Land and Environment Court of New South Wales CITATION : Engadine Area Traffic Action Group Inc v Sutherland Shire Council & Anor (No. 2) [2004] NSWLEC 434 APPLICANT: Engadine Area Traffic Action Group Inc PARTIES : FIRST RESPONDENT: Sutherland Shire Council SECOND RESPONDENT: Wallis & Moore Pty Limited FILE NUMBER(S) : 40087 of 2004 CORAM: Lloyd J Costs :- unsuccessful applicant - public interest litigation - novel matter requiring interpretation and future administration of the law - special circumstances - no order as to costs KEY ISSUES: Costs: - indemnity costs - relevant considerations LEGISLATION CITED: Land and Environment Court Act 1979 s 69(2) Anglo Cyprian Trade Agencies Ltd v Paphof Wine Industries Ltd [1951] 1 All ER 873; Botany Municipal Council v Department of Arts, Sport and Environment (1992) 34 FCR 412; Broadwater Action Group Inc v Richmond Valley Council (No. 2) (2003) 129 LGERA 401; Darlinghurst Residents' Association v Elarosa Investments Pty Ltd (No. 3) (1992) 75 LGRA 214; Degman Ltd v Wright (No. 2) (1983) 2 NSWLR 354; Engadine Area Traffic Action Group v Sutherland Shire Council & Anor [2004] NSWLEC 127; Engadine Area Traffic Action Group v Sutherland Shire Council & Anor [2004] NSWLEC 264; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397,; Friends of Hay Street Inc v Hastings Council (1995) 87 LGERA 44; CASES CITED: Friends of Hinchinbrook Society Inc v Minister for the Environment (No. 5) (1998) 99 LGERA 140; Hofer v Howell (2001) 113 LGERA 391; Kennedy v Director-General of National Parks & Wildlife Service (2002) 121 LGERA 84 ; Liverpool City Council v Roads & Traffic Authority & Interlink (No. 2) (1992) 75 LGRA 210; Maule v Liporoni (No. 2) (2002) 122 LGERA 216; Oshlack v Richmond River Council (1998) 193 CLR 72; Oshlack v Richmond River Council (1994) 82 LGERA 236; Plumb v Penrith City Council (2003) 126 LGERA 109; Rosniak v Government Insurance Office (1997) 41 NSWLR 608; Rundle v Tweed Shire Council (No. 2) (1989) 69 LGRA 21 DATES OF HEARING: 15/07/2004 DATE OF JUDGMENT: 08/13/2004 APPLICANT: Mr J Johnson (barrister) SOLICITORS: Colin Biggers & Paisley FIRST RESPONDENT: Mr J Reilly (solicitor) LEGAL REPRESENTATIVES: SOLICITORS: Abbott Tout SECOND RESPONDENT: Mr G B Newport (barrister) SOLICITORS: R S Davis & Davis JUDGMENT: - 10 - IN THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES Lloyd J Friday, 13 August 2004 LEC No. 40087 of 2004 Engadine Area Traffic Action Group Inc v Sutherland Shire Council & Anor (No. 2) [2004] NSWLEC 434 JUDGMENT INTRODUCTION 1 Lloyd J: On 15 April 1982 the second respondent, Wallis & Moore Pty Limited ("Wallis & Moore"), obtained development consent for a large residential subdivision of land at Woronora Heights. The development consent was subject to a condition requiring the payment of a monetary contribution to Sutherland Shire Council, the first respondent in these proceedings ("the council"), towards the cost of roadworks providing access to the subdivision. On 9 April 2001 the council decided not to proceed with the roadworks and not to expend the money it had collected. The council subsequently agreed to repay the money – an amount of $825,810.17 – to Wallis & Moore. 2 The present applicant, Engadine Area Traffic Action Group Inc, then brought proceedings seeking declarations that the council held the money pursuant to s 94 of the Environmental Planning and Assessment Act 1979 ("the EP&A Act") for the purpose of constructing the roadworks and that it was in breach of that section in failing to apply the money for the intended purpose and in agreeing to return the money to Wallis & Moore. The applicant also sought to restrain the council from applying the money for any purpose other than the intended roadworks and sought an order requiring the council to apply the money towards those works. Those proceedings were heard by me and in a reserved judgment on 31 May 2004, I dismissed the applicant's claims: Engadine Area Traffic Action Group Inc v Sutherland Shire Council & Anor [2004] NSWLEC 264. 3 Wallis & Moore now seek an order for the costs of these proceedings from the applicant on an indemnity basis. In the alternative, costs are sought on the usual (party and party) basis. THE PARTIES' SUBMISSIONS 4 Mr G B Newport, appearing for Wallis & Moore, relies upon the following submissions. (a) Wallis & Moore was wholly successful in defending the claim and is entitled at least to the usual order for costs. The traditional principle is compensatory and applicable to orders for costs made under s 69(2) of the Land and Environment Court Act 1979 ("the Court Act") (Oshlack v Richmond River Council (1998) 193 CLR 72 at 97, cited in Broadwater Action Group Inc v Richmond Valley Council (No. 2) (2003) 129 LGERA 401 at 411). (b) Wallis & Moore has not engaged in any disentitling misconduct (Anglo Cyprian Trade Agencies Ltd v Paphof Wine Industries Ltd [1951] 1 All ER 873 at 874, cited in Oshlack at 97). (c) If the applicant has been set up to pursue objectives in the public interest, this does not deprive Wallis & Moore of an order for costs where they have been successful (Botany Municipal Council v Department of Arts, Sport and Environment (1992) 34 FCR 412 at 416-417, cited in Friends of Hinchinbrook Society Inc v Minister for the Environment (No. 5) (1998) 99 LGERA 140 at 142). (d) The Court can only depart from the traditional principle, which favours costs orders against the unsuccessful party, where it finds that the nature of the litigation concerns public rights rather than private rights and there are sufficient special circumstances which are not extraneous to the objects of s 69 of the Court Act (Kennedy v Director-General of the National Parks and Wildlife Service (2002) 122 LGERA 84 at 87). (e) The proceedings could not be properly characterised as public interest litigation (Oshlack, cited in Kennedy at 85-86; Rundle v Tweed Shire Council (No. 2) (1989) 69 LGRA 21 at 27; Liverpool City Council v Roads & Traffic Authority & Interlink (No 2) (1992) 75 LGRA 210; Maule v Liporoni (No. 2) (2002) 122 LGERA 216 at 223; Darlinghurst Residents' Association v Elarosa Investments Pty Ltd (No. 3) (1992) 75 LGRA 214 at 215, cited in Maule v Liporoni at 224). The applicant did not represent interests concerning significant numbers of the public, nor concerning a much wider and significant geographical area. (f) There were not sufficient special circumstances to justify departure from the ordinary rule (that costs should be ordered against an unsuccessful party). (g) The applicant's misconduct and/or unreasonable conduct caused Wallis & Moore to incur liability for solicitor and client costs far beyond what could reasonably have been expected to occur in litigation of genuine issues (Broadwater Action Group at 411; Degman Ltd v Wright (No. 2) (1983) 2 NSWLR 354 at 358, cited in Maule v Liporoni at 227). (h) The following actions of the applicant constitute misconduct or unreasonable conduct: (i) initially seeking and obtaining interlocutory orders upon certain grounds and then abandoning those grounds at the final hearing; (ii) filing and serving numerous affidavits, which were not read by the applicant because of the abandonment of issues at the hearing; (iii) initially pursuing a claim based on Wednesbury unreasonableness when if properly advised it would have known that the basis was misconceived and hopeless; and (iv) pursuing the claims based on s 94(6), estoppel, and agreement, where such claims were contrary to established law or where misconceived or hopeless. 5 Mr J Johnson, appearing for the applicant, relies upon the following submissions. (a) In abandoning the claim upon the ground of Wednesbury unreasonableness, the applicant acted reasonably in abandoning a point that it considered had no real prospects of success. (b) The proceedings brought by the applicant were raised in novel circumstances and called for a fresh consideration of the law and how it should be applied in an area of a public interest nature. These factors amount to special circumstances (Oshlack; EP&A Act, ss 5 and 123). (c) The proceedings dealt with a question of public law and should be characterised as public interest proceedings. (d) If neither party succeeds in their submissions, there should be no order as to the costs of this motion (Hofer v Howell (2001) 113 LGERA 391). CONSIDERATION 6 The Court has a wide discretion to award costs under s 69(2) of Court Act. The usual order as to costs embodies the important principle that a successful party is generally entitled to an award of costs in its favour: Oshlack at 86 [35], 97 [67]; Broadwater Action Group at 411. The order is compensatory and is not intended to punish the unsuccessful party. 7 Wallis & Moore, however, seek indemnity costs rather than the usual order for costs. I shall consider this submission first. Is Wallis & Moore entitled to indemnity costs? 8 Indemnity costs may be awarded if the nature of the losing party's conduct constitutes exceptional circumstances. In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, Woodward J stated that exceptional circumstances arise where a party, properly advised, should have known that it had no chance of success. Similarly, commencing and continuing an action that is hopeless will also constitute exceptional circumstances: Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 616; Broadwater Action Group at 412. Although these circumstances are not limited only to an ethically or morally delinquent party, there must be evidence of some unreasonable conduct: Rosniak at 616; Broadwater Action Group at 412. 9 Mr Newport submits that in seeking and obtaining interlocutory orders on the grounds of Wednesbury unreasonableness, and then abandoning those grounds at the final hearing, the applicant engaged in unreasonable conduct by pursuing a claim that, if properly advised, it would have known was misconceived and hopeless. Mr Newport further relies upon the fact that the affidavits filed and served by the applicant in support of this claim were never read. 10 Of the affidavits mentioned by Mr Newport, many related to the application for interlocutory relief. In those proceedings, the applicant relied upon the ground of Wednesbury unreasonableness in seeking an interlocutory injunction to restrain the council from repaying the monetary contributions to Wallis & Moore. Cowdroy J held on that basis that there was a serious question to be tried and granted an interlocutory injunction: see Engadine Area Traffic Action Group v Sutherland Shire Council & Anor [2004] NSWLEC 127. In that respect, the affidavits and the claim for interlocutory relief served the applicant's purpose in restraining payment of the money to Wallis & Moore pending the final hearing before me. 11 At the final hearing, the applicant sensibly abandoned its claims based on unreasonableness, estoppel and contract, those claims having no real prospect of success. By way on contract, in Broadwater Action Group the applicant acted unreasonably in instigating and pursuing claims at hearing, notwithstanding the fact that it had absolutely no evidence whatsoever to support its claims which thus had no chance of success. Similarly, in Maule v Liporoni (No. 2) (2002) 122 LGERA 216, the applicant persisted with claims that were baseless without regard to whether there was any evidence in support thereof and which had no chance of success. 12 The conduct of the applicant in these proceedings differs considerably from those cases. In this case the applicant chose not to pursue the claims at hearing, which, upon reflection, were not going to succeed, instead sensibly abandoning them at the outset of the hearing. Moreover, the claim based on Wednesbury unreasonableness could not be described as hopeless since Cowdroy J was persuaded at the interlocutory hearing that it raised a serious question to be tried. 13 Parties often abandon particular grounds which they may have initially raised. In abandoning those grounds prior to or at the commencement of the hearing, the applicant cannot be said to have pursued or persisted in claims that were hopeless, so that its conduct may be said to be unreasonable. Additionally, it may be observed that the matters that were raised and relied upon by the applicant at the hearing clearly constituted an arguable case. Taking into account the whole of the circumstances surrounding both the interlocutory proceedings and the final hearing it cannot be said that the applicant acted unreasonably. These circumstances do not call for an order for indemnity costs. Is the Wallis & Moore entitled to the usual order as to costs? 14 Wallis & Moore seek in the alternative the usual order as to costs. A court may, however, depart from this principle where it finds that the litigation can be characterised as public interest litigation and that there are sufficient special circumstances to depart from the usual order: Oshlack at 91 [49]; Kennedy v Director-General of National Parks & Wildlife Service at 87. I turn now to consider whether a departure from the usual order as to costs is warranted in this instance. Are the proceedings public interest litigation? 15 There are several matters that may be considered in determining whether the proceedings can be characterised as public interest litigation. These may conveniently be summarised as follows: § The public interest served by the litigation: Darlinghurst Residents' Association v Elarossa Investments Pty Ltd (No. 3) (1992) 75 LGRA 214 at 215; Liverpool City Council v Roads and Traffic Authority (No. 2) (1992) LGRA 210. § Whether that interest is confined to a relatively small number of members from the group or association in the immediate vicinity of the development, concerned with their own private amenity; or whether the interest is wider, involving a significant number of members of the public and concern for a wider and significant geographic area: Darlinghurst Residents' Association at 215; Oshlack at 80-81. § Whether the applicant sought to enforce public law obligations: Oshlack at 80 [20]. § Whether the prime motivation of the litigation is to uphold the public interest and the rule of law: Oshlack at 80 [20]. § Whether the applicant has no pecuniary interest in the outcome of the proceedings: Oshlack v Richmond River Shire Council (1994) 82 LGERA 236 at 246. 16 The principal proceedings required the Court to consider the nature of the trust under which councils hold monetary contributions which have been paid under s 94 of the EP&A Act. More importantly, this necessitated an examination of whether a council could refund such contributions and if so, in what circumstances. These were questions of a public nature since they concerned moneys held by the council for public purposes. In the principal judgment (at [30]) I noted that there did not appear to be any case where the Court has ordered a repayment of moneys paid to a council under s 94 of the EP&A Act. I specifically refer in the judgment (at [22]) to the fact that the trust is of a public nature and is not to be governed by private law. The council's obligations under the trust, and its ability to refund the trust moneys, were matters concerning its public law obligations. The principal question determined in the proceedings also extends to other councils, providing guidance regarding to their obligations and powers concerning such monetary contributions. These were the broader public interests served by the litigation. 17 Additionally, the litigation also served the public interest of particular residents in the Engadine area by determining whether the council was under an obligation to construct the roadworks, or whether it could return the moneys to Wallis & Moore. As such, these proceedings served the interests of the members of the applicant, who live within or in close proximity to the development. The applicant was not, however, concerned with pecuniary or private interests since it expressly rejected any remedy that would require the council to return the contributions to the residents of subdivision. The proceedings also served the interests of the council, developers and the wider community in providing clarification of the council's powers and obligations in applying and refunding contributions. As such, it can be said that the proceedings constituted public interest litigation. 18 In Botany Municipal Council v Department of Arts, Sport and Environment (1992) 34 FCR 412 at 416-417, Gummow J stated that the public interest nature of the litigation alone does not deprive the successful party of an order for costs. His Honour's reasoning was followed and adopted by Northrop, Burchett and Hill JJ in Friends of Hinchinbrook Society Inc v Minister for the Environment (No. 5) (1998) 99 LGERA 140 at 142. This principle has also been recognised by this Court on several occasions; for example, in Rundle v Tweed Shire Council (No. 2) (1989) 69 LGRA 21 at 27 and Oshlack per Stein J at first instance (at 241), approved by Gaudron and Gummow JJ in the High Court (at 91). 19 Thus, whilst the public interest nature of the litigation may be a relevant consideration on the question of costs, it is necessary that there be some additional or special circumstances before the Court may depart from the usual order as to costs by making no order. Are there any additional or special circumstances in this instance? 20 Special circumstances may arise in public interest litigation where the proceedings require consideration of a novel matter involving the proper interpretation and application of the law. In finding special circumstances in Oshlack at first instance, Stein J noted that the applicant raised an arguable case that required resolution of significant issues concerning the interpretation and future administration of the law. Plumb v Penrith City Council (2003) 126 LGERA 109 raised novel matters requiring interpretation and application of the eight part test relating to threatened species. Although the applicant's challenge did not succeed, Pearlman J stated that the applicant's case was arguable and raised questions concerning the proper legal approach to be used in the determination of the issues in the case. Her Honour held that these were factors giving rise to special circumstances justifying a departure from the usual order for costs. Similarly, in Friends of Hay Street Inc v Hastings Council (1995) 87 LGERA 44, Pearlman J held there were special circumstances in that case. In reaching this conclusion her Honour took into account the fact that the applicant had raised important matters involving the interpretation of a significant statutory provision and requiring determination of a question that had ongoing implications for the council's fulfilment of its obligations. 21 These proceedings raised significant and novel questions, requiring the Court to interpret and apply s 94(6) of the EP&A Act in considering the extent of a council's obligations in applying monetary contributions and whether, and in what circumstances, a council could refund those contributions. The Court had not previously been required to consider a council's ability to refund contributions, as noted in the principal judgment at [30]. The applicant presented an arguable case and raised these important and significant issues for consideration. The novel nature of some of these issues was reflected in my decision to reserve judgment. The raising of these matters, in combination with the public interest nature of the litigation, gives rise to special circumstances justifying departure from the usual order as to costs. CONCLUSION AND ORDERS 22 The applicant has been successful in resisting this motion for costs. Applying the usual order as to costs, the applicant is awarded the costs of this motion. 23 The Court makes the following orders: (1) The notice of motion for costs is dismissed. (2) There be no order as to the costs of the hearing. (3) The second respondent, Wallis & Moore Pty Limited, pay the applicant's costs of this motion for costs. I hereby certify that the preceding 23 paragraphs are a true copy of the reasons for judgment herein of the Honourable Mr Justice D H Lloyd. Associate Dated: 13 August 2004 ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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