Community Association DP270253 v Woollahra Municipal Council

1. [1]

   BARRETT JA: In this appeal brought by leave, Community Association DP 270253 (“the Association”) challenges a decision of 7 February 2014 with respect to costs made in Class 1 proceedings in the Land and Environment Court of New South Wales (the “L&E Court”).

2. [2]

   On 7 February 2014, Pain J decided that there should be no order as to costs in proceedings in which the Association was successful in its application for revocation by the L&E Court of an order issued by Woollahra Municipal Council (“the Council”) under s 121B of the Environmental Planning and Assessment Act 1979 (NSW) on 3 August 2012. The order in question required the Association to carry out certain works on land vested in it.

3. [3]

   The Association maintains that the judge’s discretion as to costs miscarried and that the Council should have been ordered to pay the Association’s costs of the L&E Court proceedings.

Factual background

1. [4]

   The Association is a “community association” constituted on registration of a community plan under the Community Land Management Act 1989 (NSW). Its functions relate to a residential development consisting of several dwellings on an estate known as the Babworth Estate located at Double Bay. The development was completed in 2001 by Kimberley Securities Ltd. The several dwellings that that company had caused to be constructed then passed into other ownership. Upon registration of the community plan, the land shown in that plan as “association property” was vested in the Association by s 31 of the Community Land Development Act 1989 (NSW).

2. [5]

   The development of the Babworth Estate was the subject of development consent issued by the Council. One of the conditions of consent (Condition 29) was as follows:

3. [6]

   The “applicant” referred to in the condition was Kimberley Securities. That company constructed a stairway in about 2005. However, a gate was installed at the top of the stairway and prevented access to the foreshore except by persons holding keys to the gate. On 21 November 2005, the Council modified the 2001 consent by adding a new condition and altering Condition 29. The new condition was Condition 176:

4. [7]

   The alteration to Condition 29 entailed adding the following at the end:

5. [8]

   It is convenient to refer to the conditions about the stairway and the gate as the “Stairway Conditions”.

6. [9]

   The Council’s s 121B order of 3 August 2012 that became the subject of the proceedings determined by Pain J required the Association to “complete the pedestrian access (stairway) to the foreshore along the southern side of the ‘finger of land’” in accordance with certain plans and drawings.

7. [10]

   Something more should be said about the features of the land. Two distinct areas of association property (formerly owned by Kimberley Securities) are relevant. One is a parcel of land which, on the east, abuts the Sydney Harbour foreshore. The other – the “finger of land” referred to in the Stairway Conditions – is a narrow strip of land running in a generally east-west direction from the northern end of the Eastbourne Road cul-de-sac to the western boundary of the foreshore parcel adjacent to the harbour. The finger of land lies immediately to the south of a piece of land purchased by Mr and Mrs Litver in 2008 which is the site of their home. The eastern boundary of their lot abuts the foreshore parcel which separates their lot from the harbour. The foreshore parcel is not accessible by land otherwise than through the Litvers’ lot, along the finger of land or through land adjoining to the north which is in other ownership. The import of the Council’s Stairway Conditions was to ensure public access to the foreshore parcel from the end of Eastbourne Road through the finger of land. A “public positive covenant” was registered under s 88B of the Conveyancing Act 1919 (NSW) in respect of the foreshore parcel and the finger of land in 2001.

The proceedings in the L&E Court

1. [11]

   The Association commenced Class 1 proceedings in the L&E Court challenging the Council’s s 121B order of 3 August 2012 requiring it to complete the stairway on the finger of land. The proceedings were brought under s 121ZK of the Environmental Planning and Assessment Act which provides that a person on whom an order is served “may appeal against the order to the Court”.

2. [12]

   In pursuing its proceedings, the Association relied on a number of grounds. In particular, the Association contended that certain conditions of the 2001 consent (including the Stairway Conditions) were invalid. Pain J upheld that contention and, in exercise of the power conferred by s 121ZK(4)(a) of the Environmental Planning and Assessment Act, revoked the s 121B order.

3. [13]

   The question of costs was reserved and her Honour heard argument on 5 February 2014. In advance of that hearing, the Association had filed a notice of motion by which it sought an order that the Council pay its costs. Such an application was deemed appropriate in the light of rule 3.7 of the Land and Environment Court Rules 2007 (NSW):

4. [14]

   This rule applied because the proceedings brought by the Association were proceedings in Class 1 of the court’s jurisdiction. The effect of the rule was to preclude the making of a costs order unless the court considered that the making of such an order was “fair and reasonable in the circumstances”. Pain J decided that the circumstances were not such as to make it fair and reasonable that the Council pay the whole or any part of the Association’s costs. The Association contends that that decision was wrong.

Appeal rights

1. [15]

   The avenue of appeal available to the Association is that created by s 57(1) of the Land and Environment Court Act 1979 (NSW). That section provides, in relation to certain proceedings (including Class 1 proceedings), that a party “may appeal to the Supreme Court against an order or decision (including an interlocutory order or decision) of the Court on a question of law”. By virtue of s 57(4)(f), leave of the Supreme Court is required for an appeal with respect to an order or decision as to costs. Such leave was granted in this case on 8 July 2014.

2. [16]

   In pursuing its appeal, the Association acknowledges that the catalogue of matters in rule 3.7(3) is, as it were, merely illustrative. By this I mean that rule 3.7(3) does not prescribe criteria that the court is to apply in deciding whether a costs order should be made. Rather, it identifies matters that the court “might consider” when addressing whether the circumstances are such as to render the making of a particular costs order fair and reasonable. The question for the court under rule 3.7(2) is whether it “considers that the making of an order . . . is fair and reasonable in the circumstances”; and the rule 3.7(3) matters are matters to which, among others, the court may pay attention when addressing that question.

The substantive outcome in the L&E Court

1. [17]

   The primary judge’s decision on costs was, of course, made in the light of her conclusions on the substantive issues in the case. The substantive decision was, in brief, as follows:

2. [18]

   The references to the several “tests” in Newbury is sufficiently explained by setting out the following part of the headnote to the report of that case:

The judgment on costs

1. [19]

   In her judgment of 7 February 2014, the primary judge set out the parties’ submissions on the matter of costs and referred to the rule 3.7(2) “presumption that there will be no order as to costs (so that effectively each party will pay its own costs) unless it is fair and reasonable to make an order.” Her Honour then observed that success alone did not justify a costs order in the Association's favour. After noting that rule 3.7(3) referred to matters that might be taken into account and that the Association relied on several such matters, the judge said that, in light of the decision in Arden Anglican School v Hornsby Shire Council [2008] NSWLEC 103; 158 LGERA 224 (“Arden”), the broad discretion arising under rule 3.7(2) required attention to all considerations relevant to a determination of the costs question. It was also noted that Arden “identifies at [10] the no discouragement principle which underpins the no costs rule in planning appeals, referring to the discussion of that in the Court of Appeal in Port Stephens Council v Sansom [2007] NSWCA 299; 156 LGERA 125 at [22] – [23]”. The primary judge continued:

2. [20]

   The reference here to “Thaina Town” is a reference to the decision of this Court in Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council [2007] NSWCA 300; 156 LGERA 150 (“Thaina Town”).

3. [21]

   Turning to the specifics of the case before her, the judge said that the Association’s appeal against the making of the s 121B order was “unusually complex”. The principal issues were identified as “issues of mixed fact and law as to whether the conditions in question complied with the Newbury tests as a collateral attack upon the relevant conditions raised by the Community Association's grounds of appeal”. Having referred to her findings and conclusions on those issues, the judge made the following points:

4. [22]

   The primary judge said that the Association's submissions “equated” her finding that the Stairway Conditions were unreasonable in the sense relevant to the third Newbury test (ie, Wednesbury unreasonableness) with “unreasonable conduct on the Council's part warranting an award of costs in reliance on r 3.7(3)(c), (d), and (f)(ii), all of which rely on an aspect of unreasonable behaviour”. Her Honour did not accept that view of matters. She was of the opinion that the court’s finding in 2013 that imposition of the particular development consent conditions in 2001 was unreasonable in a Wednesbury sense did not mean that all of the Council's actions since imposing the conditions in 2001 (including modification of the conditions in 2005 and issue of the s 121B order in 2012) were unreasonable for costs purposes. Her Honour continued (at [20]):

5. [23]

   The primary judge accepted (at [21]) the Council's submission that it was entitled to regard the Stairway Conditions as valid until set aside by findings of the Court; also that the conditions were directed to “a public interest objective of greater amenity for the public through access to the foreshore”.

6. [24]

   Her Honour was of the opinion (at [22]) that the Council had not failed to “accede to the obvious” in relation to the application of the Newbury tests. The matters before the Court were, she said, complicated and the outcome, including in relation to Wednesbury unreasonableness, was not necessarily apparent to the Council in 2001 or subsequently. The finding that the conditions were manifestly unreasonable was based on evidence about adverse impacts on a neighbouring lot (the land occupied by the Litners) and use of existing stairs by the public during 2008-2010. The judge was therefore of the opinion that paragraphs (c), (d) and (f)(ii) of rule 3.7 did not apply.

7. [25]

   Furthermore, the fact that the means of achieving the Council's public amenity planning objectives “turned out to be incorrect in a legal sense” did not warrant any “finding of improper purpose in a costs sense”. The judge therefore concluded that paragraph (e) of rule 3.7 did not apply.

8. [26]

   The ultimate conclusion was stated thus:

Grounds of appeal

1. [27]

   The Association appeals on a number of grounds, as follows:

2. [28]

   1. The primary judge’s discretion under s 98 of the Civil Procedure Act 2005 (NSW) and rule 3.7 of the Land and Environment Court Rules miscarried because

3. [29]

   There is also an appeal in respect of the order that the Association pay the Council’s costs of the Association’s application for a costs order.

Material placed before this Court

1. [30]

   The primary judge’s reasons and the transcript of the hearing were placed before this Court. In addition, each party was permitted to tender further documents. Those relied on by the Association are:

2. [31]

   The Council, for its part, relied on the Association’s application filed in the L&E Court on 30 August 2012, the Council’s statement of facts and contentions in reply provided to the primary judge and an assessment report of a Council officer dated 3 August 2012.

Submissions on appeal

1. [32]

   The Association takes the view that it must show error in the sense described in the well-known passage in House v The King [1936] HCA 40; 55 CLR 499 at 504 – 505. Its contention is that the primary judge, in deciding not to make the costs order it sought, exercised her discretion in such a way that a plainly unreasonable or unjust result was delivered, so that an inference that the discretion miscarried must be drawn.

2. [33]

   The Association further says that “only lip service” was paid to the decision in Thaina Town; and that insufficient attention has been given to the distinction drawn by the Court in that case between a “merits review” in proceedings in which a person dissatisfied with a planning decision elects to bring proceedings to have the decision reviewed or made de novo and a “review of a decision to impose a liability on a person by requiring conduct to occur and expense to be incurred under the threat of criminal sanctions”. It was said in Thaina Town that exercise of the costs discretion did not entail the same approach in both kinds of case.

3. [34]

   The Association acknowledges that the rules of court at issue in Thaina Town were different from rule 3.7 relevant to this case but submits that there is no distinction in principle or substance requiring any different approach. In that respect, the Association points to the following passage in the judgment of Biscoe J in Arden (above) at [9]-[10]:

4. [35]

   Having regard to what was said by Biscoe J, the Association contends that the primary judge’s decision was irrational and gave rise to an unjust result, bearing in mind that the Council attached to the development consent conditions that were unlawful and persisted in attempting to enforce those conditions.

5. [36]

   Particular points made by the Association are the following:

6. [37]

   The basic contention of the Association is that the Council acted unreasonably at all points from and including the imposition of the first of the Stairway Conditions in 2001 and, in particular, in issuing the s 121B order and defending proceedings challenging the validity of the order. In the view the Association takes, the unreasonable conduct of the Council (being conduct within, at least, rule 3.7(3)(c) and 3.7(3)(f)) should have caused the judge to conclude, in terms of rule 3.7(2), that the making of a costs order in favour of the Association was fair and reasonable in the circumstances.

7. [38]

   The Council, in response, emphasises that, in order to succeed on appeal, the Association must identify error “on a question of law”, as specified in s 57(1) of the Land and Environment Court Act. In addition, the Council says that the decision of the primary judge on costs is reviewable in terms of Warren v Coombes [1979] HCA 9; 142 CLR 531 at 551 rather than House v The King (above). Reference is made, in that connection, to what was said in Port Stephens Council v Sansom [2007] NSWCA 299; 156 LGERA 125 at [51]. Because rule 3.7(2) precludes the making of a costs order unless the court considers that the making of the order “is fair and reasonable in the circumstances”, a process of evaluation against a stated criterion is required. While a decision whether a case is within the statutory description involves the exercise of discretion, the decision is an evaluative decision, not a discretionary decision.

8. [39]

   The Council further says that the primary judge did not fail to take account of the nature of the proceedings and the distinction drawn in Thaina Town. Her Honour expressly referred to the distinction at [18] – [19].

9. [40]

   The Council disputes the proposition that the decision of the primary judge was irrational because Her Honour failed to characterise as unreasonable actions of the Council directed towards maintenance and enforcement of the conditions concerning the stairway even though imposition of the conditions themselves was held to be unreasonable in the Wednesbury sense. Action to uphold or enforce a condition does not partake of the same character as action to impose the condition.

10. [41]

    The Council does not accept that the primary judge took into account irrelevant considerations.

11. [42]

    To the extent that the Association challenges any of the primary judge’s findings of fact, the Council says that s 57(1) does not allow that avenue of challenge.

Consideration

1. [43]

   The Council is, in my opinion, correct when it says that this appeal is governed by Warren v Coombes (above) rather than House v The King (above). The reasons are stated in Sansom (above) at [51]. The central issue is the correctness, as a matter of law, of the primary judge’s evaluative decision that, in terms of rule 3.7(2), the whole of the circumstances did not make it “fair and reasonable” that a costs order be made.

2. [44]

   The central issue raised by submissions goes to the reasonableness of the Council’s conduct in mounting a defence to the Association’s action and thereby seeking to uphold and enforce the Stairway Conditions which, as was ultimately decided, were invalidly imposed because the decision to impose them lacked a proper planning purpose and was affected by Wednesbury unreasonableness.

3. [45]

   The position the Association takes is that the Council should have appreciated and accepted the true quality of the Stairway Conditions at an early stage – that is, well before the making of the primary judge’s substantive decision. In that connection, the Association places emphasis on correspondence showing, first, that residents had, from 2009, informed the Council that they regarded removal of the gate and opening of the stairway as both unreasonable and inimical to their convenience and security and, second, that the Association’s solicitor had, in 2011 and 2012 submitted to the Council that the making of a s 121B order in the terms of the order ultimately issued would be invalid and unreasonable.

4. [46]

   The submissions from residents to the Council based on their views as to how conditions imposed by the Council affect their convenience and security cannot be regarded as something indicating unreasonable conduct on the Council’s part in litigation in which enforcement of the conditions was in issue. The fact that some residents regarded their own interests as prejudiced by particular use of land said nothing about the reasonableness or otherwise of a decision to litigate in relation to conditions relevant to that use when there was an obvious basis on which the use would be beneficial to other persons. Much less could the existence of such submissions lead to any conclusion of unreasonableness on a decision-maker’s part in relation to a past decision on the matter to which the submissions related.

5. [47]

   In seeking to deflect the Council’s decision to make the s 121B order (or, at a later time, to complain about its having been made), the Association’s solicitors said that the order would be (or was) “invalid” as “there is no obligation to complete the pedestrian stairway as is foreshadowed in terms of” the order; and that the order would be (or was) “unreasonable”. Beyond that, the solicitors’ letters sought re-consideration of the matter by the Council, foreshadowed legal proceedings and, referring without explanation to Thaina Town, said that the Association would seek an order against the Council for reimbursement of its costs of having the order set aside. The view that the order would be (or was) unreasonable was not explained or elaborated. The only concrete matter put against the validity of the order (beyond the unexplained description of it as “unreasonable”) was what was said to be an absence of any obligation to complete the stairway.

6. [48]

   The pre-action letters from the solicitors did not allege that the Stairway Conditions were invalid for any of the reasons that ultimately found favour with the primary judge in her substantive decision. The general assertion of “unreasonableness” was not given any concrete content.

7. [49]

   Furthermore, the primary judge’s decision on the substantive issues concerning the Stairway Conditions and the s 121B order does not permit any assessment that the matter was so clear-cut and the likely outcome so obvious that there was no proper basis for the Council to put the Association to proof of the case it had chosen to pursue.

8. [50]

   It is necessary to refer to the basis on which the Association argued at the costs hearing before the primary judge that a costs order should be made in its favour. That basis appears from the copy of the written submissions that was placed before this Court. The submissions concentrated very substantially on the proposition that costs awarded to the Association should be assessed on an indemnity basis because of “relevant delinquency” by the Council. That, of course, was an issue separate from the anterior question whether there should be any award of costs to the Association. In relation to that anterior question, the submission was simply that it was fair and reasonable that the Council pay the Association’s costs “because it forced [the Association] to incur significant costs by reason of the council’s insistence, by the issue of the order, for stairs to be installed leading on to private land”. In oral submissions, the matter was put somewhat differently:

9. [51]

   Reference was then made to the “unreasonable” criteria in rules 3.7(c), 3.7(d) and 3.7(f).

10. [52]

    It was thus in the oral submissions at the costs hearing that the Association put forward the argument upon which it has placed particular reliance on appeal – that the ultimate characterisation of the imposition of the Stairway Conditions as unreasonable in the Wednesbury sense had the effect that like unreasonableness infected the Council’s defence of the Association’s application (ultimately successful) for the court’s assistance in freeing itself from the consequences of the action the Council had purportedly taken under s 121B with a view to enforcing the Stairway Conditions.

11. [53]

    I do not accept that a court’s conclusion that a decision to impose a particular condition was unreasonable in the Wednesbury sense somehow spills over in a retrospective way, as it were, to warrant a conclusion that non-acceptance of the condition’s unreasonable quality at an early stage of the proceedings in the court – or at an even earlier time – is itself of the same unreasonable quality. The unreasonableness with which rule 3.7 is concerned – particularly in rules 3.7(3)(c) and 3.7(3)(d) – is unreasonableness of conduct related to the particular proceedings. Unreasonableness affecting the decision challenged in the proceedings is a quite different thing.

12. [54]

    Before commencing proceedings, the Association put to the Council the proposition that that the s 121B order was “invalid” because there was “no obligation to complete the pedestrian stairway” in accordance with the order; and that the order was, for reasons not stated, “unreasonable”. Nothing was said about the matters concerning the Stairway Conditions that ultimately found favour with the primary judge. The case was accordingly distinguishable from one in which a party proposing to take proceedings puts to the prospective defendant a clearly articulated and reasoned basis for the view that any defence is doomed to fail and the prospective defendant, having had the untenable nature of all defences pointed out to it, nevertheless refuses to accede to the particular demand and thereby compels the prospective plaintiff to pursue the foreshadowed proceedings.

13. [55]

    The Association chose to bring Class 1 proceedings and thereby to enter an arena to which rule 3.7 applied. That being so, it could not (and did not seek to) argue simply that costs should follow the event. It was required to establish that some aspect of the conduct of the Council as a litigant in the Class 1 proceedings made it fair and reasonable that the judge should cause the prima facie position prescribed by rule 3.7(2) to be replaced by a situation in which the Council was required to pay the Association’s costs. The Association has, in my opinion, failed to establish this. More particularly, it has failed to demonstrate error in the primary judge’s costs judgment on any question of law.

14. [56]

    In my opinion, the appeal should be dismissed with costs.

15. [57]

    EMMETT JA: The question in this appeal is whether a judge of the Land and Environment Court erred in the exercise of discretion by declining to make an order for costs in favour of a successful party. In the proceedings at first instance, the appellant, Community Association DP270253 (the Association), claimed relief in the Land and Environment Court against the respondent, Woollahra Municipal Council (the Council), in relation to an order (the s 121B Order) made by the Council under s 121B of the Environmental Planning and Assessment Act 1979 (NSW) (the Act). The s 121B Order required the Association to construct a stairway over private land owned by the Association, to facilitate access by the general public to a rectangular parcel of land on the foreshore of Double Bay owned by the Association (the foreshore land).

16. [58]

    The s 121B Order was made in order to ensure compliance with conditions upon which development consent had been granted to the then owner of Babworth House in Darling Point and the surrounding estate by the Council in 2001. The consent was for the restoration and redevelopment of Babworth House and the surrounding estate. One of the conditions of the consent was that a stairway for pedestrian access be constructed to the foreshore of Double Bay. Another condition provided that that stairway was to provide access to the foreshore land. The former owner constructed a stairway that provided access to a point near the foreshore land, but did not actually provide access to the foreshore land. The s 121B Order required the Association to complete the stairway, such that public access was provided to the foreshore land.

17. [59]

    The Land and Environment Court found that certain of the conditions of the consent given in 2001 had no nexus with the proposed development and, accordingly, were beyond power because they were unreasonable in the sense that no properly informed decision maker could have made the decision to impose those conditions. The Land and Environment Court therefore revoked the s 121B Order.

18. [60]

    The Association then applied for an order that the Council pay its costs of the proceedings. The trial judge refused costs in the exercise of discretion conferred by r 3.7 of the Land and Environment Court Rules 2007 (NSW). Rule 3.7 applies to the proceedings in question. Under r 3.7(2), the Court is not to make an order for the payment of costs unless the Court considers that the making of an order as to the whole or any part of the costs is fair and reasonable in the circumstances. Under r 3.7(3), circumstances in which the Court might consider the making of a costs order to be fair and reasonable include:

19. [61]

    The Association contended that, in circumstances where the Court concluded that the decision to impose conditions on the consent given in 2001 was unreasonable, the making of an order as to the costs of the proceedings to obtain the revocation was fair and reasonable in the circumstances. In essence, the Association contended that the Council had acted unreasonably in circumstances leading up to the commencement of the proceedings.

20. [62]

    No attempt was made in the application for costs to establish the circumstances that led up to the commencement of the proceedings. The imposition of conditions 14 years beforehand could not constitute such circumstances. Had the Association advanced submissions to the Council prior to the commencement of the proceedings that outlined to the Council arguments that were ultimately accepted by the Court and were able to demonstrate that there was no rational answer to those submissions, and that the Council nevertheless maintained its intention to enforce the order, there may have been a case for making an order for costs. However, no such contentions were advanced and no evidence as to such matters was adduced.

21. [63]

    I have had the advantage of reading in draft form the proposed reasons of Barrett JA. I agree with his Honour, for the reasons proposed by him, that the appeal should be dismissed with costs.

22. [64]

    LEEMING JA: I agree with Barrett JA.