Thaina Town (On Goulburn) Pty Ltd v Council of the City of Sydney

Gee v Port Stephens Council (2003) 131 LGERA 325; Hunter Development Brokerage Pty Limited v Cessnock City Council [2006] NSWCA 292 (1 November 2006); CASES CITED: Outdoor Australia Pty Limited v Auburn Council (1996) 89 LGERA 365; Residents Against Improper Development Inc v Chase Property Investments Pty Limited [2006] NSWCA 323 (23 November 2006); Thaina Town v City of Sydney [2006] NSWLEC 624 (5 October 2006)

APPLICANT Mr M Hetherington SOLICITORS LEGAL REPRESENTATIVES: C P White & Hetherington RESPONDENT Mr S Kondilios (solicitor) SOLICITORS Maddocks Lawyers

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

THAINA TOWN (ON GOULBURN) PTY LTD V COUNCIL OF THE CITY OF SYDNEY

1 HIS HONOUR: The applicant, Thaina Town (On Goulburn) Pty Limited, operates a Thai restaurant in a residential flat building at 85-91 Goulburn Street, Sydney. The building is strata titled. The applicant is the lessee of a strata lot on the ground floor. 2 Cooking in the restaurant obviously generates fumes, odours, grease and oil. An exhaust system is fitted above the kitchen of the restaurant to extract the cooking fumes, odours, grease and oil. Part of the exhaust system is in the restaurant lot but the majority is in the common property venting through the roof of the building. 3 The Council of the City of Sydney received complaints from a resident of the building, the owner of the penthouse on level 14, of cooking odours. The Council investigated the premises. The Council found odours, cooking grease and oil were discharging from the exhaust system into the plant room, one level above the penthouse on level 15. 4 The only source of cooking odours, grease and oil is the Thai restaurant. It is the only source which connects to the exhaust system. 5 In May 2006, the Council issued a prevention notice under s 96(2) of the Protection of the Environment Operations Act 1997. This provides: The appropriate regulatory authority may, by notice in writing, do either or both of the following:

(b) direct the person carrying on the activity (whether or not at the premises),

to take such action, as is specified in the notice and within such period (if any) as is specified in the notice, to ensure that the activity is carried on in future in an environmentally satisfactory manner. 6 The prevention notice issued by the Council stated relevantly:

" Activities Suspected of Being Carried on in an Environmentally Unsatisfactory Manner :

The City of Sydney Council, being the appropriate regulatory authority for the purposes of Pt 4.3 of the Protection of the Environment Operations Act 1997 ("Council"), suspects that an activity, namely, your use of the mechanical ventilation kitchen system ("the exhaust system"), has been or is being carried on in an environmentally unsatisfactory manner at 85-91 Goulburn Street, Sydney ("the premises"), insofar as:

(a) odours, cooking grease and oil are discharging from the exhaust system into the plant room level of the premises;

(b) odours, cooking grease and oil are discharging from the exhaust system onto the roof level of the premises;

(c) odours smelling of grease and cooking oil are discharging from the exhaust system throughout the premises in concentrations that are discernible by other occupants of the premises as "an offensive odour" within the meaning of the Protection of the Environment Operations Act 1997;

(d) installation of the exhaust system does not comply with either or both the Building Code of Australia ("the BCA") or Australian Standard AS1668.2091 ("the AS").

Direction to take preventive action : To ensure that the above activity is carried out in future in an environmentally satisfactory manner, council directs you to take the following preventive action:

(1) have the exhaust system, plant room level and roof level cleaned, including removal of all grease, oil and other substances, by suitably qualified kitchen exhaust contractor within 14 days from the date on which this Prevention Notice is given to you; and (a) submit to council, within 28 days from the date on which this Prevention Notice is given to you, a compliance assessment report prepared by a suitably qualified mechanical ventilation engineer identifying all remedial works, repairs, alterations and/or replacement of plant (including all plans and specifications), necessary to have the exhaust system comply with the BCA and the AS."

7 The applicant carried out the works required in the first part of the order, that is, the cleaning of the exhaust system, plant room level and roof level, however, the applicant disputed the second part of the order, that is, the preparation and submission to the Council of a compliance assessment report. 8 An applicant who is dissatisfied with a prevention notice has a right to appeal to the Land and Environment Court under s 289(1) of the Protection of the Environment Operations Act. The appeal is a hearing de novo. The Court engages in merits review of the decision to issue the prevention notice. The Court can decide afresh on the evidence before it whether and in what terms a prevention notice should be issued. The appeal is assigned to Class 1 of the Court's jurisdiction: s 17 of the Land and Environment Court Act 1979. 9 Commissioner Brown of the Court heard and determined the applicant's appeal. In reasons for judgment given on 5 October, 2006 (Thaina Town v City of Sydney [2006] NSWLEC 624), Commissioner Brown found:

(a) the problem with the exhaust system was not in that part which was in the restaurant premises but rather in that part which was in the common property of the building;

(b) the Owners' Corporation of the Strata Plan was responsible for the maintenance and repair of the common property: s 62 of the Strata Schemes Management Act 1996;

(c) the applicant does not have the management or control of the common property;

(d) the applicant is, therefore, not the occupier of the premises in which the exhaust system is deficient;

(e) accordingly, the Council could not issue a prevention notice to the applicant under s 96(2)(a) of the Protection of the Environment Operations Act and neither should the Court;

(f) the activity is the external mechanical ventilation system, not the total operation of the restaurant and all resultant impacts caused by its occupation including with a mechanical ventilation exhaust system;

(g) the applicant is not the person carrying on the activity of the external mechanical ventilation system. (This finding must be understood as referring to that part of the external mechanical ventilation system that is deficient and that is in the common property.) Rather, the Owners' Corporation carries out that activity in the common property;

(h) accordingly, the Council could not issue a prevention notice to the applicant under s 96(2)(b) of the Protection of the Environment Operations Act and neither should the Court; and

(i) the appeal should therefore be upheld and the prevention notice revoked. 10 The applicant now applies for its costs of the appeal. 11 Section 69(2) of the Land and Environment Court Act provides: "Subject to the rules and subject to any other Acts:

(b) the Court may determine by whom and to what extent costs are to be paid." 12 The Court has made rules, including Pt 16 r 4(2) of the Land and Environment Court Rules 1996 which provides: "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." 13 However, Pt 16 r 4(1) states that this Rule applies only to certain categories of proceedings in Classes 1, 2 and 3 of the Court's jurisdiction. An appeal under s.289 of the Protection of the Environment Operations Act is not one of these categories. Hence, Pt 16 r 4(2) does not apply. 14 The result is that the Court's power to order costs is to be found only in the unconstrained power in s 69(2) of the Land and Environment Court Act. 15 In Hunter Development Brokerage Pty Limited v Cessnock City Council [2006] NSWCA 292 (1 November 2006) Basten JA held: "[16] Statutory powers to award costs may be found in one of three forms. The first is an unconstrained conferral of power without direction or limitation. Absent the relevant rule, the power conferred by s.69(2) is such a power. As was explained by Gaudron and Gummow JJ in Oshlack adapting the words of Dixon J in Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 505, the power is "unconfined except insofar as 'the subject matter and the scope and purpose' of the legislation may enable an appellate court to pronounce the reasons given by the primary judge to be 'definitely extraneous to any objects the legislature could have found in view'": 193 CLR 72 at [22].

[17] As identified in Latoudis v Casey, the primary and generally the only relevant consideration is that the power is conferred 'to compensate the successful party against the expense to which that party has been put by reason of the legal proceedings': Oshlack at [25]; see also Ruddock v Vadarlis [2001] FCA 1865; (2001) 188 ALR 143 at [12] (Black CJ and French J)." 16 As I have noted, the appeal under s 289 involves merits review in Class 1 of the Court's jurisdiction. The long-standing practice of the Court in merits review proceedings in Class 1 has been that there should be no order for costs unless the circumstances of the case merit an order for costs. This practice is the basis of the discussion by Basten JA in Hunter Developments Brokerage Pty Limited v Cessnock City Council of the different lines of authority in this court exemplified by Outdoor Australia Pty Limited v Auburn Council (1996) 89 LGERA 365 and Gee v Port Stephens Council (2003) 131 LGERA 325: see at [32]-[42]. The practice of the Court not to order costs in merits review proceedings in Class 1 of the Court's jurisdiction is also referred to by the Court of Appeal in Residents Against Improper Development Inc v Chase Property Investments Pty Limited [2006] NSWCA 323 (23 November 2006), particularly in the judgment of McClellan CJ at CL at [219], [225], [226], [227], [231], [238], [241], [248], [250], and [252] and Tobias JA at [199], [202], [208], [209]. 17 In Hunter Development Brokerage, Basten JA does not hold that such an approach was in error. At [39], Basten JA states: "Applying the principles articulated in Latoudis v Casey to the unfettered discretion granted by s 69(2), prior to the promulgation of the rule [that is, Pt 16 r 4(2)], the proper approach to questions of cost must have required that costs follow the event unless there were circumstances which justified a different rule. Whether the nature of the merits review jurisdiction provided such a justification need not be determined in this case, because the rule now governs." 18 Santow JA agreed with Basten JA. Bryson JA did also adding at [5]:

"The discretion conferred by s.69 is broad, the general outcome of its exercise will be that costs follow the event but there is no absolute rule that that will be the outcome. The facts and circumstances of a particular Class 1 proceeding may furnish sound ground or a good reason for the exercise of the discretion in a different way. Generalised classification into proceedings which involve matters of merit and not questions of law are not facts and circumstances of the particular case and not sound grounds or good reasons." 19 McClellan CJ at CL refers to the policy reasons underlying the Court's approach in merits review proceedings in Residents Against Improper Development Inc v Chase Property Investments Pty Limited [2006] NSWCA 323 at [219]-[251]. 20 In the circumstances of this case, I am of the opinion that the proper order that should be made is that each party pay their own costs of the proceedings. 21 As I have noted in the brief description of the facts, there is an undoubted problem with the emission of cooking odours, grease and oil into the residential parts of this building. The only source of these cooking odours, grease and oil is the applicant's restaurant. The exhaust system which captures the applicant's cooking odours, grease and oil has its origins in the applicant's premises. The exhaust system then passes through the common wall into the common property of the building and continues to vent at the roof. 22 The Commissioner found as a matter of fact on the evidence before him on the hearing of the merits review appeal that the deficiency in the exhaust system resided not in that part of the exhaust system which was in the applicant's premises but in the continuation of that exhaust system that went through the common property through to the roof. On that factual finding, the Commissioner determined that the applicant was not the occupier of the premises in which the deficient part of the exhaust system existed. 23 Accordingly, the Commissioner determined that a prevention notice could not be issued to the applicant to prepare a report as to the measures that should be taken to remedy the deficient part of the exhaust system because the proper person to do that report was the occupier of the premises in which the deficient part of the exhaust system existed, namely, the Owners' Corporation. 24 Similarly, the Commissioner made a finding of fact that the activity that was being carried out in an environmentally unsatisfactory manner was the activity of passing the cooking odours, grease and oil through that part of the exhaust system that was in the common property rather than the activity of the applicant in extracting from its kitchen the cooking odours, grease and oil into an exhaust system in the common property which was known to be deficient. Again, on the basis of this factual finding the Commissioner determined that the prevention notice should be issued to the Owners' Corporation rather than to the applicant. 25 The factual findings, particularly in relation to the second matter, could equally have been made differently. If that had occurred the consequence would be that the order could properly have been made against the applicant under s 96(2)(b). The consequence of such a contrary factual finding would have meant that the applicant would have failed in its appeal. Yet the question of fact that lay in dispute between the parties was fairly open. 26 An applicant who is dissatisfied with a particular factual finding and wished to contest it on an appeal on the merits to the Court could be dissuaded from bringing such an appeal if the consequence of a loss on questions of merit would always result in costs following the event, that is, that the applicant would have to pay the costs of the Council. Such policy considerations have underpinned the practice of the Court in not making an order for costs in merits review proceedings in Class 1. This is evident in the decision of Pearlman CJ in Outdoor Australia Pty Limited v Auburn Council (1996) 89 LGERA 365 at 369. It is evident in the discussion by McClellan CJ at CL in Residents Against Improper Development Inc v Chase Property Investments Pty Limited [2006] NSWCA 323 at the paragraphs earlier referred to. 27 It is also evident in the discussion by Basten JA in Hunter Development Brokerage Pty Limited v Cessnock City Council [2006] NSWCA 292 (1 November 2006). Indeed, Basten JA's reasoning for concluding that the decision in Gee v Port Stephens Council (2003) 131 LGERA 325 may have unduly fettered the Court's discretion - namely that, in merits review proceedings, the nature of an issue as one of legal capacity or power rather than the merits was not determinative and did not mandate that the Court should make an order that costs follow the event rather than adopt the usual practice in merits review proceedings in Class 1 that there be no order as to costs - accepted the practice that in merits review proceedings an appropriate order can be that there be no order as to costs. 28 As I have said, the particular circumstances of this case make it appropriate that there be no order as to costs. There is an undoubted problem with escape of cooking odours, grease and oil into the building. The problem would not exist but for the actions of the applicant's restaurant in venting its cooking odours, grease and oil from the kitchen into the exhaust system that is in the common property and that is deficient. As a result of the Court's decision the Council will need to and, as I understand it, is intending to issue a prevention notice against the owner of the common property to remedy that situation. 29 I find that it was reasonably open to the Council to determine that an appropriate solution was to issue a prevention notice in the form that it did against the source of the cooking odours, grease and oil and that is the applicant's premises. It is to be remembered that the nature of the work required by the prevention notice was to prepare a compliance assessment report which identified the problems. The order in terms did not require the carrying out of works that might be identified in that compliance assessment report. 30 For these reasons, I consider that each party should pay their own costs. That is sufficient to dispose of the applicant's motion which sought that there be an order for costs in its favour. 31 There is also a notice of motion by the Council seeking an order that, in respect of one appearance before the Court, the applicant pay the Council's costs. That appearance involved the hearing of a notice of motion by the applicant to vacate the hearing date in order to allow negotiations to take place between the applicant and the Council in relation to the scope of the compliance assessment report that was the subject of the prevention notice. The Court dismissed the applicant's notice of motion and maintained the hearing dates. The Council submitted that costs should follow the event in relation to that notice of motion. 32 However, this appearance and the contested motion should be seen as merely being part of the preparation of the merits review appeal for hearing. 33 For the reasons that I have given above, I do not consider it appropriate that there be an order for costs for the final hearing of the merits review appeal. So too, that should be the situation for the interlocutory steps in preparation for that final hearing. Each party should pay their own costs. 34 Finally, I need to come to the question of costs of each of the motions. Generally, the costs of motions for costs do follow the event. In this case, the applicant has been unsuccessful in persuading the Court that an order for costs should be made in its favour for the proceedings but equally the Council has been unsuccessful in its motion that an order for costs should be made in its favour in relation to the particular appearance before the Court at the interlocutory stage. Probably there is not a precise balancing of the time spent between these two notices of motion but I nevertheless do note that each party was unsuccessful on its motion. 35 However, more generally, I consider that in the circumstances of this case the applicant should not be ordered to pay the Council's costs of defending the applicant's motion for costs. Although I have held that the proper order in the particular circumstances of this case is that each party pay their own costs, the applicant's motion was not without merit. It had in its favour the fact that Pt 16 r 4 did not apply and that the Court's discretion was the unfettered one under s 69(2) of the Act. There are also dicta in its favour by reference to the recent Court of Appeal decisions to which I have earlier referred. 36 I consider that in all the circumstances it would not be a proper exercise of discretion to order the applicant to pay the Council's costs of the applicant's notice of motion for costs. Equally, I do not consider that the Council should pay the applicant's costs of its unsuccessful motion in relation to the interlocutory application because I consider that it should be part and parcel of the general order that each party pay their own costs. 37 There is one further application for costs that I need to deal with. The respective notices of motion for costs were originally fixed for hearing on 28 November 2006. As it happened the solicitor for the Council in this case was also the solicitor and advocate in another case that was before me at the same time. That case through no fault of the solicitor for the Council took longer than anticipated. I determined it was desirable in the interests of justice that that case not be adjourned but be finally disposed of on that occasion. The consequence was that the solicitor for the Council was jammed and could not be in two places at the one time. Nevertheless, from the applicant's point of view, it had both its solicitor and counsel available to argue the notices of motion for costs in this case. 38 By reason of the fact that the solicitor for the Council was still detained in the other proceedings before me, the notices of motion for costs in this case were stood down in the hope that the matter before me would resolve itself in a reasonable time frame so as to allow the notices of motion for costs in this case to be heard and determined. Unfortunately, that was not to be. The matter before me last Tuesday took a considerable time and did not finish until after 6 pm. The consequence was that the solicitor for the Council was not able to be released from his obligations in that matter so as to be available to argue the notices of motion for costs in this matter. 39 Nevertheless, as has often been said, costs are compensatory and not punitive. The fact was that the applicant had its legal representatives ready, willing and able to argue the notices of motion for costs in this case but was prevented from doing so. 40 In the circumstances, I consider that it is appropriate that an order be made to compensate in part the applicant for its costs of having its legal representatives available. I do so purely on the basis of compensation. As I have said, the circumstances which came about were through no fault of the solicitor for the Council but nevertheless I consider it is appropriate that the Council compensate the applicant in part for its costs. 41 I am informed that the counsel and solicitor for the applicant waited for two hours between 3.00pm and 5.00pm on Tuesday, 28 November 2006. They seek to be compensated for that time. In the circumstances, I do not consider that both should be compensated for waiting there for that time. However, I consider that at least one should be at a rate of $300 an hour. I am prepared to allow $600 compensation by way of an order for costs. 42 Accordingly, the Court makes the following orders:

(1) Each party pay is to their own costs of the substantive proceedings.

(2) Each party is to pay their own costs of each of the Council's and the applicant's notices of motion for costs.

(3) The Council is to pay the sum of $600 to the applicant for the thwarted hearing of the notices of motion for costs on 28 November 2006. **********

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.