Land and Environment Court of New South Wales CITATION : Notaras and Anor v Holman and Anor [2004] NSWLEC 453 APPLICANTS John Arthur Notaras and Bradford March PARTIES : FIRST RESPONDENT Anthony Holman SECOND RESPONDENT Mark Moran FILE NUMBER(S) : 40732 of 2003 CORAM: Pain J KEY ISSUES: Costs :- no hearing on merits to guide decision LEGISLATION CITED: Land and Environment Court Act 1979, s 69, s 96 C M Hairis Architects v Waverley Council [2003] NSWLEC 404; Fountain Selected Meats (Sales) Pty Limited v International Produce Merchants Pty Limited (1988) 81 ALR 379; Joanou v Randwick City Council (1999) 105 LGERA 237; CASES CITED: Menangle Sand & Soil Pty Limited v Wingecarribee Shire Council (2000) 108 LGERA 209; Oshlack v Richmond River Council (1998) 193 CLR 72; Re the Minister for Immigration and Multicultural Affairs of the Commonwealth of Australia; ex parte Lai Qin (1997) 186 CLR 622; Warringah Shire Council v Hutchison 3G Australia Pty Limited (2003) 126 LGERA 1 DATES OF HEARING: 13/08/2004 DATE OF JUDGMENT: 09/03/2004 APPLICANT Mr T.F. Robertson SC instructed by Burrell Solicitors FIRST RESPONDENT LEGAL REPRESENTATIVES: Mr I. Hemmings instructed by Baker & McKenzie SECOND RESPONDENT Mr C. Burge instructed by Lovegrove Solicitors JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES PAIN J 3 SEPTEMBER 2004 40732 of 2003 JOHN NOTARAS and BRADFORD MARCH v ANTHONY HOLMAN and MARK MORAN JUDGMENT 1 HER HONOUR: The Applicants, John Notaras and Bradford March, commenced Class 4 proceedings against Anthony Holman, the First Respondent, and Mark Moran, the Second Respondent seeking certain declarations and orders, including: (a) declarations that the First Respondent had carried out work without consent on the land, that the First Respondent had not complied with conditions of a development consent issued to him by the Council and that the construction certificate granted by Mark Moran was invalid and; (b) orders that the First Respondent comply with the development consent and demolish and reinstate certain works. 2 These proceedings have been discontinued by the Applicants. The First Respondent and the Second Respondent have both filed notices of motion seeking orders for costs of the proceedings and of their Notice of Motion. The Second Respondent sought costs on an indemnity basis. At the hearing before me only the Applicant Notaras was represented. The Applicant March did not appear and no submissions were directed to him. The Applicant Notaras resisted the First and Second Respondents' claim for costs and argued that an appropriate order is that each party pay its own costs. 3 Before I consider the parties' arguments in relation to costs it is first necessary to set out some of the history of these proceedings. Background 4 On 14 May 2001 the First Respondent lodged a development application with Waverley Municipal Council seeking consent to the demolition of an existing dwelling and the construction of new dwelling with swimming pool at 20 Hunter Street, Dover Heights. The Council granted development consent to this development application on 17 October 2001 ("the development consent"). In December 2001 the First Respondent lodged an application ("the first s 96 application") with the Council seeking modification of the development consent pursuant to s 96 of the Environmental Planning and Assessment Act 1979 ("the EP&A Act"). This s 96 application was approved by the Council on 13 March 2002. On 19 May 2003 the First Respondent lodged a second application with the Council seeking further amendments to the development consent pursuant to s 96 of the EP&A Act ("the second s 96 application"). 5 On 26 June 2003, before the second s 96 application was determined, John Notaras and Bradford March, the Applicants, filed a Class 4 application with this Court seeking: (a) an interlocutory injunction; (b) various declarations including declarations that the First Respondent had carried out work without consent on the land, that the First Respondent had not complied with conditions of development consent and that the construction certificate granted by Mark Moran was invalid; and (c) various orders including orders that the First Respondent comply with the development consent and demolish and reinstate works. Also on 26 June 2003 I issued an ex-parte injunction requiring the First Respondent to cease work on the land until further order of the Court. 6 On 27 June 2003 the matter came back before me, this time with both the Applicants and the First Respondent represented. Following argument, during which counsel for the First Respondent gave an undertaking that "the Respondent will not do works in the landscaped area anticipated in the [Second] s 96 application unless or until approved", I dissolved the injunction. 7 On 22 July 2003 the Applicants filed a motion seeking orders that Mark Moran, the certifier who issued the construction certificate, be joined as Second Respondent in the proceedings. On 24 July 2003 the Applicants filed their points of claim. On 20 August 2003 I ordered that Mark Moran be joined as Second Respondent. In July and August 2003 the First Respondent made amendments to the second s 96 application. 8 On 9 September 2003 I granted the Applicants leave to amend their application and the Applicants filed an amended Class 4 application. The amended application sought relief against the First Respondent and declarations that the construction certificate issued by the Second Respondent is invalid or, in the alternative, does not extend to authorise certain works. On 16 September 2003 the Applicants filed a further amended Class 4 application and amended points of claim. In October 2003 both the First and Second Respondents filed points of defence. 9 On 27 November 2003 Bradford March, one of the Applicants, discontinued the proceedings by filing a notice of discontinuance. The First and Second Respondents did not consent to this discontinuance. 10 In December 2003 the Council granted consent to the second s 96 application. On 7 May 2004, the Applicant Notaras filed a Notice of Discontinuance. The First and Second Respondents did not consent to this discontinuance. Submissions 11 The Respondents submitted that the general rule in relation to costs is that costs follow the event. The Respondents relied on the decision of Bignold J in Joanou v Randwick City Council 105 LGERA 237 to support their submission that, where there has been no determination of the proceedings by way of a final hearing, the election by the Applicants to discontinue their proceedings is a relevant event in relation to which the general rule that costs follow the event operates. 12 The Respondents accept that the decision of the High Court in Re the Minister for Immigration and Multicultural Affairs of the Commonwealth of Australia; ex parte Lai Qin (1997) 186 CLR 622 is authority for the general proposition that, where the parties have acted reasonably in commencing and continuing the proceedings up until the time those proceedings are discontinued, the proper exercise of the Court's discretion in relation to costs is that no order as to costs should be made. However the Respondents argued that this principle does not apply to the current proceedings as the Applicant Notaras did not achieve the relief he sought prior to discontinuance and this is a necessary prerequisite to the application of this principle. Further, the Respondents submitted that even if the principle enunciated in Lai Qin applies, the First Respondent would be entitled to his costs as: (i) the Applicant Notaras' conduct in commencing the proceedings after December 2003 was not reasonable given that: (a) the second s 96 application had been lodged by the First Respondent and, if consented to, would have regularised all the matters to which the Applicant Notaras' claim related; and (b) he commenced proceedings seeking an ex parte interlocutory injunction without first making any attempt to first contact the Applicant Notaras; (ii) the Applicant Notaras' conduct in continuing the proceedings after December 2003 was not reasonable once the Council had consented to the second s 96 application which regularised all the matters to which his claim related; and (iii) the First Respondent would have been almost certain to have succeeded in the proceedings had the Applicant Notaras not discontinued. 13 The Second Respondent argued that he is entitled to his costs as: (i) the Applicants' conduct in commencing the proceedings was not reasonable given that: (a) the Applicants commenced the proceedings against the Second Respondent some three months after the second s 96 application was lodged; and (b) the Applicants did not seek any substantive relief against the Second Respondent; and (ii) the Applicants' conduct in continuing the proceedings after December 2003 was not reasonable once the Council had consented to the second s 96 application which regularised all the matters to which the Applicants' claim related. 14 The Second Respondent also argued that he was entitled to indemnity costs for the above reasons. 15 In resisting the Respondents' application for costs the Applicant Notaras relied on my decision in Warringah Shire Council v Hutchison 3G Australia Pty Limited (2003) 126 LGERA 1 and Menangle Sand & Soil Pty Limited v Wingecarribee Shire Council (2000) 108 LGERA 209 to support his argument that the following principle enunciated in Lai Qin by McHugh J at 265 applies to the current proceedings: If it appears that both the 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. 16 Further, the Applicant Notaras argued that to reject the principles enunciated in Lai Qin in favour of applying a rigid rule that costs follow the event would be to confine the discretion of the Court in a manner which the High Court warned against in Oshlack v Richmond River Council (1998) 193 CLR 72. 17 The Applicant Notaras argued that he was substantially successful in achieving the outcome sought by him in commencing the proceedings as: (i) the proceedings were enforcement proceedings commenced by the Applicant Notaras to ensure compliance with the development consent and the EP&A Act; (ii) following the commencement of the proceedings, the First Respondent amended his second s 96 application. (iii) once the Council, a third party to the proceedings, approved the second s 96 application, as amended, the works the subject of the proceedings became regularised so that the development consent and the EP&A Act were no longer breached. 18 The Applicant Notaras argued that his conduct in commencing and continuing proceedings against both the First and Second Respondents was reasonable. As regards the First Respondent the Applicant Notaras argued that he was reasonable in commencing and continuing the proceedings up until the time the Council granted consent to the second s 96 application as: (a) the fact that the second s 96 application was made demonstrates that works were being carried out in a manner which did not conform to the development consent; and (b) the commencement of the proceedings before the determination of the second s 96 application was necessary so as to halt the works and preserve the Applicant Notaras' position should the second s 96 application be refused as otherwise the works would have been completed and the First Respondent in a strong position to argue that the Court should exercise its discretion to refuse relief. 19 As regards the Second Respondent the Applicant Notaras argued that he was reasonable in commencing and continuing the proceedings up until the time the Council granted consent to the second s 96 application as: (a) while no relief was directly sought against the Second Respondent, the Second Respondent, as an accredited certifier, may have suffered consequences under Part 4B of the EP&A Act if the declarations sought regarding the validity of the construction certificate were made; (b) the declarations sought, if made, would have prevented the Second Respondent from issuing further construction certificates in relation to the land in a manner inconsistent with the declarations; and (c) the Second Respondent did not, at the time the orders for joinder were made, oppose his joinder as Second Respondent to these proceedings. 20 In relation to the Second Respondent's claim for indemnity costs the Applicant Notaras relied on Fountain Selected Meats (Sales) Pty Limited v International Produce Merchants Pty Limited (1988) 81 ALR 379 and the cases which follow this decision, such as, C M Hairis Architects v Waverley Council [2003] NSWLEC 404 to argue that it is well established that, in order to receive an award of indemnity costs, the Second Respondent must first demonstrate that: (a) the Applicant Notaras commenced proceedings in circumstances where he should have known that he had no chance of success; or (b) that the proceedings were commenced by the Applicant Notaras for some ulterior motive or because of some wilful disregard of the known facts or the clearly established law. The Applicant Notaras submitted that the Second Respondent has not succeeded in establishing that any of these criteria apply to his conduct in relation to the current proceedings. Finding 21 Under s 69(2) of the Land and Environment Court Act 1979 I have a broad discretion in deciding how costs should be awarded. As McHugh J stated in Oshlack at [65]: Although the statutory discretion is broadly stated, it is not unqualified. It clearly cannot be exercised capriciously. Importantly, the discretion must be exercised judicially in accordance with established principle and factors directly connected with the litigation. In this manner, the law has gradually developed principles to guide the proper exercise of the discretion and, in some cases, to highlight extraneous considerations which, if taken into account, will cause the exercise of the discretion to miscarry. Consistent with the aim of justice, the law could not have developed otherwise. 22 In Lai Qin McHugh J stated (at 624 to 625): … the principles which govern an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra curial means. … If it appears that both the 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. 23 McHugh J made it clear at 624 that, where a matter has been discontinued, "the court cannot try a hypothetical action between the parties." Accordingly, I do not propose to embark on a consideration of the merits of the parties' respective cases. I did not allow the Applicant Notaras to read affidavit material filed in the main proceedings as the matters he sought to put were contested by the First Respondent and it is not appropriate that I consider the merits of the matter. It is clear from the Applicant Notaras' submissions that when the Council consented to the second s 96 application it obviated a number, although not all, of the grounds relied on by the Applicants. I am prepared to accept that the grant of consent to the second s 96 application was a supervening event in relation to at least that part of the claim. The principles enunciated in Lai Qin could only apply therefore to that part of the case, particularly if Lai Qin is interpreted as applying only where the relief sought in the action is achieved by settlement or extracurial means as the Applicant argued. If the parties acted reasonably, the appropriate order would be that each party pay its own costs in relation to this part of the case. I consider however that: (a) the failure by the Applicant Notaras to give any notice to the First Respondent before applying for an interlocutory injunction; (b) the fact the second s 96 application had already been filed with the Council; and (c) the substantial delay by the Applicant Notaras in filing a notice of discontinuance; combine to suggest that a partial award of costs in favour of the First Respondent is warranted in relation to this part of the case. 24 In Joanou Bignold J stated at 242 that: … the usual rule in costs is that the discontinuing party should pay the costs of the parties discontinued against unless there be some exceptional or special circumstances which would require a different order. 25 Bignold J cited the principles enunciated by McHugh J in Lai Qin but held they were not relevant to the determination of costs before him as the discontinuing party could not be said to have achieved the relief sought. In relation to that part of the case not covered by the second s 96 application I consider the discontinuance was relevantly an "event" as determined in Joanou. 26 I consider the First and Second Respondents are entitled to that part of their costs of the proceedings as a result. 27 I consider that it is appropriate that the Applicant Notaras should pay half the First and Second Respondents' costs. 28 I do not consider that the circumstances warrant that these costs should be payable on an indemnity basis. I agree with the submissions of the Applicant Notaras' counsel that in order for an award of indemnity costs the criteria defined in Fountain Selected Meats (Sales) Pty Ltd must be met and they have not been met here. Order 29 The Applicant Notaras is to pay 50 per cent of the costs of the First and Second Respondents in relation to these proceedings. 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