Carcione Nominees Pty Ltd and Scolaro - [2010] WASAT 158

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: LOCAL GOVERNMENT (MISCELLANEOUS PROVISIONS) ACT 1960 (WA)

CITATION: CARCIONE NOMINEES PTY LTD and SCOLARO [2010] WASAT 158

MEMBER: MR T CAREY (MEMBER)

HEARD: DETERMINED ON THE DOCUMENTS

DELIVERED : 2 NOVEMBER 2010

FILE NO/S: CC 990 of 2010

BETWEEN: CARCIONE NOMINEES PTY LTD
Applicant
AND
RITA SCOLARO
PASIFAL NOMINEES PTY LTD
Respondents

Catchwords:

Local government Difference alleged between adjoining owners regarding proposal to underpin or otherwise strengthen neighbouring building Application withdrawn Application for costs Standing of applicant Whether proposal to underpin or otherwise strengthen Prospects of success Whether respondents entitled to costs if application determined

Legislation:

Local Government (Miscellaneous Provisions) Act 1960, s 389, s 391, s 391(b), s 391(1), s 391(2), s 391(3), s 391(4), s 392, Div 4, Pt XV
State Administrative Tribunal Act 2004 (WA), s 5, s 52(3), s 52(4), s 87(1), s 87(3)

Result:

Costs application unsuccessful

Category: B

Representation:

Counsel:

Applicant: Mr J Skinner
Respondents : Mr MS Macdonald

Solicitors:

Applicant: Jackson McDonald
Respondents : Macdonald Rudder

Case(s) referred to in decision(s):

Diploma Construction Pty Ltd and Owners of Strata Plan 44936 [2010] WASAT 63
Pearce and Germain [2007] WASAT 291(S)

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The respondents applied for an order for costs upon the withdrawal by the applicant of the application. They relied, among other things, on an alleged lack of prospects of success of the proceeding, and a claim that had an order been made or sought, it would have been on the basis that the respondents recovered their costs.
The proceeding concerned s 389 and s 391 of the Local Government (Miscellaneous Provisions) Act 1960 (WA), which deal with the possible need to underpin or otherwise strengthen the foundations of a building on a property adjoining that for which construction of a building is proposed. The sections contemplate the giving of a notice by the developing owner indicating whether underpinning/strengthening is proposed, and, in the event that the adjoining owner disagrees, of a counter notice by that owner. Any such difference may be determined, upon application, by the Tribunal.
The Tribunal rejected each of the respondents' grounds for seeking costs. In doing so, it found that:
a)the incorrect naming of the applicant was not sufficient for a costs order, given that it was capable of rectification by amendment of the application;
b)although, on a literal construction of the relevant provisions, the opportunity for commencing the proceeding may not have arisen, the steps the applicant took were consistent with the policy of the provisions to protect neighbouring owners in the position of the respondents. The respondents themselves had not acted in accordance with those provisions;
c)observations made concerning awards of costs consequential upon the early withdrawal of proceedings in the earlier decision of Diploma Construction Pty Ltd and Owners of Strata Plan 44936 [2010] WASAT 63 were apposite;
d)the claim that the respondents would necessarily have recovered costs if an order as sought was made was not made out, having regard to the relevant provisions.

Factual background and basis of respondents' costs claim

On 20 July 2010, the applicant filed an application under s 389 of the Local Government (Miscellaneous Provisions) Act 1960 (LGMP Act). Section 389 of the LGMP Act is concerned with differences arising between a building owner and an adjoining owner in relation to work in respect of which notice has been given under Div 4 of Pt XV of the LGMP Act. The relevant notice said by the applicant in this case to have been given was a notice under s 391(2) of the LGMP Act informing the respondents, as an adjoining owner, of an intention to erect a building or structure, a part of which would fall within 3 metres of a building belonging to the respondents and which would extend to a lower level than the foundations of the respondents' building, and stating the applicant's intention to underpin or otherwise strengthen those foundations.
The respondents through their solicitors indicated their opposition to any encroachment on their land for the purposes of the intended works. A letter from another solicitor who previously acted for the respondents also stated that the respondents did not agree to the use of ground anchors under the respondents' building being part of the proposal, in a letter to that solicitor, for underpinning or strengthening the respondents' building. According to a preliminary plan enclosed with the letter to the previous solicitor, what was envisaged was the installation of concrete piles located wholly within the owner's property to form a two level car parking basement, supported by a series of temporary mechanical anchors and whalers. Four anchors were proposed, two of which would be located underneath the footings of the respondents' building.
The application was listed for an initial directions hearing on 28 July 2010. On that occasion, the respondents, who were legally represented, suggested that the application was 'spurious', on the basis that the anchors were designed to support retaining walls on the applicant's property and not to underpin the respondents' building. On that occasion, in the face of the respondents' expressed opposition to mediation, I referred the matter to a compulsory conference in order to explore the possibility of settlement.
The compulsory conference occurred over two dates, 6 August 2010 and 17 August 2010. On the second occasion, the Tribunal was constituted by a fulltime member of the Tribunal and a sessional member who is a qualified engineer. By reason of s 52(4) of the State Administrative Tribunal Act 2004 (WA) (SAT Act), what occurred in the compulsory conference is confidential to the participants. What I can say is that the compulsory conference failed to achieve the resolution of the matter by a settlement between the parties, being one of its main purposes: s 52(3) of the SAT Act.
In the course of the present application, the applicant indicated, by the filing of a formal application on 17 August 2010, an intention to substitute Birchley Pty Ltd as the applicant, on the basis that Birchley Pty Ltd is the registered proprietor of the property the subject of the application to the Tribunal. As the applicant explains the position, Carcione Nominees Pty Ltd is the entity that was to undertake the proposed development, and Birchley Pty Ltd, a related company, is the owner of the land. However, when the matter next came before me for directions on 2 September 2010, I was informed that the applicant wished to withdraw its application. The reason given for this was that a fresh notice pursuant to s 391 of the LGMP Act was issued, also on 17 August 2010, in the name of Birchley Pty Ltd, which effectively rendered the application otiose. The possibility of an outcome which would not necessitate a fresh application was also mentioned.
Although counsel for the respondents did not object to withdrawal of the application, he indicated that his clients had incurred significant costs in respect of the application and that his clients sought a costs order. The grounds for such an order were stated as follows:
1)The application was incompetent due to the lack of standing of Carcione Nominees Pty Ltd.
2)Reliance was placed on the claim first made at the initial directions hearing that the insertion of anchors in the manner proposed did not amount to underpinning the respondents' building.
3)The application had no real prospects of success and was withdrawn subsequent to extensive discussions between the parties.
4)Had an order been made as sought, the respondents would have been entitled to payment of their legal costs in accordance with s 391(4) of the LGMP Act.
On 2 December 2010, I granted leave to the applicant to withdraw the application, and, subject to the determination of the costs issue, dismissed the application. The respondents were directed to file and serve a document proposing the amount of any costs order and basis for the amount proposed, and any supplementary submissions in support of a costs order. The applicant was directed to file and serve its response to the order sought and the respondents' submissions. The Tribunal was to thereafter determine the costs application on the papers and fix the amount of any costs order.
On 16 September 2010, the respondents filed their submissions in the form of a letter proposing that there should be an order for the respondents' costs in the sum of $40,000, having regard to the total amount of costs paid by the respondents and the provisions of the Legal Practitioner's (State Administrative Tribunal) Determination 2008. The letter indicated that on 2 September 2010, Mr Macdonald made oral submissions as to why costs and/or compensation should be made and that, at my direction, those submissions would not be repeated.
On 30 September 2010, the applicant filed a document titled 'Applicant's submissions opposing application for costs'. That document contained comprehensive submissions in respect of the costs application, dealing with both the grounds advanced in support of a costs order and the amount claimed.
A dispute arose as to whether the applicant's submissions went outside what was contemplated by my order of 2 September 2010. My recollection of what was said at the directions hearing on that day is that it was clear that the applicant wished to file written submissions going to both the merits of any costs order and the amount. I am satisfied that the applicant's written submissions are within what was contemplated by the order and I have therefore had regard to them. I further note that the respondents have taken the opportunity of filing responsive submissions by a letter from their solicitors dated 19 October 2010, to which I have also had regard. In any event, as the remainder of these reasons shall hopefully make clear, the respondents had not been prejudiced by any relative brevity of their submissions, made orally or in their solicitors' letter, compared with the applicant's written submissions. It is the essential nature of the respondents' submissions, not any lack of expansiveness of expression, which has not found favour.
My reasoning for the ultimate finding that the respondents are not entitled to any costs order is set out below, by reference to each of the grounds advanced on their behalf.

Lack of standing of applicant

The misnaming of Carcione Nominees Pty Ltd as the applicant is not generally the type of conduct which would result in an adverse costs order. It was submitted that it rendered the application incompetent. Whether that is so is a moot point. Generally, where it is clear that a party to an application has been wrongly named, amendment in order to rectify the position will generally be available. I acknowledge, however, that there may be cases where this is not possible: for example, where a particular notice is required as a precondition of filing an application, and the wrong name is used in the notice.
In this case, the three letters upon which the applicant would have relied as constituting a notice under s 391(2) of the LGMP Act (see attachment to the application to substitute Birchley Pty Ltd as the applicant), one of which was written by the architect, with the other two being from the builder engaged for the purposes of the proposed development, only went so far, in terms of identification of the owner of the subject property, as (per letter from Design Management Group Pty Ltd to Mrs Rita Scolaro dated 23 June 2010) 'the Owners of 1118 1120 Hay Street, West Perth', and (per letter from Georgiou Building Pty Ltd to Mr Craig Dawson, Knight Frank dated 30 June 2010) 'the Carcione Group'. The effect was that the expression of the s 391(2) notice was in generic terms, provided on behalf of the owner of the land to be developed. In those circumstances, leaving to one side the respondents' other arguments regarding validity of the notice, the misnomer of the applicant in the proceeding in the Tribunal would have been capable of remedy by substitution of the correct party's name and would not have been capable of striking down the notice. As such, it is not a sufficient basis for the making of an adverse costs order against the applicant.

The proposal did not constitute underpinning the foundations of the respondents' building

It is convenient to set out s 389 and s 391 of the LGMP Act in full:
389. Settlement of difference between building and adjoining owners
Where between a building owner and an adjoining owner a difference arises in relation to a work in respect of which notice has been given under this Division, either owner may apply to the State Administrative Tribunal for a determination in relation to that difference and the State Administrative Tribunal, in making the determination, may determine the right to execute, and the time and manner of executing the work, and generally to determine such other matters as arise out of, or are incidental to the difference; but the State Administrative Tribunal shall not, unless the parties agree otherwise, appoint for the commencement of the work, a time before the expiration of the period which by this Division is prescribed for the notice in the particular case.
391. Building owner to underpin adjoining owner’s building
(1)Where a building owner intends to erect within 3 metres of a building belonging to an adjoining owner a building or structure any part of which within the 3 metres extends to a lower level than the foundations of the building belonging to the adjoining owner, he may, and, if required by the adjoining owner, shall, underpin or otherwise strengthen the foundations of the building of the adjoining owner to such extent as is necessary.
(2)The building owner shall give at least 35 days’ notice in writing to the adjoining owner, stating his intention to build within the 3 metres and whether he proposes to underpin or otherwise strengthen the foundations of the adjoining owner’s building and with the notice shall serve a plan and sections showing the site of the proposed building and the depth to which he proposes to excavate.
(3)If the adjoining owner within 14 days after being served with the notice gives a counter notice in writing that he disputes the necessity of, or that he requires the underpinning or strengthening, a difference is to be regarded as having arisen between the building owner and the adjoining owner.
(4)The building owner is liable to compensate the adjoining owner and occupier for inconvenience, loss, or damage, if any, which results to them by reason of the exercise of the powers conferred by this section.
(5)This section does not relieve the building owner from liability to which he would otherwise be subject in case of injury caused by his building operations to the adjoining owner.
Reading these provisions together, they provide the owner (adjoining owner) of a property adjoining a property the subject of a development proposal by its neighbour (developing owner) the right to require, against the wishes of the developing owner, that the developing owner should 'underpin or otherwise strengthen the foundations of the building of' the adjoining owner, or not. This is achieved through the developing owner giving the notice under s 391(2), and the adjoining owner giving the counter notice under s 391(3).
The developing owner's notice is to state whether or not it is proposed to underpin or otherwise strengthen the foundations of the adjoining owner's building. Within 14 days of service of the notice, the adjoining owner can, by a counter notice, dispute the developing owner's position on the underpinning/strengthening issue. That is to say, where the developing owner proposes to underpin or otherwise strengthen, the adjoining owner can dispute the necessity of doing so. Where the developing owner does not propose to underpin or strengthen, the adjoining owner can require it. In the case of any such difference, either owner may apply to the Tribunal to make a determination in relation to that difference.
Clearly, these provisions are designed to address the potential for damage to adjoining property interests arising from the construction of a building or structure, and associated excavation works, in close proximity to existing buildings. The legislation is there to protect the interests of the adjoining property owner. It contemplates the parties themselves agreeing on the need to underpin or strengthen, or not, as the case may be. However, where a difference between them arises, the avenue of an application to the Tribunal is provided.
The respondents' submission, made at the first directions hearing and repeated as part of their costs application, of a lack of a complying s 391(2) notice seeks to distinguish between the anchors providing support for retaining walls wholly on the applicant's property, on the one hand, and underpinning of the respondents' building, on the other. It is said that the anchors cannot be said to underpin the respondents' building. That much may be true. However, the scope of the section extends beyond underpinning to 'otherwise strengthening the foundations' of the adjoining building. Where anchors are proposed to support retaining walls, those walls performing the function of retaining the earth in close proximity to the foundations of the respondents' building, it is certainly arguable that the purpose of the combined edifice (the retaining wall supported by the two anchors beneath the respondents' building) is one which triggers the operation of s 391 of the LGMP Act. That being so, I am unable, for the purpose of this costs application, to make a definitive finding that what was proposed does not fit the statutory prescription.
The respondents' recent written submissions also dispute that a 'difference' between the parties existed for the purposes of s 391(3) and s 389 of the LGMP Act. They point out that the letter relied upon to create the difference, a letter from the respondents' solicitors to the applicant's builder dated 13 July 2010 (Macdonald Rudder letter), fails to mention underpinning at all.
The Macdonald Rudder letter, which is by way of reply to a letter from Georgiou Building Pty Ltd to the respondents' former solicitors dated 5 July 2010, states relevantly:
On advice received to date my clients are not inclined to grant consent to any encroachment on their land, whether, [sic] above, on, or below the surface.
Until otherwise advised in writing you must not enter my clients' said land, and without limitation must not place anything under the said land.
The letter goes on to indicate a preparedness of the respondents to further consider their position, on the condition that Birchley Pty Ltd promises to pay and indemnify the respondents in respect of all costs and charges in connection with:
… their enquiry into the [sic] whether they will consent to any entry on their land and if so on what terms.
It is true that the 'difference' contemplated by the legislation, where the developing owner's notice proposes to underpin or strengthen the adjoining building, is the adjoining owner's disagreement about the necessity of doing so, and that the Macdonald Rudder letter did not descend to that topic. However, the letter manifested a refusal to allow entry upon, or permit any encroachment under the surface of, the respondents' land, in response to the applicant's proposal aimed squarely at the s 391 provisions. Assuming, as I do for the purposes of the costs application, that the proposal was for the underpinning or strengthening of the respondents' building, the only available ground for the respondents' refusal was their disagreement that underpinning or strengthening was necessary. It was entirely understandable that the applicant drew the inference, favourable to the respondents, that they relied upon s 391(3) of the LGMP Act in denying the applicant access to their land. The other course open to it, consistent with the position adopted by the respondents for the purposes of the costs application, would have been to await the expiry of the 14 day period provided by s 391(3) of the LGMP Act, at which point consent for its strengthening proposal would be deemed to have been given, and in due course (allowing for the 35 day period for which s 391(2) of the LGMP Act provides), proceeded, or attempted to proceed, with the project, including the construction of the piling retaining wall supported by the anchors. One can only wonder whether, had the applicant chosen that course, the respondents would have been content to adopt the literal interpretation of s 391(3) of the LGMP Act for which they now contend.

The negative response received from the respondents' former solicitor, in terms that the respondents did not agree to ground anchors being used under her property, constitutes a direct rejection of the specific strengthening proposal, and otherwise attracts the same analysis.
The respondents' recent written submissions suggest that they have done nothing wrong and did nothing to warrant the application made by the applicant. In fact, they did err (on the assumption of a compliant s 391(2) notice) in their inadequate response to the applicant's notice. They attributed to themselves, wrongly (on the same assumption), a general right of veto of the applicant's development proposal, which rendered their response to the applicant's notice inappropriate, and potentially harmful to their own interests. They should be thankful that the applicant's vigilance regarding the statutory provisions designed for the protection of those in their position was greater than their own. It is difficult to reconcile making a costs order in the respondents' favour with the likelihood that the operation of the legislative provisions in place for their protection was stymied due to their own non-compliance.

Lack of prospects of success and circumstances of withdrawal of the application

As I understand this ground, it seeks to draw together the alleged fatal flaws in the application in order to demonstrate its futility that, to adopt the terminology in the leading costs authority in the Tribunal of Pearce and Germain [2007] WASAT 291(S), the application was 'obviously unmeritorious' (at [24]) for which the respondent ought be reimbursed its costs of opposing it. The reference in the respondent's oral submissions to the withdrawal of the application subsequent to extensive discussions between the parties appears to suggest that even given the lack of merit of the application, it still behove extensive representations on the respondent's behalf, and at the respondent's expense, before the applicant was prepared to withdraw.
Although, as I have indicated, I am not prepared to attempt to deal definitively with each of the respondents' grounds for submitting that the application was without merit, my earlier observations indicate a different perspective from that for which the respondents contend; one for which, in my view, there exists a deal of support.
In addition, I agree with the applicant's adoption of comments I made in Diploma Construction Pty Ltd and Owners of Strata Plan 44936 [2010] WASAT 63 to the following effect:
•it is generally difficult, at a relatively early stage in the proceedings, to make any meaningful assessment on the merits;
•the withdrawal of proceedings at an early stage does not necessarily give rise to the inference that the applicant regarded the application as being without merit. In the present case, it appears that, were the substance of the application to have been proceeded with, it would most likely have been by an application of Birchley Pty Ltd based upon the fresh notice under s 391(2) of the LGMP Act. However, as I have said, it is certainly arguable that a complying s 391(2) notice and counter notice were given, giving rise to a difference for determination by the Tribunal; and
•awards of costs consequential upon the relatively early withdrawal of proceedings are likely to deter such withdrawals.

The entitlement the respondents would have had to their legal costs had the order sought in the application been made

The respondents' submission relied originally upon s 391(4) of the LGMP Act, making the developing owner liable to the adjoining owner (and occupier):
… for inconvenience, loss or damage, if any, which results to them by reason of the exercise of the powers conferred by this section.
According to the submission, the costs sought fall within 'inconvenience'.
It is not at all clear to me that if the application had proceeded through to a final order, the respondents would necessarily have recovered their costs of the proceeding by reason of s 391(4) of the LGMP Act. The expression 'the exercise of the powers conferred by this section' (my emphasis) indicates a focus on the things which a building owner is empowered to do by s 391 of the LGMP Act namely, to 'underpin or otherwise strengthen the foundations of the building of the adjoining owner to such extent as is necessary'. The intent of the provision appears to be to reimburse the adjoining owner for any 'inconvenience, loss or damage' caused by such action by the developing owner. The costs of any proceeding in the Tribunal to determine a difference of a s 391(3) kind do not sit comfortably with such a construction of s 391(4).
The provision is to be contrasted with s 392(1) of the LGMP Act, which states:
392. Security to be given by building and adjoining owners
(1)An adjoining owner may if he thinks fit serve notice in writing on the building owner requiring him before commencing work which he is authorised by this Division to execute, to give such security as is agreed upon, or in case of difference, such security as the State Administrative Tribunal on the application of either of the owners directs be given, for the payment of such expenses, costs, and compensation, in respect of the work as may be payable by the building owner.
There are some interesting aspects of s 392(1) of the LGMP Act. It provides for the giving of a notice by the adjoining owner requiring the provision of security, in a case of any work under the Division, including, but not limited to, s 391 underpinning or strengthening.
The security which the provision contemplates is:
… for the payment of such expenses, costs and compensation, in respect of the work as may be payable by the building owner.
The words 'expenses, costs and compensation' is to be contrasted with the heads of compensation payable under s 391(4) of the LGMP Act. Specifically, the reference to 'costs' is suggestive of legal costs being payable by a developing owner to an adjoining owner in cases where security is given, but not otherwise.
It is true that the application sought, in addition to a determination under s 389 of the LGMP Act of the alleged difference regarding the need to underpin or strengthen the respondent's property:
A determination … pursuant to s 389 and s 392(1) of the Act as to the security, if any, to be given by the applicant to the respondents in respect of the works in question.
The ground referable to the order just mentioned as it appears in the application is as follows:
Insofar as the Macdonald Rudder Notice is a notice under s 392(1) of the Act requiring the applicant to give security for the payment of expenses, costs and compensation in respect of the works in question as may be payable by the applicant, the applicant seeks a determination by the Tribunal as to the amount of such security to be given.
The 'Macdonald Rudder Notice' is, in context, the Macdonald Rudder letter dated 13 July 2010. Specifically, it is that part of the letter which indicates that before the respondents would be prepared to further consider their position, they required a promise to indemnify the respondents' costs and charges in consequence of, in connection with or arising out of:
… their enquiry into whether they will consent to any entry on their land and if so on what terms.
The requirement in the Macdonald Rudder letter of a promise of indemnity was by way of inducement for the respondents to reconsider their refusal to consent to the encroachment on their land which the strengthening by anchors would have required. However, the promise was sought solely in relation to the costs of the stated enquiry, not in respect of the strengthening works themselves. That much is clear because the 'enquiry' included the terms upon which consent to any entry to the land might be given. Presumably, had the respondents changed their minds and agreed to the strengthening proposal, they would have required, as one of those terms, security in respect of the strengthening works. However, in their negotiations with the developing owner, matters did not progress that far.
In these circumstances, the Macdonald Rudder letter cannot be regarded as a notice of security for the purposes of s 392(1) of the LGMP Act. The respondents' original submission, therefore, falls back on s 391(4) of the LGMP Act. For the reasons I have explained, I am not persuaded that they would be entitled under that provision to an automatic reimbursement of their costs of the application.
The respondents' recent written submissions rely upon s 87(3) of the State Administrative Tribunal Act 2004 (WA) (SAT Act), which extends the Tribunal's power to award costs so as:
… to compensate the other party for any expenses, loss, inconvenience, or embarrassment resulting from the proceeding or the matter because of which the proceeding was brought.
Section 87(3) of the SAT Act is a facultative provision enabling costs orders to be made so as to compensate in the respects referred to. Whether or not it can be invoked will depend upon the Tribunal first being satisfied that the case before it is a proper one for rebutting the usual presumption under s 87(1) of the Act that parties bear their own costs. A further obstacle for the submission is that the enabling Act, in this case the LGMP Act, specifically s 391(4), provides for compensation in different terms from s 87(1) of the SAT Act. To the extent that there is any inconsistency between the two, the enabling Act prevails: s 5 of the SAT Act. However, even if s 87(1) of the SAT Act could apply, I find that it does not, due to my rejection of the costs claims.

Conclusion and order

As I am not satisfied by any of the grounds upon which the respondents rely in seeking a costs order, the application for costs will be dismissed.

Order

The Tribunal orders that:
1.The respondents' application for costs is dismissed.

I certify that this and the preceding [45] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
MR T CAREY, MEMBER