Reported Decision : 103 LGERA 219 Land and Environment Court of New South Wales CITATION: Kentgreen Dural Pty Ltd -V- Hornsby Shire Council [1999] NSWLEC 158 PARTIES APPLICANT: Kentgreen Dural Pty Ltd RESPONDENT Hornsby Shire Council NUMBER: 10084 of 1999 CORAM: Bignold J KEY ISSUES: Practice & Procedure :- Discontinuance of class 1 proceedings 3 weeks prior to fixed hearing - costs LEGISLATION CITED: Pt 11 r 5 Rules of Court DATES OF HEARING: 07/06/1999 DATE OF JUDGMENT DELIVERY: 07/08/1999 APPLICANT: Mr T. Robertson, Barrister SOLICITORS: Macedone Christie Willis - Solari LEGAL REPRESENTATIVES: RESPONDENT: Mr M. Wright, Solicitor SOLICITORS: Michell Sillar JUDGMENT: TABLE OF CONTENTS A. INTRODUCTION 1-5 B. THE BASIS FOR THE COUNCIL'S CLAIM FOR COSTS 6 C. RELEVANT PRINCIPLES FOR THE EXERCISE OF THE COURT'S DISCRETION 7-25 D. THE APPLICANT'S CASE THAT NO EXCEPTIONAL CIRCUMSTANCES HAVE BEEN ESTABLISHED 26-32 E. CONCLUSIONS 3 3-35 F. SHOULD THE COSTS TO BE AWARDED BE ON THE INDEMNITY BASIS? 36-37 G. ORDERS 38-42 IN THE LAND AND Matter No. 10084 of 1999 ENVIRONMENT COURT OF Coram: Bignold J. NEW SOUTH WALES 8 July 1999 KENTGREEN DURAL PTY LIMITED Applicant v. HORNSBY SHIRE COUNCIL Respondent JUDGMENT Bignold J: A. INTRODUCTION 1. By its Notice of Motion filed 31 May 1999, the Respondent (the Council) seeks an order that the Applicant pay the Council's costs of the proceedings on an indemnity basis in consequence of the Applicant's discontinuance of the proceedings.. 2 The Applicant resists the order sought. 3. The proceedings which involved an appeal pursuant to s 96(7) of the Environmental Planning and Assessment Act 1979 against the Council's determination refusing the Applicant's application to modify two existing development consents were commenced in this Court on 16 February 1999 and were terminated on 21 May 1999 when the Applicant filed a Notice of Discontinuance. 4. At the time the proceedings were discontinued, they had been fixed for hearing on 15, 16 and 17 June 1999, having been so fixed, at the Applicant's instigation by the Registrar at callover held on 10 March 1999. 5. The discontinuance did not have the consent of the Council. B. THE BASIS FOR THE COUNCIL'S CLAIM FOR COSTS 6. The Council's claim for costs is principally founded upon the provisions of Part 11 Rule 5(1) of the Rules of Court which provide as follows: If a party to any proceedings discontinues them in whole or in part, the Court may, on the application of another party, order the discontinuing party to pay the costs of any party against whom the discontinued claim was brought and who does not consent to the discontinuance. C. RELEVANT PRINCIPLES FOR THE EXERCISE OF THE COURT'S DISCRETION 7. In support of its costs claim, the Council places considerable reliance upon my decision in Manly Wharf Pty Ltd v. Manly Council (1997) 98 LGERA 245 which, like the present case, involved a discontinuance of class 1 proceedings at a time when they had been fixed for hearing (some two months previously) and the discontinuance occurred five weeks before the fixed haring dates. 8. In that case, the Applicant's resistance of the Council's costs claim was principally based upon the Court's Practice Direction which in paragraph 10, declares that the practice of the Court in proceedings in classes 1 and 2 of the Court's jurisdiction is that no order for costs is made "unless the circumstances are exceptional". 9. At 246/247, I posed the question as to the relationship between (a) the Court's Practice Direction and (b) Part 11 Rule 5 of the Rules of Court, in providing the relevant guidance to the exercise of the broad judicial discretion in relation to the costs of proceedings that is vested in the Court by the Land and Environment Court Act 1979, s 69. After discussing the competing arguments and surveying the course of decided cases in this Court I expressed the following conclusion at 249: My review of the decided cases has revealed that the preponderating weight of authority supports the following proposition (which I would adopt in answering the question that I have earlier posed): Ordinarily costs will be awarded against a discontinuing party because the discontinuance of the proceedings either (a) satisfies the exceptional circumstances test within the meaning of the Court's Practice Direction or (b) operates as an established exception to that Practice Direction. Having regard to the all embracing terms of the Practice Direction (as to which see the Chief Judge's judgment in Outdoor Australia Pty Ltd v Auburn Council (1996) 89 LGERA 365) the preferable basis for the proposition I have enunciated may be that the discontinuance of the proceedings satisfies the exceptional circumstances test. 10. However, having expressed that general conclusion, I immediately acknowledged that there may be circumstances involving discontinued proceedings where the ordinary costs consequence of discontinuance may not be applicable, when I said (at 249/250): However I would emphasise that although an order for costs against the discontinuing party will ordinarily flow from the discontinuance of the proceedings, it may be established that the discontinuance reflects, not a total abandonment of the applicant's claims, but a compromise or settlement of them, in which circumstances it may be just that there be no order as to costs following upon the discontinuance of the proceedings. Moreover the party against whom the proceedings have been discontinued may forfeit its presumptive entitlement to costs if it has been guilty of any relevant misconduct in the litigation. This is the basis upon which I would understand Talbot J in Bryant to have held there to be an absence of exceptional circumstances, notwithstanding the discontinuance of those proceedings. 11. In the course of the Applicant's argument, my attention has been directed to three later decisions of the Court in which class 1 or 2 proceedings were discontinued before the hearing, but claims to costs by the party against whom the proceedings had been discontinued failed. These cases which are all noted at para 2.6000 of the Law Book Co. Practice Book on the Court are: (i.) Chris Lonergan & Associates v. Byron Shire Council (unreported 27 April 1998) per Pearlman CJ; (ii.) Gilling v. Hawkesbury City Council (unreported 7 May 1998) per Bignold J; (iii.) David Crane and Associates Pty Ltd v. Kogarah Council (unreported 10 June 1998) per Lloyd J. 12. In Lonergan, the Chief Judge said of the Manly Wharf case: I do not take that case as authority for the proposition that a discontinuance of proceedings is always an exceptional circumstance entitling the non-discontinuing party to an award of costs in its favour. That seems clear from pp 9 and 10 of the judgment where his Honour discussed a possible rule that ordinarily costs will be awarded against a discontinuing party because the discontinued proceedings operate as exceptional circumstances. But his Honour went on to mention other circumstances where that rule (if it was a rule) would not be applied. 13. Her Honour went on to reaffirm her view expressed in McColl v. Gosford City Council (unreported 24 February 1995) (which had been referred to in the Manly Wharf case) that: …the principle which applies in these cases is one that has been routinely applied by the Court. That principle is to look for exceptional circumstances as founding an award of costs 14. The Chief Judge then proceeded to examine the facts of the case (in respect of the litigation history, culminating in the discontinuance of the proceedings) which she concluded did not constitute exceptional circumstances required to grant an award of costs . 15. In Gilling where the proceedings were discontinued, only seven or eight days before the fixed hearing dates in circumstances where the council had belatedly filed a statement of issues raising matters of far reaching implications, including questioning whether the Court had jurisdiction to defer the appeal, I said: In all the circumstances I am satisfied, by the submissions advanced on behalf of the Applicant, that the decision to discontinue the appeal in the light of the foreshadowed escalation of the case belatedly injected by the Council in the litigation history, was justifiable and reasonable and ought not carry any adverse consequences for the Applicant in costs. In short, I am satisfied that the discontinuance, properly understood in the light of the litigation history, does not constitute, in this particular case, "exceptional circumstances" within the meaning of the Court's Practice on costs and, for that reason, I am of the opinion that there is no justification for an order for costs in favour of the Council against the discontinuing party called for in this case, and I so determine. 16. In David Crane Lloyd J, faced with the apparently conflicting approaches reflected in the Manly Wharf case and the Lonergan case, reconciled the cases by deducing therefrom the following principles: (1) In planning and building appeals it is first necessary to look for some exceptional circumstance so as to found an order for costs ( Chris Lonergan & Associates v Byron Council , Pearlman J, 27 April 1998, unreported). This is a direct consequence of cl 10 of the Practice Direction to which I have referred. (2) Ordinarily the filing of a notice of discontinuance without consent will satisfy the requirement for an exceptional circumstance or operate as an established exception to the practice direction ( Manly Wharf Pty Limited v Manly Council, Bignold J, 22 October 1997, unreported ). This is because the discontinuance usually represents an abandonment of the applicant's claim, thereby leading to the result that costs incurred by the other party are necessarily wasted or thrown away. 17. Having identified the principles, his Honour next adds the salutary caution that they must not become hard and fast rules, when he says: Whilst these principles generally govern the making of an order for costs in cases such as this, they are not hard and fast rules. If they were, then that would be contrary to the provisions of s 69(2) of the Land and Environment Court Act 1979 , which give the Court an unfettered discretion as to costs. They are merely principles which the court has adopted as a guide to the exercise of the discretion which exists under that section. Moreover, the facts in each case are seldom the same. There may be special facts or circumstances which might justify a departure from these principles in any particular case. Accordingly, it is necessary to examine the particular facts and circumstances which gave rise to the filing of the notice of discontinuance in this case. 18. After noting the relevant facts and the competing arguments, Lloyd J noted that in Manly Wharf it was recognised that it may be established that the discontinuance did not reflect a total abandonment of the applicant's claims, in which event, it may be just that there be no order as to costs following the discontinuance of the proceedings. 19. His Honour also thought it relevant to consider whether the discontinuing party acted reasonably or unreasonably in discontinuing the proceedings, in that respect drawing upon the principles enunciated by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 625. 20. Applying those principles, Lloyd J concluded that it had not been unreasonable for the applicant to discontinue the proceedings because of the supervening change of the relevant planning law. 21. Another unreported decision (which is not referred to in the Law Book Co. Practice Book) where a discontinuance of class one proceedings just three days prior to the fixed hearing dates was held not to constitute "exceptional circumstances" is my decision in Symchung Pty Ltd v. Concord Council (29 May 1998). 22. In that case, I said of the Manly Wharf decision: However as I pointed out in the recent judgment in the Manly Council case (which has been cited in argument) the principle does not apply automatically or inexorably and ultimately the question of discretion to order the payment of costs in the context of the Court's general policy that costs in class 1 and 2 proceedings are not generally awarded save for exceptional circumstances requires a consideration of the facts of each case and in particular as I pointed out in that case, the conduct of the parties in the litigation and in matters relevant thereto. 23. In that case, the Council had raised 11 or 12 new issues within a fortnight of the fixed hearing. In concluding that in these circumstances the applicant had acted reasonably in discontinuing the proceedings I said: Having regard to the timing (that is the belatedness of the raising of those issues) and to the nature and consequences of the new case sought to be raised on the legitimate expectation of the Applicant in the litigation (which had no doubt been conducting itself on the basis of an appeal limited to the imposition of the condition deleting one residential storey from the development) I am of the opinion that in the circumstances of this case the discontinuance of the proceedings by the Applicant was a reasonable and unexceptional response to the dramatically changing scenario presented by the Council's belated change of decision in the case. 24. In my respectful opinion, the four cases decided since the decision in the Manly Wharf case have not undermined the authority of the Manly Wharf case. If I were required to reconsider it in the light of the subsequent cases, I would re-affirm it. In my opinion, the subsequent cases provide illustrations of circumstances where the discontinuance of the proceedings has been held to be reasonable conduct on the part of the discontinuing party and as such, such conduct has been held sufficient to negate the "ordinary " cost consequences of a discontinuance of proceedings (or as I have described it, the presumptive entitlement to costs in favour of the party against whom the proceedings are discontinued), as is expressly provided for in Part 11 Rule 5 of the Rules of Court . 25. Significantly, for present purposes, it is to be noted that in each of the cases (except for Lonergan), the Court's conclusion that the discontinuance was reasonable in the circumstances of the case and did not "exceptional circumstances", was based upon some action by the other party in the litigation (Gilling; Symchung) or some supervening action beyond the parties' control (David Crane). D. THE APPLICANT'S CASE THAT NO EXCEPTIONAL CIRCUMSTANCES HAVE BEEN ESTABLISHED 26. In the present case, the Applicant seeks to go further than the cases have so far gone by urging a finding by the Court that its decision to discontinue the proceedings at a time some three weeks before the fixed hearing dates, was reasonable conduct on its part in the litigation and as such, ought to be held to not constitute "exceptional circumstances" as is required to be established to justify an order for costs in accordance with the Court's Practice Direction in paragraph 10 27. The grounds advanced for such a favourable finding are that in the ordinary course of litigation, professional judgment generally is relied upon by litigants in pressing claims, and that in the present case the Applicant, acting on professional advice as to the prospects of its success in the proceedings, decided to discontinue the proceedings. This, it was argued, was not only a reasonable decision on the part of the Applicant, acting in the present case responsibly on professional advice, but was to be regarded as an unexceptional action in the litigation. 28. In support of these submissions, the Applicant tendered the professional (both legal and planning) advices that it had received, both before and after commencing the proceedings. 29. It should be noted that the professional advice that the Applicant received after the litigation had been commenced was obviously more comprehensive and probing than that which it had received before commencing the litigation. 30. I do not think it necessary to the resolution of the issue requiring determination in the present case, to delve deeply into the litigation or into the history of the relevant development consents in respect of which the Applicant was seeking modification, other than to say that the prospects of success in the appeal, though by no means forlorn or hopeless, were nonetheless beset with obvious difficulty (both in terms of legal and planning considerations), a fact that is attested by the legal and planning advice that was obtained on behalf of the Applicant after the proceedings had been commenced and after they had been set down for hearing at the Applicant's instigation. 31. The Applicant had commenced the proceedings in substantial reliance upon professional planning opinion of a very experienced town planner who had been responsible for the preparation and presentation of the Applicant's modification application made to the Council, and although that consultant had maintained his advice throughout the litigation history, expert legal advice and additional planning advice obtained after the proceedings had been commenced, had placed a quite different complexion on the Applicant's case. 32. In the light of these facts, can it be said that the Applicant's discontinuance of the proceedings was reasonable conduct in the litigation on its part, which negates the "ordinary" costs consequence of the discontinuance of the proceedings some three weeks before the fixed hearing dates? E. CONCLUSIONS 33. In my judgment, the circumstances of the Applicant's discontinuance of the proceedings in the present case do not displace the ordinary cost consequence of a discontinuance, as is contemplated by Part 11 Rule 5(1) of the Rules of Court, and as applied in the Manly Wharf case. 34. The Applicant's decision to discontinue was entirely its decision, in the sense that it was unaffected by any action taken by the Council in the litigation or by any supervening action beyond the parties' control. It may be readily inferred that the Applicant, in discontinuing the proceedings, acted entirely responsibly in the litigation, in the light of the professional advice it received after it had commenced the litigation. However, it had sought the early hearing of the appeal and the professional advice that it obtained, which obviously and profoundly affected its decision to terminate the litigation, was received only three weeks before the fixed hearing date, at a time when the Council had presumably incurred costs in preparing its case. 35. In my judgment, the circumstances of the discontinuance in the present case, do not justify a decision not to exercise the costs power expressly conferred by Pt 11 r 5 of the Rules of Court, and governing the situation when the proceedings are discontinued without the consent of the other party. The express power to order costs having been thereby enlivened, I am of the opinion, that the preponderance of authority in this Court (including the cases decided since the Manly Wharf case) is that the discontinuance is relevantly to be regarded as constituting "exceptional circumstances" sufficient to award costs in accordance with the Court's Practice Direction—par 10, it not being established that the discontinuance was induced by any action of the Council or supervening action beyond the control of the parties; rather it being deliberate and no doubt, responsible decision of a litigant, acting on professional advice concerning prospects of success in the proceedings. F. SHOULD THE COSTS TO BE AWARDED BE ON THE INDEMNITY BASIS? 36. In my judgment, the circumstances of the present case do not justify the award of costs on the indemnity basis. Although I have concluded that the Applicant's case was beset with difficulties, I would by no means regard it as a hopeless case, or a case that was ill-advisedly commenced or persisted in. On the contrary, albeit late in the very brief litigation history, the Applicant, on obtaining more comprehensive professional advice (legal and planning), promptly decided to discontinue the proceedings. I do not accept the Council's submission that the Applicant ought to have obtained the professional advice it ultimately obtained before it filed its appeal or before it sought an early hearing of its appeal. In my judgment, the Applicant acted responsibly in the litigation in which it had an arguable case. 37. Accordingly, I find that the Council has not established its case to an award of costs on the indemnity basis. G. ORDERS 38. For all the foregoing reasons, I am of the opinion that the Council is entitled to costs pursuant to Pt 11 r 5(2) of the Rules of Court (ie costs reasonably incurred prior to the discontinuance). 39. Such costs should be in the sum as agreed, or failing agreement, as assessed. 40. However, the Council has failed to make out its claim to costs on the indemnity basis. 41. Since the Council has succeeded in its claim to costs (which was resisted by the Applicant) but has failed in its claim to costs on the indemnity basis, I think it fair and reasonable that each party pay its own costs of the hearing of the present Notice of Motion. 42. Accordingly, I make the following orders: 1. Pursuant to Pt 11 r 5, of the Rules of Court the Applicant is ordered to pay the costs of the Respondent, being the costs reasonably incurred by the Respondent in the proceedings prior to the discontinuance of the proceedings on 21 May 1999, such costs being in the sum agreed or failing agreement, as assessed. 2. Each party pay its own costs of the hearing on the Respondent's Notice of Motion seeking costs on the indemnity basis. 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.