The Applicant commenced Class 4 proceedings seeking a declaration of invalidity of a development consent (Consent) granted by Lane Cove Council, the Second Respondent, (the Council) to the First Respondent on 23 September 2019. The approved work is for the demolition of an existing house, carport and swimming pool and construction of a new dwelling and swimming pool.
The Applicant has now filed a notice of motion dated 13 February 2020 seeking orders, firstly that the proceedings be dismissed and secondly that the First and Second Respondents pay the Applicant's costs of the proceedings on the ordinary basis. Where proceedings are dismissed or discontinued the Uniform Civil Procedure Rules 2005 (UCPR) provide for the payment of a defendant's costs by a plaintiff unless the court otherwise orders. This judgment deals with whether an otherwise order ought be made as against the First Respondent. The Applicant now advises it does not seek costs against the Council.
The Applicant relies on the affidavit of Jason Hones solicitor for the Applicant affirmed 13 February 2020. A chronology of events in the proceedings is set out at pars 4-20 including extensive correspondence between the parties exhibited to the affidavit leading up to the surrender of the Consent, which occurred on 30 January 2020.
A letter was sent by Mr Hones on 16 October 2019 to the First Respondent advising of the absence of a cl 4.6 application to address the asserted exceedance of the height control in the Lane Cove Local Environmental Plan 2009 (LLEP) with consequential invalidity of the Consent. An undertaking was sought, to be provided by 18 October 2019, that no reliance be placed on the Consent and that a notice of surrender of the Consent be sent within seven days of the undertaking being provided. A similar letter was sent to the First Respondent's husband and a firm of solicitors who were believed to act for the First Respondent. As no reply was received proceedings were commenced in the Court on 31 October 2019 by summons together with a notice of motion for interlocutory orders to restrain reliance on the Consent. A letter dated 4 November 2019 from the First Respondent's solicitor containing an undertaking in different terms to the letter of 16 October 2019 was not accepted. A second proposal from the First Respondent's solicitor that an independent surveyor be appointed together with the same undertaking in a letter dated 5 November 2019 was also not accepted. After further correspondence on 5 November, 6 November proposing consent orders in relation to the interlocutory motion and 7 November 2019, later on 7 November 2019, the First Respondent's solicitor sent a letter agreeing to proposed consent orders which included access for a surveyor to the First Respondent's land by 22 November 2019. These orders were made by consent in Court on 8 November 2019 when the notice of motion for interlocutory relief was returnable.
I note the orders made by consent by the Court on 8 November 2019 were:
1. Upon the Applicant giving the usual undertaking as to damages, the First Respondent, its servants, agents and invitees be restrained from acting upon or pursuant to development consent DA232/18 (Consent) in respect of the land known as 6 Haughton Street, Linley Point (Land) until further order.
2. The First Respondent, its servants, agents and invitees be restrained from altering the existing ground levels of the Land until further order.
3. Access be granted to the Applicant's surveyor for the purposes of surveying the existing ground levels of the Land.
4. The survey to which the access is granted to the Applicant's surveyor pursuant to order [3] is to be conducted by 22 November 2019.
5. The Notice of Motion for interlocutory relief filed on 31 October 2019 be stood over for further mention on 13 December 2019 at which time orders [1] and [2] may be vacated.
6. The listing of the Summons on 6 December 2019 be vacated.
7. Matter listed on 13 December 2019.
On 10 December 2019 Mr Hones sent a letter to the First Respondent's solicitor enclosing a survey and plan overlaid with ground levels which was said to depict a dwelling approved that exceeded the height controls in the LLEP. This letter was described as a Calderbank offer and invited the First Respondent to agree to orders setting aside the consent and payment of the Applicant's costs. The offer was open for 10 days.
The First Respondent filed an affidavit on 12 December 2019 which disagreed in part with matters in the survey provided by the Applicant. By letter on that day Mr Hones again invited the First Respondent to surrender the Consent.
I note that consent orders were made by the Court on 13 December 2019 as follows:
1. The summons, and motion filed on 31 October 2019, be stood over for further mention on 14 February 2020 at which time;
a. The parties intend to take a timetable for the future progression of the matter including the allocation of hearing dates; and
b. Orders [1] and [2] made on 8 November 2019 may be vacated.
2. The Respondents are to file and serve their respective responses to the summons by 31 January 2020.
3. The Second Respondent is to file and serve its statement of reasons under UCPR Pt 59 by 7 February 2020.
The Court notes:
1. Orders [1] and [2] made on 8 November 2019 remain in force until further order.
No defences were filed by the Respondents by 12 December 2019 as required by court order.
On 5 February 2020 the First Respondent's solicitor sent a letter to Mr Hones advising that the Consent had been surrendered and the proceedings should be discontinued under UCPR Pt 12 r 12.1 as the subject matter of the proceedings no longer existed. Various letters concerning the disputed claim for costs by the Applicant were also attached to the affidavit.
The assessment report of the Council dated 10 July 2019 stated that the height of the proposed dwelling complied with the building height control in the LLEP of 9.5 metres from existing ground level.
[3]
Applicant's submissions
An otherwise order is appropriate in this case see Ralph Lauren 57 Pty Ltd v Byron Shire Council [2014] NSWCA 107 (Ralph Lauren) at [20]-[34].
The first relevant consideration for the making of an otherwise order is the reasonableness of the Applicant's conduct, which was reasonable at every stage of the proceedings:
Prior to the commencement of proceedings: the Applicant invited the First Respondent to surrender the Consent. There was no response.
In the obtaining of interlocutory relief: the Applicant invited the Respondents to submit to the interlocutory relief. They declined. Interlocutory relief was nevertheless granted. I note that this is not accurate, consent orders were made by the Court on 8 November 2019 and the First Respondent agreed not to rely on the Consent or alter existing ground levels on her property.
In the conduct of the proceedings: the Applicant complied with the Court's directions in the proceedings to the extent they required the Applicant to undertake surveying work. The first substantive directions were made on 13 December 2019 which required the Respondents to file their responses to the summons by 31 January 2020.
In its attempt to resolve the proceedings: the Applicant reasonably invited the Respondents to settle the proceedings, by way of Calderbank letters, on two occasions.
In the resolution of the proceedings: the Respondents having capitulated by the surrender of the impugned Consent, the Applicant reasonably brought the proceedings to an end by seeking their dismissal, subject only to an argument about costs.
Next, it is relevant to consider the subject matter of the proceedings. The problem with the Consent was jurisdictional. The breach of the height control mandated the consideration of a cl 4.6 objection. In the absence of the cl 4.6 objection the consent was doomed. Even if there could have been any room for doubt (as to the facts) prior to the commencement of the proceedings (and in the Applicant's submission there was no room for doubt), all doubt was resolved after the survey work the subject of the interlocutory orders was carried out. The First Respondent continued to defend proceedings she would almost certainly have lost, Ralph Lauren at [26].
The First Respondent's conduct in these proceedings was unreasonable in the Lai Qin sense, Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6, that is, "the defendant's unreasonableness in defending litigation that it would almost inevitably have lost up to the point of surrender, causing the plaintiff unnecessarily and unreasonably to have incurred costs to that point, may provide the justification for a cost order in favour of the discontinuing plaintiff." (Ralph Lauren at [26]).
Further, the surrender of the Consent was a clear capitulation not an external, or extraneous, supervening event. The formal surrender of the impugned Consent, being the subject matter of the litigation, does not fall into the category sometimes considered appropriately as a supervening event. For example there was no change in the legislative scheme which authorised the grant of Consent without the cl 4.6 objection and there was no opportunity for the Council to consider a cl 4.6 objection for the first time after it had granted consent (as it was functus). Rather, this is one of those cases where the Respondent's capitulation means the Applicant has succeeded in litigation even though the success was achieved without a hearing.
Finally, two Calderbank offers were made. As the ultimate capitulation demonstrates, the making of the offers was reasonable. The rejection of the offers was unreasonable. That alone, as an independent ground for the exercise of the costs discretion, would give rise to an order of costs in the Applicant's favour.
[4]
First Respondent's submissions
The Applicant has not discharged the onus it bears of demonstrating why an otherwise order ought be made, Ralph Lauren at [21]. The First Respondent concedes that an appropriate order is that each party bear their own costs. She should not be required to pay the Applicant's costs. That the First Respondent surrendered the consent does not alone justify awarding costs in the Applicant's favour where the Applicant is discontinuing the proceedings. The Court made no determination on the substantive matters in issue as there has been no final hearing. No unreasonable conduct has occurred where the Applicant discontinued because it has achieved the results sought by means of settlement litigation with the consent of the parties, Ralph Lauren at [28]. Walker v Siasat [2014] NSWLEC 86 (Siasat) applied the principles in Ralph Lauren in similar circumstances to this case, at [26], [28], [31], [32], [33], [35] in not making a costs order in favour of a discontinuing party in similar circumstances.
The Court will not ordinarily look behind a settlement for the reasons or motivations of the parties, Ralph Lauren at [29]. Where there is no unreasonableness in the conduct of a defendant, and where a discontinuing plaintiff has achieved some measure of success by settlement, the proper exercise of the costs discretion will usually be no order as to costs. The matters identified in [28] and [31] of Ralph Lauren apply to the circumstances of this case.
A hypothetical trial should not be conducted. In the present case, the point the litigation had reached was that the Applicant had served its points of claim. The Respondents had not served their points of defence and no evidence had been prepared and served by any party on the substantive case. The time for the Respondents to serve their points of defence was at a date after the Consent was surrendered. It would not have been appropriate for them to have served any points of defence in those circumstances. Further, there were no hearing dates allocated and therefore the Court has been put to limited expense in managing the case. The matter effectively was managed through the making of two sets of consent orders, on 8 November 2019 and 13 December 2019, and the surrender of the Consent by the First Respondent on 31 January 2020.
In Siasat, the respondent surrendered the development consent on the second day of the hearing and yet the Court nonetheless ordered each party to bear its own costs of the proceedings. The First Respondent in the present case has surrendered the development consent at a very early point in the litigation.
Further, there is no disentitling conduct on the part of the First Respondent which would have the effect of displacing the general rule as to costs. In particular:
1. There was no relevant delay on the First Respondent's part. The letter sent on 16 October 2019 to the First Respondent was sent to a vacant lot and required a response in two days. There is no evidence of when the First Respondent became aware of the Applicant's concerns.
2. The proceedings were commenced on 31 October 2019: affidavit of Jason Hones dated 13 February 2020, at par 8 (JH). One week later, on 7 November 2019 the First Respondent agreed to the Applicant's proposed consent orders: JH par 15.
3. The consent orders restrained the First Respondent from acting upon the Consent (orders 1 and 2) and granted access to the Applicant's surveyor for the purpose of surveying the existing ground levels of the First Respondent's land by 22 November 2019.
4. The Applicant did not advise the First Respondent of the results of the Applicant's survey until 10 December 2019: JH par 17.
5. On 12 December 2019 the First Respondent filed an affidavit, JH par 18, which did not accept the Applicant's survey as accurate and correct (par 7). At pars 8-9 and without admission, the First Respondent deposed that she had lodged a new development application (DA) with Council in substantially the same terms as the development approval on the basis that a new DA was of greater utility in saving the Court's time and resources and in saving her own expenses in defending the proceedings. Further, she deposed the new DA was a more effective manner of dealing with the Applicant's complaint.
6. On 13 December 2019 the Court made consent orders for the summons and injunction noting that the First Respondent had, without admission, lodged a new development application with the Second Respondent. At all times orders 1 and 2 made by consent on 8 November 2019 remained in place.
7. On 30 January 2020 the First Respondent formally surrendered the Consent, again denying the Consent was invalid but that the surrender was made to avoid the need for expensive and unnecessary litigation: JH par 20.
8. On 12 February 2020 the First Respondent invited the Applicant to discontinue the proceedings with either no order as to costs or an order that each party pay its own costs: JH par 23.
9. No prehearing costs were incurred in the proceedings.
No basis for making an otherwise order, apart from an order that each party pay their own costs of the proceedings is warranted.
[5]
Consideration
The relevant principles applying in these circumstances where the default position on discontinuance or dismissal is that a plaintiff pay another party's costs were identified in Ralph Lauren (as extracted in Siasat at [30]) as follows:
21. The court can only order otherwise if it makes a discretionary decision to depart from the default costs order provided for in r 42.19(2). This means that there is an onus on the discontinuing party to make an application in respect of costs if it does not propose to pay the costs of the other parties: Foukkare v Angreb Pty Ltd [2006] NSWCA 335 at [65]. It also means that there must be some positive ground or good reason for departing from the ordinary course: Australiawide Airlines Ltd v Aspirion Pty Ltd at [54]; Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [54]. As Basten JA summarised in Bitannia Pty Ltd v Parkline Constructions Pty Ltd at [70]:
... the discontinuing plaintiff must be the moving party on an application for an alternative costs order. If it is necessary to establish a factual basis for such an order, the plaintiff will bear the onus of proving the relevant facts. Similarly, if it necessary to draw particular inferences from primary facts, the plaintiff will also bear that burden. Finally, the plaintiff will bear the burden of persuading the court that some other order is appropriate.
22. The circumstances on which a discontinuing plaintiff may rely to persuade the court that an alternative costs order is appropriate are varied and those discussed in the authorities do not exhaust the circumstances in which the discretion might be exercised. However, the authorities reveal that circumstances where a court has made an alternative costs order have a common thread related to the reasonableness or unreasonableness of the conduct of the parties.
23. Where the discontinuing plaintiff is seeking an order that the defendant pay the plaintiff's costs of the proceedings, the circumstances relied on tend to be that the defendant has acted so unreasonably that it should pay the discontinuing plaintiff's costs. The mere fact that the discontinuing plaintiff may have achieved some practical success, such as achieving the result it sought in the proceedings, does not by itself and without some extra circumstance, ordinarily justify the awarding of costs in favour of the discontinuing plaintiff. The extra circumstance needed is frequently found in the unreasonableness of the conduct of the defendant: Australian Securities Commission v Aust-Home Investments Ltd [1993] FCA 585; (1993) 44 FCR 194 at 201; Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 at 624-625; One.Tel v Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548 at [5]. The unreasonableness in the conduct of the defendant may be prior to the commencement of the proceedings, where such conduct may have precipitated the litigation, or in the defence of the proceedings.
...
26. Unreasonableness of conduct can also be found in a defendant continuing to defend litigation until it then surrenders to the plaintiff by consenting to the court making orders, or giving an undertaking to the court, in substantially the same terms and effect as sought by the plaintiff in the proceedings: see Edwards Madigan Torhillo Briggs Pty Ltd v Gloria Stack [2003] NSWCA 302 at [5]; Kiama Council v Grant [2006] NSWLEC 96; (2006) 143 LGERA 441 at [56], [60]-[71], [80]; Ku-ring-gai Council v Minister for Planning (No 2) [2008] NSWLEC 276 at [25], [26]; and Hall v Ku-ring-gai Council [2009] NSWSC 370 at [39]- [48]. This is not a settlement of the litigation in the ordinary sense, but rather a surrender to the plaintiff. In this circumstance, although there has not been a trial on the merits, the court may feel confident that the discontinuing party would have almost certainly have succeeded if the matter had been fully tried: Lai Qin at 625. The defendant's unreasonableness in defending litigation that it would almost inevitably have lost up to the point of surrender, causing the plaintiff unnecessarily and unreasonably to have incurred costs to that point, may provide the justification for a costs order in favour of the discontinuing plaintiff.
...
28. Circumstances where there may be no unreasonable conduct of the parties include where the plaintiff discontinues because it has achieved the relief sought in the proceedings by means of settlement of the litigation with the mutual consent of the parties or by extra curial means, or because of the happening of a supervening event which so removes or modifies the subject of the dispute that no issue remains between the parties except that of costs: Lai Qin at 624; and One.Tel at [6].
29. In the case of a settlement, the court ordinarily will not look behind the settlement to the reasons or motivation of the parties to settle, and hence will not evaluate the reasonableness of the parties in settling: see Bitannia Pty Ltd v Parkline Constructions at [81].
...
31. If, however, the defendant's action constituted or caused the supervening event, the reasonableness or unreasonableness of the defendant's actions may need to be assessed. It is not sufficient by itself that the defendant's action is or brought about the supervening event; there ordinarily needs to be something unreasonable in the defendant taking that action. ... Notwithstanding that the defendant's action caused the proceeding to become futile, unless there was some unreasonableness in the defendant so acting, the proper exercise of the costs discretion may still be to make no order as to the costs of the proceeding. Examples of this type of case are given in Kiama Council v Grant at [72]-[77].
...
33. If there is no unreasonableness in the conduct of the defendant then, notwithstanding that the discontinuing plaintiff might have achieved some practical success by settlement or extra curial means, the proper exercise of the costs discretion will usually be to make no order as to costs. As McHugh J said in Lai Qin at 625...
The Applicant bears the onus of establishing why an otherwise order ought be made: Ralph Lauren at [21]. There has been no finding on the substantive issues in dispute in this matter to guide a costs consideration. It is not appropriate that I do so now. The applicant's position is that its legal case is so obvious that it was bound to succeed in the litigation.
The Applicant submits that the proceedings should not have needed to be commenced because the First Respondent should have complied with the demand in the letter of 16 October 2019 to surrender the Consent given the clear error made in granting the Consent in breach of the LLEP height requirements in the absence of a cl 4.6 application. Further, because its success in the proceedings was inevitable, the surrender of the Consent at the end of January 2020 was a capitulation and should have occurred much earlier.
I essentially agree with the First Respondent's submissions as these correctly reflect the history of the litigation. There was no unreasonable behaviour by the First Respondent before or during the litigation for the reasons stated in [22] above. Applying the principles in Ralph Lauren at [28] and [31] no basis has been established by the Applicant for unreasonable behaviour by the First Respondent before or during the litigation.
The Applicant's submissions do not take into account the relatively short period over which events took place in the lead up to the commencement of the proceedings. The first letter dated 16 October 2019 from the Applicant's solicitor to the First Respondent required a response in two days to an undertaking that the First Respondent not act on the Consent and that she provide the notice of surrender of the Consent within seven days of giving the undertaking. That letter was sent to a vacant lot. Further letters were sent to the First Respondent's husband and to her solicitor. It is unknown on the evidence precisely when the First Respondent received any of the correspondence sent before proceedings were commenced by the Applicant's solicitor on 31 October 2019. The first time there was correspondence from the First Respondent's solicitor according to the attachments to Mr Hones' bundle was on 4 November 2019, after the proceedings were commenced. The First Respondent had to determine if she should surrender a valuable development consent which is generally considered valid until declared invalid by this Court. Such a decision cannot reasonably be expected to occur in the space of a few days, assuming that the legal position as detailed in the solicitor's letter was correct. There is no evidence of unreasonableness on the First Respondent's part before the Applicant's solicitor commenced proceedings.
The proceedings having been commenced on 31 October 2019 with a notice of motion seeking interlocutory relief returnable on 8 November 2019, the parties engaged in extensive correspondence in a very short period of time as outlined above on 4-7 November 2019, resulting in consent orders agreed on 7 November 2019 being made on 8 November 2019 by the Court. The First Respondent agreed not to rely on the Consent (order 1) and not to alter ground levels (order 2). The orders included granting access to a surveyor to the First Respondent's land to carry out a survey. These results were communicated on 10 December 2019. The First Respondent filed an affidavit dated 12 December 2019 which did not accept the Applicant's survey as accurate and advised that without admission a new DA in essentially the same terms had been lodged with the Council as this had more utility than incurring the cost of defending the proceedings. Consent orders were made by the Court on 13 December 2019. The Consent was surrendered on 30 January 2020. The First Respondent continued to be bound by orders that she not disturb ground levels or rely on the Consent. No unreasonable behaviour of the First Respondent arises from these events.
The surrender of the Consent was made without admission by the First Respondent. It should not be considered as a capitulation but rather as a supervening event which resulted in the subject matter of the litigation no longer being in existence.
Relying on offers said to be Calderbank in nature does not take this matter any further given that there has been no final hearing of the issues in dispute by the Court and my finding that there has been no relevant delay by the First Respondent.
Considering the extract of Ralph Lauren set out above no basis has been demonstrated for an otherwise order to be made in favour of the Applicant. As relied on by the First Respondent, Siasat had broadly similar facts albeit that the consent in issue was surrendered on the second day of a hearing.
The Applicant's notice of motion seeking dismissal of proceedings can be made. In the exercise of my discretion to order costs, the costs order to be made is that each party pay their own costs.
The legal costs of the costs hearing arise for consideration given that both parties have incurred expense in arguing this notice of motion. The Applicant has been unsuccessful in its application for costs and should pay the First Respondent's costs on the basis that costs follow the event.
[6]
Orders
The Court makes the following orders:
1. The proceedings are dismissed.
2. Each party is to pay its costs of the proceedings referred to in order (1).
3. The Applicant is to pay the First Respondent's costs of this costs hearing.
4. The exhibits are returned.
[7]
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Decision last updated: 28 April 2020