Waverley Council v Barukh and Anor

Evidence

1. The Court received a statement of agreed facts filed 2 November 2022. Mr Barukh read parts of his affidavit affirmed 20 September 2022 and parts of the affidavit of his solicitor, Mark Hanna, affirmed 3 November 2022. Each of the parties provided written and made oral submissions.

Ms Blajic's position

1. Ms Blajic seeks an order that Mr Barukh pays the costs of these proceedings on the basis that Mr Barukh has effectively capitulated to the relief sought by Council against him. In the alternative, Ms Blajic seeks an order that Council pays her costs incurred in these proceedings because, first, it was unreasonable for Council, having joined Ms Blajic as a necessary party, to bring these proceedings to an end without including any consideration of her costs; and second, in the alternative, on the basis that she should not have been joined to the proceedings at all.
2. Ms Blajic submits that the proceedings arose out of building works being carried out by Mr Barukh at 70 Edward Street leading to the emergency order issued by Council and when the further amended summons was filed on 26 November 2021 reflecting the orders which had been made by consent (including an order that remedial works be carried out on Ms Blajic's property), the substantive relief sought by Council in the proceedings had been effected. Despite this, Council chose not to discontinue the proceedings in circumstances where, if it had discontinued, there would be a presumption that it would pay the costs of each of the respondents. Therefore, in the circumstances of Mr Barukh's effective capitulation making further prosecution of litigation unnecessary, an award of costs in favour of Ms Blajic is justified.
3. In the alternative, Ms Blajic submits that in circumstances where Council has abandoned the proceedings (being a "constructive discontinuance") effectively thereby avoiding the cost presumption in r 42.20 of the Uniform Civil Procedure Rules 2005 (NSW) ('UCPR'), Council's conduct was unreasonable in that it failed properly to negotiate with Ms Blajic in relation to any residual costs order. In any event, costs are compensatory, and this should be a critical factor in the exercise of the Court's discretion.
4. Ms Blajic also submits that she has not acted unreasonably at any point during the conduct of these proceedings.

Mr Barukh's position

1. Mr Barukh's primary position is that the Court could not (and should not) determine the matter upon the basis that any conduct on behalf of Mr Barukh caused the collapse of the retaining wall and that, in the circumstances, it is not appropriate for the Court to run a hypothetical case in any event. Further, to the extent that it is suggested by Ms Blajic that there has been a "surrender", Mr Barukh submits that the original summons required works to be carried out in accordance with a particular engineer's report (Peter Carters & Associates Pty Ltd), which required the installation of piles. Thereafter, following lengthy mediation, an agreement was reached that works would be carried out in accordance with different engineering plans (prepared by Ross Engineering) which did not require the installation of piles. As such, Mr Barukh submits there was no surrender or capitulation.
2. Mr Barukh submits that, in circumstances where the matter involved complex issues concerning methodology for reconstruction of a retaining wall and the fact that Mr Barukh had acted promptly, there was nothing unreasonable in his conduct, particularly in deferring any agreement as to what works would be carried out until there had been an agreed engineering solution which was acceptable to all the parties. In those circumstances, Mr Barukh submits that Ms Blajic's application for costs should be dismissed, and she should pay his costs of the application.
3. Mr Barukh also submits that the notice of motion filed by Ms Blajic on 16 November 2021 required further works which ultimately Mr Barukh agreed to in the Consent Orders which adopted specified remedial works sought in Ms Blajic's motion. Therefore, the Consent Orders did not amount to a surrender particularly in circumstances where it could be said that Mr Barukh enjoyed some success in that the works did not involve the installation of piles.
4. Mr Barukh also submits that, apart from the above, he was not given appropriate notice of Ms Blajic's claim such that although a draft notice of motion was provided to Mr Barukh's solicitors on 12 November 2021 (before her motion was filed on 16 November 2021), it differed in certain respects from that which was ultimately sought and, in any event, the three parties came to an agreement on the method for reconstruction of the retaining wall, and in those circumstances, the agreement ultimately reached does not trigger an entitlement to costs.

Council's position

1. In circumstances where Council was successful in obtaining the orders it sought against Mr Barukh, and where Council and Mr Barukh have resolved costs between themselves, Council submits that the usual rule applicable to Class 4 proceedings, that costs follow the event, should be followed. Council submits that Ms Blajic's notice of motion sought relief and costs against Mr Barukh and did not seek any relief against Council. After the Consent Orders were made on 26 November 2021, the only issues remaining between the parties were Council's claims for declaratory relief and costs orders against Mr Barukh, Mr Barukh's cross-summons seeking relief only against Ms Blajic, and Ms Blajic's cross-summons seeking relief only against Mr Barukh (noting that both cross-summonses are not pressed).
2. In the above circumstances, Council submits there was no reason for Ms Blajic to incur the costs of these proceedings after the date of the agreement between the parties and, to the extent that it may be submitted otherwise, Council's successful application to have Ms Blajic joined to the proceedings was reasonable and appropriate on the basis that on any view, she was a necessary party as the works involved in relation to the retaining wall required works to be undertaken on her property.
3. Council submits that as a consequence of the agreement between it and Mr Barukh, Council did not press for any further relief and in those circumstances, the usual order for the disposal of proceedings is that the proceedings (being the further amended summons) are otherwise dismissed. In the circumstances, by reference to rr 42.19 and 42.20 of the UCPR (in relation to costs orders in circumstances where proceedings are discontinued and/or dismissed), Council submits that no claim remained against Ms Blajic such that no claim against Ms Blajic was discontinued or dismissed and, on that basis, Ms Blajic has no entitlement to costs of any discontinued or dismissed claim.

Consideration

1. The Court has a broad discretion as to costs pursuant to s 98 of the Civil Procedure Act 2005 (NSW) ('CP Act') and the UCPR to determine by whom, to whom, and to what extent costs are to be paid. This discretion is to be liberally construed and its exercise restricted only by limitations and conditions that are clearly expressed: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [21]; Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 at 543.
2. Section 98(1) of the CP Act provides: (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.
3. Ordinarily, costs will follow the event and be payable on the ordinary basis unless it appears to the Court that other orders should be made: UCPR, rr 42.1, 42.2. The "event" usually refers to the event of the claim and may be understood as referring to the practical result of a particular claim: Sze Tu v Lowe (No 2) [2015] NSWCA 91 at [39]; Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15].
4. While a successful party is usually entitled to a costs order, when there has been no hearing on the merits, as in the present circumstance, the Court is necessarily deprived of the factor that usually determines whether or how it will make an order for costs.
5. Although the question of discontinuance may not be determinative where Council has chosen not to discontinue the proceedings, in circumstances where, first, Ms Blajic submits that Council's conduct amounts to a "constructive discontinuance" and/or there has been a capitulation or surrender by Mr Barukh; and second, Council submits that as between Council (as applicant) and Ms Blajic (as second respondent), no claim has been either dismissed or discontinued, questions of nicety arise.
6. Rule 42.19 of the UCPR governs the costs discretion in the case of discontinued proceedings and, simply stated, an order for costs under r 42.19 of the UCPR is to be made unless there is a discretionary reason to order otherwise. This means there is ordinarily an onus on the discontinuing party to convince the Court that it should not be liable for the payment of the other party's costs of the proceedings.
7. However, this is not necessarily the case in circumstances of a supervening or extra-curial event which results in the removal of the subject matter of the dispute such that no issue remains except for that of costs.
8. In summary, the absence of a hearing on the merits of the proceedings will usually mean that the Court will make no order as to costs, subject to a qualification that even where parties have acted reasonably, costs may be awarded if the Court is satisfied that one party "was almost certain to have succeeded if the matter had been fully tried", adopting the well-known comments of McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624-625; [1997] HCA 6 ('Ex parte Lai Qin'); Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [2] (per Basten JA).
9. Further, the circumstances leading to the discontinuance (constructive or otherwise) or abandonment of the proceedings and the conduct of the parties are relevant in the exercise of the Court's discretion: Ralph Lauren 57 Pty Ltd v Byron Shire Council [2014] NSWCA 107; (2014) 199 LGERA 424 at [20]-[34]. The position may be different where a respondent simply capitulates: Nadilo v Eagleton [2021] NSWCA 232; (2021) 250 LGERA 89 ('Nadilo') at [12].
10. In Kiama Council v Grant [2006] NSWLEC 96; (2006) 143 LGERA 441 at [80], Preston CJ of LEC made the following comments which I respectfully adopt: "The principles that emerge from these cases are that in a civil enforcement or judicial review case where there has been no hearing on the merits: (a) where one party effectively surrenders to the other party by: (i) discontinuing without the consent of the other party; or (ii) giving undertakings to the Court or submitting to the Court making orders against the party substantially in the terms or to the effect claimed by the other party; the proper exercise of the costs discretion will ordinarily be to make the usual order as to costs, unless there is disentitling conduct on the part of the other party; and (b) where some supervening event or settlement so removes or modifies the subject of the dispute that no issue remains except that of costs, the proper exercise of the costs discretion will ordinarily be to make no order as to costs unless: (i) one of the parties has acted so unreasonably that the other party should obtain the costs of the action; or (ii) even if both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried so that the party should obtain the costs of the action."
11. I am conscious that the power to award costs is an important aspect of rendering justice between litigants (Nadilo at [6] per Brereton JA) and that the rules and principles that are to be applied reflect the notion that justice to a successful party is not achieved if it comes at the price of being substantially out-of-pocket so that the party who is responsible for litigation should bear the costs. While the rationale is usually that the formal disposition of the proceedings by dismissal truly effects "the event", this does not hold true where a discontinuance or dismissal is consequent upon an applicant having obtained practical success, thereby rendering the further prosecution pointless. Put simply, where some supervening event, for example in the present case the effective settlement, so removes or modifies the subject of the dispute (as opposed to a party effectively surrendering to the other), there is difficulty in discerning a clear reason why one party, rather than the other, should bear the costs.
12. Leaving aside the obvious caution and principle in Ex parte Lai Qin which requires that I determine the question of costs by assessing whether "…both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continue to be reasonable until the litigation [came to an end]", the present matter is made more complicated by there being a third party.
13. While the question of unreasonableness in relation to a party's conduct needs to be viewed practically and substantively and not by focusing on the precise terms of the summons (Nadilo at [94] per Preston CJ of LEC), I am unable to conclude that either Council or Mr Barukh conducted themselves unreasonably and, although I do not consider that the matter is determined simply by whether the conduct involved capitulation or surrender (although as I find later in this judgment, there was a sufficient element of capitulation), I find it is appropriate to also consider the substance of the outcome that Ms Blajic (and Council) has achieved.
14. Adopting the approach of Preston CJ of LEC in Nadilo at [85], albeit in circumstances concerning a primary applicant and a primary respondent, that a party's success should not be evaluated by close comparison of the precise terms of the orders made by the Court by consent of the parties and the prayers for relief in the summons, but rather by looking to the substance of the outcomes sought and obtained, I consider that it would be unjust if Ms Blajic was caused to incur costs in being brought into proceedings and then participating in settlement in circumstances where if the matter had proceeded to hearing, it is almost certain that Council, as applicant (or indeed Ms Blajic by way of her notice of motion), would have enjoyed success which would have been reflected in orders not dissimilar to the Consent Orders.
15. The present conundrum arises in circumstances where Ms Blajic has been brought into the proceedings through no fault of her own, has incurred costs in the conduct of the matter, and has not conducted herself unreasonably on the matters presently before the Court (although I have some concern that the draft notice of motion provided to Mr Barukh prior to 16 November 2021 made a more extravagant claim for relief), and where there has been settlement which effectively gives Council, as applicant, the substantive relief it otherwise sought and also addresses concerns which resided with Ms Blajic.
16. When the relief sought in the further amended summons is compared to the Consent Orders, it is clear (by Order 2) that Mr Barukh was to carry out remedial works in relation to "[r]estoration of stormwater drainage infrastructure" on Ms Blajic's property. As such, it is clear that she has enjoyed some success in the resolution of these proceedings. Doing the best I can, taking into account the fact that Ms Blajic was joined to the proceedings as the result of the conduct of others (that is, that her conduct did not in any way initiate the proceedings) and my finding (to the extent that there may have been an argument to the contrary) that she was a necessary party, it is clear that although the primary dispute was between Council and Mr Barukh, there were concerns in relation to works that were required to be done on her property as a result of circumstances which, on the evidence before the Court, were related to matters which, at least, caused, first, Council to issue the emergency order (pursuant to s 9.34 and Pt 1 of Sch 5 of the EPA Act dated 1 April 2021); and thereafter, seek relief (at least in relation to the original summons filed 17 August 2021) in relation to non-compliance with that order.
17. The practical and substantive effect of the Consent Orders that were ultimately agreed between the parties provided, on any reasonable view, success to Council (and, it would appear, success of Ms Blajic's notice of motion filed 16 November 2021), even though as Mr Barukh submits, the Consent Orders did not precisely reflect the works that were otherwise sought in the original summons (or to the extent relevant, in the draft notice of motion prepared on behalf of Ms Blajic). Moreover, I consider that the Consent Orders reflect a sufficient element of capitulation by Mr Barukh and on that ground, I find that the interests of justice require that Ms Blajic receive a proportion of her costs. Although I have a concern in relation to the conduct of the cross-summons (and as noted above, both Ms Blajic and Mr Barukh confirmed to the Court (at least on 18 February 2022) that they would not be "pressing" for the relief sought under their respective cross-summonses), I see a practical difficulty in determining (or assessing) costs that may have been involved with those cross-summonses.
18. In summary, I find that the interests of justice require that, to the extent that Ms Blajic has enjoyed some success in these proceedings in circumstances where she was brought into the proceedings and necessarily incurred costs in the conduct up until the settlement thereof, I consider it appropriate that she receive one half of her costs of these proceedings up until the time of the entry of the Consent Orders and that Mr Barukh should pay these costs.
19. Although submissions were made on Ms Blajic's behalf that Council's conduct, in entering a settlement of the matter without consideration of Ms Blajic's costs, was indicative of unreasonable (and therefore disentitling) conduct in relation to a claim for costs, and while this is a matter of some concern as noted above, I am not satisfied that I have sufficient evidence to make this finding. Despite this, Council was the moving party and also the party who joined Ms Blajic to the proceedings and apparently settled its claims against Mr Barukh without consideration of Ms Blajic's costs position. As I have concerns as to Council's conduct in the further settlement of these proceedings (as submitted by Ms Blajic), I consider that, taking into account the above matters, the appropriate order is that there should be no order as to Council's costs of this costs application.
20. In all of the circumstances, I find that Ms Blajic should receive one half of her costs of these proceedings up until the time of the entry of the Consent Orders on 26 November 2021 which are to be paid by Mr Barukh and although Ms Blajic has enjoyed partial success in this costs application, that there should be no order as to the costs of this costs application with the intention that each party bear their own costs.

Orders

1. The Court makes the following orders: 1. The further amended summons is dismissed. 2. Moshe Chai Barukh, the first respondent, is to pay one half of the costs of Maria Blajic, the second respondent, incurred in these proceedings up until 26 November 2021. 3. There be no order as to costs of this costs application.

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