TL and TL Tradings Pty Ltd v Parramatta City Council

[2017] NSWLEC 142

Land and Environment Court

New South Wales

Medium Neutral Citation:	TL & TL Tradings Pty Ltd v Parramatta City Council [2017] NSWLEC 142
Hearing dates:	7 September and 17 October 2017
Date of orders:	26 October 2017
Decision date:	26 October 2017
Jurisdiction:	Class 1
Before:	Moore J
Decision:	1   The Applicant’s costs application dismissed; and 2   The Applicant is ordered to pay the Respondent’s costs of the Applicant’s costs application up to the close of business on 6 September 2017 as agreed or assessed and on an indemnity basis thereafter.
Catchwords:	COSTS - Class 1 merit appeal concerning refused application to modify a development consent for a brothel - modification sought a further trial period - further trial opposed by the Respondent - further trial period granted but for a shorter period sought - further trial period proposed to be subject to a new Plan of Management - new Plan of Management significantly inadequate and major revision required - Applicant did not succeed on remaining contested issues even after concessions made about revisions to the Plan of Management - approval only possible by the Court taking an “amber light” approach to the outcomes - the Applicant could not be regarded as achieving the outcomes sought in its modification application - the Applicant would not have succeeded on a “costs follow the event” basis had that been the required approach - therefore no basis possibly available to consider awarding costs when considered on a “fair and reasonable” basis as required in Class 1 proceedings - costs application dismissed. COSTS - Calderbank offer made by Respondent - offer that there be no order for costs if Applicant withdrew the costs motion - offer not accepted - offer involved a genuine compromise by the offeror - offeror set out details of the basis upon which it said the offeree would be unsuccessful in the costs proceedings - offeree unsuccessful on the bases advance by the offeror - unreasonable of the offeree not to accept the offer - appropriate to order the Applicant to pay the Respondent’s costs on an indemnity basis from the time of expiry of the offer.
Legislation Cited:	Civil Procedure Act 2005, s 98(3) Environmental Planning and Assessment Act 1979, s 79C(1) Land and Environment Court Rules 2007, Pt 3 r 7 Uniform Civil Procedure Rules 2005, Pt 36 r 36.15 Parramatta Development Control Plan 2011, cl 5.6 Parramatta Local Environmental Plan 2011, cl 6.9
Cases Cited:	1643 Pittwater Road Pty Ltd v Pittwater Council [2004] NSWLEC 685 Ali v Liverpool City Council [2009] NSWLEC 1327 Amazonia Hotels Pty Ltd v Council of the City of Sydney [2014] NSWLEC 1247 Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No2) [2008] FCAFC 107 Calderbank v Calderbank [1975] 3 All ER 333 Grant v Kiama Municipal Council [2006] NSWLEC 70 I V Trading Pty Limited v Parramatta City Council [2010] NSWLEC 1170 James v Surf Road Nominees Pty Ltd (No2) [2005] NSWCA 296 Jonah Pty Limited v Pittwater Council (2006) 144 LGERA 408; [2006] NSWLEC 99 Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 Renaldo Plus 3 Pty Limited v Hurstville City Council [2005] NSWLEC 315 Roads and Traffic Authority v McGregor & Anor (No2) [2005] NSWCA 453 Sze Tu v Lowe (No 2) [2015] NSWCA 91 TL & TL Tradings Pty Ltd v Parramatta City Council (No 2) [2016] NSWLEC 150
Category:	Costs
Parties:	TL & TL Tradings Pty Ltd (Applicant) Parramatta City Council (Respondent)
Representation:	Counsel: Mr A Gadiel, solicitor (Applicant) Dr J Smith, barrister (Respondent)   Solicitors: Mills Oakley (Applicant) Matthews Folbigg Pty Ltd (Respondent)
File Number(s):	151482 of 2016
Publication restriction:	No

TABLE OF CONTENTS

Introduction

The modification application to the Council

The three Class 1 proceedings

The first Class 1 appeal

The second Class 1 appeal

The scope of the modification application

The Company’s costs application

The Council’s reasons for opposition to the costs application

The jurisdictional issue

The costs hearing process

The basis for costs orders in Class 1 proceedings

Introduction

The Company’s costs case

Introduction

The material dealt with for the Company on day 1 of the costs hearing

Introduction

The Council’s evidence at the substantive hearing

The Company’s town planning evidence at the substantive hearing

The transcript of the substantive hearing

Day two of the costs hearing

The need for a Plan of Management

Evolution of the Plan of Management

Introduction

The substantive costs application

Introduction

The outcome of the contested merit hearing

Costs of the costs application

Conclusion

Orders

Judgment

Introduction

1. In 2010, development consent was granted to permit premises in Sutherland Street, Clyde to be used as a brothel. That approval was granted by Brown C (I V Trading Pty Limited v Parramatta City Council [2010] NSWLEC 1170). One of the elements of that approval was that the use was the subject to a three-year trial period after the commencement of the use.

2. During that trial period, in mid-2014, the brothel was raided by police and a number of people, including the brothel's then manager, were arrested for dealing drugs, including methamphetamine (ice).

3. In October 2014, TL&TL Tradings Pty Ltd (the Company), the Applicant in these costs proceedings and in the earlier Class 1 merit proceedings before me, took over management of the brothel. Mr Tony Lin is the guiding mind behind the Company.

The modification application to the Council

4. Prior to the end of the three-year trial period being undertaken pursuant to the 2010 development consent, an application was submitted to Parramatta City Council (the Council) by the Company seeking to modify the original development consent by extending its operation for a further three‑year trial period. That modification application was refused by the Council.

5. The original development consent permitted the brothel to continue trading until any further application had been finalised by the Council but it did not provide for any right to continue trading after the Council's determination (if it was refusal) should a Class 1 appeal have been filed in the Court against that refusal.

6. However, Mr Lin continued to trade the brothel after the Council's refusal. By doing so, he was trading without development consent and the Council issued an order requiring him to cease trading.

The three Class 1 proceedings

7. The Company commenced three sets of proceedings in the Court. The first was an appeal against the order to cease trading. Those proceedings were subsequently discontinued.

8. However, the Company commenced the two other Class 1 appeals. One sought consent to permit the brothel to recommence trading on a temporary basis - the first Class 1 appeal (trading having ceased in response to the Council's order). The other was against the refusal to permit the further three‑year trial period for which application had been made - the second Class 1 appeal.

The first Class 1 appeal

9. On 24 May 2016, the first of the remaining Class 1 appeals commenced to be heard by me. Mr Gadiel, solicitor, appeared for the Company and Dr Smith, barrister, appeared for the Council. The matter commenced in Court. During the course of the morning hearing, it became obvious to me that a site inspection was necessary and the hearing was adjourned to permit that inspection to happen that afternoon.

10. As the second Class 1 appeal had been set down for a conciliation conference in July 2016, I adjourned, after the site inspection, the temporary trading application until 2 August 2016 as, if the conciliation process in the second Class 1 appeal was successful, determination of the short-term trading application would be unnecessary.

The second Class 1 appeal

11. The conciliation conference was unsuccessful. I arranged for those proceedings to be set down before me on 2 August 2016, the same date as the temporary trading application was resuming.

12. On that occasion, I indicated to Mr Gadiel and Dr Smith why I considered it to be fundamentally inappropriate for me to determine the temporary trading application and then put a Commissioner in the invidious position, in hearing and determining the application for the substantive extended trial period, in effect, of conducting an appeal on whatever had been the outcome of what would be my decision in my temporary trading determination.

13. I indicated, therefore, that I proposed to hear and determine the substantive issue concerning the application to modify the original consent to permit a further extended trial period to take place. The hearing, on that basis, was held on 4, 10, 24, 26 and 27 October 2016. On 27 October 2016, I reserved my decision.

14. On 28 November 2016, I delivered my decision (TL & TL Tradings Pty Ltd v Parramatta City Council (No 2) [2016] NSWLEC 150). I upheld the appeal and granted a further trial period (but of two years rather than the three years which had been sought). This trial period was subject to the imposition of a significantly revised Plan of Management (POM) and of my determination on contested issues (particularly the extent of the time necessary for the provision of a security guard and the nature of that person’s duties).

The scope of the modification application

15. The modification application that required to be determined in the first phase of these proceedings was one which was filed on 31 March 2016. The modification application sought a further trial period of three years, subject to the POM that had been in effect as a consequence of Condition 14 of the development consent granted by Brown C in 2010.

16. The Company subsequently filed its Statement of Facts and Contentions (SOFAC) (going first, as is the practice with respect to modification applications). This document set out nine particularised contentions in support of its proposed modification. Relevant, particularly, to the conduct of the contested substantive proceedings that are the subject of this costs application, Contention 8 and its supporting particulars were in the following terms:

Contention 8: First modification application and second modification application - the impact of the brothel use on the amenity [sic]

50   In relation to the second and third proceedings, the impact of the brothel use on the amenity of occupants in the locality has been and would be acceptable.

Particulars

a)   There have been no significant adverse impacts in the locality arising from the Applicant's operation of the brothel.

b)   The Applicant has managed the brothel well.

c)   The Applicant has complied with the POM.

17. Attention is to be drawn, in this context (as considerable attention was given during the contested hearing to issues relating to the POM that would be required if I was to grant a further trial period), to the fact that the POM, in the third particular to the above set out contention, was the POM which had applied to the brothel for the three-year trial period pursuant to the development consent granted by Brown C in 2010.

The Company’s costs application

18. On 19 July 2017, a Notice of Motion was filed on behalf of the Company seeking that the Council pay the Company's costs of the proceedings, on an ordinary basis, from 18 July 2016 to 18 May 2017 and that the Council pay the Company's costs of the costs application.

19. The Company's costs application was set down for a single-day hearing before me on 7 September 2017.

The Council’s reasons for opposition to the costs application

20. The pre-trial material, filed on behalf of the Council, made it clear that the Council wished to resist the costs application on two bases.

21. First, the Council proposed to submit that the relevant provisions of the Uniform Civil Procedure Rules 2005 (the UCPR) concerning the finality of orders meant that the Company was out of time in making the costs application. The Council therefore proposed to submit that I did not have jurisdiction to grant the costs relief sought by the Company.

22. The second basis put by the Council was that it was not “fair and reasonable” (this being the relevant test pursuant to Pt 3 r 7 of the Land and Environment Court Rules 2007 (the Court Rules)) that the Council be required to pay the Company's costs.

The jurisdictional issue

23. After I handed down my decision on the substantive merits of the Company's application (given on 28 November 2016), further work was required to be undertaken to finalise the POM and to settle an agreed form of orders - orders that would expressly incorporate the terms of that POM.

24. That work was concluded by 20 December 2016, when those documents were provided to me. Critically, the orders and the POM were provided in electronic form. Provision of them electronically enabled their loading, that day, to the Court’s electronic record-keeping system. That loading effected what is, for formal legal purposes, described as the entry of those orders, a concept engaged by the relevant provision of the UCPR upon which Dr Smith relied as the foundation of his jurisdictional objection. The relevant provisions of the UCPR upon which Dr Smith relies are Pt 36 r 36.15(3A) and (3C) in combination, provisions in the following terms:

36.16   Further power to set aside or vary judgment or order

(1)   The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order.

(2)   ….

(3)   ....

(3A)   If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered.

(3B)   …

(3C)   Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B).

(4)   ….

25. As I have noted, the orders in the substantive proceedings were entered for the purposes of this rule on 20 December 2016. The costs application made by the Company’s legal representatives was filed on 19 July 2017. Self‑evidently, this date of lodgement is significantly outside the 14-day period permitted by the above set out rule - a time period, if applicable, not permitted to be extended.

26. It was Dr Smith's position that this rule provided the only statutorily available avenue by which the Company could seek to agitate any further matters potentially arising for consideration (such as this costs application).

27. Mr Gadiel put a contrary position. The commencing point for his submissions on the jurisdictional contest was that, in the orders of 20 December 2016, the question of costs was not addressed in that there was no order, of any nature, on this point.

28. I interpolate that this was unsurprising for two reasons.

29. The first is that, simply, neither party proposed to me, during the substantive phase of the proceedings, that I should make any order (of any nature whatsoever) concerning costs.

30. The second is that, as the substantive proceedings were ones arising in Class 1 of the Court's merit jurisdiction, the “fair and reasonable” test arises for consideration on costs applications in such proceedings. The practice generally in the Court has been that, in the comparatively infrequent circumstances when costs applications are made in such merit proceedings, they are made by a separate and subsequent Notice of Motion. This practice arises as the overwhelming majority of Class 1 merit appeals are determined by Commissioners and Commissioners do not have the power to make costs orders.

31. However, Mr Gadiel proposed to advance the proposition that a proper interpretation of s 98(3) of the Civil Procedure Act 2005 provided an available avenue for the Company to make this costs application. This provision is in the following terms:

98   Courts powers as to costs

(1)   ...

(2)   ...

(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)   ...

(5)   ...

(6)   ...

32. To the extent to which matters of discretion might be involved concerning the time between the entry of the orders and the making of the costs application, it was the Company’s position that there were valid reasons for the delay and that, therefore, any such discretion ought be exercised in the Company’s favour.

The costs hearing process

33. As a consequence, at the commencement of the hearing on 7 September 2017, Mr Gadiel indicated that he anticipated that dealing with the jurisdictional issue would take quite some time. This was also apparent to me from the material that had been filed by the Council on this point.

34. It was obvious, however, that if the hearing was to continue, it was not going to conclude on that day and might well take more than one further day if both the jurisdictional and merit issues were to be dealt with. I therefore suggested to Mr Gadiel and Dr Smith that I felt it was more appropriate to proceed to hear and determine the merit issues of the claim on the Court Rules’ test basis and to defer dealing with the jurisdictional issue on the basis that, if the merit claim failed, there was no point in dealing with the jurisdictional question.

35. The hearing then turned to the question of whether there was a substantive merit basis upon which costs should be awarded to the Company.

36. As matters eventuated, the jurisdictional issue was able to be the subject of full submissions on 17 October 2017 - meaning that, had the Company succeeded on the merits of its application (which it has not for the reasons set out later), I would have been able to determine the jurisdictional issues. Given my conclusion on the merits, it is inappropriate to venture any views on these issues.

The basis for costs orders in Class 1 proceedings

Introduction

37. First, it is appropriate to set out the relevant terms of Pt 3 r 7 of the Court Rules. It is as follows:

3.7   Costs in certain proceedings

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

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

(b)   …

(c)   …

(i)   …

(ii)   …

(iii)   …

(iv)   …

(v)   …

(vi)   …

(vii)   …

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

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

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

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

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

(b)   that a party has failed to provide, or has unreasonably delayed in providing, information or documents:

(i)   that are required by law to be provided in relation to any application the subject of the proceedings, or

(ii)   that are necessary to enable a consent authority to gain a proper understanding of, and give proper consideration to, the application,

(c)   that a party has acted unreasonably in circumstances leading up to the commencement of the proceedings,

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

(e)   that a party has commenced or defended the proceedings for an improper purpose,

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

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

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

38. For the reasons which follow, only r 3.7(3)(d) potentially arose for consideration but, on a proper understanding of the process for and outcomes of the merit proceedings, it is not necessary to go further than the analysis that follows.

The Company’s costs case

Introduction

39. The case advanced by Mr Gadiel for the Company was based on the way the Council had framed its case before and at the substantive hearing and therefore the way that the Company had had to meet that case.

40. The Council's case can be understood from the issues that it raised in its SOFAC in which, in six contentions (the first five of which were particularised), the Council said gave rise to issues warranting refusal of the application. At this point, it is appropriate to reproduce the terms of each of those six contentions without reproducing the entirety of the matters particularised with respect to the first five of them. The six contentions pressed by the Council were in the following terms:

1. The application should be refused because the impacts from the subject premises during the three-year trial period establish that the development is unacceptable and would not warrant the continued use as a brothel.

2. The application should be refused because of the inability to safely manage the subject premises as a brothel.

3. The application should be refused because the proposal is inconsistent with the objectives and requirements of cl 5.6 of the Parramatta Development Control Plan 2011 (PDCP).

4. The application should be refused because the proposal fails to satisfy, amongst other things, cl 6.9 of the Parramatta Local Environmental Plan 2011.

5. The application should be refused because the proposal does not meet the zone objectives for the IN1 - General Industrial zone under the Parramatta Local Environmental Plan 2011.

6. The application should be refused because approval of the proposed development is not in the public interest, having regard to Contentions 1 to 5 above and the objection received during the notification period.

41. A complete PDF copy of the Council's SOFAC, filed on 11 May 2016, is reproduced as Annexure A to this decision. The SOFAC had been tendered in the substantive proceedings and was again tendered in these costs proceedings - becoming Exhibit A.

42. In essence, the position advanced by Mr Gadiel was that, effectively, the entirety of that which was pressed by the Council as warranting refusal was based on past conduct of the operators of the brothel (including the drug‑dealing by the former operator) and that this approach was impermissible for the reasons explained by Preston CJ in Jonah Pty Limited v Pittwater Council (2006) 144 LGERA 408; [2006] NSWLEC 99 (Jonah).

43. Whilst it would have been permissible, he submitted, for the Council to rely on past conduct (to the extent that the past conduct related to potentially legitimate planning issues and not impermissible matters such as the drug‑dealing by the former operator) these matters should have been addressed by contentions proposing that they could have been dealt with by conditions of consent rather than warranting refusal as the Council had pleaded.

44. To the extent that the Council purported to rely on matters that were unrelated to matters of proper planning consideration, that position was fundamentally flawed and was untenable. It should not have been pleaded by the Council in the first instance.

The material dealt with for the Company on day 1 of the costs hearing

Introduction

45. To develop his line of argument further, Mr Gadiel took me through what had happened during the first proceedings. He did so in three consecutive steps.

The Council’s evidence at the substantive hearing

46. First, Mr Gadiel tendered much of the material upon which the Council had relied in the substantive proceedings. As he did so, sequentially, he took me to what he submitted were the elements of that evidence which supported the Company's position that the Council had run its case on an impermissible basis. He took me through this material on 7 September 2017.

The Company’s town planning evidence at the substantive hearing

47. Mr Gadiel then tendered the expert report of the Company's town planner, Mr Daintry, a document which had been tendered in the substantive proceedings.

The transcript of the substantive hearing

48. After he had concluded his tendering and analysis of the evidence from the substantive proceedings, he then commenced taking me through the transcript of the earlier hearing. In doing so, he took me to several passages where he acknowledged that Dr Smith had dealt with the correct way in which Jonah should be considered and applied. Mr Gadiel submitted that, effectively, this amounted to mere lip service and that the way the Council case had, in fact, been run was the impermissible basis which had been proscribed by the Chief Judge in Jonah.

49. Mr Gadiel did not finish taking me through the transcript of the substantive hearing that day, requiring a further hearing.

Day two of the costs hearing

50. The second day of the costs hearing, on 17 October 2017, commenced with Mr Gadiel taking me through the remainder of the transcript of the substantive hearing to which he had not taken me on the first day of the costs hearing. This analysis was undertaken on the same basis as the analysis undertaken of the transcript by Mr Gadiel on 7 September 2017.

51. Mr Gadiel and Dr Smith then completed their closing submissions, closing submissions which not only encompassed the substantive merit matters relating to the costs application but also addressed the preliminary jurisdictional issue that had been raised by Dr Smith as posing what the Council submitted was an insurmountable barrier to the Company's success in this costs application.

52. I then reserved my decision.

The need for a Plan of Management

53. In the decision given by Brown C granting the initial development consent, the Commissioner included a condition (Condition 14) that the brothel was to be managed in accordance with the POM that was required by that consent. The Court has adopted a Planning Principle concerning Plans of Management and their necessity to be incorporated, expressly, and is part of the conditions of consent and reproduced as an annexure to those conditions (see Renaldo Plus 3 Pty Limited v Hurstville City Council [2005] NSWLEC 315 and Amazonia Hotels Pty Ltd v Council of the City of Sydney [2014] NSWLEC 1247).

54. In these proceedings, consistent with that planning principle, it was necessary for there to be an acceptable and appropriate POM incorporated in any modification approval permitting a further trial period for the brothel.

55. Although the modification application being dealt with in these proceedings included proposed modifications to the POM that had arisen from the 2010 approval by Brown C (a period which expired on 6 December 2014), the powers which I was exercising were not confined merely to consideration of the terms of that POM but also encompassed imposing additional conditions, provided they related to the modifications sought to the original consent (1643 Pittwater Road Pty Ltd v Pittwater Council [2004] NSWLEC 685).

Evolution of the Plan of Management

Introduction

56. One significant aspect of what took place during the substantive hearings, and in the period leading up to it, related to the POM that ultimately formed the basis for the granting of the further two-year trial period.

57. First, it is to be observed that the original trial period that followed from the original decision by Brown C in 2010 had, as the operating regime for that trial period, a POM that applied to it. This was the POM referred to in the third particular to the Company’s Contention 8 in its SOFAC (as earlier set out).

58. As Mr Gadiel properly acknowledged on the second day of this costs hearing, I observed, during the course of the site inspection on 24 May 2016, that further improvements were required to the POM in order to render the POM properly acceptable if a further trial period was to be permitted (see [49] of my earlier decision). Indeed, during the course of the site inspection, a variety of matters raised by me, or on behalf of the Council, concerned matters which required to be addressed by either modification to the POM or by additions to it.

59. Mr Daintry's expert planning report, dated 3 July 2016, had, annexed to it, a new draft POM and the annexures proposed to be attached to, and incorporated in, that POM. Mr Daintry’s draft POM was dated 11 July 2016. He proposed incorporation into the plan the documents that were annexures to it. It is to be observed that the documents proposed to be incorporated in Mr Daintry's draft plan, by express reference and requirement to be annexed to it, were some two centimetres thick and were to be in addition to the 40 operative pages of Mr Daintry's draft itself. It is not necessary to list the annexures - however, given that the POM and the annexures were proposed to be translated into Cantonese and Mandarin, the utility of such a tome was questionable and required, subsequently, to be dealt with.

60. During the course of the site inspection, Mr Daintry also acknowledged a number of areas where improvements might be made, whilst, with respect to other areas, it was clear that these might require either further consideration by the relevant experts or determination by me.

61. After the site inspection, the Council replaced Mr Fryar, the consultant town planner who had been engaged by the Council for the purposes of these proceedings, with Mr Mead, a new town planning consultant who subsequently took part in the joint conferencing process and gave evidence on behalf of the Council during the hearing.

62. Mr Mead subsequently prepared an expert report and took part in the joint conferencing with Mr Daintry and the Council's Crime Prevention Officer, Mr Williams. Leading Senior Constable Ashton also took part in this joint conferencing (although Leading Senior Constable Ashton did not, subsequently, give oral evidence). Two joint expert reports arose from the joint conferencing.

63. The joint conferencing led to agreement about further improvements to be made to the proposed POM.

64. Although the way the Council pursued its case during the hearing was that the modification application should be refused and no further trial period should be permitted for the brothel, nonetheless, the Council's evidence and submissions were also directed to what the Council considered to be remaining inadequacies in the revised POM.

65. Mr Daintry had acknowledged, in his preparation for these proceedings, that the earlier POM was inadequate. He prepared his draft POM, a document that was appended to his expert report for these proceedings.

66. Following the joint conferencing and first joint expert report, Mr Daintry prepared a revised draft POM, dated 1 August 2016. This became Exhibit P in the merit proceedings.

67. As a consequence, at the commencement of the resumed hearings, there was a revised POM that then provided the foundation for the concurrent evidence between Mr Daintry, Mr Mead and Mr Williams during the course of the resumed hearing.

68. During the course of this concurrent evidence, further improvements were agreed to be appropriate to be made to the revised draft POM. I do not propose, in this decision, to set out those changes; they are adequately dealt with in my earlier decision, principally between [120] and [131].

69. It is sufficient to indicate that the changes which came out of the questioning of those witnesses (including questioning by me concerning matters such as the extent to which documents were proposed to be translated into both Mandarin and Cantonese) would have made it clear that the then revised proposed POM advanced on behalf of the Company at the commencement of the substantive hearing in October 2016 was not a document which had any possibility of resulting in the granting the amendment application sought to found a further trial period for operation of this brothel.

70. At the end of the evolution of the matters that would need to be incorporated in the POM arising out of the concurrent evidence, the Council maintained its position that the proposed further trial period should be rejected.

71. However, the Council's position was also that, if I were minded to grant a further trial period, a number of further changes needed to be made both to the POM and to the length of the new trial period. Critically, the Council's position was that, at three years, any further trial period was too long and was inconsistent with the PDCP (although the PDCP did not, strictly, apply as I was dealing with the modification application, nonetheless, it was an appropriate matter for consideration under the public interest heading in s 79C(1)(e) of the Environmental Planning and Assessment Act (the EP&A Act)).

72. Although the Applicant had proposed that there be a security guard employed on Friday and Saturday evenings, the position of the Council was that this was inadequate and that a security guard should be on duty at all times while the brothel was trading, if I was to permit a further trial period.

73. Whilst a good deal of the Council's evidence was directed to impermissible matters proposing that past unlawful conduct as a basis of refusal (contra to the decision by Preston CJ in Jonah that past unlawful conduct might be used as a basis for informing future conditions of consent, but that past unlawful conduct could not be used as a basis for refusal), a deal of this evidence also provided an appropriate evidentiary landscape to permit my consideration of both general POM issues and, specifically, the extent to which it would be appropriate to require the engagement of a security guard whilst the brothel was trading.

74. In this context, I readily acknowledge, whilst a good deal of the evidence given by Mr Williams was both misplaced and irrelevant, nonetheless, there was some relevant material which was informative of issues requiring my determination.

75. On the question of employment of a security guard, not only was it necessary for me to determine when such a person would be employed but it was also necessary for me to specify what should be the patrolling pattern and frequency for that person (see my earlier decision at [209] to [226]).

The substantive costs application

Introduction

76. In conventional civil litigation, the presumption is that costs are ordinarily expected to “follow the event” (UCPR, Pt 42 r 1).

77. In Sze Tu v Lowe (No 2) [2015]NSWCA91, Gleeson JA (Meagher and Barrett JJA concurring) (Sze Tu) wrote, at [39]:

How “the event” should be defined will depend upon the nature of the litigation. Generally the “event” refers to the event of the claim and may be understood as referring to the practical result of a particular claim.

78. As earlier set out, in Class 1 matters in this Court, a more onerous threshold is required to be satisfied - namely whether it is “fair and reasonable” to award costs in the circumstances of a particular case.

79. As a consequence, it is necessary to consider, in the context of the way the case has been advanced by Mr Gadiel for the Company on this costs application, whether the Company would have succeeded on a “follow the event” basis, as a precursor step, to considering whether the “fair and reasonable” threshold had then been satisfied. This requires consideration of the outcomes of my merit determination.

The outcome of the contested merit hearing

80. There are a number of matters to be observed concerning the outcomes of the contested merit element of the application to modify the 2010 development consent to permit a further trial period for the operation of the brothel. These are set out below.

• For the Council, although it consistently maintained the position that no further trial period should be permitted, it failed on this position. However, as the “flip side” of the matters upon which the Company failed, it had considerable and significant success on matters of fundamental detail in the POM and on the length of the further trial period.

• For the Applicant, it:

•   succeeded in obtaining a further trial period but not of the length for which the original amendment application had contended;

•   was forced to modify, extensively, the POM initially advanced as the basis upon which a further trial period should be approved (the Brown C approved POM). Indeed, a completely new draft was required. This new draft required modifications( including ones responding to inadequacies in Mr Daintry’s initial draft POM acknowledged by him as requiring to be addressed);

•   failed to persuade me that I ought not adopt the position advanced by the Council about the times during which a security guard should be required to be employed at the premises. In this regard, the position advanced by the Council was accepted by me.

81. Although it can be seen that the adoption by me of an “amber light” approach (see [50] of my earlier decision and Ali v Liverpool City Council [2009] NSWLEC 1327 at [120]) resulting in the granting of a further trial period, it is fair to say that the length of the trial period and, especially, the operational basis upon which the further trial period was granted differed significantly from that for which the Applicant had originally sought approval from the Council.

82. Two things are readily apparent from my earlier decision.

83. First, although the Applicant did obtain a further trial period, it did so only on terms that were significantly (indeed, radically) different from those which it desired.

84. Second, of fundamental importance in these costs proceedings, any fair reading of my earlier decision makes it blindingly obvious that:

1. had an “amber light” approach not been adopted; but

2. the approach which was taken by the Court when I was first appointed to it of deciding whether or not a proposal should be approved on a solely “red light/green light” basis,

this modification application would have been doomed to failure (and, moreover, deservedly so because of the defects in the application as it was at the beginning of the proceedings).

85. On this basis, there is no rational basis upon which I could consider that the outcome of the merit proceedings was “the event” sought by the Company - indeed, the Company’s result when viewed against that which it had sought at the beginning of the proceedings was, at best, only partial success.

86. Although an unsuccessful party can be ordered to pay the entirety of the costs of the successful party even though the successful party did not succeed on all issues (James v Surf Road Nominees Pty Ltd (No2) [2005]NSWCA296 at [32], Roads and Traffic Authority v McGregor &Anor(No2) [2005]NSWCA453at [17]), in these proceedings, the evidentiary unfolding of the parties’ position was so intermingled, and the evolution of the POM so fundamental to the Council’s case (and, absent the “amber light” approach, such a fundamental barrier to the Company’s success), that severing issues into win/lose categories would be impossible.

87. Further, although there are circumstances where an “issue by issue” approach may produce a fairer result than the traditional rule can come into play (Bowen Investments Pty Ltd vTabcorpHoldings Ltd (No2) [2008] FCAFC107 at [5] - noting that the use of “fair and reasonable” in the passage cited is not used in the same sense as in the Court Rules), that is not here the position, given that, on the contested issues requiring my merit determination on an “amber light” basis, the Company failed on each of them.

88. It therefore follows that there is no rational basis upon which it would be “fair and reasonable” to contemplate making any costs order against the Council.

Costs of the costs application

89. Costs applications made in Class 1 proceedings are not subject to any “fair and reasonable” test before costs are awarded to the successful party on that costs application (Grant v Kiama Municipal Council [2006] NSWLEC 70 at [74]). As the Council has been completely successful in resisting this costs application, the presumptive position is that it will have its costs of the costs application awarded on an ordinary basis - that is, “as agreed or assessed”.

89. However, Dr Smith submitted to me that, based on an offer made by the Council, by letter dated 23 August 2017, the Council should have its costs on an indemnity basis from the expiry of the unaccepted offer made to the Company. The offer was made in the following terms:

Withdrawal of motion

In light of the above, your client’s notice of motion must fail and to avoid any unnecessary legal costs of the parties, we invite your client to withdraw the motion immediately.

In the event that your client withdraws its motion, our client offers not to seek an order for costs against your client for costs incurred to date. This offer remains open for 14 days, namely until close of business on 6 September 2017.

However, if your client’s motion proceeds to hearing and our client is successful in defending the motion, we place you on notice of our intention to rely upon this letter in support of an application that your client pay our client’s costs for the motion on an indemnity basis consistent with Calderbank v Calderbank [1075] 3 All ER 333.

91. The offer was not one made on the formalised basis provided for in Pt 42 Div 3 of the UCPR but was, as noted in its terms, a Calderbank offer (Calderbank v Calderbank [1975] 3 All ER 333).

92. There are two tests required to be satisfied before the failure of a party to accept an offer made on this basis will be liable for the offering party’s costs on an indemnity basis from the time of expiry of the offer that had been made (Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8]). Those tests are:

1. there was a genuine offer of compromise, and

2. it was unreasonable for the offeree not to accept it.

93. It is, therefore, necessary for me to assess whether or not these tests were satisfied under the circumstances.

94. This requires me to assess whether or not that which was offered by the Council constituted a real and genuine benefit to the Company and, conversely, a real and genuine compromise by the Council. The relevant element of the offer as earlier set out was that the Council would forgo its costs incurred prior to the discontinuance of the proceedings by the Company if the matter did not go to hearing. As can be seen from the date of the offer (23 August 2017); the date of its expiry (6 September 2017); and the first day of this costs hearing, it is reasonable to expect that virtually all, if not all, the Council's pre-hearing legal preparation costs would have been incurred prior to the expiry of the offer. However, it is to be observed that the Council's solicitors have not intimated, in any quantified fashion, what might be the financial benefit to the Company if the Company was to accept the offer that had been made.

95. On balance, I am satisfied that, despite the failure of the Council to provide any indicative quantification to the Company of what might be the costs’ benefit to the Company if it was to have accepted the offer, the absence of such indicative quantification does not render the offer unreasonable. The Council’s solicitors’ letter provides a clear basis on which the Company’s solicitors could reasonably infer that the costs the Council was prepared to forgo were not trifling.

96. I now turn to whether it was unreasonable not to have accepted the offer. I am satisfied, for the reasons that follow, that it was unreasonable not to accept it.

97. I have reached this conclusion because the letter containing the Council's offer had set out, in some detail, the nature of the defence upon which the Council proposed to rely in defending this costs application. The elements of the 23 August 2017 letter setting those matters out is reproduced as Annexure B to this decision.

98. In particular, as I have earlier set out, the Council expressly laid out the three bases upon which the Council proposed to argue, on the question of costs, why the Company could not be regarded as having succeeded on the primary contested matters in the merit proceedings.

99. Although not precisely couched in the terms of an analysis of what constituted “the event” in defining the outcome of the proceedings (as discussed in Sze Tu), nonetheless, the Council clearly, concisely and precisely articulated three fundamental bases (at (7) of the letter) why it could not be said that the Company had succeeded in a sufficiently comprehensive fashion even to lay the foundations for the potentiality of a successful costs application.

100. For the reasons earlier set out, this costs application was doomed from the instant of its lodgement.

101. Although, as also earlier set out in some detail, the Council did not succeed in the merit proceedings in resisting the Company being granted any further trial period for its brothel, nonetheless, the shorter length of the granted trial period than that sought by the Company and the conditions through the significantly revised POM under which it was to be permitted to be undertaken were quite different and more restrictive than had been the position advanced on behalf of the Company at the commencement of the merit proceedings.

102. I am, therefore, satisfied that all the preconditions for the awarding of indemnity costs to the Council were met by the terms of the offer made in the Council's solicitors’ letter of 23 August 2017.

103. It therefore follows that the Company is to be required to pay the Council’s costs of this costs application on an indemnity basis.

Conclusion

104. I have concluded that:

1. There was, at its highest, a mixed outcome for the Applicant and it only succeeded in obtaining any further trial period for its brothel on a basis significantly differing from the basis upon which it commenced the proceedings. Indeed, absent the “amber light approach” adopted in the merit hearing (a process which led to a significantly changed and improved POM being mandated to be observed for the brothel during the further trial period - in part by agreement between the parties’ experts by evolution during the hearings and in part by imposition by me), this application as originally put to the Court was doomed to failure;

2. Although the Council’s case was run partly on an impermissible basis contra to Jonah, the Council’s case, overall, provided a proper foundation for sufficient and significant improvements to be made to the Applicant’s proposal for me to consider granting the modification I determined appropriate, but only after upholding the Council’s position on several fundamental contested issues;

3. If this costs application had had to be determined on a “costs follow the event” basis, the application would fail and, even on the basis of the actual outcomes, there would be no valid basis for apportionment;

4. As a consequence, the costs application must be dismissed;

5. For costs applications in Class 1 matters, the applicable costs approach is that “costs follow the event”, therefore the Council should have its costs of this costs application; but

6. However, the Council had made a valid and reasonable offer to the Applicant to settle the proceedings, an offer which was not accepted by the Company (and the failure to accept the offer was unreasonable under the circumstances). It therefore follows that, from the date of expiry of that offer, the Council is to have its costs prior to the expiry of that offer on an “as agreed or assessed” basis and on an indemnity basis thereafter.

Orders

105. The orders of the Court therefore are:

1. The Applicant’s costs application is dismissed;

2. The Applicant is ordered to pay the Respondent’s costs of the Applicant’s costs application up to the close of business on 6 September 2017 as agreed or assessed and on an indemnity basis thereafter; and

3. The exhibits are returned.

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Annexure A - 26 Oct 17 (1.12 MB, docx)

Annexure B - 26 Oct 17 (652 KB, docx)

Decision last updated: 27 October 2017