Land and Environment Court of New South Wales CITATION : Rockdale City Council v Payne and Anor [2000] NSWLEC 115 APPLICANT Rockdale City Council PARTIES : RESPONDENTS Payne and Anor FILE NUMBER(S) : 40059 of 1999 CORAM: Pearlman J KEY ISSUES: Costs :- no hearing on the merits - reasonableness of parties conduct LEGISLATION CITED: Environmental Planning and Assessment Act 1979 s 121B Land and Environment Court Rules 1996 pt 15 r 7 CASES CITED: Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622 DATES OF HEARING: 03/05/2000 EX TEMPORE 05/03/2000 JUDGMENT DATE : APPLICANT Mr C J Leggat (Barrister) SOLICITORS Abbott Tout LEGAL REPRESENTATIVES: RESPONDENT Mr J E Robson (Barrister) SOLICITORS Martin L Payne JUDGMENT: IN THE LAND AND 40059 of 1999 ENVIRONMENT COURT Pearlman J OF NEW SOUTH WALES 3 May 2000 ROCKDALE CITY COUNCIL Applicant v MARTIN PAYNE and LYNN LOVEDAY Respondent JUDGMENT 1. This is an application for costs made by Rockdale City Council 2. The class four proceedings were commenced by an application dated 15 March 1999 and filed in the Court on 16 March 1999. They were ultimately settled by consent orders on 7 June 1999. 3. The proceedings, by reason of the consent orders, did not result in a hearing on the merits. In those circumstances the decision of the High Court in Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622 is pertinent. McHugh J at p 625 set out the following approach which I am bound to follow. He said: If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the Court will make no order as to the cost of the proceedings. 4. It is necessary therefore that I have regard to the conduct of both the council and the respondents because each party contends that the other did not act reasonably in connection with the proceedings. 5. The relevant facts are these. On 10 February 1999 the respondents were notified by the solicitors for the council that evidence was available that the subject premises were being used in breach of conditions of development consent, that is, that trading was taking place outside permitted operating hours. The solicitors requested cessation of the illegal use within seven days, failing which class 4 proceedings would commence. 6. On 18 February 1999 the respondents replied. There are a number of important facts about their response. First, they admitted that there was a breach of the conditions of development consent by trading outside the permitted hours. They notified the council, secondly, that a development application was being prepared and had been lodged with the council on the previous day which, in their opinion would, if granted, overcome the concerns raised by the Court. Those concerns had been raised in class 1 proceedings, No 10629 of 1998, which was an appeal against the refusal by the council to, amongst other things, extend the operating hours of the business. In a judgment given on 22 January 1999 Commissioner Watts refused that appeal (insofar as it applied to the extension of the opening hours) on the basis that there was a detriment to adjoining residents especially because of the disturbance caused by the operation of cars in the street during the early hours of trading. Going back to the letter of 18 February 1999, the respondents asked the council to consider the development application before the class 4 application was lodged. 7. The next step was a further letter on 26 February 1999 to the respondents from the council's solicitors, again warning of the commencement of proceedings unless the illegal use ceased by 4.00 pm on 1 March 1999. On 1 March 1999 the respondents replied. They again requested the council to reconsider its position because the development application was still before the council and because, as they set out in their letter, the respondents believed that the development application, if granted, would overcome the concerns of the council and the residents as well as those concerns pointed out in the judgment of the Court in the Class 1 appeal. They also pointed out the considerable damage to the goodwill of the business and the financial detriment that they would suffer if they ceased the early opening of trading hours and they said that it would be reasonable to give two or three weeks notice to their members of a change of trading hours. 8. That letter received a response dated 11 march 1999 from the solicitors for the council, again warning of the commencement of class 4 proceedings and asking again for an undertaking that the illegal use would cease by 13 March 1999. However, on 9 March 1999 the council independently (and without notice to the council's solicitor, Mr Reilly) issued a notice to the respondents under s 121B of the Environmental Planning and Assessment Act 1979, to the respondents requiring the cessation of trading before 8.00 am in compliance with the conditions of development of two development consents and allowing a period of 14 days from that date for compliance. So, by 9 March 1999 the respondents had a s 121B notice which required compliance by 23 March 1999 and they had a letter requiring compliance by 13 March 1999. 9. On 12 March 1999, according to the evidence of Mr Reilly, Mr Payne stated that he was prepared to give an undertaking to comply with the conditions of consent limiting hours of operation in two weeks' time. The response from Mr Reilly was that the council would not wait for a further two weeks and class 4 proceedings could be expected to commence. 10. On 15 or 16 March 1999, another conversation took place between Mr Payne and Mr Reilly in which Mr Payne stated his confusion about the two directives he had been given, the s 121B notice which required a cessation by 23 March 1999 and the letters from the council's solicitors requiring cessation by 13 March 1999. The response from Mr Reilly was that both class 4 proceedings and a notice under s 121B are separate avenues of enforcement. Three letters warning the respondents, one dated 10 February 1999, one dated 26 February 1999 and one dated 11 March 1999 had been sent and there was no more time available. 11. On the following day, 16 March 1999, as I earlier said, the class 4 proceedings were commenced. The class 4 proceedings sought several orders. The first, in general terms, required an order that the respondents be restrained from using the premises otherwise than in accordance with development consent 15/84 and development consent 46/90. The second, in general terms, sought an order restraining the respondents from using the half of the ground floor of the property used for the ladies' fitness classes outside the approved hours of operation and, thirdly, an order was sought, again in general terms, that the respondents be restrained from using the first floor and the other half of the ground floor for its approved use as a gymnasium outside the approved hours of operation. 12. On 18 March 1999 the respondents gave a written undertaking. The terms of the undertaking are important and they are as follows: We hereby give an undertaking as directors of Body Shape Fitness Centre Pty Limited to cease trading before 8.00 am Monday to Friday at 398 Rocky Point Road, Sans Souci and to cease illegal use of the premises effective as and from Friday 2 April, 1999 until such time as we may be permitted by law. We advise we consider it is reasonable to give two (2) weeks notice to our members of the change in our trading hours and accordingly we will proceed to notify our members that our morning trading will not commence until 8.00 am as from Monday 5 April, 1999. 13. On 6 April 1999 the development application to which the respondents earlier referred, was refused by the council and a class 1 appeal in relation to that refusal was filed on 11 May 1999. 14. On 7 June 1999 the class 4 proceedings were settled by the granting by consent of an order which is not precisely the same as the order that was sought in the class 4 application, but is as follows: The respondents, by themselves, their servants, agents or assigns are restrained from using, or causing, suffering or permitting to be used the premises being Lot 2 DP75587, generally known as 398 Rocky Point Road, Sans Souci ("the property") for the purposes of a gymnasium otherwise than in accordance with Development Consent, C15/84 and Development Consent, C46/90 that apply to the property, without the prior consent of the applicant Council. 15. The question of costs remained outstanding to be determined at a later date and it is that issue which is now the subject of this hearing. 16. In the circumstances I have outlined, the council claims that the respondents acted unreasonably. In his submissions Mr Leggat, appearing for the council, made the following points. First, it is clear that the respondents knew that the trading before 8.00 am was illegal. They admitted as much in their letter of 18 February 1999 to the council's solicitors. Secondly, one of their reasons for so trading and not ceasing the illegal use was, as they pointed out in their letter of 1 March 1999 was a financial one. They considered there would be damage to the goodwill of the business and a financial detriment arising from refunds to members. Thirdly, there had been proceedings in the Court, of which the respondents were aware, and in particular Mr Payne was aware, he being a solicitor in practice and therefore an officer of the Court, in which the Court had found trading hours before 8.00 am were detrimental to the amenity of adjoining residents. Fourthly, the undertaking which was proffered on 18 March 1999 was not an unqualified undertaking to cease illegal use of the premises forthwith, it was, instead, an undertaking to cease that use as from 5 April 1999. Fifthly, that use could have ceased as from 22 January 1999, being the date of the judgment in which extended hours were not allowed. Accordingly the undertaking was not reasonably acceptable to the council. 17. Mr Leggat also said that the failure to make a costs order in the council's favour would, to use a colloquial expression, frighten the horses, meaning that it would send a wrong message to the council. I put no weight on that submission for the reason that the proper approach of the Court in this case is to follow the dictum McHugh J in Minister for Immigration; Ex parte Lai Qin . It is not a question of whether any sort of a message should be given to the council, the only question is to look at the reasonableness of the conduct of the parties. 18. Mr Robson, appearing for the respondents, endeavoured to persuade the Court that the conduct of the council was unreasonable in taking the proceedings. He pointed out, first, that an undertaking had been given in the terms that I have outlined; secondly, that at the time that undertaking was given the class 4 application had been filed but had not been served; thirdly, that the respondents had no formal notice that the proceedings had commenced; fourthly, that it was not unreasonable for them in the circumstances to require a period of notice to be given to their members; and fifthly, that the undertaking had the effect of bringing about full compliance as from 5 April 1999 with the conditions regulating operating hours in the two development consents and, lastly, the undertaking was observed by the respondents from that date. 19. Furthermore Mr Robson submitted that the orders sought would not have changed what the respondents were doing as from 2 April 1999 because in effect from that date they had ceased the illegal use of the premises and the consent orders to that extent took the matter no further. 20. I have outlined all those facts and submissions in order to explain my opinion that there are no circumstances of unreasonableness on either side of the parties. I think that the council acted reasonably right up until the settlement of the litigation by the consent orders. There was a breach of the development consents. It was a breach which had been noticed by the Court. The council was entitled to bring proceedings to enforce compliance with the development consents and it was entitled also to enforce compliance by an order under s 121B. It took both those steps in circumstances with adequate and ample warning to the respondents and in circumstances where the response of the respondents was not to give an undertaking to cease forthwith. 21. On the other side of the equation, however, I do not think that the respondents acted unreasonably. What they did, as was obvious from the correspondence, was to admit their breach and to try and bring about an orderly shutting down of that part of their trading which was in breach. It was not unreasonable, in my opinion, for them to endeavour to have the class 1 application considered by the council before they ceased the trading even though they knew that that trading was in breach. It was not unreasonable for them to try to cease the illegal use at a time which allowed some notice to be given to their members. The undertaking which they gave was not a full undertaking in that it was qualified as to time, but it was an undertaking to comply and they did comply. 22. It is not unusual for respondents, when faced with the threat of proceedings, to try to regularise their position and to do so in an orderly manner and that is what the respondents in this case were doing. I do not think any extra opprobrium should be placed upon Mr Payne because he is a solicitor of this Court. These are not contempt proceedings and Mr Payne was entitled to act as a normal business proprietor. 23. I find that the conduct of both parties was reasonable in commencing and defending the proceedings and was reasonable until the litigation was settled. Accordingly, it is appropriate that I make no order as to costs. 24. Mr Robson correctly and properly drew the Court's attention to pt 15 r 7 of the Land and Environment Court Rules 1996 which provides as follows: The Court may order the respondent to pay the costs of the proceedings where a respondent satisfies or causes to be satisfied the claim of the applicant after the proceedings have been commenced. 25. There is a difficulty, as Mr Robson pointed out, with determining whether the respondents actually satisfied or caused to be satisfied the claim of the council after proceedings had been commenced. The proceedings were commenced on 16 March 1999 and the undertaking which was given on 18 March 1999 was not an undertaking that operated forthwith. It provided for a cessation of the illegal use of the premises from 2 April 1999. Furthermore, three orders were sought (as I have earlier indicated) and in the end the only order that was made by consent was one order and it was not exactly in the form of the orders which were sought. 26. McHugh J pointed in Minister for Immigration; Ex parte Lai Qin (at p 624) that "… when there has been no hearing on the merits … a court is necessarily deprived of the factor which usually determines whether or how it will make a costs order" . It is also deprived of the factual evidence which would or would not support the orders which were sought. 27. In the circumstances where the applicant claimed three orders, and where in the end the matter was settled by consent with one final order and where the undertaking given by the respondents was qualified, it is not a proper case, in the exercise of my discretion, to depart from what I earlier foreshadowed, that is, to make no order as to costs. 28. There will be no order as to costs and the council's application for costs is dismissed. The exhibit may be 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.