Land and Environment Court of New South Wales CITATION : Port Stephens Council v Randell [2000] NSWLEC 169 APPLICANT Port Stephens Council PARTIES : RESPONDENT Randell FILE NUMBER(S) : 40121 [No 2] of 1999 CORAM: Cowdroy J KEY ISSUES: Costs :- Indemnity Costs Federal Court of Australia Act 1976 (Cth) LEGISLATION CITED: Land and Environment Court Act 1979 Land and Environment Court Rules 1996 Supreme Court Rules 1970 Albert Hadid v Lenvest Communications Inc & Ors [2000] FCA 628; Flemington Properties Pty Limited v Raine & Horne Commercial Pty Limited & Or (11 February 1998, no. 0053/98, Federal Court of Appeal) ; CASES CITED: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd and Ors (1988) ALR 397; Multicon Engineering v Federal Airports Corporation 138 ALR 245; Stelios Christofidellis & Ors v Ned & Visjna Zdrilic & Ors [2000] FCA 679 DATES OF HEARING: 2/08/00 DATE OF JUDGMENT: 08/28/2000 APPLICANT Mr J Maston (Barrister) SOLICITORS Sparke Helmore LEGAL REPRESENTATIVES: RESPONDENT Mr J Robson (Barrister) SOLICITORS Deacon Graham James JUDGMENT: IN THE LAND AND MATTER No. 40121 of 1999 ENVIRONMENT COURT CORAM: Cowdroy J OF NEW SOUTH WALES DECISION DATE: 28/8/00 Port Stephens Council Applicant v Anthony Victor Randell Respondent JUDGMENT [No 2] 1. Port Stephens Council ("the applicant") seeks an order that its costs of the class four proceedings be paid by the respondent and that such costs be paid on an indemnity basis from the 17 May 2000. On that date an attempt was made by the parties to negotiate a settlement of the proceedings and in the course thereof the applicant made a without prejudice offer ("the offer") to the respondent. The offer provided that if the respondent removed dam F from his property and paid the applicant's costs, the applicant would not press the Court for any order in respect of the other disputed dams on the respondent's property namely dams A, B and C subject to such dams receiving geo-technical and hydrological certification. The offer was not accepted and the hearing of the proceedings continued. On 14 June 2000 the Court determined that dams C and F should be removed, the sites rehabilitated, and that dams A and B required appropriate certification. 2. The applicant contends that since the respondent has not achieved a more favourable result than the offer, the respondent should be ordered to pay indemnity costs from the date of the offer. 3. In Multicon Engineering Pty Limited v Federal Airports Corporation 138 ALR 245 Rolfe J considered an application for indemnity costs under Pt 52 r 17 of the Supreme Court Rules 1970 ("the SC Rules") and said at 451:- In my opinion the proper approach to take to an offer of compromise, whether made under the Rules or pursuant to a Calderbank letter, is that there should be a prima facie presumption in the event of the offer not being accepted and in the event of the recipient of the offer not receiving a result more favourable than the offer, that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of the making of the offer. 4. The approach of Rolfe J has not been followed in several judgments of the Federal Court of Australia: see Flemington Properties Pty Limited v Raine & Horne Commercial Pty Limited & Or (11 February 1998, no. 0053/98, Federal Court of Appeal), Albert Hadid v Lenvest Communications Inc & Ors [2000] FCA 628 and Stelios Christofidellis & Ors v Ned & Visjna Zdrilic & Ors [2000] FCA 679. In Stelios , Einfeld J considered conflicting decisions concerning awards of indemnity costs and said at [22]:- In my opinion, the two recent decisions of a Full Court of this Court in Re Wilcox: Ex parte v Venture Industries Pty Ltd (1996) 141 ALR 727 (Black CJ, Cooper and Merkel JJ) and Abbott v Random House Australia [1999] FCA 1540 (Beaumont, Miles and Drummond JJ) have settled this question. In this respect, the following extract of the judgment in Re Wilcox (at page 732-3 was quoted with approval in Abbott: In order to exercise the discretion [to award indemnity costs] judicially the following principles have been accepted by the court as applicable: (a) the court ought not to depart from the rule that costs be ordered on a party and party basis unless the circumstances of the case warrant the court in departing from the usual course; (b) the circumstances which may warrant departure from the usual course arise as and when the justice of the case so requires or where there may be some special or unusual feature in the case to justify the court in departing from the usual course; (c) while the circumstances in cases in which indemnity costs have been ordered offer a guide, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for costs other than on a party and party basis. 5. His Honour further said at [23]:- The result is that there are now at least these three single judge decisions in this Court that conflict with the presumption said to arise in Multicon Engineering . Further, these three authorities suggest that an order for indemnity costs is only appropriate in a case where an offer of settlement has been rejected in circumstances that made the further litigation of the proceedings plainly unreasonable. To adopt this approach will provide a useful yardstick by which the question prompted by Re Wilcox and Abbott can be answered here, viz. Whether the particular facts and circumstances of this case warrant the making of an order for costs other than on a party and party basis. See also Marks v GIO Holdings Ltd (1996) 66 FCR 128. 6. The provisions of Pt 22 of the SC Rules (which provide for an offer of compromise) and of Pt 52 of the SC Rules (which relate to costs) do not apply to class four proceedings in this Court. Further since s 43 of the Federal Court of Australia Act 1976 (Cth) invests the Federal Court of Australia with a similar discretion to award costs as provided by s 69 of the Land and Environment Court Act 1979 ("the LEC Act"), this Court will follow the approach adopted by the Full Federal Court as explained by Einfeld J and set out above. 7. The question in these proceedings is whether the respondent's defence and the continuation of the proceedings after the offer was made could be said to be unreasonable, or put another way whether the respondent, properly advised should have known that he had no chance of success. Woodward J in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd and Ors (1988) ALR 397 at 401 expressed the test of unreasonableness as follows:- In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. 8. It could not be said that the conduct of the respondent was unreasonable. Throughout the hearing there was little factual dispute between the parties. Rather the effect of a State Environmental Planning Policy upon the entitlement of the respondent to construct the dams upon the subject property was the issue of critical significance. 9. The respondent was entitled to consider that his defence was arguable and that if successful would provide a complete answer to the applicant's claim. In these circumstances, the Court does not consider that the rejection of the offer made by the applicant was unreasonable. For these reasons the Court dismisses the application for indemnity costs. 10. The respondent submits that no order for costs should be made. It submits that the determination by the Court in favour of the applicant was technical arising from the construction of the application of the relevant planning instruments. The Court finds however that the usual rule should apply namely that the unsuccessful party should be ordered to pay the costs of the successful party. 11. The Court makes the declarations and orders attached to this judgment. The Court declares that: 1. The Respondent by itself, its servants or agents has carried out development on Lot 114 DP 752451 known as 36 Dunns Creek Road, Dunns Creek, being the construction of 2 dams (identified and marked "F" and "C" on Annexure No.1 hereto) without development consent required by the Environmental Planning and Assessment Act 1979 (as amended). 2. The Respondent by itself, its servants or agents has carried out development on Lot 114 DP 752451 known as 36 Dunns Creek Road, Dunns Creek, being the enlargement of 2 existing dams (identified and marked "A" and "B" on Annexure No.1 hereto) without development consent required by the Environmental Planning and Assessment Act 1979 (as amended). The Court orders that: 3. The Respondent within four (4) calendar months from the date of approval by the Applicant of the rehabilitation plan and specification referred to in Order 4 below drain dams "F" and "C" (as identified in Annexure No.1 hereto), remove the embankments and reinstate the land form to substantially the same condition prior to the construction of those dams. 4. The work required to comply with Order 3 shall be carried out in accordance with a rehabilitation plan and specification. The rehabilitation plan and specification shall be submitted by the Respondent to the Applicant for approval within two (2) calendar months from the date hereof. 5. The Respondent within two (2) calendar months from the date hereof in respect of dams "A" and "B" (identified and marked "A" and "B" on Annexure No.1 hereto) obtain:- (a) A report and recommendation from a qualified geotechnical engineer as to the adequacy of the dam walls (embankments) in terms of; i) compacted density of the walls; and ii) the material used for the construction of the walls. (b) A report of a registered surveyor showing in plan and elevation the dimensions of the spillways and dam walls (embankments). (c) A report and recommendation from a qualified civil engineer with expertise in hydrology as to the appropriate spillway size and construction having regard to the relevant catchment discharge to dams "A" and "B". (d) The report in (a) and (c) above and the survey in (b) above shall be delivered to the Applicant Council forthwith upon receipt. 6. Provided that the report referred to in Order 5(a) states that dams "A" and "B" are structurally satisfactory and require no modification, and the report in Order 5(c) confirms the adequacy of the spillways for dams "A" and "B" no further order is made as to dams "A" and "B". If the said reports or either of them recommends remedial work then the Respondent shall carry out such work within four (4) calendar months of approval by the Applicant of the work to be carried out in those reports. 7. The parties have liberty to apply in respect of Orders 3,4, 5 and 6. 8. The Respondent pay the Applicant's costs of these proceedings. 9. These orders be stayed for a period of twenty eight (28) days 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.