Posted on July 31, 2013 by

Counting the costs: Discontinuing Class 1 proceedings

As a general rule, a successful party to proceedings in Classes 1, 2 and 3 of the Land and Environment Court (Court) will not be awarded their costs for conducting the appeal.

Unlike ordinary litigation where ‘costs follow the event’, the Land and Environment Court Rules 2007 provide that the Court may only make a costs order where it is ‘fair and reasonable in the circumstances’.

But what happens if a party brings proceedings in the Court, only to later discontinue those proceedings? Is it ‘fair and reasonable’ that the party against whom proceedings are discontinued is entitled to recover its costs of defending the appeal?

Biscoe J recently considered this question in Ross v Lane Cove Council [2013] NSWLEC 109.

Facts

In May 2012, the Council wrote to Mr Ross alleging that he had carried out unauthorised works to a dwelling house, including the construction of two concrete awnings. The Council required Mr Ross to give an undertaking to lodge a modification application under s96 of the Environmental Planning and Assessment Act 1979 (EPA Act), or it would commence proceeding against him.

In response, Mr Ross undertook to make an application for a building certificate, rather than under s96 of the EPA Act. The Council commenced Class 4 proceedings against him seeking declaratory and injunctive relief, and a demolition order.

In August 2012, Pepper J declared that the works carried out were not in conformity with the development consent, and granted an injunction. Her Honour did not make any further orders and stood the proceedings over to allow the Council to consider a s96 application that had been lodged two days earlier.

The Council refused the s96 application and Mr Ross lodged an appeal (Class 1 Appeal). In defending its decision, the Council argued that the proposed development was not ‘substantially the same’ as the development approved, and the case fell outside s96.

During the course of the Class 1 Appeal, Mr Ross amended his s96 application by deleting the awnings, with the intent that he would lodge a separate building certificate application for them. However, it later emerged that the Commissioner did not consider the application to have been amended in this way, and was likely to make orders which would have the effect of requiring demolition of the awnings. At this point, Mr Ross decided to discontinue the Class 1 Appeal.

The Council seeks its costs

The Council sought its costs of the Class 1 Appeal on the basis that the discontinuance of the proceedings was unreasonable. In support of that contention, the Council pointed to the fact that Mr Ross had permitted the matter to go to hearing, and to be adjourned on the basis that he would provide amended drawings, before abandoning this by discontinuing the proceedings.

Mr Ross argued that his discontinuance did not mean that it was ‘fair and reasonable’ to make a costs order against him. He had lodged the s96 application at the Council’s request, yet the Council had opposed the application on the basis that it fell outside s96. Further, there had been a change in circumstance, in that he had understood from the Commissioner’s comments that he would be required to remove the awnings.

The decision

Biscoe J declined to make a costs order against Mr Ross.

His Honour noted that prior to changes to the Rules in 2007, there may have been a presumption (that could be displaced) that a discontinuing party would be subject to a costs order. However, any such presumption no longer applied.

The sole question for the Court was whether making a costs order was ‘fair and reasonable in the circumstances’.

In the present case, His Honour pointed to the following circumstances that weighed against finding that it was ‘fair and reasonable’ to make a costs order against Mr Ross:

• the Council had invited a s96 application, but had then contended that the application fell outside the scope of s96, even when the awnings had been deleted from the application;
• Mr Ross had come to understand, rightly or wrongly, that if the s96 application had been approved by the Court, it would require the removal of the concrete awnings;
• with the deletion of the awnings from the application, Mr Ross had ‘substantially succeeded in the proceedings’. Had the matter proceeded, the Council would not have been entitled to its costs.

Comment

The case highlights the difficulties that a Council may face in trying to recover its costs against an applicant who discontinues proceedings in Class 1, 2 and 3.

Much will depend on the circumstances. Biscoe J pointed out that if there was no reasonable basis for the appeal in the first place, it may be fair and reasonable for a costs order to be made against the discontinuing party. On the other hand, if evidence emerges during the course of proceedings, as a result of which an applicant decides that there is an increased risk in the litigation, it may well be sensible for the applicant to discontinue. Imposing a costs order in these circumstances would only serve as a disincentive for an applicant to discontinue.

Biscoe J also made an observation about r3.7(3)(c) of the Rules, which provides that it may be fair and reasonable for a costs order to be made where a party has acted unreasonably in circumstances leading up to the proceedings. His Honour stated that this provision is not concerned with the factual basis on which the proceedings are brought, but rather, the conduct of a party to the proceedings. The fact that the proceedings might have come about because of unlawful works carried out by the applicant would not give rise to a presumption of a costs order against them. This is because it is reasonable for a person who has carried out unauthorised works to seek to regularise those works by lodging an application for them.