Land and Environment Court of New South Wales CITATION : Zekic v Marrickville Council and Ors. [2005] NSWLEC 273 APPLICANT: Zekic PARTIES : RESPONDENTS: Marrickville Council and Ors. FILE NUMBER(S) : 40023 of 2005 CORAM: Bignold J Costs :- Class 4 proceedings-discontinued without consent-whether circumstances to exclude the presumptive entitlement to a costs order in favour of party discontinued against. KEY ISSUES: Land and Environment Court Act 1979, s 69(2) LEGISLATION CITED: Part 11 r 5 of the Rules of Court Gormick Constructions Pty Ltd v Sydney City Council (2002) 123LGERA 42; Joannou v Randwick City Council (1998) 105 LGERA 237; CASES CITED: Latoudis v Casey (1990) 170 CLR 534; Oshlack v Richmond River Council (1998) 193 CLR 72; Re The Minister for Immigration and Ethnic Affairs; Exparte Lai Qin (1997) 186 CLR 622 DATES OF HEARING: 12/05/2005 DATE OF JUDGMENT: 06/06/2005 APPLICANT: In person SOLICITORS N/A 1ST RESPONDENT: LEGAL REPRESENTATIVES: Mr Christmas, Solicitor SECOND RESPONDENT: Mr J Hones, Solicitor SOLICITORS FIRST RESPONDENT: Principal Solicitor Marrickville Council SECOND RESPONDENT: Hones Lawyers JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES BIGNOLD J 6 June 2005 40023 of 2005 MIRSAD ZEKIC v MARRICKVILLE COUNCIL & ORS. JUDGMENT CORAM: HIS HONOUR A. INTRODUCTION 1 By Notice of Motion filed 3 May 2005, the second Respondents seek an order that the Applicant pay their costs in these class 4 proceedings in consequence of the Applicant discontinuing the proceedings by filing on 29 April 2005 a Notice of Discontinuance. The filing of the Notice of Discontinuance had been anticipated in the facsimile transmission sent on 19 April 2005 by the Solicitor then acting for the Applicant to the parties and to the Registrar of the Court. That transmission advised as follows: We have received instructions from Mr Zekic that, taking into account his potential exposure to further costs in these proceedings, he will not be pressing his Application further. He wishes to file a Notice of Discontinuance forthwith. He accepts the offer made by the First Respondent not to claim costs against him and he recognises, but does not admit, the Second Respondents' claim for costs against him. In that regard, he seeks to file a Notice of Discontinuance this week, such Notice reserving the Second Respondents' claim for costs against him to be determined by the Court in due course. 2 Upon the hearing of the second Respondents' Notice of Motion seeking costs, the first Respondent (the Council) has confirmed to the Court that it does not seek an order for costs against the Applicant and the Applicant has resisted the costs order sought against him by the second Respondents—both as a matter of principle and as to quantum. B. THE BASIS FOR THE SECOND RESPONDENTS' MOTION FOR COSTS 3 Although conventionally the second Respondents' Motion for costs invokes the Court's general costs power as conferred by s 69(2) of the Land and Environment Court Act 1979, the more particular power that is directly relevant in a case such as the present (where the claim to costs is based upon the discontinuance of the proceedings) is the power conferred by Part 11 r 5 of the Rules of Court where subrules (1) and (2) provide as follows: (1) 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. (2) The costs payable to a party under any order made under this rule are to be the costs of the party occasioned by the discontinued claim and reasonably incurred before service on the party of notice of the discontinuance. 4 This particular costs Rule is to be understood in the light of Pt 11 r 1 of the Rules of Court which provides that a party "may at any time discontinue any proceedings brought by the party so far as concerns the whole or any part of any claim by the party". 5 This unqualified right to discontinue proceedings is to be contrasted with the procedure for discontinuing proceedings in the Supreme Court and in the Federal Court where the leave of the Court is required for a party to discontinue proceedings (and where such leave is generally granted on terms that the discontinuing party pay the costs of the other parties). 6 In Joannou v Randwick City Council (1998) 105 LGERA 237, I noted the existence of a line of authority in this Court which establishes as a general rule that when class 4 proceedings are dismissed or discontinued because the applicant chooses not to proceed with them, the ordinary rule is that costs follow the event, it being concluded in such cases that the event is relevantly the discontinuance of the proceedings. 7 In that case (where I ordered the discontinuing party to pay the costs of the parties discontinued against) I applied that line of authority when holding that it had not been dislodged or displaced by anything said in the later decision of McHugh J in Re The Minister for Immigration and Ethnic Affairs; Exparte Lai Qin (1997) 186 CLR 622 which contains a very helpful conspectus of the principles upon which a Court will usually exercise its costs power in respect of costs applications made in cases where there has been no hearing on the merits. His Honour's decision has been very often cited and applied in decisions of this Court but it is important to note, as I did in Joanou (at 240), that the principles expounded by his Honour are: 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. [at 624] 8 Accordingly, in cases such as Joanou or the present case where the Applicant has simply discontinued the proceedings (without achieving any relief or success in or outside the proceedings) the principles expounded in Ex parte Lai Qin have no application: See Gormick Constructions Pty Ltd v Sydney City Council (2002) 123 LGERA 42 at 52. Rather, the "discontinuance" is generally regarded as the relevant "event" in the proceedings in consequence of which the applicant is held to have failed in the proceedings and is generally held to be liable to suffer a costs order in favour of the party discontinued against who has not consented to the discontinuance (as is specifically contemplated by Pt 11 r 5(1) of the Rules of Court). 9 Since that established line of authority prima facie applies to the present case, the only question to arise is whether there are circumstances or reasons in the present case which justify the displacement of the presumptive entitlement of the second Respondents to receive a costs order pursuant to Pt 11 r 5. 10 The Applicant bears the onus of establishing the existence of such circumstances or reasons. C. THE APPLICANT'S CASE FOR RESISTING A COSTS ORDER PURSUANT TO PART 11 RULE 5 11 The Applicant relies upon the following facts— (i) the brief and problematic history of the litigation; (ii) the inconclusive nature of the Applicant's claims raised in the litigation; (iii) the second Respondents' voluntary participation in the proceedings; and (iv) the reasons for the Applicant's discontinuance of the proceedings. 12 It is necessary to examine each of these facts in greater detail. (i) The history of the litigation 13 The history of the litigation was most certainly brief and problematic. 14 On 14 January 2005 the Applicant commenced the class 4 proceedings against only the Marrickville Council claiming the following relief:— 1. A declaration that a breach of minimum side setbacks (900mm) occurred (south boundary) as a result of Marrickville Councils' Approval DA 200400431 dm, causing a great disadvantage to my property. 2. An order to Marrickville Council to amend relevant section of its approval. 15 Upon the first return date (4 February 2005), the List Judge (Lloyd J) stood the case over for further directions on 17 February 2005 and directed that "any motion for joinder by the beneficiaries (of the development consent) be returnable on that date". Additionally, Lloyd J noted that the parties were considering mediating the dispute. 16 On 17 February 2005, when the matter was next before the List Judge, his Honour, on the Motion of the persons who were joined as second Respondents (apparently over the Applicant's objection) ordered their joinder and ordered that the costs of that Motion be costs in the cause. The parties were given leave to obtain a date for the mediation from the Court's Registry. 17 I should interpose that on 10 February 2005 (ie the day, before filing their Motion for joinder as a party), the second Respondents' Solicitor wrote to the Applicant advising inter alia, of his views (i) that the class 4 application "had no prospects of success being fundamentally and fatally flawed"; (ii) the fact that the beneficiaries of the development consent ("which you appear to seek to challenge and/or modify") should have been joined as a party to the proceedings; (iii) that the proceedings should be immediately withdrawn; (iv) that if he proceeded with the application, the second Respondents would seek costs against him; and (v) that he should obtain legal advice from a suitably qualified legal practitioner before proceeding further with his case. 18 Court mediation was conducted on 22 February 2005 but without success. 19 On the same day that the mediation took place the Applicant was directed to file points of claim by 14 March 2005 and the case was stood over to the Duty Judge on 16 March 2005. 20 When the matter came before me on that date, the Applicant, who was still a litigant in person, had filed the required points of claim which were in the following terms: 1. When consenting to DA 200400431 and in respect of the Southern wall of the Family-Studio, as well as of stairs and deck of the Southern side access, Marrickville Council failed to comply with DCP No 35—Minimum side setbacks (width of allotments exceeding 12 m): 900mm. 2. When consenting to DA 200400431 and in respect of the Southern wall of the Family-Studio, as well as of stairs and deck of the Southern side access, Marrickville Council failed to comply with DCP No 35—Minimum side setbacks (width of allotments exceeding 12 m): 900mm. 3. Marrickville Council failed to consider my objections in context of my development intentions. 4. The Wall (Southern wall of Family-Studio (F/S)) would have a drastic effect on my (soon to be proposed) courtyard due to its height (3.7 m above it) and location along its Northern prospects that it (The Wall) would block off by approximately two fifths. 5. Had my objection to this wall been considered, a number of simple solutions would be found. 6. In respect to the stairs and deck The Council failed to recognise the following: i) its proximity to my living room (about 2.5m away from my living room window), bedrooms and the courtyard (which clearly, it would overlook), ii) its height (the deck about 1.1m above the ground), iii) the design of it, in conjunction with the large door, suggests that its function would not be to provide for an ordinary service access but rather, the one for the main access (de-facto main entrance) and therefore: iii) it would present a drastic loss of privacy. 7. The Council's attempt to address to the issue of the stairs and deck was barely symbolic. 21 On that occasion when both Respondents objected to the competency of the Applicant's class 4 application and Points of Claim, I made the following orders— 1. On the Respondents' objection to the legal competency of the class 4 Application and Points of Claim, the Applicant is directed to file and serve Amended Application and Amended Points of Claim by 6 April 2005 if he wishes to prosecute the case. 2. If Applicant files/serves amended Application and Points of Claim he shall also confirm with the Respondents' Solicitors that the evidence he will rely upon at the hearing is the Council's file relevant to the grant of development consent, together with a model of the original development (to be made available by the second Respondents' Solicitor) and an affidavit by the Applicant disclosing the progress of his development proposal for his own property. 3. Stand matter over to 9.30 11 April 2005 before Bignold J for further directions. 4. If Applicant decides not to prosecute case, he shall notify in writing the Respondents and the Court of his decision. 5. Liberty to restore on two days' notice. 22 When the matter next came before the Court on 11 April 2005, the Applicant for the first time in the proceedings was legally represented by Mr Williams, Solicitor who had filed his appearance on 6 April 2005 and on the same day had advised the Registrar of the Court in the following terms: As I understand it, this matter is listed for callover next Monday 11 April and that the Court had previously directed that the Applicant file amended Points of Claim and amended Application by today. Next Monday I will be asking the Court to allow a further week for me to file and serve the Application and the amended Points of Claim. Having only just been instructed in the matter, I would hope that the Court would accept the proposition that it is in the interests of the Court and all parties that a short adjournment be allowed so as to ensure that any documents filed on the Applicant's behalf are as accurate and relevant to the law and facts as possible. I am writing to the First and Second Respondents' solicitors today suggesting an agreed timetable so as to minimise any prejudice or delay that might otherwise result from the short adjournment that I am now seeking. 23 On 11 April 2005, I varied the Orders that I had made on 16 March 2005 by giving the following directions: 1. Applicant to file amended Application and amended Points of Claim plus relevant evidence by close of business 18 April 2005 2. Respondent to file Points of Defence and evidence by noon 2 May 2005 3. Matter Stood over to his Honour on 4 May at 9.30 am. 4. Second Respondents' application for costs to date reserved. 24 In the event, no amended class 4 application or amended points of claim were ever served or filed and the matter did not return to the Court again before the Applicant discontinued the proceedings. 25 Rather, the Court's Registrar and the parties were notified by facsimile transmission on 19 April 2005 from the Applicant's Solicitor in the terms I have earlier recited (see par 1). Thereafter, by letter dated 28 April 2005 enclosing the Applicant's Notice of Discontinuance, the Applicant's Solicitor notified the Court's Registrar that the Applicant had withdrawn his instructions and that accordingly he no longer represented the Applicant in the proceedings. The Notice of Discontinuance was stamped by the Court as having been filed on 29 April 2005. (ii) The inconclusive nature of the Applicant's claims 26 I have earlier fully recited the content of the Applicant's class 4 application and the Points of Claim. 27 It is self-evident that these documents as formulated by the Applicant do not disclose any basis for obtaining any relief in the proceedings, a point that was emphasised by both Respondents when the matter was before me on 16 March 2005, when in response to the Respondents' objection to the competency of the claims I gave the Applicant a last opportunity to consider the future course of the case (including the option not to prosecute the case). (iii) The second Respondents' voluntary participation in the litigation 28 The originating process only claimed relief against the Council. The claimed relief was self-evidently not obtainable in the class 4 proceedings because it asserted no legal basis for the relief claimed. Moreover, the claimed relief was of such a nature as to be obviously beyond this Court's powers, notwithstanding the extreme breadth of the Court's powers to remedy a breach of the Environmental Planning and Assessment Act 1979 (vide ss 122-124). 29 Whereas it is conventional practice in this Court in cases involving a challenge to the validity of a development consent for the person having the benefit of the consent to be a party to the litigation (in addition to the local Council that granted the purported development consent) it does not necessarily follow that such proceedings cannot competently be instituted without such a person being nominated as a party. Sometimes they are not an original party and they may take the initiative to be joined as a party and where that initiative is taken, their joinder reflects conventional practice in the Court. However, in this respect it should be noted that recently there has been an emerging trend departing from past practice in this Court of both the Council and the person having the benefit of the development consent actively participating in proceedings involving a challenge to the validity of the development consent, the impetus for change coming from the observations of Gaudron and Gummow JJ in their joint judgment in Oshlack v Richmond River Council (1998) 193 CLR 72 suggesting that in such cases it would be entirely appropriate for the Local Council not to become a protagonist, but to leave the defence of the proceedings to the party who had the benefit of the development consent that was under challenge. 30 But the more fundamental question posed in the present case is whether the proceedings in truth involved any challenge to the validity of the relevant development consent or any real imperilment of that consent, because if it be concluded, as I have concluded (consistently with the Respondents' emphatic objection to the competency of the proceedings), that the claims made in the proceedings were self-evidently unsustainable and the relief was accordingly self-evidently unattainable, it cannot reasonably be said that the proceedings created any real challenge to the validity of the development consent or any other real or serious threat to it. The most that can be said of the proceedings is that for a very brief period in the litigation history (from 16 March 2005 to 18 April 2005), there remained a chance that the Applicant's claims could theoretically be reformulated with the benefit of legal representation, into claims that at least qualified as a challenge to the validity of the relevant development consent. But with the benefit of hindsight, it is known that that chance never materialised before the proceedings were discontinued. 31 That being said, it follows that the decision of the second Respondents to seek to be joined in the present case was neither a legal nor factual necessity and significantly that circumstance never changed throughout the brief history of the litigation. This is reinforced by the fact that before applying for joinder the second Respondents' Solicitor had written to the Applicant in the terms I have earlier summarised (par 17). 32 In these circumstances, I can only conclude that the second Respondents voluntarily chose to become a party to a proceeding which at its highest posed, during the limited period that I have identified, some remote and indefinite possibility of some threat to the second Respondents' interest in preserving the development consent (which possibility was never realised). 33 Moreover, this decision was taken in a litigation context where the Council, as the originally nominated sole respondent to the proceedings, was actively participating in the proceedings and was itself raising objection to the legal competency of the proceedings. (iv) The reason for the Applicant's discontinuance of the proceedings 34 Evidence of the reason for the Applicant's decision to discontinue the proceedings is provided in the facsimile transmission from the Applicant's Solicitor sent to the parties and to the Registrar of the Court on 19 April 2005 the terms of which are recited in par 1 of these reasons. 35 There is no reason to doubt this evidence and it is corroborated by the intense and rapid exchange of correspondence between the Applicant's Solicitor and the second Respondents' Solicitor that occurred in the brief period from 6 to 19 April 2005. Copies of that correspondence are annexed to the affidavit of Mr Pearce (one of the second respondents) sworn 29 April 2005 which was read at the hearing of the second Respondents' costs Motion. That correspondence indicates that for the brief period that the Applicant was legally represented, his Solicitor had obtained advice from experienced Counsel and had obtained a draft affidavit from a practicing architect. 36 The correspondence also expresses attempts to settle the proceedings. 37 Although the Solicitor for the second Respondents has submitted that the true reason for the Applicant's discontinuance of the proceedings was the ultimate realisation by the Applicant, with the benefit of legal advice, that his case was hopeless, I am quite unable to accept this submission in the light of the evidence of the correspondence passing between the parties' Solicitors during the two to three weeks period that the Applicant was legally represented immediately preceding the discontinuance of the proceedings. 38 Accordingly, on the evidence, I am satisfied that the Applicant's discontinuance of the proceedings reflected his considered response to his exposure to the potential risk of a costs order being made against him in the event that his claim failed. 39 I merely add the observation that even if I had found (conformably to the second Respondents' submission) that the true reason for the discontinuance was the Applicant's ultimate realisation that his case was hopeless, that fact would have merely confirmed what both Respondents had been emphatically saying about the Applicant's case from their first involvements respectively in the case. D. CONCLUSIONS AND ORDERS 40 The rationale for making a costs order in civil litigation is the subject of detailed exposition in the decisions of the High Court of Australia in Latoudis v Casey (1990) 170 CLR 534 (involving costs in a summary criminal case) and in Oshlack v Richmond River Council (1998) 193 CLR 72 (involving costs in a civil enforcement case brought in this Court pursuant to the Environmental Planning and Assessment Act 1979, s 123). 41 In Latoudis, McHugh J compendiously expounded the rationale for the making of a costs order in the following passage at 566/567: An order for costs indemnifies the successful party in litigious proceedings in respect of liability for professional fees and out-of-pocket expenses reasonably incurred in connexion with the litigation: Kelly v Noumenon Pty Ltd (1988) 47 SASR 182, at p 184. The rationale of the order is that it is just and reasonable that the party who has caused the other party to incur the costs of litigation should reimburse that party for the liability incurred. The order is not made to punish the unsuccessful party. Its function is compensatory. Thus, in civil proceedings an order may, and usually will, be made even though the unsuccessful party has nearly succeeded or has acted reasonably in commencing the proceedings. It may, and usually will, be made even though the action has failed through no fault of the unsuccessful party. In Cilli v Abbott (1981) 53 FLR 108, at p 111, Keely, Toohey and Fisher JJ pointed out that "the object of costs is not to penalize; it is to indemnify the successful party in regard to expense to which he has been put by reason of legal proceedings": see also Anstee v Jennings [1935] VLR 144, at p 148. 42 In view of my findings on the several matters raised by the Applicant in resisting an order for costs in favour of the second Respondents, the crucial question for decision is whether the Applicant's proceeding has relevantly caused the second Respondents to necessarily incur reasonable legal costs in connection with these proceedings. In my judgment, the answer to this question must be "no". Rather, as I have already demonstrated by my consideration of the matters raised by the Applicant's resistance of the second Respondents' costs claim, the Applicant's proceeding never at any time in the litigation history raised a real or serious challenge to the validity of the relevant development consent, yet despite this continuing fact the second Respondents became and remained parties to the proceeding by virtue of their own free choice in circumstances where their Solicitor had earlier informed the Applicant that his case was "fundamentally and fatally flawed". 43 Moreover throughout the brief litigation history of the proceeding, in which the Applicant's claims were never reformulated so as to raise even a recognisable claim of invalidity of the development consent, the second Respondents incurred legal expenses in connection with a self evidently legally flawed claim made by a litigant in person (which flawed claim was never cured) even after both Respondents had informally raised objection to the legal competency of the claim (albeit not by way of a Strike out Motion for Summary dismissal). In these circumstances it cannot be concluded that such legal costs were either reasonably or necessarily incurred by the second Respondents in connection with the Applicant's proceeding. 44 No doubt, the second Respondents' Solicitor's participation in the rapid and intensive exchange of correspondence with the Applicant's Solicitor while he acted for the Applicant for the brief period of 2-3 weeks had some significant impact upon the Applicant's ultimate decision not to reformulate his claim but rather, to discontinue the proceeding altogether. 45 This process and outcome doubtless served the second Respondents' interests well, but it was not effort or expenditure that was reasonably or necessarily incurred in the litigation for the reasons I have given. Rather, it was more in the nature of effort and expenditure directed at the avoidance of potential litigation (which is a common background to most litigation). In the present case it was directed to avoid litigation that might have emerged if the Applicant's flawed claims had been reformulated (which never happened), but this is an immaterial difference. 46 For these reasons, I am satisfied that in the very particular and unusual circumstances of this case, there are sound reasons justifying the non-fulfilment of the presumptive entitlement to costs that the second Respondents had by virtue of Pt 11 r 5 of the Rules of Court. 47 It follows that the compensatory principle for awarding costs is not attracted in the present case because the costs incurred by the second Respondents were not reasonably and necessarily incurred in respect of, or in response to, the Applicant's proceedings, which never in truth posed a legal or factual threat to the validity of the relevant development consent in circumstances where the second Respondents (assisted by legal advice) at all material times knew this to be the case. It is in this sense that I have concluded that the Applicant's proceeding has not relevantly "caused" the second Respondents to incur costs for which they should be compensated by a costs order made in the discontinued proceedings. 48 For all the foregoing reasons, I order that the second Respondents' Notice of Motion claiming costs be dismissed and I further order that there be no costs orders made in these discontinued proceedings. 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.