costs
47St Marys sought its costs of the application, on a solicitor-client basis, because:
(a) it had largely been successful;
(b) the issuing of the subpoenas and notice to produce was premature;
(c) the processes amounting to a fishing expedition by the Valuer-General;
(d) the breadth and scope of the paragraphs of the subpoenas and notice to produce made them oppressive; and
(e) the Valuer-General had, by reason of its tardy disclosure of the forensic purpose for which it sought the documents had acted unreasonably and unfairly in its conduct.
48The Valuer-General submitted that these proceedings, being an appeal under s 37 of the Act in Class 3 of the Court's jurisdiction, meant that the Court could not make an order for the payment of costs unless it considered that the making of the order as to the whole or any part of costs was fair and reasonable in the circumstances (r 3.7(1) and (2) of the Land and Environment Court Rules 2007 ("the Rules")). The Valuer-General further submitted that none of the considerations described in r 3.7(3) of the Rules applied to his conduct and nor had he engaged in any other conduct that would permit the Court to be satisfied that it was fair and reasonable in all the circumstances that he be required to pay the whole or any part of St Marys' costs.
49In response, St Marys submitted, first, that r 3.7 did not lay down a presumptive rule that fettered the broad discretion the Court had with respect to costs, and second, that the character of the litigation was a relevant factor the Court ought have regard to in determining any application for costs under this rule and the present application had the character of ordinary litigation where typically costs follow the event.
50Shortly after the hearing was adjourned to facilitate the preparation of the delivery of an ex tempore judgment St Marys sought leave of the Court to make further submissions on the issue of costs. The application was not initially opposed by the Valuer-General, provided that he had a reasonable opportunity to respond to the submissions. The Court granted leave. Regrettably, but through no fault of the Valuer-General, this necessitated the matter returning to the Court for further oral argument due to the unavailability of the Valuer-General's counsel.
51Upon resumption the next day, the Valuer-General sought to oppose the leave already granted by the Court. No real reason was provided to the Court warranting its vacation of its earlier order. Suffice it to say it was not vacated. That more of the parties' and Court's time and resources have been devoted to the issue of costs than to the substantive application is, to say the least, highly regrettable.
52Counsel for St Marys took the Court to a number of authorities dealing with costs in Classes 1, 2 and 3 of the Court's jurisdiction in which the Court had demonstrated a willingness to order costs notwithstanding the terms of r 3.7 (or its predecessor, Pt 16 r 4 of the Land and Environment Court Rules 1996).
53That the Court can order costs in respect of applications to set aside subpoenas in Class 3 of its jurisdiction attracting r 3.7 is an unremarkable proposition and one with which I do not cavil. But this does not mean, as was in effect suggested by St Marys, that whenever the Valuer-General seeks to obtain materially relevant evidence by way of compulsion, costs should follow the event because the litigation transmogrifies into so-called ordinary litigation. To do so would subvert the plain and unambiguous text of r 3.7.
54I do not accept the interpretation given to the operation of r 3.7 by St Marys. As identified by Biscoe J in Agonic Holdings Pty Ltd v Lithgow City Council [2009] NSWLEC 34 and Arden Anglican School v Hornsby Shire Council [2008] NSWLEC 103; (2008) 158 LGERA 224, the rule may properly be characterised as a presumptive rule to the effect that ordinarily costs will lie where they fall (see also Port Stephens Council v Sansom [2007] NSWCA 299; (2007) 156 LGERA 125 at [50] where similar language was employed by Spigelman CJ). This is not to say that the Court does not retain a broad discretion to determine that an award of costs is appropriate if the circumstances are fair and reasonable. Once the Court's jurisdiction to award costs is enlivened, it clearly does.
55The presumption may be displaced. Some of the factors that might rebut the presumption are set out in r 3.7(3). These are neither prescriptive nor exhaustive. I accept that, for example, the character of the litigation and the conduct of the proceedings by the parties are factors to which the Court may have regard in assessing whether, as a matter of fairness and reasonableness, the presumptive rule ought to be displaced. For the Court to have regard to these factors, including the character of the litigation, be it akin to ordinary litigation or to a merits appeal, is not, as the Court of Appeal in Sansom (at [53]) and Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council [2007] NSWCA 300; (2007) 71 NSWLR 230 (at [68]) cautioned against, to adopt a principle or guideline which of itself is entitled to presumptive or determinative weight. This approach would lead to error.
56In any event, care must also be exercised in identifying the character of the litigation in overly general terms. As was noted in Thaina Town (at [75]), "the very breadth of matters encompassed by so general and wide-ranging a concept leads almost inevitably to a fetter on the discretion because relevant differences in the kinds of matters so classified are not taken into account."
57In Agonic , Biscoe J discussed the effect of the promulgation of the current Rules and, in particular, the enactment of r 3.7 and its operation in these terms (at [4] and [5]):
4 The Land and Environment Court Rules 2007 commenced in January 2008 and replaced the Land and Environment Court Rules 1979. Rule 3.7(2) of the new rules replaced Pt 16 r 4(2) of the old rules which provided that: "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". The essential difference between those two provisions is the absence of the words "in the circumstances of the particular case" in the new rule. In relation to the old provision, Bryson JA in Hunter Development Brokerage Pty Ltd v Cessnock City Council (No 2) [2006] NSWCA 292, (2006) 151 LGERA 46 at [4] said that those words excluded "generalised approaches". By reason of the omission of those words in the new rule, it may be that generalised approaches are permissible, although a specific generalised approach may be insufficient to enliven the discretion or may be displaced by the circumstances of the particular case. The non-exhaustive list of circumstances in rule 3.7(3) directs attention to the circumstances of the particular case. The list is similar to the indicative guidelines formulated under the old rule in Grant v Kiama Municipal Council [2006] NSWLEC 70 at [15] by Preston J and approved by the Court of Appeal in Port Stephens Council v Sansom [2007] NSWCA 299 (2007), 156 LGERA 125 at [56].
5 The effect of the costs rule is that, in the ordinary case, costs will lie where they fall. This presumptive rule is not displaced unless the Court considers that the making of a costs order is fair and reasonable in the circumstances. The rationale of the presumptive rule was addressed in Arden Anglican School v Hornsby Shire Council [2008] NSWLEC 103, (2008) 158 LGERA 224 at [9] - [10] by me as follows:
[9] In the context of the presumptive rule that there will be no order as to costs in planning appeals, the power to make a costs order is in the broadest of terms, that is, what is "fair and reasonable in the circumstances". All rational considerations are relevant to the formulation of that judgment. In the end, the question is whether, in the opinion of the Court, they are of sufficient weight to overcome the presumptive rule. Indicative guidelines for the exercise of the discretion are useful in promoting consistent decisions, but are not entitled to presumptive, let alone determinative, weight. These principles were identified in the context of the former Part 16 r 4 by the Court of Appeal in Port Stephens Council v Sansom at [48], [53] and [54] and Thaina Town (On Goulburn) Pty Ltd v Sydney City Council (2007) 156 LGERA 150 at [33] and [35]. Those judgments were delivered on the same day by an identically constituted Bench of five judges. Spigelman CJ delivered the leading judgment in each case. The presence of the words in the particular circumstances of the case' in the old rule influenced his Honour to hold that a general characterisation of proceedings such as merits review' or `capacity', cannot be determinative or, indeed, entitled to presumptive weight: Sansom at [60]. In the present case, there was no suggestion that the absence of these words from the new rule bears on the outcome.
[10] One of the purposes of the costs follow the event rule in ordinary civil litigation is to encourage the parties to settle their disputes: Sansom at [26]; Thaina at [65]. In contrast, a no discouragement principle underlies the no costs rule in planning appeals, that is, that persons generally should not be discouraged from exercising their rights of appeal via the prospect of an adverse costs order: Sansom at [22]-[23]. This may be rationalised on the bases that a significant purpose of planning appeals is to improve the decision-making process and that those involved are not adversaries in the same sense as adversaries in conventional civil litigation. ...
58I adopt his Honour's remarks. It may equally be observed that a no discouragement principle underlies the presumptive no costs rule in valuation appeals. That is to say, a person should not be discouraged from exercising his or her right of appeal by reason of fear of an adverse costs order where that person believes that the valuation is incorrect. This includes any exercise of a person's right by interlocutory application, including obtaining documents by compulsion. Having said this, the Court must not give disproportionate or determinative weight to the no discouragement principle. To do so would lead to error.
59Ultimately, each of the cases St Marys referred the Court to in support of its application for costs ( Commonwealth of Australia v Randwick City Council [2000] NSWLEC 171; (2000) 109 LGERA 297, Jacobson & McMillian v Ballina Shire Council [2006] NSWLEC 375, Palace Group of Hotels trading as Beach Palace Hotel v Randwick City Council [2007] NSWLEC 406, Hodgson v The Minister Administering the Water Management Act 2000 [2007] NSWLEC 193 and Taylor v Port Macquarie [2009] NSWLEC 1233) was, in my view, distinguishable and provided marginal assistance.
60In the decision of Taylor v Port Macquarie costs were awarded pursuant to a successful application to set aside a subpoena (at [28]). However, that decision concerned an application for compensation under the Land Acquisition (Just Terms Compensation) Act . Proceedings under that Act do not engage r 3.7(1) of the Rules. Rather, costs follow the event.
61In Commonwealth of Australia v Randwick City Council , while an order for costs was made against the Commonwealth pursuant to the dismissal of notices of motion in Class 1 proceedings seeking to set aside various subpoenas, there was no discussion whatsoever illuminating the basis of the order.
62In Palace Group of Hotels , the subpoenas, issued as they were in the context of a de novo merits appeal in Class 1 of the Court's jurisdiction, wholly lacked any legitimate forensic purpose. That is not the case here. Moreover, in that case there was no opposition by the recipient of the costs order to the order being made.
63In Jacobson & McMillan the challenge was not to the subpoena itself, but to access to documents produced on subpoena. Furthermore, the party seeking access was wholly successful. No discussion of either Sansom or Thaina Town was contained in the judgment because these decisions had not yet been published.
64In my view, it cannot be said that St Marys was wholly successful. The fact remains that it did not set aside paragraph 1 or 2 of the subpoenas or notice to produce.
65St Marys argued that but for the compromise in respect of paragraph 1 it would have been successful in setting aside that paragraph of the subpoenas and notice to produce, a fact reflected by the Valuer-General agreeing to amend the wording of the paragraph to reduce the scope of the documents sought.
66I do not agree. Without descending into the merits of whether or not paragraph 1 would have been set aside (which I would not have been inclined to do because the documents sought were clearly relevant to an issue that will almost certainly be the subject of the second McKinnon report, namely building costs, and could not be oppressive given that they were already in Mr McKinnon's possession), the parties reached a sensible compromise for which neither party ought to be penalised. It could equally be argued that St Marys' change in position, coming as it did after considerable argument, was indicative of a realisation by it that it may not be successful in setting aside this paragraph. This highlights the vice in a court speculating why a party has chosen to resolve a dispute or an issue in a dispute.
67It also cannot be said, in my opinion, that the subpoenas and notice to produce did not on their face disclose a legitimate forensic purpose having regard to the nature of the appeal. Nor can they legitimately be described in their totality as a fishing expedition as that term is properly understood (this is to be contrasted with Palace Group of Hotels at [6] and [7]).
68Furthermore, in my view, when regard is had to the correspondence passing between the parties attached to the affidavit of Mr Cregan and when consideration is given to the evidence contained in the affidavit of Mr Row, in my view, a sufficient explanation was given by the Valuer-General to St Marys and Lend Lease as to the forensic purpose for which the documents were sought. That is to say, an explanation enabling St Marys and Lend Lease to form an opinion as to whether or not it had any basis for setting aside the subpoenas and notice to produce had been issued to them.
69To the extent that the affidavit of Mr Row was filed and served after the notice of motion (it was served on 24 December 2010, that is, two days after the notice of motion was filed), its close proximity in time to the filing of the notice of motion afforded St Marys and Lend Lease an additional opportunity to consider whether or not it wished to pursue the application to set aside. Having read the affidavit they, as they were rightfully entitled to do, elected to pursue this course. But it is not correct to claim, as St Marys and Lend Lease do, that it was wholly uninformed, prior to today, as to the forensic purpose in issuing the subpoenas and notice to produce.
70While undeniably the purpose of seeking production has been elaborated upon in greater detail during the course of today's hearing, it is not the case that no or insufficient explanation was given by the Valuer-General prior to today's hearing as to why he sought the documents referred to in the schedule set out above.
71Finally and to the extent that I need to decide this issue for the purpose of costs, in my opinion, the subpoenas and notice to produce were not issued prematurely. In this regard I repeat my observations above.
72This, together with the fact that both parties have been in part successful in respect of the application to set aside all but compels the Court to conclude, as I do, that to order costs in these circumstances would be neither fair nor reasonable and, therefore, the Court cannot make an order for the payment of costs on behalf of either party.
73There is nothing in Jacobson that mandates any different result in respect of Lend Lease as a third party, which by reason of their ultimate ownership of St Marys, is not, in my view, completely disinterested.
74Finally, although the costs order was sought by St Marys on a solicitor-client basis, no legitimate justification was given for the making of such an order. Departures from costs orders, which are generally made on a part-party basis, are not lightly entertained by a court. The corollary of this is that they should not be lightly sought by a party.