Motorplex (Australia) Pty Ltd v Port Stephens Council [No 2]

[2007] NSWLEC 770

Land and Environment Court

of New South Wales

CITATION:

Motorplex (Australia) Pty Ltd v Port Stephens Council [No 2] [2007] NSWLEC 770

PARTIES:

APPLICANT
Motorplex (Australia) Pty Ltd

RESPONDENT
Port Stephens Council

FILE NUMBER(S):

11328 of 2004

CORAM:

Preston CJ

KEY ISSUES:

Costs :- previous determination of separate issue concluded that endangered ecological communities existed on site - applicant seeks leave to amend Development Application and Class 1 Application to re-locate development outside area of endangered ecological communities - Council seeks to have proceedings dismissed due to costly and protracted proceedings and repeated applications to amend - alternatively Council seeks to make leave to amend conditional upon an order for past costs and security for future costs in favour of Council - proper course is not to dismiss proceedings but to engage in concerted case management and proceed to final hearing as soon as reasonably practicable - leave granted to applicant to amend on terms regulating any further amendment and as to costs thrown away - fair and reasonable that applicant pay Council's costs of and occasioned by the amendment - leave granted to proceed to assessment of costs forthwith - order for security for costs should not be made in circumstances

LEGISLATION CITED:

Civil Procedure Act 2005
Corporations Act 2001 (Cth) s 1335(1)
Courts Legislation Amendment Act 2007
Environmental Planning and Assessment Regulation 2000 cl 55
Land and Environment Court Act 1979 s 39(2), s 69(2), s 69(3), s 69(7)
Land and Environment Court Rules 1996 Pt 6 r 1, Pt 16 r 4(2), Supreme Court Rules 1970 Pt 53 r 2(1)
Uniform Civil Procedure Rules 2005, Pt 42.21

CASES CITED:

Aldi Foods Pty Limited v Holroyd City Council (2005) 142 LGERA 141;
Andrews v Caltex Oil (Australia) Pty Ltd (1982) 40 ALR 305;
Cameron's Unit Services Pty Limited v Kevin R Whelpton & Associates (Australia) Pty Ltd (1986) 13 FCR 46;
Fiduciary Ltd and Anor v Morning Star Research Pty Ltd (2002) 55 NSWLR 1;
Harpur v Ariadne Australia Ltd [1984] 2 Qd R 523;
Idoport Pty Ltd v NAB Ltd [2001] NSWSC 744;
Interchase Ltd (in liq) v Colliers Jardine Pty Ltd (1995) 17 ACSR 447; 13 ACLC 1,115;
K P Cable Investments Pty Limited v Meltglow Pty Ltd (1995) 56 FCR 189;
Marinkovic v Rockdale City Council [2006] NSWLEC 601;
Marinkovic v Rockdale City Council (No 2) (2007) 151 LGERA 385;
Melville v Craig Nowlan & Associates Pty Ltd (2002) 54 NSWLR;
Motorplex (Australia) Pty Ltd v Port Stephens Council [2007] NSWLEC 74;
Port Stephens Council v Sansom [2007] NSWCA 299;
Southern Cross Exploration NL v Fire and All Risks Insurance Co Ltd (1985) 1 NSWLR 114;
Timbarra Protection Coalition Inc v Ross Mining NL (1999) 46 NSWLR 55;
Upton v T V W Enterprises Ltd (1984) 57 ALR 361;
Warren Mitchell Ltd v Australian Maritime Officers’ Union (1993) 12 ACSR 1; 11 ACLC 1,128

DATES OF HEARING:

31 October 2007
12 November 2007

 
DATE OF JUDGMENT: 

26 November 2007

LEGAL REPRESENTATIVES:

APPLICANT
A Pearman (Barrister)
SOLICITORS
Concordia Pacific

RESPONDENT
P W Larkin (Barrister)
SOLICITORS
Sparke Helmore

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

PRESTON CJ

26 NOVEMBER 2007

11328 OF 2004

MOTORPLEX (AUSTRALIA) PTY LTD V PORT STEPHENS COUNCIL [NO 2]

JUDGMENT

1 HIS HONOUR: These proceedings, involving an appeal under s 97 of the Environmental Planning and Assessment Act 1979, have yet to come on for a hearing, notwithstanding that they were commenced in 2004. There has been a hearing and determination of a separate question: Motorplex (Australia) Pty Ltd v Port Stephens Council [2007] NSWLEC 74 (16 February 2007). However, this did not resolve the proceedings but instead has led to further dispute. As a consequence, the parties have filed rival notices of motion.

2 The applicant’s notice of motion dated 2 July 2007 seeks for the Court, pursuant to s 39(2) of the Land and Environment Court Act 1979, to exercise the Council’s powers under clause 55 of the Environmental Planning and Assessment Regulation 2000 to amend the applicant’s development application and hence the applicant’s Class 1 application to the Court. The amendments sought by the applicant have continued to change since the motion was filed, however, by the time of the last hearing date of the applicant’s motion on 12 November 2007, the amendments sought are as shown generally in a set of plans and documents filed on that day (although if leave be granted by the Court further amendment of these plans and documents would be required to bring consistency between them).

3 The Council’s notice of motion dated 31 July 2007 seeks three sets of alternative orders. The first set is that the whole proceedings should be dismissed with costs.

4 The second set of orders is that the applicant should pay the Council’s costs of the proceedings to date, except insofar as those costs relate to traffic impacts. This order, as explained later, assumes that the proceedings are not dismissed and addresses the applicant’s motion for leave to amend the development application and the Class 1 application. The Council seeks such a costs order as a term of leave being granted to amend the development application and the Class 1 application. The Council also seeks, in relation to any such order for costs, that the Council have leave to proceed to an assessment of its costs forthwith.

5 The third set of orders is that the applicant provide security for the Council’s costs of the proceedings. Evidently, this order also assumes that the proceedings are not dismissed.

6 The Council also seeks its costs of its motion, assuming it is successful in one or other of these ways.

7 The logical order to deal with these rival applications by the parties is to deal with, first, the Council’s application that the proceedings be dismissed; secondly, the applicant’s application to amend the development application and the Class 1 application; thirdly, the Council’s application that the applicant pay the Council’s costs to date and have leave to proceed to an assessment of those costs forthwith; and fourthly, the Council’s application that the applicant provide security for costs. The costs of the respective motions can then be determined.

Application for dismissal of proceedings

8 The Council submits that there has been unreasonable delay in the prosecution of the proceedings, having been commenced on 28 October 2004; the applicant ought to have lodged a proper development application and Class 1 application from the outset but did not do so; the Council has been put to a wholly unreasonable degree of cost by reason of the lack of a proper development application and Class 1 application and the conduct of the applicant in prosecuting its appeal in the Court; and the separate question determined by the Court as to the existence of endangered ecological communities on the land was meant to be dispositive of the proceedings but has not proved to be because the applicant now seeks to amend the development application and Class 1 application. The Council relied on affidavit evidence, including of the Council’s solicitors, chronicling the long and costly saga from the commencement of the proceedings to date.

9 The Council submits that, having regard to the past history of the proceedings, there is a real prospect that the applicant may continue to conduct itself in the way it has in the past, including making repeated applications to amend. The applicant has taken since 2004 to put forward this latest proposal for the development and, even in the course of the applicant’s motion seeking leave to amend, numerous amendments have been made. Indeed, the most recent version still needs further adjustment to bring about consistency between the plans provided to the Court. The Council submits that the applicant should not be given any further indulgence by the Court.

10 In these circumstances, the Council submits that the Court should dismiss the proceedings. This action would allow the applicant to lodge a fresh development application, incorporating the most recent proposed amendments, with the Council. If the Council determined to refuse any such application, the applicant could appeal again to the Court against such decision of the Council. The Council submits that this is the proper course rather than seeking to retain the current proceedings.

11 The applicant submits that there is no warrant in the circumstances to dismiss the proceedings. The parties both sought and the Court agreed to order that the question of whether endangered ecological communities occur on the land be heard and determined separately from other questions in the proceedings. The relevance of this question was that if endangered ecological communities occurred on the land, the development as then proposed was likely to significantly affect the endangered ecological communities, as substantial components of the development (including the drag strip) were located in the areas of the alleged endangered ecological communities and a species impact statement would therefore need to be prepared under the Environmental Planning and Assessment Act 1979. If a species impact statement was required to, but did not, accompany the development application, the Court, exercising the functions of the consent authority, would not have jurisdiction to determine the applicant’s Class 1 application: see Timbarra Protection Coalition Inc v Ross Mining NL (1999) 46 NSWLR 55. Accordingly, the parties sought and the Court agreed to order the question of the existence of the endangered ecological communities on the land be heard and determined as a separate question.

12 I heard that question and determined that three endangered ecological communities occurred in areas on the land and found that their location was depicted on a map to which I referred: see Motorplex (Australia) Pty Ltd v Port Stephens Council [2007] NSWLEC 74 (16 February 2007).

13 In response to that determination, the applicant sought to amend its development so as to move components of the development, including importantly the drag strip, wholly outside of the areas where the endangered ecological communities were found to exist. The applicant submits that the amendment is responsive to the Court’s decision and seeks to lessen the environment impact of the development and otherwise lead to an improved community outcome. Such a response, the applicant submits, is proper and ought to be expected. The Court should deal with the application to amend. If the Court was minded to grant leave to amend, there is no justification to dismiss the proceedings. The Court could condition any grant of leave to amend.

14 I consider that the Council has not made out a case for the proceedings to be dismissed summarily at this stage. The proceedings have certainly been protracted and costly to both parties. Nevertheless, the solution is not to dismiss the proceedings and put the parties to the respective cost of lodging and determining a fresh development application and appealing and defending any decision to refuse that development application. Rather, the proceedings should be subjected to concerted case management with the goal of bringing the proceedings on for a final hearing as soon as is reasonably practicable. Questions of costs, both to date and in the future, can be dealt with without dismissing the proceedings.

15 The applicant has formulated an amended development to respond to the Court’s determination of the separate question by moving the development out of the areas in which the endangered ecological communities were found to exist. The Council foreshadows that there may still be indirect effects on the endangered ecological communities and that the new location of the development has its own problems, particularly associated with being Koala habitat. Nevertheless, I agree with the applicant that it is reasonable for it to respond to the Court’s determination of the separate question in the way it has by amending the development so as to relocate it away from the endangered ecological communities.

16 In Marinkovic v Rockdale City Council (No 2) (2007) 151 LGERA 385, I allowed amendments to plans that were responsive to a Commissioner’s interim judgment, notwithstanding that on a previous occasion the long and tortuous history of the proceedings caused me to order the applicant to pay costs in relation to that history: see Marinkovic v Rockdale City Council [2006] NSWLEC 601. In the second decision, I noted that there should be a capacity for an applicant in Class 1 proceedings to respond to the changing circumstances that evolve in the course of the proceedings. I said:

“[21] In Aldi Foods Pty Limited v Holroyd City Council (2005) 142 LGERA 141, Talbot J noted that the generation of amended plans as a consequence of an evolutionary process involving management techniques adopted by the court and the appointment of a court appointed expert is not necessarily of itself a matter for adverse comment in respect of reasonableness in the context of a costs application: at 14.
[22] There should be a capacity for an applicant in class 1 proceedings before the Court to amend its application to respond to evidence, including evidence of a court appointed expert, and to address concerns of the court that is hearing the appeal. A respondent council should expect that an applicant might need to respond in this way. That is to say, such amendments should be seen to be part of the usual process of conducting a class 1 appeal in this Court. The mere making of an amendment is not by itself a circumstance that always makes it fair and reasonable to make an order for costs.
[23] Of course, there must be some limit placed upon this capacity to respond to evidence and to the Court’s concerns by means of an amendment. This case is a good illustration. The multiple amendments that were made by the applicant prior to 19 September 2006 is an illustration of where an applicant has stepped outside what can be reasonably expected in the usual conduct of a class 1 appeal.”

17 Similarly, in this case, it ought to be expected that the applicant would respond by amending its development so as to eliminate or lessen the environmental impact of the development on the endangered ecological communities that the Court found, contrary to the applicant’s argument, to exist on the development site. It would not be proper to dismiss the proceedings because the applicant has now done so.

18 Accordingly, I decline to dismiss the proceedings summarily at this stage.

Application to amend

19 The applicant seeks leave to amend the development application and the Class 1 application in terms of the plans filed in Court on 12 November 2007, with foreshadowed further amendments to bring about consistency between the plans. The set of plans are:

(a) Further Amended Site Plan by Lakesedge Engineering Services Pty Ltd, drawing no 1286-100AB, A1, filed in Court on 12 November 2007;

(b) Conacher Travers, Fig 1 Concept Landscape Plan, drawing no 6048, Amendment A, dated 9 November 2007, filed in Court on 12 November 2007;

(c) Earthworks and Stormwater Management Plan by Cardno Stanwill, drawing no 6066-SK 01, Revision F, filed 9 November 2007 (which would need amendment to accord with the Lakesedge Engineering plan filed 12 November 2007);

(d) Detail of typical acoustic barriers filed 9 November 2007 (which would need amendment to accord with the Lakesedge Engineering plan filed 12 November 2007); and

(e) Figure 1 – EEC Drag Strip by Conacher Travers dated 22 May 2007 (which would need amendment to accord with the Lakesedge Engineering plan filed 12 November 2007);

20 The applicant had prepared a further amended species impact statement dated September 2007 which dealt with the relocation of the development outside of the endangered ecological communities. However, this draft amended species impact statement would need further amendment to address the further adjustments made to the development at the new location in the set of plans filed in Court on 12 November 2007. This could be done in a comparatively short time frame of a few weeks.

21 The applicant read affidavit evidence of various experts addressing the matters required by paragraph 29 of the Court’s Practice Note – Class 1 Development Appeals.

22 The applicant submitted that it had only once before formally sought and obtained the leave of the Court to amend its development application and Class 1 application. That leave was granted by Jagot J on 24 March 2006. The amended development was the applicable development at the time of my determination of the separate question as to the existence of the endangered ecological communities on the site. It was not until after my determination of the separate question that the applicant sought leave to amend the development application and the Class 1 application again. This is the present notice of motion. This application is responsive to my determination.

23 The Council did not seriously contest that the amendments now sought by the applicant to the development application and Class 1 application did address the matters in paragraph 29 of the Court’s Practice Note – Class 1 Development Appeals. The relocation of the development away from the areas in which the Court found the endangered ecological communities to exist would be beneficial in lessening the environmental impact on those communities. However, the Council foreshadowed that the amended development, in its new location, created other environmental impacts, including on Koala habitat. Nevertheless, the Council will be able to address these issues in due course.

24 The Council again expresses concern having regard to the past history of this matter that the applicant may make repeated applications in the future to amend. Council again submits that since 2004 the applicant has had the opportunity to put forward this latest proposal and even in the course of the current motion seeking leave to amend, numerous amendments have been made.

25 The Council submitted that any leave to amend should be made conditional on both a costs order (for past costs) and an order for security of costs (for future costs). I will deal with these questions of costs shortly.

26 I am satisfied that the applicant should be given leave to amend the development application and the Class 1 application generally in accordance with the plans filed in Court on 12 November 2007, with the necessary consequential amendments to bring about consistency between the plans. Such amendments are responsive to the Court’s determination of the separate question. The amendments move the development away from the location of the endangered ecological community. In that regard, the amendments lessen the environmental impact. It may be that the new location of the development creates other consequences, as the Council has foreshadowed. Such consequences will need to be addressed in due course and at the hearing. Ultimately, whether the amendments now proposed go far enough to make the development an acceptable development will be for the Court to determine in due course.

27 The history of the matter does, however, warrant imposing terms on any grant of leave to amend. One term should be to regulate any further amendment. In Marinkovic v Rockdale City Council [2006] NSWLEC 601, where there had also been a long history of delay in prosecuting the appeal and multiple amendments of the application, I sought to regulate future amendments by making an order in the following terms:

“No further amendments on the development application will be allowed without the express leave of Preston CJ or other judge if he is unavailable. Such leave is to be sought by way of Notice of Motion together with supporting Affidavit in accordance with paragraph 3 of the Court’s Consolidated Court Appointed Expert Standard Direction No. 1.”

28 I consider that such an order is also appropriate in this case, although the reference to the applicable standard direction should be amended to refer to paragraph 29 of the Court’s Practice Note Class 1 – Development Appeals.

29 I also consider that the Court should impose terms on the grant of leave to amend as to costs. For reasons I will explain, the costs order should be that the applicant pay both the Council’s costs of the application for leave to amend and the costs of and occasioned by the amendment. I will now deal with this issue.

Application to pay costs

30 The Council seeks an order that the applicant pay its costs of the proceedings to date, other than those that relate to traffic impacts. The Council submits that such an order is necessary to compensate the Council for the costs it has incurred to date by reason of the applicant’s conduct. The Council relied on my order to that effect in Marinkovic v Rockdale City Council [2006] NSWLEC 601.

31 The applicant submits that it would not be fair and reasonable to make an order for costs as this stage in the proceedings. The proceedings have not yet been concluded. It is premature to make an order for costs. All of the factors relevant to the exercise of the discretion under s 69(2) of the Land and Environment Court Act 1979 and Pt 16 r 4(2) of the Land and Environment Court Rules 1996 are not yet known, including importantly, the outcome of the proceedings.

32 I consider that the applicant should pay the respondent’s costs of and occasioned by the amendment of the development application and hence the Class 1 application. This is an appropriate term to impose on the grant of leave to the applicant to amend its development application and Class 1 application.

33 The amendment, as I have noted, relocates the development wholly outside of the areas in which the Court found the endangered ecological communities to exist. If this amended development had been originally proposed, there would have been no need to determine the separate question of whether the vegetation communities in these areas are endangered ecological communities.

34 As I have earlier indicated, the parties sought and the Court ordered the separate question, on the basis that, if the vegetation communities are endangered ecological communities, the development was likely to significantly affect the endangered ecological communities and a species impact statement would therefore be required. If, however, the development were to be located outside the areas in which the alleged endangered ecological communities were located, there would not be a significant effect on those communities and no species impact statement would be required. Hence, the necessity for the separate question arose only because the applicant proposed development in the areas of the alleged endangered ecological communities.

35 The applicant now proposes moving the development wholly outside of the areas of the endangered ecological communities. By the amendment now proposed, the hearing and determination of the separate determination has been rendered nugatory. It is of no utility to the amended development in the new location.

36 In these circumstances, it is fair and reasonable that the Council be compensated for the costs of the hearing and determination of the separate question necessitated by the applicant’s then proposed development application and Class 1 application. Those costs have been thrown away by reason of the amendment. Indeed, the Council’s costs thrown away by reason of the amendment probably go further than just those associated with the hearing and determination of the separate question. The Council’s preparation of its case to date has been orientated towards meeting the applicant’s then proposed development, significant components of which, including the drag strip, were located in the areas of the endangered ecological communities. The Council’s preparation of its case and its evidence were directed to meeting that development in that location.

37 By reason of the proposed amendment, a part of that preparation and evidence may be thrown away. It is not possible for me to determine how much preparation and evidence may be thrown away by reason of the proposed amendment. That will be a matter for assessment by a taxing officer. It is sufficient to note that it is likely that part of the Council’s costs to date will be thrown away by reason of the amendment.

38 The next question is whether the Council should be given leave to proceed to an assessment of costs forthwith. Ordinarily, an order for costs of an interlocutory proceeding should not entitle a party to have a bill of costs assessed until the principal proceedings in which the interlocutory order was made is concluded. However, the Court does retain a discretion to depart from this general practice and may order that the costs may be assessed forthwith. Factors which have led courts to depart from the general practice include:

(a) where the application or aspect in respect of which the particular costs order is made before conclusion of the proceedings represents the determination of a separately identifiable matter or may be viewed as the completion of a discrete aspect;

(b) some unreasonable conduct on the part of the party against whom costs have been ordered;

(c) there is much to come in the proceedings and one can see a fairly long time before the proceedings are disposed of; and

(d) justice otherwise demands it: Fiduciary Ltd and Anor v Morning Star Research Pty Ltd (2002) 55 NSWLR 1 at 4-5.

39 In this case, the order for costs of and occasioned by the amendment is to be imposed as a term of granting the applicant leave to amend its development application and Class 1 application. It is a separately identifiable matter. Furthermore, the largest part of the costs of and occasioned by the amendment will relate to the hearing and determination of the separate question. That too is a separately identifiable matter.

40 The amendment of the development application to a large extent begins the appeal process again. Although concerted case management of the amended application may control the conduct of the proceedings this time, there still is a good way to travel before the proceedings will be concluded. The future conduct of the proceedings is not related to the costs of and occasioned by the amendments. It would not be just for the Council to remain uncompensated whilst the applicant pursues its amended development through this process.

41 There is a further fact in the circumstances of this case that makes it just to depart from the usual order. The Council has adduced evidence in support of its application for security for costs that establishes that the applicant, being a company, is impecunious: see further below. The applicant, although given an opportunity to respond, including by an adjournment of the hearing, has failed to rebut the evidence of impecuniosity adduced by the Council. There is a real question that the applicant may not be now able to meet any order for costs made against it. It would be unjust in these circumstances to require the Council to continue to defend the proceedings and incurring yet further costs until the conclusion of the principal proceedings before it is able to have its costs of the interlocutory proceeding assessed. Instead, justice demands that the Council should be able to have its costs of the interlocutory proceeding assessed now.

Security for costs

42 The foregoing conclusions go a long way to resolving the Council’s application for security for costs. The Council’s concern is that the applicant is impecunious and will not be in a financial position to meet any order for costs made against it. I have determined that an order for costs should be made in that the applicant should pay the Council’s costs of and occasioned by the amendment of the development application and the Class 1 application and that the Council should have leave to have the order for costs assessed forthwith. In these circumstances, there is no need for an order for security for costs to protect the Council’s interests in relation to these past costs.

43 Any order for security for costs is, therefore, only relevant to deal with any future costs order that might be made against the applicant and in favour of the Council.

44 The Court has power to order security for costs in these proceedings, notwithstanding that they involve administrative merits review in Class 1 of the Court’s jurisdiction. At the time of this application, there are three sources of power to order security for costs: under s 69(3) of the Land and Environment Court Act 1979, under the former Pt 53 r 2(1) of the Supreme Court Rules adopted by Pt 6 r 1 of the Land and Environment Court Rules 1996 and under s 1335(1) of the Corporations Act (Cth) 2001. I will deal with each of these sources of power in a moment.

45 I should note, however, that the recent Courts Legislation Amendment Act 2007 has been passed by the New South Wales Parliament and has received assent on 15 November 2007. It will come into force early next year. The effect of that Act is to bring the Land and Environment Court, and its practice and procedure, under the provisions of the Civil Procedure Act 2005 and the Uniform Civil Procedure Rules 2005. The particular effect, in relation to the power to order security for costs, is to omit the power under s 69(3) of the Land and Environment Court Act 1979 and replace it with the power under Pt 42.21 of the Uniform Civil Procedure Rules 2005. Cognate amendments to the Uniform Civil Procedure Rules 2005 and the Land and Environment Court Rules 1996 will be made and will come into force at the same time as the Courts Legislation Amendment Act 2007. The power under the adopted former Pt 53 r 2(1) of the Supreme Court Rules will be removed. The power under the Corporations Act 2001 will remain unaffected.

46 Section 69(3) of the Land and Environment Court Act is a wide power and is not to be read down or construed in such a way as to conclude that the Land and Environment Court has no power to order security for costs against an impecunious person, whether natural or corporate: Melville v Craig Nowlan & Associates Pty Ltd (2001) 54 NSWLR 82 at 87, 101, 111-112 and 119. Section 69(3) was enacted in the knowledge of the traditional rule that impecuniosity of a plaintiff is not a sole basis for ordering security for costs. When power was given under Corporations legislation to courts to order security for costs against impecunious corporations, the effect was to deny to them the traditional rule that applied to natural persons: Harpur v Ariadne Australia Ltd [1984] 2 Qd R 523 at 527. In Melville v Craig Nowlan & Associates Pty Ltd (2001) 54 NSWLR 82, Heydon JA referred to this fact and held:

“By parity of reasoning, when legislation such as s 69(3) uses general language, not limited by reference to impecunious corporations and without any exception in favour of impecunious natural persons, it is open to conclude that the ‘ancient rule’ [that the impecuniosity of the plaintiff should not deny him his day in court] was not intended to survive”: at 101 [80]

47 In addition to the power in s 69(3) of the Land and Environment Court Act, the Court currently has power to order security for costs under Pt 53 r 2(1) of the Supreme Court Rules adopted by Pt 6, r 1 of the Land and Environment Court Rules 1996. That rule provides:

“2 (1) Where, in any proceedings, it appears to the Court on the application of a defendant -
(a) that a plaintiff is ordinarily resident outside the State;
(b) that a plaintiff is suing, not for his own benefit, but for the benefit of some other person and there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so;
(c) subject to subrule (2), the address of the plaintiff is not stated or is mis-stated in his originating process;
(d) that a plaintiff has changed his address after the commencement of the proceedings with a view to avoiding the consequences of the proceedings; or
(e) that there is reason to believe that a plaintiff being a body corporate will be unable to pay the costs of the defendant if ordered to do so;
the Court may order that plaintiff to give such security as the Court thinks fit for the costs of the defendant of and incidental to the proceedings and that the proceedings be stayed until the order is given”.

48 The Council relies on paragraphs (b) and (e) of this rule.

49 Paragraph (b) addresses the type of deception where a plaintiff is a “stalking horse to enable someone else to evade personal responsibility” for the consequences of the proceedings: Cameron’s Unit Services Pty Limited v Kevin R Whelpton & Associates (Australia) Pty Ltd (1986) 13 FCR 46 at 53. The rule requires that the question of benefit be addressed in two ways: first, is the plaintiff suing not for his own benefit and, secondly, is instead the plaintiff suing for the benefit of some other person? Proof of one does not necessarily establish the other. The rule requires both to be established: see Andrews v Caltex Oil (Australia) Pty Ltd (1982) 40 ALR 305 at 309 and Upton v T V W Enterprises Ltd (1984) 57 ALR 361 at 362-363.

50 Paragraph (e) is relevant in this case because the applicant is a corporation.

51 Thirdly, because the applicant is a corporation, the Court may also exercise the power to order security for costs under s 1335(1) of the Corporations Act 2001 which provides:

“Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given”.

52 This power under the Corporations Act 2001 is in addition to the Court’s power under its enabling statute and under the Rules to order that security for costs be given: see s 69(7) of the Land and Environment Court Act which states that the provisions of s 69 relating to security do not affect the operation of provisions under any other Act in relation to furnishing of security.

53 In Southern Cross Exploration NL v Fire and All Risks Insurance Co Ltd (1985) 1 NSWLR 114, Waddell J held that a court needs to decide two questions in determining whether to exercise the power under the predecessor provision under the Companies (New South Wales) Code:

“The first may be described as a threshold question. It is, whether, having regard to the whole of the evidence before the Court, there is credible testimony by which it appears that there is reason to believe that the plaintiffs will be unable to pay the costs of the defendants if successful in their defence. If this question is answered, yes, the second question arises which is whether, in the exercise of the discretion given to the court by the subsection, the relief sought should be granted wholly or in part or should be refused”: at 116. See also Interchase Ltd (in liq) v Colliers Jardine (Qld) Pty Ltd (In Liq) (1995) 17 ACSR 447; 13 ACLC 1,105.

54 In relation to the threshold question, the inability of the corporate plaintiff to pay costs must be established by credible testimony. Mere speculation as to the solvency of the company will not be a sufficient ground for the exercise of the court’s discretion to make an order for security: Warren Mitchell Ltd v Australian Maritime Officers’ Union (1993) 12 ACSR 1; 11 ACLC 1, 238.

55 In relation to the second question, the discretion, a court asked to order security for costs should not approach the application with any predisposition in favour of the defendant or the plaintiff. In K P Cable Investments Pty Limited v Meltglow Pty Ltd (1995) 56 FCR 189 at 196, Beazley J stated:

“The law is now settled that the discretion to order security for costs is unfettered and should be exercised having regard to all the circumstances of the case without any predisposition in favour of the award of security”.

56 Although the discretion is unfettered, the courts have nevertheless given some guidance as to the factors a court should consider when exercising the discretion. In K P Cable Investments Pty Limited v Meltglow Pty Ltd (1995) 56 FCR 189 at 197-198, Beazley J stated the following guidelines in relation to the discretionary power under the Corporations Act:

1. Applications for security for costs should be brought promptly;

2. The strength and bona fides of the applicant’s case are relevant considerations;

3. Whether the applicant’s impecuniosity is caused by the respondent’s conduct the subject of the claim;

4. Whether the respondent’s application for security is oppressive, in the sense that it is being used merely to deny an impecunious applicant a right to litigate;

5. Whether there are any persons standing behind the company who are likely to benefit from the litigation and who are willing to provide the necessary security;

6. Whether persons standing behind the company have offered any personal undertaking to be liable for the costs and if so, the form of any undertaking;

7. Security will only ordinarily be ordered against a party who is in substance a plaintiff, and an order ought not to be made against parties who are defending themselves and thus forced to litigate: see also Idoport Pty Ltd v NAB Ltd [2001] NSWSC 744.

57 The Council tendered a bundle of documents produced by the applicant in response to a notice to produce relating to the financial affairs of the applicant (Exhibit 2). These included trading, profit and loss statements and balance sheets for the last five years, as well as bank statements. The applicant was given an opportunity, by an adjournment of the hearing, to obtain and tender any further documents it wished to rely upon in relation to its financial affairs. The applicant tendered its own bundle of documents. However, these were essentially the same bank statements that had been tendered by the Council but now revealing words that were previously whited out (Exhibit G). The applicant did not tender any different financial statements.

58 The trading, profit and loss statement for the year ended 30 June 2007 shows that the applicant made an accumulated loss of $668,153.14. This loss had increased each year from 2002. The losses of the applicant for the year ending 30 June 2002 to date are as follows: $68,080.41 (2002); $83,810.59 (2003); $92,237.31 (2004); $237,741.81 (2005); $428,116.67 (2006); and $668,153.14 (2007).

59 The balance sheet of the applicant as at 30 June 2007 reveals that it has total assets of $3,422.56, divided as current assets (cash and receivables) of $1,309.83 and non current assets (property, plant and equipment and intangibles) of $2,112.73; total liabilities of $671,571.70, divided as total current liabilities (creditors and borrowings) of $151.00 and total noncurrent liabilities (creditors and borrowings) of $671,420.70; and the equity of only $4, being two ordinary shares of $1, one A class share of $1 and one B class share of $1.

60 The applicant did not adduce any evidence to establish that the corporation’s parlous financial position is different or explicable.

61 The ASIC company extract for Motorplex Australia Pty Limited, the applicant, reveals that the shares are held beneficially by Peter and Wendy Lee. They are also the directors.

62 The land the subject of the development application is owned by the M G Car Club Newcastle Inc. The applicant tendered a Deed of Agreement for Lease and Development between the M G Car Club Newcastle Inc and Motorplex Australia Pty Limited dated April 2001. That Deed provided for the applicant to make application for development consent in accordance with plans and specifications approved by the M G Car Club and to carry out the development in accordance with the consent. Upon satisfaction of certain preconditions, the lease of the land would become effective. The applicant was unable to obtain development consent in the time required under the Deed and accordingly the Deed lapsed.

63 The applicant has tendered letters from the M G Car Club, the latest of which was dated 9 November 2007, expressing support for the applicant’s development application. The letter dated 9 November 2007 provides:

“The committee of our Club, with the backing of our 500 members, has reaffirmed the continuing support of your company’s ongoing Court appeal, in the Land and Environment Court NSW against the refusal, by the Port Stephens Council, of your Development Application for the upgrade and extension of the Motor Sport Complex at the Ringwood Park, north of Raymond Terrace.
As has previously been indicated, we assure you that we will continue to honour the original Deed of Agreement until a decision has been made by the Land and Environment Court.
We make this commitment as we feel that the Port Stephens Council has without substance delayed the process since the outset. Once more, best wishes with this endeavour and we feel that if justice and fairness prevails, you will be successful in the foreseeable future.”

64 The Council submits that the financial information tendered is credible testimony establishing that the applicant will be unable to pay the costs of the Council if an order is made against the applicant in favour of the Council. The Council also submits that the applicant is suing, not for its own benefit, but rather for the benefit of other persons. The other persons are, firstly, the shareholders and directors Peter and Wendy Lee and secondly, the M G Car Club and its 500 members.

65 The Council adduced evidence from its solicitor that the Council’s costs up to 3 July 2007 have amounted to a total of $492,762.71, with $7,900 being spent on traffic experts, and that the estimated future costs if the proceedings continue will total $130,500.

66 The applicant, as I have noted, did not contest the evidence that established that the applicant corporation is impecunious. The applicant nevertheless submitted that many of the factors referred to in K P Cable Investments Pty Limited v Meltglow Pty Ltd (1995) 56 FCR 189 at 197-198 were relevant and supported not ordering security for costs. The applicant submitted: “the application for security for costs should have been sought at the outset and not at the ‘heel of the hunt’, the applicant’s case is not without merit and further, the respondent’s application is oppressive for the amount and purpose sought”.

67 I have determined that an order for security for costs should not be made, either in respect of costs which have already been incurred by the Council, or in respect of future costs.

68 In relation to the costs that have already been incurred, my determination that there should be an order that the applicant pay the Council’s costs of and occasioned by the amendment to the development application and the Class 1 application and that the Council should have leave to proceed to an assessment forthwith adequately protects the Council’s interests in relation to costs already incurred.

69 In relation to future costs, although I am satisfied that there is credible evidence that the application corporation is impecunious, other factors tend against ordering security for costs. I am not satisfied that the applicant is bringing the proceedings, not for its own benefit, but for the benefit of other persons. The applicant corporation, if it obtains a development consent could re-enter negotiations with the M G Car Club to enter into a new deed of agreement and a lease which would enable it to carry out the development and profit therefrom. It is true that the shareholders and directors of the applicant corporation as well as the M G Car Club and its 500 members will benefit from the grant of the consent and the carrying out of any development pursuant to such consent. However, as noted earlier, it is not sufficient to show that other persons may benefit from the proceedings brought by the applicant; it is also necessary to establish that the applicant would not benefit. I am not satisfied that the Council has established this fact.

70 Furthermore, I consider that discretionary factors mitigate against ordering security for costs. In particular, there has been a considerable delay in bringing the application for security for costs; there has not been an adequate explanation from the Council for the delay; the making of an order that the applicant provide security for costs in addition to orders that the applicant pay the costs of and occasioned by the amendment and that the Council have leave to proceed forthwith to an assessment of those costs, may be oppressive and stifle the applicant’s Class 1 application in the Court; and the amended development application and Class 1 application upon which the applicant now relies is bona fides and based on expert advice given to the applicant. In these circumstances, the Court should not order the applicant to provide security for any costs that might be ordered in the future against the applicant in favour of the Council.

71 I note that it is by no means certain that the Council will receive an order for costs at the conclusion of the proceedings in its favour even if the applicant is unsuccessful in its Class 1 application. The proceedings fall within Class 1 of the Court’s jurisdiction and are governed currently by Pt 16 r 4(2) of the Land and Environment Court Rules 1996 which provides that no order for the payment of costs will be made in such proceedings unless the Court considers that the making of a costs order is, in the circumstances of the particular case, fair and reasonable. The starting statutory presumption is, therefore, that there is no order for costs unless the Court forms the opinion that it is fair and reasonable in the particular circumstances of the case to do so. As to the approach to determining whether it is fair and reasonable in a particular case, see the Court of Appeal’s recent decision in Port Stephens Council v Sansom [2007] NSWCA 299 (25 October 2007).

72 In this regard, these proceedings differ from traditional litigation governed by the ordinary rule that costs follow the event. Security for costs may be ordered against a plaintiff in traditional litigation in the knowledge that if the plaintiff is unsuccessful, ordinarily, the plaintiff would be ordered to pay the successful defendant’s costs. In contrast, in proceedings in Class 1 of the Court’s jurisdiction, governed by Pt 16 r 4(2) of the Land and Environment Court Rules 1996, an unsuccessful applicant will not be ordered to pay the successful respondent’s costs unless the Court forms the opinion that it is fair and reasonable to do so in the particular circumstances of the case.

Costs of the respective motions

73 The applicant has been successful in its motion to seek leave to amend its development application and Class 1 application. However, the Court has determined that such leave should only be granted on terms, including that the applicant pay the Council’s costs of and occasioned by the amendment. The Council has thus been successful in part in its application seeking an order for costs. The Council has also been successful in its application for leave to proceed forthwith to an assessment of these costs. The Council has been unsuccessful in its application to have the proceedings dismissed with costs and for the applicant to provide security for costs.

74 On balance, I consider that the Council has been successful and should be entitled to its costs of the respective motions.

Orders

75 The Court orders:

1. Leave is granted to the applicant to amend the development application and the Class 1 application to rely on the following plans:

(a) Further Amended Site Plan by Lakesedge Engineering Services Pty Ltd, drawing no 1286-100AB, A1, filed in Court on 12 November 2007;
(b) Conacher Travers, Fig 1 - Concept Landscape Plan, drawing no 6048, Amendment A, dated 9 November 2007, filed in Court on 12 November 2007;
(c) Earthworks and Stormwater Management Plan by Cardno Stanwill, drawing no 6066-SK 01, Revision F, filed 9 November 2007 (which would need amendment to accord with the Lakesedge Engineering plan filed 12 November 2007);
(d) Detail of typical acoustic barriers filed 9 November 2007 (which would need amendment to accord with the Lakesedge Engineering plan filed 12 November 2007); and
(e) Figure 1 – EEC Drag Strip by Conacher Travers dated 22 May 2007 (which would need amendment to accord with the Lakesedge Engineering plan filed 12 November 2007).


2. No further amendments of the development application will be allowed without express leave of Preston CJ or other Judge if he is unavailable. Such leave is to be sought by way of Notice of Motion together with supporting Affidavit in accordance with paragraph 29 of the Practice Note - Class 1 Development Applications.

3. The applicant is to pay the Council’s costs of and occasioned by the amendment of the development application and the Class 1 application.

4. The applicant is to pay the Council’s costs of the Council’s notice of motion dated 31 July 2007 and the applicant’s notice of motion dated 2 July 2007.

5. Leave is granted to the Council to proceed to an assessment of the costs ordered in Order 3 and Order 4 forthwith.

6. Direct the applicant to file and serve any amended species impact statement by 7 December 2007.

7. Direct the Council to file an amended statement of facts and contentions by 14 December 2007.

8. Direct the applicant to file all evidence upon which it seeks to rely by 11 January 2008.

9. Direct the Council to file all evidence upon which it seeks to rely by 1 February 2008.

10. List the matter for directions hearing before the Registrar on 28 November 2007 for the purpose of fixing a hearing date and making such other directions for the preparation of the hearing as the Registrar considers appropriate, including varying the timetable in directions 6 to 9 above.

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