Shoalhaven City Council v South Coast Concrete Crushing & Recycling Pty Ltd [2010] NSWLEC 80 | Case summary | Zoe

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Shoalhaven City Council v South Coast Concrete Crushing & Recycling Pty Ltd

[2010] NSWLEC 80

Land and Environment Court (NSW)|2010-05-06|Before: Pepper J, Lloyd J

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At a glance

Source facts

Court

Land and Environment Court (NSW)

Decision date

2010-05-06

Before

Pepper J, Lloyd J

Source

Original judgment source is linked above.

Judgment (62 paragraphs)

[1]

Introduction 1 HER HONOUR: These proceedings concern the costs payable by parties in circumstances where final orders have not been made by the Court because of a supervening event. 2 On 14 December 2009, Lloyd J delivered judgment, which included making various findings of fact, on the substantive issues concerning the operation of extractive activities involving brick clay and clay shale material by the first respondent, South Coast Concrete Crushing & Recycling Pty Ltd ("SCCCR") (Shoalhaven City Council v South Coast Concrete Crushing & Recycling Pty Ltd [2009] NSWLEC 197). 3 No final orders were made by his Honour primarily on the basis of, first, a request by SCCCR to allow the extent of any existing use rights to be determined as a separate question pursuant to r 28.2 of the Uniform Civil Procedure Rules 2005 ("UCPR"). And second, a request by SCCCR to address matters of discretion concerning the making of the final orders, after the determination of the substantive issues. 4 No evidence or submissions on the question of the exercise of the Court's discretion were made because subsequent to Lloyd J handing down his decision on 14 December 2009, SCCCR was given Pt 3A approval under the Environmental Planning and Assessment Act 1979 ("EPAA") to engage in the extractive activities the subject of the proceedings before his Honour. The parties agreed that, as a consequence, there was no utility in seeking final orders by way of declaratory relief from the Court. 5 Both parties now seek their costs of the proceedings. Issues 6 By reason of both parties seeking costs, the following issues arise for determination: (a) whether there has been an 'event', that is to say, a hearing on the merits, thereby engaging the normal rule that costs follow the event given that no final orders were made by Lloyd J and given that there was no hearing as to whether, as a matter of discretion, relief ought to be granted;

[2]

[4]

(d) whether there was any disentitling conduct on behalf of the Shoalhaven City Council ("the council") such that it has lost any entitlement it may have had to an award of costs. Disposition of the Application 7 In my opinion, the appropriate order consequential upon the decision of Lloyd J on 14 December 2009, is that the council, having been substantially successful with respect to the findings made by Lloyd J pursuant to the issues framed by him, are entitled to their costs. 8 In making this order I have found that although no final orders were made by his Honour and that the question of the exercise of the Court's discretion with respect to the declaratory relief sought by the council remains unanswered, there was nevertheless a hearing on the merits sufficient to enliven an award of costs. 9 It also follows that I do not accept that the Pt 3A approval constitutes a supervening event sufficient to warrant an order that each party must bear their own costs. 10 Finally, I reject the contentions of SCCCR that the council, by pursuing the proceedings notwithstanding its knowledge that an application for Pt 3A approval had been made and could be granted, constituted disentitling conduct which obviated its entitlement to costs. Factual Background 11 The factual background giving rise to the proceedings before Lloyd J and the present application is found in his Honour's decision (at [2]-[7]). 12 As stated in that judgment, by its amended summons, the council sought declarations that the extraction of material not used for brick-making was an "extractive industry" for which there was no development consent, that the process of importing materials for blending with materials extracted from the land was an "industry" which was a prohibited use, and alternatively, that a significant increase in the rate of extraction comprised an unlawful intensification of the existing use. 13 The council contended that there had been a fundamental and significant change in the use of the land in or about 2000 when brick-making ceased. That is to say, the use of the land for the core purpose of brick-making had been abandoned and the present activities on the land amounted to an unlawful change and intensification of use. 14 SCCCR asserted that the activities were protected by existing use rights and by a consent granted on 14 July 2003, for the "crushing and recycling of waste products". History of the Proceedings 15 Because of the issues for determination, in particular, whether the council engaged in any disentitling conduct, it is necessary to set out in some detail the procedural history of the matter before Lloyd J. In addition to the decision of his Honour, this history is contained in the affidavits of Mr Grant Gleeson, the solicitor for the council, sworn 24 August 2009 and 30 April 2010, and the affidavits of Mr William Ellicott, the solicitor for SCCCR, sworn 20 August 2009 and 27 April 2010. 16 It is revealed that:

[5]

(a) on 5 July 2006, Lloyd J delivered his decision in Normans Plant Hire Pty Limited v South Coast Concrete Crushing & Recycling Pty Limited [2006] NSWLEC 390, which relevantly held that mining operations on the site the subject of these proceedings were unlawful. As a consequence on 8 September 2006, SCCCR engaged City Plan Services to prepare a Pt 3A application for designated development; (b) on 24 November 2006, Lloyd J handed down another decision dealing with the same subject matter ( Normans Plant Hire Pty Limited v South Coast Concrete Crushing & Recycling Pty Limited (No 2) [2006] NSWLEC 734), which restrained SCCCR from operating within the subject site but which postponed the orders for a period of four weeks; (c) on 12 October 2007, two months before the repeal of the immunity afforded to SCCCR by s 74 of the Mining Act 1992 became effective, the respondent lodged DA07/2723 for a temporary extension of its extractive operations until 31 December 2008; (d) on 16 December 2007, the repeal of s 74 of the Mining Act came into effect; (e) on 10 April 2008, the solicitors for the council wrote to SCCCR stating that the position was unclear as to whether or not there was any authority for SCCCR to conduct the current operations on the site, and if there was, what the lawful extent of the operation was. The council stated that this lack of clarity could ultimately require declaratory relief from the Court. Accordingly, given the history of concerns raised in relation to the subject site and given its role in the proper administration of its local environmental plan, the council invited further information and submissions from SCCCR; (f) on 21 April 2008, solicitors for SCCCR respondend stating that it saw little purpose in addressing the matters raised by the council; (g) on 18 June 2008, the council, by an instrument of refusal, determined DA07/2723; (h) on 27 June 2008, the current proceedings were commenced by the council by way of application. The application claimed the following relief: 1. A declaration that the carrying out of development by the respondent on land at South Nowra being the land identified as Lot 464 Deposited Plan 1058778 known as Mineral Lease 5087 (ML1) comprising the extraction of clay/shale constitutes an "extractive industry" for the purposes of the Shoalhaven Local Environmental Plan 1985 (LEP).

[23]

(q) on 8 July 2009, the solicitors for SCCCR wrote to the council enclosing an affidavit, served late, stating that SCCCR had strong prospects of receiving approval from the Department of Planning with respect to their Pt 3A application and that, therefore, whilst not accepting the initial offer made by the council to resolve the matter, it was prepared to consider operating within an agreed framework until the Minister had completed her final assessment of the application. The letter also foreshadowed that SCCCR would seek leave to file further affidavit evidence; (r) on 24 July 2009, solicitors for the council responded by way of letter stating that leave would be opposed. It reiterated that if SCCCR was prepared to provisionally submit to limiting the extraction of material to 64,555 tonnes per annum then the council would be prepared to give further instructions to agree to the delayed conduct of the proceedings, however, if not, then it would be "necessary for the matter to be returned to the Court"; (s) on 19 August 2009, the council wrote to SCCCR foreshadowing that it intended to rely upon an amended summons; (t) an amended summons was filed in the Court on 25 August 2009. It sought: 1. A declaration that the carrying out of development by the respondent on land at South Nowra being the land identified as Lot 464 Deposited Plan 1058778 known as Mineral Lease 5087 (ML1) comprising the extraction of clay/shale not used for brick making constitutes an "extractive industry" for the purposes of the Shoalhaven Local Environmental Plan 1985 (LEP). 2. A declaration that the use of the land, the subject of declaration 1 above, commenced on or about 2002 without development consent . Exportation of Material 6 In the alternative, a declaration that any use of the subject site authorised by Division 10 of Part IV of the EP&A Act does not incorporate the exportation of material from ML 1. Blending 7 A declaration that the process of the importation of materials for blending with material extracted from ML 1 comprises an "industry" for the purposes of the LEP.

[33]

(4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount. 19 Importantly, s 98 of the CPA states that costs are in the discretion of the Court and that an order as to costs may be made at any stage in the proceedings (s 98(3) and (4)(a)). 20 Rule 42.1 of the UCPR provides that generally costs follow the event: 42.1 General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. 21 Ordinarily the power to award costs is exercised after a hearing on the merits. Furthermore, it is usually the successful party which is entitled to his or her costs (Latoudis v Casey (1990) 170 CLR 534). That is to say, success in the action or on particular issues is the primary factor that usually controls the exercise of a discretion. A successful party is prima facie entitled to a costs order (Latoudis at 543 and 566-568). 22 The reason for the rule that 'costs follow the event' is because the award of costs to a successful party in civil litigation is not to punish the unsuccessful party, but because it is just and reasonable to compensate the successful for the expense to which it has been put by reason of the litigation (Latoudis at 567 and Oshlack v Richmond River Council (1988) 193 CLR 72 at [67]). Consideration Has There Been a Hearing on the Merits? 23 The usual rule that 'costs follow the event' is, however, problematic if there has been no hearing on the merits by reason of some intervening event. 24 SCCCR submitted, first, that in the present case because final orders have not been made and because there has been no hearing with respect to the exercise of the Court's discretion to make such orders, that there had been no hearing on the merits enlivening the usual rule. And second, because the council had not sought to restrain any unlawful use but had only sought declaratory relief with respect to the quantum of material that could be extracted - which, SCCCR submitted, it could not be said with any confidence that Lloyd J would have made in light of his findings - that to award costs in these circumstances would be to impermissibly try what was in effect a hypothetical action between the parties (Re The Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624). SCCCR emphasised, in this regard, the fact that the proceedings were constituted by his Honour having specifically separated the issues for determination from any question of final relief. 25 The council submitted that the fact that no injunctive relief was sought was irrelevant, especially given that its prosecution of the proceedings was with significant merit. Moreover, that even if no declaratory relief was granted there had nevertheless been a merits hearing before Lloyd J. Furthermore, merely because the proceedings before his Honour had been bifurcated with the question of relief to be heard and determined separately, this did not mean that costs could not be awarded with respect to that part of the proceedings that had been argued before the Court. Finally, it submitted that both with respect to the material finding of his Honour, namely, that the permitted rate of extraction was 7,000 tonnes per annum, and in light of the other findings made, that declaratory relief would have, in all likelihood, been ordered. 26 In my opinion, the proceedings before Lloyd J clearly constituted a hearing on the merits. Evidence was presented to the Court and argument was heard in full on the issues that his Honour determined in due course. There can be no doubt that by reason of his Honour's findings, both legal and factual, merits were established with respect to the lawfulness of the activities undertaken by SCCCR on the site, which, as is evident from both the summons and the amended summons, was the very question that his Honour was asked to decide. 27 At no point did SCCCR accept that it was engaged in any unauthorised activity on the site nor, more specifically, that there was any limitation on its level of extraction. The decision held that from late 2001 SCCCR's conduct was without authority in several respects and it found a level of extraction dramatically lower that that ever accepted by SCCCR. That no injunctive relief was sought by the council to restrain the activities of SCCCR, is not determinative of the issue of whether there has been a hearing on the merits. 28 Accordingly, I find that there was a hearing on the merits insofar as the issues argued before Lloyd J were determined by him. Did the Pt 3A Approval Constitute a Supervening Event so as to Remove or Modify the Subject of the Dispute Such that There Should be No Order as to Costs? 29 In Kiama v Grant (2006) 143 LGERA 441 Preston J summarised the principles applicable where there has been a supervening event as follows (at [80(b)]): 80 The principles that emerge from these cases are that in a civil enforcement or judicial review case where there has been no hearing on the merits: … (b) where some supervening event or settlement so removes or modifies the subject of the dispute that no issue remains except that of costs, the proper exercise of the costs discretion will ordinarily be to make no order as to costs unless: (i) one of the parties has acted so unreasonably that the other party should obtain the costs of the action; or (ii) even if both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried so that the party should obtain the costs of the action. 30 SCCCR argued that the Pt 3A approval is a supervening event that has effectively removed the subject of the dispute between the parties such that no issue remains except that of costs, and that therefore, either the proper exercise of the costs discretion is that there should be no order as to costs or, because the council acted unreasonably in pursuing the litigation in light of the application for designated development (which had been made prior to the proceedings being commenced), the council should lose any entitlement it has to an award of costs. It reinforces the latter submission by contending that it cannot be said that one party was almost certain to have succeeded had the matter been tried to completion. In support, SCCCR relied on authorities such as Lai Qin and Kiama Council v Grant. 31 However, in my view, these decisions are distinguishable on the basis that in each case there was no hearing on the merits whatsoever because the supervening event that occurred meant that the hearing did not proceed. That is not what has happened here. 32 Although the Pt 3A approval clearly rendered futile any further hearing of the proceedings, it nevertheless came after the matter had been fully argued before his Honour and findings had been made by the Court. There was, therefore, no avoidance of any costs of the litigated action by reason of the supervening event. 33 As stated above, because there has been a hearing on the merits, the Court has discretionary power to award costs irrespective of the subsequent Pt 3A approval or the separate nature of the proceedings. This is expressly provided for in s 98(3) and (4)(a) of the CPA. 34 In my view, subject to the question of whether or not there has been any disentitling conduct on the part of the council and which, if any, party succeeded in the proceedings before Lloyd J, a cost order may appropriately be made by the Court. 35 This is because although I accept that the Pt 3A approval was a supervening event, I do not accept that it so removed or modified the subject of the dispute such that no issue remained except that of costs. The proceedings before Lloyd J may be viewed as both separate but nevertheless entire. The subject of the dispute before Lloyd J, namely, the issues for determination and factual findings made pursuant to those issues, remained, irrespective of the question of relief. 36 In these circumstances, a costs order ought to be made in order to compensate the successful party against the expense to which it has been put by reason of the litigation. 37 Thus this is not a case where the proper exercise of the costs discretion is to make no order as to costs. While a supervening event occurred, there was a full hearing on the merits on the separate issues his Honour was asked to decide and which he did decide.

[45]

(d) with respect to the fourth to sixth issues, namely, whether the current use was protected by existing use rights, his Honour determined the question as follows: (1) first, he accepted the submissions of SCCCR that the current extraction of material was protected by existing use rights (at [94]-[101]); (2) second, his Honour accepted the submissions of the council to find that the current blending of imported waste material with the extracted materials was not subject to existing use rights (at [138]); and (3) third, agreeing with the submissions of SCCCR, his Honour held that the use of the site for exportation was at all relevant times something which did not require a separate development consent and was not a "use" of the land (at [159]); (e) in relation to the seventh issue, his Honour held that the statutory limitation contained in s 109(2) of the EPAA applied to the existing use as at the date that the immunity under s 74 of the Mining Act ceased, that is to say, 23 November 2001, and not as submitted by the council, namely, 3 February 1986, when s 109(2) took effect (at [169]); (f) in relation to the eighth issue, his Honour accepted the submissions of the council that there had been an expansion and intensification of the use and rejected the submission of SCCCR that the use should be more broadly categorised (at [193]-[199]); and (g) in relation to the ninth issue, his Honour noted that the council had sought a declaration that the quantum of output of combined blended material was 64,555 tonnes per annum "or such other quantum as the Court determined appropriate" in the circumstances. The council had submitted that in light of the history of extractive use averaging about 7,000 tonnes per annum for a considerable period of time, followed by a period of approximately five years in which the average extraction was about 65,000 tonnes per annum, the long term average was much lower than 65,000 tonnes per annum. Alternatively, the council had submitted that the rate of extraction ought to be fixed at 65,000 tonnes per annum. The respondent had submitted that the Court should apply a liberal approach and that an averaging exercise over a number of years was not appropriate. His Honour held that a reasonable period would encompass the entire period between the commencement of operations in 1947 and 23 November 2001, and that after examining extraction rates during this period and applying the limitations on use in s 109(2) of the EPAA liberally, the extraction of material should be limited to 7,000 tonnes per annum (at [209]). 41 Thus Lloyd J came to the following conclusions and made the following orders (at [210]-[211]): 210 I have come to the following conclusions on the various issues raised during the hearing: (1) The correct categorisation of the current uses of the respondents' land is an " extractive industry " which is permissible with consent under the Shoalhaven LEP, and a separate use as an " industry ", which is a prohibited use. (2) The current use as an " extractive industry " is unlawful in the absence of either a right to continue the use under Pt 4 Div 10 of the EPA Act or the grant of a development consent for that use. The current use as an industry is unlawful unless it is an existing use as defined in s 106 of the Act. (3) The use of the land for brickmaking was a separate independent use as an industry and an existing use, but that use was abandoned in about 2000 when brickmaking ceased. (4) The development consent granted by the Council on 14 July 2003 authorises the " crushing and recycling of waste products ". It does not authorise the blending of the imported waste products with the clay and shale material extracted from ML1 or the imported clay and shale. (5) The development consent allows the exportation of the crushed and recycled waste products. (6) The crushing and blending of clay and shale material, imported or otherwise, is an " industry " which is and was at all material times an existing use as defined in s 106 of the Act, and is thus a lawful use. I have not decided whether s 109(2) applies to this existing use. (7) The winning of clay and shale from ML1 is an " extractive industry ", which use may continue under s 109(1) of the EPA Act. (8) The prohibition in s 109(2)(c) of the EPA Act against any enlargement, expansion or intensification of the extractive industry operates from the date upon which the immunity from that Act (by dint of s 74 of the Mining Act ) ceased, namely 23 November 2001. (9) The consequence of s 109(2)(c) is that extraction from ML1 is limited to a maximum of 7,000 tonnes per annum.

[58]

(b) second, that to capitulate and ultimately accept the original undertaking offered by the council to limit extraction to 64,555 tonnes of material as a way of temporarily resolving the proceedings in late August 2009 was reasonable, and therefore, the rejection of it by the council was, as a corollary, unreasonable. This cannot be so irrespective of the likelihood or otherwise of Pt 3A approval being granted. The fact remains that at this stage the matter was, from the council's perspective at least, ready to proceed. It can be inferred that the offer was only made by SCCCR because Lloyd J considered it appropriate that the matter proceed notwithstanding the Pt 3A application and the amended summons; and (c) third, to the extent that SCCCR complains that costs were wasted as a consequence of the hearing proceeding when the very thing that it predicted would occur, namely, Pt 3A approval being granted, eventuated, the fallacy in this submission is that there was unfairness in the council agitating to have the proceedings heard, when a similar offer had been put by the council and rejected by SCCCR in May 2009. The reality is that notwithstanding that council had informed SCCCR that it was uncertain as to whether or not SCCCR could lawfully engage in the extraction of material both on the site and at its current level, SCCCR continued to do so. Moreover, SCCCR was unwilling, until the week prior to the hearing, to place any limits on its extractive capacity in order to avoid litigation. By either giving the undertaking sought by the council in May 2009, or at the very least, negotiating some alternate level of extraction, SCCCR could have avoided the very thing about which it now complains, namely, a hearing on the merits, with all its attendant costs. It did neither. 53 As the procedural history of the proceedings demonstrates, SCCCR was put on notice early as to the council's uncertainty of the lawfulness of SCCCR's activities on the site and the need for the council to approach the Court for declaratory relief. Having had its invitation to regularise, or at the very least make submissions as to the lawfulness of their activities, rejected by SCCCR, the council not unreasonably commenced proceedings in June 2008. At that time there was no suggestion that Pt 3A approval was imminent. Thereafter, SCCCR engaged in what can only be described as dilatory conduct, no doubt in part occasioned by their expectation that the approval would be granted. However, far from avoiding or limiting costs, the conduct of SCCCR had the converse effect. Even as late as April 2009, the Pt 3A application was no closer to resolution because further documentation was required to be submitted by SCCCR. Notwithstanding the delay in the Pt 3A application being finalised and in the preparation of its defence to the proceedings, SCCCR continued to extract material at elevated rates and refused to acknowledge any limits on, or an absence of authority concerning, its extractive capacity until very late in August 2009.