The recent judgment of CBUS Property Pty Ltd v North Sydney Council highlights the complexities involved in seeking costs in Class 1 proceedings. This judgment provides important insights into the Court’s considerations when determining costs and the implications for local councils and applicants when bringing such motions.

Background

CBUS Property Pty Ltd filed a development application (the DA) for a large site in North Sydney, seeking to demolish existing structures and construct new residential buildings. Initially, the application complied with the parking requirements in the North Sydney Development Control Plan 2013 (the DCP). However, the Council amended the DCP to reduce maximum parking rates, significantly impacting the DA. Despite ongoing negotiations and expert conferences, the Council raised new contentions related to parking and floor space ratio (FSR), leading to further complications.

The Council filed an application with the Court (called a Notice of Motion) seeking costs from the Applicant from a specific date, arguing that the Applicant should have known the DA could not be approved without major amendments due to the amended DCP. The Council contended that maintaining the proceedings without addressing these issues was unreasonable.

The Applicant sought to discontinue the proceedings without any cost orders, arguing that the issues were complex and multifaceted. They contended that the Council’s new contentions regarding parking and FSR were not clearly articulated until much later, making it reasonable to continue the appeal until they decided to discontinue. The Applicant also emphasised the “no discouragement” principle, which discourages awarding costs in a way that deters parties from pursuing legitimate appeals.

Determination of the Court

The Court ruled that the Council’s application for costs was not fair and reasonable under the circumstances. The Court noted that the Council’s contentions regarding parking and FSR were not clearly communicated until the particulars letter from the Council in October 2023. Additionally, the complexity of the issues and the Applicant’s reasonable grounds for their position led the Court to conclude that each party should bear its own costs (which is the usual approach in Class 1 proceedings in the Land and Environment Court).

The Court emphasised that the discontinuance of proceedings itself does not create a presumption for costs against the discontinuing party. It also highlighted the importance of clear and timely communication of issues and contentions by local councils to avoid unnecessary costs and delays. The decision reiterated that it is critical for local councils to clearly identify and communicate their contentions in formal documents like the Statement of Facts and Contentions (SOFAC) and seek leave from the Court when amendments are necessary (for example, if there is an update to a DCP or other statutory instrument or policy).

Moreover, the judgment illustrated the importance of the “no discouragement” principle. This principle ensures that applicants in Class 1 proceedings are not deterred from pursuing or discontinuing their appeals due to the risk of adverse cost orders. The Court determined that the Applicant’s decision to discontinue was based on a multifaceted evaluation of the issues, and not solely due to the Council’s contentions on parking and FSR.

Key takeaways

1. Clarity and Timing: local councils must clearly communicate any new contentions or issues as early as possible in the proceedings. Delays in doing so can undermine their position in seeking costs.
2. Complexity of Issues: When multiple complex issues are involved, parties must carefully consider the potential implications and costs before proceeding with motions for costs.
3. No Discouragement Principle: The Court upholds the principle that parties should not be discouraged from pursuing or discontinuing appeals due to the fear of adverse costs orders, especially in complex cases. This needs to be carefully considered if a party does intend to put on an application for costs.
4. Evaluative Judgment: The Court exercises a broad evaluative judgment in determining whether costs orders are fair and reasonable, considering all circumstances of the case. Parties need to be prepared for and consider what evidence could be put on by others which could impact on the prospects of a costs order being made.
5. Detrimental Costs Orders: unsuccessful applications can result in detrimental costs orders against the party bringing the application, as seen in this judgment against North Sydney Council (because Council was not successful in their application, the Court made an order that Council pay the costs of the Applicant in relation to the application for costs).
6. Changes in strategy during litigation: it is appropriate for all parties to constantly evaluate the potential outcomes and strategic implications of continuing or discontinuing proceedings, especially in light of new contentions or regulatory changes that may impact the feasibility of a development application before the Court.

Further reading

You can read a copy of the judgment below.