Oaks Hotels and Resorts (NSW) No 2 Pty Ltd v Otrebski

[2015] NSWLEC 129

Land and Environment Court

New South Wales

Medium Neutral Citation:	Oaks Hotels & Resorts (NSW) No 2 Pty Ltd v Otrebski [2015] NSWLEC 129
Hearing dates:	13 August 2015
Date of orders:	13 August 2015
Decision date:	13 August 2015
Jurisdiction:	Class 4
Before:	Pepper J
Decision:	Application for costs dismissed.
Catchwords:	COSTS: application for respondents to pay applicant’s costs – no hearing on merits – as soon as respondents served with summons they agreed to relief – correspondence notifying respondents of commencement of proceedings if unlawful conduct did not cease sent to wrong address and not received – costs of costs application disproportionate to the costs of obtaining relief – sustainability of hearing on papers where contested issues of fact based on evidence not formally before the court – application for costs dismissed.
Legislation Cited:	Civil Procedure Act 2005, s 98
Cases Cited:
Texts Cited:
Category:	Costs
Parties:	Oaks Hotels No 2 & Resorts (Applicant) Andrew Otrebski (First Respondent) Grace Kurek (Second Respondent)
Representation:	Counsel: Mr C McFadzean, solicitor (Applicant) Mr B Gelonesi, solicitor (Respondents)   Solicitors: Swaab Attorneys (Applicant) GP Legal (Respondents)
File Number(s):	40933 of 2014

EX TEMPORE Judgment

Oaks Hotels Seek an Order for Costs

1. This application for costs by the applicant in Class 4 proceedings, Oaks Hotels & Resorts (NSW) No 2 Pty Ltd (“Oaks”), has had a brief, but unsatisfactory history.

2. On 12 November 2014, Oaks filed a summons effectively seeking injunctive relief (no declarations were sought) to stop the respondents, Mrs Grace Kurek and Mr Andrew Otrebski, from using a unit owned by them as residential accommodation absent development consent.

3. Upon being served with the summons in December 2014, the respondents immediately agreed to relief sought.

4. At this juncture, the cost to both parties of the litigation would have been minimal. However, not content with each party bearing their own costs, notwithstanding the immediate capitulation by the respondents upon being informed that proceedings had been commenced against them, Oaks decided to pursue the respondents for its costs.

5. Suffice it to say that after several appearances before the Court for directions, the filing of two affidavits and the filing of three sets of written submissions, the costs to the parties of preparing for, and proceeding with, the costs application have grossly and disproportionately exceeded the initial costs of obtaining the relief in the summons. This is a deplorable state of affairs, which ought neither be readily condoned nor facilitated by the Court.

6. Costs in Class 4 proceedings are governed by s 98 of the Civil Procedure Act 2005, which affords the Court a discretion as to whether or not to award them. Having said this, costs normally follow the event in this jurisdictional Class.

7. Oaks argued that because it was successful in obtaining the relief it sought in the summons, it had enjoyed success on the ‘event’, and therefore, was entitled to its costs.

8. Oaks relied upon an affidavit of Mr Nicholas Mark (a solicitor employed by Oaks’ legal representative) affirmed 13 August 2015, to submit that a number of letters had been sent to the respondents notifying them of the alleged unlawful development being carried on at the unit and warning them that if the use of the apartment as a residential premises did not cease, that legal proceedings would be commenced against them. No response to the correspondence was, however, forthcoming, and hence, proceedings were instituted.

9. By contrast, the respondents relied upon an affidavit sworn by Ms Kurek on 15 May 2015, to submit that:

1. first, the correspondence referred to above had been sent to the wrong address and that they did not realise that Oaks had commenced legal proceedings against them in the Court until early December 2014; and that

2. second, partly based on advice from the local council, and the developer from whom they purchased the unit, they believed that they had approval to use the apartment in the manner in which they did, or at the very least, that such a use was not unlawful, and that, in any event, they had been leasing the apartment out only on a short term basis, that is to say, three months, which was consistent with the lawful use contended for by Oaks.

10. No objections were taken to either affidavit and neither deponent was required for cross-examination.

The Costs Proceedings Before the Court

11. The parties initially requested that the costs application be dealt with on the papers. The possible availability of this process was offered by Craig J on 20 March 2015 at a directions hearing before his Honour. It appears that the parties did not disclose to his Honour on that occasion the spectre of a dispute as to the facts governing the determination of the costs hearing and that the parties would be filing contested affidavit evidence in support of their respective positions.

12. In any event, to deal with the matter on the papers absent a hearing where there is a dispute as to the facts founding the claim for costs is wholly inappropriate.

13. For this reason, the Court informed the parties by e-Court communication on two separate occasions (6 and 7 August 2015) that the matter would have to be heard in open Court.

14. However, at 10am this morning when the matter was scheduled to commence, there was no appearance for or by the respondents. Telephonic communication between the solicitor for Oaks and the solicitor for the respondents revealed that the respondents believed that the matter was being dealt with on the papers, with no appearance by them necessary.

15. In the result, the proceedings were adjourned until noon to allow the respondents to appear. When they did, their solicitor extraordinarily explained that he had been “too busy” to read his email and therefore, was not aware of the second e-Court communication, and thus, was not aware that the matter was being dealt with today in open court.

Each Party is to Bear Their Own Costs

16. As stated above, the gravamen of the respondents’ submissions is that had they been informed earlier of the issue with their use of the unit they would have ceased the impugned use immediately – as they did upon being served with the summons – and therefore, there would have been no need to commence legal proceedings and incur legal costs. Furthermore, they were not aware that their use of the apartment for residential purposes, rather than as serviced apartments, was unlawful. The council, for example, had never indicated this use was verboten to them in their dealing with it both before and after the institution of proceedings.

17. Oaks tried to courageously argue that because the respondents had not expressly denied receiving the correspondence from them alerting them to the unlawful use, that the Court should infer that the letters had in fact been received by them. This submission was put in the face of a powerful inference to the contrary drawn directly from the unchallenged evidence of Ms Kurek referred to above, namely, that because the correspondence was sent to the wrong address it was never received by them.

18. I am prepared to readily draw this latter inference given the uncontested evidence of Ms Kurek to this effect. Accordingly, the first time that the respondents were aware of the issue giving rise to the litigation, and its concomitant legal costs, was when they received a copy of the summons.

19. Oaks also submitted that the Court should infer, based on some equivocal correspondence to the respondents from the developer and the property manager, and a conversation that had taken place between Ms Kurek and a council officer over four years ago (the contents of which were vague), that the respondents were aware of the use to which the apartment could be put, viz, as a serviced apartment, and not as a residential apartment.

20. Even if this inference were available, which it was not on the material before the Court, not only should it have been put to Ms Kurek in cross-examination as a matter of fairness, given its tenuous basis, the inference rose no higher than an awareness by the respondents of a possible lawful use of the unit, and not that the respondents were aware that their current use of the apartment as residential premises was unlawful.

21. Indeed, there has been no finding by way of declaration, or otherwise, that the use complained of was actually unlawful. And to the contrary, the affidavit evidence of Ms Kurek strongly suggests that the council was of the view that the respondents were not in breach of any law.

22. Thus, in circumstances where the respondents were not aware that they were potentially acting unlawfully in their use of the unit, where the first time the respondents were made aware that there was a problem with their use was upon receipt of the summons, where the respondents immediately ceased the allegedly unlawful use, and where it has not been demonstrated that they have in fact contravened any law, I am disinclined to award costs to Oaks.

23. I am reinforced in this conclusion by the perplexing decision by Oaks to insist upon pressing it’s application for costs even after it had discovered that it had sent the critical correspondence to the wrong address.

24. Strictly speaking, Oaks is correct in its submission that it was not, as a matter of law, obliged to notify the respondents of its intention to enforce its rights under the Environmental Planning and Assessment Act 1979. But to fail to do so, even if accidental as in this case, does have a significant bearing on the Court’s discretion to award costs.

25. As access to litigation becomes increasingly the exclusive domain of those with deep pockets due to its prohibitive cost, parties are under, at the very least, a moral obligation to avoid the formal resolution of conflicts by curial means whenever, and wherever, possible. Failure to do so may result in any fruits of victory being devoured by legal fees because a court is unwilling, in the proper exercise of its discretion, to award costs in the victor’s favour. It is at least arguable that a failure to make genuine attempts to resolve legal disputes prior to commencing proceedings amounts to disentitling conduct by a party.

26. Finally, and for the sake of completeness, it is necessary for the Court to deal with the respondents’ application that Oaks pay their costs of the proceedings, an application made for the first time during the hearing.

27. In addition to the matters relied upon by the respondents adumbrated above, the respondents submitted that legal costs had been unnecessarily incurred because instead of filing the summons in the Court, Oaks could, and should, have complained to the council, which, if the respondents had truly been engaged in unlawful development, the council would have endeavoured to take steps to cause the unlawful use to cease. Although from the bar table Oaks stated that it had attempted to alert the council to the unlawful use and the council had declined to act, this evidence was not contained in Mr Mark’s affidavit.

28. Oaks resisted the respondents’ application arguing principally that it had been successful in obtaining relief and that the respondents had accepted that they had been acting unlawfully. While the former submission cannot be cavilled with, the latter can. All that the respondents did by agreeing to the relief sought in the summons was to cease using the unit as described. It did not amount to an admission of any unlawful behaviour by them.

29. On balance, the fact that Oaks made attempts, albeit wholly ineffectual, to contact the respondents prior to initiating legal proceedings, means that it would be an inappropriate exercise of my discretion to award costs in the respondents’ favour given their acquiescence to the relief sought.

30. As for the costs of today’s application, due to the conduct of the respondents’ solicitor described above, today’s hearing has been unnecessarily protracted. However, were it not for Oaks act in mistakenly sending correspondence to the wrong address, it is highly likely that, consistent with the respondents’ behaviour to date, no such costs application would have been necessary in the first place because there would have been no necessity to commence proceedings in this Court.

31. It is therefore appropriate that in addition to each party bearing their own costs of the proceedings, that each party bear their own costs of today’s application.

Orders

32. Oaks’ application that the respondents pay its costs of the proceedings is dismissed, with no order as to costs.

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Decision last updated: 14 August 2015