Land and Environment Court of New South Wales CITATION : H & W Pty Ltd v Lane Cove Council [2010] NSWLEC 87 This decision has been amended. Please see the end of the judgment for a list of the amendments. APPLICANT H & W Pty Ltd PARTIES : RESPONDENT Lane Cove Council FILE NUMBER(S) : 10126 of 2010 CORAM: Craig J KEY ISSUES: COSTS :- application to discontinue proceedings - reasonable in the circumstances - recent decision changing jurisprudence concerning existing use provisions of the Regulation - supervening event - not fair and reasonable to make a costs order against party applying to discontinue due to that event Civil Procedure Act 2005 Environmental Planning and Assessment Act 1979 LEGISLATION CITED: Environmental Planning and Assessment Regulation 2000 Lane Cove Environmental Plan 1987 Lane Cove Environmental Plan 2009 State Environmental Planning Policy No 1 Iris Diversified Property Pty Ltd v Randwick City Council [2010] NSWLEC 58 CASES CITED: Manly Warringah Rugby Leagues Club Pty Ltd v Warringah Council [2006] NSWLEC 88 Port Stephens Council v Sansom [2007] NSWCA 299; (2007) 156 LGERA 125 Wehbe v Pittwater Council [2007] NSWLEC 827; 156 LGERA 446 DATES OF HEARING: 31 May 2010 EX TEMPORE JUDGMENT DATE : 31 May 2010 APPLICANT A Hudson, Solicitor of Wilshire Webb Staunton Beattie Lawyers LEGAL REPRESENTATIVES: RESPONDENT D Wilson (Barrister) SOLICITOR Pikes Lawyers JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES CRAIG J 31 May 2010 10/10126 H & W PTY LTD v LANE COVE COUNCIL EX TEMPORE JUDGMENT 1 HIS HONOUR: On 18 December 2009, H & W Pty Ltd (the applicant) lodged a development application with Lane Cove Council (the Council). The development application related to the land and premises known as 19 Glenview Street, Greenwich (the site). 2 The applicant's development application was refused by the Council on 17 March 2010. However, there having been no determination of that application by late February 2010, the applicant appealed to this Court pursuant to s 97 of the Environmental Planning and Assessment Act 1979 (the EPA Act) on the basis of the Council's deemed refusal of its application: s 82(1) EPA Act. Its Class 1 application commencing the appeal was filed on 25 February 2010. 3 As was required of it, the Council filed a statement of facts and contentions on 24 March 2010 and on 21 April directions were given by way of consent orders for the preparation of the matter for hearing. At that same time, the hearing was fixed for three days commencing on 9 June next. 4 By notice of motion filed on 25 May 2010, the applicant seeks leave to discontinue the proceedings. Its intention to take that course was notified by its solicitor to the Council's solicitor on 21 May 2010 but on 24 May 2010 the latter indicated that his client would not agree to discontinue on the basis that each party should bear its own legal costs. 5 The Council has today filed in Court a notice of motion seeking an order that its costs of the proceedings be paid by the applicant. Thus, it is necessary for me to determine whether leave should be granted to the applicant to discontinue its proceedings on the basis that each party pay its own costs or whether I should accede to the Council's application for an order that the applicant pay its costs of the proceedings The development application and issues pertaining to its determination 6 Standing on the site at present is a substantial two-storey federation building, said to have been erected in the early 1900's and also said to have been converted to accommodate three flats in about 1927. This building is listed as an item of environmental heritage in a Schedule to each of Lane Cove Environmental Plan 1987 (LEP 1987) and Lane Cove Local Environmental Plan 2009 (LEP 2009). Also on the site is an in-ground swimming pool and a carport erected towards the front of the site. 7 The applicant's development application involved three key elements although there were other aspects of it which were incidental to or consequent upon those elements. Those key elements were: (i) conversion of the existing heritage building to a single dwelling house; (ii) the erection of a new detached dwelling on the site over a basement car park, intended to accommodate six vehicles, and (iii) subdivision of the site, including a stratum subdivision pertaining to the basement car park. 8 The site was zoned Residential 2(a2) under provisions of LEP 1987. Although LEP 2009 had, on 19 February 2010, become the operative local environmental plan for the Lane Cove Local Government area, a savings provision contained in that LEP required that the applicant's development application be assessed and determined by reference to LEP 1987. Under the provisions of that instrument, the use of land and buildings for the purpose of a residential flat development was prohibited but, subject to constraints contained in the provisions of that LEP, the use of land for the purpose of a dual occupancy was permissible development with consent. 9 The applicant lodged its development application with the Council on the basis that development was permissible by reason of the operation of s 107 of the EPA Act and cl 41 of the Environmental Planning and Assessment Regulation 2000 (the Regulation). In short, it contended that its proposed development was permissible, with consent, in reliance upon what are compendiously referred to as the "existing use" provisions of the planning legislation. 10 In its contentions, the Council challenged the applicability of the existing use provisions of the EPA Act and the Regulation to sustain permissibility in the circumstances of this development application. It also raised a number of merit issues which, it contended, would be a proper basis upon which to refuse the application. The decision of the Court in Iris Diversified Property 11 The applicant was alive to the "existing use" issues raised by the Council in its contentions. On the basis of the law, as it was understood, at the time at which its appeal was commenced and the matter prepared for hearing, it believed that cl 41 of the Regulation, as applied in earlier decided cases, provided a proper foundation upon which to argue that its development application was permissible. It is apparent from the evidence filed on behalf of the Council that its issue in relation to "existing use" related to the application of a number of provisions of LEP 1987 imposing development standards to be observed before consent could be granted for dual occupancy development. These standards relevantly pertained to the area of the site upon which dual occupancy development could be undertaken; the height of any building to be erected and the floor space ration applicable to a dual occupancy development. As the applicant's proposal did not meet these requirements, the Council's argument was that the Court was not empowered to grant consent under cl 41(1)(d) of the Regulation because the use to which the existing use was proposed to be changed was not a use "that may be carried out with or without development consent under the Act" as cl 41(1)(d) required. 12 It is appropriate to observe that until earlier this month, the conventional jurisprudence attending the operation of s 108(3) of the EPA Act was that once an existing use, within the meaning of s 106, was established, any provision of a local environmental plan which "derogated" from an entitlement contained within cl 41 of the Regulation (an "incorporated provision") could not operate as a prohibition upon the carrying out of development. Provisions of a local environmental plan, such as those which provided for a minimum height or restricted development to a given floor space ratio, were provisions that did so "derogate" and thus were not to be considered as having any "force or effect" in acting as a prohibition upon the exercise of those entitlements for which cl 41 provided. 13 However, considerable change to this understanding of the operations of s 108(3) and the "existing use" provisions of the Regulation resulted from the decision of Pain J in Iris Diversified Property Pty Ltd v Randwick City Council [2010] NSWLEC 58. Her Honour's decision in that matter was delivered on 7 May 2010. It determined that provisions of a planning instrument that seek to impose a development standard necessary to be observed before granting consent to a particular form of permissible development are not provisions which derogate from the incorporated provisions of the Regulation. They are provisions which must be observed but, as her Honour held, are susceptible to an objection under State Environment Planning Policy No 1 (SEPP 1). Her Honour's decision was made in the context of cl 41(1)(d) of the Regulation. The applicant's submissions 14 The applicant submits that leave to discontinue the proceedings should be granted in accordance with subrule (1) of Pt 12.1 of the Uniform Civil Procedure Rules 2005. It submits that this leave should be granted on terms that each party pay its own costs of the proceedings. 15 The essential basis for the applicant's submission is that its Class 1 proceedings were properly arguable upon its understanding of the law prior to the decision given in Iris Diversified Property on 7 May 2010. It had retained counsel to appear on the hearing as well as experts who would address the merit issues and some of whom had already conferred with their counterparts retained by the Council. 16 It was submitted that although the decision in Iris Diversified Property did not present a complete bar to its prospects of success, it was a case which any commissioner of the Court would be bound to follow and, in likelihood, any judge of the Court determining the matter would, as a matter of comity, also follow. This had the consequence, so the argument ran, that a number of objections under SEPP 1 would be necessary to be made in order to meet the prohibitions otherwise imposed by the development standards contained in LEP 1987. In the result the standard of satisfaction necessary to be reached in order to sustain its objections under SEPP 1 significantly reduced its prospects of success to the point where they were assessed to be very poor. 17 The applicant pointed to the circumstance that it became aware of the decision in Iris Diversified Property when it was drawn to its attention by the Council's solicitors on 10 May. The implications of the judgment were considered by its legal representatives and ultimately the decision was made on 20 May that the proceedings should be discontinued. As I have earlier recorded, those instructions were conveyed to the Council's solicitors on 21 May. It was by reason of the Council's refusal to agree to discontinuance on the basis that each party bear its own costs that has necessitated the present notice of motion. The Council's submissions 18 The Council submits that it is "fair and reasonable" that the applicant should, in the circumstances, pay its costs. Without intending any disservice to the detailed submissions advanced on behalf of the Council, in essence, the submission it puts is twofold: (i) that the subdivision sought as part of the development application was "doomed to failure" by reason of the provisions of LEP 1987, as subdivision did not involve the "use of land" within the meaning of cl 41 of the Regulation ( Wehbe v Pittwater Council [2007] NSWLEC 827; 156 LGERA 446); (ii) the decision in Iris Diversified Property did not compel the termination of the present proceedings; rather, it simply left the applicant with the option of lodging a number of SEPP 1 objections which it chose not to do. It is not "fair and reasonable" to make an order for costs against the applicant 19 I have not found the resolution of this dispute easy. However, I have concluded that it would not be "fair and reasonable" in the circumstances of this case to order that the applicant should pay the respondent's costs. 20 While the discretion of the Court to make an order for costs has its foundation in s 98 of the Civil Procedure Act 2005, the opening words of subsection (1) of the section expressly provide that the discretion is subject to the rules of court. This Court has a rule which expressly deals with orders for costs in Class 1 proceedings. That rule is found in Pt 3.7 of the Land and Environment Court Rules 2007 (LECR). Subrule (2) provides as follows: "(2) The Court is not to make an order for the payment of costs unless the Court considers that the making of an order as to the whole or any part of the costs is fair and reasonable in the circumstances." As has often been said, this subrule creates a presumption against the making of an order for costs, it being necessary on the part of the party applying for an order to demonstrate that it is "fair and reasonable" so to do ( Port Stephens Council v Sansom [2007] NSWCA 299; (2007) 156 LGERA 125). That presumption is therefore my starting point for consideration. 21 I can readily accept that the filing of a notice of discontinuance without the consent of the other party to proceedings will generally provide a circumstance in which the making of an order will be "fair and reasonable". This will be so because the discontinuance reflects an abandonment of the proceedings with the consequence that the costs incurred by the other party will necessarily be wasted. 22 Having acknowledged the general position that will pertain as a consequence of the filing of a notice of discontinuance, it must also be recognised that there will be circumstances in which discontinuance is reasonable on the part of the discontinuing party and which will have the effect of negating the ordinary cost consequences. One such circumstance is where there has been a supervening event beyond the control of the party (Manly Warringah Rugby Leagues Club Pty Ltd v Warringah Council [2006] NSWLEC 88 at [13]). Provisions such as s 56 of the Civil Procedure Act and the requirement only to litigate issues that are genuinely in dispute are requirements which, in appropriate circumstances, should inform the making of a decision by a party to discontinue proceedings when a supervening event substantially impacts upon the factual or legal basis upon which legal proceedings were originally founded. 23 The Council did not contest that the decision of Pain J in Iris Diversified Property was a "supervening event". It acknowledged that the "event" required a change of course on the part of the applicant, necessitating the filing of a number of objections under SEPP 1. However, it contended, as I have earlier indicated, that it was unreasonable for the applicant not to take that course in seeking to sustain its development application by that means. 24 I cannot agree. The need for the applicant to support its application by reference to a number of objections under SEPP 1 considerably changed the burden that it was required to bear, compared with that imposed upon it had the "existing use" jurisprudence prior to Iris Diversified Property prevailed. The matters necessary to be addressed in order to sustain an objection under SEPP 1 have been articulated in a number of cases (see, for example, Wehbe at [36] ff). Confronted by a different factual and jurisprudential basis upon which it needed to argue its case, it seems to me that the applicant took an appropriate course by seeking to discontinue the proceedings when it did. 25 I should add that it was not part of the Council's case that the applicant delayed unreasonably in notifying its decision to discontinue once the decision in Iris Diversified Property became known to it. As earlier indicated, the decision of Pain J was drawn to the attention of the applicant on May 10 and the decision to discontinue notified on 21 May. 26 The Council also relies upon the fact that the subdivision component of the development application could not have succeeded. Determination of that part of the application did not turn upon the elucidation of the law contained in the judgment of Pain J. This contention was disputed by the applicant. It is unnecessary, for present purposes, to resolve this dispute. It is sufficient to notice that the applicant had lodged a single development application with a number of different elements. On the hearing of the Class 1 appeal, it was open to the Court to grant development consent for some of those elements, for example conversion of the existing heritage building and erection of the new dwelling house, but to reject the subdivision element: s 80(4) EPA Act. It is difficult to see that had the hearing proceeded to conclusion and the result been that the land use components of the application were approved but subdivision was not, the Council would successfully have sustained an argument for partial payment of its costs. 27 This component of the Council's application does not therefore persuade me that it is "fair and reasonable" to order costs against the applicant. Conclusion 28 For these reasons I am not persuaded that it is fair and reasonable that the applicant should be ordered to pay the Council's costs. However, given that each party has acted reasonably and appropriately in bringing the notices of motion which they did, in the context of Pt 3.7 of LECR I am not disposed to require that either party should have any liability to the other for the payment of costs. 29 The orders that I make are therefore as follows: 1. The applicant be given leave to file in Court the notice of discontinuance of its proceedings in accordance with the notice annexed to its notice of motion dated and filed on 25 May 2010. 2. Each party pay its own costs of the proceedings. 3. Dismiss the Council's notice of motion dated 31 May 2010. 4. Order that each party pay its own costs of the notice of motion. ********** 08/06/2010 - Line 5 should read as: Land and Environment Court Rules 2007 - Paragraph(s) 20 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.