Waverley Council v Refkin Pty Limited

REASONS FOR JUDGMENT 1 On 11 August 2000, the Waverley Council ("the Council"), a local government body for a part of Sydney, New South Wales, commenced a proceeding in this Court. There were two respondents to the proceeding, Refkin Pty Limited and Mr John Robert Keith. The latter has, I infer, been the managing director of the former at all times material for present purposes. 2 The Council commenced the proceeding by filing a statement of claim together with its application. It served that application and statement of claim on the respondents on 29 November 2000, in other words, over three and a half months after commencing the proceeding. 3 On 4 December 2000, I conducted a directions hearing in the proceeding. At that hearing, I gave certain directions and fixed a further directions hearing for 16 February 2001. 4 At the directions hearing on 16 February 2001, by consent, I granted to the Council leave to file in Court an amended statement of claim, ordered the Council to pay the respondents' costs thrown away by the amendment of its statement of claim, as well as the respondents' costs of the directions hearing, gave certain directions and fixed a further directions hearing for 4 May 2001. 5 At the directions hearing on 4 May 2001, by consent, I ordered the Council to pay the respondents' costs of the directions hearing, gave certain directions and fixed a further directions hearing for 21 May 2001. 6 On 16 May 2001, the Council, without either the leave of the Court or the consent of the respondents, filed a notice of discontinuance of the proceeding. The Council was entitled to file that notice without either such leave or such consent, because the pleadings in the proceeding were not yet closed: see the Federal Court Rules (Cth) ("the Rules"), O 22, par 2(1)(b). 7 There is now before me a motion, filed by the respondents on 7 June 2001, seeking the following orders: "1. That the previous cost[s] orders of 16 February 2001 and 4 May 2001 be vacated. 2. That the Applicant pay the … Respondents' costs of th[is] proceeding[ ] on a[n] … indemnity basis. 3. That the Applicant pay the Respondents' costs of this … Motion on a[n] … indemnity basis." I note that, in default of my making the orders sought by the respondents, the Council will be liable (as it concedes) to pay the respondents' costs of the entire proceeding on a party and party basis. That outcome will arise partly by reason of the consent orders which I have already made on 16 February and 4 May 2001 and partly by reason of the operation of the Rules. As to the latter as the source of the Council's obligation to pay, on a party and party basis, that part of the respondents' costs of the proceeding not covered by my consent orders of 16 February and 4 May 2001, see O 22, subr 3(1) and O 62, rr 12, 19 and 26. 8 It is convenient to begin my discussion of the respondents' motion by setting out the background to the present proceeding, on which background the respondents have relied heavily before me in support of their motion. 9 On 30 September 1996, the Council received from Mr Keith a development application, together with an accompanying Statement of Environmental Effects ("the Statement") prepared for Refkin, seeking development approval for the erection of two ground floor shops and eleven residential apartments at a location within the Waverley local government area. 10 In the Statement, reference was made to the fact that the eleven residential apartments mentioned in the development application were to comprise three one-bedroom dwellings, four two-bedroom dwellings and four three-bedroom dwellings. The Statement discussed the compatibility of the proposed development with: the Waverley Local Environmental Plan 1985; the Draft Waverley Local Environmental Plan 1995; and a number of Development Control plans. Having done so, the Statement then addressed three issues which it described as "key". 11 One of those three key issues was described as "Contribution Towards the Provision of Affordable Housing". As to that issue, the Statement stated: "The Affordable Housing Study, July 1996 was undertaken on Council's behalf by Berkhout Planning & Development in conjunction with Hill PDA. The Study recommends that: · the affordable housing program should aim to secure 15 affordable housing units on an annual basis by offering development incentives; · development incentives, including a floor space bonus, should be offered for the construction of affordable housing in business zones, if the development is constructed within the building envelope for that zone; and · Council's willingness to use development incentives in return for the construction of affordable housing should be included in the Council's Local Environmental Plan and Development Control Plans. It is proposed that one of the one bedroom dwellings within the development be transferred to Council for the provision of affordable housing. It is anticipated that the Council could manage the accommodation by offering it to a local community housing organisation or the Department of Housing. The integration of the affordable housing accommodation with privately owned dwellings is likely to lead to positive social outcomes. The locality is suited to affordable housing being centred on convenient public transport. The proposal achieves desirable social objectives without compromising environmental objectives. The proposal is, therefore, consistent with the recommendations of the Study and the development incentives in the terms of the floor space ratio and height of the proposed building can be justified on the basis of the contribution that the proposal will make to the provision of affordable housing in Waverley." I note that the terms of the Study referred to in the passage just quoted were not in evidence before me. 12 On 22 July 1997, the Council decided to grant to Mr Keith consent to his development application, subject to twenty-two conditions. The second of the twenty-two conditions was as follows: "That a 1 x 1 bedroom unit is to be transferred to Council in perpetuity within two months of the Strata Plan being registered. This unit is to be managed by a local community group to provide permanent and safe housing in accordance with Council's Affordable Housing Program." I note that the terms of the Program just referred to were not in evidence before me, that the consent granted was for four shops and nine residential units, rather than for the two shops and eleven residential units referred to in the original development application, and that the number of one-bedroom dwellings among the nine residential units appears to have remained at the originally proposed three. 13 It seems that Mr Keith appealed to the Land and Environment Court of New South Wales against at least one of the conditions attached to the Council's development consent, but not against condition two, and that, on 5 February 1998, that Court also granted development consent to Mr Keith, subject to (relevantly) condition two. 14 It appears that, on 18 June 1999, titles were issued for lots in the strata plan referred to in condition two and that, on 7 September 1999 and again on 28 September 1999, the Council wrote to Refkin regarding the latter's compliance with condition two. 15 Then, on 9 February 2000, solicitors acting for the Council wrote to Refkin, referring to condition two to the development consent and to the two earlier letters just referred to and asserting the following matters: titles had been issued for lots in the relevant strata plan on 18 June 1999; condition two had not yet been complied with; lots three, four and five in the strata plan were the only one-bedroom units in the development; lot four had been sold, though no transfer had yet been registered; lot five had been sold and the transfer registered; and the Council had placed a caveat on lot three. The solicitors also stated: "Not only has no unit been transferred, but we have received no communication from you on that subject. This chain of events has caused concern in the Council that Refkin may not comply with the terms of the condition. … We are instructed to request that you forward to us a memorandum of transfer and any other relevant documentation for the purpose of facilitating a transfer to Council of unit 3 in accordance with the terms of the consent. Should we not receive a memorandum of transfer as requested by 10am on Monday 14th February 2000, we are instructed to commence proceedings for appropriate relief by way of injunction and [sic] compensation or both without further notice or delay." 16 Having plainly not received the requested transfer, on 14 February 2000, the Council commenced proceedings against Refkin in the Equity Division of the Supreme Court of New South Wales. 17 On 16 February 2000, the Council's solicitors received a reply to their letter to Refkin of 9 February 2000. The letter was dated 14 February 2000 and was written on behalf of Refkin by Mr Keith, who was described as Refkin's managing director. After referring to the solicitors' letter, Refkin's letter continued, "We do not agree with part of the contents of your letter. The condition to which you refer is both ultra vires and void for uncertainty. Consequently this Company believes the purported condition to be of no force and effect. Having regard to the involvement of Council Officers in the negotiations which lead [sic] to a number of concessions being made by the Company in respect of the development, and their subsequent change of position, followed by threats made by Council Officers to the Company, the Company does not believe that it is bound by the matter to which you refer." 18 On 18 February 2000, there was decided in the Land and Environment Court the case of Meriton Apartments Pty Ltd v Minister for Urban Affairs and Planning (2000) 107 LGERA 363 (Cowdroy J). In that case, the Court declared invalid the South Sydney Local Environmental Plan 1998 (Amendment No 2) - Green Square and the Green Square Affordable Housing Development Control Plan 1999. 19 On 9 March 2000, for reasons given ex tempore, Young J dismissed the Council's Supreme Court proceedings against Refkin and ordered the Council to pay Refkin's costs of the proceedings on an indemnity basis: see Waverley Council v Refkin Pty Ltd [2000] NSWSC 242 (unreported). 20 According to Young J's reasons for judgment, the Council was seeking by way of final relief in the proceedings an order that the last unit in the development subject to condition two be transferred to it or, alternatively, damages of the "Lord Cairns' Act" type under s 68 of the Supreme Court Act 1970 (NSW). The Council was also seeking, by way of interlocutory relief, an order preventing Refkin from selling the last unit in the development subject to condition two. 21 The claim for interlocutory relief had come before Young J during the preceding week, at which time his Honour had expressed the view that, in Meriton, Cowdroy J had ruled that conditions like condition two were invalid. Young J had then stood the matter over so that the parties could consider their positions. Then, on 9 March 2000, the plaintiff had, according to Young J, submitted that the Supreme Court "had no jurisdiction to decide the basic issues that arise, and that I should adjourn it [that is, the matter] until those issues had been considered by the Land and Environment Court". 22 Young J accepted the plaintiff's submission regarding the Supreme Court's lack of jurisdiction, but that submission persuaded his Honour, not merely to adjourn the proceedings, as had been sought by the plaintiff, but to dismiss them instead, because, according to his Honour, "the court has no power to give the final relief asked for by the plaintiff". His Honour also ordered that the plaintiff pay the defendant's costs of the proceedings on an indemnity basis, because "the Council brought the case in this court but then, when faced with difficulty [a reference, I infer, to Young J's earlier expression of view as to the effect of Meriton], raised technical submissions which prevented me from hearing it". 23 On the same day as Young J gave his reasons for judgment, the Council commenced proceedings against Refkin in the Land and Environment Court. In those proceedings, the Council sought a declaration that condition two was valid and an order that Refkin cause the cessation of use and occupation of a particular lot in the relevant strata plan until condition two had been complied with. 24 On some date before 16 June 2000, the Council discontinued its Land and Environment Court proceedings and, on that day, there came before Talbot J of that court a motion that the Council pay Refkin's costs of the proceedings on an indemnity basis. On 19 June 2000, Talbot J acceded to that motion, for reasons which he then gave: see Waverley Council v Refkin Pty Ltd [2000] NSWLEC 124 (unreported). 25 In his reasons for judgment, Talbot J quoted a passage from the reasons for judgment of Woodward J in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401 (FCA). In that passage, Woodward J had said that it was appropriate to consider awarding costs on an indemnity basis "whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success". Talbot J said that Refkin had relied before him solely on a submission that the present case was of the type referred to in Woodward J's statement, a submission that Talbot J appears plainly to have accepted. 26 Talbot J did not make explicit in his reasons for judgment the precise reason or reasons which moved him to conclude that the Council, properly advised, should have known that the proceedings had had no chance of success. I will, however, mention various matters mentioned by Talbot J in the course of his reasons for judgment which may be thought to have influenced him in that respect. 27 Talbot J mentioned that, although the development consent had been granted to Mr Keith, Mr Keith had not been made a party to the proceedings in the Land and Environment Court. Talbot J mentioned that Refkin had been granted a building approval in respect of the development, which approval had not repeated condition two. He mentioned that the particular lot in the relevant strata plan in respect of which the Council had sought an order that Refkin cause the cessation of its use and occupation until condition two had been complied with did not comprise a one-bedroom dwelling, but instead comprised a shop. Finally, he mentioned that, at the time of the commencement of the proceedings, "any lot which could be regarded as the subject of condition 2 had been sold". 28 Presumably, it was the last of those four matters which was determinative for Talbot J. 29 For the sake of completeness, I note that, in his reasons for judgment, Talbot J also said, "There is no dispute that condition 2 … has not been complied with. Although Young J made reference to the decision of Cowdroy J on 18 February 2000 in Meriton Apartments Pty Ltd v Minister for Urban Affairs and Planning and Anor [2000] NSWLEC 20 it is not readily apparent how the issues decided in that matter have any bearing on the present case." 30 I turn now to the claims made by the Council in the present proceeding, as appearing from its application and amended statement of claim. 31 For present purposes, it is sufficient to say that, in substance, the Council was seeking damages under the Trade Practices Act 1974 (Cth) ("the Act") from both of the respondents and that its complaints were of contraventions of subs 52(1) of the Act by Refkin, together with resulting loss to the Council, and of Mr Keith's having been involved, within the meaning of subs 75B(1) of the Act, in those contraventions by Refkin. The Council's case included allegations by it of the making knowingly falsely by Refkin of implied representations as to the existence of a present intention by it to fulfil promises expressly made by it regarding the transfer to the Council of a one-bedroom unit in the development. 32 I turn now to the submissions made before me by the respondents in support of their application for costs against the Council on an indemnity basis. 33 The first point to be made about those submissions is that they did not duplicate those which had been made by Refkin in the Land and Environment Court proceedings. In other words, the respondents did not submit before me (and conceded during argument that they could not have done so successfully) that the action in this Court had been commenced or continued in circumstances where the Council, properly advised, should have known that it had had no chance of success. 34 Instead, as I have already foreshadowed above, the respondents relied heavily on the background to the present proceeding, although they did rely as well on two particular aspects of the present proceeding, considering the proceeding in isolation. 35 It is convenient to deal with the latter two matters first. 36 The two particular aspects of the present proceeding considered in isolation on which the respondents relied were: first, the three and a half month delay in service on the respondents of the application and statement of claim, the reason for which delay was unexplained in the evidence before me and the existence of which delay was said by the respondents to be "unusual"; and, secondly, the fact that, in its statement of claim, the Council had alleged "fraud" against the respondents. 37 Neither of the two particular aspects of the present proceeding considered in isolation on which the respondents relied persuades me that the present is an appropriate case for ordering costs on an indemnity basis. 38 As to the Council's delay in serving the application and statement of claim on the respondents, although that delay may have been unusual, there is no evidence before me to suggest that it prejudiced the respondents in any way. In the absence of such evidence, one would assume that, rather than prejudicing the respondents, the delay in service on them actually benefited them, because it meant that their costs of the proceeding were expended later than they would otherwise have been. 39 As to the allegations of "fraud" against the respondents, I accept that it is convenient to describe as allegations of "fraud" the Council's allegations against Refkin of the making knowingly falsely by it of implied representations as to the existence of a present intention by it to fulfil promises expressly made by it. I further accept that the allegation against Mr Keith of involvement, within the meaning of subs 75B(1) of the Act, in Refkin's contraventions of the Act was necessarily one of "something akin to fraudulent conduct": see my reasons for judgment in Tetra Pak Marketing Pty Ltd v Musashi Pty Ltd [2001] FCA 1269 (6 September 2001, unreported) at [100]. Next, I accept that the making by a party of allegations of fraud against another party either irrelevantly or knowing them to be false is a circumstance which has in past cases been thought to warrant the ordering of costs on an indemnity basis against the party making the allegations. 40 However, I have no evidence before me which persuades me that the Council's "fraud" allegations against the respondents in the present case were made knowing them to be false, nor do I consider that those allegations were made irrelevantly; as to the latter point, they were, in fact, of the essence of the Council's case against both respondents. In any event, it is fair to say that the respondents did not submit that I should conclude that the Council's "fraud" allegations against the respondents in the present case had been made either irrelevantly or knowing them to be false; nor did they make any other submission as to why the making by the Council of its "fraud" allegations against the respondents in the present case justified an order for costs on an indemnity basis. In the absence of any submission before me from the respondents as to why the making by the Council of its "fraud" allegations against the respondents in the present case justified an order for costs on an indemnity basis and in circumstances in which I proceed on the basis that the allegations were made neither knowingly falsely nor irrelevantly, I put to one side for present purposes the making of those allegations by the Council. 41 I turn now to what was the essence of the respondents' case for an order for costs on an indemnity basis against the Council, namely, the background to the present proceeding. 42 The respondents submitted before me that that background meant that the present litigation should be characterised as extraordinary. The present litigation was the third time in which the Council had sued the same parties, seeking substantially the same relief, each time in a different court. The present litigation was also the third time in which the Council had brought the relevant proceeding to an end by its own action. 43 There are difficulties with the respondents' account which I have just set out concerning the three proceedings. 44 First, the Council had not sued the same parties in all three proceedings. It was only in the present proceeding that it had sued Mr Keith, an omission which had been drawn to notice by Talbot J, so far as the second proceedings were concerned. Before that drawing to notice by Talbot J, it appears that, not only the Council, but also the respondents, had treated Refkin and Mr Keith as interchangeable (as had Young J). 45 Secondly, the Council had not sought the same relief in all three proceedings. In the Supreme Court proceedings, the final relief primarily claimed was an order requiring Refkin to transfer to the Council an appropriate one of the units in the development, with Lord Cairns' Act damages being claimed against Refkin as a "backstop". In the Land and Environment Court proceedings, the relief primarily claimed was an order that Refkin cause the cessation of use and occupation of an inappropriate one of the units in the development until condition two had been complied with, with declaratory relief regarding the validity of condition two also being sought. In the proceeding in this Court, the relief sought had been damages only, both from Refkin and from Mr Keith. In any event, the basis on which relief was claimed by the Council differed as between the proceeding in this Court, on the one hand, and the two earlier proceedings, on the other. In the two earlier proceedings, breach of condition two was relied on, while in the present proceeding, contravention of the Act was relied on. 46 Thirdly, to characterise the Council as having brought the Supreme Court proceedings to an end by its own action does not appear to me to be accurate. As I read Young J's reasons for judgment, the Council had sought only the adjournment of those proceedings, not their dismissal. However, Young J had decided that their dismissal was the appropriate course in the circumstances. 47 However, the various matters to which I have referred above do not appear to me to be as destructive of the respondents' reliance on the background to the present proceeding as does one other feature of that background, namely, that, in both of the two earlier proceedings, Refkin had had its costs of the proceedings paid, not on a party and party basis, but on an indemnity basis. In other words, to the extent to which its costs had been reasonably incurred and of a reasonable amount, Refkin had received a complete indemnity for them. In those circumstances, I am unable to see why the existence of those proceedings should be thrown into the balance in the respondents' favour when deciding whether they should receive their costs of the present proceeding on an indemnity basis. Instead, those earlier proceedings should be ignored for that purpose. When that is done, there is nothing sufficiently out of the ordinary about the present proceeding to justify a departure from the usual position regarding costs. 48 In addition to my not being persuaded by the matters on which the respondents have relied before me as justifying an order for costs in their favour on an indemnity basis, there is one matter the existence of which appears to me to tend against their obtaining such an order, namely, the fact that they gave no timely notice to the Council of an intention to seek costs on such a basis, rather than on the usual party and party basis. It was not until after the Council had discontinued its proceeding that the respondents first gave it such notice. 49 Not only was the Council not put on notice in a timely way of the respondents' intention to seek costs against it on an indemnity basis, but the Council could legitimately have inferred that the respondents would be content with the payment of their costs on a party and party basis, by reason of their consenting to my making of the costs orders in their favour on 16 February and 4 May 2001 on a party and party basis. 50 In all the circumstances, I will dismiss the respondents' motion, with costs. (I note that the Council made no submission before me that, if I should dismiss the respondents' motion and order the respondents to pay the Council's costs of that motion, I should order that those costs be paid on an indemnity basis, rather than on the usual party and party basis: compare Matthew 26:52 ("[A]ll they that take the sword shall perish with the sword").) I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katz.