Council of the City of Sydney v Waldorf Apartments Hotel Sydney Pty Limited (No 3)

[2008] NSWLEC 175

Land and Environment Court

of New South Wales

CITATION:	Council of the City of Sydney v Waldorf Apartments Hotel Sydney Pty Limited and Anor (No 3) [2008] NSWLEC 175
PARTIES:	APPLICANT Council of the City of Sydney FIRST RESPONDENT Waldorf Apartments Hotel Sydney Pty Limited SECOND RESPONDENT Rinbac Pty Limited
FILE NUMBER(S):	40389 of 2007
CORAM:	Pain J
KEY ISSUES:	Costs :- exercise of discretion to award costs in Class 4 proceedings - whether disentitling conduct due to Council's incorrect representations to the Respondents many years before litigation commenced
LEGISLATION CITED:	Civil Procedure Act 2005 s 98 Environmental Planning and Assessment Act 1979 s 81A Local Government Act 1919 s 342AS Uniform Civil Procedure Rules 2005 Pt 42.1
CASES CITED:	Bostock v Ramsey Urban District Council [1900] 2 QB 616 Cleaver v Byron Shire Council (1975) 31 LGRA 31 Council of the City of Sydney v Waldorf Apartments Hotel Sydney Pty Limited and Anor [2008] NSWLEC 97 Council of the City of Sydney v Waldorf Apartments Hotel Sydney Pty Limited and Anor (No 2) [2008] NSWLEC 122 Grace & Anor v Thomas Street Cafe Pty Ltd & Ors (2006) 149 LGERA 86 Grace & Anor v Thomas Street Cafe Pty Ltd & Ors [2007] NSWCA 359 Kiama Council v Grant (2006) 143 LGERA 441 Latoudis v Casey (1990) 170 CLR 534 Oshlack v Richmond River Council (1998) 193 CLR 72 Pratten v Warringah Shire Council (1969) 17 LGRA 371 TV Shopping Network Ltd v Scutt and Anor (1998) 43 IPR 451
DATES OF HEARING:	19 May 2008
DATE OF JUDGMENT:	20 May 2008
LEGAL REPRESENTATIVES:	APPLICANT Mr M Baird SOLICITOR Sydney City Council RESPONDENT Mr M Staunton SOLICITOR Landerer & Co

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

Pain J

20 May 2008

40389 of 2007 Council of the City of Sydney v Waldorf Apartments Hotel Sydney Pty Limited and Anor (No 3)

JUDGMENT ON COSTS

1 Her Honour: In Council of the City of Sydney v Waldorf Apartments Hotel Sydney Pty Limited and Anor [2008] NSWLEC 97 (Waldorf (No 1)) I held that the First Respondent did not have development consent for use as serviced apartments for premises at 57 – 67 Liverpool Street Sydney (the premises), known as the Waldorf, under a development consent granted in 1980 by the Applicant (the Council) for a residential flat building. The Council now seeks its costs. I note that the Second Respondent is not part of this application.

2 The use for serviced apartments had commenced in about 1988. Such a use is permissible development requiring development consent in the relevant zone. I also held that the Council was not estopped from taking enforcement action despite being aware of the serviced apartment activity and making representations that no development consent was required for this in the early 1990s. The First Respondent also raised an argument based on Grace & Anor v Thomas Street Cafe Pty Ltd & Ors (2006) 149 LGERA 86. This ground was withdrawn after further submissions were filed following the Court of Appeal decision in Grace & Anor v Thomas Street Cafe Pty Ltd & Ors [2007] NSWCA 359.

3 I exercised my discretion to make declarations and consequential orders but postponed the latter for six years in Council of the City of Sydney v Waldorf Apartments Hotel Sydney Pty Limited and Anor (No 2) [2008] NSWLEC 122 (Waldorf (No 2)). The declarations and orders made were as follows:

1. Declare that development consent DA/44/80/0226 issued on 1 September 1980 for use of the building at 57-67 Liverpool Street, Sydney as “flats”, does not permit or authorise the use of the building for “serviced apartments”.

2. Declare that in breach of s 76A of the Environmental Planning and Assessment Act 1979 the First Respondent is carrying out development, namely the use of 57-67 Liverpool Street, Sydney as “serviced apartments” without development consent having first been obtained.

3. Order that except as provided by order 4 and order 5 the First Respondent, its servants, agents and invitees are restrained from using 57-67 Liverpool Street, Sydney (the building) for the purpose of serviced apartments without prior development consent.

4. Subject to order 5, order 3 does not apply to that part of the building specified in the schedule to these orders for six years.

…

Council’s submissions

4 The Council now seeks its costs from the First Respondent on the basis that it is the successful party and costs ought to follow the event. The Court made declarations and orders. The postponement of the orders taking effect for six years does not undermine the overall successful outcome in the proceedings for the Council. There has been no disentitling conduct to deprive it of its costs. Three affidavits of Mr Fozzard, Council’s solicitor, dated 27 November 2007, 28 April 2008 and 15 May 2008 were relied on. One was read in the substantive proceedings concerning the history of the matter leading up to the commencement of proceedings. The Council wrote to the First Respondent on 1 February 2007 and 23 April 2007 stating its position before proceedings were commenced on 4 May 2007. The First Respondent had replied that it considered it did not need further development consent.

5 The more recent affidavits of Mr Fozzard identify correspondence between the parties in relation to the costs hearing the subject of this judgment and in relation to the s 81A Environmental Planning and Assessment Act 1979 (EP&A Act) argument of the First Respondent following the Court of Appeal decision in Grace v Thomas Street Cafe.

6 As has been identified by Preston J in Kiama Council v Grant (2006) 143 LGERA 441, where the orders made are substantially the same as the orders sought by the Council, the applicant should be entitled to its costs. The order against the respondent is not to punish the unsuccessful party, its function is compensatory. The rationale of making a costs order is “that it is just and reasonable that the successful party should be reimbursed for the costs incurred in bringing or defending the action.” (Latoudis v Casey (1990) 170 CLR 534 per McHugh J at 567).

First Respondent’s submissions

7 The First Respondent argued that the proper costs order is that each party pay its own costs as, firstly, the Council was not successful in gaining the relief it sought. The relief sought by the Applicant was an order that the First Respondent immediately cease using the subject premises for serviced apartments. It was unsuccessful in obtaining that relief.

8 Secondly, there has been disentitling conduct on the part of the Council. Circumstances leading up to the litigation may be considered in relation to whether there is such misconduct, McHugh J in Oshlack v Richmond River Council (1998) 193 CLR 72 at [69], referring to Bostock v Ramsey Urban District Council [1900] 2 QB 616 at 622 per A L Smith LJ. The disentitling conduct of the Council is that, firstly, Council staff made representations in the early 1990s that development consent was not needed which the First Respondent relied on to its detriment. It did not seek to regularise its serviced apartment use before 1996 when the relevant planning instruments changed and the requirements for serviced apartment use became far more onerous. Secondly, there was gross delay in the commencement of these proceedings in 2007 causing the First Respondent prejudice because it is unlikely to be able to comply with the current planning laws if it does apply for development consent. Reliance was placed on findings of Young J in TV Shopping Network Ltd v Scutt and Anor (1998) 43 IPR 451 at 460 where he identified disentitling conduct as including an administrative authority failing in its duty leading the unsuccessful party to make unwarranted assumptions; see Pratten v Warringah Shire Council (1969) 17 LGRA 371 at 381, 382 and Cleaver v Byron Shire Council (1975) 31 LGRA 31 at 34. The conduct need not be deliberately misleading to be disentitling.

Finding

9 Costs in Class 4 proceedings are to be determined under s 98 of the Civil Procedure Act 2005. Part 42.1 Uniform Civil Procedure Rules 2005 states that costs follow the event unless the Court considers some other order ought be made.

10 In relation to whether the Council was the successful party in the proceedings, I consider it was. There was a determination of two substantive issues, whether there was development consent for serviced apartment use and whether the Council was estopped from enforcing the EP&A Act. It succeeded on the two substantive issues in the proceedings. Further there were some costs thrown away by the process of discontinuing the s 81A EP&A Act argument by the First Respondent following the Court of Appeal judgment in Grace v Thomas Street Cafe after the substantive hearing. While I exercised my discretion to make orders which postponed the consequential orders made, I do not consider that undermines the overall success of the Council in the proceedings. As its counsel pointed out, I did make declarations and consequential orders but chose to postpone their effect for six years.

11 The more interesting question is whether there is disentitling conduct which suggests the Council should not be awarded its costs despite being the successful party. As referred to in the First Respondent’s submissions, disentitling conduct has been held to include circumstances leading up to the litigation. The First Respondent argued that the conduct I had to consider in relation to estoppel and also discretion (which was the same evidence) also gives rise to disentitling conduct relevant to this costs application. It argued that, because of the Council’s conduct up to 1996, this litigation was inevitable and was brought about entirely by the Council’s behaviour. It is not suggested that there was anything deliberately mischievous in what the Council did. However, had the Council not made the representations it did the First Respondent could have applied for development consent for the serviced apartment use before 1996 when it was likely to have obtained it.

12 The Council pointed out that more than one letter was sent several months before proceedings were commenced to provide the opportunity for the First Respondent to put its case to the Council and to lodge a development application. As identified in Mr Fozzard’s affidavit of 27 November 2007, there were opportunities provided to the First Respondent to state its position and it maintained that it did not require development consent for the serviced apartment use. It did not confine the dispute to issues of discretion only as it could have done. It is quite unreasonable to effectively submit that any enforcement action by the Council after 1996 gives rise to disentitling conduct preventing an award of costs when the Council has otherwise been successful. Further, the serviced apartment use is permissible with development consent and the First Respondent still has the opportunity to apply for consent. I agree. The commencement of enforcement proceedings by the Council and the events well before that relied on by the First Respondent do not give rise to disentitling conduct.

13 The First Respondent’s submissions on disentitling conduct also ignore the fact that it commenced the serviced apartment use without development consent in about 1988. It did not commence that use because of any action by the Council. While later actions of the Council did lead it to act to its detriment in that development consent was not applied for before 1996, I do not consider that behaviour, which I took into account in the exercise of my discretion to make appropriate orders, is also behaviour that disentitles the Council from being awarded costs. Further, the Council has been successful while the plaintiffs in Cleaver and Pratten were not. In Cleaver the plaintiff took action because he had incurred costs due to an incorrect certificate issued under s 342AS of the Local Government Act 1919. He claimed costs for injurious affection. A preliminary question of whether there was such an error was determined against the plaintiff but Waddell J did not award costs as he considered the plaintiff had acted on erroneous advice from the State Planning Authority. In Pratten the plaintiff did not obtain the declaration he sought but the Council’s costs were not ordered to be paid in full because its actions contributed to the plaintiff taking the action he did.

14 The Council should have its costs paid by the First Respondent. As the Council has been successful in this costs application its costs should also be paid by the First Respondent on the basis that costs follow the event and are compensatory.

Orders

15 The Court makes the following orders:

1. The First Respondent is to pay the Council’s costs of the proceedings as agreed or assessed.
2. The First Respondent is to pay the Council’s costs of this costs application as agreed or assessed.