Reported Decision : 178 LGERA 97 Land and Environment Court of New South Wales CITATION : Vis Visitor Investment Services Pty Ltd v Hawkesbury City Council & Anor (No.2) [2010] NSWLEC 252 This decision has been amended. Please see the end of the judgment for a list of the amendments. APPLICANT Vis Visitor Investment Services Pty Ltd PARTIES : FIRST RESPONDENT Hawkesbury City Council SECOND RESPONDENT Hawkesbury Riverside Retreat Limited FILE NUMBER(S) : 40605 of 2008 CORAM: Sheahan J KEY ISSUES: COSTS :- indemnity costs - principles to apply - how to deal with untimely service of voluminous documents, and with settlement negotiations - adjournments - "trial by ambush" - "trolley load litigation" - unreasonable or disentitling conduct Civil Procedure Act 2005 LEGISLATION CITED: Environmental Planning and Assessment Act 1979 Environmental Planning and Assessment Regulation 1994 Australian Securities Commission v Aust-home Investments Ltd (1993) 44 FCR 194 Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 and Residents Against Improper Development Inc v Chase Property Investments Pty Ltd [2006] NSWCA 323; 149 LGERA 360 Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited & Ors [2006] NSWSC 583 Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited [2008] NSWCA 243 Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No.2) [2009] NSWCA 12 Calderbank v Calderbank [1975] 3 All ER 333; 3 WLR 586 Canterbury City Council v RTA of NSW [2004] NSWLEC 536 Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 Chen v Karandonis [2002] NSWCA 412 Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 Commonwealth of Australia v Gretton [2008] NSWCA 117 Degmam Pty Ltd (In Liq) v Wright (No.2) [1983] 2 NSWLR 354 Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 Evans Shire Council v Richardson (No.2) [2006] NSWCA 61 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 Gilberg v Maritime Super Pty Ltd (No.2) [2009] NSWCA 394 Glaser v Poole (No.2) [2010] NSWLEC 232 CASES CITED: Jones v Bradley (No.2) [2003] NSWCA 258 Kiama Council v Grant [2006] NSWLEC 96; 143 LGERA 441 Latoudis v Casey (1990) 170 CLR 534 Leichhardt Municipal Council v Green [2004] NSWCA 341 Mackinnon v BlueScope Steel (AIS) Pty Ltd & Ors (No.2) [2009] NSWCA 229 Michael Wilson & Partners Ltd v Nicholls [2009] NSWSC 669 Monaghan v Holroyd Council [2009] NSWLEC 112; 167 LGERA 321 Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 Port Stephens Council v Sanson [2007] NSWCA 299; 156 LGERA 125 Ray Fitzpatrick Pty Limited v Minister for Planning (No.5) [2008] NSWLEC 183 Re Minister for Immigration and Ethnic Affairs: Ex parte Lai Qin [1997] HCA 6; 186 CLR 662 Rosniak v Government Insurance Office (1997) 41 NSWLR 608 Seven Network Limited v News Limited [2007] FCA 1062; ATPR (Digest) 42-274 South Eastern Sydney Area Health Service v King [2006] NSWCA 2 Tinyow v Lee [2006] NSWCA 247 Trustee for the Salvation Army (NSW) Property Trust v Becker (No.2) [2007] NSWCA 194 Vis Visitor Investment Services Pty Ltd v Hawkesbury City Council [2008] NSWLEC 39 Vis Visitor Investment Services Pty Ltd v Hawkesbury City Council and Anor [2010] NSWLEC 10 DATES OF HEARING: 19 April 2010 DATE OF JUDGMENT: 8 December 2010 APPLICANT Mr N Eastman SOLICITORS D C Balog & Associates FIRST RESPONDENT LEGAL REPRESENTATIVES: Mr D Wilson SOLICITORS A R Walmsley & Co SECOND RESPONDENT Submitting appearance SOLICITORS Freehills JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES Sheahan J 8 December 2010 40605 of 2008 VIS VISITOR INVESTMENT SERVICES PTY LTD v HAWKESBURY CITY COUNCIL & ANOR (No.2) JUDGMENT Introduction 1 His Honour: The applicant company's class 4 application was dismissed on 2 February 2010, and in my orders I directed that it pay the Council's costs on a party/party basis as agreed or assessed, according to law – see [2010] NSWLEC 10. 2 The Council has now moved the court by Notice of Motion ('NOM') dated 16 February 2010 for an order that some, if not all, of its costs should be paid by the applicant on an indemnity basis. It is again noted that the second respondent filed a submitting appearance, save as to costs, and has taken no active part in the matter. It is also noted that as my orders were not formally entered until 12 March 2010 there is no question about my power to vary the party/party costs order in response to the NOM. 3 The judgment I delivered on 2 February 2010 was lengthy because both the subject matter and the conduct of the proceedings were complex. 4 After many years of making decisions favourable to the applicant in respect of its development and continued use of certain lands as a caravan park, or tourist or recreation facility, the Council advanced the argument that the applicant did not have any consent which could be held actually to approve the use of the landholding as a whole for the purposes of caravan park. Caravan parks require a planning consent for use, approvals for particular works, and a licence to operate. 5 The applicant discontinued its then current appeal in class 2 of the court's jurisdiction, and commenced these class 4 proceedings on 20 June 2008, seeking relief only by way of a declaration that it did indeed have consent for the use of the land as a caravan park, but the proceedings did not assert either estoppel, or existing use rights. The declaration sought was in the following terms: " A declaration that the land constituting Lot 1 in DP 862897 and known as Hawkesbury Riverside Retreat, including site 68 as described on the revised site plan dated 15 March 2000 referred to in the Statement of Environmental Effects accompanied the development application dated 18 April 2000 submitted to Hawkesbury City Council by Glenys Gilling and numbered M619/00, has development consent to for (sic) use as a caravan park." 6 Points of Claim ('POC') and Points of Defence ('POD') were filed on 30 October 2008 and 5 December 2008 respectively, and on 6 February 2009 the case was listed for hearing on 14-16 April 2009. 7 The documentary evidence sought to be relied upon by the applicant at the substantive hearing was overwhelmingly drawn from many Council documents produced and inspected during the discovery phase. The evidence indicates that some 9,100 pages were discovered to the applicant in July 2008, then put on a compact disc provided to it in September 2008 (see Exhibit H1). 8 On 30 October 2008, the applicant filed and served an affidavit sworn by its solicitor, David Charles Balog, which it contends clearly identified the evidence among those documents upon which it intended to rely at the hearing. The respondent does not accept that that affidavit made that clear at all, but there would appear to me to be no point in the applicant putting on an affidavit which merely listed what Council had produced. However, it is true to say that the provenance of the documents is not explained in that affidavit, and that it was not read in the substantive proceedings (see T14.4.09, pp21-22 and Exhibit V1). 9 The substantive hearing duly commenced on 14 April 2009, the Tuesday after Easter. The applicant sought to tender 5,500 of those 9,100 pages, in a "bundle" which it had served only on the Thursday before the four-day Easter holiday weekend, and on the contents of which no agreement had been reached between the parties. Mr Wilson, counsel for the Council, objected to the tender but was content to allow Mr Eastman, counsel for the applicant, to open his case for more than one full hearing day, without any or all of the documents being accepted into evidence. 10 The history of how the matter evolved from that point is dealt with in my primary judgment, in particular at pars [57]-[77]. Relevantly on the question of costs, that passage of the judgment included the following paragraphs: "57 When the hearing of these proceedings commenced in April 2009, more than 5,500 pages of Council material regarding that history, in seven or eight volumes covering some 26 Council files, were placed before the court by the applicant. However, they were under objection from the Council, and they were not formally tendered in evidence. An index of sorts had been filed, and the applicant's counsel, Mr N M Eastman, referred to many of those documents when seeking, in a lengthy opening, to link various "consents" and other events, to the extent that relevant documentation was available. 58 In his filed written submissions, Mr Eastman said (at par 29) that, while Council may have produced all of its files, they were not "complete", as their contents revealed the existence of some other documents which were not among the material produced to the court. 59 Issues arose on the second hearing day (15 April 2009), before Mr Eastman had completed his opening, as to whether all relevant Council documents had been produced to the applicant or to the court. When it was verified that a key file, upon which Mr Eastman had opened as "missing", had, in fact, been discovered to the applicant, and could be available to the court, the hearing was adjourned, at the behest of both parties. 60 The pleadings as they stood in April were then amended, and the documentary evidence reformulated, before the hearing resumed in August. 61 The applicant tendered in August a much slimmer volume of material (127 folios, plus index – Exhibit V1). Mr Eastman told the court (T21, L39-41) that only the "relevant part" of each key document had been extracted from the Council material produced. Mr Wilson foreshadowed objection to many folios, but I admitted the bundle, in full, subject to relevance (T16, L9-13), and Mr Eastman reopened the case on the basis of amended Points of Claim ("APOC"), dated 26 May 2009, and amended Points of Defence ("APOD"), dated 3 August 2009." 11 When the hearing resumed on 5 August 2009, it proceeded on the basis of the Amended Points of Claim and Amended Points of Defence referred to in [61] quoted above. 12 The following additions were made to the POC by the Amended Points of Claim: "The 1975 consent … 17A. No Council file pertaining the (sic) land indicates that any of the conditions of the consent for 68A/90/74 were not fulfilled after 1 July 1975. 17B. The Council have treated the consent 68A/90/74 as consent for use for the purposes of a caravan park as depicted in the plans referred to in paragraphs 17 above, by adding 'additional' sites in subsequent consents, as set out in paragraphs 22 to 34 below. A second 1975 development application 18A. In 1975, a development application form was submitted to Colo Shire Council and numbered 68A/30/75 which sought consent for 'the erection of 4 amenity blocks in conjunction with caravan park and cycle track' and sought consent for a 'proposed use for caravans'. 18B. A second development application form was submitted to Colo Shire Council and also bearing the number 68A/30/75 which was part of a comprehensive plan before the Council being 68A/90/74. 18C. Submitted with the development application referred to in 18A above, was a plan depicting 49 caravans and including 25 caravans on site, and marked Plan marked 'as amended on 17 February 1975'. 18D. The Council file for the development application 68A/30/75 does not contain a record of consent being granted for the development application 68A/30/75, but the plans referred to in 68A/30/75 were part of the plans approved with the development consent for 68A/90/74. The 1997 consent … 22A. The sites described as to be 'relocated', are relocated from their positions as depicted in the approved plans for 68A/90/74 described in paragraph 17 above. The 1999 consent … 26A. The sites described as to be 'additional', are additional to those sites as depicted in the approved plans for 68A/90/74 described in paragraph 17 above. The 2000 consent … 31A. The sites described as to be 'additional', are additional to those sites as depicted in the approved plans for 68A/90/74 described in paragraph 17 above, as revised by the plans approved and referred to in paragraphs 26 and 26A above." 13 The Amended Points of Defence, adopting the same numbering, pleaded as follows to those additional POC: "17A. The Respondent does not know and cannot admit paragraph 17A insofar as paragraph 17A is capable of being pleaded to. 17B. The Respondent denies paragraph 17B. 18A to 18D. The Respondent does not know and cannot admit paragraphs 18A, 18B and 18C and 18D of the Amended Points of Claim. Further those amended paragraphs of the Amended Points of Claim, the facts pleaded therein are not matters relevant in determining the true construction of a development consent. 22A. The Respondent relies upon the terms of any development consent for the true construction of that consent. 26A. The respondent repeats the pleading in 22A herein. 31A. The respondent repeats the pleading in 22A herein." The Principles to apply on the question of costs 14 In all cases the exercise of the judicial discretion on costs requires the making of orders that are just, equitable, fair and reasonable in all the circumstances of the case. The principal relevant authorities, including the Chief Judge's judgment in Kiama Council v Grant [2006] NSWLEC 96; 143 LGERA 441, list the relevant factors to be weighed in the balancing act. 15 Costs are compensatory, not punitive (Latoudis v Casey (1990) 170 CLR 534), the power to award them is purely discretionary (Oshlack v Richmond River Council ("Oshlack") [1998] HCA 11; 193 CLR 72), and the discretion to award costs on any basis must be exercised judicially (Port Stephens Council v Sansom [2007] NSWCA 299; 156 LGERA 125). There is always also the overriding principle that the costs expected to be met by parties and paid to their opponents must be "proportionate as to what is truly at stake" (see Sackville J in Seven Network Limited v News Limited [2007] FCA 1062; ATPR (Digest) 42-274 at [18]). 16 In the ordinary course, if one party is found entitled to an order for costs, the ordinary order would be on a party/party basis. To depart from that "ordinary course" the court needs to find "some positive ground or good reason" to do so (Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 and Residents Against Improper Development Inc v Chase Property Investments Pty Ltd [2006] NSWCA 323; 149 LGERA 360). In Oshlack (at [44]), Gaudron and Gummow JJ said that indemnity costs were appropriate where the case involved "some relevant delinquency on the part of the unsuccessful party". The court must look at all the circumstances pertaining to each particular stage of the litigation (South Eastern Sydney Area Health Service v King ('King') [2006] NSWCA 2). For costs to be awarded on an indemnity basis the court has to find "special circumstances". 17 Many of the relevant principles and cases concerning indemnity costs were recently surveyed by Pain J in Glaser v Poole (No.2) [2010] NSWLEC 232, but each case turns on its own facts. 18 In one of my own decisions, Ray Fitzpatrick Pty Limited v Minister for Planning (No.5) [2008] NSWLEC 183, I said this in respect of indemnity costs (at [79]): 'To result in an order for indemnity costs the behaviour of the party concerned, whether generally or in regard to its rejection of an offer of compromise, must be found to be "imprudent", "unreasonable", or tainted by fraud, misconduct, an ulterior motive, wilful disregard for known facts or settled law, groundless contentions, "disentitling conduct", "plainly unreasonable conduct", or "relevant delinquency".' 19 Circumstances which might justify an order for costs to be made on an indemnity basis could include those surrounding the making and rejection of some offer of compromise in the proceedings, and/or circumstances where the party subject to the order to pay costs behaved in an "unreasonable" manner, such as to be regarded by the court, as having been guilty of "disentitling" conduct. (See my discussion of these principles in Monaghan v Holroyd Council [2009] NSWLEC 112; 167 LGERA 321). 20 Both those circumstances are alleged by the Council to arise against the interests of the applicant company in the present proceedings, but in deciding these matters it is well accepted law that the court cannot conduct a hypothetical trial on the merits of the dispute in order to decide the question of costs (Re Minister for Immigration and Ethnic Affairs: Ex parte Lai Qin [1997] HCA 6; 186 CLR 662, Australian Securities Commission v Aust-home Investments Ltd (1993) 44 FCR 194). 21 In so far as any rejection of a settlement offer is concerned, other than where a relevant Rule (such as, now, UCPR 20.26) might apply, one governing principle is that laid down by Calderbank v Calderbank [1975] 3 All ER 333; 3 WLR 586. In order to ground an order for indemnity costs, the letter relied upon to invoke the Calderbank principles must constitute "a genuine offer of compromise which it was unreasonable for the [offeree] not to accept" (Leichhardt Municipal Council v Green [2004] NSWCA 341, per Santow JA at [46], Evans Shire Council v Richardson (No.2) [2006] NSWCA 61 at [26]). See also Elite Protective Personnel Pty Ltd v Salmon ("Elite") [2007] NSWCA 322 per McColl JA at [97]-[99] – the decision in Elite was in particular reference to consideration of offers "inclusive of costs", but it contains useful restatements of relevant issues to be considered in the exercise of judicial discretion on costs. Specifically on "inclusive" offers, and the capacity of an offeree to estimate whether "the offer represented a true compromise", see also Tinyow v Lee [2006] NSWCA 247. 22 In Trustee for the Salvation Army (NSW) Property Trust v Becker (No.2) [2007] NSWCA 194, Ipp JA distinguished between "Rules offers" and "Calderbank offers", saying (at [27]-[28]): "27 Calderbank offers are simply offers that do not comply with the relevant rules of court relating to the making of offers of compromise: Jones v Bradley (No 2) (at [5]). Whether an offer, intended to be an offer under the Uniform Civil Procedure Rules but which is ineffective because it does not comply with those Rules, operates as a Calderbank offer, depends upon the intention of the offeror as revealed by the terms of the offer. The offer may disclose an intention that it should take effect only if it complies with the Uniform Civil Procedure Rules. On the other hand, it may disclose a general intent to make an offer, irrespective of whether it takes effect under the Uniform Civil Procedure Rules or not. 28 The offer of compromise in this case provided that, if it was ineffective under the Uniform Civil Procedure Rules because different Rules applied in probate proceedings, the offer was to be treated as a Calderbank offer. As I have explained, the Uniform Civil Procedure Rules do apply to offers of compromise in probate proceedings, and the offer of compromise is ineffective under the Uniform Civil Procedure Rules as it does not comply with Pt 20 r 20.26(2). Nevertheless, in my opinion, the offer reflects an overriding intent that, irrespective of its application under the relevant Rules that might apply to it, it should take effect as a Calderbank offer. In my opinion, the offer of compromise was capable of being accepted by the appellant on the basis that it was an informal Calderbank offer and should be regarded as such an offer." 23 His Honour held (in [29]) that the offer in that case constituted a genuine compromise unreasonably rejected by the appellants, and referred to an earlier judgment he had given in the same litigation (see [2007] NSWCA 136, at [131]) where he had said: " I respectfully agree with the judge that, had the charities carried out a reasonable evaluation of the strengths and weaknesses of their case at that time, it would have become clear 'that they were without any reliable evidence to prove the grounds upon which their opposition was based': at [59]." 24 In Commonwealth of Australia v Gretton ('Gretton') [2008] NSWCA 117, Beazley JA also characterised offers (in terms of Rules, Calderbank, etc), referred to many of the authorities referred to above, and noted that the making of a Calderbank offer does not automatically result in a favourable costs order, even where the judgment is more favourable to the party making the offer, than the offer itself. The offer must be a genuine offer of compromise which it is unreasonable for the appellant not to accept. The onus is on the party making the offer to satisfy the court that it should exercise the costs discretion in its favour. In Mackinnon v BlueScope Steel (AIS) Pty Ltd & Ors (No.2) [2009] NSWCA 229, Hoeben J (with whom Ipp and Macfarlan JJA both agreed) stressed the point that each case turns on its own facts when it comes to the application of the Calderbank principles. 25 In Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353, Basten JA (at [105]ff) sourced the modern approach to indemnity costs as the judgment of Holland J in Degmam Pty Ltd (In Liq) v Wright (No.2) [1983] 2 NSWLR 354 and surveyed the leading cases in the Federal Court (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 per Woodward J, and Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 per Sheppard J), summarised by Beazley JA in Chen v Karandonis [2002] NSWCA 412. Basten JA observed (at [111]) that "more recent case-law generally shows a tendency to grant indemnity costs orders more readily than was the case in the past". Gretton had expanded the operation of the test of unreasonableness from the consequences of refusing a Calderbank offer to "other aspects of a party's conduct of litigation" ([112]). His Honour was concerned ([113]) that the principles be carefully applied so that "the extent that an unsuccessful party will be at risk of an order for costs assessed on an indemnity basis, absent some blameworthy conduct on its part" should not be allowed to widen. "A test of unreasonableness should not be upheld on other than clear grounds". 26 In Gilberg v Maritime Super Pty Ltd (No.2) [2009] NSWCA 394, Hodgson JA took the view (at [120]) that the making of an indemnity costs order on the basis of a Calderbank refusal "would not depend solely on whether the court was satisfied that the offeree acted unreasonably in refusing the offer". In Canterbury City Council v RTA of NSW [2004] NSWLEC 536, Lloyd J said that the rejection of a reasonable offer was but "one among many" factors to be considered. The Court of Appeal had said in King (at [90]): "The discretion to award indemnity costs following a Calderbank letter must be considered having regard to all the circumstances of the case, including the relevant strengths and weaknesses of each party's case as they may have been apparent to the parties at the time the offer was made". 27 In Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited & Ors [2006] NSWSC 583, at first instance, Einstein J observed that evidence of unreasonable conduct on the part of the party ordered to pay costs is usually required (Rosniak v Government Insurance Office (1997) 41 NSWLR 608, at 616 per Mason P). He went on to observe (at [22]) that the difficulty or otherwise of the litigation cannot itself be the basis for the order of costs on a special basis as the courts are constantly engaged in complex litigation and the fact that a particular piece of litigation raises difficult questions of law necessitating elaborate presentation is not a novelty. He went on to say that the mere fact that a party fights the proceedings fiercely and that no stone is left unturned, is not a ground for a special costs order, nor is the mere fact that a case has been found to lack merit (see at [23] and [24]). His Honour noted that a Calderbank letter raises no prima facie presumption in favour of indemnity costs. At [36] His Honour said: "The fact that the offer proves to have been more favourable than the ultimate judgment does not of itself prove unreasonable conduct in rejecting the offer". The relevant question is whether the failure of the party to accept a settlement offer was reasonable and that has to be assessed in the light of all the circumstances (Jones v Bradley (No.2) [2003] NSWCA 258). 28 Baulderstone went on appeal to the Court of Appeal (see Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No.2) [2009] NSWCA 12). Allsop P said (at [18]): "… Parties to litigation are expected to act reasonably in the running, and the resolution by compromise, of litigation. Stubborness, intransigence and unrealistic and unreasonable expectations and demands can lead to unnecessary and unreasonable demands on scarce public resources. Just as parties are obliged to exhibit co-operation and openness in the conduct of litigation … they are obliged not to act unreasonably in the consideration and dealing with settlement offers." 29 The final authority relied upon by Council was Michael Wilson & Partners Ltd v Nicholls ('Wilson') [2009] NSWSC 669, another matter involving Einstein J. From the commencement of the proceedings, the defendants complained that the plaintiff at short notice, and sometimes without notice, produced at the bar table and sought to tender vast quantities of documents in folders. The defendants had complained that it had not been possible for them "on the run" to absorb this material. The plaintiff's response was that the documents had been long discovered and were present in the electronic court book – they were "no more and no less than the result of the plaintiff's endeavours to make more user-friendly, the materials for consideration during the hearing" ([15]). His Honour commented that regardless of those explanations, the plaintiff had conducted "trolley load litigation". At [16] His Honour said: "By this term I refer to the practice of a party in litigation with little or no notice, to flood its opponent with materials and then to insist that whilst its opponent is entitled to a period in which to endeavour to absorb the new materials, that period should be miniscule". 30 At [17], His Honour quoted some comments by Allsop P, said to have been made in the Baulderstone appeal decision to which I have referred, but the paragraph numbers he gives, "[160]-[161]", are not correct. The "[161]" from which I wish to quote actually comes from a case of the same name, reported at [2008] NSWCA 243. It makes the comment that: " the need for clarity, precision and openness as part of this co-operation [to express the issues for trial before and during the trial] has been emphasised in the context of ambush or surprise… [and] flows most clearly from the statutory duty of a party and his or her legal representatives in legal proceedings to assist the court to further the overriding purpose to facilitate the just, quick and cheap resolution of the real issues in dispute and to participate in the processes of the Court to that end ". (See also Civil Procedure Act 2005 s 56). 31 Einstein J said (in Wilson, at [21]): "These issues of case management of major litigation presently being heard on a final basis raise questions of fine judgment. On the one hand the Court must avoid the circumstance in which a defendant without proper ground seeks to put off the hearing into the dim distant future. On the other hand the Court administers justice and must ensure that there is a 'fair' playing field. Trolley load litigation is to be discouraged. But when it has clearly been deployed and has the capacity to wrong foot the opposing party, the court utilises its many powers to right the imbalance. That is appropriate presently. The defendant's costs of and occasioned by the time be taken in and absorbing the latest tranche of eighteen or thereabout folders are to be paid by the plaintiff on an indemnity basis." The Claim for Indemnity Costs 32 In its NOM Council sought from the applicant, in the alternative: (1) all its costs on an indemnity basis; (2) its costs " in respect of the adjournment on 15 April 2009 " on an indemnity basis; (3) indemnity costs " in respect of the adjourned hearing … on or about 5 August 2009 "; together with its costs on the NOM. 33 In its written submissions (pars 41 and 79), Council sought: (4) an order that the applicant pay costs up to 8 April 2009 on an ordinary basis and costs 9-15 April on an indemnity basis, and (5) indemnity costs from and including 15 April 2009. 34 Put shortly, the Council claims, in respect of the period to 14 April 2009, that the late service of, and the attempt to tender, 5,500 pages of documents amounted to (i) an "attempt at trial by ambush" (par 21), expanding the applicant's case beyond its pleadings as they then stood, and to (ii) "trolley load litigation" (par 36), as described by Einstein J in Wilson. 35 In respect of the period after 15 April 2009, the Council submits that the applicant's pleadings and evidence, as "refined", were still unsatisfactory, rendering the case "impossible to decide" (par 54) and, in light of my judgment, clearly "doomed to failure" (pars 55-56), with a major dispute about the 2000 development consent totally evaporating (pars 57-58). 36 In addition, the Council asserts that its attempts to settle the case met with "outright rejection", demonstrating on the applicant's part "cavalier conduct … unreasonable in the circumstances" (par 78). Evidence and Events relevant to Costs 37 On the costs application each side relies on an affidavit by its solicitor – Kylie Steele (employed by Balog) for the applicant, and Adrian Richard Walmsley for the Council. 38 Walmsley deposed on 16 February 2010 to various items of correspondence between himself and Balog, both before and after the aborted April 2009 hearing. Not all the correspondence listed in his affidavit is annexed to it, but the relevant history would appear to be as follows. 39 In an email of 26 August 2008 (Annexure 'B'), Balog says to Walmsley: " As you are aware this is a (sic) likely to be a documentary case relating to whether a certain parcel of land has development consent as a caravan park. The consents relating to the land date back to 1968. … We have requested copies of the documents by way of Notice to Produce dated some 7 weeks previously. Our counsel inspected the documents which Council had delivered to your offices and marked those which needed to be copied. … when we organised a courier to collect the documents, you informed us that the Council no longer consented to this course. Subsequently, and in order to gain proper access to the documents to be able to copy them, we issued a subpoena for the documents to be produced to the court." 40 On 12 March 2009, Walmsley wrote to Balog (Annexure 'F'), seeking to: "…discuss informally just what we are actually fighting about. If we take the schedule recently provided by Greg Hall as a starting point, there are obviously many approvals we concede, there are some in your application relating to other properties which I would hope you would concede (and remove from the application), some we say were never 'taken up' on which you may have comment, and then we should be left with very few in issue". 41 On 6 April 2009, during the week before the hearing, Balog wrote to Walmsley (Annexure 'G'): " We refer to the above matter and confirm we are instructed that as a result of negotiations between David Hooker and Council's Gary Baldry and Matt Owens, our client intends to prepare a new Development Application, and contemplates submitting this before the end of April 2009". 42 The letter went on to explore the possibility that the hearing be vacated. 43 On 6 April 2009, Balog replied to Walmsley (Annexure 'H'): " There is no agreement as has been suggested. Should you wish a similar suggestion to be given consideration, please identify with specificity what development application is intended. I asked you about a bundle of documents, but you have not responded". 44 On 9 April 2009, the Thursday immediately before Easter and the hearing (due to commence on the next working day, Tuesday 14 April), Walmsley complained to Balog (Annexure 'J') about the large "bundle" of documents delivered to his counsel, with no index. The letter goes on: "…We have been asking for you to submit, as the applicant in these proceedings, a bundle of documents which might become an agreed bundle for some time. I raised the possible clarification and reduction of issues with you in my letter of 12 March 2009 and we subsequently discussed your provision of a bundle of documents in telephone conversations between then and 6 April 2009 when I wrote pressing for what might become an agreed bundle of documents. I also spoke with you on 6, 7 and 8 April, mentioning this matter on each occasion. With respect to you, or your Counsel, whoever is the author of the submission of this mass of documentation, it is simply not possible that all of it can be relevant. At a guess, they are simply a print out of all of Council's files that were provided to you as a consequence of your subpoena which was general in terms and lacking specificity. It is essential that the relevant documents be identified, provided separately to those 7 folders, together with an index so that some meaningful consideration might be given to their being agreed as the relevant documents. I need not remind you that the hearing of the matter starts on Tuesday, the next working day from today. Accordingly, it is requested that the above be provided no later than 3:00 today. If this is not done, it may be necessary for us to make application to the Court as to dates and costs. …It is understood that your client has probably misled you towards thinking that the matter has been resolved and that this led to your letter of 6 April raising certain terms. It is confirmed that the alleged discussions did not take place as stated and that settlement of the proceedings did not arise. Nevertheless, we have virtually been ambushed by your very late service of material and urge you to correct this situation in relation to the afore-mentioned bundle of documents". 45 Then followed the four-day Easter weekend and the two-day hearing on 14-15 April, as to which see [10] above for the summary of events from my substantive judgment. 46 In respect of the adjournment I granted during the second day, I note the following comments made by Mr Wilson – (i) at the end of the first day (T14.4.09, p61, LL39-49): " I apprehend that after my friend's opening I'll have an application to make. It's stemming back to the late receival of these documents. We're finding out for the first time what it is that the applicant is relying on by way of documentation although we did notice in the pleading that the pleading does refer to some of the consents but as your Honour has probably detected from this side of the Bar table, we're being taken to documents specifically being relied upon now for the two purposes. One is the construction of consents, another seems to be that inferences might be drawn from documents to which the court is taken which doesn't seem to be pleaded in terms and I'll have an application to make I think." (ii) the start of proceedings on the second day (T15.4.09, p1, L22-29): "I think I should say and I do apologise for interrupting but after my friend finishes his opening I intend to make the application that I foreshadowed yesterday but not before hand because the opening is important to at least particularise that which the applicant's getting at. HIS HONOUR: Is your application going to be for an adjournment? WILSON: Yes." 47 When it was established that the allegedly missing document was in fact on the CD, Mr Eastman admitted his error and consented to an adjournment of the hearing (T15.4.09, p14, L43). 48 Mr Wilson sought "costs thrown away", but I reserved the question, and granted the adjournment "in the interests of both parties" (T15.4.09, p16, L28). 49 I turn now to relevant correspondence subsequent to that adjournment of the matter on 15 April 2009 and prior to its resumption on 5 August 2009. 50 Walmsley wrote to Balog on a "without prejudice" basis on 28 April 2009 (Annexure 'K'), apparently following a conversation between them: "…It is confirmed that I am most concerned about escalating costs in this matter. I am also concerned that I do not know where this litigation is going to take us, or what it will achieve for either party. On my instructions it is clear that the property does not have the benefit of a development consent for a caravan park as such. It is undeniable that the property has several consents for various elements that undoubtedly are mostly part of a caravan park. Counsel advises that, while he agrees with my view and our instructions, it is a possibility that the Court could find, on the balance of probabilities that a caravan park is conducted on the property. While, in my mind, this would not amount to the declaration you seek on behalf of your client company, it would be something of a finding in your favour. Council's costs to date are, again in my view, disproportionately high for the subject under discussion. I assume that yours are of like proportion. Both parties, with any level of responsibility, should be asking what this is all going to achieve. It seems to both Counsel and myself, and the Council concurs, that the matter might be capable of resolution on one of two bases. The first is that the owner submits a development application for a caravan par per se. The other is that, based on Counsel's advice as to the possibility mentioned above, the parties enter consent orders to the same, or similar, effect. The latter is doubtless the quicker and easier of the two options. In either event, it must be made clear that either approach will not obviate the need for any party entitled to occupy one of the sites within the flood zone or path, and which appear to be white on the marked up plan, to make a specific development application in respect of the sites and any activity on those sites . I must also make it clear that Council is most unlikely to give consent for the kind of development originally proposed by your client company in respect of site 68 and which was the subject of the, now discontinued, appeal. Regardless of the matters I have mentioned, current legislative instruments make it essential for such individual applications to be made. Having said that, and assuming that my contention is accurate, I still do not understand the point of the present proceedings as, even were the declaration sought by [the proceedings] to be made, such applications are still required. However, the way the proceedings are presently framed, Council has no option but to continue its strong opposition to the orders sought." 51 On 22 May 2009, I gave certain directions, and on 26 May the applicant filed its APOC. On 27 May, again on a "without prejudice" basis, Walmsley wrote to Balog in the following terms (Annexure 'L'): " I am instructed to submit to you the following draft by Wilson as a possible resolution: 1. a declaration that the whole of lot 1 may lawfully be used as a caravan park in accordance with a site layout plan; 2. a further declaration that particular sites have approval for the construction, erection or placement of a building or structure of a particular kind; 3. a further declaration that particular identified sites, for example, by reference to their flooding characteristics, require development consent first had and obtained and prior to occupation or use or the erection, construction, placement or bringing onto the site any building, structure or thing of a permanent or temporary nature; and 4. if the declarations are of sufficient specificity, a consequential order that the owner of the land do all things necessary voluntarily to surrender all prior identified development consents in accordance with s104A of the EPA Act and Reg 97 of the EPA Regulations. Kindly consider and advise. I should make it clear that my instructions remain firm that Council requires its costs to be paid as the above represents the Council's views throughout. I also confirm that nothing I have seen of your case suggests expressly that development consent is not required, whatever the outcome of the litigation, in respect of the flood prone land which, to all practical purposes, is the lots not coloured on the coloured and marked up plan. As I recall, the matter is listed for directions this Friday." 52 On 29 May 2009 the parties again appeared before me for further directions. 53 On 1 June 2009 Balog sent Walmsley a five-page email (Annexure 'M'), not stated to be "without prejudice". He had been instructed to refuse the offer made on 27 May for the following reasons: 1. While you are in effect surrendering to the Applicant's application, the price you demand is the payment of your client's costs by the Applicant. 2. In your letter of 28 th April 2009 you advise '… Counsel advises that, while he agrees with my view and our instructions, it is a possibility that the Court could find, on the balance of probabilities that a caravan park is conducted on the property…". 3. Oddly, your correspondence of 27 th May 2009 purports to say that the Council's view has always been that a consent for use of the land as a caravan park exists (noting the nexus between your proposed declaration number 1 and your statement that this 'represents the Council's views throughout'). 4. If your client's view is that there is consent for the use of the land as a caravan park, and the declaration my client seeks is that the land has consent for the use of it as a caravan park, then it is difficult to see how you will continue to contest the making of the declaration. 5. Costs will follow the event". 54 The email went on to take issue with the comment in the letter of 27 May that the contents of the declarations proposed "represent the Council's views throughout". Balog contended that the very purpose of the proceedings was to obtain a declaration that the use of the land for the purposes of a caravan park was lawful. If the Council agreed with that view, there would be no need for the proceedings, but Balog went on to point out that since about 2007 the Council had clearly indicated that it held the opposite view. 55 For 30 years the Council had treated the land as if it had consent, and it was not until the class 2 proceedings came before Tuor C that the opposite was asserted, and then repeated. (It was not asserted in the Statement of Issues prepared for that matter). The lengthy email then set out pars [21]-[25] of Biscoe J's judgment on the ensuing s 56A appeal ([2008] NSWLEC 39). His Honour noted that during the hearing before the Commissioner the Council had shifted its ground, to contend there was no development consent and to require that the then s 56A appellant prove that there was. Mr Balog went on to point out that six numbered paragraphs of the POD denied the existence of a caravan park consent. 56 Balog challenged Walmsley (Annexure 'M', p4 of 5) to identify how, procedurally, the proposed settlement would be put into place, given the reluctance of the court to make "consent declarations". The applicant then proposed that it would seek the four declarations set out in the respondent's letter of 27 May, and proposed that the respondent enter a submitting appearance and agree to pay the applicant's costs to that date, with each party to incur its own costs after that date. Balog said that the offer was not made on a "without prejudice" basis, but the email concluded: "…. but we are instructed to make it clear that it is likely to be tendered in any application for costs, possibly on an indemnity basis, now that your client appears to be endeavouring to execute a back flip on the position it has maintained in all proceedings from 2007 to date, having in reality forced our client to bring these proceedings because of its denial that the caravan park has a consent for that purpose". 57 On 19 June 2009 I gave further directions, and on 23 June the Registrar fixed the resumption of the hearing for 5-6 August 2009. 58 During July 2009 Council discovered another file that had, indeed, been missing from the CD but was mentioned in the POC. The POD had noted that Council held no such file, but the mishap was then remedied (see affidavit of Kylie Steele, 16 April 2010, par 19). 59 The parties mentioned the matter before me on 3 August 2009, and the APOD were filed. 60 When the hearing resumed on 5 August, the authenticity of the documents in the smaller bundle tendered by Mr Eastman was accepted by Mr Wilson, but there were still relevance objections, which Mr Wilson was content for me to note, rather than determine to exclude any documents. Consideration 61 These proceedings were commenced because Council changed its position in respect of its dealings with the caravan park, and the applicant opted to seek a declaration from the court to establish the lawfulness of the operation by proving the existence of a relevant consent. Pre-hearing 62 The court is of the view that the proceedings were reasonably commenced. They then followed a fairly routine course until, on the eve of the hearing, the 5,500-document bundle was served, with the intention of relying upon it at that hearing. 63 I can see no justification for an order on an indemnity basis for the period up to and including 8 April 2009. First hearing 64 The Council argues that serving a bundle so "big and late" was unreasonable conduct which should now attract indemnity costs for the period 9 to 15 April 2009. 65 Its written opening submissions for the substantive hearing argued that the bundle went beyond the pleaded consents, but the Council chose to allow the hearing to proceed, so that the applicant could articulate its case, and the Council further consider its response. 66 In that sense the unreasonable was met by the reasonable, even though the lateness and illegibility of the bundle have never been adequately explained. The court considers that the general party/party costs order deals adequately with the position with the April hearing and the adjournment. Negotiations 67 Settlement "discussions" of some sort then took place. The major elements of the relevant correspondence are set out above. As the authorities surveyed above make clear, the more important test for an award of indemnity costs is the reasonableness of an offeree's response, rather than the correct characterisation of the offer itself (in terms of Rules, Calderbank principles, or neither). 68 In the end, the respondent Council proposed that the matter be settled by the applicant's obtaining the declaration it sought, but paying the Council's costs. 69 The long email of 1 June 2009 shows that the applicant clearly understood the offer as put, and was firm both in rejecting it, and making a counter-offer on "open" terms. 70 I do not find the applicant's behaviour to be unreasonable, and I consider that indemnity costs ought not be ordered in respect of the period from the April adjournment until the August hearing. Second hearing 71 When the hearing resumed in August, on the basis of a smaller (but still rather unhelpful) bundle and clearly amended pleadings, Mr Eastman saw no need to alter his written submissions. The applicant had a difficult case to make, but it was certainly arguable, despite my criticisms of its presentation. 72 It was not "hopeless" or "doomed to fail", but, it failed, and a party/party costs order for the hearing was appropriate. The respondent Council was certainly not guilty of any disentitling conduct, and the applicant does not challenge the order made. 73 The Council has not made out a case for indemnity costs in respect of the ultimate hearing. Summary 74 None of the five articulations of claims for indemnity costs (outlined in [32]-[33] above) has succeeded. Notice of Motion 75 The NOM was clearly arguable, so the appropriate order in respect of the costs dispute and its hearing is that each party pay its own costs. Orders 76 The orders of the court are, therefore: 1. The respondent's Notice of Motion dated 16 February 2010 is dismissed. 2. The court's Order (ii) of 2 February 2010 is affirmed. 3. The applicant and the first respondent are each to pay their own costs on the Notice of Motion. 4. The exhibits may be returned. 10/01/2011 - Errors in case citations - Paragraph(s) [1] "[2008] NSWLEC 10" changed to "[2010] NSWLEC 10"[15] "193 CLR 32" changed to "193 CLR 72" 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.