Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Shellharbour City Council v Minister for Local Government [2017] NSWCA 256 Hearing dates: On the papers Decision date: 12 October 2017 Before: Basten JA, Macfarlan JA, Sackville AJA Decision: (1) Dismiss the appellant's application to set aside order (2) made in the Land and Environment Court on 20 September 2016, namely that the applicant pay the respondents' costs in that Court. (2) Make no order as to the costs of the parties in this Court. Catchwords: PRACTICE AND PROCEDURE – civil – costs – challenge to validity of proposed amalgamation of local government areas – challenge dismissed at trial – respondent abandons proposal – appeal discontinued – whether success inevitable – whether respondent's conduct unreasonable – whether respondent should pay costs of trial – whether respondent should pay costs of appeal Legislation Cited: Local Government Act 1993 (NSW), s 218A Uniform Civil Procedure Rules 2005 (NSW), r 42.19 Cases Cited: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 Ku-ring-gai Council v West [2017] NSWCA 54 One Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 Edwards Madigan Torzillo Briggs Pty Ltd v Gloria Stack [2003] NSWCA 302 Hunter's Hill Council v Minister for Local Government [2017] NSWCA 188 Category: Costs Parties: Shellharbour City Council (Appellant) Minister for Local Government (First Respondent) NSW Department of Premier and Cabinet (Second Respondent) Mike Allen as delegate of the Acting Director-General of the Office of Local Government (Third Respondent) NSW Local Government Boundaries Commission (Fourth Respondent) Representation: Counsel: G Kennett SC/V McWilliam/C McMeniman (Appellant) T E O'Brien (First Respondent) Solicitors: Sparke Helmore Lawyers (Appellant) Crown Solicitor's Office (Respondents) File Number(s): 2016/289287 Decision under appeal Court or tribunal: Land and Environment Court Jurisdiction: Class 4 Citation: [2016] NSWLEC 119 Date of Decision: 20 September 2016 Before: Moore J File Number(s): 2016/154342 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Judgment 1. THE COURT: On 6 January 2016 the respondent Minister proposed the amalgamation of the local government area of the appellant Council with the local government area of the Wollongong City Council. The proposed amalgamation was opposed by the appellant, which commenced proceedings in the Land and Environment Court challenging the report of a delegate of the Minister supporting the proposed merger. On 20 September 2016 those proceedings were dismissed: Shellharbour City Council v Minister for Local Government (No 2). [1] 2. On 27 September 2016 the Council lodged a notice of appeal to this Court against the judgment of the Land and Environment Court. The proceedings were listed for hearing on 16 and 17 February 2017 before the Court as presently constituted. Two days before the hearing, the Minister decided not to proceed with the amalgamation. As a result, the appeal did not proceed and, on 5 April 2017, orders were made granting the appellant leave to discontinue its appeal. 3. The discontinuance was qualified; the parties were unable to agree on appropriate orders for costs, both in this Court and in the Court below. The parties agreed to the outstanding issues being dealt with by way of written submissions. 4. Because the appellant was unsuccessful in the Court below, it was ordered to pay the costs of the proceedings in that Court. It seeks to have that order set aside and to have this Court order that the Minister and the Secretary of the Department of Premier and Cabinet pay the appellant's costs in the Land and Environment Court and in this Court. (The Secretary was not properly named as the second respondent, but it is not necessary to correct that omission or to consider whether the Secretary should be ordered to pay costs; the orders sought are actively resisted by the Minister.) 5. The Minister resisted the application to set aside the costs order in the Land and Environment Court and submitted that each party should bear its own costs in this Court. Although in the ordinary course the party discontinuing proceedings would pay costs, pursuant to r 42.19 of the Uniform Civil Procedure Rules 2005 (NSW), the Minister accepted that this rule should not apply where the proceedings had been rendered futile. In accordance with the principle stated by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin, [2] the Minister submitted that the appropriate course was for the parties to bear their own costs in this Court, there having been no determination on the merits. 6. The appellant resisted that conclusion on two bases. The appellant described the Minister's abandonment of the proposed amalgamation as "a complete capitulation." It contended that if the appeal had proceeded it would "almost certainly" have succeeded. That was because the appeal which was listed for hearing on the same days, brought by Ku-ring-gai Council on identical grounds, was upheld. [3] Further, it submitted that the Minister had been unreasonable in her conduct of the proceedings. 7. It should be accepted that both these characterisations, if made good, may provide a basis for awarding costs against a party who has capitulated, as was recognised by Burchett J in One Tel Ltd v Commissioner of Taxation, [4] in a passage cited with approval by Davies AJA (Mason P and Meagher JA agreeing) in Edwards Madigan Torzillo Briggs Pty Ltd v Gloria Stack. [5] If the appellant made good its claim that, without addressing the merits, this Court could be satisfied that it would have succeeded in any event, it would also be appropriate to set aside the costs order made in the Land and Environment Court and allow the appellant its costs of the trial. 8. With respect to the assertion of inevitable success, the appellant submitted that "there is no factually distinguishing matter in these proceedings even as to appeal grounds, submissions and composition of the Court." However, that proposition cannot be accepted. 9. First, Ku-ring-gai Council succeeded primarily on a ground which was not available to the present appellant, namely that the proposed amalgamation did not, in accordance with the requirement of s 218A(1) of the Local Government Act 1993 (NSW), seek the amalgamation of "two or more areas". 10. Secondly, the other bases upon which Ku-ring-gai Council succeeded depended on the unavailability to the delegate and the Council of what were described as undisclosed KPMG documents, on which the financial benefits of the proposed amalgamation, accepted by the Minister, were based. While it may be assumed that the claim for public interest immunity (raised by ground 2 in the notice of appeal) may have been overturned, that merely removed one obstacle to the Council obtaining the documents. The question whether the failure to provide the documents to the Council resulted in procedural unfairness in a practical sense would have depended on a consideration of what steps the Council took to obtain them and how it could have deployed them in its case before the delegate. In so far as the Council relied on a claim of constructive failure to exercise the statutory power on the part of the delegate, who did not have access to the documents, success would have depended, at least in part, on the reasoning of the delegate in reaching his conclusion with respect to the financial benefits. It is sufficient for present purposes to note that the reasoning of the delegate, set out by the primary judge at [101], did not place unconditional reliance upon the KPMG figures. As appeared from the judgment of this Court in the Mosman and North Sydney Council appeals, different conclusions might be reached depending on the circumstances of the particular case. [6] 11. The second basis upon which the appellant relied was the "unreasonable conduct" of the Minister. There were two aspects of the Minister's conduct upon which reliance was placed. Taken chronologically, the first was the failure of the Minister to offer an undertaking not to proceed with the amalgamation pending determination of the proceedings in the Land and Environment Court, a step which forced the appellant to seek interlocutory injunctive relief. That application apparently resulted in the undertaking being given, in effect two days after it had been refused. Whether that conduct was reasonable or not, it could not have affected the costs order made at the end of the trial. 12. The second basis on which it was alleged that the Minister's conduct was unreasonable was the abandonment of the amalgamation shortly before the appeal was to be heard. Two points may be made in that respect. First, the appellant's affidavit in this Court annexed the public statement by the Government made on 14 February 2017. On its face, that document demonstrates that the abandonment of all the unconsummated mergers in regional New South Wales was a political decision and made no reference to the merits of the appellant's (or any other council's) case. There was no material before the Court to suggest that the document should not be so understood. 13. Secondly, the appellant identified no basis for concluding that the Minister's conduct of the proceedings in the Land and Environment Court had been unreasonable, beyond the first matter with respect to the interlocutory undertaking, noted above. 14. In short, while the appellant obtained the result it sought in the litigation as a result of a political decision by the Government, the resistance by the Minister to the proceedings in the Land and Environment Court was not shown to be unreasonable. It follows that the bases upon which the appellant sought to have its costs, in the absence of a determination of the appeal on the merits, must be rejected. 15. In those circumstances, the Court makes the following orders: 1. Dismiss the appellant's application to set aside order (2) made in the Land and Environment Court on 20 September 2016, namely that the applicant pay the respondents' costs in that Court. 2. Make no order as to the costs of the parties in this Court. ********** Endnotes 1. [2016] NSWLEC 119 (Moore J). 2. (1997) 186 CLR 622 at 625; [1997] HCA 6. 3. Ku-ring-gai Council v West [2017] NSWCA 54. 4. (2000) 101 FCR 548; [2000] FCA 270 at [5]. 5. [2003] NSWCA 302 at [5]. 6. Hunter's Hill Council v Minister for Local Government [2017] NSWCA 188. 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: 12 October 2017