Wentworth Shire Council v Bemax Resources Limited and Ors [2013] NSWSC 1364 | Case summary

Judgment 1REIN J: The three sets of proceedings and their outcomes are dealt with in my reasons for judgment of 2 August 2013. On that date, the parties indicated that the costs outcome could not be agreed and I set in place a regime for submissions to which regime the parties have adhered. I will in these reasons use the same terminology as used in the provisional reasons for judgment. 2The joint venturers failed in their claim that the Council was precluded from charging them more than $100K plus "pegged" increases per annum because although clause 3.1 of the Road Agreement on the interpretation I favoured so required, the clause was beyond the Council's power to make, it impermissibly fettering the Council from determining rates in accordance with the Act. I held that neither s 42 of the Fair Trading Act 1987 (NSW) ("FTA") and s 52 of the Trade Practices Act 1974 (Cth) ("TPA") was available to the joint venturers because: (1) the Council was not a trading corporation and the Road Agreement was not entered into by the Council "in trade or commerce", and (2) I was not persuaded that any loss had been demonstrated to have arisen by reason of the joint venturers reliance on the representation made by the Council that rates would be limited. 3In relation to Bemax, it was not a party to the Road Agreement so its claims were really limited to the FTA and TPA claims which were unsuccessful for similar and further reasons as the claims of the joint venturers. 4In relation to the third set of proceedings (the Class 3 proceedings) which were transferred from the LGA, the outcome was determined by the agreement of the parties that s 574 of the LGA did not apply to the claims which Bemax was advancing. The Class 3 proceedings were in the nature of defensive proceedings, designed to preclude any argument by the Council that the matters advanced by Bemax could not be advanced because they had not been the subject of an application made under s 574. 5The Council contends that since it has been successful in the proceedings and obtained judgment for the difference between rates levied and rates actually paid by the joint venturers and Bemax it should (1)have an order that its cost be paid by the joint venturers and Bemax on the ordinary basis and (2)have an order that the joint venturers and Bemax pay interest on costs paid by the Council to its lawyers in accordance with s 100 of the Civil Procedure Act 2005 (NSW). 6The Council relied on r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") which is in the following terms: Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. and submitted that the usual rule namely that it should obtain its costs on the ordinary basis should apply. 7The joint venturers and Bemax resist the orders sought for several reasons: (1)The Council entered into an agreement which contained a term to which it had agreed but which it has successfully maintained did not bind it. The submissions proceed: ...No encouragement should be given to local councils to adopt an approach of entering into agreements that are ultra vires, then relying on the fact that they are not fettered by the agreement, giving rise to litigation in which they then recover their costs in full. It is respectfully submitted that such a costs result is not in the interests of justice. Moreover, other than the construction argument on which the Bemax parties succeeded (and the allied rectification claim on which the Judgment at [56] looked favourably), the Trade Practices Act case, the Fair Trading Act case and the estoppel case were each brought as a shield more than as a sword in answer to the ultra vires point. (2)The Council insisted on discovery which was "very expensive, and ultimately unnecessary" and to require the joint venturers and Bemax parties to pay for that is "not consistent with the policy of the just, quick and cheap resolution of the real issue in proceedings". (3)In relation to the Class 3 proceedings the usual rule - 3.7(3) - of the Land and Environment Court Rules 2007 (NSW) is that there be no order for costs (unlike the position in the UCPR). The Bemax parties contend that there is no good reason to depart from a presumption that each party bear their own costs as none of the specified circumstances in rule 3.7(3) applies here nor is it to the circumstances specified. (4)The joint venturers and Bemax also make the point that the Snapper proceedings were erroneously commenced against the joint venturers for the Gingko rates. Bemax asserted that it was not the registered owner of the Gingko mining lease which then led to the Council issuing fresh rate notices against the joint venturers rather than Bemax and amending its claim to include the joint venturers. The costs thrown away by reason of the amendment they contend should not be recovered. (5)The joint venturers also point to some other delays on the part of the Council in preparing the case and submit that for all the delay arising out of the actions of the Council including the initial failure to join the joint venturers the Council should not, even if otherwise entitled, receive interest on costs paid. (6) The Bemax parties also query the claims for pre-trial costs. 8The Bemax parties rely on the affidavits of Anna Mihaela Coculescu dated 8 August 2013 and of 21 August 2013 and the Council relies on the affidavits of Kerry Susanne Keady dated 15 August 2013 and of 23 August 2005. 9In support of the first point, at 7, the Bemax parties refer to the decision in Commercial Union General Insurance Co Ltd v Patchell Industries Ltd (1993) 7 ANZ Ins Cas 61-171 in which the New Zealand High Court noted that much time had been spent in preparation of the appeal by counsel for the insured on a ground that had been abandoned very shortly before the hearing and then said: For that reason, and in the hope that the appellant may thereby be discouraged from continuing to use policies which include exceptions upon exceptions upon exceptions, and are of such complexity as to define confident interpretation, not only by customers, but by judges, while allowing the appeal and accordingly directing that judgment be entered for the appellant/defendant, I make no order as to costs. 10It is true that the joint venturers were successful in their contention as to how clause 3.1 ought be interpreted, but they do not claim that the costs of that aspect of the case should not be awarded against them perhaps in recognition that that issue took up a relatively short amount of time. I should note that I do not accept that the TPA and FTA claims should be seen as a shield rather than a sword. Bemax was not a party to the agreement and its case was very much dependent on the TPA and FTA claims. The joint venturers needed those claims if the Council was successful in its ultra vires point, as they conceded, and on that premise the TPA and FTA claims were not only a shield but also a sword. 11One can have some sympathy with a party who in dealing with a Council learns that the Council will not honour a clause to which it has agreed but if I am correct in the conclusion to which I have come, the Council and the joint venturers ought not to have entered into such an agreement and the Council was justified in contending that the clause was ultra vires. As Mr Robertson points out in his submissions the joint venturers had solicitors acting for them (as did the Council). The clause was not shown to be in standard use by the Council. In Patchell Industries the principal reason for the making no order as to costs seems to have been the time spent on an issue abandoned by the insurer and the circumstances are different here. Whilst there are cases in which a Court can mark its disapproval of the conduct of a successful party by refusing that party costs, I am not convinced that the use by the Council of a clause agreed to by the other party to the contract which it is later realised is ultra vires is a circumstance calling for a mark of disapproval and particularly when the Council had made its position clear by July 2007, well before the proceedings commenced. 12In relation to discovery, given the claims advanced by the joint venturers and Bemax, in my view the Council was entitled to examine all documents that might bear on the claim that joint venturers had suffered detriment in consequence of the misrepresentations pleaded. Much of the time in the case was spent on that aspect of the case and I not am satisfied that the discovery process was "unnecessary". The plaintiffs may well have indicated that they did not contend that they would not have continued with the project had they known the true position about rates but what precisely they were saying they would have done was not clear as Mr Shirfan's evidence itself demonstrates. The fact that Mr Finnis was willing to concede matters does not establish that the Council ought not to have sought orders for discovery which orders were, in any event, ultimately made by consent. I am not persuaded that there is any proper basis for excluding the costs of discovery. 13In relation to the amendment of pleadings, the valuations received from the Valuer General showed Bemax as the owner of the Gingko mining lease and the Council issued the rate notices to Bemax based on that. Bemax did not respond to the rate notices by asserting that it was not liable as owner and it paid the $100K (i.e. the amount for which it contested it was liable) each year that rate notices were received. In April 2010 during negotiations in relation to the issues that had arisen, the solicitor for the Bemax parties, Mr Dwyer, stated that Bemax was not an owner or occupier of the mining lease. The letter in which that advice was communicated was stated to be "without prejudice" but no point has been taken about its reception in these proceedings. Ms Keady responded to the letter inter alia by asking for a copy of the relevant mining lease(s), to which request she did not, to her belief, receive a reply. No reply was tendered by the Bemax parties. When the Council issued its proceedings in August 2011, Bemax in its defence pleaded that it became the holder of the mining lease in August 2008. In May 2012 Bemax amended its pleading and withdrew its affirmative allegation in relation to ownership but did not deny ownership. In August 2012, a search was conducted which established that Bemax was not the owner of the Gingko mining lease at the time that rate notices were issued and Council had to issue fresh notices. It is an unfortunate history but it is does not seem to me that the Council can be criticised for having issued proceedings against Bemax or that it should be deprived of interest on costs paid by it because of delay due to the identity of the rate payer. Any costs incurred by reason of the change in identity of the ratepayer for the Gingko mine should be treated as part of the warp and weft of the litigation. 14This leads me to the Class 3 proceedings. The Council submits that the joint venturers reliance on s 574 was one in which it had no reasonable prospect of success, or it was unreasonable to maintain. It is true that s 574 was not relevant and hence without prospect as Mr Robertson submitted but it seems to me that the Class 3 proceedings were defensive in nature to deal with a possible argument that was never in fact advanced by the Council. In my view, the Class 3 proceedings are so closely interwoven with the other proceedings that there costs outcome should follow the outcome in those other proceedings and I prefer to base myself on that reason. 15On the issue of interest, the orders sought are in terms of those made in Lahoud v Lahoud [2006] NSWSC 126 per Campbell J (as he then was) [82]-[83] approved by NSW Court of Appeal in Drummond & Rosen v Easey (No 2) [2009] NSWCA 331, [4] - [5] per Macfarlan JA and Tobias JA. I am not satisfied that the Council has been responsible for any significant delay in the achievement of a hearing date such as to disentitle it from obtaining interest on the costs paid by it. However, the costs incurred prior to the commencement of the proceedings should not be included either as costs ordered against the Bemax parties or be the subject of any award of interest. 16The Council, aware that in the Gingko proceedings it has (by a very small amount), failed to reach the $500K threshold for the purposes of UCPR 42.34, submits that UCPR 42.34 ought not preclude an order for costs in this case. In my view, given the fact that these proceedings were intricately connected with the Gingko proceedings there was every reason for the Gingko proceedings to be heard with the Snapper proceedings (and the Class 3 proceedings) and I am satisfied that it was appropriate for the proceedings to be heard in this Court. Mr Carrathurs does not contend otherwise. 17In my view, the orders which should be made are those propounded by the Council with interest to run on costs from the date the costs were paid but with a notation that costs incurred prior to the commencement of proceedings are not included.

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Wentworth Shire Council v Bemax Resources Limited and Ors

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