Land and Environment Court New South Wales Medium Neutral Citation: Blues Point Hotel Property Pty Ltd v North Sydney Council (No 2) [2021] NSWLEC 79 Hearing dates: 25 June 2021 Date of orders: 22 July 2021 Decision date: 22 July 2021 Jurisdiction: Class 4 Before: Duggan J Decision: See paragraphs 23 and 24 Catchwords: COSTS – discretion to award costs pursuant to r 42.1 of the Uniform Civil Procedure Rules – whether costs should be apportioned – applicant successful on first of three issues for determination – first issue for determination not clearly discrete issue in proceedings – usual order made Legislation Cited: Uniform Civil Procedure Rules 2005 Environmental Planning and Assessment Act 1979 Cases Cited: Blues Point Hotel Property Pty Ltd v North Sydney Council [2021] NSWLEC 27 Cretazzo v Lombardi (1975) 13 SASR 4 Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 F & D Bonaccorso Pty Ltd v City of Canada Bay Council (No 5) [2008] NSWLEC 235 Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748 James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 Category: Costs Parties: Blues Point Hotel Property Pty Ltd (First Applicant) Blues Point Hotel Property No. 2 Pty Ltd (Second Applicant) North Sydney Council (Respondent) Representation: Counsel: A Pickles SC (First and Second Applicants) J P Merlino, solicitor (Respondent) Solicitors: Bartier Perry Lawyers (First and Second Applicants) HWL Ebsworth Lawyers (Respondent) File Number(s): 2019/373973 Publication restriction: No Judgment 1. Judgment in the substantive proceedings in Blues Point Hotel Property Pty Ltd v North Sydney Council [2021] NSWLEC 27 (Blues Point (No 1)) was delivered on 31 March 2021. I adopt the facts and circumstances as set out in that judgment without repeating them here. I adopt the same defined terms as were used in Blues Point (No 1). 2. In proceedings such as these the usual order pursuant to r 42.1 of the Uniform Civil Procedure Rules 2005 (UCPR) would be that costs follow the event. However, the Applicants have made an application that the usual order not apply and that the Court, in its discretion, determine that each party should pay its own costs, or alternatively, that the Applicants pay only part of the Council's costs to reflect its success on one of three issues in the proceedings. 3. The Council seeks the usual order for costs. Applicants' submissions 1. The Applicants submit that the usual order is not appropriate, and that either no order for costs should be made or an apportioned costs order should be made because, as set out at [6] of its written submissions: 6. These proceedings involved three issues, which had been articulated by the parties. The applicants succeeded on the first issue, but not on the second and third. The Court held that the first issue, on which the applicants succeeded was fundamental to determination of other issues. 1. The three issues referred to are the issues as identified by the parties in the List of Real Issues for Determination and set out in [38] of Blues Point (No 1): (1) Whether the whole of the premises identified as Lot 1 in Deposited Plan 1018682 and known as the Blues Point Hotel, 116 Blues Point Road, McMahons Point (Premises) benefits from an existing use, pursuant to section 4.65 of the Environmental Planning and Assessment Act 1979 (Act), for the purpose of a hotel as defined under the North Sydney Planning Scheme Ordinance 1963 (NSPO). (2) Whether the existing use of the Premises as a hotel extends to the first-floor external terrace (First-Floor Terrace). (3) Whether the use of the First-Floor Terrace for hotel patrons (who may consume food and alcohol) is an enlargement, expansion or intensification of an existing use which requires development consent. 1. The Applicants submit that the first issue of whether existing use rights as a hotel applied to the whole of the premises was a sufficiently distinct matter on which an apportioned costs order is appropriate. It relies on the principles set out in James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 as considered and applied in F & D Bonaccorso Pty Ltd v City of Canada Bay Council (No 5) [2008] NSWLEC 235. 2. The Applicants submitted that the issue of the extent of existing use rights was a discrete issue, not just a disputed question of fact or law. While the Court's determination of the issue was a fundamental step in the determination of the other issues, its discreteness is illustrated by the fact that it was articulated by the parties as an issue of fact or law for determination, and it was determined that way. 3. The position taken by Council in relation to the extent of existing use rights was the basis for its pre-hearing enforcement actions against the Applicants which precipitated the Applicants commencing proceedings. The Applicants contend that the Council's position was that existing use rights as a hotel were limited to downstairs being the part of the premises where alcohol could be sold or consumed, and that the first floor including the outdoor terrace was a separate and independent residential accommodation use. 4. Despite there being no relief granted in relation to the first issue, its determination now facilitates the use of the first floor for hotel purposes and the lodgement of development applications for its expansion, enlargement or intensification. Prior to the determination of the issue the Applicants were prevented from using the first floor for hotel purposes because the Council had stated in its correspondences, being a Council Order made 2 May 2017 and a Penalty Infringement Notice issued in May 2019, that the first floor was residential accommodation. 5. Had the Council accepted and the parties agreed that existing use rights applied to the whole premises (but not the outdoor terrace), it would have reduced the extensive amount of historical material in evidence, and the scope of written and oral argument during the hearing. 6. The Applicants submit that if an order for costs is to be made the apportionment to be adopted should be in the order of 25-30% of the costs of the proceedings. The Court should approach the discretionary exercise on the basis of impression and evaluation, citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261. It should not seek to identify a discrete portion of evidence, argument and documentary material which goes specifically to whether the first floor was residential accommodation. Council's submissions 1. The Council submits that the Court should not exercise its discretion to make an order other than the usual order that costs follow the event because the proceedings were dispositive of single real issue, that being whether the outdoor terrace benefited from existing use rights for the purposes of a pub as defined under the LEP pursuant to s 4.65 of the Environmental Planning and Assessment Act 1979 (EP&A Act). 2. That the issue was identified as a question of fact or law for determination does not make it a discrete issue. The three issues identified were necessary and indivisible steps in the adjudication of the single real issue and overall disposition of the matter, being the rejection of the relief sought in the Applicants' Summons. There is nothing separate or dominant about any or all of the articulated issues for determination. 3. The Council submits that it always contended the premises benefitted from existing use rights as a hotel in some form. The Applicants were not precluded from lodging a development application for the use of the outdoor terrace by way of expansion, enlargement or intensification of existing use rights and could have done so in the absence of the Court's determination. 4. If costs were to be apportioned, the issue encompasses 10-15% of costs on the basis of volume of evidence and hearing time in relation to the determination of existing use rights applying to the whole building as opposed to the ground and first floor. Findings 1. Rule 42.1 of the UCPR applies to proceedings of this kind and provides that: 42.1 General rule that costs follow the event 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. 1. That rule operates as a presumption in favour of the usual order unless the Court, in the exercise of its discretion, determines that another order is appropriate. 2. Both parties relied on the principles governing apportionment in circumstances where an unsuccessful party has been successful on an issue or issues in relation to Class 4 proceedings as summarised by Biscoe J in F & D Bonaccorso Pty Ltd v City of Canada Bay Council (No 5) [2008] NSWLEC 235. In setting out the principles, Biscoe J cites the Court of Appeal in James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 where the Court said: [34] Where a matter involves multiple issues and the question before the court is whether it should make some other order as to costs other than the order that costs follow the event, a distinction is commonly drawn between cases which involve clearly discrete issues for determination, and those in which all issues are inseparable, or at least sufficiently linked, with respect to the overall disposition of a particular matter. In Permanent Trustee Aust Ltd v FAI General Insurance Co Ltd (unreported, NSWSC, 3 June 1998), Hodgson CJ in Eq noted that the obvious examples of a matter involving discrete issues is one where a plaintiff makes separate claims for different relief, or a claim by a plaintiff and a cross-claim by a defendant. Another example is where a respondent is successful in having an appeal against an earlier decision dismissed, but for reasons other than those raised in the respondent's Notice of Contention. This is not to say that so-called 'discrete issues', for the purposes of apportioning costs, only exist in cases where there are separate claims made within a single matter. As Toohey J stated in the passage quoted at [33] above, it can relate to ' any disputed question of fact or law ' before a Court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter. 1. Having regard to the nature of the proceedings and the issues for determination, I do not consider that the issue on which the Applicants had some success, was a clearly discrete issue from those on which the Applicants failed. This is because the issue of the extent of existing use rights as a hotel was directed to the single process of reasoning required to determine the ultimate question of whether the outdoor terrace outdoor benefitted from existing use rights. The three issues articulated in the Real Issues for Determination and decided in Blues Point (No 1) were sufficiently linked with respect to the overall disposition of that ultimate question. 2. Moreover the Applicants were not entirely successful on the issue, having argued that the relevant liquor license applied to the whole of the premises which included the outdoor terrace, and that it was unnecessary to look at the particulars of how the outdoor terrace was used because it was part of the premises specified in the license. Whilst I accepted that existing use rights as a hotel applied to the premises specified in the license, I found that the outdoor terrace surface area was only part of the license to the extent that it formed the roof of the bar below. Even if the Council had agreed that existing use rights applied to the whole of the premises, I would have still been required to consider evidence of the use of the outdoor terrace to make a finding in relation to it. 3. That the issue was articulated and determined separately to the other issues is not a sufficient basis for the exercise of my discretion to apportion costs. I accept the Respondent's submission that doing so would be taking a 'scoreboard' approach which was warned against by Jacobs J in Cretazzo v Lombardi (1975) 13 SASR 4 at 16 as cited by Toohey J in Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748. 4. While the Applicants may have relied on assertions made by the Council in pre-hearing correspondence that the first floor of the premises was residential accommodation, and these assertions informed its decisions on whether or not to lodge development applications, these are circumstances which have no relevance bearing on whether the first issue was a clearly discrete issue in the proceedings. Conclusion and orders 1. I am not satisfied that the Applicants' success in relation to the first issue is an appropriate basis to make a costs order other than the usual order. 2. The Court orders that: 1. The Applicants are to pay the Respondent's costs of the proceedings including the costs of the Motion for costs; and 2. The exhibits are returned. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 July 2021