Bardsley-Smith v Penrith City Council (No 2)

[2015] NSWLEC 94

Land and Environment Court

New South Wales

Medium Neutral Citation:	Bardsley-Smith v Penrith City Council (No 2) [2015] NSWLEC 94
Hearing dates:	18 September, 27 September, and 13 December 2013; 1 April, 8 May, 23 June, and 21 July 2014; eCourt 29 August and 3 October 2014; 17 November 2014, 15 December 2014, 3 February 2015, 13 May 2015
Date of orders:	12 June 2015
Decision date:	12 June 2015
Jurisdiction:	Class 4
Before:	Sheahan J
Decision:	See orders in [125]
Catchwords:	INJUNCTIONS AND DECLARATIONS – Determination of final relief on remitter – Court of Appeal determined that the challenged consent authorised only the sale of specified pharmaceutical items directly to the public, and, therefore, the respondents’ use of the site for a large scale retail pharmacy was in breach of that consent – subsequent grant of consent for the use of the site as a “neighbourhood shop” – whether subsequent consent rendered futile the making of a declaration and granting of an injunction reflecting the findings of the Court of Appeal. COSTS – Applicants successful in their appeal on some grounds not argued at first instance – whether the applicants are entitled to a costs order in their favour in respect of the first instance proceedings.
Legislation Cited:	Civil Procedure Act 2005 Environmental Planning and Assessment Act 1979 Land and Environment Court Act 1979 National Health Act 1953 (Cth) Penrith Local Environmental Plan 2010 Penrith Local Environmental Plan (Industrial Land) 1996 Poisons and Therapeutic Goods Act 1966 Therapeutic Goods Regulations 1990 Uniform Civil Procedure Rules 2005
Cases Cited:	Administration and Marketing Solutions Pty Ltd v Bardsley-Smith [2014] HCA Trans 59 Bardsley-Smith v Penrith City Council [2012] NSWLEC 79; 189 LGERA 130 Bardsley-Smith v Penrith City Council [2013] NSWCA 200; 195 LGERA 34 Bardsley-Smith v Penrith City Council (No 2) [2013] NSWCA 284 Brown v Randwick City Council (No 2) [2012] NSWLEC 28 Calardu Warrawong (Homestarters) Pty Limited v Wollongong City Council (No 2) [2010] NSWLEC 26 Chamwell Pty Ltd v Strathfield Council [2007] NSWLEC 114; 151 LGERA 400 Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 Great Lakes Council v Lani [2007] NSWLEC 681; 158 LGERA 1 Greenwood v Warringah Council (No 2) [2013] NSWLEC 3; 196 LGERA 28 Hoxton Park Residents Action Group Inc v Liverpool City Council (No 3) [2012] NSWLEC 43; 190 LGERA 119 Hughes v Western Australian Cricket Association (Inc) [1986] FCA 382; (1986) ATPR 40-748 James v Surf Road Nominees Pty Limited (No. 2) [2005] NSWCA 296 Liverpool City Council v Roads and Traffic Authority (No 2) (1992) 75 LGRA 210 Madden v Connell [2001] NSWSC 1051 Macquarie International Health Clinic Pty Ltd v University of Sydney (1998) 98 LGERA 218 Permanent Trustee Aust Ltd v FAI General Insurance Co Ltd (unreported, NSWSC, 3 June 1998) Pittwater Council v Bolitho [2007] NSWLEC 355 Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256; 288 ALR 385 Waters v. P C Henderson (Aust) Pty. Limited (unreported CA(NSW) Kirby P, Mahoney and Priestley JJA, 6 July 1994) Woolworths Ltd v Pallas Newco Pty Ltd [2004] NSWCA 422; 61 NSWLR 707
Texts Cited:	G.E. Dalpont, “Law of Costs”, 2nd ed.
Category:	Consequential orders (other than Costs)
Parties:	Janis Margaret Bardsley-Smith (First Applicant) Ian Patrick Stubbs (Third Applicant) Penrith City Council (First Respondent) Administration and Marketing Solutions Pty Limited (Second Respondent) Damien Michael Gance (Third Respondent)
Representation:	Counsel: Mr J Robson SC with Mr C Ireland (Applicants) Submitting (First Respondent) Mr A Galasso SC with Mr N Eastman (Second and Third Respondents) Solicitors: McPhee Kelshaw Solicitors (Applicants) Gadens Lawyers (First Respondent) Rotstein Commercial Lawyers (Second and Third Respondents)
File Number(s):	40565 of 2009

Judgment

Introduction

1. This is the latest phase of a long and complex challenge, in Class 4 of this Court’s jurisdiction.

2. The subject of the challenge has been Penrith Council’s approval of a “Chemist Warehouse”, known as “Chemist Warehouse Distribution Centre Penrith” (“CWDCP”), located in a predominantly “bulky goods” retail centre on the outskirts of Penrith.

3. The matter is back before me on remitter from the Court of Appeal – after a series of attempts to find a resolution, informed by that Court’s decisions in July and August 2013, and following an unsuccessful attempt by the respondents to appeal to the High Court.

4. The two issues remaining to be now resolved are final relief, and costs.

The litigation in brief

5. The CWDCP opened on 21 September 2009, and the lease was apparently renewed for a further five years, sometime in about October 2012. Its operations will be described in the next section of this judgment.

6. The challenge in this Court was brought by a group of “local pharmacy and family pharmacy operators” in Penrith (Tp12, LL22 – 23), on the basis that the “Chemist Warehouse” use which the Council approved, was properly characterised as a large “shop”.

7. The Penrith Local Environmental Plan 2010 (“LEP”) reversed the zoning table structure of the Penrith Local Environmental Plan (Industrial Land) 1996, and altered the definition of “shop”. Hence, the LEP applicable at the date of the relevant development application (“DA”), which received the contested consent, prohibited “shops” in the relevant zone.

8. The applicants contended before me, at first instance, that, no matter how it was “dressed up”, the “CWDCP” development/operation, or at least the front section of it, was simply a “shop”, and so was an independent and dominant use, and prohibited.

9. If the applicants’ challenge were to have succeeded, the original CWDCP development consent (“DC”) would have offended s 76B of the Environmental Planning and Assessment Act 1979 (“EPA Act”), and the CWDCP would have been operating contrary to law since it commenced in September 2009.

10. Interests associated with “Chemist Warehouse”, namely Damien Gance and Administration and Marketing Solutions Pty Ltd, have defended the DC in these proceedings, and the Council has maintained a submitting appearance.

11. In my decision on 18 April 2012 ([2012] NSWLEC 79; 189 LGERA 130), I dismissed the applicants’ summons, made a costs order, and returned all exhibits.

12. The applicants appealed to the Court of Appeal, which overturned part(s) of my decision, including my costs order ([2013] NSWCA 200; 195 LGERA 34).

13. That Court formulated the relief which it said should be granted to the applicants, but remitted the matter to this Court ([2013] NSWCA 284), on 30 August 2013, for me to hear and determine the respondents’ case on discretion, a question which there was no need for me to decide at first instance, in view of my decision to reject the challenge.

14. On 14 March 2014, the High Court refused the active respondents special leave to appeal from the Court of Appeal’s decision(s): Administration and Marketing Solutions Pty Ltd v Bardsley-Smith [2014] HCA Trans 59.

15. Accordingly, the matter now comes back before this Court on the 2013 remitter from the Court of Appeal.

The Chemist Warehouse Distribution Centre Penrith

16. The proceedings were somewhat complicated by the complex State and Federal regulation of the pharmacy industry, coupled with the use of particular terms to describe various pharmaceutical products, such as “ethical”, “generic”, “restricted”, “scheduled”, “PBS” (Pharmaceutical Benefits Scheme), and “OTC” (over the counter). For example, the term “ethical” in this context appears to refer to “any potent substance” which may be “beneficial” or “therapeutic” to the person taking it, but such substances are not necessarily required to be prescribed by a medical practitioner, nor necessarily covered by the PBS.

17. In delivering the first judgment of the Court of Appeal ([2013] NSWCA 200; 195 LGERA 34), Sackville AJA, with whom McColl and Barrett JJA agreed without adding comments, accurately described the challenged CWDCP operation (at [105] – [123]), and I respectfully adopt His Honour’s summary.

18. To provide adequate background for what follows, I now set out quite fully what His Honour said (some emphasis added):

105.   … each of the three businesses conducted on the Premises - the retail pharmacy, the ePharmacy and the wholesale distribution of pharmaceutical products - was conducted by a separate entity:

The ePharmacy was conducted by ePharmacy Group Pty Ltd. CWDCP played a role in the ePharmacy by distributing products to offsite customers for a fee, but did so on behalf of ePharmacy Group Pty Ltd. CWDCP retained title in the products distributed by the ePharmacy until delivery to the customers, but it appropriated the products to the ePharmacy's business.

MCHBD [an associated business trading as “My Chemist Health and Beauty Distribution”] conducted the wholesale distribution centre for pharmaceutical products. CWDCP provided warehouse and storage facilities and dispatched goods to offsite customers for a fee on behalf of MCHBD.

CWDCP conducted the retail pharmacy. There is no evidence that the principals of either ePharmacy Group Pty Ltd or MCHBD played a significant role in the management of the retail pharmacy.

…

113.   ... The retail pharmacy was conducted in a large, separate section of the Premises comprising about 43 per cent of the total floor space. The retail pharmacy generated about $5 million in sales per annum and thus can fairly be described as a large scale operation. Each of the three main uses of the Premises - a retail pharmacy, an ePharmacy and a wholesale distribution centre for pharmaceutical products - was carried on by a separate entity. There was some interaction among these three businesses, but they were not conducted as a single, integrated unit.

114.   The ePharmacy was permitted to take stock from the retail pharmacy on a regular basis to fill orders placed with the ePharmacy by its offsite customers. CWDCP retained title to all pharmaceutical products delivered to offsite customers of the ePharmacy until title passed to the customer. It is a fair inference from the evidence that stock transferred in this way constituted a significant proportion of the value of the pharmaceutical products sold by the ePharmacy, although the proportion was probably less than one half. However, having regard to the relatively modest volume of sales by the ePharmacy, the products transferred to it by CWDCP constituted only a small proportion of the stock it carried or sold to its retail customers.

115.   CWDCP also transferred stock from time to time to enable MCHBD to meet particular orders placed by My Chemist/Chemist Warehouse outlets. This occurred when MCHBD had insufficient stock to satisfy the particular orders. But products owned by CWDCP were stored in a separate part of the Premises from that used to store products owned by MCHBD. The evidence does not support a finding that stock was transferred from CWDCP to MCHBD on anything other than an occasional or intermittent basis.

…

118.   On the evidence, the Premises are used for at least two different purposes. One purpose is as a distribution centre, including the ePharmacy. The second purpose is as a "shop" as that term is defined both in the 1996 LEP and the 2010 LEP. The Premises are and have been

a building or place used for the purpose of selling, exposing or offering for sale by retail goods, merchandise or materials (1996 LEP).

The Premises are and have also been used as:

retail premises that sell ... personal care products ... or other items of general merchandise (2010 LEP).

For the reasons that have been given, the use of the Premises as a retail pharmacy cannot be characterised as subordinate or subservient to use as a distribution centre. Use as a retail pharmacy is for an independent purpose - that is, the large scale retailing of pharmaceutical and related products. This use is for the purpose of a "shop" as that term is defined in both the 1996 LEP and the 2010 LEP and is therefore unlawful.

119. The position would be different if the retail pharmacy supplied only PBS items and OTC drugs to members of the public. There may be an issue, not addressed in argument, as to whether such a limited retail activity is within the definition of a "shop" in the 2010 LEP. But even if it is, the limited use would have been subordinate to use of the Premises for the purpose of a distribution centre authorised by the Consent granted under the 1996 LEP. In these circumstances, the Premises would have been used for the single purpose of a distribution centre at the time the 2010 LEP came into force. That would have been a protected existing use and could have continued lawfully after the 2010 LEP came into force.

120.   The present case is different from Macquarie [International] Health Clinic [Pty Ltd] v University of Sydney [(1998) 98 LGERA 218]. In that case, the trial Judge made a finding of fact that the proposed use of a hospital to be erected partly on land zoned as "education" should be characterised as use for the purpose of a teaching hospital (see at 221). The trial Judge also found that a teaching hospital, by its very nature, performs both clinical and educational functions and that these functions were "inextricably bound up" (at 222). The Court of Appeal found that it was open to the trial Judge to conclude that the two purposes were inextricably linked and could not be severed. In the present case, although there is a connection between use for the purpose of a distribution centre and use for the purpose of a retail pharmacy, they are not inextricably linked. The distribution centre and the retail pharmacy are capable of operating independently of each other and to a considerable extent they do so.

...

122. No submission was made to the primary Judge or to this Court that the use of the Premises as a retail pharmacy was any different at the date the 2010 LEP came into force than its use at the date of the trial. Since that use was for the prohibited purpose of a "shop" under the 1996 LEP, it was not use for a lawful purpose immediately before the coming into force of the 2010 LEP. It was therefore not an "existing use" as defined in s 106 of the EPA Act and continuation of the use as a retail pharmacy was not protected by s 107(1).

123. Use of the Premises as a retail pharmacy is not a use permitted without consent under the 2010 LEP. In any event, use of the Premises as a large scale retail pharmacy is prohibited under the 2010 LEP. It follows that the current use of the Premises as a retail pharmacy is in breach of the EPA Act.

This Court’s original decision

19. In upholding the original DC at first instance, and dismissing the competitors’ challenge to it, I decided that:

1. Council had correctly characterised and approved the project as a warehouse distribution outlet, with an ancillary traditional retail pharmacy;

2. it was permissible as an innominate use, with consent;

3. it was not a “shop” as defined in either LEP, but a multi-faceted single use with minor ancillary shop aspects ([297]); and

4. the retail and distribution functions of the project were “inextricably bound”.

20. Council’s consent had also imposed a specific condition (no 4 – later modified), which required retail activity to be kept “ancillary” to the distribution centre use. In this respect, it must be recalled that the National Health Act 1953 (Cth) (“the NH Act”) requires that a PBS warehouse must have an “outlet” for the general public.

21. However, a large, traditional retail pharmacy is not required by the Commonwealth Act, and some “lesser” operation would fulfil the public access requirement. Also, the Commonwealth Act does not affect the need for such a pharmacy to comply with State planning laws.

22. The respondents relied on Chamwell Pty Ltd v Strathfield Council [2007] NSWLEC 114; 151 LGERA 400, arguing that the site had only a single purpose, i.e. “distribution of pharmaceutical and health care products”, a function which was, as noted above, required by law to have ancillary public PBS access.

23. I set out the principles of characterisation (at [229] – [248]), and held that condition 4 was “certain” in its wording, that it was fundamental to the consent, and that it was not severable from the balance of the DC or its conditions.

The two judgments of the Court of Appeal

The appellants/applicants’ challenge should succeed

24. The Court of Appeal held that I had adopted the correct principles of construction, and that I had correctly understood the law regarding incorporation of documents.

25. However, it held that I went too far in referring to – whether or not I actually relied upon – correspondence between the proponent and the Council, and to the internal deliberations of the Council, and that, if I took such material into account, I was in error.

26. The Court noted that I had concluded that there was no jurisdictional error committed by the Council in granting the DC. However, it also criticised my reference to the expectations of the retail customers of pharmacies, and to what I saw as the need to “draw a line” between a mere “hole in the wall” access point for the public, and something amounting to a pharmacy supermarket (see my judgment at [278] – [280]).

27. Sackville AJA said (at [64] – some emphasis added):

The determination of whether a proposed development is for a prohibited purpose is a question of characterisation that involves issues of fact and degree: Woolworths Ltd v Pallas Newco Pty Ltd [2004] NSWCA 422; 61 NSWLR 707, at [54]-[55], per Spigelman CJ (with whom Mason P, Handley JA and Cripps AJA agreed). Nonetheless, the correct characterisation of the purpose of the proposed development involves a jurisdictional fact: Woolworths Ltd v Pallas Newco Pty Ltd, at [88], per Spigelman CJ; at [181], per Sheller JA. If a consent authority purports to grant consent to a proposed development for what is in truth a purpose prohibited under the relevant LEP, the authority acts without power and thus commits a jurisdictional error. The consequence is that the development consent is invalid, at least to the extent that it purports to permit use of the land for a prohibited purpose. It follows that if the Consent in the present case purports to authorise use of the Premises for the purposes of a "shop" (a prohibited purpose under item (b)(iii) of the Development Control Table relating to Zone 4(b), reproduced at [16] above) it is invalid, at least to that extent.

28. It was permissible to have a “shop”, in order to comply with the Commonwealth law and the planning law at the same time, but such “shop” had to be limited in its extent, and clearly subordinate to the use of the premises as a warehouse/distribution centre.

29. Sackville AJA held that the then present use, as disclosed before both this Court and the Court of Appeal, went “well beyond” what was permitted ([95]). His Honour inferred from the evidence that PBS/OTC constituted only a small proportion of sales ([104]).

30. As the respondents were, therefore, in breach of s 76A(1)(b) and s 122(b)(iii) of the EPA Act, the CWDCP use was not protected as an “existing use” (which would have negated the apparent unlawfulness of the retail pharmacy use).

31. His Honour held that “warehouse or distribution centre” (under the 1996 LEP) excluded retail sales, but that condition 4 of the DC specifically contemplated “at least some retail sales”.

32. The DA documents gave little indication of the extent etc. of the proposed retail activity, and they showed the front of the premises as a “warehouse”, and not a retail pharmacy.

33. Sackville AJA commented that, in my judgment, I had overstated the extent to which Council was “put on notice” of the proponents’ intentions. The Statement of Environmental Effects (“SEE”) contemplated a “very limited retail pharmacy, limited to PBS items and OTC drugs”, and condition 4 did not extend that scope.

28. The Court of Appeal judgment then went on to deal with the fact that the objecting applicants had not argued, before me, that the present use was unlawful, on the simple basis that it did not conform with the DC. Mr Robson’s argument had focussed on the retail use as prohibited. If it were a breach of the DC, it could not be an existing use.

29. His Honour then said (at [124]–[127] – emphasis mine):

124. The appellants in their further amended summons sought declaratory and injunctive relief both on the basis that the Consent was void insofar as it permits use as a retail pharmacy and that the present use is prohibited under the 2010 LEP. Curiously enough, the notice of appeal only seeks orders on the basis that the Consent is void. It was pointed out in argument that the grounds identified in the notice of appeal do not embrace all the arguments advanced on behalf of the appellants.

125.   If the appellants are to obtain orders restraining the Respondents from using the Premises for unlawful purposes, they will need to file an amended notice of appeal seeking appropriate relief. Furthermore, any injunction will need to reflect the fact that use of the Premises as a retail pharmacy is permissible under the Consent, provided the pharmacy's activities are limited to supplying members of the public with PBS items and OTC drugs.

126.   It is also necessary to deal with a defence pleaded by the Respondents but not addressed by the primary Judge. The Respondents pleaded that the Court should exercise its discretion against granting the appellants the relief they sought. The primary Judge did not deal with this defence because he rejected the appellants' challenges and therefore no question of a discretionary bar to the grant of relief arose. The Respondents submitted that the proceedings should be remitted to the L&E Court to deal with the pleaded defence. In the end, the appellants did not dispute that this course is appropriate should the appeal be upheld on the ground that the current use as a large scale retail pharmacy contravenes the EPA Act.

127.   My present view is that unless the Respondents' discretionary defence succeeds, the appellants are entitled to an injunction restraining the Respondents from using the Premises as a retail pharmacy except to the extent that the pharmacy is used to supply members of the public with "pharmaceutical benefits" and OTC drugs. There appears to be no difficulty in defining the former expression since it is defined in s 84 of the [NH Act]. However, in order for the injunction to be framed with sufficient specificity, it will be necessary for the expression "OTC drugs" to be carefully defined. I therefore propose that the parties be given an opportunity to agree on the terms of an appropriate injunction. If they cannot, each should file a draft order supported by brief written submissions not exceeding three pages in length.

36. As the respondents point out in their submissions on the present remitter, a lot of the elements of the applicants’ comprehensive challenge at first instance were specifically rejected by the Court of Appeal (see Tp15).

The first orders of the Court of Appeal

37. As already noted ([12] above), the Court of Appeal, in its first judgment ([2013] NSWCA 200; 195 LGERA 34), set aside, with costs, my dismissal of the applicants’ summons, and my costs order. It also, inter alia, directed the parties to file, within 14 days, an agreed draft of the proposed injunction to which the Court of Appeal referred (in par [127], quoted in [35] above).

38. In the absence of such agreement being reached, the appellants were directed to file, within 14 days, their draft, and their submissions in support of it, and within a further seven days, the respondents were to file their draft, with submissions in support of it.

39. Order 7 then provided:

Subject to the parties’ compliance with Orders 3-6 above and to any further order of this Court, the matter be remitted to the Land and Environment Court to deal with paragraph 4(h) of the Amended Points of Defence and otherwise the matter to be dealt with in conformity with this judgment.

40. Paragraph 4(h) of the Amended Points of Defence (“APOD”), filed on 28 October 2010, simply urged this Court, “in exercising its discretion, [to] not make the orders sought by the Applicants if the Applicants are otherwise able to prove breach of the [EPA Act 1979]”.

41. No particulars of this discretionary defence were provided in the APOD before me.

42. In the Court of Appeal’s second judgment, delivered on 30 August 2013 ([2013] NSWCA 284), Sackville AJA summarised (at [4] – [5]), his earlier judgment on behalf of that Court, in these terms:

4.   The Court reached the following conclusions:

the Consent was to be construed as permitting the use of the Premises as a retail pharmacy only for the supply to members of the public of PBS items and OTC drugs (at [87]);

so construed, the Consent was valid (at [94]);

the current use of the Premises included use for a purpose prohibited under the relevant local environmental plan ("LEP"), namely a shop (at [118]); and

the current use of the Premises as a large-scale retail pharmacy was prohibited under the LEP (at [123]).

5.   In considering the orders that should be made, the Court took a number of matters into account, including the following:

the use of the Premises would not be unlawful if the retail pharmacy was confined to the supply of items covered by the Pharmaceutical Benefits Scheme ("PBS" items) and over-the-counter ("OTC") drugs (at [119]);

in view of the conclusions reached on the appeal, it would be necessary for a discretionary defence pleaded by the Respondents, but not addressed by the primary Judge, to be dealt with by remitting the matter to the L&E Court (at [126]);

the notice of appeal was deficient because it sought orders only on the basis that the Consent was void and did not seek orders reflecting the conclusions actually reached by the Court (and which had been fully argued) (at [124]); and

subject to the Respondents' discretionary defence, the appellants were entitled to an injunction, but in order for the injunction to be framed with sufficient specificity it was necessary for the expression "OTC drugs" to be carefully defined (at [127]).

The second judgment and “final” orders of the Court of Appeal

43. In His Honour’s second Court of Appeal judgment, to which I have referred immediately above, Sackville AJA recorded (at [7]) that the parties had filed (“after some delay”) the documents which he had directed.

44. The appellants/applicants sought from the Court of Appeal the following orders in place of those which I had made in my 2012 judgment:

3.    ...

(a)   Declaration that Development Consent DA 08/1288 ("the Consent") granted by the First Respondent to the Second Respondent on 20 February 2009 does not permit the retail sale and supply to members of the public, at the Premises, of items other than PBS items, Prescription drugs and OTC drugs.

(b)   Order that the Second Respondent, the Third Respondent and any agent, servant or employee of either the Second Respondent or Third Respondent be restrained from doing any act that constitutes the retail sale and supply to members of the public of items, other than PBS items, Prescription drugs and OTC drugs, to members of the public, at the Premises.

4.    In these Orders, the following terms have meanings as defined:

"Premises" means "Tenancy 230" (located within the "Penrith SupaCenta", Jamisontown)

"PBS items" has the same meaning as the term "pharmaceutical benefits" as defined in s 84 of the National Health Act 1953 (Cth).

"Prescription drugs" means drugs listed on Schedules 4, 5 and 8 of the Poisons and Therapeutic Goods Act 1966.

"OTC drugs" means drugs listed on Schedule 2 and 3 of the Poisons and Therapeutic Goods Act 1966.

45. The appellants had also pointed out in their written submissions that the Poisons and Therapeutic Goods Act 1966 (“the Poisons Act”) lists, in Schedules 2 and 3, drugs that may be sold OTC, generally with direct supervision by a pharmacist, and, in Schedules 4, 5 and 8, drugs which require a prescription from a medical practitioner, although not necessarily PBS items.

46. However, the respondents went beyond the terms of the first Court of Appeal orders, and filed an affidavit by a pharmacist, expressing opinions about the meaning of the term “OTC drugs”.

47. The respondents asked the Court of Appeal (1) to remit to this Court, for definition, the term “OTC drugs”, or (2) to define “prescription drugs” to mean items in Schedules 4, 5 and 6 of the Poisons Act, and “OTC drugs” to mean “an ‘OTC medicine’, as defined in the Therapeutic Goods Regulations 1990 ...”, or in terms of “an item which is associated with the use of a Pharmaceutical benefit or a Prescription drug” (see [10]).

48. Sackville AJA noted, in his second judgment (at [11]), that Schedule 6 of the Poisons Act lists substances used for agricultural, industrial and other non-medical purposes, and he, therefore, assumed that the reference by the respondents to Schedule 6 was an error.

49. His Honour then said ([12]):

[My first] judgment contemplated that this Court would settle the terms of an injunction, although no final order can be made until the L&E Court deals with the Respondents' discretionary defence. There is no good reason why this Court should not do what is proposed in the judgment. The issue left unresolved by the judgment was not what pharmacists would understand by the expression "OTC drugs", but how an injunction should be drafted so as to be sufficiently clear in its terms and reflect the Court's reasoning.

50. Sackville AJA observed (in [13]) that the appellants’ proposed orders met the criteria his judgment had laid down, but that the respondents’ did not.

51. He commented, in conclusion ([13] – [17] – my emphasis):

13.    … [my earlier] judgment made it clear that only a limited class of OTC drugs could be dispensed consistently with the Consent, namely those closely related to the supply of pharmaceutical benefits (see at [80], [82], [93]). The appellants' draft orders achieve both precision and the necessary connection with the supply of PBS items.

14.    By contrast, the Respondents' proposed orders are uncertain in scope and operation. The proposed orders also would permit them to sell products having little of nothing to do with PBS items.

15.    The only order I propose at this stage is as follows:

Confirm that Order 7 made by this Court on 4 July 2013 has effect. [See above at [39]]

16.    If, however, the L&E Court rejects the Respondents' discretionary defence, the following orders and declaration should be made by the L&E Court:

1.    Declare that Development Consent DA 08/1288 ("the Consent") granted by the First Respondent ("the Council") to the Second Respondent ("AMS") on 20 February 2009 does not permit the retail sale and supply to members of the public at Tenancy 230 within the "Penrith SupaCenta", Jamisontown ("the Premises") of items other than PBS items, Prescription drugs and OTC drugs.

2.    Order that AMS, the Third Respondent ("Mr Gance") and any agent, servant or employee of either AMS or Mr Gance be restrained from doing any act that constitutes the retail sale and supply to members of the public of items other than PBS items, Prescription drugs and OTC drugs.

3.   In these orders the following definitions apply:

"PBS items" has the same meaning as "pharmaceutical benefits" as defined in s 84 of the National Health Act 1953 (Cth);

"Prescription drugs" means any drug listed in Schedules 4, 5 and 8 to the [Poisons Act], as in force from time to time;

"OTC drugs" means any drug listed in Schedules 2 and 3 to the Poisons Act as amended from time to time.

17.    If the Respondents' discretionary defence succeeds in the L&E Court, it will be a matter for that Court to decide whether it is appropriate to make a declaration in the terms set out above.

Proceedings and events following the two Court of Appeal judgments

52. Following the Court of Appeal remitter, the respondents (1) sought special leave to appeal to the High Court, and (2) made a fresh DA to the Council, seeking consent for a “neighbourhood shop” (as defined and allowed by the LEP).

53. The parties came back before this Court, for a first post-remitter mention, on 18 September 2013, and the matter has been mentioned before me, in the context of the Court of Appeal remitter, on many occasions. It has also been before the Registrar, and/or managed by eCourt, on several other occasions.

54. Clearly, the special leave application and the new DA had to run their course before this Court could act upon the remitter.

55. Gadens Lawyers, who have maintained their “submitting” role in the proceedings on Council’s behalf, attended on some of those occasions, and have kept the Court informed of Council’s progress with its assessment of the new DA.

56. On 1 October 2013, the respondents engaged a planner, Robert Player, to prepare a “planning report” regarding obtaining consent from Council to a “neighbourhood shop” within the CWDCP premises. The respondents instructed him to prepare a DA accordingly, and the plans for the shop, and a list of products to be sold in it, were contained in Player’s affidavit of 8 November 2013 (pp30, 32, and 10-11, respectively).

57. However, the DA was, for various reasons, which Player explained in his affidavit of 21 February 2014, not lodged until 18 February 2014. Player further deposed, on 7 May 2014, to an exchange of “further info” with the Council, and that, subject to Council needing further legal advice, a decision on the DA was then expected by late June 2014.

Special leave refused

58. In the meantime, in the High Court, on 14 March 2014 (see [14] above, and Exhibit R3), senior counsel for the applicants for special leave (the active respondents before this Court) sought to argue error, and underlying procedural unfairness, on the part of the Court of Appeal.

59. Refusing leave, Crennan J (on behalf of herself and Keane J) said (at LL737 – 755):

The applicant seeks special leave to appeal from orders made by the Court of Appeal of the Supreme Court of New South Wales allowing an appeal from orders of the Land and Environment Court. The outcome of an appeal to this Court would turn substantially on the construction of a development consent adopted by the Court of Appeal. The applicant complains that there was an insufficient opportunity to address on that question of construction.

Noting that, we are of the view that there are insufficient prospects of disturbing either the Court of Appeal’s construction of the development consent or a related finding that the use of the premises in question was used for a prohibited purpose under the Penrith Local Environment Plan 1996 (Industrial Land). Accordingly, we are not persuaded that this application gives rise to more general questions about the operation of sections 76B, 106, 107 and 109B of the [EPA Act] as might warrant a grant of special leave. Nor are we persuaded that considerations concerning the administration of justice would support a grant of special leave. Special leave to appeal is refused with costs.

Council grants a new approval

60. Council eventually approved the respondents’ “neighbourhood shop” DA (14/0171) on 12 November 2014, with such consent to expire on 12 November 2016 (Exhibit R1).

61. That (new) DC, for “fit-out and use as Neighbourhood Shop – Chemist Warehouse”, included the following relevant conditions:

1   The development must be implemented substantially in accordance with the approved site plan (Ref. No. 07008, dated 8/12/08, prepared by Rice Daubney), floor plan (Ref. No. AMC 01.13/62, Rev. A02, dated 31/10/13, prepared by AM Solutions) and signage plans (Ref. No. 2465, dated 12/11/13, prepared by CS&G Signs Pty Ltd) as stamped approved by Council, the application form and any supporting information received with the application, except as may be amended in red on the approved plans and by the following conditions.

...

7   The development is to operate as a neighbourhood shop as defined under [LEP] and consistent with the information contained within the Development Application and the subsequent information prepared by Don Fox Planning dated 21 July 2014 and 30 October 2014, including the approved floor plan (Ref. No. AMC 01.13/62, Rev. A02, dated 31/10/13, prepared by AM Solutions).

In this regard, and to ensure consistency with the information provided in the submitted Development Application, the tenant is to retain product unit breakdowns of those items sold from the neighbourhood shop. These breakdowns are to demonstrate, to the satisfaction of Council, that the neighbourhood shop is selling a range of general merchandise including milk, bread, packaged foods, sunscreen, magazines, household goods, ice creams, batteries, chips, suncare products, snack food, confectionery, skincare products, prophylactics, health foods, newspapers, cleaning goods, personal care products, pharmacy lines and deodorant.

8   The display areas around the perimeter of the tenancy, facing towards the arcade of the subject complex, are to be stocked with a range of general merchandise consistent with the range depicted in "green" on the approved plans. These display areas are not to be stocked and displayed with a single product line (such as perfume and personal care products). This is in order to identify the premises to customers as stocking a range of general merchandise consistent with the definition of a neighbourhood shop.

9   This development consent is limited to a period of three (3) years from the date of issue of the Occupation Certificate. After this time, a new application will be required to be submitted to Council for continuation of the use.

62. The active parties to the proceedings continued their endeavours to negotiate the terms of an appropriate injunction. Eventually, on 3 February 2015, this Court was told that those negotiations had failed, and the parties were sent to the Registrar to secure dates for this hearing. Directions were given for the filing of evidence and submissions.

63. The respondents’ solicitor, Hamish Rotstein, deposes (12 May 2015, par 5) that works conforming to the Neighbourhood Shop Consent commenced in mid-February 2015 and were completed on or about 2 March 2015.

64. Since then (par 5(c)), the active respondents “AMS and Gance have been trading at the Premises in accordance with the Neighbourhood Shop Consent, and the original Development Consent DA 08/1288 (as interpreted by the Court of Appeal)”.

65. Until the premises were reconfigured, and the operations within CWDCP were modified, the large pharmacy business, as it was conducted “unabated” (Tp9, L23) from September 2009 until early 2015, was serving approximately 25,000 customers, and enjoying takings of more than $2 million, per quarter, pursuant to the DC at the heart of these proceedings (see Gance, Exhibit A1, par 18).

66. The applicants’ submissions in chief (2 April 2015, par 25) make the following observations regarding CWDCP’s changed situation:

25.   The recent consent does not authorise the operation of the large retail pharmacy complex that the Respondents' contended at first instance and in the Court of Appeal was authorised at the Premises pursuant to the [challenged] Consent. It authorises a quite different use of the Premises ... indicated by the following matters:

(a)   Condition 1 of the development consent indicates that the development must be implemented substantially in accordance with new plans, including the proposed floor plan revision A02, that is quite different from the floor plan the subject of the trial ...

(b)   The new development consent is for the fit-out and use of the Premises as a Neighbourhood Shop whereas the first development consent provided that retail sales were to be ancillary to the primary use of the Premises as a distribution centre (condition 4) and was simply for the tenancy fit-out and use of the chemist warehouse shop at Tenancy 230 Paddy's Place.

(c)   The Neighbourhood Shop consent does not authorise the large scale pharmacy operation found to be carried out at the Premises by the Court of Appeal at [95], [100], [118] and [123] of the Appeal Judgment.

(d)   The Neighbourhood Shop consent by Condition 8 required the display areas around the perimeter of the tenancy facing towards the arcade of the subject complex to be stocked with a range of general merchandise consistent with the range depicted in green on the approved plans. It required that these display areas were not to be stocked and displayed with a single product line (such as perfume and personal care products as was the case at trial and as the Court saw on the view).

(e)   The new consent only provides for the sale of pharmacy line products on one small shelf of the front of shop area.

(f)   The new development consent only authorises the sale of listed types of general merchandise in the front of shop area (which was reduced in size) being insect repellent, milk, day to day needs, bread, package foods, sunscreen, magazines, household goods, ice-cream, batteries, chips, sun care, snack food, confectionary, prophylactics, skin care, health foods, newspapers, cleaning, personal care and deodorant.

(g)   The Neighbourhood Shop consent only provided for one shelf in the front of shop area stocking a combination of general merchandise and pharmacy lines.

(h)   The front of shop area was reduced in size to 195m².

(i)   The development consent was limited to a period of 3 years pursuant to condition 9, whereas the original development consent was not time-limited.

Relevant Statutes and Rules

67. The sections of the EPA Act under which the Court grants relief are ss 123 and 124, which provide:

123   Restraint etc of breaches of this Act

(1)   Any person may bring proceedings in the Court for an order to remedy or restrain a breach of this Act, whether or not any right of that person has been or may be infringed by or as a consequence of that breach.

(2)   Proceedings under this section may be brought by a person on his or her own behalf or on behalf of himself or herself and on behalf of other persons (with their consent), or a body corporate or unincorporated (with the consent of its committee or other controlling or governing body), having like or common interests in those proceedings.

(3    Any person on whose behalf proceedings are brought is entitled to contribute to or provide for the payment of the legal costs and expenses incurred by the person bringing the proceedings.

(4)   (Repealed)

124   Orders of the Court

(1)   Where the Court is satisfied that a breach of this Act has been committed or that a breach of this Act will, unless restrained by order of the Court, be committed, it may make such order as it thinks fit to remedy or restrain the breach.

(2)   Without limiting the powers of the Court under subsection (1), an order made under that subsection may:

(a)   where the breach of this Act comprises a use of any building, work or land—restrain that use,

(b)   where the breach of this Act comprises the erection of a building or the carrying out of a work—require the demolition or removal of that building or work, or

(c)   where the breach of this Act has the effect of altering the condition or state of any building, work or land—require the reinstatement, so far as is practicable, of that building, work or land to the condition or state the building, work or land was in immediately before the breach was committed.

(3)   Where a breach of this Act would not have been committed but for the failure to obtain a consent under Part 4, the Court, upon application being made by the defendant, may:

(a)   adjourn the proceedings to enable a development application to be made under Part 4 to obtain that consent, and

(b)   in its discretion, by interlocutory order, restrain the continuance of the commission of the breach while the proceedings are adjourned.

(4)   The functions of the Court under this Division are in addition to and not in derogation from any other functions of the Court.

(5) Nothing in this section affects the provisions of Division 3 of Part 3 of the Land and Environment Court Act 1979.

68. The relevant section of the Civil Procedure Act 2005 under which the Court grants an order for costs is s 98, which provides:

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.

(2)   Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court.

(3)   An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings.

(4)   In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to:

(a)   costs up to, or from, a specified stage of the proceedings, or

(b)   a specified proportion of the assessed costs, or

(c)   a specified gross sum instead of assessed costs, or

(d)   such proportion of the assessed costs as does not exceed a specified amount.

...

(6)   In this section, costs include:

(a)   the costs of the administration of any estate or trust, and

(b)   in the case of an appeal to the court, the costs of the proceedings giving rise to the appeal, and

(c)   in the case of proceedings transferred or removed into the court, the costs of the proceedings before they were transferred or removed.

69. Rule 42.1 of the Uniform Civil Procedure Rules 2005 provides:

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.

Submissions

70. Success by the applicants in their appeal to the Court of Appeal effectively means that the court system has concluded that they should have won their case at first instance. Hence, they now seek a declaration and an injunction in their favour, and their costs, to conclude the matter.

71. The respondents have now the combination of a valid consent, not time-limited, for the distribution component of CWDCP, and a three-year consent for a neighbourhood shop associated with that (Tp18, LL25 – 26), but they consider that this Court need not make any declarations, or orders, including as to costs, as the applicants did not succeed on every issue raised.

Relief

72. The applicants accept (subs 10 April 2015, par 14) that “any injunctive relief should carve out or except activities carried out pursuant to [the] new Neighbourhood Shop Consent” (my emphasis).

73. However, they submit (par 15) that the “fresh approval”, which came after the Court of Appeal formulated the relief and remitted the matter, is plainly not the “discretionary defence”, to which the APOD (par 4(h)), and the Court of Appeal decision, referred.

74. Once the use changed to accord with the new DC, the EPA Act breach identified by the Court of Appeal “will have ceased” (par 16), but the new DC “does not constitute any reason not to make the first declaration set out in Order 1 at [16]” of the second Court of Appeal judgment, and Order 2 should also be tailored to make the exception suggested (pars 17 – 18).

75. The applicants’ submissions (par 19) further point out that Gance (8 November 2013, par 34) “accepts that the reconfiguration of the Premises to operate as a neighbourhood shop is designed to achieve compliance” with any injunction granted in the terms laid down by Sackville AJA.

76. They rely on this evidence as conceding (par 21) that “the appropriate outcome” is for the injunction to be granted, with the exception.

77. The respondents submit (par 15) that:

1. the applicants “failed both at first instance and on appeal” on their “primary claim”, i.e. that the DC was invalid, and succeeded on their “Issue 2”, namely (par 12) that “the present use of the premises was prohibited”, and the CWDCP was “operating in breach of s 76B”; and

2. that their success in the Court of Appeal was on an argument not raised before me (par 17), i.e. that “the third respondent was operating in breach of the [DC], properly construed, other than condition 4”.

78. They further submit (par 30) that there is no utility in the injunction, and that it should not be made. Indeed, Mr Galasso argued orally (Tp14) that neither a declaration nor an injunction is appropriate, as the applicants ended up with (Tp15, LL33 – 34) “what at best could be described as a bare win”. The potential for the respondents to “operate in breach” is essentially cured by the granting of the Neighbourhood Shop DC, which they claim (par 34) has superseded the DC at issue in the primary proceedings.

79. The respondents’ submissions on relief conclude (pars 36 – 37):

36.   As the applicants have not been successful on the challenge to the validity of the original development consent, and nor is there any need or utility in ordering any injunction, the second and third respondents contend that the ultimate order the Court ought make is to dismiss the applicants’ Summons. In the alternative no injunction order ought be made.

37.   In the alternative, if the Court does grant injunctive relief the form of Order should be clearly subject to the continued existence and operation of the consent considered by the Court both as to the warehouse component and that part of the pharmacy use the subject of determination by the Court of Appeal, and the convenience store consent.

80. The applicants filed extensive “submissions in reply” – on both relief and costs.

81. The applicants claim (reply subs par 2) that the respondents “proceed on the basis of a denial (or at least a misunderstanding) of the outcome in the Court of Appeal”, and (par 3) that their conduct in the original DA process was identified by the Court of Appeal as “potentially misleading”.

82. On the other hand, the applicants’ case was always that (par 4) “the operation of a large retail pharmacy at the site was contrary to or in breach of the Consent (and ... Condition 4)”, and that (par 5) “the use actually being carried out involved retail sales that were not ancillary as required by Condition 4”. Alleged breach of the consent was pressed both at trial and on appeal; it was denied in the APOD, and its significance has been downplayed in the respondents’ present submissions (pars 6 – 8).

83. The applicants’ reply submissions say (par 10):

... the principal argument at trial was that the operation of the Premises as a shop was prohibited, and the Applicants’ claim that this was so was upheld in the Court of Appeal. It is irrelevant to the present dispute (in relation to costs and relief) that the Court of Appeal found additional or supporting reasons for granting relief, namely a departure from the types of items listed as proposed to be sold in the SEE.

84. Those submissions further record (par 11) that, contrary to some of the respondents’ submissions, Sackville AJA (at [100] of his first judgment) noted that it was “not necessary to decide the appeal on a ground not advanced at trial”, and they give examples (in pars 12 – 14) of other findings and comments by His Honour which make that point.

85. On the question of utility, the applicants point to the fact that the respondents’ breach continued throughout five years of litigation, and submit that they must not be permitted any real chance of further attempts to go beyond what the Court of Appeal has prescribed, particularly given the three year limitation on the new consent (pars 15 – 17), and the continued operation and relevance of the original consent for a warehouse/distribution centre. This Court’s discretion on relief has been confined by Sackville AJA’s orders (pars 18 – 26).

86. Mr Robson submitted to the Court, on 13 May 2015, a form of order which should be made if this Court rejects the respondents’ discretionary defence. The Court of Appeal’s draft (in par [16] of its second judgment, quoted above in [51]) would stand, subject to the addition to the Order in the second paragraph, after the words “OTC drugs”, of additional words. He suggests “... and any activity authorised by development consent DA 14/0171 granted on 12 November 2014”, but it seems to me that the use of the word “and” in this formulation would have an effect opposite to what the applicants intend.

87. On the other hand, Mr Galasso suggested an alternative form of “carve out”, if I were minded to effect one, namely inserting at the very beginning of proposed Order 2, the words “subject to any grant of development consent other than the Consent”.

Costs

88. The applicants submit (par 22) that, as the Court of Appeal found “legally flawed” the arguments upon which the respondents succeeded before me at first instance, costs should “follow [that] event”, regardless of the respondents’ having “shifted ground”, after exhausting their appeal rights, and obtaining the new DC, substantially modifying the activities carried out at the Premises.

89. The new use is (par 25) “quite different” – a Neighbourhood Shop, seriously scaled back from the tenancy fit-out for a “Chemist Warehouse” ancillary to a distribution centre. The area and scale of retail, and non-drug promotions, is “significantly different”.

90. As the applicants were ultimately successful on the central issue they litigated at trial, they are entitled to an order for their costs.

91. In his oral submissions on behalf of the respondents on the question of costs, Mr Galasso SC said (at Tp23, LL27 – 32, p24, LL35 – 36, and p26, LL1 – 4):

•   ...at the very least not less than half of the proceeding was lost by the applicant ... [I]t's really the whole case that they failed on ...

...

•   ... the prayers sought in this Court and what came out of the Court of Appeal are as different as night [and day].

...

•   ... effectively nothing that the applicant ran before your Honour, other than it being an entry card to go to the Court of Appeal, nothing that the applicants ran before your Honour ended up being or culminating in a result leading to a finding of the Court of Appeal let alone any determination by it

92. He made it clear (Tp26, LL35 – 38):

... we don't seek an order for costs in our favour, what we say is that the appropriate order is that there be no order for costs in the proceedings before this Court, whether it be in the primary hearing or in this application.

93. If the applicants were to win any order for their costs, it should be, Mr Galasso submitted (Tp26, LL41 – 43), for no more than a “maximum of 25%” of them.

94. The respondents’ written submissions advance (par 40) four reasons for refusing the applicants a costs order:

(a)   First, if the Court accepts the submission that no injunction ought be ordered, the applicants will have obtained no relief of an type at all;

(b)   Secondly, to the extent that the applicants were successful it was success in the Court of Appeal, which has dealt with costs in that Court. In the Court of Appeal the applicants’ “success” was not on a ground that it advanced in the first instance proceedings, or for that matter in the Court of Appeal itself, so it ought not get the costs of the first instance proceedings merely because of the Court of Appeal result;

(c)   Thirdly, it is common place, and appropriate, for costs orders to be apportioned particularly where an applicant does not succeed on discrete issues (Brown v Randwick City Council [(“Brown”)] [2012] NSWLEC 28 at [10] and [11]). This principle has universal application in this case because the applicant succeeded on none of the issues advanced in this Court. As costs a compensatory, any costs orders would both compensate an applicant for issues upon which it was unsuccessful, and punish the respondents for defending grounds which were brought without foundation;

(d)   Fourthly, the applicants commenced these proceedings without warning, a factor which can be disentitling of an award of costs.

95. In support of (a), the respondents rely on Liverpool City Council v Roads and Traffic Authority (No 2) (1992) 75 LGRA 210, and on Pittwater Council v Bolitho [2007] NSWLEC 355 (at [163] – [165]).

96. In respect of (b) and (c), the respondents’ submissions say (in par 44):

... The Court was never invited to determine that the third respondent was in breach of the original consent because it sold items beyond that which was listed on the PBS or characterised as OTC. No pleading, evidence, submission or any other indication at all of any type was ever contended. Quite to the contrary, as the Court recorded in the first instance judgment at [283], the applicants never engaged on this issue of where the “drawing of the line” was to be, let alone any contention that the line was to be drawn at OTC/PBS which is ultimately what the Court of Appeal decided.

97. At first instance, the applicants made three “critical complaints” (par 49):

... First, that the consent is invalid. Secondly, that the present use is a use as a “shop” and therefore in breach of s.76B (that is, the carrying out of a prohibited use). Thirdly, that the operation is in breach of condition 4 (which required retail sales to be ancillary to distribution).

98. The respondents continued (pars 50 and 52):

50. Importantly, other than the ground that the premises was operating in breach of condition 4, there was no issue that it was otherwise operating outside of that which was permitted by the consent. The applicants’ fundamental premise was that the use was either correctly characterised as a “shop” at the time of the application to the Council (and hence invalid because there was no power to grant consent) or, was operating as a “shop” in breach of s.76B notwithstanding the consent. ...

...

52.   The applicants are unable to assert that the issue upon which they ultimately had “success” in the Court of Appeal, being the respondents were operating in breach of the consent by selling things other than PBS and OTC medicines, was ever a matter that the trial judge was asked to deal with. It formed absolutely no part of the case at first instance.

99. In support of (d), the respondents relied upon my reasoning in Calardu Warrawong (Homestarters) Pty Limited v Wollongong City Council (No 2) [2010] NSWLEC 26.

100. The respondents’ “fall back” position is that any costs order in favour of the applicants should be for only a proportion of their costs. 25% is nominated (subs par 62).

101. Mr Galasso relied, in particular, on James v Surf Road Nominees Pty Limited (No. 2) (“James”) [2005] NSWCA 296, and cases cited therein. I now set out pars [32] – [37] of the Court of Appeal judgment in James:

32    The effect of Pt 52A r.11 is that an unsuccessful party may be ordered to pay the entirety of the costs of the successful party, even though the successful party did not succeed on all issues. However, as is specified by the rule itself, the Court is entitled to make a different order. That may occur where there are multiple issues involved. This was the subject of comment in Waters v. P C Henderson (Aust) Pty. Limited (unreported CA(NSW) Kirby P, Mahoney and Priestley JJA, 6 July 1994) where Mahoney JA said:

“Where the proceedings involve multiple issues the application of the rule that costs follow the event may involve hardship where a party succeeds on some issues and yet fails on others. Particularly is this so where, for example, a defendant succeeds on issues that occupied the bulk of the time taken by the proceedings. Nevertheless, 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.”

33   Similarly, Toohey J made the following observations in Hughes v Western Australian Cricket Association [[1986] FCA 382]; (1986) ATPR 40-748:

“1. Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order.

2. Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed.

3. A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the party’s costs of them. In this sense, “issue” does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law.” (references omitted)

34   Where a matter involves multiple issues and the question before the court is whether it should make some other order as to costs other than the order that costs follow the event, a distinction is commonly drawn between cases which involve clearly discrete issues for determination, and those in which all issues are inseparable, or at least sufficiently linked, with respect to the overall disposition of a particular matter. In Permanent Trustee Aust Ltd v FAI General Insurance Co Ltd (unreported, NSWSC, 3 June 1998), Hodgson CJ in Eq noted that the obvious examples of a matter involving discrete issues is one where a plaintiff makes separate claims for different relief, or a claim by a plaintiff and a cross-claim by a defendant. Another example is where a respondent is successful in having an appeal against an earlier decision dismissed, but for reasons other than those raised in the respondent’s Notice of Contention. This is not to say that so-called “discrete issues”, for the purposes of apportioning costs, only exist in cases where there are separate claims made within a single matter. As Toohey J stated in the passage quoted at [33] above, it 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.

35   In Madden v Connell [2001] NSWSC 1051, Hamilton J referred to there being a “rule” that where there are “discrete issues and the time taken on each issue at the hearing can be identified or realistically estimated”, an order for costs may be made against the party which fails on such issues, or alternatively, that party may be deprived of its costs for that portion of the matter. In the Court’s opinion it is preferable not to speak in terms of “rules”. However, the underlying approach to the “rule” stated by his Honour may be an available approach to the exercise of the court’s discretion as to costs in a particular case, depending upon all of the circumstances.

36   Where the court does exercise its discretion to apportion costs, the apportionment itself involves the exercise of discretion. As Gummow, French and Hill JJ recognised in Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261:

“Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion for the trial judge. Mathematical precision is illusory and the exercise of the discretion will often depend upon matters of impression and evaluation.”

This case is a classical example of that sentiment.

37   In the Court’s opinion, it would be unreasonable to separate out “the construction issue” relating to the Deed of Guarantee and order that the corporate respondents be entitled to some proportion of the costs of the proceedings because they succeeded on that issue. The construction of the guarantee meant little of itself. The intent of the proceedings relating to the guarantee was to seek to have the appellants made liable on it. This Court has found against the corporate respondents on that issue. Accordingly, subject to what is said below about the cross-claim on the oppression issue, the corporate respondents should pay the appellants’ costs of the proceedings.

102. The applicants’ reply submissions reinforce the points they had made in chief.

103. They assert (pars 27 – 29):

1. That the Court of Appeal findings “supersede the contrary findings at trial in this Court, and are deemed to be the findings that would have been made in this Court if the trial had proceeded in accordance with law. The Applicants’ success in the proceedings arises from those findings”;

2. That the applicants “have also secured practical success by means of the proceedings as the proceedings have had the direct result that the Respondents have moved to secure their new neighbourhood shop consent and to confine their operations to that new consent which involves trade of a different and more confined character to the trade being carried out on the findings of the Court of Appeal absent these proceedings, namely trade as a large retail pharmacy ...”; and

3. That their “success will also be demonstrated by injunctive orders, if made, but the making of orders is not necessary to activate the costs follow the event principle and presumptive rule in r42.1 UCPR”.

104. They quote and rely on many of the cases to which the respondents referred, but to opposite effect, and join issue with the respondents’ primary costs submissions.

105. The applicants have consistently argued, as their central issue, that a large retail pharmacy was not authorised. At no stage did the respondents concede on that point; they argued about it as far as the Court of Appeal, but the Court of Appeal upheld the applicants’ position, and the High Court refused leave to revisit that decision.

106. The applicants conclude their written reply (par 43) by submitting that, in these circumstances, it is “rather perverse for the Respondents to claim that the Applicants have not been successful on the main contested issue at trial”.

107. In his oral reply submissions, Mr Robson SC adopted my summary (at [12] of my primary judgment) of the “four substantive questions” he had raised at trial.

108. He also adopted my comments (at [228]) that the two “primary questions” they raised in the proceedings were “the validity of the enabling consent, and the legality of the [then] present use”.

109. He submitted that the applicants had succeeded on all of those questions, and so should get an order for the whole of their costs, with no apportionment (see also Tp34).

110. The outcome of the proceedings, following the Court of Appeal decision, is that the respondents are (Tp28, LL18 – 21) “...prohibited from doing is running a large scale pharmacy and that's the relief to which the applicants, in my respectful submission, are entitled and that's the relief with the carve out [my emphasis, and see [72] above] that has proper utility and reflects the findings in effect of the courts”, and, in terms of appropriate relief (Tp29, LL2 – 4), “the declaration says that you cannot have what they were doing before. And the injunction says, you can't keep doing what they were doing except in accordance with the consent”.

111. The form of order the applicants submitted on 13 May 2015 (see [86] above) included also an order that the second and third respondents pay the applicants’ costs of the proceedings in this Court.

Consideration

Relief

112. Preston J discussed the relative efficacy of declarations, orders, and publication of a “public pronouncement by the courts”, in Great Lakes Council v Lani [2007] NSWLEC 681; 158 LGERA 1, at [17] – [26], and I respectfully adopt and apply His Honour’s analysis here, without repeating it.

113. Declarations of breach, unsupported by remedial orders, may have little effect, but injunctions can also work an injustice, by being disproportionate to the problem at hand: Hoxton Park Residents Action Group Inc v Liverpool City Council (No 3) [2012] NSWLEC 43; 190 LGERA 119, at [10].

114. Nothing put to me by the respondents persuades me that the declaration and injunction suggested by Sackville AJA and supported by the successful applicants, should not be made, with appropriate additions. The applicants’ submissions are clearly to be preferred, except as to the form of words to be used to achieve the “carve out” which accommodates the new consent.

115. The respondents have their two DCs, and I consider that there is neither prejudice nor disproportionality caused to them by the relief proposed by the applicants, subject to “carve out”, provided that the injunction also does not preclude any further approvals which the respondents might legally obtain.

116. The injunction will be framed to accommodate that prospect, as well as the problems I discovered with the applicants’ suggested wording ([86] and [87] above).

Costs

117. I turn now, therefore, to consider the question of costs.

118. In the ordinary course of events, the successful party would be awarded costs in “both the appellate court and the court below” (G.E. Dalpont, “Law of Costs”, 2nd ed., 2009, p677, par 20.12).

119. Costs in the higher courts in this matter, have already been awarded to the applicants, without any apportionment.

120. It has been frequently noted and stated by this Court (respondents’ sub 62) that:

... the decision on whether or not costs should be apportioned is not a mathematical exercise of ticking off the paragraphs in the points of claim to see who won which issue. It is an exercise of discretion based on the whole of the circumstances which the court has before it. ...

121. In Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) (“Tomanovic”) [2011] NSWCA 256; 288 ALR 385, a differently constituted bench of the Court of Appeal, from that in James, said (at [83] – [84]):

83 The Sayer Interests submit that there are several matters that call for the costs order concerning the Equity Proceedings to depart markedly from the starting point that UCPR 42.1 provides. One is that the Tomanovic Interests "either abandoned or failed in respect of 90% of the myriad of particular allegations of oppression pressed against Mr Sayer in the Equity Proceedings". This figure of 90% is derived from a detailed analysis that counsel for the Sayer Interests put forward of the evidence, closing submissions, cross-examination and judgment in the court below. That analysis identifies some 22 factual topics, breaks them into categories of "claims of oppression pressed in evidence, but abandoned at commencement of the hearing", "claims of oppression particularised and lost at trial, and not pressed by appellant on appeal", "claims of oppression particularised - pressed and lost at both trial and on appeal", "respondent's claim in Common Law Proceedings debt recovery claim (excluding cross-claim)" and "claims of oppression upheld on appeal". It then counts the number of paragraphs dealing with affidavit evidence in each category, the number of paragraphs dealing with each such topic in closing submissions, and the number of pages devoted to each such topic in cross-examination, and the number of paragraphs of the trial judgment devoted to each such topic.

84   This is a highly artificial way of proceeding and gives a false air of mathematical precision. As has been repeatedly stated, where there is a mixed outcome in proceedings the question of apportionment of costs between issues on which the party who has overall been successful has succeeded, and those on which that party has failed, is very much a matter of discretion, and mathematical precision is illusory: James ... at [36]; ... Further, even the number of topics that are identified and categorised overstate matters to some extent. Even so, there is substance in the submission that the Tomanovic Interests raised many matters on which they did not succeed.

122. I discussed both James and Tomanovic in Greenwood v Warringah Council (No 2) [2013] NSWLEC 3; 196 LGERA 28, at [16] – [17], and Preston J discussed James, and other cases, but not Tomanovic, in Brown. His Honour said (at [9] –[11]):

9   One circumstance where the Court may consider it appropriate to make a different order as to costs is where multiple issues are involved and the successful applicant fails on one or more of the issues which are discrete from the issues on which the applicant succeeded.

10   The principles governing apportionment have been summarised in a number of judicial decisions, including in the Court of Appeal in [James] at [32]-[36]; in this Court ... and by other courts in the other cases referred to in these decisions.

11   What is clear from these summaries of principles is that 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: [James] at [32] and [34] respectively. In determining the discreteness of the issues, it is relevant to consider whether the time taken on each issue, at the hearing and in evidence, can be identified or realistically estimated: [James] at [35]. It may also be relevant to consider whether the issues on which the applicant did not succeed lacked real merit: ...

123. In “the whole of the circumstances” ([19] above) of the present case, I find the segmentation/mathematical approach to costs neither appropriate nor useful.

124. The applicants received orders for costs, without apportionment, in both appellate courts. Ultimately, they have been successful in their primary proceedings, and should have a similar order made here.

Orders

125. The Court will, therefore, make the orders proposed by the applicants:

1. The Court declares that Development Consent DA 08/1288 (“the Consent”) granted by the First Respondent (“the Council”) to the Second Respondent (“AMS”) on 20 February 2009 does not permit the retail sale and supply to members of the public at Tenancy 230 within the “Penrith SupaCenta”, Jamisontown (“the Premises”) of items other than PBS items, Prescription drugs and OTC drugs.

2. The Court orders that, subject to any grant of development consent other than the Consent, AMS, the Third Respondent (“Mr Gance”) and any agent, servant or employee of either AMS or Mr Gance be restrained from doing any act that constitutes the retail sale and supply to members of the public of items other than PBS items, Prescription drugs and OTC drugs.

3. In these orders the following definitions apply:

“PBS items” has the same meaning as “pharmaceutical benefits” as defined in s 84 of the National Health Act1953 (Cth);

“Prescription drugs” means any drug listed in Schedules 4, 5 and 8 to the Poisons and Therapeutic Goods Act 1966 (“Poisons Act”), as in force from time to time;

“OTC drugs” means any drug listed in Schedule 2 and 3 to the Poisons Act as amended from time to time.

4. The Second and Third Respondents are jointly and severally ordered to pay the Applicants’ costs of proceedings 40565 of 2009 in the Land and Environment Court, as agreed or assessed.

5. The exhibits are returned.

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Decision last updated: 12 June 2015