on costs. It was the entire purport of her earlier judgment. It cannot be said that her Honour failed to take it into account. 81 I can see no basis for inferring her Honour failed to give this consideration appropriate weight to an extent that would justify the intervention of this Court. The fact that this matter was relevant was the very point of the analysis by Preston CJ of the Land and Environment Court in Grant on which Pain J expressly relied. 82 In written submissions, the Appellant identified an error of law in her Honour's reference to the overlap between a merits review case and a point of law case. The Council was successful on the latter i.e. the proper characterisation of the proposed development as either a permissible tourist facility or an impermissible commercial premises. Mr Craig submitted that this was a pure question of statutory construction. The primary facts were all agreed, either by way of statement of facts or in documents, and there was no element of merits review in the task of characterisation. He submitted that this constituted a fundamental mistake in the characterisation of proceedings and therefore involved jurisdictional error. 83 I can see no relevant jurisdictional error. Her Honour's analysis that the task of characterisation was not "truly separate from the merits review" simply indicated that there would have been an overlap between the facts and matters necessary to be investigated for the purpose of characterisation and the facts of the matters to be determined if the matter had proceeded to a full appeal on the merits. (I understand her Honour's use of the terminology of "merits review" which has featured in the case law, to be confined to the kind of review involved in a planning appeal.) 84 In oral submissions Mr Craig submitted that her Honour's reference to the overlap was "definitely extraneous" to the exercise of the discretion in the sense identified by the High Court in Oshlack supra at [31], [49]. He submitted that this was because there was no mixture or overlap between the considerations. There must always be a foundation of fact prior to the determination of a question of law. In this case there were no controversial issues of fact and the decision by her Honour did not overlap with what would have occurred in a merit hearing. What was determined was a pure jurisdictional question to be decideded on an agreed stated set of facts. 85 This issue was considered by Preston CJ of the Land and Environment Court in Chamwell Pty Limited v Strathfield Council (2007) 151 LGERA 400 where he said, after referring to Hunter Developments and RAID: "[57] The characterisation of the purpose of a development is an essential task for any consent authority in exercising the power to determine a development application. That task involves, largely, questions of fact and degree although it can also involve questions of law including determining what is the proper interpretation of relevant environmental planning instruments and of the nominate purposes of development. It is a task that consent authorities both at first instance, mainly councils, and on appeal in this Court must undertake on a daily basis. … [59] As I have said, the characterisation of the purpose of development is a task that consent authorities must do on a regular basis. Mostly, this is done at the time of and as part and parcel of the determination of the development application. In this case, the parties sought and the Court agreed to separate the question from the balance of the hearing. There were certain advantages to both parties in doing this, including the saving of the cost of preparation of all of the other issues raised in the proceedings. But I do not consider that the separation of the issue in this case changes the character of that task of characterisation."

(See also Penrith City Council v Waste Management Authority (1990) 71 LGRA 376 at 388.) 86 I agree with the reasons of Preston CJ of the Land and Environment Court as to the inevitability of this kind of overlap. On the basis that the characterisation of the proceedings was an appropriate matter for her Honour to take into account, an issue which is raised on the question of law discussed below, her Honour's reference to overlap in a practical sense cannot be regarded as a definitely extraneous consideration. When her Honour said that the kinds of matters that needed to be considered for purposes of characterisation were not "truly separate" and that "there was some overlap with issues that could be considered a merit hearing" her Honour was correct. 87 Implicitly her Honour was saying that when determining whether or not, contrary to the presumptive rule, there ought be an order for costs, the overlap between a full hearing and the separate hearing was a relevant matter. 88 In the light of the previous authorities to which her Honour referred, specifically as summarised by Preston CJ of the Land and Environment Court in Grant which her Honour extracted, her Honour accepted that the fact that a question of capacity was involved was a relevant consideration, tending in favour of the conclusion that an award of costs was fair and reasonable. However, her Honour indicated that because of the extent of overlap between what was involved in the separate question and what would have been involved in a merits review, that factor was entitled to less weight than it might otherwise be given. 89 In oral submissions it was submitted that the overlap consideration was irrelevant. In my opinion, it was not irrelevant. As Mr T Hale SC, who appeared for the Respondent, submitted, her Honour was having regard to the nature of the preliminary question she had to decide. Whether or not this Court would give this function minimal weight in the circumstances, is not a matter which arises on a question of law. 90 The final matter said to give rise to an error of law was that her Honour took into account the non-discouragement principle, namely that applicants should not be discouraged from commencing Class 1 proceedings in the Land and Environment Court or raising preliminary questions of law for fear of adverse costs orders. This was said to be a definitely extraneous consideration and an irrelevant consideration. 91 Mr Craig submitted that in the present context there was simply no work for the no discouragement principle to do. It could not be said, he submitted, that Parliament did not wish to discourage the commencement of proceedings which were beyond the jurisdiction of the court. 92 In the context of a "fair and reasonable test", it is difficult to assert that a factor can never be relevant. However, in my opinion, the "no discouragement" principle will rarely, if ever, be pertinent in a case such as the present. 93 The first reason for that is that the non-discouragement principle is not directed, at least not primarily directed, to the particular case. The principle as a principle is concerned with the deterrent effect for other proceedings. Insofar as this is the case, this is not a "circumstance" of the "particular case" within the meaning of r 4(2) at all. 94 Secondly, when determining a question of capacity on a separate question, as in this case, the Court is not concerned with an order for costs for the proceedings as a whole. The Court is concerned with an order for costs with respect only to the costs of the determination of the separate question. Even if a general non-discouragement principle were applicable, it is less likely that a person would be discouraged from instituting proceedings on the basis that costs may be awarded if there were to be a separate determination of a question. This is because if the proceeding were resolved on the separate question it becomes unnecessary to conduct the proceedings as a whole, thereby saving substantial costs which even the unsuccessful party would otherwise bear for his or her own case. 95 A separate trial of a matter that can avert a full trial is a discrete proceeding and, where it can save costs for the parties and the Court, should be positively encouraged by the Court. That is to say persons ought to be encouraged, by the prospect of receiving costs, to institute proceedings that could determine the whole of the case in a more expeditious manner. The reference by Pain J at [7] to the "non discouragement" principle itself applying to a separate point of law is not reflected in any other authority. 96 Even the losing party on a separate question is saved the burden of incurring the additional costs of conducting the whole of the proceedings in circumstances where it would not be entitled to an order for costs at all. Those additional costs may, and in the usual case would, be greater than an adverse costs order in the separate proceedings. It will frequently be the case that the ability to receive costs on the separate question would in fact serve the "non discouragement" principle rather than detract from it. 97 The non-discouragement principle is now reflected in the basic rule in Pt 16 r 4(2) that there will be no order as to costs. It would, in my opinion, impermissibly detract from the Court's discretion implicit in a fair and reasonable test to give that principle presumptive effect beyond the basic rule. It is possible to construe her Honour's observations in par [7] as doing this. On balance, however, I have concluded that this paragraph should be understood as reflecting the basic rule which it is necessary for the successful party to overcome by identifying circumstances which make it fair and reasonable to do so. 98 This conclusion is consistent with her Honour's express statement at [6], to repeat: "it is more likely that an award of costs will be made in favour of the successful party on a preliminary question of law as an exception to the usual rule that each party pay its own costs".

Conclusion 99 In my opinion, no error of law has been identified. 100 The appeal should be dismissed with costs. 101 MASON P: I agree with Spigelman CJ. 102 BEAZLEY JA: I agree with Spigelman CJ. 103 GILES JA: I agree with Spigelman CJ. 104 IPP JA: I agree with Spigelman CJ. **********

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.