BYT Nominees Pty Limited v North Sydney Council (No 3) [2008] NSWLEC 294

Land and Environment Court of New South Wales

CITATION : BYT Nominees Pty Limited v North Sydney Council (No 3) [2008] NSWLEC 294 This decision has been amended. Please see the end of the judgment for a list of the amendments.

APPLICANT BYT Nominees Pty Limited PARTIES : RESPONDENT North Sydney Council

FILE NUMBER(S) : 11338 of 2007

CORAM: Preston CJ

KEY ISSUES: Costs :- Class 1 proceedings - preliminary question of law - threshold question preliminary to merits consideration - fair and reasonable to order costs

LEGISLATION CITED: Environmental Planning and Assessment Act 1979 Div 10 Pt 4, Pt 5, s 97, s 106, s 107, s 108 Land and Environment Court Rules 2007 Pt 3 r 3.7

BYT Nominees Pty Limited v North Sydney Counil [2008] NSWLEC 164 (5 May 2008) BYT Nominees Pty Limited v North Sydney Counil (No 2) [2008] NSWLEC 228 (29 July 2008) CASES CITED: Dosan v Rockdale City Council (2001) 117 LGERA 363 No Dump Residents Association Inc v Collex Pty Limited (No 2) [2005] NSWLEC 136 (29 March 2005) Port Stephens Council v Sansom (2007) 156 LGERA 125

DATES OF HEARING: 14 October 2008

EX TEMPORE JUDGMENT DATE : 14 October 2008

APPLICANT Mr I Hemmings (barrister) SOLICITORS Hones La Hood Lawyers LEGAL REPRESENTATIVES: RESPONDENT Mr A Pickles (barrister) SOLICITORS Mallesons Stephen Jaques

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

PRESTON CJ

14 OCTOBER 2008

11338 OF 2007

BYT NOMINEES PTY LIMITED V NORTH SYDNEY COUNCIL (No 3)

JUDGMENT

1 HIS HONOUR: North Sydney Council has applied for an order that BYT Nominees Pty Limited pay the council's cost in respect of the preliminary question of law that I heard on 29 April 2008 and determined on 5 May 2008. BYT opposes the application and submits the proper order should be that there be no order as to costs. 2 The preliminary question was raised in proceedings in Class 1 of the Court's jurisdiction, being an appeal under s 97 of the Environmental Planning and Assessment Act 1979 ("the Act") by BYT against the council's refusal of its development application. BYT proposed in this development application to demolish an existing two storey residential flat building and construct a new four storey residential flat building in its place on land at 2 Premier Street, Neutral Bay. The council contended - and ultimately the Court found - that the proposed development, involving the erection and subsequent use of a new apartment building outside the envelope of an existing apartment building, is prohibited under North Sydney Local Environmental Plan 2001 in the Residential A2 zone in which the land is located. There is no power in the Court to grant development consent to a prohibited development. 3 BYT contended, however, that the Court would have power to grant consent to the new apartment building under the existing use provisions of Division 10 of Pt 4 of the Act. BYT contended that the existing apartment building is an existing use within the meaning of that term in s 106(a) of the Act. As a consequence, pursuant to s 107(1), neither the Act nor North Sydney Local Environmental Plan 2001, prevented the continuance of that existing use and, pursuant to s 108(1) and Pt 5 of the Environmental Planning and Assessment Regulation 2000, that existing use could be enlarged, expanded, intensified, altered or extended and/or rebuilt. Hence, BYT contended, the existing use provisions operated to make permissible the proposed development of the erection and use of a new apartment building, notwithstanding the provisions of North Sydney Local Environmental Plan 2001. On this basis, BYT lodged this development application with the council on 9 November 2007. 4 On 22 November 2007, the council, after an initial assessment of BYT's development application, wrote to BYT stating that the proposed development was prohibited. The council explained its reasoning as including that the existing residential flat building did not have existing use rights as both established apartment building and apartment building revision were permissible uses in the Residential A2 zone under cl 14 of North Sydney Local Environmental Plan 2001; that the proposed development, however, did not involve continuation of an established apartment building because the existing residential flat building was to be demolished and replaced by a new building; and that the proposed development also was not apartment building revision because the new residential flat building extended beyond the envelope of the existing building. The council, therefore, invited the applicant to withdraw its development application and, if the applicant did so, the council would refund in part the development application fee. 5 On 28 December 2007, BYT declined the council's offer to withdraw the development application, contending that the site enjoys existing use rights. 6 On the same day, 28 December 2007, BYT lodged its Class 1 appeal to this Court against the council's deemed refusal of its development application. 7 On 14 January 2008, the council refused the development application. The first reason given for refusal was that: "1. The existing residential apartment building is permissible in the zone and the site does not benefit from existing use rights. The proposed development does not satisfy the definition, objectives or controls of clause 26 (' apartment building revision or adaptation' ) of North Sydney Local Environmental Plan 2001 (NSLEP 2001) and therefore constitutes prohibited development." 8 On 18 January 2008, the council's solicitor telephoned BYT's solicitor to discuss the conduct of the proceedings. In the ensuing telephone conversation, BYT's solicitor advised that BYT proposed to file a notice of motion seeking to have a preliminary question of law determined. BYT's solicitor stated that his instructions were that if BYT lost the preliminary question of law, BYT would discontinue the proceedings. The preliminary question was a discrete, simple and interesting point. 9 Later that day, BYT's solicitors emailed the council's solicitors enclosing a draft notice of motion with a preliminary point of law raising the question of whether the site continues to enjoy the benefit of existing use rights. 10 On 29 January 2008, BYT's solicitors provided to the council's solicitors a draft statement of agreed facts concerning the existing residential flat building for the purposes of the hearing and determination of the preliminary question of law. 11 Also on 29 January 2008, the council's solicitors provided to BYT's solicitors the council's statement of facts and contentions. In contention 1, the council stated that the development should be refused because the development is prohibited. 12 On 31 January 2008, the council's solicitors wrote to BYT's solicitors seeking clarification of the applicant's draft notice of motion and the draft statement of agreed facts. 13 On 31 January 2008, BYT's solicitors provided an amended notice of motion raising a preliminary question of whether the property has existing use rights. 14 On 1 February 2008, BYT's solicitors filed the notice of motion seeking an order that the applicant's preliminary question of law, namely "whether, notwithstanding North Sydney Local Environmental Plan 2001, the property continues to have existing use rights?", be listed before a judge for hearing and determination. 15 Ultimately, the preliminary question was listed for hearing on 29 April 2008. I heard the preliminary question on that day. I delivered judgment on 5 May 2008 and, for reasons I gave in the written judgment, answered the question in the negative: see BYT Nominees Pty Limited v North Sydney Council [2008] NSWLEC 164. 16 BYT had applied for a direction, and the Court had agreed to make a direction, that the preliminary question be heard and determined, on the basis that the preliminary question would be dispositive of the appeal if answered in the negative. However, after considering my reasons for judgment, BYT advised that it wished to raise another argument as to how the proposed development might possibly be permissible, namely, that the proposed development fell within the permissible development of "established apartment building". Accordingly, I did not dismiss the proceedings but rather made orders for the matter to proceed to a final hearing of all of the remaining questions in the proceedings. 17 That hearing occurred on 29 July 2008 before Lloyd J. His Honour determined that the proposed development did not fall within the permissible development of established apartment building and was prohibited: BYT Nominees Pty Limited v North Sydney Council (No 2) [2008] NSWLEC 228. Accordingly, Lloyd J dismissed BYT's appeal. Lloyd J made no order as to costs of that part of the proceedings. However, the question of the costs of the preliminary question that was heard and determined earlier had been reserved for later determination. 18 The council submits that it is fair and reasonable to make an order for costs in relation to the preliminary question. The council submits the preliminary question is of a kind covered by Pt 3, r 3.7(3)(a) of the Land and Environment Court Rules 2007. That is a circumstance in which the Court might consider the making of a cost order to be fair and reasonable so as to displace the presumptive rule in a Pt 3, r 3.7(2) that, ordinarily, the Court will not make an order as to costs. The council submits that none of the other circumstances of the case would suggest that it would not be fair and reasonable to make a cost order. Hence, the council submits that the Court would consider it fair and reasonable to make an order for costs of the preliminary question. The council does not seek an order for costs as to the balance of the proceedings. 19 The council submits that the applicant was the party who applied for the preliminary question and, by the time the applicant made its motion seeking an order that the Court hear and determine the preliminary question, the Land and Environment Court Rules 2007 had come into force. The council submits that the applicant, therefore, had made its application for a preliminary question in the knowledge of the new rule and, in particular, Pt 3, r 3.7(3)(a) of the Land and Environment Court Rules 2007. 20 BYT submits that the Court should start with the presumptive rule in Pt 3, r 3.7(2) that the Court is not to make an order for the payment of costs. BYT submits that the matters in Pt 3, r 3.7(3) are indicia of circumstances where the Court might consider the making of a cost order to be fair and reasonable, but do not oblige the Court to so consider. Mere satisfaction of one or more of the circumstances in r 3.7(3)(a)-(f) does not demand that the Court consider it fair and reasonable to make a cost order. 21 BYT submits that underpinning r 3.7(2) is what has been referred to as the non discouragement principle, that is, that an applicant should not be discouraged from appealing to the Court in certain classes of the Court's jurisdiction, including Class 1, for fear of having to pay costs if the appeal is unsuccessful. BYT submits, therefore, that the Court would consider this non discouragement principle in assessing whether it is fair and reasonable to order costs, even if one or more of the circumstances of the kind in r 3.7(3)(a)-(f) exists. 22 In this case, BYT submits that the non discouragement principle tends against the Court ordering costs where the applicant has raised a question of law as to whether the site had existing use rights that could found the development application it had made for the proposed development. 23 Furthermore, BYT submits that it was reasonable for it to have raised the question. In the 20 years in which the existing use provisions had been in force, there were only two cases that had considered the question that was raised by BYT, these being Dosan v Rockdale City Council (2001) 117 LGERA 363 and No Dump Residents Association Inc v Collex Pty Limited (No 2) [2005] NSWLEC 136 (29 March 2005). 24 However, those two cases pointed in different directions. In Dosan v Rockdale City Council, Lloyd J was inclined to the view that if a development that formerly was prohibited under a local environmental plan and was an existing use, had become permissible upon a change of the local environmental plan, then the existing use ceased, the development having become permissible. On the other hand, in No Dump Residents Association Inc v Collex, Talbot J expressed doubts as to that conclusion of Lloyd J in Dosan, although Talbot J did not find it necessary to determine the matter having regard to the facts of that case. BYT submits, therefore, that there were conflicting decisions and, furthermore, there was no authoritative determination of the issue raised by its preliminary question. 25 BYT also submits that the issue involved was of wider interest and had ramifications for the council beyond this particular matter. 26 I consider that, in the circumstances of this case, it would be fair and reasonable to make an order that BYT pay the council's costs of the preliminary question heard and determined by me. The question raised by the preliminary question squarely falls into the category of question described in rule 3.7(3)(a). 27 The question was a threshold question. The proposed development was prohibited by the relevant environmental planning instrument, North Sydney Local Environmental Plan 2001. BYT had, therefore, to rely on the exception in the existing use provisions of the Environmental Planning and Assessment Act 1979 to make permissible the proposed development and to found its development application. 28 The preliminary question did not turn on any contested questions of fact. Indeed, the hearing of the preliminary question proceeded on a statement of agreed facts. Rather, resolution of the question turned on the interpretation of the existing use provisions in the Environmental Planning and Assessment Act 1979. 29 The question was potentially, and was originally thought to be when separated as a preliminary question, determinative of the proceedings. It was preliminary to and otherwise did not involve an evaluation of the merits of the development application. 30 As the Court of Appeal said in Port Stephens Council v Sansom (2007) 156 LGERA 125 at 148[92]-149[96], the no discouragement principle will rarely, if ever, be pertinent in a case involving the capacity to lodge a development application and to commence proceedings in the Court. 31 I do not consider that the fact that the question had not been the subject of an authoritative determination to be influential. Of course, if there had been an authoritative determination of the question, then it may well have been unreasonable for BYT to have pursued the question in face of that authoritative determination and the circumstances in rule 3.7(f) might have applied. As it was, the question was clearly arguable and it was not unreasonable for BYT to have pursued it. But that merely precludes the circumstance in rule 3.7(f) being relevant; it does not necessarily suggest that it would not be fair and reasonable to order costs for pursuing a question falling within the category in rule 3.7(a). 32 I do not consider that the question was of such public interest or wider significance as to cause the litigation to transcend conventional litigation between the parties. 33 Further, my determination, being a decision of a judge at first instance, is not an authoritative determination of the question. It simply adds another decision in favour of the view that had been expressed by Lloyd J in Dosan v Rockdale City Council, contrary to the doubts expressed by Talbot J in No Dump Residents Association Inc v Collex. 34 Hence, the situation that BYT found itself in before it raised the preliminary question has not been materially changed by my decision. There still is no authoritative determination of the question and there will not be one until there is a Court of Appeal decision on the question. The fact that my determination has involved arguments from both parties and a reasoned analysis in response to those arguments is a distinction from that which existed in Dosan v Rockdale City Council and No Dump Residents Association Inc v Collex, but I do not consider that this fact alone transforms the matter into a matter of public interest or wider significance. 35 I also do not consider that there is anything else about the circumstances of the litigation in relation to the preliminary question that would suggest to the contrary of the view, deriving from the circumstance that the question was of a kind in r 3.7(3)(a), that it would be fair and reasonable to make an order for the payment of costs. 36 BYT also raises an issue as to the quantum of the costs that may be claimed by the council in relation to the preliminary question. I do not consider it is necessary for me to determine any question going to the quantum of costs at this stage. The council will have to prepare a bill as to its costs. That can be challenged by BYT. Any challenge can be assessed. Any issue as to the unreasonableness of any item claimed, including as to whether it was reasonable in the circumstances to have both senior and junior counsel, can be raised and determined on the assessment of the costs. I express no opinion about these matters. 37 Accordingly, I order the applicant, BYT Nominees Pty Limited, to pay the respondent's, North Sydney Council's, costs in respect of the preliminary question heard on 29 April 2008 and determined on 5 May 2008. 38 In light of my determination that I have just given the council also seeks an order for the payment of its costs of its application for costs. It is usual that costs would follow the event for these matters. Accordingly, I also order the applicant to pay the council's costs of its application for costs. **********

23/10/2008 - Noting in citation to judgment being No 3 - Paragraph(s) citation

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