Quin v O'Malley trading as Yellamo Building Certifiers & Another [2006] NSWLEC 107 | Case summary

JUDGMENT 1 Talbot J: Following judgment delivered on 16 September 2005 (Quin v O'Malley t/as Yellamo Building Certifiers and Another [2005] NSWLEC 503) the first respondent seeks the following order: The Applicant shall pay the First Respondent's costs of and incidental to these proceedings as agreed or assessed on the following bases: a) on a party and party basis for the period up to and including 8 June 2005; and b) on an indemnity basis for the period commencing from 9 June 2005. 2 The applicant has filed with the Court draft short minutes of order in which it proposes inter alia that the Court make the following order: The First Respondent to pay the Applicant's costs of and incidental to its failure to submit to the orders of the Court. 3 The second respondent also claims its costs from the applicant. 4 Mr Howard of counsel appears for the first respondent and submits that as the first respondent has been successful in these proceedings he is, prima facie, entitled to an award of costs on a party and party basis. Mr Howard further submits that there has been no disentitling conduct on the first respondent's part that would displace the presumption that he is entitled to a costs award upon an exercise of the discretion to award costs under s 69 of the Land and Environment Court Act 1979. 5 Mr Corsaro SC submits on behalf of the applicant that, as the only relief claimed was against the second respondent, the first respondent is not entitled to an award of costs because the costs were incurred as a result of his decision to take the main protagonist's role where that role was properly occupied by the second respondent. This submission was based on the observations by Gaudron and Gummow JJ in Oschlack v Richmond River Council (1998) 193 CLR 72, in particular the reference to the position which a consent authority should ordinarily adopt at 90: In a significant number of such litigious disputes, it will, in accordance with the reasoning in R v Australian Broadcasting Tribunal; Ex parte Hardiman [footnote omitted] , be entirely appropriate for, if not incumbent upon, the local government body not to assume the position of a protagonist and to avoid incurring substantial costs. The position of protagonist will be filled by the party against which injunctive relief is sought and which is the real contradictor in respect of the application for declaratory relief. 6 The applicant argues that the above comments apply to the first respondent in this case. The first and second respondents have common interests in upholding the validity of the construction certificate and the first respondent has not demonstrated how his interests were not protected by the second respondent's defence of the application. Where the second respondent is the "real contradictor" the first respondent's costs have been incurred unnecessarily and he therefore is not entitled to an award for costs. 7 It needs to be remembered that the ratio of the decision of the majority in Oschlack is that where the nature of the litigation concerns public rather than private rights the usual presumption that an order for costs will be made in favour of a successful party can be displaced having regard to special circumstances. The special circumstances in Oschlack did not exist in the present case. 8 The first respondent says that although no orders were sought against him, the applicant alleged that he failed to properly perform his duties under the Environmental Planning and Assessment Act 1979 and in particular that he contravened cl 145 of the Environmental Planning and Assessment Regulation 2000 by issuing a construction certificate when it was not open to him to be satisfied that the design and construction of the building as per the construction certificate plans were not inconsistent with the development consent. 9 The applicant's claim against the first respondent, if established, could have exposed the first respondent to prosecution for an offence under the EPA Act and disciplinary proceedings for unsatisfactory professional conduct or professional misconduct pursuant to Part 4B of the EPA Act. In circumstances where by letter dated 12 November 2004 the applicant indicated that it had "not ruled out" making a complaint about the first respondent to the Department of Infrastructure, Planning and Natural Resources, the first respondent says it was fully justified in assuming the position of protagonist so as to avoid exposure to liability and to prevent damage to his career and reputation. The first respondent relies upon the decision of Lloyd J in Maule v Liporoni [No 2] (2002) 122 LGERA 216 where His Honour held, after considering the decision of the High Court in Oschlack, that "the council was entirely justified in assuming the position of protagonist so as to protect the integrity of its decision-making and to protect its officers against the unjustified attack of mala fides brought against them." The first respondent submits that he was equally justified in assuming the position of protagonist, if not more so, than was Gosford City Council in Maule. 10 The evidence from the correspondence and the form of the Points of Claim made it abundantly clear, at least for present purposes that the professional competence and integrity of the first respondent was in serious question. In those circumstances I am satisfied that the first respondent was entitled to vigorously defend the allegations made against him irrespective of the approach taken by the second respondent. Although prima facie in the same interest a finding against the first respondent in the context of the validity of the construction certificate could foreseeably expose the first respondent to a claim by the second respondent. The interests of the two respondents were sufficiently diverse to justify separate representation notwithstanding that the applicant was not seeking direct relief against the first respondent. Having regard to the position of the first respondent in the contexts identified above it was perfectly appropriate for that respondent to have independent and separate representation and to fully engage in the applicant's claim. Indemnity Costs 11 The first respondent submits that the applicant should pay his costs on an indemnity basis as and from 9 June 2005 on two bases. Firstly, that the proceedings against the first respondent were unreasonably continued as and from that date because the applicant, properly advised, should have known that he had no chance of success. Secondly, that the first respondent made an offer of compromise which the applicant, who was entirely unsuccessful against the first respondent, unreasonable failed to accept. 12 A series of correspondence between the first respondent's solicitors and the solicitors for the applicant is in evidence, culminating in a letter dated 8 June 2005 whereby the first respondent confirmed its position that the claim against him was misconceived and had no chance of success. The applicant correctly points out that while the letter of 8 June 2005 does state the first respondent's position that the challenge to the validity of the construction certificate was misconceived, it contains no explanation by reference to legal standard or principle or developed argument as to why this might be the case. 13 The first respondent submits that the evidence relied upon by the applicant as to the cause of the alleged damage to his property does not demonstrate a causal nexus between that damage and the issue of the construction certificate by the first respondent and further that the applicant initially sought to prosecute a claim for damages, but that the applicant abandoned this claim. The applicant argues, on the other hand, that the pleadings contained no claim for damages, nor did the Court reject any such claim. Ultimately any claim for damages against the first respondent was expressly abandoned so that it is not necessary to resolve this aspect of the argument. 14 The basis in administrative law for the applicant's challenge to the validity of the construction certificate was that the issuing of the construction certificate was unreasonable in the Wednesbury sense. That argument was ultimately rejected. The first respondent submits that the applicant's claim in this regard had no real prospects of success and that this position was put to the applicant in the first respondent's letter of 8 June 2005. The applicant says in response to this submission that the first respondent has not satisfied its burden of proving that the applicant's case was so untenable as to amount to an abuse of process. 15 Ultimately the applicant says that its case for declaratory relief was not so untenable (and nothing in the letter of 8 June 2005 changed the position) as to raise a presumption that the proceedings were continued "for some ulterior motive, or because of some wilful disregard of the known facts or the established law" (Fountain Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1998) 81 ALR 397 at 401). I agree with this submission. 16 The first basis upon which the first respondent relies, namely that the applicant unreasonably continued the proceedings against the first respondent because the applicant properly advised should have known he had no chance of success, should be rejected. The applicant expressly abandoned any claim for damages against the first respondent. Therefore it cannot be said that the proceedings were unreasonably continued on that account. Nor am I prepared to find that the applicant's challenge to the validity of the construction certificate on the basis of unreasonableness in the Wednesbury sense had no chance of success in the context of an application for an order to pay costs on an indemnity basis. It was necessary to resolve a conflict between the parties in respect of the way in which the approved plans should be construed. 17 The letter of 8 June 2005, after confirming the first respondent's position that the applicant's claim against him was misconceived, conveyed a without prejudice offer to settle the matter on the basis that the applicant discontinue his claim as against the first respondent within 7 days of the day of receipt and each party pay its own costs. 18 In order to persuade the Court to exercise its discretion to award indemnity costs to the first respondent on the basis of an offer of compromise, he must establish that the offer was a genuine offer of compromise that was reasonable and that the applicant's failure to accept the offer was unreasonable (Leichhardt Municipal Council v Green [2004] NSWCA 341). 19 The first respondent's offer was a genuine offer of compromise. There was nothing more the first respondent could offer the applicant because no relief was sought against him. However, in my opinion, it was not unreasonable in the circumstances for the applicant to refuse the offer. The offer was predicated on the applicant accepting, without any explanation from the first respondent, that its claim was misconceived. The applicant could not have accepted the first respondent's offer without prejudicing its claim for declaratory relief in respect of the validity of the construction certificate against the second respondent. 20 In Oschlack Gaudron and Gummow JJ stated at 89 that: It may be true in a general sense that costs orders are not made to punish an unsuccessful party. However, in the particular circumstance of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs but for costs on a "solicitor and client" basis or an indemnity basis. The result is more fully or adequately to compensate the successful party the disadvantage of what otherwise would have been the position of the unsuccessful party in the absence of such delinquency on its part. 21 The first respondent has not satisfied the Court that there has been a relevant "delinquency" on the part of the applicant that would justify an order for costs against him on an indemnity basis. The Second Respondent's Costs Application 22 The proceedings remain on foot as between the applicant and the second respondent in relation to the applicant's prayer for an order that the retaining wall be demolished. Those proceedings have been stayed pending the outcome of proceedings in the District Court. As a condition of its consent to the stay Mr Fraser of counsel, who appears for the second respondent, seeks on its behalf an order for costs against the applicant in the proceedings as to those parts of the applicant's claim that have been decided by the Court or abandoned by the applicant. The costs sought by the second respondent include costs incurred in relation to the applicant's challenge to the validity of the construction certificate and the costs in relation to the applicant's abandoned claim for damages. 23 The applicant submits that it is inappropriate to view the determination of its claim for declaratory relief as a separate question in its case against the respondent. The proceedings as between the applicant have not been finalised. The applicant's case is that the second respondent carried out work unlawfully. The issue that has been decided is that the construction certificate is valid, that is, valid consents are in place. What remains to be determined is whether the conditions of the consent were complied with. It is therefore premature to determine the issue of costs in the proceedings overall as between the applicant and the second respondent. It could well be that the applicant is eventually successful in its claim against the second respondent and the extent and reasons for that success will need to be measured and considered in the light of the earlier determination of the issue regarding the validity of the construction certificate. 24 There is the prospect for an argument that has not been raised to the effect that rather than the appearance of the first respondent being unnecessary in the first part of the case the same could equally be said about the additional costs of separate representation for the second respondent during argument that centred its attack on the competency and legality of the first respondent's actions. 25 The Notice of Motion by the second respondent seeking an order for costs against the applicant at this stage should therefore be adjourned until after final judgment. Orders 26 For the reasons given above the Court orders that:

The applicant pay the first respondent's costs of and incidental to the proceedings including the motion for costs as agreed or assessed on a party and party basis.

Quin v O'Malley trading as Yellamo Building Certifiers & Another

At a glance

Court

Decision date

Before

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Judgment (18 paragraphs)

Parties

Cases Cited (5)