Land and Environment Court of New South Wales CITATION : Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Limited (No 4); The Hills Shire Council v Ko-veda Holiday Park Estate Limited (No 3) [2010] NSWLEC 239 This decision has been amended. Please see the end of the judgment for a list of the amendments. APPLICANT PARTIES : The Hills Shire Council RESPONDENT Ko-veda Holiday Park Estate Limited FILE NUMBER(S) : 40625 of 2007; 41019 of 2009 CORAM: Pain J KEY ISSUES: COSTS :- exercise of discretion in relation to costs order in Class 4 civil enforcement proceedings - whether usual rule that costs ought follow the event should apply - whether Calderbank letter of offer should deprive successful party of costs - whether failure to negotiate is disentitling conduct relevant to costs - whether costs should be apportioned Civil Procedure Act 2005 Pt 4, s 56, s 98 Environmental Planning and Assessment Act 1979 Pt 4A, s 96, s 124 LEGISLATION CITED: Evidence Act 1995 s 131(2)(h) Rivers and Foreshores Improvement Act 1948 Pt 3A Uniform Civil Procedure Rules 2005 r 42.1 ACR Trading Pty Ltd v Fat-Sel Pty Ltd (1987) 11 NSWLR 67 Arnold v Minister Administering the Water Management Act 2000 (No 4) [2009] NSWLEC 87 Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Ltd & Anor [2008] NSWLEC 181 Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Ltd [2009] NSWCA 160 Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Ltd (No 2) [2009] NSWCA 310 Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Limited (No 2); Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Limited [2010] NSWLEC 79 Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Limited (No 3); The Hills Shire Council v Ko-veda Holiday Park Estate Limited (No 2) [2010] NSWLEC 238 CASES CITED: Brymount Pty Ltd t/a Watson Toyota v Cummins & Anor; Young Shire Council v Cummins & Anor (No 2) [2005] NSWCA 69 Denis Gelle Pty Ltd v Baulkham Hills Shire Council [2001] NSWLEC 229 E T Petroleum Holdings Pty Ltd v Clarenden Pty Ltd (No 2) [2005] NSWSC 562 F & D Bonaccorso Pty Ltd v City of Canada Bay Council (No 5) [2008] NSWLEC 235 Halsey v Milton Keynes NHS Trust [2004] 4 All ER 920 Hopeshore Pty Ltd v Melroad Equipment Pty Ltd [2004] FCA 1445; (2005) 212 ALR 66 Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 Warringah Shire Council v Sedevcic (1987) 63 LGRA 361 TEXTS CITED: G E Dal Pont Law of Costs, 2nd ed (2009) LexisNexis Butterworths P Taylor et al, Ritchie's Uniform Civil Procedure NSW vol 1, (2005) LexisNexis Butterworths DATES OF HEARING: 15 November 2010 16 November 2010 DATE OF JUDGMENT: 25 November 2010 APPLICANT Mr A Galasso SC SOLICITOR The Hills Shire Council LEGAL REPRESENTATIVES: RESPONDENT Mr T Robertson SC SOLICITOR Hones La Hood JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES Pain J 25 November 2010 40625 of 2007 Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Limited (No 4) 41019 of 2009 The Hills Shire Council v Ko-veda Holiday Park Estate Limited (No 3) JUDGMENT 1 Her Honour: The issue of costs in these lengthy proceedings now falls to be determined as between the Hills Shire Council (formerly Baulkham Hills Shire Council) (the Council) and the First Respondent (hereafter the Respondent). Costs between the Council and the Second Respondent were disposed of in the Court of Appeal. The Court delivered its first substantive judgment Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Ltd & Anor [2008] NSWLEC 181 (Ko-veda No 1) on 4 July 2008 dismissing the Council's Class 4 application. This decision was appealed by the Council. The Court of Appeal in Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Ltd [2009] NSWCA 160 upheld the appeal and in Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Ltd (No 2) [2009] NSWCA 310 the matter was remitted for the making of appropriate orders by this Court. 2 Additional proceedings 41019 of 2009 were commenced and an order made that these be heard with remitted proceedings 40625 of 2007. In Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Limited (No 2); Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Limited [2010] NSWLEC 79 (Ko-veda No 2) detailed orders requiring replanting in the Respondent's caravan park were made. The Council seeks all its costs. The Respondent seeks costs on a number of alternative bases. Costs of the Council's Amended Class 4 Application filed 27 February 2008 on the second day of hearing were reserved. 3 In its Notice of Motion dated 5 November 2010 the Respondent seeks the following orders: In proceedings No. 40625 of 2007: 1. An order that the Applicant pay the Respondent's costs of the proceedings on an ordinary basis: (a) from 10 September 2007, being the date of the written Calderbank offer made by the Respondent, as set out in Annexure H to the affidavit of Benny Madsen sworn 14 September 2010; or, in the alternative, … (c) from 3 March 2008, being the date of the written offer made by the Respondent, as set out in Annexure L to the affidavit of Benny Madsen sworn 14 September 2010. 2. In the alternative to the orders sought in paragraph 1 above, an order that: (a) the Applicant pay the Respondent's costs on an ordinary basis relating to: i. the Applicant's challenge to the validity of the construction certificate and its joinder of the accredited certifier, Warwick Norris, as a respondent in the proceedings; and ii. the Applicant's claim for relief in the form of the orders sought that the respondent remove or procure the removal of the cabin and associated structures erected on each of cabin lots 40 and 47; and iii. the Applicant's claim concerning alleged breach by the respondent of condition 5 of the development consent (identified in paragraphs [17] – [20] and [37] – [40] of the Further Amended Points of Claim; and (b) that the Applicant pay the Respondent's costs occasioned by the various amendments made by the Applicant to its Summons and Points of Claim; and (c) otherwise, each party bear its own costs of the proceedings. 3. In the alternative to the orders sought in paragraphs 1 and 2 above, an order that each party bear its own costs of the proceedings. 4. In the alternative to the orders sought in paragraphs 1, 2 and 3 above, if the Court orders the Respondent to pay the Applicant's costs of the proceedings an order that the costs relating to the matters identified in paragraph 2(a) and 2(b) above be excluded from any costs. In proceedings No. 41019 of 2009: 5. An order that each party bear its own costs of the proceedings. Chronology 4 A chronology of relevant events follows, drawn in part from a much longer chronology set out in Ko-veda No 2 at [19]: (i) In Denis Gelle Pty Ltd v Baulkham Hills Shire Council [2001] NSWLEC 229 (proceedings 11164 of 2000) the Court refused development consent for relocation of caravan sites from one part of the existing caravan park to the location the subject of these proceedings. Refusal was largely because the proposed vegetative screening of the caravan sites was inappropriate and there was concern about its maintenance. (ii) 17 January 2003, the development application (DA) for cabins installation supported by an environmental impact statement (EIS) with a vegetation management plan (VMP) in four stages was lodged with the Council. (iii) 15 August 2003, the Council issued the cabins consent for the relocation and installation of 47 cabins within the Respondent's holiday park from lot 5 in DP 729341 and lot 1 in DP 783552 to lot D in DP 3842968. (iv) December 2006, March 2007, cabins for lots 40 and 47 delivered and installed. (v) 4 July 2007, proceedings 40625 of 2007 Class 4 application filed by the Council seeking removal of two cabins on lots 40 and 47. (vi) Points of Claim dated 28 June 2007 and filed 4 July 2007. (vii) 16 August 2007, settlement conference. (viii) 10 September 2007, Calderbank offer by Respondent's solicitor to the Council. (ix) 29 September 2007, refusal of Calderbank offer by Council. (x) 26-29 February 2008, (part) hearing before Pain J. (xi) 27 February 2008, Amended Class 4 application filed in Court. (xii) 3 March 2008 second written offer (Conzept VMP proposed). (xiii) 6-7 March 2008, (further) hearing before Pain J. (xiv) 2 June 2008, placement of third cabin on lot 46 (installed after Ko-veda No 1 delivered). (xv) July 2008, Ko-veda No 1 judgment delivered by Pain J. (xvi) 15 July 2008, letter from Council to Respondent's solicitors advising appeal proposed to be lodged. (xvii) 22 July 2008, Site 43 site agreement. (xviii) 30 July 2008, Court of Appeal proceedings commenced and served. (xix) Within the period 22 April 2007 to 1 April 2009 a total of ten site agreements for cabin lot occupation were entered between the Respondent and various third parties for eleven cabin lots inclusive of the cabin lots mentioned above in (xl), (xliv), (xlvii). (xx) 29-30 April 2009, hearing in Court of Appeal. (xxi) 29 June 2009, first judgment delivered by Court of Appeal. (xxii) 1 October 2009, second judgment delivered in Court of Appeal, declaration of breach of consent conditions and order remitting matter to the Court. (xxiii) 25 October 2009, Further Amended Class 4 application in proceedings 40625 of 2007. (xxiv) 15 October 2009, letter from Council advising of intention to commence Class 4 proceedings seeking removal of nine cabins. (xxv) 15 October 2009, letter from Council re two cabins. (xxvi) 16 October 2009, Council letter to Respondent's solicitor stating undertaking it would accept re nine cabins. (xxvii) 19 October 2009, letter from Respondent's solicitor to Council. (xxviii) 23 October 2009, letter from Respondent's solicitor to Council. (xxix) 28 October 2009, Council letter re nine cabins. (xxx) 29 October 2009, Further Amended Class 4 application filed. Paragraph 4A sought an order that further landscaping works be carried out without removal of cabins or restraint of occupation. (xxxi) 2 December 2009, letter from Respondent's solicitor to Council refusing to give undertaking sought re nine cabins. (xxxii) 23 December 2009, Class 4 summons filed in proceedings 41019 of 2009 in relation to nine cabins installed on Respondent's land. (xxxiii) 4 February 2010, order made that proceedings 40625 of 2007 and 41019 of 2009 be heard together. (xxxiv) 9-12 and 15 February 2010, hearing on remitter from Court of Appeal in 40625 of 2007 and in 41019 of 2009 at first instance. (xxxv) 31 May 2010, judgment in Ko-veda No 2 delivered by Pain J. (xxxvi) 1 July 2010, final orders made by Pain J. Summary of orders 5 In Ko-veda No 1 the Court dismissed the Council's application. 6 In Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Ltd (No 2) [2009] NSWCA 310 the Court of Appeal made the following declarations and orders, inter alia: (d) Declare that the two cabins installed by the first respondent on Lots 40 and 47 on land known as 2868 River Road, Wisemans Ferry, comprising Folio Identifier 1102/1061450 and Folio Identifier 1201/1076039 were installed in breach of Conditions 1, 6, 30 and 41 of Development Consent No. 2430/2003/HE issued by the appellant to the first respondent and dated 1 August 2003. (e) Remit the proceedings as between the Council and the first respondent to the Land and Environment Court to determine the relief, if any, to which the appellant is entitled as a consequence of the breaches referred to in paragraph (d) above. (f) Remit the costs of the hearing at first instance as between the Council and the first respondent to the Land and Environment Court to be determined by the Judge conducting the remitted hearing referred to in paragraph (e) above. 7 In Ko-veda No 2 the Court made numerous detailed orders requiring differing planting regimes in stages 1 and 2 of the cabins consent, inter alia. Conditions of consent breached 8 Conditions 1, 6, 30 and 41 are in the following terms: Condition 1 – Development in accordance with submitted plans The development being carried out substantially in accordance with Development Application No 2430/03/HE and accompanying Environmental Impact Statement (EIS) prepared by Integrated Site Design dated June 2002, and all supplementary and additional information received by Council, except where amended by the following conditions of consent. The approval allows the relocation of 47 short-term sites from Lot 5 DP 729341 and Lot 1 DP 783552 to Lot D. … Condition 6 – Compliance with Department of Infrastructure, Planning and Natural Resources Requirements Compliance with the requirements of the NSW Department of Infrastructure, Planning and Natural Resources attached as Appendix A to this consent and dated 26 June 2003, through all stages of the development. Condition 30 – Completion of Landscape Works Upon completion of each stage of landscape works, the applicant/developer is to arrange an inspection of the landscape works undertaken with the appropriate Officers from Council and the Department of Sustainable Natural Resources. The installation of each subsequent stage of cabins cannot proceed until the applicant/developer is advised in writing by both Council and the Department of Sustainable Natural Resources that the landscape works have been completed satisfactorily. Should rectification works or additional landscape works be required, the applicant/developer will be advised as such and a subsequent inspection will be undertaken by the parties. The satisfactory completion of landscape works is required prior to the issue of a Building Construction Certificate for each stage of the development. Condition 41 – Part 3A permit from Department of Infrastructure, Planning and Natural Resources No works are to commence on site until such time as a Part 3A permit required under the provisions of the Rivers and Foreshores Improvement Act 1948 has been issued by the Department of Sustainable Natural Resources. 9 Important background to note is that the EIS for the consent referred to four stages of cabin installation. These proceedings dealt only with stages 1 and 2, not 3 and 4. Evidence 10 The Council tendered a bundle of documents as exhibit A which contains copies of correspondence between Hones La Hood Lawyers and the Council between the dates 3 August 2007 and 25 January 2010. 11 The Respondent tendered a two volume bundle as exhibit 1 which contains copies of the Respondent's and Council's pleadings for proceedings 40625 of 2007, relevant copies of the parties' written submissions, transcripts of hearings in this Court (for 26-27 February 2008, 22 October 2009, 9-12 February 2010 and 15 February 2010), and correspondence between the Respondent's legal representatives and the Council between the dates 2 August 2007 and 5 November 2010. 12 A copy of the cabins consent notice of determination for DA 2430/03/HE dated 1 August 2003, including conditions of consent attaching the general terms of approval (GTA) from the Department of Infrastructure, Planning and Natural Resources (DIPNR) for work requiring a permit under Pt 3A of the Rivers and Foreshores Improvement Act 1948 was tendered by the Respondent as exhibit 3. Evidence on vegetation management plans 13 The Respondent relied on two affidavits of Narelle Sonter, landscape and horticultural consultant, sworn 16 September 2010 and 10 November 2010 which provide a comparative assessment of various VMPs. Three VMPs were referred to in evidence. 14 The Conzept VMP dated February 2008 (found at annexure L to Mr Madsen's affidavit sworn 14 September 2010) was part of the Respondent's 3 March 2008 written offer to settle with the Council. The Botanica VMP prepared by Ms Sonter and dated 8 June 2010 (found at appendix 2 to Ms Sonter's affidavit sworn 16 September 2010) was the subject of the Court's order of 1 July 2010. The EcoHort VMP dated February 2002 (found at appendix 3 to Ms Sonter's affidavit sworn 16 September 2010) was submitted as part of the EIS for the integrated development application for proposed alterations to the Ko-Veda Holiday Park lodged with the Council in 2003. 15 The Council relied on the affidavit of Suzan Lucas, Tree Management Coordinator of the Council, sworn 28 October 2010, which states her response to Ms Sonter's comparative assessment of the various VMPs and provides her own assessment of the principal differences between the plans. Ultimately a summary of this evidence was handed up in Court by the Respondent's counsel. This stated there were more plants in the Conzept VMP for stage 1 and more plants in the Botanica VMP for stage 2. Evidence of what occurred at settlement conference on 16 August 2007 16 I delivered an ex tempore decision Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Limited (No 3); The Hills Shire Council v Ko-veda Holiday Park Estate Limited (No 2) [2010] NSWLEC 238 (Ko-veda No 3) on the first day of the costs hearing on the admissibility of evidence relating to settlement negotiations pursuant to s 131(2)(h) of the Evidence Act 1995. I determined that this evidence was admissible as it was relevant to the determination of liability for costs in the proceedings. 17 The Respondent tendered a report, dated 21 August 2007 by Harrison Gray Pty Ltd (chartered loss adjusters) regarding a professional indemnity claim related to proceedings 40625 of 2007, as exhibit 2. The report describes a pre-trial settlement conference between the parties which was held on 16 August 2007. The report states that during discussions, without prejudice, the Respondent was were prepared to give an undertaking to the Council that they would not erect any more cabins on the site until the vegetation shielding the cabins from the river had reached a certain level. The report states that the Council confirmed its position of wanting to proceed to seek orders from the Court consistent with the Class 4 application, including the removal of the cabins, and that it was unlikely that Council would consider any other alternatives. 18 The Council relied on the affidavits of Craig Winn, senior legal officer of the Council, sworn 28 October 2010, Matthew Pearce, corporate lawyer of the Council, sworn 28 October 2010, and Matthew Fraser, barrister, sworn 12 November 2010 to support its submissions regarding settlement negotiations. The Respondent relied on two affidavits of Benny Madsen, director of the Respondent, sworn 9 November 2010 and 14 September 2010, as well as the affidavits of Thomas Howard, barrister, sworn 10 November 2010, Andrew Pickles, barrister, affirmed 10 November 2010, David Thomas, solicitor, sworn 10 November 2010, Jason Hones, solicitor, sworn 11 November 2010, and Sarah Furlonger, solicitor, sworn 11 November 2010 to support its submissions regarding settlement negotiations. It is unnecessary to refer to the affidavit evidence in detail as there is no dispute about what happened at the settlement negotiations. Respondent's Calderbank offer 10 September 2007 19 The Respondent offered to: cease further work until it obtained a Pt 3A permit, lodge a s 96 modification to delete all conditions predicated on the application of Pt 4A of the Environmental Planning and Assessment Act 1979 (the EP&A Act) (principally construction certificate requirements) and insert conditions based on the relevant local government regulation, undertake that the two existing cabins not be occupied until necessary approvals have been obtained, and offer to install a temporary vegetation screen according to an annexed plan, inter alia. Respondent's open written offer 3 March 2008 20 The Respondent offered, while leaving the two cabins in place, to cease their occupation until the sewage management system was commissioned, submit to a Court order that within three months it will carry out landscaping works in accordance with the Conzept VMP and submit to an order that the planting be maintained for two years and payment of a bond, inter alia. Council's offer of 16 October 2009 re nine cabins 21 The Council stated it would accept an undertaking in terms that the occupation of the nine cabins not be permitted until vegetation and landscaping was installed in accordance with the development consent. By letter dated 23 November 2009 the Respondent refused to give the undertaking because the cabins were subject to contracts with third parties. Respondent's submissions 22 While the Council obtained relief and can be considered the successful party such as to attract the initial presumption that costs should be awarded in its favour under r 42.1 of the Uniform Civil Procedure Rules 2005 (the UCPR), there are many reasons why costs ought not be awarded on that basis. These are the alternative bases set out in the Notice of Motion. The Council was marginally successful and failed to obtain the primary relief sought, namely the removal of the two cabins on lots 40 and 47. Nor did it obtain orders restraining their occupation. 23 The original Class 4 application sought 14 declarations of a breach of a development consent and five orders. None of the orders sought were obtained. A declaration of breach of four consent conditions (1, 6, 30 and 41) was made by the Court of Appeal. The removal of cabins was the critical relief sought by the Council and confirmed in the Council's opening submissions. The Amended Class 4 application dated 27 February 2008 filed in Court on the second day of the hearing was amended significantly. An alternative order was sought that the two cabins remain until the installation and growth of vegetation and landscaping and completion of the sewage treatment system. Another order sought was an order restraining the Respondent from installing any further cabins in relation to the development consent until installation and growth of vegetation and landscaping and completion of the sewage treatment system. This put in issue for the first time the adequacy of landscaping outside stage 1 of the cabins consent. The Council continued to maintain that its primary position was the removal of the cabins. Calderbank letter – 10 September 2007 24 Where the successful party obtains relief no more substantial than that already offered by the unsuccessful party to settle the dispute in a Calderbank letter the Court can, in the exercise of its discretion, not award its costs from that date. Here a Calderbank offer was made on 10 September 2007 which dealt with all the legal aspects of the Council's case as it transpired on appeal and which the Council has failed to better in the final orders made by the Court in Ko-veda No 2. As a consequence of refusal of a Calderbank letter when the offer turns out to be no less than the outcome achieved in the litigation in this case, it is relevant to the Court's consideration of whether the presumption in r 42.1 ought apply. 25 The subject Calderbank letter was a reasoned offer made well in advance of the hearing, was open for a reasonable period, and included a supplementary costs offer: Brymount Pty Ltd t/a Watson Toyota v Cummins & Anor; Young Shire Council v Cummins & Anor (No 2) [2005] NSWCA 69 at [14]. It is submitted that the Council's refusal of the offer was unreasonable and justifies an order that the Council pay the Respondent's costs from the date of the Council's refusal of that offer (26 September 2007). Alternatively, it is submitted that the refusal by the Council of this offer is a matter which would justify the Court refraining from making any order that the Respondent pay the Council's costs of those proceedings as and from 26 September 2007. It is not being relied on to seek indemnity costs. Offer of 3 March 2008 26 On 3 March 2008 the Respondent made an open written offer to settle the proceedings which centred upon the carrying out of landscape works in accordance with a landscape plan prepared by Conzept Landscape Architects dated February 2008. 27 Until 27 February 2008, the Council had only ever sought removal of the cabins and restraint of their occupation: it had never sought anything less. At lunch time on 27 February 2008, the Council, for the first time, sought an order, in the alternative by way of amendment to its application which contemplated the carrying out of landscaping without removal of the cabins (see par 13 and 14 Respondent's written submissions on costs). Upon this amendment being made, counsel for the Respondent indicated in Court that the Respondent might be able to put something forward which would adapt the existing landscaping and augment it to bring it to the point of achieving the objectives of the development consent. The Respondent's solicitor then promptly retained the landscape consultant to prepare the Conzept plan and it was presented to the Council's solicitors on 29 February 2008. 28 The evidence of Ms Sonter is that there are a greater number of plants in the Conzept VMP than the Botanica VMP approved by the Court in Ko-veda No 2. Disentitling conduct 29 The Council unreasonably refused to negotiate at the settlement conference in August 2007. The evidence establishes that the Council adopted an unreasonable and trenchant position at the settlement conference of 16 August 2007 and, in particular, adopted a position that it was unwilling to compromise the relief it sought by way of its application that the cabins be removed. The report of the costs assessor at the settlement conference confirms the approach of the Council. 30 Having regard to the particular circumstances, including the co-existence of a Pt 3A permit for the rock wall, which required the landscaping regime on the same area of land as the development consent and which conflicted with the requirements of condition 1 of the consent, the fact that the Respondent had planted vegetation in accordance with the Pt 3A permit for the rock wall some 18 months prior to the installation of the cabins and the fact that the Respondent had acted on the basis of the construction certificate, which the Council wrongly required the Respondent to obtain under the consent, it was unreasonable for the Council to have refused to compromise its position that the cabins must be removed. Its adoption of this unreasonable position constituted disentitling conduct if the Court were otherwise minded to order that costs follow the event. 31 The Council issued a development consent with a fundamental legal flaw, namely requiring a construction certificate to be issued for each stage by virtue of condition 8 when none was required under the EP&A Act, as found by the Court of Appeal. This resulted in the Respondent proceeding on a false premise and caused wasted time and costs. Further, the Council positively pleaded its case on the basis that Pt 3A applied to the development consent, despite being notified this was erroneous by the Respondent in its letter of 10 September 2007. There was no reason for the Respondent to plead as a defence that Pt 3A did not apply. Apportionment of costs 32 Alternatively, orders are sought in prayer 2 of the Notice of Motion for apportionment of costs on the various bases set out. The Respondent incurred costs in relation to these discrete issues for which it should be compensated. 41019 of 2009 (nine cabins) 33 The Class 4 proceedings in relation to the nine cabins erected after Ko-veda No 1 were unnecessary as any relief obtained in proceedings 40625 of 2009 would have satisfied the Council's concerns in relation to the nine cabins. The breaches of the EP&A Act were admitted. Each party should pay its own costs of the proceedings. Council's submissions 34 The overall context of the proceedings is important given the refusal in 2001 by Pearlman J in Denis Gelle of the first DA for cabin installation submitted by the Respondent due to inadequate screening of cabins from the river. The Respondent was clearly in breach of that part of the consent which required staged planting of vegetation prior to the installation of cabins. The Respondent relied on the construction certificate in the proceedings despite asserting it was not required in the 10 September 2007 letter. 35 Reasonableness during the course of the proceedings is not tested by the overlay of hindsight. The Council cannot be expected to second guess how this Court will exercise its discretion. Insisting on removal of the cabins when these were transportable and placed on piers on the site was not unreasonable, simply requiring that the terms of the development consent be complied with. 36 The proposal put forward by the Respondent essentially required modification of the development consent. There was no disentitling conduct when seeking compliance with the development consent. When the settlement conference was held there was no defence filed by either Respondent. The Council simply maintained its position that given the clear requirement for staged vegetation, the transportable cabins ought be removed. Why was it reasonable for the Respondent to insist on the cabins remaining rather than the Council seeking their removal when it was clear the cabins should not be there. 37 The effect of the Respondent's argument is that in order to be reasonable the Council must start with the position that works done in compliance can remain and the Council must look to ameliorative measures. Section 124 is not so constrained. The assumption the Respondent makes is that in order to be reasonable the illegal work must continue. The Council is not seeking to punish it in attempting to remedy a flagrant breach of the development consent. 38 If the Council's success is measured only in reference to the prayer sought then every Class 4 application would have to seek orders in cascading effect. It is axiomatic that the Court has discretion under s 124 and there is no obligation on the Council to seek anything less than the terms of the development consent. The Council's success is not measured by the Court's exercise of discretion. 39 There was not a fundamental change in the Council's case when the Amended Class 4 application was filed in Court on the second day of hearing on 27 February 2008. It reflected what happened during the hearing and what was available in the exercise of the Court's discretion. Calderbank letter of 10 September 2007 40 This letter has no significance in relation to costs, being an offer to make a s 96 modification application. The temporary vegetation screen was completely inadequate for the purposes of screening the cabins from the river. The judgment in Ko-veda No 2 did not have an outcome which equated to or was better than the outcome offered by the Respondent. The planting ordered in Ko-veda No 2 is quite different to that proposed in the Calderbank letter of 10 September 2007. 41 At the time of the Calderbank letter of 10 September 2007 it was impossible to determine what order the Court would make. The Council was seeking compliance with the development consent, a reasonable position. Letter of 3 March 2008 42 The offer of 3 March 2008 included the Conzept VMP which sought to amend the vegetation plan for the whole of the site, that is, stages 3 and 4 were also included but were not the subject of the proceedings. The Botanica plan the Court ordered had different vegetation from the Conzept VMP, did not include the Canary Island palms and included riverfront planting and fire retardant trees in areas not included in the Conzept VMP in stage 1. In stage 2 the Botanica plan is markedly different to the Conzept plan and largely incorporated the Ecohort plan the subject of the cabins consent and the EIS referred to in condition 1, as intended in Ko-veda No 2 at [128] and [135]. The large number of plants in the Conzept VMP referred to by Ms Sonter is irrelevant. The Conzept VMP if implemented would result in the development consent being amended. No s 96 application to modify the consent was ever made. 41019 of 2009 (nine cabins) 43 The Council was reasonably entitled to expect the removal of the nine cabins. The Respondent had benefited economically from the sale of the cabins and charging rent, benefiting from what was effectively a modified consent. 44 The Respondent raised a new issue at the outset of the hearing on discretion which required new evidence and submissions. In the discretionary hearing the Council was successful in obtaining consequential relief by way of final orders requiring the Respondent to remedy the fundamental breach of the cabins consent in relation to the failure to install landscaping in accordance with condition 1 of the consent (the EcoHort plan). 45 The Court of Appeal recognised (Baulkham Hills Shire Council v Ko-veda Holiday Park Estate Ltd (No 2) [2009] NSWCA 310) at [20] that the Council was the successful party having established a breach so that costs would normally follow the event. The breaches found were of conditions 1, 6, 30 and 41 of the cabins consent. The Calderbank letter is not a reason to not award costs to the Council. Finding 46 Costs in Class 4 proceedings are determined under s 98 of the Civil Procedure Act 2005 (the CP Act) and UCPR r 42.1 to the effect that costs follow the event. Costs are compensatory, not punitive per Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 at 566. I must determine the costs in proceedings 40625 of 2007 in Ko-veda No 1 and Ko-veda No 2, in proceedings 41094 of 2009 (nine cabins) in Ko-veda No 2 and of this costs motion. As can be seen in the chronology in par 3, the cabins consent was granted in August 2003, two cabins were installed in late 2006 and early 2007, Class 4 proceedings seeking their removal were commenced in July 2007, Ko-veda No 1 was delivered in July 2008, an appeal was lodged, nine cabins were installed in stage 1 (out of a total of 12 cabin sites in that stage) before the Court of Appeal delivered its judgments in June and October 2009. Additional proceedings 41019 of 2009 were commenced seeking removal of the nine cabins. Both proceedings were heard together and were the subject of Ko-veda No 2. 47 In Ko-veda No 2 the Court was exercising its broad discretion to remedy breaches of the EP&A Act in light of the finding of breaches by the Court of Appeal. As can be detected from the lengthy judgment delivered after five hearing days there were a number of issues which required the Court's consideration. The Court's wide discretion to remedy breaches of the EP&A Act under s 124 has been considered in numerous cases including by Kirby P in ACR Trading Pty Ltd v Fat-Sel Pty Ltd (1987) 11 NSWLR 67 at 82 where his Honour held as follows: Nevertheless, it is important to appreciate the wide scope and purpose of the discretion conferred by s 124 of the Act. Clearly, it is not a warrant to set at nought the complicated and sensitively balanced provisions of the legislation, substituting for the operation of the of the law laid down by Parliament, the personal opinions of the judge hearing the case. On the other hand, it would be equally erroneous to ignore the discretion or to give it an unduly restricted operation. It is just as much part of the structure and scheme of the Act, for the enforcement of planning law, as are the other parts. Similar statements about the broad nature of the Court's discretion are found in Warringah Shire Council v Sedevcic (1987) 63 LGRA 361 at 365-366. 48 The Council maintains that it was the successful party as it alleged a fundamental breach of the cabins consent, the Court of Appeal found there were such breaches and this Court ordered planting on the Council's land in stages 1 and 2 as a means of enforcing the development consent. The breaches of conditions found by the Court of Appeal were significant. Condition 1 required planting of vegetation at certain stages before cabins were installed, an important part of the scheme envisaged by the cabins consent conditions. Condition 30 required inspections of vegetation by the Council and DIPNR before the installation of cabins. When the Court's orders in Ko-veda No 2 are considered there is force in the Council's argument. The orders required additional planting in stage 1 before the final cabin can be installed, and more extensive planting in stage 2 largely in accordance with the Ecohort VMP before any cabins can be installed there. While this is recognised by the Respondent, it argues its costs should be paid from certain dates, or in relation to certain aspects of the case or that each party pay its own costs. Preparedness to negotiate? 49 The first matter to consider is the Respondent's submission that there was disentitling conduct on the part of the Council when it participated in the settlement negotiations in August 2007 shortly after proceedings were commenced, and maintained its position that the two cabins erected without the necessary vegetation screening being in place should be removed. The Respondent argued in written submissions that the Council unreasonably failed to mediate, stating in oral submissions that the terms mediate and negotiate were being used interchangeably. 50 The Respondent referred to G E Dal Pont Law of Costs, 2nd ed (2009) LexisNexis Butterworths at [8.46] on whether the failure to mediate can have cost consequences. The principal authority cited of Halsey v Milton Keynes NHS Trust [2004] 4 All ER 920 in the English Court of Appeal was an action for damages for personal injury following an accident. The appeal ground was that the primary judge should not have awarded all the costs to the plaintiff because he/she had refused to engage in mediation. Dyson LJ for the court discussed the desirability of encouraging alternative dispute resolution at [4]-[8], concluding at [10] that if a party is intransigently opposed to alternative dispute resolution it would be wrong for the court to compel them to embrace it. In deciding to deprive a party of costs on the grounds he/she refused to agree to alternative dispute resolution, such an order is an exception to the general rule that costs should follow the event, at [13]. The burden is on the unsuccessful party to show why there should be a departure from the general costs rule. 51 Dal Pont states (p 237) that Australian judges are yet to adopt the principles in Halsey but also refers (at footnote 247) to single judge decisions where the failure to mediate was considered relevant on cost issues. Dal Pont cites Hopeshore Pty Ltd v Melroad Equipment Pty Ltd [2004] FCA 1445; (2005) 212 ALR 66 which considers the making of a security for costs application and does not provide any assistance in this case. In E T Petroleum Holdings Pty Ltd v Clarenden Pty Ltd (No 2) [2005] NSWSC 562 White J in considering an application for indemnity costs did consider whether a refusal to mediate may have adverse cost consequences. He notes that mediation or on-site negotiations may be useful to narrow the issues. 52 Mediation, as opposed to negotiation, is generally a more formalised process, and can be ordered by a court under Pt 4 of the CP Act, requiring the appointment of a mediator, inter alia. An agreement between the parties providing for confidentiality over what is said at the mediation is common. Whether a distinction for cost purposes should be drawn between a failure to mediate in a court appointed mediation, or more generally, and a negotiation does not need to be explored here. 53 The Respondent in oral argument relied on s 56 of the CP Act concerning the need for proceedings to be just, quick and cheap to support a submission that the Council should have been more reasonable and prepared to consider the alternative position of the cabins remaining as part of the settlement negotiations in August 2003. Section 56 is directed to the conduct of steps in the litigation process. No authority where s 56 has been considered in relation to preparedness to negotiate was referred to and none is identified in the commentary in P Taylor et al, Ritchie's Uniform Civil Procedure NSW vol 1, (2005) LexisNexis Butterworths at par 56.5 – 56.18. 54 The Court encourages parties to negotiate and resolve their differences where that is appropriate. However I do not understand that lack of preparedness (to be contrasted with failure) to negotiate alone is a relevant consideration when determining costs in civil enforcement proceedings. Here the Council came to the settlement negotiation meeting, stated its position and did not wish to resile from it. 55 If behaviour at settlement negotiations is relevant on a question of costs, whether that is unreasonable in a party not negotiating needs to be assessed in the relevant context, here civil enforcement proceedings for an alleged breach of the EP&A Act by virtue of a failure to comply with important consent conditions. The Respondent had installed cabins in a way the Council considered was in clear breach of the development consent which required screening by vegetation of all cabins before these were installed. For the reasons provided by the Council's counsel summarised above at par 34-36 this behaviour was reasonable. It is not self-evident that the "de facto" reasonable position was for the Council to accept that the two cabins could remain. As the Council submitted, at that initial stage of the proceedings the cabins, which are moveable, appeared to have been installed without the necessary vegetation screening required under condition 1 or the required inspections by the Council under condition 30. The efficient conduct of litigation does not mean that in civil enforcement proceedings a council is not entitled to act on the basis that consent conditions ought be complied with. Calderbank offer 56 The next matter to consider is the effect, if any, for costs purposes of the Calderbank letter of September 2007. The Respondent is not relying on this to obtain an indemnity costs order. As submitted by the Respondent the costs consequence which flows from the making and rejection of a Calderbank offer rests within the Court's discretion: Brymount per Beazley JA at [11]. It submits that the Council did not achieve a better result than that offered in September 2007 because the Court did not order the removal of any cabins so that the subsequent three years of litigation were unnecessary and the Respondent's costs ought be paid. That circumstance rebuts any presumption of a costs order under UCPR r 42.1 according to the Respondent. 57 For the reasons given by the Council, namely that the September 2007 offer was to take action which the consent required anyway, to make a s 96 application for modification of the existing development consent and the temporary screening proposed was minimal and not in accordance with the VMP approved in the EIS, its refusal of the Calderbank letter of September 2007 was reasonable. The Respondent criticises the Council for seeking removal of the cabins at the outset only with no reference to the possibility of vegetation being installed until later amendments of the pleadings. That the reason the Council wanted the cabins removed was the failure to have the necessary vegetation screening in place would have been abundantly clear to the Respondent from the correspondence from the Council raising that matter. This did not have to be the subject of the orders sought by the Council. 58 The outcome in this matter ultimately depended on the exercise by the Court of its broad discretion to grant appropriate relief to remedy or restrain breaches of the EP&A Act. Whether a party can assess so early in proceedings whether an offer is reasonable in proceedings of this nature is an interesting issue. While principles arising from the making of a Calderbank offer apply, the circumstances in which the offer must be assessed are highly relevant. By the time Ko-veda No 2 was handed down there were a number of matters which the Court had to consider because of the history of the matter and the respective parties' actions. The balancing exercise that was necessary in formulating appropriate orders to take into account all relevant matters did not suggest an obvious outcome for the exercise of the Court's discretion in the proceedings at the early stage at which the Calderbank offer was made. While orders were not ultimately made which required removal or prevented occupation of the cabins already placed and occupied by third parties in stage 1, orders requiring further planting of vegetation before the final cabin can be placed in stage 1 and before any cabins are installed in stage 2 were made. That the orders ultimately made did not include the removal of the two cabins does not suggest unreasonable refusal of the Calderbank letter of offer. Open offer 3 March 2008 59 In the March 2008 letter the Respondent proposed implementing the Conzept VMP for the whole of the area the subject of the cabins consent, namely to include stages 3 and 4. Only stages 1 and 2 are the subject of the two proceedings before me. I held in Ko-veda No 2 at [129] that it is inappropriate in Class 4 civil enforcement proceedings to engage in a merit review process more appropriate in the Court's Class 1 jurisdiction. If an alternative vegetation plan was accepted to that in the EIS referred to in condition 1 this would have the effect of modifying the cabins consent conditions. This was the Council's view and is relevant in the assessment of costs in relation to the reasonableness of the Council in refusing to consider the Conzept VMP the subject of the March 2008 letter. The Council was reasonable to not accept the Conzept VMP as a substitute for the VMP proposed in the EIS lodged with the cabins consent for this reason. 60 Nor is it evident that the Conzept VMP represented a better outcome than the Botanica VMP in any event, for the reasons given by the Council relating to the removal of the Canary Island palms, and the placement of particular types of plant treatments at specified locations in stages 1 and 2. Simply counting the number of plants in stage 1 overly simplifies the vegetation screening issues in this matter. The summary of evidence handed up by the Respondent's counsel states that for stage 2 the Botanica VMP has more plants than the Conzept VMP. I held in Ko-veda No 2 the stage 2 planting was to implement the Ecohort VMP incorporating the existing planting as far as possible. I do not consider the letter of 3 March 2008 has the effect that the Respondent should be awarded its costs because the Council failed to achieve a better outcome in the litigation. 61 The Respondent has not demonstrated that it is entitled to its costs as sought in prayers 1(a) and (c) of the Notice of Motion. The Council should be awarded its costs of proceedings 40625 of 2007 in Ko-veda No 1 and Ko-veda No 2, subject to considering whether there should be an apportionment of costs as referred to in the Respondent's Notice of Motion prayer 4, referring in turn to prayers 2(a) and (b). Apportionment of costs 62 As part of the discretion to be exercised in relation to costs a court can consider apportionment of costs based on the outcome of defined and severable issues, avoiding a mathematical approach in doing so. This Court has applied such considerations in Arnold v Minister Administering the Water Management Act 2000 (No 4) [2009] NSWLEC 87 at [17] and F & D Bonaccorso Pty Ltd v City of Canada Bay Council (No 5) [2008] NSWLEC 235 at [8], [15] inter alia. (i) construction certificate 63 The sorry history of this litigation in relation to the application of the construction certificate requirements in Pt 4A of the EP&A Act can be seen in the judgments. In Ko-veda No 1 much of the judgment was spent considering whether the construction certificate required by the cabins consent conditions and issued by the Second Respondent was valid. As I held that it was, the Council's grounds of review based on breaches of numerous consent conditions failed. In the Court of Appeal the Court held the construction certificate was not legally required under the cabins consent and that part of the consent fell away. It therefore found that there were a number of breaches of development consent conditions by the Respondent. 64 The Council criticises the Respondent for stating in the Calderbank letter of September 2007 that Pt 4A did not apply and offering to make an application under s 96 of the EP&A Act to modify the consent to remove the affected parts of the development consent conditions yet relied on the construction certificate as part of its defence in the substantive proceedings. The Respondent was entitled to do so given the requirement by which it was bound in the cabins consent the Council issued, to obtain a construction certificate at various stages of the development. The construction certificate issue occupied a substantial part of the hearing and my consideration in Ko-veda No 1. It is open to the Court in the exercise of its discretion to apportion costs on the basis of issues if it considers it appropriate to do so. This was a dominant and severable issue and the Council's costs in relation to the construction certificate ought not be paid by the Respondent. Further the Council should pay the Respondent's costs in relation to the construction certificate issue. (ii) other matters 65 The other matters raised by the Respondent as appropriate for an order in its favour or modification of any costs order in favour of the Council are at prayer 2(a)(ii) of the Notice of Motion concerning the relief sought by the Council of removal of the two cabins on lots 40 and 47. That the Court in the exercise of its discretion did not make such an order does not suggest this was unreasonable, for the reasons given above in relation to the settlement negotiations in August 2007. No apportionment on this basis is warranted. 66 The issue raised in prayer 2(a)(iii) concerning condition 5 relates to the requirement for approval by the Council of a carport next to each cabin. At [6] in Ko-veda No 1 I note that the Respondent admitted that there was a technical breach of this condition of consent. This took up very little time at the hearing and no apportionment of costs on that issue is warranted. 67 In prayer 2(b) of the Notice of Motion the Respondent seeks its costs of the amendments to the Class 4 application and summons. The principal amendment for the purposes of this argument was made on 27 February 2008 to add alternative orders such as preventing occupation of the two cabins on lots 40 and 47 (assuming these remained) until the vegetation screening was in place. I do not consider the inclusion of these alternative orders in the pleadings represented a major change in the way the Council ran its case, and simply reflected the possible orders the Court could make in its discretion. That the Respondent chose to prepare a further VMP, the Conzept VMP, after that amendment, was not required by the amendment of the pleadings and was not sought separately by the Council or the Court. It is not appropriate to apportion costs in relation to these amendments. Proceedings 41019 of 2009 68 As held at [120] of Ko-veda No 2, the Respondent was entitled to erect the further nine cabins in stage 1 after Ko-veda No 1 during the period the appeal was pending in the absence of any application restraining the Respondent from doing so by the Council. The Respondent having done so, contrary to the Respondent's submissions, the Council was entitled to commence proceedings given that it sought removal of the nine cabins or alternatively orders that the cabins not be occupied because of the same breaches found by the Court of Appeal in relation to the two cabins. Correspondence between the parties was tendered which shows that there were discussions about how the nine cabins could be dealt with but ultimately no agreement was reached and further proceedings were commenced. 69 The Respondent admitted the breaches of the cabins consent in relation to the nine cabins until the first day of hearing when it sought to rely on a new substantive issue in relation to a condition of development consent (condition 7) not previously raised in the proceedings before me or the Court of Appeal. I held that issue could not be dealt with applying the principle of Anshun estoppel in Ko-veda No 2. While separate proceedings were commenced these were efficiently dealt with through joinder with proceedings 40625 of 2007 for the hearing on appropriate relief in Ko-veda No 2. 70 Balancing up these unusual circumstances suggests that each party should pay its own costs of these proceedings except that the Respondent should pay the Council's costs of meeting the additional issue concerning condition 7 of the cabins consent raised by the Respondent and the Anshun estoppel argument. Costs of costs hearing 71 Each party seeks its costs of the costs arguments. Both parties were only partially successful in their respective claims. It is appropriate that each party pay its costs of this costs argument. 72 I will discuss the terms of final orders with the parties to see if these can be simplified before finalising them. 20/12/2010 - incorrect double citation - Paragraph(s) cover sheet 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.