Land and Environment Court New South Wales Medium Neutral Citation: The Owners Strata Plan 432 v Seddon (No 2) [2016] NSWLEC 92 Hearing dates: 5 June 2015, 19 June 2015, 30 July 2015, 10 November 2015 Date of orders: 29 July 2016 Decision date: 29 July 2016 Jurisdiction: Class 4 Before: Sheahan J Decision: See orders in paragraph [106] Catchwords: COSTS: complex proceedings – no single clear "event" – principles to apply – apportionment – interest claimed – protections under the Strata Titles legislation. Legislation Cited: Civil Procedure Act 2005 Environmental Planning and Assessment Act 1979 Strata Schemes Management Act 1996 Uniform Civil Procedure Rules 2005 Cases Cited: Amalgamated Holdings Ltd v North Sydney Council [2012] NSWLEC 138; 191 LGERA 51 Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 Brown v Randwick City Council (No 2) [2012] NSWLEC 28 Calardu Warrawong (Homestarters) Pty Ltd v Wollongong City Council and Others (No. 2) [2010] NSWLEC 26 Clark & Davis v Wollongong Council (No 2) [2008] NSWLEC 226 Cutcliffe v Lithgow City Council [2006] NSWLEC 463; 147 LGERA 330 Davies v Ku-ring-gai Municipal Council [2003] NSWSC 1010 Drummoyne Municipal Council v Lebnan (1974) HCA 34; 131 CLR 350 Farah, A and Farah, S v Warringah Council and KSSLZ#13 Pty Limited and Ward, T and Ward, M [2006] NSWLEC 544 Friends of King Edward Park Inc v Newcastle City Council (No 3) [2016] NSWLEC 74 GPT Re Limited v Wollongong City Council & Anor [2006] NSWLEC 303; 151 LGERA 116 Greenwood v Warringah Council (No 2) [2013] NSWLEC 3; 196 LGERA 28 His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand & Anor v The Macedonian Orthodox Community Church St Petka Incorporated & Anor (No 2) [2007] NSWCA 142 James & Ors. V. Surf Road Nominees PTY Limited & Ors. (No 2) [2005] NSWCA 296 JT Stratford and Sons Ltd v Lindley (No 2) [1969] 1 WLR 1547 Joseph Lahoud & Anor v Victor Lahoud & Anor [2006] NSWSC 126 Latoudis v Casey [1990] HCA 59; 170 CLR 534 Leda Pty. Ltd v. Weerden & Anor (No. 2) [2007] NSWCA 283 Moallem v Consumer, Trader and Tenancy Tribunal & Ors [2013] NSWSC 1700 Monaghan v Holroyd City Council; Holroyd City Council v Monaghan [2009] NSWLEC 112; 167 LGERA 321 One.Tel v Commissioner of Taxation [2000] FCA 270; 101 FCR 548 Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72; 96 LGERA 173 Owners Strata Plan No 50411 & Ors v Cameron North Sydney Investments Pty Ltd [2003] NSWCA 5 Rossi v Living Choice Australia Ltd (No 2) [2015] NSWCA 301 Ryding v Miles & Ors (No 2) [2012] NSWSC 312 Symes v The Proprietors Strata Plan No 31731 [2003] NSWCA 7 The Owners – Strata Plan No 68372 v Allianz Australia Insurance Limited (No 2) [2015] NSWSC 729 The Owners – Strata Plan No 70798 v Bakkante Constructions Pty Ltd [2014] NSWCA 410 The Owners Strata Plan 432 v Seddon [2015] NSWLEC 69 Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1996, unreported) Xabregas v The Owners – Strata Plan No. 79205; Moallem v Consumer, Trader and Tenancy Tribunal & Ors (No. 2) [2014] NSWSC 1027 Xabregas v The Owners – Strata Plan No. 79205; Moallem v Consumer, Trader and Tenancy Tribunal & Ors (No. 3) [2014] NSWSC 1338 Category: Costs Parties: The Owners Strata Plan 432 (Applicant) James Donald Seddon (First respondent) Vanessa Jane Larsen (Second respondent) Manly Council (Third respondent) Representation: Counsel: Ms L Byrne and (on 10 November 2015) Ms D Woods, barristers (Applicant) Mr S Docker, barrister (First and second respondents) Mr M Seymour, barrister (Third respondent) Solicitors: Turnbull Bowles Lawyers (Applicant) Surry Partners (First and second respondents) General Counsel, Manly Council (Third respondent) File Number(s): 2016/166905 (formerly 40963 of 2013) Judgment Introduction 1. This judgment concerns the costs of the various proceedings in this case, which all three respondents actively defended. 2. For simplicity, I will, in this judgment as in the first, refer to the first and second respondents as "the respondents", and, for the purpose of adjudicating the parties' respective liabilities for any costs, they should be regarded as one entity/party, "competing" in the proceedings with a single applicant and the third respondent (to which I will refer as the "Council"): see Brown v Randwick City Council (No 2) ("Brown") [2012] NSWLEC 28, at [2] and [27]. 3. In my substantive judgment of 1 May 2015 (The Owners Strata Plan 432 v Seddon [2015] NSWLEC 69), I made declarations and orders in favour of the applicant and against the respondents (at [466]). I also held that a complying development certificate ("CDC") granted by Council was invalid. Costs were reserved. 4. On 15 May 2015, the respondents filed a NOM seeking orders of two types – two paragraphs sought a variation in the orders I had made on 1 May, and the remaining paragraphs sought various costs orders. 5. I heard the variation aspects of that NOM on 5 June 2015, and it was vigorously contested by the applicant. 6. Ultimately, all parties reached an agreement that the first order I had made on 1 May 2015 was to stand, but the second order was to be varied. That outcome obviated the need for the respondents to proceed with an appeal of which they had given "Notice of Intention". Costs of the variation application were reserved. 7. The effect of the agreed amendment to my May orders is that the final orders of the Court in respect of the substantive issues in this case are: (1) The Court declares: (i) that the first and second respondents are carrying out or threatening to carry out works at 15 Crescent Street, Fairlight, being Lot 15 SP 432, in breach of the Environmental Planning and Assessment Act 1979; and (ii) that [CDC] No CD56/10 issued by Manly Council on the 27th October 2010 to the first and second respondents is null and void and of no effect. (2) The Court orders that the first and second respondents, by themselves, their employees, agents and contractors be restrained from carrying out any works in the northern part of Lot 15 Strata Plan 432 pursuant to [CDC] No CD56/10 issued by Manly Council on the 27th of October 2010 or inconsistent with BA524/62 unless authorised by the Environmental Planning and Assessment Act 1979 (NSW). The Statutory Costs Regime 1. These being Class 4 proceedings, the relevant costs provisions are s 98(1) of the Civil Procedure Act 2005 ("the CP Act") and the Rules in Part 42 of the Uniform Civil Procedure Rules 2005 ("UCPR"), which provide as follows: 98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. 42.1 General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. 42.7 Interlocutory applications and reserved costs (1) Unless the court orders otherwise, the costs of any application or other step in any proceedings, including: (a) costs that are reserved, and (b) costs in respect of any such application or step in respect of which no order as to costs is made, are to be paid and otherwise dealt with in the same way as the general costs of the proceedings. ... 1. As the applicant represents a strata scheme, and the respondents are unit holders in it, s 229 of the Strata Schemes Management Act 1996 ("the Strata Act") is also relevant (emphasis added – see also main judgment at [286] and [464]): 229 Costs in proceedings by owners against owners corporation (1) This section applies to proceedings brought by one or more owners of lots against an owners corporation or by an owners corporation against one or more owners of lots (including one or more owners joined in third party proceedings). (2) The court may order in proceedings that any money (including costs) payable by an owners corporation under an order made in the proceedings must be paid from contributions levied only in relation to such lots and in such proportions as are specified in the order. (3) If a court makes such an order the owners corporation must, for the purpose of paying the money ordered to be paid by it, levy contributions in accordance with the terms of the order and must pay the money out of the contributions paid in accordance with that levy. (4) Division 2 of Part 3 of Chapter 3 (section 78 (2) excepted) applies to and in respect of contributions levied under this section in the same way as it applies to contributions levied under that Division. 1. Section 230 is referred to in some submissions and authorities, and so may also be relevant in this case: 230 Restrictions on owners corporation levying contributions for expenses (1) An owners corporation cannot, in respect of its costs and expenses in proceedings brought by or against it under Chapter 5, levy a contribution on another party who is successful in the proceedings. (2) An owners corporation that is unsuccessful in proceedings brought by or against it under Chapter 5 cannot pay any part of its costs and expenses in the proceedings from its administrative fund or sinking fund, but may make a levy for the purpose. (3) In this section, a reference to proceedings under Chapter 5 includes a reference to proceedings on appeal. 1. As noted in my judgment (at [464]), Mr Docker, counsel for the respondents, submitted at trial that such "special" provisions are "there to protect lot owners who are being sued by owners corporations from having to contribute to The Owners Corporations' fees". Special Strata Levies and the Applicant's Costs 1. The applicant's solicitor, James Blake, has deposed that, as at 9 November 2015, the applicant had incurred costs of $158,036.87, most of which it had paid. Some $25,000 would appear to have been spent between 1 May and 5 June 2015 (T10.11.15 p38, LL45 – 50, and p51). 2. The payment and non-payment (by the respondents) of strata levies, and the payment out of such levies, by the applicant, of its own legal costs, are detailed in the financial records contained in Exhibits A1, A3 and A4. 3. In a letter dated 13 February 2015 (Exhibit R3) the applicant's solicitors said: We are instructed that the Owners Corporation will not attempt to collect from your clients contributions for special levies in relation to the litigation until costs in the proceedings are determined by the Land and Environment Court and then only in accordance with such orders as are made, and of course subject to s230 of the Strata Schemes Management Act. ... Your clients may rely on this letter in answer to any attempt to recover levies sought to be collected to defray costs of the litigation unless and until the proceedings are determined by the Land and Environment Court and then only in accordance with such orders as are made, and of course subject to s230 of the Strata Schemes Management Act. 1. The applicant's solicitors followed up on 9 September 2015 (Exhibit A5) and included the following: The Owners Corporation expects your clients to discharge their outstanding levies, which, as at 4 September 2015 come to a total of $10,320.33. We should also point out that your clients are not entitled to derive any benefit under Section 230 of the Act because: 1. They have not been successful; and 2. In any event, Section 230 only applies to proceedings before an Adjudicator and the Tribunal under Chapter 5 of the Act and has not application in respect of these proceedings. Our client's rights are expressly reserved. The Costs Agenda 1. Attempts by all parties to negotiate an agreement on costs ultimately failed (see Council's email of 28 May 2015 – Exhibit C1 – and correspondence attached to Richard Phillipps' affidavit of 16 June 2015), and they agreed before me, on 19 June 2015, that a costs mediation would not work. 2. In my absence on extended leave in late 2015, the parties agreed with Pepper J, on 30 July 2015, that there were clear economies to be achieved in all the costs issues coming back before me as the trial judge, on my return, rather than before any other judge of the Court in my absence. 3. As Her Honour wisely noted (T30.7.15 p5, L29), a "costs argument ... of this complexity always turns on nuances". 4. All counsel agreed, at the beginning of the costs hearing on 10 November 2015, that the issues for resolution by this judgment were, as itemised by Mr Seymour, appearing for the Council: 1. Leave to amend the motion for costs 2. Costs of the proceedings: (A) The Applicant's claim for costs (B) Any apportionment of Applicant's costs; (C) Any interest on costs awarded; (D) Any apportionment of costs as between the three Respondents. 3. Costs of the application to vary the injunction ([4] above) 4. Whether the Respondents should be levied for (3). 5. Costs of these applications 1. Issue 1 of that list was an application made by the applicant, at the beginning of the actual costs hearing on 10 November 2015, for leave to amend its Notice of Motion ("NOM") for costs to add a claim for interest. 2. That amendment was opposed by all respondents, but I allowed it (T10.11.15 p8, LL27 – 28, and see par 3 in [22] below), and the interest claim was argued. No specific costs issues arise from that amendment – all parties' costs on it are their "costs in the cause": see His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand & Anor v The Macedonian Orthodox Community Church St Petka Incorporated & Anor (No 2) [2007] NSWCA 142, at [18]ff, referring to JT Stratford & Sons Ltd v Lindley (No 2) [1969] 1 WLR 1547. 3. The costs paragraphs of the respondents' NOM of 15 May 2015, remain for determination, namely: 3. The Third Respondent is to indemnify the First and Second Respondents for their liability to the Applicant for costs in these proceedings. 4. In the alternative, as between the Third Respondent on the one hand and the First and Second Respondents on the other hand, the Third Respondent is to contribute the proportion of the amount payable by the Respondents for the Applicant's costs of the proceedings determined by the Court, being an amount no less than 50%. 5. The Applicant is to pay the First and Second Respondents' costs of this Notice of Motion in respect of paragraphs 1 and 2 above. 6. The Third Respondent is to pay the First and Second Respondents' costs of this Notice of Motion in respect of paragraphs 3 and 4 above. 7. Such further or other order as the Court deems fit. 1. In respect of issue 2(D) (in [19] above), and pars 3 and 5 of the NOM in the previous paragraph, all three respondents have agreed that if a costs order is made in favour of the applicant, 50% of it should be borne by the respondents, and 50% by the Council. 2. As amended on 10 November 2015, the applicant's NOM for costs and interest seeks the following orders: 1. That the Respondents pay the Applicant's costs of the proceedings as agreed or assessed. 2. That the Respondents pay the Applicant's costs of the motion. 3. That the Respondents pay interest at the prescribed rate as defined in s101(4) and (5) Civil Procedure Act 2005 on costs and disbursements paid by the Applicant to its legal advisers in connection with these proceedings on the Allowed Percentage (as defined below) from the date of payment of each such amount until such time as the Respondents have paid the Applicant under any order made in these proceedings. For the purposes of this Order: X = the total amount of costs and disbursements which the Applicant has paid or is liable to pay its legal advisers in connection with these proceedings; Y = the recoverable costs and disbursements allowed on assessment or by agreement to the applicant in connection with these proceedings. The Allowed Percentage = Y/X x (multiplied by) 100%. 1. The Council seeks no orders in its favour. 2. Hence, the issues remaining for the Court's determination are (referring again to the list in [19] above) – the liability for the applicant's costs (issues 2(A) and (B)); whether any interest is payable on them (issue 2(C)); the costs of the variation of the Court's orders (issue 3); any role for s 229 of the Strata Act (issue 4); and the costs of the costs hearing (issue 5). Some Relevant History The "dilemma" 1. In 2009, the (1st and 2nd) respondents bought both a residential apartment unit (Lot 7 at the eastern end of the third floor), and a garage unit (Lot 15 at the western end of the ground floor), in a block of strata apartments managed by the applicant, and located within the local government area for which the respondent Council was responsible. 2. A communal laundry/toilet for the block had occupied the northern end of the garage unit Lot since about 1963, but it was, despite being shown on Council-approved drawings, not shown on the registered Strata Plan. The Court was told at trial that the only inference available was that it was overlooked. 3. The parties tried for a considerable time to negotiate a solution to their "dilemma" (see judgment at [7] and [453]), which was caused by the differences between Council's plans and the registered strata plan. 4. Regrettably, negotiations in 2012 – 2013 did not lead to a solution acceptable to all parties, at least partly because Council did not favour the suggestion that Lot 15 be subdivided (see first affidavit of Richard Phillipps, dated 16 May 2014, par 8, and Exhibit R2 tab C fols 45 – 46/73) 5. The 2nd respondent Larsen deposed (25 February 2014, par 5): ... I was aware of the existence of the laundry and toilet facilities in Lot 15 and that they were used by other owners and tenants of Strata Plan 432 on a casual arrangement when we bought Lots 7 and 15 but I also knew that the whole of Lot 15 was being sold to us and was valued as such by our lender. 1. In her costs affidavit, affirmed 19 May 2015 (par 10), Larsen further deposed to a suggestion allegedly made to her by a (then) Council planner, who later advised her about obtaining a CDC (par 9), that the laundry was "probably a temporary arrangement". The CDC, the works it purported to authorize, and these proceedings 1. In late October 2010, the respondents obtained the subject CDC from Council, authorising removal of the various laundry-type installations within Lot 15 (par 16). 2. The desire of the respondents to commence the CDC-approved works in December 2013, when settlement negotiations had broken down, and so to ensure that they had exclusive possession and use of the whole of their garage lot, led to the urgent commencement of these extraordinarily complex, costly and time-consuming proceedings. 3. In the first phase of them, Biscoe J granted to the applicant, ex parte, on 10 December 2013, an interlocutory injunction restraining the respondents from "stopping other lot owners" from using the laundry/toilet facilities in Lot 15. (That injunction was continued by consent until I delivered the principal judgment on 1 May 2015.) 4. On 18 December 2013, the Council was joined as a third respondent, and on 20 December 2013, the applicant's summons was amended. A late settlement offer 1. On 20 December 2013, the applicant's solicitor sent to the respondents' solicitors a lengthy "without prejudice" letter (affidavit of Phillipps, dated 13 May 2015, annexure "B"), stating seventeen assumptions, and proposing a basis for settlement. Many of the assumptions concerned the covenant, and others the deemed development consent. The offer comprised three parts: a) The area occupied by the laundry and toilet becomes Common Property. b) The covenant is removed by agreement of the parties. c) The remainder of Lot 15 becomes free from the covenant and the Respondents obtain a clean and unencumbered title to Lot 15 and Lot 7. 1. It was also proposed that the proceedings be discontinued, with each party to pay its own costs, that the respondents voluntarily surrender the CDC, and that a valuer be jointly engaged to value Lot 15 and provide expert advice on financial aspects of the settlement. 2. In her submissions on costs (18 June 2015, par 6), Ms Byrne said: The offer ... invited [the respondents] to accept two propositions on which the Applicant was ultimately successful, namely, the residential flat building the subject of the litigation had the benefit of a deemed development consent under current planning law, and secondly, the CDC was invalid. The offer included the payment of compensation for the part of Lot 15 containing the approved laundry and toilet, to be determined by a valuer mutually agreed by the parties. No meaningful correspondence from the First and Second Respondents was received in response: Affidavit of Phillipps 13 May 2015, para 4. The letter also said that the Applicant would pay its own costs to date and made the offer open for 21 days. 1. Council submits (par 5) that the majority of the assumptions in the applicant's letter of offer were not vindicated by the Court. The conduct of the hearing 1. When the case came on for hearing on 20 May 2014, the applicant was granted leave to amend the summons again ([49] – [54]). 2. On 21 May 2014, the applicant filed amended Points of Claim, to which all three respondents, none having decided to "submit", filed responsive Points of Defence ([56] – [59]). 3. Among the Points of Defence there were complaints of delay and abuse of process, and a claim of estoppel ([59], and [380] – [396]). 4. The Council defended its CDC, and the respondents saw the applicant's case as interfering with their property rights. 5. The hearing proceeded over five days; it involved an avalanche of documents and affidavits, and much "shifting of ground" by the applicant, even at the reply stage, and it was followed by further written submissions. 6. In her affidavit of 19 May 2015, the respondent Larsen deposed (at pars 19 and 20): 19. I would not have defended the proceedings if all that was being sought was a declaration that the CDC was invalid on grounds 1, 2 and 4 in the Further Amended Summons and an injunction restraining me and Mr Seddon from acting on the CDC. This is because if that was all they were seeking I would have considered it a matter for the Council because it advised me to apply for the CDC and it issued the CDC. I felt we had to defend the proceedings because the Owners Corporation were seeking an injunction against Mr Seddon and I permanently restraining us from stopping the other lot owners using the laundry and toilet facilities in Lot 15. 20. On 10 December 2013, the Owners Corporation got an interlocutory injunction restraining us stopping the other lot owners using the laundry and toilet facilities in Lot 15. Although we were not represented at that hearing, we understood the Owners Corporation's argument was based on the restrictive covenant on the title of Lot 15, ... (The covenant was dealt with in my judgment, especially in pars [21], [25], [139], [140] and [146], but the understanding referred to in Larsen's par 20 is to be found in the documents before the Court, namely an email from the applicant's solicitor to the respondent's solicitor, sent at 2.16pm on 10 December 2013.) The outcome 1. The Owners Corporation succeeded on two of its four grounds of challenge to the relevant CDC. 2. The Court found it invalid on two closely linked grounds "based on the deemed planning consent that required laundry facilities to be in lot 15" (Docker, 3.6.15 par 9). 3. The applicant was, therefore, entitled to relief. 4. As the third and fourth grounds of challenge were potentially relevant to the formulation of that relief, I considered them as well. 5. Ground (3) was based on an alleged failure to obtain the owner's consent in respect of common property, an issue involving a threshold question of estoppel. The estoppel and related arguments raised by the respondents failed in this regard ([380] – [397]), and so did Ground (3). 6. However, ground (4), based on Council's failure to inspect before granting the CDC, was upheld. 7. The failure of ground (3) had an impact on the declaration(s) I could/should make, and, in the exercise of the Court's discretion, I also granted only part of the injunctive relief the applicant had sought. The Costs Principles 1. I turn now to discuss some general principles which apply to costs questions, and then to apply them to the question of the applicant's costs (issues 2(A) and (B)), and the costs of varying the orders (issue 3). (I will later return to the questions peculiar to Strata situations, and to the issue of interest.) 2. The general principles are undisputed, and were well summarized by Ball J in The Owners – Strata Plan No 68372 v Allianz Australia Insurance Limited (No 2) ("Allianz") [2015] NSWSC 72, at [15] – [23]. 3. I also covered the correct principles extensively in Monaghan v Holroyd City Council; Holroyd City Council v Monaghan [2009] NSWLEC 112; 167 LGERA 321, and I still adhere to my reasoning in that very unusual case. 4. More recently, I again discussed the established principles at some length, in Friends of King Edward Park Inc v Newcastle City Council (No 3) ("Friends") [2016] NSWLEC 74 (see [78] – [92], and [100] – [103]). I will not repeat that analysis, but I will apply it to the complexity of the present case. 5. Although Friends involved "public interest" litigation, and had some complications as a result of submitting appearances, the fundamental principles I outlined in my judgment apply equally to this more "private" case. 6. Costs are compensatory, and not punitive: Latoudis v Casey [1990] HCA 59; 170 CLR 534, at 543 per Mason CJ. 7. The costs discretion (or power) must be exercised judicially, "that is to say not arbitrarily, capriciously, or so as to frustrate the legislative intent": Oshlack v Richmond River Council ("Oshlack") [1998] HCA 11; 193 CLR 72; 96 LGERA 173, at [22]. 8. It is not automatic that "costs follow the event", and it is never simple to find clear agreement on what the event is or was in any particular case. 9. All sides of any costs argument can usually find some authority "on point", because each costs decision turns on its own facts, but the Court must act fairly, and do substantial justice among the parties to litigation, following close scrutiny of their conduct of the particular matter. See, e.g., my judgments on costs in Clark & Davis v Wollongong Council (No 2) [2008] NSWLEC 226 at [30] – [42], and in Greenwood v Warringah Council (No 2) [2013] NSWLEC 3; 196 LGERA 28. 10. In Friends, I reviewed many cases which were raised again in the present case, and I drew heavily on the principles laid down by Biscoe J in Cutcliffe v Lithgow City Council ("Cutcliffe") [2006] NSWLEC 463; 147 LGERA 330, especially at [50], as considered in other cases, particularly by the Court of Appeal in Rossi v Living Choice Australia Ltd (No 2) ("Rossi") [2015] NSWCA 301. (See Friends at [104] – [110], and [135] – [151].) 11. On issues of apportionment among parties, I looked particularly at Biscoe J's decision in GPT Re Limited v Wollongong City Council & Anor [2006] NSWLEC 303; 151 LGERA 116, and the Chief Judge's decision in Brown (see Friends at [111] – [117], and [124] – [134]). 12. On questions of apportionment of costs on the basis of issues won/lost, the Court of Appeal noted in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304, at [38] (most citations omitted): • Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1996, unreported). • In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: ... • If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: ... • Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: ... • A separable issue can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [("James")] [2005] NSWCA 296 at [34]. • Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James ... 1. As the Chief Judge said in Brown (at [11]): ... the mere fact that an applicant does not succeed on all issues raised in the proceedings is not sufficient by itself for the Court to depart from the usual rule and instead award costs only with respect to the issues on which the applicant did succeed. The issues on which the applicant did not succeed need to be "clearly dominant or separable" or "clearly discrete" from those on which the applicant did succeed ... It may also be relevant to consider whether the issues on which the applicant did not succeed lacked real merit Consideration 1. Costs issues 1 and 2(D) have already been dealt with – see [21] and [23] above. The costs of the trial – Issues 2(A), and 2(B) 1. In the present case, the applicant commenced proceedings against the respondents on the basis of the restrictive covenant, but then joined the Council and attacked the CDC, shifting its ground on several occasions (judgment at [13]). 2. Indeed, Council submits (par 12) that the applicant's case was never properly pleaded. Mr Seymour submits on Council's behalf (par 13): The Applicant's actual case as to these vague allegations was only outlined in the Applicant's Submissions and Chronology filed on 14 May 2014. Before that date it was impossible to determine which documents provided in the voluminous affidavits filed for the Applicant were relevant to particular issues. By that time, the pleadings had closed, the hearing was imminent and there was only limited ability for the Council to try to achieve greater efficiencies in bringing forward the real issues in dispute. Further, the Applicant delayed making an application to amend the Summons to add the third ground which caused real prejudice to the Council's preparation of it's case: ... 1. The applicant conceded during argument that it commenced the proceedings in the expectation that even success would not resolve the real problem at the apartment block. As Ms Byrne said (T10.11.15 p18, LL1 – 3): ... we recognised from day 1 that these proceedings in the Land and Environment Court were not going to solve all of the issues that existed on the site ... 1. Constant changes in the stance of an applicant disrupts the forensic decision-making of respondents, both before trial (e.g. whether to submit or contradict), and during the hearing (e.g. as to evidence to be tendered, and witnesses to be cross-examined), thereby adding to every party's costs. Talbot J arrived at "special orders" in Farah, A and Farah, S v Warringah Council and KSSLZ#13 Pty Limited and Ward, T and Ward, M [2006] NSWLEC 544, where His Honour noted (at [11]) the increases in costs caused by "complicated and convoluted pleadings amended ... on a number of occasions ...". 2. The key submissions against the applicant's costs claim are those Mr Seymour makes on behalf of the Council (in pars 8 and 15): 8. The Applicant's success on Ground 1/2 depended upon the authority of Drummoyne Municipal Council v Lebnan (1974) 131 CLR 350 (see judgment at [333]). The Applicant only raised that case in reply on the final day of the hearing. Had that issue been raised properly in pleadings, in opening or in submissions in chief as a clear legal basis for the allegation that the Building Approval must be treated as a Planning Consent, the Council would have had a different view as to its tactical position on these grounds at an earlier time. However, by the time it was raised, substantial costs had already been incurred. ... 15. Finally, the Council submits that it was only joined (and issues against the Council only raised) after the proceedings had been commenced and with no opportunity to consider alternatives to litigation: Calardu Warrawong (Homestarters) Pty Ltd v Wollongong City Council (No 2) [2010] NSWLEC 26. Further, it was only by a late and highly informal amendment to the Applicant's case that invalidity for failure of the Council to inspect the premises was raised. Had the Council known of that allegation at a more reasonable time in the preparation of the case, its view about the tactical advantages of defending the proceedings would have been very different. The Applicant should not obtain an unfair benefit by such unreasonable conduct: ... 1. The applicant succeeded in obtaining a declaration that the CDC was invalid, but not in obtaining the practical result it primarily sought, namely an injunction restraining the respondents from excluding other lot owners from using the facilities. It achieved (as per Rossi) a "level of success", but not "total success". 2. The respondents did not succeed in their estoppel/abuse of process arguments, upon which they moderated their opening stance ([383]). The Council also shifted its ground on the significance and effect of its 1960s decisions, and, in the end, did not succeed in its "deemed consent" case. 3. So, on any analysis, the "event" was a no better than "mixed" result for the applicant, and for all three respondents, and, as expected, the underlying "dilemma" caused by the apparent error in, or omission from, the Strata Plan was not resolved. 4. On any measure, the amount of costs claimed by the applicant ([12] above) would appear disproportionate to what was really in dispute in this case. 5. In Rossi, the Court of Appeal concluded, regarding the costs of that case in this Court (at [32]): Contrary to Mr Rossi's position, it is not appropriate to award costs against the separate respondents individually. Consistently with the approach adopted above, it is not in the interests of the efficient disposal of this case to apportion costs according to issues. Rather, Mr Rossi should recover a defined proportion of his costs, for which each of the respondents will be jointly and severally liable. ... (Mr Rossi will carry 30% of his own costs of the trial.) 1. I respectfully adopt that reasoning for the present case. I prefer to take a "broad brush", rather than "piecemeal", approach. 2. I cannot accept, in all the circumstances I have summarized, both in my principal judgment and above – including the very significant, and very late, further amendment of the summons and the argument – that the applicant should recover all of its costs, against the respondents, but I equally cannot accept that it should recover none. 3. As Mr Seymour submitted (pars 9 and 10): 9. ... a large part of the Applicant's claims failed. Further, its entire motive for bringing the proceedings – which rested on assertions that the Owners Corporation had a "right" to use the facilities in Lot 9 (sic) as a laundry – was rejected by the Court. The Applicant should not be compensated for the entire costs of the proceedings. 10. It is submitted that it is a reasonable reflection of the success of the Applicant is that there be an order for 50 per cent of the Applicant's costs. 1. I think the just outcome of the costs debate would be an order in the applicant's favour for two-thirds of its costs, up to and including the delivery of my judgment on 1 May 2015. 2. The burden of those costs should fall on all three respondents; it should be joint and several, but apportioned 50/50 as between the respondents on the one hand and the Council on the other. The costs of the variation of the Court's orders – Issue 3 1. The next phase of the case to be considered is that from 1 May 2015 until 5 June 2015, when the substantive orders were amended by the Court. 2. The respondents were aggrieved by the feared impact of the injunction as formulated – namely its "unintended consequences" – and all parties should have been able to agree on a suitable amendment. In the absence of such agreement, the Court had to rectify the orders to reflect the judgment more accurately. 3. However, the applicant resisted any variation until late in the argument on 5 June, ultimately "surrendering" to the overwhelming case for the respondents' version: One.Tel v Commissioner of Taxation [2000] FCA 270; 101 FCR 548 (see 553, at [6]). 4. I do not accept Ms Byrne's characterisation of that outcome as "not a surrender [but simply] a sensible agreement between three barristers" (T10.11.15 p66, LL12 – 14). 5. The applicant should pay the respondents' costs of their motion to vary, and the applicant and Council should pay their own respective costs of it. Should interest be payable? – Issue 2(C) 1. The applicant bears the onus of persuading the Court that the discretion on interest ought be exercised in its favour. 2. Interest applies, if at all, generally only after costs are agreed or their assessment has been certified, but there are some statutory discretions to order that interest will date from a different time. 3. For example, in Davies v Ku-ring-gai Municipal Council ("Davies") [2003] NSWSC 1010, the plaintiff unsuccessfully sought interest from the various dates upon which she paid her costs to her solicitors. 4. Austin J noted (at [5]) that the discretions should be exercised "to ensure that the successful party is properly compensated", in all the circumstances of the case, "including such matters as whether the successful party has been out of pocket for a lengthy time, whether the unsuccessful party has benefited from the use of money during that time, and the conduct of the parties". His Honour held (at [9]) that the facts and circumstances in Davies were insufficient to justify an order for interest on the costs, but His Honour did not exclude ([14]) the possibility of an order being made prior to assessment. 5. The general inefficiency and extravagance of the present applicant's case must be relevant to the question of interest, just as I regarded it as "disentitling conduct" in respect of the costs and apportionment questions ready discussed. 6. There were delays during the proceedings, but many of them were agreed upon by the three respondents, who argue that they should not now be charged interest as a result (T10.11.15 pp62 – 63). 7. True it is that the applicant has incurred and already paid substantial costs, but it is not "out of pocket" or "out of its money", in the usual sense in which those terms are used in the authorities (see T10.11.15 p38, and p52, L31, and Joseph Lahoud & Anor v Victor Lahoud & Anor [2006] NSWSC 126; Leda Pty. Ltd v. Weerden & Anor (No. 2) [2007] NSWCA 283; Ryding v Miles & Ors (No 2) [2012] NSWSC 312; Amalgamated Holdings Ltd v North Sydney Council [2012] NSWLEC 138; 191 LGERA 51, and Allianz ([55] above, at [66] – [74]). 8. I reject the applicant's claim for interest on its costs. The Strata Act – Issue 4 1. I set out above ([9] and [10]) the provisions of ss 229 and 230 of the Strata Act, and it is to be remembered also that the Court has wide-ranging power and discretion regarding costs under s 98(1) of the CP Act ([8] above). 2. As I have decided to order the applicant to pay some of the respondents' costs, s 229 is engaged. It has been judicially considered on several occasions. 3. In Owners Strata Plan No 50411 v Cameron North Sydney Investments Pty Ltd ("Cameron") [2003] NSWCA 5, Heydon JA (at [168] – [170]) invoked s 229 and the forerunner of s 98. 4. In Symes v The Proprietors Strata Plan No 31731 ("Symes") [2003] NSWCA 7, Heydon JA again (at [82]) invoked s 229 to refine or strengthen some orders he had been asked to make, in terms that His Honour thought might not go "far enough". 5. In Moallem v Consumer, Trader and Tenancy Tribunal & Ors [2013] NSWSC 1700, White J reviewed ([87] – [99]) the decisions in Cameron and Symes regarding s 229, and said (at [101]): However, unlike the orders of the Court of Appeal in Cameron Investment Services and Symes which impliedly conferred an unqualified power on the owners corporation to raise levies on other lot owners to meet costs that could not be raised from the successful party or, in the case of Cameron, from the administrative fund, sinking fund or other existing assets, the orders of 5 December 2012 do contain such a qualification. 1. See also Xabregas v The Owners – Strata Plan No. 79205; Moallem v Consumer, Trader and Tenancy Tribunal & Ors (No. 2) [2014] NSWSC 1027, in which White J said (at [103] – [104]): 103 Although the Court of Appeal's decisions are authority that justifies a trial judge making orders pursuant to s 98 of the Civil Procedure Act authorising the making of a differential levy, it does not appear that in Cameron North Sydney Investments, nor in Symes v Proprietors, Strata Plan 31731 the Court of Appeal's attention was drawn to the requirement of s 78(2) of the Strata Schemes Management Act that if levies are to be raised, they are to be raised against the owners of lots in proportion to their lot entitlements. It may be, as is implicit in the Court of Appeal's decisions, that s 98 which confers a power specifically in respect of costs is a particular provision which authorises the making of orders permitting the Owners Corporation to raise levies otherwise than in accordance with s 78(2) to pay costs. However, because of the doubts about that course, I think it preferable in this case not to make orders conferring power, or purportedly conferring power, on the Owners Corporation to make levies otherwise than in accordance with s 78(2), except where that is authorised by s 229. 104 Section 229 of the Strata Schemes Management Act authorises the making of orders prohibiting an owners corporation from levying a lot owner who was the successful party for the costs payable by the owners corporation. Section 98 of the Civil Procedure Act empowers the making of orders prohibiting an owners corporation from raising levies against the successful party in respect of the owners corporation's own costs. There is nothing in the Strata Schemes Management Act that precludes such an order. I have already made an order that none of the costs payable by the Owners Corporation to Ms Moallem and none of the costs incurred by the Owners Corporation in relation to her summons and notice of motion were to be levied against Ms Moallem and that the Owners Corporation was not to use the administrative funds, sinking fund or other existing assets for the purpose of paying or meeting those costs. But an order under s 98 should then say how the burden of the owners corporation's own costs is to be borne, unless it is to be implied that the burden is to be borne by a differential levy. 1. In the next phase of that litigation – leading to Xabregas v The Owners – Strata Plan No. 79205; Moallem v Consumer, Trader and Tenancy Tribunal & Ors (No. 3) [2014] NSWSC 1338 – White J did not depart from any statements I have quoted from his two earlier decisions. 2. Section 229 was considered, obiter dicta, by the Court of Appeal in The Owners – Strata Plan No 70798 v Bakkante Constructions Pty Ltd ("Bakkante") [2014] NSWCA 410. The primary judge had expressed the view "that an exempting order under s 229 ... was not available" in respect of the costs of a Dr Zankin (see [92]). The question of his entitlement to a s 229 order had to be reconsidered by the Court of Appeal, and in so doing Leeming JA said (at [95]): Section 229 is a specific power whose exercise impacts not merely the successful lot owner and the unsuccessful owners corporation, but (indirectly) all other lot owners. I consider that s 229 is the only means by which a lot owner with a favourable costs order can be shielded from a partial exposure to meet, by levy, the liability of the owners corporation (which is to say, I do not consider that the general power to order costs goes so far). I respectfully agree with the primary judge (in his September judgment) that s 229 was not directed to situations such as the present where a lot owner chooses to involve himself or herself in litigation between the owners corporation and a third party. The choice to do so inevitably carries with it the possibility that the owners corporation will, if it is unsuccessful, have to bear two sets of costs. Indeed, it is plain that at trial and on appeal on most issues (especially, the cross-examination of Mr Groom) it was Dr Zankin who took the lead role, although his interests and Bakkante's were aligned. Further, I do not think that the position alters depending on whether there is a trial at which a lot owner is permitted to participate, and a motion after the trial to which the lot owner is joined. 1. It would appear, as Mr Docker noted (par 16), that Cameron and Symes were not drawn to the Court's attention in Bakkante, and I accept his submission (par 14) that the Court should make an order under s 229(2) in respect of the costs the respondents are to recover from the applicant regarding the variation of the Court's orders on 5 June 2015. Costs on the costs argument – Issue 5 1. As no party was entirely successful on the questions argued regarding costs, I think each party should pay its own costs of the argument. Orders 1. The orders of the Court will be: 1. The three respondents are ordered jointly and severally to pay two-thirds of the applicant's costs of the proceedings up to and including delivery of judgment on 1 May 2015 on a party-party basis, as agreed or assessed, the first and second respondents being responsible to pay 50% of those costs and the third respondent the remaining 50%. 2. The applicant is ordered to pay the first and second respondents' costs of securing a variation on 5 June 2015 of the Court's orders of 1 May 2015. 3. The applicant and the third respondent are ordered to pay their own respective costs of those variation proceedings. 4. Any costs payable by the applicant pursuant to Orders (2) and (3) above are to be paid by it from contributions levied in relation to Lots other than Lots 7 and 15, in shares proportional to the unit entitlements of the respective Lots other than Lots 7 and 15. 5. The applicant's amended Notice of Motion filed 10 November 2015, and paragraphs 3 to 7 of the first and second respondents' Notice of Motion filed 15 May 2015, are otherwise dismissed. 6. Each party is to pay all its own costs incurred in respect of the costs argument after the hearing on 5 June 2015. 7. 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. Decision last updated: 02 August 2016