Land and Environment Court New South Wales Medium Neutral Citation: Cessnock City Council v Rush [2012] NSWLEC 178 Hearing dates: 24 July 2012 Decision date: 27 July 2012 Jurisdiction: Class 4 Before: Pain J Decision: See paragraph 43 Catchwords: COSTS - exercise of discretion to award costs in Class 4 proceedings where consent orders filed - no relevant event to inform award of costs as no hearing on merits - conduct of parties during the proceedings - partial award of costs made Legislation Cited: Civil Procedure Act 2005 s 98 Local Government (General) Regulation 2005 cl 241(1) Public Interest Disclosures Act 1994 s 20B Uniform Civil Procedure Rules 2005 Pt 42 r 42.1 Cases Cited: Kiama Council v Grant [2006] NSWLEC 96; (2006) 143 LGERA 441 Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 Re the Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; 186 CLR 622 Category: Costs Parties: Cessnock City Council (Applicant) Martin Rush (First Respondent) Cordelia Burcham (Second Respondent) Bob Pysent (Third Respondent) James Ryan (Fourth Respondent) Neil Gorman (Fifth Respondent) Dale Troy (Sixth Respondent) Chris Parker (Seventh Respondent) James Hawkins (Eighth Respondent) Allen McCudden (Ninth Respondent) Jeff Maybury (Tenth Respondent) Graham Smith (Eleventh Respondent) Representation: Mr P McEwen SC (Applicant) Mr J Ryan (Fourth Respondent - in person) Mr C Parker (Seventh Respondent - in person) Sparke Helmore Lawyers (Applicant) File Number(s): 40481 of 2012 Judgment 1The Court made consent orders in these Class 4 proceedings on 22 June 2012 as follows: 1 An order quashing the: (a) decision made by the Second to Eleventh Respondents at the ordinary meeting of the Cessnock Council held on 2 May 2012 to delegate the management and performance of proceedings No 2012/84966 in the Supreme Court of New South Wales ("the Resolution") to the Chair of Hunter Councils Incorporated; and (b) Instrument of delegation attached to the Resolution ("the Instrument'). 2 An order restraining the Second to Eleventh Respondents from implementing the Resolution or the Instrument attached to the Resolution, or any similar Resolution or Instrument. 3 An order restraining the First Respondent, being the Chair of Hunter Councils Incorporated, from exercising functions in reliance upon the Resolution or the Instrument, or any similar Resolution or Instrument. 4 No order as to costs with respect to the First, Second, Third, Fifth, Sixth, Eighth, Ninth, Tenth and Eleventh Respondent. 5 Costs be reserved with respect to the Fourth Respondent and Seventh Respondent. 2The only matter outstanding arises from order 5 and is the Applicant Cessnock City Council's (the Council's) application for costs against the Fourth and Seventh Respondents (Mr Ryan and Mr Parker) who are councillors. As identified in order 4 no costs are sought from eight other Respondents who are also councillors. The First Respondent Mr Rush is not a councillor of this Council. Mr Ryan and Mr Parker represented themselves throughout the proceedings. Relevant background is identified in the points of claim 3The following relevant background is contained in the Points of Claim (POC) filed on 22 June 2012: The Parties 1. The Applicant, Cessnock City Council (the Council), is constituted as a council under s 220 of the Local Government Act 1993 (NSW) (LG Act), is entitled to exercise powers under the LG Act and is capable of suing. 2. Hunter Councils Incorporated is a public company limited by guarantee capable of being sued. 3. The First Respondent is the Mayor of Muswellbrook Shire Council and is designated by Hunter Councils Incorporated as its "Chair". 4. The Second to Eleventh Respondents (the Respondent Councillors) are Councillors of the Applicant. Supreme Court proceedings 5. On 13 March 2012 the Second Respondent Councillor gave notice of a motion for, inter alia, the termination of the employment of the General Manager of the Council Ms Lea Rosser, to be heard in the business of the Council at its meeting to be held on 21 March 2012. 6. On 20 March 2012 the Council commenced Proceedings 2012/84966 in the Supreme Court pursuant to s 20B of the Public Interest Disclosures Act 1994 (NSW) (the PID Act), to restrain councillors from taking action to terminate the contract of employment of Ms Rosser, on the ground that for the purposes of s 20 of the PID Act this would involve detrimental action against her that is substantially in reprisal for her having made a public interest disclosure under the PID Act concerning alleged corrupt conduct within Part 3 of the Independent Commission Against Corruption Act 1988 (NSW) (the ICAC Act) by certain of the Respondent Councillors (Supreme Court Proceedings). 7. On 30 March 2012 Ms Rosser delegated to Mr Michael Brady, the Council's Group Leader Customer Services, pursuant to s 378 of the LG Act her functions relating to any matter concerning the Supreme Court Proceedings. 8. Following the commencement of the Supreme Court Proceedings , the Respondent Councillors were aware that it was the intention of Mr Brady to continue to prosecute the Supreme Court Proceedings. 9. As at 2 May 2012 the Supreme Court Proceedings were listed for hearing on 28 to 31 May 2012. The resolution 10. On 2 May 2012, an Ordinary Meeting of the Applicant was held (the Meeting). The Fourth Respondent Councillor moved a Notice of Motion (the Notice of Motion) relating to the conduct and carriage of the Supreme Court Proceedings. 11. As at 2 May 2012, the Respondent Councillors were the first to tenth defendants in the Supreme Court Proceedings. 12. As Chairperson at the Meeting, the Mayor ruled that the Notice of Motion was not urgent (the Mayor's Ruling). 13. The Fourth Respondent Councillor moved a motion of dissent from the Mayor's Ruling. This was seconded by the Second Respondent Councillor. 14. The motion of dissent was carried by ten votes, by the Respondent Councillors (Motion of Dissent). 15. The following Notice of Motion was then moved and carried by a majority, with the Respondent Councillors voting for the Notice of Motion, being Resolution numbered 2020 in the Minutes of the Meeting: With regard to the Supreme Court proceedings 2012/84966 initiated by Cessnock Council which seeks to restrain 10 Councillors from considering a motion to terminate the General Managers Contract, the Council resolves to delegate the management and performance of this matter to the Chair of Hunter Councils as per the attached instrument of delegations. In general and as per specifically the instruments of delegations, the Chair of Hunter Councils shall assume all responsibility for proceeding with the case, or not, as they see fit taking into account all the interests of the Council, the greater community and affected individuals. The Chair of Hunter Councils will be subject to the NSW Local Government Code of Conduct in the same way senior staff and Councillors are. The Chair of Hunter Councils may make appropriate reports to the full Council as appropriate. This specific delegation overrides and takes precedence over:- a) any general delegation given to the General Manager and Senior Staff to conduct legal action which would incorporate this legal action. b) any action taken pursuant to the motion of urgency moved by Clr Burcham on April 4th 2012 which regarded placing the carriage of proceedings in the hands of an appropriate person but not including the General Manager. This delegation takes place in circumstances where the Mayor's limited emergency powers are no longer applicable and relevant and it is appropriate to have a neutral person administer the proceedings (the [delegation] resolution). 4In the summons filed on 25 May 2012 the grounds of invalidity relied on were that the delegation resolution failed to comply with cl 241(1) of the Local Government (General) Regulation 2005, there was apprehended bias when the resolution was passed and it purported to delegate functions to the chair of Hunter Councils Inc which is not a legal person, inter alia. The POC referred to all three grounds and expanded on the third ground to some extent. Evidence 5The Council read the affidavits of Mr Gray, Council's solicitor, dated 19 June 2012 (DZG1) and 18 July 2012 (DZG2); affidavit of Ms Grant, Council's solicitor, dated 18 July 2012 (DEG); and affidavit of Mr Baird, Council's solicitor in the Supreme Court proceedings, dated 19 June 2012. The Council tendered the transcript of proceedings before me on 15 June 2012 (exhibit A) and exhibits to the affidavits of Mr Gray and Ms Grant both dated 18 July 2012 (exhibits B and C). The exhibits to Mr Gray's and Ms Grant's affidavits refer to documents which are the basis for the chronology set out below and it is therefore unnecessary to summarise them here. 6Mr Baird's affidavit states that the Council commenced Supreme Court proceedings on 20 March 2012 to restrain seven councillors from taking action to terminate the general manager's contract of employment pursuant to s 20B of the Public Interest Disclosures Act 1994. An interlocutory injunction to this effect is currently in place. Mr Baird received a telephone call on 3 May 2012 from a man identifying himself as Mr Rush, who stated that he had been appointed by the Council as delegate in relation to the Supreme Court proceedings, had instructed Mr Pickup to act in the Supreme Court proceedings, that a notice of change of solicitors would be filed and that he would be discontinuing the proceedings and seeking costs against the mayor and general manager. Mr Baird has not had any contact with Mr Rush since their telephone conversation on 3 May 2012. 7On 7 May 2012 Mr Baird attended a hearing in the Supreme Court proceedings when there was no appearance entered by Mr Pickup or counsel, nor was any notice of change of solicitor filed. That day, Mr Baird spoke to Mr Pickup who indicated that his client would not take any action in the proceedings (including intervening) without first giving 24 hours' notice. Mr Baird has not received any notice in this regard. On 28 May 2012 the Supreme Court proceedings were adjourned until 12 September 2012 for the allocation of a hearing date following the release of the Independent Commission Against Corruption's findings on its current investigation into the Council. 8Mr Ryan, the Fourth Respondent, read in part his affidavits dated 22 July 2012 and 23 July 2012. Mr Ryan's first affidavit states that on 5 April 2012 he signed a request to the mayor to convene an extraordinary meeting to consider a motion regarding the Supreme Court proceedings. (A copy of this facsimile request dated 5 April 2012 and received by the Council on 30 April 2012 is annexed to Mr Ryan's second affidavit.) The motion sought to delegate the management and performance of those proceedings, initiated by the mayor, to the chair of Hunter Councils Inc, as a person independent of the Council. As there was no attempt to convene an extraordinary meeting, at the Council meeting on 2 May 2012 Mr Ryan moved as a matter of urgency the resolution to have the chair of Hunter Councils Inc take carriage of the Supreme Court proceedings. This motion was carried in accordance with the Council's Code of Meeting Practice cl 13.12. 9Mr Ryan annexed to his affidavit a letter from Mr Belling, solicitor for seven of the councillor Respondents in the Supreme Court proceedings, dated 18 June 2012. The letter states that Mr Belling was present in Court when Mr Baird said Mr Rush had given the Council an undertaking not to act on the resolution of 2 May 2012 without giving 24 hours' notice and confirms that Mr Belling said seven of the councillor Respondents gave a similar undertaking. Mr Belling had further indicated that the parties he represented had "no interest in taking any steps" under that resolution. 10On 15 June 2012 Mr Ryan met with Council's legal representatives and made an offer of compromise, a summary of which is contained in emails to the Council's solicitors dated 20 and 21 June 2012 (exhibited to Mr Gray's affidavit of 18 July 2012 at tabs 6, 7 and 8 and Ms Grant's affidavit of 18 July 2012 at tab 21). Mr Ryan suggested that the parties consent to the Court ordering that the councillors be restrained from acting on or seeking to pass a similar resolution, and that the Council be restrained from acting on the resolution until after the Supreme Court proceedings were finalised. This, Mr Ryan believed, would have served the purpose of removing any statutory obligation on the Council to implement the resolution as well as any Council concern of the councillors acting on the resolution. Mr Ryan thought this would have had the "added benefit of allowing Council to approach the important public task of determining what is an appropriate Code of Meeting Practice in more constructive conditions." The Council rejected this offer. 11On 19 June 2012 Mr Ryan received the POC. On 20 June 2012 he telephoned the Council's acting general manager offering to enter into consent orders and emailed the Council's solicitors. That email, a copy of which is exhibited to Ms Grant's affidavit of 18 July 2012 (tab 21), states that Mr Ryan and Mr Parker were willing to enter into consent orders to settle the matter on the basis that each party meet their own costs. Mr Ryan referred to the offer of compromise he made on 15 June 2012 which was rejected. Mr Ryan said his and Mr Parker's response in offering to enter into consent orders following receipt of the POC was reasonable because it included the argument that the delegation made by resolution on 2 May 2012 was not made to a legal person. This was only mentioned peripherally in the draft summons and not mentioned at all in the letter dated 14 May 2012. On 6 July 2012 Mr Ryan emailed the general manager and acting general manager seeking a copy of the Council's insurance policy. On 13 July 2012 he received a memo from the acting general manager stating that the Council's insurer had been notified of a potential claim for costs and had requested a copy of any judgment in the Court proceedings to identify whether a claim for costs would be covered under the insurance policy. 12A copy of an email sent by Mr Ryan on 6 July 2012 rejecting the Council's offer of compromise for Mr Ryan to pay the Council's costs in the sum of $8,000 and making a counter offer that each party bear its own costs was exhibited to Mr Gray's affidavit of 18 July 2012 (tab 15). It stated: (i)Mr Ryan did not believe the Council was entitled to its costs after the Council's solicitors' letter of 14 May 2012 as it did not outline the Council's eventual claims in the proceedings and the point it contended for was not strong. (ii)Mr Ryan did not accept that the Council was entitled to costs after the draft summons (attached to a letter dated 23 May 2012) as it did not allege, like the POC issued on 19 June 2012, that the resolution of 2 May 2012 did not give a delegation to a natural person. Mr Ryan also considered the Council did not provide any justification for why his offer of compromise made on 15 June 2012 to the Council could not be legally implemented. (iii)On 20 June 2012, after receiving the POC on 19 June 2012, Mr Ryan indicated that he would be amenable to entering into consent orders save as to costs and reiterated the terms of his offer made on 15 June 2012 including the reasons he believed it was appropriate. This offer included the phrase "restraining Councillors from either acting on or seeking to pass on a like Resolution", which was an undertaking given in the Supreme Court. (iv)At the mention on 22 June 2012 the short minutes of order presented by the Council were changed and included the phrase "or any similar Resolution or instrument". Mr Ryan alleged that the Council had taken advantage of the offer he made by widening the words of the consent orders in the manner he had suggested and therefore it was not appropriate for the Council to be awarded costs. (v)The Council was not entitled to costs on the basis that Mr Ryan considered the Council acted in bad faith in the proceedings by not informing the councillors of their inclusion in the Council's insurance policies with regard to defending legal action taken against them in their role as councillors. In his view the Council officers had a duty to inform the councillors of this and that this failure had a material effect on the case. (vi)Finally, if costs were to be awarded Mr Ryan indicated he would be objecting to the quantum of costs as he did not think it was appropriate for two senior solicitors and senior counsel to be present at each mention. 13Mr Ryan made similar submissions to those summarised above in the email at the costs hearing. Mr Parker, the Seventh Respondent, did not read any affidavits or tender any evidence. Chronology referring to evidence 14The following chronology was provided by the Council and amended as required and indicated by the braces: 20/03/2012 Proceedings (No. 2012/84966) commenced in the Supreme Court of New South Wales (Supreme Court Proceedings) Affidavit of David Baird sworn 19 June 2012 (DB) Paragraph 2 26/03/2012 The General Manager of Cessnock City Council (the Council), namely [Lea] Rosser, delegated the exercise of certain functions to the Acting General Manager, namely Michael Brady, in relation to the Supreme Court Proceedings Points of Claim 28/03/2012 James Ryan emails a copy of the proposed delegation to the Chair of Hunter Council to Chris Parker Affidavit of Daryl Gray [affirmed] 18 July 2012 (DZG2) (Exhibit Tab 12, pg 30 - documents provided by James Ryan under Notice to Produce) 05/04/2012 James Ryan emails a copy of the proposed delegation to the Chair of Hunter Councils to Martin Rush DZG2 Exhibit Tab 23, pg 72 05/04/2012 James Ryan emails a notice for an extra-ordinary meeting of the Council to consider the proposed delegation to the Chair of Hunter Councils to Mayor Alison Davey DZG2 Exhibit Tab 23, pg 72 06/04/2012 Martin Rush emails James Ryan indicating he would accept the proposed delegation DZG2 Exhibit Tab 23, pg 74 07/04/2012 Martin Rush amends the proposed delegation and provides a copy by email to James Ryan DZG2 Exhibit Tab 23, pg 75 02/05/2012 Ordinary meeting of the Council where it was resolved to delegate the management and performance of the Supreme Court Proceedings to the Chair of Hunter Councils Incorporated (the Delegation Resolution) [deleted] Summons 03/05/2012 [10.59am] Martin Rush emails Michael Brady querying the terms of the delegation and requests a copy of the minute of resolution and the memoranda of delegation [deleted] DZG2 (Exhibit Tab 23, pg 77 - documents provided by Martin Rush under Notice to Produce) 03/05/2012 [1.41pm] Martin Rush emails Michael Brady repeating request for documents DZG2 Exhibit Tab 23, pg 78 [deleted] 03/05/2012 [3.44pm] Martin Rush emails Michael Brady accepting the terms of the delegation DZG2 Exhibit Tab 23, pg 80 03/05/2012 [3.47pm] Martin Rush calls David Baird of HWL Ebsworth Lawyers advising that a Notice of Change of Solicitor will be filed DB Paragraph 3 03/05/2012 [4.49pm] James Ryan emails Martin Rush a copy of the Delegation Resolution DZG2 Exhibit Tab 23, pg 82 03/05/2012 [10.43pm] Michael Brady emails Martin Rush advising he is seeking independent legal advice DZG2 Exhibit Tab 23, pg 86 04/05/2012 Letter from Sparke Helmore Lawyers to Martin Rush seeking undertaking that he will not act on the Delegation Resolution Affidavit of Daryl Gray (DZG1) affirmed 19/6/12 - paragraph 4 04/05/2012 Letter from Sparke Helmore Lawyers to Local Government Legal seeking undertaking DZG1 Paragraph 5 04/05/2012 Undertaking provided by Martin Rush and Local Government Legal not to act on delegation without 24 hours notice DZG1 - Annexure "C" and Paragraph 6 07/5/2012 Mention of the Supreme Court Proceedings - Tony Pickup of Local Government Legal and Robert Lovas present DZG1 Paragraph 8 DB Paragraph 4 07/05/2012 Letter from Sparke Helmore Lawyers to Local Government Legal seeking 24 hours written notice of filing of court process by Martin Rush DZG1 Paragraph 9 07/05/2012 Letter from Local Government Legal confirms continuation of undertaking and 24 hours notice of the filing of any court by Mr Rush or Local Government Legal DZG1 Paragraph 10 07/05/2012 Mr Pickup advises David Baird that no action will be taken in the Supreme Court proceedings without 24 hours notice DB Paragraph 6 14/05/2012 Letters sent by email to Chris Parker and James Ryan seeking undertaking to refrain from taking any action in respect of the Delegation Resolution DZG2 Exhibit Tabs 1 and 2 16/05/2012 Ordinary meeting of the Council where rescission motion concerning the Delegation Resolution put and lost Not in dispute 18/05/2012 Chris Parker refuses to provide undertaking in relation to the Delegation Resolution Affidavit of Dianna Grant sworn 19 July 2012 (DEG) Exhibit Tabs 1 and Tab 2 23/05/2012 Proposed Summons forwarded by email to James Ryan and Chris Parker seeking consent to relief set out in proposed Summons DZG2 Exhibit Tabs 4 and 5 25/05/2012 Summons filed (Summons) in the Land and Environment Court in relation to the Delegation Resolution (the LEC Proceedings) Summons 28/05/2012 Supreme Court Proceedings adjourned to 12 September 2012 DB Paragraph 8 30/05/2012 Chris Parker served personally with Summons and proposed Short Minutes of Order DEG Exhibit Tab 3 30/05/2012 James Ryan served personally with Summons and proposed Short Minutes of Order DEG Exhibit Tab 3 14/06/2012 Letter sent by email to James Ryan and Chris Parker seeking position on proposed Orders DEG Exhibit Tabs 4 and 5 14/06/2012 Chris Parker advises he does not consent to the proposed Orders DEG Paragraph 11 and Exhibit Tab 8 14/06/2012 James Ryan advises he does not consent to the proposed Orders DEG Paragraph 12 14/06/2012 Updated Short Minutes of Order sent by email to James Ryan and Chris Parker DEG Exhibit Tabs 9 and 10 [15/06/2012 James Ryan makes an offer of compromise to the Council DZG2 Exhibit Tabs 6, 7, 8 DEG Exhibit Tab 21] 15/06/2012 First Mention of the LEC Proceedings - Short Minutes of Order made by Justice Pain DEG Paragraph 18 18/06/2012 Notice to Produce served on James Ryan by email DEG Exhibit Tab 14 18/06/2012 Notice to Produce served on Chris Parker by email DEG Exhibit Tab 15 19/06/2012 Points of Claim and supporting Affidavits sent by email to James Ryan DEG Exhibit Tabs 16 and 17 19/06/2012 Points of Claim and supporting Affidavits sent by email to Chris Parker DEG Exhibit Tabs 18 and 19 20/06/2012 James Ryan advises himself and Chris Parker willing to enter Consent Orders on the basis that each party meet their own costs [James Ryan refers to his offer of compromise made on 15 June 2012] DEG Exhibit Tab 21 DZG2 Exhibit Tabs 6, 7, 8 and 10 20/06/2012 Chris Parker advises he has no documents to provide under the Notice to Produce 21/06/2012 James Ryan serves Notice of Appearance submitting to the Orders save as to costs DEG Exhibit Tab 22 DZG2 Exhibit Tab 9 21/06/2012 Chris Parker serves Notice of Appearance submitting to the orders save as to costs DZG2 Exhibit Tab 11 [21/06/2012 In response to an email from the Council's solicitor, James Ryan emails the Council elaborating on his offer of compromise made on 15 June 2012] DZG2 Exhibit Tab 8 22/06/2012 Second mention of the LEC Proceedings. Orders made quashing the Delegation Resolution. Directions also made concerning Notices to Produce. Matter listed for costs hearing on 24 July 2012. DEG Paragraph 30 29/06/2012 James Ryan produces documents under Notice to Produce DZG2 Exhibit Tab 12 02/07/2012 Offer made to James Ryan and Chris Parker to pay $8,000 each towards Council's costs in the LEC Proceedings DZG2 Exhibit Tabs 13 and 14 06/07/2012 James Ryan rejects offer and makes counter-offer that each party bear its own costs DZG2 Exhibit Tab 15 06/07/2012 Chris Parker rejects offer and makes counter-offer that each party bear its own costs DZG2 Exhibit Tab 16 12/07/2012 SH Lawyers rejects counter-offer by letter to James Ryan DZG2 Exhibit Tab 19 13/07/2012 Martin Rush provides documents under Notice to Produce DZG2 Exhibit Tab 23 15There is no dispute about the occurrence of matters identified in the chronology which refers to steps taken in the Supreme Court proceedings and in these proceedings, inter alia. Council's submissions Up to 15 June 2012 16Up to 15 June 2012, the first return date, one eleventh of the Council's costs are sought from the two Respondents. Kiama Council v Grant [2006] NSWLEC 96; (2006) 143 LGERA 441 at [80(a)(ii)] is relied on, whereby the making of the consent orders results in a party effectively surrendering to the other party with the orders made against the party substantially in the terms or to the effect claimed by the other party. In such circumstances Kiama Council v Grant suggests that it would be appropriate for the usual costs order to be made in the absence of disentitling conduct. 17The consent orders made were in broadly similar terms to the relief sought in the summons. Mr Ryan and Mr Parker essentially capitulated to the Council's orders and the Council should be compensated for its costs. There is no disentitling conduct on the Council's part. After 15 June 2012 18After 15 June 2012 all of the Council's costs are sought from the two Respondents, relying on Kiama Council v Grant at [80(b)(i)] which states that where a supervening event or settlement removes the subject of the dispute so that no issue remains except that of costs, no order as to costs ought be made unless one of the parties has acted so unreasonably that the other party should obtain the costs of the action. The costs of the costs hearing are sought. 19Mr Ryan and Mr Parker acted unreasonably in not settling at the same time as the other Respondents prior to the first mention on 15 June 2012. Mr Ryan cannot rely on the history of the Supreme Court proceedings where seven of the Respondents (not including Mr Parker or Mr Ryan) gave an undertaking to the Council that they would not proceed without giving 24 hours' notice, as that is inter partes. Those proceedings serve a different purpose and do not raise the validity of the delegation resolution the subject of these proceedings. The undertaking was for 24 hours in any event. An undertaking in those proceedings cannot be an antidote for proceedings in this Court. It could not be enforced by this Court, for example. 20Notice was given to Mr Ryan and Mr Parker of these proceedings on 14 May, 18 May and 23 May 2012 when a draft summons was sent. The summons was filed on 25 May 2012 and served on 30 May 2012 with proposed short minutes of order and a cover letter of 29 May 2012 requesting that the short minutes of order be executed and returned. The Council's solicitors were instructed not to pursue a costs order against Mr Ryan and Mr Parker on the proviso that the proposed short minutes of order were returned by 4:00pm on 13 June 2012. The Council's case was identified in the summons. The transcript of the mention on 15 June 2012 demonstrates that Mr Ryan was considering whether he would file a motion seeking a stay of proceedings. 21The offer of compromise made by Mr Ryan, a summary of which is in the emails to the Council's solicitors dated 20 and 21 June 2012, could not be agreed to as there was no power for Council to bind itself in that way. This was advised in the letter from the Council's solicitor dated 2 July 2012 par 3 and an earlier email of 21 June 2012. 22Delay and obfuscation by the two Respondents warrants an award of costs in the Council's favour. Neither Respondent explains why he did not settle before the first mention date on 15 June 2012 as the other Respondents did. Mr Ryan's and Mr Parker's submissions 23These proceedings could have no practical effect given the undertakings proffered in the Supreme Court proceedings by seven of the Respondents. Mr Ryan and another councillor quite properly requested an extraordinary meeting to consider a resolution to delegate the performance and management of the Supreme Court proceedings. The request was received by the Council on 30 April 2012. It was necessary to act urgently as the request for an extraordinary meeting was ignored by the mayor and the Supreme Court proceedings were progressing. The steps taken by the councillors in passing the delegation resolution were completely in accordance with the Council's Code of Meeting Practice. These proceedings seek to challenge the Code of Meeting Practice which it is important to uphold. 24The Council's case changed from that advised in the letter from its solicitor dated 14 May 2012, to the summons served on 30 May 2012, to the POC received on 19 June 2012. Only cl 241 was relied on initially by the Council in the letter dated 14 May 2012. The POC expanded on the third ground identified in the summons. 25Mr Ryan made a reasonable offer of compromise (see par 10 above) whereby the Council would not have to be concerned about the delegation resolution being acted on and Mr Ryan's interest in maintaining the Code of Meeting Practice was satisfied. The Council's argument, if successful, required that the Council's Code of Meeting Practice be effected. There is public interest in the councillors adhering to the published Code of Meeting Practice. It is desirable that this issue be parked so that it is not dealt with until the Supreme Court proceedings are resolved. 26It is also reasonable that each party pay its own costs. 27There was disentitling conduct in that the Council officers did not advise of the insurance policies available to councillors. 28Mr Parker adopted Mr Ryan's submissions. He also submitted that he was acting in the public interest. Consideration 29The Court has wide discretion to award costs under s 98 of the Civil Procedure Act 2005. Costs orders are intended to be compensatory not punitive: Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 at 542 - 543 and 547. In this case the Council seeks to be compensated for some of its costs by two of the eleven respondents. The making of consent orders by the Court means that there is no relevant "event" being a determination of the merits to inform a costs determination. The usual rule in Class 4 proceedings, in accordance with Uniform Civil Procedure Rules 2005 (UCPR) Pt 42 r 42.1 that costs follow the event, cannot necessarily be applied in these circumstances. While the Council suggested UCPR r 42.19 concerning costs where proceedings are discontinued by an applicant applied, that is not the basis on which proceedings have been finalised. The consent orders quash a decision made by the Respondents as councillors and restrain them from implementing the delegation resolution or instrument or similar resolution or instrument. 30In Re the Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; 186 CLR 622 at 624 - 625 McHugh J (sitting alone) stated the principles "which govern an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means": A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. ... Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. ... If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. (footnotes omitted) 31That passage has been referred to in numerous costs decisions in this Court. As advised to the parties during the hearing when it was necessary to limit the matters sought to be put before the Court, it is not generally appropriate that the Court form a view on the merits of substantive matters simply for the purposes of determining costs, as reflected in the above passage. Consent orders made reflect relief sought in the Council's summons 32As the Council submitted, the facts here are reflect the circumstances referred to in Kiama Council v Grant at [80(a)(ii)]. The consent orders are largely in the terms sought by the Council in the summons quashing the delegation resolution, suggesting an order should be made in the Council's favour as there has been essentially a capitulation by the Respondents to the Council. That finding relates to the Council's claim for one eleventh of the costs up to 15 June 2012, the first mention date, from each of the two Respondents. These costs are sought from only two Respondents presumably because the other Respondents all agreed to the making of consent orders before the first mention date. The Council's solicitor's letter of 29 May 2012 sent with the summons stated that if the proposed short minutes of order were executed and returned before 13 June 2012, no order for costs would be sought. No unreasonable behaviour by Respondents 33As a result of Mr Ryan and Mr Parker not consenting to the making of orders on or before 15 June 2012 the Council submits it has incurred unnecessary costs through having to attend court after 15 June 2012 and further negotiating with Mr Ryan who indicated at the mention on 15 June 2012 that he was considering an application for a stay of proceedings. That application was not made and shortly afterwards on 20 June 2012 Mr Ryan and Mr Parker agreed to the same orders as the other Respondents, apart from costs. Both Respondents sent notices of appearances submitting to the making of the orders sought save as to costs on 21 June 2012. These, along with submitting appearances from the other Respondents were all filed in Court on 22 June 2012. Consent orders quashing the delegation resolution were made on 22 June 2012 with the issue of costs as against the Fourth and Seventh Respondents left outstanding. Given these circumstances the amount of additional costs incurred by the Council as a result of Mr Ryan and Mr Parker not agreeing to the consent orders on 15 June 2012 should be small. 34Mr Ryan argued that he was only properly informed of the Council's case on the third ground identified in the summons when he received the POC on 19 June 2012 and then decided it was appropriate to agree to the orders proposed by the Council. All the grounds relied on were identified in the summons. The POC expand to a limited extent the third ground but the issue is identified in the summons. Nevertheless to the extent there was any delay on the part of Mr Ryan it was minimal and he did not act unreasonably in agreeing to consent orders but for costs immediately after receiving the POC. Kiama Council v Grant [par 80(b)(i)] has no application to the actions of Mr Ryan and Mr Parker. 35Mr Ryan submitted that he was motivated throughout by the need to uphold the Council's Code of Meeting Practice and that his offer achieved this. I accept that Mr Ryan (and Mr Parker by extension) believed that his actions were well intentioned but that is not relevant to the exercise of my discretion in the context of this particular costs application. No disentitling conduct by Council 36Mr Ryan submitted that the form of orders he proposed to the Council's legal representatives at Court on 15 June 2012, confirmed in later emails dated 20 and 21 June 2012 to the Council's solicitors, were reasonable and should have been accepted. I understand him to be raising this matter as an example of disentitling conduct by the Council (and as showing he has behaved reasonably). The Council's solicitor's email dated 21 June 2012 identified that the terms of that offer were not legally open to the Council to implement. It is also not clear to me that the Court would have agreed to the making of orders in those terms for the reason given by the Council's solicitor. Further, if made, their effect would be to stay these proceedings until the outcome of the Supreme Court proceedings. Those proceedings are directed to different circumstances and do not require consideration of the validity of the delegation resolution as the summons in this case does. The appropriateness of making such orders is not apparent. It was not disentitling conduct for the Council to reject the offer of compromise made by Mr Ryan on 15 June 2012. I further note that the undertaking to give 24 hours' notice in the Supreme Court proceedings has no relevance to these proceedings. 37Mr Ryan also submitted that he did not have adequate notice of the Council's case because this was not fully identified until the POC. The summons identifies all the grounds to be relied on with particularity. The Council's solicitors wrote before proceedings were commenced on 14 May, 18 May and 23 May 2012. It was necessary that the proceedings be commenced promptly given the nature of the delegation resolution. There was no disentitling conduct by the Council in this regard. 38Mr Ryan also submitted that there was disentitling conduct because Council's officers failed to advise him of the nature of the Council's insurance policies concerning legal expenses. He submitted that there was a duty of care owed by the Council's officers in this regard. I understand from submissions he made from the bar table that I am to infer he may have acted differently had he had legal advice earlier. In the absence of any actual evidence about this it is difficult to see how this submission is relevant to whether the Council should be awarded its costs in these proceedings. I make no finding of disentitling conduct by the Council on this basis. Some costs should be awarded in favour of the Council 39As noted already at par 33, the substantive consent orders agreed by all Respondents achieve what the Council sought in its summons suggesting a capitulation by them in the circumstances of this case. Taking into account that the two Respondents are not legally represented, agreed to the making of consent orders five days after the first court mention and the day after the POC were received, the making of consent orders but for costs was postponed by a week only, and the Respondents are entitled to challenge the costs order sought by the Council, I do not consider they have acted so unreasonably after 15 June 2012 to warrant an award of all the Council's costs. The Council should be awarded one eleventh of its costs up to and including 15 June 2012 from each of the two Respondents subject to further limitations I refer to below. The costs of the costs hearing on 24 July 2012 is a separate matter I also refer to below. Limit on costs award appropriate 40The legal costs for the period 11 May to 27 June 2012 incurred by the Council as detailed in the Council's solicitors' letter to each of the two Respondents dated 2 July 2012 were over $80,000. The letter itemised solicitors' fees of approximately $50,000 incurred from 11 May to 27 June 2012 and the costs of both senior and junior counsel from 16 May to 22 June 2012 of over $21,000. The letter does identify that not all these costs are recoverable as party/party costs but nevertheless the costs appear large for two months work when apart from the commencement of proceedings only two Court mentions were necessary. The letter sought to settle costs on the basis that each Respondent pay $8,000, not including the costs of any contested costs hearing. 41The issues applying to the eleven Respondents were the same and eight of the Respondents were represented by the same solicitor at the first mention on 15 June 2012. Consent orders were agreed but for costs by Mr Ryan and Mr Parker on 20 June 2012 only five days after the first mention on 15 June 2012. Council's solicitors briefed senior counsel in the proceedings before this Court including on the costs hearing. Briefing both senior and junior counsel is not justified on a costs basis given that the matter settled relatively quickly once proceedings were commenced. I am not criticising the appearance of senior counsel by these comments. If I am not careful, however, in limiting the amount of costs awarded against the two Respondents to what is appropriate in the circumstances of this case the costs award could be seen as punitive. Any costs recovered must not include senior counsel's fees, only one set of solicitor's fees and be otherwise reasonable. Costs of the costs hearing 42I have decided to award some of the costs sought by the Council. It seeks its costs of the costs hearing at which it was partially successful. On the basis that costs should follow the event the Council should get some of its costs. I have wide discretion to determine on what basis costs are to be awarded. I am concerned about the costs incurred in this regard given that the costs hearing took much of a hearing day when the substantive matter was settled on the second mention date before the Court, senior counsel was briefed, there appears to have been considerable work by the Council's solicitors, and the amount otherwise recoverable from the two Respondents should be relatively modest. Cost recovery costs should not overwhelm the amount of costs in contention. I consider that I should award half of the Council's costs of the costs hearing with further limitations on what can be recovered. Only costs in relation to one solicitor are recoverable and costs incurred in the preparation of those affidavits read (including the related exhibits) in the costs hearing can be recovered, not costs for affidavits not read. Reasonable disbursements incurred in the preparation for the costs hearing are recoverable. No loading for senior counsel is to be recovered. 43Before making final orders I will give the parties an opportunity to confer about an appropriate amount in light of this judgment to see if they wish orders to be made for a particular amount rather than the usual order, costs as agreed or assessed. It may also be that the Respondents will wish to make an application to be allowed time to pay. I have no information about their personal financial positions or the impact of the Council's insurance policies, if any. An appropriate time to do so will be discussed with the parties. 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. Decision last updated: 02 August 2012