Land and Environment Court New South Wales Medium Neutral Citation: Elbaf v Kayellou [2015] NSWLEC 81 Hearing dates: 15 October 2014 Date of orders: 20 May 2015 Decision date: 20 May 2015 Jurisdiction: Class 4 Before: Sheahan J Decision: (1) The costs order made by Beech-Jones AJ on 16 June 2014 is confirmed, on a party-party basis. (2) The Council is ordered to pay the Elbafs' costs of their summons on a party-party basis, as agreed or assessed. (3) The Council is ordered to pay the Elbafs' and Kayellou's costs of the costs hearing before me on 15 October 2014, on a party-party basis, as agreed or assessed. (4) All exhibits, Court and Evidence books are returned. Catchwords: COSTS – class 4 proceedings discontinued – circumstances in which the usual costs order that the discontinuing party pay the costs of the proceedings should not be made – "supervening event" – whether there was an "effective surrender" – unreasonable conduct – indemnity costs. Legislation Cited: Civil Procedure Act 2005 Environmental Planning and Assessment Act 1979 Local Government Act 1993 Uniform Civil Procedure Rules 2005 Cases Cited: Australiawide Airlines Pty Ltd v Aspiricon Pty Ltd [2006] NSWCA 365 Elbaf v Campbelltown City Council [2014] NSWLEC 1074 F Hannan Pty Ltd v Electricity Commission of NSW (No 3) (1985) 66 LGRA 306 Hypec Electronics Pty Ltd (In liq) v Mead [2004] NSWSC 731; 61 NSWLR 169 Kiama Council v Grant [2006] NSWLEC 96; 143 LGERA 441 Latoudis v Casey [1990] HCA 59; 170 CLR 534 Mead v Watson as Liquidator for Hypec Electronics Pty Ltd [2005] NSWCA 133; 23 ACLC 718 Minister for Urban Affairs and Planning v Rosemount Estates Pty Ltd (1996) 91 LGERA 31 Mirvac Projects Pty Ltd v Ku-Ring-Gai Council [2007] NSWLEC 245 Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 Ralph Lauren 57 Pty Ltd v Byron Shire Council [2014] NSWCA 107; 199 LGERA 424 Re Minster for Immigration and Ethnic Affairs; Ex Parte Lai Qin [1997] HCA 6; 186 CLR 622 Styles v Wollondilly Shire Council (No 3) [2001] NSWLEC 133 Category: Costs Parties: Abduhalim Elbaf (First Applicant/Cross-Respondent) Amne Elbaf (Second Applicant/Cross-Respondent) Mohammed Wassim Kayellou (First Respondent/Second Cross-Respondent) Campbelltown City Council (Second Respondent/Cross-Applicant) Representation: Counsel: Mr J Lazarus (Applicants/First Cross-Respondents) Mr M Wright (Second Respondent/Cross-Applicant) Mr A Pickles (First Respondent/Second Cross-Respondent) Solicitors: Burrell Solicitors (Applicants/First Cross-Respondents) Marsdens Law Group (Second Respondent/Cross-Applicant) Hills Group Legal (First Respondent/Second Cross-Respondent) File Number(s): 41030 of 2013 Judgment Introduction 1. The only questions remaining for the Court in these complex Class 4 proceedings concern the parties' costs. 2. The applicants ("the Elbafs") brought the proceedings against the certifier of a project at Ingleburn (the first respondent – "Kayellou"), and against the relevant development approval authority (the second respondent – "Council"), and then the Council brought a cross-summons against the Elbafs (as "first respondents" to it) and Kayellou (as "second respondent" to it). To avoid confusion, I will refer to all parties by name. 3. In the proceedings, as so joined, the Elbafs and Council both sought declaratory relief concerning the validity or invalidity of: 1. a complying development certificate ("CDC"), issued on 13 December 2012 by Kayellou; and 2. an order issued by Council on 11 November 2013, pursuant to s 121B of the Environmental Planning and Assessment Act 1979 ("EPA Act"), in respect of the subject development. 1. The Elbafs argued that the CDC was valid and the order was invalid, and the Council argued that the CDC was invalid and the order valid. Both the Elbafs and the Council also sought consequential restraining orders, and costs. 2. Other than the presently remaining questions as to costs, the proceedings are effectively concluded, having become otiose, following: 1. some orders made by Beech-Jones AJ, on 16 June 2014; 2. Council's decisions favourable to the Elbafs, on 19 August 2014; and 3. an order made by Pepper J, by consent, on 29 August 2014. The Evidence 1. For the Court's consideration of these questions of costs, voluminous documents were placed before me by the respective counsel for the parties, without objection, including the Court and Evidence Books from an earlier occasion. 2. Two affidavits were read – one by David Baird, Council's solicitor, dated 11 September 2014, and one by John Burrell, solicitor for the Elbafs, dated 19 September 2014. Both annexed relevant documents. 3. A chronology of key events was also largely agreed, and all three counsel provided helpful written and oral submissions. 4. Mr Lazarus, counsel for the Elbafs, also tendered the Council's Statement of Facts and Contentions from one of two relevant earlier Class 1 proceedings (matter no 10970 of 2013), brought against it by the Elbafs (Exhibit A1). 5. Mr Wright, counsel for the Council, also referred this Court to the submissions he had prepared for the substantive hearing, listed on 16 June 2014 before Beech-Jones AJ. 6. The two Class 1 appeals (10969 and 10970 of 2013) were dismissed by Commissioner Morris on 29 April 2014 (Elbaf v Campbelltown City Council [2014] NSWLEC 1074 – see Burrell pp62 – 80). 7. Subsequently, in May 2014, the Elbafs lodged development and building certificate applications to obtain approval to use the as-built structure, and to complete the subject residential building, "more or less as approved in the disputed [CDC]". (See Burrell p32, par 10, and pp40 – 57, and 81 – 94). The Costs Issues 1. Council had won from Beech-Jones AJ, when His Honour vacated, on 16 June 2014, the hearing scheduled for 16 – 17 June 2014, an order (Order 5) for its "costs thrown away" as a consequence of that vacation, on the ordinary party-party basis, as agreed or assessed, but His Honour reserved (Order 6) Council's right to pursue an order for those costs to be paid on an indemnity basis, an order which it now seeks before me. (See His Honour's reasons at pp34 – 38 of Burrell). 2. Council seeks, in addition, an order that the balance of its costs of the proceedings be paid on a party-party basis. 3. Kayellou filed a submitting appearance in response to the Elbafs' summons, but chose actively to defend the cross-summons, until 12 June 2014, on which date the Elbafs indicated their intention to discontinue their summons and submit to the cross-summons. Kayellou then entered a submitting appearance on the cross-summons. 4. Council, therefore, seeks an order against both Kayellou and the Elbafs for its costs, on a party-party basis. 5. Kayellou resists the Council's claim, but does not seek his costs from the Council or the Elbafs. 6. Kayellou says that, as between him and the Council, the appropriate order is that each party pay its own costs. 7. If the Council does not succeed in obtaining its costs from him, Kayellou seeks from the Council his costs of this costs hearing. 8. The Elbafs' primary argument is that Beech-Jones AJ's costs order should stand, as is, and that Council should pay the Elbafs' costs on the summons, but that there be no order for costs on the cross-summons, on the grounds that it was unlawful for the Council to issue its s 121B order. 9. Their secondary position is that existing orders should stand, but there should be no other order as to costs of the proceedings as a whole, on the basis of a "supervening event" having removed the need for them. 10. Their third position is that, if the Court finds that the grant of DC is not a "supervening event", and the Elbafs are ordered to pay costs on the summons, the Council should pay the other parties' costs on their cross-summons. 11. They fourthly argue that, if I conclude that each party should bear its own costs, the Council should pay the Elbafs' costs of this costs hearing. The Relevant History 1. The chronology of key events prior to relevant litigation is as follows: 13 December 2012 CDC No. 0455/2012 for "Two Storey + granny flat" issued by Kayellou to Abduhalim Elbaf, and registered by Council (Reference 2491/2012/CDCPRI). 1 March 2013 Council contacted by owners of the subject land to advise that works pursuant to CDC 0455/2012 were to commence shortly on the land, and that section 94A contributions would be paid. 5 April 2013 Complaint received by Council from nearby resident regarding building works being undertaken on the land and trucks associated with the development tracking mud onto the road. 9 April 2013 Inspection of the land by Council's Development Compliance Officer reveals that building works had commenced for development in accordance with CDC 0455/2012. 9 April 2013 Examination of Council records by Council Staff who form the opinion that CDC 0455/2012 had been issued in contradiction of Council's Environmental Planning Instruments. 22 April 2013 Development Application ("DA") lodged by Abduhalim Elbaf for the construction of a two storey dwelling and attached outbuilding on the Land (DA879/2013/DA-DW). 23 April 2013 Notice of proposed Order in the terms of Order No 2 and Order No 19 issued by Council to Abduhalim and Amne Elbaf. 1 May 2013 Letter from Urbanesque Planning Pty Ltd to Council making representations on the Elbafs' behalf on the Notice of Proposed Order. 6 May 2013 Building Certificate ("BC") Application (No. 957/2013/BC-UW) lodged by Abduhalim Elbaf, for a BC to be issued for the structures on the land, namely a partially constructed dwelling, an outbuilding, and retaining walls. 6 May 2013 Application lodged by Abduhalim Elbaf under section 68 of the Local Government Act 1993 for approval to install and approval to operate a system of wastewater management on the land (Application No. 960/2013/S68WWI). 14 May 2013 Notice of Determination issued by Council in respect of Application No. 960/2013/S68WWI granting approval for the installation of an aerated waste water treatment system on the land. 20 June 2013 Letter issued by Council to Abduhalim Elbaf stating that a BC will not be issued until certain documentation is submitted to Council. 25 June 2013 Notice of Determination issued by Council to Abduhalim Elbaf, refusing consent to DA No. 879/2013/DA-DW. 12 July 2013 Request for review of determination of DA No. 879/2013/DA-DW, pursuant to section 82A of the EPA Act lodged by Ahmad Majzoub (Application No. 1458/2013/DA-82A). 15 October 2013 Notice of Determination issued by Council to Ahmad Majzoub in respect of Application No. 1458/2013/DA-82A, confirming refusal of DA No. 879/2013/DA-DW. 11 November 2013 Orders in terms of Order No. 2 and Order No. 19 issued by Council to Abduhalim and Amne Elbaf. 1. Litigation commenced in December 2013. 2. On 6 December 2013, the Elbafs lodged a Class 1 appeal in this Court against the Order issued by Council on 11 November 2013 (matter no 10954 of 2013). That appeal remains undetermined, and is expected to be discontinued after this costs judgment is delivered. 3. On 12 December 2013, the Elbafs lodged appeals against Council's refusal of DA No. 879/2013/DA-DW (matter no 10970 of 2013), and against Council's deemed refusal of BC Application No. 957/2013/BC-UW (matter no 10969 of 2013). 4. On 23 December 2013, they commenced these Class 4 proceedings. 5. On 17 February 2014, the Council filed its cross-summons in these proceedings. 6. The focus of the summons and cross-summons was the validity of the CDC, an issue which the Council says it raised with the Elbafs as early as April 2013. 7. On 18 February 2014, Kayellou filed a submitting appearance to the Elbafs' summons, and, on 19 February 2014, he filed his response to the cross-summons. 8. On 4 March 2014, the Elbafs filed their response to the cross-summons. 9. In the months February to April 2014, case management of these Class 4 proceedings continued, and, on 4 April 2014, they were set down for hearing on 16 – 17 June 2014. 10. On 7 April 2014, Kayellou filed an amended response to the cross-summons. 11. On 29 April 2014, Commissioner Morris handed down her judgment in matters 10969 and 10970 ([2014] NSWLEC 1074 – see [27] above), and refused both DA No. 879/2013/DA-DW, and BC Application No. 957/2013/BC-UW. 12. On 13 May 2014, Ahmad Majzoub lodged a further DA (1138/14) on behalf of the Elbafs. 13. During early June 2014, a Court Book, an agreed Statement of Facts, and a chronology were prepared, in readiness for the hearing. 14. On 10 June 2014, Burrell told Baird that the Elbafs would now seek to discontinue the Class 4 summons, and submit on the cross-summons. 15. On 11 June 2014, he confirmed those instructions, and added (Baird p10): In respect of costs, we are instructed our client will pay Council's reasonable costs to date in respect of the Summons in a sum to be agreed or assessed however, as discussed, our client would prefer to reach a written agreement that is not recorded in any orders made in the proceedings, as they wish to include these costs in any future damages claim against Kayellou. We enclose some notes discussing this issue on a without prejudice and confidential basis. 1. In his reply of 11 June 2014, Baird advised Burrell that Council would require that an order be made for the Council's costs, and he invited the Elbafs to surrender the CDC. 2. On 12 June 2014, Burrell suggested the wording of a costs order (Baird p22): The applicants pay the second respondent's costs of the applicant's claim up until 1.15pm on 11 June 2014 (when notice of discontinuance was formally given), excluding the costs of and associated with the cross-claim. 1. Later on 12 June, Mr Andrew Pickles, counsel for Kayellou, made clear his client's position on costs (Baird p27). 2. Kayellou agreed to the adjournment of the proceedings, but not to paying Council's costs thrown away as a consequence of it. He had, earlier on 12 June, offered to pay Council 50% of its costs on the cross-summons, but Baird said, in response to Pickles, on 13 June (Baird p33): We give you notice that Council now intends to seek from the Court orders against each of the Cross Respondents requiring them to pay Councils costs on a full indemnity basis having regard to the late submission to the orders of the Court by each Cross Respondent. 1. In the period 12 – 14 June 2014, Baird advised Beech-Jones AJ that the hearing may not proceed, and he also suggested to Burrell that the hearing dates be vacated, pending Council's consideration of the Elbafs' May applications, which offered (Baird p31) "a resolution to the unlawful use ... of the land". 2. Burrell did not concede that those applications "rely on" the CDC, and did not agree to vacation of the hearing, even if it were to be limited to the cross-summons. Council was placed in the position of prosecuting the cross-summons, at a cost which could have been avoided by the Elbafs' consenting to vacating the date (Baird p31). If Council succeeded on the cross-summons it would seek indemnity costs from the Elbafs (Baird p32). 3. In refusing to consent to the adjournment, Burrell wrote (Baird p29): The CDC is entirely unrelated to the current applications. In our view, the question as to the validity of the CDC and the s.121B Order which was issued by Council on the assertion that the CDC is invalid, require judicial determination irrespective of those applications and the outcome of those applications, first, in the public interest as a matter of considerable community and administrative concern and second, because of the personal hardship and financial loss occasioned by our clients as a consequence of Council intervening to stop work on the site under the CDC. … We see no substantive reason why Council is materially altered by the discontinuance … we see no substantive reason to vacate the hearing of the cross-claim. 1. On 12 June 2014, Pickles emailed Baird, saying that his clients agreed to the adjournment, but would not agree to pay Council's "costs thrown away" by the adjournment, because he was ready to proceed to be heard on costs on 16 – 17 June, and that any adjournment would be at the behest, and for the convenience, of the Council. 2. After working hours on 13 June 2014, Burrell indicated a possible change in the Elbafs' position, and, on 14 June 2014, Baird wrote back to Burrell (Baird p36), indicating that, if the Elbafs' position changed as had been suggested, and the hearing dates were vacated, Council would require the Elbafs to undertake not to rely upon the CDC. 3. On 16 June 2014, as the hearing commenced before Beech-Jones AJ, Mr Jason Lazarus, counsel for the Elbafs, sought His Honour's leave to withdraw the Notice of Discontinuance, and the Submitting Appearance on the cross-summons, and asked for an adjournment. 4. The purpose of these withdrawals was to preserve the Elbafs' position in relation to the validity of the CDC, so that it could be relied upon in the event that the applications then before Council were refused. 5. The Council did not oppose that suggested course (see Tp26), and Beech-Jones AJ made the following orders: 1. To the extent necessary, grant the Applicants leave to withdraw their submitting appearance in regard to the Second Respondent's Cross Summons. 2. To the extent necessary, grant the Applicants leave to withdraw their Notice of Discontinuance. 3. Vacate the hearing dates of 16 and 17 June 2014. 4. The proceedings are stood over to 25 July 2014 at 9.30am before the Land & Environment Court List Judge for mention. 5. Order the Applicants to pay the costs of the Second Respondent thrown away by vacation of the hearing dates, as agreed or assessed. 6. The question of whether the Applicants should pay these costs on the indemnity basis is reserved. 7. Note the undertaking given by the Applicants to the Court by their Counsel that, unless and until relieved of this undertaking by further order of the Court, they will not by themselves, their servants or agents carry out any work or otherwise rely upon complying development certificate CDC 0455/12. 1. On 25 July 2014, pursuant to Order 4, the List Judge in this Court, Pepper J, stood the matter over to 29 August 2014. 2. On 19 August 2014, Council approved the Elbafs' DA and BC. 3. On 27 August 2014, Baird told Burrell that Council would agree to "the finalization of all Court matters", on the following basis (Burrell p105): 1. Council will consent to the Applicants filing a Notice of Discontinuance on the Summons in Class 4 of the court's jurisdiction on the basis that the Applicants agree to pay Councils costs as agreed or assessed. 2. Council will revoke the order the subject of the Class 1 appeal and agree to the discontinuance of those proceedings on the basis of each party paying their own costs. 3. Council will agree to filing a Notice of Discontinuance on their Cross Summons in Class 4 only on the basis that your client surrenders the CDC pursuant to s104A of the EPA Act and agrees to pay Councils costs as agreed or assessed. 1. On 29 August 2014, Pepper J made a series of orders and directions, by consent, including the following: 1. The applicants and the second respondent are to file Notices of Discontinuance of the Summons and Cross-Summons respectively on terms that the applicants surrender the subject CDC upon the determination of costs of the matter as follows: 1. Those orders and directions also established a timetable for the present hearing on costs, and granted liberty to all parties to restore on three days' notice. Relevant Costs Principles 1. Rule 42.19(2) of the Uniform Civil Procedure Rules 2005 ("UCPR"), provides: Unless the court orders otherwise or the notice referred to in rule 12.1 (2) otherwise provides, the plaintiff must pay such of the defendant's costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued 1. Costs are in the discretion of the court pursuant to s 98(1) of the Civil Procedure Act 2005, but the usual order in UCPR r 42.19(2) should be made, unless there are some "good reasons for departing from the ordinary course": Australiawide Airlines Pty Ltd v Aspiricon Pty Ltd [2006] NSWCA 365 at [54]. 2. I was taken to numerous authorities illustrating the circumstances in which an "alternative order" has been, or may be, made. 3. Relevantly, where one party effectively "surrenders" to the other party, by discontinuing without the consent of the other party, or gives undertakings to the court substantially in terms or to the effect claimed by the other party, the proper exercise of the court's discretion is to make a costs order in favour of the successful party, unless there is "disentitling" conduct on its part: Ralph Lauren 57 Pty Ltd v Byron Shire Council ("Ralph Lauren") [2014] NSWCA 107; 199 LGERA 424, at [26]. 4. Additionally, if there has been a "supervening event" or settlement, removing the subject of the dispute, so that no issue remains, apart from costs, the proper exercise of the court's discretion is to make no order as to costs, unless the conduct of one party has been so unreasonable that the other party should obtain its costs of the action, or, if one party had been almost certain to succeed if the matter had been fully tried, that party should obtain the costs of the action: Kiama Council v Grant ("Grant") [2006] NSWLEC 96; 143 LGERA 441, at [80]. Consideration A: Council's Claims for Costs 1. The Council's costs claims against both the Elbafs, and Kayellou, in my opinion, must be dismissed. Application of the principles enunciated in, Grant and Re Minster for Immigration and Ethnic Affairs; Ex Parte Lai Qin ("Lai Qin") [1997] HCA 6; 186 CLR 622, clearly show that, when the grant of a subsequent development consent renders the proceedings futile, that is a "supervening event", and each party should, therefore, bear its own costs. 2. I am not convinced that the Elbafs' conduct in agreeing to discontinue its summons, and to surrender its CDC upon the determination of these costs proceedings, was an "effective surrender", as submitted by Mr Michael Wright, of counsel, on Council's behalf (pars 37 – 40). 3. The basis for departure from the usual course prescribed by r 42.19(2), where there has been an "effective surrender", is based on the following passage in the judgment of Preston ChJ, sitting in the Court of Appeal in Ralph Lauren (at [26]), refusing leave to appeal my decision at first instance (citations omitted): Unreasonableness of conduct can also be found in a defendant continuing to defend litigation until it then surrenders to the plaintiff by consenting to the court making orders, or giving an undertaking to the court, in substantially the same terms and effect as sought by the plaintiff in the proceedings: … This is not a settlement of the litigation in the ordinary sense, but rather a surrender to the plaintiff. In this circumstance, although there has not been a trial on the merits, the court may feel confident that the discontinuing party would have almost certainly have succeeded if the matter had been fully tried: Lai Qin at 625. The defendant's unreasonableness in defending litigation that it would almost inevitably have lost up to the point of surrender, causing the plaintiff unnecessarily and unreasonably to have incurred costs to that point, may provide the justification for a costs order in favour of the discontinuing plaintiff. 1. His Honour had earlier qualified this point, stating (at [23] – again citations omitted): The mere fact that the discontinuing plaintiff may have achieved some practical success, such as achieving the result it sought in the proceedings, does not by itself and without some extra circumstance, ordinarily justify the awarding of costs in favour of the discontinuing plaintiff. The extra circumstance needed is frequently found in the unreasonableness of the conduct of the defendant … The unreasonableness in the conduct of the defendant may be prior to the commencement of the proceedings, where such conduct may have precipitated the litigation, or in the defence of the proceedings. 1. The mere fact that the Elbafs consented to the surrender of the CDC, and the Council therefore achieved some "practical success", is not sufficient to entitle the Council to its costs, nor is it an "effective surrender". 2. The Elbafs withdrew their submitting appearance on the cross-summons on the 16 June before Beech-Jones AJ (see [49] above), because they wanted to preserve their position on the validity of the CDC, so that it could be relied upon in the event that the DA then pending before Council, regularising the works, was refused. 3. The undertaking given by the Elbafs, to not carry out any works in reliance on the CDC, until the issue of its validity had been finally determined, can hardly be said to be the "effective surrender" for which the Council contends. The issue of validity remained unresolved. 4. Nor was subsequent agreement by the Elbafs to surrender the CDC, upon the resolution of the costs issue, an "effective surrender" in the proceedings. 5. That agreement, it can be assumed, came as a result of the grant of the DA approval, which regularised the work, and the Elbafs, therefore, no longer relied on the validity of the CDC. 6. Had the DA been refused, the Elbafs, assuming their position had not changed since the matter was before Beech-Jones AJ, would presumably have sought to assert the validity of the CDC, so that it could be relied upon. 7. None of this conduct can be said to be unreasonable. 8. The Council further argued that the Elbafs' conduct in the proceedings generally, and particularly in the week leading up to the hearing before Beech-Jones AJ (detailed above at [38] – [48]), was so unreasonable that the hearing dates had to be abandoned, so entitling the Council to its costs. 9. I do not agree. 10. The Elbafs conceded that their conduct in that week was unsatisfactory, and that the Council was entitled to its costs thrown away. Such conduct led to a compensatory order for costs thrown away being made by Beech-Jones AJ, but they submit now (pars 37 – 38) that it cannot now be a basis for claiming all of its costs of the entire proceedings. 11. I agree with this submission. 12. On Council's behalf, Mr Wright responded to this claim (Tp27, L23 – p28, L21): It was also suggested in the course of Mr Lazarus's submissions that the only dimension of unreasonableness in the applicants' conduct relied upon by the council is the matters going to the unexplained, sudden changes of the position in the week before the hearing. That, with respect, is incorrect. I made clear in the costs submissions that I was relying upon the outline of submissions filed in proceedings before Beech Jones AJ. I don't need to take your Honour in detail through the whole of the argument in submissions, but I rely upon it and I invite your Honour to have regard to it in due course. But what the submissions set out is the basis upon which the council says that the development which was the subject of the CDC was prohibited development. … In any event, if your Honour has regard to the full chronology of events, and in particular what I took your Honour to, from the period it came to council's attention, that there were concerns about the validity of the CDC, that council went out of its way to resolve the matter with the applicants in the course of 2013 and it was only after the applications made to it to regularise what was occurring on the land were refused that it took the step of issuing the order. But what Mr Lazarus seeks to do, with respect, is to deflect attention from the true issue in the proceedings, and that is his reliance upon the CDC. It was the primary issue both in his summons and the cross summons. The question the Court would inevitably have had to determine was whether the CDC was valid. The cross summons sought relief in relation to what might be described as the underlying breach of the Act: that is, the CDC itself was invalid. I accept there has been no direct determination of that question, but that's not the point in relation to the application for costs. Insofar as there has been a result in the proceedings, the position contended for by the council throughout that is, that the CDC should not be relied upon that if there is a means by which the structures and uses of the land might be regularised, it should be done properly by, first, a development application and, second, by an application for a building certificate in respect of structures already built, that is the course that should be followed. 1. I am not satisfied that the conduct of the Elbafs, in seeking to assert the validity of the CDC, whilst pursuing the regularisation of the works through another means, namely the DA/BC processes, was in any way "unreasonable". Consistent with what I said above (at [72]), reliance on the CDC as a "fall back" position, in the event that the DC was NOT granted, was an entirely appropriate course. 2. I turn, now, to Council's claims for costs against Kayellou. 3. Council alleged (pars 60 – 61) that Kayellou acted unreasonably in actively defending the cross-summons, and then later entering a submitting appearance, on the eve of the hearing before Beech-Jones AJ. 4. I accept the arguments made by Kayellou, in his written and oral submissions, that this conduct was not unreasonable. 5. His submitting appearance was a direct result of the intention expressed by the Elbafs, that they no longer sought to rely on the CDC, or to defend its validity. Kayellou (par 13) could have no interest in defending a CDC upon which its holder no longer intended to rely. Up to that point, it was not unreasonable for Kayellou to defend the validity of the CDC that he issued. Its timing simply reflected the conduct of the Elbafs in entering a submitting appearance on the cross-summons, and discontinuing their summons (par 14). 6. For those reasons I find the conduct of Kayellou entirely reasonable, and reject Council's claims for costs. 7. It follows from what I have written, that all parties should pay their own costs in respect of the Council's cross-summons, as the grant of the DC regularising the works the subject of the CDC, was a "supervening event" (see [61] above), and there was no unreasonable conduct on the part of either Kayellou or the Elbafs, entitling the Council to its costs. B: The Elbafs' Claims for Costs 1. The Elbafs claim that the Council should pay their costs of its summons. 2. Although the Elbafs are the discontinuing parties, it was submitted that the Council's conduct in issuing the s 121B order (see [24] above) was unreasonable conduct which precipitated the commencement of the proceedings, therefore entitling them to their costs, (relying on what Preston ChJ said in Ralph Lauren at [23] – see [64] – [65] above). 3. The unreasonableness, it was said, stems from the fact that a CDC, like a DC remains valid, until declared invalid by the court: F Hannan Pty Ltd v Electricity Commission of NSW (No 3) (1985) 66 LGRA 306, at 327; Minister for Urban Affairs and Planning v Rosemount Estates Pty Ltd (1996) 91 LGERA 31, at 88; Mirvac Projects Pty Ltd v Ku-Ring-Gai Council [2007] NSWLEC 245, at [26]. 4. Although the Elbafs could point to no authority that extended that principle to CDCs, the Council conceded that CDCs are a "species" of DC, and that there is no reason the DC principle would not extend to them. 5. It follows that the s 121B order was issued without power, because, at the time it was issued, the works were authorised by a valid CDC (Elbafs' subs par 27). 6. It was asserted that this conduct "forced" the Elbafs to bring the proceedings, asserting the validity of the CDC, and the invalidity of the s 121B order. 7. The Council submitted that this claim invites the Court to undertake a merits assessment of the "validity" of the s 121B order and the CDC, at issue in the substantive proceedings, but such a course should be avoided in costs matters: Lai Qin. 8. It is a well-established principle that DCs remain valid, until they are declared not so. The Council was, therefore, pre-mature in issuing the s 121B order, asserting the unlawfulness of the works and the invalidity of the CDC. 9. The proper course would have been to commence Class 4 proceedings by way of summons asserting the invalidity of the CDC prior to issuing the s 121B order. 10. There would have been no need for the Elbafs to file their summons if the Council had acted lawfully. 11. For those reasons, I am satisfied that the Elbafs are entitled to have the Council pay the costs of their summons. C: Indemnity Costs? 1. Beech-Jones AJ ordered costs thrown-away, by vacation of the June hearing dates, but on only a party-party basis, reserving the question of making that order in terms of indemnity costs, on the basis of the Elbafs' conduct in the lead-up to that hearing. 2. The Council now submits that it is entitled to have those costs on an indemnity basis, principally because it was unreasonable of the Elbafs to refuse vacation of the hearing dates, pending the outcome of the DA (see [45] – [46] above), the approval of which has now rendered the proceedings futile. 3. Mr Wright succinctly stated the Council's position (Tp29, LL 8 – 48): The reason why the costs order should be, in effect, changed to an order for indemnity costs is that exactly what the council said should happen by virtue of the present intention to resolve the proceedings has happened. All of the costs incurred, the costs thrown away for the preparation of the hearing in June, could have been avoided, and the council's reasoned suggestion has been vindicated by the ultimate result. Council has determined the applications; they've been approved; the use of the land and the buildings have been regularised by the approval of those applications; and the council should not be visited and the ratepayers should not be visited with any of the costs associated with the applicants' attempts to preserve its position for its own purposes were that result had been achieved. 1. Mr Wright relied on the principles enunciated by Campbell J in Hypec Electronics Pty Ltd (In liq) v Mead [2004] NSWSC 731; 61 NSWLR 169, at [40] – [46], as confirmed on appeal in Mead v Watson as Liquidator for Hypec Electronics Pty Ltd [2005] NSWCA 133; 23 ACLC 718, at [8]. I also discussed the principles relevant to indemnity costs in Styles v Wollondilly Shire Council (No 3) ("Styles") [2001] NSWLEC 133, at [6] to [14] . 2. In Styles, I acknowledged (at [10] and [12]) that the court has a broad and unfettered discretion to award costs on an indemnity basis, turning on the particular circumstances of the case in question. However, there must be circumstances which are "out of the ordinary, such as an element of abuse of process, ulterior or extraneous purposes, or unreasonableness", or, as described by Gummow and Gaudron JJ, in Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72, a "relevant delinquency on the part of the unsuccessful party", (Styles, at [14]). 3. With these principles in mind, I am not satisfied that the Elbafs' conduct in the week preceding 16 June was so "out of the ordinary", or involved some element of "delinquency", warranting the making of an indemnity costs order. 4. True it is that their conduct was unsatisfactory, as their counsel has acknowledged (see [75] above), but the late change in position, so preserving the Elbafs' right to rely on the CDC as a "fall back", was a forensic decision it was entitled to make (see [67] – [72] above). The late changes were regrettable, but such late changes are not entirely uncommon in the course of adversarial litigation. 5. The Council has already been "compensated" for the costs thrown away as a result of the vacation of the hearing dates (see [51] above): Latoudis v Casey [1990] HCA 59; 170 CLR 534. 6. I, therefore, decline to make an indemnity costs order in Council's favour for costs thrown away by the vacation of the hearing dates. D: Kayellou's Position 1. Kayellou appeared before me only to resist the claim for costs made against him by the Council. 2. The Elbafs have made no claim for the costs of their summons against him, and he made no claim for his costs against the others. 3. For reasons already stated, the Council is not entitled to a costs order in its favour (see [62] – [84] above). The Costs of this Costs Hearing 1. As the Council has been entirely unsuccessful on all the costs issues it raised, it is fair and reasonable that it should be ordered to pay the costs of the other parties. Orders 1. I therefore make the following orders: 1. The existing costs order made by Beech-Jones AJ on 16 June 2014 is confirmed, on a party-party basis. 2. The Council is ordered to pay the Elbafs' costs of their summons, on a party-party basis, as agreed or assessed. 3. The Council is ordered to pay the Elbafs' and Kayellou's costs of the costs hearing before me on 15 October 2014, on a party-party basis, as agreed or assessed. 4. All exhibits, Court and Evidence books 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. Decision last updated: 20 May 2015