Newcastle City Council v Wieland

[2009] NSWCA 113

Reported Decision: 74 NSWLR 173

New South Wales

Court of Appeal

CITATION:	Newcastle City Council v Paul Wieland [2009] NSWCA 113
HEARING DATE(S):	30 April 2009
JUDGMENT DATE:	19 May 2009
JUDGMENT OF:	Beazley JA at 1; Hodgson JA at 2; Ipp JA at 6
DECISION:	The appeal be dismissed with costs.
CATCHWORDS:	PROCEDURE - costs - agreements as to costs - whether costs of the proceedings includes costs of mediation - application of Civil Procedure Act 2005 - s 28
LEGISLATION CITED:	Civil Procedure Act 2005 Rules of the Supreme Court 1971 (WA) Uniform Civil Procedure Rules 2005 Uniform Civil Procedure Rules 2005 (Qld)
CATEGORY:	Principal judgment
CASES CITED:	Charlick Trading Pty Ltd v Australian National Railways Commissions [2001] FCA 629 Higgins v Nicol (No 2) (1972) 21 FLR 34 Mackay v Hamilton [1905] VLR 457 Mead & Anor v Allianz Australia Insurance Ltd [2007] NSWSC 500
PARTIES:	Newcastle City Council (First Appellant) HP Planning Services Pty Ltd (Second Appellant) Paul Wieland (First Respondent) Janine Wieland (Second Respondent)
FILE NUMBER(S):	CA 40082/08
COUNSEL:	P R Cummings (Appellants) T A Alexis SC; D H Mitchell (Respondents)
SOLICITORS:	Rockliffs (Appellants) Moray & Agnew Solictors (First respondent) Colin Biggers & Paisley (Second Respondent)

LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	1510/06
LOWER COURT JUDICIAL OFFICER:	Sidis DCJ
LOWER COURT DATE OF DECISION:	5 February 2008
LOWER COURT MEDIUM NEUTRAL CITATION:	Wieland v Newcastle City Council [2008] NSWDC 4

CA 40082/08
DC 1510/06

BEAZLEY JA
HODGSON JA
IPP JA

19 MAY 2009

Newcastle City Council & Anor v Paul Wieland & Anor

Judgment

1 BEAZLEY JA: I agree with the reasons of Ipp JA and the orders he proposes. I also agree with the additional comments of Hodgson JA.

2 HODGSON JA: I agree with the order proposed by Ipp JA and, subject to the following comments, I agree with his reasons.

3 In my opinion, if there is an express agreement between the parties as to how the costs of a mediation ordered under Pt 4 of the Civil Procedure Act 2005 (CPA) are to be paid, that will be given effect to under s 28(b) of the CPA unless displaced by an order under s 28(a). There may be cases in which a question of construction would arise as to whether an order as to payment of “the costs of the proceedings” displaces a pre-existing agreement.

4 That is, there may be cases where, even though the costs of the proceedings will generally include the costs of a court-ordered mediation under Pt 4 of the CPA, a pre-existing agreement so strongly conveys that the costs of the mediation are to be treated entirely separately from other costs of the proceedings as to justify a conclusion that a later consent order (or possibly even a judge-imposed order where the judge knows of the pre-existing agreement) concerning the costs of the proceedings was not intended to include the costs of the mediation. It is not necessary to express a view as to whether or not that was the case in Mead & Anor v Allianz Australia Insurance Ltd [2007] NSWSC 500.

5 However, in my opinion, if it is intended that an order for the costs of the proceedings is not to extend to the costs of a court-ordered mediation, this should be made clear in the order.

6 IPP JA

The issue on appeal

7 This appeal raises the question whether the expression, “costs of the proceedings” includes the costs of mediation.

8 The question arises in the following way. By consent orders made in the District Court, the first appellant (the Council) and the second appellant (“the architects”) were ordered, each, to pay the “costs of the proceedings”. The appellants contend that, because that expression does not encompass the costs of mediation, they do not have to pay the costs of mediation that the respondents incurred.

The mediation occurs

9 The respondents are the owners of a property at Wallsend, New South Wales. In May 2003 a retaining wall between that property and a neighbouring property failed. The respondents sued the Council and the architects (the latter being responsible for the design of the retaining wall) for the damages they suffered in consequence.

10 The trial commenced on 13 November 2006 before Sidis DCJ. On 17 November the matter was adjourned. Thereafter the parties agreed to mediate their dispute. On 4 December Sidis DCJ made orders that the question of mediation arrangements be left to the parties.

11 The parties agreed that the mediator should be McGrowdie ADCJ. In order to obtain his Honour’s participation as a mediator, the parties needed to obtain a court order for mediation. Such an order was made by consent on 11 January 2007 by the Principal Registrar of the District Court.

12 The mediation was held at the District Court premises on 29 January with McGrowdie ADCJ as mediator. The matter was not then settled. The parties did, however, settle their dispute shortly after the mediation, namely, on 8 February 2007. On 12 February (when the trial resumed), Sidis DCJ made consent orders in consequence of the settlement. The consent orders provided:

“[The Council] pay one half of the plaintiffs’ costs of the proceedings, as agreed or assessed.”

And:

“[The Architects] pay one half of the plaintiffs’ costs of the proceedings up to and including 8 February; and thereafter all of the plaintiff’s costs, as agreed or assessed.”

13 Thus, by the consent orders, each appellant was required to pay one half of the respondents’ costs of the proceedings.

The dispute as to the costs of the mediation and the primary judge’s decision

14 Following the settlement, the parties failed to agree on the respondents’ costs of the proceedings. The respondents lodged a bill of costs in assessable form and a costs assessor was appointed. The appellants objected to the costs of the mediation that the respondents claimed in their bill of costs. They asserted that “[t]he parties did not agree that the costs of the mediation would be costs in the proceedings and there is no order of the Court directing that the defendants should be liable for those costs”.

15 The respondents thereupon brought proceedings for a declaration that the order for the “costs of the proceedings” included the costs of the mediation. Sidis DCJ upheld the respondents’ claim.

16 Her Honour said that she was supported in her conclusion by two factors. Firstly, she said that there was an initial agreement that the appellants would meet the respondents’ costs of the mediation and there was no evidence to suggest that this agreement was terminated when the mediation was conducted as a court ordered mediation. Secondly, her Honour noted that the mediation was “a matter that was discussed in the course of the proceedings before the court on several occasions before the mediation took place … . The mediation was conducted by a judicial officer pursuant to an order of the Registrar and it was conducted on the Court’s premises”. Her Honour held that the mediation was “clearly undertaken as part of the litigation process”.

17 Sidis DCJ varied the consent orders by inserting in them, at an appropriate point, the words “including the costs of the mediation proceedings before Acting Judge McGrowdie in January 2007 as agreed or assessed”.

18 The appellants appeal against her Honour’s decision.

A question of construction

19 It was common ground on appeal that her Honour erred in holding that there was an initial agreement that the appellants would meet the respondents’ costs of the mediation. This basis for upholding her Honour’s decision therefore falls away.

20 The question before this court is one of construction. The court is required to construe the parties’ agreement and the consent orders. In effect, it is only the expression “costs of the proceedings” that is relevant. The entire agreement was not reflected in the costs orders. The parties treated the costs orders as being the relevant part of their agreement and I shall follow suit.

21 Mr Cummings, of counsel, who appeared for the appellants, correctly conceded, “if this Court construes the term ‘costs of the proceedings’ as including … the party/party costs of the mediation, then … the appeal fails”.

22 Mr Alexis SC who, together with Mr Mitchell, appeared for the respondents, drew attention to the fact that, prior to the mediation, an insurer of one of the appellants offered to pay for the costs of the mediation before a private mediator. He submitted that this was an important surrounding circumstance bearing on the construction of the parties’ agreement and the consent orders. I do not accept that submission. Firstly, the offer is to be construed as relating only to the mediator’s fees. Secondly, as the offer was not accepted, it should be regarded as irrelevant. I would disregard the offer in construing the parties’ agreement and the consent orders.

23 Mr Alexis also submitted that the appellants knew, before the mediation, that the respondents were “impecunious”. He argued that this was a factor relevant to the construction of the consent orders. Again, I do not accept that submission. In the circumstances of this case, the impecuniosity of the respondents is not a factor from which a reliable inference can be drawn as to the parties’ intentions concerning liability for the costs of the mediation. It cannot be inferred that, because the appellants knew that the respondents were short of money, they (the appellants) would agree to bear their own costs of the mediation.

Mediation is part of the court’s proceedings

24 In construing the expression “costs of the proceedings,” regard must be had to the relevant statutory provisions.

25 The first step in the exercise of construction required is to determine whether mediation is part of the “proceedings”, that is, the legal proceedings in the District Court commenced by the respondents against the appellants for the damages that they incurred.

26 The mediation between the parties was ordered by the court in accordance with s 26 of the Civil Procedure Act 2005 (the CPA), which states:

“ 26 Referral by court

(cf Act No 52 1970, section 110K; Act No 9 1973, section 164A; Act No 11 1970, section 21L)

(1) If it considers the circumstances appropriate, the court may, by order, refer any proceedings before it, or part of any such proceedings, for mediation by a mediator, and may do so either with or without the consent of the parties to the proceedings concerned.
(2) The mediation is to be undertaken by a mediator agreed to by the parties or appointed by the court, who may (but need not be) a listed mediator.
(3) In this section, listed mediator means a mediator appointed in accordance with a practice note with respect to the nomination and appointment of persons to be mediators for the purposes of this Part.”

27 The terms “mediation” and “mediator” are defined by s 25 of the CPA. Section 25 provides that in Pt 4 of that Act (which comprises ss 25 to 34) “mediation means a structured negotiation process in which the mediator, as a neutral and independent party, assists the parties to a dispute to achieve their own resolution of the dispute”. “Mediator” is defined as “a person to whom the court has referred a matter for mediation”. As the District Court referred the matter for mediation, the mediation was a mediation defined by s 25 to which Pt 4 of the CPA applied.

28 As the mediation was a mediation under Pt 4, the other provisions of that part applied to it. These included the provision for duties of participation in good faith (s 27), the giving effect to mediated outcomes by court order (s 29), privilege (s 30), confidentiality (s 31), directions by the mediator (s 32) and the protection of the mediator from liability (s 33). A court appointed mediator, McGrowdie ADCJ, conducted the mediation, which was conducted under the auspices of the court.

29 In such circumstances, it is not possible to contend that the mediation did not form part of the court’s procedures. Mr Cummings, rightly, accepted that it was.

Are the costs of mediation part of the costs of the proceedings

30 Section 28 of the CPA deals specifically with the costs of mediations ordered under Pt 4. It provides:

“ 28 Costs of mediation

The costs of mediation, including the costs payable to the mediator, are payable:
(a) if the court makes an order as to the payment of those costs, by one or more of the parties in such manner as the order may specify, or
(b) in any other case, by the parties in such proportions as they may agree among themselves.”

31 Mr Cummings submitted that, by s 28, costs of mediation are only payable if they are ordered under s 28(a) or agreed under s 28(b). I did not understand Mr Alexis to dispute this proposition, which I think is correct. Mr Alexis submitted that the agreement of the appellants to pay the costs of the proceedings was an agreement within s 28(b). Accordingly, the dispute between the parties came down to whether the agreement to pay the costs of the proceedings included the costs of mediation.

32 Mr Cummings submitted that costs of mediation fell into a special category. He submitted that, while costs of mediation, in a broad sense, are costs of the proceedings, it does not follow that, when a court makes an order that a party pay the costs of the proceedings, or when parties agree to pay the costs of the proceedings, there is an understanding that those costs include the costs of mediation. He submitted that, if costs of mediation are payable, there must be an express order to that effect or the parties must expressly so agree.

33 This submission must be considered in the context of the court’s general power to award costs. That power is contained in s 98 of the Act, which states, relevantly:

“ 98 Courts powers as to costs
(cf Act No 52 1970, section 76; SCR Part 52A, rules 5, 6, 7 and 8; Act No 9 1973, section 148B; Act No 11 1970, section 34)
(1) Subject to rules of court and to this or any other Act:
(a) costs are in the discretion of the court, and
(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and
(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.
(2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court.
(3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings.
(4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to:
(a) costs up to, or from, a specified stage of the proceedings, or
(b) a specified proportion of the assessed costs, or
(c) specified gross sum instead of assessed costs, or
(d) sch proportion of the assessed costs as does not exceed a specified amount.
… .”

34 The term “costs” is broadly defined in s 3 of the CPA as follows:

“ costs , in relation to proceedings, means … costs payable in or in relation to the proceedings, and includes fees, disbursements, expenses and remuneration.”

The term “civil proceedings” is defined as “any proceedings other than criminal proceedings”.

35 These sections of the CPA are to be read with rule 42.7 of the Uniform Civil Procedure Rules 2005, which states:

“ 42.7 Interlocutory applications and reserved costs

(1) Unless the court orders otherwise, the costs of any application or other step in any proceedings, including:
(a) costs that are reserved, and
(b) costs in respect of any such application or step in respect of which no order as to costs is made,
are to be paid and otherwise dealt with in the same way as the general costs of the proceedings.
(2) Unless the court orders otherwise, costs referred to in subrule (1) do not become payable until the conclusion of the proceedings.”

36 The broad terms of UCPR r 42.7(1) must mean that a “step in any proceedings” includes mediation within the meaning of s 28. Thus, UCPR r 42.7, when read with s 98 of the CPA, includes a power to award the costs of mediation under s 28. That is to say, as ordinarily understood, the costs of proceedings under UCPR r 42.7 include the costs of mediation.

37 This does not mean that s 28 has no work to do, as Mr Cummings submitted would be the case on this construction. The work that it does is to define the circumstances under which costs of mediation are payable. Section 28, as I have observed, makes plain that, in the absence of an order or agreement, costs of mediation are not payable. This is to be contrasted with the position in certain other States such as Western Australia, where by O 29 r 3(ba) of the Rules of the Supreme Court 1971 (WA) “each party’s costs of and incidental to a mediation conference shall be the party’s costs in the cause” unless otherwise ordered or agreed to, and Queensland, where by r 351 of the Uniform Civil Procedure Rules 2005 (Qld) “each party's costs of and incidental to an ADR process not resulting in the full settlement of the dispute between the parties are the party's costs in the dispute” unless otherwise ordered by the court.

38 In my view, s 28 does not create a special category of costs, as Mr Cummings submitted. I do not think that the legislative scheme relating to costs admits of such a construction.

39 The appellant relied upon the decision of Bergin J in Mead & Anor v Allianz Australia Insurance Ltd [2007] NSWSC 500. In that case her Honour, for two reasons, declined to construe “cost of these proceedings” as including the costs of the mediation. First, her Honour found that such a construction would be inconsistent with the agreement to mediate that the parties in that case had made. Her Honour said that, when the parties entered into that agreement, “they regarded the mediation as a separate aspect of their litigious process; that is, they saw it as necessary to make a separate application for costs of the mediation” (at [13]). Secondly, her Honour was of the view that, as a matter of policy, it would not be appropriate to hold that “costs of the proceedings” included mediation costs in circumstances where there was a consensual order for mediation, a mediation agreement and subsequent compromise.

40 There is nothing in the agreement to mediate that the parties in the present case entered into that is to the same effect as that which obtained in Mead & Anor v Allianz Australia Insurance Ltd.

41 As to matters of policy, while I accept the force of Bergin J’s remarks, there are compelling policy reasons why costs of mediation should be included in the costs of the proceedings. These are discussed in two cases that I mention below.

42 In Higgins v Nicol (No 2) (1972) 21 FLR 34, Joske J observed at (57-58):

“I see no reason why [the costs of attempting to arrive at a compromise] should not be regarded as part of the course of the hearing and be allowed for on a party and party taxation just as much and in the same way as the calling and examination of witnesses is part of the course of the hearing and is allowed for on taxation. What is to happen when, as happened in this very case, suggestions for a settlement come from the court itself?”

43 Mansfield J in Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629 expressed the same notion (at [92]):

“I do not accept the proposition … that costs of negotiations to explore compromise of a claim should never be allowed on a party and party taxation. There is a substantial public interest, as well as private interest, in the resolution of disputes by negotiation or by mediation. It is not a common feature of litigious claims that the parties are required to consider, and often to participate in, pre-trial mediation. The Rules prescribe powers and procedures to that effect. Negotiation and mediation may resolve a dispute entirely. Apart from the benefit to the parties of such resolution, such an outcome saves the costs associated with the trial and releases judicial and court resources to deal with other matters. Negotiation and mediation often also partly resolve a dispute so as to enable the focus of the parties in litigation to be more confined, again with consequential savings of time and expense to the parties and to the benefit of the public. In my view, steps taken by the parties to confine the areas of their dispute will often be able to be categorised as necessary or proper for the attainment of justice. They will often facilitate the presentation of the case so as to enable a just result to be achieved in an expeditious and economic manner. Even if those processes do not in fact result in any consensual outcome, either totally or in relation to certain issues or matters which then do not require proof, it does not follow that the processes themselves were not necessary or proper for the purpose of [whether those costs are allowed on taxation].”

44 Mansfield J went on to say (at [93]):

“I do not consider that the line drawn by Holroyd J in Mackay v Hamilton [1905] VLR 457 at 460 - 461 between costs : “...incurred by a party for the simple purpose of making a settlement ... [and] costs incurred in fighting or prosecuting the action until from one cause or another it has to stop" is one which should continue to be rigidly given effect to. Indeed, his Honour recognised that costs incurred in seeking to procure a settlement may overlap with costs which would have been necessary for the prosecution of the action, and made allowance for that. But, in my view, in the light of the more modern approach to litigation discussed above, that sharply drawn line no longer exists.”

His Honour proceeded to order that the party liable for costs pay the costs involved in negotiating a settlement.

45 The remarks of Joske J in Higgins v Nicol (No 2) and Mansfield J in Charlick Trading Pty Ltd v Australian National Railways Commission expose the policy considerations that support the notion that the ordinary costs of the proceedings should include the costs of mediation.

46 In my opinion, the costs of the proceedings in the consent orders are to be construed as including the costs of mediation.

47 In my opinion, Sidis DCJ was correct in the conclusion to which she came.

48 I propose that the appeal be dismissed with costs.

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