Ryde City Council v Chen

Utilities order no longer needed to close brothel 13The issue now to be determined is whether, in light of these actions, a utilities order should be made. The Council stated that, in light of the actions taken by Ms Kim to evict and exclude Mr Chen and the evidence that he will not be allowed to re-enter and use the premises again, it would no longer press for a utilities order. 14In the events that have happened in this case, I agree that a utilities order does not now need to be made. A utilities order under s 121ZS of the EPA Act is a means of enforcing a brothel closure order, being an order under s 121B of the EPA Act to cease using premises as a brothel. The cessation of utilities to the premises is intended to cause the cessation of use of the premises as a brothel. 15In this case, by reason of the actions taken by the owner of the premises, Ms Kim, to evict the tenant, Mr Chen, who was using the premises as a brothel, the use of the premises as a brothel has ceased. The intended result of the brothel closure order, of cessation of use of the premises as a brothel, has been achieved. A utilities order is therefore not required to enforce the brothel closure order. 16Use of the premises as a brothel cannot be recommenced by Mr Chen, by reason of his eviction and exclusion from the premises and the avowed intention of Ms Kim and her real estate agent to not allow Mr Chen to reenter and re-use the premises. 17Furthermore, the Court injunction issued last week restrains Mr Chen and Ms Kim from using or causing the use of the premises as a brothel. These actions and injunctions are sufficient to address any risk of recommencement of the use of the premises as a brothel. A utilities order for a limited period of time is not needed to alleviate further such a risk.

Costs of the proceedings 18The final issue to be determined is the costs of the two sets of proceedings. The first proceedings are in Class 4 of the Court's jurisdiction in which the general rule is that the Court orders that costs follow the event, that is to say, orders the unsuccessful party to pay the successful party's costs of the proceedings. In the Class 4 proceedings, the Council has been successful in the event in that it has established that Mr Chen and Ms Kim breached the EPA Act and obtained declaratory and injunctive relief against Mr Chen and Ms Kim. The Council, having been successful, is prima facie entitled to an order that both Mr Chen and Ms Kim should pay the Council's costs. 19The second set of proceedings are in Class 1 of the Court's jurisdiction, being the application for a utilities order. In this class of jurisdiction, the general rule is that there is no order as to costs unless the Court considers it fair and reasonable in the circumstances to make an order for costs. I do not consider it fair and reasonable to make a costs order in the Class 1 proceedings. I do not consider the fact that, due to the events that have occurred, a utilities order will not be made as had originally been sought by the Council, is a sufficient reason to depart from the general rule that there should be no order as to costs. I note that the central reason why a utilities order has not been made is Ms Kim's recent actions to evict and exclude Mr Chen from the premises and thereby bring about a cessation of use of the premises as a brothel. This action has occurred only after the hearing. The Council has therefore achieved the event it sought by the utilities order by Ms Kim's actions. Viewed this way, the Council has been successful because by bringing the proceedings it has brought about the event sought of the cessation of use of the premises as a brothel. 20The Council and Ms Kim reached agreement on the costs orders that should be made between them in the two sets of proceedings. In the Class 4 proceedings, Ms Kim's liability for costs should be fixed in the amount of $10,000. This would leave Mr Chen liable to pay the balance of the Council's costs in the Class 4 proceedings. In the Class 1 proceedings, the Council and Ms Kim agreed that there should be no order as to costs. 21As I noted in my judgment last week, Mr Chen has not appeared at the hearing so has not been able to make submissions in relation to this proposed apportionment of liability for the Council's costs of the Class 4 proceedings. 22Conventionally, a costs order is made against all of the unsuccessful respondents without specifying the shares or contributions between them. The respondents' liability to pay the successful applicant's costs is joint and several. The justification for the joint and several liability is that a successful applicant is, under the general rule that costs follow the event, entitled to its costs of the proceedings and if one of the unsuccessful respondents is unable or unwilling to meet its share of the obligation, the misfortune should be that of the unsuccessful respondents and not that of the successful applicant: Trade Practices Commission v Nicholas Enterprises Pty Ltd (1979) 28 ALR 201 at 210; Rushcutters Bay Smash Repairs Pty Ltd v H McKenna Netmakers Pty Ltd [2003] NSWSC 670 at [2]. 23In this case, however, the successful applicant, the Council, has agreed that each respondent should be liable only severally for their specified shares ($10,000 in the case of Ms Kim and the balance in the case of Mr Chen) and not be jointly liable for the whole of the Council's costs. The Council thereby accepts the risk that if it cannot recover costs from Mr Chen up to his share, it will not be able to have recourse to Ms Kim to recover the outstanding amount. 24In circumstances where the successful applicant is agreeable to a costs order in its favour specifying the respective shares or contributions of the unsuccessful respondents, I consider it is appropriate to depart from the conventional order and specify contributions of the respondents. 25The proportions agreed between the Council and Ms Kim was that Ms Kim should pay a fixed amount of $10,000. The Council advised that its total costs were in the order of $50,000. Hence, Ms Kim's share is 20 per cent. The Council and Ms Kim submit that this is an appropriate apportionment having regard to the respective roles of Mr Chen and Ms Kim in the events leading up to, and during, the proceedings and their respective breaches of the EPA Act. Primary responsibility rested with Mr Chen - he was the person using the premises as a brothel. Although Ms Kim still had some responsibility as the owner of the premises, in relative terms, it was considerably less than Mr Chen's responsibility. Moreover, Ms Kim did make some efforts to persuade Mr Chen to cease the use before and after the proceedings were commenced, although then unsuccessful, but after the last hearing she was successful in evicting Mr Chen and bringing about a cessation of use of the premises as a brothel. The Council and Ms Kim submit an apportionment of 20 per cent to Ms Kim and 80 per cent to Mr Chen is reasonable in the circumstances. 26I agree. I consider it appropriate to apportion the respective contributions of Ms Kim and Mr Chen in these proportions. The apportionment can be done by fixing an amount which represents the respective proportions. In this case, the proportion translates to $10,000 for Ms Kim.

Owner should not be indemnified by operator 27Ms Kim also filed a crossclaim against Mr Chen seeking that Mr Chen indemnify Ms Kim for the $10,000 she will have to pay the Council. This claim is, in effect, that Ms Kim as one unsuccessful respondent should be indemnified by another unsuccessful respondent for the costs she has to pay the successful applicant. 28Even assuming the costs powers are wide enough to allow such an order, I do not consider it appropriate in the circumstances. Ms Kim's conduct of failing to comply with the brothel closure order addressed to her is discrete conduct from that of Mr Chen in both using the premises for the prohibited purpose of sex services premises and failing to comply with the brothel closure order addressed to him. 29Both Ms Kim and Mr Chen filed defences to the Council's claims that they were in breach of the EPA Act. Ms Kim actively defended the proceedings at the hearing. 30I do not consider that the circumstances justify ordering Mr Chen to indemnify Ms Kim for her share of the Council's costs of the proceedings. 31Of course, the fact that I do not make such an order for indemnification in these proceedings does not, and should not, affect any rights Ms Kim might have to recover the $10,000 she will have to pay the Council, as damages for Mr Chen's repudiation of the lease by using the premises for a purpose other than that approved under the lease. 32For these reasons, I consider the appropriate costs order in the Class 4 proceedings should be that Ms Kim pay an amount of $10,000 towards the Council's costs of the proceedings and Mr Chen pay the Council's costs of the proceedings less the amount of $10,000 paid by Ms Kim.

Orders 33Accordingly, the Court orders: In proceedings no 11/10729: (1)The proceedings are dismissed. (2)There is no order as to costs of the proceedings. In proceedings no 11/40728: (1)The second respondent pay the amount of $10,000 towards the applicant's costs of the proceedings within three months of the date of these orders. (2)The first respondent pay the applicant's costs of the proceedings in an amount agreed or assessed, less $10,000. (3)The second respondent's cross-claim against the first respondent is dismissed, with no order as to costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 March 2012