Land and Environment Court of New South Wales CITATION : Clark & Davis v Wollongong City Council & Others (No.2) [2008] NSWLEC 226 APPLICANTS Anne Clark and Greg Davis FIRST RESPONDENT Wollongong City Council PARTIES : SECOND RESPONDENT Molner Freeman Architects Pty Ltd THIRD RESPONDENT Alison Eilbeck FILE NUMBER(S) : 40614 of 2007 CORAM: Sheahan J KEY ISSUES: Judicial Review :- procedural fairness; final relief; discretion; whether s.25B order is appropriate; costs; indemnity costs Environmental Planning and Assessment Act 1979 LEGISLATION CITED: Land and Environment Court Act 1979 Development Control Plan No.49 ("Residential Development") Belmore Residents' Action Group Inc v Canterbury City Council and Another (2006) 147 LGERA 226 Bungendore Residents Group Inc v Palerang Council & Anor (No.4) [2007] NSWLEC 536 Centro Properties Limited v Hurstville City Council and Another (2004) 135 LGERA 257 Clark & Davis v Wollongong City Council & Others [2008] NSWLEC 110 Cutcliffe and Another v Lithgow City Council and Others (2006) 147 LGERA 330 F & D Bonoccorso Pty Ltd v City of Canada Bay Council (No.3) [2007] NSWLEC 569 CASES CITED: Glowpace Pty Ltd v South Sydney City Council [2000] NSWLEC 220 Hastings Point Progress Association Inc v Tweed Shire Council and Anor; Hastings Point Progress Association Inc v Tweed Shire Council and Ors [2008] NSWLEC 219 Homemakers Supacenta-Belrose Pty Limited v Warringah Council and Anor [2008] NSWLEC 54 Kindimindi Investments Pty Ltd v Lane Cove Council and Another (2007) 150 LGERA 333 Latoudis v Casey (1990) 170 CLR 534 Mid Western Community Action Group Inc v Mid-Western Regional Council & Anor [2007] NSWLEC 411 Mid Western Community Action Group Incorporated v Mid-Western Regional Council & Anor (No 2) [2008] NSWLEC 143 Ray Fitzpatrick Pty Limited v Minister for Planning (No.5) [2008] NSWLEC 183 DATES OF HEARING: 3 June 2008 DATE OF JUDGMENT: 14 August 2008 APPLICANT Mr A Galasso SC SOLICITORS Cutler Hughes & Harris FIRST RESPONDENT Mr M Fraser SOLICITORS Kells Lawyers LEGAL REPRESENTATIVES: SECOND RESPONDENT Submitting appearance SOLICITORS Burridge & Legg THIRD RESPONDENT Mr T To SOLICITORS Watkins Tapsell JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES Sheahan J 14 August 2008 40614 of 2007 Anne Clark & Greg Davis v Wollongong City Council & Others (No.2) JUDGMENT Introduction 1 His Honour: I delivered my principal judgment in this case on 14 March 2008 (see Clark & Davis v Wollongong City Council & Others [2008] NSWLEC 110), but deferred the questions of final relief and costs. The Second Respondent has taken no part in the proceedings; the three active parties have not been able to agree upon these outstanding matters, and are now back before the Court for their determination. 2 The Third Respondent, Ms Eilbeck, obtained a development consent from the First Respondent, the Council, on 24 July 2006 to redevelop her residential property at 139 Lawrence Hargrave Drive, Austinmer. The Applicants live next door to the south of that property and challenged the validity of the consent on a number of grounds. They succeeded on their "denial of procedural fairness" point, based on Council's failure to notify them of Ms Eilbeck's proposal. They also established several other failings in the Council's assessment process, but in those respects the consent is protected by s.101 of the Environmental Planning & Assessment Act 1979 ("EP&A Act"). 3 The Applicants wish the Court to make the declaration and grant the injunction sought in their Class 4 application. The Respondents have not pressed their original claim based on "discretion", but urge the Court to invoke the provisions of Division 3 of Part 3 (ss25A-25E) of the Land & Environment Court Act 1979 ("the Court Act"), rather than grant the relief sought in the Class 4 application. 4 The only additional evidence admitted at the further hearing on 3 June was (1) some correspondence between those representing the First Respondent, and either the Third Respondent or her representative (Exhibit C1), and (2) Wollongong City Council's Development Control Plan No.49 ("Residential Development") dated August 2007 (Exhibit R1). Both those exhibits were admitted on the question of costs. The Relief sought 5 Section 25E imposes a "duty" on the Court, when it finds a consent to be invalid, to consider making orders under that Division rather than striking down the consent. The relevant provisions of the Court Act, introduced in 1997, are cognate with ss103-104 of the EP&A Act, and provide as follows: "25A Application of Division (1) This Division applies to: (a) a development consent granted, or purporting to be granted, under the Environmental Planning and Assessment Act 1979 : (i) by the Minister, and (ii) whether before or after the commencement of this subsection, and (b) a development consent granted, or purporting to be granted, under the Environmental Planning and Assessment Act 1979 : (i) by any other consent authority, and (ii) in respect of a development application made on or after the commencement of this subsection. (2) This Division extends to invalidity arising from any steps preliminary to the granting of a development consent to which this Division applies, whether those steps were taken, or should have been taken, by the Minister or any other consent authority, or by any other person or body. (3) In particular, this Division extends to invalidity arising from non-compliance with requirements declared to be mandatory requirements under section 102 of the Environmental Planning and Assessment Act 1979. (4) A reference in this Division to the Minister is a reference to the Minister responsible for the administration of the Environmental Planning and Assessment Act 1979. 25B Orders for conditional validity of development consents (1) The Court may, instead of declaring or determining that a development consent to which this Division applies is invalid, whether in whole or in part, make an order: (a) suspending the operation of the consent in whole or in part, and (b) specifying terms compliance with which will validate the consent (whether without alterations or on being regranted with alterations). (2) Terms may include (without limitation): (a) terms requiring the carrying out again of steps already carried out, or (b) terms requiring the carrying out of steps not already commenced or carried out, or (c) terms requiring acts, matters or things to be done or omitted that are different from acts, matters or things required to be done or omitted by or under this Act or any other Act. 25C Orders for validity of development consents (1) On application by the Minister or any other consent authority for an order under this subsection on the grounds that the terms specified under section 25B have been substantially complied with and that it is not proposed that the relevant development consent be regranted with alterations, the Court may make an order: (a) declaring that the terms have been substantially complied with, and (b) declaring that the consent is valid, and (c) revoking the order of suspension. (2) On application by the Minister or any other consent authority for an order under this subsection on the ground that the terms specified under section 25B have been substantially complied with and that the development consent has been regranted with alterations as referred to in section 103 of the Environmental Planning and Assessment Act 1979 , the Court may make an order: (a) declaring that the terms have been complied with, and (b) declaring that the development consent has been validly regranted, and (c) declaring that the suspended development consent has been revoked, and (d) revoking the order of suspension. 25D Power to grant another development consent Nothing in this Division prevents the grant of another development consent in relation to the same matter, during or after the period of suspension, pursuant to a development application duly made. 25E Duty of Court It is the duty of the Court to consider making an order under this Division instead of declaring or determining that a development consent to which this Division applies is invalid, whether in whole or in part. 6 Section 103 and s.104 of the EP&A Act provide as follows: 103 Revocation or regrant of development consents after order of Court (1) This section applies to a development consent granted, or purporting to be granted, by a consent authority, to which an order of suspension applies under section 25B of the Land and Environment Court Act 1979. (2) The consent authority may revoke a development consent to which this section applies, whether or not the terms imposed by the Court under section 25B of the Land and Environment Court Act 1979 have been complied with. (3) However, if the terms imposed by the Court have been substantially complied with, the consent authority may revoke the development consent to which this section applies and grant a new development consent with such alterations to the revoked consent as the consent authority thinks appropriate having regard to the terms themselves and to any matters arising in the course of complying with the terms. Such a grant of a development consent is referred to as a regrant of the consent. (4) No preliminary steps need be taken with regard to the regrant of a development consent under this section, other than those that are required to secure compliance with those terms. (5) Section 81 and such other provisions of this Act as may be prescribed by the regulations apply to development consents regranted under this section. 104 Appeals and other provisions relating to development consents after order of Court (1) A development consent declared to be valid under section 25C of the Land and Environment Court Act 1979: (a) is final and the provisions of sections 97 and 98 do not apply to or in respect of it, and (b) is operative as from the date the development consent originally took effect or purported to take effect, unless the Court otherwise orders. (2) A development consent declared under section 25C of the Land and Environment Court Act 1979 to be validly regranted: (a) is final and the provisions of sections 97 and 98 do not apply to or in respect of it, and (b) takes effect from the date of the declaration or another date specified by the Court. 7 Jagot J has helpfully summarised the scheme as follows (see Mid Western Community Action Group Incorporated v Mid-Western Regional Council & Anor (No 2) [2008] NSWLEC 143 ("Mid Western No.2") at [16]): It is apparent that the scheme commences with a single consent affected by some defect. Instead of declaring that consent invalid, it may be suspended on terms imposed by the Court. Once the terms have been satisfied the consent authority may decide whether: - (i) to revoke the suspended consent (s 103(2)), or (ii) any alteration to the consent is required having regard to the terms and matters arising in the course of complying with the terms (s 103(3)). If the consent authority does not revoke the consent or consider any alteration is required then the consent may become operative only by the making of orders and declaration under s 25C(1). Such a consent operates from the date of the original grant of consent unless the Court otherwise orders (s 104(1)). If the consent authority does not revoke the consent but does consider an alteration is required then the consent may be revoked and a new consent regranted in accordance with s 103(3). Such a regrant is protected from any requirement for preliminary steps to be taken other than steps required to comply with the terms of the orders under s 25B. The language of s 25B(1)(b) (which refers to validating the consent whether without alterations or on being regranted with alterations), the cumulative declarations and order in s 25C(2), and the provisions of s 104(2) disclose that a regranted consent takes effect as a consequence of the Court exercising its functions under s 25C(2). As Stockland submitted, the scheme treats suspended and regranted consents the same. Differences in descriptions apparent from comparing s 25C(1)(b) and s 25C(2)(b) and s 104(1) and s 104(2) are not material to this issue. It would be odd if a consent authority would be able to avoid the Court's supervisory role merely by making some alteration to the consent. Section 104(2)(b), moreover, is clear and must be taken to mean what it says. These considerations also confirm the difficulty with an alternative submission made on behalf of the Action Group that a declaration under s 25C(2)(a) (that the terms have been complied with) would be sufficient of itself to render the regranted consent operative. Discussion 8 The procedural fairness ground in this case turned on the Council's policy of ignoring any advices as to the change of ownership of rateable properties, other than an official Land Titles Office advice of the registration of a new registered proprietor. The Applicants relied on the despatch by their solicitors of a letter to Council advising of the settlement of their purchase. The Council's Points of Defence declined to admit receipt of the letter, but a late affidavit by Council's Mr Lloyd (filed a few days before the original hearing) explained Council's failure to act upon the letter by reference to the policy, which then became the focus of much attention at the hearing and in my judgment. 9 The Applicants did not learn of the July 2006 consent until about March 2007. Their solicitors then wrote to the Council about the lack of notification of the development application, and the consequent denial of an opportunity to make any objection or submission during the assessment process. 10 The correspondence now before the Court shows that Council then raised with Ms Eilbeck the strong possibility of a successful challenge to the consent, on the basis of its admitted failure to act on the letter advising change of ownership, and invited her to consider lodging a fresh development application "which would then be notified to your neighbours, who will be entitled to review the plans and make a written submission …" (see Exhibit C1 – letter of 4 April 2007). The Third Respondent did not respond to Council's invitation. 11 The Applicants commenced these proceedings on 2 July 2007, and the pleading process unfolded with both Respondents strongly defending the assessment process and the consent. On 17 September 2007 solicitors for the Council wrote to the solicitors for the Third Respondent in the following terms: " We refer to our respective clients' points of defence and note that both our clients seek similar orders under Division 3 of Part 3 of the Land and Environment Court Act 1979 (Act): 1. suspending the operation of the consent; 2. specifying terms compliance with which will validate the consent; and 3. on those terms being followed and application being made by our client, an order under section 25C of the Act declaring that the consent is valid. Our client considers that a satisfactory and more cost-effective outcome can be reached for both our clients, without the need to resort to pressing on towards a hearing of the proceedings and our clients' applications for the above orders, if, with the knowledge of the applicants: 1. your client lodges a fresh development application with our client; 2. our client waives the relevant development application fee(s); 3. our client notifies the applicants of the fresh development application and gives them the opportunity to make submissions, notwithstanding the fact that no such notification is required by its Development Assessment and Compliance Notification Policy; 4. our client determines the fresh development application accordingly; and 5. if the fresh development application is determined by granting consent, your client surrenders the consent the subject of these proceedings. For your client's benefit in considering whether to lodge a fresh development application, we note the following in respect of changes to the relevant planning controls since the granting of consent to the original development application: 1. Our client's Design Guidelines for Residential Dwelling Developments in the 7(c) Environmental Protection Residential Zone have been repealed and would not apply to any fresh development application. 2. Our client's Development Control Plan No. 49 – Residential development would apply to any fresh development application. Of particular application would be section 9 of that document, which details additional standards for the erection of a dwelling within a non-urban or environmental protection zone. The invitation made by our client is made without any admission as to liability or invalidity of the consent the subject of these proceedings. We note that by way of letter dated 4 April 2007 our client gave a similar invitation to your client (enclosed). If your client elects not to lodge a fresh development application, our client proposes to tender these 2 letters to the Court on the question of costs should that issue arise later in the proceedings." 12 It needs to be remembered that these proceedings concern a domestic redevelopment in a residential area, and the dispute fuelled between two neighbours is a direct consequence of failures on the part of the Council, which have now been proven to the Court. The Applicants were denied the opportunity of being heard on their concerns, but some of the Council's other failures, convincingly articulated at the hearing, remain protected by s.101. 13 The Applicants, having succeeded in their strongly contested challenge to the consent, oppose the making of a s.25B order, while the Respondents urge it upon the Court as the most appropriate course of action. Both Respondents have submitted drafts of orders they consider should be made. Submissions 14 Mr Galasso, appearing for the Applicants in the present case, says (T6, L33ff) that the Court should not move into Division 3 "simply because one can formulate the matters that ought to be considered". His fundamental position is that a consent granted in this case, in denial of procedural fairness to a key stakeholder, is so infected by error – especially when its other proven flaws are considered – that it should be declared invalid. Section 25E imposes a "duty to consider", but s.25B makes it clear that the Court has a discretion – a pure and broad discretion. An order under s.25B should not be made simply because it is possible to formulate one. His clients are entitled to a true and proper reconsideration of the whole Eilbeck proposal, and, in order for that to occur, the declaration of invalidity should be made. The development application as presented originally is still on foot and can be properly reconsidered by the Council. Even with Court supervision under s.25B, the Council could grant, in his submission, only a token hearing to the Applicants if such an order were made. 15 In his submissions for the Council, Mr Fraser put to the Court some of the advantages of a s.25B order – e.g. the setting of a firm timetable, the requirement for Court supervision of the outcome, and the opportunity to propose complete re-notification. It would open up the s.79C process again to any submission that anyone wished to make. There is no restriction on the breadth of the order possible so it could embrace those matters already protected by s.101. Pearlman J's decision in Glowpace Pty Ltd v South Sydney City Council [2000] NSWLEC 220 ("Glowpace") shows that a s.25B order can be appropriate where procedural fairness is found to be denied. He said (at T15, L32-33): "the fact that it's a serious matter doesn't make s.25B inappropriate". Mr Fraser even argued that it may be even more appropriate in those circumstances. 16 I took Mr To, for the Third Respondent, to be asserting, on the basis of Midwestern No.2, that there should be a presumption in favour of the use of s.25B. He said (at T16, L19, quoting Jagot J): "to find that process inappropriate requires the finding of principled reasons why orders should not be made". He also said that s.25B is not limited to issues which are not blocked by s.101. Once invalidity is established, the Court can craft a process that requires the doing of steps of any kind. The process is, therefore, responsive to the practical concerns of both the applicant in the proceedings and the applicant for the consent. Mr To even conceded that I could amend his draft order to require full neighbour re-notification, or at least re-notification of the adjacent neighbour to the North of the site, Ms O'Donnell, who claimed not to have been notified on the first occasion, but was not involved directly in the proceedings. 17 In reply, Mr Galasso submitted that it was not the nature of the development, but the nature of the flaw in the consent, that should determine whether or not to use s.25B. The Council has argued for full re-notification, but may as well have the declaration struck down and start again. He had been criticised for not submitting an alternative draft order, but the Applicants' position has consistently been, and remains, that Division 3 is not an appropriate response to this case. If the consent is declared invalid, the original DA (or some amended DA) can be (re)assessed, and the Council will have to consider what the Court has said in respect of the original decision. Consideration 18 There was for a time a difference in view within the Court as to whether the scope of Division 3 was limited to, for example, cases where the defect in the consent lay in steps preliminary to its being granted. The Court of Appeal firmly resolved those differences in Kindimindi Investments Pty Ltd v Lane Cove Council and Another (2007) 150 LGERA 333 ("Kindimindi"). The three appeal judges (Hodgson, Tobias and McColl JJA) expressed themselves differently, but the thrust of the decision is clear from the headnote: Held: (dismissing the appeal) (1) The division should not be limited to the particular kind of invalidity specified in s 25A(2) . (2) The use of the word "extends" in s 25A(2) , is a strong indication that the section was not intended to be an exhaustive indication of the type or types of invalidity to which the division applies. If the section had used the word "applies", or "applies only", then that may have been the intention disclosed. (3) There seems no logic in selecting that particular type of invalidity, rather than any type of invalidity that might affect a development consent or purported development consent. The general intention was that technical breaches should be capable of being rectified, and there can be technical breaches which are not matters arising from preliminary steps. (4) There is some uncertainty as to the scope of steps preliminary to the granting of a development consent. It is not entirely clear whether that would include the requirement that consideration of certain matters take place. If it does extend to the requirement of consideration of certain matters, then the lack of logic in separating out preliminary steps from other matters becomes even clearer. (5) That s 25A(2) should not be given that limiting effect appears from s 25E . That section requires the court to consider the making of an order under the division in relation to development consents to which this division applies, that is, all development consents falling within s 25A(1) . That would be a little strange if the division was only intended to apply to particular types of invalidity. 19 Probably the key paragraph of Tobias JA's judgment is [32]: It seems to me that s.25B(2)(c), for instance, would authorise the imposition of a term requiring a consent authority to reconsider if it has already considered the matter, or to consider for the first time if it has failed to consider the matter, any one or more of the matters required to be considered by, for instance, s.79C of the Environmental Planning and Assessment Act. That, of course, does not mean that in every case where a purported consent is invalid upon the basis that s.79C has not been complied with, that the court will exercise its discretion to suspend the consent and to require the consideration or reconsideration of a s.79C matter. 20 McColl JA concluded (at [47]), from consideration of the Minister's second reading speech, that "the legislature was concerned to confer on the Land & Environment Curt a broad power to remedy breaches", and Hodgson JA refuted any suggestion that s.25A(2) was intended to limit exhaustively the kinds of invalidity the Division could deal with. At first instance Lloyd J had opined that the Division was beneficial and remedial legislation, and should, therefore, be given a wide or liberal construction. As the complaint in Kindimindi concerned a discrete error of a technical nature, that could be considered in isolation from other matters, a s.25B order was held to be appropriate. 21 In some cases since Kindimindi, this Court has made s.25B orders, and in others it has declined to do so. There is no general principle to be followed – each case turns on its own facts: · In Mid Western No.2, Jagot J referred to the process as applying in cases of "a single consent affected by some defect" (emphasis added). · In Homemakers Supacenta-Belrose Pty Limited v Warringah Council and Anor [2008] NSWLEC 54 ("Homemakers"), a s.25B order was made by Pain J when there was a particular matter outstanding at the time the development consent was granted, but the assessment process was complete. · A s.25B order was not made in Bungendore Residents Group Inc v Palerang Council & Anor (No.4) [2007] NSWLEC 536 ("Bungendore") where the breaches were "substantive". · In Hastings Point Progress Association Inc v Tweed Shire Council and Anor; Hastings Point Progress Association Inc v Tweed Shire Council and Ors [2008] NSWLEC 219 ("Hastings"), Pain J held that the breach was not "a discrete matter which can be divorced from the general consideration of the merits required by s.79C", and concluded that a s.25B order was not appropriate, because the whole of the merit assessment of the proposal would have to be reconsidered by the decision-maker in order to assess the cumulative impact of concerns. 22 In the pre-Kindimindi case, Centro Properties Limited v Hurstville City Council and Another (2004) 135 LGERA 257, McClellan ChJ found that a noise assessment should have been obtained, but that a s.25B order was not appropriate because such a noise assessment would need to be considered, not just on its own, but in conjunction with all other merit materials to ensure that the Council's assessment process would not again miscarry. 23 Also pre-Kindimindi, Talbot J took the view in Belmore Residents' Action Group Inc v Canterbury City Council and Another (2006) 147 LGERA 226 that if a step to be taken to remedy a breach necessitates the reopening of the whole process, that could (quaere "should") not be facilitated by s.25B. 24 I think it is reading too much into Jagot J's judgment in Mid Western No.2 to say that there is a "presumption" that a s.25B order should/will be made. The Court has a statutory duty to consider that course, but it is discretionary. What Her Honour said in that case is that, where s.25B orders are appropriate, and can be satisfactorily formulated, they should be made, if no "principled reason" can be found not to do so. 25 However, one must bear in mind also the whole of Jagot J's experience in that Mid Western litigation – see also her original judgment at [2007] NSWLEC 411. The Court should be cognisant of the risk that further complex litigation may flow if there remains any serious dispute or concern about that the adoption of the s.25B process. A judgment always has to be made, on the facts of the instant case, whether the making of a s.25B order is really the appropriate course. The discretion must be exercised with care. 26 One concludes from a consideration of these authorities that a s.25B order probably ought not be made where the whole of the merit assessment process underpinning the challenged consent, as distinct from one "discrete" component of it, which can be viewed in isolation, has clearly miscarried. 27 The real failure in the process in the present case was the adoption by the Council of an "extraordinary" policy kept from the public domain, and not known or appreciated by either the Applicants or the Third Respondent, the impact of which was, on this occasion, a denial of procedural fairness. The full import of the policy was not exposed in the proceedings until the oral evidence consequent upon Mr Lloyd's affidavit. 28 Had there not been that process failure within the Council, s.101 would have protected the consent, and the Applicants would have been left without a remedy. I must say that I find it quite extraordinary to think that a range of challenges held to be statute-barred by s.101 could end up being reopened by virtue of an order under s.25B, made in preference to a declaration of invalidity based on some other ground, not barred by s.101. 29 I prefer the submissions of Mr Galasso. The whole assessment process clearly miscarried in this case, and I do not consider it an appropriate case for the exercise of the Court's discretion under Division 3. Accordingly, I have decided to make the orders sought by the Applicants in their Class 4 application. Costs 30 I turn, therefore, to the competing submissions on the question of costs. 31 The Applicants say simply that they (1) succeeded in their challenge, and (2) were guilty of no "disentitling conduct", so costs should follow the "event" of their success. They further submit that costs should not be apportioned to any degree against them, as they were forced, by the failure of the First Respondent to make any relevant admissions, to run the whole of their case. All their grounds of challenge were matters of substance, and all were made good. Some did not overcome s.101, but it was also important to their case that the consent should be struck down, and not dealt with under Division 3. The costs order should be made "jointly and severally" against both Respondents, as the Third Respondent persisted in opposing, for example, the Applicants' claim that the floor space control gave rise to the need for a SEPP 1 objection (see T9). It is up to the Court to decide if the Respondents should bear the burden other than equally. Having now seen the correspondence in Exhibit C1, in which Council admitted to the Third Respondent something it persisted in denying to the Applicants, Mr Galasso later submitted that his clients should be entitled to their costs (at least from the Council) on an indemnity basis. 32 Mr To, for the Third Respondent, conceded that the Applicants had succeeded in their claim, and were entitled to their costs, and he submitted that the Council alone should pay them, and should also pay the Third Respondent's costs (T27, L13-16), as it was Council's defective processes and policies which brought down his client's consent. 33 Mr Fraser for the First Respondent argued, firstly, that if a s.25B order had been made, the First Respondent, rather than the Applicants, would be adjudged the successful party, as such an order could have been made by consent. His first "fallback position" was that, as both the Applicants and the Third Respondent were at fault, the Third Respondent should meet all the costs, at least after 4 April 2007 or 17 September 2007 (the dates of the letters in Exhibit C1), because she did not enter into the negotiations sought by the First Respondent. Each party should pay its own costs pre 4 April 2007. Mr Fraser also submitted that the letters in Exhibit C1 put the Third Respondent on notice that the proceedings would end up as they have, and that she should pay for the fight she wanted to have in order to save her consent. 34 The First Respondent's second "fallback position" was that the Applicants should get only 20%-50% of their costs anyway, because they persisted in arguing all their challenges after the First Respondent made clear it was relying on s.101 to defeat them. Consideration 35 Biscoe J has helpfully collected all the relevant authorities and principles on costs in such matters, in his judgments in Cutcliffe and Another v Lithgow City Council and Others (2006) 147 LGERA 330 (see his summary at par [50]), and F & D Bonoccorso Pty Ltd v City of Canada Bay Council (No.3) [2007] NSWLEC 569. 36 In the present case the Council took an active part rather than submit to orders, and the Third Respondent actively defended her consent. Had the Applicants not succeeded on the procedural fairness point, s.101 would have saved the Third Respondent's consent, despite the proven flaws in the process, and errors in the Council's assessment. The Third Respondent came to Court without knowledge of the Council policy which ultimately brought down her consent. 37 The Council is not to be punished for this situation. Costs are compensatory not punitive. Latoudis v Casey (1990) 170 CLR 534. 38 However, the Third Respondent, in the end, is as much a victim of the Council's faulty policies and processes as the Applicants. She cannot be criticised by Council for deciding, when asked, to "sit tight" as the beneficiary of the consent. The Council's September 2007 letter (Exhibit C1) gave her notice of some changes in the planning regime which may have worked to her disadvantage if she started afresh. There is no disentitling conduct on her part, and she is entitled to be compensated by the Council for the expense to which she has been put by the proceedings. She is now compelled to pursue her wishes for her property in the light of the Court's decision to strike down the consent rather than apply Division 3. 39 I have concluded that the appropriate order for the Court to make in its exercise of the costs discretion is that the First Respondent should pay the costs of both the Applicants and the Third Respondent. 40 On the question of indemnity costs, I do not need to refer in detail to the well established principles in the authorities. I dealt with those principles in Ray Fitzpatrick Pty Limited v Minister for Planning (No.5) [2008] NSWLEC 183, specifically at pars [31]-[39], and [79], and generally on litigant conduct. 41 I accept the submission of Mr Fraser that parties to contested litigation have no obligation to admit anything that is legally arguable. The ultimate issue in this case was the "fairness" of the Council's little known policy about changes in ownership, as it was clear by the time of the hearing that Council no longer denied receiving the letter. (The evidence was clear from the outset in any event, as a result of the banking of the rate adjustment, that the letter had arrived at Council – the issue in the case was the action or inaction which flowed from its receipt). 42 On a proper review of how each active party conducted this litigation, no basis has been made out for an indemnity costs order. Postscript 43 At the close of his oral submissions on 3 June 2008 (T33, L18-49), Mr Fraser complained that in my substantive judgment I failed to deal specifically with pars 46 to 57 of his original written submissions. 44 In par 46 of those earlier submissions Mr Fraser conceded that if there were a failure of notification it would amount to a denial of procedural fairness. 45 On 6 December 2007 (at T26, L9-13) he clearly stated to the Court that he did not press the rest of par 46 and pars 47-57. Orders 46 The orders of the Court are: 1. The Court declares that development consent 2006/296 for the demolition of an existing dwelling house, construction of a single storey dwelling and in-ground concrete swimming pool on the property known as 139 Lawrence Hargrave Drive, Austinmer granted by the First Respondent on 24 July 2006 is invalid and of no force and effect. 2. That the Second and Third Respondents be restrained from carrying out development pursuant to that consent. 3. The First Respondent is to pay the costs of both the Applicants and the Third Respondent, on a party-party basis, as agreed or assessed. 4. All the Exhibits are returned. 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.