Tweed Shire Council v Cooke

JUDGMENT on costs

1. In Tweed Shire Council v Cooke [2023] NSWLEC 73 (Cooke No 1) at [218], [219] I made declarations that use of land Lot 34 DP 755714 and Lot 3 DP 1264574 in Kunghur, NSW for an agricultural produce industry by Mr Cooke the First Respondent was unlawful and reserved costs. Mr Kovac the Second Respondent in proceeding 2021/364584 (Lot 34 proceeding) also defended the proceedings. He was not the subject of declarations. Tweed Shire Council the Applicant (the Council) has now filed notices of motion seeking costs orders against Mr Cooke the First Respondent in proceeding 2021/364656 (Lot 3 proceeding) and the Lot 34 proceeding and Mr Kovac the Second Respondent in the Lot 34 proceeding (collectively, the Respondents). The motions can be dealt with together.
2. The motions are largely identical except where indicated otherwise and are extracted below: 1 An order pursuant to section 98(1) of the Civil Procedure Act 2005 that the first [and second respondents are] to pay the applicant's costs of the proceedings: a. on the ordinary basis up to and including 19 March 2023; and b. on an indemnity basis between 20 March 2023 to 27 June 2023. 2 In the alternative to Order 1, an order pursuant to section 98(1) of the Civil Procedure Act 2005 that the first [and second respondents are] to pay the applicant's costs of the proceedings on an ordinary basis. …
3. The motions did not seek costs from Mr Van Lieshout the Third Respondent in the Lot 34 proceeding or Kempcove Pty Ltd the Second Respondent in the Lot 3 proceeding. Both filed submitting appearances save as to costs in the substantive proceedings.

Cost rules

1. Section 98 of the Civil Procedure Act 2005 (NSW) states as follows: Part 7 Judgments and orders … Division 2 Costs in proceedings 98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act - (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court….
2. Rule 42.1 of the Uniform Civil Procedures Rules 2005 (NSW) (UCPR) provides that the costs follow the event unless it appears to a court that some other order should be made as to the whole or any part of the costs. Rule 42.1 applies in Class 4 matters before the Court pursuant to r 1.5 and Sch 1 Col 2 of the UCPR.

Chronology

1. The parties agreed on the following chronology dated 14 September 2023 : Date Event 5 November-20 December 2021 Correspondence between parties prior to commencement of proceedings. 23 December 2021 Proceedings are commenced by way of summons. 10 March 2022 Points of claim filed. 8 September 2022 DA22/0601 and BIC application lodged by Respondents for some buildings on site. 18 November 2022 By this date the Applicant had filed its evidence in chief and bundle of documents including the affidavit of Mr Chrystal dated 14 November 2022 and exhibit PC-1. 20 December 2022 Respondents filed its evidence comprising the affidavit of Mr Connolly and Exhibit SC-1 dated 20 December 2022. 21 December 2022 By this date the Applicant had filed its supplementary evidence including the affidavit of Mr Chrystal dated 21 December 2022. 31 January 2023 Respondents filed Affidavit of Mr Connolly and Exhibit SC-2 dated 30 January 2023. 23 February 2023 Applicant filed and served its evidence in reply including the affidavit of Mr Watts and exhibit LW-1 dated 22 February 2023. 2 March 2023 Further amended defences filed. 7 March 2023 DA22/0601 for use of various buildings on Lot 34 and Lot 3 was refused by Council. 8 March 2023 BC22/0058 BIC application was refused by Council. 8 March 2023 Town planning joint expert report was filed and served (finalised 7 March 2023). 15 March 2023 Applicant made Calderbank offer. 17 March 2023 First Respondent produced sales records in response to notice to produce dated 13 March 2023. 20 March 2023 Applicant's Calderbank offer expired. 22 March 2023 Letter from CJM Lawyers responding to Applicant's Calderbank offer and made counteroffer. 24 March 2023 Letter from Sparke Helmore to CJM Lawyers rejecting counteroffer. Supplementary town planning joint expert report filed 24 March 2024. 27 March 2023 Substantive hearing commences. 27 March 2023 Letter from CJM Lawyers to Sparke Helmore with invitation to treat made on 'without instructions' basis. 27 March 2023 First & Second Respondents made Calderbank offer. 28 March 2023 Email from Sparke Helmore to CJM Lawyers rejecting Calderbank offer. 28 March 2023 Letter from CJM Lawyers to Sparke Helmore with amended Calderbank offer sent by email at 10.51pm. 29 March 2023 First & Second Respondents' Amended Calderbank offer expired at 12pm. 30 March 2023 Email from Sparke Helmore to CJM Lawyers sent at 8.15am rejecting Calderbank offer. Substantive Hearing adjourned at end of 30 March 2023 until 20 June 2023 to deal with bushfire issues. 16 June 2023 Class 1 appeals commenced. Substantive hearing continues. Respondents provide undertakings to the Court to: • cease hemp farming or ancillary activities (including hemp processing); 20 June 2023 • cease residential use of Buildings A and 2; • demolish Buildings G, 2 and 5 (subject to obtaining development consent); and • remove shipping container near Building 1 and caravan near Building F. Applicant provides Court by email at 2.35pm with further amended summons. 25 June 2023 First & Second Respondents submitted application for s 68 Local Government Act 1993 (NSW) approval. Final hearing date commences at 4.15pm. 27 June 2023 Further undertaking provided by Respondents to the Court to cease use of toilet structures (comprising Buildings B, E, 4, Y and a toilet structure near Buildings Q-V) until s 68 approval obtained. Applicant further amended the summons.

1. As can be seen in the chronology above the hearing in the substantive proceedings occurred in multiple tranches, 27-30 March, 20 June and 27 June 2023. In Cooke No 1 I stated at [3], [5]-[16]: [3] It is not disputed that the Development Site was used for the growing of hemp plants and the use of hemp leaves to infuse olive oil which is bottled and packaged for sale on-line and in leased shop premises in Murwillumbah called Australian Cannabis University Store. As discussed below in [5]-[15], due to recent events the use is currently not occurring. … Events after first hearing Low-THC hemp licence refused [5] Mr Jeong solicitor affirmed an affidavit dated 16 June 2023 which attested that Mr Cooke's application for a low-THC hemp licence as required by the Hemp Industry Act 2008 (NSW) was refused. Mr Jeong is instructed that all farming and ancillary activities including the occupation of buildings for residential use have ceased. Two Class 1 appeals are also now on foot. Low-THC hemp licence issued 8 January 2013, 9 January 2018 [6] Mr Cooke was the licensee for low-THC hemp licence HIA 38 issued on 8 January 2013 in force until 8 January 2018.The licence was subject to general conditions that apply under the Hemp Industry Act. Mr Cooke was then issued low-THC hemp licence 50157 dated 9 January 2018 expiring 8 January 2023. The licence authorised the following activities on Lot 34: (1) Cultivate low-THC hemp for commercial production; (2) Supply low-THC hemp for commercial production; (3) Cultivate low-THC hemp for use in manufacturing process; and (4) Supply low-THC hemp for use in manufacturing process. Rural industry development application refusal Class 1 appeal [7] A Class 1 appeal (2023/00192915) in relation to the refusal by the Council of development application DA/0601 seeking approval for the use of buildings on the Development Site as farm buildings (Rural Industry DA) was filed in the Court on 16 June 2023. Consent for use as farm buildings is sought in relation to Buildings I-P (shipping containers), 3 (kitchen and office), 6-7 (greenhouse, two storey shed and retaining walls), X (timber hut, security), Z (lab building), A (general manager's facilities), Q-V (agricultural greenhouses), W (water tank), 5 (two shipping containers with associated roof covering), 4 (toilet structure), 8 (greenhouse tool containers), B (toilet), C (small greenhouse), E (toilet), Y (composting toilet) and AA (unless earlier removed by the Respondents). [8] Consent for demolition is sought in relation to buildings G (shed), 1 (goat shed), 2 (Darko's cabin), and 5 (two shipping containers and roof). Building information certificate refusal Class 1 appeal [9] A Class 1 appeal (2023/00193058) in relation to the refusal of building information certificate (BIC) BC22/0058 was lodged on 16 June 2023. The BIC is sought in relation to Buildings I-P (downtown), 3 (Kitchen & office), Z (lab building), X (security), and 6a (retaining walls). [10] Mr Jeong affirmed an affidavit dated 26 June 2023 which attests that a BIC application was lodged on 25 June 2023 for Buildings A, B and C. These buildings are the subject of the Class 1 Appeal (2023/00192915) seeking approval for the Rural Industry DA. The Respondents prepared a summary document listing structures subject to the BIC appeal and structures subject of the further BIC application (marked MFI 4) [11] I note for completeness that no Class 1 appeal was lodged for the refusal of the development application DA22/0742 seeking approval for an expanded dwelling house (Dwelling House DA). Buildings A and 2 were the subject of that DA. Undertakings [12] An undertaking by the Respondents was provided to the Court in proceeding 2021/364584 concerning Lot 34 on 20 June 2023 (Ex 4) as follows: The First and Second Respondents undertake: (a) not to undertake any hemp farming, or ancillary activities including hemp processing activities (subject to (b) below), on either Lot 34 or Lot 3 unless and until a renewed or new hemp licence is issued by the Department of Primary Industries in respect of the lot; (b) not to make any residential use of Building A and Building 2 on Lot 34 that is the subject of these proceedings and under the care and control of the First or Second Respondents (unless and until development consent is granted for such residential use); © to demolish: the two sheds marked 'G' (noting 'H' has been demolished); Building 1 (Goat shed); Building 2 (Wooden Cabin); Building 5 (two shipping containers and associated roof covering and awnings), subject to obtaining development consent for such demolition; and (d) to remove: shipping container beside Building 1 and caravan near Building F. [13] An undertaking in very similar terms was provided to the Court by Mr Cooke in proceeding 2021/364656 concerning Lot 3 on 20 June 2023 (Ex 4) as follows: The First Respondent undertakes: (a) not to undertake any hemp farming, or ancillary activities including hemp processing activities (subject to (b) below), on either Lot 34 or Lot 3 unless and until a renewed or new hemp licence is issued by the Department of Primary Industries in respect of the lot; (b) not to make any residential use of Building A and Building 2 on Lot 34 that is the subject of these proceedings and under the care and control of the First or Second Respondents (unless and until development consent is granted for such residential use); (c) to demolish: the two sheds marked 'G' (noting 'H' has been demolished); Building 1 (Goat shed); Building 2 (Wooden Cabin); Building 5 (two shipping containers and associated roof covering and awnings), subject to obtaining development consent for such demolition; and (d) to remove: shipping container beside Building 1 and caravan near Building F. [14] The use of various compost toilets remained in dispute pending approval under s 68 of the Local Government Act 1993 (NSW) (LG Act) which the Respondents accepted they needed. By affidavit affirmed 26 June 2023, Mr Jeong stated that a LG Act application for the toilet structures being Buildings B, E, 4 and Y and a toilet structure near Buildings Q to V was lodged on 25 June 2023. A further undertaking was given to the Court on 27 June 2023 in proceeding 2021/364584 (Ex 8) as follows: 1. The First and Second Respondents undertake not to make any use of the toilet structures on Lot 34 or Lot 3 that are the subject of these proceedings and under the care and control of the First or Second Respondents, being Buildings B, E, 4 and Y and a toilet structure near Buildings Q to V, unless and until approval is granted for their use under section 68 of the Local Government Act 1993. [15] A further undertaking in very similar terms was given to the Court on 27 June 2023 in proceeding 2021/364656 (Ex 8) as follows: 1. The First Respondent undertakes not to make any use of the toilet structures on Lot 34 or Lot 3 that are the subject of these proceedings and under the care and control of the First or Second Respondents, being Buildings B, E, 4 and Y and a toilet structure near Buildings Q to V, unless and until approval is granted for their use under section 68 of the Local Government Act 1993. [16] These changed circumstances reduced the need to consider most issues heard in the first tranche of the hearing and changed the nature of the relief sought by the Council as reflected in the recently further amended summonses set out below in [17] and [19].
2. In relation to issues in Cooke No 1 I stated at [24]-[26]: [24] In the course of the hearing the following issues were identified as requiring resolution in both proceedings, not all of which remain to be determined in light of evidence adduced and events which have occurred since the first hearing as indicated below: Defined terms • Alleged exempt works and structures means building 6, building 7, buildings Q - V, water tank W. • Codes SEPP is the State Environmental Planning Policy (Exempt and Complying Development Codes) 2008 • Farm building means building 3, 5, 6, 7, 8, C (igloo), Q - V, I-P, G, W, X, Z and 1 (including shipping container) • SEPP 4 means State Environmental Planning Policy No 4 - Development Without Consent and Miscellaneous Exempt and Complying Development 1981 • Development Site is Lot 34 and Lot 3 • LEP is the Tweed Local Environmental Plan 2014 • Lot 34 is Lot 34 in DP 755714 • Lot 34 Proceedings is 2021/00364584 • Lot 3 is Lot 3 in DP 1264574 • Lot 3 Proceedings is 2021/00364656 ISSUES FOR DETERMINATION 1. Characterisation of the land use - intensive plant agriculture, extensive agriculture or agricultural produce industry (rural industry) a. Is the making, bottling and packaging of products from the hemp (chiefly olive oil infused with hemp) ancillary to an intensive plant agriculture purpose or extensive agriculture? OR b. Is the making, bottling and packaging of products from the hemp (chiefly olive oil infused with hemp) incidental to an intensive plant agricultural use or extensive agriculture, even if not ancillary to it ? 2. If the land use is an agricultural produce industry, who bears the onus of proving that the exempt development provisions under the Codes SEPP can be relied upon in respect of the Alleged exempt works and structures? 3. In relation to the Alleged exempt works and structures, has it been proved that any removal a tree [sic] or other vegetation required a permit, approval or development consent for the purposes of clause 1.16(3)(b)? [not pressed] 4. Do the Alleged exempt works and structures comply with the development standards in clause 2.32(1) of the Codes SEPP, in particular: a. Subclause I relating to ridgelines [building 6 and 7 only]; b. Subclause (f) relating to boundary setbacks (building W only) [no longer arises]; c. Subclause (g) relating to building separation [building 6 and 7 only]; d. Subclause (i) relating to the design and specifications of a professional engineer [not pressed]; 5. If the development is characterised as intensive plant agriculture or extensive agriculture at question 1, is the construction and use of the Farm Buildings development that required development consent? [depends on answer to issue 1] 6. Can building G rely on the provisions of clause 10 of SEPP 4? [no longer arises] 7. Is the use of the timber cabin being building 2 the carrying out of development for the purposes of multi dwelling housing, being a prohibited use? In the alternative, is it development for the purposes of a dwelling, requiring consent? [no longer arises] 8. Did the building of a timber cabin in the area marked A require development consent? [depends on answer to issue 1] 9. Was an approval under the Local Government Act required for the installation of moveable dwellings and human waste storage facilities (buildings B, E, Q-V, Y) on the Development Site? [no longer arises] 10. In relation to any residual contravention of planning law arising from the above issues, the scope of any relief and whether it should it be limited to the making and sale of hemp products, and its timing, or suspension, in the exercise of the Court's discretion. [25] In relation to issue 4 addressing whether some buildings are exempt development, Buildings Q-V, W and G no longer arise. Issues 6, 7 and 9 no longer arise. [26] The remaining issues are 1, 2, 4, 5 and 8. The outcome of issues 5 and 8 depends on my finding in relation to issue 1. Issues 2 and 4 are linked. The Court will need to determine issue 4 in respect of Buildings 6 and 7. Issue 10 concerning what relief may be appropriate in the exercise of the Court's discretion depends on the determination of the other issues.
3. Two discrete issues arise in these costs proceedings given the parties' submissions. Firstly, the Respondents submit that the motions are premature and should be dismissed or stood over pending the outcome of the two pending Class 1 appeal proceedings for refusal of a development application (DA) and refusal of a building information certificate (BIC). Secondly, whether indemnity costs should be paid by the Respondents for a certain period in light of a Calderbank offer dated 15 March 2023 sent by the Council to the Respondents.

Evidence

1. The Council read the affidavit of Mr McKelvey solicitor dated 11 August 2023 and tendered exhibit AM5 to that affidavit (excluding tabs 1-9) (Ex A). The Respondents read the affidavit of Mr Jeong solicitor dated 23 August 2023 and tendered exhibit JJ3 to that affidavit (excluding JJ3-11 to JJ3-15) (Ex 1). The evidence will be summarised below as relevant to the issues.

Issue 1: Are notices of motion premature?

1. Issue 1 is whether the notices of motion are premature and whether a relevant event informing a costs order has occurred. Linked to whether there is an event that informs a costs consideration is that orders sought by the Council for demolition of various structures have been stood over pending the outcome of the Class 1 proceedings. The relevant pars of Cooke No 1 at [211], [214]-[219] are extracted below: Consideration of exercise of discretion [211] That the activities by the Respondents have presently ceased due to the recent refusal of a hemp licence under legislation administered by the Department of Primary Industries can be noted and is the practical reason why all activity has ceased on the Development Site. I otherwise consider that event has little relevance to this proceeding which is concerned with breaches of the EPA Act. The event of refusal of the hemp licence does not cure the breaches of the EPA Act established by the Council. Nor have these been remedied in a legal sense. As the Council submitted, if a hemp licence is ultimately issued the same planning issues remain for consideration. … Conclusion [214] Balancing these various matters and in light of the principles identified above I consider I should make the declarations sought in the Third Further Amended Summons in proceeding 2021/364584 concerning Lot 34, and in the Second Further Amended Summons in proceeding 2021/364656 concerning Lot 3 given the nature of the breaches and the delay in seeking to have them regularised by Mr Cooke in particular. The declarations sought by the Council are directed to Mr Cooke only. The determination of issue 1 will be of assistance in the Class 1 appeals in clarifying the appropriate characterisation of the activity occurring on the Development Site and the making of declarations further confirms those findings. [215] The Council seeks several orders for injunctive relief and demolition of various buildings in both proceedings, with any such orders to be postponed pending the outcome of the two Class 1 proceedings presently on foot. The Respondents submit that it is more appropriate given s 1.3 of the EPA Act that no orders for demolition be considered until after the outcomes of the Class 1 proceedings is known. The orders sought by the Council include postponement of any demolition until the outcome of the Class 1 proceedings is known. [216] As there is possible complexity in the outcome of both Class 1 proceedings in relation to the legal status of various buildings I will postpone the making of any demolition orders until these have been determined. I observe that a much longer timeframe than 28 days should be allowed in the event that demolition becomes necessary, given the evidence of Mr Kershaw that at least 28 weeks would be needed if all structures are to be removed. It is unnecessary to make any injunctive orders in the current circumstances. Costs [217] The usual costs order in civil enforcement proceedings is that costs follow the event so that the Council as the successful party would expect to obtain a costs order in its favour in the absence of any disentitling conduct. The Respondents indicated they may wish to make submissions on costs, as did the Council. To accommodate these submissions I will reserve costs, noting that there appear to be reasonable grounds to make the usual order. A timetable to deal with costs will be discussed with the parties. Declarations (2021/364584) [218] The Court makes the following declarations in proceeding 2021/364584: (1) A declaration that the First Respondent has breached s 4.2(1)(a) of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act) by using land identified as Lot 34 in DP 755714 located at 2956 Kyogle Road, Kunghur, New South Wales (Lot 34) and structures thereon for the purposes of an agricultural produce industry, being a type of rural industry (by the handling, treating, processing and storage of produce from agriculture for commercial purposes) being development permissible with consent pursuant to the Tweed Local Environmental Plan 2014 (TLEP), for which consent has not been obtained. (2) A declaration that the First Respondent has breached s 4.2(1)(a) of the EPA Act by carrying out building works for the purposes of an agricultural produce industry (being a type of rural industry) on Lot 34 for which development consent is required for which none has been obtained, comprising: (a) alterations and additions to a building comprising a site office, kitchen facilities, laboratory area and attached timber deck, located in the area marked '3' on the site map annexed hereto and marked Annexure A (Site Map); (b) the erection of a rectangular greenhouse measuring approximately 16m in length and 8m in height, located in the area marked '6' on the Site Map; (c) the erection of a two-storey shed located in the area marked '7' on the Site Map; (d) the installation of two shipping containers, with an associated roof covering and awnings, in the location marked '8' on the Site Map; (e) the construction of six greenhouses approximately 100m² in area in the areas marked 'Q', 'R', 'S', 'T', 'U' and 'V' on the Site Map; (f) the erection of 8 shipping containers in the locations marked 'I', 'J', 'K', 'L', 'M', 'N', 'O' and 'P' on the Site Map; (g) the installation of two water tanks, located in the areas marked '3' and 'W' on the Site Map; and (h) a plastic igloo/greenhouse structure, earthworks, retaining walls, and placement of concrete blocks in the locations marked, 'C', '6' and '7' on the Site Map. (3) A declaration that the First Respondent has breached s 4.2(1)(a) of the EPA Act by carrying out building works on Lot 34 comprising a structure (located in the area marked 'A') for which development consent is required for which none has been obtained. (4) Orders 4-9 in the Third Further Amended Summons dated 27 June 2023 stood over. (5) The parties to approach the Court within 14 days after final determinations of Class 1 appeal (2023/00192915) and Class 1 appeal (2023/00193058). (6) Costs are reserved. (7) Liberty to restore on 3 days notice. Declarations (2021/364656) [219] The Court makes the following declarations in proceeding 2021/364656: (1) A declaration that the First Respondent has breached s 4.2(1)(a) of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act) by using land identified as Lot 3 in DP 1264574 located at 2924 Kyogle Road, Kunghur, New South Wales (Lot 3) for the purposes of an agricultural produce industry, being a type of rural industry (by the handling, treating, processing, storage and packing of produce from agriculture for commercial purposes) being development permissible with consent pursuant to the Tweed Local Environmental Plan 2014 (TLEP), for which consent has not been obtained. (2) A declaration that the First Respondent has breached s 4.2(1)(a) of the EPA Act by carrying out development on Lot 3 for which development consent is required but for which none has been obtained, comprising: (a) the construction of a building which is located in the area marked 'X' on the site map annexed hereto and marked Annexure A (Site Map); and (b) the construction of a two-storey shed and adjacent water tank which is located in the area marked 'Z' on the Site Map. (3) Orders 3-6 in the Second Further Amended Summons dated 27 June 2023 stood over. (4) The parties to approach the Court within 14 days after determination of Class 1 appeal (2023/00192915) and Class 1 appeal (2023/00193058). (5) Costs are reserved.

Respondents' submissions

1. The Respondents submitted the Council's premature notices of motion for costs should be dismissed given the proceedings are yet to conclude. Alternatively, the motions should be stood over pending the outcome of the Class 1 proceedings and the final determination of whether injunctive relief will be granted. Costs should be determined at the conclusion of the proceedings when the overall outcome is known and all material considerations can be taken into account in the exercise of a costs discretion: House v The King (1936) 55 CLR 499; [1936] HCA 40 at 504-505; Luxmore Pty Ltd v Hydedale Pty Ltd (2008) 20 VR 481; [2008] VSCA 212 and Perriam Ltd v Wayne [2011] EWHC 403 (QB) at [53].
2. The Respondents submitted they were successful on the 'postponement' issue in Cooke No 1 at [215]-[216] in relation to injunctive orders and demolition orders. The Court stood over the orders seeking to restrain the use and demolition of buildings pending the determination of the Class 1 proceedings: 1. orders 4-9 in the Third Further Amended Summons dated 27 June 2023 in the Lot 34 proceedings at [218]; and 2. orders 3-6 in the Second Further Amended Summons dated 27 June 2023 in the Lot 3 proceedings at [219].
3. As the Court made bare declarations only the Council was unsuccessful in relation to its application for the injunctive orders which may never be granted. A hearing on injunctive relief is still required. If no injunctive relief is granted the Respondents would seek a partial or an apportioned costs order on that issue. It is insufficient to merely establish breach and not obtain appropriate relief to remedy or restrain that breach: Liverpool City Council v Roads and Traffic Authority and Interlink Roads Pty Ltd (No 1) (1991) 74 LGRA 265 (Liverpool No 1) at 277-281 and Liverpool City Council v Roads and Traffic Authority and Interlink Roads Pty Ltd (No 2) (1992) 75 LGRA 210 at 212 cited in Great Lakes Council v Lani; Great Lakes Council v Lani and Lamp Pty Limited [2007] NSWLEC 681 (Lani) at [42].
4. Fairness should dictate whether an apportionment order should be made or not: In the matter of Cheal Industries Pty Ltd - Fitzpatrick v Cheal [2012] NSWSC 932 at [184]. The issue of injunctive relief and demolition is a separable or even dominant issue justifying such a costs order: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [32]-[37]. The Respondents were successful on the separable issue of injunctive relief as well as the strategy and outcome of the proceedings. The Respondents sought orders that no relief be granted pending development consent in the proceedings; an intention communicated to the Council prior to the commencement of the hearing. It would be unfair for costs orders to be made now when the Respondents may have grounds for a partial or an apportioned costs order.
5. Cooke No 1 also identified defects in the time period for demolition sought by the Council at [216] as raised by the Respondents. The Respondents submitted the undertakings provided to the Court on 20 June 2023 were the result of the supervening event being the refusal of the hemp licence rather than a capitulation or surrender to the Council in the proceedings.
6. The authorities relied on by the Council below in [18] deal with factual circumstances distinct from the present case being judicial review of development consents. The Court exercised its discretion in Homemakers Supacenta-Belrose Pty Ltd v Warringah Council (No 2) (2008) 158 LGERA 90; [2008] NSWLEC 126 (Homemakers) not to award costs to the applicant.

Council's submission

1. The motions are not premature. The general rule is that costs follow the event. The event depends on the nature of the litigation and the practical result of a particular claim: Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15]. This matter is similar to cases of judicial review where orders are made under s 25C of the Land and Environment Court Act 1979 (NSW) (LEC Act). The event for costs purposes is the established breaches of the Environment Planning and Assessment Act 1979 (NSW) (EPA Act), not the ultimate outcome in terms of validating orders made under s 25C of the LEC Act: Homemakers at [11]-[12]; Calardu Warrawong (Homestarters) Pty Ltd v Wollongong City Council (No 2) [2010] NSWLEC 26 at [17]; Csillag v Woollahra Council (2011) 181 LGERA 141; [2011] NSWLEC 17 at [62]; Clark & Davis v Wollongong City Council (No 2) [2008] NSWLEC 226 at [37]. Costs were not awarded in Homemakers as a result of disentitling conduct: at [15].
2. The Respondents did not seek to adjourn the Class 4 proceedings pursuant to s 9.46(3) of the EPA Act pending the final determination of the development application. If proceedings had been adjourned and some or all of that application had been granted the complexity of the proceedings and issues for the Court to determine would have radically changed. In circumstance where the Respondents did not seek an adjournment of the proceedings they should not seek the deferral of the costs orders.
3. The Council is the successful party. Cooke No 1 determined the principal issue in dispute whether the Respondents were required to obtain development consent and found they were. The Council achieved the practical result sought in the proceedings being the declarations made by the Court that the Respondents have carried out development for the purposes of agricultural produce industry without consent. All the buildings erected on Lot 34 and Lot 3 (Development Site) that are not otherwise the subject of the undertakings were included in the declarations. Cooke No 1 does not record a single contested matter on which the Respondents were successful. The Court did not accept the Respondents' primary defence that no development consent was required. Cooke No 1 expressly states at [217] that the Council as the successful party would expect to obtain a costs order in its favour in the absence of any disentitling conduct. No disentitling conduct has been suggested.
4. Given limited undertakings have been provided not to carry out hemp processing activities in the absence of a hemp licence, a restraining order is not necessary at present. Where one party effectively surrenders to another party by giving undertakings to the Court in terms or to the effect claimed by the other party the exercise of the costs discretion will ordinarily be to make the usual order as to costs: Kiama Council v Grant [2006] NSWLEC 96 (Grant). Relying on Cooke No 1 at [211] the refusal of the Respondent's hemp licence is not a supervening event as it is not an event that removes or modifies the subject of the dispute that no issue remains except that of costs: Grant at [72]. The Council chose not to press for immediate injunctive relief to the benefit of the Respondents and Class 1 appeals and ought not be penalised for doing so.
5. There was no 'postponement' issue. The Respondents unsuccessfully submitted that any decision on relief be delayed until the outcome of the Class 1 appeals have been determined. There will be no exercise of discretion prior to the making of demolition orders. Absent any development consent the relevant structures ought to be ordered for demolition as implied by Cooke No 1 at [216]. Any relief the Respondents obtained in separate Class 1 proceedings would be the subject of a distinct cost order that should not contaminate the costs of these proceedings.
6. Unlike the authorities relied on by the Respondents for a partial or apportioned costs order the proceedings did not have mixed success as the Respondents did not succeed on any contested issue in the proceedings. Liverpool No 1 can be distinguished from this matter as it involved a technical breach of the EPA Act where there had been significant environmental assessment. In Mulwaree Shire Council v Cospack International Pty Limited [2003] NSWLEC 29 at [11]-[13] the Court determined it was reasonable for the respondent to pay the council's costs in the Class 4 proceedings up to the time when the parties mutually agreed to await the outcome of concurrent Class 1 proceedings.

Consideration

1. Costs are compensatory not punitive: Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 at 543. The awarding of costs is informed by the event being the result of the litigation. The Respondents contest whether a relevant event exists for costs purposes inter alia.
2. Extracted above in [8] is Cooke No 1 at [24]-[26] which identified the issues that remained after substantial reduction following the first tranche of hearing. Of ten issues identified, issues 1, 2, 4, 5 and 8 remained. To the extent these issues required determination, several being interlinked, the Council was successful.
3. The Council succeeded on characterisation of use (issue 1) which was the dominant issue in the proceedings that required the most evidence and took by far the most hearing time. Expert town planning evidence was called and had to be considered at length. Issues 5 and 8 did not need to be decided as the Council was successful on issue 1. An issue as to whether various structures on the lots were exempt development not requiring development consent (issue 4) was identified at the outset of proceedings, the number of structures in issue reduced over the course of the hearing due to concessions by the Respondents that these were not exempt. The exempt development issue only needed to be determined in relation to buildings 6 and 7 and these were found not to be exempt development. Issue 2 did not need to be resolved in light of the conclusion to issue 4. The consequence of these findings was that the Council established breaches of the EPA Act.
4. Issue 10 the exercise of discretion to grant relief was also considered, informed by the Court's findings on the substantive issues and the relevant circumstances that then presented themselves to the Court, as outlined in Cooke No 1 at [214]-[216] extracted above in [11]. The Council succeeded in having declarations made in both proceedings which the Respondents opposed. That was the principal issue which fell to be considered in the exercise of my discretion.
5. The Respondents have pressed that the granting of discretionary relief such as injunctive orders or orders for demolition should be regarded as a separate issue which remains to be determined, and consequently no event has yet occurred as the proceedings are not yet finalised. The Respondents' approach does not reflect what has happened in the proceedings in relation to injunctive orders and orders for demolition. No injunctive orders needed to be considered by me in light of the circumstances outlined in Cooke No 1 at [5]-[16] extracted above in [7], which included that the Respondents offered undertakings to the Court not to continue the hemp processing activity on both lots which I ultimately found required development consent. That they did so because a hemp licence was refused by the Department of Primary Industry is immaterial to my consideration of breaches of the EPA Act. I do not consider the refusal of the hemp licence was a supervening event for costs purposes. Whatever the reason for the giving of the undertakings by the Respondents, there was no practical need to make injunctive orders. Very little court time was spent on that issue.
6. In relation to demolition orders, the Council sought these in prayers 5 and 6 in the Third Further Amended Summons in the Lot 34 proceeding and in prayer 4 in the Second Further Amended Summons in the Lot 3 proceeding, with an additional order sought that compliance with these orders be postponed until the outcome of the Class 1 appeals is known. While the Respondents sought to emphasise their success on what it called the 'postponement' issue, namely that I stood over all these orders in both proceedings with the parties required to approach the Court within 14 days of the determination of the Class 1 appeals, rather than making the express orders sought by the Council, very little court time was required on this matter and I consider this was a relatively minor variation to the orders sought by the Council.
7. To the extent there may be further argument down the track after the Class 1 appeals have been determined I consider that is likely to be of short duration. Issues such as the timeframe for any demolition order if made can be readily determined on the available evidence already filed and that issue does not amount to a major defect in what the Council sought, contrary to what the Respondents submitted in [16] above.
8. The Respondents submitted that if they are successful in resisting injunctive relief and demolition orders following the determination of the Class 1 appeals they should have the opportunity to argue that a portion of their costs ought to be paid. The outcome of any such orders depends entirely on what is determined in the Class 1 appeals. That this may be a possibility in the future is not a reason to postpone making costs orders now. The Class 1 proceedings are entirely separate from these Class 4 proceedings. The costs regime that applies in that context is also quite different. The Class 1 appeals should not prevent the Council as the successful party from obtaining costs in these Class 4 proceedings.
9. I consider there is an event which informs the determination of costs for the substantive hearing being the finding of breaches of the EPA Act, consistent with Homemakers at [11], cited in Calardu at [17]. The analogy with cases which have considered costs where orders under s 25C of the LEC Act were considered, such as Homemakers, are helpful to consider in these circumstances where the Respondents have availed themselves of the opportunity to commence Class 1 appeals to seek to regularise their use of land in completely separate proceedings. Cases relied on by Respondents such as the cases cited in Lani at [42] (see above in [14]) address different circumstances and are unhelpful as a result.
10. Whether injunctive orders or more relevantly demolition orders may be made in the future should not be treated as a separate stand alone or dominant issue, as that simply does not reflect how that relief was considered or why it remains undetermined in the circumstances of this case. The cases where apportionment of costs orders have been made as relied on by the Respondents above in [15] have no factual similarity to these matters given the overwhelming success of the Council in Cooke No 1 and provide no assistance.
11. To delay the Council as the successful party from obtaining costs in what has been a substantial and essentially final proceeding is unwarranted in the circumstances. The Council as the successful party should have its costs paid by the Respondents in both proceedings.
12. The second issue therefore arises of whether any of these costs should be paid on an indemnity basis from 20 March to 27 June 2023, as the Council seeks.

Issue 2: Should indemnity costs be payable from 20 March 2023 to 27 June 2023?

1. Issue 2 is whether the Respondents should pay indemnity costs to the Council for the period from 20 March 2023 to 27 June 2023 following the Respondents' rejection of an offer made in accordance with the principles in Calderbank v Calderbank [1976] Fam 93; [1975] 3 All ER 333 (Calderbank). The relevant correspondence between the Council and the Respondents' legal representatives is extracted below.
2. The Council's solicitor sent a letter to the Respondents' solicitor dated 15 March 2023 described as a Calderbank offer one week before the hearing commenced on 27 March 2023. The letter stated as follows: … As the parties have now filed and served all their evidence in the proceedings, subject to discretionary considerations in relation to bushfire (although Council has served some evidence about the bushfire risk which highlights the challenges your clients must address), the parties are now in the best position to consider their prospects of success and risk. Based on the extent of the expert and lay evidence Council remains of the view that it has good prospects of success in these proceedings. The proximity to the hearing dates does not allow any time for further mediation. The Council has however instructed us to make a further offer of proposed consent orders to your clients in order to resolve these proceedings. Our client's offer is set out in the enclosed Consent Orders. As an offer of compromise, you will see from the proposed orders that Council is prepared to accept a significant discount on costs payable by your clients in the proceedings considering Council has incurred substantial costs and would likely recover in the order of 65-70% of its party/party costs on assessment. This would include the substantial costs the Council is likely to incur between now and the conclusion of the hearing which will be avoided if the Council's offer is accepted. Council's proposed orders also, as an act of compromise, allow your clients' the opportunity to fully exhaust their statutory rights in relation to development applications DA22/0742 and/or DA22/0601 prior to any remedial orders taking effect. The Council considers that your clients are unlikely to obtain any better position before the Court at a final hearing of the proceedings due to the strength of the expert and lay evidence that has been filed by the Council. Council's evidence demonstrates that there are serious and extensive breaches of the Environmental Planning and Assessment Act 1979 and the Local Government Act 1993 which are continuing. When proper consideration is given to the concessions made by your clients' town planning expert, Mr Connolly, about the uses that are being carried out by your clients, it is clear that the development of the subject site comprises an "agricultural produce industry" as defined in the Tweed Local Environmental Plan 2014. That development is permissible only with development consent and, as is conceded by your clients' defences in the proceedings, no such development consent has been obtained. The Council's offer to enter into the enclosed Consent Orders is available for acceptance until 5pm, 20 March 2023. This offer is made in accordance with the principles in Calderbank v Calderbank [1976] Fam 93. If this offer is rejected it will be relied upon for any application for costs in these proceedings, including any application for indemnity costs. …
3. The proposed orders enclosed in the letter dated 15 March 2023 stated as follows [annexures omitted]: In these orders: The "Property" means: Lot 34 in DP 755714 located at 2956 Kyogle Road, Kunghur, New South Wales (Lot 34), and Lot 3 in DP 1264574 located at 2924 Kyogle Road, Kunghur, New South Wales (Lot 3). Lot 3 Proceedings means proceedings number 2021/00364656, Lot 34 Proceedings means proceedings number 2021/00364584, Reference to "Sites" are references to the site locations on the Property numbered on the aerial photograph (Site Map) annexed and marked "Annexure A" to these Orders. Reference to "Structure" or "Structures" means the building, structure or works described in these Orders located on each Site and depicted on the relevant photograph annexed and marked "Annexure B" to these Orders. "Agricultural Produce Industry" is a type of "rural industry" as defined in the Tweed Local Environmental Plan 2014 (LEP 2014) involving the handling, treating, production, processing, storage or packing of products derived from hemp plant for commercial purposes and includes: The processing of hemp plants by drying and crushing, the extraction of oil tinctures from hemp, including the conversion of residue from those tinctures to biochar, the processing of products derived from hemp plants by infusing crushed and dried hemp plant with olive oil, with hemp leaves than filtered to leave an oil residue, the bottling and storage of cannabis infused olive oil, and the processing, production and storage of ingredients produced from hemp for hemp related products including: i. CBD A oil, ii. CBD 1G oil (containing THC-A); iii. CBD oil double strength, iv. "Canna Puss" bath products, v. Skin cream containing cannabis oil, vi. resin extraction; and vii. a product called "bubble hash". By consent, the Court orders: 1 The hearing dates in these proceedings listed for 27 to 31 March 2023 are vacated. 2 The First and Second Respondent in the Lot 34 Proceedings and the First Respondent in the Lot 3 Proceedings must cease the using the Property for the purposes of Agricultural Produce Industry until such time as development consent for that use is obtained. 3 The First and Second Respondent in the Lot 34 Proceedings and the First Respondent in the Lot 3 Proceedings must not use or permit the use of any of the Structures (including but not limited to those Structures at Sites "A" and "2" on the Site Map and depicted at the relevant photographs at Annexure B) for the purposes of "residential accommodation" within the meaning of the LEP 2014 without development consent and will demand in writing that any occupants currently using the Structures for the purposes of "residential accommodation" be removed within 28 days of the date of these orders. 4 The First and Second Respondent in the Lot 34 Proceedings must within 60 days of these Orders demolish and remove the following from each Site unless the extended time for compliance in Order 9 applies: a. The Structures comprising the following alterations and additions to an existing building: 1. a site office, 2. kitchen facilities, 3. laboratory area, and 4. attached timber deck, located at Site 3 of the Site Map and depicted in the photographs at Annexure B, b. The Structure located at Site A of the Site Map and depicted in the photographs at Annexure B, c. The Structures comprising: i. Three free-standing compost toilet structures located at Site B, E and near Sites Q-V on the Site Map, ii. The toilet block facility/underground septic tank at Site 4 on the Site Map, as depicted in the relevant photograph at Annexure B, d. the Structure comprising two shipping containers and associated roof coverings and awnings located at Site 5 on the Site Map and depicted in the photograph at Annexure B, e. The Structure comprising a rectangular greenhouse located at Site 6 on the Site Map and depicted in the photograph at Annexure B, f. The Structure comprising a two-storey shed located at Site 7 on the Site Map and depicted in the photograph at Annexure B, g. the Structure comprising two shipping containers and associated roof coverings and awnings located at Site 8 on the Site Map and depicted in the photograph at Annexure B, h. the Structures comprising two caravans, one at Site F and the other near Sites Q-V of the Site Map, depicted in the photographs at Annexure B, i. the Structures comprising two sheds located at Sites G and H on the Site Map and depicted in the photographs at Annexure B, j. the Structures comprising 8 shipping containers located at Sites I, J, K, L, M, N, O and P on the Site Map and depicted in the photographs at Annexure B, k. the Structures comprising the 6 greenhouses located at Sites Q, R, S, T, U and V on the Site Map and depicted in the photograph at Annexure B, l. the Structures comprising 2 water tanks located at Sites 3 and W on the Site Map and depicted in the photographs at Annexure B, m. the earthworks, retaining walls and concrete blocks at Sites "C", "6" and "7" on the Site Map and depicted in the photographs at Annexure B, and n. the plastic igloo structure at Site "C" on the Site Map and depicted in the photograph at Annexure B. 5 The First Respondent in the Lot 3 Proceedings must within 60 days of date of these Orders demolish and remove the following from each Site: a. The Structure comprising a shed located at Site 1 on the Site Map and depicted in the relevant photograph at Annexure B, b. The Structure comprising a shipping container near the shed at Site 1 on the Site Map and depicted in the relevant photograph at Annexure B, c. The Structure located at Site X on the Site Map and depicted in the relevant photograph at Annexure B, d. The Structure comprising a free-standing compost toilet structure located at Site Y on the Site Map and depicted in the relevant photograph at Annexure B, and e. The Structure comprising a two-storey shed and adjacent water tank located at Site Z on the Site Map and depicted in the relevant photograph at Annexure B. 6 The First and Second Respondent in the Lot 34 Proceedings and the First Respondent in the Lot 3 Proceedings must dispose of any residual building material following demolition of the Structures in accordance with Orders 4 and 5 at an authorised waste facility. 7 The First and Second Respondent in the Lot 34 Proceedings are to pay 75% of the applicant's costs in the Lot 34 Proceedings as agreed or assessed. 8 The First Respondent in the Lot 3 Proceedings is to pay 75% if the applicant's costs of the Lot 3 Proceedings as agreed or assessed. 9 If within 4 weeks from the date of these orders the First Respondent and Second Respondent in the Lot 34 Proceedings and the First Respondent in the Lot 3 Proceedings appeals against the determination of development applications DA22/0742 and/or DA22/0601 to this Court under s 8.2 of the Environmental Planning and Assessment Act 1979 (EPA Act) then the time for compliance by: a. the First and Second Respondent in the Lot 34 Proceedings with Orders 4(a), (b), (d), (j) and (m), and b. the First Respondent in the Lot 3 Proceedings with Order 5(a), (c), (d) and (e), does not commence until any appeal is finally determined by this Court.
4. The Respondents' solicitor sent a reply letter to the Council's solicitor dated 22 March 2023 rejecting the offer and making a counter-offer expressed as being a Calderbank offer. The letter stated as follows: … We refer to your letter dated 15 March 2023. Our clients do not accept your offer to settle the matter. Upon consideration of all expert and lay evidence, save for supplementary bushfire expert evidence, we consider that Council fails to displace the onus of proof in seeking the prayers for relief. As advised previously, we believe parts of the evidence on which Council seeks to rely are inadmissible and we dispute the procedure whereby the Council seeks to subpoena our client "for cross examination". As previously advised, the First Respondent's hemp licence 50157 remains in force while the renewal is being processed by the Department of Regional. We have secured written confirmation of this status and attach same for your reference. This correspondence will be included in the Respondent's Supplementary Bundle. We do not cavil with admitted facts and expert evidence which confirms that some end of process activities may be (if viewed in isolation) categorised as "agriculture produce industry" use. However, we maintain our position that such activities are merely incidental and ancillary to the overall "intensive plant agriculture" use. We also disagree with Council in the attribution of the onus of proving that buildings are not exempt under the Code, which in our view is Council's onus and has not been discharged on the evidence. Even if we are incorrect in these propositions, in our view the evidence does not support Council's principal prayers for relief; as the cannabis farm has a valuable public benefit and the technical or inadvertent breaches identified and would not support orders for closure of the farm and demolition of all the buildings as Council seeks. Nevertheless, in the interest of resolving this matter without going to a hearing and expending significant costs and time, in relation to at most technical breaches that our clients are doing everything within their power to regularise, we are instructed to make a counter-offer. Adopting the manner of your client's offer, see attached our client's proposed Consent Orders. Further, our clients also offer to pay for Council's costs, but we are of the view that the Respondents' admissions form minor parts of the proceedings and as such the appropriate costs order is for 20% of party/party costs on assessment. The payment of these costs shall be payable in instalments over 2 years. This offer is open for acceptance until 5pm on Friday, 24 March 2023 considering that the hearing is scheduled for next week starting on Monday, 27 March 2023. This letter is made in accordance with the principles enunciated in Calderbank v Calderbank [1975] 3 All ER 333 and will be tendered to the court on the question of costs, which will be sought on an indemnity basis. …
5. The Council's legal representative sent a letter to the Respondents' legal representative dated 24 March 2023 rejecting the counter-offer. The letter stated as follows: … We have obtained instructions on your letter dated 22 March 2023 and advise that its terms are not acceptable to our client. The offer is unacceptable for the following reasons in particular: 1. The significant scale of the development undertaken on the subject site without consent - the Council does not agree that the breaches are of a technical nature, 2. It proposes that all buildings remain on the site in the absence of any development consent/Building Information Certificate/section 68 approval, 3. There is no reference to Building 2, 4. There is no order requiring the cessation of any residential uses, 5. There is no proposal to cease production of cannabis oil on the site - only the storage and bottling of the oil, 6. There is in our view uncertainty about the status of the hemp licence and whether your clients may lawfully continue the growing of hemp on Lot 34 (noting we are not aware of any licence having been issued for Lot 3), 7. No evidence has been presented by your clients which demonstrates that "intensive plant agriculture" is currently being carried out on the site, and 8. The costs offer (ie 20% of Council's costs as agreed or assessed) is considered by Council to be unreasonable. …
6. The affidavit of Mr Jeong dated 23 August 2023 provides as follows: 1. the Respondents in their points of defence filed 23 June 2022 and amended points of defence filed 16 June 2023 foreshadowed and relied on the regularisation of both the use of the land and the buildings by securing development consent and BICs as relevant. In a letter sent to the Council on 17 December 2021 the Respondents sought an opportunity to regularise any non-compliances. 2. on 27 March 2023 the first day of hearing the Respondents made an invitation to treat regarding settlement of the proceedings and made a settlement offer to the Council. On 28 March 2023 the Respondents made an amended settlement offer after a solicitor for the Council indicated the offer had been unacceptable. On 30 March 2023 the Council rejected the offer. 3. the Council sought modified orders over the course of the hearing that were served on the Court on 20 June 2023 and 27 June 2023.

Council's submissions

1. The application for indemnity costs is limited to the time period from 20 March 2023 to 27 June 2023 including costs incurred by the Council between the expiry of the Calderbank offer and the final day of hearing of the proceedings. The rejection of the Calderbank offer on 22 March 2022 was unreasonable in the face of voluminous sales records which confirmed the extent of the commercial operation taking place on the Development Site and related shop premises.
2. The Calderbank offer was a genuine offer of compromise including a 25% discount on the Council's party/party costs that was a real and tangible benefit to the Respondents. While the Calderbank offer required the Respondents to accept the Council's case the Respondents had already done so to some extent given the development applications and concessions made at the hearing without any further evidence being filed. The Calderbank offer was fair allowing the Respondents an opportunity to exhaust any appeal rights associated with the DA and BIC application prior to the effect of any remedial orders.
3. The Calderbank offer was reasonable in requiring cessation of the agricultural produce industry use until consent was obtained. The Council could only negotiate and compromise on costs. Any compromise by the Council on the continued use of some buildings without consent would require the Council to inappropriately sanction unlawful development and allow the Respondents to continue to derive significant commercial benefit from the unlawful development.
4. The Calderbank offer was unreasonably rejected by the Respondents in light of the factors identified in Favotto Family Restaurants Pty Ltd v Chief Commissioner of State Revenue (No 2) [2020] NSWSC 519 (Favotto) at [29]. The Respondents who were legally represented and had filed their evidence were in a good position to assess the strengths and weaknesses of their case. The time allowed to consider the Calderbank offer was reasonable and no extension was sought. The extent of the discount on costs was significant in the circumstances given the length and complexity of the proceedings and the extent of the evidence filed by the parties. The Council had a strong case against the Respondents at the time the Calderbank offer was made. At the date of the offer there was: 1. probative evidence about the use of the land and sales records establishing the commercial activity on the Development Site; 2. evidence that most of the buildings claimed to be exempt development were located on a ridgeline and/or within a building separation distance of 6m; and 3. no evidence of any public interest considerations to support a favourable exercise of discretion.
5. Accepting the Calderbank offer would have avoided the time and cost of litigation. The Calderbank offer proposed clear and detailed orders and expressly stated it was based on the principles in Calderbank, made on a without prejudice basis save as to costs and foreshadowed an application for indemnity costs in the event that the offer was rejected.
6. In reply the Council relied on the table below to indicate that the Respondents were in a similar or worse position on each of the elements of the Calderbank offer following Cooke No 1. Terms of Offer (AM5 p128- Undertaking/Judgment Notes

1. Vacation of hearing dates N/A Hearing unnecessary if Offer was accepted. Costs would have been saved.
2. Cessation of use as an agricultural produce industry Undertaking given 20 June 2023. Declaration in J:218(1) Similar outcome achieved by undertaking given 20 June 2023.
3. Cessation of use of structures A and 2 Undertaking given 20 Declaration in J:218(3) for structure A. June 2023. Same outcome achieved by undertaking given 20 June 2023. 4 - 6. Demolition of structures unless saved by development consent under order 9 Same as outcome in 215- 216 and 218(4). Similar outcome achieved in the orders of the Court at J: 218(4). 7 - 8. Payment of 75% of the Council's costs as agreed or assessed Judgment indicates at 217: The usual costs order in civil enforcement proceedings is that costs follow the event so that the Council as the successful party would expect to obtain a costs order in its favour in the absence of any disentitling conduct. The Court also noted that there appear to be reasonable grounds to make the usual order. On the assumption that the preliminary view expressed at 217 becomes the Court's prima facie costs order, the Respondent is worse off than if the offer had been accepted.

1. In the Calderbank offer order 9 (see above in [38]) was proposed in circumstances where the Class 1 appeals were not on foot. Proposed order 9 permitted structures to be retained if the Respondents could obtain development consent. In light of proposed order 9 the Respondents did not achieve a better outcome in Cooke No 1 and it was unreasonable to refuse the Calderbank offer.
2. The Respondents had a worse outcome as they did not benefit from the 25% discount on costs as clearly proposed in orders 7-8. Costs are understood to be party/party costs. In reply to the Respondents' reliance on Roberts v Rodier [2006] NSWSC 1084 (Roberts) at [9] below in [51], no lump sum figure was sought by the Respondents for assessment. The Council submitted that the Respondents' submission that the offer was not reasonable was made without supporting materials. The Respondents have not relied on any authority where the Court retrospectively apportions the costs of Class 4 proceedings following later success.

Respondents' submissions

1. A Calderbank offer does not found an indemnity costs order unless the offeror obtains a result at trial that is no less favourable than the offer: Commonwealth of Australia v Gretton [2008] NSWCA 117 (Gretton) at [39], [43]. A Calderbank offer can only found an indemnity costs order if the offeree ends up worse off than if the offer had been accepted: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37] cited in Freedom Development Group Pty Limited v D'Ettorre Properties Pty Limited T/as D'Ettorre Real Estate (No 2) [2023] NSWCA 185 (Freedom Development Group) at [22]-[23] and Valmont Interiors Pty Ltd v Giorgio Armani Australia Pty Ltd (No 3) [2021] NSWCA 160 at [23]. The Respondents are not worse off for having rejected the Calderbank offer. Cooke No 1 is superior to the Calderbank offer for the Respondents as any decision about demolition has been deferred until after the determination of the Class 1 proceedings. The Calderbank offer conversely sought to impose demolition orders with the mere possibility of deferred compliance (regardless of the outcome of the Class 1 proceedings). The table relied on by the Council above in [47] demonstrates the Council did not achieve a better result as the third column notes the same or similar outcomes achieved in the proposed orders as in Cooke No 1. A similar result as in a Calderbank offer does not result in indemnity costs: Favotto at [28].
2. A Calderbank offer must involve a genuine offer of compromise and not merely seek capitulation: Ryde City Council v Tourtouras (No 2) [2007] NSWCA 262 at [4] and Westbury Holdings Kiama Pty Ltd v ASIC [2007] NSWSC 1064 at [10]. The Calderbank offer was in substance a mere restatement of the relief sought by the Council, and mirrored the revised summonses handed up by the Council at the commencement of the last day of proceedings. It was not obvious that 75% of the Council's costs as agreed or assessed would be less than party/party costs so the offer cannot support an order for indemnity costs: Roberts at [9]. No specific amount of costs was identified so that the Respondents did not know the extent of costs they would be liable for. The offer was not reasonable.
3. The Council must demonstrate that an indemnity costs order should be made based on the Calderbank offer: Gretton at [46]. The onus is on the Council to show that the rejection of the Calderbank offer was unreasonable. It was not unreasonable to reject the offer. In effect it would have been an agreement to abandon the benefit of any Class 1 proceedings except only to delay the demolition of the buildings and structures. A reasonable counter-offer was made. The counter-offer in substance offered to abandon the hemp processing on the Development Site whilst continuing the growing of hemp.

Consideration

1. The Court of Appeal in Gretton considered the principles governing Calderbank offers at [38]-[46] and it is useful to set out some of these paragraphs: [41] There are public policy considerations that underpin the making of favourable costs orders where a Calderbank offer has been made. In Leichhardt Municipal Council v Green [2004] NSWCA 341, Santow JA said at [14]: "… the practice of Calderbank letters is allowed because it is thought to facilitate the public policy objective of providing an incentive for the disputants to end their litigation as soon as possible. Furthermore, however, it can be seen as also influenced by the related public policy of discouraging wasteful and unreasonable behaviour by litigants." See also Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 . [42] The public policy in encouraging settlement also finds statutory encouragement: see the Civil Procedure Act, s 56. Section 131 of the Evidence Act also provides statutory acknowledgment that Calderbank offers may be received into evidence. [43] The making of a Calderbank offer does not automatically result in a favourable costs order, notwithstanding that the judgment is more favourable to the party making the offer than the terms of the offer. Rather, as Giles JA stated in SMEC Testing Services Pty Ltd v Campbelltown City Council at [37]: "…the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure …" (Emphasis added) See also Jones v Bradley (No 2) at [8]. [44] Two general 'rules' have emerged relating to Calderbank offers, namely, that to justify the making of an order for costs on an indemnity basis, the offer must be a genuine offer of compromise, which it is unreasonable for the appellant not to accept: Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 at [4]-[5]; Leichhardt Municipal Council v Green at [21]-[24], [36]. However, as this Court (Santow, Bryson JJA, Stein AJA) pointed out in Leichhardt Municipal Council v Green at [8], the 'common law principles' that have been developed in relation to costs "operate merely as guides to how the discretion might appropriately be exercised". The principles or rules to which I have just referred fall within that category. [45] The discretion is to be exercised having regard to all the relevant circumstances in the case. The question that had been raised in Leichhardt Municipal Council v Green was whether there had been a genuine offer of compromise. As the Court said at [21]: "There is little appreciable difference between saying that an offer should not in the court's discretion attract costs sanctions in the circumstances and saying that an offer is not a genuine offer of compromise in the circumstances. Both depend upon a value judgment of the offer and the conduct of the parties in the circumstances of the claim." [46] The onus is on the party making a Calderbank offer to satisfy the court that it should exercise the costs discretion in its favour: see Evans Shire Council v Richardson (No 2) [2006] NSWCA 61.
2. These principles identify that all relevant circumstances need to be weighed up in determining whether refusal of a Calderbank offer was unreasonable, and the Council in this case bears the onus of doing so. The first issue to determine in assessing the effect of a Calderbank offer is whether the Council achieved a better outcome in the proceedings than its offer, as identified in Gretton at [43]. It is therefore necessary to compare the Council's offer in the letter dated 15 March 2023 extracted in full in [37]-[38] above with what was determined in Cooke No 1. The consent orders proposed as part of the Calderbank offer provided for the vacation of the hearing dates, proposed the cessation of use of Lot 34 and Lot 3 for an agricultural produce industry until development consent had been obtained and payment of 75% of the Council's party/party costs.
3. In relation to Lot 34 the offer proposed inter alia: 1. prohibition on the use of specified structures as identified on the site map for residential accommodation (order 3); and 2. removal or demolition of numerous structures including site office, kitchen facilities, laboratory area and attached timber deck, a structure at Site A, four toilet structures, various shipping containers, various greenhouses, two-storey shed, caravans inter alia as identified in order 4(a)-(n).
4. In relation to Lot 3 the demolition of various structures including a shed, shipping container, two-storey shed and water tank inter alia was proposed (order 5(a)-(e)).
5. The extensive demolition and removal activities the subject of order 4(a)-(n) were to be postponed in part in accordance with order 9. Under order 9, if Class 1 appeals of the DA and BIC application refusals were filed within four weeks compliance was postponed for structures specified in some of the subclauses in proposed order 4, namely (a), (b), (d), (j) and (m) for Lot 34 and order 5(a), (c), (d) and (e) for Lot 3. Acceptance of the Calderbank offer would have required the Respondents to remove or demolish various structures the subject of order 4(c), (e), (f), (g), (h), (i), (k), (l), (n) and order 5(b) within 60 days of the order being made.
6. The Respondents' response dated 22 March 2023 above in [39] refused the offer and made an alternative offer, asserted a technical breach of the EPA Act, sought an order that use of the land for intensive agriculture (no development consent required) continue, emphasised that the Respondents were seeking to regularise their activities and offered payment of party/party costs of 20%.
7. I have already identified above in relation to issue 1 that the Council was successful on all substantive issues in the proceedings. The Respondents have attempted to inaccurately characterise the proceedings as focussed on the relief that the Court may grant to the Council by stating that it wished to regularise its use. Whether the use of the Development Site required development consent was the major issue that was required to be determined. The Council was successful on that major issue and all other substantive issues. The breaches in relation to which the Council was successful were not technical. The Council was successful on the legal issues underpinning the Calderbank offer.
8. By the final stages of the hearing in June 2023 the Respondents had filed two Class 1 appeals on 16 June 2023 in relation to the Council's refusal of the DA and the BIC application. In Cooke No 1 compliance with the demolition orders was postponed until the outcome of the Class 1 appeals was known. As identified in [29] above I did not make the orders in the terms sought by the Council, standing over several orders concerning demolition until after the Class 1 appeals have been determined. Analysis of the success of the Calderbank offer is not straightforward in these circumstances. No demolition orders were made in the final judgment in the circumstances outlined above in [29]. Demolition orders have yet to be made and may not be made at all based on the outcome of the Class 1 appeals. It is difficult to conclude finally whether the Council can be said to have succeeded in doing better than the Calderbank offer in Cooke No 1 in these unusual circumstances for costs purposes. Considering further the reasonableness of the refusal enables an overall conclusion to be drawn, as I discuss below.
9. Relevant considerations when exercising discretion in regard to rejection of a Calderbank offer (if the final result in the proceedings is less favourable to the offeree) were identified in Favotto by Ward CJ at Eq (as Her Honour then was) as follows: [28] Relevantly, it should be noted that while the rejection of a Calderbank offer, in circumstances (where it transpires that the final result in the proceeding is less favourable to the offeree) enlivens the discretion to award indemnity costs, it does not create a prima facie right to such an order (see Chief Commissioner of State Revenue v Platinum Investments Management Ltd (No 2) [2011] NSWCA 192 at [9]). Rather, in order to warrant the making of a special (indemnity) costs order, it is clear that the offer must "constitutes a genuine offer of compromise, which it was unreasonable for the [unsuccessful party] not to accept" (Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375 at [4] per Handley, Basten and Beazley JJA, as Her Excellency then was; see also Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) (2006) 67 NSWLR 706; [2006] NSWCA 120 at [8] per Santow and Basten JJA and Young CJ in Eq; Leichhardt Municipal Council v Green [2004] NSWCA 341 (Leichhardt Municipal Council) at [23] per Santow JA with whom Bryson JA and Stein AJA agreed). Further; where the offer is a Calderbank offer, the onus to demonstrate that it was unreasonable to reject it is on the party seeking to rely on the making of the offer (see Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [26])... [29] The factors to which a Court will have regard when considering whether the rejection or non-acceptance of the offer was unreasonable include: the stage of the proceeding at which the offer was received; the time allowed to the offeree to consider the offer; the extent of the compromise offered; the offeree's prospects of success assessed as at the date of the offer; the clarity with which the terms of the offer were expressed; and whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it (see Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2) [2011] VSCA 398 at [8]; Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 (Hazeldene's Chicken Farm) at [25]; Miwa at [12]).
10. In terms of the factors identified in Favotto at [29], the terms of the offer were clear and made with the benefit of both parties having all evidence filed and the production by Mr Cooke of sales records which identified the scale of the commercial operation being conducted in the use of the Development Site. The offer was made a week before the hearing commenced and provided five days for acceptance which was reasonable in the circumstances. The offer foreshadowed an application for indemnity costs if the offer was not accepted.
11. On the assumption that the Council did do better than the Calderbank offer in Cooke No 1 for this paragraph at least, as emphasised in numerous authorities such as Gretton at [43], not accepting a Calderbank offer does not mean that indemnity costs are automatically payable. An offer must be a genuine compromise which it was unreasonable of a respondent not to accept. The onus of establishing that refusal was unreasonable rests with the Council. While I accept the Council's submission that as a public body it could not make an offer that contemplated a breach of the EPA Act, the Calderbank offer made was essentially the Council's case at hearing with some of the demolition orders to be postponed until the Class 1 appeals were finalised provided these were commenced within four weeks of the orders. No criticism at all is intended by this observation. I am seeking to highlight the complexity of assessing a Calderbank offer in the circumstances of this matter being civil enforcement proceedings where the capacity exists for the Respondents to regularise a breach of the EPA Act.
12. Whether an offer was a genuine offer of compromise or was unreasonably rejected considering all relevant circumstances must be assessed at the time the offer was made, Freedom Development Group at [23]. I consider the Council's Calderbank offer as a public authority enforcing the EPA Act was reasonable in the circumstances of a now proven breach of the EPA Act but I do not consider the Respondents' refusal was unreasonable given the scale of the demolition and removal orders sought in the offer. At the time the Calderbank offer was made in March 2023 the DA and BIC applications filed on behalf of Mr Cooke in September 2022 had been refused. The possibility existed that Class 1 appeals could be lodged with the potential for all of the structures on the lots to remain some of which would otherwise have had to be removed under the terms of the Calderbank offer.
13. The offer for the Respondents to pay 75% of party/party costs was also a compromise. I do not need to consider whether this was reasonable in order to finally determine the matter. On balance I do not consider the indemnity costs order sought by the Council is warranted in all relevant circumstances.

Costs of notices of motion

1. The Council did not seek costs for the motions. As each party succeeded on one of the two issues which required determination each party should pay their costs of the motions.

Order

1. The Court makes the following order in the notice of motion dated 11 August 2023 in proceeding 2021/364584: 1. The First and Second Respondents are to pay the Applicant's costs of the proceeding on an ordinary basis. 2. The exhibits to be returned.
2. The Court makes the following order in the notice of motion dated 11 August 2023 in proceeding 2021/364656: 1. The First Respondent is to pay the Applicant's costs of the proceeding on an ordinary basis. 2. The exhibits to be returned.

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