ROI Properties Pty Ltd v Council of City of Sydney

CASES CITED: Rajski v Tectran Corporation Pty Ltd [2003] NSWSC 476 United Group Rail Services Limited v Rail Corporation NSW South Wales [2009] NSWCA 177

APPLICANT Ms McCulloch (solicitor) SOLICITOR LEGAL REPRESENTATIVES: Pikes Lawyers RESPONDENT Mr R Winram (solicitor) SOLICITOR Maddocks

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

10711 of 2009 ROI Properties Pty Ltd v Council of City of Sydney

JUDGMENT 1 Her Honour: The parties participated in a s 34 conciliation conference on 4 December 2009 before Commissioner Brown. According to the Court file the s 34 conference was terminated and the matter referred to the Registrar for the making of orders for the conferencing of experts, inter alia. Such orders were made by the Assistant Registrar on 9 December 2009. The Applicant has filed a Notice of Motion dated 23 December 2009 seeking its costs of the preparation and attendance at the s 34 conference. The Applicant argues that there was a failure by the Council to properly conciliate and the Council acted so unreasonably that the Applicant's costs ought be paid. Section 34(1A) provides that if a conciliation conference has been arranged under s 34(1) each party has a duty to participate in good faith in the conciliation conference.

2 The Applicant seeks both legal and experts' costs. The Applicant's solicitor appeared at the s 34 conference with four expert witnesses and two representatives of the Applicant company. The Council was represented at the s 34 conference by its solicitor only.

3 An affidavit of Ms McCulloch, solicitor, dated 23 December 2009 was read, identifying steps in the proceedings such as the matter being set down for a s 34 conference on 13 November 2009 by the Assistant Registrar. Correspondence between her and the solicitor for the Council is annexed to the affidavit. By letter dated 16 November 2009 the Council's solicitor, Mr Kondilios, wrote seeking the further information requested in the Statement of Facts and Contentions by 20 November 2009 and asking the Applicant to identify by 20 November 2009 those matters which the Applicant says can be usefully discussed at the s 34 conference. By letter dated 17 November 2009 Ms McCulloch requested particulars of the amended Statement of Facts and Contentions. She sent a letter dated 20 November 2009 to the Council's solicitor providing the information requested and identifying issues that the Applicant considered could be usefully discussed at the forthcoming s 34 conference. There was no response to that letter from the Council's solicitor. The next letter received from the Council's solicitor dated 30 November 2009 was a response to the letter of 17 November 2009 requesting further particulars. The Applicant was to provide a supplementary acoustic report and an operations management plan before the s 34 conference. The operations management plan was served on the Council's solicitors the day before the s 34 conference and the supplementary acoustic report was provided at the conference.

4 An affidavit of Mr Kondilios, solicitor, dated 3 February 2010 was read by the Council in which he attests to the Council's preparations for the s 34 conference and the instructions he received in attending the s 34 conference to represent the Council. The affidavit refers to a meeting on 30 November 2009 with Council's senior solicitor and two of the Council's experts to consider whether there was scope for the issues to be narrowed or resolved based on the additional information provided by the Applicant. The affidavit in par 2 identifies matters (a)-(h) in issue. Six are described as threshold issues and two are described as issues which could be satisfied. He attended the s 34 conference with instructions to conciliate the contentions capable of resolution (par 3 of the affidavit). These are not identified in par 3 but appear to be a reference to the two issues which could be satisfied identified in par 2. He attests that he had instructions to participate in the s 34 conference on behalf of the Council and that the Council's senior solicitor and experts were available for him to call to obtain further instructions if the need arose. He attests that the Council participated in the s 34 conference in good faith through his attendance. According to his affidavit the Commissioner directed at the conclusion of the conference that the experts meet and jointly confer about issues to summarise or consolidate the contentions in dispute. According to par 11 this was because the parties agreed that it would be a faster and cheaper course to take rather than five experts per party discussing their contentions in turn in a mediation room. 5 An affidavit of Mr Winram, solicitor, dated 3 February 2010 was also read which largely confirms matters referred to in Ms McCulloch's affidavit.

6 The transcript of proceedings before the Acting Registrar on 13 November 2009 was tendered. It is clear from this and Mr Winram's affidavit that the Council opposed the matter being set down for a s 34 conference. The Acting Registrar nevertheless set it down. One of the reasons given by the Applicant's solicitor in support of having a s 34 conference rather than case management was that there could be a conciliation process between experts at a s 34 conference. There was also reference by the Applicant's solicitor to the attendance of experts at the s 34 conference when dates were being discussed as the need to accommodate them was referred to by Ms McCulloch. There was otherwise no specific reference in the correspondence in evidence to experts attending the s 34 conference. Applicant's submissions 7 The Applicant submitted that the Council had an obligation to conciliate in good faith and it failed to take reasonable steps to reconcile the differences between the parties and therefore to conciliate the proceedings. Its failure to bring any experts to the s 34 conference demonstrates that. The Council's actions were also unreasonable and the Applicant incurred significant costs as a result. The correspondence shows the Council in its letter dated 16 November 2009 asked the Applicant to provide information and identify matters for discussion in order to make best use of the s 34 conference. This was done in the detailed letter dated 20 November 2009 sent to the Council's solicitor so that, in the absence of any different view being communicated by the Council, the Applicant could reasonably expect that such discussion would take place at the s 34 conference. The Council entered into a course of conduct which caused the Applicant to believe the Council was willing to engage in discussion with the Applicant about each of the contentions raised in the amended Statement of Facts and Contentions and the detailed issues in relation to each of these identified in the letter of 20 November 2009. The Applicant incurred substantial costs in preparing for the s 34 conference and arranging for two persons from the Applicant company and four expert witnesses to attend the s 34 conference in addition to the Applicant's solicitor. The Council did not tell the Applicant that it was not prepared to negotiate in relation to the matters raised in the letter of 20 November 2009 and would not bring any experts before the s 34 conference. Council's submissions 8 The Council submitted that it properly prepared for the s 34 conference and acted in good faith. This is demonstrated by the Council's solicitor's letter to the Applicant's solicitor dated 16 November 2009 requesting that information as identified in the Statement of Facts and Contentions and identification of the issues which could be usefully discussed at the s 34 conference. It met with its solicitors on 30 November 2009 to discuss each contention and to see if the issues could be narrowed in light of the information provided by the Applicant. It provided detailed particulars to the Applicant's solicitor in the letter dated 30 November 2009. It gave its solicitor appropriate instructions to participate in the s 34 conference and to conciliate on those matters which it considered were capable of resolution. Its senior solicitor and experts were available to be called on during the s 34 conference should Mr Kondilios need to contact them. The Council considered all the information provided by the Applicant and instructed its solicitor to attend the s 34 conference with an open mind and consider what the Applicant put at the s 34 conference. 9 The s 34 conference was successful in light of the orders made at the conclusion that the parties' experts confer about the issues in contention as this was considered to be a faster and cheaper course to obtain a clear indication from the experts as to their views. Consideration of good faith, albeit in the context of contracts, is referred to in Rajski v Tectran Corporation Pty Ltd [2003] NSWSC 476 per Palmer J at [20]. 10 In the absence of knowing what occurred at the conciliation conference it is difficult to establish that there was a failure to participate in good faith. The Applicant has objected to the reading of the paragraph in the affidavit of Mr Kondilios in which he attests to what occurred. It has not put on any evidence from the solicitor, Mr Gary Green, who attended the conference on behalf of the Applicant. The Applicant bears the onus of establishing that there was a failure to conciliate yet will not agree to evidence of what occurred at the s 34 conference being adduced, as could be done by agreement under s 34(12). Consideration 11 I have jurisdiction to determine this application for costs by virtue of s 23 of the Land and Environment Court Act 1979 (the Court Act). Rule 3.7 of the Land and Environment Court Rules 2007 (the Court Rules) applies. Rule 37(2) states that no order for costs ought be made in Class 1 proceedings unless the Court considers it is fair and reasonable to do so. Rule 3.7(3) sets out the circumstances in which the Court might consider the making of a costs order to be fair and reasonable including, inter alia, the unreasonable conduct of proceedings.

12 Under s 34(11) no evidence of anything said at the s 34 conference can be referred to in this hearing unless there is agreement to do so by both parties under s 34(12). There was no such agreement in this case. I make no criticism of either party in that regard. The result is, however, that neither party can make submissions supported by evidence of what occurred at the s 34 conference to advance their respective cases. Without that evidence the determination of costs occurs in a partial vacuum. 13 The Applicant submits there has been a failure by the Council to conciliate in good faith as s 34(1) requires. In relation to what is required of the parties in a conciliation, I have been referred to a useful passage of a paper delivered to the ACDC Training Program by Preston J "Conciliation in the Land and Environment Court of NSW: History, Nature and Benefits" (3 August 2007, available on the Court website): The parties are under an implied duty to negotiate in good faith. This involves more than mere attendance at the conference; it goes towards the conduct of the parties. The essential core content of an obligation to negotiation or conciliate in good faith involves, first, to undertake to subject oneself to the process of negotiation or conciliation and, secondly, to undertake in subjecting oneself to that process, to have an open mind in the sense of a willingness to consider such options for the resolution of the dispute as may be propounded by the other party or by the conciliator, as appropriate, and a willingness to give consideration to putting forward options for the resolution of the dispute. The parties must also be in a position to reach agreement by having the necessary authority. 14 The "Note to Parties and Practitioners - Preliminary Conferences under s 34 of the Land and Environment Court Act 1979" published on the Court website under "Practice and Procedure" states that: All parties must be prepared and have sufficient instructions and authority to engage in meaningful conciliation at the preliminary conference. 15 There is no basis not to accept the evidence of Mr Kondilios concerning his instructions from the Council. He identifies the detailed preparations of the Council for the s 34 conference and that this required the discussion of all relevant issues. He had authority to conciliate on two out of eight matters, albeit more minor in light of the issues in the proceedings, and says he was instructed to attend and be open to whatever matters the Applicant wished to raise. I am reluctant to find in light of Mr Kondilios' evidence that there was failure to conciliate in good faith on the Council's part. By virtue of the Council's preparation and instructions to Mr Kondilios I surmise the matters that it considered could be addressed at the conference were narrower than the Applicant intended in light of the letter of 20 November 2009 but that does not mean that there was a lack of good faith in the conciliation process on the Council's part. 16 The Council's experts did not attend the s 34 conference in person but were available by telephone if needed. Whether that is sufficient must depend on the particular circumstances. I would have expected that the attendance of experts in person (where available) to resolve issues was necessary in this matter if conciliation was to occur. That is generally a matter that would be discussed between the parties' solicitors in the course of preparing for a s 34 conference. The Applicant's claim is more accurately characterised as whether the Council's actions in not bringing any of its experts to the s 34 conference caused the Applicant to have costs thrown away at the s 34 conference so that the Applicant should have those costs paid under r 37(2). There is no mention in Mr Kondilios' evidence of the letter from the Applicant's solicitors dated 20 November 2009 identifying the specific matters that could be usefully discussed at the s 34 conference. That letter responded to a letter from the Council's solicitor asking that issues that could be discussed at the s 34 conference be identified. As no response was received to that letter the Applicant was entitled to believe these issues would be discussed at the s 34 conference. 17 My understanding is that where experts have already been engaged by the parties by the time a s 34 conference has been appointed, the usual approach is that they attend if there are issues relevant to their expertise, in the absence of agreement between parties that it is not necessary that they do so. In this case there was no specific mention of experts attending the s 34 conference in any letters from the Applicant's solicitor or the Council's solicitor or in other communication between the parties. The transcript of the mention before the Assistant Registrar on 13 November 2009 makes clear that the Applicant was intending to bring its experts to the s 34 conference and the Council was represented at the mention by its solicitor.

18 In the absence of knowing anything that occurred at the s 34 conference it is difficult to conclude just on those facts to what extent costs were thrown away. For example, I do not know if Mr Kondilios made inquiries of his experts in the course of the s 34 conference. It is not correct that the Council can assert that the s 34 conference was successful as it was simply noted as terminated by the presiding Commissioner. That orders for the conferencing of the experts were made subsequently is not material to the Applicant's claim for costs arising from the conduct of the s 34 conference. 19 It is unfortunate that the attendance of experts was not specifically addressed by the parties' respective solicitors in correspondence or other communication in advance of the appointed conference. The Council submitted that acting in good faith does not require that a party act to advance the interest of another party (United Group Rail Services Limited v Rail Corporation NSW South Wales [2009] NSWCA 177 per Palmer J at [76]) and further that there was no specific requirement that the Council communicate with the Applicant about experts. Regardless of those submissions, it is not appropriate that one party cause another party to incur unnecessary costs at any stage of proceedings including conciliation conferences. 20 Ideally the Council's solicitor should have contacted the Applicant's solicitor before the s 34 conference to advise that the Council was not intending to bring experts along in person, but would have them available by telephone, so that whether this was adequate could have been discussed between the parties' solicitors. The salutary lesson for all parties is that there needs to be specific discussion by both parties about the attendance in person of experts at s 34 conferences in sufficient time for appropriate arrangements to be made. 21 I stress that there is no requirement that experts be engaged just for the purpose of attending a s 34 conference. In this matter it was the case that the parties already had the benefit of expert advice when the s 34 conference was set down.

22 This matter is finely balanced as to what order, if any, ought be made and whether any order ought be made at this stage of the proceedings when there is no final determination of the appeal. Given the non-adversarial nature of s 34 conferences the Court should award costs against any party in relation to the conduct of such proceedings reluctantly. The nature of conciliation conferences is more comparable to mediation proceedings than to an adversarial court hearing. Costs of mediation would not generally be awarded to any party. 23 I have decided that the final determination of this Notice of Motion should be stood over until the substantive Class 1 matter has been decided in the normal course of the Court's business. At that time the Applicant has leave to approach the Registrar within 21 days for the motion to be relisted before me for mention to advise if the matter is still pressed.

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