CBUS Property Pty Ltd v North Sydney Council

[2024] NSWLEC 47

Land and Environment Court

New South Wales

Medium Neutral Citation:

CBUS Property Pty Ltd v North Sydney Council [2024] NSWLEC 47

Hearing dates:

6 February 2024

Date of orders:

10 May 2024

Decision date:

10 May 2024

Jurisdiction:

Class 4

Before:

Pain J

Decision:

The Court orders:

(1) The Respondent’s notice of motion dated 21 November 2023 is dismissed.

(2) The Respondent is to pay the Applicant’s costs of the Applicant’s notice of motion dated 3 November 2023 and the Respondent’s notice of motion dated 21 November 2023.

Catchwords:

COSTS – partial costs of respondent council not payable following discontinuance of Class 1 appeal by applicant – no discouragement principle considered – costs of costs motion considered

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98

Environmental Planning and Assessment Act 1979 (NSW), s 4.15

Land and Environment Court Act 1979 (NSW), s 69 (repealed)

Land and Environment Court Rules 2007 (NSW), r 3.7

Uniform Civil Procedure Rules 2005 (NSW), rr 12.1, 42.19, Sch 1

Cases Cited:

Arden Anglican School v Hornsby Shire Council (2008) 158 LGERA 224; [2008] NSWLEC 103

Awesome Corowa Pty Ltd v Federation Council (No 2) [2022] NSWLEC 93

Brennan v Leichhardt Council (No 2) [2013] NSWLEC 199

Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation(Cth) (1981) 147 CLR 297; [1981] HCA 26

Crescent Newcastle Pty Ltd v Newcastle City Council and Friends of King Edward Park Inc [2021] NSWLEC 143

Drake v Randwick City Council [2021] NSWLEC 97

El Khouri v Gemaveld Pty Ltd [2023] NSWCA 78

Gales-Kingscliff Pty Ltd v Tweed Shire Council (No 2) v Tweed Shire Council (No 2) [2007] NSWLEC 817

Grant v Kiama Municipal Council [2006] NSWLEC 70

Hillsong Church Ltd v Council of the City of Sydney (No 2) [2012] NSWLEC 118

Jacobson & McMillan v Ballina Shire Council [2006] NSWLEC 375

Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59

Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101; [2008] HCA 38

McConaghy Developments Pty Ltd v Tamworth City Council (1996) 89 LGERA 415Norton v Blacktown City Council [2009] NSWLEC 214

Port Stephens Council v Sansom (2007) 156 LGERA 125; [2007] NSWCA 299

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28

Regional Architects Pty Ltd v Coffs Harbour City Council [2021] NSWLEC 29

Roden v Bandora Holdings Pty Ltd [2015] NSWLEC 191

Ross v Lane Cove Council [2013] NSWLEC 109

Sydney Seaplanes Pty Ltd v Page (2021) 106 NSWLR 1; [2021] NSWCA 204

Trustees of the Roman Catholic Church for theDiocese of Broken Bay v Willoughby City Council [2023] NSWLEC 88

Twynam Investments Pty Ltd v Goulburn Mulwaree Council [2021] NSWLEC 7

Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council (2007) 71 NSWLR 230; [2007] NSWCA 300

Zhang v Davidson (No 2) [2020] NSWLEC 89

Texts Cited:

Land and Environment Court of New South Wales, Practice Note – Class 1 Development Appeals, 2017

D Pearce and S Argument, Delegated Legislation in Australia (6th ed, 2023, LexisNexis)

Category:

Procedural rulings

Parties:

CBUS Property Pty Ltd (Applicant)
North Sydney Council (Respondent)

Representation:

Counsel:
A Hemmings (Applicant)
B Haines (Respondent)

Solicitors:
Addisons (Applicant)
Spark Helmore (Respondent)

File Number(s):

2022/00252804-005, 006

JUDGMENT on costs oF discontinuance of planning appeal

1. The Applicant CBUS Property Pty Ltd commenced a Class 1 appeal in relation to the deemed refusal of a development application for demolition and construction at a large site in North Sydney (the site) by North Sydney Council (the Council). The site is subject to a site-specific development control plan (DCP) under the North Sydney Development Control Plan 2013 (NSDCP). The Applicant sought to discontinue the proceeding by notice of motion dated 3 November 2023 pursuant to r 12.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). The Council did not consent as the Applicant did not agree to pay its costs from a certain date. Two notices of motion are before the Court. The Council’s notice of motion dated 21 November 2023 seeks orders that its costs of the proceeding be paid by the Applicant from 2 June 2023. The Applicant’s notice of motion dated 3 November 2023 seeks orders that the proceeding be discontinued, that each party pay their own costs of the proceeding and the Council pay the Applicant’s costs of the motion. The Registrar granted leave to discontinue on 22 November 2023 so that only the issues of costs remains in relation to both notices of motion.

2. The motions were heard together and evidence in one motion was treated as evidence in the other.

3. The parties agree that r 3.7 of the Land and Environment Court Rules 2007 (NSW) (LEC Rules) applies. This states in part:

Part 3 Proceedings in Class 1, 2 or 3 of the Court’s jurisdiction

…

3.7 Costs in certain proceedings

(1) This rule applies to the following proceedings (except for appeals under section 56A of the Act)—

(a) all proceedings in Class 1 of the Court’s jurisdiction,

…

(2) The Court is not to make an order for the payment of costs unless the Court considers that the making of an order as to the whole or any part of the costs is fair and reasonable in the circumstances.

(3) Circumstances in which the Court might consider the making of a costs order to be fair and reasonable include (without limitation) the following—

(a) that the proceedings involve, as a central issue, a question of law, a question of fact or a question of mixed fact and law, and the determination of such question—

(i)  in one way was, or was potentially, determinative of the proceedings, and

(ii)  was preliminary to, or otherwise has not involved, an evaluation of the merits of any application the subject of the proceedings,

…

(d) that a party has acted unreasonably in the conduct of the proceedings,

...

(f) that a party has commenced or continued a claim in the proceedings, or maintained a defence to the proceedings, where—

(i) the claim or defence (as appropriate) did not have reasonable prospects of success, or

(ii) to commence or continue the claim, or to maintain the defence, was otherwise unreasonable.

Evidence

Affidavits read by the Council

4. The Council read the affidavit of Ms Morton the Council’s solicitor dated 17 November 2023. It stated in part that on 13 December 2022 the Applicant’s planner made a submission opposing the draft amendment to the NSDCP to amend the car parking rates in the ‘High Accessibility Area’ which included the site. In an email dated 4 May 2023 (Annexure A to the affidavit), the Council advised that it had resolved to adopt the amendments the NSDCP, which came into effect on 4 May 2023 (amended NSDCP).

5. The Council tendered the affidavit of Ms Murray the Applicant’s solicitor dated 31 May 2023 (Murray Affidavit 1) in support of the Applicant’s notice of motion of the same date seeking an order to vacate the hearing fixed for 7-10 August 2023. The affidavit stated:

[24] Prior to the amendments to the DCP the application complied with the DCP maximum parking rates. The amendments to the DCP have decreased the maximum parking requirements for the site meaning that traffic and parking will now be a major contention. I expect that cross-examination and legal submissions on this point alone will take 1-2 days.

Affidavits read by the Applicant

6. The Applicant read the affidavit of Ms Murray dated 3 November 2023 (Murray Affidavit 2) supporting the Applicant’s notice of motion of the same date setting out a brief history of the Class 1 proceeding. Annexed to the affidavit is an unsolicited letter from the Council’s solicitor on 17 October 2023 (the particulars letter) providing revised particulars to contention 9(a), particular (d) of the further amended Statement of Facts and Contentions (further amended SOFAC).

7. The affidavit concluded:

[49] I am instructed that the Applicant's decision to discontinue the proceedings is based on the following aspects:

a) The large majority of the contentions in the Further Amended SOFAC remain unresolved following the joint conferencing of the parties' experts.

b) The main reason is that the Respondent has raised a contention regarding the gross floor area exceedance of the development in its letter dated 17 October 2023, when this contention was not explicitly raised previously, and was previously an insufficient information contention. A clause 4.6 request is not available to address this.

c) The NDSCP [sic] Amendment occurred after the filing of the appeal, and the Applicant had hoped to reach an agreed outcome with the Respondent following the s34 conciliation process and joint conferencing process considering this site was subject to a site specific DCP at the time of rezoning which did not change parking controls at that time. However, the number of contentions increased following the termination of the s34 conference, and majority of contentions including the parking and traffic contention have not been resolved.

d) The effect of the NDSCP [sic] Amendment was not only to require a significant reduction in parking in the amount of 92 spaces, but it also had a gross floor area impact which has now been raised by the Respondent as a contention. Other gross floor area impacts have been raised by Council such as with the basement.

e) Reducing the gross floor area by 2,690m² (11.15%) (see paragraph 38) would necessitate a wholesale redesign of the development. The development has also been designed for a specific market segment that requires car parking spaces, as outlined in the Apartment Demand Review prepared by Charter Keck Cramer dated 1 August 2023 (Tab 18). A significant redesign of the development will take many months to complete to respond to a different target market, and the current design is not financially feasible. The Applicant will have to reconsider the development proposal entirely.

f) Discontinuing the proceedings now will prevent the parties from incurring significant costs, particularly as the Joint Planning Expert Report has not yet been undertaken.

Joint traffic report

8. The Applicant tendered the joint traffic report relating to traffic and parking issues referred to in the Council’s further amended SOFAC, see below in [12]. The Applicant pointed to disagreements between the traffic experts, namely:

Disagreements

2.1.6   [Expert for the Applicant] is of the opinion the previous DCP should apply, and the proposal complies with those parking requirements.

2.1.7   [Expert for the Applicant] is of the opinion that vehicle ownership will have no influence on the traffic generation of the proposed development during peak periods and other factors influence decision making on whether a resident uses a vehicle during peak periods.

2.1.8   [Expert for the Council] has applied the current planning controls and due to the surplus of car parking being provided is of the view the proposal does not comply with Council objectives 5, 6, 7, 11 in that it does not minimise parking to limit its impact.

Agreed chronology

9. The parties agreed a chronology part of which is extracted where relevant to the issues on costs and slightly amended by me to aid comprehension:

Date

Event

From July 2021

The Applicant owns 173-179 Walker Street and 11-17 Hampden Street, North Sydney (the site).

30 July 2021

North Sydney Local Environmental Plan 2013 (NSLEP) is amended specifically to address the site’s development.

27 September 2021

NSDCP is amended to establish site-specific planning controls for the subject site.

5 July 2022

The Applicant lodges DA 197/22 for the site proposing 189 dwellings and 237 car spaces, where the number of parking spaces complies with the NSDCP

25 July 2022

At a Council meeting, the Council resolves to publicly exhibit draft amendments to NSDCP affecting on-site parking in ‘High Accessibility Areas’. The High Accessibility Area includes the site. The proposed amendments, which were to be publicly displayed, would reduce the parking at the site.

25 August 2022

The Applicant files its Class 1 application based upon a deemed refusal (i.e. this proceeding) with on-site car parking based upon the then non-amended NSDCP.

13 September 2022

Council exhibits draft amendments to the NSDCP to amend the car parking rates for development.

4 October 2022

The Council files and serves SOFAC. The SOFAC raises no contention concerning compliance with the NSDCP, traffic and parking.

19 October 2022

The Applicant files and serves SOFAC in reply.

12 December 2022

Section 34 conciliation conference commences.

13 December 2022

The Applicant’s town planning consultant, Ethos Urban, makes a submission to the Council expressly on behalf of the Applicant regarding the proposed amendments to the NSDCP concerning on-site parking.

1 March 2023

Section 34 conciliation conference terminates.

8 March 2023

Proceeding is listed for hearing from 7-10 August 2023.

18 April 2023

The Court grants leave to the Applicant to rely on amended plans and documents (amended application). The Court also grants leave to the parties to amend the SOFAC and reply, and orders the Applicant to pay the Council’s costs thrown away as a result of the amended application.

26 April 2023

The Council resolves to make the proposed amendment to the NSDCP’s on-site parking rates in the ‘High Accessibility Area’, which includes the site. There are no savings or transitional provisions.

4 May 2023

The Council issues letters to submitters on draft amended NSDCP that the submissions were considered, but that the Council has decided to adopt the proposed amendments.

Commencement of NSDCP amendments concerning on‑site parking rates in the ‘High Accessibility Area’ as follows:

• Studio – 0.3 space per unit;

• 1B – 0.4 space per unit;

• 2B – 0.7 space per unit;

• 3B plus – 1 space per unit;

• Motorcycle 1 space per 10 car spaces;

• Visitors – nil.

23 May 2023

Following the Applicant obtaining leave to rely on amended plans and information, the Council files amended SOFAC. An insufficient information contention (contention 9) is inserted relating to the car parking provision of the development and relating to the amended NSDCP car parking rates.

30 May 2023

The Applicant files and serves its amended SOFAC in reply.

31 May 2023   

The Applicant files notice of motion seeking orders vacating the 7‑10 August 2023 trial dates and estimating that 7-8 days would be needed for a hearing.

2 June 2023   

7-10 August 2023 hearing vacated, and new hearing dates fixed for 20-24 and 27-28 November 2023.

25 August 2023   

The Applicant files notice of motion seeking to rely upon further amended plans and documents.

1 September 2023   

The Court grants leave to the Applicant to rely on further amended plans and documents (further amended application). The Court also grants leave to the parties to further amend the SOFAC and reply arising from the further amended application, and orders the Applicant to pay the Council’s costs thrown away as a result of the further amended application.

22 September 2023   

The Council files and serves its further amended SOFAC. Contentions are inserted regarding the car parking provision rates, the amended NSDCP, and the gross floor area calculations for the development. Contention 9 addresses insufficient information.

26 September 2023   

The Applicant sends a letter to the Council questioning compliance with the Court’s orders made on 1 September 2023, with respect to the further amended SOFAC raising contentions which did not arise from the further amended application.

28 September 2023   

The Council responds to the Applicant’s letter dated 26 September 2023.

4 October 2023   

The Applicant files and serves its further amended SOFAC in reply.

17 October 2023

The Council sends a letter providing further particularisation of contention 9(a) particular (d) saying:

• ‘Recalculation of the gross floor area and floor space ratio must be carried out in accordance with the LEP definitions of these terms – which in addition to car parking and access, as described above, includes [wintergardens enclosed by screens]’;

• ‘… As the proposed development exceeds the floor space ratio development standards by 11.15%, the application must be refused unless the plans are amended to show that the development does not exceed the maximum floor space ratio permitted, as clause 4.6(8)(cab) of the LEP is a bar to the grant of consent to a development application that contravenes clause 4.4 and is identified in the LEP’s Special Provisions Area Map (as the Site is).’

The joint heritage report is filed later that day. The parties’ experts did not agree on any of the heritage contentions, which all remained unresolved.

The Applicant brings a motion seeking leave to rely on landscaping evidence, which was declined by the Court on 18 October 2023.

20 October 2023   

The joint view loss report is filed. The parties’ experts did not agree on most of the view loss contentions, which remained unresolved.

24 October 2023   

The joint traffic report is filed.

27 October 2023   

The joint urban design report is filed. The parties’ experts agreed on some but not all of the urban design contentions which remained unresolved. The parties’ experts suggested design amendments which they agreed would resolve some of the contentions.

Later that day, the Applicant notified the Council that the Applicant had decided to discontinue the proceeding and requested that each party pay its own costs.

30 October 2023

The Council advises the Applicant it would consent to the discontinuance of the proceeding on the basis that the Applicant pay the Council’s costs in the amount of $142,582.

1 November 2023

The Applicant provides the Council with a draft notice of discontinuance, with a term allowing the Council to file a notice of motion for any costs orders.

The Council responds to the Applicant that it does not consent to the filing of the notice of discontinuance in the form proposed.

3 November 2023

The Applicant files a notice of motion seeking leave from the Court to discontinue the proceeding on the basis that each party bear its own costs of the proceeding

9 November 2023

The Court vacates the hearing which was listed on 20-24, and 27-28 November 2023.

20 November 2023

The Court directs the Council to file a notice of motion for any application for costs between the parties in the substantive proceeding.

21 November 2023

The Council files a notice of motion seeking an order for costs in the substantive proceeding.

22 November 2023

The Court grants the Applicant leave to discontinue the proceeding, lists the notices of motion dated 3 November 2023 and 21 November 2023 for hearing on 6 February 2024, and reserves the question of costs of the proceeding and costs of the notice of motion filed 3 November 2023.

Statements of Facts and Contentions

10. On 23 May 2023 the Council filed its amended SOFAC. A new insufficient information contention was inserted as follows:

9) Insufficient Information

a) General information

Insufficient information has been submitted with the application in order to enable a thorough assessment to be completed.

Particulars

…

c)Amended plans are required to reduce the gross floor area to comply with the maximum permitted. As detailed under heading b) On-site parking below, amendments to the DCP have decreased the maximum parking requirements for the site. According to the LEP definition of gross floor area, the new maximum parking rates cause the proposal to exceed the maximum floor space ratio, as parking that exceeds the permitted maximum must be included in gross floor area calculations for the development proposed.

…

b) North Sydney DCP 2013 Part B Section 10 Car Parking and Transport

…

On-site parking

Particulars

The proposed development exceeds the maximum car parking requirements permissible under clause 10.2 Part B NSDCP 2013, which may cause increased traffic congestion which is contrary to applicable objectives.

a) Provision of excessive car parking will result [sic] the use of the private vehicle as the main travel mode and will undermine the submitted green travel plan’s future mode share targets.

b) The objectives of the NSDCP are to contain the existing levels of traffic generation and reduce them which is not achieved by the proposal.

c) The maximum permissible provision of car parking is 131 residential spaces and 18 motorcycle spaces as outlined below:

i) 0.3 spaces per studio = 1.8;

ii) 0.4 spaces per 1 bedroom apartments = 19.2

iii) 0.7 spaces per 2 bedroom apartments = 32.2

iv) 1 space per 3 or more bedroom apartments = 77

v) Motorcycle car parking – 1 space per 10 dwelling = 17.7 spaces.

11. On 30 May 2023 the Applicant filed its amended SOFAC in reply. In respect of the new insufficient information contention, the Applicant stated the following:

Insufficient Information

9 In response to paragraph 9 Part B of the Respondent’s Amended SOFC, the Applicant denies that the development application should be refused because insufficient information on the impacts of views has been provided.

a) General information

Particulars

….

b. In response to part a particular (c), the Applicant disputes that carparking above the DCP controls should be considered gross floor area under the LEP definition.

…

12. On 22 September 2023 the Council filed its further amended SOFAC. Contention 9 stated:

9) Insufficient Information

a) General information

Insufficient information has been submitted with the application in order to enable a thorough assessment to be completed.

Particulars

…

(c) Amended plans are required to reduce the gross floor area to comply with the maximum permitted. With the parking proposed, (without including additional gross floor area), the development equals the maximum floor space ratio requirement of the NSLEP 2013. As detailed under heading b) On-site parking, below, amendments to the DCP have decreased the maximum parking requirements for the site. The current proposal includes 227 parking spaces and the maximum permitted is now 135 spaces, meaning there is an excess of 92 parking spaces. In accordance with the LEP definition of gross floor area, the new maximum parking rates would cause the proposal to exceed the maximum floor space ratio, as parking and access thereto that exceeds the permitted maximum must be included in gross floor area and floor space ratio calculations for the development proposed.

(d) Recalculation of gross floor area and floor space ratio must be carried out in accordance with the LEP definitions of these terms – which includes any habitable space enclosed by a wall/screen 1.4m or greater in height – this would include enclosed wintergardens, for example, which are not easily or clearly identified by the plans. As the proposed development exceeds the floor space ratio development standard the application must be refused unless the application is accompanied by a satisfactory request to contravene the standard in accordance with clause 4.6 NSLEP 2013.

…

b) North Sydney DCP 2013 Part B Section 10 Car Parking and Transport

…

On-site parking

Particulars

The proposed development exceeds the maximum car parking requirements permissible under clause 10.2 Part B NSDCP 2013, which may cause increased traffic congestion which is contrary to applicable objectives.

a. The submitted Traffic Report adopts the incorrect parking rates from NSDCP 2013 that are no longer applicable to the site.

b. NSDCP 2013 – Part B – Section 10 – Car Parking and Transport was amended on 4 May 2023 and applies to the site with no savings provision.

c. Provision of excessive car parking will result in the use of private motor vehicles as a travel mode and will undermine the submitted green travel plan future mode share targets, contrary to Objective 1, 2 and 3 of 10.2 of NSDCP and Objective 5, 6, 7 of 10.1.1 of NSDCP.

d. The objectives of the NSDCP are to contain the existing levels of traffic generation and reduce them which has not been adequately demonstrated by the proposal.

e. The proposed development will therefore generate traffic above what is permitted by the planning controls, which will increase delays in the road network and reduce any spare capacity of surrounding intersections.

f. The access into and out of Lower Walker Street is atypical and does not provide adequate geometry to permit all vehicle movements, reduced traffic volumes along Lower Walker Street should be sought to improve road safety.

g. The maximum permissible provision of car parking is 135 residential spaces and 18 motorcycle spaces as outlined below:

i. 9 @ 0.3 spaces per studio = 2.7 – 3 whole spaces;

ii. 45 @ 0.4 spaces per 1 bedroom apartments = 18.0 spaces

iii. 45 @ 0.7 spaces per 2 bedroom apartments = 31.5 – 32 whole spaces

iv. 71 @ 1 space per 3 or more bedroom apartments = 71 spaces

v. 6 @ 1.5 spaces per multi dwelling unit = 9 spaces

vi. 6 @ 0.25 visitors (to multi dwelling units) spaces = 1.5 – 2 whole spaces

vii. Motorcycle car parking – 1 space per 10 dwellings = 18 spaces.

13. On 4 October 2023 the Applicant filed its further amended SOFAC in reply, which stated:

Insufficient Information

9 In response to paragraph 9 of Part B of the Respondent’s FASOFC, the Applicant denies that the development application should be refused because insufficient information has been provided.

a) General information

Particulars

…

b. In response to part a particular (c), the Applicant disputes that carparking above the DCP controls should be considered gross floor area under the LEP definition. The definition of gross floor area under the NSLEP excludes ‘car parking to meet any requirements of the consent authority’. The Court may determine what the requirements for car parking for this development are. While the DCP provides maximum car parking rates, s4.15(3A)(b) states the DCP provisions must be applied flexibly to allow reasonable alternative solutions that achieve the objects of the DCP standards. The proposal complies with the objectives under control 10.2.1 of the DCP.

Council’s submissions

14. There is a presumption in Class 1 proceedings that each party pays its own costs when proceedings are discontinued, r 3.7(2) of the LEC Rules. Relevant principles are identified in Ross v Lane Cove Council [2013] NSWLEC 109 (Ross) at [9] and Trustees of the Roman Catholic Church for the Diocese of Broken Bay v Willoughby City Council [2023] NSWLEC 88 at [10]-[14]. This presumption should be displaced pursuant to r 3.7(3)(f)(i), (ii).

Evidence justifying discontinuing proceeding was known to the Applicant from 2 June 2023

15. The Applicant should have known from 2 June 2023 that the proposed development did not comply with the amended NSDCP. It was clear from when the amended NSDCP came into effect that the development application (DA) in the form it was then proposed could not be approved. It was unreasonable for the Applicant to maintain the proceeding until after receipt of the particulars letter in October 2023 without amending the DA to deal with the excess of car spaces on the site in compliance with the amended NSDCP. If these changes were not going to be made, the DA should have been discontinued. The factual circumstances that existed as at 2 June 2023 continued to exist up until the proceeding was ultimately discontinued in November 2023. This makes it fair and reasonable for the Applicant to pay the Council’s costs from the time the last hearing was vacated.

16. Murray Affidavit 2 sets out the Applicant’s reasons for discontinuing the proceeding at par 49, see above in [7].

17. In response to par 49(a) of Murray Affidavit 2, the Council acknowledged the presumption as to costs would not be displaced if the principal reason for discontinuing the proceeding was because the majority of contentions in the further amended SOFAC remained outstanding following the joint conferencing of the parties’ experts. It is disputed that factor was the sole or major factor in the Applicant’s mind.

18. In response to pars 49(b) and 49(d) of Murray Affidavit 2, the main reason the Applicant says it discontinued the proceeding was because the Council raised a contention regarding the gross floor area (GFA) exceedance of the development in the particulars letter, which had not been raised previously. The Council sought to refute this referring to the following events:

1. The Applicant had made submissions to the Council objecting to draft amendments to the NSDCP in a letter dated 13 December 2022, see Ms Morton’s affidavit summarised above in [4]. As at the date of this letter the Applicant appeared to be aware that if the NSDCP was amended the Applicant would be forced to comply with these amendments. The Applicant was notified of the amended NSDCP on 4 May 2023.

2. It was pointed out to the Applicant that the amended NSDCP had affected parking within the development. The contention was raised in clear terms in the amended SOFAC and further amended SOFAC under contention 9(a) particular (c). The Applicant’s further amended SOFAC in reply demonstrated knowledge of the changes to the NSDCP and its consequences for the proposed development.

3. The Applicant was aware of the position under the amended NSDCP. Murray Affidavit 1 cites the amended NSDCP reducing the maximum parking requirements for the site as a reason for the initial vacation of the hearing.

19. The substance of the particulars letter makes clear what was already known to the Applicant with regards to the application of the amended NSDCP, how it interacted with the North Sydney Local Environmental Plan 2013 (NSLEP) and its impact on the proposed development. The Council accepted it did not explicitly raise cl 4.6 of the NSLEP until the particulars letter. The reason to do so was because it was evident to the Council that the Applicant was not changing its DA. However it would have been clear to the Applicant from 2 June 2023 that it could not rely on cl 4.6.

20. The Council accepted that costs will now be saved by reason of the discontinuance. However all of the matters raised are matters which should have been in the Applicant’s mind when it sought to vacate the hearing on the first occasion. It is not fair to allow the Applicant to rely on the same issue a second time.

Unreasonable for the Applicant in reply to dispute the NSDCP controls

21. The Applicant’s response to the amended and further amended SOFACs disputing that car parking above the DCP controls should be considered GFA under the NSLEP was unreasonable and the maintenance of such a position until the Applicant discontinued the proceeding was unreasonable.

22. The Applicant’s further amended SOFAC in reply also contended that the NSDCP provisions must be applied flexibly to allow reasonable alternative solutions that achieve the objectives of the NSDCP standards per s 4.15(3A)(b) of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act). Disputing how the NSDCP control operates was unreasonable as the NSLEP does not permit flexibility in relation to this particular aspect of the development.

Points in reply

23. In reply, the present matter is distinguishable from Crescent Newcastle Pty Ltd v Newcastle City Council and Friends of King Edward Park Inc [2021] NSWLEC 143 (Crescent Newcastle) at [74] citing Ross at [9]-[10]. In Ross Biscoe J observed that the decision of an applicant to discontinue in light of new evidence which would increase litigation risks, costs and time would weigh against ordering costs against the discontinuing party. Here, no new evidence emerged during the proceeding that was not already before the Applicant in June 2023.

24. The articulation of the issue in the amended SOFAC in relation to car parking and the amended car parking rates was sufficiently clear to highlight to the Applicant that if nothing was done to amend the DA it would be refused. It was not improper to raise the insufficient information contention in the amended SOFAC.

Applicant’s submissions

25. Leave to discontinue should be granted without any requirement to pay costs to the Council. The Applicant was well aware of the amendments to the NSDCP. The real issue in dispute is whether the consequence of the amended NSDCP leads to the necessary conclusion that there were no prospects of success such that it was unreasonable for the Applicant to continue the appeal but rather should have discontinued on 2 June 2023.

No discouragement principle applies

26. Under the ‘no discouragement’ principle applicants for development should ordinarily not be discouraged from pursuing merits appeals by reason of the risk of an adverse costs order, Arden Anglican School v Hornsby Shire Council (2008) 158 LGERA 224; [2008] NSWLEC 103 (Arden Anglican) at [10]. This principle is given effect by r 3.7 of the LEC Rules through the negative stipulation against making an order for costs except where the Court considers it ‘fair and reasonable’ to otherwise order, Crescent Newcastle at [68]. To overcome the presumptive rule, the Council must satisfy the Court there is sufficient weight in what is being said of the Applicant’s conduct in continuing the proceeding past 2 June 2023, Arden Anglican at [9]. Something more than the circumstance of discontinuance is necessary, Crescent Newcastle at [73].

27. The no discouragement principle necessarily extends to decisions to not proceed with an appeal upon reconsideration of the potential issues, strengths and weaknesses and costs of an appeal, as occurred in the present circumstances. The Applicant sensibly decided to discontinue in light of evidence that emerged during the proceeding, Ross at [10].

Applicant should have known case hopeless not accepted

28. The Council’s argument assumes that any amendment to the proposed scheme to reduce proposed parking would not be made. This assumption cannot be made good given that as of 2 June 2023 the expert evidence was not closed, joint conferencing of the town planners had not occurred or been completed and amendments could have been proposed during the town planning joint conference.

29. The decision to discontinue was multifactorial in light of all the circumstances set out in Murray Affidavit 2 as extracted above in [7]. After the particulars letter joint reports were completed for heritage impact (17 October 2023), view loss (20 October 2023), traffic (24 October 2023) and urban design (27 October 2023). The parties’ experts did not agree on contentions across each report. It was clear at this point there would be a substantial dispute about the interpretation of the floor space ratio (FSR) control in the NSLEP based on the particulars letter and the joint reports. The parking issue, although a main focus, was not the only issue which was important to the Applicant’s merits appeal.

Reasonable to refute parking contention of Council

30. The Applicant did not unreasonably dispute the Council’s argument that the DA would have to be refused on the basis of parking and FSR. It is accepted the Court is not required to try any hypothetical issue where no hearing has taken place. The purpose of outlining the Applicant’s arguments is to show that they would have been fairly arguable had a hearing occurred.

31. The Applicant understood the definition of GFA under the NSLEP as central to the dispute. The NSLEP definition of GFA of car parking that is to be counted for the purposes of calculating FSR excludes ‘car parking to meet any requirements of the consent authority’, NSLEP dictionary, subcl (g). The ‘any’ requirements of the consent authority are not necessarily limited to those contained in a DCP and can extend to requirements determined to be appropriate to a particular development, McConaghy Developments Pty Ltd v Tamworth City Council (1996) 89 LGERA 415 at 419. There remained the possibility that the Court on hearing the appeal may have concluded that the proposed provision of parking was appropriate for the development. In such a case there would be no breach of the FSR development standard.

32. Non-compliance with the FSR development standard does not necessitate refusal. Contrary to a long-applied approach to merits appeals, in the recent decision of El Khouriv Gemaveld Pty Ltd [2023] NSWCA 78 (El Khouri) Leeming JA held that a height development standard imposed by a local environmental plan was not a jurisdictional requirement mandating refusal where exceeded but a matter to which regard was required under s 4.15 of the EPA Act, at [51]-[54], [74].

33. Additionally the joint traffic report demonstrates there was a substantial disagreement between the traffic experts regarding whether car parking space leads to traffic generation, see above in [8]. This was material to the prospects of the argument before the Court.

Conduct of the appeal

Response to Council’s SOFACs not unreasonable

34. The Council’s original SOFAC did not refer to any parking issue. The amended SOFAC raised new contentions described as ‘insufficient information’ concerning parking (contention 9). On 31 May 2023 the Applicant vacated the hearing listed for 7-10 August 2023 on the basis the amended SOFAC raised the insufficient information contention which now meant that traffic and parking would be a major contention. The Council had the opportunity to further particularise the insufficient information contention in their further amended SOFAC. This contention was still raised as an insufficient information contention and did not state that the DA must be refused.

35. The Applicant’s replies to the amended SOFAC and further amended SOFAC did not constitute unreasonable behaviour. On each occasion the Applicant was granted leave to amend to address the insufficient information contention including disputing the Council’s construction of the NSLEP definition of GFA.

Particulars letter did not comply with Class 1 Practice Note

36. The Council acted contrary to pars 18, 19, 20, 94 and Sch B par 6 of the Practice Note – Class 1 Development Appeals (Class 1 Practice Note) by sending the particulars letter. The particulars letter contained an unsolicited additional particular stating the DA must be refused. This had not been raised previously. The Council ought to have identified this particular in its SOFAC with leave sought from the Court to amend per pars 19, 20 of the Class 1 Practice Note. A contention that the application must be refused with the factual and/or legal basis for that contention set out should have been clearly identified, Sch B par 6. This accords with the purpose of contentions and the role of SOFACs in reply in allowing parties to engage with the real issues in dispute, Gales-Kingscliff Pty Ltd v Tweed Shire Council (No 2) v Tweed Shire Council (No 2) [2007] NSWLEC 817 at [19], [45]‑[46].

37. The late identification of the issue in the particulars letter was also material to the timing of the Applicant’s decision not to pursue the appeal. There can be no criticism of the Applicant’s decision to discontinue which was made promptly on 27 October 2023 after receipt of the particulars letter and the various joint reports.

Consideration

38. The Council bears the onus of proving the partial costs order it seeks should be made following discontinuance of the merits appeal by the Applicant. A reflection of the no discouragement principle, the usual approach in Class 1 proceedings is that each party pays their own costs. The purpose of the no discouragement principle is that persons generally should not be discouraged from exercising their rights of appeal by reason of the risk of an adverse costs order, Arden Anglican at [10] citing Port Stephens Council v Sansom (2007) 156 LGERA 125; [2007] NSWCA 299 (Sansom) at [22]-[23]. The principle also applies when a party seeks to withdraw a Class 1 appeal unless the Court considers it is fair and reasonable, r 3.7(2) of the LEC Rules and Ross at [9].

39. The presumption in r 42.19 of the UCPR that a discontinuing party pays the costs of the other party does not apply to Class 1 proceedings, see Sch 1. Rule 3.7 of the LEC Rules applies in this case. Rule 3.7(3) identifies circumstances that may give rise to a costs order. The Council relies on subrr (3)(f)(i) and (ii), asserting that the Applicant unreasonably continued the appeal beyond the point in time when it should have been apparent that the DA would have to be refused if not amended due to the operation of the amended NSDCP, which came into effect on 4 May 2023. I note that much of the Council’s evidence appeared to be directed to establishing that the Applicant was aware of the amended NSDCP. The Applicant accepts that it was well aware of that instrument and made submissions to the Council objecting to it being made.

38. The chronology set out above in [9] identifies that the Applicant commenced the Class 1 appeal on 25 August 2022. SOFAC and SOFAC in reply were exchanged. The Applicant sought to further amend plans and leave was granted to do so. It is clear from these circumstances there were many issues in play.

39. The Council submits that its costs from 2 June 2023 should be paid by the Applicant. That is the date the Applicant obtained orders for the vacation of hearing dates on 7-10 August 2023 and new hearing dates in November 2023 were fixed. By that stage the amended NSDCP had taken effect. It was obvious according to the Council that the Applicant could not succeed without major amendment of its DA, and accordingly that is when it should have discontinued the appeal if the Applicant was not going to amend the DA. That submission is too simplistic for the following reasons.

40. Firstly, the way that the application of the amended NSDCP was raised in the amended SOFAC and further amended SOFAC under the heading ‘insufficient information’ did not clearly articulate to the Applicant the Council’s position in the terms it put in this costs motion. This is clear from the extracts of these documents above in [10]-[12].

41. The circumstances before the Applicant as of 2 June 2023 were not the same as those before the Applicant when deciding to discontinue in October 2023 as asserted by the Council. The unsolicited particulars letter sent on 17 October 2023 was the first time the Council’s view was clearly stated to the Applicant that the DA in relation to parking if not amended could not be approved as cl 4.6 was unavailable. As the Applicant identified the Class 1 Practice Note required that such a contention should have been included in the SOFAC and no application by the Council to amend to do so was made. The Applicant was not squarely apprised of the Council’s position until the particulars letter. The Applicant’s complaint that the SOFAC should have been amended with leave of the Court based on the Class 1 Practice Note is well founded.

42. Secondly, I do not accept that the amended NSDCP was ‘obvious’ in its application to the Applicant’s proposed DA. I am not going to rule on the application of the amended NSDCP to the Applicant’s DA in order to resolve this costs issue, see caution against doing so in Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 per Mason CJ at 541-542, McHugh J at 566-567. The Applicant’s contentions in reply which responded to the new insufficient information contention regarding parking arising under the amended NSDCP identify what appear to be arguable matters, summarised in the Applicant’s submissions above in [31]-[32]. The Applicant referred to El Khouri providing a basis for it to submit that a development standard imposed by a local environmental plan was not a jurisdictional requirement mandating refusal where exceeded. It is not necessary that I determine the application of that case but I accept that this was a matter the Applicant could potentially have reasonably raised. I do not consider it was unreasonable for the Applicant to pursue these responses to the parking contention based on the amended NSDCP.

43. Thirdly, Murray Affidavit 2 identifies at par 49 multiple reasons why the Applicant decided to discontinue the proceeding, extracted above in [7]. These reasons appear reasonable in the circumstances of complex proceedings involving numerous expert disciplines where many issues were unresolved despite conciliation processes in the Court. These identify substantive matters in addition to the potential operation of the amended NSDCP. The Applicant also referred to the joint traffic report extracted in part above in [8] which highlights that there were a range of issues outstanding.

44. Contrary to the Council’s argument, the appeal continued to have prospects of approval even if the proposed parking remained in excess of the maximum under the amended NSDCP. It cannot be safely assumed by the Council that an amendment would not have been proposed if the proceeding had continued to hearing.

45. The Applicant further evaluated the perceived strengths and weaknesses of the appeal having regard to the joint reports delivered in late October 2023 and determined not to proceed. There was nothing unreasonable in so doing. It would not be consistent with the no discouragement principle nor fair and reasonable for costs to be ordered against the Applicant. The circumstances are squarely within the propositions that discontinuance itself creates no presumption as to costs and a reasonable basis for discontinuance weighs against any costs order.

46. In light of all these matters I find that it is not fair and reasonable for the Council’s costs from 2 June 2023 to be paid by the Applicant. The consequence of this finding is that each party must bear its own costs of the proceeding.

The costs of the costs motion

49. The parties disagree about how the costs of the costs motions following discontinuance should be dealt with. The Applicant has been successful in opposing the Council’s application for the payment of its costs from 2 June 2023. The parties’ submissions give rise to the issue of whether the same presumption against the awarding of costs under r 3.7(2) of the LEC Rules applies to the costs of a costs motion. The parties’ submissions referred to approximately 30 cases in seeking to make their various arguments. As other cases referred to in these cases also warranted consideration it has been necessary to consider an unusually large number of cases on a matter that usually occupies a few sentences at most at the end of a substantive judgment.

Council’s submissions

50. The Council submitted that if it is unsuccessful costs should not follow the event, rather r 3.7(2) applies so that costs of this costs motion are only awarded if it is fair and reasonable to do so. The Council had to file a motion in order to obtain costs. Each party should pay its own costs of the motion. The Council also submitted that if it was successful in obtaining an order for costs its costs ought be paid.

51. The Council identified categories of cases of the Court as follows:

1. Cases where r 3.7 has been applied to the costs of unsuccessful motions in various circumstances so that costs are only awarded if fair and reasonable to do so. The following cases relate to costs of costs motions, Brennan v Leichardt Council (No 2) [2013] NSWLEC 199 (Brennan) at [36]-[37], Hillsong Church Ltd v Council of the City of Sydney (No 2) [2012] NSWLEC 118 (Hillsong) at [54]-[56], Ross at [36]-[37], Crescent Newcastle at [105]-[109]. All of these cases apart from Brennan held it was not fair and reasonable to order costs for the costs motion.

2. Cases where costs of the costs motion follow the event, or the Court made orders where no issue was raised between the parties that the motion’s costs should not follow the event, Awesome Corowa Pty Ltd v Federation Council (No 2) [2022] NSWLEC 93 (Awesome Corowa) at [57], Regional Architects Pty Ltd v Coffs Harbour City Council [2021] NSWLEC 29 (Regional Architects) at [120]-[121].

3. Cases where determination of the costs motion included the costs of the motion, effectively treating costs as part of the costs of Class 1 proceedings, see Regional Architects at [120]-[121], Norton v Blacktown City Council [2009] NSWLEC 214 at [15]-[16].

4. Cases where costs seem to follow the event following a motion seeking costs. Firstly, some include the observation that for such costs applications costs customarily follow the event, for example Twynam Investments Pty Ltd v Goulburn Mulwaree Council [2021] NSWLEC 7 (Twynam) at [64]. Secondly, the approach in Drake v Randwick City Council [2021] NSWLEC 97 (Drake) at [32] finding that ‘costs of costs applications in Class 1 proceedings do conventionally follow the event, as such proceedings are to be regarded as falling within the scope of [r 3.7(3)(a)] as giving rise solely to legal issues’.

52. There is no established convention that the costs of a costs motion follows the event given the range of decisions identified above. In assessing the costs of the Council’s costs motion, the following applies:

1. Based upon the wording of r 3.7, and as illustrated by the decisions cited for categories (1) and (3) above, costs for a Class 1 motion of any kind including costs are to be assessed under the presumption in r 3.7(2), and can only be awarded if it is fair and reasonable in the circumstances;

2. Where a party successfully brings a motion seeking costs under r 3.7, the party would also be entitled to the costs of its motion on the basis that this is fair and reasonable;

3. Where a party unsuccessfully brings a motion seeking costs, r 3.7(2) applies. The unsuccessful party should only have to pay the costs of the costs motion if it is shown that is fair and reasonable in the circumstances as costs of a costs motion are not treated differently from any other costs in Class 1 proceedings;

4. Given the various categories of cases identified, there is no identifiable practice or custom that costs of a costs motion generally follows the event. Instead, r 3.7(2) applies, and for a successful notice of motion the fair and reasonable result will generally be that the costs of the motion becomes the costs of the Class 1 proceeding. However, the converse does not necessarily apply to an unsuccessful motion.

5. It follows that there is nothing unfair or inconsistent with a party contending that, if successful, the costs of its motion should be paid by the other party, but if not successful, then there should be no order for the costs of the motion.

53. For the following reasons, if the Council was not successful on its costs motion, there is no basis to consider that it is fair and reasonable that the Council should have to pay the costs of the Applicant:

1. The circumstance in r 3.7(3)(a) is not engaged by the costs motion itself. Rule 3.7(3)(a) applies to the issues in the proceeding as a whole;

2. The circumstance in r 3.7(3)(d) is not triggered. There was nothing unreasonable in the Council’s conduct of the proceeding including bringing its costs motion. The Applicant, on 2 June 2023, was aware of the changes to the NSDCP and, for reasons advanced in the oral hearing on 6 February 2023, by 2 June 2023 the Applicant had all the information it needed to decide to discontinue the proceeding. Instead the Applicant did not act until 3 November 2023 with costs being incurred in the meantime (this submission seems to assume that the Council was successful on its substantive motion, it was not);

3. The circumstances in r 3.7(3)(f)(i) or (ii) are also not engaged. Further, unlike Brennan at [36]-[37], the Council’s application cannot be said to have lacked prospects of success; and

4. There are no other circumstances suggesting that it would be fair and reasonable for the Council to pay the Applicant’s costs of the costs motion. A party such as the Applicant who embarks upon Class 1 proceedings does so knowing that such applications may be brought, particularly where that party discontinues its action after significant costs are incurred.

54. In reply the issue is to be determined by consideration of r 3.7. The decisions cited by the Applicant such as Grant v Kiama Municipal Council [2006] NSWLEC 70 (Grant v Kiama), Jacobson& McMillan v Ballina Shire Council [2006] NSWLEC 375 (Jacobson) do not support its approach that costs follow the event. The Council has identified where the Court has specified that r 3.7 applies to motions in Class 1 proceedings and contrasted these with other decisions citing matters such as ‘conventions’ or where the parties have agreed on how costs should be determined, for example Awesome Corowa at [57]. The cases cited by the Council demonstrate that r 3.7 requires the fair and reasonable test to be applied to motions including costs motions. The Council’s approach is not inconsistent, it simply applies r 3.7 to the costs of the costs motion. An example of this approach can be seen in Ross at [37]. This decision shows that it was consistent for the council to contend that if successful costs of the motion should be paid but that it was not fair and reasonable to pay Mr Ross’ costs if the council was not successful.

55. The Council’s costs motion followed a discontinuance of the Class 1 proceeding and is not an interlocutory procedural dispute, or a preliminary issue having no bearing on the merits so that r 3.7(3)(a)(ii) does not apply. Provided the costs motion is bona fide and not brought for an ulterior purpose no reason exists in principle as to why that party should expect to pay the costs of that motion unless it is shown that bringing the motion was itself not fair and reasonable.

Applicant’s submissions

56. There are divergent approaches in the Court to costs of costs applications in Class 1 appeals and whether r 3.7(2) applies. In Grant v Kiama at [74] Preston CJ concurred with the costs order made by a commissioner that for a partially successful motion for costs where each party succeeded on two out of four issues and each paid their own costs was said to reflect the usual order that costs follow the event, citing numerous cases where this approach had been taken. That decision pre-dates r 3.7 but remains relevant.

57. There are several decisions where the approach taken to costs of the costs application was that costs follow the event, for example Awesome Corowa at [57], Drake at [32], Regional Architects at [120], Twynam at [64].

58. Several decisions (many in Class 2 proceedings) exist where the fair and reasonable presumption in r 3.7(2) has been applied to costs of costs applications, for example Zhang v Davidson (No 2) [2020] NSWLEC 89 (Zhang) at [68]-[70].

59. A hybrid approach was adopted in Drake at [32] in making an order that costs follow the event on the basis that costs applications fell within r 3.7(3)(a).

60. If the scope, object, and purpose of r 3.7(2) is considered the better view is that costs of costs applications should follow the event. The purpose of the rule in applying the no discouragement principle is identified in Arden Anglican at [10].

61. In Jacobson, Jagot J discusses the distinction between the issue of costs in merits appeals as opposed to ‘ordinary litigation’ at [25]:

… The substance of both notices of motion was unconnected to the merit appeal against the s 124 order, and was akin to ordinary litigation. In Gee v Port Stephens Council (2003) 131 LGERA 325, McClellan J considered the issue of costs in merit appeals. At [60], McClellan J distinguished between “matters appropriate for ordinary litigation” and the “merits of the application”. The decisions referred to by Preston J in Grant v Kiama Municipal Council at [74] also disclose that notices of motion are generally treated as subject to the “usual order as to costs”.

62. Applying the reasoning of Jagot J above in Jacobson, the Applicant submits that a costs application is ‘unconnected to the merit appeal’, involves no assessment of the ‘merits of the application’ itself and, therefore, is ‘akin to ordinary litigation’. Therefore costs should follow the event.

63. There are sound policy reasons for taking this approach when regard is had to the underlying purpose of the ‘special costs rule’ in r 3.7(2) as opposed to the ‘usual order’ that costs follow the event. Whilst it is appropriate that the prospect of a costs order should not discourage a person from exercising their right of appeal to test the merits of the development, the situation is quite different with respect to a costs application itself. The parties should be encouraged to settle the costs dispute rather than litigating the costs dispute and risk incurring disproportionate costs by the parties.

64. In the alternative, adopting the reasoning of Moore J in Drake, the Court would find that the costs application ought be regarded as falling within the scope of r 3.7(3)(a) of the costs rules such that costs would follow the event.

65. The cases relied on by the Council to submit that costs of a motion are only awarded if fair and reasonable to do so (category (1) above) which do not concern costs motions are not relevant.

Consideration of costs of the costs motion

66. The Court has broad discretion to award costs under s 98 of the Civil Procedure Act 2005 (NSW) subject to any court rules. Rule 42.1 of the UCPR does not apply to Class 1 proceedings, as provided in Sch 1. That rule provides for the general rule that costs follow the event. Rule 3.7 of the LEC Rules applies in Class 1, 2 and 3 proceedings whereby under subr (2) costs are not awarded unless the Court considers doing so is fair and reasonable. Non-exhaustive circumstances where the Court may consider it is fair and reasonable to award costs are specified in subr (3). The application of r 3.7(2) means that generally each party pays their own costs unless a different order is made.

67. The parties’ submissions referred to a large number of decisions of the Court where costs have been considered in Class 1 and 2 proceedings. Given the frequency with which costs issues arise in many contexts in Class 1 and 2 proceedings this will be far from exhaustive. The focus of this decision is the approach to the award of costs of a costs motion following the discontinuance of a Class 1 appeal. My analysis does not require that a distinction be made between decisions on costs in Classes 1 and 2 as the same rule applies in both.

68. The parties identify in various cases different approaches by various judges of the Court to determining how costs of costs motions are payable in Class 1 and 2 appeals, namely:

1. Costs follow the event, being the result in the substantive (costs) argument sometimes by agreement of the parties (above in [51(2)]), sometimes as part of the costs of the substantive motion (above in [51(3)]), and sometimes because the judge considered that was the usual convention (above in [51(4)], [57]).

2. Each party pays their own costs unless fair and reasonable to order otherwise as provided by r 3.7(2), for example Hillsong, Ross, Zhang.

3. Costs of costs applications come within r 3.7(3)(a) as considered in Drake so that costs can follow the outcome of the substantive proceeding.

69. The Applicant has emphasised that the approach to the issue of costs in this context is a matter of statutory construction. In accordance with well‑established principles legislation must be read as a whole so as to give effect to all sections wherever feasible, Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [69]-[70] (McHugh, Gummow, Kirby and Hayne JJ). Where individual words require construction, their ordinary meaning must be considered in context, Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation(Cth) (1981) 147 CLR 297; [1981] HCA 26 at 305 (Gibbs CJ) cited in Roden v Bandora Holdings Pty Ltd [2015] NSWLEC 191 at [42], Sydney Seaplanes Pty Ltd v Page (2021) 106 NSWLR 1; [2021] NSWCA 204 at [25]-[41] (Bell P). The principles of statutory construction are also applicable to the LEC Rules being delegated legislation, Master Education Services Pty Ltd v Ketchell (2008) 236 CLR 101; [2008] HCA 38 at 110 (Gummow ACJ, Kirby, Hayne, Crennan and Kiefel JJ) cited in D Pearce and S Argument, Delegated Legislation in Australia (6th ed, 2023, LexisNexis) at 591.

70. The consideration of costs of costs motions must commence with r 3.7(2) of the LEC Rules. The broad drafting of the rule applies on its face to ‘any order for the payment of costs’ in Class 1 proceedings. This must include costs of any motion seeking costs filed in Class 1 proceedings. On one view that is the end of the inquiry, which is essentially the case submitted by the Council. Subrule (3) provides examples of where it may be fair and reasonable to award costs, broadly where behaviour has been unreasonable in some way (subrr (3)(b), (c), (d), (e), (f)), or in subr (3)(a)(ii) where the evaluation of the merits of an application the subject of the proceeding was not involved or was determinative of the proceeding (subr (3)(a)(i)). Subrule (3) cannot confine the application of subr (2) given the latter’s terms.

69. Such an approach is confirmed by Sansom, where in considering an earlier costs regime in Class 1 proceedings s 69(2) of the Land and Environment Court Act 1979 (NSW) and Pt 16 r 4 of the LEC Rules as then in force, the Court of Appeal (Spigelman CJ, Mason P, Beazley, Giles and Ipp JJA agreeing) identified that the formulation ‘fair and reasonable’ calls for a judgment to be made rather than a discretion to be exercised accepting that the evaluative process can be accurately described as conferring a wide discretion, at [51]. Spigelman CJ emphasised the importance of not unnecessarily limiting the evaluative judgment required in relation to costs with the starting point being the presumptive rule that there will be no order as to costs, at [48]. Spigelman CJ identified that principles and guidelines can usefully be adopted as long as these are not treated as rules and are accepted as indicative only, identifying that Grant v Kiama at [15] provides one such indication, at [54]-[56]. Similar observations by the Court of Appeal appear in Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council (2007) 71 NSWLR 230; [2007] NSWCA 300 (Thaina Town) at [35].

70. The differences between the former costs provisions considered in Sansom and Thaina Town and the current provisions were helpfully considered in Agonic Holding Pty Ltd v Lithgow City Council [2009] NSWLEC 34 (Agonic) at [4]-[5] (Biscoe J) cited in Hillsong at [43] as follows:

[4] The Land and Environment Court Rules 2007 commenced in January 2008 and replaced the Land and Environment Court Rules 1979. Rule 3.7(2) of the new rules replaced Pt 16 r 4(2) of the old rules which provided that: “No order for the payment of costs will be made in proceedings to which this Rule applies unless the Court considers that the making of a costs order is, in the circumstances of the particular case, fair and reasonable”. The essential difference between those two provisions is the absence of the words “in the circumstances of the particular case” in the new rule. In relation to the old provision, Bryson JA in Hunter Development Brokerage Pty Ltd v Cessnock City Council (No 2) [2006] NSWCA 292, (2006) 151 LGERA 46 at [4] said that those words excluded “generalised approaches”. By reason of the omission of those words in the new rule, it may be that generalised approaches are permissible, although a specific generalised approach may be insufficient to enliven the discretion or may be displaced by the circumstances of the particular case. The non-exhaustive list of circumstances in rule 3.7(3) directs attention to the circumstances of the particular case. The list is similar to the indicative guidelines formulated under the old rule in Grant v Kiama Municipal Council [2006] NSWLEC 70 at [15] by Preston J and approved by the Court of Appeal in Port Stephens Council v Sansom [2007] NSWCA 299 (2007), 156 LGERA 125 at [56].

[5] The effect of the costs rule is that, in the ordinary case, costs will lie where they fall. This presumptive rule is not displaced unless the Court considers that the making of a costs order is fair and reasonable in the circumstances. ...

73. As essentially identified in Agonic the differences between the current and former costs provisions can be seen as minimal in effect and the observations in Sansom and Thaina Town continue to apply. A consequence of the Applicant’s arguments is essentially that a separate approach to costs of costs motions is warranted and that approach should be that costs generally follow the event. While not expressly articulated by the Applicant in these terms that is the effect of its argument. While the Applicant’s argument relied on ArdenAnglican at [10] where the rationale for the presumptive rule was described by Biscoe J, the effect of its approach would be to separate out a particular costs category and that is not in accordance with the statutory scheme. Grant v Kiama and Jacobson decided under the earlier costs regime in Pt 16 r 4 of the LEC Rules identify one approach commonly applied by judges undertaking the necessary evaluative judgment in relation to the award of costs of costs motions, namely on the basis these follow the event.

74. No principle of statutory construction supports the limitation of the application of r 3.7(2) in this way. It follows that the observations in Sansom and Thaina Town apply to the LEC Rules in their current form as identified in Agonic and ArdenAnglican. It is not appropriate that I seek to resolve the divergent approaches to the costs of costs applications, contrary to the Applicant’s submission that I should do so.

75. As the large number of cases referred to by both parties show, various approaches have been taken by judges over time. The possibility of different approaches to the determination of costs of costs motions arises from the wide discretion to undertake the evaluative judgment arising from r 3.7(2). Once it is accepted that r 3.7(2) applies to all types of costs matters then adopting a universal ‘rule’ for how that discretion might be exercised, such as that costs for costs motions ought follow the event, is not appropriate. Ultimately the evaluative judgment in each case must be determined on its own facts and the Court has a wide discretion to be exercised judicially in considering costs in all the various contexts in which they arise under r 3.7(2).

76. The Council sought to distinguish cases which have considered interlocutory procedural matters and those where merit questions do not arise from its application for costs following the discontinuance because that occurred at the end of the proceeding. It is not clear that there is any useful distinction to be drawn on that basis. The Council’s application for costs following discontinuance by the Applicant did not require the evaluation of any merit issues.

77. I consider the alternative approach the Applicant proposed in Drake has much to recommend it on this occasion. Rule 3.7(3)(a)(ii) can apply, while still a matter of discretion for a judge as to the outcome, which does lead to the approach taken in a number of the cases referred to namely that costs of this costs motion should follow the event. That is the approach I will take in this matter.

78. Consequently I do not need to consider the parties’ conflicting submissions on why it would be fair and reasonable (or not) to award costs.

Orders

79. The Court orders:

1. The Respondent’s notice of motion dated 21 November 2023 is dismissed.

2. The Respondent is to pay the Applicant’s costs of the Applicant’s notice of motion dated 3 November 2023 and the Respondent’s notice of motion dated 21 November 2023.

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Decision last updated: 13 May 2024